As filed with the Securities and Exchange Commission on June 16, 1999
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
PACIFIC SELECT EXEC SEPARATE ACCOUNT OF
PACIFIC LIFE & ANNUITY COMPANY
(Exact Name of Registrant)
PACIFIC LIFE & ANNUITY COMPANY
(Name of Depositor)
700 Newport Center Drive
P.O. Box 9000
Newport Beach, California 92660
(Address of Depositor's Principal Executive Office)
(949)219-3743
(Depositor's Telephone Number, including Area Code)
Diane N. Ledger
Vice President
Pacific Life Insurance Company
700 Newport Center Drive
P.O. Box 9000
Newport Beach, California 92660
(Name and Address of Agent for Service of Process)
Copies to:
Jeffrey S. Puretz, Esq.
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
Title of securities being registered: interests in the Separate Account under
Pacific Select Exec II-NY Flexible Premium Variable Life Insurance Policies.
Approximate date of proposed public offering: As soon as practicable after the
effective date of the Registration Statement. The Registrant hereby amends this
Registration Statement on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933 or until
the Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
Filing fee: None
Pacific Select Exec Separate Account of Pacific
Life & Annuity Company
CROSS-REFERENCE SHEET
Pursuant to Rule 404(c) of Regulation C under the Securities Act of 1933
(Form N-8B-2 Items required by Instruction as to the Prospectus in Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
1. (a) Name of trust............................... Prospectus front cover
(b) Title of securities issued.................. Prospectus front cover
2. Name and address of each depositor............... Prospectus front cover; Back Cover
3. Name and address of trustee...................... N/A
4. Name and address of each principal underwriter... About PL&A
5. State of organization of trust................... Pacific Select Exec Separate
Account
6. Execution and termination of trust agreement..... Pacific Select Exec Separate
Account
7. Changes of name.................................. N/A
8. Fiscal year...................................... N/A
9. Material Litigation.............................. N/A
II. General Description of the Trust and Securities of the Trust
10. (a) Registered or bearer securities............. Pacific Select Exec II-NY basics; The death benefit
(b) Cumulative or distributive
securities................................ Pacific Select Exec II-NY basics; The death benefit
(c) Withdrawal or redemption......... Withdrawals, surrenders and loans
(d) Conversion, transfer, etc........ Withdrawals, surrenders and loans
(e) Periodic payment plan............ N/A
(f) Voting rights.................... Voting Rights
(g) Notice to security holders....... Reports we'll send you
(h) Consents required................ Voting Rights
(i) Other provisions................. N/A
11. Type of securities comprising
units................................. Pacific Select Exec II-NY basics
12. Certain information regarding
periodic payment plan certificates.... N/A
13. (a) Load, fees, expenses, etc......... Deductions from your premiums; Surrendering your policy
(b) Certain information regarding
periodic payment plan certificates.... N/A
(c) Certain percentages................... Deductions from your premiums; Surrendering your policy
(d) Difference in price................... N/A
(e) Certain other fees, etc............... Deductions from your premiums; Surrendering your policy
(f) Certain other profits or
benefits.............................. The death benefit; Your policy's accumulated value
(g) Ratio of annual charges to
income................................ N/A
14. Issuance of trust's securities........ Pacific Select Exec II-NY basics
15. Receipt and handling of payments
From purchasers..................... How premiums work
16. Acquisition and disposition of Your policy's accumulated
underlying securities............... value: Your investment
options
17. Withdrawal or redemption............ Withdrawals, surrenders
and loans
18. (a) Receipt, custody and disposition
of income....................... Your policy's accumulated
value
(b) Reinvestment of distributions... N/A
(c) Reserves or special funds....... N/A
(d) Schedule of distributions....... N/A
19. Records, accounts and reports....... Statements and
Reports
20. Certain miscellaneous provisions
of trust agreement:
(a) Amendment....................... N/A
(b) Termination..................... N/A
(c) and (d) Trustees, removal and
successor....................... N/A
(e) and (f) Depositors, removal
and successor................... N/A
21. Loans to security holders........... Withdrawals,
surrenders and loans
22. Limitations on liability............ N/A
23. Bonding arrangements................ N/A
24. Other material provisions of
trust agreement..................... N/A
III. Organizations, Personnel and Affiliated Persons of Depositor
25. Organization of depositor...................................................... About PL&A
26. Fees received by depositor..................................................... See Items 13(a) and 13(e)
27. Business of depositor.......................................................... About PL&A
28. Certain information as to officials and affiliated persons of depositor........ About PL&A
29. Voting securities of depositor................................................. N/A
30. Persons controlling depositor.................................................. N/A
31. Payments by depositor for certain services rendered to trust................... N/A
32. Payments by depositor for certain other services rendered to trust............. N/A
33. Remuneration of employees of depositor for certain services rendered to trust.. N/A
34. Remuneration of other persons for certain services rendered to trust........... N/A
IV. Distribution and Redemption of Securities
35. Distribution of trust's securities by states................................... N/A
36. Suspension of sales of trust's securities...................................... N/A
37. Revocation of authority to distribute.......................................... N/A
38. (a) Method of distribution.......................................... How policies are distributed
(b) Underwriting agreements......................................... How policies are distributed
(c) Selling agreements.............................................. How policies are distributed
39. (a) Organization of principal underwriters.......................... How policies are distributed
(b) N.A.S.D. membership of principal underwriters................... How policies are distributed
40. Certain fees received by principal underwriters...................... How policies are distributed
41. (a) Business of each principal underwriter.......................... How policies are distributed
(b) Branch offices of each principal underwriter.................... N/A
(c) Salesmen of each principal underwriter.......................... N/A
42. Ownership of trust's securities by certain persons................... N/A
43. Certain brokerage commissions received by principal underwriters..... N/A
44. (a) Method of valuation............................................. Your policy's accumulated value
(b) Schedule as to offering price................................... How premiums work
(c) Variation in offering price to certain persons.................. Monthly deductions
45. Suspension of redemption rights...................................... Timing of payments, forms, and requests
46. (a) Redemption valuation................................................... Withdrawals, surrenders and loans
(b) Schedule as to redemption price........................................ Withdrawals, surrenders and loans
47. Maintenance of position in underlying securities............................ Your investment options
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of trustee...................................... N/A
49. Fees and expenses of trustees............................................... N/A
50. Trustee's lien.............................................................. N/A
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of trust's securities.................................. The death benefit
VII. Policy of Registrant
52. (a) Provisions of trust agreement with respect to selection
or elimination of under lying securities............................... How our accounts work
(b) Transactions involving elimination of underlying securities............ How our accounts work
(c) Policy regarding substitution or elimination of underlying securities.. How our accounts work
(d) Fundamental policy not otherwise covered............................... N/A
53. Tax status of trust......................................................... Variable life insurance and your taxes
VIII. Financial and Statistical Information
54. Trust's securities during last ten years.......... N/A
55. N/A
56. Certain information regarding periodic payment
plan certificates................................. N/A
57. N/A
58. N/A
59. Financial statements (Instruction 1(c) of
"Instructions as to the Prospectus" of Form S-6).. Financial Statements
PACIFIC SELECT
EXEC II - NY PROSPECTUS
Pacific Select Exec II - NY is a flexible premium variable life insurance
policy issued by Pacific Life & Annuity Company.
This policy is not available in all states. This prospectus provides information that you should know before buying a
This prospectus is not an offer in any state policy. It's accompanied by a current prospectus for the Pacific Select Fund, a
or jurisdiction where we're not legally fund that provides the underlying portfolios for the variable investment
permitted to offer the policy. options offered under the policy. Please read these prospectuses carefully and
keep them for future reference.
The policy is described in detail in this
prospectus. The Pacific Select Fund is Here's a list of all of the investment options available under your policy:
described in its prospectus and in its
Statement of Additional Information (SAI). VARIABLE INVESTMENT OPTIONS
No one has the right to describe the policy Money Market Large-Cap Value
or the Pacific Select Fund any differently High Yield Bond Mid-Cap Value
than they have been described in Managed Bond Equity
these documents. Government Securities Bond and Income
Growth Equity Index
You should be aware that the Securities and Aggressive Equity Small-Cap Index
Exchange Commission (SEC) has not reviewed Growth LT REIT
the policy for its investment merit, and Equity Income International
does not guarantee that the information in Multi-Strategy Emerging Markets
this prospectus is accurate or complete.
It's a criminal offense to say otherwise. FIXED OPTIONS
Fixed Account
Fixed LT Account
YOUR GUIDE TO THIS PROSPECTUS
An overview of Pacific Select Exec II - NY 4
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Pacific Select Exec II - NY basics 12
Owners, person insured by the policy, and beneficiaries 13
Policy date, monthly payment date, policy anniversary date 14
Statements and reports we'll send you 15
Your right to cancel 15
Timing of payments, forms and requests 16
Telephone transactions 17
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The death benefit 18
Choosing your death benefit option 18
Choosing a death benefit qualification test 19
Comparing the death benefit options 20
When we pay the death benefit 22
Changing your death benefit option 22
Changing the face amount 23
Optional riders 24
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How premiums work 26
Planned periodic premium payments 26
Deductions from your premiums 27
Allocating your premiums 27
Limits on the premium payments you can make 28
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Your policy's accumulated value 29
Calculating your policy's accumulated value 29
Monthly deductions 29
Lapsing and reinstatement 32
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Your investment options 34
Variable investment options 34
Fixed options 38
Transferring among investment options 38
Transfer programs 39
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Withdrawals, surrenders and loans 41
Making withdrawals 41
Taking out a loan 42
Ways to use your policy's loan and withdrawal features 43
Surrendering your policy 44
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General information about your policy 46
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Variable life insurance and your taxes 49
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About PL&A 53
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Illustrations 77
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Appendices 93
Appendix A: Rates per $1,000 of initial face amount 93
Appendix B: Death benefit percentages 94
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Where to go for more information back cover
2
Terms used in this prospectus
We've tried to make this prospectus easy to read and understand, but you may
find some words and terms that are new to you. We've identified some of these
below and the pages where you'll find an explanation of what they mean.
If you have any questions, please ask your registered representative or call us
at 1-800-800-7681.
Accumulated value 29 Joint owners 13
Accumulation units 36 Lapse 32
Age 13 Loan account 42
In this prospectus, you and your mean the Allocation 27 Modified endowment con-
policyholder or owner. PL&A, we, us and our Assignment 48 tract 51
refer to Pacific Life & Annuity Company. Beneficiary 14 Monthly payment date 14
The fund refers to Pacific Select Fund. Business day 16 Net amount at risk 30
Policy means a Pacific Select Exec II - NY Cash surrender value 44 Net cash surrender value 44
variable life insurance policy, unless we Cash value accumulation Net premium 26
state otherwise. Pacific Life means Pacific test 19 Net single premium 19
Life Insurance Company, our parent company. Contingent beneficiary 14 Outstanding loan amount 42
Cost of insurance rate 29 Planned periodic premium 26
Death benefit 18 Policy anniversary 14
Death benefit percentage 19 Policy date 14
Death benefit qualifica- Policy year 14
tion test 19 Portfolio 34
Face amount 18 Proper form 16
Fixed account 38 Reinstatement 33
Fixed LT account 38 Riders 24
Fixed options 38 Separate account 54
General account 54 Seven-pay limit 51
Guideline minimum death Tax code 49
benefit 19 Unit value 36
Guideline premium limit 28 Variable account 34
Guideline premium test 19 Variable investment op-
Illustration 15 tion 34
In force 12
Income benefit 46
3
AN OVERVIEW OF PACIFIC SELECT EXEC II - NY
This overview tells you some key things you should know about your policy. It's
designed as a summary only--please read the entire prospectus and your policy
for more detailed information.
Some states have different rules about how life insurance policies are
described or administered. The terms of your policy, or of any endorsement or
rider, prevail over what's in this prospectus.
--------------------------------------------------------------------------------
Pacific Select Exec II - NY basics Pacific Select Exec II - NY is a flexible premium variable life insurance
policy.
This policy may be appropriate if you want
to provide a death benefit for family . Flexible premium means you can vary the amount and frequency of your premium
members or others or to help meet other payments.
long-term financial objectives. It may not
be the right kind of policy if you plan to . Variable means the policy's value depends on the performance of the investment
withdraw money for short-term needs. options you choose.
Please discuss your insurance needs and . Life insurance means the policy provides a death benefit to the beneficiary
financial objectives with your registered you choose.
representative.
In addition to providing a death benefit that is generally free of federal
You'll find more about the basics of income tax, any growth in your policy's accumulated value is tax-deferred. You
Pacific Select Exec II - NY starting on can choose from 18 variable investment options, each of which invests in a
page 12. corresponding portfolio of the Pacific Select Fund, and two fixed options, both
of which provide a guaranteed minimum rate of interest.
Pacific Select Exec II - NY is designed for long-term financial planning.
Please take some time to read the information in this prospectus before you
decide if this life insurance policy meets your insurance needs and financial
objectives.
Your right to cancel
During the free look period, you have the right to cancel your policy and
return it to us or your registered representative for a refund. We'll refund
the amount of your premium payments. We'll hold the net premiums in the Money
Market investment option until the free look transfer date.
4
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The death benefit You can choose one of three death benefit options depending on what is more
important to you: a larger death benefit or building the accumulated value of
Your policy provides a death benefit for your policy.
your beneficiary after the person insured
by the policy has died, as long as your The death benefit will always be the greater of the death benefit under the
policy is in force. option you choose or the guideline minimum death benefit.
You'll find more about the death benefit This policy offers two ways to calculate the guideline minimum death benefit:
starting on page 18. the cash value accumulation test and the guideline premium test. These are
called death benefit qualification tests. The test you choose will generally
depend on the amount of premiums you want to pay. In general, you should choose
the cash value accumulation test if you do not want to limit the amount of
premiums you can pay into your policy.
You cannot change your death benefit qualification test. But you can change
your death benefit option and increase or decrease your policy's face amount
(with certain restrictions) while your policy is in force. Any of these changes
may affect your policy charges.
Optional riders
There are eight optional riders that provide extra benefits, some at additional
cost.
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How premiums work Deductions from your premiums
We deduct a premium load from each premium payment you make. The premium load
Your policy gives you the flexibility to is made up of a sales load, a state and local tax charge, and a federal tax
choose the amount and frequency of your charge.
premium payments within certain limits.
Each premium payment must be at least $50. Limits on the premium payments you can make
Federal tax law puts limits on the premium payments you can make in relation to
You'll find more about how premiums work your policy's death benefit. We may refuse all or part of a premium payment you
starting on page 26. make, or remove all or part of a premium from your policy and return it to you
under certain circumstances.
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Your policy's accumulated value Accumulated value is the value of your policy on any business day. It is not
guaranteed - it depends on the performance of the investment options you've
Accumulated value is used as the basis for chosen, the premium payments you've made, policy charges, and how much you've
determining policy benefits and charges. If borrowed or withdrawn from the policy.
there is not enough accumulated value to
cover policy charges, your policy could Monthly deductions
lapse. We deduct a monthly charge from your policy's accumulated value on each monthly
payment date. The charge is made up of cost of insurance, an administrative
You'll find more about accumulated value charge, and a mortality and expense risk charge. If you add any riders, we'll
starting on page 29. add any charges for them to your monthly charge.
Lapsing and reinstatement
If there is not enough accumulated value to cover the monthly charge on the day
we make the deduction, your policy may lapse - which means you'll no longer
have any insurance coverage. If your policy is in danger of lapsing, we'll give
you a grace period of 61 days to pay the required premium. If your policy
lapses at the end of the grace period, you have five years from the day it
lapses to apply for a reinstatement.
5
AN OVERVIEW OF PACIFIC SELECT EXEC II - NY
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Your investment options You can choose from 18 variable investment options, each of which invests in a
corresponding portfolio of the Pacific Select Fund. We're the investment
The investment options you choose will adviser for the Pacific Select Fund. We oversee the management of all the
affect your policy's accumulated value, fund's portfolios and manage two of the portfolios directly. We've retained
and may affect the death benefit. other portfolio managers to manage the other portfolios. The value of each
portfolio will fluctuate with the value of the investments it holds, and
Please review the investment options returns are not guaranteed.
carefully and ask your registered
representative to help you choose the You can also choose from two fixed options, the Fixed account and the Fixed LT
right ones for your goals and risk account, both of which provide a guaranteed minimum annual interest rate of 3%
tolerance. during the first 10 policy years, and 3.3% thereafter. We may offer a higher
interest rate. If we do, we'll guarantee that rate for one year.
You'll find more about the investment
options starting on page 35. We allocate your premium payments and accumulated value to the investment
options you choose. Your policy's accumulated value will fluctuate depending on
You'll find out more about our automatic the investment options you've chosen. You bear the investment risk of any
transfer programs starting on page 39. variable investment options you choose.
We'll hold your premium payments in the Money Market investment option until
the free look transfer date. Please turn to Your right to cancel for details.
Transferring among investment options
You can transfer among the investment options during the life of your policy
without paying any current income tax. There is currently no charge for
transfers.
You can make as many transfers as you like between variable investment options.
You can also make automatic transfers from one variable investment option to
another using our dollar cost averaging or portfolio rebalancing programs.
These programs are not available for the fixed options.
You can only make one transfer from each fixed option in any 12-month period.
For the Fixed account, each transfer may be no more than $5,000 or 25% of the
accumulated value in the Fixed account, whichever is greater. For the Fixed LT
account, each transfer may be no more than $5,000 or 10% of the accumulated
value in the Fixed LT account, whichever is greater. You can only transfer to
the fixed options in the policy month right before each policy anniversary.
You can also make automatic transfers from the Fixed account to other
investment options during the first policy year using our first year transfer
program.
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Withdrawals, surrenders and loans You can take out all or part of your policy's accumulated value while your
policy is in force by making withdrawals or surrendering your policy. You can
Making a withdrawal, taking out a loan or take out a loan from us using your policy as security. You can also use your
surrendering your policy can change your policy's loan and withdrawal features to supplement your income, for example,
policy's tax status, generate taxable during retirement.
income, or make your policy more
susceptible to lapsing. Be sure to plan Making withdrawals
carefully before using these policy You can withdraw part of your policy's net cash surrender value starting on
benefits. your policy's first anniversary. This reduces your policy's accumulated value
and could affect the face amount and death benefit.
You'll find more about withdrawals,
surrenders and loans starting on page 41.
6
Taking out a loan
You can take out a loan from us using your policy's accumulated value as
security. You pay interest at an annual rate of 3.55% on the amount you borrow.
The accumulated value used to secure your loan is set aside in a loan account,
where it earns interest at an annual rate of 3% during the first 10 policy
years, and 3.3% thereafter.
The amount in the loan account is not available to help pay for any policy
charges. Taking out a loan affects the accumulated value of your policy because
the amount set aside in the loan account misses out on the potential earnings
available through the investment options.
Surrendering your policy
You can surrender or cash in your policy for its net cash surrender value while
the person insured by the policy is still living. If you surrender your policy
during the first 10 policy years, we'll apply a surrender charge. If you
increase your policy's face amount and surrender your policy during the first
10 years after the increase, we'll apply a surrender charge to the amount of
the increase.
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Variable life insurance and your taxes Your beneficiary generally will not have to pay federal income tax on death
benefit proceeds. You'll also generally not be taxed on any or all of your
There are tax issues to consider when you policy's accumulated value unless you receive a cash distribution by making a
own a life insurance policy. These are withdrawal or surrendering your policy.
described in detail starting on page 49.
If your policy is a modified endowment contract, all distributions you receive
during the life of the policy may be subject to tax and a 10% penalty.
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About PL&A PL&A is a life insurance company based in Arizona. We issue the policies.
Pacific Mutual Distributors, Inc., our affiliate, is the distributor of the
When you buy a life insurance policy, policies.
you're relying on the insurance company
that issues it to be able to meet its How our accounts work
financial obligations to you. We put your premium payments in our general and separate accounts. We own the
assets in our accounts and make the allocations to the investment options
You'll find more about PL&A, and our you've chosen.
strength as a company, starting on page 53.
Amounts allocated to the fixed options are held in our general account. Our
We may use any profit derived from any general account includes all of our assets, except for those held in our
charges under the policy for any lawful separate accounts. Our ability to meet our obligations under the policy is
purpose, including our sales and backed by our strength as an insurance company.
distribution expenses.
Amounts allocated to the variable investment options are held in our separate
account. The assets in this account are kept separate from the assets in our
general account and our other separate accounts, and are protected from our
general creditors.
7
AN OVERVIEW OF PACIFIC SELECT EXEC II - NY
This section of the overview explains the fees and expenses associated with
your Pacific Select Exec II - NY policy.
Understanding policy expenses ----------------------------------------------------------------------------------
and cash flow
Your premium
The chart to the right illustrates how You make a
cash normally flows through a Pacific premium payment
Select Exec II - NY policy. We deduct a
premium load
The dark shaded boxes show the fees
and expenses you pay directly or Net premium
indirectly under your policy. These are We allocate the
explained in the pages that follow. net premium to
the investment
We'll hold your net premium payments in options you
the Money Market investment option choose
until the free look transfer date.
Please turn to Your right to cancel for Fixed options Variable Pacific Select The fund deducts
details. We hold amounts investment Fund advisory fees and
you allocate to options The variable other fund
these options in We hold amounts investment options expenses from the
our general you allocate to invest in the portfolios
account these options fund's portfolios
in our separate
account.
We deduct:
. cost of
insurance
We make monthly deductions . administrative
charge
. mortality and
. expense risk
charge
. rider charges
Loan account Accumulated
Accumulated value We deduct a
value set aside The total value If you make a withdrawal withdrawal charge
to secure of your policy
a policy loan
We deduct a
surrender charge
If you surrender your policy . during the first
10 policy years
. during the first
10 years after
you increase
the face amount
8
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Deductions from your premiums We deduct a premium load from each premium payment you make. The load is made
up of three charges:
The premium load is explained in more
detail on page 27. Sales load - 2.5% of each premium payment.
State and local tax charge - 2.35% of each premium payment.
Federal tax charge - 1.50% of each premium payment.
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Deductions from your policy's We deduct a monthly charge from your policy's accumulated value in the
accumulated value investment options on each monthly payment date. This charge is made up of
three charges:
The monthly charge is explained in more
detail starting on page 29. Cost of insurance - We deduct a cost of insurance charge based on the cost of
insurance rate for your policy's initial face amount and for each increase you
An example make to the face amount. We calculate this charge by multiplying the current
cost of insurance rate by a discounted net amount at risk at the beginning of
For a policy that insures a male non- each policy month. When the person insured by the policy reaches age 100, the
smoker who is age 45 when the policy is cost of insurance charge is zero--in other words, you no longer pay any cost of
issued, with: insurance charge.
. a face amount of $350,000 Administrative charge - We deduct a charge of $7.50 a month. When the person
. accumulated value of $30,000 in the insured by the policy reaches age 100, the administrative charge is zero -- in
variable options. other words, you no longer pay any administrative charge.
The monthly charge for the M&E risk face Mortality and expense risk charge - The mortality and expense risk charge
amount charge is: varies depending on your policy's face amount, the age of the person insured by
the policy, and accumulated value. We deduct a charge based on your policy's
. $44.45 (($350,000 / 1,000) X 0.127) initial face amount and on each increase to the face amount. The charge is made
up of two separate charges:
The monthly charge for the M&E risk asset
charge is $17.09 in policy years 1 through . The M&E risk face amount charge, which we deduct every month during the
10 (($25,000 X 0.0625%) plus first 10 policy years at a rate that is based on the age of the person insured
($5,000 X 0.0292%)). by the policy on the policy date and each $1,000 of the initial face amount of
your policy. If you increase your policy's face amount, the charge for the
The monthly charge for the M&E risk asset amount of the increase is based on the age of the person insured by the policy
charge is $9.58 in policy year 11 and on the day of the increase.
thereafter (($25,000 X 0.0375%) plus
($5,000 X 0.0042%)). . The M&E risk asset charge, which we deduct every month of policy years 1
through 10 at an annual rate of:
Sample rates for the M&E risk face amount
charge appear in Appendix A. . 0.75% (0.0625% monthly), of the first $25,000 of your policy's accumulated
value in the variable investment options, plus
. 0.35% (0.0292% monthly), of the accumulated value in the investment options
that exceeds $25,000
and which we deduct every month of policy years 11 and thereafter at an annual
rate of:
. 0.45% (0.0375% monthly), of the first $25,000 of your policy's accumulated
value in the variable investment options, plus
. 0.05% (0.0042% monthly) of the accumulated value in the variable investment
options that exceeds $25,000.
For the purposes of this charge, accumulated value is calculated on the monthly
payment date before we deduct the monthly charge, but after we deduct any
outstanding loan amount or allocate any new net premiums, withdrawals or loans.
When the person insured by the policy reaches age 100, the annual rate is 0% --
in other words, you no longer pay this charge.
Riders - If you add any riders to your policy, we add any charges for them to
your monthly charge.
9
AN OVERVIEW OF PACIFIC SELECT EXEC II - NY
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Withdrawal and surrender charges You can withdraw part of your policy's net cash surrender value at any time
starting on your policy's first anniversary. There is a $25 charge for each
Withdrawal and surrender charges are withdrawal you make. We deduct this charge proportionately from all of your
explained in more detail on pages investment options.
41 and 44.
If you surrender or cash in your policy during the first 10 years of owning the
An example policy, we'll deduct a surrender charge. If you increase your policy's face
For a policy: amount and surrender your policy during the first 10 years after the increase,
. that insures a male non-smoker who is we'll apply a surrender charge to the amount of the increase.
age 45 when the policy is issued
. with an initial face amount of $350,000. The surrender charge is assessed at a rate that is based on the age and risk
class of the person insured by the policy on the policy date, and each $1,000
The surrender charge is: of the initial face amount of your policy. The amount of the surrender charge
does not change during the first policy year. Starting on the first policy
. $8,757.00 in the first policy year anniversary, we reduce the charge by 0.9259% a month until it reaches zero at
(($350,000 / $1,000) X 25.02) the end of 10 policy years.
. $2,919.16 at the end of the seventh Your policy's surrender charge will never be greater than the maximum surrender
policy year ($8,757.00 - ($8,757.00 X charge. The maximum surrender charge is calculated at a rate that is based on
.9259% X 72 months)) the age and risk class of the person insured by the policy on the policy date,
and each $1,000 of the initial face amount of your policy. It does not change
However, we will never deduct more than during the first 10 policy years, and then is reduced to zero at the end of the
the maximum surrender charge, which is 10th policy year.
$4,426.10.
If you increase your policy's face amount, each increase has a surrender charge
Sample rates for the surrender charge and and maximum surrender charge based on the amount of the increase. If you
the maximum surrender charge appear decrease the face amount, the decrease will not affect your policy's surrender
in Appendix A. charge or maximum surrender charge.
10
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Fees and expenses paid by the The Pacific Select Fund pays advisory fees and other expenses. These are
Pacific Select Fund deducted from the assets of the fund's portfolios and may vary from year to
year. They are not fixed and are not part of the terms of your policy. If you
You'll find more about the Pacific Select choose a variable investment option, these fees and expenses affect you
Fund starting on page 34, and in the fund's indirectly because they reduce portfolio returns.
prospectus, which accompanies this prospectus.
Advisory fee
Pacific Life is the investment adviser to the fund. The fund pays an advisory
fee to them for these services. The table below shows the advisory fee as an
annual percentage of each portfolio's average daily net assets.
Other expenses
The table also shows expenses the fund paid in 1998 as an annual percentage of
each portfolio's average daily net assets. To help limit fund expenses, Pacific
Life agreed to waive all or part of their investment advisory fees or otherwise
reimburse each portfolio for expenses (not including advisory fees, additional
costs associated with foreign investing and extraordinary expenses) that exceed
0.25% of its average daily net assets. Pacific Life does this voluntarily, but
do not guarantee that they'll continue to do so after December 31, 2000. No
reimbursement was necessary for 1998.
-----------------------------------------------------------------
Portfolio Advisory fee Other expenses Total expenses
-----------------------------------------------------------------
Money Market/1/ 0.37% 0.06% 0.43%
High Yield Bond/1/ 0.60% 0.06% 0.66%
Managed Bond 0.60% 0.06% 0.66%
Government Securities 0.60% 0.06% 0.66%
Growth 0.65% 0.05% 0.70%
Aggressive Equity 0.80% 0.09% 0.89%
Growth LT 0.75% 0.05% 0.80%
Equity Income/1/ 0.65% 0.05% 0.70%
Multi-Strategy/1/ 0.65% 0.06% 0.71%
Large-Cap Value/2/ 0.85% 0.06% 0.91%
Mid-Cap Value/2/ 0.85% 0.06% 0.91%
Equity 0.65% 0.06% 0.71%
Bond and Income 0.60% 0.10% 0.70%
Equity Index 0.16% 0.05% 0.21%
Small-Cap Index/2/ 0.50% 0.06% 0.56%
REIT/2/ 1.10% 0.06% 1.16%
International 0.85% 0.15% 1.00%
Emerging Markets 1.10% 0.36% 1.46%
-----------------------------------------------------------------
/1/ Total net expenses for these portfolios in 1998, after deduction of an
offset for custodian credits, was: 0.42% for Money Market Portfolio, 0.65% for
High Yield Bond Portfolio, 0.69% for Equity Income Portfolio, and 0.70% for
Multi-Strategy Portfolio.
/2/ Expenses are estimated. There were no actual advisory fees or other
expenses for these portfolios in 1998 because the portfolios started on January
4, 1999.
11
PACIFIC SELECT EXEC II - NY BASICS
When you buy a Pacific Select Exec II - NY life insurance policy, you're
entering into a contract with Pacific Life & Annuity Company. Your contract
with us is made up of your application, your policy, applications to change or
reinstate the policy, any amendments, riders or endorsements to your policy,
and specification pages.
Policy amendments and When we approve your signed application, we'll issue your policy. If your
endorsements are a part of your application does not meet our underwriting requirements, we can reject it or
policy and confirm changes you or ask you for more information. Once we receive your first premium payment, the
we make to the policy. policy has been delivered to you and any delivery requirements have been met,
we'll consider your policy to be in force. That's when our obligations under
Specification pages summarize the policy begin.
information specific to your
policy at the time the policy is Your policy will be in force until one of the following happens:
issued. . the person insured by the policy dies
. the grace period expires and your policy lapses, or
Riders provide extra benefits, . you surrender your policy.
some at additional cost. Some
riders may only be added when you If your policy is not in force when the person insured by the policy dies, we
apply for your policy. are not obligated to pay the death benefit proceeds to your beneficiary.
This policy may be appropriate if Pacific Select Exec II - NY is a flexible premium variable life insurance
you want to provide a death policy that insures the life of one person and pays death benefit proceeds
benefit for family members or after that person has died.
others or to help meet other
long-term financial objectives. Under a flexible premium life insurance policy, you have the flexibility to
It may not be the right kind of choose the amount and frequency of your premium payments. You must, however,
policy if you plan to withdraw pay enough premiums to cover the ongoing cost of policy benefits.
money for short-term needs.
A premium load is deducted from each premium payment you make. The resulting
Please discuss your insurance net premium is allocated to the investment options you choose, and becomes part
needs and financial objectives of your policy's accumulated value.
with your registered
representative. Charges are deducted from the accumulated value each month to help cover the
cost of the policy's death benefit and other expenses. If there is not enough
We'll hold your net premium accumulated value to cover the monthly charge on the day we make the deduction,
payments in the Money Market your policy may lapse after a grace period - which means you'll no longer have
investment option until the free any insurance coverage.
look transfer date. Please turn
to Your right to cancel for Investment earnings will increase your policy's accumulated value, while
details. investment losses will decrease it. The premium payments you'll be required to
make to keep your policy in force will be influenced by the investment results
of the investment options you've chosen.
12
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Owners, person insured by the Owners
policy, and beneficiaries The owner is the person named on the application who makes the decisions about
the policy and its benefits while it's in force. You can own a policy by
Please consult your financial yourself or with someone else. Two or more owners are called joint owners. You
advisor or a lawyer about need the signatures of all owners for all policy transactions.
designating ownership interests.
If one of the joint owners dies, the surviving owners will hold all rights
If you would like to change the under the policy. If the last joint owner dies, his or her estate will own the
owner of your policy, please policy unless you've given us other instructions.
contact us or your registered
representative for a change of A policy can also be owned by an institution, trust, corporation or group or
owner form. We can process the sponsored arrangement. These owners often buy more than one policy, which may
change only if we receive your qualify them for reduced charges or lower premium payments.
instructions in writing.
We may reduce or waive the sales load or surrender charges on policies sold to
our directors or employees, to any of our affiliates, or to trustees, employees
or affiliates of the fund.
You can change the owner of your policy by completing a change of owner form.
Once we've received and recorded your request, the change will be effective as
of the day you signed the change of owner form.
Person insured by the policy
Risk classes are usually based on This policy insures the life of one person who is age 85 or younger at the time
age, gender, health and whether you apply for your policy, and who has given us satisfactory evidence of
or not the person to be insured insurability. Your policy refers to this person as the insured. The policy pays
by the policy smokes. Most death benefit proceeds after this person has died.
insurance companies use similar
risk classification criteria. The person to be insured by the policy is assigned an underwriting or insurance
risk class which we use to calculate cost of insurance and other charges. We
When we refer to age throughout normally use the medical or paramedical underwriting method to assign
this prospectus, we're using the underwriting or insurance risk classes, which may require a medical
word as we've defined it here, examination. We may, however, use other forms of underwriting if we think it's
unless we tell you otherwise. appropriate.
When we use a person's age in policy calculations, we generally use his or her
age as of the nearest policy date, and we add one year to this age on each
policy anniversary date. For example, when we talk about someone "reaching age
100", we're referring to the policy anniversary date closest to that person's
100th birthday, not to the day when he or she actually turns 100.
13
PACIFIC SELECT EXEC II - NY BASICS
Beneficiaries
The beneficiary is the person, people, entity or entities you name to receive
the death benefit proceeds. Here are some things you need to know about naming
beneficiaries:
. You can name one or more primary beneficiaries who each receive an equal share
of the death benefit proceeds unless you tell us otherwise. If one beneficiary
dies, his or her share will pass to the surviving primary beneficiaries in
proportion to the share of the proceeds they're entitled to receive, unless you
tell us otherwise.
If you would like to change the
beneficiary of your policy, . You can also name a contingent beneficiary for each primary beneficiary you
please contact us or your name. The contingent beneficiary will receive the death benefit proceeds if the
registered representative for a primary beneficiary dies.
change of beneficiary form. We
can process the change only if we . You can choose to make your beneficiary permanent (sometimes called
receive your instructions in irrevocable). You cannot change a permanent beneficiary's rights under the
writing. policy without his or her permission.
. If none of your beneficiaries is still living when the death benefit proceeds
are payable, you as the policy owner will receive the proceeds. If you're no
longer living, the proceeds will go to your estate.
. You can change your beneficiary at any time while the person insured by the
policy is still living, and while the policy is in force. The change will be
effective as of the day you signed the change of beneficiary form.
--------------------------------------------------------------------------------
Policy date, monthly payment Your policy date
date, policy anniversary date This is usually the day we approve your policy application. It's also the
beginning of your first policy year. Your policy's monthly, quarterly, semi-
annual and annual anniversary dates are based on your policy date.
The policy date is set so that it never falls on the 29th, 30th or 31st of any
month. We'll apply your first premium payment as of your policy date or as of
the day we receive your premium, whichever is later.
Backdating your policy
You can have your policy backdated up to six months, as long as we approve it.
Backdating in some cases may lower your cost of insurance rates since these
rates are based on the age of the person insured by the policy. Your first
premium payment must cover the premium load and monthly charges for the period
between the backdated policy date and the day your policy is issued.
Your monthly payment date
This is the day we deduct the monthly charges from your policy's accumulated
value. The first monthly payment date is your policy date, and it's the same
day each month thereafter. Monthly charges are explained in the section called
Your policy's accumulated value.
Your policy anniversary date
This is the same day as your policy date every year after we issue your policy.
A policy year starts on your policy date and each anniversary date, and ends on
the day before the next anniversary date.
14
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Statements and reports we'll send We send the following statements and reports to policy owners:
you
. a confirmation for many financial transactions, usually including premium
We can create customized payments and transfers, loans, loan repayments, withdrawals and surrenders.
hypothetical illustrations of Monthly deductions and scheduled transactions made under the dollar cost
benefits under your policy based averaging, portfolio rebalancing and first year transfer programs are reported
on different assumptions. You'll on your quarterly policy statement.
find sample illustrations
starting on page 106. . a quarterly policy statement. The statement will tell you the accumulated
value of your policy by investment options, cash surrender value, the amount of
We'll send you one policy the death benefit, the policy's face amount, and any outstanding loan amount.
illustration free of charge each It will also include a summary of all transactions that have taken place since
policy year if you ask for one. the last quarterly statement, as well as any other information required by law.
We reserve the right to charge
$25 for additional illustrations. . supplemental schedules of benefits and planned periodic premiums. We'll send
these to you if you change your policy's face amount or change any of the
policy's other benefits.
. financial statements, at least annually or as required by law, of the separate
account and Pacific Select Fund, that include a listing of securities for each
portfolio of the Pacific Select Fund.
--------------------------------------------------------------------------------
Your right to cancel During the free look period, you have the right to cancel your policy and
return it to us or your registered representative for a refund.
Please call us or your registered
representative if you have The amount of your refund will be the amount of the premium payments you've
questions about your right to made. We'll always deduct any outstanding loan amount from the amount we refund
cancel your policy. to you.
You'll find a complete description of the free look period that applies to your
policy on the policy's cover sheet, or on a notice that accompanied your
policy. The free look period ends 10 days after you receive your policy. If you
are replacing another life insurance policy, your free-look period ends 60 days
after you receive your policy.
If you cancel your policy during the free-look period, we're required to refund
the premium payments you've made. We'll hold the net premiums in the Money
Market investment option until the free look transfer date. On that day, we'll
transfer the accumulated value in the Money Market investment option to the
investment options you've chosen.
The free look transfer date is the latest of the following:
. 15 days after we issue your policy
. when we consider your policy to be in force.
15
PACIFIC SELECT EXEC II - NY BASICS
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Timing of payments, forms and Effective date
requests The effective date of payments, forms and requests you send us is usually
determined by the day and time we receive the item in proper form at the
A business day, called a mailing address that appears on the back cover of this prospectus.
valuation date in your policy, is
any day that the New York Stock Planned periodic premium payments, loan requests, transfer requests, loan
Exchange and our life insurance payments or withdrawal or surrender requests that we receive in proper form
client services offices are open. before 4:00 p.m. Eastern time on a business day will normally be effective as
It usually ends at 4:00 p.m. of the end of that day, unless the transaction is scheduled to occur on another
Eastern time. business day. If we receive your payment or request on or after 4:00 p.m.
Eastern time on a business day, your payment or request will be effective as of
The New York Stock Exchange is the end of the next business day. If a scheduled transaction falls on a day
usually closed on weekends and on that is not a business day, we'll process it as of the end of the next business
the following days: day.
. New Year's Day, Martin Luther
King, Jr. Day, President's Day, Other forms, notices and requests are normally effective as of the next
Good Friday, Memorial Day, July business day after we receive them in proper form, unless the transaction is
Fourth, Labor Day, Thanksgiving scheduled to occur on another business day. Change of owner and beneficiary
Day and Christmas Day. forms are effective as of the day you sign the change form, once we receive
them in proper form.
Our client services offices are
also usually closed on the Proper form
following days: We'll process your requests once we receive all letters, forms or other
. the Monday before New Year's necessary documents, completed to our satisfaction. Proper form may require,
Day, July Fourth, or Christmas among other things, a signature guarantee or some other proof of authenticity.
Day, if any of these holidays We do not generally require a signature guarantee, but we may ask for one if it
falls on a Tuesday appears that your signature has changed, if the signature does not appear to be
. the Tuesday before Christmas yours, if we have not received a properly completed application or confirmation
Day if that holiday falls on of an application, or for other reasons to protect you and us.
a Wednesday
. the Friday after New Year's
Day, July Fourth or Christmas
Day, if any of these holidays
falls on a Thursday
. the Friday after Thanksgiving.
Call us or contact your
registered representative if you
have any questions about the
proper form required for a
request.
16
When we make payments and transfers
We'll normally send the proceeds of transfers, withdrawals, loans, surrenders,
To request payment of death exchanges and death benefit payments within seven days after the effective date
benefit proceeds, send us proof of the request. We may delay payments and transfers, or the calculation of
of death and payment payments and transfers based on the value in the variable investment options
instructions. under unusual circumstances, for example, if:
. the New York Stock Exchange closes on a day other than a regular holiday or
weekend
. trading on the New York Stock Exchange is restricted
. an emergency exists as determined by the SEC, as a result of which the sale of
securities is not practicable, or it is not practicable to determine the value
of a variable account's assets, or
. the SEC permits a delay for the protection of policy owners.
We may delay transfers and payments from the fixed options, including the
proceeds from withdrawals, surrenders and loans, for up to six months. We'll
pay interest at an annual rate of at least 3% on any withdrawals or surrender
proceeds from the fixed options that we delay for 30 days or more.
We pay interest at an annual rate of at least 3% on death benefit proceeds,
calculated from the day the person insured by the policy dies to the day we pay
the proceeds.
--------------------------------------------------------------------------------
Telephone transactions You can make loans or transfers by telephone any time after the free look
period as long as we have your signed authorization form on file.
Here are some things you need to know about telephone transactions:
. You must complete a telephone authorization form.
. If your policy is jointly owned, all joint owners must sign the telephone
authorization. We'll take instructions from any owner.
. We may use any reasonable method to confirm that your telephone instructions
are genuine. For example, we may ask you to provide personal identification or
we may record all or part of the telephone conversation. We may refuse any
transaction request made by telephone.
We'll send you a written confirmation of each telephone transaction.
Sometimes, you may not be able to make loans or transfers by telephone, for
example, if our telephone lines are busy because of unusual market activity or
a significant economic or market change, or our telephone lines are out of
service during severe storms or other emergencies. In these cases, you can send
your request to us in writing, or call us the next business day or when service
has resumed.
When you send us your telephone authorization form, you agree that:
. we can accept and act upon instructions you give us over the telephone
. neither we, Pacific Life, any of our other affiliates, the Pacific Select
Fund, or any director, trustee, officer, employee or agent of ours or theirs
will be liable for any loss, damages, cost or expenses that result from
transactions processed because of a request by telephone that we believe to be
genuine, as long as we have followed our own procedures
. you bear the risk of any loss that arises from your right to make loans or
transfers over the telephone.
17
THE DEATH BENEFIT
We'll pay death benefit proceeds to your beneficiary after the person insured
by the policy dies while the policy is still in force. Your beneficiary
generally will not have to pay federal income tax on death benefit proceeds.
Your policy's initial amount of This policy offers three death benefit options, Options A, B and C. The option
insurance coverage is its initial you choose will generally depend on which is more important to you: a larger
face amount. We determine the death benefit or building the accumulated value of your policy.
face amount based on instructions
provided in your application. This policy offers two ways to calculate the guideline minimum death benefit:
the cash value accumulation test and the guideline premium test. These are
The minimum face amount when a called death benefit qualification tests. The test you choose will generally
policy is issued is usually depend on the amount of premiums you want to pay.
$50,000, but we may reduce this
in some circumstances. Here are some things you need to know about the death benefit:
. You choose your death benefit option and death benefit qualification test
You'll find your policy's face on your policy application.
amount, which includes any . If you do not choose a death benefit option, we'll assume you've chosen
increases or decreases, in the Option A.
specification pages in your . If you do not choose a death benefit qualification test, we'll assume
policy. you've chosen the guideline premium test.
. The death benefit will always be the greater of the death benefit under
the option you choose or the guideline minimum death benefit, calculated using
the death benefit qualification test you've chosen.
. The death benefit will never be lower than the face amount of your policy
if you've chosen Option A or B. Of course, the death benefit proceeds will
always be reduced by any outstanding loan amount.
. We'll pay the death benefit proceeds to your beneficiary when we receive
proof of the death of the person insured by the policy.
--------------------------------------------------------------------------------
Choosing your death benefit option You can choose one of the following three options for the death benefit on your
application.
Option A - the face amount of your policy. Option B - the face amount of your policy
plus its accumulated value.
[GRAPHIC APPEARS HERE] [GRAPHIC APPEARS HERE]
The death benefit changes as your policy's
accumulated value changes. The better your
investment options perform, the larger the
death benefit will be.
Option C - the face amount of your policy
plus the total premiums you've paid minus
any withdrawals or distributions made.
[GRAPHIC APPEARS HERE]
The more premiums you pay and the less you
withdraw, the larger the death benefit will be.
18
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Choosing a death benefit This policy offers two death benefit qualification tests, which we use to
qualification test calculate the guideline minimum death benefit. You choose one of these tests on
your application. Once you choose a test, you cannot change it.
The guideline minimum death benefit is the
minimum death benefit needed for your In general, you should choose the cash value accumulation test if you do not
policy to qualify as life insurance under want to limit the amount of premiums you can pay into your policy. If you want
Section 7702 of the Internal Revenue Code. to pay a premium that increases the net amount at risk, however, you need to
provide us with satisfactory evidence of insurability before we can increase
Net amount at risk is the difference between the death benefit.
the death benefit that would be payable if
the person insured by the policy died and The guideline minimum death benefit will generally be smaller under the
the accumulated value of your policy. guideline premium test than under the cash value accumulation test.
There are other limits on premiums you can Cash value accumulation test
pay into your policy, which are described If you choose the cash value accumulation test, your policy's guideline minimum
in How premiums work. death benefit will be the greater of:
. the minimum death benefit amount that's needed for the policy to qualify as
life insurance under the tax code or
The cash value accumulation test is . 101% of the policy's accumulated value.
defined in Section 7702(b) of the tax code.
This test determines what the death benefit should be in relation to your
policy's accumulated value. In general, as your policy's accumulated value
increases, the death benefit must also increase to ensure that your policy
qualifies as life insurance under the tax code.
An example
For a policy that insures a male, age 45 Under the test, a policy's death benefit must be large enough to ensure that
when the policy was issued, with a standard its cash surrender value, as defined in Section 7702 of the tax code (and which
nonsmoking risk class, in Policy Year 6 the is based on accumulated value, among other things), is never larger than the
guideline minimum death benefit under the net single premium that's needed to fund future benefits under the policy. The
cash value accumulation test is calculated net single premium under your policy varies according to the age, sex, and risk
by multiplying each $1,000 of accumulated class of the person insured by your policy. It's calculated using an interest
value by a "net single premium factor" rate of at least 4% and the guaranteed mortality charges as of the time the
of 2.4728. policy is issued. We'll use a higher interest rate if we've guaranteed it under
your policy.
The death benefit determined by your policy's net single premium will be at
least equal to the amount required for the policy to qualify as life insurance
under the tax code.
Guideline premium test
The guideline premium test is defined in If you choose the guideline premium test, we calculate the guideline minimum
Section 7702(a)(2) of the tax code. death benefit by multiplying your policy's accumulated value by a death benefit
percentage.
Death benefit percentages are defined in You'll find a table of death benefit percentages in Appendix D and in your
Section 7702(d) of the tax code. policy. The death benefit percentage is based on the guideline premium limit
and the age of the person insured by the policy. It is 250% when the person is
age 40 or younger, and reduces as the person gets older.
Under this test, the total premiums you pay cannot exceed your policy's
guideline premium limit. You'll find a more detailed discussion of the
guideline premium limit in How premiums work.
19
THE DEATH BENEFIT
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Comparing the death benefit options The tables below compare the death benefits provided by the policy's three
death benefit options. The examples are intended only to show differences in
death benefits and net amounts at risk. Accumulated value assumptions may not
be realistic.
The example below is based on the following:
. the person insured by the policy is age 45 at the time the policy was issued
and dies at the beginning of the sixth policy year
. face amount is $100,000
. accumulated value at the date of death is $25,000
. total premium paid into the policy is $30,000
. the guideline minimum death benefit under the guideline premium test is
$46,250 (assuming a guideline premium test factor of 185% x accumulated
value)
. the guideline minimum death benefit under the cash value accumulation test is
$61,820.00 (assuming a net single premium factor of $2.4728 for each $1,000
of accumulated value)
-------------------------------------------------------------------------------------
If you select the guideline
premium test, the death
benefit is the larger of
these two amounts
---------------------------
Death Death benefit Guideline Net amount at
benefit How it's under minimum risk used for cost
option calculated the option death benefit of insurance charge
-------------------------------------------------------------------------------------
Option A Face amount $100,000 $46,250 $74,754.01
Option B Face amount plus
accumulated value $125,000 $46,250 $99,692.51
Option C Face amount plus
premiums less distributions $130,000 $46,250 $104,680.21
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
If you select the cash
value accumulation test, the
death benefit is the larger
of these two amounts
---------------------------
Death Death benefit Guideline Net amount at
benefit How it's under minimum risk used for cost
option calculated the option death benefit of insurance charge
-------------------------------------------------------------------------------------
Option A Face amount $100,000 $61,820.00 $74,754.01
Option B Face amount plus
accumulated value $125,000 $61,820.00 $99,692.51
Option C Face amount plus
premiums less distributions $130,000 $61,820.00 $104,680.21
-------------------------------------------------------------------------------------
20
If the death benefit equals the guideline Here's the same example, but with an accumulated value of $75,000. Because
minimum death benefit, any increase in accumulated value has increased, the guideline minimum death benefit is now:
accumulated value will cause an automatic
increase in the death benefit. . $138,750 for the guideline premium test
. $185,460 for the cash value accumulation test.
-------------------------------------------------------------------------------------
If you select the guideline
premium test, the death
benefit is the larger of
these two amounts
---------------------------
Death Death benefit Guideline Net amount at
benefit How it's under minimum risk used for cost
option calculated the option death benefit of insurance charge
-------------------------------------------------------------------------------------
Option A Face amount $100,000 $138,750 $63,408.68
Option B Face amount plus
accumulated value $175,000 $138,750 $99,569.51
Option C Face amount plus
premiums less distributions $130,000 $138,750 $63,408.68
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
If you select the cash
value accumulation test,
the death benefit is the
larger of these two amounts
---------------------------
Death Death benefit Guideline Net amount at
benefit How it's under minimum risk used for cost
option calculated the option death benefit of insurance charge
-------------------------------------------------------------------------------------
Option A Face amount $100,000 $185,460 $110,003.78
Option B Face amount plus
accumulated value $175,000 $185,460 $110,003.78
Option C Face amount plus
premiums less distributions $130,000 $185,460 $110,003.78
-------------------------------------------------------------------------------------
These examples show that each death benefit option provides a different level
of protection. Keep in mind that cost of insurance charges, which affect your
policy's accumulated value, increase with the amount of the death benefit, as
well as over time. The cost of insurance is charged at a rate per $1,000 of the
discounted net amount at risk. As the net amount at risk increases, your cost
of insurance increases. Accumulated value also varies depending on the
performance of the investment options in your policy.
21
THE DEATH BENEFIT
--------------------------------------------------------------------------------
When we pay the death benefit We calculate the amount of the death benefit proceeds as of the end of the day
the person insured by the policy dies. If that person dies on a day that is not
Your beneficiary can choose to receive the a business day, we calculate the proceeds as of the next business day.
death benefit proceeds in a lump sum or use
it to buy an income benefit. Please see the Your policy's beneficiary must send us proof that the person insured by the
discussion about income benefits in General policy died while the policy was in force, along with payment instructions.
information about your policy.
Death benefit proceeds equal the total of the death benefits provided by your
It is important that we have a current policy and any riders you've added, minus any outstanding loan amount, minus
address for your beneficiary so that we can any overdue charges.
pay death benefit proceeds promptly. If we
cannot pay the proceeds to your beneficiary We'll pay interest at an annual rate of at least 3% on the death benefit
within five years of the death of the person proceeds, calculated from the day the person insured by the policy dies to the
insured by the policy, we'll be required to day we pay the proceeds.
pay them to the state.
--------------------------------------------------------------------------------
Changing your death benefit option You can change your death benefit option while your policy is in force. Here's
how it works:
We will not change your death benefit option
if it means your policy will be treated as a . You can change the death benefit option once in any policy year.
modified endowment contract, unless you've
told us in writing that this would be . You must send us your request in writing.
acceptable to you. Modified endowment
contracts are discussed in Variable life . You can change to Option A or Option B.
insurance and your taxes.
. You cannot change from any death benefit option to Option C.
Net amount at risk is the difference between
the death benefit that would be payable if . The change will become effective on the first monthly payment date after we
the person insured by the policy died and receive your request. If we receive your request on a monthly payment date,
the accumulated value of your policy. we'll process it that day.
. The face amount of your policy will change by the amount needed to make the
death benefit under the new option equal the death benefit under the old option
just before the change. We will not let you change the death benefit option if
doing so means the face amount of your policy will become less than $50,000. We
may waive this minimum amount under certain circumstances.
. Changing the death benefit option can also affect the monthly cost of
insurance charge since this charge varies with the net amount at risk.
. The new death benefit option will be used in all future calculations.
22
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Changing the face amount You can increase or decrease your policy's face amount starting on the first
policy anniversary as long as we approve it. Here's how it works:
If you change the face amount, we'll send
you a supplemental schedule of benefits . You can change the face amount as long as the person insured by the policy is
and premiums. still living.
If your policy's death benefit is equal to . You can only change the face amount once in any policy year.
the guideline minimum death benefit, and
the net amount at risk is more than three . You must send us your request in writing while your policy is in force.
times the death benefit on the policy date,
we may reduce the death benefit by . The change will become effective on the first monthly payment date after we
requiring you to make a withdrawal from receive your request. If we receive your request on a monthly payment date,
your policy. we'll process it that day.
If we require you to make a withdrawal, we . The person insured by the policy will also need to agree to the change in
will not charge you our usual $25 face amount, if that person is someone other than you.
withdrawal fee, but the withdrawal may be
taxable. Please turn to Withdrawals, . Increasing the face amount may increase the death benefit, and decreasing the
surrenders and loans for information about face amount may decrease the death benefit. The amount the death benefit
making withdrawals. changes will depend, among other things, on the death benefit option you've
chosen and whether, and by how much, the death benefit is greater than the
face amount before you make the change.
. Changing the face amount can affect the net amount at risk, which affects the
cost of insurance charge. An increase in the face amount may increase the cost
of insurance charge, while a decrease may decrease the charge.
. We can refuse your request to make the face amount less than $50,000. We can
waive this minimum amount in certain situations, such as group or sponsored
arrangements.
Increasing the face amount
Here are some additional things you should know about increasing the face
amount:
. You must give us satisfactory evidence of insurability.
. Each increase you make to the face amount must be $25,000 or more.
. We may charge you a fee of up to $100 for each increase to cover the costs of
processing the request. We deduct the fee on the day the increase is effective
from all of your investment options in proportion to the accumulated value you
have in each option.
. Increasing the face amount will increase the mortality and expense risk
charge.
. For any increase in face amount which arises from conversion of a term rider,
we will waive the surrender charge and the mortality and expense risk charge
that would otherwise apply for the increase.
. We will allow an increase in face amount only if the resulting death benefit
increase at least equals our minimum limit on the request date.
. We will not allow an increase if there has been a prior decrease in face
amount, including any decrease caused by a withdrawal.
Decreasing the face amount may affect your Decreasing the face amount
policy's tax status. To ensure your policy Here are some additional things you should know about decreasing the face
continues to qualify as life insurance, we amount:
might be required to return part of your
premium payments to you if you've chosen the . We'll apply any decrease in the face amount in the following order:
guideline premium test, or make distributions . to the most recent increases you made to the face amount in the order you
from the accumulated value, which may made them
be taxable. . to the original face amount.
. We do not charge you for a decrease in face amount.
For more information, please see Variable . We can refuse your request to decrease the face amount if making the change
life insurance and your taxes. means:
. your policy will end because it no longer qualifies as life insurance
. the distributions we'll be required to make from your policy's accumulated
value will be greater than your policy's net cash surrender value
. your policy will become a modified endowment contract and you have not told
us in writing that this is acceptable to you.
23
THE DEATH BENEFIT
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Optional riders There are eight optional riders that provide extra benefits, some at additional
cost. Not all riders are available in every state, and some riders may only be
Ask your registered representative for more added when you apply for your policy.
information about the riders available with
the policy. . Accidental death rider
Provides additional insurance coverage in the event of the accidental death of
There may be tax consequences if you the person insured by the policy.
exercise your rights under the Accelerated
living benefits rider. Please see Variable . Children's term rider
life insurance and your taxes for more Provides term insurance for the children of the person insured by the policy.
information.
. Annual renewable term rider
Samples of the provisions for the extra Provides annual renewal term insurance on the person insured by the policy
optional benefits are available from us until age 80.
upon written request.
. Annual renewable and convertible term rider
Provides annual renewal term insurance on members of the immediate family of
the person insured by the policy.
. Guaranteed insurability rider
Gives the right to buy additional insurance on the life of the person insured
by the policy on certain specified dates without proof of insurability.
. Waiver of charges rider
Waives certain charges if the person insured by the policy becomes totally
disabled before age 60.
. Accelerated living benefits rider
Gives the policy owner access to a portion of the policy's death benefit if
the person insured by the policy has been diagnosed with a terminal illness
resulting in a life expectancy of six months or less (or longer than six
months in some states).
. Disability benefit rider
Provides a monthly addition to the policy's accumulated value when the person
insured by the policy has a qualifying disability, until he or she reaches age
65.
We guarantee the amounts of the extra benefits when we issue your rider. We'll
add any rider charges to the monthly charge we deduct from your policy's
accumulated value.
24
Things to keep in mind
Combining a policy and a rider may be more economical than adding another
policy. It may also be more economical to provide an amount of insurance
coverage through a policy alone.
Under certain circumstances, combining a policy with an Annual renewable term rider
may result in a face amount equal to the face amount of a single policy until age 80.
Combining a policy and an Annual renewable term rider will result in current charges
that are lower than for a single policy with the same face amount.
However, your policy has guaranteed maximum charges. Adding an Annual renewable
term rider will result in guaranteed maximum charges that are higher than for a
single policy with the same face amount.
25
HOW PREMIUMS WORK
Your policy gives you the flexibility to choose the amount and frequency of
your premium payments within certain limits. Each premium payment must be at
least $50.
The amount, frequency, and period of time
over which you make premium payments may We deduct a premium load from each premium payment, and then allocate your net
affect whether your policy will be premium to the investment options you've chosen. Depending on the performance
classified as a modified endowment contract, of your investment options, and on how many withdrawals, loans or other policy
or no longer qualifies as life insurance for features you've taken advantage of, you may need to make additional premium
tax purposes. See Variable life insurance payments to keep your policy in force.
and your taxes for more information.
If we do not receive your first premium payment within 20 days after we issue
your policy, we can cancel the policy and refund any partial premium payment
you've made. We may waive the 20 day requirement in some cases.
--------------------------------------------------------------------------------
Planned periodic premium payments You can schedule the amount and frequency of your premium payments. We refer to
scheduled premium payments as your planned periodic premium. Here's how it
works:
Even if you pay all your premiums when . On your application, you choose a fixed amount of at least $50 for each
they're scheduled, your policy could lapse premium payment.
if the accumulated value, less any
outstanding loan amount, is not enough to . You indicate whether you want to make premium payments annually, semi-
pay your monthly charges. Turn to Your annually, or quarterly. You can also choose monthly payments using our
policy's accumulated value for more monthly Uni-check plan, which is described below.
information.
. We send you a notice to remind you of your scheduled premium payment (except
for monthly Uni-check payments, which are paid automatically). If you own
more than one policy, we'll send one notice -- called a listbill -- that
reminds you of your payments for all of your policies. You can choose to
receive the listbill every month. While you do not have to make the premium
payments you've scheduled, not making a premium payment may have an impact on
any financial objectives you may have set for your policy's accumulated value
and death benefit, and could cause your policy to lapse.
. We'll treat any payment you make during the life of your policy as a loan
repayment, not as a premium payment, unless you tell us otherwise. When a
payment, or any portion of it, exceeds your outstanding loan amount, we'll
treat it as a premium payment. Some states may require us to consider your
payments as premium payments if you have not given us instructions to do
otherwise.
26
Monthly Uni-check plan
Once you've made your first premium payment, you can make monthly premium
payments using our Uni-check plan. Here's how it works:
. you authorize us to withdraw a specified amount from your checking account
each month
. you can choose any day between the 4th and 28th of the month
. if you do not specify a day for us to make the withdrawal, we'll withdraw
the premium payment on your policy's monthly anniversary. If your policy's
monthly anniversary falls on the 1st, 2nd or 3rd of the month, we'll withdraw
the payment on the 4th of each month.
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Deductions from your premiums We deduct a premium load from each premium payment you make. The load is made
up of three charges:
Your net premium is your premium payment
less the premium load. Sales load
We deduct a 2.5% sales load from each premium payment you make.
This charge helps pay for the cost of distributing our policies and is
guaranteed not to increase. If our sales and distribution expenses are more
than the sales load, we can recover these expenses from other charges, such as
the mortality and expense risk charge and the surrender charge, and from any
mortality gains.
State and local tax charge
We deduct 2.35% from each premium payment to pay state and local premium and
other taxes. The actual taxes we pay vary from state to state, and in some
instances, among municipalities. We do not expect to profit from this charge,
and do not expect to change the rate unless the rate we pay changes.
Federal tax charge
We deduct 1.50% from each premium payment to pay federal taxes. We reserve the
right to change this rate to respond to changes in law.
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Allocating your premiums We generally allocate your net premiums to the investment options you've chosen
on your application on the day we receive them.
There are special restrictions when
allocating premiums to the Fixed LT We allocate your first premium on the free look transfer date. We'll hold your
account. net premiums in the Money Market investment option until the free look transfer
date, and then transfer them to the investment options you've chosen.
Please turn to Your investment options for
more information about the investment
options.
27
HOW PREMIUMS WORK
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Limits on the premium payments Federal tax law puts limits on the amount of premium payments you can make in
you can make relation to your policy's death benefit. These limits apply in the following
situations:
Before you buy a policy, you can . If you've chosen the guideline premium test as your death benefit
ask us or your registered qualification test and accepting the premium means your policy will no longer
representative for a personalized qualify as life insurance for federal income tax purposes.
illustration that will show you
the guideline single premium and The total amount you can pay in premiums and still have your policy qualify as
guideline level annual premiums. life insurance is your policy's guideline premium limit. The sum of the
premiums paid, less any withdrawals, at any time cannot exceed the guideline
premium limit, which is the greater of:
. the guideline single premium or
. the sum of the guideline level annual premiums.
Your policy's guideline single premium and guideline level annual premiums
appear on your policy's specification pages.
We may refuse to accept all or part of a premium payment if, by accepting it,
you will exceed your policy's guideline premium limit. If we find that you've
exceeded your guideline premium limit, we may remove all or part of a premium
you've paid from your policy as of the day we applied it, and return it to you.
We'll adjust the death benefit retroactively to that date to reflect the
reduction in premium payments.
You'll find a detailed discussion . If applying the premium in that policy year means your policy will become a
of modified endowment contracts modified endowment contract.
in Variable life insurance and
your taxes. A life insurance policy will become a modified endowment contract if the sum of
premium payments made during the first seven contract years, less a portion of
withdrawals, exceeds the seven-pay limit defined in Section 7702A of the
Internal Revenue Code.
Unless you've told us in writing that you want your policy to become a modified
endowment contract, we'll remove all or part of the premium payment from your
policy as of the day we applied it and return it to you. We'll also adjust the
death benefit retroactively to that date to reflect the reduction in premium
payments. If we receive such a premium within 20 days before your policy
anniversary, we'll hold it and apply it to your policy on the anniversary date.
In both of these situations, if we remove an excess premium from your policy,
we'll return the premium amount to you no later than 60 days after the end of
that policy year. We may adjust the amount for interest or for changes in
accumulated value that relate to the amount of the excess premium payment we're
returning to you.
If we do not return the premium amount to you within that time, we'll increase
your policy's death benefit retroactively, to the day we applied the premium,
and prospectively so that it's always the amount necessary to ensure your
policy qualifies as life insurance, or to prevent it from becoming a modified
endowment contract. If we increase your death benefit, we'll adjust cost of
insurance or rider charges retroactively and prospectively to reflect the
increase.
Net amount at risk is the . If applying the premium payment to your policy will increase the net amount
difference between the death at risk. This will happen if your policy's death benefit is equal to the
benefit that would be payable if guideline minimum death benefit or would be equal to it once we applied your
the person insured by the policy premium payment.
died and the accumulated value of
your policy. We may choose to accept your premium payment in this situation, but before we
do so, we may require satisfactory evidence of the insurability of the person
insured by the policy.
We will not accept premium payments after the person insured by the policy
reaches age 100.
28
YOUR POLICY'S ACCUMULATED VALUE
Accumulated value is used as the Accumulated value is the value of your policy on any business day.
basis for determining policy
benefits and charges. We use it to calculate how much money is available to you for loans and
withdrawals, and how much you'll receive if you surrender your policy. It also
affects the amount of the death benefit if you choose a death benefit option
that's calculated using accumulated value.
The accumulated value of your policy is not guaranteed - it depends on the
performance of the investment options you've chosen, the premium payments
you've made, policy charges and how much you've borrowed or withdrawn from the
policy.
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Calculating your policy's Your policy's accumulated value is the total amount allocated to the variable
accumulated value investment options and the fixed options, plus the amount in the loan account.
Please see Taking out a loan for We determine the value allocated to the variable investment options on any
information about loans and the business day by multiplying the number of accumulation units for each variable
loan account. investment option credited to your policy on that day, by the variable
investment option's unit value at the end of that day. The process we use to
calculate unit values for the variable investment options is described in Your
investment options.
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Monthly deductions We deduct a monthly charge from your policy's accumulated value in the
investment options each monthly payment date.
If there is not enough
accumulated value to pay the Unless you tell us otherwise, we deduct the monthly charge from the investment
monthly charge, your policy could options that make up your policy's accumulated value, in proportion to the
lapse. The performance of the accumulated value you have in each option. This charge is made up of three
investment options you choose, charges:
not making planned premium
payments, or taking out a loan Cost of insurance
all affect the accumulated value This charge covers the cost of providing you with life insurance protection. We
of your policy. deduct a cost of insurance charge based on the cost of insurance rate for your
policy's initial face amount and for each increase you make to the face amount.
You'll find a discussion about
when your policy might lapse, and There are maximum or guaranteed cost of insurance rates associated with your
what you can do to reinstate it, policy. These rates are shown in your policy's specification pages. When the
later in this section. person insured by your policy reaches age 100, the guaranteed cost of insurance
rate is zero - in other words, you no longer pay any cost of insurance.
Unisex rates are used when a The guaranteed rates include the insurance risks associated with insuring one
policy is owned by an employer in person. They are calculated using 1980 Commissioners Standard Ordinary
connection with employment- Mortality Tables or the 1980 Commissioners Ordinary Mortality Table B, which
related or benefit programs. are used for unisex cost of insurance rates. The rates are also based on the
age, gender and risk class of the person insured by the policy unless unisex
rates are required.
Our current cost of insurance rates are based on the age, risk class, smoking
status and gender (unless unisex rates are required) of the person insured by
the policy. These rates generally increase as the person's age increases, and
they vary with the number of years the policy has been in force. Our current
rates are lower than the guaranteed rates and they will not exceed the
guaranteed rates in the future.
29
YOUR POLICY'S ACCUMULATED VALUE
Guaranteed period
We'll guarantee our current cost of insurance rates for five years.
If you increase the face amount, the cost of insurance rates associated with
the increase will have a five-year guaranteed period. This will be effective on
the day of the increase.
--------------------------------------------------------------------------------
If you add an annual renewable How we calculate cost of insurance
term rider to your policy, we We calculate cost of insurance by multiplying the current cost of insurance
will include the face amount of rate by a discounted net amount at risk at the beginning of each policy month.
the rider in this calculation of
cost of insurance. Net amount at risk for the cost of insurance calculation is the difference
between a discounted death benefit that would be payable if the person insured
by the policy died and the accumulated value of your policy at the beginning of
the policy month before the monthly charge is due.
First, we calculate the total net amount at risk for your policy in two steps:
. Step 1: we divide the death benefit that would be payable at the beginning of
the policy month by 1.002466.
. Step 2: we subtract your policy's accumulated value at the beginning of the
policy month from the amount we calculated in step 1.
Next, we allocate the net amount at risk in proportion to the face amount and
each increase that's in force as of your monthly payment date.
We then multiply the amount of each allocated net amount at risk by the cost of
insurance rate for each coverage. The sum of these amounts is your cost of
insurance charge.
30
Administrative charge
We deduct a charge of $7.50 a month to help cover the costs of administering
and maintaining our policies. We guarantee that this charge will not increase.
When the person insured by the policy reaches age 100, the administrative
charge is zero - in other words, you no longer pay any administrative charge.
Mortality and expense risk charge
Mortality risk is the chance that the people insured by policies we've issued
do not live as long as expected. This means the cost of insurance charges
specified in the policies may not be enough to pay out actual claims.
Expense risk is the chance that our actual administrative and operating
expenses are more than the fees and expenses deducted under the policies and
the separate account.
The mortality and expense risk charge helps compensate us for these risks. It
has two components, which are described in the following box. We guarantee this
charge will not increase.
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An example How we calculate the mortality and expense risk charge
For a policy that insures a male
non-smoker who is age 45 when the The mortality and expense risk charge has two separate charges:
policy is issued, with:
. a face amount of $350,000 . M&E risk face amount charge We deduct a face amount charge every month during
the first 10 policy years, at a rate that is based on the age of the person
. accumulated value of $30,000 in insured by the policy on the policy date and on a face amount component
the variable options after factor per $1,000 of the initial face amount of your policy. The rates for
deducting any outstanding loan the face amount component are shown in Appendix A.
amount.
If you increase the face amount, each increase will have a corresponding face
The monthly charge for the M&E amount charge related to the amount of the increase. We'll specify these
risk face amount charge is: charges in a supplemental schedule of benefits at the time of the increase.
. $44.45 (($350,000 / 1,000) X 0.127). We'll apply each charge for 10 years from the day of the increase. If you
decrease the face amount, the charge will remain the same.
The monthly charge for the M&E
risk asset charge is $17.09 in . M&E risk asset charge We deduct a risk asset charge every month.
policy years 1 through 10
(($25,000 X 0.0625%) plus During policy years 1 through 10, we charge an annual rate 0.75% (0.000625
($5,000 X 0.0292%)). monthly), of the first $25,000 of your policy's accumulated value in the
variable investment options, plus an annual rate of 0.35% (0.000292 monthly),
The monthly charge for the M&E of the accumulated value in the variable investment options that exceeds
risk asset charge is $9.58 in $25,000.
policy year 11 and thereafter
(($25,000 x 0.0375%) plus During policy years 11 and thereafter, we charge an annual rate of 0.45%
($5,000 x 0.0042%)). (0.0375% monthly) on the first $25,000 of your policy's accumulated value in
the variable investment options plus an annual rate of 0.05% (0.0042% monthly)
Sample rates for the M&E risk of the accumulated value in the variable investment options that exceeds
face amount charge appear in $25,000.
Appendix A.
For the purposes of this charge, the amount of accumulated value is calculated
on the monthly payment date before we deduct the monthly charge, but after we
deduct any outstanding loan amount or allocate any new net premiums,
withdrawals or loans. When the person insured by the policy reaches age 100,
the annual rate is 0%--in other words, you no longer pay this charge.
Charges for optional riders
If you add any riders to your policy, we add any charges for them to your
monthly charge.
31
YOUR POLICY'S ACCUMULATED VALUE
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Lapsing and reinstatement Your policy will lapse if there is not enough accumulated value, after
subtracting any outstanding loan amount, to cover the monthly charge on the day
we make the deduction. Your policy's accumulated value is affected by the
following:
. loans or withdrawals you make from your policy
. not making planned premium payments
. the performance of your investment options
. charges under the policy.
There is no guarantee that your policy will not lapse even if you pay your
planned periodic premium.
If there is not enough accumulated value to pay the total monthly charge, we
deduct the amount that's available and send you, and anyone you've assigned
your policy to, a notice telling you the minimum amount you have to pay to keep
your policy in force. This minimum amount is equal to three times the monthly
charge that was due on the monthly payment date when there was not enough
accumulated value to pay the charge.
We'll give you a grace period of 61 days from when we send the notice to pay
the required premium. Your policy will remain in force during the grace period.
If you do not make the minimum payment
If we do not receive your payment within the grace period, your policy will
lapse with no value. This means we'll end your life insurance coverage.
Remember to tell us if your payment is a If you make the minimum payment
premium payment. Otherwise, we'll
treat it as a loan repayment. If we receive your payment within the grace period, we'll allocate your net
premium to the investment options you've chosen and deduct the monthly charge
from your investment options in proportion to the accumulated value you have in
each option.
If your policy is in danger of lapsing and you have an outstanding loan amount,
you may find that making the minimum payment would cause the total premiums
paid to exceed the maximum amount for your policy's face amount under tax laws.
In that situation, we will not accept the portion of your payment that would
exceed the maximum amount. To stop your policy from lapsing, you'll have to
repay a portion of your outstanding loan amount.
How to avoid future lapsing
To stop your policy from lapsing in the future, you may want to make larger or
more frequent premium payments if tax laws permit it. Or if you have a loan,
you may want to repay a portion of it.
Paying death benefit proceeds during the grace period
If the person insured by the policy dies during the grace period, we'll pay
death benefit proceeds to your beneficiary. We'll reduce the payment by any
unpaid monthly charges and any outstanding loan amount.
32
Reinstating a lapsed policy
If your policy lapses, you have five years from the end of the grace period to
apply for a reinstatement. We'll reinstate it if you send us the following:
. a written application
. evidence satisfactory to us that the person insured by the policy is still
insurable
. a premium payment sufficient to keep your policy in force for three months
after the day your policy is reinstated
. payment of all unpaid monthly charges that were due in the grace period.
We'll reinstate your policy as of the first monthly payment date on or after
the day we approve the reinstatement. Once we reinstate your policy, its
accumulated value will be the same as it was on the day your policy lapsed.
We'll allocate it according to your most recent premium allocation
instructions.
Reinstating a lapsed policy with an outstanding loan amount
If you had an outstanding loan amount when your policy lapsed, we will not pay
or credit interest on it during the period between the lapsing and
reinstatement of your policy. There are special rules that apply to reinstating
a policy with an outstanding loan amount:
. If we reinstate your policy on the first monthly payment date that immediately
follows the lapse, we'll also reinstate the loan amount that was outstanding
the day your policy lapsed.
. If we reinstate your policy on any monthly payment date other than the monthly
payment date that immediately follows the lapse, we'll deduct the outstanding
loan amount from your policy's accumulated value. This means you will no longer
have an outstanding loan amount when your policy is reinstated.
33
YOUR INVESTMENT OPTIONS
This section tells you about the investment options available under your policy
and how they work.
You can change your premium allocation We put your premium payments in our general and separate accounts. We own the
instructions by writing, sending a fax, or, assets in our accounts and allocate your premiums, less any charges, to the
if we have your completed telephone investment options you've chosen. Amounts allocated to the fixed options are
authorization form on file, by calling us held in our general account. Amounts allocated to the variable investment
at 1-800-800-7681. Or you can ask your options are held in our separate account.
registered representative to contact us.
You choose your initial investment options on your application. If you choose
You'll find information about when we more than one investment option, you must tell us the dollar amount or
allocate premium payments to your percentage you want to allocate to each option. You can change your premium
investment options in How premiums work. allocation instructions at any time.
The investment options you choose, and how they perform, will affect your
policy's accumulated value and may affect the death benefit. Please review the
investment options carefully and ask your registered representative to help you
choose the right ones for your goals and tolerance for risk. Make sure you
understand any costs you may pay directly and indirectly on your investment
options because they will affect the value of your policy.
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Variable investment options You can choose from 18 variable investment options. Each variable investment
option is set up as a variable account under our separate account and invests
Variable investment options are also known in a corresponding portfolio of the Pacific Select Fund. Each portfolio invests
as variable accounts. These variable in different securities and has its own investment goals, strategies and risks.
accounts are divisions of our separate The value of each portfolio will fluctuate with the value of the investments it
account. We bear the direct operating holds, and returns are not guaranteed. Your policy's accumulated value will
expenses of our separate account. For more fluctuate depending on the investment options you've chosen. You bear the
information about how these accounts work, investment risk of any variable investment options you choose.
see About PL&A.
The following chart is a summary of the Pacific Select Fund portfolios. You'll
Pacific Life is the investment adviser for find detailed descriptions of the portfolios in the Pacific Select Fund
the Pacific Select Fund. They oversee the prospectus that accompanies this prospectus. There's no guarantee that a
management of all the fund's portfolios, portfolio will achieve its investment objective. You should read the fund
and manage two of the portfolios directly. prospectus carefully before investing.
They've retained other portfolio managers
to manage the other portfolios.
34
PORTFOLIO THE PORTFOLIO'S THE PORTFOLIO'S PORTFOLIO
INVESTMENT GOAL MAIN INVESTMENTS MANAGER
Money Market Current income consistent Highest quality money market Pacific Life
with preservation of instruments believed to have
capital. limited credit risk.
High Yield Bond High level of current Fixed income securities with Pacific Life
income. lower and medium-quality credit
ratings and intermediate to
long terms to maturity.
Managed Bond Maximize total return Medium and high-quality fixed Pacific Investment
consistent with prudent income securities with varying Management Company
investment management. terms to maturity.
Government Securities Maximize total return Fixed income securities that Pacific Investment
consistent with prudent are issued or guaranteed by the Management Company
investment management. U.S. government, its agencies
or government-sponsored
enterprises.
Growth Growth of capital. Equity securities of smaller Capital Guardian
and medium-sized companies. Trust Company
Aggressive Equity Capital appreciation. Equity securities of small Alliance Capital
emerging-growth companies and Management L.P.
medium-sized companies.
Growth LT Long-term growth of capital Equity securities of a large Janus Capital
consistent with the number of companies of any Corporation
preservation of capital. size.
Equity Income Long-term growth of capital Equity securities of large and J.P. Morgan
and income. medium-sized dividend-paying Investment Management
U.S. companies. Inc.
Multi-Strategy High total return. A mix of equity and fixed J.P. Morgan
income securities. Investment Management
Inc.
Large-Cap Value Long-term growth of Equity securities of large U.S. Salomon Brothers
capital. Current income is companies. Asset Management Inc
of secondary importance.
Mid-Cap Value Capital appreciation. Equity securities of medium- Lazard Asset
sized U.S. companies believed Management
to be undervalued.
Equity Capital appreciation. Equity securities of large U.S. Goldman Sachs Asset
Current income is of growth-oriented companies. Management
secondary importance.
Bond and Income Total return and income A wide range of fixed income Goldman Sachs Asset
consistent with prudent securities with varying terms Management
investment management. to maturity, with an emphasis
on long-term bonds.
Equity Index Investment results that Equity securities of companies Bankers Trust Company
correspond to the total that are included in the
return of common stocks Standard & Poor's 500 Composite
publicly traded in the U.S. Stock Price Index.
Small-Cap Index Investment results that Equity securities of companies Bankers Trust Company
correspond to the total that are included in the
return of an index of small Russell 2000 Small Stock Index.
capitalization companies.
REIT Current income and long- Equity securities of real Morgan Stanley Asset
term capital appreciation. estate investment trusts. Management
International Long-term capital Equity securities of companies Morgan Stanley Asset
appreciation. of any size located in Management
developed countries outside of
the U.S.
Emerging Markets Long-term growth of Equity securities of companies Blairlogie Capital
capital. that are located in countries Management
generally regarded as "emerging
market" countries.
35
YOUR INVESTMENT OPTIONS
An example Calculating unit values
You ask us to allocate $6,000 to the When you choose a variable investment option, we credit your policy with
Government Securities investment option on accumulation units. The number of units we credit equals the amount we've
a business day. At the end of that day, the allocated divided by the unit value of the variable account. Similarly, the
unit value of the variable account is $15. number of accumulation units in your policy will be reduced when you make a
We'll credit your policy with 400 units transfer, withdrawal or loan from a variable investment option, and when your
($6,000 divided by $15). monthly charges are deducted.
The value of an accumulation unit is not The value of an accumulation unit is the basis for all financial transactions
the same as the value of a share in the relating to the variable investment options. We calculate the unit value for
underlying portfolio. each variable account once every business day, usually at or about 4:00 p.m.
Eastern time.
Generally, for any transaction, we'll use the next unit value calculated after
we receive your written request. If we receive your written request before 4:00
For information about timing of p.m. Eastern time, we'll use the unit value calculated as of the end of that
transactions, see Pacific Select Exec II - business day. If we receive your request on or after 4:00 p.m. Eastern time,
NY basics. we'll use the unit value calculated as of the end of the next business day.
If a scheduled transaction falls on a day that is not a business day, we'll
process it as of the end of the next business day. For your monthly charge,
we'll use the unit value calculated on your monthly payment date. If your
monthly payment date does not fall on a business day, we'll use the unit value
calculated as of the end of the next business day.
The unit value calculation is based on the following:
. the investment performance of the underlying portfolio
. any dividends or distributions paid by the underlying portfolio
. any charges for any taxes that are, or may become, associated with the
operation of the variable account.
The unit value of a variable account will change with the value of its
corresponding Pacific Select Fund portfolio. Changes in the unit value of a
variable account will not change the number of accumulation units credited to
your policy.
A look at performance
Performance information may appear in advertisements, sales literature, or
reports to policy owners or prospective buyers.
Information about the performance of any variable account of the separate
account reflects only the performance of a hypothetical policy. The
calculations are based on allocating the hypothetical policy's accumulated
value to the variable account during a particular time period.
Performance information is no guarantee of how a variable account will perform
in the future. You should keep in mind the investment objectives and policies,
characteristics and quality of the portfolio of the fund in which the variable
account invests, and the market conditions during the period of time that's
shown.
We may show performance information in any way that's allowed under the law
that applies to it. This may include presenting a change in accumulated value
due to the performance of one or more variable accounts, or as a change in a
policy owner's death benefit.
36
We may show performance as a change in accumulated value over time or in terms
of the average annual compounded rate of return on accumulated value. This
would be based on allocating premium payments for a hypothetical policy to a
particular variable account over certain periods of time, including one year,
or from the day the variable account started operating. If a portfolio has
existed for longer than its corresponding variable account, we may also show
the hypothetical returns that the variable account would have achieved had it
invested in the portfolio from the day the portfolio started operating.
Performance may reflect the deduction of all policy charges including premium
load, the cost of insurance, the administrative charge, and the mortality and
expense risk charge. The different death benefit options will result in
different expenses for the cost of insurance, and the varying expenses will
result in different accumulated values.
Performance may also reflect the deduction of the surrender charge, if it
applies, by assuming the hypothetical policy is surrendered at the end of the
particular period. At the same time, we may give other performance figures that
do not assume the policy is surrendered and do not reflect any deduction of the
surrender charge.
In our advertisements, sales literature and reports to policy owners, we may
compare performance information for a variable account to:
. other variable life separate accounts, mutual funds, or investment products
tracked by research firms, ratings services, companies, publications, or
persons who rank separate accounts or investment products on overall
performance or other criteria
. the Consumer Price Index, to assess the real rate of return from buying a
policy by taking inflation into consideration.
Reports and promotional literature may also contain our rating or a rating of
our claims-paying ability. These ratings are set by firms that analyze and rate
insurance companies and by nationally recognized statistical rating
organizations.
You'll find more about Pacific Select Fund Fees and expenses paid by the Pacific Select Fund
fees and expenses in An overview of Pacific The Pacific Select Fund pays advisory fees and other expenses. These are
Select Exec II - NY. deducted from the assets of the fund's portfolios and may vary from year to
year. They are not fixed and are not part of the terms of your policy. If you
choose a variable investment option, these fees and expenses affect you
indirectly because they reduce portfolio returns. The fund is governed by its
own Board of Trustees.
37
YOUR INVESTMENT OPTIONS
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Fixed options You can also choose from two fixed options: the Fixed account and the Fixed LT
account. The fixed options provide a guaranteed minimum annual rate of
The fixed options are not securities, so interest. The amounts allocated to the fixed options are held in our general
they do not fall under any securities act. account.
For this reason, the SEC has not reviewed
the disclosure in this prospectus about Here are some things you need to know about the fixed options:
these options. However, other federal
securities laws may apply to the accuracy . Accumulated value allocated to the fixed options earns interest on a daily
and completeness of the disclosure about basis, using a 365-day year. Our minimum annual interest rate is 3% during the
these options. first 10 policy years, and 3.3% thereafter.
For more information about the general . We may offer a higher annual interest rate on the fixed options. If we do,
account, see About PL&A. we'll guarantee the higher rate for one year.
. If we offer a higher annual interest rate on a fixed option, we may also pay
additional interest on accumulated value in excess of $25,000 in that fixed
option. Ask your registered representative for current interest rates.
. There are no investment risks or direct charges.
. There are limitations on when and how much you can transfer from the fixed
options. These limitations are described below, in Transferring among
investment options.
. We may limit the total amount you allocate to the Fixed LT account for all
Pacific Life policies you own to $1,000,000 in any 12-month period, and
transfer any amount over $1,000,000 to your other investment options according
to your most recent instructions. We may increase the $1,000,000 limit at any
time at our sole discretion. You should contact us to find out if a higher
limit is in effect.
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Transferring among You can transfer among your investment options any time during the life of your
investment options policy without triggering any current income tax. You can make transfers by
writing to us, by making a telephone transfer, or by signing up for one of our
You can make transfers and use transfer automatic transfer programs. You'll find more information about making
programs only after the free look transfer telephone transfers in Pacific Select Exec II basics.
date. For more information, please see
Pacific Select Exec II - NY basics. Transfers will normally be effective as of the end of the business day we
receive your written or telephone request.
You can make transfers to the fixed
options any time during the first 18 Here are some things you need to know about making transfers:
months of your policy.
. If you're making transfers between variable investment options, there is no
You'll find more about the first year minimum amount required and you can make as many transfers as you like.
transfer program later in this section.
. You can make transfers from the variable investment options to the fixed
options only in the policy month right before each policy anniversary.
. You can only make one transfer from each fixed option in any 12-month period,
except if you've signed up for the first year transfer program.
. You can only transfer up to the greater of $5,000 or 25% of your policy's
accumulated value in the Fixed account in any 12-month period, except for
scheduled transfers under the first year transfer program.
. You can only transfer up to the greater of $5,000 or 10% of your policy's
accumulated value in the Fixed LT account in any 12-month period.
. Currently, there is no charge for making a transfer but we may charge you in
the future.
. There is no minimum required value for the investment option you're
transferring to or from.
38
. You cannot make a transfer if your policy is in the grace period and is in
danger of lapsing.
. We can restrict or suspend transfers.
. We may choose to impose limits on transfer amounts, the value of the
investment options you're transferring to or from, or the number and frequency
of transfers you can make.
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Transfer programs We offer three programs that allow you to make automatic transfers of
accumulated value from one investment option to another. Under the dollar cost
averaging and portfolio rebalancing programs, you can transfer among the
variable investment options. Under the first year transfer program, you can
make transfers from the Fixed account to the Fixed LT account and the variable
investment options.
Since the value of accumulation units can Dollar cost averaging program
change, more units are credited for a Our dollar cost averaging program allows you to make scheduled transfers of $50
scheduled transfer when unit values are or more between variable investment options without paying a transfer fee. It
lower, and fewer units when unit values does not allow you to make transfers to or from either of the fixed options.
are higher. This allows you to average the Here's how the program works:
cost of investments over time. Investing
this way does not guarantee profits or . You can set up this program at any time while your policy is in force.
prevent losses.
. You need to complete a request form to enroll in the program.
. You must have at least $5,000 in a variable investment option to start the
program.
. We'll automatically transfer accumulated value from one variable investment
option to one or more of the other variable investment options you've
selected.
. We'll process transfers as of the end of the business day on your policy's
monthly, quarterly, semi-annual or annual anniversary, depending on the
interval you've chosen. We will not make the first transfer until after the
free look transfer date.
. We will not charge you for the dollar cost averaging program or for transfers
made under this program, even if we decide to charge you in the future for
transfers outside of the program, except if we have to by law.
. We have the right to discontinue, modify or suspend the program at any time.
. We'll keep making transfers at the intervals you've chosen until one of the
following happens:
. the total amount you've asked us to transfer has been transferred
. there is no more accumulated value in the investment option you're
transferring from
. your policy enters the grace period and is in danger of lapsing
. you tell us in writing to cancel the program
. we discontinue the program.
39
YOUR INVESTMENT OPTIONS
Because the portfolio rebalancing Portfolio rebalancing program
program matches your original As the value of the underlying portfolios changes, the value of the allocations
percentage allocations, we may to the variable investment options will also change. The portfolio rebalancing
transfer money from an investment program automatically transfers your policy's accumulated value among the
option with relatively higher variable investment options according to your original percentage allocations.
returns to one with relatively
lower returns. Here's how the program works:
. You can set up this program at any time while your policy is in force.
. You enroll in the program by sending us a written signed request or a
completed automatic rebalancing form.
. Your first rebalancing will take place on the monthly payment date you choose.
You choose whether we should make transfers quarterly, semi-annually or
annually, based on your policy date.
. If you cancel this program, you must wait 30 days to begin it again.
. You cannot use this program if you're already using the dollar cost averaging
program.
. We do not currently charge for the portfolio rebalancing program or for
transfers made under this program.
. We can discontinue, suspend or change the program at any time.
This program allows you to First year transfer program
average the cost of investments Our first year transfer program allows you to make monthly transfers during the
over your first policy year. first policy year from the Fixed account to the variable investment options or
Investing this way does not the Fixed LT account. It does not allow you to transfer among variable
guarantee profits or prevent investment options.
losses.
Here's how the program works:
. You enroll in the program when you apply for your policy.
. You choose a regular amount to be transferred every month for 12 months
. We make the first transfer on the day we allocate your first premium to the
investment options you've chosen. Each transfer will be made on the same day
every month.
. If you sign up for this program, we'll waive the usual transfer limit for the
Fixed account during the first policy year.
. If we make the last transfer during the second policy year, we will not count
it toward the usual one transfer per year limit for the Fixed account.
. If the accumulated value in the Fixed account is less than the amount to be
transferred, we'll transfer the balance and then cancel the program.
. If there is accumulated value remaining in the Fixed account at the end of the
program, our usual rules for the fixed account will apply.
. We do not currently charge for the first year transfer program or for
transfers made under this program.
40
WITHDRAWALS, SURRENDERS AND LOANS
Making a withdrawal, taking out a loan or You can take out all or part of your policy's accumulated value while your
surrendering your policy can change your policy is in force by making withdrawals or surrendering your policy. You can
policy's tax status, generate taxable take out a loan from us using your policy as security. You can also use your
income, or make your policy more susceptible policy's loan and withdrawal features to supplement your income, for example,
to lapsing. Be sure to plan carefully before during retirement.
using these policy benefits.
If you withdraw a larger amount than you've
paid into your policy, your withdrawal may
be considered taxable income.
For more information, see Variable life
insurance and your taxes.
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Making withdrawals You can withdraw part of your policy's net cash surrender value starting on
your policy's first anniversary. Here's how it works:
You can choose to receive your withdrawal
in a lump sum or use it to buy an income . You must send us a written request that's signed by all joint owners.
benefit. Please see the discussion about . Each withdrawal must be at least $200, and the net cash surrender value of
income benefits in General information your policy after the withdrawal must be at least $500.
about your policy. . If your policy has an outstanding loan amount, the maximum withdrawal you can
take is the amount, if any, by which the cash surrender value just before the
We will not accept your request to make a withdrawal exceeds the outstanding loan amount divided by 90%.
withdrawal if it will cause your policy to . We'll charge you $25 for each withdrawal you make.
become a modified endowment contract, unless . If you do not tell us which investment options to take the withdrawal from,
you've told us in writing that you want your we'll deduct the withdrawal and the withdrawal charge from all of your
policy to become a modified endowment investment options in proportion to the accumulated value you have in each
contract. option.
. The accumulated value, cash surrender value and net cash surrender value of
your policy will be reduced by the amount of each withdrawal.
. If the person insured under the policy dies after you've sent a withdrawal
request to us, but before we've made the withdrawal, we'll deduct the amount of
the withdrawal from any death benefit proceeds owing.
How withdrawals affect your policy's death benefit
Making a withdrawal will affect your policy's death benefit in the following
ways:
. if your policy's death benefit does not equal the guideline minimum death
benefit, the death benefit will decrease by the amount of your withdrawal.
. if your policy's death benefit equals the guideline minimum death benefit, the
death benefit may decrease by more than the amount of your withdrawal.
How withdrawals affect your policy's face amount
If you've chosen death benefit Option B or Option C, making a withdrawal does
not reduce your policy's face amount.
If you've chosen death benefit Option A, a withdrawal may reduce your face
amount. You can make one withdrawal during each of the first 15 policy years of
up to 10% of the total premium payments you've made without reducing your
policy's face amount. If you withdraw a larger amount, or make additional
withdrawals, the face amount will be reduced by the amount, if any, by which
the face amount exceeds the death benefit immediately before the withdrawal,
minus the amount of the withdrawal.
41
WITHDRAWALS, SURRENDERS AND LOANS
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Taking out a loan You can borrow money from us any time while your policy is in force either by
sending us a request in writing, or over the telephone. You'll find more
The amount in the loan account, plus any information about requesting a loan by telephone in Pacific Select Exec II - NY
interest you owe, is referred to throughout basics.
this prospectus as your outstanding loan
amount. Your policy refers to this amount When you borrow money from us, we use your policy's accumulated value as
as policy debt. security. You pay interest on the amount you borrow. The accumulated value set
aside to secure your loan also earns interest. Here's how it works:
Taking out a loan will affect the growth of
your policy's accumulated value, and may . To secure the loan, we transfer an amount equal to the amount you're
affect the death benefit. borrowing from your accumulated value in the investment options to the loan
account. We'll transfer this amount from your investment options in proportion
An example to the accumulated value you have in each option, unless you tell us
For a policy with: otherwise.
. accumulated value of $100,000 . Interest owing on the amount you've borrowed accrues daily at an annual rate
. an outstanding loan amount of $60,000 of 3.55%. Interest that has accrued during the policy year is due on your
. a most recent monthly charge of $225 policy anniversary. If you do not pay the interest when it's due, we'll add it
to the amount of your loan and begin accruing interest on it from the day it was
The maximum amount you can borrow during due. We'll also transfer an amount equal to the interest that was due, from your
policy years 1 through 10 is the greater of: policy's accumulated value to the loan account. We'll transfer this amount from
your investment options in proportion to the accumulated value you have in each
$25,500 ((90% X ($100,000 - option, unless you tell us otherwise.
$5,000)) - $60,000) . The amount in the loan account earns interest daily at an annual rate of
3% during the first 10 policy years, and 3.3% thereafter. On your policy
or anniversary, we transfer the interest that's been credited to the loan account
proportionately to your investment options according to your most recent
$31,809.75 allocation instructions.
(a X (b / c)) - d, where:
a = $92,300 ($100,000 - How much you can borrow
$5,000 - ($12 X $225)) The minimum amount you can borrow is $200. You can borrow up to the larger of
b = 1.03 the following amounts:
c = 1.0355
d = $60,000) . 90% of the accumulated value in the investment options, less any surrender
charges that would apply if you surrendered your policy on the day you took
The maximum amount you can borrow during out the loan.
policy year 11 and thereafter is the . the result of a X (b / c) - d, where:
greater of:
a = the accumulated value of your policy less any surrender charges that would
$25,500 have applied if you surrendered your policy on the day you took out the loan,
((90% X ($100,000 - $5,000)) - and less 12 times the most recent monthly charge
$60,000) b = 1.03 during policy years 1 through 10, and
or 1.033 during policy year 11 and thereafter
c = 1.0355
d = any outstanding loan amount.
$32,077.16
(a X (b / c)) - d, where: Paying off your loan
a = $92,300 ($100,000 - You can pay off all or part of the loan any time while your policy is in force.
$5,000 - ($12 X $225)) Unless you tell us otherwise, we'll generally transfer any loan payments you
b = 1.033 make proportionately to your investment options according to your most recent
c = 1.0355 allocation instructions. We may, however, first transfer any loan payments you
d = $60,000) make to the fixed options, up to the amount originally transferred from the
fixed options to the loan account. We'll then transfer any excess amount to
your variable investment options according to your most recent allocation
instructions.
While you have an outstanding loan, we'll treat any money you send us as a loan
payment unless you tell us otherwise in writing.
42
Your outstanding loan amount could result in What happens if you do not pay off your loan
taxable income if you surrender your policy, If you do not pay off your loan, we'll deduct the amount in the loan account,
if your policy lapses, or if your policy is including any interest you owe, from one of the following:
a modified endowment contract. You should
talk to your tax advisor before taking out a . the death benefit proceeds before we pay them to your beneficiary
loan under your policy. See Taking out a . the cash surrender value if you surrender your policy
loan in Variable life insurance and . the amount we refund if you exercise your right to cancel.
your taxes.
Taking out a loan, whether or not you repay it, will have a permanent effect on
the value of your policy. For example, while your policy's accumulated value is
held in the loan account, it will miss out on the potential earnings available
through the variable investment options. The amount of interest you earn on the
loan account may be less than the amount of interest you would have earned from
the fixed options. These could lower your policy's accumulated value, which
could reduce the amount of the death benefit.
When a loan is outstanding, the amount in the loan account is not available to
help pay for any policy charges. If, after deducting your outstanding loan
amount, there is not enough accumulated value in your policy to cover the
policy charges, your policy could lapse. You may need to make additional
premium payments or loan repayments to prevent your policy from lapsing.
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Ways to use your policy's loan and You can use your policy's loan and withdrawal features to supplement your
withdrawal features income, for example, during retirement.
If you're interested in using your life Using your policy to supplement your income does not change your rights or our
insurance policy to supplement your obligations under the policy. The terms for loans and withdrawals described in
retirement income, please contact us for this prospectus remain the same.
more information.
Here are some things you should consider when setting up an income stream:
We can provide you with illustrations that
give you examples of how this could affect . the rate of return you expect to earn on your investment options
the accumulated value, net cash surrender . how long you would like to receive regular income
value and death benefit of your policy based . the amount of accumulated value you want to maintain in your policy.
on different hypothetical gross rates of
return. We will not use a higher rate than Understanding the risks
12%, and will always compare it with a rate Setting up an income stream may not be suitable for all policy owners. It's
of 0% based on guaranteed insurance costs. important to understand the risks that are involved in using your policy's loan
You'll find sample illustrations and the and withdrawal features.
assumptions they're based on starting on
page 106. You must always leave enough accumulated value in your policy to help ensure
your policy will continue to qualify as life insurance and will not lapse. Your
The hypothetical rates of return are policy will lapse if there is not enough accumulated value, after subtracting
illustrative of past or future results. any outstanding loan amount, to cover the monthly charge on the day we make the
Policy values and benefits would be deduction and the grace period expires. If your policy lapses, we'll end your
different from those shown in the life insurance coverage.
illustrations if:
There are also charges associated with reinstating a lapsed policy.
. the gross annual rates of return are
different from the hypothetical rates You should consult with your financial adviser and carefully consider how much
you can withdraw and borrow from your policy each year to set up your income
. premiums were not paid as illustrated stream.
. loan interest was paid when due. Remember that the performance of your investment options also affects your
policy's accumulated value. Poor performance can increase the danger of your
policy lapsing. And as the cost of insurance generally increases with the age
of the person insured by the policy, this can also reduce the accumulated
value.
43
WITHDRAWALS, SURRENDERS AND LOANS
You can also ask for accompanying charts In addition, you should carefully review the policy statements we send you.
and graphs that compare results from Your statements will allow you to monitor your policy's accumulated value, less
various retirement strategies. your outstanding loan amount, to ensure your policy can continue to support the
income stream you have chosen.
You can ask your registered representative If your policy lapses or you surrender your policy after you have taken out a
for illustrations showing how policy loan, you could face significant income tax liability in the year of the lapse
charges may affect existing accumulated or surrender. Any outstanding loan amount will automatically be repaid when
value and how future withdrawals and loans your policy lapses or you surrender your policy. You could be taxed to the
may affect the accumulated value and death extent that the net surrender value plus the outstanding loan amount repaid
benefit. exceeds the cost basis of your policy.
Tax issues are described in detail in Interest on a loan is due to us on each policy anniversary. If we do not
Variable insurance and your taxes. receive the interest when due, we'll add it to the outstanding loan amount and
begins accruing interest on it from the day it was due. This has a compounding
effect and can add to your income tax liability.
If the person insured by the policy dies, we'll deduct any outstanding loan
amount from the death benefit. This means the death benefit proceeds will be
less than the death benefit and may be less than the face amount.
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Surrendering your policy You can surrender or cash in your policy at any time while the person insured
by the policy is still living. Your policy's cash surrender value is its
You can choose to receive your money in a accumulated value less any surrender charge that applies. The net cash
lump sum or use it to buy an income benefit. surrender value equals your policy's cash surrender value after deducting any
Please see the discussion about income outstanding loan amount.
benefits in General information about your
policy. Here are some things you need to know about surrendering your policy:
If you increase your policy's face amount, . You must send us your policy and a written request.
we'll send you a supplemental schedule of . We'll send you the policy's net cash surrender value. If you surrender your
benefits that shows the surrender charge policy during the first 10 policy years, we'll deduct a surrender charge that
associated with the increase. helps cover our costs for underwriting, issuing and distributing our policies
. Your policy's surrender charge is based on the initial face amount of your
policy and will never be greater than the maximum surrender charge. The maximum
surrender charge is calculated at a rate that is based on the age and risk
class of the person insured by the policy, and each $1,000 of initial face
amount.
. There's no surrender charge on the initial face amount after 10 policy years.
. We guarantee the surrender charge rates will not increase.
. If you increase your policy's face amount, each increase has a surrender
charge and maximum surrender charge, based on the amount of the increase, for
10 years.
. If you decrease the face amount, the decrease will not affect your policy's
surrender charge or maximum surrender charge.
44
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Sample rates for the surrender charge How we calculate the surrender charge
and the maximum surrender charge appear
in Appendix A. The surrender charge and the maximum surrender charge are assessed against your
policy's accumulated value. They are based on the age and risk class of the
An example person insured by the policy for each $1,000 of the initial face amount of your
For a policy: policy.
. that insures a male non-smoker who
is age 45 when the policy is issued The amount of the surrender charge does not change during the first policy
. with an initial face amount of $350,000. year. Starting on the first policy anniversary, we reduce the charge by 0.9259%
each month until it reaches zero at the end of 10 policy years.
The surrender charge is:
The maximum surrender charge does not change during the first 10 policy years,
. $8,757.00 in the first policy year and then is reduced to zero at the end of the 10th policy year. The maximum
(($350,000 / $1,000) X 25.02) surrender charge on the initial face amount of your policy will never be more
. $2,919.16 at the end of the seventh than $32.752 per $1,000 of initial face amount.
policy year ($8,757.00 - ($8,757.00 X
.9259% X 72 months))
We will never deduct more than the maximum
surrender charge, which is $4,426.10
45
GENERAL INFORMATION ABOUT YOUR POLICY
This section tells you some additional things you should know about your
policy.
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Income benefit If you surrender or make a withdrawal from your policy, you can use the money
to buy an income benefit that provides a monthly income. Your policy's
beneficiary can use death benefit proceeds to buy an income benefit. In
addition to the income benefit described below, you can choose from other
income benefits we may make available from time to time.
The following is one income benefit available under the Pacific Select Exec II
policy:
. The income benefit is based on the life of the person receiving the income. If
the policy owner is buying the income benefit, monthly income will be based on
the owner's life. If the policy's beneficiary buys the income benefit, monthly
income will be based on the beneficiary's life.
. We'll pay a monthly income for at least 10 years regardless of whether the
person receiving the income is still alive.
. After 10 years, we'll only pay the monthly income for as long as the person
receiving it is still alive.
. The minimum monthly income benefit calculated must be at least $100.
. For this income benefit, the amount you receive will always be at least as
much as the amount guaranteed by your policy.
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Reduced Paid-Up Benefit You may use the net cash surrender value of your policy to purchase guaranteed
fixed paid-up insurance on the life of the person insured by the policy. You
may choose to do this at any time while the policy is in force.
If you convert your policy, the net cash surrender value will be transferred to
our general account. The amount of paid-up insurance is determined by applying
the net cash surrender value as the net single premium based upon the insured's
age and risk class, 1980 CSO mortality table, and 3% interest. Any riders
attached to the policy will terminate at the time of conversion.
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Substituting the person insured by Starting on your policy's first anniversary, you can apply to substitute the
your policy person insured by your policy. You must apply in writing and we must receive
satisfactory evidence of insurability of the new person to be insured by the
If you substitute the person insured policy. You can only add riders on the new person insured by the policy if we
by the policy, we'll send you a revised approve the addition of the riders.
schedule of benefits.
The substitution will become effective on the first monthly payment date after
we approve your request. We may have to adjust the face amount, accumulated
value, surrender charge and policy charges to reflect the substitution.
We can refuse your request to substitute if, among other reasons:
. we would be required to end the policy in order to comply with new guideline
premium limits under tax law
. we would be required to make distributions from your policy's accumulated
value that are greater than the net cash surrender value.
46
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Paying the death benefit in the case If the person insured by the policy, whether sane or insane, commits suicide
of suicide within two years of the policy date, death benefit proceeds will be the total
of all premiums you've paid, less any outstanding loan amount and any
withdrawals you've made.
If you've substituted the person insured by the policy and that person, whether
sane or insane, commits suicide within two years of the day the substitution
was made, we'll calculate death benefit proceeds differently. Proceeds will be
limited to the net cash surrender value of your policy as of the day the
substitution was made, less any increase in any outstanding loan amount, any
withdrawals you've made, and any dividends we've paid in cash, since the day
the substitution was made.
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Replacement of life insurance The term replacement has a special meaning in the life insurance industry.
or annuities Before you make a decision to buy, we want you to understand what impact a
replacement may have on your existing insurance policy.
A replacement occurs when you buy a new life insurance policy or annuity
contract, and a policy or contract you already own has been or will be:
. lapsed, forfeited, surrendered or partially surrendered, assigned to the
replacing insurer, or otherwise terminated
. converted to reduced paid-up insurance, continued as extended term insurance,
or otherwise reduced in value by the use of nonforfeiture benefits or other
policy values
. amended to effect either a reduction in benefits or in the term for which
coverage would otherwise remain in force or for which benefits would be paid
. reissued with any reduction in cash value, or
. pledged as collateral or subject to borrowing, whether in a single loan or
under a schedule of borrowing over a period of time.
There are circumstances when replacing your existing life insurance policy or
annuity contract can benefit you. As a general rule, however, replacement is
not in your best interest. You should carefully compare the costs and benefits
of your existing policy or contract with those of the new policy or contract to
determine whether replacement is in your best interest.
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Errors on your application If the age or gender of the person insured by your policy is stated incorrectly
on your application, the death benefit under your policy will be the greater of
If unisex cost of insurance rates apply to the following:
your policy, we will not adjust the face
amount if we discover that gender has been . the amount of death benefit that would be purchased by the most recent cost of
stated incorrectly on your application. insurance charge for the correct age and gender or
. the guideline minimum death benefit for the correct age and gender.
We'll adjust the accumulated value by recalculating all previous cost of
insurance charges and other monthly deductions based on the correct age and
gender.
47
GENERAL INFORMATION ABOUT YOUR POLICY
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Contesting the validity of your policy We have the right to contest the validity of your policy for two years from the
policy date. Once your policy has been in force for two years from the policy
date during the lifetime of the person insured by the policy, we generally lose
the right to contest its validity.
We also have the right to contest the validity of a policy that you reinstate
for two years from the day that it was reinstated. Once your reinstated policy
has been in force for two years from the reinstatement date during the lifetime
of the person insured by the policy, we generally lose the right to contest its
validity. During this period, we may contest your policy only if there is a
material misrepresentation on your application for reinstatement.
We have the right to contest the validity of an increase in the face amount of
a policy for two years from the day the increase becomes effective. Once the
increased face amount has been in force for two years during the lifetime of
the person insured by the policy, we generally lose the right to contest its
validity.
We also have the right to contest the validity of a policy if there has been a
substitution to the person insured by the policy. We can contest a policy's
validity for two years from the day the substitution becomes effective. Once
the substitution has been in force for two years during the lifetime of the
person insured by the policy, we generally lose the right to contest its
validity.
Regardless of the above, we can contest the validity of your policy for failure
to pay premiums at any time. The policy will terminate upon successful contest
with respect to the person insured by the policy.
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Assigning your policy as collateral You can assign your policy as collateral to secure a loan, mortgage, or other
kind of debt. Here's how it works:
Assigning a policy that's a modified
endowment contract may generate taxable . An assignment does not change the ownership of the policy.
income and a 10% penalty tax. . After the policy has been assigned, your rights and the rights of your
beneficiary will be subject to the assignment. The entire policy, including any
income benefit, rider, benefit and endorsement, will also be subject to the
assignment.
. We're not responsible for the validity of any assignment.
. We must receive and record a copy of the original assignment in a form that's
acceptable to us before we'll consider it binding.
. Unless otherwise provided, the person or organization you assign your policy
to may exercise the rights under the policy, except the right to change the
policy owner or the beneficiary or the right to choose a monthly income
benefit.
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Non-participating This policy will not share in any of our surplus earnings.
48
VARIABLE LIFE INSURANCE AND YOUR TAXES
This discussion about taxes is based on our understanding of the present
federal income tax laws as they are currently interpreted by the Internal
Revenue Service (IRS). It's based on the Internal Revenue Code of 1986, as
amended, (the tax code) and does not cover any state or local tax laws.
The tax consequences of owning a policy
or receiving proceeds from it may vary This is not a complete discussion of all federal income tax questions that may
by jurisdiction and according to the arise under the policy. There are special rules that we do not include here
circumstances of each owner or beneficiary. that may apply in certain situations.
Speak to a qualified tax adviser for We do not know whether the current treatment of life insurance policies under
complete information about federal, state current federal income tax or estate or gift tax laws will continue. We also do
and local taxes that may apply to you. not know whether the current interpretations of the laws by the IRS or the
courts will remain the same. Future legislation may adversely change the tax
treatment of life insurance policies, other tax consequences described in this
discussion or tax consequences that relate directly or indirectly to life
insurance policies.
We do not make any guarantees about the tax status of your policy, and you
should not consider the discussion that follows to be tax advice.
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Tax treatment of life insurance policies Definition of life insurance
We believe that the policy qualifies as life insurance. That means it will
In order to qualify as a life insurance receive the same tax advantages as a conventional fixed life insurance policy.
contract for federal income tax purposes, The two main tax advantages are:
the policy must meet the statutory
definition of life insurance. . In general, your policy's beneficiary will not be subject to federal income
tax when he or she receives the death benefit proceeds. This is true regardless
Death benefits may be excluded from income of whether the beneficiary is an individual, corporation, or other entity.
under Section 101(a) of the tax code. . You'll generally not be taxed on any or all of your policy's accumulated value
unless you receive a cash distribution by making a withdrawal, surrendering
your policy, or in some instances, taking a loan from your policy.
The tax laws defining life insurance, however, do not cover all policy
features. Your policy may have features that could prevent it from qualifying
as life insurance. For example, the tax laws have yet to address many issues
concerning the treatment of substandard risk policies and policies with term
insurance on the person insured by the policy. We can make changes to your
policy if we believe the changes are needed to ensure that your policy
continues to qualify as a life insurance contract.
Tax regulations deal with allowable charges for mortality costs and other
expenses that are used in calculating whether a policy qualifies as life
insurance. For life insurance policies entered into on or after October 21,
1988, these calculations must be based upon reasonable mortality charges and
other charges reasonably expected to be actually paid.
49
VARIABLE LIFE INSURANCE AND YOUR TAXES
The Treasury Department has issued proposed regulations about reasonable
standards for mortality charges. While we believe that our mortality costs and
other expenses used in calculating whether the policy qualifies as life
insurance are reasonable under current laws, we cannot be sure that the IRS
agrees with us. We can change our mortality charges if we believe the changes
are needed to ensure that your policy qualifies as a life insurance contract.
Section 817(h) of the tax code describes Diversification rules and ownership of the separate account
the diversification rules. Your policy will not qualify for the tax benefit of a life insurance contract
unless the separate account follows certain rules requiring diversification of
For more information about diversification investments underlying the policy. In addition, the IRS requires that the
rules, please see Managing the Pacific policyholder does not have control over the underlying assets.
Select Fund in the accompanying Pacific
Select Fund prospectus. The Treasury Department has announced that the diversification rules "do not
provide guidance concerning the circumstances in which it will treat an
investor, rather than the insurance company, as the owner of the assets in a
separate account." The IRS treats a variable policy owner as the owner of
separate account assets if he or she has the ability to exercise investment
control over them. Owners of the assets are taxed on any income or gains the
assets generate. Although the Treasury Department announced it would provide
further guidance on the issue, it had not done so when we wrote this
prospectus.
No IRS rulings deal with policies that have exactly the same ownership rights
as your policy. Since you have additional flexibility in allocating premiums
and policy values, it is possible the IRS would treat you as the owner of your
policy's proportionate share of the assets of the separate account.
We do not know what will be in future Treasury Department regulations. We
cannot guarantee that the fund's portfolios will be able to operate as
currently described in the prospectus, or that the fund will not have to change
any portfolio's investment objective or policies. We can modify your policy if
we believe it will prevent you from being considered the owner of your policy's
proportionate share of the assets of the separate account.
Policy exchanges fall under Section Policy exchanges
1035(a) of the tax code. If you exchange your entire policy for another one that insures the same
person, it generally will be treated as a tax-free exchange and, if so, will
not result in the recognition of gain or loss. If the person insured by the
policy is changed, the exchange will be treated as a taxable exchange.
Change of ownership
You may have taxable income if you transfer ownership of your policy, sell your
policy, or change the ownership of it in any way.
There are special rules for corporate-owned Corporate owners
policies. You should consult your There are special tax issues for corporate owners:
tax adviser.
. using your policy to fund deferred compensation arrangements for employees
Section 59A of the tax code deals with the has special tax consequences
environmental tax. . corporate ownership of a policy may affect your exposure to the alternative
minimum tax and the environmental tax.
50
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Conventional life insurance policies The tax treatment of your policy will depend upon whether it is a type of
contract known as a modified endowment contract. We describe modified endowment
Under Section 7702A of the tax code, contracts later in this section. If your policy is not a modified endowment
policies that are not classified as contract, it will be treated as a conventional life insurance policy and will
modified endowment contracts are taxed as have the following tax treatment:
conventional life insurance policies.
Surrendering your policy
The cost basis in your policy is generally When you surrender, or cash in, your policy, you'll generally be taxed on the
the premiums you've paid plus any taxable difference, if any, between the cash surrender value and the cost basis in your
distributions less any withdrawals or policy.
premiums previously recovered that were
not taxable. Making a withdrawal
If you make a withdrawal after your policy has been in force for 15 years,
you'll only be taxed on the amount you withdraw that exceeds the cost basis in
the policy.
Special rules apply if you make a withdrawal within the first 15 policy years
and it's accompanied by a reduction in benefits. In this case, there is a
special formula under which you may be taxed on all or a portion of the
withdrawal amount.
Taking out a loan
If you take out a loan, you will not pay tax on the loan amount unless your
policy is surrendered or lapses and you have not repaid your outstanding loan
amount. The interest you pay, or that's accrued, on a loan is generally
nondeductible. Ask your tax adviser for more information.
Loans and corporate-owned policies
If you borrow money to buy or carry certain life insurance policies, tax law
provisions may limit the deduction of interest payable on loan proceeds. If the
taxpayer is an entity that's a direct or indirect beneficiary of certain life
insurance, endowment or annuity contracts, a portion of the entity's deductions
for loan interest may be disallowed, even though this interest may relate to
debt that's completely unrelated to the contract. There may be a limited
exception that applies to contracts issued on 20% owners, officers, directors
or employees of the entity. For more information about this exception, you
should consult your tax adviser.
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Modified endowment contracts A modified endowment contract is a special type of life insurance policy. If
your policy is a modified endowment contract, it will have the tax treatment
Section 7702A of the tax code defines a described below. Any distributions you receive during the life of the policy
class of life insurance policies known are treated differently than under conventional life insurance policies.
as modified endowment contracts. Like Withdrawals, loans, pledges, assignments and the surrender of your policy are
other life insurance policies, the death all considered distributions and may be subject to tax on an income-first basis
benefit proceeds paid to your beneficiary and a 10% penalty.
generally are not subject to federal
income tax and your policy's accumulated When a policy becomes a modified endowment contract
value grows on a tax-deferred basis A life insurance policy becomes a modified endowment contract if, at any time
until you receive a cash distribution. during the first seven policy years, the sum of actual premiums paid exceeds
the seven-pay limit. The seven-pay limit is the cumulative total of the level
If there is a material change to your annual premiums (or seven-pay premiums) required to pay for the policy's future
policy, like a change in the death death and endowment benefits.
benefit, we may have to retest your
policy and restart the seven-pay premium
period to determine whether the change
has caused the policy to become a
modified endowment contract.
51
VARIABLE LIFE INSURANCE AND YOUR TAXES
For example, if the seven-pay premiums were $1,000 a year, the maximum premiums
you could pay during the first seven years to avoid modified endowment
treatment would be $1,000 in the first year, $2,000 through the first two years
and $3,000 through the first three years, etc. Under this test, a Pacific
Select Exec II - NY policy may or may not be a modified endowment contract,
depending on the amount of premiums paid during the policy's first seven
contract years or after a material change has been made to the policy.
Surrendering your policy
If you surrender your policy, you're taxed on the amount by which the cash
surrender value exceeds the cost basis in the policy.
Making a withdrawal or taking out a loan
If you make a withdrawal or take out a loan from a modified endowment contract,
you're taxed on the amount of the withdrawal or loan that's considered income,
including all previously non-taxed gains. Income is the difference between the
cash surrender value and the cost basis in your policy. It's unclear whether
interest paid, or accrued, on a loan is considered interest for federal income
tax purposes. If you borrow money to buy or carry certain life insurance
policies, tax law provisions may limit the deduction of interest payable on
loan proceeds. You should consult your tax adviser.
All modified endowment contracts we or our affiliates issue to you in a
calendar year are treated as a single contract when we calculate whether a
distribution amount is subject to tax.
10% penalty tax
If any amount you receive from a modified endowment contract is taxable, you
may also have to pay a penalty tax equal to 10% of the taxable amount.
A taxpayer will not have to pay the penalty tax if any of the following
exceptions apply:
. you're at least 59 1/2 years old
. you're receiving an amount because you've become disabled
. you're receiving an amount that's part of a series of substantially equal
periodic payments, paid out at least annually. These payments may be made for
your life or life expectancy or for the joint lives or joint life expectancies
of you and your beneficiaries.
Distributions before a policy becomes a modified endowment contract
If your policy fails the seven-pay test and becomes a modified endowment
contract, any amount you receive or are deemed to have received during the two
years before it became a modified endowment contract may be taxable. The
distribution would be treated as having been made in anticipation of the
policy's failing to meet the seven-pay test under Treasury Department
regulations which are yet to be prescribed.
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Policy riders Accelerated living benefits rider
Amounts received under this rider should be generally excluded from taxable
Please see the discussion of optional income under Section 101(g) of the tax code.
riders in The death benefit.
Benefits under the rider will be taxed, however, if they are paid to someone
Please consult with your tax adviser if other than a person insured by the policy, and the person insured by the
you want to exercise your rights under policy:
this rider.
. is a director, officer or employee of the person receiving the benefit, or
. has a financial interest in a business of the person receiving the benefit.
52
ABOUT PL&A
Pacific Life & Annuity Company is a life insurance company based in Arizona.
Our operations include life insurance, annuity and institutional products, group
life and health insurance and various other insurance products and services. At
the end of 1998, we had total assets of $337.9 million.
PL&A is authorized to conduct life insurance and annuity business in the
State of New York and certain other states. Our principal office is located at
700 Newport Center Drive, Newport Beach, California 92660.
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How we're organized PL&A was incorporated in 1982 under the name of Pacific Financial Life
Insurance Company. It merged with Pacific Financial Life Insurance Company of
Arizona and assumed the name PM Group Life Insurance Company in transferring
domicile from California to Arizona, which was completed in 1990. On January 1,
1999, we changed our name to our current name, PL&A.
PL&A is a direct, wholly-owned subsidiary of Pacific Life Insurance Company.
Pacific Life is a life insurance company based in California. Along with its
subsidiaries and affiliates, Pacific Life's operations include life insurance,
annuity, pension and institutional products, group employee benefits, broker-
dealer operations, and investment advisory services.
Pacific Life was established on January 2, 1868 under the name, Pacific Mutual
Life Insurance Company of California. It was reincorporated as Pacific Mutual
Life Insurance Company on July 22, 1936. On September 1, 1997, Pacific Life
converted from a mutual life insurance company to a stock life insurance
company. Pacific Life is a subsidiary of Pacific LifeCorp, a holding company,
which in turn is a subsidiary of Pacific Mutual Holding Company, a mutual
holding company.
Under their charters, Pacific Mutual Holding Company must always hold at least
51% of the outstanding voting stock of Pacific LifeCorp. Pacific LifeCorp must
always own 100% of the voting stock of Pacific Life. Owners of Pacific Life's
annuity contracts and life insurance policies have certain membership interests
in Pacific Mutual Holding Company. They have the right to vote on the election
of the Board of Directors of the mutual holding company and on other matters.
They also have certain rights if the mutual holding company is liquidated or
dissolved.
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How policies are administered Pacific Life Insurance Company administers the policies sold under this
prospectus. At the end of 1998, Pacific Life had over $89.6 billion of
individual life insurance and total admitted assets of approximately $37.6
billion. In 1998, they were ranked the 18th largest life insurance carrier in
the U.S. in terms of admitted assets.
Pacific Life, together with its affiliated enterprises, has total assets and
funds under management of $290 billion. They are authorized to conduct life and
annuity business in the District of Columbia and in all states except New York.
Pacific Life's principal office is at 700 Newport Center Drive, Newport Beach,
CA 92660.
53
ABOUT PL&A
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How policies are distributed Pacific Mutual Distributors, Inc. (PMD), our affiliate, is the distributor of
our policies. PMD is located at 700 Newport Center Drive, Newport Beach,
California 92660.
PMD is registered as a broker-dealer with the SEC and is a member of the
National Association of Securities Dealers (NASD). We pay PMD for its services
as our distributor.
The policies are sold by registered representatives of broker-dealers who have
signed agreements with us and PMD. Registered representatives must be licensed
to sell variable life insurance under the state insurance and securities
regulations that apply. Broker-dealers must be registered with the SEC.
How we pay broker-dealers
We pay broker-dealers commission for promoting, marketing and selling our
policies. Broker-dealers pay a portion of the commission to their registered
representatives, under their own arrangements.
Commissions are based on "target" premiums we determine. The commission we pay
will vary with the agreement, but the most common schedule of commissions we
pay is:
A target premium is a hypothetical premium . 63% of premiums paid up to the first target premium in the first policy year
that is used only to calculate commissions. . 4% of premiums paid up to the first target premium after the first policy year
It varies with the death benefit option you . 4% of the premiums paid under targets 2-10
choose, the age of the person insured by . 2% of premiums paid in excess of the 10th target premium.
the policy on the policy date, and the
gender (unless unisex rates are required) We may pay broker-dealers an annual renewal commission of up to 0.20% of a
and risk class of the person insured by policy's accumulated value less any outstanding loan amount. We calculate the
the policy renewal amount monthly and it becomes payable on each policy anniversary.
A policy's target premium will be less than
the policy's guideline level premiums. We may also pay override payments, expense and marketing allowances, bonuses,
wholesaler fees and training allowances.
Registered representatives who meet certain sales levels can qualify for sales
incentives programs we sponsor. We may also pay them non-cash compensation like
expense-paid trips, expense-paid educational seminars, and merchandise. They
can choose to receive their compensation on a deferred basis.
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How our accounts work We own the assets in our general account and our separate account. We allocate
your net premiums to these accounts according to the investment options you've
chosen.
General account
We can provide you with reports of our Our general account includes all of our assets, except for those held in our
ratings as an insurance company and our separate accounts. We guarantee you an interest rate for up to one year on any
ability to pay claims with respect to our amount allocated to the fixed options. The rate is reset annually. The fixed
general account assets. options are part of our general account, which we may invest as we wish,
according to any laws that apply. We'll credit the guaranteed rate even if the
investments we make earn less. Our ability to pay these guarantees is backed by
our strength as a company.
The fixed options are not securities, so they do not fall under any securities
act. For this reason, the SEC has not reviewed the disclosure in this
prospectus about the fixed options. However, other federal securities laws may
apply to the accuracy and completeness of the disclosure about the fixed
options.
54
Separate account
You'll find the audited consolidated Amounts allocated to the variable investment options are held in our separate
financial statements for PL&A later in account. The assets in this account are kept separate from the assets in our
this section of the prospectus. We include general account and our other separate accounts, and are protected from our
these financial statements to show our general creditors.
strength as a company and our ability to
meet our obligations under the policies. The separate account was established on September 24, 1998 under Arizona law
under the authority of our Board of Directors. It's registered with the SEC as
a type of investment company called a unit investment trust. The SEC does not
oversee the administration or investment practices or policies of the account.
The separate account is not the only The separate account is divided into variable accounts. Each variable account
investor in the Pacific Select Fund. invests in shares of a designated portfolio of the Pacific Select Fund. We may
Investment in the fund by other separate add variable accounts that invest in other portfolios of the fund or in other
accounts for variable annuity contracts securities.
and variable life insurance contracts
could cause conflicts. For more We're the legal owner of the assets in the separate account, and pay its
information, please see the Statement of operating expenses. The separate account is operated only for our variable life
Additional Information for the Pacific insurance policies. We must keep enough money in the account to pay anticipated
Select Fund. obligations under the insurance policies funded by the account, but we can
transfer any amount that's more than these anticipated obligations to our
general account. Some of the money in the separate account may include charges
we collect from the account and any investment results on those charges.
We cannot charge the assets in the separate account attributable to our
reserves and other liabilities under the policies funded by the account with
any liabilities from our other business.
Similarly, the income, gains or losses, realized or unrealized, of the assets
of any variable account belong to that variable account and are credited to or
charged against the assets held in that variable account without regard to our
other income, gains or losses.
Making changes to the separate account
We can add, change or remove any securities that the separate account or any
variable account holds or buys, as long as we comply with the laws that apply.
We can substitute shares of one Pacific Select Fund portfolio with shares of
another portfolio or fund if:
. any portfolio is no longer available for investment
. our management believes that a portfolio is no longer appropriate in view of
the purposes of the policy.
We'll give you any required notice or receive any required approval from policy
owners or the SEC before we substitute any shares. We'll comply with the filing
or other procedures established by insurance regulators as required by law.
We can add new variable accounts, which may include additional subaccounts of
the separate account, to serve as investment options under the policies. These
may be managed separate accounts or they may invest in a new portfolio of the
fund, or in shares of another investment company or one of its portfolios, or
in a suitable investment vehicle with a specified investment objective.
We can add new variable accounts when we believe that it's warranted by
marketing needs or investment conditions. We'll decide on what basis we'll make
new accounts available to existing policy owners.
55
ABOUT PL&A
We can also eliminate any of our variable accounts if we believe marketing, tax
or investment conditions warrant it. We can terminate and liquidate any
variable account.
If we make any changes to variable accounts or substitution of securities, we
can make appropriate changes to this policy or any of our other policies, by
appropriate endorsement, to reflect the change or substitution.
We will notify you if there is a material change in the investment policy of a
Variable Account. The notice will inform you of your options, including your
option to transfer from such Variable Account to the Fixed Account within 60
days after:
. the effective date of the material change, or
. the date we send you the notice, whichever is later.
If we believe it's in the best interests of people holding voting rights under
the policies and we meet any required regulatory approvals we can do the
following:
. operate the separate account as a management investment company, unit
investment trust, or any other form permitted under securities or other laws
. register or deregister the separate account under securities law
. combine the separate account with one of our other separate accounts or our
affiliates' separate accounts
. combine one or more variable accounts
. create a committee, board or other group to manage the separate account.
. change the classification of any variable account.
Taxes we pay
We may be charged for state and local taxes. Currently, we pay these taxes
because they are small amounts with respect to the policy. If these taxes
increase significantly, we may deduct them from the separate account.
We may charge the separate account for any federal, state and local taxes that
apply to the separate account or to our operations. This could happen if our
tax status or the tax treatment of variable life insurance changes.
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Voting rights We're the legal owner of the shares of the Pacific Select Fund that are held by
the variable accounts. We may vote on any matter at shareholder meetings of the
fund. However, we are required by law to vote as you instruct on the shares
relating to your allocation in a variable investment option. This is called
your voting interest.
Your voting interest is calculated as of a day set by the Board of Trustees of
the fund called the record date. Your voting interest equals the accumulated
value in a variable investment option divided by the net asset value of a share
of the corresponding portfolio. Fractional shares are included. If allowed by
law, we may change how we calculate your voting interest.
We'll send you documents from the fund called proxy materials. They include
information about the items you'll be voting on and forms for you to give us
your instructions. We'll vote shares held in the separate account for which we
do not receive voting instructions in the same proportion as all other shares
in the portfolio held by that separate account for which we've received timely
instructions.
We'll vote shares of any portfolio we hold in our general account in the same
proportion as the total votes for all of our separate accounts, including this
separate account.
56
If the law changes to allow it, we can vote as we wish on shares of the
portfolios held in the separate account.
When required by state insurance regulatory authorities, we may disregard
voting instructions that:
. would change a portfolio's investment objective or subclassification
. would approve or disapprove an investment advisory contract.
We may disregard voting instructions on a change initiated by policy owners
that would change a portfolio's investment policy, investment adviser or
portfolio manager if:
. our disapproval is reasonable
. we determine in good faith that the change would be against state law or
otherwise be inappropriate, considering the portfolio's objectives and
purpose, and considering what effect the change would have on us.
If we disregard any voting instructions, we'll include a summary of the action
we took and our reasons for it in the next report to policy owners.
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Preparing for the year 2000 We rely significantly on Pacific Life's computer systems and applications in
our daily operations. Pacific Life long ago recognized the challenges
associated with the Year 2000 date change. This change involves the ability of
computer systems to properly recognize the Year 2000. The inability to do so
could result in major failures or miscalculations. Pacific Life began prior to
1995 to assess and plan for the potential impact of the Year 2000. More
recently, Pacific Life has been executing a company-wide plan adopted during
1998 which called for correction or replacement of remaining non-compliant
systems by December 31, 1998.
Pacific Life has successfully executed this project plan to date. Virtually all
affected systems were remediated and tested in time for use during 1998 year-
end processing cycles. Although it is not possible to certify that any system
will be completely free of Year 2000 problems, they have performed extensive
testing to identify and deal with such potential problems. Additionally, most
of the company's critical systems were subject to an independent third-party
review process which used sophisticated automated tools to identify Year 2000
related bugs. The results have been very positive and Pacific Life feels the
company's internal systems are positioned well for the date change in the
century.
Pacific Life plans to continue to test and re-test throughout 1999 and will
respond promptly should any problems arise at any time thereafter.
Pacific Life is continuing to work on contingency plans for critical business
processes. When appropriate, alternative methods and procedures are being
developed to work around unanticipated problems.
In addition to the above, Pacific Life will continue to carefully evaluate
responses from vendors and significant business partners regarding the
compliance of their critical business processes and products. Although
ultimately PL&A and Pacific Life cannot be responsible for the Year 2000
compliance efforts of these outside entities, we will take appropriate steps
wherever possible to develop contingency plans to address vendors and partners
deemed non-compliant.
57
ABOUT PL&A
Expenses to make Pacific Life's systems Year 2000 compliant are currently
estimated to range from $10 million to $12 million, which excludes the cost of
their personnel who support Year 2000 compliance efforts. Pacific Life does not
anticipate any other material future costs associated with the Year 2000
compliance projects, although there can be no assurance.
These Year 2000 related statements are designated as "Year 2000 Readiness
Disclosure" pursuant to the Year 2000 Information Readiness Disclosure Act,
enacted October 19, 1998.
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State regulation We're subject to the laws of the state of Arizona governing insurance companies
and to regulations issued by the Commissioner of Insurance of Arizona. In
addition, we're subject to the insurance laws and regulations of the other
states and jurisdictions in which we're licensed or may become licensed to
operate.
An annual statement in a prescribed form must be filed with the Commissioner of
Insurance of Arizona and with regulatory authorities of other states on or
before March 1st in each year. This statement covers our operations for the
preceding year and our financial condition as of December 31st of that year.
Our affairs are subject to review and examination at any time by the
Commissioner of Insurance or his agents, and subject to full examination of our
operations at periodic intervals.
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Legal proceedings and legal matters The separate account is not involved in any legal proceedings that would have a
material effect on policy owners.
Legal matters concerning the issue and sale of the life insurance policies
described in this prospectus, our organization and authority to issue the
policies under Arizona law, and the validity of the forms of the policies under
Arizona law, have been passed upon by our general counsel. Legal matters
relating to federal securities laws and federal income tax laws have been
passed upon by Dechert Price & Rhoads.
--------------------------------------------------------------------------------
Registration statement We've filed a registration statement with the SEC for Pacific Select Exec II -
NY, under the Securities Act of 1933. The SEC's rules allow us to omit some of
the information required by the registration statement from this prospectus.
You can ask for it from the SEC's office in Washington, D.C. They may charge
you a fee.
--------------------------------------------------------------------------------
Management The following is a list of our directors and certain officers, along with some
information about their business activities over the past five years. They do
not receive any compensation from the separate account for services they
provide to it nor do we pay any separately allocable compensation for these
services.
Unless otherwise indicated, the business address of each of these people is c/o
Pacific Life & Annuity Company, 700 Newport Center Drive, Newport Beach,
California 92660.
58
NAME AND POSITION PRINCIPAL OCCUPATION DURING THE LAST FIVE YEARS
William L. Ferris Director, President and Chief Executive Officer of PL&A; Director of American Cancer
Director, President Society of Orange County and of California Health Decisions.
and Chief Executive
Officer
Thomas C. Sutton Director and Chairman of the Board of Pacific Life & Annuity Company; Director,
Director and Chairman of the Board and Chief Executive Officer of Pacific Life Insurance Company;
Chairman of the Director, Chairman of the Board and Chief Executive Officer of Pacific LifeCorp,
Board August 1997 to present; Director, Chairman of the Board and Chief Executive Officer
of Pacific Mutual Holding Company, August 1997 to present; Trustee and Chairman of
the Board and Former President of Pacific Select Fund; Management Board Member of
PIMCO Advisors L.P., December 1997 to present; Former Equity Board Member of PIMCO
Advisors L.P.; Former Director of Pacific Corinthian Life Insurance Company;
Director of Newhall Land & Farming; The Irvine Company; Edison International; and
similar positions with other affiliated companies of Pacific Life Insurance Company.
David R. Carmichael Director of PL&A; Senior Vice President and General Counsel of PL&A, July 1998 to
Director, Senior present; Director (since August 1997), Senior Vice President and General Counsel of
Vice President and Pacific Life Insurance Company; Senior Vice President and General Counsel of Pacific
General Counsel LifeCorp, August 1997 to present; Senior Vice President and General Counsel of
Pacific Mutual Holding Company, August 1997 to present; Director of: Association of
California Life and Health Insurance Companies and Association of Life Insurance
Counsel.
Audrey L. Milfs Director, Vice President (since February 1999) and Secretary of PL&A; Director
Director, Vice (since August 1997), Vice President and Corporate Secretary of Pacific Life
President and Insurance Company; Vice President and Corporate Secretary of Pacific LifeCorp,
Secretary August 1997 to present; Vice President and Corporate Secretary of Pacific Mutual
Holding Company, August 1997 to present; Secretary of Pacific Select Fund; similar
positions with other affiliated companies of Pacific Life Insurance Company.
Glenn S. Schafer Director of PL&A; Director (since November 1994) and President (since January 1995)
Director of Pacific Life Insurance Company; Executive Vice President and Chief Financial
Officer of Pacific Life Insurance Company, April 1991 to January 1995; Director and
President of Pacific LifeCorp, August 1997 to present; Director and President of
Pacific Mutual Holding Company, August 1997 to present; President (since February
1999) and Former Trustee of Pacific Select Fund; Management Board Member of PIMCO
Advisors L.P., December 1997 to present; Former Equity Board Member of PIMCO
Advisors L.P.; Former Director of Pacific Corinthian Life Insurance Company; and
similar positions with other affiliated companies of Pacific Life Insurance Company.
Khanh T. Tran Senior Vice President (since February 1999) and Chief Financial Officer of PL&A;
Senior Vice Director (since August 1997), Senior Vice President and Chief Financial Officer of
President and Chief Pacific Life Insurance Company, June 1996 to present; Vice President and Treasurer
Financial Officer of Pacific Life, November 1991 to June 1996; Senior Vice President and Chief
Financial Officer of Pacific LifeCorp, August 1997 to present; Senior Vice President
and Chief Financial Officer of Pacific Mutual Holding Company, August 1997 to
present; Senior Vice President and Chief Financial Officer of other affiliated
companies of Pacific Life Insurance Company.
Lynn C. Miller Executive Vice President of PL&A, July 1998 to present; Executive Vice President of
Executive Vice Pacific Life Insurance Company, January 1995 to present; Senior Vice President of
President Pacific Life Insurance Company 1989 to 1995.
Brian D. Klemens Vice President and Treasurer of PL&A, February 1999 to present; Vice President and
Vice President and Treasurer of Pacific Life Insurance Company, December 1998 to present; Assistant
Treasurer Vice President, Accounting and Assistant Controller of Pacific Life Insurance
Company, April 1994 to December 1998; Vice President and Treasurer of Pacific
LifeCorp, June 1999 to present; Vice President and Treasurer of Pacific Mutual
Holding Company, June 1999 to present; Vice President and Treasurer of other
affiliated companies of Pacific Life Insurance Company.
59
ABOUT PL&A
--------------------------------------------------------------------------------
Financial statements The next several pages contain the audited financial statements-statutory basis
for PM Group Life Insurance Company of December 31, 1998 and 1997 and for the
two years ended December 31, 1998, which are included in this prospectus only
so you can assess our ability to meet our obligations under the policies.
Unaudited financial statements-statutory basis for PL&A as of ,
1999 and for the months ended , 1999 and 1998 are also
included.
--------------------------------------------------------------------------------
Experts The audited financial statements-statutory basis for PM Group Life Insurance
Company as of December 31, 1998 and 1997 and for the two years ended December 31,
1998 included in this prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein, and have been
so included in reliance upon the reports of such firm given upon their authority
as experts in accounting and auditing.
60
PM GROUP LIFE INSURANCE COMPANY
Financial Statements - Statutory Basis as of and for the years ended
December 31, 1998 and 1997
and Independent Auditors' Report
61
INDEPENDENT AUDITORS' REPORT
PM Group Life Insurance Company:
We have audited the accompanying statements of admitted assets, liabilities and
capital and surplus - statutory basis of PM Group Life Insurance Company (the
"Company") as of December 31, 1998 and 1997, and the related statements of
operations - statutory basis, capital and surplus - statutory basis, and cash
flows - statutory basis for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As described more fully in Note 1 to the financial statements, the Company
prepared these financial statements using accounting practices prescribed or
permitted by the Insurance Department of the State of Arizona which practices
differ from generally accepted accounting principles. The effects on the
financial statements of the variances between the statutory basis of accounting
and generally accepted accounting principles are presumed to be material.
In our opinion, because of the effects of the matter described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial
position of PM Group Life Insurance Company as of December 31, 1998 and 1997,
or the results of its operations or its cash flows for the years then ended.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the admitted assets, liabilities and capital and surplus
of PM Group Life Insurance Company as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for the years then ended, on the
basis of accounting described in Note 1.
DELOITTE & TOUCHE LLP
Costa Mesa, California
February 22, 1999
62
PM Group Life Insurance Company
STATEMENTS OF ADMITTED ASSETS,
LIABILITIES AND CAPITAL AND SURPLUS-STATUTORY BASIS
December 31,
1998 1997
- --------------------------------------------------------------------------
(In Thousands)
ADMITTED ASSETS
Bonds $217,096 $227,199
Preferred stocks 5,662 5,215
Common stocks 17,372 9,419
Mortgage loans 11,118 14,079
Real estate 687
Cash and short-term investments 36,922 33,185
Premiums due and uncollected 26,186 25,635
Other assets 23,555 22,761
- --------------------------------------------------------------------------
TOTAL ADMITTED ASSETS $337,911 $338,180
- --------------------------------------------------------------------------
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Policy reserves $119,743 $126,716
Policy benefits payable 83,792 85,338
Deposit funds 7,748 9,882
Accrued general expenses 11,640 13,193
Other liabilities 31,027 24,521
Asset valuation reserve 7,262 6,870
- --------------------------------------------------------------------------
TOTAL LIABILITIES 261,212 266,520
- --------------------------------------------------------------------------
Capital and Surplus:
Common stock - $1 par value; 5 million shares
authorized; 2.9 million shares issued and outstanding 2,900 2,900
Paid-in surplus 37,607 37,607
Unassigned surplus 36,192 31,153
- --------------------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS 76,699 71,660
- --------------------------------------------------------------------------
TOTAL LIABILITIES AND CAPITAL AND SURPLUS $337,911 $338,180
- --------------------------------------------------------------------------
See Independent Auditors' Report and Notes to Financial Statements - Statutory
Basis
63
PM Group Life Insurance Company
STATEMENTS OF OPERATIONS-STATUTORY BASIS
Years Ended December 31,
1998 1997
- ---------------------------------------------------------------
(In Thousands)
REVENUES
Premiums $ 499,481 $ 439,629
Net investment income 23,795 23,143
Other income 4,510 2,695
- ---------------------------------------------------------------
TOTAL REVENUES 527,786 465,467
- ---------------------------------------------------------------
BENEFITS AND EXPENSES
Current and future policy benefits 404,671 330,435
Operating expenses 114,774 110,288
- ---------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES 519,445 440,723
- ---------------------------------------------------------------
INCOME BEFORE FEDERAL INCOME TAXES 8,341 24,744
Federal income taxes 2,237 8,581
- ---------------------------------------------------------------
NET GAIN FROM OPERATIONS 6,104 16,163
Net realized capital gains (losses) (1,014) 1,228
- ---------------------------------------------------------------
NET INCOME $ 5,090 $ 17,391
- ---------------------------------------------------------------
See Independent Auditors' Report and Notes to Financial Statements - Statutory
Basis
64
PM Group Life Insurance Company
STATEMENTS OF CAPITAL AND SURPLUS-STATUTORY BASIS
Common Stock
------------- Paid-in Unassigned
Shares Amount Surplus Surplus Total
- ----------------------------------------------------------------------
(In Thousands)
BALANCES,
JANUARY 1, 1997 2,900 $2,900 $37,607 $ 22,685 $ 63,192
Net income 17,391 17,391
Dividend paid to parent (14,000) (14,000)
Other surplus transactions 5,077 5,077
- ----------------------------------------------------------------------
BALANCES,
DECEMBER 31, 1997 2,900 2,900 37,607 31,153 71,660
Net income 5,090 5,090
Other surplus transactions (51) (51)
- ----------------------------------------------------------------------
BALANCES,
DECEMBER 31, 1998 2,900 $2,900 $37,607 $ 36,192 $ 76,699
- ----------------------------------------------------------------------
See Independent Auditors' Report and Notes to Financial Statements - Statutory
Basis
65
PM Group Life Insurance Company
STATEMENTS OF CASH FLOWS-STATUTORY BASIS
Years Ended December 31,
1998 1997
- ------------------------------------------------------
(In Thousands)
CASH FLOWS FROM OPERATING
ACTIVITIES
Receipts
Premiums $ 500,017 $ 444,232
Net investment income 22,048 21,363
Other, net 3,238 8,598
Payments
Policy benefit payments (408,288) (326,113)
Operating expenses (117,981) (106,716)
Federal income taxes (3,377) (9,688)
- ------------------------------------------------------
NET CASH PROVIDED BY
(USED IN) OPERATING AC-
TIVITIES (4,343) 31,676
- ------------------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds
Bonds 72,754 56,909
Stocks 3,736 3,768
Mortgage loans 3,274 2,469
Other 8,180 2,623
Payments for the
purchases of
Bonds (63,816) (79,015)
Stocks (7,608) (3,300)
Other (8,440) (7,649)
- ------------------------------------------------------
NET CASH PROVIDED BY
(USED IN) INVESTING AC-
TIVITIES 8,080 (24,195)
- ------------------------------------------------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Dividend paid to parent (14,000)
- ------------------------------------------------------
Change in cash and short-
term investments 3,737 (6,519)
Cash and short-term in-
vestments, beginning of
year 33,185 39,704
- ------------------------------------------------------
CASH AND SHORT-TERM IN-
VESTMENTS, END OF YEAR $ 36,922 $ 33,185
- ------------------------------------------------------
See Independent Auditors' Report and Notes to Financial Statements - Statutory
Basis
66
PM Group Life Insurance Company
NOTES TO FINANCIAL STATEMENTS-STATUTORY BASIS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
PM Group Life Insurance Company ("PM Group") is a stock life insurance
company domiciled in the State of Arizona, and a wholly-owned subsidiary of
Pacific Life Insurance Company ("Pacific Life"), formerly Pacific Mutual
Life Insurance Company ("Pacific Mutual"). PM Group offers group health,
dental and life products to three principal market segments in the United
States. Its Group Employee Benefits Operation serves larger employer groups
of fifty or more lives, while the Multiple Employer Trust unit insures
smaller employer groups with less than fifty lives per group. The Pacific
Risk Management Services unit offers stop loss and life products to self-
funded plan sponsors.
Pursuant to consent received from the Insurance Department of the State of
California, Pacific Mutual implemented a plan of conversion to form a
mutual holding company structure (the "Conversion") on September 1, 1997.
The Conversion created Pacific LifeCorp, an intermediate stock holding
company and Pacific Mutual Holding Company ("PMHC"), a mutual holding
company. Pacific Mutual was converted to a stock life insurance company and
renamed Pacific Life. Under their respective charters, PMHC must always own
at least 51% of the outstanding voting stock of Pacific LifeCorp, and
Pacific LifeCorp must always own 100% of the voting stock of Pacific Life.
BASIS OF PRESENTATION
These financial statements have been prepared in accordance with accounting
practices prescribed or permitted by the Insurance Department of the State
of Arizona, which is a comprehensive basis of accounting other than
generally accepted accounting principles ("GAAP"). Prescribed statutory
accounting practices include a variety of publications of the National
Association of Insurance Commissioners ("NAIC"), as well as state laws,
regulations, and general administrative rules. Permitted statutory
accounting practices encompass all accounting practices not so prescribed.
Accounting practices prescribed or permitted by the Insurance Department of
the State of Arizona differ in certain respects, which in some cases are
materially different from GAAP. The significant differences are noted
below:
An interest maintenance reserve ("IMR") is established to capture
realized investment gains and losses, net of tax, on the sale of fixed
income investments resulting from changes in the general level of
interest rates, and is amortized into income over the remaining years
to expected maturity of the assets sold under statutory accounting
practices; no such reserve is required under GAAP.
An asset valuation reserve ("AVR"), based upon a formula prescribed by
the NAIC, is established as a liability to offset potential non-
interest related investment losses, and changes in the AVR are charged
or credited directly to surplus under statutory accounting practices;
no such reserve is required under GAAP.
Investments in bonds and preferred stocks are generally carried at
amortized cost under statutory accounting practices; under GAAP,
investments in bonds and preferred stocks, other than those classified
as held to maturity, are carried at estimated fair value.
Certain assets, principally deferred income taxes and furniture and
equipment, are designated as non admitted and excluded from assets by a
direct charge to surplus under statutory accounting practices; under
GAAP, such assets are carried on the statement of financial condition
with appropriate valuation allowances.
In March 1998, the NAIC adopted the Codification of Statutory Accounting
Principles ("Codification"). The Codification, which is intended to
standardize regulatory accounting and reporting for the insurance industry,
is
67
PM Group Life Insurance Company
NOTES TO FINANCIAL STATEMENTS-STATUTORY BASIS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
proposed to be effective January 1, 2001. However, statutory accounting
principles will continue to be established by individual state laws and
permitted practices and it is uncertain when, or if, the state of Arizona
will require adoption of Codification for the preparation of statutory
financial statements. PM Group has not finalized the quantification of the
effects of Codification on its statutory financial statements.
The following is a reconciliation of statutory capital and surplus, as
reflected in the accompanying financial statements, to stockholder's equity
on a GAAP basis:
December 31,
1998 1997
--------------------
(In Thousands)
Statutory capital and surplus as reported
herein $ 76,699 $ 71,660
Non admitted deferred income tax 19,383 16,632
Asset valuation reserve 7,262 6,870
Unrealized gain on securities 3,874 18,740
Other non admitted assets 2,309 3,102
Interest maintenance reserve 1,389 1,186
Deferred tax on unrealized gains on
securities (4,877) (9,380)
Other (1,891) (2,084)
--------------------
Stockholder's equity - GAAP basis $104,148 $106,726
--------------------
There were no significant differences between statutory net income of $5.1
million and GAAP net income of $5.8 million for the year ended December 31,
1998 and statutory net income of $17.4 million and GAAP net income of $17.3
million for the year ended December 31, 1997.
PM Group's significant statutory accounting practices are described below.
INVESTMENTS
Bonds qualifying for amortization are carried at amortized cost; all other
bonds are carried at prescribed values. Preferred stocks are principally
stated at amortized cost. Common stocks are carried at market value.
Mortgage loans are stated at unpaid principal balances. Real estate is
valued at the lower of depreciated cost or market, less related mortgage
debt. Real estate is depreciated using the straight-line method over 5 to
30 years.
Short-term investments are carried at amortized cost which approximates
estimated fair value. Short-term investments generally consist of bonds,
commercial paper and money market instruments whose maturities at the time
of acquisition were one year or less.
The AVR is computed in accordance with a prescribed formula and is designed
to stabilize surplus against valuation and credit-related losses for
certain invested assets. Changes to the AVR are reported as direct
additions to, or deductions from, surplus. The IMR results in the deferral
of after-tax realized capital gains and losses attributable to interest
rate fluctuations on fixed income investments. These capital gains and
losses are amortized into investment income over the remaining life of the
investment sold. The IMR of $1.4 million and $1.2 million as of December
31, 1998 and 1997, respectively, is included in other liabilities on the
accompanying statements of admitted assets, liabilities and capital and
surplus - statutory basis.
Net realized capital gains and losses are determined on the specific
identification method and are presented net of Federal capital gains tax
and transfers to the IMR.
68
PM Group Life Insurance Company
NOTES TO FINANCIAL STATEMENTS-STATUTORY BASIS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Derivatives are used principally for hedging purposes and are valued
consistently with the hedged items.
POLICY RESERVES AND DEPOSIT FUNDS
Medical expense claim reserves are based on PM Group's actual loss
experience. Life insurance reserves, including premium waivers, are based
on various tabular methods and actual loss experience. Disabled life
reserves are determined using various tabular reserve methods.
The liability for deposit funds is based primarily on the policyholders'
equity in their deposit accounts, including credited interest.
REVENUES AND EXPENSES
Premiums are recognized as revenue over the premium paying period.
Investment income is recorded as earned.
Expenses, including policy acquisition costs, and Federal income taxes are
charged to operations as incurred.
FEDERAL INCOME TAXES
PM Group's operations are included in the consolidated Federal income tax
return of PMHC, PM Group's ultimate parent. PM Group is allocated an income
tax expense based on the effect of including its operations in the
consolidated provision. Deferred taxes are provided for as permitted by the
Insurance Department of the State of Arizona. The net deferred tax asset is
non admitted. This practice has no effect on total surplus.
OTHER SURPLUS TRANSACTIONS
Other surplus transactions primarily consist of unrealized capital gains
and losses, changes in non admitted assets and change in the AVR.
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments disclosed in Notes 2 and
3 has been determined using available market information and appropriate
valuation methodologies. However, considerable judgment is required to
interpret market data to develop the estimates of fair value. Accordingly,
the estimates presented may not be indicative of the amounts PM Group could
realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies could have a significant effect
on the estimated fair value amounts.
RISK-BASED CAPITAL
Risk-based capital is a method developed by the NAIC to measure the minimum
amount of capital appropriate for an insurance company to support its
overall business operations in consideration of its size and risk profile.
The formulas for determining the amount of risk-based capital specify
various weighting factors that are applied to financial balances or various
levels of activity based on the perceived degree of risk. The adequacy of a
company's actual capital is measured by comparing it to the risk-based
capital as determined by the formulas. Companies below minimum risk-based
capital requirements are classified within certain levels, each of which
requires specified corrective action. As of December 31, 1998 and 1997, PM
Group exceeded the minimum risk-based capital requirements.
69
PM Group Life Insurance Company
NOTES TO FINANCIAL STATEMENTS-STATUTORY BASIS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
BUSINESS RISKS
PM Group operates in a business environment which is subject to various
risks and uncertainties. PM Group's group health insurance is subject to
varying levels of regulation. The United States Congress has, from time to
time, considered various health care proposals and several states have
enacted health care reform legislation. Although it is not possible to
predict what changes may be adopted at the state or Federal level, certain
changes could have a negative impact upon the group health business of PM
Group.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
practices prescribed or permitted by regulatory authorities requires
management to make estimates and assumptions that affect the reported
amounts of admitted assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the 1998
financial statement presentation.
70
PM Group Life Insurance Company
NOTES TO FINANCIAL STATEMENTS-STATUTORY BASIS
2. INVESTMENTS IN DEBT SECURITIES
The statement value, gross unrealized gains and losses, and estimated fair
value of debt securities are shown below. Debt securities include bonds,
redeemable preferred stocks and short-term investments. Short-term
investments amounted to $38.0 million and $31.1 million as of December 31,
1998 and 1997, respectively. The estimated fair value of publicly traded
securities is based on quoted market prices. For securities not actively
traded, estimated fair values were provided by independent pricing services
specializing in "matrix pricing" and modeling techniques. PM Group also
estimates certain fair values based on interest rates, credit quality and
average maturity or from securities with comparable trading
characteristics.
Gross Unrealized
Statement ---------------- Estimated
Value Gains Losses Fair Value
-------------------------------------
(In Thousands)
December 31, 1998:
------------------
U.S. Treasury securities and
obligations of U.S. government
authorities and agencies $ 6,145 $ 114 $ 3 $ 6,256
Obligations of states, political
subdivisions and foreign
governments 8,409 345 16 8,738
Corporate securities 157,844 3,189 952 160,081
Mortgage-backed and asset-backed
securities 82,730 1,462 225 83,967
Redeemable preferred stock 4,862 165 6 5,021
-------------------------------------
Total $259,990 $5,275 $1,202 $264,063
-------------------------------------
December 31, 1997:
------------------
U.S. Treasury securities and
obligations of U.S. government
authorities and agencies $ 5,907 $ 56 $ 5,963
Obligations of states, political
subdivisions and foreign
governments 7,605 228 7,833
Corporate securities 143,201 20,115 $429 162,887
Mortgage-backed and asset-backed
securities 101,613 1,591 274 102,930
Redeemable preferred stock 5,203 165 193 5,175
-------------------------------------
Total $263,529 $22,155 $896 $284,788
-------------------------------------
The carrying value and estimated fair value of debt securities as of
December 31, 1998, by contractual repayment date of principal, are shown
below. Expected maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties.
Statement Estimated
Value Fair Value
---------------------
(In Thousands)
Due in one year or less $ 55,829 $ 55,837
Due after one year through five years 95,381 96,983
Due after five years through ten years 20,987 21,652
Due after ten years 5,063 5,624
---------------------
177,260 180,096
Mortgage-backed and asset-backed securities 82,730 83,967
---------------------
Total $259,990 $264,063
---------------------
71
PM Group Life Insurance Company
NOTES TO FINANCIAL STATEMENTS-STATUTORY BASIS
2. INVESTMENTS IN DEBT SECURITIES (Continued)
Proceeds from sales of investments in debt securities were $35.8 million
and $39.0 million for the years ended December 31, 1998 and 1997,
respectively. Gross gains of $3.0 million and $16,000 and gross losses of
$0 and $715,000 were realized on those sales for the years ended December
31, 1998 and 1997, respectively.
3. FINANCIAL INSTRUMENTS
The estimated fair values of PM Group's financial instruments, including
debt securities (Note 2), are as follows:
December 31, 1998 December 31, 1997
----------------- -----------------
Statement Estimated Statement Estimated
Value Fair Value Value Fair Value
-------------------------------------------
(In Thousands)
Assets:
Debt securities $259,990 $264,063 $263,529 $284,788
Preferred and common stocks 18,172 18,172 9,431 9,445
Mortgage loans 11,118 12,396 14,079 15,775
Liabilities:
Deposit funds 7,748 7,748 9,882 9,882
Derivative financial
instrument:
Asset swap contract (2,327)
The following methods and assumptions were used to estimate the fair value
of these financial instruments as of December 31, 1998 and 1997:
PREFERRED AND COMMON STOCKS
The estimated fair values are based on quoted market prices or dealer
quotes.
MORTGAGE LOANS
The estimated fair value of the mortgage loan portfolio is determined by
discounting the estimated future cash flows, using a year-end market rate
which is applicable to the yield, credit quality and average maturity of
the composite portfolio.
DERIVATIVE FINANCIAL INSTRUMENT
PM Group used an asset swap contract to manage interest rate and equity
risk to better match portfolio duration to liabilities. Asset swap
contracts involve the exchange of upside equity potential for fixed income
streams. The amounts to be received or paid pursuant to the agreement are
accrued and recognized through an adjustment to net investment income in
the accompanying statements of operations - statutory basis over the life
of the agreement. The asset swap contract matured during 1998. As of
December 31, 1997 the asset swap contract had a notional principal amount
of $5.0 million.
DEPOSIT FUNDS
The estimated fair value of deposit funds with no defined maturities is the
amount payable on demand.
72
PM Group Life Insurance Company
NOTES TO FINANCIAL STATEMENTS-STATUTORY BASIS
4. LIABILITY FOR UNPAID CLAIMS AND CLAIM ADJUSTMENT EXPENSES
Activity in the liability for unpaid claims and claim adjustment expenses,
which is included in both policy reserves and policy benefits payable on
the accompanying statements of admitted assets, liabilities and capital and
surplus - statutory basis, is summarized as follows:
Years Ended
December 31,
1998 1997
------------------
(In Thousands)
Balance at January 1 $139,533 $118,712
Less reinsurance recoverables 755 1,009
------------------
Net balance at January 1 138,778 117,703
------------------
Incurred related to:
Current year 415,300 350,231
Prior years (18,282) (17,973)
------------------
Total incurred 397,018 332,258
------------------
Paid related to:
Current year 305,894 241,508
Prior years 93,596 68,920
------------------
Total paid 399,490 310,428
------------------
Net balance at December 31 136,306 139,533
Plus reinsurance recoverables 119 755
------------------
Balance at December 31 $136,425 $140,288
------------------
As a result of payment of prior years estimated claims, the provision for
claims and claim adjustment expenses decreased by $18.3 million and $18.0
million for the years ended December 31, 1998 and 1997, respectively. This
reduction is primarily due to lower than anticipated settlement of claims
and reduced claim adjustment expenses.
5. RELATED PARTY TRANSACTIONS
Pacific Life provides services of certain management and other personnel,
and other support services to PM Group. Services provided include employee
participation in a pension plan and postretirement health care and life
insurance plans maintained by Pacific Life. Charges for these services
amounted to $12.1 million and $13.1 million for the years ended December
31, 1998 and 1997, respectively, and are included in operating expenses on
the accompanying statements of operations - statutory basis.
PM Group permits certain officers and employees to defer a portion of
current cash compensation under a deferred compensation plan maintained by
Pacific Life. Interest accrued to this plan amounted to $312,375 and
$252,886 for the years ended December 31, 1998 and 1997, respectively.
Under a reinsurance and service agreement, which terminated on January 1,
1999, PM Group assumed substantially all of Pacific Life's group life and
health insurance. Premiums of $99.6 million and $98.6 million and benefits
of $95.1 million and $82.1 million were assumed for the years ended
December 31, 1998 and 1997, respectively. Amounts receivable under this
agreement were $25.0 million and $16.8 million as of December 31, 1998 and
1997, respectively.
73
PM Group Life Insurance Company
NOTES TO FINANCIAL STATEMENTS-STATUTORY BASIS
6. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE PLANS
PM Group participates in a defined benefit health care plan and a defined
benefit life insurance plan (the "Plans") sponsored by Pacific Life that
provide postretirement benefits for all eligible retirees and their
dependents. Generally, qualified employees may become eligible for these
benefits if they reach normal retirement age, have been covered under
Pacific Life's policy as an active employee for a minimum continuous period
prior to the date retired, and have an employment date before January 1,
1990. The Plans contain cost-sharing features such as deductibles and
coinsurance, and require retirees to make contributions which can be
adjusted annually. Pacific Life's commitment to qualified employees who
retire after April 1, 1994 is limited to specific dollar amounts. Pacific
Life reserves the right to modify or terminate the Plans at any time.
Pacific Life and PM Group utilize the accrual method of accounting for the
costs of the Plans as prescribed by the Insurance Departments of the States
of California and Arizona, respectively. PM Group has elected to amortize
the transition obligation, which has been allocated from Pacific Life, of
$3.7 million over twenty years. The transition obligation amortization
amounted to $183,000 for each of the years ended December 31, 1998 and
1997.
7. DIVIDEND RESTRICTIONS
Dividend payments by PM Group to its parent cannot exceed the lesser of 10%
of surplus as regards to policyholders or the statutory net gain from
operations, without prior approval from the Insurance Commissioner of the
State of Arizona. During 1997, PM Group received approval to pay an
extraordinary dividend in excess of these limitations. For the year ended
December 31, 1997, PM Group paid a dividend of $14.0 million, of which $8.0
million was considered extraordinary. No dividends were paid during 1998.
During 1999, PM Group can pay dividends amounting to approximately
$6.1 million without prior approval from the Insurance Commissioner of the
State of Arizona.
8. COMMITMENTS
PM Group has outstanding commitments to make investments in bonds and
limited partnerships as follows (In Thousands):
Year Ending December 31:
-----------------------
1999 $ 6,248
2000-2003 18,657
2004 and thereafter 5,370
-------
Total $30,275
-------
PM Group leases office facilities under various non-cancelable operating
leases. Aggregate minimum future commitments are as follows (In Thousands):
Year Ending December 31:
-----------------------
1999 $2,190
2000 1,872
2001 1,443
2002 1,328
------
Total $6,833
------
74
PM Group Life Insurance Company
NOTES TO FINANCIAL STATEMENTS-STATUTORY BASIS
9. LITIGATION
PM Group is a respondent in a number of legal proceedings, some of which
involve extra-contractual damages. In the opinion of management, the
outcome of these proceedings is not likely to have a material adverse
effect on the financial position of PM Group.
10. SUBSEQUENT EVENT
PM Group is in the process of requesting from the New York Insurance
Department authority to transact business in the State of New York. In
connection with this request, the Insurance Department of the State of
Arizona has approved the amendment of PM Group's certificate of authority
to allow the sale of variable annuities and variable life insurance. PM
Group is awaiting approval of its name change to Pacific Life & Annuity
Company.
----------------------------------------------------------------------------
75
PACIFIC LIFE & ANNUITY COMPANY
Financial Statements - Statutory Basis
as of , 1999 and December 31, 1998
and for the Months ended , 1999 and 1998
[To Be Inserted Later]
76
ILLUSTRATIONS
-----------------------------------------------------------------------------------
If you ask us, we'll provide you with Illustrations 1 through 14, which appear on the following pages, illustrate how
different kinds of illustrations: the death benefit, accumulated value and net cash surrender value of a
hypothetical policy may vary over an extended period of time, based on certain
. Illustrations similar to the ones in hypothetical rates of return.
this prospectus, but based on information
you give us about the age of the person These illustrations are based on a hypothetical policy with the following
to be insured by the policy, their risk characteristics:
class, the face amount, the death benefit
and premium payments. . the annual premium is $10,000
. on the policy date, the person insured by the policy is a 45-year old male
. Illustrations that show the allocation of select non-smoker
premium payments to specified variable
accounts. These will reflect the expenses The death benefit option, death benefit qualification test and the cost of
of the portfolio of the fund in which the insurance rates vary by illustration, as follows:
variable account invests.
-----------------------------------------------------------------------------------
. Illustrations that use a hypothetical Face amount Death benefit Qualification test Cost of insurance rate
gross rate of return that's greater than -----------------------------------------------------------------------------------
12%. These are available only to certain Illustration 1 $451,940 Option A Guideline premium Current
large institutional investors. Illustration 2 $451,940 Option A Guideline premium Guaranteed
Illustration 3 $181,828 Option B Guideline premium Current
Illustration 4 $181,828 Option B Guideline premium Guaranteed
Illustration 5 $451,940 Option C Guideline premium Current
Illustration 6 $451,940 Option C Guideline premium Guaranteed
Illustration 7 $451,940 Option A Cash value accumulation Current
Illustration 8 $451,940 Option A Cash value accumulation Guaranteed
Illustration 9 $181,828 Option B Cash value accumulation Current
Illustration 10 $181,828 Option B Cash value accumulation Guaranteed
Illustration 11 $451,940 Option C Cash value accumulation Current
Illustration 12 $451,940 Option C Cash value accumulation Guaranteed
Illustration 13 $451,940 Option A Guideline premium Current
Illustration 14 $451,940 Option A Guideline premium Guaranteed
Assumptions
Here are the assumptions we're using:
. The hypothetical rates of return are equal to constant gross annual rates of
0%, 6% and 12%.
. All premium payments are made at the beginning of the policy year.
. An amount equal to the annual premium, after taxes, is invested to earn
interest at 5% compounded annually for the second column of each table, Total
premiums paid plus interest at 5%, which shows the amount that would
accumulate.
. No policy loans have been taken out.
. The amounts shown for the death benefits, accumulated values and net cash
surrender values reflect charges deducted from the variable accounts. This
means that the net investment return on the variable accounts is lower than the
gross investment return on the assets.
. The amounts shown for the death benefits, accumulated values and net cash
surrender values also reflect premium loads, cost of insurance, administrative
charges, mortality and expense risk charges, and surrender charges.
. Illustrations 1 through 12 assume total annual advisory fees and expenses of
The fund's investment advisory fees and .77% of total average daily net assets of the fund. This reflects average
expenses are shown in An overview of advisory fees of .69% and average expenses of .08% based upon fees and expenses
Pacific Select Exec II - NY. of portfolios available as investment options under the policy.
77
ILLUSTRATIONS
. Illustrations 13 and 14 assume total annual advisory fees and expenses of .72%
of total average daily net assets of the fund. This reflects weighted average
advisory fees of .65% and weighted average expenses of .08% based upon fees and
expenses of portfolios available as investment options under the policy.
. There are no charges against the variable accounts for income taxes but we
reserve the right to impose charges in the future.
Things to keep in mind
Here are a few things to keep in mind when reviewing the illustrations:
. The values shown would be different if, although the gross annual investment
rates of return averaged 0%, 6% or 12% over a period of years, they also rose
above or fell below those averages for individual policy years.
. After we've deducted the charges and fund expenses described in the
assumptions above, the illustrated gross annual investment rates of return of
0%, 6% and 12% correspond to approximate net annual rates of return of -.77%,
5.18%, and 11.14% for illustrations 1 through 12 and -.72%, 5.24%, and 11.19%
for illustrations 13 and 14.
. The amounts shown would be different if unisex insurance rates were used or if
the people insured by the policy were females and insurance rates for females
were used.
. For the illustrations that assume current cost of insurance rates, the amounts
shown would be different if either person insured by the policy was a smoker
and rates for smokers were used.
. The fund expenses used in the illustrations do not include foreign taxes.
Here's what foreign taxes were for the year ended December 31, 1998:
-------------------------------------------------
Percentage of average
Portfolio daily net assets
-------------------------------------------------
Aggressive Equity 0.01%
Growth LT 0.01%
Equity Income 0.01%
Equity Index 0.01%
International 0.23%
Emerging Markets 0.26%
-------------------------------------------------
78
----------------------------------------------------------------------------
Illustration 1
Death benefit Option A and guideline premium test at current cost of
insurance rates
Based on average annual advisory fees and expenses of the portfolios
DEATH BENEFIT OPTION:A
GUIDELINE PREMIUM TEST
FACE AMOUNT:$451,940
MALE SELECT NONSMOKER ISSUE AGE 45
ANNUAL PREMIUM:$10,000
----------------------------------------------------------------------------
Flexible premium Total
variable universal life premiums End of year DEATH BENEFIT assuming
Illustration of death benefits, accumulated End of paid plus hypothetical gross annual investment
values and net cash surrender values. policy interest at return of
year 5% 0% 6% 12%
All premium payments are illustrated as ----------------------------------------------------------------------------
if made at the beginning of the policy 1 $10,500 $451,940 $451,940 $451,940
year. 2 $21,525 $451,940 $451,940 $451,940
3 $33,101 $451,940 $451,940 $451,940
This illustration assumes no policy loans 4 $45,256 $451,940 $451,940 $451,940
or partial withdrawals have been made. 5 $58,019 $451,940 $451,940 $451,940
6 $71,420 $451,940 $451,940 $451,940
The death benefits, accumulated values and 7 $85,491 $451,940 $451,940 $451,940
cash surrender values will differ if 8 $100,266 $451,940 $451,940 $451,940
premiums are paid in different amounts 9 $115,779 $451,940 $451,940 $451,940
or frequencies. 10 $132,068 $451,940 $451,940 $451,940
15 $226,575 $451,940 $451,940 $451,940
The hypothetical investment rates shown 20 $347,193 $451,940 $451,940 $640,342
above and elsewhere in this prospectus 25 $501,135 $451,940 $451,940 $1,094,265
are illustrative only and should not be 30 $697,608 $451,940 $564,267 $1,760,824
interpreted as a representation of past 35 $948,363 $451,940 $762,929 $2,972,033
or future investment results. Actual ----------------------------------------------------------------------------
rates of return may be more or less than End of year End of year
those shown and will depend on a number ACCUMULATED VALUE NET CASH SURRENDER VALUE
of factors, including the investment End of assuming hypothetical gross assuming hypothetical gross
allocations made to variable accounts by policy annual investment return of annual investment return of
the owner and the experience of the year 0% 6% 12% 0% 6% 12%
accounts. No representation can be made ----------------------------------------------------------------------------
by us, the separate account or the fund 1 $6,950 $7,431 $7,914 $1,235 $1,716 $2,198
that these hypothetical rates of return 2 $13,725 $15,120 $16,574 $8,010 $9,404 $10,859
can be achieved for any one year or 3 $20,408 $23,161 $26,151 $14,692 $17,445 $20,436
sustained over any period of time. 4 $26,996 $31,583 $36,763 $21,280 $25,868 $31,048
5 $33,502 $40,411 $48,527 $27,787 $34,696 $42,812
This is an illustration only. An 6 $39,929 $49,667 $61,573 $34,903 $44,642 $56,547
illustration is not intended to predict 7 $46,275 $59,374 $76,044 $42,506 $55,605 $72,275
actual performance. Interest rates, 8 $52,542 $69,556 $92,102 $50,029 $67,043 $89,590
dividends, and values set forth in the 9 $58,731 $80,238 $109,928 $57,475 $78,982 $108,671
illustration are not guaranteed. 10 $64,842 $91,449 $129,721 $64,842 $91,449 $129,721
15 $98,926 $162,644 $275,421 $98,926 $162,644 $275,421
20 $129,767 $254,085 $524,871 $129,767 $254,085 $524,871
25 $154,648 $372,321 $943,332 $154,648 $372,321 $943,332
30 $171,158 $527,352 $1,645,630 $171,158 $527,352 $1,645,630
35 $176,529 $726,600 $2,830,508 $176,529 $726,600 $2,830,508
----------------------------------------------------------------------------
79
ILLUSTRATIONS
-------------------------------------------------------------------------------
Illustration 2
Death benefit Option A and guideline premium test at guaranteed cost of
insurance rates
Based on average annual advisory fees and expenses of the portfolios
DEATH BENEFIT OPTION:A
GUIDELINE PREMIUM TEST
FACE AMOUNT:$451,940
MALE SELECT NONSMOKER ISSUE AGE 45
ANNUAL PREMIUM:$10,000
-------------------------------------------------------------------------------
Flexible premium variable Total
universal life premiums
Illustration of death benefits, End of paid plus End of year DEATH BENEFIT assuming
accumulated values and net cash policy interest at hypothetical gross annual investment return of
surrender values. year 5% 0% 6% 12%
-------------------------------------------------------------------------------
All premium payments are 1 $10,500 $451,940 $451,940 $451,940
illustrated as if made at the 2 $21,525 $451,940 $451,940 $451,940
beginning of the policy year. 3 $33,101 $451,940 $451,940 $451,940
4 $45,256 $451,940 $451,940 $451,940
This illustration assumes no 5 $58,019 $451,940 $451,940 $451,940
policy loans or partial 6 $71,420 $451,940 $451,940 $451,940
withdrawals have been made. 7 $85,491 $451,940 $451,940 $451,940
8 $100,266 $451,940 $451,940 $451,940
*Additional payment will be 9 $115,779 $451,940 $451,940 $451,940
required to prevent policy 10 $132,068 $451,940 $451,940 $451,940
termination. 15 $226,575 $451,940 $451,940 $451,940
20 $347,193 $451,940 $451,940 $563,691
The death benefits, accumulated 25 $501,135 $451,940 $451,940 $954,633
values and cash surrender values 30 $697,608 $451,940 $451,940 $1,518,808
will differ if premiums are paid 35 $948,363 $0* $527,321 $2,539,141
in different amounts or -------------------------------------------------------------------------------
frequencies. End of year End of year
ACCUMULATED VALUE NET CASH SURRENDER VALUE
The hypothetical investment rates End of assuming hypothetical gross assuming hypothetical gross
shown above and elsewhere in this policy annual investment return of annual investment return of
prospectus are illustrative only year 0% 6% 12% 0% 6% 12%
and should not be interpreted as -------------------------------------------------------------------------------
a representation of past or 1 $6,950 $7,431 $7,914 $1,235 $1,716 $2,198
future investment results. Actual 2 $13,725 $15,120 $16,574 $8,010 $9,404 $10,859
rates of return may be more or 3 $20,408 $23,161 $26,151 $14,692 $17,445 $20,436
less than those shown and will 4 $26,996 $31,583 $36,763 $21,280 $25,868 $31,048
depend on a number of factors, 5 $33,502 $40,411 $48,527 $27,787 $34,696 $42,812
including the investment 6 $38,772 $48,498 $60,397 $33,747 $43,472 $55,371
allocations made to variable 7 $43,779 $56,790 $73,392 $40,010 $53,021 $69,622
accounts by the owner and the 8 $48,501 $65,283 $87,631 $45,988 $62,770 $85,118
experience of the accounts. No 9 $52,909 $73,962 $103,246 $51,653 $72,706 $101,989
representation can be made by us, 10 $56,972 $82,815 $120,386 $56,972 $82,815 $120,386
the separate account or the fund 15 $76,024 $135,816 $245,076 $76,024 $135,816 $245,076
that these hypothetical rates of 20 $82,672 $197,011 $462,042 $82,672 $197,011 $462,042
return can be achieved for any 25 $67,932 $269,079 $822,960 $67,932 $269,079 $822,960
one year or sustained over any 30 $12,450 $362,433 $1,419,447 $12,450 $362,433 $1,419,447
period of time. 35 $0* $502,210 $2,418,229 $0* $502,210 $2,418,229
-------------------------------------------------------------------------------
This is an illustration only. An
illustration is not intended to
predict actual performance.
Interest rates, dividends, and
values set forth in the
illustration are not guaranteed.
80
-------------------------------------------------------------------------------
Illustration 3
Death benefit Option B and guideline premium test at current cost of insurance
rates
Based on average annual advisory fees and expenses of the portfolios
DEATH BENEFIT OPTION:B
GUIDELINE PREMIUM TEST
FACE AMOUNT:$181,828
MALE SELECT NONSMOKER ISSUE AGE 45
ANNUAL PREMIUM:$10,000
-------------------------------------------------------------------------------
Flexible premium variable Total
universal life premiums
Illustration of death benefits, End of paid plus End of year DEATH BENEFIT assuming
accumulated values and net cash policy interest at hypothetical gross annual investment return of
surrender values. year 5% 0% 6% 12%
-------------------------------------------------------------------------------
All premium payments are 1 $10,500 $190,072 $190,594 $191,117
illustrated as if made at the 2 $21,525 $198,153 $199,706 $201,321
beginning of the policy year. 3 $33,101 $206,107 $209,222 $212,592
4 $45,256 $213,957 $219,182 $225,059
This illustration assumes no 5 $58,019 $221,706 $229,607 $238,852
policy loans or partial 6 $71,420 $229,354 $240,520 $254,112
withdrawals have been made. 7 $85,491 $236,902 $251,943 $270,997
8 $100,266 $244,351 $263,901 $289,681
The death benefits, accumulated 9 $115,779 $251,700 $276,419 $310,357
values and cash surrender values 10 $132,068 $258,952 $289,523 $333,239
will differ if premiums are paid 15 $226,575 $296,584 $368,949 $496,165
in different amounts or 20 $347,193 $331,268 $469,350 $769,929
frequencies. 25 $501,135 $361,226 $594,492 $1,228,641
30 $697,608 $384,608 $749,059 $1,997,535
The hypothetical investment rates 35 $948,363 $399,482 $938,932 $3,288,461
shown above and elsewhere in this -------------------------------------------------------------------------------
prospectus are illustrative only End of year End of year
and should not be interpreted as ACCUMULATED VALUE NET CASH SURRENDER VALUE
a representation of past or End of assuming hypothetical gross assuming hypothetical gross
future investment results. Actual policy annual investment return of annual investment return of
rates of return may be more or year 0% 6% 12% 0% 6% 12%
less than those shown and will -------------------------------------------------------------------------------
depend on a number of factors, 1 $8,244 $8,766 $9,289 $5,945 $6,467 $6,989
including the investment 2 $16,325 $17,878 $19,493 $14,026 $15,578 $17,194
allocations made to variable 3 $24,279 $27,394 $30,764 $21,979 $25,094 $28,464
accounts by the owner and the 4 $32,129 $37,354 $43,231 $29,830 $35,054 $40,932
experience of the accounts. No 5 $39,878 $47,779 $57,024 $37,579 $45,480 $54,724
representation can be made by us, 6 $47,526 $58,692 $72,284 $45,504 $56,670 $70,262
the separate account or the fund 7 $55,074 $70,115 $89,169 $53,558 $68,599 $87,652
that these hypothetical rates of 8 $62,523 $82,073 $107,853 $61,512 $81,062 $106,842
return can be achieved for any 9 $69,872 $94,591 $128,529 $69,367 $94,085 $128,023
one year or sustained over any 10 $77,124 $107,695 $151,411 $77,124 $107,695 $151,411
period of time. 15 $114,756 $187,121 $314,337 $114,756 $187,121 $314,337
20 $149,440 $287,522 $588,101 $149,440 $287,522 $588,101
This is an illustration only. An 25 $179,398 $412,664 $1,046,813 $179,398 $412,664 $1,046,813
illustration is not intended to 30 $202,780 $567,231 $1,815,707 $202,780 $567,231 $1,815,707
predict actual performance. 35 $217,654 $757,104 $3,106,633 $217,654 $757,104 $3,106,633
Interest rates, dividends, and -------------------------------------------------------------------------------
values set forth in the
illustration are not guaranteed.
81
ILLUSTRATIONS
-------------------------------------------------------------------------------
Illustration 4
Death benefit Option B and guideline premium test at guaranteed cost of
insurance rates
Based on average annual advisory fees and expenses of the portfolios
DEATH BENEFIT OPTION:B
GUIDELINE PREMIUM TEST
FACE AMOUNT:$181,828
MALE SELECT NONSMOKER ISSUE AGE 45
ANNUAL PREMIUM:$10,000
-------------------------------------------------------------------------------
Flexible premium Total
variable universal life premiums
Illustration of death benefits, End of paid plus End of year DEATH BENEFIT assuming
accumulated values and net cash policy interest at hypothetical gross annual investment return of
surrender values. year 5% 0% 6% 12%
-------------------------------------------------------------------------------
All premium payments are 1 $10,500 $190,072 $190,594 $191,117
illustrated as if made at the 2 $21,525 $198,153 $199,706 $201,321
beginning of the policy year. 3 $33,101 $206,107 $209,222 $212,592
4 $45,256 $213,957 $219,182 $225,059
This illustration assumes no 5 $58,019 $221,706 $229,607 $238,852
policy loans or partial 6 $71,420 $228,844 $239,993 $253,569
withdrawals have been made. 7 $85,491 $235,795 $250,769 $269,755
8 $100,266 $242,548 $261,940 $287,553
The death benefits, accumulated 9 $115,779 $249,090 $273,510 $307,121
values and cash surrender values 10 $132,068 $255,405 $285,477 $328,628
will differ if premiums are paid 15 $226,575 $285,974 $355,499 $478,926
in different amounts or 20 $347,193 $309,140 $438,357 $725,056
frequencies. 25 $501,135 $321,186 $533,087 $1,128,049
30 $697,608 $316,473 $636,190 $1,788,815
The hypothetical investment rates 35 $948,363 $284,496 $737,213 $2,871,603
shown above and elsewhere in this -------------------------------------------------------------------------------
prospectus are illustrative only End of year End of year
and should not be interpreted as ACCUMULATED VALUE NET CASH SURRENDER VALUE
a representation of past or End of assuming hypothetical gross assuming hypothetical gross
future investment results. Actual policy annual investment return of annual investment return of
rates of return may be more or year 0% 6% 12% 0% 6% 12%
less than those shown and will -------------------------------------------------------------------------------
depend on a number of factors, 1 $8,244 $8,766 $9,289 $5,945 $6,467 $6,989
including the investment 2 $16,325 $17,878 $19,493 $14,026 $15,578 $17,194
allocations made to variable 3 $24,279 $27,394 $30,764 $21,979 $25,094 $28,464
accounts by the owner and the 4 $32,129 $37,354 $43,231 $29,830 $35,054 $40,932
experience of the accounts. No 5 $39,878 $47,779 $57,024 $37,579 $45,480 $54,724
representation can be made by us, 6 $47,016 $58,165 $71,741 $44,994 $56,143 $69,719
the separate account or the fund 7 $53,967 $68,941 $87,927 $52,450 $67,425 $86,410
that these hypothetical rates of 8 $60,720 $80,112 $105,725 $59,709 $79,101 $104,714
return can be achieved for any 9 $67,262 $91,682 $125,293 $66,757 $91,176 $124,787
one year or sustained over any 10 $73,577 $103,649 $146,800 $73,577 $103,649 $146,800
period of time. 15 $104,146 $173,671 $297,098 $104,146 $173,671 $297,098
20 $127,312 $256,529 $543,228 $127,312 $256,529 $543,228
This is an illustration only. An 25 $139,358 $351,259 $946,221 $139,358 $351,259 $946,221
illustration is not intended to 30 $134,645 $454,362 $1,606,987 $134,645 $454,362 $1,606,987
predict actual performance. 35 $102,668 $555,385 $2,689,775 $102,668 $555,385 $2,689,775
Interest rates, dividends, and -------------------------------------------------------------------------------
values set forth in the
illustration are not guaranteed.
82
-------------------------------------------------------------------------------
Illustration 5
Death benefit Option C and guideline premium test at current cost of insurance
rates
Based on average annual advisory fees and expenses of the portfolios
DEATH BENEFIT OPTION:C
GUIDELINE PREMIUM TEST
FACE AMOUNT:$451,940
MALE SELECT NONSMOKER ISSUE AGE 45
ANNUAL PREMIUM:$10,000
-------------------------------------------------------------------------------
Flexible premium Total
variable universal life premiums
Illustration of death benefits, End of paid plus End of year DEATH BENEFIT assuming
accumulated values and net cash policy interest at hypothetical gross annual investment return of
surrender values. year 5% 0% 6% 12%
-------------------------------------------------------------------------------
All premium payments are 1 $10,500 $461,940 $461,940 $461,940
illustrated as if made at the 2 $21,525 $471,940 $471,940 $471,940
beginning of the policy year. 3 $33,101 $481,940 $481,940 $481,940
4 $45,256 $491,940 $491,940 $491,940
This illustration assumes no 5 $58,019 $501,940 $501,940 $501,940
policy loans or partial 6 $71,420 $511,940 $511,940 $511,940
withdrawals have been made. 7 $85,491 $521,940 $521,940 $521,940
8 $100,266 $531,940 $531,940 $531,940
The death benefits, accumulated 9 $115,779 $541,940 $541,940 $541,940
values and cash surrender values 10 $132,068 $551,940 $551,940 $551,940
will differ if premiums are paid 15 $226,575 $601,940 $601,940 $601,940
in different amounts or 20 $347,193 $651,940 $651,940 $651,940
frequencies. 25 $501,135 $701,940 $701,940 $1,052,003
30 $697,608 $751,940 $751,940 $1,695,435
The hypothetical investment rates 35 $948,363 $801,940 $801,940 $2,864,137
shown above and elsewhere in this -------------------------------------------------------------------------------
prospectus are illustrative only End of year End of year
and should not be interpreted as ACCUMULATED VALUE NET CASH SURRENDER VALUE
a representation of past or End of assuming hypothetical gross assuming hypothetical gross
future investment results. Actual policy annual investment return of annual investment return of
rates of return may be more or year 0% 6% 12% 0% 6% 12%
less than those shown and will -------------------------------------------------------------------------------
depend on a number of factors, 1 $6,916 $7,396 $7,878 $1,201 $1,681 $2,162
including the investment 2 $13,619 $15,009 $16,457 $7,904 $9,293 $10,742
allocations made to variable 3 $20,194 $22,932 $25,905 $14,479 $17,217 $20,190
accounts by the owner and the 4 $26,635 $31,189 $36,332 $20,920 $25,474 $30,617
experience of the accounts. No 5 $32,955 $39,801 $47,846 $27,240 $34,085 $42,131
representation can be made by us, 6 $39,153 $48,785 $60,568 $34,127 $43,759 $55,542
the separate account or the fund 7 $45,228 $58,160 $74,632 $41,459 $54,391 $70,863
that these hypothetical rates of 8 $51,180 $67,945 $90,189 $48,667 $65,432 $87,676
return can be achieved for any 9 $57,007 $78,159 $107,405 $55,751 $76,903 $106,149
one year or sustained over any 10 $62,709 $88,826 $126,467 $62,709 $88,826 $126,467
period of time. 15 $93,915 $155,844 $265,940 $93,915 $155,844 $265,940
20 $119,274 $238,748 $503,290 $119,274 $238,748 $503,290
This is an illustration only. An 25 $132,578 $338,474 $906,899 $132,578 $338,474 $906,899
illustration is not intended to 30 $125,391 $458,618 $1,584,518 $125,391 $458,618 $1,584,518
predict actual performance. 35 $84,760 $608,696 $2,727,749 $84,760 $608,696 $2,727,749
Interest rates, dividends, and -------------------------------------------------------------------------------
values set forth in the
illustration are not guaranteed.
83
ILLUSTRATIONS
---------------------------------------------------------------------------------
Illustration 6
Death benefit Option C and guideline premium test at guaranteed cost of
insurance rates
Based on average annual advisory fees and expenses of the portfolios
DEATH BENEFIT OPTION:C
GUIDELINE PREMIUM TEST
FACE AMOUNT:$451,940
MALE SELECT NONSMOKER ISSUE AGE 45
ANNUAL PREMIUM:$10,000
---------------------------------------------------------------------------------
Flexible premium Total
variable universal life premiums
Illustration of death benefits, End of paid plus End of year DEATH BENEFIT assuming
accumulated values and net cash surrender policy interest at hypothetical gross annual investment return of
values. year 5% 0% 6% 12%
---------------------------------------------------------------------------------
All premium payments are illustrated as 1 $10,500 $461,940 $461,940 $461,940
if made at the beginning of the policy 2 $21,525 $471,940 $471,940 $471,940
year. 3 $33,101 $481,940 $481,940 $481,940
4 $45,256 $491,940 $491,940 $491,940
This illustration assumes no policy loans 5 $58,019 $501,940 $501,940 $501,940
or partial withdrawals have been made. 6 $71,420 $511,940 $511,940 $511,940
7 $85,491 $521,940 $521,940 $521,940
* Additional payment will be required to 8 $100,266 $531,940 $531,940 $531,940
prevent policy termination. 9 $115,779 $541,940 $541,940 $541,940
10 $132,068 $551,940 $551,940 $551,940
The death benefits, accumulated values 15 $226,575 $601,940 $601,940 $601,940
and cash surrender values will differ if 20 $347,193 $651,940 $651,940 $651,940
premiums are paid in different amounts 25 $501,135 $0* $701,940 $826,721
or frequencies. 30 $697,608 $0* $751,940 $1,324,285
35 $948,363 $0* $0* $2,222,385
The hypothetical investment rates shown ---------------------------------------------------------------------------------
above and elsewhere in this prospectus End of year End of year
are illustrative only and should not be ACCUMULATED VALUE NET CASH SURRENDER VALUE
interpreted as a representation of past End of assuming hypothetical gross assuming hypothetical gross
or future investment results. Actual rates policy annual investment return of annual investment return of
of return may be more or less than those year 0% 6% 12% 0% 6% 12%
shown and will depend on a number of ---------------------------------------------------------------------------------
factors, including the investment 1 $6,916 $7,396 $7,878 $1,201 $1,681 $2,162
allocations made to variable accounts by 2 $13,619 $15,009 $16,457 $7,904 $9,293 $10,742
the owner and the experience of the 3 $20,194 $22,932 $25,905 $14,479 $17,217 $20,190
accounts. No representation can be made by 4 $26,635 $31,189 $36,332 $20,920 $25,474 $30,617
us, the separate account or the fund that 5 $32,955 $39,801 $47,846 $27,240 $34,085 $42,131
these hypothetical rates of return can be 6 $37,826 $47,439 $59,210 $32,800 $42,413 $54,184
achieved for any one year or sustained over 7 $42,326 $55,146 $71,525 $38,556 $51,376 $67,755
any period of time. 8 $46,416 $62,888 $84,870 $43,903 $60,375 $82,357
9 $50,046 $70,622 $99,327 $48,790 $69,365 $98,071
This is an illustration only. An 10 $53,157 $78,292 $114,987 $53,157 $78,292 $114,987
illustration is not intended to predict 15 $63,736 $120,045 $224,408 $63,736 $120,045 $224,408
actual performance. Interest rates, 20 $51,413 $153,763 $402,335 $51,413 $153,763 $402,335
dividends, and values set forth in the 25 $0* $160,610 $712,690 $0* $160,610 $712,690
illustration are not guaranteed. 30 $0* $95,774 $1,237,649 $0* $95,774 $1,237,649
35 $0* $0* $2,116,557 $0* $0* $2,116,557
---------------------------------------------------------------------------------
84
----------------------------------------------------------------------------
Illustration 7
Death benefit Option A and cash value accumulation test at current cost of
insurance rates
Based on average annual advisory fees and expenses of the portfolios
DEATH BENEFIT OPTION:A
CASH VALUE ACCUMULATION TEST
FACE AMOUNT:$451,940
MALE SELECT NONSMOKER ISSUE AGE 45
ANNUAL PREMIUM:$10,000
----------------------------------------------------------------------------
Flexible premium Total
variable universal life premiums
Illustration of death benefits, accumulated End of paid plus End of year DEATH BENEFIT assuming
values and net cash surrender values. policy interest at hypothetical gross annual investment return of
year 5% 0% 6% 12%
All premium payments are illustrated as if ----------------------------------------------------------------------------
made at the beginning of the policy year. 1 $10,500 $451,940 $451,940 $451,940
2 $21,525 $451,940 $451,940 $451,940
This illustration assumes no policy loans 3 $33,101 $451,940 $451,940 $451,940
or partial withdrawals have been made. 4 $45,256 $451,940 $451,940 $451,940
5 $58,019 $451,940 $451,940 $451,940
The death benefits, accumulated values 6 $71,420 $451,940 $451,940 $451,940
and cash surrender values will differ if 7 $85,491 $451,940 $451,940 $451,940
premiums are paid in different amounts 8 $100,266 $451,940 $451,940 $451,940
or frequencies. 9 $115,779 $451,940 $451,940 $451,940
10 $132,068 $451,940 $451,940 $451,940
The hypothetical investment rates shown 15 $226,575 $451,940 $451,940 $529,123
above and elsewhere in this prospectus 20 $347,193 $451,940 $451,940 $877,869
are illustrative only and should not be 25 $501,135 $451,940 $561,426 $1,386,191
interpreted as a representation of past 30 $697,608 $451,940 $704,553 $2,142,168
or future investment results. Actual rates 35 $948,363 $451,940 $871,967 $3,304,229
of return may be more or less than those ----------------------------------------------------------------------------
shown and will depend on a number of End of year End of year
factors, including the investment ACCUMULATED VALUE NET CASH SURRENDER VALUE
allocations made to variable accounts by End of assuming hypothetical gross assuming hypothetical gross
the owner and the experience of the policy annual investment return of annual investment return of
accounts. No representation can be made by year 0% 6% 12% 0% 6% 12%
us, the separate account or the fund that ----------------------------------------------------------------------------
these hypothetical rates of return can be 1 $6,950 $7,431 $7,914 $1,235 $1,716 $2,198
achieved for any one year or sustained over 2 $13,725 $15,120 $16,574 $8,010 $9,404 $10,859
any period of time. 3 $20,408 $23,161 $26,151 $14,692 $17,445 $20,436
4 $26,996 $31,583 $36,763 $21,280 $25,868 $31,048
This is an illustration only. An 5 $33,502 $40,411 $48,527 $27,787 $34,696 $42,812
illustration is not intended to predict 6 $39,929 $49,667 $61,573 $34,903 $44,642 $56,547
actual performance. Interest rates, 7 $46,275 $59,374 $76,044 $42,506 $55,605 $72,275
dividends, and values set forth in the 8 $52,542 $69,556 $92,102 $50,029 $67,043 $89,590
illustration are not guaranteed. 9 $58,731 $80,238 $109,928 $57,475 $78,982 $108,671
10 $64,842 $91,449 $129,721 $64,842 $91,449 $129,721
15 $98,926 $162,644 $275,155 $98,926 $162,644 $275,155
20 $129,767 $254,085 $517,143 $129,767 $254,085 $517,143
25 $154,648 $369,589 $912,535 $154,648 $369,589 $912,535
30 $171,158 $511,246 $1,554,425 $171,158 $511,246 $1,554,425
35 $176,529 $684,634 $2,594,347 $176,529 $684,634 $2,594,347
----------------------------------------------------------------------------
85
ILLUSTRATIONS
----------------------------------------------------------------------------
Illustration 8
Death benefit Option A and cash value accumulation test at guaranteed cost
of insurance rates
Based on average annual advisory fees and expenses of the portfolios
DEATH BENEFIT OPTION:A
CASH VALUE ACCUMULATION TEST
FACE AMOUNT:$451,940
MALE SELECT NONSMOKER ISSUE AGE 45
ANNUAL PREMIUM:$10,000
----------------------------------------------------------------------------
Flexible premium Total
variable universal life premiums
Illustration of death benefits, End of paid plus End of year DEATH BENEFIT assuming
accumulated values and net cash surrender policy interest at hypothetical gross annual investment return of
values. year 5% 0% 6% 12%
----------------------------------------------------------------------------
All premium payments are illustrated as 1 $10,500 $451,940 $451,940 $451,940
if made at the beginning of the policy 2 $21,525 $451,940 $451,940 $451,940
year. 3 $33,101 $451,940 $451,940 $451,940
4 $45,256 $451,940 $451,940 $451,940
This illustration assumes no policy loans 5 $58,019 $451,940 $451,940 $451,940
or partial withdrawals have been made. 6 $71,420 $451,940 $451,940 $451,940
7 $85,491 $451,940 $451,940 $451,940
*Additional payment will be required to 8 $100,266 $451,940 $451,940 $451,940
prevent policy termination. 9 $115,779 $451,940 $451,940 $451,940
10 $132,068 $451,940 $451,940 $451,940
The death benefits, accumulated values and 15 $226,575 $451,940 $451,940 $471,175
cash surrender values will differ if 20 $347,193 $451,940 $451,940 $755,078
premiums are paid in different amounts 25 $501,135 $451,940 $451,940 $1,135,935
or frequencies. 30 $697,608 $451,940 $494,676 $1,651,999
35 $948,363 $0 $582,216 $2,358,166
The hypothetical investment rates shown ----------------------------------------------------------------------------
above and elsewhere in this prospectus End of year End of year
are illustrative only and should not be ACCUMULATED VALUE NET CASH SURRENDER VALUE
interpreted as a representation of past End of assuming hypothetical gross assuming hypothetical gross
or future investment results. Actual rates policy annual investment return of annual investment return of
of return may be more or less than those year 0% 6% 12% 0% 6% 12%
shown and will depend on a number of ----------------------------------------------------------------------------
factors, including the investment 1 $6,950 $7,431 $7,914 $1,235 $1,716 $2,198
allocations made to variable accounts by 2 $13,725 $15,120 $16,574 $8,010 $9,404 $10,859
the owner and the experience of the 3 $20,408 $23,161 $26,151 $14,692 $17,445 $20,436
accounts. No representation can be made by 4 $26,996 $31,583 $36,763 $21,280 $25,868 $31,048
us, the separate account or the fund 5 $33,502 $40,411 $48,527 $27,787 $34,696 $42,812
that these hypothetical rates of return 6 $38,772 $48,498 $60,397 $33,747 $43,472 $55,371
can be achieved for any one year or 7 $43,779 $56,790 $73,392 $40,010 $53,021 $69,622
sustained over any period of time. 8 $48,501 $65,283 $87,631 $45,988 $62,770 $85,118
9 $52,909 $73,962 $103,246 $51,653 $72,706 $101,989
This is an illustration only. An 10 $56,972 $82,815 $120,386 $56,972 $82,815 $120,386
illustration is not intended to predict 15 $76,024 $135,816 $245,021 $76,024 $135,816 $245,021
actual performance. Interest rates, 20 $82,672 $197,011 $444,808 $82,672 $197,011 $444,808
dividends, and values set forth in the 25 $67,932 $269,079 $747,791 $67,932 $269,079 $747,791
illustration are not guaranteed. 30 $12,450 $358,952 $1,198,743 $12,450 $358,952 $1,198,743
35 $0* $457,132 $1,851,537 $0* $457,132 $1,851,537
----------------------------------------------------------------------------
86
--------------------------------------------------------------------------------
Illustration 9
Death benefit Option B and cash value accumulation test at current cost of
insurance rates
Based on average annual advisory fees and expenses of the portfolios
DEATH BENEFIT OPTION:B
CASH VALUE ACCUMULATION TEST
FACE AMOUNT:$181,828
MALE SELECT NONSMOKER ISSUE AGE 45
ANNUAL PREMIUM:$10,000
--------------------------------------------------------------------------------
Flexible premium Total
variable universal life premiums
Illustration of death benefits, accumulated End of paid plus End of year DEATH BENEFIT assuming
values and net cash surrender values. policy interest at hypothetical gross annual investment return of
year 5% 0% 6% 12%
All premium payments are illustrated as if --------------------------------------------------------------------------------
made at the beginning of the policy year. 1 $10,500 $190,072 $190,594 $191,117
2 $21,525 $198,153 $199,706 $201,321
This illustration assumes no policy loans 3 $33,101 $206,107 $209,222 $212,592
or partial withdrawals have been made. 4 $45,256 $213,957 $219,182 $225,059
5 $58,019 $221,706 $229,607 $238,852
The death benefits, accumulated values and 6 $71,420 $229,354 $240,520 $254,112
cash surrender values will differ if 7 $85,491 $236,902 $251,943 $270,997
premiums are paid in different amounts or 8 $100,266 $244,351 $263,901 $289,681
frequencies. 9 $115,779 $251,700 $276,419 $310,357
10 $132,068 $258,952 $289,523 $333,389
The hypothetical investment rates shown 15 $226,575 $296,584 $368,949 $601,782
above and elsewhere in this prospectus 20 $347,193 $331,268 $487,723 $983,811
are illustrative only and should not be 25 $501,135 $361,226 $624,524 $1,542,027
interpreted as a representation of past 30 $697,608 $384,608 $775,631 $2,373,347
or future investment results. Actual rates 35 $948,363 $399,482 $953,226 $3,652,280
of return may be more or less than those --------------------------------------------------------------------------------
shown and will depend on a number of End of year End of year
factors, including the investment ACCUMULATED VALUE NET CASH SURRENDER VALUE
allocations made to variable accounts End of assuming hypothetical gross assuming hypothetical gross
by the owner and the experience of the policy annual investment return of annual investment return of
accounts. No representation can be made by year 0% 6% 12% 0% 6% 12%
us, the separate account or the fund that --------------------------------------------------------------------------------
these hypothetical rates of return can be 1 $8,244 $8,766 $9,289 $5,945 $6,467 $6,989
achieved for any one year or sustained over 2 $16,325 $17,878 $19,493 $14,026 $15,578 $17,194
any period of time. 3 $24,279 $27,394 $30,764 $21,979 $25,094 $28,464
4 $32,129 $37,354 $43,231 $29,830 $35,054 $40,932
This is an illustration only. An 5 $39,878 $47,779 $57,024 $37,579 $45,480 $54,724
illustration is not intended to predict 6 $47,526 $58,692 $72,284 $45,504 $56,670 $70,262
actual performance. Interest rates, 7 $55,074 $70,115 $89,169 $53,558 $68,599 $87,652
dividends, and values set forth in the 8 $62,523 $82,073 $107,853 $61,512 $81,062 $106,842
illustration are not guaranteed. 9 $69,872 $94,591 $128,529 $69,367 $94,085 $128,023
10 $77,124 $107,695 $151,411 $77,124 $107,695 $151,411
15 $114,756 $187,121 $312,939 $114,756 $187,121 $312,939
20 $149,440 $287,312 $579,552 $149,440 $287,312 $579,552
25 $179,398 $411,127 $1,015,123 $179,398 $411,127 $1,015,123
30 $202,780 $562,822 $1,722,176 $202,780 $562,822 $1,722,176
35 $217,654 $748,434 $2,867,623 $217,654 $748,434 $2,867,623
--------------------------------------------------------------------------------
87
ILLUSTRATIONS
-------------------------------------------------------------------------------
Illustration 10
Death benefit Option B and cash value accumulation test at guaranteed cost of
insurance rates
Based on average annual advisory fees and expenses of the portfolios
DEATH BENEFIT OPTION:B
CASH VALUE ACCUMULATION TEST
FACE AMOUNT:$181,828
MALE SELECT NONSMOKER ISSUE AGE 45
ANNUAL PREMIUM:$10,000
-------------------------------------------------------------------------------
Flexible premium variable Total
universal life premiums
Illustration of death benefits, End of paid plus End of year DEATH BENEFIT assuming
accumulated values and net cash policy interest at hypothetical gross annual investment return of
surrender values. year 5% 0% 6% 12%
-------------------------------------------------------------------------------
All premium payments are 1 $10,500 $190,072 $190,594 $191,117
illustrated as if made at the 2 $21,525 $198,153 $199,706 $201,321
beginning of the policy year. 3 $33,101 $206,107 $209,222 $212,592
4 $45,256 $213,957 $219,182 $225,059
This illustration assumes no 5 $58,019 $221,706 $229,607 $238,852
policy loans or partial 6 $71,420 $228,844 $239,993 $253,569
withdrawals have been made. 7 $85,491 $235,795 $250,769 $269,755
8 $100,266 $242,548 $261,940 $287,553
The death benefits, accumulated 9 $115,779 $249,090 $273,510 $307,121
values and cash surrender values 10 $132,068 $255,405 $285,477 $328,628
will differ if premiums are paid 15 $226,575 $285,974 $355,499 $565,099
in different amounts or 20 $347,193 $309,140 $438,357 $885,100
frequencies. 25 $501,135 $321,186 $533,577 $1,315,839
30 $697,608 $316,473 $636,187 $1,900,660
The hypothetical investment rates 35 $948,363 $284,496 $737,209 $2,701,857
shown above and elsewhere in this -------------------------------------------------------------------------------
prospectus are illustrative only End of year End of year
and should not be interpreted as ACCUMULATED VALUE NET CASH SURRENDER VALUE
a representation of past or End of assuming hypothetical gross assuming hypothetical gross
future investment results. Actual policy annual investment return of annual investment return of
rates of return may be more or year 0% 6% 12% 0% 6% 12%
less than those shown and will -------------------------------------------------------------------------------
depend on a number of factors, 1 $8,244 $8,766 $9,289 $5,945 $6,467 $6,989
including the investment 2 $16,325 $17,878 $19,493 $14,026 $15,578 $17,194
allocations made to variable 3 $24,279 $27,394 $30,764 $21,979 $25,094 $28,464
accounts by the owner and the 4 $32,129 $37,354 $43,231 $29,830 $35,054 $40,932
experience of the accounts. No 5 $39,878 $47,779 $57,024 $37,579 $45,480 $54,724
representation can be made by us, 6 $47,016 $58,165 $71,741 $44,994 $56,143 $69,719
the separate account or the fund 7 $53,967 $68,941 $87,927 $52,450 $67,425 $86,410
that these hypothetical rates of 8 $60,720 $80,112 $105,725 $59,709 $79,101 $104,714
return can be achieved for any 9 $67,262 $91,682 $125,293 $66,757 $91,176 $124,787
one year or sustained over any 10 $73,577 $103,649 $146,800 $73,577 $103,649 $146,800
period of time. 15 $104,146 $173,671 $293,863 $104,146 $173,671 $293,863
20 $127,312 $256,529 $521,403 $127,312 $256,529 $521,403
This is an illustration only. An 25 $139,358 $351,256 $866,222 $139,358 $351,256 $866,222
illustration is not intended to 30 $134,645 $454,359 $1,379,179 $134,645 $454,359 $1,379,179
predict actual performance. 35 $102,668 $555,381 $2,121,389 $102,668 $555,381 $2,121,389
Interest rates, dividends, and -------------------------------------------------------------------------------
values set forth in the
illustration are not guaranteed.
88
-------------------------------------------------------------------------------
Illustration 11
Death benefit Option C and cash value accumulation test at current cost of
insurance rates
Based on average annual advisory fees and expenses of the portfolios
DEATH BENEFIT OPTION:C
CASH VALUE ACCUMULATION TEST
FACE AMOUNT:$451,940
MALE SELECT NONSMOKER ISSUE AGE 45
ANNUAL PREMIUM:$10,000
-------------------------------------------------------------------------------
Flexible premium variable Total
universal life premiums
Illustration of death benefits, End of paid plus End of year DEATH BENEFIT assuming
accumulated values and net cash policy interest at hypothetical gross annual investment return of
surrender values. year 5% 0% 6% 12%
-------------------------------------------------------------------------------
All premium payments are 1 $10,500 $461,940 $461,940 $461,940
illustrated as if made at the 2 $21,525 $471,940 $471,940 $471,940
beginning of the policy year. 3 $33,101 $481,940 $481,940 $481,940
4 $45,256 $491,940 $491,940 $491,940
This illustration assumes no 5 $58,019 $501,940 $501,940 $501,940
policy loans or partial 6 $71,420 $511,940 $511,940 $511,940
withdrawals have been made. 7 $85,491 $521,940 $521,940 $521,940
8 $100,266 $531,940 $531,940 $531,940
The death benefits, accumulated 9 $115,779 $541,940 $541,940 $541,940
values and cash surrender values 10 $132,068 $551,940 $551,940 $551,940
will differ if premiums are paid 15 $226,575 $601,940 $601,940 $601,940
in different amounts or 20 $347,193 $651,940 $651,940 $850,728
frequencies. 25 $501,135 $701,940 $701,940 $1,346,266
30 $697,608 $751,940 $751,940 $2,082,941
The hypothetical investment rates 35 $948,363 $801,940 $801,940 $3,215,061
shown above and elsewhere in this -------------------------------------------------------------------------------
prospectus are illustrative only End of year End of year
and should not be interpreted as ACCUMULATED VALUE NET CASH SURRENDER VALUE
a representation of past or End of assuming hypothetical gross assuming hypothetical gross
future investment results. Actual policy annual investment return of annual investment return of
rates of return may be more or year 0% 6% 12% 0% 6% 12%
less than those shown and will -------------------------------------------------------------------------------
depend on a number of factors, 1 $6,916 $7,396 $7,878 $1,201 $1,681 $2,162
including the investment 2 $13,619 $15,009 $16,457 $7,904 $9,293 $10,742
allocations made to variable 3 $20,194 $22,932 $25,905 $14,479 $17,217 $20,190
accounts by the owner and the 4 $26,635 $31,189 $36,332 $20,920 $25,474 $30,617
experience of the accounts. No 5 $32,955 $39,801 $47,846 $27,240 $34,085 $42,131
representation can be made by us, 6 $39,153 $48,785 $60,568 $34,127 $43,759 $55,542
the separate account or the fund 7 $45,228 $58,160 $74,632 $41,459 $54,391 $70,863
that these hypothetical rates of 8 $51,180 $67,945 $90,189 $48,667 $65,432 $87,676
return can be achieved for any 9 $57,007 $78,159 $107,405 $55,751 $76,903 $106,149
one year or sustained over any 10 $62,709 $88,826 $126,467 $62,709 $88,826 $126,467
period of time. 15 $93,915 $155,844 $265,940 $93,915 $155,844 $265,940
20 $119,274 $238,748 $501,154 $119,274 $238,748 $501,154
This is an illustration only. An 25 $132,578 $338,474 $886,253 $132,578 $338,474 $886,253
illustration is not intended to 30 $125,391 $458,618 $1,511,448 $125,391 $458,618 $1,511,448
predict actual performance. 35 $84,760 $608,696 $2,524,335 $84,760 $608,696 $2,524,335
Interest rates, dividends, and -------------------------------------------------------------------------------
values set forth in the
illustration are not guaranteed.
89
ILLUSTRATIONS
------------------------------------------------------------------------------
Illustration 12
Death benefit Option C and cash value accumulation test at guaranteed cost of
insurance rates
Based on average annual advisory fees and expenses of the portfolios
DEATH BENEFIT OPTION:C
CASH VALUE ACCUMULATION TEST
FACE AMOUNT:$451,940
MALE SELECT NONSMOKER ISSUE AGE 45
ANNUAL PREMIUM:$10,000
------------------------------------------------------------------------------
Flexible premium Total
variable universal life premiums
Illustration of death benefits, accumulated End of paid plus End of year DEATH BENEFIT assuming
values and net cash surrender values. policy interest at hypothetical gross annual investment return of
year 5% 0% 6% 12%
All premium payments are illustrated as if ------------------------------------------------------------------------------
made at the beginning of the policy year. 1 $10,500 $461,940 $461,940 $461,940
2 $21,525 $471,940 $471,940 $471,940
This illustration assumes no policy loans 3 $33,101 $481,940 $481,940 $481,940
or partial withdrawals have been made. 4 $45,256 $491,940 $491,940 $491,940
5 $58,019 $501,940 $501,940 $501,940
*Additional payment will be required to 6 $71,420 $511,940 $511,940 $511,940
prevent policy termination. 7 $85,491 $521,940 $521,940 $521,940
8 $100,266 $531,940 $531,940 $531,940
The death benefits, accumulated values and 9 $115,779 $541,940 $541,940 $541,940
cash surrender values will differ if 10 $132,068 $551,940 $551,940 $551,940
premiums are paid in different amounts 15 $226,575 $601,940 $601,940 $601,940
or frequencies. 20 $347,193 $651,940 $651,940 $682,706
25 $501,135 $0* $701,940 $1,035,798
The hypothetical investment rates shown 30 $697,608 $0* $751,940 $1,513,591
above and elsewhere in this prospectus 35 $948,363 $0* $0* $2,166,863
are illustrative only and should not be ------------------------------------------------------------------------------
interpreted as a representation of past End of year End of year
or future investment results. Actual ACCUMULATED VALUE NET CASH SURRENDER VALUE
rates of return may be more or less than End of assuming hypothetical gross assuming hypothetical gross
those shown and will depend on a number policy annual investment return of annual investment return of
of factors, including the investment year 0% 6% 12% 0% 6% 12%
allocations made to variable accounts by ------------------------------------------------------------------------------
the owner and the experience of the 1 $6,916 $7,396 $7,878 $1,201 $1,681 $2,162
accounts. No representation can be made 2 $13,619 $15,009 $16,457 $7,904 $9,293 $10,742
by us, the separate account or the fund 3 $20,194 $22,932 $25,905 $14,479 $17,217 $20,190
that these hypothetical rates of return 4 $26,635 $31,189 $36,332 $20,920 $25,474 $30,617
can be achieved for any one year or 5 $32,955 $39,801 $47,846 $27,240 $34,085 $42,131
sustained over any period of time. 6 $37,826 $47,439 $59,210 $32,800 $42,413 $54,184
7 $42,326 $55,146 $71,525 $38,556 $51,376 $67,755
This is an illustration only. An 8 $46,416 $62,888 $84,870 $43,903 $60,375 $82,357
illustration is not intended to predict 9 $50,046 $70,622 $99,327 $48,790 $69,365 $98,071
actual performance. Interest rates, 10 $53,157 $78,292 $114,987 $53,157 $78,292 $114,987
dividends, and values set forth in the 15 $63,736 $120,045 $224,408 $63,736 $120,045 $224,408
illustration are not guaranteed. 20 $51,413 $153,763 $402,174 $51,413 $153,763 $402,174
25 $0* $160,610 $681,871 $0* $160,610 $681,871
30 $0* $95,774 $1,098,309 $0* $95,774 $1,098,309
35 $0* $0* $1,701,333 $0* $0* $1,701,333
------------------------------------------------------------------------------
90
----------------------------------------------------------------------------
Illustration 13
Death benefit Option A and guideline premium test at current cost of
insurance rates
Based on a weighted average of annual advisory fees and expenses of
the portfolios
DEATH BENEFIT OPTION:A
GUIDELINE PREMIUM TEST
FACE AMOUNT:$451,940
MALE SELECT NONSMOKER ISSUE AGE 45
ANNUAL PREMIUM:$10,000
----------------------------------------------------------------------------
Flexible premium Total
variable universal life premiums
Illustration of death benefits, accumulated End of paid plus End of year DEATH BENEFIT assuming
values and net cash surrender values. policy interest at hypothetical gross annual investment return of
year 5% 0% 6% 12%
All premium payments are illustrated as ----------------------------------------------------------------------------
if made at the beginning of the policy year. 1 $10,500 $451,940 $451,940 $451,940
2 $21,525 $451,940 $451,940 $451,940
This illustration assumes no policy loans or 3 $33,101 $451,940 $451,940 $451,940
partial withdrawals have been made. 4 $45,256 $451,940 $451,940 $451,940
5 $58,019 $451,940 $451,940 $451,940
The death benefits, accumulated values and 6 $71,420 $451,940 $451,940 $451,940
cash surrender values will differ if 7 $85,491 $451,940 $451,940 $451,940
premiums are paid in different amounts or 8 $100,266 $451,940 $451,940 $451,940
frequencies. 9 $115,779 $451,940 $451,940 $451,940
10 $132,068 $451,940 $451,940 $451,940
The hypothetical investment rates shown 15 $226,575 $451,940 $451,940 $451,940
above and elsewhere in this prospectus 20 $347,193 $451,940 $451,940 $644,794
are illustrative only and should not be 25 $501,135 $451,940 $451,940 $1,104,074
interpreted as a representation of past or 30 $697,608 $451,940 $569,883 $1,780,416
future investment results. Actual rates of 35 $948,363 $451,940 $771,855 $3,011,877
return may be more or less than those shown ----------------------------------------------------------------------------
and will depend on a number of factors, End of year End of year
including the investment allocations made ACCUMULATED VALUE NET CASH SURRENDER VALUE
to variable accounts by the owner and the End of assuming hypothetical gross assuming hypothetical gross
experience of the accounts. No policy annual investment return of annual investment return of
representation can be made by us, the year 0% 6% 12% 0% 6% 12%
separate account or the fund that these ----------------------------------------------------------------------------
hypothetical rates of return can be 1 $6,954 $7,436 $7,918 $1,239 $1,720 $2,203
achieved for any one year or sustained 2 $13,736 $15,132 $16,588 $8,021 $9,417 $10,873
over any period of time. 3 $20,430 $23,186 $26,180 $14,715 $17,471 $20,465
4 $27,032 $31,626 $36,815 $21,317 $25,911 $31,100
This is an illustration only. An 5 $33,556 $40,478 $48,610 $27,841 $34,763 $42,895
illustration is not intended to predict 6 $40,002 $49,763 $61,696 $34,977 $44,738 $56,671
actual performance. Interest rates, 7 $46,372 $59,505 $76,220 $42,603 $55,736 $72,451
dividends, and values set forth in the 8 $52,666 $69,730 $92,346 $50,153 $67,217 $89,833
illustration are not guaranteed. 9 $58,884 $80,463 $110,254 $57,628 $79,206 $108,998
10 $65,028 $91,732 $130,150 $65,028 $91,732 $130,150
15 $99,325 $163,390 $276,818 $99,325 $163,390 $276,818
20 $130,463 $255,684 $528,520 $130,463 $255,684 $528,520
25 $155,724 $375,403 $951,788 $155,724 $375,403 $951,788
30 $172,713 $532,601 $1,663,941 $172,713 $532,601 $1,663,941
35 $178,691 $735,100 $2,868,454 $178,691 $735,100 $2,868,454
----------------------------------------------------------------------------
91
ILLUSTRATIONS
-------------------------------------------------------------------------------
Illustration 14
Death benefit Option A and guideline premium test at guaranteed cost of
insurance rates
Based on a weighted average of annual advisory fees and expenses of the
portfolios
DEATH BENEFIT OPTION:A
GUIDELINE PREMIUM TEST
FACE AMOUNT:$451,940
MALE SELECT NONSMOKER ISSUE AGE 45
ANNUAL PREMIUM:$10,000
-------------------------------------------------------------------------------
Flexible premium variable Total
universal life premiums
Illustration of death benefits, End of paid plus End of year DEATH BENEFIT assuming
accumulated values and net cash policy interest at hypothetical gross annual investment return of
surrender values. year 5% 0% 6% 12%
-------------------------------------------------------------------------------
All premium payments are 1 $10,500 $451,940 $451,940 $451,940
illustrated as if made at the 2 $21,525 $451,940 $451,940 $451,940
beginning of the policy year. 3 $33,101 $451,940 $451,940 $451,940
4 $45,256 $451,940 $451,940 $451,940
This illustration assumes no 5 $58,019 $451,940 $451,940 $451,940
policy loans or partial 6 $71,420 $451,940 $451,940 $451,940
withdrawals have been made. 7 $85,491 $451,940 $451,940 $451,940
8 $100,266 $451,940 $451,940 $451,940
*Additional payment will be 9 $115,779 $451,940 $451,940 $451,940
required to prevent policy 10 $132,068 $451,940 $451,940 $451,940
termination. 15 $226,575 $451,940 $451,940 $451,940
20 $347,193 $451,940 $451,940 $568,027
The death benefits, accumulated 25 $501,135 $451,940 $451,940 $963,776
values and cash surrender values 30 $697,608 $451,940 $451,940 $1,536,516
will differ if premiums are paid 35 $948,363 $0* $538,106 $2,574,391
in different amounts or -------------------------------------------------------------------------------
frequencies. End of year End of year
ACCUMULATED VALUE NET CASH SURRENDER VALUE
The hypothetical investment rates End of assuming hypothetical gross assuming hypothetical gross
shown above and elsewhere in this policy annual investment return of annual investment return of
prospectus are illustrative only year 0% 6% 12% 0% 6% 12%
and should not be interpreted as -------------------------------------------------------------------------------
a representation of past or 1 $6,954 $7,436 $7,918 $1,239 $1,720 $2,203
future investment results. Actual 2 $13,736 $15,132 $16,588 $8,021 $9,417 $10,873
rates of return may be more or 3 $20,430 $23,186 $26,180 $14,715 $17,471 $20,465
less than those shown and will 4 $27,032 $31,626 $36,815 $21,317 $25,911 $31,100
depend on a number of factors, 5 $33,556 $40,478 $48,610 $27,841 $34,763 $42,895
including the investment 6 $38,846 $48,593 $60,520 $33,820 $43,568 $55,495
allocations made to variable 7 $43,875 $56,921 $73,567 $40,106 $53,152 $69,798
accounts by the owner and the 8 $48,622 $65,455 $87,873 $46,110 $62,942 $85,360
experience of the accounts. No 9 $53,059 $74,183 $103,569 $51,802 $72,927 $102,313
representation can be made by us, 10 $57,151 $83,092 $120,810 $57,151 $83,092 $120,810
the separate account or the fund 15 $76,390 $136,527 $246,446 $76,390 $136,527 $246,446
that these hypothetical rates of 20 $83,282 $198,530 $465,596 $83,282 $198,530 $465,596
return can be achieved for any 25 $68,837 $272,093 $830,842 $68,837 $272,093 $830,842
one year or sustained over any 30 $13,702 $368,431 $1,435,997 $13,702 $368,431 $1,435,997
period of time. 35 $0* $512,482 $2,451,801 $0* $512,482 $2,451,801
-------------------------------------------------------------------------------
This is an illustration only. An
illustration is not intended to
predict actual performance.
Interest rates, dividends, and
values set forth in the
illustration are not guaranteed.
92
APPENDIX A - RATES PER $1,000 OF INITIAL FACE AMOUNT
Face amount component of M&E Risk Charge
- --------------------------------------------------------------------------------
Issue Issue
Age Male Female Unisex Age Male Female Unisex
- ----- ----- ------ ------ ----- ----- ------ ------
0 0.075 0.063 0.073 45 0.127 0.118 0.125
5 0.069 0.059 0.067 50 0.139 0.127 0.136
10 0.066 0.058 0.064 55 0.155 0.138 0.151
15 0.064 0.055 0.062 60 0.176 0.154 0.171
20 0.098 0.095 0.098 65 0.206 0.176 0.199
25 0.101 0.098 0.101 70 0.247 0.208 0.237
30 0.105 0.101 0.105 75 0.306 0.257 0.292
35 0.111 0.106 0.110 80 0.385 0.329 0.368
40 0.118 0.111 0.116 85 0.498 0.440 0.478
- ----- -------------------------- -------------------------------------
Surrender Charge Maximum Surrender Charge
Issue ------------------------------ -------------------------------
Age Male Female Unisex Male Female Unisex
- ----- ----- ------ ------ ------ ------ ------
0 5.70 4.79 5.52 1.150 0.724 1.074
5 5.24 4.48 5.09 1.222 0.772 1.146
10 5.02 4.41 4.89 1.258 0.784 1.182
15 4.86 4.18 4.73 1.282 0.820 1.206
20 9.35 7.83 9.04 3.284 2.444 3.132
25 11.32 9.58 10.97 4.342 3.368 4.172
30 12.69 10.87 12.33 5.246 4.164 5.056
35 14.36 12.31 13.95 6.302 5.096 6.082
40 19.08 16.26 18.51 8.918 7.302 8.632
45 25.02 21.85 24.35 12.646 10.400 12.246
50 29.24 24.97 28.32 16.190 13.352 15.696
55 34.88 29.06 33.59 19.504 16.132 18.916
60 42.39 34.52 40.60 25.560 21.144 24.770
65 52.23 42.29 50.23 32.196 26.922 31.250
66 51.67 44.17 52.00 32.752 27.516 31.800
67 51.56 46.16 51.89 32.696 27.470 31.744
68 51.44 48.29 51.78 32.568 27.386 31.628
69 51.39 50.58 51.74 32.024 26.950 31.094
70 51.29 51.15 51.63 31.732 26.730 30.812
75 50.63 49.40 50.98 30.034 25.452 29.164
80 49.91 46.06 50.19 26.284 22.080 25.458
85 48.14 48.74 48.30 18.606 14.570 17.918
- ----- ------------------------------ -------------------------------
If the person insured by the policy is assigned a risk classification other
than standard, a factor is applied to the M&E risk face amount charge,
surrender charge rate and maximum surrender charge rate according to the
nonstandard table rating assigned to that person insured. If the person insured
is assigned a nonstandard rating reflected in the table below, the rates above
that apply to the person insured is multiplied by the nonstandard table factor
below that applies.
NONSTANDARD TABLE FACTORS
Nonstandard Table Number
Issue -------------------------------------------------------------------------------
age 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
----- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
0-45 1.05 1.10 1.15 1.20 1.25 1.30 1.35 1.40 1.45 1.50 1.55 1.60 1.65 1.70 1.75 1.80
50 1.05 1.10 1.15 1.20 1.25 1.30 1.35 1.40 1.45 1.50 1.55 1.60 1.65 1.65 1.65 1.65
55 1.05 1.10 1.15 1.20 1.25 1.30 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35
60 1.05 1.05 1.05 1.05 1.05 1.05 1.05 1.05 1.05 1.05 1.05 1.05 1.05 1.05 1.05 1.05
65-85 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
----- -------------------------------------------------------------------------------
Representative figures shown. For issue ages not listed, please ask your
registered representative.
93
APPENDIX B - DEATH BENEFIT PERCENTAGES
--------------- --------------- --------------- --------------------------
Age Percentage Age Percentage Age Percentage Age Percentage
--------------- --------------- --------------- --------------------------
0-40 250 50 185 60 130 70 115
41 243 51 178 61 128 71 113
42 236 52 171 62 126 72 111
43 229 53 164 63 124 73 109
44 222 54 157 64 122 74 107
45 215 55 150 65 120 75-90 105
46 209 56 146 66 119 91 104
47 203 57 142 67 118 92 103
48 197 58 138 68 117 93 102
49 191 59 134 69 116 greater than 93 101
--------------- --------------- --------------- --------------------------
94
PACIFIC SELECT
EXEC II - NY WHERE TO GO FOR MORE INFORMATION
The Pacific Select Exec II - NY variable For more information about Pacific Select Exec II - NY, please call or write to
life insurance policy is underwritten us at the address below. You should also use this address to send us any
by Pacific Life & Annuity Company. notices, forms or requests about your policy.
--------------------------------------------------------------------------------
How to contact us Pacific Life & Annuity Company
Client Services Department
700 Newport Center Drive
P.O. Box
Newport Beach, California 92658-7500
1-800-800-7681
7 a.m. through 5 p.m. Pacific time
--------------------------------------------------------------------------------
How to contact the SEC You can also find reports and other information about the policy and separate
account from the SEC. The SEC may charge you a fee for this information.
Public Reference Section of the SEC
Washington, D.C. 20549-6009
1-800-SEC-0330
Internet: www.sec.gov
PACIFIC SELECT EXEC II - NY
Flexible Premium Variable Insurance Policy
Issued by Pacific Life & Annuity Company
Supplement dated to
Prospectus dated
The attached prospectus describes two death benefit qualification tests
available in connection with the Pacific Select Exec II - NY Flexible Premium
Variable Life Insurance Policy ("Policy")--the cash value accumulation test
and the guideline premium test. As of the date of this supplement to the
prospectus, the cash value accumulation test is not yet available.
The attached prospectus describes an Annual renewable term rider under "The
death benefit: Optional riders". As of the date of this supplement to the
prospectus, the Annual renewable term rider is not yet available.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PACIFIC SELECT EXEC SEPARATE ACCOUNT
PART II. ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
Contents of Registration Statement
This Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet.
The cross-reference sheet.
The Prospectus consisting of 94 pages.
Supplement to prospectus consisting of 1 page.
The undertaking to file reports.
Representation pursuant to Section 26(e) of the Investment Company Act of 1940.
Rule 6e-3(T) representation.
The Signatures.
Written consent of the following person (included in the exhibits shown below):
Deloitte & Touche LLP, independent auditors
Dechert Price & Rhoads
The following exhibits:
1. (1) (a) Minutes of Action of Board of Directors of PM Group Life Insurance
Company (PL&A) dated July 1, 1998
(b) Memorandum Establishing Separate Account
(2) Inapplicable
(3) (a) Form of Distribution Agreement Between PL&A and Pacific Mutual
Distributors, Inc.
(b) Form of Selling Agreement Between Pacific Mutual Distributors, Inc.
and Various Broker-Dealers
(4) Inapplicable
(5) (a) Flexible Premium Variable Life Insurance Policy
(b) Annual Renewable Term Rider (Form R98-ART NY)
(c) Accelerated Living Benefit Rider (Form R92-ABR NY)
(d) Spouse Term Rider (Form R98-SPT NY)
(e) Children's Term Rider (Form R84-CT NY)
(f) Waiver of Charges (Form R98-WC NY)
(g) Accidental Death Benefit (Form R84-AD NY)
(h) Guaranteed Insurability Rider (Form R84-GI NY)
(i) Disability Benefit Rider (Form R98-DB NY)
(6) (a) Bylaws of PL&A
(b) Articles of Incorporation of PM Group Life Insurance Company
(c) Amended & Restated Articles of Incorporation for PM Group Life
Insurance Company
(7) Inapplicable
(8) Inapplicable
(9) (a) Form of Participation Agreement between PL&A and Pacific Select
Fund
(b) Administrative Agreement Between PL&A and Pacific Life Insurance
Company (Pacific Life)
(10) Application for Flexible Premium Variable Life Insurance Policy &
General Questionnaire
2. Form of Opinion and consent of legal officer of PL&A as to legality of
Policies being registered
3. Inapplicable
4. Inapplicable
5. Inapplicable
6. (a) Consent of Deloitte & Touche LLP
(b) Consent of Dechert Price & Rhoads
7. Opinion of Actuary
8. Memorandum Describing Issuance, Transfer and Redemption Procedures
9. Powers of Attorney
10. Inapplicable
11. Inapplicable
12. Inapplicable
13. Inapplicable
14. Inapplicable
15. Inapplicable
16. Inapplicable
17. Inapplicable
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.
REPRESENTATION PURSUANT TO SECTION 26(e) OF THE INVESTMENT COMPANY ACT OF 1940
Pacific Life & Annuity Company, the sponsoring insurance company of the
Registrant, represents that the fees and charges to be deducted under the
variable Life Insurance Policy ("Policy") described in the prospectus contained
in this registration statement are, in the aggregate, reasonable in relation to
the services rendered, the expenses expected to be incurred, and the risks
assumed in connection with the Policy.
RULE 6e-3(T) REPRESENTATION
This filing is made pursuant to Rule 6e-3(T) and Rule 6c-3 under the
Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Pacific Select Exec Separate Account of Pacific Life & Annuity Company, has
duly caused this Registration Statement on Form S-6 to be signed on its behalf
by the undersigned thereunto duly authorized in the City of Newport Beach, and
State of California, on this 16th day of June, 1999.
PACIFIC SELECT EXEC SEPARATE ACCOUNT
(Registrant)
BY: PACIFIC LIFE & ANNUITY COMPANY
(Depositor)
BY: _____________________________________
William L. Ferris*
President and Chief Executive Officer
*BY: /s/ DAVID R. CARMICHAEL
David R. Carmichael
as attorney-in-fact
(Power of Attorney is contained in this Registration Statement on Form S-6 for
the Pacific Select Exec Separate Account, as Exhibit 9.)
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Pacific Life &
Annuity Company has duly caused this Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized all in the City of Newport
Beach, and State of California, on this 16th day of June, 1999.
BY: PACIFIC LIFE & ANNUITY COMPANY
(Registrant)
BY: _________________________________
William L. Ferris *
President and Chief Executive Officer
*BY: /s/ DAVID R. CARMICHAEL
David R. Carmichael
as attorney-in-fact
(Power of Attorney is contained in this Registration Statement on Form S-6 for
the Pacific Select Exec Separate Account, as Exhibit 9.)
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
Signature Title Date
____________________ Director, President and Chief __________ , 1999
William L. Ferris* Executive Officer
____________________ Director and Chairman of the Board __________ , 1999
Thomas C. Sutton*
____________________ Director, Senior Vice President and __________ , 1999
David R. Carmichael* General Counsel
____________________ Director and Secretary __________ , 1999
Audrey L. Milfs*
____________________ Director __________ , 1999
Glenn S. Schafer*
____________________ Chief Financial Officer and __________ , 1999
Khanh T. Tran* Treasurer
____________________ Executive Vice President __________ , 1999
Lynn C. Miller*
____________________ Senior Vice President __________ , 1999
William J. Doomey*
____________________ Vice President __________ , 1999
Gary L. Falde*
*By: /s/ DAVID R. CARMICHAEL June 16, 1999
------------------------------
David R. Carmichael
as attorney-in-fact
(Powers of Attorney are contained as Exhibit 9 in this Registration Statement on
Form S-6 of Pacific Select Exec Separate Account.)