Registration No. 333-37883
No. 811-08439
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Pre-Effective Amendment No. 2
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM
N-8B-2
TRANSAMERICA OCCIDENTAL LIFE SEPARATE ACCOUNT VUL-1
(Exact Name of Registrant)
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
1150 South Olive Street
Los Angeles, CA 90015
(Address of Principal Executive Office of Depositor)
Name and Address of Agent for Service: Copies to:
James W. Dederer, Esq. Stephen E. Roth, Esq.
Executive Vice President, General Counsel Sutherland, Asbill & Brennan LLP
and Corporate Secretary 1275 Pennsylvania Avenue, N.W.
Transamerica Occidental Life Insurance Company Washington, D.C. 20004
1150 South Olive Street
Los Angeles, CA 90015
Approximate date of proposed public offering: as soon as practicable after th
effective date of the Registration Statement.
Title of securities being registered: Flexible Payment Variable Life
Insurance Policy.
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 dates as the Commission, acting pursuant to said Section 8(a),
shall determine.
RECONCILIATION AND TIE BETWEEN ITEMS
IN FORM N-8B-2 AND THE PROSPECTUS
Item No. of
Form N-8B-2 Caption in Prospectus
1........................................................... Cover Page
2........................................................... Cover Page
3........................................................... Not Applicable
4........................................................... Distribution
5........................................................... Description of Transamerica; The Separate Account
6........................................................... The Separate Account
7........................................................... Not Applicable
8........................................................... Not Applicable
9........................................................... Legal Proceedings
10.......................................................... Summary; Description of Transamerica, The Separate
Account, The Portfolios; The Policy; Policy
Termination and Reinstatement; Other Policy
Provisions
11.......................................................... Summary; Investment Objectives and Policies
12 Summary;
13.......................................................... Summary; Charges and Deductions
14.......................................................... Summary; Application for a Policy
15.......................................................... Summary; Application for a Policy;
Payments; Allocation of Net Payments
16.......................................................... The Separate Account; Payments; Allocation of Net
Payments
17.......................................................... Summary; Surrender; Partial Withdrawal;
Charges and Deductions; Policy
Termination and Reinstatement
18.......................................................... The Separate Account; Payments
19.......................................................... Reports; Voting Rights
20.......................................................... Not Applicable
21.......................................................... Summary; Policy Loans; Other Policy
Provisions
22.......................................................... Other Policy Provisions
23.......................................................... Not Required
24.......................................................... Other Policy Provisions
25.......................................................... Description of Transamerica
26.......................................................... Not Applicable
27.......................................................... Description of Transamerica
28.......................................................... Directors and Principal Officers of Transamerica
29.......................................................... Description of Transamerica
30.......................................................... Not Applicable
31.......................................................... Not Applicable
32.......................................................... Not Applicable
33.......................................................... Not Applicable
34.......................................................... Not Applicable
35.......................................................... Distribution
36.......................................................... Not Applicable
37.......................................................... Not Applicable
38.......................................................... Summary; Distribution
39.......................................................... Summary; Distribution
40.......................................................... Not Applicable
41.......................................................... Description of Transamerica, Distribution
42.......................................................... Not Applicable
43.......................................................... Not Applicable
44.......................................................... Payments; Policy Value and Cash
Surrender Value
45.......................................................... Not Applicable
46.......................................................... Policy Value; Surrender;
Federal Tax Considerations
47.......................................................... Description of Transamerica
48.......................................................... Not Applicable
49.......................................................... Not Applicable
50.......................................................... The Separate Account
51.......................................................... Cover Page; Summary; Charges and
Deductions; The Policy; Policy Termination and
Reinstatement; Other Policy Provisions
52.......................................................... Addition, Deletion or Substitution of
Investments
53.......................................................... Federal Tax Considerations
54.......................................................... Not Applicable
55.......................................................... Not Applicable
56.......................................................... Not Applicable
57.......................................................... Not Applicable
58.......................................................... Not Applicable
59.......................................................... Not Applicable
INDIVIDUAL FLEXIBLE PAYMENT VARIABLE LIFE INSURANCE POLICIES
FUNDED THROUGH
TRANSAMERICA OCCIDENTAL LIFE SEPARATE ACCOUNT VUL-1
OF TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
Transamerica Occidental Life Separate Account VUL-1 ("Separate Account") is a
separate investment account of Transamerica Occidental Life Insurance Company
("Transamerica"). Transamerica issues the individual flexible payment variable
life insurance policies described in this prospectus ("Policies").
You may direct your net payments, as well as any value accumulated under the
Policy, to up to seven of the seventeen sub-accounts of the Separate Account or
to the Fixed Account, or to both. The money you place in each sub-account will
be invested solely in a corresponding mutual fund investment portfolio
("portfolio"). The value of each sub-account will vary in accordance with the
investment performance of the portfolio in which that sub-account invests. You
bear the entire investment risk for all assets you place in the sub-accounts.
This means that, depending on market conditions, the amount you invest in the
sub-accounts may increase or decrease.
Currently, you may choose among the following sub-accounts:
Sub-Accounts
Janus Aspen Worldwide Growth Alger American Income & Growth
Morgan Stanley UF International Magnum Alliance VPF Growth & Income
Dreyfus VIF Small Cap MFS VIT Growth with Income
OCC Accumulation Trust Small Cap Janus Aspen Balanced
MFS VIT Emerging Growth OCC Accumulation Trust Managed
Alliance VPF Premier Growth Morgan Stanley UF High Yield
Dreyfus VIF Capital Appreciation Morgan Stanley UF Fixed Income
MFS VIT Research Transamerica VIF Money Market
Transamerica VIF Growth
Policy owners may, within limits, choose the amount of initial payment and vary
the frequency and amount of future payments. The Policy allows partial
withdrawals and full surrender of the Policy's surrender value, within limits.
The Policies are not suitable for short-term investment because of the
substantial nature of the surrender charge.
IT MAY NOT BE ADVANTAGEOUS TO REPLACE EXISTING INSURANCE WITH THE POLICY.
THIS PROSPECTUS IS VALID ONLY WHEN
ACCOMPANIED BY CURRENT PROSPECTUSES OF EACH OF THE PORTFOLIOS. THE
SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED ON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE POLICIES ARE OBLIGATIONS OF TRANSAMERICA OCCIDENTAL LIFE INSURANCE
COMPANY AND ARE DISTRIBUTED BY
TRANSAMERICA SECURITIES SALES CORPORATION. THE POLICIES ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR CREDIT UNION. THE POLICIES ARE NOT INSURED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION (FDIC), OR ANY OTHER FEDERAL AGENCY. INVESTMENTS IN
THE POLICIES ARE SUBJECT TO VARIOUS
RISKS, INCLUDING THE FLUCTUATION OF VALUE AND POSSIBLE LOSS OF PRINCIPAL.
THIS PROSPECTUS SETS FORTH THE
INFORMATION YOU SHOULD KNOW BEFORE DECIDING TO PURCHASE A POLICY. YOU SHOULD
RETAIN THIS PROSPECTUS FOR FUTURE
REFERENCE. THIS PROSPECTUS MUST BE ACCOMPANIED OR PRECEEDED BY CURRENT
PROSPECTUSES FOR THE PORTFOLIOS. THE
PORTFOLIO PROSPECTUSES SHOULD BE READ IN CONJUNCTION WITH THIS PROSPECTUS.
Dated January 26, 1998
Table of Contents
SUMMARY 8
SPECIAL TERMS...........................................................................................10
DESCRIPTION OF TRANSAMERICA,
THE SEPARATE ACCOUNT, AND THE PORTFOLIOS................................................................12
INVESTMENT OBJECTIVES AND POLICIES, AND INVESTMENT ADVISERS....................................13
THE POLICY..............................................................................................16
APPLICATION FOR A POLICY.......................................................................16
FREE LOOK PERIOD...............................................................................16
CONVERSION PRIVILEGE...........................................................................17
PAYMENTS.......................................................................................17
ALLOCATION OF NET PAYMENTS.....................................................................18
TRANSFER PRIVILEGE.............................................................................18
DEATH BENEFIT..................................................................................19
LEVEL OPTION AND ADJUSTABLE OPTION.............................................................19
CHANGE TO LEVEL OR ADJUSTABLE OPTION...........................................................21
CHANGE IN FACE AMOUNT..........................................................................21
OPTION TO ACCELERATE DEATH BENEFITS (LIVING BENEFITS RIDER)......................................
POLICY VALUE...................................................................................22
MATURITY BENEFITS................................................................................
PAYMENT OPTIONS................................................................................23
OPTIONAL INSURANCE BENEFITS....................................................................23
SURRENDER......................................................................................24
PARTIAL WITHDRAWAL.............................................................................24
PAID-UP INSURANCE OPTION.......................................................................24
CHARGES AND DEDUCTIONS..................................................................................25
PAYMENT EXPENSE CHARGE.........................................................................25
MONTHLY INSURANCE PROTECTION CHARGE............................................................25
CHARGES AGAINST OR REFLECTED IN THE ASSETS
OF THE SEPARATE ACCOUNT...................................................................27
SURRENDER CHARGES..............................................................................28
PARTIAL WITHDRAWAL COSTS.......................................................................29
TRANSFER CHARGES...............................................................................29
CHARGE FOR CHANGE IN FACE AMOUNT...............................................................29
OTHER ADMINISTRATIVE CHARGES...................................................................30
POLICY LOANS............................................................................................30
PREFERRED LOAN OPTION
LOAN INTEREST CHARGED
REPAYMENT OF OUTSTANDING LOAN
EFFECT OF POLICY LOANS
POLICY TERMINATION AND REINSTATEMENT....................................................................31
TERMINATION
REINSTATEMENT
OTHER POLICY PROVISIONS.................................................................................33
POLICY OWNER
BENEFICIARY
ASSIGNMENT
LIMIT ON RIGHT TO CHALLENGE POLICY
SUICIDE
MISSTATEMENT OF AGE OR SEX
DELAY OF PAYMENTS
FEDERAL TAX CONSIDERATIONS..............................................................................34
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
AND THE SEPARATE ACCOUNT.................................................................34
TAXATION OF THE POLICIES.......................................................................34
POLICY LOANS...................................................................................35
INTEREST DISALLOWANCE
MODIFIED ENDOWMENT CONTRACTS...................................................................35
DISTRIBUTION UNDER MODIFIED ENDOWMENT CONTRACTS
VOTING RIGHTS...........................................................................................35
DIRECTORS AND PRINCIPAL OFFICERS OF
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY.................................................36
DISTRIBUTION............................................................................................37
REPORTS 37
PERFORMANCE INFORMATION.................................................................................38
LEGAL PROCEEDINGS.......................................................................................41
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS.......................................................41
FURTHER INFORMATION.....................................................................................41
MORE INFORMATION ABOUT THE FIXED ACCOUNT
GENERAL DESCRIPTION
FIXED ACCOUNT INTEREST
TRANSFERS, SURRENDERS, PARTIAL WITHDRAWALS AND POLICY LOANS
INDEPENDENTAUDITORS.....................................................................................42
FINANCIAL STATEMENTS....................................................................................42
APPENDIX A - GUIDELINE MINIMUM SUM INSURED TABLE.......................................................A-1
APPENDIX B - OPTIONAL INSURANCE BENEFITS...............................................................A-2
APPENDIX C - PAYMENT OPTIONS...........................................................................A-3
APPENDIX D ILLUSTRATIONS OF DEATH BENEFIT,
POLICY VALUES AND ACCUMULATED PAYMENTS........................................................A-4
APPENDIX E - MAXIMUM SURRENDER CHARGES.................................................................A-9
SUMMARY
This summary is intended to provide only a very brief overview of the more
significant aspects of the Policy. The Prospectus and the Policy provide further
detail. The Policy provides insurance protection for the named beneficiary. We
do not claim that the Policy is similar or comparable to a systematic investment
plan of a mutual fund. The Policy and its attached application are the entire
agreement between you and Transamerica.
WHAT IS THE POLICY'S OBJECTIVE?
The objective of the Policy is to give permanent life insurance protection and
help you build assets on a tax-deferred basis. Features available through the
Policy include:
o A net death benefit that can protect your family or beneficiaries
o Payment options that can guarantee an income for life
o A personalized investment portfolio
o Experienced professional investment advisers
o Tax deferral on earnings
While the Policy is in force, it will provide:
o Life insurance coverage on the Insured
o Policy Value
o Surrender rights and partial withdrawal rights
o Loan privileges
o Optional insurance benefits available by rider
The Policy combines features and benefits of traditional life insurance with the
advantages of professional money management. Unlike the fixed benefits of
ordinary life insurance, the Policy Value and the Adjustable Option death
benefit will increase or decrease depending on investment results of the
portfolios. Also, unlike traditional insurance policies, the Policy has no fixed
schedule for payments. Within limits, you may make payments of any amount and
frequency. While you may establish a schedule of payments ("planned payments"),
the Policy will not necessarily lapse if you fail to make planned payments.
However, making planned payments will not guarantee that the Policy will remain
in force. If the Guaranteed Death Benefit Rider is in effect, however, payments
of sufficient amounts, net of partial withdrawals, partial withdrawal charges
and any outstanding loans, will guarantee that the Policy will not lapse. See
"PAYMENTS" at page __ and "POLICY TERMINATION AND REINSTATEMENT" at page ____.
WHO ARE THE KEY PERSONS UNDER THE POLICY?
The Policy is a contract between the Policy owner and Transamerica. Each Policy
has a Policy owner (you), an Insured (you or another individual you select) and
a beneficiary. As Policy owner, you make payments, choose investment allocations
and select the Insured and beneficiary. The Insured is the person covered under
the Policy. The beneficiary is the person who receives the net death benefit
when the Insured dies.
WHAT HAPPENS WHEN THE INSURED DIES?
We will pay the net death benefit to the beneficiary when the Insured dies while
the Policy is in effect. You may choose between two death benefit options. Under
the Level Death Benefit Option ("Level Option"), the death benefit is the face
amount (the insurance amount issued) or the guideline minimum sum insured (the
minimum death benefit required by federal tax law), whichever is greater. Under
the Adjustable Death Benefit Option ("Adjustable Option"), the death benefit is
either (a) the sum of the face amount and Policy Value, or (b) the guideline
minimum sum insured, whichever is greater. The net death benefit is the death
benefit less any outstanding loan and due and unpaid partial withdrawals,
partial withdrawalcharges, and monthly insurance protection charges. However,
after the final payment date (and except as provided otherwise under the
Guaranteed Death Benefit Option), the net death benefit is 101% of the Policy
Value less any outstanding loan and due and unpaid partial withdrawals and
partial withdrawal charges. The beneficiary may receive the net death benefit in
a lump sum or under a payment option we offer. Under certain conditions, a
portion of the net death benefit may be paid to you prior to the Insured's death
as provided under the Option to Accelerate Death Benefits (Living Benefits
Rider). See "DEATH BENEFIT" at page ____.
CAN I EXAMINE THE POLICY?
Yes. You have the right to examine and cancel your Policy by
returning it to us or to one of our
representatives, generally by the later of:
o 45 days after the application for the Policy is signed, or
o 10 days after you receive the Policy (or a longer period as required by
state law for replacement policies or for other reasons). We refer to
this 10-day or longer period as the "state free look period"
In some states, the 45 day period noted above does not apply, and only the 10
day (or longer) provision applies.
This right to examine and cancel your Policy is often referred to as the free
look right.
If your Policy provides for a full refund under its "Right to Examine Policy"
provision as required in your state, and you exercise your free look right, your
refund will be the total of payments made to the Policy.
If your Policy does not provide for a full refund and you exercise your free
look right, you will receive, with regard to your Policy,
o Amounts allocated to the Fixed Account plus
o The current value in the Separate Account plus
o All fees, charges and tax deductions which have been imposed
After an increase in face amount, a right to examine and cancel the increase
also applies. See "FREE LOOK PERIOD" at page ___.
WHAT ARE MY INVESTMENT CHOICES?
The Policy gives you an opportunity to select among a number of investment
options, including sub-accounts and a Fixed Account. Seventeen portfolios from
eight mutual funds, each fund having its own adviser(s), offer a wide range of
investment objectives. The available sub-accounts are as follows:
Janus Aspen Worldwide Growth Morgan Stanley UF International Magnum Dreyfus VIF
Small Cap OCC Accumulation Trust Small Cap MFS VIT Emerging Growth Alliance VPF
Premier Growth Dreyfus VIF Capital Appreciation MFS VIT Research Transamerica
VIF Growth Alger American Income & Growth Alliance VPF Growth & Income MFS VIT
Growth with Income Janus Aspen Balanced OCC Accumulation Trust Managed Morgan
Stanley UF High Yield Morgan Stanley UF Fixed Income Transamerica VIF Money
Market
This range of investment choices allows you to allocate your money among the
sub-accounts to meet your investment needs. If your Policy provides for a full
refund under its "Right to Examine Policy" provision as required in your state,
after the policy is issued by us we will allocate all sub-account investments to
the sub-account investing in the Money Market Portfolio of Transamerica Variable
Insurance Fund, Inc., until the end of four calendar days plus the number of
days under the state free look period (usually 10 days, but longer under some
circumstances). After this, we will allocate all amounts to the sub-accounts as
you have chosen.
The Policy also offers a Fixed Account, which provides a guaranteed minimum
interest rate of 4% annually on amounts allocated to the Fixed Account. We may
declare a higher rate. The Fixed Account is part of the General Account of
Transamerica. Amounts in the Fixed Account do not vary with the investment
performance of a portfolio. See "MORE INFORMATION ABOUT THE FIXED ACCOUNT" at
page ___.
INVESTMENT OBJECTIVES AND POLICIES, AND INVESTMENT ADVISERS
A summary of investment objectives of the portfolios is set forth below. Before
investing, read carefully the profiles or prospectuses of the portfolios that
accompany this Prospectus. Statements of Additional Information for the
portfolios are available on request. There is no guarantee that the investment
objectives of the portfolios will be achieved. Policy Value may be less than the
aggregate payments made to the Policy.
The boards of the portfolios have responsibility for the supervision of the
affairs of the portfolios. These boards have entered into management agreements
with the investment advisers ("Advisers"). These Advisers, subject to their
board's review, are responsible for the daily affairs and general management of
the portfolios. The Advisers perform the respective administrative and
management services for the portfolios, furnish to the portfolios all necessary
office space, facilities and equipment, and pay the compensation, if any, of
officers and board members who are affiliated with the Advisers.
Each portfolio bears all expenses incurred in its operation, other than the
expenses its Advisers assume under the management agreement. Portfolio expenses
include
o Costs to register and qualify the portfolio's shares under
the Securities Act of 1933 ("1933 Act")
o Other fees payable to the SEC
o Independent public accountant, legal and custodian fees
o Association membership dues, taxes, interest, insurance
payments and brokerage commissions
o Fees and expenses of the board members who are not affiliated
with the Advisers
The management fees listed below are fees specified in the applicable advisory
contract (i.e., before any fee waivers). The portfolios' prospectuses contain
more detailed information on the portfolios' investment objectives,
restrictions, risks, expenses and Advisers.
The Worldwide Growth Portfolio of the Janus Aspen Series seeks long-term growth
of capital in a manner consistent with the preservation of capital. It is a
diversified portfolio that pursues its objective primarily through investments
in common stocks of foreign and domestic issuers. The portfolio has the
flexibility to invest on a worldwide basis in companies and other organizations
of any size, regardless of country of organization or place of principal
business activity. The portfolio normally invests in issuers from at least five
different countries, including the United States. The portfolio may at times
invest in fewer than five countries or even a single country.
Adviser: Janus Capital Corporation. Management Fee: 0.75% of the first
$300 million plus 0.70% of the next $200
million plus 0.65% of the assets over $500 million.
The International Magnum Portfolio of the Morgan Stanley Universal Funds, Inc.,
seeks long-term capital appreciation by investing primarily in equity securities
of non-U.S. issuers domiciled in EAFE countries. The countries in which the
portfolio will invest are those comprising the Morgan Stanley Capital
International EAFE Index, which includes Australia, Japan, New Zealand, most
nations located in Western Europe and certain developed countries in Asia, such
as Hong Kong and Singapore (collectively the "EAFE countries"). The portfolio
may invest up to 5% of its total assets in securities of issuers domiciled in
non-EAFE countries. Under normal circumstances, at least 65% of the total assets
of the portfolio will be invested in equity securities of issuers in at least
three different EAFE countries.
Adviser: Morgan Stanley Asset Management Inc. Management Fee: 0.80% of the
first $500 million plus 0.75% of the
next $500 million plus 0.70% of the assets over $1 billion.
The Small Cap Portfolio of the Dreyfus Variable Investment Fund seeks to
maximize capital appreciation. It seeks to achieve its objective by investing
principally in common stocks. Under normal market conditions, the portfolio will
invest at least 65% of its total assets in companies with market capitalizations
of less than $1.5 billion at the time of purchase which The Dreyfus Corporation
believes to be characterized by new or innovative products, services or
processes which should enhance prospects for growth in future earnings.
Adviser: The Dreyfus Corporation. Management Fee: 0.75%.
The Small Cap Portfolio of the OCC Accumulation Trust seeks capital appreciation
through investments in a diversified portfolio consisting primarily of equity
securities of companies with market capitalizations of under $1 billion. Under
normal circumstances at least 65% of the portfolio's assets will be invested in
equity securities. The majority of securities purchased by the portfolio will be
traded on the New York Stock Exchange, the American Stock Exchange or in the
over-the-counter market, and will also include options, warrants, bonds, notes
and debentures which are convertible into or exchangeable for, or which grant a
right to purchase or sell, such securities. In addition, the portfolio may also
purchase foreign securities provided that they are listed on a domestic or
foreign securities exchange or are represented by American depository receipts
listed on a domestic securities exchange or traded in domestic or foreign
over-the-counter markets.
Adviser: OpCap Advisors. Management Fee: 0.80% of the first $400 million
plus 0.75% of the next $400 million
plus 0.70% of assets over $800 million.
The Emerging Growth Series of the MFS Variable Insurance Trust seeks to provide
long-term growth of capital. Dividend and interest income from portfolio
securities, if any, is incidental to the investment objective of long-term
growth of capital. The policy is to invest primarily (i.e., at least 80% of its
assets under normal circumstances) in common stocks of companies that the
Adviser believes are early in their life cycle but which have the potential to
become major enterprises (emerging growth companies). While the portfolio will
invest primarily in common stocks, the portfolio may, to a limited extent, seek
appreciation in other types of securities such as fixed income securities (which
may be unrated), convertible securities and warrants when relative values make
such purchases appear attractive either as individual issues or as types of
securities in certain economic environments. The portfolio may invest in
non-convertible fixed income securities rated lower than "investment grade"
(commonly known as "junk bonds") or in comparable unrated securities, when, in
the opinion of the Adviser, such an investment presents a greater opportunity
for appreciation with comparable risk to an investment in "investment grade"
securities. Under normal market conditions the portfolio will invest not more
than 5% of its nets assets in these securities. Consistent with its investment
objective and policies described above, the portfolio may also invest up to 25%
(and generally expects to invest not more than 15%) of its net assets in foreign
securities (including emerging market securities and Brady Bonds) which are not
traded on a U.S. exchange.
Adviser: Massachusetts Financial Services Company. Management Fee: 0.75%.
The Premier Growth Portfolio of Alliance Variable Products Series Fund, Inc.,
seeks growth of capital by pursuing aggressive investment policies. Since
investments will be made based upon their potential for capital appreciation,
current income will be incidental to the objective of capital growth. The
portfolio will invest predominantly in the equity securities (common stocks,
securities convertible into commons stocks and rights and warrants to subscribe
for or purchase common stocks) of a limited number of large, carefully selected,
high-quality U.S. companies that, in the judgment of the Adviser, are likely to
achieve superior earnings growth. The portfolio investments in the 25 such
companies most highly regarded at any point in time by the Adviser will usually
constitute approximately 70% of the portfolio's net assets. The portfolio thus
differs from more typical equity mutual funds by investing most of its assets in
a relatively small number of intensively researched companies. The portfolio
will, under normal circumstances, invest at least 85% of the value of its total
assets in the equity securities of U.S. companies.
Adviser: Alliance Capital Management L.P. Management Fee: 1%.
The Capital Appreciation Portfolio of the Dreyfus Variable Investment Fund is a
diversified portfolio, the primary investment objective of which is to provide
long-term capital growth consistent with the preservation of capital; current
income is a secondary investment objective. During periods which the Sub-Adviser
determines to be of market strength, the portfolio acts aggressively to increase
shareholders' capital by investing principally in common stocks of domestic and
foreign issuers, common stocks with warrants attached and debt securities of
foreign governments. The portfolio will seek investment opportunities generally
in large capitalization companies (those with market capitalizations exceeding
$500 million) which the Sub-Adviser believes have the potential to experience
above average and predictable earnings growth.
Adviser: The Dreyfus Corporation. Sub-Adviser: Fayez Sarofim & Co.
Management Fee: 0.75%.
The Research Series of the MFS Variable Insurance Trust seeks long-term growth
of capital and future income. The policy is to invest a substantial proportion
of its assets in equity securities of companies believed to possess better than
average prospects for long-term growth. Equity securities in which the portfolio
may invest include the following: common stocks, preferred stocks and preference
stocks, securities such as bonds, warrants or rights that are convertible into
stocks and depository receipts for those securities. These securities may be
listed on securities exchanges, traded in various over-the-counter markets or
have no organized markets. A smaller proportion of the assets may be invested in
bonds, short-term obligations, preferred stocks or common stocks whose principal
characteristic is income production rather than growth. Such securities may also
offer opportunities for growth of capital as well as income. In the case of both
growth stocks and income issues, emphasis is placed on the selection of
progressive, well-managed companies. The portfolio's non-convertible debt
investments, if any, may consist of "investment grade" securities, and, with
respect to no more than 10% of the portfolio's net assets, securities in the
lower rated categories or securities which the Adviser believes to be a similar
quality to these lower rated securities (commonly know as "junk bonds").
Consistent with its investment objective and policies described above, the
portfolio may also invest up to 20% of its net assets in foreign securities
(including emerging market securities) which are not traded on a U.S. exchange.
Adviser: Massachusetts Financial Services Company. Management Fee: 0.75%.
The Growth Portfolio of the Transamerica Variable Insurance Fund, Inc., seeks
long-term capital growth. Common stock (listed and unlisted) is the basic form
of investment. Although the portfolio invests the majority of its assets in
common stocks, the portfolio may also invest in debt securities and preferred
stocks (both having a call on common stocks by means of a conversion privilege
or attached warrants) and warrants or other rights to purchase common stocks.
Unless market conditions would indicate otherwise, the portfolio will be
invested primarily in such equity-type securities. When in the judgment of the
Sub-Adviser market conditions warrant, the portfolio may, for temporary
defensive purposes, hold part or all of its assets in cash, debt or money market
instruments. The portfolio may invest up to 10% of its assets in debt securities
having a call on common stocks that are rated below investment grade.
Adviser: Transamerica Occidental Life Insurance Company. Sub-Adviser:
Transamerica Investment Services, Inc.
Management Fee: 0.75%.
The Income and Growth Portfolio of The Alger American Fund seeks, primarily, a
high level of dividend income. Capital appreciation is a secondary objective of
the portfolio. Except during temporary defensive periods, the portfolio attempts
to invest 100%, and it is a fundamental policy of the portfolio to invest at
least 65%, of its total assets in dividend paying equity securities. The Adviser
will favor securities it believes also offer opportunities for capital
appreciation. The portfolio may invest up to 35% of its total assets in money
market instruments and repurchase agreements and in excess of that amount (up to
100% of its assets) during temporary defensive periods.
Adviser: Fred Alger Management, Inc. Management Fee: 0.625%.
The Growth and Income Portfolio of the Alliance Variable Products Series Fund,
Inc., seeks reasonable current income and reasonable opportunity for
appreciation through investments primarily in dividend-paying common stocks of
good quality. Whenever the economic outlook is unfavorable for investment in
common stock, investments in other types of securities, such as bonds,
convertible bonds, preferred stock and convertible preferred stocks may be made
by the portfolio. Purchases and sales of portfolio securities are made at such
times and in such amounts as are deemed advisable in light of market, economic
and other conditions.
Adviser: Alliance Capital Management L.P. Management Fee: 0.625%.
The Growth with Income Series of the MFS Variable Insurance Trust seeks
reasonable current income and long-term growth of capital and income. Under
normal market conditions, the portfolio will invest at least 65% of its assets
in equity securities of companies that are believed to have long-term prospects
for growth and income. Equity securities in which the portfolio may invest
include the following: common stocks, preferred stocks and preference stock;
securities such as bonds, warrants or rights that are convertible into stocks;
and depository receipts for those securities. These securities may be listed on
securities exchanges, traded in various over-the-counter markets or have no
organized markets. Consistent with its investment objective and policies
described above, the portfolio may also invest up to 75% (and generally expects
to invest no more than 15%) of its net assets in foreign securities (including
emerging market securities and Brady Bonds) which are not traded on a U.S.
exchange.
Adviser: Massachusetts Financial Services Company. Management Fee: 0.75%.
The Balanced Portfolio of the Janus Aspen Series seeks long-term capital growth,
consistent with preservation of capital and balanced by current income. It is a
diversified portfolio that, under normal circumstances, pursues its objective by
investing 40-60% of its assets in securities selected primarily for their growth
potential and 40-60% of its assets in securities selected primarily for their
income potential. This portfolio normally invests at least 25% of its assets in
fixed-income senior securities, which include debt securities and preferred
stocks.
Adviser: Janus Capital Corporation. Management Fee: 0.75% of the first
$300 million plus 0.70% of the next $200
million plus 0.65% of the assets over $500 million.
The Managed Portfolio of the OCC Accumulation Trust seeks growth of capital over
time through investment in a portfolio consisting of common stocks, bonds and
cash equivalents, the percentages of which will vary based on the Adviser's
assessments of the relative outlook for such investments. Debt securities are
expected to be predominantly investment grade intermediate to long term U.S.
Government and corporate debt, although the portfolio will also invest in high
quality short term money market and cash equivalent securities and may invest
almost all of its assets in such securities when the Adviser deems it advisable
in order to preserve capital. In addition, the portfolio may also purchase
foreign securities provided that they are listed on a domestic or foreign
securities exchange or are represented by American depository receipts listed on
a domestic securities exchange or traded in domestic or foreign over-the-counter
markets.
Adviser: OpCap Advisors. Management Fee: 0.80% of first $400 million
plus 0.75% of next $400 million plus
0.70% of the assets over $800 million.
The High Yield Portfolio of the Morgan Stanley Universal Funds, Inc., seeks
above-average total return over a market cycle of three to five years by
investing primarily in high yield securities of U. S. and foreign issuers,
including corporate bonds and other fixed income securities and derivatives.
High yield securities are rated below investment grade and are commonly referred
to as "junk bonds." The portfolio's average weighted maturity will ordinarily
exceed five years and will usually be between five and fifteen years.
Adviser: Miller Anderson & Sherrerd, LLP. Management Fee: 0.50% of first
$500 million plus 0.45% of next $500
million plus 0.40% of the assets over $1 billion.
The Fixed Income Portfolio of the Morgan Stanley Universal Funds, Inc., seeks
above-average total return over a market cycle of three to five years by
investing primarily in a diversified portfolio of U.S. government and agencies,
corporate bonds, mortgage backed securities, foreign bonds and other fixed
income securities and derivatives. The portfolio's average weighted maturity
will ordinarily exceed five years and will usually be between five and fifteen
years.
Adviser: Miller Anderson & Sherrerd, LLP. Management Fee: 0.40% of the
first $500 million plus 0.35% of the next
$500 million plus 0.30% of the assets over $1 billion.
The Money Market Portfolio of the Transamerica Variable Insurance Fund,
Inc., seeks to maximize current income
from money market securities consistent with liquidity and the preservation
of principal. The portfolio invests
primarily in high quality U. S. dollar-denominated money market instruments
with remaining maturities of 13
months or less, including: obligations issued or guaranteed by the U. S.
and foreign governments and their
agencies and instrumentalities; obligations of U. S. and foreign banks, or
their foreign branches, and U. S.
savings banks; short-term corporate obligations, including commercial
paper, notes and bonds; other short-term
debt obligations with remaining maturities of 397 days or less; and
repurchase agreements involving any of the
securities mentioned above. The portfolio may also purchase other
marketable, non-convertible corporate debt
securities of U. S. issuers. These investments include bonds, debentures,
floating rate obligations, and issues
with optional maturities.
Adviser: Transamerica Occidental Life Insurance Company. Sub-Adviser:
Transamerica Investment Services, Inc.
Management Fee: 0.35%.
If there is a material change in the investment policy of a portfolio, we will
notify you of the change. If you have Policy Value allocated to that portfolio,
you may without charge reallocate the Policy Value to another portfolio or to
the Fixed Account. For you to exercise your rights, we must receive your written
request within sixty (60) days of the later of the
o Effective date of the change in the investment policy, or
o Receipt of the notice of your right to transfer
CAN I MAKE TRANSFERS AMONG THE SUB-ACCOUNTS AND THE FIXED ACCOUNT?
Yes. You may make transfers among the sub-accounts and the Fixed Account,
subject to our consent and current rules. You will incur no current taxes on
transfers while your money is in the Policy. A transfer charge may apply to
certain transfers. See "TRANSFER PRIVILEGE" at page ____.
HOW MUCH CAN I INVEST AND HOW OFTEN?
The number and frequency of your payments are flexible, within limits. See
"PAYMENTS" at page ____.
WHAT IF I NEED MY MONEY?
You may borrow up to the loan value of your Policy. You may also make partial
withdrawals, and you may surrender the Policy for its surrender value. There are
two types of loans which may be available to you:
o A preferred loan option is available after the tenth Policy year and,
after that date, will apply to any outstanding loans and new loan
requests unless you revoke the preferred loan option in writing. The
guaranteed annual interest rate credited to the portion of the Policy
Value securing a preferred loan will be not less than 7.5%.
o A non-preferred loan option is always available to you. The guaranteed
annual interest rate credited to the portion of the Policy Value
securing a non-preferred loan will be not less than 6.0%. The current
annual interest rate credited is 7.2%. We may change the interest rate
credited at any time in our sole discretion.
We will allocate Policy loans among the sub-accounts and the Fixed Account
according to your instructions. If you do not make an allocation, we will make a
pro rata allocation among the sub-accounts and the Fixed Account. We will
transfer the Policy Value in each sub-account equal to the Policy loan to the
Fixed Account. See "POLICY LOANS" at page ___.
You may surrender your Policy and receive its surrender value. See "SURRENDER"
at page ___ and "SURRENDER CHARGES" at page ___. After the first Policy year,
you may make partial withdrawals of $500 or more from the Policy Value (provided
you have not exercised the paid-up insurance option), subject to partial
withdrawal costs. Under the Level Option, the face amount and Policy Value will
be reduced by each partial withdrawal and the Policy Value will be further
reduced by the partial withdrawal costs. Under the Adjustable Option, the Policy
Value will be reduced by the amount of the partial withdrawal and the partial
withdrawal costs. We will not allow a partial withdrawal if it would reduce the
face amount below $50,000. See "PARTIAL WITHDRAWAL" at page ___ and "WHAT
CHARGES WILL I INCUR UNDER MY POLICY? - Partial Withdrawal Costs" at page ___. A
surrender or partial withdrawal may have tax consequences. See "TAXATION OF THE
POLICIES" at page ___.
CAN I MAKE FUTURE CHANGES UNDER MY POLICY?
Yes. There are several changes you can make after receiving your Policy, within
limits. You may
o Cancel your Policy under its right to examine and cancel provision
o Transfer your ownership to someone else
o Change the beneficiary
o Change the allocation of payments, with no tax consequences under
current law
o Make transfers of Policy Value among the Fixed Account and the sub-
accounts
o Adjust the death benefit by increasing or decreasing the face amount
o Change your choice of death benefit options between the Level Option
and Adjustable Option
o Add or remove optional insurance benefits provided by rider
CAN I CONVERT MY POLICY INTO A NON-VARIABLE POLICY?
Yes. You can convert your Policy without charge during the first 24 months after
the date of issue or after an increase in face amount. On conversion, we will
transfer the Policy Value in the sub-accounts to the Fixed Account. We will
allocate all future payments to the Fixed Account, unless you instruct us
otherwise.
WHAT CHARGES WILL I INCUR UNDER MY POLICY?
The following charges will apply to your Policy under the circumstances
described. Some of these charges apply throughout the Policy's duration. Other
charges apply only if you choose options under the Policy. See "CHARGES AND
DEDUCTIONS" at page ___.
o Charges deducted from payments.
Payment Expense Charge - From each payment, we will deduct a payment
expense charge, currently equal to 4.0% of the payment. The payment
expense charge is deducted for state and local premium taxes, federal
income tax treatment of Deferred Acquisition Costs, and a portion of
Policy sales and administrative expenses.
o We deduct the following monthly charge from Policy Value:
Monthly Insurance Protection Charge - This charge is the cost of
insurance, including optional insurance benefits provided by rider.
o The following expenses are charged against or reflected in the
Separate Account:
Administration Charge - We deduct this charge during the first 20
Policy years only. It is a daily charge at a rate equivalent to an
annual rate of 0.15% of the daily net asset value of each sub-account.
This charge is eliminated after the twentieth Policy year. We currently
waive this charge (subject to state law) after the tenth Policy year,
but we reserve the right to implement this charge after the tenth
Policy year.
Mortality and Expense Risk Charge - We impose a daily charge at a
current rate equivalent to an annual rate of 0.65% of the daily net
asset value of each sub-account. We may increase this charge, subject
to state and federal law, to a daily rate equivalent to a rate no
greater than 0.80% annually.
Portfolio Expenses - The portfolios incur investment advisory fees and
other expenses, which are reflected in the sub-accounts of the Separate
Account. The levels of fees and expenses vary among the portfolios and
are described below under "WHAT ARE THE EXPENSES AND FEES OF THE
PORTFOLIOS?" at page ____.
o Charges designed to reimburse us for Policy administrative costs apply
under the following circumstances:
Charge for Change in Face Amount - For each increase or decrease in
face amount you request, we deduct a charge of $40 from Policy Value.
Transfer Charge - The first 12 transfers of Policy Value in a Policy
year are free. A current transfer charge of $10, never to exceed $25,
applies for each additional transfer in the same Policy year.
Other Administrative Charges - We reserve the right to charge for other
administrative costs we incur. While there are no current charges for
these costs, we may impose a charge (guaranteed never to exceed $25 per
occurrence) for
o Changing net payment allocation instructions
o Changing the allocation of monthly insurance protection
charges among the various sub-accounts
o Providing more than one projection of values during a
Policy year in addition to your annual
statement
o The charges below apply only if you surrender your Policy or make partial
withdrawals:
Surrender Charges- The charges only apply if, during the time the
charges are in effect, you request a full surrender of your Policy or a
decrease in face amount. The surrender charges are intended to help
compensate us for certain administrative expenses and certain
distribution expenses.
The surrender charges are computed on the date of issue for the initial
face amount and apply for ten years from the date of issue. New
surrender charges are computed for any increase in face amount. The
surrender charges for a face amount increase apply for ten years from
the date the increase is effective, and those surrender charges only
apply to the face amount increase.
The amount of the surrender charges is equal to a rate per $1,000 of
face amount. The rate varies by age and sex of the Insured, as well as
the Policy duration (or duration since the increase in face amount).
Surrender charge rates decrease each Policy year on the Policy
anniversary for the initial face amount and on each twelve-month
anniversary of the effective date of a face amount increase for the
charges associated with the increase.
Partial Withdrawal Costs - We deduct the following from the Policy
Value for partial withdrawals:
o A transaction fee of 2.0% of the amount withdrawn, not
to exceed $25, for each partial
withdrawal for processing costs
o A partial withdrawal charge of 5.0% of the amount
withdrawn which exceeds the "Free 10%
Withdrawal," described below
The partial withdrawal charge does not apply to:
o That part of a withdrawal equal to 10% of the Policy Value in
a Policy year less prior free withdrawals made in the same
Policy year ("Free 10% Withdrawal")
o Withdrawals when no surrender charges apply
We reduce the Policy's outstanding surrender charges, if any, by
partial withdrawal charges that we previously deducted.
WHAT ARE THE EXPENSES AND FEES OF THE PORTFOLIOS?
In addition to the charges described above, certain management fees and other
expenses are deducted from the assets of the underlying portfolios. The levels
of fees and expenses vary among the portfolios. The following table shows the
management fees and other expenses and total portfolio annual expenses of the
portfolios for 1996. For more information concerning these fees and expenses,
see the prospectuses of the portfolios.
Portfolio Expenses
(as a percentage of assets after fee waiver and/or expense reimbursement)(1)
Total
Portfolio
Management Other Annual
Portfolio Fees (2) Expenses Expenses
Janus Aspen Worldwide Growth 0.66 0.14 0.80
Morgan Stanley UF International Magnum 0.62 0.53 1.15
Dreyfus VIF Small Cap 0.75 0.04 0.79
OCC Accumulation Trust Small Cap 0.80 0.22 1.02
MFS VIT Emerging Growth 0.75 0.25 1.00
Alliance VPF Premier Growth 0.72 0.23 0.95
Dreyfus VIF Capital Appreciation 0.75 0.09 0.84
MFS VIT Research 0.75 0.25 1.00
Transamerica VIF Growth 0.75 0.10 0.85
Alger American Income & Growth 0.63 0.19 0.82
Alliance VPF Growth & Income 0.63 0.19 0.82
MFS VIT Growth with Income 0.75 0.25 1.00
Janus Aspen Balanced 0.79 0.15 0.94
OCC Accumulation Trust Managed 0.80 0.10 0.90
Morgan Stanley UF High Yield 0.27 0.53 0.80
Morgan Stanley UF Fixed Income 0.24 0.46 0.70
Transamerica VIF Money Market 0.35 0.25 0.60
Transamerica may receive payments from some or all of the portfolios or their
advisers in varying amounts, that may be based on the amount of assets allocated
to the portfolios. The payments are for administrative or distribution services.
Expense information regarding the portfolios has been provided by the
portfolios. Transamerica has no reason to doubt the accuracy of that
information, but Transamerica has not verified those figures. In preparing the
table above, Transamerica has relied on the figures provided by the portfolios.
These figures are for the year ended December 31, 1996, except for Morgan
Stanley UF International Magnum, High Yield and Fixed Income Portfolios which
are estimates which assume that each portfolio's average daily net assets will
be $50 million, and except for the Transamerica VIF Money Market Portfolio which
are estimates for the year 1998, its first year of operation. The expenses for
the Transamerica VIF Growth Portfolio are restated to reflect the current
expenses applicable to the Portfolio after the reorganization of its
predecessor, Transamerica Occidental's Separate Account Fund C. Actual expenses
in future years may be higher or lower than these figures.
Notes to Fee Table:
(1) From time to time, the portfolios' investment advisers, each in its own
discretion, may voluntarily waive all or part of their fees and/or voluntarily
assume certain portfolio expenses. The expenses shown in the table reflect a
portfolio's adviser's waivers of fees or reimbursement of expenses, if
applicable. It is anticipated that such waivers or reimbursements will continue
for calendar years 1997 and 1998. Without such waivers or reimbursements, the
annual expenses for 1996 for certain portfolios would have been, as a percentage
of assets, as follows:
Total Portfolio
Portfolio Management Fee Other Expenses Annual Expense
--------- -------------- -------------- --------------
Janus Aspen Worldwide Growth 0.77 0.14 0.91
Morgan Stanley UF International Magnum 0.80 0.53 1.33
OCC Accumulation Trust Small Cap 0.80 0.26 1.06
MFS VIT Emerging Growth 0.75 0.41 1.16
Alliance VPF Premier Growth 1.00 0.23 1.23
MFS VIT Research 0.75 0.73 1.48
Transamerica VIF Growth 0.75 0.59 1.34
Alliance VPF Growth & Income 0.63 0.32 0.95
MFS VIT Growth with Income 0.75 1.32 2.07
Janus Aspen Balanced 0.92 0.15 1.07
Morgan Stanley UF High Yield 0.50 0.53 1.03
Morgan Stanley UF Fixed Income 0.40 0.46 0.86
The expenses of the Transamerica VIF Growth Portfolio reflect all 12 months of
1996, including the first 10 months of 1996 when the portfolio was organized as
a separate account of Transamerica Occidental Life Insurance Company; for those
10 months, the separate account was assessed mortality and expense risk charges
which will no longer be assessed at the portfolio level. Without expense
reimbursements, the other expenses for the first year of operation for the
Transamerica VIF Money Market Portfolio are expected to be 0.80% There were no
fee waivers or expense reimbursements for the Dreyfus VIF Small Cap Portfolio,
Dreyfus VIF Capital Appreciation Portfolio, Alger American Income and Growth
Portfolio or OCC Accumulation Trust Managed Portfolio.
(2) The management fee of certain of the portfolios includes breakpoints at
designated asset levels. Further, information on these breakpoints is provided
under "INVESTMENT OBJECTIVES AND POLICIES, AND INVESTMENT ADVISERS" at page ____
and in the prospectuses for the portfolios.
WHAT ARE THE LAPSE AND REINSTATEMENT PROVISIONS OF MY POLICY?
The Policy will not lapse if you fail to make payments unless:
o The surrender value is insufficient to cover the next
monthly insurance protection charge and
loan interest accrued or
o The outstanding loan exceeds Policy Value less surrender
charges
In either situation there is a 62-day grace period during which you must pay
premium sufficient to keep the Policy in force.
If you make payments at least equal to minimum monthly payments, we guarantee
that your Policy will not lapse before the 49th monthly processing date from
date of issue or increase in face amount, within limits. Under the Guaranteed
Death Benefit Rider, if you make payments of a sufficient amount, net of partial
withdrawals, partial withdrawal charges and any outstanding loans, we guarantee
that your Policy will not lapse. In order to maintain this guarantee, on each
Policy anniversary through the final payment date, the total of your payments,
net of partial withdrawals, partial withdrawal charges and any outstanding
loans, must at least equal the guaranteed death benefit premium times the number
of Policy years since the Policy was issued (adjusted for Policy changes, if
any). The guaranteed death benefit premiums are currently 90% of the guideline
level premium if you elected the Level Death Benefit Option or 75% of the
guideline level premium if you elected the Adjustable Death Benefit Option.
Certain other conditions may apply and once terminated this rider may not be
reinstated. See "POLICY TERMINATION AND REINSTATEMENT" at page ___.
You may reinstate your Policy within three years (subject to state law) after
the date of default, within limits.
CAN I ELECT PAID-UP INSURANCE WITH NO FURTHER PREMIUMS DUE?
Yes. The Policy provides a paid-up insurance option. If this option is elected,
we will provide paid-up insurance coverage, usually having a reduced face
amount, for the life of the Insured with no more premiums being due under the
Policy. If you elect this option, Policy owner rights and benefits will be
limited. See "PAID-UP INSURANCE OPTION" at page __.
HOW IS MY POLICY TAXED?
The Policy is given federal income tax treatment similar to a conventional fixed
benefit life insurance policy. On a withdrawal of Policy Value, Policy owners
currently are taxed only on the amount of the withdrawal that exceeds total
payments. Withdrawals greater than payments made are treated as ordinary income.
During the first 15 Policy years, however, an "income-out first" rule applies to
certain distributions required under Section 7702 of the Internal Revenue Code
(the "Code") because of a reduction in benefits under the Policy.
The net death benefit under the Policy is excludable from the gross income of
the beneficiary. However, in some circumstances federal estate tax may apply to
the net death benefit or the Policy Value.
A Policy may be considered a "modified endowment contract." This may occur if
total payments during the first seven Policy years exceed the total net level
payments payable if the Policy had provided certain paid-up future benefits
after seven level annual payments. If the Policy is considered a modified
endowment contract, all distributions (including Policy loans, partial
withdrawals, surrenders and assignments) will be taxed on an "income-out first"
basis. Also, a 10% penalty tax may be imposed on that part of a distribution
that is includible in income. For more information, see "FEDERAL TAX
CONSIDERATIONS-MODIFIED ENDOWMENT CONTRACTS" at page ___.
SPECIAL TERMS
Age: how old the Insured is on the birthday closest to the Date of
Issue and, subsequently, the Policy
anniversary.
Attained Age: the Insured's age as of the Insured's birthday closest to
the start of the policy year of
determination. Attained age is used in the calculation of the Guideline
Minimum Sum Insured.
Beneficiary: the person or persons you name to receive the net death benefit
when the Insured dies.
Date of Issue: the date the Policy was issued. It is the date used to
measure the monthly processing date,
Policy months, Policy years and Policy anniversaries.
Death Benefit: the amount payable when the Insured dies before the Maturity
Date, before deductions for any outstanding loan and due and unpaid partial
withdrawals, partial withdrawal charges, and monthly insurance protection
charges.
Evidence of Insurability: information, including medical information, that we
use to decide whether to issue the requested coverage, to determine the
underwriting class for the person insured, or to determine whether the policy
may be reinstated.
Face Amount: the amount of insurance coverage issued. The initial face amount
is shown in your Policy.
Final Payment Date: the Policy anniversary nearest the Insured's 100th birthday.
No payments may be made by you after this date. No monthly insurance protection
charges will be deducted from the Policy Value after this date. Generally, the
net death benefit after this date will equal 101% of the Policy Value minus any
outstanding loan, except as otherwise provided under the Guaranteed Death
Benefit Rider.
Fixed Account: an account that is a part of the General Account and that
guarantees a fixed interest rate.
General Account: all our assets other than those held in the Separate
Account and other separate accounts we
establish.
Guideline Minimum Sum Insured: the minimum death benefit required to
qualify the Policy as a "life insurance
contract" under federal tax laws. The guideline minimum sum insured is the
product of
o The Policy Value times
o A percentage based on the Insured's attained age
Insured: the person insured under the Policy. If the Insured dies while
the Policy is in force and before the
Maturity Date the net death benefit will be paid to the Beneficiary.
Insurance Protection Amount: the death benefit less the Policy Value.
Internal Revenue Code or Code: the Internal Revenue Code of 1986, as amended,
and its rules and regulations.
Issuance: the date we mail the Policy for delivery to you if the application
is approved.
Loan Value: the maximum amount you may borrow under the Policy.
Maturity Date: the Policy anniversary nearest the Insured's age 115.
Minimum Monthly Payment: a monthly amount shown in your Policy. If you pay this
amount, less partial withdrawals, partial withdrawal charges and any outstanding
loans, we guarantee that your Policy will not lapse before the 49th monthly
processing date from the date of issue or increase in face amount, within
limits.
Monthly Insurance Protection Charge: the amount of money we deduct from
Policy Value each month to pay for the
insurance protection amount and any riders.
Monthly Processing Date: the date, shown in your Policy, on which monthly
insurance protection charges are
deducted.
Net Death Benefit: on or before the final payment date (and before the
paid-up insurance option is exercised),
the net death benefit is
o The death benefit under the elected death benefit option
(Level Option or Adjustable Option) minus
o Any outstanding loan, monthly insurance protection charges due
and unpaid through the Policy month in which the Insured dies,
as well as any due and unpaid partial withdrawals and partial
withdrawal charges.
After the final payment date (and except as otherwise provided under the
Guaranteed Death Benefit Rider), the net death benefit is
o 101% of the Policy Value minus
o Any outstanding loan and any due and unpaid partial
withdrawals and partial withdrawal charges.
If the paid-up insurance option is exercised, the net death benefit is the
paid-up insurance amount minus any outstanding loan.
Net Payment: your payment less a payment expense charge.
Outstanding Loan: all unpaid Policy loans plus loan interest due or accrued.
Paid-Up Insurance: life insurance coverage for the life of the Insured, with
no further premiums due.
Policy Anniversary: annual anniversary of the date of issue.
Policy Change: any change in the face amount, the addition or deletion of a
rider, or a change in death benefit
option (Level Option or Adjustable Option).
Policy Value: the total value of your Policy. It is the sum of the:
o Value of the units of the sub-accounts credited to your
Policy plus
o Accumulation in the Fixed Account credited to your Policy
Policy owner: the person who may exercise all rights under the Policy,
with the consent of any irrevocable
beneficiary. "You" and "your" refer to the Policy owner in this Prospectus.
Portfolio: a mutual fund investment portfolio in which a corresponding
sub-account invests.
Premium: a payment you must make to us to keep the Policy in force.
Pro rata Allocation: an allocation among the Fixed Account and the sub-accounts
in the same proportion that, on the date of allocation, the portion of the
Policy Value in the Fixed Account and the portion of the Policy Value in each
sub-account bear to the total Policy Value net of any outstanding loans.
Separate Account: Transamerica Occidental Life Separate Account VUL-1 of
Transamerica Occidental Life Insurance
Company, one of our separate investment accounts.
Sub-Account: a subdivision of the Separate Account investing exclusively in
the shares of a portfolio.
Surrender Value: the Policy Value less any outstanding loan and surrender
charges. The surrender value is the
amount payable on a full surrender.
Transamerica: Transamerica Occidental Life Insurance Company. "We", "our"
and "us" refer to Transamerica in this
Prospectus.
Underwriting Class: the insurance risk classification that we assign the Insured
based on the information in the application and other evidence of insurability
we consider. The Insured's underwriting class will affect the monthly insurance
protection charge and the payment required to keep the Policy in force.
Unit: a measure of your interest in a sub-account.
Valuation Date: any day on which the net asset value of the shares of
any portfolio and unit values of any
sub-accounts are computed. Valuation dates currently occur on
o Each day the New York Stock Exchange is open for trading
o Other days (other than a day during which no payment, partial
withdrawal or surrender of a Policy was received) when there
is a sufficient degree of trading in a portfolio's securities
so that the current net asset value of the sub-account may be
materially affected.
Valuation Period: the interval between two consecutive valuation dates.
Variable Life Service Center: our office at 440 Lincoln Street, Worcester
Massachusetts 01653. Our mailing
address for all written requests and other correspondence is P.O. Box 8990,
Boston, Massachusetts 02266-8990.
Our customer service telephone number is (800) 782-8315.
Written Request: your request in writing, satisfactory to us, received at our
Variable Life Service Center.
DESCRIPTION OF TRANSAMERICA,
THE SEPARATE ACCOUNT, AND THE PORTFOLIOS
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY. Transamerica Occidental Life
Insurance Company ("Transamerica") is a stock life insurance company
incorporated under the laws of the State of California in 1906. Transamerica is
principally engaged in the sale of life insurance and annuity policies.
Transamerica is a wholly-owned subsidiary of Transamerica Insurance Corporation
of California, which in turn is a direct subsidiary of Transamerica Corporation.
The home office of Transamerica is 1150 South Olive Street, Los Angeles,
California 90015.
THE SEPARATE ACCOUNT. Transamerica Occidental Life Separate Account VUL-1
("Separate Account") was established by us as a separate account under the laws
of the State of California, pursuant to resolutions adopted by our Board of
Directors on June 11, 1996. The Separate Account is registered with the
Securities and Exchange Commission ("SEC" or "Commission") under the Investment
Company Act of 1940 ("1940 Act") as a unit investment trust. It meets the
definition of a separate account under the federal securities laws. However, the
Commission does not supervise the management of the investment practices or
policies of the Separate Account.
The assets used to fund the variable part of the Policies are set aside in the
Separate Account. The assets of the Separate Account are owned by Transamerica
but they are held separately from our other assets. Section 10506 of the
California Insurance Code provides that the assets of a separate account are not
chargeable with liabilities arising out of any other business operation of the
insurance company (except to the extent provided in the policies). Income, gains
and losses incurred on the assets in the Separate Account, whether or not
realized, are credited to or charged against the Separate Account without regard
to our other income, gains or losses. Therefore, the investment performance of
the Separate Account is entirely independent of the investment performance of
our General Account assets or any other separate account maintained by us.
The Separate Account currently has seventeen sub-accounts available for
investment, each of which invests solely in a specific corresponding mutual fund
portfolio. Changes to the sub-accounts may be made at our discretion.
THE PORTFOLIOS. The portfolios are open-end management investment companies or
portfolios of series, open-end management companies registered with the SEC
under the 1940 Act and are usually referred to as mutual funds. This SEC
registration does not involve SEC supervision of the investments or investment
policies of the portfolios. Shares of the portfolios are not offered to the
public but solely to the insurance company separate accounts and other qualified
purchasers as limited by federal tax laws. The assets of each portfolio are held
separate from the assets of the other portfolios. Each portfolio operates as a
separate investment vehicle. The income or losses of one portfolio have no
effect on the investment performance of another portfolio. The sub-accounts
reinvest dividends and/or capital gains distributions received from a portfolio
in more shares of that portfolio as retained assets.
The sub-accounts available under the Policies invest in the following
portfolios:
Income and Growth Portfolio of The Alger American Fund
Growth and Income Portfolio and
Premier Growth Portfolio of Alliance Variable Products Series Fund, Inc.
Capital Appreciation Portfolio and
Small Cap Portfolio of Dreyfus Variable Investment Fund
Balanced Portfolio and
Worldwide Growth Portfolio of Janus Aspen Series
Emerging Growth Series
Growth with Income Series and
Research Series of MFS Variable Insurance Trust
Fixed Income Portfolio
High Yield Portfolio and
International Magnum Portfolio of Morgan Stanley Universal Funds, Inc.
Managed Portfolio and
Small Cap Portfolio of OCC Accumulation Trust
Growth Portfolio and
Money Market Portfolio of Transamerica Variable Insurance Fund, Inc.
THE POLICY
APPLICATION FOR A POLICY - We offer Policies to proposed Insureds 80 years old
and younger. After receiving a completed application from a prospective Policy
owner, we will begin underwriting to decide the insurability of the proposed
Insured. We may require medical examinations and other information before
deciding insurability. We issue a Policy only after underwriting has been
completed. We may reject an application that does not meet our underwriting
guidelines.
If a prospective Policy owner makes an initial payment of at least one minimum
monthly payment, we will issue a conditional receipt which provides fixed
conditional insurance, but not until after all its conditions are met. Included
in these conditions are the completion of both parts of the application,
completion of all underwriting requirements, and the proposed Insured must be
insurable under Transamerica's rules for insurance under the Policy, in the
amount, and in the underwriting class applied for in the application. After all
conditions are met, the amount of fixed conditional insurance provided by the
conditional receipt will be the amount applied for, up to a maximum of $250,000
for persons age 16 to 65 and insurable in a standard underwriting class, and up
to $100,000 for all other ages and underwriting classes.
If you make payments before the date of issuance, we will allocate the payments
initially to the Fixed Account within two business days of receipt of the
payments at our Variable Life Service Center. If the Policy is not issued, we
will return to you the amount of your payments.
If your application is approved and the Policy is issued, we will allocate your
Policy Value within two days of the date we approve your application according
to your allocation instructions. However, if your Policy provides for a full
refund of payments under its "Right to Examine Policy" provision as required in
your state (see "THE POLICY - "FREE LOOK PERIOD"), we will initially allocate
your sub-account investments to the sub-account investing in the Money Market
portfolio ("Money Market sub-account"). We will also transfer interest earned in
the Fixed Account allocable to the portion of your payment designated by you for
the Separate Account. This allocation to the Money Market sub-account will be
effective for four calendar days plus the state free look period. After this, we
will allocate all amounts to the sub-accounts according to your investment
choices.
FREE LOOK PERIOD - The Policy provides for a free look period. You have the
right to examine and cancel your Policy by returning it to us or to one of our
representatives by the later of:
o 45 days after the application for the Policy is signed, or
o 10 days after you receive the Policy (or a longer period as
required by state law for replacement policies or for other
reasons). We refer to this 10 day or longer time period as the
"state free look period"
In some states, the 45 day period noted above does not apply, and only the 10
day (or longer) provision applies.
If your Policy provides for a full refund under its "Right to Examine
Policy" provision as required in your state, your
refund will be the total payments made to the Policy.
If your Policy does not provide for a full refund, you will receive
o Amounts allocated to the Fixed Account plus
o The Policy Value in the Separate Account plus
o All fees, charges and tax deductions which have been imposed
We may delay a refund of any payment made by check until the check has cleared
your bank.
After an increase in face amount as a result of your written request, we will
mail or deliver a notice of a free look period for the increase. You will have
the right to cancel the increase by the later of
o 45 days after the application for the increase is signed or
o 10 days after you receive the new Policy specification pages
issued for the increase
On canceling the increase, you will receive a credit to your Policy Value of
charges deducted for the increase. We will refund to you the amount to be
credited if you request. We will waive any surrender charge computed for the
increase.
CONVERSION PRIVILEGE - Within 24 months of the date of issue or of the effective
date of an increase in face amount, you can convert your Policy into a
non-variable Policy by transferring the value in the sub-accounts to the Fixed
Account. The conversion will take effect at the end of the valuation period in
which we receive, at our Variable Life Service Center, notice of the conversion
satisfactory to us. There is no charge for this conversion.
We will allocate all future payments to the Fixed Account, unless you instruct
us otherwise.
PAYMENTS - Payments are payable to Transamerica Occidental Life Insurance
Company. Payments may be made by mail to our Variable Life Service Center or
through our authorized representative. All net payments after the initial
payment are credited to the Separate Account or Fixed Account on the valuation
date of receipt at the Variable Life Service Center.
You may establish a schedule of planned payments. If you do, we will bill you at
regular intervals. Making planned payments will not guarantee that the Policy
will remain in force. The Policy will not necessarily lapse if you fail to make
planned payments. You may make unscheduled payments before the final payment
date or skip planned payments.
You may choose a monthly automatic payment method of making payments. Under this
method, each month we will deduct payments from your checking account and apply
them to your Policy. The minimum payment allowed under this method is $50.
The Policy does not limit payments as to frequency and number. However, no
payment may be less than $100 without our consent. Payments must be sufficient
to provide a positive surrender value at the end of each Policy month or the
Policy may lapse. See "POLICY TERMINATION AND REINSTATEMENT." During the first
48 Policy months following the date of issue or the effective date of an
increase in face amount, a guarantee may apply to prevent the Policy from
lapsing. The guarantee will apply during this period if we received payments
from you that, when reduced by outstanding loans, partial withdrawals and
partial withdrawal charges, equal or exceed the required minimum monthly
payments. The required minimum monthly payments are based on the number of
months the Policy, increase in face amount or Policy change that causes a change
in the minimum monthly payment has been in force. MAKING MONTHLY PAYMENTS EQUAL
TO THE MINIMUM MONTHLY PAYMENTS DOES NOT GUARANTEE THAT THE POLICY WILL REMAIN
IN FORCE, EXCEPT AS STATED IN THIS PARAGRAPH.
Under the Guaranteed Death Benefit Rider, if you make payments of a sufficient
amount, net of partial withdrawals, partial withdrawal charges and any
outstanding loans, we guarantee that your Policy will not lapse. In order to
maintain this guarantee, on each Policy anniversary through the final payment
date, the total of your payments received by us, net of partial withdrawals,
partial withdrawal charges and any outstanding loans, must at least equal the
guaranteed death benefit premium times the number of Policy years since the
Policy was issued. The guaranteed death benefit premiums are currently 90% of
the guideline level premium if you elected the Level Option or 75% of the
guideline level premium if you elected the Adjustable Option. A Policy change
may affect the amount of payments necessary to keep the rider in force. Certain
other conditions may apply, and once terminated this rider may not be
reinstated.
Total payments may not exceed the current maximum payment limits under federal
tax law. These limits will change with a change in face amount, the addition or
deletion of a rider, or a change between the Level Option and Adjustable Option.
Where total payments would exceed the current maximum payment limits, we will
only accept that part of a payment that will make total payments equal the
maximum. Any part of the payments greater than that amount will first be applied
as a loan repayment, if you have an outstanding loan, and any remainder will be
returned to you. We will refund to you any excess amount (including interest)
not later than 60 days after the end of the Policy year in which the excess
payment occurred. However, we will accept a payment needed to prevent Policy
lapse during a Policy year. The amount refundable will not exceed the surrender
value of the policy. If the entire surrender value is refunded, we will treat
the transaction as a full surrender of your Policy. See "POLICY TERMINATION AND
REINSTATEMENT."
ALLOCATION OF NET PAYMENTS - The net payment equals the payment made less the
payment expense charge. In the application for your Policy, you decide the
initial allocation of the net payment among the Fixed Account and the
sub-accounts. You may allocate net payments to one or more of the sub-accounts,
but may not have Policy Value in more than seven sub-accounts at once. The
minimum amount that you may allocate to a sub-account is 1.0% of the net
payment. Allocation percentages must be in whole numbers (for example, 331/3%
may not be chosen) and must total 100%.
You may change the allocation of future net payments by written request or
telephone request. You have the privilege to make telephone requests, unless you
elected not to have the privilege on the application. The policy of Transamerica
and its representatives and affiliates is that they will not be responsible for
losses resulting from acting on telephone requests reasonably believed to be
genuine. We will use reasonable methods to confirm that instructions
communicated by telephone are genuine; otherwise, Transamerica may be liable for
any losses from unauthorized or fraudulent instructions. We require that callers
on behalf of a Policy owner identify themselves by name and identify the Policy
owner by name, date of birth and social security number. All telephone requests
are tape recorded. An allocation change will take effect on the date of receipt
of the notice at the Variable Life Service Center. No charge is currently
imposed for changing payment allocation instructions. We reserve the right to
impose a charge in the future, but guarantee that the charge will not exceed
$25.
The Policy Value of each sub-account will vary with the investment experience of
the portfolio in which the sub-account invests. You bear this investment risk.
Investment performance may also affect the death benefit. Review your
allocations of payments and Policy Value as market conditions and your financial
planning needs change.
TRANSFER PRIVILEGE - Subject to our then current rules, you may transfer amounts
among the sub-accounts or between one or more sub-accounts and the Fixed
Account. (You may not transfer that portion of the Policy Value held in the
Fixed Account that secures a Policy loan.)
The transfer privilege is subject to our consent. We reserve the right to
impose limits on transfers including,
but not limited to, the
o Minimum amount that may be transferred
o Minimum amount that may remain in a sub-account following a
transfer from that sub-account
o Minimum period between transfers involving the Fixed Account
o Maximum amounts that may be transferred from the Fixed Account
Transfers involving the Fixed Account are currently permitted only if:
o There has been at least a ninety (90) day period since the
last transfer from the Fixed Account,
and
o The amount transferred from the Fixed Account in each
transfer does not exceed the lesser of
$100,000 or 25% of the Policy Value
These rules are subject to change by us.
We will make transfers at your written request or telephone request, as
described in "THE POLICY - ALLOCATION OF NET PAYMENTS." Transfers are effected
at the value next computed after receipt of the transfer order, except for
automatic transfers.
You may apply for automatic transfers under either the Dollar Cost Averaging
(DCA) option or the Automatic Account Rebalancing (AAR) option by submitting
your written request to our Variable Life Service Center. Transfers under either
DCA or AAR are generally effective on the 15th day of each scheduled month. If
your written request is received by us prior to the 15th of the month, your
option may begin as early as the 15th of the month in which we receive your
request. Otherwise, your option may begin as early as the 15th of the following
month. You may cancel your election of an option by written request at any time
with regard to future transfers. The DCA option and the AAR option may not be
effective at the same time on your Policy. If you elect one option and, at a
later date, submit written request for the other option, your new written
request will be honored, and the previously elected option will be automatically
terminated.
Dollar Cost Averaging. This option allows you to systematically transfer a set
dollar amount from the Money Market sub-account on a monthly, quarterly, or
semi-annual basis to one or more other sub-accounts. The minimum amount of each
DCA transfer from the Money Market sub-account is $100, and at no time may you
have value in more than seven sub-accounts. The Dollar Cost Averaging option is
designed to reduce the risk of your purchasing units only when the price of the
units is high, but you should carefully consider your financial ability to
continue the option over a long enough period of time to purchase units when
their value is low as well as when it is high. The DCA option does not assure a
profit or protect against a loss. The DCA option will terminate automatically
when the value of your Money Market sub-account is depleted.
There is no additional charge for electing the DCA option. Transfers to the
Fixed Account are not permitted under the DCA option. We reserve the right to
terminate the DCA option at any time and for any reason.
Automatic Account Rebalancing. Once your net payments and requested transfers
have been allocated among your sub-account choices, the performance of each
sub-account may cause your allocation to shift such that the relative value of
one or more sub-accounts is no longer consistent with your overall objectives.
Under the Automatic Account Rebalancing option, the balances in your selected
sub-accounts can be restored to the allocation percentages you elect on your
written request by transferring values among the sub-accounts. At no time may
you have value in more than seven sub-accounts. The minimum percentage
allocation for each selected sub-account is 1%, and percentage allocations must
be in whole numbers. The AAR option is available on a quarterly, semi-annual or
annual basis. The minimum total amount of the transfers under the AAR option is
$100 per scheduled date. If the total transfer amount is less than $100, no
transfer will occur on that scheduled date. The AAR option does not guarantee a
profit or protect against a loss.
There is no additional charge for electing the AAR option. Transfers to the
Fixed Account are not permitted under the AAR option. We reserve the right to
terminate the AAR option at any time and for any reason.
The first 12 transfers in a Policy year are free. After that, we will deduct a
$10 transfer charge from amounts transferred in that Policy year. We reserve the
right to increase the charge, but we guarantee the charge will never exceed $25.
The first automatic transfer for the elected option counts as one transfer
toward the 12 free transfers allowed in each Policy year. Each subsequent
automatic transfer for the elected option is free, and does not reduce the
remaining number of transfers that are free in a Policy year.
Any transfers made for a conversion privilege, or because of a Policy loan or
material change in investment Policy will not count toward the 12 free
transfers.
DEATH BENEFIT - If the Policy is in force on the date of the Insured's death, we
will, with due proof of death, pay the net death benefit to the named
beneficiary. We will normally pay the net death benefit within seven days of
receiving due proof of the Insured's death, but we may delay payment of net
death benefits. See "OTHER POLICY PROVISIONS - DELAY OF PAYMENTS." The
beneficiary may receive the net death benefit in a lump sum or under a payment
option. See "APPENDIX C - PAYMENT OPTIONS."
Before the final payment date and before the paid-up insurance option is
exercised, the net death benefit is
o The death benefit provided under the Level Option or
Adjustable Option, whichever is elected and
in effect on the date of death plus
o Any other insurance on the Insured's life that is provided
by rider minus
o Any outstanding loan and any due and unpaid partial
withdrawals, partial withdrawal charges and monthly insurance
protection charges through the Policy month in which the
Insured dies
After the final payment date and except as otherwise provided in the Guaranteed
Death Benefit Rider, the net death benefit is
o 101% of the Policy Value minus
o Any outstanding loan and any due and unpaid partial
withdrawals and partial withdrawal charges.
If the paid-up insurance option is exercised, the net death benefit is the
paid-up insurance amount minus any outstanding loan.
In most states, we will compute the net death benefit on the date we receive due
proof of the Insured's death.
LEVEL OPTION AND ADJUSTABLE OPTION - The Policy provides two death benefit
options through the final payment date and before the paid-up insurance option
is exercised: the Level Option and the Adjustable Option. You choose the desired
option in the application. You may change the option once per Policy year by
written request. There is no charge for a change in option.
Under the Level Option, the death benefit is the greater of the
o Face amount or
o Guideline minimum sum insured
Under the Adjustable Option, the death benefit is the greater of the
o Face amount plus Policy Value or
o Guideline minimum sum insured
Under both the Level Option and Adjustable Option, the death benefit provides
insurance protection. Under the Level Option, the death benefit is level unless
the guideline minimum sum insured exceeds the face amount; then, the death
benefit varies as the Policy Value changes. Under the Adjustable Option, the
death benefit always varies as the Policy Value changes.
At any face amount, the death benefit will be greater under the Adjustable
Option than under the Level Option because the Policy Value is added to the face
amount and included in the death benefit. (If, however, the death benefit is the
guideline minimum sum insured, then the death benefit will be the same.)
However, the monthly insurance protection charge will be greater and, therefore,
Policy Value will accumulate at a slower rate than under the Level Option.
If you desire to have payments and investment performance reflected in the death
benefit, you should choose the Adjustable Option. If you desire to have payments
and investment performance reflected to the maximum extent in the Policy Value,
you should select the Level Option.
Guideline Minimum Sum Insured - The guideline minimum sum insured is a
percentage of the Policy Value as set forth in "APPENDIX A - GUIDELINE MINIMUM
SUM INSURED TABLE." The guideline minimum sum insured is computed in accordance
with federal income tax laws to ensure that the Policy qualifies as a life
insurance contract and that the insurance proceeds will be excluded from the
gross income of the beneficiary.
Illustration of the Level Option - In this illustration, assume that the Insured
is currently age 40 (attained age) and that there is no outstanding loan.
Under the Level Option, a Policy with a $100,000 face amount will have a death
benefit of $100,000. However, because the death benefit must be equal to or
greater than 250% of Policy Value, if the Policy Value exceeds $40,000 the death
benefit will exceed the $100,000 face amount. In this example, each dollar of
Policy Value above $40,000 will increase the death benefit by $2.50. For
example, a Policy with a Policy Value of $50,000 will have a guideline minimum
sum insured of $125,000 ($50,000 x 2.50); Policy Value of $60,000 will produce a
guideline minimum sum insured of $150,000 ($60,000 x 2.50); and Policy Value of
$75,000 will produce a guideline minimum sum insured of $187,500 ($75,000 x
2.50).
Similarly, if Policy Value exceeds $40,000, each dollar taken out of Policy
Value will reduce the death benefit by $2.50. If, for example, the Policy Value
is reduced from $60,000 to $50,000 because of partial withdrawals, charges or
negative investment performance, the death benefit will be reduced from $150,000
to $125,000. If, however, the product of the Policy Value times the applicable
percentage from the table in Appendix A is less than the face amount, the death
benefit will equal the face amount.
The applicable percentage becomes lower as the Insured's age increases. If the
Insured's attained age in the above example were, for example, 50 (rather than
40), the applicable percentage would be 185%. The death benefit would not exceed
the $100,000 face amount unless the Policy Value exceeded $54,054 (rather than
$40,000), and each dollar then added to or taken from Policy Value would change
the death benefit by $1.85.
Illustration of the Adjustable Option - In this illustration, assume that the
Insured is age 40 (attained age) and
that there is no outstanding loan.
Under the Adjustable Option, a Policy with a face amount of $100,000 will
produce a death benefit of $100,000 plus Policy Value. For example, a Policy
with Policy Value of $10,000 will produce a death benefit of $110,000 ($100,000
+ $10,000); Policy Value of $25,000 will produce a death benefit of $125,000
($100,000 + $25,000); Policy Value of $50,000 will produce a death benefit of
$150,000 ($100,000 + $50,000). However, the death benefit must be at least 250%
of the Policy Value. Therefore, if the Policy Value is greater than $66,667,
250% of that amount will be the death benefit, which will be greater than the
face amount plus Policy Value. In this example, each dollar of Policy Value
above $66,667 will increase the death benefit by $2.50. For example, if the
Policy Value is $70,000, the guideline minimum sum insured will be $175,000
($70,000 x 2.50); Policy Value of $80,000 will produce a guideline minimum sum
insured of $200,000 ($80,000 x 2.50); and Policy Value of $90,000 will produce a
guideline minimum sum insured of $225,000 ($90,000 x 2.50).
Similarly, if Policy Value exceeds $66,667, each dollar taken out of Policy
Value will reduce the death benefit by $2.50. If, for example, the Policy Value
is reduced from $80,000 to $70,000 because of partial withdrawals, charges or
negative investment performance, the death benefit will be reduced from $200,000
to $175,000. If, however, the product of the Policy Value times the applicable
percentage is less than the face amount plus Policy Value, then the death
benefit will be the current face amount plus Policy Value.
The applicable percentage becomes lower as the Insured's age increases. If the
Insured's attained age in the above example were 50, the death benefit must be
at least 185% of the Policy Value. The death benefit would be the sum of the
Policy Value plus $100,000 unless the Policy Value exceeded $117,647 (rather
than $66,667). Each dollar added to or subtracted from the Policy would change
the death benefit by $1.85.
CHANGE TO LEVEL OR ADJUSTABLE OPTION - You may change the death benefit option
once each Policy year by written request, within limits noted in "LEVEL OPTION
AND ADJUSTABLE OPTION." Changing options will not require evidence of
insurability. The change takes effect on the monthly processing date on or next
following the date of receipt of the written request. We will impose no charge
for changes in death benefit options.
If you change the Level Option to the Adjustable Option, we will decrease the
face amount to equal
o The death benefit under the Level Option minus
o The Policy Value on the date of the change
The change may not be made if the face amount would fall below $50,000. After
the change from the Level Option to the Adjustable Option, future monthly
insurance protection charges may be higher or lower than if no change in option
had been made. However, the insurance protection amount will always equal the
face amount unless the guideline minimum sum insured applies. No surrender
charges will be imposed for the decrease in face amount resulting solely because
of a change in death benefit options from the Level Option to the Adjustable
Option.
If you change the Adjustable Option to the Level Option, we will increase the
face amount, and the new face amount will be equal to the death benefit under
the Adjustable Option on the date of change. The death benefit will be the
greater of
o The new face amount or
o The guideline minimum sum insured
No new surrender charge rates or new surrender charge period will be imposed
solely because of a change in death benefit options. After the change from the
Adjustable Option to the Level Option, an increase in Policy Value will reduce
the insurance protection amount and the monthly insurance protection charge. A
decrease in Policy Value will increase the insurance protection amount and the
monthly insurance protection charge.
A change in death benefit option may result in total payments exceeding the then
current maximum payment limitation under federal tax law. If this occurs, we
will pay the excess to you.
CHANGE IN FACE AMOUNT - You may increase or decrease the face amount by written
request. An increase or decrease in the face amount takes effect on the later of
o The monthly processing date on or next following the date of
receipt of your written request or
o The date of our approval of your written request, if evidence
of insurability is required
Increases - You must submit evidence of insurability satisfactory to us with
your written request for an increase. The consent of the Insured is also
required whenever the face amount is increased. An increase in face amount may
not be less than $10,000. You may not increase the face amount after the Insured
reaches age 80. A written request for an increase must include a payment if the
surrender value is less than the sum of
o $40 plus
o Two minimum monthly payments
On the effective date of each increase in face amount, we will deduct a
transaction charge of $40 from Policy Value for administrative costs. You may
allocate the deduction to one sub-account. If you make no allocation we will
make a pro rata allocation. We will also compute surrender charges for the
increase. An increase in the face amount will increase the insurance protection
amount and, therefore, the monthly insurance protection charges. We will provide
you new specification pages for the Policy indicating the effective date of the
increase and any additional charges due to the increase.
After increasing the face amount, you will have the right, during a free look
period, to have the increase canceled. See "THE POLICY - FREE LOOK PERIOD." If
you exercise this right, we will credit to your Policy the charges deducted for
the increase, unless you request a refund of these charges. We will also cancel
any surrender charges for the increase.
Decreases - You may decrease the face amount by written request. The minimum
amount for a decrease in face amount is $10,000. The minimum face amount in
force after a decrease is $50,000. We may limit the decrease or return Policy
Value to you, as you choose, if the Policy would not comply with the maximum
payment limitation under federal tax law. A return of Policy Value may result in
tax liability to you.
A decrease in the face amount will lower the insurance protection amount and,
therefore, the monthly insurance protection charge. In computing the monthly
insurance protection charge, a decrease in the face amount will reduce the face
amount in inverse order (i.e., first, the most recent increase, then the next
most recent increases, then the initial face amount).
On the effective date of a decrease in the face amount, we will deduct from the
Policy Value a transaction charge of $40 and, if applicable, any surrender
charges. You may allocate the deduction to one sub-account. If you make no
allocation, we will make a pro rata allocation. We will reduce the surrender
charge by the amount of any surrender charge deducted. We will provide you with
new specification pages indicating the effective date of the decrease and the
new minimum monthly payment, if any.
OPTION TO ACCELERATE DEATH BENEFITS (LIVING BENEFITS RIDER) - Subject to state
law and approval, you may elect to add the Option to Accelerate Death Benefits
(Living Benefits Rider) to your Policy. There is no direct charge for this
rider. The rider allows you to receive a portion of the net death benefit while
the Insured is alive, subject to the conditions of the rider. You may submit a
written request to receive the "living benefit" under this rider if the policy
is in-force and a qualified physician certifies that the Insured has an illness
or physical condition which is likely to result in the Insured's death within 12
months. You may receive the living benefit either in a single sum or in 12 equal
payments. The option may only be exercised once under the Policy.
The amount you may receive is based on the "option amount". The option amount is
the portion of the death benefit you elect to apply under the rider as an
accelerated death benefit. The option amount must be at least $25,000 and may
not exceed the lessor of
One-half of the death benefit on the date the option is elected, or
The amount that would reduce the face amount to $100,000, our
current minimum issue limit, or $250,000
The "living benefit" is the lump sum benefit under this rider and is the amount
used to determine the monthly benefit under the rider. It is the Actuarially
calculated present value of the option amount adjusted to reflect the actuarial
present value of lost future mortality charges and to reflect any outstanding
loans. The methodology used in this calculation is on file with state
departments of insurance, where required. Subject to state law, an expense
charge of $150 will be deducted from Policy Value if you exercise the option
under this rider.
If you elect to exercise this option, your Policy will be affected as follows:
A portion of the outstanding loan will be deducted from the living
benefit, while the remaining outstanding loan will continue in force
The Policy's death benefit will be decreased by the option amount, with
insurance decreased or eliminated in inverse order, starting with the
most recent face amount increase and ending with the initial face
amount
Policy value will be reduced in the same proportion as the reduction in
the death benefit
To the extent of the decrease in face amount as a result of exercising the
option, we will waive any surrender charges which would otherwise apply to that
decrease in face amount.
The rider is intended to provide a qualified accelerated death benefit that is
excludable from gross income for federal income tax purposes. Whether any tax
liability may be incurred, however, depends upon a number of factors.
POLICY VALUE - The Policy Value is the total value of your Policy. It is the
sum of
o Your accumulation in the Fixed Account (including amounts
securing any outstanding loans) plus
o The value of your units in the sub-accounts
There is no guaranteed minimum Policy Value. Policy Value on any date depends on
variables that cannot be predetermined.
Your Policy Value is affected by the
o Frequency and amount of your net payments
o Interest credited in the Fixed Account
o Investment performance of your sub-accounts
o Partial withdrawals
o Loans, loan repayments and loan interest paid or credited
o Charges and deductions under the Policy
o The death benefit option
Computing Policy Value - We compute the Policy Value on the date of issue and on
each valuation date. On the date of issue, the Policy Value is
o The value of the amounts allocated to the Fixed Account and
sub-account(s), net of mortality and expense risk charges,
administration charges and portfolio expenses (see "THE POLICY
APPLICATION FOR A POLICY"), minus
o The monthly insurance protection charge due
On each valuation date after the date of issue, the Policy Value is the sum of
o Accumulations in the Fixed Account plus
o The sum of the product of
o The number of units in each sub-account times
o The value of a unit in each sub-account on the valuation date
The Unit - We allocate each net payment to the sub-accounts you select. We
credit allocations to the sub-accounts as units. Units are credited separately
for each sub-account.
The number of units of each sub-account credited to the Policy is the quotient
of
o That part of the net payment allocated to the sub-account
divided by
o The dollar value of a unit on the valuation date the payment
is received at our Variable Life Service Center (but see
"APPLICATION FOR A POLICY" for treatment of payments received
by us before we approve the application)
The number of units will remain fixed unless changed by a split of unit value,
transfer, loan, partial withdrawal or surrender. Also, each deduction of charges
from a sub-account will result in the cancellation of units equal in value to
the amount deducted.
The dollar value of a unit of a sub-account varies from valuation date to
valuation date based on the investment experience of that sub-account. This
investment experience reflects the investment performance, expenses and charges
of the portfolio in which the sub-account invests. The value of each unit was
set at $10.00 on the first valuation date of each sub-account. The value of a
unit on any valuation date after the first valuation date is the product of
o The dollar value of the unit on the preceding valuation date
times
o The net investment factor
Net Investment Factor - The net investment factor measures the investment
performance of a sub-account during the valuation period that has just ended.
The net investment factor is the result of (a) plus (b), divided by (c), minus
(d) and minus (e) where:
(a) is the net asset value per share of a portfolio held in the
sub-account determined at the end of the current valuation period
(b) is the per share amount of any dividend or capital gain
distributions made by the portfolio on shares held in the sub-account
if the "ex-dividend" date occurs during the current valuation period
(c) is the net asset value per share of a portfolio share held in the
sub-account determined as of the end of the immediately preceding
valuation period
(d) is a charge for mortality and expense risks and
(e) is a charge for administration during a period not exceeding the
first twenty Policy years
See "CHARGES AGAINST OR REFLECTED IN THE ASSETS OF THE SEPARATE ACCOUNT."
MATURITY BENEFITS - If the Insured is alive on the maturity date, we will pay
the surrender value as of the maturity date to the Policy owner. The surrender
value may be paid in a single sum or under a payment option as described below.
PAYMENT OPTIONS - The net death benefit payable may be paid in a single sum or
under one or more of the payment options then offered by Transamerica. Payment
options are paid from our General Account and are not based on the investment
experience of the Separate Account. See "APPENDIX C - PAYMENT OPTIONS." These
payment options also are available at the maturity date or if the Policy is
surrendered. If no election is made, we will pay the net death benefit in a
single sum.
OPTIONAL INSURANCE BENEFITS - You may add optional insurance benefits to the
Policy by rider, as described in "APPENDIX B - OPTIONAL INSURANCE BENEFITS." The
cost of optional insurance benefits becomes part of the monthly insurance
protection charge, except that the guaranteed death benefit rider cost is a one
time transaction charge of $25 deducted on the first monthly processing date.
SURRENDER - You may surrender the Policy and receive its surrender value. The
surrender value is
o The Policy Value minus
o Any outstanding loan and surrender charges
We will compute the surrender value on the valuation date on which we receive
your written request for surrender. We will deduct a surrender charge if you
surrender the Policy within 10 full Policy years of the date of issue or of an
increase in face amount. See "CHARGES AND DEDUCTIONS - SURRENDER CHARGES."
The surrender value may be paid in a lump sum or under a payment option then
offered by us. See "APPENDIX C PAYMENT OPTIONS." We will normally pay the
surrender value within seven days following our receipt of your written request.
We may delay benefit payments under the circumstances described in "OTHER POLICY
PROVISIONS DELAY OF PAYMENTS."
For important tax consequences of a surrender, see "FEDERAL TAX CONSIDERATIONS."
PARTIAL WITHDRAWAL - After the first Policy year (and before the paid-up
insurance option is exercised), you may withdraw part of the surrender value of
your Policy on written request. Your written request must state the dollar
amount you wish to receive. You may allocate the amount withdrawn among the
sub-accounts and the Fixed Account. If you do not provide allocation
instructions, we will make a pro rata allocation. Each partial withdrawal must
be at least $500. Under the Level Option, the face amount is reduced by the
partial withdrawal. We will not allow a partial withdrawal if it would reduce
the Level Option face amount below $50,000.
On a partial withdrawal from a sub-account, we will cancel the number of units
equal in value to the amount withdrawn. The amount withdrawn will be the amount
you requested plus the partial withdrawal costs. See "CHARGES AND DEDUCTIONS -
PARTIAL WITHDRAWAL COSTS." We will normally pay the partial withdrawal within
seven days following our receipt of written request. We may delay payment as
described in "OTHER POLICY PROVISIONS - DELAY OF PAYMENTS."
For important tax consequences of partial withdrawals, see "FEDERAL TAX
CONSIDERATIONS."
PAID-UP INSURANCE OPTION - On written request, you may elect life insurance
coverage, usually for a reduced amount, for the life of the Insured with no
further premiums due. The paid-up insurance will be the amount that the
surrender value can provide as a net single premium applied at the Insured's age
and underwriting class on the date this option is elected. If the surrender
value exceeds the net single premium, we will pay the excess to you. The net
single premium is based on the Commissioners Ultimate 1980 Standard Ordinary
Mortality Tables, Smoker or Non-Smoker, male or female or unisex with increases
in the tables for non-standard risks. Interest will not be less than 4.5%
annually.
IF THE PAID-UP INSURANCE OPTION IS ELECTED, THE FOLLOWING POLICY OWNER RIGHTS
AND BENEFITS WILL BE AFFECTED:
o As described above, the paid-up insurance benefit will be
computed differently from the net death benefit and the death
benefit options will not apply
o We will not allow transfers of Policy Value from the Fixed
Account back to the Separate Account
o You may not make further payments
o You may not increase or decrease the face amount or make
partial withdrawals
o Riders will continue only with our consent
You may, after electing paid-up insurance, surrender the Policy for its net cash
value. The guaranteed cash value is the net single premium for the paid-up
insurance at the Insured's age. The net cash value is the cash value less any
outstanding loan. (The cash value will equal the guaranteed cash value unless we
credit interest at a rate higher than 4.5% annually.) We will transfer the
portion of the Policy Value in the sub-accounts of the Separate Account to the
Fixed Account on the date we receive your written request to elect the paid-up
insurance option.
On election of reduced paid-up insurance, the Policy could become a modified
endowment contract. If a Policy becomes a modified endowment contract, Policy
loans, partial withdrawals or surrender will receive unfavorable federal tax
treatment. See "FEDERAL TAX CONSIDERATIONS - MODIFIED ENDOWMENT CONTRACTS."
CHARGES AND DEDUCTIONS
The following charges will apply to your Policy under the circumstances
described. Some of these charges apply throughout the Policy's duration. Other
charges apply only if you choose options under the Policy.
The charges are for the services and benefits provided, costs and expenses
incurred and risks assumed by us under or in connection with the Policies.
Services and benefits provided by us include:
the death benefits, cash and loan benefits provided
by the Policy
investment options, including net payment allocations
administration of various elective options under th
Policy, and
the distribution of various reports to Policy owners
Costs and expenses incurred by us include:
those associated with underwriting applications and changes
in face amount and riders
various overhead and other expenses associated with
providing the services and benefits
related to the Policy
sales and marketing expenses, and
other costs of doing business, such as federal, state
and local premium and other taxes
and fees
Risks assumed by us include the risks that Insureds may live for a shorter
period of time than estimated resulting in the payment of greater death benefits
than expected, and that the costs of providing the services and benefits under
the Policies will exceed the charges deducted.
PAYMENT EXPENSE CHARGE - Currently, we deduct 4.0% of each payment as a payment
expense charge. This charge is for state and local premium taxes, federal income
tax treatment of Deferred Acquisition Costs, and certain Policy sales and
administrative expenses.
Premium tax rates vary from state to state and are a percentage of payments made
by Policy owners to us. Currently, rates in the fifty states and the District of
Columbia range between 0.75% and 3.5%. Since we are subject to retaliatory tax,
the effective premium tax for us typically ranges between 2.35% and 3.5%.
Typically, we pay premium taxes (including retaliatory tax) in all
jurisdictions, but the payment expense charge would be deducted, even if we were
not subject to premium or retaliatory tax in a state.
We may increase or decrease the payment expense charge to reflect changes in our
expenses for taxes.
MONTHLY INSURANCE PROTECTION CHARGE - Before the final payment date, on each
monthly processing date we will deduct a monthly insurance protection charge
from your Policy Value. This charge is the cost for insurance protection under
the Policy, including optional insurance benefits provided by rider.
We deduct the monthly insurance protection charge on each monthly processing
date starting with the date of issue. You may allocate monthly insurance
protection charges to one sub-account. If you make no allocation, we will make a
pro rata allocation. If the sub-account you chose does not have sufficient funds
to cover the monthly insurance protection charges, we will make a pro rata
allocation. We will deduct no monthly insurance protection charges after the
final payment date.
Computing Monthly Insurance Protection Charge - We designed the monthly
insurance protection charge to compensate us for the anticipated cost of paying
net death benefits under the Policies, as well as to compensate us for a part of
our acquisition costs, taxes, and administrative expenses. The charge is
computed monthly for the initial face amount and for each increase in face
amount. Monthly insurance protection charges can vary.
For the initial face amount under the Level Option, the monthly insurance
protection charge is the product of
o The insurance protection rate times
o The difference between (a) the initial face amount and (b) the
Policy Value (minus any rider charges at the beginning of the
Policy month), divided by 1,000
Under the Level Option, the monthly insurance protection charge decreases as the
Policy Value increases if the guideline minimum sum insured is not in effect.
For the initial face amount under the Adjustable Option, the monthly insurance
protection charge is the product of
o The insurance protection rate times
o The initial face amount, divided by 1,000
For each increase in face amount under the Level Option, the monthly insurance
protection charge for the increase is the product of
o The insurance protection rate for the increase times
o The difference between (a) the increase in face amount and (b)
any Policy value (minus any rider charges) greater than the
initial face amount at the beginning of the Policy month and
not allocated to a prior increase, divided by 1,000
For each increase in face amount under the Adjustable Option, the monthly
insurance protection charge is the product of
o The insurance protection rate for the increase times
o The increase in face amount, divided by 1,000
If the guideline minimum sum insured is in effect under either Option, we will
compute a monthly insurance protection charge for that part of the death benefit
subject to the guideline minimum sum insured that exceeds the current death
benefit not subject to the guideline minimum sum insured. This charge is the
product of
o The insurance protection rate for the initial face amount times
o The difference between
o The guideline minimum sum insured and (a) the greater of the
face amount or the Policy Value, if you selected the Level
Option, or (b) the face amount plus the Policy Value, if you
selected the Adjustable Option, divided by 1,000
We will adjust the monthly insurance protection charge for any decreases in
face amount. See "THE POLICY - CHANGE
IN FACE AMOUNT - DECREASES."
Insurance Protection Rates - We base insurance protection rates on the
o Male, female or unisex rate table
o Age and underwriting class of the Insured
o Effective date of an increase or date of any rider
For unisex Policies, sex-distinct rates do not apply. For the initial face
amount, the insurance protection rates are based on your age at the beginning of
each Policy year. For an increase in face amount or for a rider, the insurance
protection rates are based on your age on the effective date of the increase or
rider and, thereafter, on each anniversary of the effective date of the increase
or rider. We base the current insurance protection rates on our expectations as
to future mortality experience. Rates will not, however, be greater than the
guaranteed insurance protection rates set forth in the Policy. These guaranteed
rates are based on the Commissioners 1980 Ultimate Standard Ordinary Mortality
Tables, Smoker or Non-Smoker, and the Insured's sex (except for policies for
which unisex rates apply) and age (with increases in the Tables for non-standard
risks). The Tables used for this purpose set forth different mortality estimates
for males and females (unisex rates use male rates) and for smokers and
non-smokers. Any change in the insurance protection rates will apply to all
Insureds of the same age, sex and underwriting class, whose Policies have been
in force for the same period.
The underwriting class of an Insured will affect the insurance protection rates.
We currently place Insureds into preferred underwriting classes, preferred
non-standard underwriting classes, standard underwriting classes and
non-standard underwriting classes. The underwriting classes are also divided
into two categories: smokers and non-smokers. We will place an Insured under age
18 at the date of issue in a standard or non-standard underwriting class. We
will then classify the Insured as a smoker at age 18 unless we receive
satisfactory evidence that the Insured is a non-smoker. Prior to the Insured's
age 18, we will give you notice of how the Insured may be classified as a
non-smoker.
We compute the insurance protection rate separately for the initial face amount
and for any increase in face amount. However, if the Insured's underwriting
class improves on an increase, the lower insurance protection rate will apply to
the total face amount.
CHARGES AGAINST OR REFLECTED IN THE ASSETS OF THE SEPARATE ACCOUNT - We assess
each sub-account with a charge for mortality and expense risks we assume and,
during the first 20 Policy years, a charge for administration expenses related
to the Separate Account. Portfolio expenses are also reflected in the value of
the assets of the Separate Account.
Administration Charge - For a period not to exceed the first 20 Policy years, we
may impose a daily charge at an annual rate of 0.15% of the daily net asset
value in each sub-account. The charge is to help reimburse us for administrative
expenses incurred in the administration of the Separate Account and the
sub-accounts. The administrative functions and expenses we assume for the
Separate Account and the sub-accounts include
o Clerical, accounting, actuarial and legal services
o Rent, postage, telephone, office equipment and supplies
o The expenses of preparing and printing registration
statements and prospectuses (not allocable to
sales expense)
o Regulatory filing fees and other fees
Currently, the administration charge is waived after the tenth Policy year
(subject to state law), but we reserve the right to impose the charge after the
tenth Policy year.
Mortality and Expense Risk Charge - We impose a daily charge at a current annual
rate of 0.65% of the average daily net asset value of each sub-account. This
charge compensates us for assuming mortality and expense risks for variable
interests in the Policies. We may increase this charge, subject to state and
federal law, to an annual rate no greater than 0.80%.
The mortality risk we assume is that Insureds may live for a shorter time than
anticipated. If this happens, we will pay more net death benefits than
anticipated. The expense risk we assume is that the expenses incurred in issuing
and administering the Policies will exceed those compensated by the
administration charges in the Policies.
Portfolio Expenses - The value of the units of the sub-accounts will reflect the
management fee and other expenses of the portfolios whose shares the
sub-accounts purchase. The management fees and other expenses of the portfolios
are listed above under "SUMMARY - WHAT ARE THE EXPENSES AND FEES OF THE
PORTFOLIOS." The prospectuses and Statements of Additional Information of the
portfolios contain more information concerning the fees and expenses.
No charges are currently made against the sub-accounts for federal or state
income taxes. Should income taxes be
imposed, we may make deductions from the sub-accounts to pay the taxes. See
"FEDERAL TAX CONSIDERATIONS."
SURRENDER CHARGES - The Policy's surrender charges are designed to reimburse us
for part of the costs of product research and development, underwriting, Policy
administration, surrendering the Policy and part of sales expenses, including
commissions to our agents, advertising, and the printing of prospectuses and
sales literature.
Surrender charges are computed on the date of issue for the initial face amount.
Surrender charges apply for ten years from the date of issue. We impose
surrender charges only if, during the time the charges are effective, you
request a full surrender of your Policy or a decrease in face amount.
New surrender charges are computed for any increase in face amount. Surrender
charges for a face increase apply for ten years from the date the increase is
effective. The new surrender charges computed for an increase in face amount
apply only to the face increase.
We compute each surrender charge based on a rate per $1,000 of the related face
amount. The rate which applies to your Policy is based on whether the Insured is
male or female (male rates are used if the Policy is issued using unisex rates);
the Insured's age; and the number of years during which that surrender charge
has been effective. The surrender charge rate for the initial face amount
decreases each Policy year on the Policy anniversary. The surrender charge rate
for each increase in face amount decreases each year on the twelve month
anniversary of the effective date of the increase in face amount.
We determine the Insured's age as of the date of issue for the initial face
amount for the Policy. If there is an increase in the face amount, we determine
the Insured's age on the effective date of the increase.
The surrender charge amount which applies in a particular Policy year on your
Policy is shown on the specification pages of your Policy. New specification
pages showing the new surrender charge amounts will be provided to you if there
is an increase or a decrease in face amount on your policy.
If more than one surrender charge is in effect because of one or more increases
in face amount, we will apply the surrender charges in inverse order. We will
apply surrender and partial withdrawal charges (described below) in this order:
o First, those related to the most recent increase
o Second, those related to the next most recent increases, and
so on
o Third, those related to the initial face amount
A surrender charge may be deducted on a decrease in the face amount. The
surrender charge will be the surrender charge for the face amounts which are
decreased or eliminated in the order shown above.
Where a decrease causes a partial reduction in an increase or in the initial
face amount, we will deduct a proportionate share of the surrender charge for
that increase or for the initial face amount. The surrender charge deducted is a
fraction of the charge that would apply to a full surrender. The fraction is the
product of
o The decrease divided by the current face amount times
o the surrender charge
See "APPENDIX E - MAXIMUM SURRENDER CHARGES" for the maximum surrender charge
rates and an example of how we compute the amount of surrender charges.
PARTIAL WITHDRAWAL COSTS - For each partial withdrawal, we deduct a transaction
fee of 2.0% of the amount withdrawn, not to exceed $25.
A partial withdrawal charge may also be deducted from Policy Value. After the
first Policy year (and before you exercise the paid-up insurance option), during
each Policy year you may withdraw, without a partial withdrawal charge, up to
o 10% of the Policy Value on the date we receive the written
request at the Variable Life Service
Center, minus
o The total of any prior free withdrawals in the same Policy
year ("Free 10% Withdrawal")
The right to make the Free 10% Withdrawal is not cumulative from Policy year to
Policy year. For example, if only 8% of Policy Value were withdrawn in the
second Policy year, the amount you could withdraw in future Policy years would
not be increased by the amount you did not withdraw in the second Policy year.
We impose the partial withdrawal charge on any withdrawal greater than the Free
10% Withdrawal (the "excess withdrawal" amount). The maximum charge is 5.0% of
the excess withdrawal amount up to the surrender charge. If no surrender charge
applies on withdrawal, no partial withdrawal charge will apply. We will reduce
the Policy's outstanding surrender charges by the partial withdrawal charge
deducted. The partial withdrawal charge deducted will decrease existing
surrender charges in inverse order (i.e., first the most recent increase's
surrender charges, then the next most recent increase's surrender charges in
succession, and last the initial face amount's surrender charges).
TRANSFER CHARGES - The first 12 transfers in a Policy year are free. After that,
we will deduct a $10 transfer charge from amounts transferred in that Policy
year. We reserve the right to increase the charge, but it will never exceed $25.
If you apply for automatic transfers, the first automatic transfer for the
elected option counts as one transfer towards the 12 free transfers allowed in
each Policy year. Each future automatic transfer for the elected option is
without charge and does not reduce the remaining number of transfers that may be
made without charge.
Each of the following transfers of Policy Value from the sub-accounts to the
Fixed Account is free and does not count as one of the 12 free transfers in a
Policy year:
o A conversion within the first 24 months from date of issue
or increase
o A transfer to the Fixed Account to secure a loan
o A reallocation of the value in the Money Market sub-account as
described above under "APPLICATION FOR A POLICY" regarding
"Right to Examine Policy"
CHARGE FOR CHANGE IN FACE AMOUNT - For each increase or decrease in face amount,
we will deduct a transaction charge of $40 from Policy Value to reimburse us for
the administrative costs of the change. Unless you specify the sub-account from
which the charge is to be deducted, we will allocate the charge pro rata.
OTHER ADMINISTRATIVE CHARGES - We reserve the right to charge for other
administrative costs we incur. While there are no current charges for these
costs, we may impose a charge (guaranteed not to exceed $25 per transaction) for
o Changing net payment allocation instructions
o Changing the allocation of monthly insurance
protection charges among the various
sub-accounts and the Fixed Account
o Providing more than one projection of values in a
Policy year, in addition to the annual
statement
POLICY LOANS
You may borrow money secured by your Policy Value. The total amount of loans you
may have outstanding at any time is the loan value. In the first Policy year,
the loan value is 75% of
o The Policy Value minus
o Any surrender charges, unpaid monthly insurance protection
charges and outstanding loan interest
through the end of the Policy year
After the first Policy Year, the loan value is 90% of
o The Policy Value minus
o Any surrender charges
The loan value and the Policy Value in the first Policy year or any subsequent
Policy year are the values on the valuation date we receive your request for a
loan at our Variable Life Service Center.
There is no minimum loan. We will usually pay the loan within seven days after
we receive the written request. We may delay the payment of loans as stated in
"OTHER POLICY PROVISIONS - DELAY OF PAYMENTS".
We will withdraw the amount of the loan from the sub-accounts and the Fixed
Account according to your instructions. If you do not provide us with
instructions, we will make a pro rata withdrawal of the loan amount. We will
transfer the portion of the Policy Value in each sub-account equal to the Policy
loan to the Fixed Account to secure the outstanding loan. We will not count this
transfer as a transfer subject to the transfer charge.
The portion of the Policy Value securing the outstanding loan will earn monthly
interest in the Fixed Account at an annual rate of at least 6.0% (7.5% for
preferred loans). NO OTHER INTEREST WILL BE CREDITED.
PREFERRED LOAN OPTION - A preferred loan option is available after the tenth
Policy year and, after that date, will apply to any outstanding loans and new
loan requests unless you revoke the preferred loan option in writing. The
guaranteed annual interest rate credited to the portion of the Policy Value
securing a preferred loan will be not less than 7.5%.
There is some uncertainty as to the tax treatment of preferred loans.
Consult a qualified tax adviser. See
"FEDERAL TAX CONSIDERATIONS".
LOAN INTEREST CHARGED - Interest accrues daily at the annual rate of 8.0%.
Interest is due and payable in arrears at the end of each Policy year or for as
short a period as the loan may exist. Interest not paid when due will be added
to the loan amount and bears interest at the same rate. If this makes the loan
principal higher than the portion of the Policy Value in the Fixed Account, we
will offset this shortfall by transferring amounts from the sub-accounts. The
transferred amount will be allocated proportionately among the sub-accounts
which have value in them.
REPAYMENT OF OUTSTANDING LOAN - You may pay any loans before Policy lapse and
before the maturity date. On the valuation date on which we receive your loan
repayment at our Variable Life Service Center, we will allocate that part of the
Policy Value in the Fixed Account that secured a repaid loan to the sub-accounts
and Fixed Account according to your instructions. If you do not make a repayment
allocation, we will allocate Policy Value according to your most recent payment
allocation instructions. However, loan repayments allocated to the Separate
Account cannot exceed that portion of the Policy Value previously transferred
from the Separate Account to secure the outstanding loan.
If the outstanding loan exceeds the Policy Value less the surrender charge, the
Policy will be in default. We will mail a notice of default to the last known
address of you and any assignee. If you do not make sufficient payment within 62
days after this notice is mailed, the Policy will terminate with no value. See
"POLICY TERMINATION AND REINSTATEMENT."
EFFECT OF POLICY LOANS - Policy loans will permanently affect the Policy Value
and surrender value, and may permanently affect the death benefit. The effect
could be favorable or unfavorable, depending on whether the investment
performance of the sub-accounts is less than or greater than the interest
credited to the portion of the Policy Value in the Fixed Account that secures
the loan.
We will deduct any outstanding loan from the proceeds payable when the Insured
dies or from a surrender.
If the outstanding loan on your Policy exceeds the Policy Value minus surrender
charges, the Policy will be in default. There is no charge imposed solely
because the Policy goes into default. If you do not pay the required premium
within the grace period, however, the Policy will terminate without value.
If you have an outstanding loan, decreases in Policy Value, including decreases
due to negative investment results in your sub-account allocations, could result
in default of your Policy. If you have an outstanding loan and do not pay loan
interest when due, unpaid interest will be added to your loan and will bear
interest at the same rate. If your investment gains are not sufficient, the
outstanding loan could be greater than your Policy Value minus surrender
charges, resulting in your Policy going into default.
In the event the Policy lapses or is otherwise terminated while a loan is
outstanding, the loan is foreclosed and this foreclosure will be treated as cash
received from the Policy for income tax purposes. Any cash received (the
outstanding loan plus any other Policy Value less surrender charges) in excess
of the Policy's tax basis should be taxable as ordinary income.
POLICY TERMINATION AND REINSTATEMENT
TERMINATION - The Policy will be in default if
o The surrender value is insufficient to cover the next
monthly insurance protection charge plus
loan interest accrued OR
o An outstanding loan exceeds the Policy Value less surrender
charges
If one of these situations occurs, the Policy will be in default. On the date of
default, we will send a notice to you and to any assignee of record. The notice
will state the premium due and the date by which it must be paid. You will then
have a grace period of 62 days, measured from the date of the notice of default,
to make a payment sufficient to prevent termination.
Failure to pay a sufficient premium within the grace period will result in
Policy termination. If the Insured dies during the grace period, we will deduct
from the net death benefit any monthly insurance protection charges due and
unpaid through the Policy month in which the Insured dies and any other overdue
charge.
During the first 48 Policy months following the date of issue or an increase in
the face amount based on a request from the Policy owner, a guarantee may apply
to prevent the Policy from terminating because of insufficient surrender value.
This guarantee applies if, during this period, we receive payments from you
that, when reduced by outstanding loans, partial withdrawals and partial
withdrawal charges, equal or exceed specified minimum monthly payments. The
specified minimum monthly payments are based on the number of months the Policy,
increase in face amount or Policy change that causes a change in the minimum
monthly payment has been in force. A Policy change that causes a change in the
minimum monthly payment is a change in the face amount, the addition or deletion
of a rider, or a change in the smoker or non-smoker underwriting class on the
Policy. Except for the first 48 months after the date of issue or the effective
date of an increase, payments equal to the minimum monthly payment do not
guarantee that the Policy will remain in force.
You may also elect the Guaranteed Death Benefit Rider. There is a one time $25
charge for this rider. The charge is assessed on the first monthly processing
date. Under the Guaranteed Death Benefit Rider, if you make payments of a
sufficient amount, net of partial withdrawals, partial withdrawal charges and
any outstanding loans, we guarantee that your Policy will not lapse. In order to
maintain this guarantee, on each Policy anniversary through the final payment
date, the total of your payments received, net of partial withdrawals, partial
withdrawal charges and any outstanding loans must at least equal the guaranteed
death benefit premium times the number of policy years since the policy was
issued, adjusted as applicable for policy changes. See "PAYMENTS."
REINSTATEMENT - A lapsed Policy may be reinstated within three years (or such
other time period required by state law) of the date of default and before the
final payment date (or, before the Maturity Date, if the default occurred
because the outstanding loan exceeded the Policy Value less surrender charges).
The reinstatement takes effect on the monthly processing date following the date
you submit to us
o A written application for reinstatement
o Evidence of insurability satisfactory to us
o A payment that, after the deduction of the payment expense
charge, is large enough to cover the
minimum amount payable
Policies which have been surrendered may not be reinstated.
Minimum Amount Payable - If reinstatement is requested when less than 48 monthly
insurance protection charges have been paid since the date of issue or increase
in the face amount, you must pay the lesser of:
o The minimum monthly payment for the three months beginning
on the date of reinstatement or
o The sum of
o The amount by which the surrender charge(s)
on the date of reinstatement exceeds the
Policy Value on the date of default plus
o Monthly insurance protection charges for the
three months beginning on the date of
reinstatement
If you request reinstatement more than 48 monthly processing dates from the date
of issue or increase in the face amount, you must pay the sum shown above
without regard to the three months of minimum monthly payments. Also a lesser
amount may be required if the Guaranteed Death Benefit Rider is in effect.
Surrender Charge - The surrender charge on the date of reinstatement is the
surrender charge that would have been in effect had the Policy remained in force
from the date of issue.
Policy Value on Reinstatement - The Policy Value on the date of reinstatement
is:
. The net payment made to reinstate the Policy and interest
earned from the date the payment was
received at our Variable Life Service Center plus
. The Policy Value less any outstanding loan on the date of
default (not to exceed the surrender
charge on the date of reinstatement) minus
. The monthly insurance protection charges due on the date of
reinstatement
You may repay or reinstate any outstanding loan on the date of default or
foreclosure.
OTHER POLICY PROVISIONS
POLICY OWNER - The Policy owner is the Insured unless another person has been
named as owner in the application. As Policy owner, you are entitled to exercise
all rights under your Policy while the Insured is alive, with the consent of any
irrevocable beneficiary. The consent of the Insured is required whenever the
face amount is increased.
BENEFICIARY -The beneficiary is the person or persons to whom the net death
benefit is payable on the Insured's death. The Policy owner names the
beneficiary. Unless otherwise stated in the Policy, the beneficiary has no
rights in the Policy before the Insured dies. While the Insured is alive, you
may change the beneficiary, unless you have declared the beneficiary to be
irrevocable. If no beneficiary is alive when the Insured dies, the Policy owner
(or the Policy owner's estate) will be the beneficiary. If more than one
beneficiary is alive when the Insured dies, we will pay each beneficiary in
equal shares, unless you have chosen otherwise. Where there is more than one
beneficiary, the interest of a beneficiary who dies before the Insured will pass
to surviving beneficiaries proportionally, unless you have requested otherwise.
ASSIGNMENT - You may assign a Policy as collateral or make an absolute
assignment. All Policy rights will be transferred as to the assignee's interest.
The consent of the assignee may be required to make changes in payment
allocations, make transfers or to exercise other rights under the Policy. We are
not bound by an assignment or release thereof, unless it is in writing and
recorded at our Variable Life Service Center. When recorded, the assignment will
take effect as of the date the written request was signed. Any rights the
assignment creates will be subject to any payments we made or actions we took
before the assignment is recorded. We are not responsible for determining the
validity of any assignment or release.
The following Policy provisions may vary by state.
LIMIT ON RIGHT TO CHALLENGE POLICY - Except for fraud (unless prohibited by
state law) or nonpayment of premium, we cannot challenge the validity of your
Policy if the Insured was alive after the Policy had been in force for two years
from the date of issue. This provision does not apply to any riders providing
benefits specifically for disability or death by accident. Also, we cannot
challenge the validity of any increase in the face amount if the Insured was
alive after the increase was in force for two years from the effective date of
the increase.
SUICIDE - The net death benefit will not be paid if the Insured commits suicide,
while sane or insane, within two years from the date of issue. Instead, we will
pay the beneficiary all payments made for the Policy, without interest, less any
outstanding loan and partial withdrawals. If the Insured commits suicide, while
sane or insane, within two years from any increase in face amount, we will not
recognize the increase. We will pay to the beneficiary the monthly insurance
protection charges paid for the increase, plus any other net death benefit
payable under the policy.
MISSTATEMENT OF AGE OR SEX - If the Insured's age or sex is not correctly stated
in the Policy application, we will adjust the death benefit under the Policy to
reflect the correct age and sex. The adjusted death benefit will be the Policy
Value plus the insurance protection amount that the most recent monthly
insurance protection charge would have purchased for the correct age and sex. We
will not reduce the death benefit to less than the guideline minimum sum
insured. For a unisex Policy, there is no adjusted benefit solely for
misstatement of sex.
Certain rider benefits may also be adjusted for misstatement of age or sex.
DELAY OF PAYMENTS - Amounts payable from the Separate Account for surrender,
partial withdrawals, net death benefit, Policy loans and transfers may be
postponed whenever
. The New York Stock Exchange is closed other than customary
weekend and holiday closings
. The SEC restricts trading on the New York Stock Exchange
. The SEC determines an emergency exists, so that disposal
of securities is not reasonably
practicable or it is not reasonably practicable to compute
the value of the Separate Account's
net assets
We may delay paying any amounts derived from payments you made by check until
the check has cleared your bank.
We reserve the right to defer amounts payable from the Fixed Account. This delay
may not exceed six months.
FEDERAL TAX CONSIDERATIONS
The following description is a brief summary of some of the federal tax
considerations based on our understanding of the present federal income tax laws
as they are currently interpreted. Legislation may be proposed which, if passed,
could adversely and possibly retroactively affect the taxation of the Policies.
This summary is not exhaustive, does not purport to cover all situations, and is
not intended as tax advice. We do not address tax provisions that may apply if
the Policy owner is a corporation. You should consult a qualified tax adviser to
apply the law to your circumstances.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND THE SEPARATE ACCOUNT -
Transamerica is taxed as a life insurance company under Subchapter L of the
Code. We file a consolidated tax return with our parent and affiliates. We do
not currently charge for any income tax on the earnings or realized capital
gains in the Separate Account. A charge may apply in the future for any federal
income taxes we incur. The charge may become necessary, for example, if there is
a change in our tax status. Any charge would be designed to cover the federal
income taxes on the investment results of the Separate Account.
Under current laws, Transamerica may incur state and local taxes besides premium
taxes. These taxes are not currently significant. If there is a material change
in these taxes affecting the Separate Account, we may charge for taxes paid or
for tax reserves.
TAXATION OF THE POLICIES - We believe that the Policies described in this
prospectus are life insurance contracts under Section 7702 of the Code. Section
7702 affects the taxation of life insurance contracts and places limits on the
relationship of the Policy Value to the death benefit. As life insurance
contracts, the net death benefits of the Policies are generally excludable from
the gross income of the beneficiaries. In the absence of any guidance from the
Internal Revenue Service ("IRS") on the issue, we believe that providing the
same amount at risk after age 99 as is provided at age 99 should be sufficient
to maintain the excludibility of the death benefit after age 99. However, this
lack of specific IRS guidance makes the tax treatment of the death benefit after
age 99 uncertain. Also, any increase in Policy Value is not taxable until
received by you or your designee (but see "MODIFIED ENDOWMENT CONTRACTS").
Federal tax law requires that the investment of each sub-account funding the
Policies is adequately diversified according to Treasury regulations. We believe
that the portfolios currently meet the Treasury's diversification requirements.
We will monitor continued compliance with these requirements.
The Treasury Department has announced that previous regulations on
diversification do not provide guidance concerning the extent to which Policy
owners may direct their investment assets to divisions of a separate investment
account without being treated as the owner of such assets who is taxed directly
on the income from such assets. Regulations may provide such guidance in the
future. The Policies or our administrative rules may be modified as necessary to
prevent a Policy owner from being treated as the owner of any assets of the
Separate Account who is taxed directly on their income.
A surrender, partial withdrawal, distribution, payment at maturity date, change
in the death benefit option, change in the face amount, lapse with Policy loan
outstanding, or assignment of the Policy may have tax consequences. Within the
first fifteen Policy years, a distribution of cash required under Section 7702
of the Code because of a reduction of benefits under the Policy may be taxable
to the Policy owner as ordinary income respecting any investment earnings.
Federal, state and local income, estate, inheritance, and other tax consequences
of ownership or receipt of Policy proceeds depend on the circumstances of each
Insured, Policy owner or beneficiary.
POLICY LOANS - Transamerica believes that non-preferred loans received under the
Policy will be treated as an indebtedness of the Policy owner for federal income
tax purposes. Under current law, these loans will not constitute income for the
Policy owner while the Policy is in force (but see "Modified Endowment
Contracts"). There is a risk, however, that a preferred loan may be
characterized by the IRS as a withdrawal and taxed accordingly. At the present
time, the IRS has not issued any guidance on whether loans with the attributes
of a preferred loan should be treated differently from a non-preferred loan.
This lack of specific guidance makes the tax treatment of preferred loans
uncertain.
INTEREST DISALLOWANCE - Under Section 264(a)(4) of the Code, as amended in 1997,
interest on Policy loans is generally nondeductible for a Policy issued or
materially changed after June 8, 1997. In addition, under Section 264(f) certain
policies under which a trade or business (other than a sole proprietorship or a
business performing services as an employee) is directly or indirectly a
beneficiary can subject a taxpayer's interest expense to partial disallowance
(if the Policy is issued or materially changed after June 8, 1997), to the
extent such interest expense is allocable to the taxpayer's unborrowed cash
values thereunder. You should consult your tax advisor on how the rules
governing the non-deductibility of interest would apply in your individual
situation.
MODIFIED ENDOWMENT CONTRACTS - Special rules described below apply to the tax
treatment of loans and other distributions under any life insurance contract
that is classified as a modified endowment contract ("MEC") under Section 7702A
of the Code. A MEC is a life insurance contract that either fails the "7-pay
test" or is received in exchange for a MEC. In general, a Policy will fail this
7-pay test if the cumulative premiums and other amounts paid for the Policy at
any time during the first 7 contract years (or during any subsequent 7-year test
period resulting from a material change in the Policy) exceed the sum of the net
level premiums which would have been paid up to such time if the Policy had
provided for certain paid-up future benefits after the payment of 7 level annual
premiums. If to comply with this 7-pay test limit any premium amount is refunded
with applicable interest no later than 60 days after the end of the contract
year in which it is received, such refunded amount will be removed from the
cumulative amount of premiums that is compared against such 7-pay test limit. If
there is any reduction in the Policy's benefits (e.g., upon a withdrawal, death
benefit reduction or termination of a rider benefit) during a 7-pay test period,
the Policy will be retested retroactively from the start of such period by
taking into account such reduced benefit level from such starting date.
Generally, any increase in death benefits or other material change in the Policy
may be treated as producing a new contract for 7-pay test purposes, requiring
the start of a new 7-pay test period as of the date of such change.
DISTRIBUTIONS UNDER MODIFIED ENDOWMENT CONTRACTS - Under Section 72(c)(10) of
the Code, loans, withdrawals and other distributions made prior to the Insured's
death under a MEC are includible in gross income on an "income-out-first" basis,
i.e., the amount received is treated as allocable first to the "income in the
contract" and then to a tax-free recovery of the Policy's " investment in the
contract" (or "tax basis"). Generally, a Policy's tax basis is equal to its
total premiums less amounts recovered tax-free. To the extent that the Policy's
cash value (ignoring surrender charges except upon a full surrender) exceeds its
tax basis, such excess constitutes its "income in the contract." However, under
Code Section 72(e)(11)(A)(i), where more than one MEC has been issued to the
same policyholder by the same insurer (or an affiliate) during a calendar year,
all such MEC's are aggregated for purposes of determining the amount of a
distribution from any such MEC that is includible in gross income. In addition,
any amount includible in gross income from a MEC distribution is subject to a
10% penalty tax on premature distributions under Section 72(v) of the Code,
unless the taxpayer has attained age 59 1/2 or is disabled or the payment is
part of a series of substantially equal periodic payments for a qualifying
lifetime period. Furthermore, under Section 72(e)(4)(A) of the Code, any loan,
pledge, or assignment of (or any agreement to assign or pledge) any portion of a
MEC's cash value is treated as producing an amount received for purposes of
these MEC distribution rules. It is unclear to what extent this assignment rule
applies to a collateral assignment that does not secure a loan or pledge (e.g.,
in certain split-dollar arrangements). Under Code Section 7702A(d) the MEC
distribution rules apply not only to all distributions made during the contract
year in which the Policy fails the 7-pay test (and later years), but also to any
distributions made "in anticipation of" such failure, which is deemed to include
any distributions made during the two years prior to such failure. The Treasury
Department has not yet issued regulations or other guidance indicating what
other distributions can be treated as made "in anticipation of" such a failure
or how (e.g., as of what date) should "income in the contract" be determined for
purposes of any distribution that is deemed to be made in anticipation of a
failure.
VOTING RIGHTS
We are the legal owner of all portfolio shares held in the Separate Account and
each sub-account. As the owner, we have the right to vote at a portfolio's
shareholder meetings. However, to the extent required by federal securities laws
and regulations, we will vote portfolio shares that each sub-account holds
according to instructions received from Policy owners with Policy Value in the
sub-account. If any federal securities laws or regulations or their
interpretation change to permit us to vote shares in our own right, we reserve
the right to do so, whether or not the shares relate to the Policies.
We will provide each person having a voting interest in a portfolio with proxy
materials and voting instructions. We will vote shares held in each sub-account
for which no timely instructions are received in proportion to all instructions
received for the sub-account. We will also vote in the same proportion our
shares held in the Separate Account that do not relate to the Policies.
We will compute the number of votes that a policy owner has the right to
instruct on the record date established for the portfolio. This number is the
quotient of
o Each Policy owner's Policy Value in the sub-account divided by
o The net asset value of one share in the portfolio in which
the assets of the sub-account are
invested
We may disregard voting instructions Policy owners initiate in favor of any
change in the investment policies or in any investment adviser or principal
underwriter. Our disapproval of any change must be reasonable. A change in
investment policies or investment adviser must be based on a good faith
determination that the change would be contrary to state law or otherwise is
improper under the objectives and purposes of the portfolios. If we do disregard
voting instructions, we will include a summary of and reasons for that action in
the next report to Policy owners.
DIRECTORS AND PRINCIPAL OFFICERS OF
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
Robert Abeles* Director, Executive
Vice President and Chief
Financial Officer of TOLIC
since 1996. Executive Vice
President and Chief
Financial Officer of First
Interstate Bank of
California from 1990 to
1996.
Nicki Bair* Senior Vice President
of TOLIC since 1996. Vice
President of TOLIC from
1991 to 1996.
Roy Chong-Kit* Senior Vice
President and Actuary of
TOLIC since 1997. Vice
President and Actuary of
TOLIC from 1995 to 1997.
Actuary of TOLIC from 1988
to 1995.
Bruce Clark* Senior Vice
President and Chief Actuary
of TOLIC since 1996. Vice
President and Actuary of
TOLIC from 1994 to 1996.
Vice President and
Associate Actuary of TOLIC
from 1988 to 1994.
Thomas J. Cusack* Director, Chairman, President and Chief Executive
Officer of TOLIC since 1997. Director, President and Chief
Executive Officer of TOLIC since 1995. Senior Vice
President of Transamerica Corporation from 1993 to 1995.
Vice President of Corporate Development of General Electric
Company from 1989 to 1993.
James W. Dederer, CLU* Director, Executive Vice President,
General Counsel and Corporate Secretary of TOLIC since 1988.
Richard H. Finn**** Director and Executive Vice President of
Transamerica Corporation since 1993. Director, President
and Chief Executive Officer of Transamerica Finance Group,
Inc. since 1990.
David E. Gooding* Director and Executive Vice President of TOLIC since 1992.
Edgar H. Grubb**** Director, Executive Vice President and
Chief Financial Officer of Transamerica Corporation since
1993. Senior Vice President of Transamerica Corporation
1989-1993.
Frank C. Herringer**** Director, President and Chief Executive
Officer of Transamerica Corporation since 1991.
Daniel E. Jund, FLMI* Senior Vice President of TOLIC since 1988.
Richard N. Latzer**** Director, Senior Vice President and Chief
Investment Officer of Transamerica Corporation since 1989.
Director, President and Chief Executive Officer of
Transamerica Investment Services, Inc. since 1988.
Karen MacDonald* Director, Senior
Vice President and
Corporate Actuary of TOLIC
since 1995. Senior Vice
President and Corporate
Actuary from 1992 to 1995.
Gary U. Rolle'* Director, Executive Vice President
and Chief Investment Officer of Transamerica Investment
Services, Inc. since 1981.
William N. Scott, CLU, FLMI**
Senior Vice President of
TOLIC since 1993. Vice
President of TOLIC from
1988 to 1993.
T. Desmond Sugrue* Director
and Executive Vice
President of TOLIC since
1997. Senior Vice President
of TOLIC from 1996 to 1997.
Self-employed - Consulting
from 1994 to 1996. Employed
at Bank of America from
1988 to 1993.
Claude W. Thau, FSA** Senior Vice
President of TOLIC since
1996. Vice President of
TOLIC from 1985 to 1996.
Bruce A. Turkstra* Executive Vice President and Chief
Information Officer since 1997. Chief Information Officer
of Andersen Worldwide from 1991-1997.
Nooruddin S. Veerjee, FSA* Director, President of Group Pension Division of
TOLIC since 1993. President of Insurance Products
Division since 1997.
Senior Vice President of
TOLIC from 1992 to 1993.
Vice President of TOLIC
from 1990 to 1992.
Ron F. Wagley* Senior Vice
President and Chief Agency
Officer of TOLIC since
1993. Vice President of
TOLIC from 1989 to 1993.
Robert A. Watson**** Director and Executive Vice President of
Transamerica Corporation since 1995. President and Chief
Executive Officer Westinghouse Financial Services, 1992-1995.
William R. Wellnitz, FSA*** Senior
Vice President and Actuary
of TOLIC since 1996. Vice
President and Reinsurance
Actuary of TOLIC from 1988
to 1996.
*The business address is 1150 South Olive Street, Los Angeles,
California 90015. **The business address is 1100 Walnut Street, 23rd
Floor, Kansas City, Missouri 64106. ***The business address is 401
North Tryon Street, Charlotte, North Carolina 28202. ****The business
address is 600 Montgomery Street, San Francisco, California 94111.
The depositor is insured under a broad manuscript fidelity bond program with
coverage limits of $40,000,000. The lead underwriter is Continental Casualty
Company of Chicago, Illinois.
DISTRIBUTION
Transamerica Securities Sales Corporation acts as the principal underwriter and
general distributor of the Policies. Transamerica Securities Sales Corporation
is registered with the SEC as a broker-dealer and is a member of the National
Association of Securities Dealers. Broker-dealers sell the Policies through
their registered representatives who are appointed by us.
We pay to broker-dealers who sell the Policy commissions based on a commission
schedule. After the date of issue or an increase in face amount, commissions
will be 90% of the first-year payments up to a payment amount we established and
5% of any excess. After the first year, commissions will be 2% of payments plus
0.30% annually of unloaned Policy Value. To the extent permitted by NASD rules,
promotional incentives or payments may also be provided to broker-dealers based
on sales volumes, the assumption of wholesaling functions or other sales-related
criteria. Other payments may be made for other services that do not directly
involve the sale of the Policies. These services may include the recruitment and
training of personnel, production of promotional literature, and similar
services.
We intend to recoup commissions and other sales expenses through
o The payment expense charge
o The surrender charge
o Investment earnings on amounts allocated under the Policies to the
Fixed Account
Commissions paid on the Policies, including other incentives or payments, are
not charged to Policy owners or to the Separate Account.
REPORTS
We will maintain the records for the Separate Account. We will promptly send you
statements of transactions under your Policy, including
o Payments
o Changes in face amount
o Changes in death benefit option
o Transfers among sub-accounts and the Fixed Account
o Partial withdrawals
o Increases in loan amount or loan repayments
o Lapse or default for any reason
o Reinstatement
We will send an annual statement to you that will summarize all of the above
transactions and deductions of charges during the Policy year. It will also set
forth the status of the death benefit, Policy Value, surrender value, amounts in
the sub-accounts and Fixed Account, and any Policy loans. We will send you such
reports containing financial statements and other information for the portfolios
as the 1940 Act requires.
PERFORMANCE INFORMATION
We may advertise "Total Return" and "Average Annual Total Return" performance
information based on the periods that the portfolios have been in existence. The
results for any period prior to the Policies being offered will be calculated as
if the Policies had been offered during that period of time, with all charges
assumed to be those applicable to the sub-accounts and the portfolios.
Total return and average annual total return are based on the hypothetical
profile of a representative Policy owner and historical earnings and are not
intended to indicate future performance. "Total return" is the total income
generated net of certain expenses and charges. "Average annual total return" is
net of the same expenses and charges, but reflects the hypothetical return
compounded annually. This hypothetical return is equal to cumulative return had
performance been constant over the entire period. Average annual total returns
are not the same as yearly results and tend to smooth out variations in the
portfolio's return.
Performance information under the Policies is net of portfolio expenses,
mortality and expense risk charges, administration charges, monthly insurance
protection charges and surrender charges.
We take a representative Policy owner and assume that
o The Insured is a male Age 45, standard non-smoker underwriting class
o The Policy owner had allocations in each of the sub-accounts for the
fund durations shown, and
o There was a full surrender at the end of the applicable period
We may compare performance information for a sub-account in reports and
promotional literature to
o Standard & Poor's 500 Stock Index ("S & P 500")
o Dow Jones Industrial Average ("DJIA")
o Shearson Lehman Aggregate Bond Index
o Other unmanaged indices of unmanaged securities widely regarded
by investors as representative of the
securities markets
o Other groups of variable life separate accounts or other investment
products tracked by Lipper Analytical Services
o Other services, companies, publications, or persons such as
Morningstar, Inc., who rank the investment products on performance or
other criteria
o The Consumer Price Index
Unmanaged indices may assume the reinvestment of dividends but generally do not
reflect deductions for insurance and administration charges, separate account
charges and fund management costs and expenses. Performance information for any
sub-account reflects only the performance of a hypothetical investment in the
sub-account during a period. It is not representative of what may be achieved in
the future. However, performance information may be helpful in reviewing market
conditions during a period and in considering a portfolio's success in meeting
its investment objectives.
In advertising, sales literature, publications or other materials, we may give
information on various topics of interest to Policy owners and prospective
Policy owners. These topics may include
o The relationship between sectors of the economy and the economy as a
whole and its effect on various securities markets, investment
strategies and techniques (such as value investing, market timing,
dollar cost averaging, asset allocation and automatic account
rebalancing)
o The advantages and disadvantages of investing in tax-deferred and
taxable investments
o Customer profiles and hypothetical payment and investment scenarios
o Financial management and tax and retirement planning
o Investment alternatives to certificates of deposit and other financial
instruments, including comparisons between the Policies and the
characteristics of, and market for, the financial instruments
In each table below, "One-Year Total Return" refers to the total of the income
generated by a sub-account, based on certain charges and assumptions as
described in the respective tables, for the one-year period ended December 31,
1996. "Average Annual Total Return" is based on the same charges and
assumptions, but reflects the hypothetical annually compounded return that would
have produced the same cumulative return if the sub-account's performance had
been constant over the entire period. Because average annual total returns tend
to smooth out variations in annual performance return, they are not the same as
actual year-by-year results.
Table I: SUB-ACCOUNT PERFORMANCE
(Net of all Charges and Assuming Surrender of the Policy)
The following performance information is based on the periods that the
portfolios have been in existence. The data is net of expenses of the
portfolios, all sub-account charges, and all Policy charges (including surrender
charges) for a representative Policy. It is assumed that the Insured is Male,
Age 45, standard non-smoker underwriting class, that the face amount of the
Policy is $200,000, the death benefit option is the Level Option, that an annual
payment of $3,800 (approximately the guideline level premium) was made at the
beginning of each Policy year, that all payments were allocated to each
sub-account individually, and that there was a full surrender of the Policy at
the end of the applicable period. Returns are for the period ending December 31,
1996.
- ---------------------------------------------------------------------------------------------------------------------
Portfolio 5 Year 10 Year or Life of Years Since
Sub-Account Inception Average the Portfolio (if Inception (if
Investing in the Date (if less One Year Annual Total Less) Average Less than 10
Corresponding Portfolio than Total Return Return Annual Total Return Years)
10 Years)
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth 09/13/1993 -97.96% 1.32% 3.30
Morgan Stanley International Magnum 01/02/1997 -100% (1) 0.75
Dreyfus VIF Small Cap 08/31/1990 -100.00% 25.15% 40.92% 6.34
OCC Accumulation Trust Small Cap (2) 08/01/1988 -100.00% 1.50% 8.00% 8.42
MFS VIT Emerging Growth 07/24/1995 -100.00% -47.16% 1.44
Alliance VPF Premier Growth 06/26/1992 -100.00% 5.07% 4.52
Dreyfus VIF Capital Appreciation 04/28/1993 -100.00% -1.24% 3.68
MFS VIT Research 07/26/1995 -100.00% -48.34% 1.44
Transamerica VIF Growth n/a n/a n/a n/a n/a
Alger American Income & Growth 11/15/1988 -100.00% -1.05% 4.14% 8.13
Alliance VPF Growth & Income 01/15/1991 -100.00% 2.24% 2.84% 5.96
MFS VIT Growth with Income 10/09/1995 -100.00% -61.21% 1.23
Janus Aspen Balanced 09/13/1993 -100.00% -8.34% 3.30
OCC Accumulation Trust Managed (3) 08/01/1988 -100.00% 6.66% 13.71% 8.42
Morgan Stanley UF High Yield 01/02/1997 -100% (1) 0.75
Morgan Stanley UF Fixed Income 01/02/1997 -100% (1) 0.75
Transamerica VIF Money Market n/a n/a
- ---------------------------------------------------------------------------------------------------------------------
(1) Sub-account performance is for the period January 2, 1997 through
September 30, 1997.
(2) On September 16th, 1994, an investment company which had commenced
operations on August 1, 1988, called Quest for Value Accumulation Trust (the
"Old Trust") was effectively divided into two investment funds - The Old Trust
and the present OCC Accumulation Trust (the "Present Trust") at which time the
Present Trust commenced operations. The total net assets of the Small Cap
Portfolio immediately after the transaction were $139,812,573 in the Old Trust
and $8,129,274 in the Present Trust. For the period prior to September 16, 1994,
the performance figures for the Small Cap Portfolio of the Present Trust reflect
the performance of the Small Cap Portfolio of the Old Trust.
(3) On September 16th, 1994, an investment company which had commenced
operations on August 1, 1988, called Quest for Value Accumulation Trust (the
"Old Trust") was effectively divided into two investment funds - The Old Trust
and the present OCC Accumulation Trust (the "Present Trust") at which time the
Present Trust commenced operations. The total net assets of the Managed
Portfolio immediately after the transaction were $682,601,380 in the Old Trust
and $51,345,102 in the Present Trust. For the period prior to September 16,
1994, the performance figures for the Managed Portfolio of the Present Trust
reflect the performance of the Managed Portfolio of the Old Trust.
Performance information reflects only the performance of a hypothetical
investment during the particular time period on which the calculations are
based. One-year total return and average annual total return figures are based
on historical earnings and are not intended to indicate future performance.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the portfolio in which a
sub-account invests and the market conditions during the given time period, and
should not be considered as a representation of what may be achieved in the
future.
Table II: SUB-ACCOUNT PERFORMANCE
(Excluding Monthly Policy Charges and Surrender Charges)
The following performance information is based on the periods that the
portfolios have been in existence. The performance information is net of total
portfolio expenses, all sub-account charges and premium tax and expense charges.
The data does NOT reflect monthly charges under the Policies or surrender
charges. It is assumed that an annual payment of $3,800 (approximately the
guideline level premium for a Policy issued to a Male, Age 45, standard,
non-smoker underwriting class for a $200,000 face amount with a Level Death
Benefit Option) was made at the beginning of each Policy year and that all
payments were allocated to each sub-account individually. Returns are for the
period ending December 31, 1996.
- --------------------------------------------------------------------------------------------------------------------------
Portfolio 5 Year 10 Year or Life of Years Since
Sub-Account Inception Average the Portfolio (if Inception
Investing in the Date (if less One YearTotal Annual Total Less) Average Annual (if Less
Corresponding Portfolio than 10 years) Return Return Total Return than 10
10 Years) Total Return RetReturn Years)
- --------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth 09/13/1993 22.90% 19.72% 3.30
Morgan Stanley International Magnum 01/02/1997 14.74% (1) 0.75
Dreyfus VIF Small Cap 08/31/1990 11.19% 33.82% 46.37% 6.34
OCC Accumulation Trust Small Cap (2) 08/01/1988 13.06% 12.14% 12.88% 8.42
MFS VIT Emerging Growth 07/24/1995 11.45% 18.67% 1.44
Alliance VPF Premier Growth 06/26/1992 16.85% 16.55% 4.52
Dreyfus VIF Capital Appreciation 04/28/1993 19.58% 15.44% 3.68
MFS VIT Research 07/26/1995 16.51% 17.49% 1.44
Transamerica VIF Growth n/a n/a n/a n/a n/a
Alger American Income & Growth 11/15/1988 13.97% 9.89% 9.47% 8.13
Alliance VPF Growth & Income 01/15/1991 18.17% 12.80% 11.09% 5.96
MFS VIT Growth with Income 10/09/1995 18.53% 18.50% 1.23
Janus Aspen Balanced 09/13/1993 10.65% 11.31% 3.30
OCC Accumulation Trust Managed (4) 08/01/1988 16.92% 16.75% 18.26% 8.42
Morgan Stanley UF High Yield 01/02/1997 8.42% (1) 0.75
Morgan Stanley UF Fixed Income 01/02/1997 2.71% (1) 0.75
Transamerica VIF Money Market n/a n/a
- --------------------------------------------------------------------------------------------------------------------------
(1) Sub-account performance is for the period January 2, 1997 through
September 30, 1997.
(2) On September 16th, 1994, an investment company which had commenced
operations on August 1, 1988, called Quest for Value Accumulation Trust (the
"Old Trust") was effectively divided into two investment funds - The Old Trust
and the present OCC Accumulation Trust (the "Present Trust") at which time the
Present Trust commenced operations. The total net assets of the Small Cap
Portfolio immediately after the transaction were $139,812,573 in the Old Trust
and $8,129,274 in the Present Trust. For the period prior to September 16, 1994,
the performance figures for the Small Cap Portfolio of the Present Trust reflect
the performance of the Small Cap Portfolio of the Old Trust.
(3) On September 16th, 1994, an investment company which had commenced
operations on August 1, 1988, called Quest for Value Accumulation Trust (the
"Old Trust") was effectively divided into two investment funds - The Old Trust
and the present OCC Accumulation Trust (the "Present Trust") at which time the
Present Trust commenced operations. The total net assets of the Managed
Portfolio immediately after the transaction were $682,601,380 in the Old Trust
and $51,345,102 in the Present Trust. For the period prior to September 16,
1994, the performance figures for the Managed Portfolio of the Present Trust
reflect the performance of the Managed Portfolio of the Old Trust.
Performance information reflects only the performance of a hypothetical
investment during the particular time period on which the calculations are
based. One-year total return and average annual total return figures are based
on historical earnings and are not intended to indicate future performance.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the portfolio in which a
sub-account invests and the market conditions during the given time period, and
should not be considered as a representation of what may be achieved in the
future.
LEGAL PROCEEDINGS
There are no pending legal proceedings involving the Separate Account or its
assets. Transamerica is not involved in any litigation that is materially
important to its total assets.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
We reserve the right, subject to law, to make additions to, deletions from, or
substitutions for the shares that are held in the sub-accounts. We may redeem
the shares of a portfolio and substitute shares of another registered open-end
management company if
o The shares of the portfolio are no longer available for investment or
o In our judgment further investment in the portfolio would be improper
based on the purposes of the Separate Account or the affected
sub-account
Where the 1940 Act or other law requires, we will not substitute any shares
respecting a Policy interest in a sub-account without notice to Policy owners
and prior approval of the SEC and state insurance authorities. The Separate
Account may, as the law allows, purchase other securities for other policies or
allow a conversion between policies on a Policy owner's request.
We reserve the right to establish additional sub-accounts funded by a new
portfolio or by another investment company. Subject to law, we may, in our sole
discretion, establish new sub-accounts or eliminate one or more sub-accounts.
Shares of the portfolios are issued to other separate accounts of Transamerica
and its affiliates that fund variable annuity contracts ("mixed funding").
Shares of the portfolios are also issued to other unaffiliated insurance
companies ("shared funding"). It is conceivable that in the future such mixed
funding or shared funding may be disadvantageous for variable life Policy owners
or variable annuity Policy owners. Transamerica does not believe that mixed
funding is currently disadvantageous to either variable life insurance Policy
owners or variable annuity Policy owners. Transamerica will monitor events to
identify any material conflicts among Policy owners because of mixed funding. If
Transamerica concludes that separate portfolios should be established for
variable life and variable annuity separate accounts, we will bear the expenses.
We may change the Policy to reflect a substitution or other change and will
notify Policy owners of the change. Subject to any approvals the law may
require, the Separate Account or any sub-accounts may be
o Operated as a management company under the 1940 Act
o Deregistered under the 1940 Act if registration is no longer required
OR
o Combined with other sub-accounts or our other separate accounts
FURTHER INFORMATION
We have filed a 1933 Act registration statement for this offering with the SEC.
Under SEC rules and regulations, we have omitted from this prospectus parts of
the registration statement and amendments. Statements contained in this
prospectus are summaries of the Policy and other legal documents. The complete
documents and omitted information may be obtained from the SEC's principal
office in Washington, D.C., on payment of the SEC's prescribed fees.
MORE INFORMATION ABOUT THE FIXED ACCOUNT
This prospectus serves as a disclosure document only for the aspects of the
Policy relating to the Separate Account. For complete details on the Fixed
Account, read the Policy itself. The Fixed Account and other interests in our
General Account are not regulated under the 1933 Act or the 1940 Act because of
exemption and exclusionary provisions. 1933 Act provisions on the accuracy and
completeness of statements made in prospectuses may apply to information on the
fixed part of the Policy and the Fixed Account. The SEC has not reviewed the
disclosures in this section of the Prospectus.
GENERAL DESCRIPTION - You may allocate part or all of your net payments to
accumulate at a fixed rate of interest in the Fixed Account. The Fixed Account
is a part of our General Account. The General Account is made up of all of our
general assets other than those allocated to any separate account. Allocations
to the Fixed Account become part of our General Account assets and are used to
support insurance and annuity obligations.
FIXED ACCOUNT INTEREST - We guarantee amounts allocated to the Fixed Account as
to principal and a minimum rate of interest. The interest rates credited to the
portion of Policy Value in the Fixed Account are set by us, but will never be
less than 4% per year. We may establish higher interest rates and the initial
interest rates and the renewal interest rates may be different. We will
guarantee initial interest rates on amounts allocated to the Fixed Account,
either as payments or transfers, to the next Policy anniversary. At each Policy
anniversary, we will credit the renewal interest rate effective on that date to
money remaining in the Fixed Account. We will guarantee this rate for one year.
The initial and the renewal interest rates do not apply to the portion of the
Policy Value in the Fixed Account which secures any outstanding loan. See below
"TRANSFERS, SURRENDERS, PARTIAL WITHDRAWALS AND POLICY LOANS."
TRANSFERS, SURRENDERS, PARTIAL WITHDRAWALS AND POLICY LOANS - If a Policy is
surrendered or if a partial withdrawal is made, a surrender charge or partial
withdrawal charge may be imposed. On a decrease in face amount, the surrender
charge deducted is a fraction of the charge that would apply to a full
surrender. We deduct partial withdrawals from the portion of the Policy Value
allocated to the Fixed Account on a last-in/firstout basis.
The first 12 transfers in a Policy year are free. After that, we will deduct a
$10 transfer charge for each transfer in that Policy year. (We may increase the
charge to a maximum of $25.) The transfer privilege is subject to our consent
and to our then current rules.
Policy loans may also be made from the portion of the Policy Value in the Fixed
Account. We will credit that part of the Policy Value that is equal to any
outstanding loan with interest at an effective annual yield of at least 6.0%
(7.5% for preferred loans).
We may delay transfers, surrenders, partial withdrawals, net death benefits and
Policy loans from the Fixed Account for up to six months. However, if payment is
delayed for 30 days or more, we will pay interest at least equal to an effective
annual yield of 3.0% per year for the deferment. Amounts from the Fixed Account
used to make payments on policies that we or our affiliates issue will not be
delayed.
INDEPENDENT AUDITORS
The consolidated financial statements of Transamerica at December 31, 1996, have
been audited by Ernst & Young LLP, Independent Auditors, as set forth in their
report appearing elsewhere herein, and are included in reliance on such report
given upon the authority of such firm as experts in accounting and auditing. The
consolidated financial statements of Transamerica at September 30, 1997, have
not been audited. There are no audited financial statements for the Separate
Account since it had not commenced operations as of the date of this prospectus.
FINANCIAL STATEMENTS
Financial Statements for Transamerica are included in this prospectus, starting
on the next page. Transamerica Occidental Life Separate Account VUL-1 has not
yet commenced operations and, therefore, no financial statement is included for
the Separate Account. The financial statements of Transamerica should be
considered only as bearing on our ability to meet our obligations under the
Policy. They should not be considered as bearing on the investment performance
of the assets held in the Separate Account.
Audited Consolidated Financial Statements
Transamerica Occidental Life Insurance Company and Subsidiaries
December 31, 1996
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Audited Consolidated Financial Statements
December 31, 1996
Audited Consolidated Financial Statements
Report of Independent Auditors........................... 1
Consolidated Balance Sheet............................... 2
Consolidated Statement of Income......................... 3
Consolidated Statement of Shareholder's Equity........... 4
Consolidated Statement of Cash Flows..................... 5
Notes to Consolidated Financial Statements............... 6
-2-
2721:T-10
3/20/97
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Transamerica Occidental Life Insurance Company
We have audited the accompanying consolidated balance sheet of Transamerica
Occidental Life Insurance Company and Subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of income, shareholder's equity,
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Transamerica
Occidental Life Insurance Company and Subsidiaries at December 31, 1996 and
1995, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
As discussed in Note A, the Company changed its method of accounting for certain
debt securities effective January 1, 1994.
ERNST & YOUNG LLP
February 12, 1997
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31
1996 1995
--------------------- -------------
(In thousands, except
for share data)
ASSETS
Investments:
Fixed maturities available for sale $ 26,980,676 $ 25,997,403
Equity securities available for sale 471,734 307,881
Mortgage loans on real estate 716,669 565,086
Real estate 24,876 38,376
Policy loans 442,607 426,377
Other long-term investments 66,686 62,536
Short-term investments 135,726 211,500
--------------------- ---------------------
28,838,974 27,609,159
Cash 35,817 49,938
Accrued investment income 404,866 394,008
Accounts receivable 297,967 174,266
Reinsurance recoverable on paid and unpaid losses 829,653 1,957,160
Deferred policy acquisitions costs 2,138,203 1,974,211
Other assets 256,382 257,333
Separate account assets 3,527,950 2,533,424
--------------------- ---------------------
$ 36,329,812 $ 34,949,499
===================== =====================
LIABILITIES AND SHAREHOLDER'S EQUITY
Policy liabilities:
Policyholder contract deposits $ 22,718,955 $ 22,057,773
Reserves for future policy benefits 5,275,149 5,245,233
Policy claims and other 502,331 542,511
--------------------- ---------------------
28,496,435 27,845,517
Income tax liabilities 388,852 587,801
Accounts payable and other liabilities 560,663 534,866
Separate account liabilities 3,527,950 2,533,424
--------------------- ---------------------
32,973,900 31,501,608
Shareholder's equity:
Common stock ($12.50 par value):
Authorized--4,000,000 shares
Issued and outstanding--2,206,933 shares 27,587 27,587
Additional paid-in capital 335,619 333,578
Retained earnings 2,467,406 2,171,412
Foreign currency translation adjustments (24,472) (23,618)
Net unrealized investment gains 549,772 938,932
--------------------- ---------------------
3,355,912 3,447,891
--------------------- ---------------------
$ 36,329,812 $ 34,949,499
===================== =====================
See notes to consolidated financial statements.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31
1996 1995 1994
--------------- --------------- ----------
(In thousands)
Revenues:
Premiums and other considerations $ 1,798,034 $ 1,811,888 $ 1,430,019
Net investment income 2,077,232 1,972,759 1,771,575
Other operating revenue - - 13,273
Net realized investment gains 17,471 28,112 20,730
--------------- --------------- ---------------
TOTAL REVENUES 3,892,737 3,812,759 3,235,597
Benefits:
Benefits paid or provided 2,714,841 2,587,468 2,116,125
Increase in policy reserves and liabilities 57,968 236,205 204,159
--------------- --------------- ---------------
2,772,809 2,823,673 2,320,284
Expenses:
Amortization of deferred policy acquisition costs 235,180 182,123 176,033
Salaries and salary related expenses 158,699 145,681 133,591
Other expenses 224,084 200,339 190,500
--------------- --------------- ---------------
617,963 528,143 500,124
--------------- --------------- ---------------
TOTAL BENEFITS AND EXPENSES 3,390,772 3,351,816 2,820,408
--------------- --------------- ---------------
INCOME BEFORE INCOME TAXES 501,965 460,943 415,189
Provision for income taxes 164,685 149,647 143,491
--------------- --------------- ---------------
NET INCOME $ 337,280 $ 311,296 $ 271,698
=============== =============== ===============
See notes to consolidated financial statements.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
Net
Foreign Unrealized
Additional Currency Investment
Common Stock Paid-in Retained Translation Gains
Shares Amount Capital Earnings Adjustments (Losses)
(In thousands, except for share data)
Balance at January 1, 1994 2,206,933 $ 27,587 $ 319,279 $ 1,689,534 $ (21,054) $ 63,582
Cumulative effect of change in
accounting for investments 795,187
Net income 271,698
Dividends declared (40,000)
Change in foreign currency
translation adjustments (7,293)
Change in net unrealized
investment gains (losses) (1,180,229)
Balance at December 31, 1994 2,206,933 27,587 319,279 1,921,232 (28,347) (321,460)
Net income 311,296
Capital contributions from 14,299
parent
Dividends declared (61,116)
Change in foreign currency
translation adjustments 4,729
Change in net unrealized
investment gains (losses) 1,260,392
Balance at December 31, 1995 2,206,933 27,587 333,578 2,171,412 (23,618) 938,932
Net income 337,280
Capital contributions from
parent 2,041
Dividends declared (41,286)
Change in foreign currency
translation adjustments (854)
Change in net unrealized
investment gains (389,160)
Balance at December 31, 1996 2,206,933 $ 27,587 $ 335,619 $ 2,467,406 $ (24,472) $ 549,772
============ ========== =========== ============= =========== ============
See notes to consolidated financial statements.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31
1996 1995 1994
--------------- ---------------- ----------
(In thousands)
OPERATING ACTIVITIES
Net income $ 337,280 $ 311,296 $ 271,698
Adjustments to reconcile net income to net cash
provided by operating activities:
Changes in:
Reinsurance recoverable (73,328) (466,669) (290,926)
Accounts receivable (159,309) (58,866) (31,934)
Policy liabilities 949,108 1,273,723 804,296
Other assets, accounts payable and other
liabilities, and income taxes (32,662) (252,362) 133,499
Policy acquisition costs deferred (388,003) (381,806) (394,858)
Amortization of deferred policy acquisition costs 268,770 191,313 182,312
Net realized gains on investment transactions (51,061) (37,302) (27,009)
Other (15,758) (22,862) (124,643)
--------------- ---------------- ---------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 835,037 556,465 522,435
INVESTMENT ACTIVITIES
Purchases of securities (7,362,635) (5,667,539) (9,354,375)
Purchases of other investments (334,895) (330,503) (143,771)
Sales of securities 5,064,780 3,587,367 4,607,572
Sales of other investments 175,001 155,084 143,815
Maturities of securities 506,941 341,485 2,251,763
Net change in short-term investments 75,774 (67,337) 38,597
Other (21,358) (35,384) (25,354)
--------------- ---------------- ---------------
NET CASH USED BY
INVESTING ACTIVITIES (1,896,392) (2,016,827) (2,481,753)
FINANCING ACTIVITIES
Additions to policyholder contract deposits 6,260,653 5,151,428 4,434,726
Withdrawals from policyholder contract deposits (5,173,419) (3,624,044) (2,419,915)
Dividends paid to parent (40,000) (60,000) (40,000)
--------------- ---------------- ---------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,047,234 1,467,384 1,974,811
--------------- ---------------- ---------------
INCREASE (DECREASE) IN CASH (14,121) 7,022 15,493
Cash at beginning of year 49,938 42,916 27,423
--------------- ---------------- ---------------
CASH AT END OF YEAR $ 35,817 $ 49,938 $ 42,916
=============== ================ ===============
See notes to consolidated financial statements.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Business: Transamerica Occidental Life Insurance Company ("TOLIC") and its
subsidiaries (collectively, the "Company"), engage in providing life insurance,
pension and annuity products, reinsurance, structured settlements and
investments, which are distributed through a network of independent and
company-affiliated agents and independent brokers. The Company's customers are
primarily in the United States and Canada.
Basis of Presentation: The accompanying consolidated financial statements have
been prepared in accordance with generally accepted accounting principles which
differ from statutory accounting practices prescribed or permitted by regulatory
authorities.
Use of Estimates: Certain amounts reported in the accompanying consolidated
financial statements are based on the management's best estimates and judgment.
Actual results could differ from those estimates.
New Accounting Standards: In June of 1996, the Financial Accounting Standards
Board issued a new standard on accounting for transfers of financial assets,
servicing of financial assets and extinguishment of liabilities. The Company
must adopt the standard in 1997. The standard requires that a transfer of
financial assets be accounted for as a sale only if certain specified conditions
for surrender of control over the transferred assets exist. When adopted, the
standard is not expected to have a material effect on the consolidated financial
position or results of operations of the Company.
In 1996, the Company adopted the Financial Accounting Standards Board's new
standard on accounting for the impairment of long-lived assets and for
long-lived assets to be disposed of. The standard requires that an impaired
long-lived asset be measured based on the fair value of the asset to be held and
used or the fair value less cost to sell of the asset to be disposed of. There
was no material effect on the consolidated financial position or results of
operations of the Company.
In 1995, the Company adopted the Financial Accounting Standards Board's standard
on accounting for impairment of loans, which requires that an impaired loan be
measured based on the present value of expected cash flows discounted at the
loan's effective interest rate or the fair value of the collateral if the loan
is collateral dependent. There was no material effect on the consolidated
financial position or results of operations of the Company.
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
In 1994, the Company adopted the Financial Accounting Standards Board's standard
on accounting for certain investments in debt and equity securities which
requires the Company to report at fair value, with unrealized gains and losses
excluded from earnings and reported on an after tax basis as a separate
component of shareholder's equity, its investments in debt securities for which
the Company does not have the positive intent and ability to hold to maturity.
Additionally, such unrealized gains and losses are considered in evaluating
deferred policy acquisition costs, with any resultant adjustment also excluded
from earnings and reported on an after tax basis in shareholder's equity. As of
January 1, 1994, the impact of adopting the standard was to increase
shareholder's equity by $795.2 million (net of deferred policy acquisition cost
adjustment of $367.2 million and deferred taxes of $428.2 million) with no
effect on net income.
Principles of Consolidation: The consolidated financial statements of the
Company include the accounts of TOLIC and its subsidiaries, all of which operate
primarily in the life insurance industry. TOLIC is a wholly owned subsidiary of
Transamerica Insurance Corporation of California, which is a wholly owned
subsidiary of Transamerica Corporation. All significant intercompany balances
and transactions have been eliminated in consolidation.
Investments: Investments are reported on the following bases:
Fixed maturities--All debt securities, including redeemable preferred
stocks, are classified as available for sale and carried at fair value.
The Company does not carry any debt securities principally for the
purpose of trading. Prepayments are considered in establishing
amortization periods for premiums and discounts and amortized cost is
further adjusted for other-than-temporary fair value declines. Derivative
instruments are also reported as a component of fixed maturities and are
carried at fair value if designated as hedges of securities available for
sale or at amortized cost if designated as hedges of liabilities. See
Note K - Financial Instruments.
Equity securities available for sale (common and nonredeemable preferred
stocks)--at fair value. The Company does not carry any equity securities
principally for the purpose of trading.
Mortgage loans on real estate--at unpaid balances, adjusted for
amortization of premium or discount, less allowance for possible
impairment.
Real estate--Investment real estate that the Company intends to hold for
the production of income is carried at depreciated cost less allowance
for possible impairment. Properties held for sale, primarily foreclosed
assets, are carried at the lower of depreciated cost or fair value less
estimated selling costs.
Policy loans--at unpaid balances.
Other long-term investments--at cost, less allowance for possible
impairment.
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Short-term investments--at cost, which approximates fair value.
Realized gains and losses on disposal of investments are determined generally on
a specific identification basis. The Company reports realized gains and losses
on investment transactions in the accompanying consolidated statement of income,
net of the amortization of deferred policy acquisition costs when such
amortization results from the realization of gains or losses other than as
originally anticipated on the sale of investments associated with
interest-sensitive products. Changes in fair values of fixed maturities
available for sale and equity securities available for sale are included in net
unrealized investment gains or losses after adjustment of deferred policy
acquisition costs and reserves for future policy benefits, net of deferred
income taxes, as a separate component of shareholder's equity and, accordingly,
have no effect on net income.
Deferred Policy Acquisition Costs (DPAC): Certain costs of acquiring new and
renewal insurance contracts, principally commissions, medical examination and
inspection report fees, and certain variable underwriting, issue and field
office expenses, all of which vary with and are primarily related to the
production of such business, have been deferred. DPAC for non-traditional life
and investment-type products are amortized over the life of the related policies
in relation to estimated future gross profits. DPAC for traditional life
insurance products are amortized over the premium-paying period of the related
policies in proportion to premium revenue recognized, using principally the same
assumptions used for computing future policy benefit reserves. DPAC is adjusted
as if unrealized gains or losses on securities available for sale were realized.
Changes in such adjustments are included in net unrealized investment gains or
losses on an after tax basis as a separate component of shareholder's equity
and, accordingly, have no effect on net income.
Separate Accounts: The Company administers segregated asset accounts for certain
holders of universal life policies, variable annuity contracts, and other
pension deposit contracts. The assets held in these Separate Accounts are
invested primarily in fixed maturities, equity securities, other marketable
securities, and short-term investments. The Separate Account assets are stated
at fair value and are not subject to liabilities arising out of any other
business the Company may conduct. Investment risks associated with fair value
changes are borne by the contract holders. Accordingly, investment income and
realized gains and losses attributable to Separate Accounts are not reported in
the Company's results of operations.
Policyholder Contract Deposits: Non-traditional life insurance products include
universal life and other interest-sensitive life insurance policies.
Investment-type products include single and flexible premium deferred annuities,
single premium immediate annuities, guaranteed investment contracts, and other
group pension deposit contracts that do not have mortality or morbidity risk.
Policyholder contract deposits on non-traditional life insurance and
investment-type products represent premiums received plus accumulated interest,
less mortality charges on universal life products and other administration
charges as applicable under the contract. Interest credited to these policies
ranged from 2.6% to 9.8% in 1996 and from 2.8% to 10% in 1995 and 1994.
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Reserves for Future Policy Benefits: Traditional life insurance products
primarily include those contracts with fixed and guaranteed premiums and
benefits and consist principally of whole life and term insurance policies,
limited-payment life insurance policies and certain annuities with life
contingencies. The reserve for future policy benefits for traditional life
insurance products has been provided on a net-level premium method based upon
estimated investment yields, withdrawals, mortality, and other assumptions which
were appropriate at the time the policies were issued. Such estimates are based
upon past experience with a margin for adverse deviation. Interest assumptions
range from 2.5% in earlier years to 11.25%. Reserves for future policy benefits
are evaluated as if unrealized gains or losses on securities available for sale
were realized and adjusted for any resultant premium deficiencies. Changes in
such adjustments are included in net unrealized investment gains or losses on an
after tax basis as a separate component of shareholder's equity and,
accordingly, have no effect on net income.
Foreign Currency Translation: The effect of changes in exchange rates in
translating the foreign subsidiary's financial statements is accumulated as a
separate component of shareholder's equity, net of applicable income taxes.
Aggregate transaction adjustments included in income were not significant for
1996, 1995, or 1994.
Recognition of Revenue and Costs: Traditional life insurance contract premiums
are recognized as revenue over the premium-paying period, with reserves for
future policy benefits established from such premiums.
Revenues for universal life and investment products consist of policy charges
for the cost of insurance, policy administration charges, amortization of policy
initiation fees, and surrender charges assessed against policyholder account
balances during the period. Expenses related to these products consist of
interest credited to policyholder account balances and benefit claims incurred
in excess of policyholder account balances.
Claim reserves include provisions for reported claims and claims incurred but
not reported.
Reinsurance: Coinsurance premiums, commissions, expense reimbursements, and
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies and the terms of the
reinsurance contracts. Yearly renewable term reinsurance is accounted for the
same as direct business. Premiums ceded and recoverable losses have been
reported as a reduction of premium income and benefits, respectively. The ceded
amounts related to policy liabilities have been reported as an asset.
In 1996, the receivables and payables under certain modified coinsurance
arrangements are presented on a net basis to the extent that such receivables
and payables are with the same ceding company.
Income Taxes: TOLIC and its domestic subsidiaries are included in the
consolidated federal income tax returns
filed by Transamerica Corporation, which by the terms of a tax sharing
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
agreement generally requires TOLIC to accrue and settle income tax obligations
in amounts that would result from filing separate tax returns with federal
taxing authorities.
Deferred income taxes arise from temporary differences between the bases of
assets and liabilities for financial reporting purposes and income tax purposes,
based on enacted tax rates in effect for the years in which the temporary
differences are expected to reverse.
Fair Values of Financial Instruments: Fair values for debt securities are based
on quoted market prices, where available. For debt securities not actively
traded and private placements, fair values are estimated using values obtained
from independent pricing services. Fair values for derivative instruments,
including off-balance-sheet instruments, are estimated using values obtained
from independent pricing services.
Fair values for equity securities are based on quoted market prices.
Fair values for mortgage loans on real estate and policy loans are estimated
using discounted cash flow calculations, based on interest rates currently being
offered for similar loans to borrowers with similar credit ratings. Loans with
similar characteristics are aggregated for calculation purposes.
The carrying amounts of short-term investments, cash, and accrued investment
income approximate their fair value.
Fair values for liabilities under investment-type contracts are estimated using
discounted cash flow calculations, based on interest rates currently being
offered by similar contracts with maturates consistent with those remaining for
the contracts being valued. The liabilities under investment-type contracts are
included in policyholder contract deposits in the accompanying consolidated
balance sheet.
NOTE B--INVESTMENTS
The cost and fair value of fixed maturities available for sale and equity
securities are as follows (in thousands):
Gross Gross
Unrealized Unrealized Fair
Cost Gain Loss Value
December 31, 1996
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 288,605 $ 25,118 $ 1,628 $ 312,095
Obligations of states and political
subdivisions 258,596 8,508 538 266,566
Foreign governments 110,283 4,479 520 114,242
Corporate securities 15,171,041 779,904 108,999 15,841,946
Public utilities 4,462,063 203,604 35,769 4,629,898
Mortgage-backed securities 5,548,067 252,094 56,293 5,743,868
Redeemable preferred stocks 66,856 10,281 5,076 72,061
---------------- ---------------- ---------------- ----------------
Total fixed maturities $ 25,905,511 $ 1,283,988 $ 208,823 $ 26,980,676
================ ================ ================ ================
Equity securities $ 199,494 $ 281,418 $ 9,178 $ 471,734
================ ================ ================ ================
December 31, 1995
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 92,958 $ 6,840 $ 99,798
Obligations of states and political
subdivisions 229,028 7,832 $ 572 236,288
Foreign governments 109,632 9,068 - 118,700
Corporate securities 11,945,631 1,126,903 30,581 13,041,953
Public utilities 4,338,637 390,237 2,909 4,725,965
Mortgage-backed securities 7,277,976 487,190 15,092 7,750,074
Redeemable preferred stocks 21,372 3,757 504 24,625
---------------- ---------------- ---------------- ----------------
Total fixed maturities $ 24,015,234 $ 2,031,827 $ 49,658 $ 25,997,403
================ ================ ================ ================
Equity securities $ 150,968 $ 163,264 $ 6,351 $ 307,881
================ ================ ================ ================
The cost and fair value of fixed maturities available for sale at December 31,
1996, by contractual maturity, are shown below. Expected maturities will differ
from contractual
NOTE B--INVESTMENTS (Continued)
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties (in thousands):
Fair
Cost Value
Maturity
Due in 1997 $ 482,813 $ 511,576
Due in 1998-2001 3,688,424 3,761,584
Due in 2002-2006 4,725,231 4,839,666
Due after 2006 11,394,120 12,051,921
---------------- ----------------
20,290,588 21,164,747
Mortgage-backed securities 5,548,067 5,743,868
Redeemable preferred stock 66,856 72,061
---------------- ----------------
$ 25,905,511 $ 26,980,676
================ ================
The components of the carrying value of real estate are as follows (in
thousands):
1996 1995
--------------- ----------
Investment real estate $ 22,814 $ 27,095
Properties held for sale 2,062 11,281
---------------- ---------------
$ 24,876 $ 38,376
================ ===============
As of December 31, 1996, the Company held a total investment in one issuer,
other than the United States Government or a Unites States Government agency or
authority, which exceeded 10% of total shareholder's equity as follows (in
thousands) (See Note H.):
Name of Issuer Carrying Value
Transamerica Corporation $ 613,922
The carrying value of those assets that were on deposit with public officials in
compliance with regulatory requirements was $20.8 million at December 31, 1996.
NOTE B--INVESTMENTS (Continued)
Net investment income (expense) by major investment category is summarized as
follows (in thousands):
1996 1995 1994
Fixed maturities $ 2,005,764 $ 1,904,519 $ 1,705,618
Equity securities 5,458 3,418 5,587
Mortgage loans on real estate 58,165 40,702 40,030
Real estate (7,435) 3,209 5,024
Policy loans 27,012 25,641 24,614
Other long-term investments 978 2,353 7,173
Short-term investments 10,616 13,286 9,689
---------------- ---------------- ----------------
2,100,558 1,993,128 1,797,735
Investment expenses (23,326) (20,369) (26,160)
---------------- ---------------- ----------------
$ 2,077,232 $ 1,972,759 $ 1,771,575
================ ================ ================
Significant components of net realized investment gains are as follows (in
thousands):
1996 1995 1994
---------------- ---------------- ----------
Net gains on disposition of investments in:
Fixed maturities $ 40,967 $ 52,889 $ 7,181
Equity securities 15,750 5,637 32,374
Other 3,424 2,327 2,546
---------------- ---------------- ----------------
60,141 60,853 42,101
Provision for impairment (9,080) (23,551) (15,092)
Accelerated amortization of DPAC (33,590) (9,190) (6,279)
---------------- ---------------- ----------------
$ 17,471 $ 28,112 $ 20,730
================ ================ ================
The components of net gains on disposition of investment in fixed maturities are as follows (in thousands):
1996 1995 1994
Gross gains $ 74,817 $ 61,504 $ 46,702
Gross losses (33,850) (8,615) (39,521)
---------------- ---------------- ----------------
$ 40,967 $ 52,889 $ 7,181
================ ================ ================
Proceeds from disposition of investment in fixed maturities available for sale
were $5,476.1 million in 1996, $3,802.6 million in 1995 and $6,737.7 million in
1994.
NOTE B--INVESTMENTS (Continued)
The costs of certain investments have been reduced by the following allowances
for impairment in value (in thousands):
December 31
1996 1995
---------------- -----------
Fixed maturities $ 54,160 $ 71,429
Mortgage loans on real estate 22,654 21,516
Real estate 9,146 16,207
Other long-term investments 11,025 11,025
---------------- ----------------
$ 96,985 $ 120,177
================ ================
The components of net unrealized investment gains in the accompanying
consolidated balance sheet are as follows (in thousands):
December 31
1996 1995
---------------- ----------
Unrealized gains on investment in:
Fixed maturities $ 1,075,165 $ 1,982,169
Equity securities 272,240 156,913
---------------- ---------------
1,347,405 2,139,082
Fair value adjustments to:
DPAC (306,602) (355,571)
Reserves for future policy benefits (195,000) (339,000)
---------------- ---------------
(501,602) (694,571)
Related deferred taxes (296,031) (505,579)
---------------- ---------------
$ 549,772 $ 938,932
================ ===============
NOTE C--DEFERRED POLICY ACQUISITION COSTS (DPAC)
Significant components of changes in DPAC are as follows (in thousands):
1996 1995 1994
----------------- ---------------- -----------
Balance at beginning of year $ 1,974,211 $ 2,480,474 $ 1,929,332
Cumulative effect of change in
accounting for investments - - (367,154)
Amounts deferred:
Commissions 290,512 298,698 305,858
Other 97,491 83,108 89,000
Amortization attributed to:
Net gain on disposition of investments (33,590) (9,190) (6,279)
Operating income (235,180) (182,123) (176,033)
Fair value adjustment 48,969 (706,915) 718,498
Foreign currency translation adjustment (4,210) 10,159 (12,748)
---------------- ---------------- ----------------
Balance at end of year $ 2,138,203 $ 1,974,211 $ 2,480,474
================ ================ ================
NOTE D--POLICY LIABILITIES
Components of policyholder contract deposits are as follows (in thousands):
December 31
1996 1995
---------------- -----------
Liabilities for investment-type products $ 18,126,119 $ 17,948,652
Liabilities for non-traditional life insurance
products 4,592,836 4,109,121
--------------- ---------------
$ 22,718,955 $ 22,057,773
=============== ===============
Reserves for future policy benefits were evaluated as if the unrealized gains on
securities available for sale had been realized and adjusted for resultant
premium deficiencies by $195 million as of December 31, 1996 and $339 million as
of December 31, 1995.
NOTE E--INCOME TAXES
Components of income tax liabilities are as follows (in thousands):
December 31
1996 1995
---------------- -----------
Current tax liabilities (receivables) $ (13,752) $ 35,689
Deferred tax liabilities 402,604 552,112
---------------- ----------------
$ 388,852 $ 587,801
================ ================
Significant components of deferred tax liabilities (assets) are as follows (in
thousands):
December 31
1996 1995
---------------- -----------
Deferred policy acquisition costs $ 726,011 $ 696,728
Unrealized investment gains 296,031 505,579
Life insurance policy liabilities (578,823) (601,875)
Provision for impairment of investments (33,945) (42,062)
Other-net (6,670) (6,258)
---------------- ----------------
$ 402,604 $ 552,112
================ ================
The Company offsets all deferred tax assets and liabilities and presents them in
a single amount in the consolidated balance sheet.
Components of provision for income taxes are as follows (in thousands):
1996 1995 1994
----------------- ---------------- -----------
Current tax expense $ 99,692 $ 115,614 $ 204,087
Deferred tax expense (benefit):
Domestic 55,261 21,784 (69,490)
Foreign 9,732 12,249 8,894
---------------- --------------- ---------------
$ 164,685 $ 149,647 $ 143,491
================ =============== ===============
NOTE E--INCOME TAXES (Continued)
The differences between federal income taxes computed at the statutory rate and
the provision for income taxes as reported are as follows (in thousands):
1996 1995 1994
---------------- ---------------- ----------
Income before income taxes:
Income from U.S. operations $ 474,160 $ 425,946 $ 389,778
Income from foreign operations 27,805 34,997 25,411
--------------- --------------- ---------------
501,965 460,943 415,189
Tax rate 35% 35% 35%
--------------- --------------- ---------------
Federal income taxes at statutory rate 175,688 161,330 145,316
Income not subject to tax (2,262) (685) (910)
Low income housing credits (8,175) (3,137) (902)
Other, net (566) (7,861) (13)
--------------- --------------- ---------------
$ 164,685 $ 149,647 $ 143,491
=============== =============== ===============
Low income housing credits are recognized over the productive life of acquired
assets. In 1995, the Company recognized a $4.4 million tax benefit related to
the favorable settlement of a prior year tax matter.
Under the Life Insurance Company Income Tax Act of 1959, a portion of "gain from
operations" was not subject to current income taxation but was accumulated, for
tax purposes, in a memorandum account designated as "policyholders' surplus
account." The balance in this account was frozen at December 31, 1983 pursuant
to the Deficit Reduction Act of 1984. This amount becomes subject to tax when it
exceeds a certain maximum or when cash dividends are paid therefrom. The
policyholders' surplus account balance at December 31, 1996 was $138 million. At
December 31, 1996, $1,950 million was available for payment of dividends without
such tax consequences. No income taxes have been provided on the policyholders'
surplus account since the conditions that would cause such taxes are remote.
Income taxes of $149.1 million, $153.3 million and $195.4 million were paid
principally to the Company's parent in 1996, 1995 and 1994, respectively.
NOTE F--REINSURANCE
The Company is involved in both the cession and assumption of reinsurance with
other companies. Risks are reinsured with other companies to permit the recovery
of a portion of the direct losses, however, the Company remains liable to the
extent the reinsuring companies do not meet their obligations under these
reinsurance agreements.
NOTE F--REINSURANCE (Continued)
The components of the Company's life insurance in force and premiums and other
considerations are summarized as follows (in thousands):
Ceded to Assumed
Direct Other from Other Net
Amount Companies Companies Amount
1996
Life insurance in force,
at end of year $ 220,162,932 $ 195,158,214 $ 201,560,322 $ 226,565,040
==================== =================== =================== ===================
Premiums and other
considerations $ 1,702,975 $ 1,033,201 $ 1,128,260 $ 1,798,034
==================== =================== =================== ===================
Benefits paid or
provided $ 2,922,967 $ 1,112,561 $ 904,435 $ 2,714,841
==================== =================== =================== ===================
1995
Life insurance in force,
at end of year $ 206,722,573 $ 116,762,869 $ 174,193,592 $ 264,153,296
==================== =================== =================== ===================
Premiums and other
considerations $ 1,857,439 $ 1,079,303 $ 1,033,752 $ 1,811,888
==================== =================== =================== ===================
Benefits paid or
provided $ 2,803,213 $ 1,065,545 $ 849,800 $ 2,587,468
==================== =================== =================== ===================
1994
Life insurance in force,
at end of year $ 191,884,093 $ 115,037,553 $ 158,882,366 $ 235,728,906
==================== =================== =================== ===================
Premiums and other
considerations $ 1,085,555 $ 689,615 $ 1,034,079 $ 1,430,019
==================== =================== =================== ===================
Benefits paid or
provided $ 2,338,370 $ 867,341 $ 645,096 $ 2,116,125
==================== =================== =================== ===================
NOTE G--PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS
Substantially all employees of the Company are covered by noncontributory
defined pension benefit plans sponsored by the Company and the Retirement Plan
for Salaried Employees of Transamerica Corporation and Affiliates. Pension
benefits are based on the employee's compensation during the highest paid 60
consecutive months during the 120 months before retirement. Annual contributions
to the plans generally include a provision for current service costs plus
amortization of prior service costs over periods ranging from 10 to 30 years.
Assets of the plans are invested principally in publicly traded stocks and
bonds.
The Company's total pension costs (benefits) recognized for all plans were
$(3.1) million in 1996, $2.5 million in 1995 and $4.9 million in 1994, of which
$(3.7) million in 1996, $2.0 million in 1995 and $4.7 million in 1994,
respectively, related to the plan sponsored by Transamerica Corporation. The
plans sponsored by the Company are not material to the consolidated financial
position of the Company.
The Company also participates in various contributory defined benefit programs
sponsored by Transamerica Corporation that provide medical and certain other
benefits to eligible retirees. Postretirement benefit costs charged to income
were not significant in 1996, 1995 and 1994.
NOTE H--RELATED PARTY TRANSACTIONS
The Company has various transactions with Transamerica Corporation and certain
of its other subsidiaries in the normal course of operations. These transactions
include premiums received for employee benefit services (none in 1996 and 1995,
and $5.5 million in 1994), loans and advances, investments in a money market
fund managed by an affiliated company, rental of space, and other specialized
services. At December 31, 1996, pension funds administered for these related
companies aggregated $1,067.9 million and the investment in an affiliated money
market fund, included in short-term investments, was $44.6 million.
During 1996, The Company transferred certain below investment grade bonds with
an aggregate book value of $424.9 million, including an aggregate interest
receivable of $9.6 million, to a special purpose subsidiary of Transamerica
Corporation in exchange for assets with a fair value of $438.9 million,
comprised of collateralized higher-rated bond obligations of $413.9 million
issued by the special purpose subsidiary and cash of $25 million. The excess of
fair value of the consideration received over the book value of the bonds
transferred is included in net realized investment gains.
During 1995, the Company transferred real estate with an aggregate book value of
$27.7 million to an affiliate within the Transamerica Corporation group of
consolidated companies
NOTE H--RELATED PARTY TRANSACTIONS (Continued)
in exchange for assets with a fair value of $49.7 million, comprising mortgage
loans of $35.1 million and cash of $14.6 million. The excess of fair value of
the consideration received over the book value of the real estates transferred,
net of related tax payable to the parent, is included as a capital contribution.
Included in the investment in fixed maturities available for sale is a note
receivable from Transamerica Corporation of $200 million. The note receivable
matures in 2013 and bears interest at 7%.
NOTE I--REGULATORY MATTERS
TOLIC and its insurance subsidiaries are subject to state insurance laws and
regulations, principally those of TOLIC and each subsidiary's state of
incorporation. Such regulations include the risk-based capital requirement and
the restriction on the payment of dividends. Generally, dividends during any
year may not be paid, without prior regulatory approval, in excess of the
greater of 10% of the Company's statutory capital and surplus as of the
preceding year end or the Company's statutory net income from operations for the
preceding year. The insurance department of the domiciliary state recognizes
these amounts as determined in conformity with statutory accounting practices
prescribed or permitted by the insurance department, which vary in some respects
from generally accepted accounting principles. The Company's statutory net
income and statutory capital and surplus which are represented by TOLIC's net
income and capital and surplus are summarized as follows (in thousands):
1996 1995 1994
------------------- ------------------- ------------
Statutory net income $ 112,296 $ 131,607 $ 175,850
Statutory capital and surplus, at
end of year 1,249,045 1,115,691 947,164
NOTE J-COMMITMENTS AND CONTINGENCIES
The Company issues synthetic guaranteed investment contracts which guaranty, in
exchange for a fee, the liquidity of pension plans to pay certain qualified
benefits if other sources of plan liquidity are exhausted. Unlike traditional
guaranteed investment contracts, the plan sponsor retains the credit risk in a
synthetic contract while the Company assumes some limited degree of interest
rate risk. To minimize the risk of loss, the Company underwrites these contracts
based on plan sponsor agreement, at the inception of the contract, on investment
guidelines to be followed, including overall portfolio credit and maturity
requirements. Adherence to these investment requirements is monitored regularly
by the Company. At December 31, 1996, commitments to maintain liquidity for
benefit payments on notional amounts of $1.9 billion were outstanding compared
to $620 million at December 31, 1995.
NOTE J-COMMITMENTS AND CONTINGENCIES (Continued)
The Company is subject to mandatory assessments by state guaranty funds to cover
losses to policyholders of those insurance companies that are under regulatory
supervision. Certain states allow such assessments to be used to reduce future
premium taxes. The Company estimates and recognizes its obligation for guaranty
fund assessments, net of premium tax deductions, based on the survey data
provided by National Organization of Life and Health Insurance Guaranty
Associations. At December 31, 1996 and 1995, the estimated exposures and the
resultant accruals recorded were not material to the consolidated financial
position or results of operations of the Company.
Substantially all leases of the Company are operating leases principally for the
rental of real estate. Rental expenses for equipment and properties were $20.6
million in 1996, $25.3 million in 1995, and $16.3 million in 1994. The following
is a schedule by years of future minimum rental payments required under
operating leases that have initial or remaining noncancelable lease terms in
excess of one year as of December 31, 1996 (in thousands):
Year ending December 31:
1997 $ 15,633
1998 14,688
1999 13,593
2000 12,029
2001 11,865
Later years 58,997
$ 126,805
==================
The Company is a defendant in various legal actions arising from its operations.
These include legal actions similar to those faced by many other major life
insurers which allege damages related to sales practices for universal life
policies sold between January 1981 and June 1996. In one such action, the
Company and plaintiffs' counsel are working toward a settlement. Any such
proposed settlement is subject to significant contingencies, including approval
by the court. The lawsuit may proceed if such contingencies are not satisfied.
In the opinion of TOLIC, any ultimate liability which might result from such
litigation would not have a materially adverse effect on the consolidated
financial position of TOLIC or the results of its operations.
NOTE K--FINANCIAL INSTRUMENTS
The carrying values and estimated fair values of financial instruments are as
follows (in thousands):
December 31
-----------------------------------------
1996 1995
----------------------------------- -----------------
Carrying Fair Carrying Fair
Value Value Value Value
Financial Assets:
Fixed maturities available for sale $ 26,980,676 $ 26,980,676 $ 25,997,403 $ 25,997,403
Equity securities available for sale 471,734 471,734 307,881 307,881
Mortgage loans on real estate 716,669 770,122 565,086 671,835
Policy loans 442,607 416,396 426,377 408,088
Short-term investments 135,726 135,726 211,500 211,500
Cash 35,817 35,817 49,938 49,938
Accrued investment income 404,866 404,866 394,008 394,008
Financial Liabilities:
Liabilities for investment-type contracts:
Single and flexible premium
deferred annuities 6,962,501 6,400,632 8,080,139 7,518,211
Single premium immediate annuities 4,115,047 4,476,968 4,123,954 4,677,652
Guaranteed investment contracts 3,153,769 3,207,342 2,958,850 2,998,047
Other deposit contracts 3,894,802 3,913,046 2,785,709 2,848,301
Off-balance-sheet assets (liabilities):
Interest rate swap agreements designated
as hedges of liabilities in a:
Receivable position - 43,916 - 20,888
Payable position - (5,485) - (3,086)
The Company enters into various interest rate agreements in the normal course of
business, primarily as a means of managing its interest rate exposure in
connection with asset and liability management.
Interest rate swap agreements generally involve the periodic exchange of fixed
rate interest and floating rate interest payments by applying a specified market
index to the underlying contract or notional amount, without exchanging the
underlying notional amounts. The differential to be paid or received on those
interest rate swap agreements that are designated as hedges of financial assets
is recorded on an accrual basis as a component of net investment
NOTE K--FINANCIAL INSTRUMENTS (Continued)
income. The differential to be paid or received on those interest rate swap
agreements that are designated as hedges of financial liabilities is recorded on
an accrual basis as a component of benefits paid or provided. While the Company
is not exposed to credit risk with respect to the notional amounts of the
interest rate swap agreements, the Company is subject to credit risk from
potential nonperformance of counterparties throughout the contract periods. The
amounts potentially subject to such credit risk are much smaller than the
notional amounts. The Company controls this credit risk by entering into
transactions with only a selected number of high quality institutions,
establishing credit limits and maintaining collateral when appropriate.
Interest rate floor and cap agreements generally provide for the receipt of
payments in the event the average interest rates during a settlement period fall
below specified levels under interest rate floor agreements or rise above
specified levels under interest rate cap agreements. A swaption generally
provides for an option to enter into an interest rate swap agreement in the
event of unfavorable interest rate movements. These agreements generally require
upfront premium payments. The costs of swaptions and interest rate floor and cap
agreements are amortized over the contractual periods and resulting amortization
expenses are included in net investment income. Any conditional receipts under
these agreements are recorded on an accrual basis as a component of net
investment income if designated as hedges of financial assets or as a component
of benefits paid or provided if designated as hedges of financial liabilities.
Gains or losses on terminated interest rate agreements are deferred and
amortized over the remaining life of the underlying assets or liabilities being
hedged.
NOTE K--FINANCIAL INSTRUMENTS (Continued)
The information on derivative instruments is summarized as follows (in
thousands):
Aggregate Weighted
Notional Average
Amount Fixed Rate Fair Value
December 31, 1996
Interest rate swap agreements designated as hedges of securities available
for sale, where TLC pays:
Fixed rate interest $ 270,035 6.73% $ 1,511
Floating rate interest 250,905 6.77% 5,877
Floating rate interest based on one index and
receives floating rate interest based on
another index 326,644 - (9,359)
Interest rate swap agreements designated as
hedges of financial liabilities, where TLC pays
Fixed rate interest 60,000 4.39% 333
Floating rate interest 1,710,716 6.11% 37,655
Floating rate interest based on one index and
receives floating rate interest based on
another index 58,585 - 443
Interest rate floor agreements 560,500 6.46% 19,287
Swaptions 8,327,570 4.50% 54,198
Others 108,745 - 19,607
December 31, 1995
Interest rate swap agreements designated as hedges of securities available
for sale, where TLC pays:
Fixed rate interest $ 235,173 7.99% $ (9,307)
Floating rate interest 140,000 5.65% 137
Floating rate interest based on one index and
receives floating rate interest based on
another index 65,000 - 242
Interest rate swap agreements designated as
hedges of financial liabilities, where TLC pays:
Fixed rate interest 60,000 4.39% 741
Floating rate interest 934,678 6.17% 17,169
Floating rate interest based on one index and
receives floating rate interest based on
another index 152,000 - (108)
Interest rate floor agreements 560,500 6.46% 35,820
Interest rate cap agreements 250,000 5.93% 792
Swaptions 1,267,140 5.52% 53,040
Others 100,000 - 2,500
NOTE K--FINANCIAL INSTRUMENTS (Continued)
Generally, notional amounts indicate the volume of transactions and estimated
fair values indicate the amounts subject to credit risk.
Activities with respect to the notional amounts are summarized as follows (in
thousands):
Beginning End
of Year Additions Maturities Terminations of Year
1996:
Interest rate swap agreements
designated as hedges of
securities available for sale $ 440,173 $ 566,023 $ 143,554 $ 15,058 $ 847,584
Interest rate swap agreements
designated as hedges of
financial liabilities 1,146,678 1,887,348 1,103,525 101,200 1,829,301
Interest rate floor agreements 560,500 - - - 560,500
Interest rate cap agreements 250,000 - 250,000 - -
Swaptions 1,267,140 7,170,000 109,570 - 8,327,570
Others 100,000 8,745 - - 108,745
-------------- -------------- -------------- ------------ ----------------
$ 3,764,491 $ 9,632,116 $ 1,606,649 $ 116,258 $11,673,700
============== ============== ============== ============ ===========
1995:
Interest rate swap agreements
designated as hedges of
securities available for sale $ 274,777 $ 246,790 $ 59,947 $ 21,447 $ 440,173
Interest rate swap agreements
designated as hedges of
financial liabilities 601,545 1,035,910 460,777 30,000 1,146,678
Interest rate floor agreements 560,500 - - - 560,500
Interest rate cap agreements 100,000 250,000 100,000 - 250,000
Swaptions 100,000 1,167,140 - - 1,267,140
Others 100,000 - - - 100,000
-------------- -------------- -------------- ------------ ----------------
$ 1,736,822 $ 2,699,840 $ 620,724 $ 51,447 $ 3,764,491
============== ============== ============== ============ ================
1994:
Interest rate swap agreements
designated as hedges of
securities available for sale $ 153,000 $ 121,777 $ 274,777
Interest rate swap agreements
designated as hedges of
financial liabilities 210,000 391,545 601,545
Interest rate floor agreements 400,000 160,500 560,500
Interest rate cap agreements - 100,000 100,000
Swaptions - 100,000 100,000
Others 100,000 - 100,000
-------------- -------------- -------------- ------------ ----------------
$ 863,000 $ 873,822 $ - $ - $ 1,736,822
============== ============== ============== ============ ================
NOTE K--FINANCIAL INSTRUMENTS (Continued)
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of temporary cash investments, fixed maturities
and mortgage loans on real estate. The Company places its temporary cash
investments with high credit quality financial institutions. Concentrations of
credit risk with respect to investments in fixed maturities and mortgage loans
on real estate are limited due to the large number of such investments and their
dispersion across many different industries and geographic areas. At December
31, 1996, the Company had no significant concentration of credit risk.
NOTE L--OTHER OPERATING REVENUE
In 1994, the Company disposed of an investment in an affiliate which had been
accounted for under the equity method. Total consideration of $23.3 million was
received from the sale, resulting in income of $13.3 million.
Unaudited Consolidated Financial Statements
Transamerica Occidental Life Insurance Company and Subsidiaries
September 30, 1997
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
8
CONSOLIDATED BALANCE SHEET
September 30 December 31
1997 1996
------------------ ------------------
ASSETS (In thousands, except for share date)
Investments:
Fixed maturities available for sale $ 28,374,880 $ 26,980,676
Equity securities available for sale 858,978 471,734
Mortgage loans on real estate 729,762 716,669
Real estate 21,119 24,876
Policy loans 455,262 442,607
Other long-term investments 65,404 66,686
Short-term investments 198,307 135,726
------------------ ------------------
30,703,712 28,838,974
Cash 21,644 35,817
Accrued investment income 456,140 404,866
Accounts receivable 603,268 297,967
Reinsurance recoverable on paid and unpaid losses 672,789 829,653
Deferred policy acquisition costs 2,110,360 2,138,203
Property and equipment 176,348 149,865
Other assets 160,058 100,768
Goodwill 5,465 5,749
Separate account assets 5,236,090 3,527,950
================== ==================
$ 40,145,874 $ 36,329,812
================== ==================
LIABILITIES AND SHAREHOLDER'S EQUITY
Policy liabilities:
Policyholder contract deposits $ 23,727,939 $ 22,718,955
Reserves for future policy benefits 5,400,675 5,275,149
Policy claims and other 498,013 502,331
------------------ ------------------
29,626,627 28,496,435
Income tax liabilities 671,969 388,852
Accrued expenses and other liabilities 501,713 560,663
Separate account liabilities 5,236,090 3,527,950
------------------ ------------------
36,036,399 32,973,900
Shareholder's equity:
Common stock ($12.50 par value):
Authorized - 4,000,000 shares
Issued and outstanding - 2,206,933 shares 27,587 27,587
Additional paid-in capital 474,026 335,619
Retained earnings 2,635,679 2,467,406
Foreign currency translation adjustments (26,276) (24,472)
Net unrealized investment gains 998,459 549,772
------------------ ------------------
4,109,475 3,355,912
================== ==================
$ 40,145,874 $ 36,329,812
================== ==================
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Nine Months Ended September 30 Three Months Ended September 30
1997 1996 1997 1996
---------------- ---------------- ----------------- ------------------
(In thousands)
Revenues:
Premiums and other considerations $ 1,515,201 $ 1,263,476 $ 564,668 $ 582,089
Net investment income 1,612,626 1,549,165 546,578 518,030
Net realized investment gains (19,369) 17,465 (21,077) (5,510)
---------------- ---------------- ----------------- ------------------
TOTAL REVENUES 3,108,458 2,830,106 1,090,169 1,094,609
Benefits:
Benefits paid or provided 2,217,679 1,941,752 783,390 603,496
Increase in policy reserves and liabilities 51,612 78,433 25,060 239,601
---------------- ---------------- ----------------- ------------------
2,269,291 2,020,185 808,450 843,097
Expenses:
Amortization of deferred policy
acquisition costs 210,372 193,766 79,257 63,043
Salaries and salary related expenses 119,424 111,944 37,241 36,956
Other expenses 202,807 134,394 62,267 32,998
---------------- ------------------
---------------- -----------------
532,603 440,104 178,765 132,997
---------------- ---------------- -----------------
TOTAL BENEFITS AND EXPENSES 2,801,894 2,460,289 987,215 976,094
- ------ ---------------- ---------------- ----------------- ------------------
INCOME BEFORE INCOME TAXES 306,564 369,817 102,954 118,515
Provision for income taxes 91,980 122,296 31,839 38,463
---------------- ---------------- ------------------
NET INCOME $ 214,584 $ 247,521 $ 71,115 $ 80,052
- ------ ================ ================ ================= ==================
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
Foreign Net
Additional Currency Unrealized
Common Stock Paid-in Retained Translation Investment
-----------------------------
Shares Amount Capital Earnings Adjustments Gains
------------ ------------- ----------- ------------- ------------- ----------
(In thousands, except for share data)
Balance at January 1, 1997 2,206,933 $ 27,587 $ $ 2,467,406 $ $
335,619 (24,472) 549,772
Net income 214,584
Capital Contributions from parent 138,407
Change in foreign currency
translation adjustments (1,804)
Dividends declared (46,311)
Change in net unrealized investment 448,687
gains
------------ ------------- ----------- ------------- ------------- ----------
Balance at September 30, 1997 2,206,933 $ 27,587 $ $ 2,635,679 $ (26,276) $
474,026 998,459
============ ============= =========== ============= ============= ==========
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended
September 30
1997 1996
----------------- -------------------
(In thousands)
OPERATING ACTIVITIES
Net income $ 214,584 $ 247,521
Adjustments to reconcile net income to net
cash provided by operating activities:
Changes in:
Reinsurance recoverable and accounts receivable (148,437) 972,366
Accrued investment income (51,274) (15,859)
Insurance reserves and claims, excluding policyholder
balances on interest-sensitive policies 382,857 (423,649)
Other asserts, other liabilities and accrued income taxes (189,794) (5,474)
Amortization of policy acquisition costs 180,945 180,310
Policy acquisition costs deferred (335,253) (278,471)
Provision for depreciation 13,741 16,345
Provision for deferred income taxes 91,950 36,909
Net realized (gains) losses on investment transactions 49,109 (17,942)
Other 48,383 (75,391)
----------------- -------------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 256,811 636,665
INVESTMENT ACTIVITIES
Purchases of investments (8,339,658) (5,901,888)
Sales or maturities of securities 7,334,351 3,992,201
Purchases of property and equipment (41,532) 158,817
Other (62,581) (15,801)
----------------- -------------------
NET CASH USED BY
INVESTING ACTIVITIES (1,109,420) (1,766,671)
FINANCING ACTIVITIES
Additions to policyholder contract deposits 5,842,477 5,183,572
Withdrawals from policyholder contract deposits (5,097,448) (4,049,860)
Capital contributions from parent 138,407 -
Dividends paid to parent (45,000) (30,050)
-----------------
-------------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 838,436 1,103,662
----------------- -------------------
INCREASE IN CASH (14,173) (26,344)
-----------------
-------------------
CASH AT BEGINNING OF PERIOD 35,817 49,938
-----------------
-------------------
CASH AT END OF PERIOD $ 21,644 $ 23,594
================= ===================
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
NOTE A-SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements of Transamerica
Occidental Life Insurance Company ("TOLIC") and its subsidiary (collectively,
the "Company") have been prepared in accordance with generally accepted
accounting principles for interim periods. In the opinion of management, these
statements include all adjustments, consisting only of normal recurring
accruals, that are necessary for a fair presentation of the Company's
consolidated financial position at September 30, 1997, the consolidated results
of operations for the three months and nine months ended September 30, 1997 and
1996, and the consolidated cash flows for the nine months ended September 30,
1997 and 1996.
New Accounting Standards: In June 1997, the Financial Accounting Standards Board
("FASB") issued Statement 130, "Reporting Comprehensive Income," which
establishes standards for reporting and displaying comprehensive income and its
components in the financial statements. This statement is effective for interim
and annual periods beginning after December 15, 1997. Reclassification of
financial statements for all periods presented will be required upon adoption.
Application of this statement will not change recognition or measurement of net
income and, therefore, will not impact the Company's consolidated results of
operations or financial position.
In June 1997, the FASB also issued Statement 131, "Disclosures about Segments of
an Enterprise and Related Information," which changes the way companies report
segment information. This statement is effective for years beginning after
December 15, 1997, but need not be applied to interim financial statements in
the initial year of application. Restatement of comparative information for all
periods presented will be required upon adoption. Adoption of this statement
will result in more detailed segment disclosures but will not impact the
Company's consolidated results of operations or financial position.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE B-COMMITMENTS AND CONTINGENCIES
The Company is a defendant in various legal actions arising from its operations.
These include legal actions similar to those faced by many other major life
insurers which allege damages related to sales practices for universal life
policies sold between January 1981 and June 1996. In June 1997, a settlement of
certain cases related to this litigation was approved. Administrative and policy
benefit costs of $31 million have been accrued; additional costs related to the
settlement are not expected to be material and will be incurred over a period of
years. Additional costs related to the settlement are not currently
determinable.
In the opinion of TOLIC, any ultimate liability which might result from other
cases related to this litigation would not have a materially adverse effect on
the consolidated financial position of TOLIC or the results of its operations.
Part II
Undertaking To File Reports
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
Rule 484 Undertaking
Article V, Section I, of Transamerica's Bylaws provides: Each person who was or
is a party or is threatened to be made a party to or is involved, even as a
witness, in any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative (hereafter a
"Proceeding"), by reason of the fact that he, or a person of whom he is the
legal representative, is or was a director, officer, employee, or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another foreign or domestic corporation
partnership, joint venture, trust, or other enterprise, or was a director,
officer, employee, or agent of a foreign or domestic corporation that was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation, including service with respect to
employee benefit plans, whether the basis of the Proceeding is alleged action in
an official capacity as a director, officer, employee, or agent or in any other
capacity while serving as a director, officer, employee, or agent (hereafter an
"Agent"), shall be indemnified and held harmless by the corporation to the
fullest extent authorized by statutory and decisional law, as the same exists or
may hereafter be interpreted or amended (but, in the case of any such amendment
or interpretation, only to the extent that such amendment or interpretation
permits the corporation to provide broader indemnification rights than were
permitted prior thereto) against all expenses, liability, and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes and penalties, amounts
paid or to be paid in settlement, any interest, assessments, or other charges
imposed thereon, and any federal, state, local, or foreign taxes imposed on any
Agent as a result of the actual or deemed receipt of any payments under this
Article) incurred or suffered by such person in connection with investigating,
defending, being a witness in, or participating in (including on appeal), or
preparing for any of the foregoing, in any Proceeding (hereafter "Expenses");
provided, however, that except as to actions to enforce indemnification rights
pursuant to Section 3 of this Article, the corporation shall indemnify any Agent
seeking indemnification in connection with a Proceeding (or part thereof)
initiated by such person only if the Proceeding (or part thereof) was authorized
by the Board of Directors of the corporation. The right to indemnification
conferred in this Article shall be a contract right. (It is the Corporation's
intent that these bylaws provide indemnification in excess of that expressly
permitted by Section 317 of the California General Corporation Law, as
authorized by the corporation's Articles of Incorporation.)
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Representations Pursuant to Section 26(e) of the Investment Company Act of 1940
Transamerica hereby represents that the fees and charges deducted under the
Policy, in the aggregate, are reasonable in relation to the services rendered,
the expenses expected to be incurred, and the risks assumed by Transamerica.
APPENDIX A - GUIDELINE MINIMUM SUM INSURED TABLE
The guideline minimum sum insured is a percentage of the
policy value as set
forth below, according to federal tax regulations:
Guideline Minimum Sum Insured Table
Attained
Attained
Age Percentage
Age Percentage
- --------
40 or less 250%
60 130%
41 243%
61 128%
42 236%
62 126%
43 229%
63 124%
44 222%
64 122%
45 215%
65 120%
46 209%
66 119%
47 203%
67 118%
48 197%
68 117%
49 191%
69 116%
50 185%
70 115%
51 178%
71 113%
52 171%
72 111%
53 164%
73 109%
54 157%
74 107%
55 150%
75-90 105%
56 146%
91 104%
57 142%
92 103%
58 138%
93 102%
59 134%
94-115 101%
APPENDIX B - OPTIONAL INSURANCE BENEFITS
This Appendix provides only a summary of other insurance
benefits available by
rider. There may be an additional charge for benefits under
a rider. Rider
availability is subject to state law and approval.
WAIVER OF PAYMENT RIDER
This rider provides that, during periods of total
disability continuing
more than four months, we will add to the Policy
Value each month an
amount you selected or the amount needed to pay the
monthly insurance
protection charges, whichever is greater. This
amount will keep the
Policy in force, within limits. This benefit is subject
to our maximum
issue benefits. Its cost will change yearly.
GUARANTEED INSURABILITY RIDER
This rider guarantees that insurance may be added at
various option
dates without evidence of insurability. This benefit
may be exercised
on the option dates even if the insured is disabled.
CHILDREN'S INSURANCE RIDER
This rider provides a term insurance benefit for the
Insured's child or
children, subject to age limitations. The rider includes
a feature that
allows the insured child to convert the coverage to
another type of
policy issued by us, subject to our issue size
and issue age
limitations.
OPTION TO ACCELERATE DEATH BENEFITS (LIVING BENEFITS RIDER)
This rider allows the Policy owner to elect to receive
part of the net
death benefit under the Policy prior to the
insured's death if the
insured becomes terminally ill, as defined in the rider.
GUARANTEED DEATH BENEFIT RIDER
This rider provides that if the Policy owner makes
payments, minus
partial withdrawals, partial withdrawal charges and
any outstanding
loans, of a sufficient amount to the Policy, then we
guarantee that the
Policy will not lapse prior to the final payment date.
After the final
payment date, the rider guarantees a minimum death
benefit. The rider
remains effective only if, on each Policy anniversary
through the final
payment date, payments, less partial withdrawals,
partial withdrawal
charges and any outstanding loans, satisfy the
required payment
amounts. Once terminated, the rider may not be
reinstated.
APPENDIX C - PAYMENT
OPTIONS
PAYMENT OPTIONS - On written request, the surrender
value or all or
part of any payable net death benefit may be paid
under one or more
payment options then offered by Transamerica. If you
do not make an
election, we will pay the benefits in a single sum. If a
payment option
is selected, the beneficiary may pay to us any
amount that would
otherwise be deducted from the death benefit. A
certificate will be
provided to the payee describing the payment option
selected.
The amounts payable under a payment option are paid
from our General
Account. These amounts are not based on the investment
experience of
the Separate Account.
SELECTION OF PAYMENT OPTIONS - The amount applied under
any one option
for any one payee must be at least $5,000. The periodic
payment for any
one payee must be at least $50. Subject to the
Policy owner and
beneficiary provisions, any option selection may be
changed before the
net death benefit becomes payable. If you make no
selection, the
beneficiary may select an option when the net death
benefit becomes
payable.
APPENDIX D - ILLUSTRATIONS OF DEATH BENEFIT, POLICY
VALUES
AND ACCUMULATED PAYMENTS
The following tables illustrate the way in which the
Policy's Surrender
Value, Death Benefit and Policy Value could vary
over an extended
period of time.
Assumptions
The tables illustrate a Policy issued to a male,
Age 30, under a
standard underwriting class and qualifying for the
non-smoker rates,
and a Policy issued to a male, Age 45, under a
standard underwriting
class and qualifying for the non-smoker rates. One
set of tables
illustrates the Level Death Benefit Option; another set
illustrates the
Adjustable Death Benefit Option. In each case, one
table illustrates
the guaranteed cost of insurance rates and the other
table illustrates
the current cost of insurance rates as presently in
effect.
The tables assume that no Policy loans have been made,
that you have
not requested an increase or decrease in the initial
face amount, that
no partial withdrawals have been made, and that no
transfers above 12
have been made in any Policy year (so that no related
transaction or
transfer charges have been incurred).
The tables assume that all payments are allocated to
and remain in the
Separate Account for the entire period shown. The
tables are based on
hypothetical gross investment rates of return for the
portfolios (i.e.,
investment income and capital gains and losses, realized
or unrealized)
equivalent to constant gross (after tax) annual rates
of 0%, 6%, and
12%. The tables also show the amount that would
accumulate if payments
accumulated at 5% interest.
The Policy Values and Death Benefits would be
different from those
shown if the gross annual investment rates of return
averaged 0%, 6%,
and 12% over a period of years, but fluctuated above
or below such
averages for individual Policy years. The values
also would be
different depending on the allocation of the
Policy's total Policy
Value among the sub-accounts if the actual rates of
return averaged 0%,
6% or 12%, but the rates of each portfolio varied above
and below such
averages.
Deductions for Charges
The tables reflect deduction of the payment
expense charge, the
administration charge, the mortality and expense risk
charge, and the
monthly insurance protection charge. The amounts
shown in the tables
also take into account portfolio management fees
and operating
expenses, which averaged an annual rate of .88% of the
average daily
net assets of the portfolios. This annual rate is based
on the average
of the expense ratios of each of the portfolios for
the last fiscal
year and takes into account current expense
reimbursement arrangements.
The fees and expenses of each portfolio vary, and in
1996 the total
fees and expenses ranged from an annual rate of .60% to
an annual rate
of 1.15% of average daily net assets. The fees and
expenses of your
Policy may be more or less than .88% in the aggregate,
depending on how
you make allocations of Policy Value among the
sub-accounts. For more
information on portfolio expenses, see
Portfolio Expenses table in this prospectus and the
prospectus for the portfolios.
Net Annual Rates of Investment
Applying the current mortality and expense risk
charge, the
administration charge, and the average portfolio
management fees and
operating expenses of .88% of average net assets,
the gross annual
rates of investment return of 0%, 6% and 12% would
produce net annual
rates of -1.69%, 4.32% and 10.31%, respectively,
during the first 10
Policy years and -1.53%, 4.47% and 10.47%, respectively,
after that.
The hypothetical returns shown in the table do not
reflect any charges
for income taxes against the Separate Account since
no charges are
currently made. However, if in the future the charges
are made, to
produce the illustrated death benefits and Policy
Values, the gross
annual investment rate of return would have to exceed
0%, 6% or 12% by
a sufficient amount to cover the tax charges.
On request, we will provide a comparable
illustration based on the
proposed Insured's age, sex, and underwriting class,
and the requested
face amount, death benefit option and riders.
TRANSAMERICA
OCCIDENTAL LIFE
SEPARATE ACCOUNT
VUL-1
VARIABLE LIFE
POLICY
Male Non-Smoker age 30
Face Amount = $100,000
Adjustable Option
BASED ON CURRENT MONTHLY INSURANCE
PROTECTION CHARGES WITHOUT RIDERS
Payments Hypothetical 0%
Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return Gross
Investment Return Gross Investment Return
Interest
Policy At 5% Per Surrender Policy Death
SurrenderPolicy Death Surrender Policy Death
Year Year Value Value Benefit Value
Value Benefit Value Value Benefit
1 $3,360 $1,782 $2,878 $102,878 $1,961
$3,057 $103,057 $2,141 $3,237 $103,237
2 $6,888 $4,721 $5,707 $105,707 $5,261
$6,247 $106,247 $5,822 $6,808 $106,808
3 $10,592 $7,613 $8,489 $108,489 $8,698
$9,574 $109,574 $9,872 $10,748 $110,748
4 $14,482 $10,457 $11,224 $111,224 $12,278
$13,045 $113,045 $14,327 $15,094 $115,094
5 $18,566 $13,244 $13,901 $113,901 $15,997
$16,654 $116,654 $19,220 $19,877 $119,877
6 $22,854 $15,974 $16,522 $116,522 $19,858
$20,406 $120,406 $24,592 $25,140 $125,140
7 $27,357 $18,660 $19,098 $119,098 $23,882
$24,320 $124,320 $30,508 $30,946 $130,946
8 $32,085 $21,291 $21,619 $121,619 $28,064
$28,392 $128,392 $37,011 $37,339 $137,339
9 $37,049 $23,867 $24,086 $124,086 $32,407
$32,626 $132,626 $44,159 $44,378 $144,378
10 $42,262 $26,391 $26,500 $126,500 $36,923
$37,032 $137,032 $52,023 $52,132 $152,132
11 $47,735 $28,900 $28,900 $128,900 $41,669
$41,669 $141,669 $60,750 $60,750 $160,750
12 $53,482 $31,246 $31,246 $131,246 $46,497
$46,497 $146,497 $70,252 $70,252 $170,712
13 $59,516 $33,538 $33,538 $133,538 $51,522
$51,522 $151,522 $80,719 $80,719 $190,496
14 $65,851 $35,776 $35,776 $135,776 $56,752
$56,752 $156,752 $92,235 $92,235 $211,218
15 $72,504 $37,959 $37,959 $137,959 $62,193
$62,193 $162,193 $104,904 $104,904 $232,888
16 $79,489 $40,092 $40,092 $140,092 $67,861
$67,861 $167,861 $118,851 $118,851 $255,530
17 $86,824 $42,167 $42,167 $142,167 $73,756
$73,756 $173,756 $134,191 $134,191 $280,458
18 $94,525 $44,190 $44,190 $144,190 $79,894
$79,894 $179,894 $151,074 $151,074 $306,681
19 $102,611 $46,164 $46,164 $146,164 $86,287
$86,287 $186,287 $169,661 $169,661 $334,232
20 $111,102 $48,085 $48,085 $148,085 $92,944
$92,944 $192,944 $190,124 $190,124 $363,137
Age 60 $223,235 $64,053 $64,053 $164,053 $176,199
$176,199 $276,199 $553,234 $553,234 $741,334
Age 65 $303,476 $69,454 $69,454 $169,454 $231,591
$231,591 $331,591 $920,031 $920,031 $1,122,438
Age 70 $405,887 $72,784 $72,784 $172,784 $298,582
$298,582 $398,582 $1,517,118$1,517,118 $1,759,857
Age 75 $536,593 $72,996 $72,996 $172,996 $378,687
$378,687 $478,687 $2,492,102$2,492,102 $2,666,550
- -----------------------------------------------------------------
- -------------------------------------------
(1) Assumes a $1,400 payment is made at the beginning of
each Policy
Year. Values will be different if payments are made with a
different frequency or in different amounts.
(2) Assumes that no Policy loan has been made. Excessive
loans or
withdrawals may cause this Policy to lapse because of
insufficient
policy value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE
ONLY. THEY ARE
NOT A REPRESENTATION OF PAST
OR FUTURE INVESTMENT RATES OF RETURN. INVESTMENT RESULTS MAY
BE MORE OR LES
THAN THOSE SHOWN.
INVESTMENT RESULTS WILL DEPEND ON INVESTMENT ALLOCATIONS AND
THE DIFFERENT
INVESTMENT RATES OF RETURN
FOR THE PORTFOLIOS. THESE HYPOTHETICAL INVESTMENT RATES OF
RETURN MAY NOT
BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED OVER ANY PERIOD.
Male Non-Smoker Age 45
Face Amount =
$250,000
Level Option
BASED ON CURRENT - MONTHLY INSURANCE
PROTECTION CHARGES, (WITHOUT RIDERS),
FUND FEES, M&E AND
ADMINISTRATIVE CHARGES
- -----------------------------------------------------------------
- -------------------------------------------
Payments Hypothetical 0%
Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return
Gross Investment Return Gross Investment Return
Interest
Policy At 5% Per Surrender Policy Death
Surrender Policy Death Surrender Policy Death
Year Year Value Value Benefit
Value Value Benefit Value Value Benefit
1 $4,410 $0 $3,173 $250,000
$0 $3,390 $250,000 $0 $3,607 $250,000
2 $9,041 $1,901 $6,246 $250,000
$2,533 $6,878 $250,000 $3,192 $7,537 $250,000
3 $13,903 $5,336 $9,199 $250,000
$6,587 $10,449 $250,000 $7,943 $11,806 $250,000
4 $19,008 $8,669 $12,049 $250,000
$10,743 $14,123 $250,000 $13,086 $16,466 $250,000
5 $24,368 $11,882 $14,779 $250,000
$14,988 $17,885 $250,000 $18,642 $21,540 $250,000
6 $29,996 $14,973 $17,388 $250,000
$19,324 $21,739 $250,000 $24,658 $27,073 $250,000
7 $35,906 $17,937 $19,867 $250,000
$23,749 $25,679 $250,000 $31,178 $33,108 $250,000
8 $42,112 $20,757 $22,204 $250,000
$28,250 $29,698 $250,000 $38,239 $39,687 $250,000
9 $48,627 $23,425 $24,390 $250,000
$32,824 $33,789 $250,000 $45,901 $46,866 $250,000
10 $55,469 $25,926 $26,409 $250,000
$37,461 $37,943 $250,000 $54,217 $54,699 $250,000
11 $62,652 $28,712 $28,712 $250,000
$42,622 $42,622 $250,000 $63,727 $63,727 $250,000
12 $70,195 $30,903 $30,903 $250,000
$47,452 $47,452 $250,000 $73,678 $73,678 $250,000
13 $78,114 $32,984 $32,984 $250,000
$52,443 $52,443 $250,000 $84,664 $84,664 $250,000
14 $86,430 $34,955 $34,955 $250,000
$57,607 $57,607 $250,000 $96,809 $96,809 $250,000
15 $95,161 $36,810 $36,810 $250,000
$62,949 $62,949 $250,000 $110,249 $110,249 $250,000
16 $104,330 $38,546 $38,546 $250,000
$68,478 $68,478 $250,000 $125,138 $125,138 $250,000
17 $113,956 $40,159 $40,159 $250,000
$74,204 $74,204 $250,000 $141,653 $141,653 $250,000
18 $124,064 $41,640 $41,640 $250,000
$80,135 $80,135 $250,000 $159,993 $159,993 $250,000
19 $134,677 $42,981 $42,981 $250,000
$86,279 $86,279 $250,000 $180,386 $180,386 $250,000
20 $145,821 $44,173 $44,173 $250,000
$92,648 $92,648 $250,000 $203,093 $203,093 $250,000
Age 60 $95,161 $36,810 $36,810 $250,000
$62,949 $62,949 $250,000 $110,249 $110,249 $250,000
Age 65 $145,821 $44,173 $44,173 $250,000
$92,648 $92,648 $250,000 $203,093 $203,093 $250,000
Age 70 $210,477 $47,934 $47,934 $250,000
$128,644 $128,644 $250,000 $357,638 $357,638 $414,861
Age 75 $292,995 $45,851 $45,851 $250,000
$173,217 $173,217 $250,000 $609,976 $609,976 $652,674
- -----------------------------------------------------------------
- -------------------------------------------
(1) Assumes a $1,400 payment is made at the beginning
of each Policy
Year. Values will be different if payments are made
with a different
frequency or in different amounts.
(2) Assumes that no Policy loan has been made. Excessive
loans or
withdrawals may cause this Policy to lapse because of
insufficient policy value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE
ONLY. THEY ARE
NOT A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. INVESTMENT
RESULTS MAY BE
MORE OR LESS THAN THOSE
SHOWN. INVESTMENT RESULTS WILL DEPEND ON INVESTMENT
ALLOCATIONS AND THE
DIFFERENT INVESTMENT
RATES OF RETURN FOR THE PORTFOLIOS. THESE HYPOTHETICAL
INVESTMENT RATES
OF RETURN MAY NOT BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD.
Male Non-Smoker Age 30
Face Amount = $100,000
Level Option
BASED ON CURRENT - MONTHLY INSURANCE
PROTECTION CHARGES, (WITHOUT RIDERS),
FUND FEES, M&E AND
ADMINISTRATIVE CHARGES
- -----------------------------------------------------------------
- -------------------------------------------
Payments Hypothetical 0%
Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return
Gross Investment Return Gross Investment Return
Interest
Policy At 5% Per Surrender Policy Death
Surrender Policy Death Surrender Policy Death
Year Year Value Value Benefit
Value Value Benefit Value Value Benefit
1 $919 $0 $684 $100,000
$0 $730 $100,000 $0 $776 $100,000
2 $1,883 $372 $1,358 $100,000
$507 $1,493 $100,000 $647 $1,633 $100,000
3 $2,896 $1,146 $2,022 $100,000
$1,414 $2,290 $100,000 $1,705 $2,581 $100,000
4 $3,960 $1,908 $2,675 $100,000
$2,355 $3,122 $100,000 $2,860 $3,627 $100,000
5 $5,077 $2,649 $3,306 $100,000
$3,323 $3,980 $100,000 $4,114 $4,771 $100,000
6 $6,249 $3,369 $3,917 $100,000
$4,317 $4,865 $100,000 $5,475 $6,023 $100,000
7 $7,480 $4,080 $4,518 $100,000
$5,351 $5,789 $100,000 $6,969 $7,407 $100,000
8 $8,773 $4,771 $5,099 $100,000
$6,416 $6,744 $100,000 $8,596 $8,924 $100,000
9 $10,131 $5,441 $5,660 $100,000
$7,511 $7,730 $100,000 $10,371 $10,590 $100,000
10 $11,556 $6,093 $6,202 $100,000
$8,641 $8,750 $100,000 $12,310 $12,419 $100,000
11 $13,052 $6,730 $6,730 $100,000
$9,813 $9,813 $100,000 $14,446 $14,446 $100,000
12 $14,624 $7,234 $7,234 $100,000
$10,911 $10,911 $100,000 $16,674 $16,674 $100,000
13 $16,274 $7,717 $7,717 $100,000
$12,045 $12,045 $100,000 $19,127 $19,127 $100,000
14 $18,006 $8,175 $8,175 $100,000
$13,215 $13,215 $100,000 $21,826 $21,826 $100,000
15 $19,825 $8,608 $8,608 $100,000
$14,423 $14,423 $100,000 $24,800 $24,800 $100,000
16 $21,735 $9,021 $9,021 $100,000
$15,673 $15,673 $100,000 $28,081 $28,081 $100,000
17 $23,741 $9,406 $9,406 $100,000
$16,961 $16,961 $100,000 $31,699 $31,699 $100,000
18 $25,847 $9,769 $9,769 $100,000
$18,295 $18,295 $100,000 $35,695 $35,695 $100,000
19 $28,058 $10,110 $10,110 $100,000
$19,678 $19,678 $100,000 $40,113 $40,113 $100,000
20 $30,379 $10,428 $10,428 $100,000
$21,111 $21,111 $100,000 $44,998 $44,998 $100,000
Age 60 $61,041 $11,900 $11,900 $100,000
$38,484 $38,484 $100,000 $132,761 $132,761 $177,900
Age 65 $82,982 $11,055 $11,055 $100,000
$49,788 $49,788 $100,000 $221,477 $221,477 $270,202
Age 70 $110,985 $8,704 $8,704 $100,000
$63,668 $63,668 $100,000 $365,891 $365,891 $424,433
Age 75 $146,725 $3,627 $3,627 $100,000
$81,195 $81,195 $100,000 $601,703 $601,703 $643,823
- -----------------------------------------------------------------
- -------------------------------------------
(1) Assumes a $4,200 payment is made at the beginning of
each Policy Year.
Values will be different if payments are made
with a different
frequency or in different amounts.
(2) Assumes that no Policy loan has been made. Excessive
loans or
withdrawals may cause this Policy to lapse because of
insufficient policy value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE
ONLY. THEY ARE NOT
A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. INVESTMENT RESULTS
MAY BE MORE
OR LESS THAN THOSE
SHOWN. INVESTMENT RESULTS WILL DEPEND ON INVESTMENT ALLOCATIONS
AND THE
DIFFERENT INVESTMENT
RATES OF RETURN FOR THE PORTFOLIOS. THESE HYPOTHETICAL
INVESTMENT RATES OF
RETURN MAY NOT BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD.
Male Non-Smoker Age 45
Face Amount = $250,000
Adjustible Option
BASED ON CURRENT - MONTHLY INSURANCE
PROTECTION CHARGES, (WITHOUT RIDERS),
FUND FEES, M&E AND
ADMINISTRATIVE CHARGES
- -----------------------------------------------------------------
- -------------------------------------------
Payments Hypothetical 0%
Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return Gross
Investment Return Gross Investment Return
Interest
Policy At 5% Per Surrender Policy Death
SurrenderPolicy Death Surrender Policy Death
Year Year Value Value Benefit Value
Value Benefit Value Value Benefit
1 $15,540 $8,337 $13,167 $263,167 $9,163
$13,993 $263,993 $9,990 $14,820 $264,820
2 $31,857 $21,708 $26,053 $276,053 $24,184
$28,529 $278,529 $26,760 $31,105 $281,105
3 $48,990 $34,779 $38,642 $288,642 $39,747
$43,610 $293,610 $45,123 $48,986 $298,986
4 $66,979 $47,571 $50,951 $300,951 $55,892
$59,272 $309,272 $65,259 $68,639 $318,639
5 $85,868 $60,067 $62,964 $312,964 $72,621
$75,518 $325,518 $87,329 $90,226 $340,226
6 $105,702 $72,267 $74,682 $324,682 $89,955
$92,370 $342,370 $111,526 $113,941 $363,941
7 $126,527 $84,166 $86,096 $336,096 $107,908
$109,838 $359,838 $138,058 $139,988 $389,988
8 $148,393 $95,746 $97,194 $347,194 $126,486
$127,933 $377,933 $167,144 $168,592 $418,592
9 $171,353 $107,001 $107,966 $357,966 $145,701
$146,666 $396,666 $199,034 $199,999 $449,999
10 $195,460 $117,913 $118,396 $368,396 $165,560
$166,042 $416,042 $233,993 $234,476 $484,476
11 $220,773 $129,142 $129,142 $379,142 $186,828
$186,828 $436,828 $273,196 $273,196 $523,196
12 $247,352 $139,620 $139,620 $389,620 $208,436
$208,436 $458,436 $315,859 $315,859 $565,859
13 $275,260 $149,835 $149,835 $399,835 $230,902
$230,902 $480,902 $362,879 $362,879 $612,879
14 $304,563 $159,786 $159,786 $409,786 $254,263
$254,263 $504,263 $414,708 $414,708 $664,708
15 $335,331 $169,469 $169,469 $419,469 $278,548
$278,548 $528,548 $471,840 $471,840 $721,840
16 $367,637 $178,879 $178,879 $428,879 $303,790
$303,790 $553,790 $534,821 $534,821 $784,821
17 $401,559 $188,014 $188,014 $438,014 $330,024
$330,024 $580,024 $604,256 $604,256 $854,256
18 $437,177 $196,864 $196,864 $446,864 $357,281
$357,281 $607,281 $680,807 $680,807 $930,807
19 $474,576 $205,419 $205,419 $455,419 $385,592
$385,592 $635,592 $765,203 $765,203 $1,015,203
20 $513,845 $213,672 $213,672 $463,672 $414,991
$414,991 $664,991 $858,252 $858,252 $1,108,252
Age 60 $335,331 $169,469 $169,469 $419,469 $278,548
$278,548 $528,548 $471,840 $471,840 $721,840
Age 65 $513,845 $213,672 $213,672 $463,672 $414,991
$414,991 $664,991 $858,252 $858,252 $1,108,252
Age 70 $741,679 $250,502 $250,502 $500,502 $580,030
$580,030 $830,030 $1,488,476$1,488,476 $1,738,476
Age 75 $1,032,460$277,561 $277,561 $527,561 $777,414
$777,414$1,027,414 $2,516,266$2,516,266 $2,766,266
- -----------------------------------------------------------------
- -------------------------------------------
(1) Assumes a $4,200 payment is made at the beginning of
each Policy Year.
Values will be different if payments are made
with a different
frequency or in different amounts.
(2) Assumes that no Policy loan has been made. Excessive
loans or
withdrawals may cause this Policy to lapse because of
insufficient policy value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE
ONLY. THEY ARE
NOT A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. INVESTMENT RESULTS
MAY BE MORE
OR LESS THAN THOSE
SHOWN. INVESTMENT RESULTS WILL DEPEND ON INVESTMENT ALLOCATIONS
AND THE
DIFFERENT INVESTMENT
RATES OF RETURN FOR THE PORTFOLIOS. THESE HYPOTHETICAL
INVESTMENT RATES OF
RETURN MAY NOT BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD.
TRANSAMERICA
OCCIDENTAL LIFE
SEPARATE ACCOUNT
VUL-1
FLEXIBLE PAYMENT VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Age 45
Face Amount = $250,000
Level Option
BASED ON GUARANTEED - MONTHLY INSURANCE
PROTECTION CHARGES, (WITHOUT RIDERS),
FUND FEES, M&E AND
ADMINISTRATIVE CHARGES
- -----------------------------------------------------------------
- -----------------------------------
Payments Hypothetical 0%
Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return Gross
Investment Return Gross Investment Return
Interest
Policy At 5% PerSurrender Policy Death Surrender
Policy Death Surrender Policy Death
Year Year Value Value Benefit Value
Value Benefit Value Value Benefit
1 $4,410 $0 $3,168 $250,000 $0
$3,384 $250,000 $0 $3,601 $250,000
2 $9,041 $1,885 $6,230 $250,000 $2,517
$6,862 $250,000 $3,175 $7,520 $250,000
3 $13,903 $5,298 $9,161 $250,000 $6,546
$10,408 $250,000 $7,899 $11,762 $250,000
4 $19,008 $8,613 $11,993 $250,000 $10,679
$14,059 $250,000 $13,014 $16,394 $250,000
5 $24,368 $11,803 $14,700 $250,000 $14,894
$17,792 $250,000 $18,533 $21,431 $250,000
6 $29,996 $14,845 $17,260 $250,000 $19,171
$21,586 $250,000 $24,476 $26,891 $250,000
7 $35,906 $17,773 $19,703 $250,000 $23,544
$25,474 $250,000 $30,923 $32,853 $250,000
8 $42,112 $20,558 $22,005 $250,000 $27,990
$29,438 $250,000 $37,901 $39,349 $250,000
9 $48,627 $23,180 $24,145 $250,000 $32,493
$33,458 $250,000 $45,451 $46,416 $250,000
10 $55,469 $25,617 $26,100 $250,000 $37,032
$37,515 $250,000 $53,619 $54,101 $250,000
11 $62,652 $27,875 $27,875 $250,000 $41,617
$41,617 $250,000 $62,483 $62,483 $250,000
12 $70,195 $29,447 $29,447 $250,000 $45,748
$45,748 $250,000 $71,629 $71,629 $250,000
13 $78,114 $30,823 $30,823 $250,000 $49,915
$49,915 $250,000 $81,640 $81,640 $250,000
14 $86,430 $31,980 $31,980 $250,000 $54,105
$54,105 $250,000 $92,610 $92,610 $250,000
15 $95,161 $32,896 $32,896 $250,000 $58,302
$58,302 $250,000 $104,650 $104,650 $250,000
16 $104,330 $33,549 $33,549 $250,000 $62,494
$62,494 $250,000 $117,895 $117,895 $250,000
17 $113,956 $33,917 $33,917 $250,000 $66,667
$66,667 $250,000 $132,500 $132,500 $250,000
18 $124,064 $33,977 $33,977 $250,000 $70,810
$70,810 $250,000 $148,653 $148,653 $250,000
19 $134,677 $33,678 $33,678 $250,000 $74,890
$74,890 $250,000 $166,563 $166,563 $250,000
20 $145,821 $32,942 $32,942 $250,000 $78,854
$78,854 $250,000 $186,479 $186,479 $250,000
Age 60 $95,161 $32,896 $32,896 $250,000 $58,302
$58,302 $250,000 $104,650 $104,650 $250,000
Age 65 $145,821 $32,942 $32,942 $250,000 $78,854
$78,854 $250,000 $186,479 $186,479 $250,000
Age 70 $210,477 $21,539 $21,539 $250,000 $97,104
$97,104 $250,000 $324,175 $324,175 $376,044
Age 75 $292,995 $0 $0 $0 $107,546
$107,546 $250,000 $544,397 $544,397 $582,505
- -----------------------------------------------------------------
- -----------------------------------
(1) Assumes a payment of $875 (approximately 90% of the
guideline level
premium) is made at the beginning of each Policy Year.
Values will be
different if payments are made with a different
frequency or in
different amounts.
(2) Assumes that no Policy loan has been made. Excessive
loans or partial
withdrawals may cause this Policy to lapse because
of insufficient
Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE
ONLY. THEY ARE NOT
REPRESENTATIVE OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
INVESTMENT RESULTS
MAY BE MORE OR LESS THAN THOSE SHOWN. INVESTMENT RESULTS WILL
DEPEND ON
INVESTMENT ALLOCATIONS AND THE DIFFERENT INVESTMENT RATES OF
RETURN FOR THE
PORTFOLIOS. THESE HYPOTHETICAL INVESTMENT RATES OF RETURN MAY NOT
BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD.
TRANSAMERICA
OCCIDENTAL LIFE
SEPARATE ACCOUNT
VUL-1
FLEXIBLE PAYMENT VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Age 30
Face Amount = $100,000
Level Option
BASED ON GUARANTEED - MONTHLY INSURANCE
PROTECTION CHARGES, (WITHOUT RIDERS),
FUND FEES, M&E AND
ADMINISTRATIVE CHARGES
- -----------------------------------------------------------------
- -----------------------------------
Payments Hypothetical 0%
Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return Gross
Investment Return Gross Investment Return
Interest
Policy At 5% PerSurrender Policy Death Surrender
Policy Death Surrender Policy Death
Year Year Value Value Benefit Value
Value Benefit Value Value Benefit
1 $919 $0 $683 $100,000 $0
$729 $100,000 $0 $775 $100,000
2 $1,883 $369 $1,355 $100,000 $503
$1,489 $100,000 $644 $1,630 $100,000
3 $2,896 $1,139 $2,015 $100,000 $1,407
$2,283 $100,000 $1,697 $2,573 $100,000
4 $3,960 $1,897 $2,664 $100,000 $2,343
$3,110 $100,000 $2,846 $3,613 $100,000
5 $5,077 $2,634 $3,291 $100,000 $3,305
$3,962 $100,000 $4,092 $4,749 $100,000
6 $6,249 $3,348 $3,896 $100,000 $4,290
$4,838 $100,000 $5,443 $5,991 $100,000
7 $7,480 $4,052 $4,490 $100,000 $5,315
$5,753 $100,000 $6,923 $7,361 $100,000
8 $8,773 $4,736 $5,064 $100,000 $6,368
$6,696 $100,000 $8,534 $8,862 $100,000
9 $10,131 $5,398 $5,617 $100,000 $7,450
$7,669 $100,000 $10,287 $10,506 $100,000
10 $11,556 $6,040 $6,149 $100,000 $8,564
$8,673 $100,000 $12,201 $12,310 $100,000
11 $13,052 $6,651 $6,651 $100,000 $9,699
$9,699 $100,000 $14,280 $14,280 $100,000
12 $14,624 $7,134 $7,134 $100,000 $10,760
$10,760 $100,000 $16,445 $16,445 $100,000
13 $16,274 $7,587 $7,587 $100,000 $11,845
$11,845 $100,000 $18,814 $18,814 $100,000
14 $18,006 $8,022 $8,022 $100,000 $12,968
$12,968 $100,000 $21,421 $21,421 $100,000
15 $19,825 $8,429 $8,429 $100,000 $14,120
$14,120 $100,000 $24,282 $24,282 $100,000
16 $21,735 $8,807 $8,807 $100,000 $15,302
$15,302 $100,000 $27,425 $27,425 $100,000
17 $23,741 $9,159 $9,159 $100,000 $16,518
$16,518 $100,000 $30,881 $30,881 $100,000
18 $25,847 $9,473 $9,473 $100,000 $17,758
$17,758 $100,000 $34,675 $34,675 $100,000
19 $28,058 $9,760 $9,760 $100,000 $19,035
$19,035 $100,000 $38,856 $38,856 $100,000
20 $30,379 $10,012 $10,012 $100,000 $20,341
$20,341 $100,000 $43,459 $43,459 $100,000
Age 60 $61,041 $9,694 $9,694 $100,000 $35,072
$35,072 $100,000 $125,795 $125,795 $168,565
Age 65 $82,982 $5,980 $5,980 $100,000 $42,853
$42,853 $100,000 $207,084 $207,084 $252,642
Age 70 $110,985 $0 $0 $0 $49,991
$49,991 $100,000 $336,136 $336,136 $389,918
Age 75 $146,725 $0 $0 $0 $55,111
$55,111 $100,000 $542,159 $542,159 $580,111
- -----------------------------------------------------------------
- -----------------------------------
(1) Assumes a payment of $875 (approximately 90% of the
guideline level
premium) is made at the beginning of each Policy Year.
Values will be
different if payments are made with a different
frequency or in
different amounts.
(2) Assumes that no Policy loan has been made. Excessive
loans or partial
withdrawals may cause this Policy to lapse because
of insufficient
Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE
ONLY. THEY ARE NOT
REPRESENTATIVE OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
INVESTMENT RESULTS
MAY BE MORE OR LESS THAN THOSE SHOWN. INVESTMENT RESULTS WILL
DEPEND ON
INVESTMENT ALLOCATIONS AND THE DIFFERENT INVESTMENT RATES OF
RETURN FOR THE
PORTFOLIOS. THESE HYPOTHETICAL INVESTMENT RATES OF RETURN MAY NOT
BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD.
TRANSAMERICA
OCCIDENTAL LIFE
SEPARATE ACCOUNT
VUL-1
FLEXIBLE PAYMENT VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Age 30
Face Amount = $100,000
Adjustible Option
BASED ON GUARANTEED - MONTHLY INSURANCE
PROTECTION CHARGES, (WITHOUT RIDERS),
FUND FEES, M&E AND
ADMINISTRATIVE CHARGES
- -----------------------------------------------------------------
- ------------------------------------------
Payments Hypothetical 0%
Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return Gross
Investment Return Gross Investment Return
Interest
Policy At 5% Per Surrender Policy Death
Surrender Policy Death Surrender Policy Death
Year Year Value Value Benefit Value
Value Benefit Value Value Benefit
1 $3,360 $1,777 $2,873 $102,873 $1,957
$3,053 $103,053 $2,137 $3,233 $103,233
2 $6,888 $4,708 $5,694 $105,694 $5,247
$6,233 $106,233 $5,808 $6,794 $106,794
3 $10,592 $7,587 $8,463 $108,463 $8,670
$9,546 $109,546 $9,842 $10,718 $110,718
4 $14,482 $10,414 $11,181 $111,181 $12,230
$12,997 $112,997 $14,273 $15,040 $115,040
5 $18,566 $13,181 $13,838 $113,838 $15,922
$16,579 $116,579 $19,133 $19,790 $119,790
6 $22,854 $15,886 $16,434 $116,434 $19,751
$20,299 $120,299 $24,462 $25,010 $125,010
7 $27,357 $18,545 $18,983 $118,983 $23,736
$24,174 $124,174 $30,322 $30,760 $130,760
8 $32,085 $21,145 $21,473 $121,473 $27,870
$28,198 $128,198 $36,755 $37,083 $137,083
9 $37,049 $23,687 $23,906 $123,906 $32,159
$32,378 $132,378 $43,818 $44,037 $144,037
10 $42,262 $26,173 $26,282 $126,282 $36,610
$36,719 $136,719 $51,576 $51,685 $151,685
11 $47,735 $28,591 $28,591 $128,591 $41,217
$41,217 $141,217 $60,085 $60,085 $160,085
12 $53,482 $30,846 $30,846 $130,846 $45,891
$45,891 $145,891 $69,327 $69,327 $169,327
13 $59,516 $33,036 $33,036 $133,036 $50,735
$50,735 $150,735 $79,475 $79,475 $187,562
14 $65,851 $35,174 $35,174 $135,174 $55,768
$55,768 $155,768 $90,619 $90,619 $207,518
15 $72,504 $37,249 $37,249 $137,249 $60,987
$60,987 $160,987 $102,843 $102,843 $228,310
16 $79,489 $39,262 $39,262 $139,262 $66,399
$66,399 $166,399 $116,252 $116,252 $249,942
17 $86,824 $41,215 $41,215 $141,215 $72,012
$72,012 $172,012 $130,961 $130,961 $273,710
18 $94,525 $43,097 $43,097 $143,097 $77,823
$77,823 $177,823 $147,082 $147,082 $298,576
19 $102,611 $44,920 $44,920 $144,920 $83,851
$83,851 $183,851 $164,771 $164,771 $324,599
20 $111,102 $46,674 $46,674 $146,674 $90,094
$90,094 $190,094 $184,167 $184,167 $351,758
Age 60 $223,235 $60,221 $60,221 $160,221
$167,255 $167,255 $267,255 $525,854 $525,854 $704,645
Age 65 $303,476 $62,375 $62,375 $162,375
$215,417 $215,417 $315,417 $862,722 $862,722 $1,052,521
Age 70 $405,887 $59,222 $59,222 $159,222
$269,013 $269,013 $369,013 $1,397,511$1,397,511 $1,621,113
Age 75 $536,593 $47,701 $47,701 $147,701
$325,328 $325,328 $425,328 $2,251,258$2,251,258 $2,408,846
- -----------------------------------------------------------------
- ------------------------------------------
(1) Assumes a payment of $4,200 (approximately 90% of the
guideline level
premium) is made at the beginning of each Policy Year.
Values will be
different if payments are made with a different
frequency or in
different amounts.
(2) Assumes that no Policy loan has been made. Excessive
loans or partial
withdrawals may cause this Policy to lapse because
of insufficient
Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE
ONLY. THEY ARE NOT
REPRESENTATIVE OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
INVESTMENT RESULTS
MAY BE MORE OR LESS THAN THOSE SHOWN. INVESTMENT RESULTS WILL
DEPEND ON
INVESTMENT ALLOCATIONS AND THE DIFFERENT INVESTMENT RATES OF
RETURN FOR THE
PORTFOLIOS. THESE HYPOTHETICAL INVESTMENT RATES OF RETURN MAY NOT
BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD.
TRANSAMERICA OCCIDENTAL LIFE
SEPARATE ACCOUNT VUL-1
FLEXIBLE PAYMENT VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Age 45
Face Amount = $250,000
Adjustible Option
BASED ON GUARANTEED - MONTHLY INSURANCE
PROTECTION CHARGES, (WITHOUT RIDERS),
FUND FEES, M&E AND
ADMINISTRATIVE CHARGES
- -----------------------------------------------------------------
- ------------------------------------------
Payments Hypothetical 0%
Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return Gross
Investment Return Gross Investment Return
Interest
Policy At 5% Per Surrender Policy Death
Surrender Policy Death Surrender Policy Death
Year Year Value Value Benefit Value
Value Benefit Value Value Benefit
1 $15,540 $8,316 $13,146 $263,146 $9,142
$13,972 $263,972 $9,969 $14,799 $264,799
2 $31,857 $21,647 $25,992 $275,992 $24,121
$28,466 $278,466 $26,695 $31,040 $281,040
3 $48,990 $34,651 $38,514 $288,514 $39,609
$43,472 $293,472 $44,975 $48,837 $298,837
4 $66,979 $47,367 $50,747 $300,747 $55,662
$59,042 $309,042 $65,002 $68,382 $318,382
5 $85,868 $59,770 $62,668 $312,668 $72,272
$75,170 $325,170 $86,921 $89,819 $339,819
6 $105,702 $71,836 $74,251 $324,251 $89,432
$91,847 $341,847 $110,895 $113,310 $363,310
7 $126,527 $83,603 $85,533 $335,533
$107,198 $109,128 $359,128 $137,165 $139,095 $389,095
8 $148,393 $95,043 $96,490 $346,490
$125,559 $127,007 $377,007 $165,928 $167,375 $417,375
9 $171,353 $106,133 $107,098 $357,098
$144,513 $145,478 $395,478 $197,409 $198,374 $448,374
10 $195,460 $116,852 $117,334 $367,334
$164,053 $164,535 $414,535 $231,853 $232,335 $482,335
11 $220,773 $127,204 $127,204 $377,204
$184,203 $184,203 $434,203 $269,561 $269,561 $519,561
12 $247,352 $136,686 $136,686 $386,686
$204,476 $204,476 $454,476 $310,351 $310,351 $560,351
13 $275,260 $145,786 $145,786 $395,786
$225,380 $225,380 $475,380 $355,068 $355,068 $605,068
14 $304,563 $154,482 $154,482 $404,482
$246,910 $246,910 $496,910 $404,080 $404,080 $654,080
15 $335,331 $162,752 $162,752 $412,752
$269,062 $269,062 $519,062 $457,792 $457,792 $707,792
16 $367,637 $170,573 $170,573 $420,573
$291,831 $291,831 $541,831 $516,649 $516,649 $766,649
17 $401,559 $177,924 $177,924 $427,924
$315,212 $315,212 $565,212 $581,145 $581,145 $831,145
18 $437,177 $184,785 $184,785 $434,785
$339,200 $339,200 $589,200 $651,820 $651,820 $901,820
19 $474,576 $191,104 $191,104 $441,104
$363,759 $363,759 $613,759 $729,241 $729,241 $979,241
20 $513,845 $196,802 $196,802 $446,802
$388,821 $388,821 $638,821 $813,997 $813,997 $1,063,997
Age 60 $335,331 $162,752 $162,752 $412,752
$269,062 $269,062 $519,062 $457,792 $457,792 $707,792
Age 65 $513,845 $196,802 $196,802 $446,802
$388,821 $388,821 $638,821 $813,997 $813,997 $1,063,997
Age 70 $741,679 $216,630 $216,630 $466,630
$524,674 $524,674 $774,674 $1,384,485$1,384,485 $1,634,485
Age 75 $1,032,460 $213,291 $213,291 $463,291
$667,766 $667,766 $917,766 $2,288,307$2,288,307 $2,538,307
- -----------------------------------------------------------------
- ------------------------------------------
(1) Assumes a payment of $4,200 (approximately 90% of the
guideline level
premium) is made at the beginning of each Policy Year.
Values will be
different if payments are made with a different
frequency or in
different amounts.
(2) Assumes that no Policy loan has been made. Excessive
loans or partial
withdrawals may cause this Policy to lapse because
of insufficient
Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE
ONLY. THEY ARE NOT
REPRESENTATIVE OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
INVESTMENT RESULTS
MAY BE MORE OR LESS THAN THOSE SHOWN. INVESTMENT RESULTS WILL
DEPEND ON
INVESTMENT ALLOCATIONS AND THE DIFFERENT INVESTMENT RATES OF
RETURN FOR THE
PORTFOLIOSS. THESE HYPOTHETICAL INVESTMENT RATES OF RETURN MAY
NOT BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD.
TRANSAMERICA
OCCIDENTAL LIFE
APPENDIX E
MAXIMUM SURRENDER
CHARGES
We compute surrender charges on the Policy by using a rate per
$1,000 of face
amount of insurance. The rate which applies to a Policy is based
on whether the
insured is male or female (male rates are used if the Policy
is issued using
unisex rates); the insured's age at the start of the surrender
charge period
(date of issue for the initial face amount or effective date of
increase for an
increase in face amount); and the number of years during which
the surrender
charges have been effective.
The surrender charges are computed on the date of issue for
the initial face
amount and apply for ten years from the date of issue. New
surrender charges are
computed for any increase in face amount. The surrender
charges for a face
increase amount apply for ten years from the date the increase
is effective and
apply only to the face increase amount.
During the period that surrender charges apply, the rate
decreases each Policy
year on the Policy anniversary for the initial face amount and
on each twelve
month anniversary of the effective date of the face increase
amount. The rate
established on the Policy anniversary or twelve month
anniversary for a face
increase amount applies during that year.
The maximum surrender charge rate is the rate in the first year
of the surrender
charge period. These rates are listed on the next page. Male
rates are used if
unisex rates apply on the Policy.
The maximum amount of the surrender charges is calculated by
multiplying the
appropriate rate from the table by the face amount of
insurance divided by
$1,000. For example, if the Insured is a male, age 45 at issue,
and the initial
face amount of the Policy is $200,000, the maximum surrender
charges amount is
determined as follows:
1 Find 45 under the column Insured's Age.
1 Find the rate per $1,000 for age 45 under the
column Male Rates
($) -- $19.32.
1 Divide the face amount by $1,000 -- $200,000
divided by $1,000
equals 200.
1 Multiply the rate in item 2 by the result in number
3 -- $19.32
times 200 equals
$3,864.
The amount of the surrender charges decreases each year
on the Policy
anniversary (or twelve month anniversary for a face increase
amount) as long as
the face amount of insurance does not change. For the example
shown above, for
instance, the surrender charges rate in the fifth Policy year
is $11.59. The
surrender charges amount in the fifth year on a $200,000 face
amount is $2,318.
The surrender charges rate in the tenth Policy year is $1.93.
The surrender
charges amount in the tenth year on a $200,000 face amount is
$386.
Maximum Surrender
Charge Rates
Insured's Age Male Rates Female Rates Insured's Age Male
Rates Female
($) ($) ($)
Rates ($)
0 6.65 6.44 35 12.76
12.12
1 6.72 6.49 36 13.23
12.55
2 6.79 6.57 37 13.73
13.02
3 6.89 6.65 38 14.28
13.53
4 6.95 6.72 39 14.90
14.11
5 7.03 6.79 40 15.51
14.67
6 7.12 6.87 41 16.30
15.41
7 7.19 6.94 42 16.96
16.02
8 7.27 7.00 43 17.72
16.73
9 7.35 7.08 44 18.54
17.49
10 7.42 7.15 45 19.32
18.21
11 7.50 7.23 46 20.52
19.34
12 7.58 7.31 47 21.74
20.47
13 7.66 7.37 48 22.95
21.58
14 7.74 7.45 49 24.15
22.71
15 7.83 7.53 50 25.36
23.84
16 7.90 7.59 51 27.04
25.40
17 7.97 7.67 52 28.71
26.96
18 8.07 7.75 53 30.39
28.51
19 8.21 7.88 54 32.06
30.07
20 8.39 8.05 55 33.74
31.63
21 8.55 8.20 56 35.14
32.94
22 8.75 8.38 57 36.55
34.25
23 8.93 8.55 58 37.96
35.56
24 9.17 8.77 59 39.37
36.87
25 9.48 9.06 60 40.78
38.18
26 9.76 9.33 61 42.52
39.79
27 10.03 9.59 62 44.25
41.41
28 10.32 9.85 63 45.99
43.02
29 10.64 10.14 64 47.72
44.64
30 10.96 10.45 65 49.47
46.26
31 11.28 10.74 66 53.18
49.71
32 11.62 11.06 67 54.00
53.16
33 11.97 11.38 68 54.00
54.00
34 12.37 11.75 69-80 54.00
54.00
CONTENTS OF THE REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet.
Cross-reference to items required by Form N-8B-2. The prospectus consists of
____ pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484 under the Securities Act of 1933.
Representations Pursuant to Section 26(e) of the Investment Company Act of 1940
The signatures.
Written consents of the following persons:
1. Ernst & Young L.L.P.
2. Opinion of Counsel
3. Actuarial Opinion
The following exhibits:
1. Exhibit 1
(Exhibits required by paragraph A of the instructions to Form N-8B-2)
(1) Certified copy of Resolutions of the Board of Directors of the
Company of December 6, 1996 establishing the Transamerica
Occidental Life Separate Account
VUL-1. 1/
(2) Not Applicable.
(3) (a) Form of Distribution Agreement between Transamerica Securities
Sales Corporation and Transamerica Occidental Life Insurance
Company. 1/
(b) Form of Sales Agreement between Transamerica Life Companies,
Transamerica Securities Sales Corporation and Broker-Dealers 1/
(4) Not Applicable.
(5) Forms of Policy and Policy riders.
(6) Organizational documents of the Company, as amended. 1/
(7) Not Applicable.
(8) Form of Participation Agreement between: Transamerica Occidental
Life Insurance Company and:
(a) The Alger American Fund
(b) Alliance Variable Products Series Fund, Inc.
(c) Janus Aspen Series
(d) Morgan Stanley Universal Funds, Inc.
(e) OCC Accumulation Trust
(9) Administrative Agreements between Transamerica Occidental
Life Insurance Company
and First Allmerica Financial Life Insurance Company
(10) Form of Application 1/
(11) Issuance, Transfer and Redemption Procedures Memorandum.
(12) Financial Data Schedule. 2/
2. Form of Policy and Policy riders are included in Exhibit 1 above.
3. Opinion of Counsel. 1/
4. Not Applicable.
5. Not Applicable.
6. Actuarial consent
7. Consent of Independent Accountants 2/
8. Powers of Attorney 1/
1/ Incorporated herein by reference to the initial filing of this
Registration Statement (File No. 333-37883) on October 14, 1997.
2/ Filed herewith.
FORM S-6 EXHIBITS Exhibit 1.
(12) Financial Data Schedule
Exhibit 7 Consent of Independent Accountants
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent Auditors"
and to the incorporation by reference of our report dated February 12, 1997 on
the consolidated financial statements of Transamerica Occidental Life Insurance
Company contained in the Registration Statement (Form S-6 No. 333-37883) of
Transamerica Occidental Life Separate Account VUL-1.
/s/ Ernst & Young LLP
Los Angeles, California
January 13, 1998