As filed with the Securities and Exchange Commission on February 1, 1999
Registration No. 333-63215
811-08997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
Pre-Effective Amendment No. 3
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
INITIAL REGISTRATION STATEMENT
TRANSAMERICA OCCIDENTAL LIFE SEPARATE ACCOUNT VUL-2 OF
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
(Exact Name of Registrant)
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
1150 SOUTH OLIVE STREET
LOS ANGELES, CA 90015
(Address of Principal Executive Office)
Name and Address of Agent for Service: Copies to:
James W. Dederer, Esq. Frederick R. Bellamy, 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
It is proposed that this filing will become effective:
_____immediately upon filing pursuant to paragraph (b)
_____On (________)pursuant to paragraph (b)
_____60 days after filing pursuant to paragraph (a)(1)
_____On (date) pursuant to paragraph (a)(1)
_____On (date) pursuant to paragraph (a)(2) of Rule 485
Title of securities being registered: Modified Single Payment Variable Life
Insurance Contracts.
Approximate date of proposed public offering: as soon as practicable after the
effective date of the Registration Statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such 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 ........................... The Company, The Separate Account
6 ........................... The Separate Account
7 ........................... Not Applicable
8 ........................... Not Applicable
9 ........................... Legal Proceedings
10........................... Summary; Description of the Company, Variable
Account, and Underlying Funds; The Contract;
Contract Termination and Reinstatement; Other
Contract Provisions
11 ........................... Summary; The Trust; VIP; T. Rowe Price;
Investment Objectives and Policies
12 ........................... Summary; The Trust; VIP; T. Rowe Price;
13 ........................... Summary; The Trust; VIP; T. Rowe Price;
Investment Advisory Services to VIP;
Investment Advisory Services to the Trust;
Investment Advisory Services to T. Rowe
Price; Charges and Deductions
14 ........................... Summary; Application for a Contract
15 ........................... Summary; Application for a Contract; Premium
Payments; Allocation of Net Premiums
16 ........................... The Separate Account; The Trust; VIP; T. Rowe
Price; Allocation of Net Premiums
17 ........................... Summary; Surrender; Partial Withdrawal;
Charges and Deductions; Contract Termination
and Reinstatement
18 ........................... The Separate Account; The Trust; VIP; T. Rowe
Price; Premium Payments
19 ........................... Reports; Voting Rights
20 ........................... Not Applicable
21 ........................... Summary; Contract Loans; Other Contract
Provisions
22 ........................... Other Contract Provisions
23 ........................... Not Required
24 ........................... Other Contract Provisions
25 ........................... Allmerica Financial
26 ........................... Not Applicable
27 ........................... The Company
28 ........................... Directors and Principal Officers
29 ........................... The Company
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 ........................... The Company; Distribution
42 ........................... Not Applicable
43 ........................... Not Applicable
44 ........................... Premium Payments; Contract Value and Cash
Surrender Value
45 ........................... Not Applicable
46 ........................... Contract Value and Cash Surrender Value;
Taxation of the Contracts
47 ........................... The Company
48 ........................... Not Applicable
49 ........................... Not Applicable
50 ........................... The Separate Account
51 ........................... Cover Page; Summary; Charges and Deductions;
The Contract; Contract Termination and
Reinstatement; Other Contract Provisions
52 ........................... Addition, Deletion or Substitution of
Investments
53 ........................... Taxation of the Contracts
54 ........................... Not Applicable
55 ........................... Not Applicable
56 ........................... Not Applicable
57 ........................... Not Applicable
58 ........................... Not Applicable
59 ........................... Not Applicable
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACTS
FUNDED THROUGH TRANSAMERICA OCCIDENTAL LIFE SEPARATE ACCOUNT VUL-2
OF TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
Transamerica Occidental Life Separate Account VUL-2 ("Separate Account") is a
separate investment account of Transamerica Occidental Life Insurance Company
("Transamerica"). Transamerica issues the Transamerica Lineagesm modified single
payment variable life insurance contracts ("Contracts") described in this
prospectus.
You may direct your payments, as well as any value accumulated under the
Contract, among sub-accounts of the Separate Account or to the Fixed Account, or
to both. At any time, you may have value in up to seventeen (17) sub-accounts
plus the Fixed Account. 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:
Alger American Income & Growth MFS VIT Growth with Income
Alliance VPF Growth & Income Morgan Stanley UF Fixed Income
Alliance VPF Premier Growth Morgan Stanley UF High Yield
Dreyfus VIF Capital Appreciation Morgan Stanley UF International Magnum
Dreyfus VIF Small Cap OCC Accumulation Trust Managed
Janus Aspen Balanced OCC Accumulation Trust Small Cap
Janus Aspen Worldwide Growth Transamerica VIF Growth Portfolio
MFS VIT Emerging Growth Transamerica VIF Money Market
MFS VIT Research
Contract Owners may, within limits, choose the amount of initial payment and
vary the frequency and amount of future payments. The Contract allows partial
withdrawals within limits and full surrender of the Contract's surrender value.
The Contracts are not suitable for short-term investment because of the
substantial nature of the surrender charge.
Each Contract is a "modified endowment contract" for federal income tax
purposes, except in certain circumstances described in "TAXATION OF THE
CONTRACTS." If the contract is classified as a modified endowment contract, any
policy loan, partial withdrawal or surrender may result in adverse tax
consequences and/or penalties. A loan, distribution or other amounts received
from a modified endowment contract during the life of the Insured will be taxed
to the extent of accumulated income in the Contract. Death benefits under a
modified endowment contract, however, are generally not subject to federal
income tax. See "TAXATION OF THE CONTRACTS."
IT MAY NOT BE ADVANTAGEOUS TO REPLACE EXISTING INSURANCE WITH THE CONTRACT. 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 CONTRACTS ARE OBLIGATIONS OF TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
AND ARE DISTRIBUTED BY TRANSAMERICA SECURITIES SALES CORPORATION. THE CONTRACTS
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 CONTRACTS 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 CONTRACT. YOU SHOULD RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE.
THIS PROSPECTUS MUST BE ACCOMPANIED OR PRECEDED BY CURRENT PROSPECTUSES FOR THE
PORTFOLIOS. THE PORTFOLIO PROSPECTUSES SHOULD BE READ IN CONJUNCTION WITH THIS
PROSPECTUS.
Dated February 1, 1999
TABLE OF CONTENTS
SPECIAL TERMS............................................................
SUMMARY..................................................................
PERFORMANCE INFORMATION..................................................
DESCRIPTION OF THE COMPANY, SEPARATE ACCOUNT, AND UNDERLYING FUNDS.......
THE CONTRACT.............................................................
Applying for a Contract............................................
Free Look Period...................................................
Conversion Privilege...............................................
Payments...........................................................
Allocation of Payments.............................................
Transfer Privilege.................................................
Death Benefit......................................................
Guaranteed Death Benefit Rider.....................................
Contract Value.....................................................
Payment Options....................................................
Optional Insurance Benefits........................................
Surrender..........................................................
Partial Withdrawal.................................................
CHARGES AND DEDUCTIONS...................................................
Monthly Deductions.................................................
Daily Deductions...................................................
Surrender Charge...................................................
Partial Withdrawal Costs...........................................
Transfer Charges...................................................
CONTRACT LOANS...........................................................
CONTRACT TERMINATION AND REINSTATEMENT...................................
OTHER CONTRACT PROVISIONS................................................
TAXATION OF THE CONTRACTS..................................................
The Company and The Separate Account.................................
Taxation of The Contracts............................................
VOTING RIGHTS..............................................................
DIRECTORS AND PRINCIPAL OFFICERS...........................................
DISTRIBUTION...............................................................
REPORTS....................................................................
SERVICES...................................................................
LEGAL PROCEEDINGS..........................................................
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS..........................
PREPARING FOR YEAR 2000....................................
FURTHER INFORMATION........................................................
MORE INFORMATION ABOUT THE FIXED ACCOUNT...................................
INDEPENDENT ACCOUNTANTS....................................................
FINANCIAL STATEMENTS.......................................................
UNAUDITED FINANCIAL STATEMENTS.............................................
APPENDIX A -- GUIDELINE MINIMUM SUM INSURED TABLE.......................... A-1
APPENDIX B -- OPTIONAL INSURANCE BENEFITS.................................. B-1
APPENDIX C -- PAYMENT OPTIONS.............................................. C-1
APPENDIX D -- ILLUSTRATIONS................................................ D-1
SPECIAL TERMS
AGE: how old the Insured is on his or her last birthday measured on the date of
issue and each Contract anniversary, thereafter.
ATTAINED AGE: the Insured's age as of the Insured's birthday closest to the
start of the Contract year of determination. Attained age is used in the
calculation of the guideline minimum sum insured. For Second-to-Die Contracts,
the attained age used is that of the younger Insured, even if the younger
Insured is the first of the two Insureds to die.
BENEFICIARY: the person or persons you name to receive the net death benefit
when the Insured dies.
CONTRACT OWNER: the person who may exercise all rights under the Contract, with
the consent of any irrevocable
beneficiary. "You" and "your" refer to the Contract Owner in this prospectus.
CONTRACT VALUE: the total value of your Contract. It is the SUM of the:
- Value of the units of the sub-accounts credited to your Contract; PLUS
- Accumulation in the Fixed Account credited to the Contract.
DATE OF DEFAULT: the first day of the grace period.
DATE OF ISSUE: the date the Contract was issued. It is used to measure the
monthly processing date, Contract months, Contract years and Contract
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, withdrawal transaction fees, applicable surrender charges, and
monthly deductions.
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 Contract
may be reinstated.
FACE AMOUNT: the amount of insurance coverage. The face amount is shown in your
Contract.
FINAL PAYMENT DATE: the Contract anniversary immediately before the Insured's
100th birthday or, for a Second-to-Die Contract, the younger insured's 100th
birthday. No payments may be made by you after this date. No monthly deductions
will be deducted from the Contract Value after this date. Generally, the net
death benefit after this date will equal 101% of the Contract 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.
FORECLOSURE: the reclassification of an outstanding loan at the end of the grace
period if (a) the Contract lapses with an outstanding loan, and the Contract is
subsequently terminated at the end of the grace period; or (b) the outstanding
loan is in default, and the excess outstanding loan is not paid back by the end
of the grace period, resulting in the termination of the Contract.
GENERAL ACCOUNT: all our assets other than those held in separate investment
accounts.
GRACE PERIOD: the 62-day period beginning on (a) the monthly processing date on
which the surrender value is less than zero (0) and the Contract lapses; or (b)
the date on which the outstanding loan exceeds the Contract Value less surrender
charges.
GUIDELINE MINIMUM SUM INSURED: the minimum death benefit required to qualify the
Contract as "life insurance" consistent with federal tax laws. The guideline
minimum sum insured is the PRODUCT of
- The Contract Value TIMES
- A percentage based on the Insured's attained age, listed in Appendix A.
GUIDELINE SINGLE PREMIUM: used to determine the face amount under the Contract.
INSURANCE PROTECTION AMOUNT: the death benefit less the Contract Value.
INSURED: the person or persons covered under the Contract. If more than one
person is named, all provisions of the Contract that are based on the death of
the Insured will be based on the date of death of the last surviving Insured.
INTERNAL REVENUE CODE OR CODE: the Internal Revenue Code of 1986, as amended,
and rules and regulations.
LOAN VALUE: the maximum amount you may borrow under the Contract.
MATURITY DATE: the Contract anniversary immediately before the Insured's 115th
birthday. If there are two insureds, the younger insured's 115th birthday is
used.
MONTHLY DEDUCTIONS: the amount of money that we deduct from the Contract Value
each month to pay for the Administration Charge, Monthly Insurance Protection
Charge, Distribution Fee and the Tax Charge.
MONTHLY INSURANCE PROTECTION CHARGE: the amount of money that we deduct from the
Contract Value each month to pay for the insurance and any riders.
MONTHLY PROCESSING DATE: the date, shown in your Contract, when monthly
deductions are deducted.
NET DEATH BENEFIT: Through the final payment date the net death benefit is:
- The death benefit; MINUS
-Any outstanding loan, rider charges and monthly deductions due and unpaid
through the Contract month in which the Insured dies, as well as any unpaid
partial withdrawals, withdrawal transaction fees, and applicable surrender
charges.
After the final payment date, if the Guaranteed Death Benefit Rider is NOT in
effect, the net death benefit is:
-Guideline minimum sum insured; MINUS
-Any outstanding loan through the Contract month in which the Insured dies
as well as any unpaid partial withdrawals, withdrawal transaction fees, and
applicable surrender charges.
If the Guaranteed Death Benefit Rider is in effect after the final payment date,
the net death benefit will be either the face amount as of the final payment
date or the Guideline minimum sum insured as of the date due proof of death is
received by the Company, whichever is greater, reduced by any outstanding loan
through the Contract month in which the Insured dies.
OUTSTANDING LOAN: all unpaid Contract loans plus loan interest due or accrued.
PORTFOLIO: a mutual fund investment portfolio in which a corresponding
sub-account invests.
PRO RATA ALLOCATION: an allocation among the Fixed Account and the sub-accounts
of the Separate Account in the same proportion that, on the date of allocation,
the portion of the Contract Value in the Fixed Account (other than value subject
to outstanding loan) and the portion of the Contract Value in each sub-account
bear to the total Contract Value.
SECOND-TO-DIE: the Contract may be issued as a joint survivorship
("Second-to-Die") Contract. Life insurance coverage is provided for two
Insureds, with death benefits payable at the death of the last surviving
Insured.
SEPARATE ACCOUNT: Transamerica Occidental Life Separate Account VUL-2 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 amount payable on a full surrender. It is the Contract
Value less any outstanding loan and surrender charges.
TRANSAMERICA: Transamerica Occidental Life Insurance Company. "We", "our", "us"
and "Company" 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.
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:
- Each day the New York Stock Exchange is open for trading; and
- Other days (other than a day during which no payment, partial withdrawal
or surrender of a Contract 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-accounts 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: Transamerica Occidental Life Insurance Company, Variable Life
Service Center, P.O. Box 8990, Boston, Massachusetts 02266-8990. Our address for
express mail packages is: Transamerica Occidental Life Insurance Company,
Variable Life Service Center, 2 Heritage Drive, Quincy, Massachusetts 02171. 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.
SUMMARY
This summary provides a brief overview of the more significant aspects of the
Contract. The prospectus and the Contract provide further detail. The Contract
provides insurance protection for the named beneficiary. We do not claim that
the Contract is similar or comparable to an investment plan of a mutual fund.
The Contract and its attached application are the entire agreement between you
and Transamerica.
WHAT IS THE CONTRACT'S OBJECTIVE?
The objective of the Contract is to give permanent life insurance protection and
to help you build assets on a tax-deferred basis. Benefits available through the
Contract include:
- A life insurance benefit that can protect your family or other heirs;
- Payment options that can guarantee an income for life;
- A personalized investment portfolio you may tailor to meet your
needs, time frame and risk tolerance level;
- Experienced professional investment advisers; and
- Tax deferral on earnings while your money is accumulating.
The Contract combines features and benefits of traditional life insurance with
the advantages of professional money management. Unlike the fixed benefits of
ordinary life insurance, the Contract Value will increase or decrease depending
on investment results. Unlike traditional insurance policies, the Contract has
no fixed schedule for payments.
WHO ARE THE KEY PERSONS UNDER THE CONTRACT?
The Contract is a contract between you and us. Each Contract has a Contract
Owner ("you"), the Insured and a beneficiary. As Contract Owner, you make the
payment, choose investment allocations and select the Insured and beneficiary.
The Insured is the person covered under the Contract. 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 Contract is in effect. If the Contract was issued as a Second-to-Die
Contract, the net death benefit will be paid on the death of the last surviving
Insured.
Through the final payment date, the death benefit is either the face amount (the
amount of insurance determined by your payment) or the minimum death benefit
provided by the guideline minimum sum insured, whichever is greater. The net
death benefit is the death benefit less any outstanding loan, rider charges and
monthly deductions due and unpaid through the Contract month in which the
Insured dies, as well as any unpaid partial withdrawals, withdrawal transaction
fees, and applicable surrender charges.
After the final payment date, if the Guaranteed Death Benefit Rider is NOT in
effect, the net death benefit is guideline minimum sum insured less any
outstanding loan, and any due and unpaid partial withdrawals, withdrawal
transaction fees, and applicable surrender charges. The beneficiary may receive
the net death benefit in a lump sum or under one of the Company's benefit
payment options.
If the Guaranteed Death Benefit Rider is in effect on the final payment date, a
Guaranteed Death Benefit will be provided unless the Rider is subsequently
terminated. The Guaranteed Death Benefit will be either the face amount as of
the final payment date or guideline minimum sum insured as of the date due proof
of death is received by the Company, whichever is greater. The net death benefit
will be the death benefit reduced by any outstanding loan through the Contract
month in which the insured dies. For more information, see "Guaranteed Death
Benefit Rider" page xx.
CAN I EXAMINE THE CONTRACT?
Yes. You have the right to examine and cancel your Contract by returning it to
us or to one of our representatives within 10 days (or such later date as
provided by state law) after you receive the Contract.
If your Contract provides for a full refund under its "Right to Cancel"
provision as required in your state, your refund will be your entire payment.
If your Contract does not provide for a full refund, you will receive:
- Amounts allocated to the Fixed Account; PLUS
- The value of the units in the Separate Account; PLUS
- All fees, charges and taxes which have been imposed.
Your refund will be determined as of the valuation date that your written
request is received at our Variable Life Service Center.
WHAT ARE MY INVESTMENT CHOICES?
The Contract gives you an opportunity to select among a number of investment
options, including sub-accounts and a Fixed Account. The sub-accounts invest in
seventeen portfolios from eight mutual fund families, and offer a wide range of
investment objectives. The available sub-accounts are as follows:
Alger American Income & Growth MFS VIT Growth with Income
Alliance VPF Growth & Income Morgan Stanley UF Fixed Income
Alliance VPF Premier Growth Morgan Stanley UF High Yield
Dreyfus VIF Capital Appreciation Morgan Stanley UF International Magnum
Dreyfus VIF Small Cap OCC Accumulation Trust Managed
Janus Aspen Balanced OCC Accumulation Trust Small Cap
Janus Aspen Worldwide Growth Transamerica VIF Growth Portfolio
MFS VIT Emerging Growth Transamerica VIF Money Market
MFS VIT Research
This range of investment choices allows you to allocate your money among the
sub-accounts to meet your investment needs. You may allocate payments and value
among up to seventeen (17) sub-accounts and the Fixed Account. If your Contract
provides for a full refund under its "Right to Examine Contract" provision as
required in your state, after the Contract 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 Contract 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 xx.
WHAT ARE THE INVESTMENT OBJECTIVES OF THE PORTFOLIOS?
A summary of investment objectives of the portfolios is set forth below. See
"The Portfolios" at page xx for more information. Before investing, read
carefully the profiles or prospectuses of the portfolios that accompany this
Prospectus. Statements of Additional Information for the portfolios are
available without charge on request. There is no guarantee that the investment
objectives of the portfolios will be achieved. The Contract Value may be less
than the aggregate payments made to the Contract.
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.
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.
The Premier Growth Portfolio of Alliance Variable Products Series Fund, Inc.
seeks growth of capital by pursuing aggressive investment policies.
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.
The Small Cap Portfolio of the Dreyfus Variable Investment Fund seeks to
maximize capital appreciation.
The Balanced Portfolio of the Janus Aspen Series seeks long-term capital growth,
consistent with preservation of capital and balanced by current income.
The Worldwide Growth Portfolio of the Janus Aspen Series seeks long-term growth
of capital in a manner consistent with the preservation of capital.
The Emerging Growth Series of the MFS Variable Insurance Trust seeks to provide
long-term growth of capital.
The Growth with Income Series of the MFS Variable Insurance Trust seeks
reasonable current income and long-term growth of capital and income.
The Research Series of the MFS Variable Insurance Trust seeks long-term growth
of capital and future income.
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
securities, corporate bonds, mortgage backed securities, foreign bonds and other
fixed income securities and derivatives.
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.
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 European, Australian, and Far East (EAFE)
countries.
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.
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.
The Growth Portfolio of the Transamerica Variable Insurance Fund, Inc. seeks
long-term capital growth.
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.
CAN I MAKE TRANSFERS AMONG THE SUB-ACCOUNTS AND THE FIXED ACCOUNT?
Yes. You may transfer Contract Value among the sub-accounts and the Fixed
Account, subject to our consent and then current rules. You will incur no
current taxes on transfers while your money is in the Contract. You also may
elect automatic account rebalancing so that assets remain allocated according to
a desired mix or choose automatic dollar cost averaging to gradually move funds
into one or more sub-accounts. See TRANSFER PRIVILEGE.
The first 18 transfers of Contract Value in a Contract year are free. A transfer
charge not to exceed $25 may apply for each additional transfer in the same
Contract year. This charge is for the costs of processing the transfer.
HOW MUCH CAN I INVEST AND HOW OFTEN?
The Contract requires a single payment of at least $10,000 on or before the date
of issue. Additional payment(s) of at least $10,000 may be made as long as the
total payments do not exceed the maximum payment amount specified in the
Contract. Additional payments may be accepted, subject to our underwriting
approval if the payment would increase the death benefit.
WHAT IF I NEED MY MONEY?
You may borrow up to the loan value of your Contract. The maximum loan value is
90% of the result of Contract Value less surrender charges. You may also make
partial withdrawals and you may surrender the Contract for its surrender value.
The guaranteed annual interest rate credited to the Contract Value securing a
loan will be at least 4.0%. However, any portion of the outstanding loan that is
a preferred loan will be credited interest at an annual rate not less than
5.50%.
We will allocate Contract 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. We will transfer the portion of the Contract Value in each
sub-account equal to the Contract loan to the Fixed Account.
You may surrender your Contract and receive its surrender value. You may make
partial withdrawals of $1,000 or more from the Contract Value, subject to
partial withdrawal costs, including any applicable surrender charges. The face
amount is proportionately reduced by each partial withdrawal. We will not allow
a partial withdrawal if it would reduce the Contract Value below $10,000.
A loan, surrender or partial withdrawal may have tax consequences. See TAXATION
OF CONTRACTS.
CAN I MAKE FUTURE CHANGES UNDER MY CONTRACT?
Yes. There are several changes you can make after receiving your Contract,
within limits. You may
- Cancel your Contract under its "Right to Cancel" provision;
- Transfer your ownership to someone else;
- Change the beneficiary;
- - Change the allocation for any additional payment, with no federal income tax
consequences under current law;
- Make transfers of the Contract Value among the Fixed Account and the
sub-accounts, with no federal income taxes incurred under current law;
and
- Add or remove certain optional insurance benefits provided by rider.
CAN I CONVERT MY CONTRACT INTO A NON-VARIABLE CONTRACT?
Yes. You can convert your Contract without charge during the first 24 months
after the date of issue. On conversion, we will transfer the portion of the
Contract Value in the sub-accounts to the Fixed Account. We will allocate any
future payment(s) to the Fixed Account, unless you instruct us otherwise.
WHAT CHARGES WILL I INCUR UNDER MY CONTRACT?
The following charges will apply to your Contract under the circumstances
described. Some of these charges apply throughout the Contract's duration.
Through the final payment date or, for the distribution fee and the tax charge,
only for the first ten Contract years, we deduct the following monthly charges
from the Contract Value:
- 0.30% on an annual basis for the administrative expenses (see
"Administration Charge" page _____);
- A deduction for the cost of insurance, which varies depending on the type
of Contract and underwriting class (see "Monthly Insurance Protection
Charge" page );
- - 0.40% on an annual basis for distribution expenses deducted only during the
first ten Contract years (see "Distribution Fee" page ); and
- 0.20% on an annual basis for federal,
state and local taxes deducted only during the first ten Contract years
(see "Tax Charge" page ).
The following daily charge is deducted from the Separate Account:
- 0.80% on an annual basis for the mortality and expense risks (see
"Mortality and Expense Risk Charge" page ).
The following charges and fees apply if you exercise certain Contract rights:
- - A $25 transfer charge for transfers in excess of eighteen (18) in a
Contract year may be assessed. See Transfer Charges page ___.
- During the first nine Contract years, adjusted for reinstatements, a
surrender charge applies for surrenders and for partial withdrawals in
excess of the "Free 10% Withdrawal" amount.
- - A withdrawal transaction fee for partial withdrawals may be assessed, equal
to 2% of the amount withdrawn up to a $25 maximum. Currently, no charge is
imposed. See Partial Withdrawal Costs page ___.
There are also deductions from and expenses paid out of the assets of the
portfolios that are described in the accompanying prospectuses.
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 1997, except where otherwise noted. 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
Alger American Income & Growth 0.63 0.11 0.74
Alliance VPF Growth & Income 0.63 0.09 0.72
Alliance VPF Premier Growth 1.00 0.10 1.10
Dreyfus VIF Capital Appreciation 0.75 0.05 0.80
Dreyfus VIF Small Cap 0.75 0.03 0.78
Janus Aspen Balanced 0.77 0.06 0.83
Janus Aspen Worldwide Growth 0.66 0.08 0.74
MFS VIT Emerging Growth 0.75 0.12 0.87
MFS VIT Growth with Income 0.75 0.25 1.00
MFS VIT Research 0.75 0.13 0.88
Morgan Stanley UF Fixed Income 0.00 0.70 0.70
Morgan Stanley UF High Yield 0.00 0.80 0.80
Morgan Stanley UF International Magnum 0.00 1.15 1.15
OCC Accumulation Trust Managed 0.80 0.07 0.87
OCC Accumulation Trust Small Cap 0.80 0.17 0.97
Transamerica VIF Growth 0.62 0.23 0.85
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. These figures are
for the year ended December 31, 1997, except for the Transamerica VIF Money
Market Portfolio, which are annualized estimates for the year 1998, the first
year of operation for the portfolio. Actual expenses in future years may be
higher or lower than these figures.
Notes to Portfolio Expenses 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 Portfolio Expenses table are the expenses paid for 1997
(except for the Transamerica VIF Money Market Portfolio, which is an estimate
for the year 1998, the first year of operation for the portfolio). The expenses
shown in the table reflect a portfolio's adviser's waivers of fees or
reimbursement of expenses, if applicable, except for Alliance VPF Premier Growth
for which expenses shown are before waivers or reimbursements. It is anticipated
that such waivers or reimbursements will continue for calendar year 1998, except
for Alliance VPF Premier Growth, for which the management fee, other expenses
and total portfolio annual expenses for 1998, without waivers or reimbursements,
are estimated to be 1.00%, 0.08% and 1.08%, respectively. Without such waivers
or reimbursements, the annual expenses for 1997 for certain portfolios would
have been, as a percentage of assets, as follows:
Total Portfolio
Management Fee Other Annual Expenses
Portfolio Expenses
Janus Aspen Worldwide Growth 0.72 0.09 0.81
MFS VIT Growth with Income 0.75 0.35 1.10
Morgan Stanley UF Fixed Income 0.40 1.31 1.71
Morgan Stanley UF High Yield 0.80 0.88 1.68
Morgan Stanley UF International Magnum 0.80 1.98 2.78
Transamerica VIF Growth 0.75 0.23 0.98
Without expense reimbursements, the management fee, other expenses and
total portfolio expenses for the first year of operation for the
Transamerica VIF Money Market Portfolio are expected to be 0.35%, 0.45%
and 0.80%, respectively. There were no fee waivers or expense
reimbursements during 1997 for the Alger American Income and Growth
Portfolio, Alliance VPF Growth and Income Portfolio, Dreyfus VIF
Capital Appreciation Portfolio, Dreyfus VIF Small Cap Portfolio, Janus
Aspen Balanced Portfolio, MFS VIT Emerging Growth Portfolio, MFS VIT
Research Portfolio, OCC Accumulation Trust Managed Portfolio or OCC
Accumulation Trust Small Cap Portfolio.
(2) The management fee of certain of the portfolios includes breakpoints at
designated asset levels. Further information on these breakpoints is provided
under "DESCRIPTION OF TRANSAMERICA, THE SEPARATE ACCOUNT, AND THE PORTFOLIOS -
THE PORTFOLIOS" at page xx and in the prospectuses for the portfolios.
WHAT CHARGES WILL I INCUR IF I SURRENDER MY CONTRACT OR MAKE A PARTIAL
WITHDRAWAL?
The charges below apply only if you surrender your Contract or make partial
withdrawals:
- Surrender Charge -- This charge applies on full surrenders within the
first nine Contract years. The surrender charge begins at 9.00% of the
payment(s) withdrawn and decreases by 1% each Contract year until it is 0%
at the start of the tenth Contract year. If you
reinstate your Contract, however, the surrender charges which will apply
upon reinstatement are those which were in effect on the date of default.
-Partial Withdrawal Costs -- We deduct from the Contract Value a surrender
charge on a withdrawal exceeding the "Free 10% Withdrawal," described
below, on partial withdrawals taken during the first nine Contract years
(adjusted as applicable for reinstatements).
Currently, we do not impose a withdrawal transaction fee. We reserve the right,
however, to impose a withdrawal transaction fee equal to 2% of the amount
withdrawn, not to exceed $25 for each partial withdrawal taken.
WHAT ARE THE LAPSE AND REINSTATEMENT PROVISIONS OF MY CONTRACT?
If the Guaranteed Death Benefit Rider is not in effect on your Contract, the
Contract will lapse if, on a monthly processing date, the surrender value is
less than the monthly deductions due. If the Contract lapses, you will have a
62-day grace period in which to pay required premium. If sufficient premium is
not paid by the end of the grace period, the Contract will terminate without
value.
If the Guaranteed Death Benefit Rider is in effect on your Contract, the
Contract will not lapse. If the Guaranteed Death Benefit Rider is terminated,
however, your Contract may then lapse.
Additionally, whether the Guaranteed Death Benefit Rider is or is not in effect
on the Contract, if the outstanding loan at any time exceeds the Contract Value
minus the surrender charges, the outstanding loan will be in default. If the
outstanding loan goes into default, you will have a 62-day grace period in which
to pay back the excess outstanding loan. If you do not pay back the excess
outstanding loan by the end of the grace period, the loan will be foreclosed and
the Contract will terminate without value.
If the Guaranteed Death Benefit Rider is in effect on the Contract, the
Guaranteed Death Benefit Rider will terminate if the loan is foreclosed. Once
terminated, the Guaranteed Death Benefit Rider may not be reinstated.
Within limits, the Contract may be reinstated within three years from the date
of default if it lapses or the outstanding loan is foreclosed.
See CONTRACT TERMINATION AND REINSTATEMENT, page , and THE CONTACT - Guaranteed
Death Benefit Rider, page .
HOW IS MY CONTRACT TAXED?
The Contract has been designed to be a "modified endowment contract." However,
under Section 1035 of the Internal Revenue Code an exchange of (1) a life
insurance contract entered into before June 21, 1988, or (2) a life insurance
contract that is not itself a modified endowment contract will not cause the
Contract to be treated as a modified endowment contract if no additional
payments are made and there is no increase in the death benefit as a result of
the exchange.
If the Contract is considered a modified endowment contract, all distributions
(including Contract loans, partial withdrawals, surrenders and assignments) will
be taxed on an "income-out-first" basis. Also, a 10% federal penalty tax may be
imposed on that part of a distribution that is includible in income. However,
the net death benefit under the Contract is generally excludable from the gross
income of the beneficiary. In some circumstances, federal estate tax may apply
to the net death benefit or the Contract Value. See TAXATION OF THE CONTRACT,
page ____.
PERFORMANCE INFORMATION
The Contracts were first offered to the public in 1999. However, the Company may
advertise "Total Return" and "Average Annual Total Return" performance
information based on the periods that the portfolios have been in existence.
The portfolios are not available for purchase directly by the general public and
are not the same as mutual funds that may have similar names that are sold
directly to the public. There can be no assurance, and no representation is
made, that the investment performance of the portfolios will be comparable to a
fund with a similar name or same investment objective or adviser.
The results for any period prior to the Contracts being offered will be
calculated as if the Contracts had been offered during that period of time when
the portfolio was in existence, 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 Contract 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 Contracts is net of portfolio expenses,
monthly deductions and surrender charges. We take a representative Contract
Owner and assume that:
- The Insured is a male Age 55, standard (non-tobacco user) underwriting
class, issued under simplified underwriting guidelines;
- The Contract Owner had allocations in each of the sub-accounts for the
portfolio durations shown; and
- There was a full surrender at the end of the applicable period.
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.
We may compare performance information for a sub-account in reports and
promotional literature to:
- Standard & Poor's 500 Stock Index ("S&P 500");
- Dow Jones Industrial Average ("DJIA");
- Shearson Lehman Aggregate Bond Index;
- Other unmanaged indices of unmanaged securities widely regarded by
investors as representative of the securities markets;
- Other groups of variable life separate accounts or other investment
products tracked by Lipper Analytical Services;
- Other services, companies, publications, or persons such as Morningstar,
Inc., who rank the investment products on performance or other criteria;
and
- The Consumer Price Index.
Unmanaged indices may assume the reinvestment of dividends but generally do not
reflect deductions for insurance and administrative charges, separate account
charges and portfolio management costs and expenses.
In advertising, sales literature, publications or other materials, we may give
information on various topics of interest to Contract Owners and prospective
Contract Owners. These topics may include:
- 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);
- The advantages and disadvantages of investing in tax-deferred and taxable
investments;
- Customer profiles and hypothetical payment and investment scenarios;
- Financial management and tax and retirement planning; and
- Investment alternatives to certificates of deposit and other financial
instruments, including comparisons between the Contracts and the
characteristics of and market for the financial instruments.
At times, the Company may also advertise the ratings and other information
assigned to it by independent rating organizations such as A.M. Best Company
("A.M. Best"), Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Insurance Rating Services ("S&P") and Duff & Phelps. A.M. Best's and Moody's
ratings reflect their current opinion of the Company's relative financial
strength and operating performance in comparison to the norms of the life/health
insurance industry. S&P's and Duff & Phelps' ratings measure the ability of an
insurance company to meet its obligations under insurance policies it issues but
do not measure the ability of such companies to meet other non-policy
obligations. The ratings also do not relate to the performance of the
portfolios.
TABLE I
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 1997, SINCE
INCEPTION OF THE PORTFOLIOS NET OF PORTFOLIO EXPENSES, SUB-ACCOUNT CHARGES, ALL
MONTHLY DEDUCTIONS (CHARGES) AND ASSUMING SURRENDER OF THE CONTRACT
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 Contract charges (including
surrender charges) for a representative Contract. It is assumed that the Insured
is male, Age 55, standard (non-tobacco user) underwriting class; a single
payment of $25,000 was made; the Contract was issued under simplified
underwriting criteria; the entire payment was allocated to each sub-account
individually; and there was a full surrender of the Contract at the end of the
applicable period.
- ----------------------------------------------------------------------------------------------------------------------
10 Year or
Life of the Number
Portfolio (if of
Less than 10 Years Since
Years Since Portfolio
5 Year Portfolio Inception
Average Inception) (if Less
Sub-Account Portfolio 1 Year Total Annual Average Annual than 10
Investing in the Inception Return Total Total Return Years)
Corresponding Portfolio Date Return
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Alger American Income & Growth 11/15/88 24.18% 14.15% 11.20% 9.13
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & Income 1/14/91 16.86% 16.02% 12.46% 6.96
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier Growth 6/26/92 21.81% 17.79% 18.61% 5.52
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital Appreciation 4/05/93 16.18% N/A 16.55% 4.74
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 8/31/90 5.09% 22.82% 40.65% 7.34
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 9/13/93 10.32% N/A 12.86% 4.30
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth 9/13/93 10.37% N/A 19.45% 4.30
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 7/24/95 10.05% N/A 18.43% 2.44
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
MFS VIT Growth with Income 10/09/95 17.83% N/A 22.25% 2.23
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
MFS VIT Research 7/26/95 8.60% N/A 17.09% 2.44
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF Fixed Income 1/02/97 -1.57% N/A -1.57% 1.00
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF High Yield 1/02/97 1.96% N/A 1.96% 1.00
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF International Magnum 1/02/97 N/A -4.13% 1.00
-4.13%
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Managed(1) 8/01/88 10.51% 16.61% 17.58% 9.42
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Small Cap(2) 8/01/88 10.46% 11.37% 12.83% 9.42
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth (3) 2/26/69 34.17% 27.23% 22.79% N/A
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money Market 1/01/98 N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
(1) 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.
(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) The Growth Portfolio of the Transamerica Variable Insurance Fund, Inc., is
the successor to Separate Account Fund C of Transamerica Occidental Life
Insurance Company, a management investment company funding variable annuities,
through a reorganization on November 1, 1996. Accordingly, the performance data
for the Transamerica VIF Growth Portfolio includes performance of its
predecessor.
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
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 1997 SINCE
INCEPTION OF THE PORTFOLIOS EXCLUDING
MONTHLY DEDUCTIONS (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 and all sub-account charges. THE DATA DOES NOT REFLECT
MONTHLY DEDUCTIONS (CHARGES) UNDER THE CONTRACTS OR SURRENDER CHARGES.
- ----------------------------------------------------------------------------------------------------------------------
10 Year or
Life of the Number
Portfolio (if of
Less than 10 Years Since
Years Since Portfolio
5 Year Portfolio Inception
Average Inception) (if Less
Sub-Account Portfolio 1 Year Total Annual Average Annual than 10
Investing in the Inception Return Total Total Return Years)
Corresponding Portfolio Date Return
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Alger American Income & Growth 11/15/88 35.20% 16.47% 12.88% 9.13
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & Income 1/14/91 27.77% 18.33% 14.38% 6.96
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier Growth 6/26/92 32.79% 20.09% 20.74% 5.52
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital Appreciation 4/05/93 27.07% N/A 18.91% 4.74
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 8/31/90 15.81% 25.11% 42.80% 7.34
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 9/13/93 21.12% N/A 15.35% 4.30
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth 9/13/93 21.18% N/A 21.90% 4.30
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 7/24/95 20.85% N/A 22.47% 2.44
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
MFS VIT Growth with Income 10/09/95 28.75% N/A 26.55% 2.23
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
MFS VIT Research 7/26/95 19.37% N/A 21.16% 2.44
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF Fixed Income 1/02/97 9.08% N/A 9.08% 1.00
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF High Yield 1/02/97 12.66% N/A 12.66% 1.00
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF International Magnum 1/02/97 6.48% N/A 6.48% 1.00
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Managed(1) 8/01/88 21.32% 18.92% 19.36% 9.42
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Small Cap(2) 8/01/88 21.26% 13.70% 14.53% 9.42
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth (3) 2/26/69 45.33% 29.53% 24.64% N/A
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money Market 1/01/98 N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
(1) 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.
(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) The Growth Portfolio of the Transamerica Variable Insurance Fund, Inc., is
the successor to Separate Account Fund C of Transamerica Occidental Life
Insurance Company, a management investment company funding variable annuities,
through a reorganization on November 1, 1996. Accordingly, the performance data
for the Transamerica VIF Growth Portfolio includes performance of its
predecessor.
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.
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 Company is a charter member of the Insurance Marketplace Standards
Association ("IMSA"). Companies that belong to IMSA subscribe to a rigorous set
of standards that cover the various aspects of sales and service for
individually sold life insurance and annuities. IMSA members have adopted
policies and procedures that demonstrate a commitment to honesty, fairness and
integrity in all customer contacts involving sales and service of individual
life insurance and annuity products.
THE SEPARATE ACCOUNT. Transamerica Occidental Life Separate Account VUL-2
("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 Contracts 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 contracts and 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 (17) 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. These portfolios are
not the same as mutual funds that may have very similar names that are sold
directly to the public. 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 Contracts 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.
A summary of the investment objectives and policies of the portfolios is set
forth below. Before investing, read carefully the prospectuses of the portfolios
that accompany this prospectus. Statements of Additional Information for the
portfolios are available without charge by contacting the Variable Life Service
Center.
There is no guarantee that the investment objectives of the portfolios will be
achieved. Contract Value may be more or less than the aggregate payments made to
the Contract. 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 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 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 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 Adviser 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 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 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 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 investment 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 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 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, 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 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
securities, 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 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 the first
$500 million plus 0.45% of the next $500 million plus 0.40% of the assets over
$1 billion.
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 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 the first $400 million plus
0.75% of the next $400 million plus 0.70% of the assets over $800 million.
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 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. The Growth Portfolio invests primarily in common stocks of growth
companies that are considered by the Sub-Adviser to be premier companies. In the
Sub-Adviser's view, characteristics of premier companies include one or more of
the following: dominant market share; leading brand recognition; proprietary
products or technology; low-cost production capability; and excellent management
with shareholder orientation. The Sub-Adviser of the Portfolio believes in
long-term investing and places great emphasis on the sustainability of the above
competitive advantages. Unless market conditions indicate otherwise, the
Sub-Adviser also tries to keep the Portfolio fully invested in equity-type
securities and does not try to time stock market movements. 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 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 objective or policy of a
portfolio, we will notify you of the change. If you have Contract Value
allocated to that portfolio, you may reallocate the Contract Value to another
portfolio or to the Fixed Account without charge. For you to exercise your
rights, we must receive your written request within sixty (60) days of the later
of the
- Effective date of the material change in the investment objective or policy;
or
- Receipt of the notice of your right to transfer.
THE CONTRACT
APPLYING FOR A CONTRACT
Individuals wishing to purchase a Contract must complete an application. We
offer Contracts to individuals 89 years old and under. For applications for
Second-to-Die Contracts, both proposed Insureds must be 89 years old or under.
After receiving a completed application from a prospective Contract 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 Contract only after underwriting has been completed. We
may reject an application that does not meet our underwriting guidelines.
A prospective Contract Owner may make a payment at the time the application is
completed. The payment must be at least $10,000 and at least 80% of the
guideline single premium for the face amount requested. Under these
circumstances, 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 (to the
extent required by our underwriting guidelines), completion of all underwriting
requirements, and the proposed Insured must be insurable under Transamerica's
rules for insurance under the Contract, 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 made the initial payment before the date we approve the application, we
will allocate the payment to our Fixed Account within two business days of
receipt of the payment at our Variable Life Service Center. IF WE ARE UNABLE TO
ISSUE THE CONTRACT, THE PAYMENT WILL BE RETURNED TO THE CONTRACT OWNER WITHOUT
INTEREST.
If your application is approved and the Contract is issued, we will allocate
your Contract Value within two days of the date we approve your application
according to your allocation instructions. However, if your Contract provides
for a full refund of payments under its "Right to Cancel" provision as required
in your state (see THE CONTRACT -- "Free Look Period," below), we will initially
allocate your sub-account investments to the sub-account investing in the Money
Market portfolio. We will reallocate all amounts according to your investment
choices no later than the expiration of four calendar days plus the number of
days under the state free look period (usually 10 days, but longer in some
circumstances).
If your initial payment is equal to the amount of the Guideline Single Premium,
the contract will be issued with the Guaranteed Death Benefit Rider at no
additional cost. If the Guaranteed Death Benefit Rider is in effect on the final
payment date, a guaranteed net death benefit will be provided thereafter unless
the Guaranteed Death Benefit Rider is subsequently terminated. See THE CONTRACT
- -- "Death Benefit" -- "Guaranteed Death Benefit Rider," below. THE GUARANTEED
DEATH BENEFIT RIDER MAY NOT BE AVAILABLE IN ALL JURISDICTIONS.
FREE LOOK PERIOD
The Contract provides for a free look period under the Right to Cancel
provision. You have the right to examine and cancel your Contract by returning
it to us or to one of our representatives on or before the tenth day (or such
later date as required in your state) after you receive the Contract.
If your Contract provides for a full refund under its "Right to Cancel"
provision as required in your state, your refund will be your entire payment. If
your Contract does not provide for a full refund, you will receive:
- Amounts allocated to the Fixed Account; PLUS
- The Contract Value in the sub-accounts; PLUS
- All fees, charges and taxes which have been imposed.
We may delay a refund of any payment made by check until the check has cleared
your bank. Your refund will be determined as of the Valuation Date that the
Contract is received at our Variable Life Service Center.
CONVERSION PRIVILEGE
Within 24 months of the date of issue, you can convert your Contract into a
non-variable Contract by transferring all Contract 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 any future payment(s) to the Fixed Account, unless you instruct us
otherwise.
PAYMENTS
The Contracts are designed for a large single payment to be paid by the Contract
Owner on or before the date of issue. The minimum initial payment is $10,000.
The initial payment is used to determine the face amount. The face amount will
be determined by treating the payment as equal to 100% of the guideline single
premium except as provided below.
You also indicate the desired face amount on the application. If the face amount
specified exceeds 100% of the guideline single premium for the payment amount,
the application will be amended and a Contract with a higher face amount will be
issued. If the face amount specified is less than 80% of the guideline single
premium for the payment amount, the application will be amended and a Contract
with a lower face amount will be issued. The Contract Owner must agree to any
amendment to the application.
Under our underwriting rules, the face amount must be based on 100% of the
guideline single premium to be eligible for simplified underwriting and to
qualify for the Guaranteed Death Benefit Rider.
Payments are payable to the Company. Payments may be made by mail to our
Variable Life Service Center or through our authorized representative. Any
additional payment, after the initial payment, is credited to the sub-accounts
or Fixed Account on the date of receipt at the Variable Life Service Center .
The Contract limits the ability to make additional payments. Any additional
payment(s) may not cause total payments to exceed the maximum payment on the
specifications pages of your Contract. Additional payments may be accepted by us
subject to our underwriting approval if the payment would increase the amount of
the death benefit. No additional payment may be less than $10,000 without our
consent except as necessary to keep a Contract in force.
Total payments may not exceed the current maximum payment limits under federal
tax law. 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. We will return any part of a payment that is greater than that
amount. However, we will accept a payment needed to prevent Contract lapse
during a Contract year. See CONTRACT TERMINATION AND REINSTATEMENT.
ALLOCATION OF PAYMENTS
In the application for your Contract, you decide the initial allocation of the
payment among the sub-accounts and the Fixed Account. You may allocate the
payment to one or more of the sub-accounts and/or the Fixed Account. You may
allocate payment among up to seventeen (17) sub-accounts, plus the Fixed
Account. The minimum amount that you may allocate to a sub-account or to the
Fixed Account without our consent is 5.0% of the payment. Allocation percentages
must be in whole numbers (for example, 33 1/3% may not be chosen) and must total
100%.
You may change the allocation of any future payment 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 the Company
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, the Company may be liable for
any losses from unauthorized or fraudulent instructions. We require that callers
on behalf of a Contract Owner identify themselves by name and identify the
Contract 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.
The Contract Value in the sub-accounts will vary with investment experience. You
bear this investment risk. Investment performance may also affect the death
benefit. Review your allocations of Contract Value as market conditions and your
financial planning needs change.
TRANSFER PRIVILEGE
At any time prior to the election of a benefit payment option, subject to our
then current rules, you may transfer amounts among the sub-accounts or between a
sub-account and the Fixed Account. (You may not transfer that portion of the
Contract Value held in the Fixed Account that secures a Contract loan.)
We will make transfers at your written request or telephone request, as
described in THE CONTRACT -- ALLOCATION OF PAYMENTS. Transfers are effected at
the value next computed after receipt of the transfer order.
The first 18 transfers in a Contract year are free. After that, we may deduct a
transfer charge, not to exceed $25, from amounts transferred on each additional
transfer in that Contract year.
Transfers involving the Fixed Account are currently permitted only if:
- - - There has been at least a ninety (90) day period since the last transfer
from the Fixed Account; and
- - - The amount transferred from the Fixed Account in each transfer does not
exceed the lesser of $100,000 or 25% of the Contract Value.
These limitations do not apply to automatic transfers from the Fixed Account you
elect to make under the Dollar Cost Averaging Option.
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 Contract. 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 a "source account" you select for your Contract on a monthly,
quarterly, or semi-annual basis to one or more sub-accounts. You may choose
either the Money Market sub-account or the Fixed Account as your "source
account". The minimum amount of each DCA transfer from the "source account" is
$100, and you may not have value in more than seventeen 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 they are 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 "source 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. Transfers from the Fixed
Account as the "source account" will not be subject to the limitations on
transfers from the Fixed Account. We reserve the right to terminate the DCA
option at any time and for any reason.
Automatic Account Rebalancing (AAR). Once your 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. You may not have
value in more than seventeen sub-accounts. The minimum percentage allocation for
each selected sub-account without our consent is 5%, 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 would be
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 or from
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 automatic transfer for the elected option counts as one transfer
toward the 18 free transfers allowed in each Contract 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 Contract year.
The following transfers will not count toward the 18 free transfers:
- any transfers made for a conversion privilege;
- transfers to or from the Money Market sub-account during the free-look
period if your Contract provides for a full refund of payments under the
free-look provision (see "THE CONTRACT - APPLYING FOR A CONTRACT");
- transfers because of a Contract loan or a Contract loan repayment; and
- transfers because of a material change in investment policy.
TRANSFER PRIVILEGES SUBJECT TO POSSIBLE LIMITS
All of the transfer privileges described above are subject to our consent. We
reserve the right to impose limits on transfers including, but not limited to,
the:
- Minimum amount that may be transferred;
- Minimum amount that may remain in a sub-account following a transfer from
that sub-account;
- Minimum period between transfers involving the Fixed Account; and
- Maximum amounts that may be transferred from the Fixed Account.
These rules are subject to change by the Company.
DEATH BENEFIT
If the Contract is in force on the Insured's death, we will, with due proof of
death, pay the net death benefit to the named beneficiary. For Second-to-Die
Contracts, the net death benefit is payable on the death of the last surviving
Insured. There is no death benefit payable on the death of the first Insured to
die. 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 CONTRACT PROVISIONS - "Delay of Benefit Payments.") The
beneficiary may receive the net death benefit in a lump sum or under a benefit
payment option, unless the benefit payment option has been restricted by the
Contract Owner. (See APPENDIX C - BENEFIT PAYMENT OPTIONS.) The net death
benefit is the amount of the death benefit reduced by certain amounts, as
described below. The amount of the death benefit in some instances depends on
whether the Guaranteed Death Benefit Rider is in effect on the Contract at the
time of the Insured's death.
GUARANTEED DEATH BENEFIT RIDER (NOT AVAILABLE IN ALL JURISDICTIONS) - If at the
time of issue the Contract Owner has made payments equal to 100% of the
guideline single premium, a Guaranteed Death Benefit Rider will be added to the
Contract at no additional charge, if the Rider is available in your state. The
Contract will not lapse while the Guaranteed Death Benefit Rider is in force.
The Guaranteed Death Benefit Rider will terminate (AND MAY NOT BE REINSTATED) on
the first to occur of:
-- Foreclosure of the outstanding loan;
-- A request for a partial withdrawal or a loan after the final payment
date; or
--Your written request to terminate the Rider.
DEATH BENEFIT AND NET DEATH BENEFIT - Through the final payment date, the death
benefit is equal to the GREATER of the:
-- Face amount, or
-- Guideline minimum sum insured.
Through the final payment date, the net death benefit is:
-- The death benefit MINUS
-- Any outstanding loan, rider charges and monthly deductions due and
unpaid through the Contract month in which the Insured dies, as well as
any unpaid partial withdrawals, withdrawal transaction fees, and
applicable surrender charges.
If the Guaranteed Death Benefit Rider is in effect on the final payment date,
and is not subsequently terminated, then the death benefit after the final
payment date is the GREATER of:
-- The face amount on the final payment date, or
--The guideline minimum sum insured as of the date due proof of death
is received by us.
The net death benefit after the final payment date if the Guaranteed Death
Benefit Rider is in effect is:
-- The death benefit MINUS
-- Any outstanding loan, through the month in which the Insured dies.
If the Guaranteed Death Benefit Rider is NOT in effect, then the death benefit
after the final payment date is the guideline minimum sum insured as of the date
due proof of death is received by us.
The net death benefit after the final payment date if the Guaranteed Death
Benefit Rider is NOT in effect is:
-- The death benefit MINUS
-- Any outstanding loan, through the month in which the Insured dies,
as well as any unpaid partial withdrawals, withdrawal transaction fees,
and applicable surrender charges.
GUIDELINE MINIMUM SUM INSURED -- The guideline minimum sum insured is a
percentage of the Contract Value as set forth in APPENDIX A -- GUIDELINE MINIMUM
SUM INSURED TABLE. The guideline minimum sum insured is computed based on
federal income tax regulations to ensure that the Contract qualifies as a life
insurance contract and that the insurance proceeds generally will be excluded
from the gross income of the beneficiary.
ILLUSTRATION -- In this illustration, assume that the Insured is under the age
of 40, and that there is no outstanding loan.
A Contract with a $100,000 face amount will have a death benefit of at least
$100,000. However, because the death benefit must be equal to or greater than
265% of Contract Value, if the Contract Value exceeds $37,736 the death benefit
will exceed the $100,000 face amount. In this example, each dollar of Contract
Value above $37,736 will increase the death benefit by $2.65. For example, a
Contract with a Contract Value of $50,000 will have a guideline minimum sum
insured of $132,500 ($50,000 X 2.65); Contract Value of $60,000 will produce a
guideline minimum sum insured of $159,000 ($60,000 X 2.65); and Contract Value
of $75,000 will produce a guideline minimum sum insured of $198,750 ($75,000 X
2.65).
Similarly, if the Contract Value exceeds $37,736, each dollar taken out of the
Contract Value will reduce the death benefit by $2.65. If, for example, the
Contract 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 $159,000 to $132,500. If, however, the Contract Value multiplied
by 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 age in the above example were, for example, 50 (rather than between
zero and 40), the applicable percentage would be 200%. The death benefit would
not exceed the $100,000 face amount unless the Contract Value exceeded $50,000
(rather than $37,736), and each dollar then added to or taken from Contract
Value would change the death benefit by $2.00.
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 Contract. This rider is only available for
Contracts providing insurance coverage on a single life. The rider is not
available on Second-to-Die Contracts. 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 Contract
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 Contract.
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 smallest of
- One-half of the death benefit on the date the option is elected; or - The
amount that would reduce the face amount to 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 the Contract Value if you exercise the
option under this rider.
If you elect to exercise this option, your Contract 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 Contract's death benefit will be decreased by the option amount; and
- The Contract Value will be reduced in the same proportion as the reduction
in the death benefit.
The portion of the outstanding loan which will be deducted from the living
benefit will equal the outstanding loan times the option amount divided by the
death benefit.
There will be no surrender charges assessed on the reduction in Contract Value.
If you elect to exercise this option, we will provide you with a written
statement of the effect exercising this option will have on the values in your
Contract, including the effect on the outstanding loan amount, the death
benefit, and the surrender value. We will not distribute the living benefit to
you until you authorize the distribution after we have provided this written
statement.
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.
CONTRACT VALUE
The Contract Value is the total value of your Contract. It is the SUM of:
- Your accumulation in the Fixed Account; PLUS
- The value of your units in the sub-accounts.
There is no guaranteed minimum Contract Value. The Contract Value on any date
depends on variables that cannot be predetermined.
Your Contract Value is affected by the:
- Amount of your payment(s);
- Interest credited in the Fixed Account;
- Investment performance of the sub-accounts you select;
- Partial withdrawals;
- Loans, loan repayments and loan interest paid or credited; and
- Charges and deductions under the Contract.
COMPUTING CONTRACT VALUE -- We compute the Contract Value on the date of issue
and on each valuation date. On the date of issue, the Contract Value is:
- Your payment plus any interest earned during the period it was allocated
to the Fixed Account (see "THE CONTRACT -- APPLYING FOR A CONTRACT");
MINUS
- The monthly deductions due.
On each valuation date after the date of issue, the Contract Value is the SUM
of:
- Accumulations in the Fixed Account; PLUS
- The SUM of the PRODUCTS of:
- The number of units in each sub-account; TIMES
- The value of a unit in each sub-account on the valuation date.
THE UNIT -- We allocate each payment to the sub-accounts you selected. 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 Contract is the QUOTIENT
of:
- That part of the payment allocated to the sub-account; DIVIDED BY
- The dollar value of a unit on the valuation date the payment is received
at our Variable Life Service Center. (Prior to the end of the free-look
period for your Contract, however,
different rules may apply. See THE CONTRACT - APPLYING FOR A CONTRACT.)
The number of units will remain fixed unless changed by a split of unit value,
transfer, transfer charge, loan, partial withdrawal or surrender. Also, monthly
deductions taken from a sub-account will result in 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 (except that the
value for the Money Market sub-account was set at $1.00).
The value of a unit on any valuation date is the PRODUCT of:
- The dollar value of the unit on the preceding valuation date; TIMES
- The net investment factor.
NET INVESTMENT FACTOR -- The net investment factor measures the investment
performance of a sub-account during the valuation period just ended. The net
investment factor for each sub-account is the result of:
- The net asset value per share of a portfolio held in the sub-account
determined at the end of the current valuation period; PLUS
- The per share amount of any dividend or capital gain distributions made by
the portfolio on shares in the sub-account if the "ex-dividend" date
occurs during the current valuation period; DIVIDED BY
- 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;
MINUS
- The mortality and expense risk charge for each day in the valuation period
at an annual rate of 0.80% of the daily net asset value of that
sub-account.
The net investment factor may be more or less than one.
BENEFIT PAYMENT OPTIONS
The net death benefit payable may be paid in a single sum or under one or more
of the benefit payment options then offered by the Company. Benefit payment
options are paid from the General Account and are not based on the investment
experience of the Separate Account. See "APPENDIX C - BENEFIT PAYMENT OPTIONS."
These benefit payment options also are available at the maturity date or if the
Contract is surrendered. If no election is made, we will pay the net death
benefit in a single sum.
OPTIONAL INSURANCE BENEFITS
You may add an optional insurance benefit to the Contract by rider, as described
in APPENDIX B -- OPTIONAL INSURANCE BENEFITS. The cost of optional insurance
benefits, if any, becomes part of the monthly insurance protection charge.
SURRENDER
You may surrender the Contract and receive its surrender value. The surrender
value is:
- The Contract Value; MINUS
- 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 Contract within nine full Contract years of the date of issue. See
CHARGES AND DEDUCTIONS -- "Surrender Charge." If you reinstate your Contract,
however, your surrender charges upon reinstatement will be the charges which
applied on the date of default, and Contract years will be adjusted accordingly.
See CONTRACT TERMINATION AND REINSTATEMENT. The surrender value may be paid in a
lump sum or under a benefit payment option then offered by us. See APPENDIX C -
BENEFIT 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 CONTRACT PROVISIONS --
"Delay of Benefit Payments."
The surrender value will generally be includible in gross income to the extent
that the surrender value plus any outstanding loan at the time of surrender
exceeds the "tax basis" in the Contract. In addition, if the Contract is a
modified endowment contract (MEC), a 10% federal tax penalty may apply to the
taxable portion of the surrender value if the Contract Owner is less than 59 1/2
years old at the time of the distribution. See TAXATION OF THE CONTRACTS for
important information about surrenders.
PARTIAL WITHDRAWAL
You may withdraw part of the Contract Value of your Contract 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 $1,000. We will not allow a partial
withdrawal if it would reduce the Contract Value below $10,000. The face amount
is reduced proportionately based on the ratio of the amount of the partial
withdrawal plus withdrawal transaction fees and applicable surrender charges to
the Contract Value on the date of withdrawal.
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 withdrawal transaction fee plus the applicable surrender
charges. See CHARGES AND DEDUCTIONS -- "Surrender Charges" and CHARGES AND
DEDUCTIONS -- "Partial Withdrawal Costs." We will normally pay the partial
withdrawal within seven days following our receipt of the written request. We
may delay payment as described in OTHER CONTRACT PROVISIONS -- "Delay of Benefit
Payments."
If the Contract is considered a modified endowment contract (MEC), a partial
withdrawal will be includible in gross income on an "income-out-first" basis.
Additionally, a 10% federal tax penalty may apply to the taxable portion of a
partial withdrawal if the Contract Owner is less than 59 1/2 years old at the
time of the distribution. See TAXATION OF THE CONTRACTS for important
information about partial withdrawals.
CHARGES AND DEDUCTIONS
The following charges will apply to your Contract under the circumstances
described. Some of these charges apply throughout the Contract's duration.
MONTHLY DEDUCTIONS
On the monthly processing date, the Company will deduct an amount to cover
charges and expenses incurred in connection with the Contract. No monthly
deductions will be taken after the final payment date or, for the Distribution
Fee and the Tax Charge, after the end of the tenth Contract year. This monthly
deduction will be deducted by subtracting values from the Fixed Account
accumulation and/or canceling units from each applicable sub-account in the
ratio that the portion of the Contract Value in the sub-account bears to the
Contract Value. The amount of the monthly deduction will vary from month to
month. If the Contract Value is not sufficient to cover the monthly deduction
which is due, the Contract may lapse. (See CONTRACT TERMINATION AND
REINSTATEMENT.)
The monthly deduction is comprised of the following charges:
- - - ADMINISTRATION CHARGE: The Company imposes a monthly charge at an annual
rate of 0.30% of the Contract Value. This charge is to reimburse us for
administrative expenses incurred in the administration of the Contract. It is
not expected to be a source of profit.
- - - MONTHLY INSURANCE PROTECTION CHARGE: Immediately after the Contract is
issued the death benefit will be greater than the payment. While the Contract is
in force, the death benefit generally will be greater than the payment(s). To
enable us to pay this excess of the death benefit over the Contract Value, a
monthly cost of insurance charge is deducted. This charge varies depending on
the type of Contract and the underwriting class of the insured. In no event will
the current deduction for the cost of insurance exceed the guaranteed maximum
insurance protection rates set forth in the Contract. These guaranteed rates are
based on the Commissioners 1980 Standard Ordinary Mortality Tables (Age Last
Birthday), Tobacco User or Non-Tobacco User (males rates are used for unisex
Contracts and Mortality Table D for Second-to-Die Contracts) and the Insured's
sex and Age. There are appropriate adjustments in the rates for non-standard
ratings. The Tables used for this purpose set forth different mortality
estimates for males and females and for tobacco user and non-tobacco user. Any
change in the insurance protection rates will apply to all Insureds of the same
Age, sex and underwriting class whose Contracts have been in force for the same
period.
The underwriting class of an Insured will affect the insurance protection rate.
We currently place Insureds into standard underwriting classes and non-standard
underwriting classes. The underwriting classes are also divided into two
categories: tobacco user and non-tobacco user. We will place Insureds under the
age of 18 at the date of issue in a standard or non-standard underwriting class.
We will then classify the Insured as a non-tobacco user when the Insured reaches
age 18.
We also charge different current monthly insurance protection rates depending
upon whether the Contract was issued based on simplified underwriting criteria
or, instead, was issued based on full underwriting. For example, the rates
charged for a standard, non-tobacco user underwriting class will differ between
individuals in that class covered under Contracts issued on a simplified
underwriting basis compared to individuals in that class covered under Contracts
issued on a fully underwritten basis.
Currently, simplified underwriting applies to all applications which meet all of
the following conditions:
- The Insured (younger Insured for Second-to-Die applications) is at
least 30 years old but not older than 80 on the date of issue;
- The premium paid is 100% of the guideline single premium;
- - The premium is at least $10,000 but not more than the maximum permitted
under our current simplified underwriting guidelines; and
- Information disclosed on the application and received by us from the
Medical Information Bureau, Inc. (MIB) is consistent with our current
simplified underwriting guidelines.
Any application which does not meet all of the conditions listed above will be
fully underwritten. We may change our simplified underwriting criteria at any
time.
- - - DISTRIBUTION FEE: During the first ten Contract years, we make a monthly
deduction to compensate us for a portion of the sales expenses which are
incurred by us with respect to the Contracts. This charge is equal to an annual
rate of 0.40% of the Contract Value.
- - - TAX CHARGE: During the first ten Contract years, we make a monthly deduction
to partially compensate us for state and local premium taxes, and federal income
tax treatment of Deferred Acquisition Costs. This charge is equal to an annual
rate of 0.20% of Contract Value. Premium tax rates vary from state to state and
are a percentage of payments made by Contract 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 Tax Charge will be
deducted, even if we are not subject to premium or retaliatory tax in a state.
The Company does not intend to profit from this charge.
- - - RIDER CHARGES: any charges for riders are deducted monthly. Currently we
do not impose any charges for riders available under the Contract.
- - - DAILY DEDUCTIONS: We assess each sub-account with a charge for mortality and
expense risks we assume. Portfolio expenses are also reflected in the Separate
Account.
- - - MORTALITY AND EXPENSE RISK CHARGE: We impose a daily charge at an annual
rate of 0.80% 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 Contracts.
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 Contracts will exceed those compensated by the
administration charges in the Contracts. If the charge for mortality and expense
risks is not sufficient to cover mortality experience and expenses, we will
absorb the losses. If the charge turns out to be higher than mortality and
expense risk expenses, the difference will be a profit to us. If the charge
provides us with a profit, the profit will be available for our use to pay
distribution, sales and other expenses.
- - - PORTFOLIO EXPENSES: The value of the units of the sub-accounts will reflect
the investment advisory fee and other expenses of the portfolios whose shares
the sub-accounts purchase. 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 TAXATION OF THE CONTRACTS.
SURRENDER CHARGE
The Contract's contingent surrender charge is a deferred sales charge and an
unrecovered tax charge. The deferred sales charge compensates us for
distribution expenses, including commissions to our representatives, advertising
and the printing of prospectuses and sales literature.
- --------------------------- -------------------------- -------------------------- --------------------------
Contract Year Surrender Charge Contract Year Surrender Charge
- --------------------------- -------------------------- -------------------------- --------------------------
- --------------------------- -------------------------- -------------------------- --------------------------
1 9% 6 4%
- --------------------------- -------------------------- -------------------------- --------------------------
- --------------------------- -------------------------- -------------------------- --------------------------
2 8% 7 3%
- --------------------------- -------------------------- -------------------------- --------------------------
- --------------------------- -------------------------- -------------------------- --------------------------
3 7% 8 2%
- --------------------------- -------------------------- -------------------------- --------------------------
- --------------------------- -------------------------- -------------------------- --------------------------
4 6% 9 1%
- --------------------------- -------------------------- -------------------------- --------------------------
- --------------------------- -------------------------- -------------------------- --------------------------
5 5% 10+ 0%
- --------------------------- -------------------------- -------------------------- --------------------------
The surrender charge applies for nine Contract years. (See REINSTATEMENT,
however for how surrender charges and applicable Contract years are adjusted if
a contract is reinstated.) We impose the surrender charge only if, during its
duration, you request a full surrender or a partial withdrawal in excess of the
free withdrawal amount.
PARTIAL WITHDRAWAL COSTS - SURRENDER CHARGES AND WITHDRAWAL TRANSACTION FEES.
A surrender charge may be deducted from Contract Value due to partial
withdrawal. However, in any Contract year, you may withdraw, without a surrender
charge, up to:
- 10% of the Contract Value; MINUS
- The total of any prior free withdrawals in the same Contract year ("Free
10% Withdrawal").
The right to make the Free 10% Withdrawal is not cumulative from Contract year
to Contract year. For example, if only 8% of Contract Value were withdrawn in
the second Contract year, the amount you could withdraw in future Contract years
would not be increased by the amount you did not withdraw in the second Contract
year.
We impose any applicable surrender charge on any withdrawal greater than the
Free 10% Withdrawal.
Currently, we do not impose a withdrawal transaction fee for partial
withdrawals. We reserve the right to impose a withdrawal transaction fee of 2.0%
of the amount withdrawn, not to exceed $25.
TRANSFER CHARGES
The first 18 transfers in a Contract year are free. After that, we may deduct a
transfer charge not to exceed $25 from amounts transferred in that Contract
year. This charge reimburses us for the administrative costs of processing the
transfer.
If you apply for automatic transfers, the first automatic transfer for the
elected option counts as one transfer. 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 Contract Value is free and does not count as
one of the 18 free transfers in a Contract year:
- A conversion within the first 24 months from date of issue;
- A transfer to the Fixed Account to secure a loan;
- A transfer from the Fixed Account as a result of a loan repayment;
- A reallocation of value in the Money Market sub-account as described above
under "THE CONTRACT - Applying for a Contract"; and
- A transfer made because of a material change in investment policy.
CONTRACT LOANS
You may borrow money secured by your Contract Value, both during and after the
first Contract year. The total amount you may borrow is the loan value. The
maximum loan value is 90% of the result of Contract Value less surrender
charges. Contract Value equal to the outstanding loan will earn monthly interest
in the Fixed Account at an annual rate of at least 4.0%.
The minimum loan amount is $1,000. The maximum loan amount is the loan value
minus any outstanding 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 CONTRACT PROVISIONS -- Delay of Payments."
We will allocate the loan 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. We will transfer the portion of the Contract Value in each
sub-account equal to the Contract loan to the Fixed Account. We will not count
this transfer as a transfer subject to the transfer charge.
PREFERRED LOAN OPTION
Any portion of the outstanding loan that represents (1) earnings in this
Contract, (2) a loan from an exchanged life insurance policy that was carried
over to this Contract, or (3) the gain in the exchanged life insurance policy
that was carried over to this Contract may be treated as a preferred loan. The
available percentage of the gain carried over from an exchanged policy, less any
policy loan carried over, which will be eligible for preferred loan treatment is
as follows:
- ------------------- ------------------ ------------------ ------------------ ---------------- ----------------
Beginning Unloaned Beginning Unloaned Beginning Unloaned
of Contract Year Gain Available of Contract Year Gain Available of Contract Gain Available
Year
- ------------------- ------------------ ------------------ ------------------ ---------------- ----------------
- ------------------- ------------------ ------------------ ------------------ ---------------- ----------------
1 0% 6 50% 11+ 100%
- ------------------- ------------------ ------------------ ------------------ ---------------- ----------------
- ------------------- ------------------ ------------------ ------------------ ---------------- ----------------
2 10% 7 60%
- ------------------- ------------------ ------------------ ------------------ ---------------- ----------------
- ------------------- ------------------ ------------------ ------------------ ---------------- ----------------
3 20% 8 70%
- ------------------- ------------------ ------------------ ------------------ ---------------- ----------------
- ------------------- ------------------ ------------------ ------------------ ---------------- ----------------
4 30% 9 80%
- ------------------- ------------------ ------------------ ------------------ ---------------- ----------------
- ------------------- ------------------ ------------------ ------------------ ---------------- ----------------
5 40% 10 90%
- ------------------- ------------------ ------------------ ------------------ ---------------- ----------------
The annual interest rate credited to the Contract Value securing a preferred
loan will be at least 5.5%.
There is some uncertainty as to the tax treatment of preferred loans. Consult a
qualified tax adviser. See TAXATION OF THE CONTRACTS.
LOAN INTEREST CHARGED
Interest accrues daily at the annual rate of 6.0%. Interest is due and payable
in arrears at the end of each Contract year or for as short a period as the loan
may exist. Interest not paid when due will be added to the outstanding loan by
transferring the portion of the Contract Value equal to the interest due to the
Fixed Account. The interest due will bear interest at the same rate.
REPAYMENT OF OUTSTANDING LOAN
You may pay any loans before Contract lapse or foreclosure and before the
maturity date. We will allocate that part of the Contract 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 Contract Value according to your most recent payment allocation
instructions. However, loan repayments allocated to the Separate Account cannot
exceed that portion of the Contract Value previously transferred from the
Separate Account to secure the outstanding loan.
If the outstanding loan exceeds the Contract Value less the surrender charge,
the outstanding loan will be in default and the Contract will enter a grace
period. We will mail a notice of default and minimum required payment 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 Contract will terminate
with no value. See CONTRACT TERMINATION AND REINSTATEMENT.
EFFECT OF CONTRACT LOANS
Contract loans will permanently affect the Contract 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 Contract 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 Contract exceeds the Contract Value minus
surrender charges, the Contract will be in default. There is no charge imposed
solely because the Contract goes into default. If you do not pay the required
premium within the grace period, however, the Contract will terminate without
value.
If you have an outstanding loan, decreases in Contract Value, including
decreases due to negative investment results in your sub-account allocations,
could result in default of your Contract. 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 Contract Value minus
surrender charges, resulting in your Contract going into default.
In the event the Contract 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 Contract for income tax purposes. See TAXATION OF THE
CONTRACTS.
If the Contract is considered a modified endowment contract (MEC), a loan taken
from the Contract will be includible in gross income on an "income-out-first"
basis. Additionally, a 10% federal tax penalty may apply to the taxable portion
of a loan if the Contract Owner is less than 59 1/2 years old at the time of the
distribution.
See TAXATION OF THE CONTRACTS for important information about loans.
CONTRACT TERMINATION AND REINSTATEMENT
CONTRACT LAPSE AND TERMINATION
If the Guaranteed Death Benefit Rider is not in effect on your Contract, the
Contract will lapse if, on a monthly processing date, the surrender value is
less than the monthly deductions due. If the Contract lapses, you will have a
62-day grace period in which to pay required premium. If sufficient premium is
not paid by the end of the grace period, the Contract will terminate without
value.
If the Guaranteed Death Benefit Rider is in effect on your Contract, the
Contract will not lapse. If the Guaranteed Death Benefit Rider is terminated,
however, your Contract may then lapse.
Additionally, whether the Guaranteed Death Benefit Rider is or is not in effect
on the Contract, if the outstanding loan at any time exceeds the Contract Value
minus the surrender charges, the outstanding loan will be in default. If the
outstanding loan goes into default, you will have a 62-day grace period in which
to pay back the excess outstanding loan. If you do not pay back the excess
outstanding loan by the end of the grace period, the loan will be foreclosed and
the Contract will terminate without value.
If the Guaranteed Death Benefit Rider is in effect on the Contract, the
Guaranteed Death Benefit Rider will terminate if the loan is foreclosed. Once
terminated, the Guaranteed Death Benefit Rider may not be reinstated.
See THE CONTACT - Guaranteed Death Benefit Rider.
REINSTATEMENT
A terminated Contract 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 Contract Value less surrender charges). The
reinstatement takes effect on the monthly processing date following the date you
submit to us:
- Written application for reinstatement;
- Evidence of insurability showing that the Insured is insurable according
to our current underwriting rules;
- A payment that is large enough to cover the cost of all Contract charges
and deductions that were due and unpaid during the grace period;
- A payment that is large enough to keep the Contract in force for three
months; and
- A payment or reinstatement of any loan against the Contract that existed
at the end of the grace period.
Contracts which have been surrendered may not be reinstated. The Guaranteed
Death Benefit Rider may not be reinstated.
SURRENDER CHARGE -- For the purpose of measuring the surrender charge period,
the Contract will be reinstated as of the date of default. The surrender charge
on the date of reinstatement is the surrender charge that would have been in
effect on the date of default. The remaining period during which surrender
charges apply, as well as the percentage charge applicable, will be adjusted
accordingly.
CONTRACT VALUE ON REINSTATEMENT -- The Contract Value on the date of
reinstatement is:
- The payment made to reinstate the Contract and interest earned from the
date the payment was received at our Variable Life Service Center; PLUS
- The Contract Value less any outstanding loan on the date of default; MINUS
- The monthly deductions due on the date of reinstatement.
You may reinstate any outstanding loan.
OTHER CONTRACT PROVISIONS
CONTRACT OWNER
The Contract Owner named on the specification pages of the Contract is the
Insured unless another Contract Owner has been named in the application. As
Contract Owner, you are entitled to exercise all rights under your Contract
while the Insured is alive, with the consent of any irrevocable beneficiary.
BENEFICIARY
The beneficiary is the person or persons to whom the net death benefit is
payable on the Insured's death. Unless otherwise stated in the Contract, the
beneficiary has no rights in the Contract before the Insured dies. While the
Insured is alive, you may change the beneficiary, unless you have declared the
beneficiary to be irrevocable. An irrevocable beneficiary may only be changed
with the consent of the irrevocable beneficiary. If no beneficiary is alive when
the Insured dies, the Contract Owner (or the Contract 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
the Contract Owner has requested otherwise.
ASSIGNMENT
You may assign a Contract as collateral or make an absolute assignment. All
Contract 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 Contract. 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 on
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 CONTRACT PROVISIONS MAY VARY BY STATE.
LIMIT ON RIGHT TO CHALLENGE THE CONTRACT
Except for fraud (unless such defense is prohibited by state law) or non-payment
of premium, we cannot challenge the validity of your Contract if the Insured was
alive after the Contract has 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. We may also challenge the validity of your
Contract for two years from the effective date of : (1) any change in
underwriting class that you request; and (2) any reinstatement.
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 Contract, without interest, less any
outstanding loan and partial withdrawals.
MISSTATEMENT OF AGE OR SEX
If the Insured's Age or sex is not correctly stated in the Contract application,
we will adjust the death benefit and the face amount under the Contract to
reflect the correct Age and sex. The adjustment will be based upon the ratio of
the maximum payment for the Contract to the maximum payment for the Contract
issued for the correct Age or sex. We will not reduce the death benefit to less
than the guideline minimum sum insured. For a unisex Contract, there is no
adjusted benefit solely for misstatement of sex. No adjustment will be made if
the Insured dies after the final payment date, if the Guaranteed Death Benefit
Rider is not in effect on the Contract.
DELAY OF PAYMENTS
We may delay paying any amounts derived from a payment you made by check until
the check has cleared your bank. Amounts payable from the Separate Account for
surrender, partial withdrawals, net death benefit, Contract 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; or
- 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 reserve the right to defer amounts payable from the Fixed Account. This delay
may not exceed 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
Contracts that we or our affiliates issue will not be delayed.
TAXATION OF THE CONTRACTS
The following summary of federal tax considerations is 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 Contracts. 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 Contract Owner is
a corporation or the Trustee of an employee benefit plan. You should consult a
qualified tax adviser to apply the law to your circumstances.
THE COMPANY AND THE SEPARATE ACCOUNT
The Company is taxed as a life insurance company under Subchapter L of the
Internal Revenue 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. We do not currently charge for
federal income taxes with respect to 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, the Company 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 CONTRACTS
We believe that the Contracts 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 Contract
Value to the death benefit. As life insurance contracts, the net death benefits
of the Contracts 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
excludability 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 Contract Value is not taxable until received by
you or your designee (but see "DISTRIBUTION UNDER MODIFIED ENDOWMENT
CONTRACTS").
Federal tax law requires that the investment of each sub-account funding the
Contracts 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 Contract
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 Contracts or our administrative rules may be modified as necessary
to prevent a Contract 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 face amount, lapse with Contract loan outstanding, or assignment of the
Contract may have tax consequences. Within the first fifteen Contract years, a
distribution of cash required under Section 7702 of the Code because of a
reduction of benefits under the Contract may be taxable to the Contract Owner as
ordinary income respecting any investment earnings. Federal, state and local
income, estate, inheritance, and other tax consequences of ownership or receipt
of Contract proceeds depend on the circumstances of each Insured, Contract Owner
or beneficiary.
A life insurance contract is treated as a modified endowment contract ("MEC") if
it otherwise meets the definition of life insurance under Code Section 7702 but
either fails the "7-pay test" of Code Section 7702A or is received in exchange
for a MEC. It is expected that most of the Contracts will be MECs, except where
a Contract is issued as part of an exchange under Code Section 1035. Under Code
Section 1035, an exchange of (1) a life insurance contract entered into before
June 21, 1988, or (2) a life insurance contract that is not itself a MEC, will
not cause the Contract to be treated as a MEC provided no additional payments
are made to the Contract and there is no increase in the death benefit as a
result of the exchange.
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 Contract will fail this 7-pay test if the cumulative
premiums and other amounts paid for the Contract at any time during the first 7
contract years (or during any subsequent 7-year test period resulting from a
material change in the Contract) exceed the sum of the net level premiums which
would have been paid up to such time if the Contract 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 Contract's benefits (e.g., upon a withdrawal, death benefit
reduction or termination of a rider benefit) during a 7-pay test period, the
Contract 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 Contract 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(e)(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
Contract's "investment in the contract" (or "tax basis"). Generally, a
Contract's tax basis is equal to its total premiums less amounts recovered
tax-free. To the extent that the Contract'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
Contractholder 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 Contract 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.
CONTRACT LOANS
As to Contracts that are not MECs, Transamerica believes that non-preferred
loans received under the Contract will be treated as an indebtedness of the
Contract Owner for federal income tax purposes. Under current law, these loans
will not constitute income for the Contract Owner while the Contract is in
force. 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 Contract
loans is generally nondeductible for a Contract issued or materially changed
after June 8, 1997. In addition, under Section 264(f) certain Contracts 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 Contract
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.
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 Contract Owners with Contract 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 Contracts.
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 Contracts.
We will compute the number of votes that a Contract Owner has the right to
instruct on the record date established for the portfolio. This number is the
quotient of
- Each Contract Owner's Contract Value in the sub-account; divided by
- 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 Contract 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 Contract Owners.
DIRECTORS AND PRINCIPAL OFFICERS OF
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
NickiBair* 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.
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.
JamesW. Dederer, CLU* Director, Executive Vice President, General Counsel and
Corporate Secretary of TOLIC since 1988.
George A. Foegele***** Director and Senior Vice President; President and Chief
Executive Officer of Transamerica Life Insurance Company of Canada.
DavidE. 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.
FrankC. 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.
KarenMacDonald* 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.
LarryRoy*** Senior Vice President Sales and Marketing of Transamerica
Corporation since 1994.
Paul E. Rutledge III*** Director and President, Reinsurance Division since
1998. President, Life Insurance Company of Virginia, 1991-1997.
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.
Nooruddin S. Veerjee, FSA* President of Insurance Products Division since
1997. Director, President of Group Pension Division of TOLIC since
1993. 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 business address is 300 Consilium Place,
Scarborough, Ontario, Canada M1H3G2.
Transamerica is insured under a broad manuscript fidelity bond program with
coverage limits of $80,000,000. The lead underwriter is Capital CNA.
DISTRIBUTION
Transamerica Securities Sales Corporation (TSSC) acts as the principal
underwriter and general distributor of the Contract. TSSC is registered with the
SEC as a broker-dealer and is a member of the National Association of Securities
Dealers (NASD). TSSC was organized on February 26, 1986, under the laws of the
state of Maryland. Broker-dealers sell the Contracts through their registered
representatives who are appointed by us.
We pay to broker-dealers who sell the Contract commissions based on a commission
schedule, Broker-dealers may choose among available commission options. Each
option includes a commission equal to a percentage of the payment made to the
Contract. Certain options also include a commission equal to a percentage of the
unloaned Contract Value ("trail commission"), paid quarterly beginning with the
second Contract year on in force Contracts. Commission options provide for
commissions of up to 8.0% of payments made, with no trail commissions, and
lesser commissions on payments made but with trail commissions.
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 Contracts.
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
- The distribution fee;
- The surrender charges; and
- Investment earnings on amounts allocated under Contracts to the Fixed
Account.
Commissions paid on the Contract, including other incentives or payments, are
not charged to the Contract Owners or the Separate Account.
The following table furnishes information with respect to each director and
officer of TSSC.
Name Position with TSSC
Barbara Kelley Director & President
Regina Fink Director & Secretary
Nooruddin Veerjee Director
Dan Trivers Senior Vice President
Nicki Bair Vice President
Chris Shaw Second Vice President
Ben Tang Treasurer
The principal business address of each of the above is 1150 S. Olive Street,
Los Angeles, California 90015.
REPORTS
We will maintain the records for the Separate Account. We will promptly send you
statements of transactions under your Contract, including:
- Payments;
- Transfers among sub-accounts and the Fixed Account;
- Partial withdrawals;
- Increases in loan amount or loan repayments;
- Lapse, loan default, or termination for any reason; and
- Reinstatement.
We will send an annual statement to you that will summarize all of the above
transactions and deductions of charges during the Contract year. It will also
set forth the status of the death benefit, Contract Value, surrender value,
amounts in the sub-accounts and Fixed Account, and any Contract loans. We will
send you reports containing financial statements and other information for the
Separate Account and the Portfolios as the 1940 Act requires.
SERVICES
The Company receives fees from the investment advisers or other service
providers of certain portfolios in return for providing certain services to
Contract Owners.
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:
- The shares of the portfolio are no longer available for investment; or
- 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 Contract interest in a sub-account without notice to Contract
Owners and prior approval of the SEC and state insurance authorities. The
Separate Account may, as the law allows, purchase other securities for other
contracts or allow a conversion between contracts on a Contract 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 and that fund other
variable life 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 insurance contract owners or variable annuity
contract owners. Transamerica does not believe that mixed funding is currently
disadvantageous to either variable life insurance contract owners or variable
annuity contract owners. Transamerica will monitor events to identify any
material conflicts because of mixed funding. If Transamerica concludes that
separate portfolios should be established for variable life and variable annuity
separate accounts, or for separate variable life separate accounts, we will bear
the expenses.
We may change the Contract to reflect a substitution or other change and will
notify Contract Owners of the change. Subject to any approvals the law may
require, the Separate Account or any sub-accounts may be:
- Operated as a management company under the 1940 Act;
- Deregistered under the 1940 Act if registration is no longer required; or
- Combined with other sub-accounts or our other separate accounts.
PREPARING FOR YEAR 2000
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoice or
engage in similar normal business activities. Although the Company does not
believe that there is a material contingency associated with the Year 2000
project, there can be no assurance that exposure for material contingencies will
not arise.
FURTHER INFORMATION
We have filed a registration statement under the Securities Act of 1933 ("1933
Act") 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 Contract 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
Contract relating to the Separate Account. For complete details on the Fixed
Account, read the Contract itself. The Fixed Account and other interests in the
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 Contract 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 payment 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 Contract
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 Contract anniversary. At each Contract 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 Contract Value in
the Fixed Account which secures any outstanding loan. See "TRANSFERS,
SURRENDERS, PARTIAL WITHDRAWALS AND CONTRACT LOANS."
TRANSFERS, SURRENDERS, PARTIAL WITHDRAWALS AND CONTRACT LOANS
If a Contract is surrendered or if a partial withdrawal is made, a surrender
charge and/or withdrawal transaction fee may be imposed. We deduct partial
withdrawals from Contract Value allocated to the Fixed Account on a
last-in/first out basis.
The first 18 transfers in a Contract year are free. After that, we may deduct a
transfer charge not to exceed $25 for each additional transfer in that Contract
year. The transfer privilege is subject to our consent and to our then current
rules.
Contract loans may also be made from the Contract Value in the Fixed Account. We
will credit that part of the Contract Value that is equal to any outstanding
loan with interest at an effective annual yield of at least 4.0% (5.5% for
preferred loans).
We may delay transfers, surrenders, partial withdrawals, net death benefits and
Contract loans 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 Contracts that we or our affiliates issue will not be delayed.
INDEPENDENT AUDITORS
The consolidated financial statements of Transamerica at December 31, 1997, 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.
There are no audited financial statements for the Separate Account since it had
not commenced operations as of December 31, 1998.
FINANCIAL STATEMENTS
Financial Statements for Transamerica are included in this prospectus, starting
on the next page. Transamerica Occidental Life Separate Account VUL-2 had not
yet commenced operations as of December 31, 1998, 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 Contract. They should not be considered as bearing on the
investment performance of the assets held in the Separate Account.
The most current financial statements of Transamerica are those as of December
31, 1997. Transamerica does not prepare financial statements more often than
annually and believes that any incremental benefit to prospective policy holders
that may result from preparing and delivering more current financial statements,
though unaudited, does not justify the additional cost that would be incurred.
In addition, Transamerica represents that there have been no adverse changes in
the financial condition or operations of the company between the end of the most
current fiscal year and the date of this prospectus.
APPENDIX A -- GUIDELINE MINIMUM SUM INSURED TABLE
The guideline minimum sum insured is a percentage of the Contract Value as set
forth below. The percentages in the table are at least equal to the minimum
percentages required by federal income tax regulations.
Guideline Minimum Sum Insured Table
Attained Age Percentage Attained Age Percentage
40 or less 265% 64 137%
41 258% 65 135%
42 251% 66 134%
43 244% 67 133%
44 237% 68 132%
45 230% 69 131%
46 224% 70 130%
47 218% 71 128%
48 212% 72 126%
49 206% 73 124%
50 200% 74 122%
51 193% 75-85 120%
52 186% 86 118%
53 179% 87 116%
54 172% 88 114%
55 165% 89 112%
56 161% 90 110%
57 157% 91 108%
58 153% 92 106%
59 149% 93 -95 105%
60 145% 96 104%
61 143% 97 103%
62 141% 98 102%
63 139% 99-115 101%
The guideline minimum sum insured percentage for contracts issued subject to the
jurisdiction of Florida is 100% (rather than 101%) for attained ages 100-115.
A-1
APPENDIX B -- OPTIONAL INSURANCE BENEFITS
This Appendix provides only a summary of other insurance benefits available by
rider. For more information, contact your representative. Certain riders may not
be available in all states.
OPTION TO ACCELERATE DEATH BENEFITS (LIVING BENEFITS RIDER)
This rider allows the Contract Owner to elect to receive part of the net death
benefit under the Contract prior to the Insured's death if the Insured becomes
terminally ill, as defined in the rider. This rider is not available on
Second-to-Die Contracts.
LIFE INSURANCE 1035 EXCHANGE RIDER
This rider provides preferred loan rates to: (a) any outstanding loan carried
over from an exchanged policy, the proceeds of which are applied to purchase the
Contract; and (b) a percentage of the gain under the exchanged policy, less the
outstanding policy loans carried over to the Contract, as of the date of
exchange.
GUARANTEED DEATH BENEFIT RIDER
If the Contract Owner pays 100% of the guideline single premium for the
Contract, this rider will be added to the Contract without additional charge. If
the rider is in effect, the Contract will not lapse through the final payment
date. After the final payment date, if the rider is in effect and is not
subsequently terminated, the rider provides that the death benefit after the
final payment date is the GREATER of (a) the face amount as of the final payment
date or (b) 101% of the Contract Value as of the date due proof of death is
received by the Company. The net death benefit under the rider after the final
payment date is the death benefit REDUCED by the outstanding loan, if any,
through the Contract month in which the Insured dies. The rider may terminate
under certain circumstances and, once terminated, may not be reinstated.
B-1
APPENDIX C - BENEFIT PAYMENT OPTIONS
BENEFIT PAYMENT OPTIONS -- When the insured dies, we will pay the net death
benefit in a lump sum unless you or the beneficiary choose a benefit payment
option. You may choose a benefit payment option while the insured is living. The
beneficiary may choose a benefit option after the insured has died. The
beneficiary's right to choose will be subject to any benefit payment option
restrictions in effect at the insured's death. You may also choose one of these
options as a method of receiving the surrender or maturity proceeds, if any are
available under this Contract. When we receive a satisfactory written request,
we will pay the benefit according to one of these options.
The amounts payable under a benefit payment option are paid from the Fixed
Account. These amounts are not based on the investment experience of the
Separate Account.
OPTION A: INSTALLMENT FOR A GUARANTEED PERIOD -- We will pay equal installments
for a guaranteed period of from one to thirty years. Each installment will
consist of part benefit and part interest. We will pay the installments monthly,
quarterly, semi-annually or annually, as requested.
OPTION B: INSTALLMENTS FOR LIFE WITH A GUARANTEED PERIOD -- We will pay equal
monthly installments as long as the designated individual is living, but we will
not make payments for less than the guaranteed period the payee chooses. The
guaranteed period may be either 10 years or 20 years. We will pay the
installments monthly.
OPTION C: BENEFIT DEPOSITED WITH INTEREST -- We will hold the benefit on
deposit. It will earn interest at the annual interest rate we are paying as of
the date of death, surrender or maturity. We will not pay less than 2 1/2%
annual interest. We will pay the earned interest monthly, quarterly,
semi-annually or annually, as requested. The payee may withdraw part or all of
the benefit and earned interest at any time.
OPTION D: INSTALLMENTS OF A SELECTED AMOUNT -- We will pay installments of a
selected amount until we have paid the entire benefit and accumulated interest.
OPTION E: ANNUITY -- We will use the benefit as a single payment to buy an
annuity. The annuity may be payable based on the life of one or two designated
individuals. It may be payable for life with or without a guaranteed period, as
requested. The annuity payment will not be less than what our current annuity
contracts are then paying.
GENERAL -- The payee may arrange any other method of benefit as long as we agree
to it. There must be at least $10,000 available for any option and the amount of
each installment must be at least $100. If the benefit amount is not enough to
meet these requirements, we will pay the benefit in a lump sum.
Installments which vary by age of the designated individual will be determined
based on the age nearest birthday of the designated individual on the date of
death, maturity, or surrender. If the net death benefit is payable, the benefit
payment option starting date is the date of death of the insured. For purposes
of policy maturity or surrender, the date the written request is received in the
Variable Life Service Center is the benefit payment option starting date.
The first installment due under any option will be for the period beginning as
of the date of death, maturity or surrender. Any unpaid balance we hold under
Options A, B or D will earn interest at the rate we are paying at the time of
settlement. We will not pay less than 3% annual interest. Any benefit we hold
will be combined with our general assets.
If the payee does not live to receive all guaranteed payments under Options A,
B, D or E or any amount deposited under Option C, plus any accumulated interest,
we will pay the remaining benefit as scheduled to the payee's estate. The payee
may name and change a successor payee for any amount we would otherwise pay the
payee's estate.
APPENDIX D -- ILLUSTRATIONS OF DEATH BENEFIT, CONTRACT VALUES
AND ACCUMULATED PAYMENTS
The following tables illustrate the way in which a Contract's death benefit and
Contract Value could vary over an extended period.
ASSUMPTIONS
The tables illustrate the following Contracts:
1. A Contract issued to a male, Age 55, under a standard underwriting class
and qualifying for the non-tobacco user discount, issued based on
simplified underwriting criteria;
2. A Contract issued to a male, Age 55, under a standard underwriting class
and qualifying for the non-tobacco user discount, issued on a fully
underwritten basis;
3. A Second-to Die Contract issued to a male, Age 55 and to a female, Age 55,
each Insured qualifying for a standard underwriting class and the
non-tobacco user discount, issued based on simplified underwriting
criteria;
4. A Second-to-Die Contract issued to a male, Age 55 and to a female, Age 55,
each Insured qualifying for a standard underwriting class and the
non-tobacco user discount, issued based on a fully underwritten basis;
5. A Contract issued to a male, Age 65, under a standard underwriting class
and qualifying for the non-tobacco user discount, issued based on
simplified underwriting criteria simplified underwriting criteria;
6. A Contract issued to a male, Age 65, under a standard underwriting class
and qualifying for the non-tobacco user discount, issued on a fully
underwritten basis;
7. A Second-to-Die Contract issued to a male, Age 65 and to a female, Age 65,
each Insured qualifying for a standard underwriting class and the
non-tobacco user discount, issued based on simplified underwriting
criteria; and
8. A Second-to-Die Contract issued to a male, Age 65 and to a female, Age 65,
each Insured qualifying for a standard underwriting class and the
non-tobacco user discount, issued based on a fully underwritten basis.
The tables illustrate Contract Values based on the assumptions that no Contract
loans have been made, that no partial withdrawals have been made, and that no
more than 18 transfers have been made in any Contract year (so that no
transaction fee or transfer charges have been incurred). On request, we will
provide a comparable illustration based on the proposed Insured's age, sex, and
underwriting class, and a specified payment.
The tables assume that the single payment is allocated to and remains 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) equal to
constant gross annual rates of 0%, 6%, and 12%. The second column of the tables
shows the amount that would accumulate if the single payment was invested to
earn interest (after taxes) at 5% compounded annually.
The Contract Values and death benefit 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 the averages for individual Contract
years. The values would also be different depending on the allocation of the
Contract's total Contract Value among the sub-accounts, if the rates of return
averaged 0%, 6% or 12%, but the rates of each portfolio varied above and below
the averages.
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 illustrated death
benefits and Contract Value, the gross annual investment rate of return would
have to exceed 0%, 6% or 12% by a sufficient amount to cover the tax charges.
DEDUCTIONS FOR CHARGES
The amounts shown for the death proceeds and Contract Values take into account
the monthly deductions from Contract Value: (1) the administration charge
equivalent to 0.30% on an annual basis; (2) the tax charge equivalent to 0.20%
on an annual basis, deducted during the first ten Contract years; and (3) the
distribution fee equivalent to 0.40% on an annual basis, deducted during the
first ten Contract years. The amounts shown for the death proceeds and the
Contract Values also take into account the daily charge against the sub-accounts
for mortality and expense risks equivalent to 0.80% on an annual basis.
EXPENSES OF THE PORTFOLIOS
The amounts shown in the tables also take into account the portfolio management
fees and operating expenses, which are assumed to be at an annual rate of 0.85%
of the average daily net assets of the portfolios. The rate of 0.85% is the
simple average of the total portfolio annual expenses for all of the portfolios
as shown in the Portfolio Expenses table in the prospectus. The fees and
expenses of each portfolio vary, and, in 1997, ranged from an annual rate of
0.70% to an annual rate of 1.15% of average daily net assets. Some of these
expenses reflect expense waivers or reimbursements by the portfolios' advisers
as discussed in Note(1) to the Portfolio Expenses table. As discussed in Note
(1) to the Portfolio Expenses table, such waivers or reimbursements continued
for 1998, except for Alliance VPF Premier Growth. It is not known if such
waivers or reimbursements will continue for 1999. Without these expense waivers
or reimbursements, if applicable, the expenses for the portfolio would be higher
and the simple average would have been at the annual rate of 1.08% of average
daily net assets. The fees and expenses associated with the Contract may be more
or less than 0.85% in the aggregate, depending upon how you make allocations of
the Contract Value among the sub-accounts.
NET ANNUAL RATES OF INVESTMENT
Taking into account the Separate Account mortality and expense risk charge of
0.80%, and the assumed 0.85% charge for portfolio management fees and operating
expenses, the gross annual rates of investment return of 0%, 6% and 12%
correspond to net annual rates of -1.65%, 4.35% and 10.35%, respectively.
UPON REQUEST, THE COMPANY WILL PROVIDE A COMPARABLE ILLUSTRATION BASED UPON THE
PROPOSED INSURED'S AGE AND UNDERWRITING CLASSIFICATION, THE SINGLE PAYMENT
AMOUNT, AND THE ALLOWABLE REQUESTED FACE AMOUNT.
UPON REQUEST, THE COMPANY WILL PROVIDE A COMPARABLE ILLUSTRATION BASED UPON THE
PROPOSED INSURED'S AGE AND UNDERWRITING CLASSIFICATION, THE SINGLE PAYMENT
AMOUNT, AND THE ALLOWABLE REQUESTED FACE AMOUNT.
Audited Consolidated Financial Statements
Transamerica Occidental Life Insurance Company and Subsidiaries
December 31, 1997
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Audited Consolidated Financial Statements
December 31, 1997
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
-26-
4367:Folder T
04/22/98 3:30 PM
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, 1997 and
1996, 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,
1997. 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, 1997 and
1996, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
January 23, 1998
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31
1997 1996
--------------------- -------------
(In thousands, except
for share data)
ASSETS
Investments:
Fixed maturities available for sale $ 29,231,998 $ 26,980,676
Equity securities available for sale 791,221 471,734
Mortgage loans on real estate 706,939 716,669
Real estate 19,633 24,876
Policy loans 451,023 442,607
Other long-term investments 69,793 66,686
Short-term investments 324,672 135,726
--------------------- ---------------------
31,595,279 28,838,974
Cash 36,656 35,817
Accrued investment income 481,913 404,866
Accounts receivable 294,542 297,967
Reinsurance recoverable on paid and unpaid losses 920,847 829,653
Deferred policy acquisitions costs 2,102,588 2,138,203
Other assets 299,500 256,382
Separate account assets 5,494,703 3,527,950
--------------------- ---------------------
$ 41,226,028 $ 36,329,812
===================== =====================
LIABILITIES AND SHAREHOLDER'S EQUITY
Policy liabilities:
Policyholder contract deposits $ 24,061,811 $ 22,718,955
Reserves for future policy benefits 5,468,611 5,275,149
Policy claims and other 557,822 502,331
--------------------- ---------------------
30,088,244 28,496,435
Income tax liabilities 814,088 388,852
Accounts payable and other liabilities 482,716 560,663
Separate account liabilities 5,494,703 3,527,950
--------------------- ---------------------
36,879,751 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 422,342 335,619
Retained earnings 2,738,151 2,467,406
Foreign currency translation adjustments (33,440) (24,472)
Net unrealized investment gains 1,191,637 549,772
--------------------- ---------------------
4,346,277 3,355,912
--------------------- ---------------------
$ 41,226,028 $ 36,329,812
===================== =====================
See notes to consolidated financial statements.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31
1997 1996 1995
--------------- --------------- ----------
(In thousands)
Revenues:
Premiums and other considerations $ 1,777,371 $ 1,641,985 $ 1,663,576
Net investment income 2,165,565 2,077,232 1,972,759
Net realized investment gains 40,263 17,471 28,112
--------------- --------------- ---------------
TOTAL REVENUES 3,983,199 3,736,688 3,664,447
Benefits:
Benefits paid or provided 2,727,064 2,558,792 2,439,156
Increase in policy reserves and liabilities 59,246 57,968 236,205
--------------- --------------- ---------------
2,786,310 2,616,760 2,675,361
Expenses:
Amortization of deferred policy acquisition costs 265,264 235,180 182,123
Salaries and salary related expenses 165,768 158,699 145,681
Other expenses 284,220 224,084 200,339
--------------- --------------- ---------------
715,252 617,963 528,143
--------------- --------------- ---------------
TOTAL BENEFITS AND EXPENSES 3,501,562 3,234,723 3,203,504
--------------- --------------- ---------------
INCOME BEFORE INCOME TAXES 481,637 501,965 460,943
Provision for income taxes 149,581 164,685 149,647
--------------- --------------- ---------------
NET INCOME $ 332,056 $ 337,280 $ 311,296
=============== =============== ===============
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, 1995 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 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
Net income 332,056
Capital transactions with
parent 86,723
Dividends declared (61,311)
Change in foreign currency
translation adjustments (8,968)
Change in net unrealized
investment gains 641,865
Balance at December 31, 1997 2,206,933 $ 27,587 $ 422,342 $ 2,738,151 $ (33,440) $ 1,191,637
============ ========== =========== ============= ============ ============
See notes to consolidated financial statements.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31
1997 1996 1995
--------------- ---------------- ----------
(In thousands)
OPERATING ACTIVITIES
Net income $ 332,056 $ 337,280 $ 311,296
Adjustments to reconcile net income to net cash
provided by operating activities:
Changes in:
Reinsurance recoverable (91,194) (73,328) (466,669)
Accounts receivable (15,983) (159,309) (58,866)
Policy liabilities 1,102,246 949,108 1,273,723
Other assets, accounts payable and other
liabilities, and income taxes (89,954) (32,662) (252,362)
Policy acquisition costs deferred (467,730) (388,003) (381,806)
Amortization of deferred policy acquisition costs 256,303 268,770 191,313
Net realized gains on investment transactions (31,302) (51,061) (37,302)
Other (64,651) (15,758) (22,862)
--------------- --------------- ---------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 929,791 835,037 556,465
INVESTMENT ACTIVITIES
Purchases of securities (9,825,763) (7,362,635) (5,667,539)
Purchases of other investments (127,437) (334,895) (330,503)
Sales of securities 8,193,409 5,064,780 3,587,367
Sales of other investments 129,671 175,001 155,084
Maturities of securities 559,361 506,941 341,485
Net change in short-term investments (188,946) 75,774 (67,337)
Other (53,478) (21,358) (35,384)
--------------- --------------- ---------------
NET CASH USED IN
INVESTING ACTIVITIES (1,313,183) (1,896,392) (2,016,827)
FINANCING ACTIVITIES
Additions to policyholder contract deposits 6,851,644 6,260,653 5,151,428
Withdrawals from policyholder contract deposits (6,411,213) (5,173,419) (3,624,044)
Capital contributions from parent 3,800 - -
Dividends paid to parent (60,000) (40,000) (60,000)
--------------- --------------- ---------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 384,231 1,047,234 1,467,384
--------------- --------------- ---------------
INCREASE (DECREASE) IN CASH 839 (14,121) 7,022
Cash at beginning of year 35,817 49,938 42,916
--------------- --------------- ---------------
CASH AT END OF YEAR $ 36,656 $ 35,817 $ 49,938
=============== =============== ===============
See notes to consolidated financial statements.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
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.
Reclassifications: Certain reclassifications of 1996 and 1995 amounts have
been made to conform to the 1997
- -----------------
presentation.
Use of Estimates: Certain amounts reported in the accompanying consolidated
financial statements are based on management's best estimates and judgment.
Actual results could differ from those estimates.
New Accounting Standards: In June of 1997, the Financial Accounting Standards
Board issued a new standard on reporting comprehensive income, which establishes
standards for reporting and displaying comprehensive income and its components
in the financial statements. This standard 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 1997, the Company adopted the Financial Accounting Standards Board's new
standard on accounting for transfers of financial assets, servicing of financial
assets and extinguishment of liabilities. 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. There was
no 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)
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.
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.
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 related to
non-traditional and investment type products are 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 3.0% to 9.7% in 1997 and 2.6% to 9.8% in 1996 and 2.8% to 10% in
1995.
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 2.25% in earlier years to 11.82%. 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.
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
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
1997, 1996 or 1995.
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. 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. 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.
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 agreement generally requires TOLIC to accrue and
settle income tax obligations in amounts that would result if TOLIC filed
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.
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
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, 1997
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 273,949 $ 78,390 $ - $ 352,339
Obligations of states and political
subdivisions 219,391 16,765 31 236,125
Foreign governments 81,425 6,996 2 88,419
Corporate securities 18,596,027 1,438,385 57,729 19,976,683
Public utilities 4,017,154 340,580 811 4,356,923
Mortgage-backed securities 3,795,464 342,805 1,977 4,136,292
Redeemable preferred stocks 69,773 24,326 8,882 85,217
---------------- ---------------- ---------------- ----------------
Total fixed maturities $ 27,053,183 $ 2,248,247 $ 69,432 $ 29,231,998
================ ================ ================ ================
Equity securities $ 309,637 $ 488,322 $ 6,738 $ 791,221
================ ================ ================ ================
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
================ ================ ================ ================
NOTE B--INVESTMENTS (Continued)
The cost and fair value of fixed maturities available for sale at December 31,
1997, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties (in thousands):
Fair
Cost Value
Maturity
Due in 1998 $ 494,969 $ 510,261
Due in 1999-2002 3,877,467 4,019,436
Due in 2003-2007 5,908,618 6,249,016
Due after 2007 12,906,892 14,231,776
---------------- ----------------
23,187,946 25,010,489
Mortgage-backed securities 3,795,464 4,136,292
Redeemable preferred stock 69,773 85,217
---------------- ----------------
$ 27,053,183 $ 29,231,998
================ ================
The components of the carrying value of real estate are as follows (in
thousands):
1997 1996
--------------- ----------
Investment real estate $ 18,806 $ 22,814
Properties held for sale 827 2,062
---------------- ----------------
$ 19,633 $ 24,876
================ ================
As of December 31, 1997, 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):
Name of Issuer Carrying Value
Hill Street Funding $ 516,822
The carrying value of those assets that were on deposit with public officials in
compliance with regulatory requirements was $21.7 million at December 31, 1997.
NOTE B--INVESTMENTS (Continued)
Net investment income by major investment category is summarized as follows (in
thousands):
1997 1996 1995
---------------- ---------------- ----------
Fixed maturities $ 2,096,543 $ 2,005,764 $ 1,904,519
Equity securities 5,339 5,458 3,418
Mortgage loans on real estate 62,877 58,165 40,702
Real estate (11,110) (7,435) 3,209
Policy loans 28,080 27,012 25,641
Other long-term investments 511 978 2,353
Short-term investments 12,770 10,616 13,286
---------------- ---------------- ----------------
2,195,010 2,100,558 1,993,128
Investment expenses (29,445) (23,326) (20,369)
----------------- ---------------- ----------------
$ 2,165,565 $ 2,077,232 $ 1,972,759
================ ================ ================
Significant components of net realized investment gains are as follows (in
thousands):
1997 1996 1995
---------------- ---------------- ----------
Net gains (losses) on disposition of investments in:
Fixed maturities $ (21,484) $ 40,967 $ 52,889
Equity securities 59,834 15,750 5,637
Other (1,410) 3,424 2,327
---------------- ---------------- ----------------
36,940 60,141 60,853
Provision for impairment (5,638) (9,080) (23,551)
Accelerated amortization of DPAC 8,961 (33,590) (9,190)
---------------- ---------------- ----------------
$ 40,263 $ 17,471 $ 28,112
================ ================ ================
The components of net gains (losses) on disposition of investment in fixed maturities are as follows (in thousands):
1997 1996 1995
Gross gains $ 82,452 $ 74,817 $ 61,504
Gross losses (103,936) (33,850) (8,615)
---------------- ---------------- ----------------
$ (21,484) $ 40,967 $ 52,889
================= ================ ================
Proceeds from disposition of investment in fixed maturities available for sale
were $7,896.5 million in 1997, $4,969.2 million in 1996 and $3,461.1 million in
1995.
NOTE B--INVESTMENTS (Continued)
The costs of certain investments have been reduced by the following allowances
for impairment in value (in thousands):
December 31
1997 1996
---------------- -----------
Fixed maturities $ 64,168 $ 54,160
Mortgage loans on real estate 24,508 22,654
Real estate 5,854 9,146
Other long-term investments 5,900 11,025
---------------- ----------------
$ 100,430 $ 96,985
================ ================
The components of net unrealized investment gains in the accompanying
consolidated balance sheet are as follows (in thousands):
December 31
1997 1996
---------------- ----------
Unrealized gains on investment in:
Fixed maturities $ 2,178,815 $ 1,075,165
Equity securities 481,584 272,240
---------------- ----------------
2,660,399 1,347,405
Fair value adjustments to:
DPAC (546,111) (306,602)
Reserves for future policy benefits (281,000) (195,000)
---------------- ----------------
(827,111) (501,602)
Related deferred taxes (641,651) (296,031)
---------------- ----------------
$ 1,191,637 $ 549,772
================ ================
NOTE C--DEFERRED POLICY ACQUISITION COSTS (DPAC)
Significant components of changes in DPAC are as follows (in thousands):
1997 1996 1995
----------------- ---------------- -----------
Balance at beginning of year $ 2,138,203 $ 1,974,211 $ 2,480,474
Amounts deferred:
Commissions 352,300 290,512 298,698
Other 115,431 97,491 83,108
Amortization attributed to:
Net gain on disposition of investments 8,961 (33,590) (9,190)
Operating income (265,264) (235,180) (182,123)
Fair value adjustment (239,509) 48,969 (706,915)
Foreign currency translation adjustment (7,534) (4,210) 10,159
----------------- --------------- ----------------
Balance at end of year $ 2,102,588 $ 2,138,203 $ 1,974,211
================ =============== ================
NOTE D--POLICY LIABILITIES
Components of policyholder contract deposits are as follows (in thousands):
December 31
1997 1996
---------------- -----------
Liabilities for investment-type products $ 19,297,966 $ 18,126,119
Liabilities for non-traditional life insurance
products 4,763,845 4,592,836
--------------- ---------------
$ 24,061,811 $ 22,718,955
=============== ===============
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 $281 million as of December 31, 1997, $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
1997 1996
---------------- -----------
Current tax liabilities (receivables) $ 44,510 $ (13,752)
Deferred tax liabilities 769,578 402,604
---------------- ----------------
$ 814,088 $ 388,852
================ ================
Significant components of deferred tax liabilities (assets) are as follows (in
thousands):
December 31
1997 1996
---------------- -----------
Deferred policy acquisition costs $ 783,624 $ 726,011
Unrealized investment gains 641,651 296,031
---------------- ----------------
Total deferred tax liabilities 1,425,275 1,022,042
Life insurance policy liabilities (613,874) (578,823)
Provision for impairment of investments (35,151) (33,945)
Other-net (6,672) (6,670)
----------------- -----------------
Total deferred tax assets (655,697) (619,438)
---------------- ----------------
$ 769,578 $ 402,604
================ ================
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):
1997 1996 1995
----------------- ---------------- -----------
Current tax expense $ 122,201 $ 99,692 $ 115,614
Deferred tax expense (benefit):
Domestic 14,731 55,261 21,784
Foreign 12,649 9,732 12,249
---------------- ---------------- ---------------
$ 149,581 $ 164,685 $ 149,647
================ ================ ===============
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):
1997 1996 1995
---------------- ---------------- -----------
Income before income taxes:
Income from U.S. operations $ 430,449 $ 474,160 $ 425,946
Income from foreign operations 51,189 27,805 34,997
--------------- --------------- ---------------
481,638 501,965 460,943
Tax rate 35% 35% 35%
--------------- --------------- ---------------
Federal income taxes at statutory rate 168,573 175,688 161,330
Income not subject to tax (3,284) (2,262) (685)
Low income housing credits (10,156) (8,175) (3,137)
Other, net (5,552) (566) (7,861)
--------------- --------------- ---------------
$ 149,581 $ 164,685 $ 149,647
=============== =============== ===============
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, 1997 was $138 million. At
December 31, 1997, $2,179 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 $58.5 million, $149.1 million and $153.3 million were paid
principally to the Company's parent in 1997, 1996 and 1995, 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
1997
Life insurance in force,
at end of year $ 241,379,957 $ 207,533,094 $ 225,685,653 $ 259,532,516
==================== =================== =================== ===================
Premiums and other
considerations $ 1,854,918 $ 1,163,259 $ 1,085,712 $ 1,777,371
==================== =================== =================== ===================
Benefits paid or
provided $ 2,950,335 $ 696,009 $ 472,738 $ 2,727,064
==================== =================== =================== ===================
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 $ 972,211 $ 1,641,985
==================== =================== =================== ===================
Benefits paid or
provided $ 2,922,967 $ 1,112,561 $ 748,386 $ 2,558,792
==================== =================== =================== ===================
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 $ 885,440 $ 1,663,576
==================== =================== =================== ===================
Benefits paid or
provided $ 2,803,213 $ 1,065,545 $ 701,488 $ 2,439,156
==================== =================== =================== ===================
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
$(5.4) million in 1997, $(3.1) million in 1996 and $2.5 million in 1995, of
which $(6.1) million in 1997, $(3.7) million in 1996 and $2.0 million in 1995,
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 1997, 1996 and 1995.
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 loans and advances, investments in a money market fund managed by an
affiliated company, rental of space, and other specialized services. At December
31, 1997, pension funds administered for these related companies aggregated
$1,467.4 million and the investment in an affiliated money market fund, included
in short-term investments, was $91.1 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 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.
NOTE H--RELATED PARTY TRANSACTIONS (Continued)
During 1997, equity securities with a fair value of $177.2 million (cost of
$55.5 million) were received from Transamerica Corporation. $50 million was used
as a partial paydown on a $200 million note due from Transamerica Corporation.
The excess of fair value over cost less the amount applied to the note was
recorded as additional paid-in capital. The remaining balance on the note, which
is due in 2013 and bears interest at 7%, is $150 million.
In addition, the Company received a capital contribution of $15 million from
Transamerica Corporation.
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):
1997 1996 1995
------------------- ------------------- ------------
Statutory net income $ 96,472 $ 112,296 $ 131,607
Statutory capital and surplus, at
end of year 1,556,228 1,249,045 1,115,691
NOTE J-COMMITMENTS AND CONTINGENCIES
The Company issues synthetic guaranteed investment contracts which guarantee, 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, 1997, commitments to maintain liquidity for
benefit payments on notional amounts of $3.3 billion were outstanding compared
to $1.9 billion at December 31, 1996.
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, 1997 and 1996, 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 $16.5
million in 1997, $20.6 million in 1996 and $25.3 million in 1995. 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, 1997 (in thousands):
Year ending December 31:
1998 $ 15,115
1999 14,468
2000 12,208
2001 11,768
2002 6,874
Later years 55,597
--------------------
$ 116,030
====================
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 entered into a settlement which was approved on
June 26, 1997. The settlement required prompt notification to affected
policyholders. Administrative and policy benefit costs associated with the
settlement of $31 million pre-tax 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 the Company, any ultimate liability which might
result from other litigation would not have a materially adverse effect on the
combined financial position of the Company 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
-----------------------------------------
1997 1996
----------------------------------- -----------------
Carrying Fair Carrying Fair
Value Value Value Value
Financial Assets:
Fixed maturities available for sale $ 29,231,998 $ 29,231,998 $ 26,980,676 $ 26,980,676
Equity securities available for sale 791,221 791,221 471,734 471,734
Mortgage loans on real estate 706,939 774,556 716,669 770,122
Policy loans 451,023 427,924 442,607 416,396
Short-term investments 324,672 324,672 135,726 135,726
Cash 36,656 36,656 35,817 35,817
Accrued investment income 481,913 481,913 404,866 404,866
Financial Liabilities:
Liabilities for investment-type contracts:
Single and flexible premium
deferred annuities 6,779,951 6,261,707 6,962,501 6,400,632
Single premium immediate annuities 4,361,311 5,122,562 4,115,047 4,476,968
Guaranteed investment contracts 3,211,834 3,265,384 3,153,769 3,207,342
Other deposit contracts 4,944,870 4,992,906 3,894,802 3,913,046
Off-balance-sheet assets (liabilities):
Interest rate swap agreements designated
as hedges of liabilities in a:
Receivable position - 8,189 - 43,916
Payable position - (5,247) - (5,485)
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, 1997
Interest rate swap agreements designated as hedges of securities available
for sale, where TLC pays:
Fixed rate interest $ 419,715 6.81% $ 1,820
Floating rate interest 280,905 6.48% 3,000
Floating rate interest based on one index and
receives floating rate interest based on
another index 337,371 - (320)
Interest rate swap agreements designated as
hedges of financial liabilities, where TLC pays:
Fixed rate interest - - -
Floating rate interest 2,252,089 6.17% 4,507
Floating rate interest based on one index and
receives floating rate interest based on
another index 304,820 - (1,565)
Interest rate floor agreements 560,500 6.46% 25,254
Swaptions 8,326,030 4.50% 103,018
Others 29,117 - 15,314
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
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
1997:
Interest rate swap agreements
designated as hedges of
securities available for sale $ 847,584 $ 322,165 $ 91,858 $ 39,900 $ 1,037,991
Interest rate swap agreements
designated as hedges of
financial liabilities 1,829,301 2,297,133 1,554,525 15,000 2,556,909
Interest rate floor agreements 560,500 - - - 560,500
Swaptions 8,327,570 - - 1,540 8,326,030
Others 108,745 20,572 100,200 - 29,117
-------------- -------------- -------------- ------------ ----------------
$ 11,673,700 $ 2,639,870 $ 1,746,583 $ 56,440 $ 12,510,547
============== ============== ============== ============ ================
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
============== ============== ============== ============ ================
NOTE K--FINANCIAL INSTRUMENTS (Continued)
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of temporary cash investments, derivatives,
fixed maturities, mortgage loans on real estate and reinsurance receivables. The
Company places its temporary cash investments and enters into derivative
transactions 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. The Company
places reinsurance with only highly rated insurance companies. At December 31,
1997, the Company had no significant concentration of credit risk.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VUL-2
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
Male, Non-Tobacco User, Age 55
Standard Underwriting Class
Simplified Underwriting Criteria
Face Amount: $221,000
BASED ON CURRENT MONTHLY INSURANCE PROTECTION CHARGES,
MONTHLY DEDUCTIONS, AND PORTFOLIO EXPENSES
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Payments Hypothetical 0% Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest
Contract At 5% Per Surrender Contract Death Surrender Contract Death Surrender Contract Death
Year Year Value Value Benefit Value Value Benefit Value Value Benefit
1 $78,750 $65,987 $72,737 $221,000 $70,424 $77,174 $221,000 $74,862 $81,612 $221,000
2 $82,688 $64,542 $70,542 $221,000 $73,411 $79,411 $221,000 $82,806 $88,806 $221,000
3 $86,822 $63,163 $68,413 $221,000 $76,463 $81,713 $221,000 $91,384 $96,634 $221,000
4 $91,163 $61,848 $66,348 $221,000 $79,582 $84,082 $221,000 $100,653 $105,153 $221,000
5 $95,721 $60,596 $64,346 $221,000 $82,769 $86,519 $221,000 $110,673 $114,423 $221,000
6 $100,507 $59,404 $62,404 $221,000 $86,027 $89,027 $221,000 $121,510 $124,510 $221,000
7 $105,533 $58,271 $60,521 $221,000 $89,358 $91,608 $221,000 $133,236 $135,486 $221,000
8 $110,809 $57,195 $58,695 $221,000 $92,764 $94,264 $221,000 $145,929 $147,429 $221,000
9 $116,350 $56,174 $56,924 $221,000 $96,246 $96,996 $221,000 $159,676 $160,426 $222,992
10 $122,167 $55,206 $55,206 $221,000 $99,808 $99,808 $221,000 $174,568 $174,568 $239,158
11 $128,275 $53,970 $53,970 $221,000 $103,527 $103,527 $221,000 $191,483 $191,483 $258,502
12 $134,689 $52,762 $52,762 $221,000 $107,384 $107,384 $221,000 $210,037 $210,037 $281,450
13 $141,424 $51,581 $51,581 $221,000 $111,384 $111,384 $221,000 $230,390 $230,390 $306,418
14 $148,495 $50,426 $50,426 $221,000 $115,534 $115,534 $221,000 $252,714 $252,714 $333,582
15 $155,920 $49,298 $49,298 $221,000 $119,839 $119,839 $221,000 $277,201 $277,201 $363,134
16 $163,716 $48,194 $48,194 $221,000 $124,304 $124,304 $221,000 $304,062 $304,062 $395,280
17 $171,901 $47,115 $47,115 $221,000 $128,935 $128,935 $221,000 $333,525 $333,525 $426,912
18 $180,496 $46,061 $46,061 $221,000 $133,738 $133,738 $221,000 $365,843 $365,843 $460,962
19 $189,521 $45,030 $45,030 $221,000 $138,721 $138,721 $221,000 $401,292 $401,292 $497,602
20 $198,997 $44,022 $44,022 $221,000 $143,889 $143,889 $221,000 $440,176 $440,176 $537,015
Age 60 $95,721 $60,596 $64,346 $221,000 $82,769 $86,519 $221,000 $110,673 $114,423 $221,000
Age 65 $122,167 $55,206 $55,206 $221,000 $99,808 $99,808 $221,000 $174,568 $174,568 $239,158
Age 70 $155,920 $49,298 $49,298 $221,000 $119,839 $119,839 $221,000 $277,201 $277,201 $363,134
Age 75 $198,997 $44,022 $44,022 $221,000 $143,889 $143,889 $221,000 $440,176 $440,176 $537,015
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
(1) Assumes a single payment of $75,000 is made at the beginning of the first
Contract Year. Values will be different if payments are made with a different
frequency or in different amounts.
(2) Assumes that no Contract loan has been made. Excessive loans or withdrawals
may cause this Contract to lapse because of insufficient Contract 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 INSURANCE COMPANY
SEPARATE ACCOUNT VUL-2
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
Male, Non-Tobacco User, Age 55
Standard Underwriting Class
Simplified Underwriting Criteria
Face Amount: $221,000
BASED ON GUARANTEED MONTHLY INSURANCE PROTECTION CHARGES,
MONTHLY DEDUCTIONS, AND PORTFOLIO EXPENSES
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Payments Hypothetical 0% Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest
Contract At 5% Per Surrender Contract Death Surrender Contract Death Surrender Contract Death
Year Year Value Value Benefit Value Value Benefit Value Value Benefit
1 $78,750 $65,164 $71,914 $221,000 $69,601 $76,351 $221,000 $74,040 $80,790 $221,000
2 $82,688 $62,755 $68,755 $221,000 $71,637 $77,637 $221,000 $81,053 $87,053 $221,000
3 $86,822 $60,253 $65,503 $221,000 $73,587 $78,837 $221,000 $88,580 $93,830 $221,000
4 $91,163 $57,652 $62,152 $221,000 $75,452 $79,952 $221,000 $96,691 $101,191 $221,000
5 $95,721 $54,908 $58,658 $221,000 $77,195 $80,945 $221,000 $105,432 $109,182 $221,000
6 $100,507 $52,016 $55,016 $221,000 $78,812 $81,812 $221,000 $114,890 $117,890 $221,000
7 $105,533 $48,929 $51,179 $221,000 $80,266 $82,516 $221,000 $125,140 $127,390 $221,000
8 $110,809 $45,618 $47,118 $221,000 $81,533 $83,033 $221,000 $136,287 $137,787 $221,000
9 $116,350 $42,029 $42,779 $221,000 $82,572 $83,322 $221,000 $148,444 $149,194 $221,000
10 $122,167 $38,085 $38,085 $221,000 $83,320 $83,320 $221,000 $161,746 $161,746 $221,592
11 $128,275 $33,232 $33,232 $221,000 $83,528 $83,528 $221,000 $176,552 $176,552 $238,345
12 $134,689 $27,909 $27,909 $221,000 $83,409 $83,409 $221,000 $192,607 $192,607 $258,093
13 $141,424 $22,042 $22,042 $221,000 $82,905 $82,905 $221,000 $209,991 $209,991 $279,288
14 $148,495 $15,545 $15,545 $221,000 $81,954 $81,954 $221,000 $228,796 $228,796 $302,011
15 $155,920 $8,326 $8,326 $221,000 $80,481 $80,481 $221,000 $249,120 $249,120 $326,348
16 $163,716 $223 $223 $221,000 $78,369 $78,369 $221,000 $271,047 $271,047 $352,362
17 $171,901 $0 $0 $0* $75,460 $75,460 $221,000 $294,776 $294,776 $377,313
18 $180,496 $0 $0 $0* $71,588 $71,588 $221,000 $320,457 $320,457 $403,775
19 $189,521 $0 $0 $0* $66,497 $66,497 $221,000 $348,233 $348,233 $431,809
20 $198,997 $0 $0 $0* $59,932 $59,932 $221,000 $378,307 $378,307 $461,535
Age 60 $95,721 $54,908 $58,658 $221,000 $77,195 $80,945 $221,000 $105,432 $109,182 $221,000
Age 65 $122,167 $38,085 $38,085 $221,000 $83,320 $83,320 $221,000 $161,746 $161,746 $221,592
Age 70 $155,920 $8,326 $8,326 $221,000 $80,481 $80,481 $221,000 $249,120 $249,120 $326,348
Age 75 $198,997 $0 $0 $0* $59,932 $59,932 $221,000 $378,307 $378,307 $461,535
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
(1) Assumes a single payment of $75,000 is made at the beginning of the first
Contract Year. Values will be different if payments are made with a different
frequency or in different amounts.
(2) Assumes that no Contract loan has been made. Excessive loans or withdrawals
may cause this Contract to lapse because of insufficient Contract Value.
* If the Guaranteed Death Benefit Rider is in effect on the Contract, the death
benefit will be $221,000 based on the assumptions for this illustration.
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 INSURANCE COMPANY
SEPARATE ACCOUNT VUL-2
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
Male, Non-Tobacco User, Age 55
Standard Underwriting Class
Full Underwriting Criteria
Face Amount: $441,000
BASED ON CURRENT MONTHLY INSURANCE PROTECTION CHARGES,
MONTHLY DEDUCTIONS, AND PORTFOLIO EXPENSES
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Payments Hypothetical 0% Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest
Contract At 5% Per Surrender Contract Death Surrender Contract Death Surrender Contract Death
Year Year Value Value Benefit Value Value Benefit Value Value Benefit
1 $157,500 $131,973 $145,473 $441,000 $140,848 $154,348 $441,000 $149,723 $163,223 $441,000
2 $165,375 $129,083 $141,083 $441,000 $146,823 $158,823 $441,000 $165,612 $177,612 $441,000
3 $173,644 $126,326 $136,826 $441,000 $152,927 $163,427 $441,000 $182,769 $193,269 $441,000
4 $182,326 $123,697 $132,697 $441,000 $159,164 $168,164 $441,000 $201,306 $210,306 $441,000
5 $191,442 $121,192 $128,692 $441,000 $165,539 $173,039 $441,000 $221,346 $228,846 $441,000
6 $201,014 $118,809 $124,809 $441,000 $172,055 $178,055 $441,000 $243,019 $249,019 $441,000
7 $211,065 $116,542 $121,042 $441,000 $178,716 $183,216 $441,000 $266,471 $270,971 $441,000
8 $221,618 $114,390 $117,390 $441,000 $185,527 $188,527 $441,000 $291,858 $294,858 $441,000
9 $232,699 $112,347 $113,847 $441,000 $192,493 $193,993 $441,000 $319,351 $320,851 $445,983
10 $244,334 $110,412 $110,412 $441,000 $199,616 $199,616 $441,000 $349,136 $349,136 $478,316
11 $256,551 $107,940 $107,940 $441,000 $207,053 $207,053 $441,000 $382,966 $382,966 $517,004
12 $269,378 $105,524 $105,524 $441,000 $214,767 $214,767 $441,000 $420,075 $420,075 $562,900
13 $282,847 $103,162 $103,162 $441,000 $222,769 $222,769 $441,000 $460,779 $460,779 $612,836
14 $296,990 $100,853 $100,853 $441,000 $231,069 $231,069 $441,000 $505,428 $505,428 $667,165
15 $311,839 $98,595 $98,595 $441,000 $239,677 $239,677 $441,000 $554,403 $554,403 $726,268
16 $327,431 $96,388 $96,388 $441,000 $248,607 $248,607 $441,000 $608,123 $608,123 $790,560
17 $343,803 $94,231 $94,231 $441,000 $257,869 $257,869 $441,000 $667,049 $667,049 $853,823
18 $360,993 $92,121 $92,121 $441,000 $267,477 $267,477 $441,000 $731,685 $731,685 $921,923
19 $379,043 $90,059 $90,059 $441,000 $277,442 $277,442 $441,000 $802,584 $802,584 $995,204
20 $397,995 $88,043 $88,043 $441,000 $287,779 $287,779 $441,000 $880,353 $880,353 $1,074,030
Age 60 $191,442 $121,192 $128,692 $441,000 $165,539 $173,039 $441,000 $221,346 $228,846 $441,000
Age 65 $244,334 $110,412 $110,412 $441,000 $199,616 $199,616 $441,000 $349,136 $349,136 $478,316
Age 70 $311,839 $98,595 $98,595 $441,000 $239,677 $239,677 $441,000 $554,403 $554,403 $726,268
Age 75 $397,995 $88,043 $88,043 $441,000 $287,779 $287,779 $441,000 $880,353 $880,353 $1,074,030
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
(1) Assumes a single payment of $150,000 is made at the beginning of the first
Contract Year. Values will be different if payments are made with a different
frequency or in different amounts.
(2) Assumes that no Contract loan has been made. Excessive loans or withdrawals
may cause this Contract to lapse because of insufficient Contract 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 INSURANCE COMPANY
SEPARATE ACCOUNT VUL-2
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
Male, Non-Tobacco User, Age 55
Standard Underwriting Class
Full Underwriting Criteria
Face Amount: $441,000
BASED ON GUARANTEED MONTHLY INSURANCE PROTECTION CHARGES,
MONTHLY DEDUCTIONS, AND PORTFOLIO EXPENSES
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Payments Hypothetical 0% Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest
Contract At 5% Per Surrender Contract Death Surrender Contract Death Surrender Contract Death
Year Year Value Value Benefit Value Value Benefit Value Value Benefit
1 $157,500 $130,335 $143,835 $441,000 $139,211 $152,711 $441,000 $148,089 $161,589 $441,000
2 $165,375 $125,528 $137,528 $441,000 $143,291 $155,291 $441,000 $162,124 $174,124 $441,000
3 $173,644 $120,532 $131,032 $441,000 $147,204 $157,704 $441,000 $177,192 $187,692 $441,000
4 $182,326 $115,340 $124,340 $441,000 $150,946 $159,946 $441,000 $193,429 $202,429 $441,000
5 $191,442 $109,865 $117,365 $441,000 $154,446 $161,946 $441,000 $210,928 $218,428 $441,000
6 $201,014 $104,094 $110,094 $441,000 $157,696 $163,696 $441,000 $229,865 $235,865 $441,000
7 $211,065 $97,934 $102,434 $441,000 $160,622 $165,122 $441,000 $250,390 $254,890 $441,000
8 $221,618 $91,326 $94,326 $441,000 $163,178 $166,178 $441,000 $272,713 $275,713 $441,000
9 $232,699 $84,165 $85,665 $441,000 $165,280 $166,780 $441,000 $297,063 $298,563 $441,000
10 $244,334 $76,297 $76,297 $441,000 $166,805 $166,805 $441,000 $323,708 $323,708 $443,480
11 $256,551 $66,614 $66,614 $441,000 $167,255 $167,255 $441,000 $353,345 $353,345 $477,015
12 $269,378 $55,995 $55,995 $441,000 $167,055 $167,055 $441,000 $385,477 $385,477 $516,539
13 $282,847 $44,289 $44,289 $441,000 $166,093 $166,093 $441,000 $420,270 $420,270 $558,959
14 $296,990 $31,328 $31,328 $441,000 $164,242 $164,242 $441,000 $457,906 $457,906 $604,436
15 $311,839 $16,926 $16,926 $441,000 $161,358 $161,358 $441,000 $498,582 $498,582 $653,142
16 $327,431 $762 $762 $441,000 $157,203 $157,203 $441,000 $542,466 $542,466 $705,205
17 $343,803 $0 $0 $0* $151,467 $151,467 $441,000 $589,956 $589,956 $755,143
18 $360,993 $0 $0 $0* $143,820 $143,820 $441,000 $641,352 $641,352 $808,103
19 $379,043 $0 $0 $0* $133,752 $133,752 $441,000 $696,943 $696,943 $864,209
20 $397,995 $0 $0 $0* $120,760 $120,760 $441,000 $757,132 $757,132 $923,701
Age 60 $191,442 $109,865 $117,365 $441,000 $154,446 $161,946 $441,000 $210,928 $218,428 $441,000
Age 65 $244,334 $76,297 $76,297 $441,000 $166,805 $166,805 $441,000 $323,708 $323,708 $443,480
Age 70 $311,839 $16,926 $16,926 $441,000 $161,358 $161,358 $441,000 $498,582 $498,582 $653,142
Age 75 $397,995 $0 $0 $0* $120,760 $120,760 $441,000 $757,132 $757,132 $923,701
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
(1) Assumes a single payment of $150,000 is made at the beginning of the first
Contract Year. Values will be different if payments are made with a different
frequency or in different amounts.
(2) Assumes that no Contract loan has been made. Excessive loans or withdrawals
may cause this Contract to lapse because of insufficient Contract Value.
* If the Guaranteed Death Benefit Rider is in effect on the Contract, the death
benefit will be $441,000 based on the assumptions for this illustration.
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 INSURANCE COMPANY
SEPARATE ACCOUNT VUL-2
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
Male, Non-Tobacco User, Age 55
Female, Non-Tobacco User, Age 55
Standard Underwriting Class
Simplified Underwriting Criteria
Face Amount: $346,000
BASED ON CURRENT MONTHLY INSURANCE PROTECTION CHARGES,
MONTHLY DEDUCTIONS, AND PORTFOLIO EXPENSES
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
Payments Hypothetical 0% Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest
Contract At 5% Per Surrender Contract Death Surrender Contract Death SurrenderContract Death
Year Year Value Value Benefit Value Value Benefit Value Value Benefit
1 $78,750 $66,337 $73,087 $346,000 $70,797 $77,547 $346,000 $75,256 $82,006 $346,000
2 $82,688 $65,190 $71,190 $346,000 $74,147 $80,147 $346,000 $83,635 $89,635 $346,000
3 $86,822 $64,050 $69,300 $346,000 $77,547 $82,797 $346,000 $92,690 $97,940 $346,000
4 $91,163 $62,911 $67,411 $346,000 $80,991 $85,491 $346,000 $102,480 $106,980 $346,000
5 $95,721 $61,823 $65,573 $346,000 $84,483 $88,233 $346,000 $113,067 $116,817 $346,000
6 $100,507 $60,785 $63,785 $346,000 $88,064 $91,064 $346,000 $124,520 $127,520 $346,000
7 $105,533 $59,797 $62,047 $346,000 $91,735 $93,985 $346,000 $136,929 $139,179 $346,000
8 $110,809 $58,855 $60,355 $346,000 $95,500 $97,000 $346,000 $150,403 $151,903 $346,000
9 $116,350 $57,960 $58,710 $346,000 $99,362 $100,112 $346,000 $165,041 $165,791 $346,000
10 $122,167 $57,109 $57,109 $346,000 $103,324 $103,324 $346,000 $180,948 $180,948 $346,000
11 $128,275 $55,942 $55,942 $346,000 $107,388 $107,388 $346,000 $198,879 $198,879 $346,000
12 $134,689 $54,800 $54,800 $346,000 $111,612 $111,612 $346,000 $218,587 $218,587 $346,000
13 $141,424 $53,680 $53,680 $346,000 $116,002 $116,002 $346,000 $240,248 $240,248 $346,000
14 $148,495 $52,584 $52,584 $346,000 $120,565 $120,565 $346,000 $264,055 $264,055 $348,553
15 $155,920 $51,510 $51,510 $346,000 $125,307 $125,307 $346,000 $290,221 $290,221 $380,190
16 $163,716 $50,458 $50,458 $346,000 $130,236 $130,236 $346,000 $318,981 $318,981 $414,675
17 $171,901 $49,427 $49,427 $346,000 $135,359 $135,359 $346,000 $350,590 $350,590 $448,755
18 $180,496 $48,417 $48,417 $346,000 $140,683 $140,683 $346,000 $385,331 $385,331 $485,517
19 $189,521 $47,428 $47,428 $346,000 $146,216 $146,216 $346,000 $423,515 $423,515 $525,159
20 $198,997 $46,459 $46,459 $346,000 $151,968 $151,968 $346,000 $465,483 $465,483 $567,890
Age 60 $95,721 $61,823 $65,573 $346,000 $84,483 $88,233 $346,000 $113,067 $116,817 $346,000
Age 65 $122,167 $57,109 $57,109 $346,000 $103,324 $103,324 $346,000 $180,948 $180,948 $346,000
Age 70 $155,920 $51,510 $51,510 $346,000 $125,307 $125,307 $346,000 $290,221 $290,221 $380,190
Age 75 $198,997 $46,459 $46,459 $346,000 $151,968 $151,968 $346,000 $465,483 $465,483 $567,890
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
(1) Assumes a single payment of $75,000 is made at the beginning of the first
Contract Year. Values will be different if payments are made with a different
frequency or in different amounts.
(2) Assumes that no Contract loan has been made. Excessive loans or withdrawals
may cause this Contract to lapse because of insufficient Contract 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 INSURANCE COMPANY
SEPARATE ACCOUNT VUL-2
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
Male, Non-Tobacco User, Age 55
Female, Non-Tobacco User, Age 55
Standard Underwriting Class
Simplified Underwriting Criteria
Face Amount: $346,000
BASED ON GUARANTEED MONTHLY INSURANCE PROTECTION CHARGES,
MONTHLY DEDUCTIONS, AND PORTFOLIO EXPENSES
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
Payments Hypothetical 0% Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest
Contract At 5% Per Surrender Contract Death Surrender Contract Death SurrenderContract Death
Year Year Value Value Benefit Value Value Benefit Value Value Benefit
1 $78,750 $66,337 $73,087 $346,000 $70,797 $77,547 $346,000 $75,256 $82,006 $346,000
2 $82,688 $65,190 $71,190 $346,000 $74,147 $80,147 $346,000 $83,635 $89,635 $346,000
3 $86,822 $64,050 $69,300 $346,000 $77,547 $82,797 $346,000 $92,690 $97,940 $346,000
4 $91,163 $62,909 $67,409 $346,000 $80,991 $85,491 $346,000 $102,480 $106,980 $346,000
5 $95,721 $61,754 $65,504 $346,000 $84,470 $88,220 $346,000 $113,067 $116,817 $346,000
6 $100,507 $60,573 $63,573 $346,000 $87,976 $90,976 $346,000 $124,520 $127,520 $346,000
7 $105,533 $59,348 $61,598 $346,000 $91,494 $93,744 $346,000 $136,914 $139,164 $346,000
8 $110,809 $58,056 $59,556 $346,000 $95,007 $96,507 $346,000 $150,329 $151,829 $346,000
9 $116,350 $56,668 $57,418 $346,000 $98,490 $99,240 $346,000 $164,852 $165,602 $346,000
10 $122,167 $55,149 $55,149 $346,000 $101,915 $101,915 $346,000 $180,583 $180,583 $346,000
11 $128,275 $53,035 $53,035 $346,000 $105,135 $105,135 $346,000 $198,077 $198,077 $346,000
12 $134,689 $50,693 $50,693 $346,000 $108,277 $108,277 $346,000 $217,260 $217,260 $346,000
13 $141,424 $48,078 $48,078 $346,000 $111,308 $111,308 $346,000 $238,330 $238,330 $346,000
14 $148,495 $45,141 $45,141 $346,000 $114,189 $114,189 $346,000 $261,515 $261,515 $346,000
15 $155,920 $41,812 $41,812 $346,000 $116,869 $116,869 $346,000 $286,984 $286,984 $375,949
16 $163,716 $38,001 $38,001 $346,000 $119,280 $119,280 $346,000 $314,802 $314,802 $409,242
17 $171,901 $33,585 $33,585 $346,000 $121,330 $121,330 $346,000 $345,183 $345,183 $441,834
18 $180,496 $28,398 $28,398 $346,000 $122,897 $122,897 $346,000 $378,334 $378,334 $476,700
19 $189,521 $22,235 $22,235 $346,000 $123,833 $123,833 $346,000 $414,476 $414,476 $513,951
20 $198,997 $14,860 $14,860 $346,000 $123,964 $123,964 $346,000 $453,858 $453,858 $553,707
Age 60 $95,721 $61,754 $65,504 $346,000 $84,470 $88,220 $346,000 $113,067 $116,817 $346,000
Age 65 $122,167 $55,149 $55,149 $346,000 $101,915 $101,915 $346,000 $180,583 $180,583 $346,000
Age 70 $155,920 $41,812 $41,812 $346,000 $116,869 $116,869 $346,000 $286,984 $286,984 $375,949
Age 75 $198,997 $14,860 $14,860 $346,000 $123,964 $123,964 $346,000 $453,858 $453,858 $553,707
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
(1) Assumes a single payment of $75,000 is made at the beginning of the first
Contract Year. Values will be different if payments are made with a different
frequency or in different amounts.
(2) Assumes that no Contract loan has been made. Excessive loans or withdrawals
may cause this Contract to lapse because of insufficient Contract 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 INSURANCE COMPANY
SEPARATE ACCOUNT VUL-2
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
Male, Non-Tobacco User, Age 55
Female, Non-Tobacco User, Age 55
Standard Underwriting Class
Full Underwriting Criteria
Face Amount: $692,000
BASED ON CURRENT MONTHLY INSURANCE PROTECTION CHARGES,
MONTHLY DEDUCTIONS, AND PORTFOLIO EXPENSES
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Payments Hypothetical 0% Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest
Contract At 5% Per Surrender Contract Death Surrender Contract Death Surrender Contract Death
Year Year Value Value Benefit Value Value Benefit Value Value Benefit
1 $157,500 $132,675 $146,175 $692,000 $141,593 $155,093 $692,000 $150,512 $164,012 $692,000
2 $165,375 $130,380 $142,380 $692,000 $148,295 $160,295 $692,000 $167,270 $179,270 $692,000
3 $173,644 $128,101 $138,601 $692,000 $155,094 $165,594 $692,000 $185,380 $195,880 $692,000
4 $182,326 $125,822 $134,822 $692,000 $161,981 $170,981 $692,000 $204,959 $213,959 $692,000
5 $191,442 $123,646 $131,146 $692,000 $168,966 $176,466 $692,000 $226,133 $233,633 $692,000
6 $201,014 $121,571 $127,571 $692,000 $176,128 $182,128 $692,000 $249,040 $255,040 $692,000
7 $211,065 $119,593 $124,093 $692,000 $183,470 $187,970 $692,000 $273,858 $278,358 $692,000
8 $221,618 $117,710 $120,710 $692,000 $191,001 $194,001 $692,000 $300,807 $303,807 $692,000
9 $232,699 $115,919 $117,419 $692,000 $198,724 $200,224 $692,000 $330,082 $331,582 $692,000
10 $244,334 $114,218 $114,218 $692,000 $206,648 $206,648 $692,000 $361,896 $361,896 $692,000
11 $256,551 $111,885 $111,885 $692,000 $214,776 $214,776 $692,000 $397,758 $397,758 $692,000
12 $269,378 $109,599 $109,599 $692,000 $223,224 $223,224 $692,000 $437,174 $437,174 $692,000
13 $282,847 $107,361 $107,361 $692,000 $232,004 $232,004 $692,000 $480,495 $480,495 $692,000
14 $296,990 $105,168 $105,168 $692,000 $241,130 $241,130 $692,000 $528,110 $528,110 $697,105
15 $311,839 $103,019 $103,019 $692,000 $250,614 $250,614 $692,000 $580,442 $580,442 $760,380
16 $327,431 $100,915 $100,915 $692,000 $260,472 $260,472 $692,000 $637,961 $637,961 $829,349
17 $343,803 $98,854 $98,854 $692,000 $270,717 $270,717 $692,000 $701,179 $701,179 $897,510
18 $360,993 $96,835 $96,835 $692,000 $281,366 $281,366 $692,000 $770,662 $770,662 $971,035
19 $379,043 $94,857 $94,857 $692,000 $292,433 $292,433 $692,000 $847,031 $847,031 $1,050,318
20 $397,995 $92,919 $92,919 $692,000 $303,936 $303,936 $692,000 $930,967 $930,967 $1,135,779
Age 60 $191,442 $123,646 $131,146 $692,000 $168,966 $176,466 $692,000 $226,133 $233,633 $692,000
Age 65 $244,334 $114,218 $114,218 $692,000 $206,648 $206,648 $692,000 $361,896 $361,896 $692,000
Age 70 $311,839 $103,019 $103,019 $692,000 $250,614 $250,614 $692,000 $580,442 $580,442 $760,380
Age 75 $397,995 $92,919 $92,919 $692,000 $303,936 $303,936 $692,000 $930,967 $930,967 $1,135,779
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
(1) Assumes a single payment of $150,000 is made at the beginning of the first
Contract Year. Values will be different if payments are made with a different
frequency or in different amounts.
(2) Assumes that no Contract loan has been made. Excessive loans or withdrawals
may cause this Contract to lapse because of insufficient Contract 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 INSURANCE COMPANY
SEPARATE ACCOUNT VUL-2
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
Male, Non-Tobacco User, Age 55
Female, Non-Tobacco User, Age 55
Standard Underwriting Class
Full Underwriting Criteria
Face Amount: $692,000
BASED ON GUARANTEED MONTHLY INSURANCE PROTECTION CHARGES,
MONTHLY DEDUCTIONS, AND PORTFOLIO EXPENSES
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Payments Hypothetical 0% Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest
Contract At 5% Per Surrender Contract Death Surrender Contract Death Surrender Contract Death
Year Year Value Value Benefit Value Value Benefit Value Value Benefit
1 $157,500 $132,675 $146,175 $692,000 $141,593 $155,093 $692,000 $150,512 $164,012 $692,000
2 $165,375 $130,380 $142,380 $692,000 $148,295 $160,295 $692,000 $167,270 $179,270 $692,000
3 $173,644 $128,101 $138,601 $692,000 $155,094 $165,594 $692,000 $185,380 $195,880 $692,000
4 $182,326 $125,817 $134,817 $692,000 $161,981 $170,981 $692,000 $204,959 $213,959 $692,000
5 $191,442 $123,508 $131,008 $692,000 $168,940 $176,440 $692,000 $226,133 $233,633 $692,000
6 $201,014 $121,146 $127,146 $692,000 $175,951 $181,951 $692,000 $249,040 $255,040 $692,000
7 $211,065 $118,696 $123,196 $692,000 $182,988 $187,488 $692,000 $273,828 $278,328 $692,000
8 $221,618 $116,112 $119,112 $692,000 $190,014 $193,014 $692,000 $300,657 $303,657 $692,000
9 $232,699 $113,336 $114,836 $692,000 $196,979 $198,479 $692,000 $329,703 $331,203 $692,000
10 $244,334 $110,299 $110,299 $692,000 $203,830 $203,830 $692,000 $361,166 $361,166 $692,000
11 $256,551 $106,070 $106,070 $692,000 $210,270 $210,270 $692,000 $396,153 $396,153 $692,000
12 $269,378 $101,385 $101,385 $692,000 $216,554 $216,554 $692,000 $434,521 $434,521 $692,000
13 $282,847 $96,156 $96,156 $692,000 $222,616 $222,616 $692,000 $476,660 $476,660 $692,000
14 $296,990 $90,281 $90,281 $692,000 $228,378 $228,378 $692,000 $523,030 $523,030 $692,000
15 $311,839 $83,624 $83,624 $692,000 $233,739 $233,739 $692,000 $573,968 $573,968 $751,899
16 $327,431 $76,003 $76,003 $692,000 $238,561 $238,561 $692,000 $629,604 $629,604 $818,485
17 $343,803 $67,170 $67,170 $692,000 $242,660 $242,660 $692,000 $690,365 $690,365 $883,668
18 $360,993 $56,796 $56,796 $692,000 $245,795 $245,795 $692,000 $756,667 $756,667 $953,401
19 $379,043 $44,471 $44,471 $692,000 $247,665 $247,665 $692,000 $828,953 $828,953 $1,027,902
20 $397,995 $29,720 $29,720 $692,000 $247,928 $247,928 $692,000 $907,716 $907,716 $1,107,414
Age 60 $191,442 $123,508 $131,008 $692,000 $168,940 $176,440 $692,000 $226,133 $233,633 $692,000
Age 65 $244,334 $110,299 $110,299 $692,000 $203,830 $203,830 $692,000 $361,166 $361,166 $692,000
Age 70 $311,839 $83,624 $83,624 $692,000 $233,739 $233,739 $692,000 $573,968 $573,968 $751,899
Age 75 $397,995 $29,720 $29,720 $692,000 $247,928 $247,928 $692,000 $907,716 $907,716 $1,107,414
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
(1) Assumes a single payment of $150,000 is made at the beginning of the first
Contract Year. Values will be different if payments are made with a different
frequency or in different amounts.
(2) Assumes that no Contract loan has been made. Excessive loans or withdrawals
may cause this Contract to lapse because of insufficient Contract 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 INSURANCE COMPANY
SEPARATE ACCOUNT VUL-2
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
Male, Non-Tobacco User, Age 65
Standard Underwriting Class
Simplified Underwriting Criteria
Face Amount: $203,000
BASED ON CURRENT MONTHLY INSURANCE PROTECTION CHARGES,
MONTHLY DEDUCTIONS, AND PORTFOLIO EXPENSES
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Payments Hypothetical 0% Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest
Contract At 5% Per Surrender Contract Death Surrender Contract Death Surrender Contract Death
Year Year Value Value Benefit Value Value Benefit Value Value Benefit
1 $105,000 $87,982 $96,982 $203,000 $93,899 $102,899 $203,000 $99,815 $108,815 $203,000
2 $110,250 $86,056 $94,056 $203,000 $97,882 $105,882 $203,000 $110,408 $118,408 $203,000
3 $115,763 $84,217 $91,217 $203,000 $101,951 $108,951 $203,000 $121,846 $128,846 $203,000
4 $121,551 $82,465 $88,465 $203,000 $106,109 $112,109 $203,000 $134,204 $140,204 $203,000
5 $127,628 $80,795 $85,795 $203,000 $110,359 $115,359 $203,000 $147,564 $152,564 $203,000
6 $134,010 $79,206 $83,206 $203,000 $114,703 $118,703 $203,000 $162,013 $166,013 $215,817
7 $140,710 $77,695 $80,695 $203,000 $119,144 $122,144 $203,000 $177,648 $180,648 $231,229
8 $147,746 $76,260 $78,260 $203,000 $123,685 $125,685 $203,000 $194,572 $196,572 $247,681
9 $155,133 $74,898 $75,898 $203,000 $128,328 $129,328 $203,000 $212,901 $213,901 $265,237
10 $162,889 $73,608 $73,608 $203,000 $133,077 $133,077 $203,000 $232,757 $232,757 $283,964
11 $171,034 $71,960 $71,960 $203,000 $138,035 $138,035 $203,000 $255,311 $255,311 $306,373
12 $179,586 $70,349 $70,349 $203,000 $143,178 $143,178 $203,000 $280,050 $280,050 $336,060
13 $188,565 $68,775 $68,775 $203,000 $148,513 $148,513 $203,000 $307,186 $307,186 $368,623
14 $197,993 $67,235 $67,235 $203,000 $154,046 $154,046 $203,000 $336,952 $336,952 $404,342
15 $207,893 $65,730 $65,730 $203,000 $159,785 $159,785 $203,000 $369,602 $369,602 $443,522
16 $218,287 $64,259 $64,259 $203,000 $165,738 $165,738 $203,000 $405,416 $405,416 $486,499
17 $229,202 $62,820 $62,820 $203,000 $171,913 $171,913 $206,296 $444,700 $444,700 $533,639
18 $240,662 $61,414 $61,414 $203,000 $178,318 $178,318 $213,982 $487,790 $487,790 $585,348
19 $252,695 $60,040 $60,040 $203,000 $184,962 $184,962 $221,954 $535,056 $535,056 $642,067
20 $265,330 $58,696 $58,696 $203,000 $191,853 $191,853 $230,223 $586,902 $586,902 $704,282
Age 60 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Age 65 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Age 70 $127,628 $80,795 $85,795 $203,000 $110,359 $115,359 $203,000 $147,564 $152,564 $203,000
Age 75 $162,889 $73,608 $73,608 $203,000 $133,077 $133,077 $203,000 $232,757 $232,757 $283,964
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
(1) Assumes a single payment of $100,000 is made at the beginning of the first
Contract Year. Values will be different if payments are made with a different
frequency or in different amounts.
(2) Assumes that no Contract loan has been made. Excessive loans or withdrawals
may cause this Contract to lapse because of insufficient Contract 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 INSURANCE COMPANY
SEPARATE ACCOUNT VUL-2
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
Male, Non-Tobacco User, Age 65
Standard Undwrtiting Class
Simplified Underwriting Criteria
Face Amount: $203,000
BASED ON GUARANTEED MONTHLY INSURANCE PROTECTION CHARGES,
MONTHLY DEDUCTIONS, AND PORTFOLIO EXPENSES
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Payments Hypothetical 0% Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest
Contract At 5% Per Surrender Contract Death Surrender Contract Death Surrender Contract Death
Year Year Value Value Benefit Value Value Benefit Value Value Benefit
1 $105,000 $86,136 $95,136 $203,000 $92,068 $101,068 $203,000 $98,003 $107,003 $203,000
2 $110,250 $82,024 $90,024 $203,000 $93,947 $101,947 $203,000 $106,600 $114,600 $203,000
3 $115,763 $77,611 $84,611 $203,000 $95,604 $102,604 $203,000 $115,877 $122,877 $203,000
4 $121,551 $72,841 $78,841 $203,000 $97,005 $103,005 $203,000 $125,948 $131,948 $203,000
5 $127,628 $67,646 $72,646 $203,000 $98,109 $103,109 $203,000 $136,952 $141,952 $203,000
6 $134,010 $61,921 $65,921 $203,000 $98,848 $102,848 $203,000 $149,047 $153,047 $203,000
7 $140,710 $55,527 $58,527 $203,000 $99,129 $102,129 $203,000 $162,359 $165,359 $211,660
8 $147,746 $48,320 $50,320 $203,000 $98,862 $100,862 $203,000 $176,689 $178,689 $225,148
9 $155,133 $40,071 $41,071 $203,000 $97,897 $98,897 $203,000 $192,015 $193,015 $239,339
10 $162,889 $30,571 $30,571 $203,000 $96,097 $96,097 $203,000 $208,430 $208,430 $254,284
11 $171,034 $18,719 $18,719 $203,000 $92,894 $92,894 $203,000 $226,397 $226,397 $271,676
12 $179,586 $5,004 $5,004 $203,000 $88,536 $88,536 $203,000 $245,576 $245,576 $294,691
13 $188,565 $0 $0 $0* $82,765 $82,765 $203,000 $265,990 $265,990 $319,188
14 $197,993 $0 $0 $0* $75,269 $75,269 $203,000 $287,658 $287,658 $345,190
15 $207,893 $0 $0 $0* $65,613 $65,613 $203,000 $310,576 $310,576 $372,692
16 $218,287 $0 $0 $0* $53,152 $53,152 $203,000 $334,692 $334,692 $401,630
17 $229,202 $0 $0 $0* $37,027 $37,027 $203,000 $359,926 $359,926 $431,912
18 $240,662 $0 $0 $0* $15,950 $15,950 $203,000 $386,124 $386,124 $463,349
19 $252,695 $0 $0 $0* $0 $0 $0* $413,115 $413,115 $495,738
20 $265,330 $0 $0 $0* $0 $0 $0* $440,675 $440,675 $528,810
Age 60 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Age 65 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Age 70 $127,628 $67,646 $72,646 $203,000 $98,109 $103,109 $203,000 $136,952 $141,952 $203,000
Age 75 $162,889 $30,571 $30,571 $203,000 $96,097 $96,097 $203,000 $208,430 $208,430 $254,284
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
(1) Assumes a single payment of $100,000 is made at the beginning of the first
Contract Year. Values will be different if payments are made with a different
frequency or in different amounts.
(2) Assumes that no Contract loan has been made. Excessive loans or withdrawals
may cause this Contract to lapse because of insufficient Contract Value.
* If the Guaranteed Death Benefit Rider is in effect on the Contract, the death
benefit will be $203,000 based on the assumptions for this illustration.
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 INSURANCE COMPANY
SEPARATE ACCOUNT VUL-2
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
Male, Non-Tobacco User, Age 65
Standard Underwriting Class
Full Underwriting Criteria
Face Amount: $406,000
BASED ON CURRENT MONTHLY INSURANCE PROTECTION CHARGES,
MONTHLY DEDUCTIONS, AND PORTFOLIO EXPENSES
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Payments Hypothetical 0% Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest
Contract At 5% Per Surrender Contract Death Surrender Contract Death Surrender Contract Death
Year Year Value Value Benefit Value Value Benefit Value Value Benefit
1 $210,000 $175,965 $193,965 $406,000 $187,798 $205,798 $406,000 $199,631 $217,631 $406,000
2 $220,500 $172,111 $188,111 $406,000 $195,763 $211,763 $406,000 $220,816 $236,816 $406,000
3 $231,525 $168,434 $182,434 $406,000 $203,902 $217,902 $406,000 $243,692 $257,692 $406,000
4 $243,101 $164,929 $176,929 $406,000 $212,219 $224,219 $406,000 $268,409 $280,409 $406,000
5 $255,256 $161,590 $171,590 $406,000 $220,718 $230,718 $406,000 $295,128 $305,128 $406,000
6 $268,019 $158,412 $166,412 $406,000 $229,406 $237,406 $406,000 $324,026 $332,026 $431,633
7 $281,420 $155,390 $161,390 $406,000 $238,288 $244,288 $406,000 $355,295 $361,295 $462,458
8 $295,491 $152,520 $156,520 $406,000 $247,370 $251,370 $406,000 $389,145 $393,145 $495,362
9 $310,266 $149,796 $151,796 $406,000 $256,657 $258,657 $406,000 $425,802 $427,802 $530,474
10 $325,779 $147,215 $147,215 $406,000 $266,155 $266,155 $406,000 $465,514 $465,514 $567,927
11 $342,068 $143,920 $143,920 $406,000 $276,071 $276,071 $406,000 $510,622 $510,622 $612,746
12 $359,171 $140,699 $140,699 $406,000 $286,356 $286,356 $406,000 $560,100 $560,100 $672,120
13 $377,130 $137,549 $137,549 $406,000 $297,025 $297,025 $406,000 $614,372 $614,372 $737,247
14 $395,986 $134,470 $134,470 $406,000 $308,091 $308,091 $406,000 $673,904 $673,904 $808,685
15 $415,786 $131,460 $131,460 $406,000 $319,570 $319,570 $406,000 $739,204 $739,204 $887,045
16 $436,575 $128,518 $128,518 $406,000 $331,476 $331,476 $406,000 $810,831 $810,831 $972,997
17 $458,404 $125,641 $125,641 $406,000 $343,826 $343,826 $412,591 $889,399 $889,399 $1,067,279
18 $481,324 $122,829 $122,829 $406,000 $356,636 $356,636 $427,963 $975,580 $975,580 $1,170,696
19 $505,390 $120,079 $120,079 $406,000 $369,923 $369,923 $443,908 $1,070,112$1,070,112$1,284,134
20 $530,660 $117,391 $117,391 $406,000 $383,705 $383,705 $460,446 $1,173,804$1,173,804$1,408,564
Age 60 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Age 65 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Age 70 $255,256 $161,590 $171,590 $406,000 $220,718 $230,718 $406,000 $295,128 $305,128 $406,000
Age 75 $325,779 $147,215 $147,215 $406,000 $266,155 $266,155 $406,000 $465,514 $465,514 $567,927
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
(1) Assumes a single payment of $200,000 is made at the beginning of the first
Contract Year. Values will be different if payments are made with a different
frequency or in different amounts.
(2) Assumes that no Contract loan has been made. Excessive loans or withdrawals
may cause this Contract to lapse because of insufficient Contract 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 INSURANCE COMPANY
SEPARATE ACCOUNT VUL-2
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
Male, Non-Tobacco User, Age 65
Standard Underwriting Class
Full Underwriting Criteria
Face Amount: $406,000
BASED ON GUARANTEED MONTHLY INSURANCE PROTECTION CHARGES,
MONTHLY DEDUCTIONS, AND PORTFOLIO EXPENSES
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Payments Hypothetical 0% Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest
Contract At 5% Per Surrender Contract Death Surrender Contract Death Surrender Contract Death
Year Year Value Value Benefit Value Value Benefit Value Value Benefit
1 $210,000 $172,272 $190,272 $406,000 $184,137 $202,137 $406,000 $196,007 $214,007 $406,000
2 $220,500 $164,048 $180,048 $406,000 $187,894 $203,894 $406,000 $213,199 $229,199 $406,000
3 $231,525 $155,223 $169,223 $406,000 $191,209 $205,209 $406,000 $231,755 $245,755 $406,000
4 $243,101 $145,681 $157,681 $406,000 $194,010 $206,010 $406,000 $251,897 $263,897 $406,000
5 $255,256 $135,292 $145,292 $406,000 $196,218 $206,218 $406,000 $273,904 $283,904 $406,000
6 $268,019 $123,843 $131,843 $406,000 $197,695 $205,695 $406,000 $298,095 $306,095 $406,000
7 $281,420 $111,055 $117,055 $406,000 $198,259 $204,259 $406,000 $324,718 $330,718 $423,319
8 $295,491 $96,639 $100,639 $406,000 $197,723 $201,723 $406,000 $353,378 $357,378 $450,297
9 $310,266 $80,142 $82,142 $406,000 $195,793 $197,793 $406,000 $384,031 $386,031 $478,678
10 $325,779 $61,141 $61,141 $406,000 $192,195 $192,195 $406,000 $416,859 $416,859 $508,568
11 $342,068 $37,437 $37,437 $406,000 $185,789 $185,789 $406,000 $452,793 $452,793 $543,352
12 $359,171 $10,008 $10,008 $406,000 $177,071 $177,071 $406,000 $491,152 $491,152 $589,383
13 $377,130 $0 $0 $0* $165,529 $165,529 $406,000 $531,980 $531,980 $638,376
14 $395,986 $0 $0 $0* $150,538 $150,538 $406,000 $575,317 $575,317 $690,380
15 $415,786 $0 $0 $0* $131,225 $131,225 $406,000 $621,152 $621,152 $745,383
16 $436,575 $0 $0 $0* $106,305 $106,305 $406,000 $669,384 $669,384 $803,260
17 $458,404 $0 $0 $0* $74,053 $74,053 $406,000 $719,852 $719,852 $863,823
18 $481,324 $0 $0 $0* $31,900 $31,900 $406,000 $772,248 $772,248 $926,698
19 $505,390 $0 $0 $0* $0 $0 $0* $826,229 $826,229 $991,475
20 $530,660 $0 $0 $0* $0 $0 $0* $881,350 $881,350 $1,057,620
Age 60 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Age 65 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Age 70 $255,256 $135,292 $145,292 $406,000 $196,218 $206,218 $406,000 $273,904 $283,904 $406,000
Age 75 $325,779 $61,141 $61,141 $406,000 $192,195 $192,195 $406,000 $416,859 $416,859 $508,568
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
(1) Assumes a single payment of $200,000 is made at the beginning of the first
Contract Year. Values will be different if payments are made with a different
frequency or in different amounts.
(2) Assumes that no Contract loan has been made. Excessive loans or withdrawals
may cause this Contract to lapse because of insufficient Contract Value.
* If the Guaranteed Death Benefit Rider is in effect on the Contract, the death
benefit will be $406,000 based on the assumptions for this illustration.
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 INSURANCE COMPANY
SEPARATE ACCOUNT VUL-2
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
Male, Non-Tobacco User, Age 65
Female, Non-Tobacco User, Age 65
Standard Underwriting Class
Simplified Underwriting Criteria
Face Amount: $288,000
BASED ON CURRENT MONTHLY INSURANCE PROTECTION CHARGES,
MONTHLY DEDUCTIONS, AND PORTFOLIO EXPENSES
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Payments Hypothetical 0% Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest
Contract At 5% Per Surrender Contract Death Surrender Contract Death Surrender Contract Death
Year Year Value Value Benefit Value Value Benefit Value Value Benefit
1 $105,000 $88,409 $97,409 $288,000 $94,354 $103,354 $288,000 $100,300 $109,300 $288,000
2 $110,250 $86,754 $94,754 $288,000 $98,686 $106,686 $288,000 $111,337 $119,337 $288,000
3 $115,763 $85,170 $92,170 $288,000 $103,108 $110,108 $288,000 $123,247 $130,247 $288,000
4 $121,551 $83,658 $89,658 $288,000 $107,641 $113,641 $288,000 $136,155 $142,155 $288,000
5 $127,628 $82,213 $87,213 $288,000 $112,286 $117,286 $288,000 $150,151 $155,151 $288,000
6 $134,010 $80,836 $84,836 $288,000 $117,049 $121,049 $288,000 $165,336 $169,336 $288,000
7 $140,710 $79,523 $82,523 $288,000 $121,932 $124,932 $288,000 $181,817 $184,817 $288,000
8 $147,746 $78,273 $80,273 $288,000 $126,940 $128,940 $288,000 $199,714 $201,714 $288,000
9 $155,133 $77,084 $78,084 $288,000 $132,077 $133,077 $288,000 $219,156 $220,156 $288,000
10 $162,889 $75,956 $75,956 $288,000 $137,346 $137,346 $288,000 $240,283 $240,283 $293,145
11 $171,034 $74,404 $74,404 $288,000 $142,748 $142,748 $288,000 $264,094 $264,094 $316,913
12 $179,586 $72,884 $72,884 $288,000 $148,363 $148,363 $288,000 $290,264 $290,264 $348,317
13 $188,565 $71,396 $71,396 $288,000 $154,199 $154,199 $288,000 $319,027 $319,027 $382,833
14 $197,993 $69,937 $69,937 $288,000 $160,264 $160,264 $288,000 $350,641 $350,641 $420,770
15 $207,893 $68,509 $68,509 $288,000 $166,568 $166,568 $288,000 $385,388 $385,388 $462,465
16 $218,287 $67,109 $67,109 $288,000 $173,120 $173,120 $288,000 $423,578 $423,578 $508,293
17 $229,202 $65,738 $65,738 $288,000 $179,929 $179,929 $288,000 $465,552 $465,552 $558,662
18 $240,662 $64,396 $64,396 $288,000 $187,006 $187,006 $288,000 $511,685 $511,685 $614,022
19 $252,695 $63,080 $63,080 $288,000 $194,362 $194,362 $288,000 $562,390 $562,390 $674,869
20 $265,330 $61,792 $61,792 $288,000 $202,007 $202,007 $288,000 $618,120 $618,120 $741,744
Age 60 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Age 65 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Age 70 $127,628 $82,213 $87,213 $288,000 $112,286 $117,286 $288,000 $150,151 $155,151 $288,000
Age 75 $162,889 $75,956 $75,956 $288,000 $137,346 $137,346 $288,000 $240,283 $240,283 $293,145
---------------------------------------------------------------------------------------------------------------
(1) Assumes a single payment of $100,000 is made at the beginning of the first
Contract Year. Values will be different if payments are made with a different
frequency or in different amounts.
(2) Assumes that no Contract loan has been made. Excessive loans or withdrawals
may cause this Contract to lapse because of insufficient Contract 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 INSURANCE COMPANY
SEPARATE ACCOUNT VUL-2
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
Male, Non-Tobacco User, Age 65
Female, Non-Tobacco User, Age 65
Standard Underwriting Class
Simplified Underwriting Criteria
Face Amount: $288,000
BASED ON GUARANTEED MONTHLY INSURANCE PROTECTION CHARGES,
MONTHLY DEDUCTIONS, AND PORTFOLIO EXPENSES
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Payments Hypothetical 0% Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest
Contract At 5% Per Surrender Contract Death Surrender Contract Death Surrender Contract Death
Year Year Value Value Benefit Value Value Benefit Value Value Benefit
1 $105,000 $88,409 $97,409 $288,000 $94,354 $103,354 $288,000 $100,300 $109,300 $288,000
2 $110,250 $86,743 $94,743 $288,000 $98,686 $106,686 $288,000 $111,337 $119,337 $288,000
3 $115,763 $84,965 $91,965 $288,000 $102,967 $109,967 $288,000 $123,168 $130,168 $288,000
4 $121,551 $83,037 $89,037 $288,000 $107,167 $113,167 $288,000 $135,859 $141,859 $288,000
5 $127,628 $80,911 $85,911 $288,000 $111,253 $116,253 $288,000 $149,487 $154,487 $288,000
6 $134,010 $78,527 $82,527 $288,000 $115,177 $119,177 $288,000 $164,142 $168,142 $288,000
7 $140,710 $75,804 $78,804 $288,000 $118,882 $121,882 $288,000 $179,929 $182,929 $288,000
8 $147,746 $72,634 $74,634 $288,000 $122,287 $124,287 $288,000 $196,977 $198,977 $288,000
9 $155,133 $68,879 $69,879 $288,000 $125,296 $126,296 $288,000 $215,451 $216,451 $288,000
10 $162,889 $64,379 $64,379 $288,000 $127,796 $127,796 $288,000 $235,574 $235,574 $288,000
11 $171,034 $58,314 $58,314 $288,000 $129,455 $129,455 $288,000 $258,048 $258,048 $309,657
12 $179,586 $51,066 $51,066 $288,000 $130,396 $130,396 $288,000 $282,401 $282,401 $338,881
13 $188,565 $42,386 $42,386 $288,000 $130,468 $130,468 $288,000 $308,698 $308,698 $370,438
14 $197,993 $31,966 $31,966 $288,000 $129,483 $129,483 $288,000 $337,007 $337,007 $404,408
15 $207,893 $19,401 $19,401 $288,000 $127,193 $127,193 $288,000 $367,369 $367,369 $440,843
16 $218,287 $4,134 $4,134 $288,000 $123,256 $123,256 $288,000 $399,786 $399,786 $479,744
17 $229,202 $0 $0 $0* $117,200 $117,200 $288,000 $434,206 $434,206 $521,047
18 $240,662 $0 $0 $0* $108,369 $108,369 $288,000 $470,506 $470,506 $564,607
19 $252,695 $0 $0 $0* $95,874 $95,874 $288,000 $508,496 $508,496 $610,195
20 $265,330 $0 $0 $0* $78,512 $78,512 $288,000 $547,922 $547,922 $657,506
Age 60 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Age 65 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Age 70 $127,628 $80,911 $85,911 $288,000 $111,253 $116,253 $288,000 $149,487 $154,487 $288,000
Age 75 $162,889 $64,379 $64,379 $288,000 $127,796 $127,796 $288,000 $235,574 $235,574 $288,000
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
(1) Assumes a single payment of $100,000 is made at the beginning of the first
Contract Year. Values will be different if payments are made with a different
frequency or in different amounts.
(2) Assumes that no Contract loan has been made. Excessive loans or withdrawals
may cause this Contract to lapse because of insufficient Contract Value.
* If the Guaranteed Death Benefit Rider is in effect on the Contract, the death
benefit will be $288,000 based on the assumptions for this illustration.
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 INSURANCE COMPANY
SEPARATE ACCOUNT VUL-2
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
Male, Non-Tobacco User, Age 65
Female, Non-Tobacco User, Age 65
Standard Underwriting Class
Full Underwriting Criteria
Face Amount: $576,000
BASED ON CURRENT MONTHLY INSURANCE PROTECTION CHARGES,
MONTHLY DEDUCTIONS, AND PORTFOLIO EXPENSES
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Payments Hypothetical 0% Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest
Contract At 5% Per Surrender Contract Death Surrender Contract Death Surrender Contract Death
Year Year Value Value Benefit Value Value Benefit Value Value Benefit
1 $210,000 $176,818 $194,818 $576,000 $188,709 $206,709 $576,000 $200,599 $218,599 $576,000
2 $220,500 $173,507 $189,507 $576,000 $197,371 $213,371 $576,000 $222,674 $238,674 $576,000
3 $231,525 $170,341 $184,341 $576,000 $206,216 $220,216 $576,000 $246,494 $260,494 $576,000
4 $243,101 $167,315 $179,315 $576,000 $215,281 $227,281 $576,000 $272,310 $284,310 $576,000
5 $255,256 $164,426 $174,426 $576,000 $224,573 $234,573 $576,000 $300,302 $310,302 $576,000
6 $268,019 $161,671 $169,671 $576,000 $234,098 $242,098 $576,000 $330,672 $338,672 $576,000
7 $281,420 $159,045 $165,045 $576,000 $243,864 $249,864 $576,000 $363,634 $369,634 $576,000
8 $295,491 $156,546 $160,546 $576,000 $253,880 $257,880 $576,000 $399,428 $403,428 $576,000
9 $310,266 $154,169 $156,169 $576,000 $264,153 $266,153 $576,000 $438,311 $440,311 $576,000
10 $325,779 $151,911 $151,911 $576,000 $274,692 $274,692 $576,000 $480,566 $480,566 $586,290
11 $342,068 $148,808 $148,808 $576,000 $285,496 $285,496 $576,000 $528,187 $528,187 $633,825
12 $359,171 $145,769 $145,769 $576,000 $296,726 $296,726 $576,000 $580,528 $580,528 $696,633
13 $377,130 $142,791 $142,791 $576,000 $308,397 $308,397 $576,000 $638,055 $638,055 $765,666
14 $395,986 $139,874 $139,874 $576,000 $320,528 $320,528 $576,000 $701,282 $701,282 $841,539
15 $415,786 $137,017 $137,017 $576,000 $333,136 $333,136 $576,000 $770,775 $770,775 $924,931
16 $436,575 $134,218 $134,218 $576,000 $346,239 $346,239 $576,000 $847,155 $847,155 $1,016,586
17 $458,404 $131,477 $131,477 $576,000 $359,858 $359,858 $576,000 $931,103 $931,103 $1,117,324
18 $481,324 $128,791 $128,791 $576,000 $374,013 $374,013 $576,000 $1,023,370$1,023,370$1,228,044
19 $505,390 $126,160 $126,160 $576,000 $388,724 $388,724 $576,000 $1,124,781$1,124,781$1,349,737
20 $530,660 $123,583 $123,583 $576,000 $404,014 $404,014 $576,000 $1,236,240$1,236,240$1,483,488
Age 60 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Age 65 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Age 70 $255,256 $164,426 $174,426 $576,000 $224,573 $234,573 $576,000 $300,302 $310,302 $576,000
Age 75 $325,779 $151,911 $151,911 $576,000 $274,692 $274,692 $576,000 $480,566 $480,566 $586,290
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
(1) Assumes a single payment of $200,000 is made at the beginning of the first
Contract Year. Values will be different if payments are made with a different
frequency or in different amounts.
(2) Assumes that no Contract loan has been made. Excessive loans or withdrawals
may cause this Contract to lapse because of insufficient Contract 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 INSURANCE COMPANY
SEPARATE ACCOUNT VUL-2
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
Male, Non-Tobacco User, Age 65
Female, Non-Tobacco User, Age 65
Standard Undwriting Class
Full Underwriting Criteria
Face Amount: $576,000
BASED ON GUARANTEED MONTHLY INSURANCE PROTECTION CHARGES,
MONTHLY DEDUCTIONS, AND PORTFOLIO EXPENSES
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Payments Hypothetical 0% Hypothetical 6% Hypothetical 12%
Made Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest
Contract At 5% Per Surrender Contract Death Surrender Contract Death Surrender Contract Death
Year Year Value Value Benefit Value Value Benefit Value Value Benefit
1 $210,000 $176,818 $194,818 $576,000 $188,709 $206,709 $576,000 $200,599 $218,599 $576,000
2 $220,500 $173,485 $189,485 $576,000 $197,371 $213,371 $576,000 $222,674 $238,674 $576,000
3 $231,525 $169,929 $183,929 $576,000 $205,933 $219,933 $576,000 $246,335 $260,335 $576,000
4 $243,101 $166,074 $178,074 $576,000 $214,335 $226,335 $576,000 $271,717 $283,717 $576,000
5 $255,256 $161,822 $171,822 $576,000 $222,505 $232,505 $576,000 $298,973 $308,973 $576,000
6 $268,019 $157,055 $165,055 $576,000 $230,355 $238,355 $576,000 $328,284 $336,284 $576,000
7 $281,420 $151,608 $157,608 $576,000 $237,763 $243,763 $576,000 $359,859 $365,859 $576,000
8 $295,491 $145,267 $149,267 $576,000 $244,574 $248,574 $576,000 $393,954 $397,954 $576,000
9 $310,266 $137,758 $139,758 $576,000 $250,592 $252,592 $576,000 $430,902 $432,902 $576,000
10 $325,779 $128,757 $128,757 $576,000 $255,591 $255,591 $576,000 $471,148 $471,148 $576,000
11 $342,068 $116,629 $116,629 $576,000 $258,910 $258,910 $576,000 $516,095 $516,095 $619,314
12 $359,171 $102,133 $102,133 $576,000 $260,793 $260,793 $576,000 $564,801 $564,801 $677,761
13 $377,130 $84,771 $84,771 $576,000 $260,936 $260,936 $576,000 $617,396 $617,396 $740,875
14 $395,986 $63,931 $63,931 $576,000 $258,965 $258,965 $576,000 $674,013 $674,013 $808,816
15 $415,786 $38,802 $38,802 $576,000 $254,385 $254,385 $576,000 $734,738 $734,738 $881,685
16 $436,575 $8,268 $8,268 $576,000 $246,512 $246,512 $576,000 $799,572 $799,572 $959,487
17 $458,404 $0 $0 $0* $234,401 $234,401 $576,000 $868,411 $868,411 $1,042,094
18 $481,324 $0 $0 $0* $216,738 $216,738 $576,000 $941,011 $941,011 $1,129,213
19 $505,390 $0 $0 $0* $191,748 $191,748 $576,000 $1,016,990$1,016,990$1,220,388
20 $530,660 $0 $0 $0* $157,025 $157,025 $576,000 $1,095,843$1,095,843$1,315,012
Age 60 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Age 65 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Age 70 $255,256 $161,822 $171,822 $576,000 $222,505 $232,505 $576,000 $298,973 $308,973 $576,000
Age 75 $325,779 $128,757 $128,757 $576,000 $255,591 $255,591 $576,000 $471,148 $471,148 $576,000
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
(1) Assumes a single payment of $200,000 is made at the beginning of the first
Contract Year. Values will be different if payments are made
with a different frequency or in different amounts.
(2) Assumes that no Contract loan has been made. Excessive loans or withdrawals
may cause this Contract to lapse because of insufficient Contract Value.
* If the Guaranteed Death Benefit Rider is in effect on the Contract, the death
benefit will be $576,000 based on the assumptions for this illustration.
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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Transamerica Occidental Life Separate Account VUL-2, has duly caused
this registration statement to be signed on its behalf by the undersigned
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the City of Los Angeles, and the State of California, on this 1st day of
February, 1999.
Transamerica Occidental Life Separate Account VUL-2
(Registrant)
(SEAL)
Attest:___________________________ By:___________________________________
(Title) (Name) David M. Goldstein
(Title) Vice President
Transamerica Occidental Life
Insurance Company
Pursuant to the requirements of the Securities Act of 1933, Transamerica
Occidental Life Insurance Company has duly caused this registration statement to
be signed on its behalf by the undersigned thereunto duly authorized, and its
seal to be hereunto affixed and attested, all in the City of Los Angeles and the
State of California, on the 1st day of February, 1999.
Transamerica Occidental Life Insurance Company
(SEAL)
Attest:___________________________ By:___________________________________
(Title) (Name) David M. Goldstein
(Title) Vice President
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities
indicated on the date(s) set forth below.
Signatures Titles Date
______________________* Director, Chairman, February 1, 1999
Thomas J. Cusack President and Chief Executive Officer
_____________________* Director February 1, 1999
James W. Dederer
_____________________* Director February 1, 1999
George A. Foegele
______________________* Director February 1, 1999
David E. Gooding
______________________* Director February 1, 1999
Edgar H. Grubb
______________________* Director February 1, 1999
Frank C. Herringer
______________________* Director February 1, 1999
Richard N. Latzer
______________________* Director February 1, 1999
Karen MacDonald
______________________* Director February 1, 1999
Gary U. Rolle'
_____________________* Director February 1, 1999
Paul E. Rutledge III
______________________* Director February 1, 1999
T. Desmond Sugrue
______________________* Director February 1, 1999
Nooruddin S. Veerjee
______________________* Director February 1, 1999
Robert A. Watson
/s/David M. Goldstein On February 1, 1999 as Attorney-in-Fact pursuant to
*By: David M. Goldstein powers of attorney previously filed and filed herewith,
and in his own capacity as Vice President.
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 LLP
2. 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-2. 1/ 3/
(2) Not Applicable.
(3) (a) Form of Distribution Agreement between Transamerica Securities
Sales Corporation and Transamerica Occidental Life Insurance
Company. 1/ 3/
(b) Form of Sales Agreement between Transamerica Life Companies, Transamerica
Securities Sales Corporation and Broker-Dealers 1/ 3/
(4) Not Applicable.
(5) Forms of Policy and Policy riders. 1/ 2/ 3/
(6) Organizational documents of the Company, as amended. 1/ 3/
(7) Not Applicable.
(8) Form of Participation Agreement between: Transamerica Occidental
Life Insurance Company and:
(a) re The Alger American Fund 1/ 3/
(b) re Alliance Variable Products Series Fund, Inc. 1/ 3/
(c) re Dreyfus Variable Investment Fund 1/ 3/
(d) re Janus Aspen Series 1/ 3/
(e) re MFS Variable Insurance Trust 1/ 3/
(f) re Morgan Stanley Universal Funds, Inc. 1/ 3/
(g) re OCC Accumulation Trust 1/ 3/
(h) re Transamerica Variable Insurance Fund, Inc. 1/ 3/
(9) Administrative Agreements between Transamerica Occidental Life Insurance
Company and First Allmerica Financial Life Insurance
Company 1/ 3/
(10) Form of Application. 1/ 3
(11) Issuance, Transfer and Redemption Procedures Memorandum. 1/ 3/
(12) Financial Data Schedule.
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 1/
7. Consent of Independent Accountants 2/ 3/
8. Powers of Attorney 1/
1/ Incorporated herein by reference to the initial filing of this
Registration Statement (File No. 333-63215) on September 10, 1998.
2/ Incorporated by reference to Pre-Effective Amendment No. 2 of this
Registration Statement (File No. 333-63215) on January 15, 1999.
3/ Filed herewith.
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.
The directors and officers of Transamerica Occidental Life Insurance Company are
covered under a Directors and Officers liability program which includes direct
coverage to directors and officers (Coverage A) and corporate reimbursement
(Coverage B) to reimburse the Company for indemnification of its directors and
officers. Such directors and officers are indemnified for loss arising from any
covered claim by reason of any Wrongful Act in their capacities as directors or
officers. In general, the term "loss" means any amount which the insureds are
legally obligated to pay for a claim for Wrongful Acts. In general, the term
"Wrongful Acts" means any breach of duty, neglect, error, misstatement,
misleading statement or omission caused, committed or attempted by a director or
officer while acting individually or collectively in their capacity as such,
claimed against them solely by reason of their being directors and officers. The
limit of liability under the program is $95,000,000 for Coverage A and
$80,000,000 for Coverage B for the period 11/15/98 to 11/15/2000. Coverage B is
subject to a self insured retention of $15,000,000. The primary policy under the
program is with CNA Lloyds, Gulf, Chubb and Travelers.
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.