As filed with the Securities
and Exchange Commission on
January 8, 2001
Registration No. 333-47406
811-10167
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
Pre-Effective Amendment No. 1
TRANSAMERICA OCCIDENTAL LIFE SEPARATE ACCOUNT VUL-4 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)
__X___On January 15, 2001 pursuant to paragraph (a)(1)
_____On (date) pursuant to paragraph (a)(2) of Rule 485
Title of securities being registered:
Flexible Premium 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.
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-4. 1/
(2) Not Applicable.
(3) (a) Form of Distribution Agreement between Transamerica Securities
Sales Corporation and Transamerica Occidental Life Insurance
Company. 1/
(b) Form of Sales Agreement between Transamerica Life Companies,
Transamerica Securities Sales Corporation and Broker-Dealers 1/
(4) Not Applicable.
(5) Forms of Policy and Policy riders. 1/
(6) Organizational documents of the Company, as amended. 1/
(7) Not Applicable.
(8) Form of Participation Agreement between: Transamerica Occidental Life Insurance Company and:
(a) re The Alger American Fund 1/
(b) re Alliance Variable Products Series Fund, Inc. 1/
(c) re Dreyfus Variable Investment Fund 1/
(d) re Janus Aspen Series 1/
(e) re MFS Variable Insurance Trust 1/
(f) re Morgan Stanley Universal Funds, Inc. 1/
(g) re OCC Accumulation Trust 1/
(h) re Transamerica Variable Insurance Fund, Inc. 1/
(i) re PIMCO Variable Insurance Trust 1/
(9) Administrative Agreements.
(10) Form of Application. 1/
(11) Issuance, Transfer and Redemption Procedures Memorandum. 1/
(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/
8. Powers of Attorney 1/
1/ Incorporated herein by reference to the initial filing of this
Registration Statement (File No. -- 333-47406) on October 5, 2000.
2/ 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Transamerica Occidental Life Separate Account VUL-4, 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 8th day of
January, 2001.
Transamerica Occidental Life Separate Account VUL-4
(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 8th day of 2001.
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
Ron F. Wagley* ___________________________ January 8, 2001
President and Director
Patrick S. Baird* ___________________________ January 8, 2001
Director
Brenda K. Clancy* ___________________________ January 8, 2001
Director and Senior Vice President
James W. Dederer* ___________________________ January 8, 2001
Director, General Counsel and Secretary
George A. Foegele* __________________________ January 8, 2001
Director
Douglas C. Kolsrud* __________________________ January 8, 2001
Director and Senior Vice President
Richard N. Latzer* __________________________ January 8, 2001
Director and Investment Officer
Karen O. MacDonald* _________________________ January 8, 2001
Director and Acting Chief Financial Officer
Gary U. Rolle'* _________________________ January 8, 2001
Director and Investment Officer
Paul E. Rutledge III* _________________________ January 8, 2001
Director and President - Reinsurance Division
Craig D. Vermie* _________________________ January 8, 2001
Director, Vice President and Counsel
_________________________ On January 8, 2001 as Attorney-in-Fact pursuant to
*By: David M. Goldstein powers of attorney filed herewith.
PROSPECTUS FOR
TRANSSURVIVORSM LIFE
VARIABLE UNIVERSAL LIFE INSURANCE
A FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR VARIABLE LIFE INSURANCE POLICY
ISSUED BY
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
OFFERING 19 SUB-ACCOUNTS UNDER SEPARATE ACCOUNT VUL-4
IN ADDITION TO A FIXED ACCOUNT
The Securities and Exchange Commission maintains a Portfolios Associated with Sub-Accounts
web site (http://www.sec.gov) that Alger American Income & Growth
contains material incorporated by reference and Alliance VP Growth and Income-Class B
other information regarding registrants that file Alliance VP Premier Growth-Class B
electronically with the Commission. Dreyfus VIF Appreciation
Dreyfus VIF Small Cap
Please note that the policies and the portfolios Janus Aspen Series Balanced-Service Shares
are not guaranteed to achieve their goals and Janus Aspen Series Worldwide Growth-Service Shares
are subject to risks, including possible loss of MFSR VIT Emerging Growth
amount invested. Please read this prospectus MFSR VIT Growth with Income
carefully and keep it for future reference. It MFSR VIT Research
should be read with the current prospectus for the MS UIF Emerging Markets Equity
portfolios. MS UIF Fixed Income
MS UIF High Yield
Neither the SEC nor the state securities commissions MS UIF International Magnum
have approved this investment OCC Accumulation Trust Managed
offering or determined that this prospectus is OCC Accumulation Trust Small Cap
accurate or complete. Any representation tot he PIMCO VIT StocksPLUS Growth & Income
contrary is a criminal offense. Transamerica VIF Growth
Transamerica VIF Money Market
Transamerica Occidental Life Insurance Company
1150 South Olive Street
Los Angeles, CA 90015
http://www.transamerica.com
January 15, 2001
TABLE OF CONTENTS
DEFINITIONS............................................................................................... 4
SUMMARY 6
TABLES OF FEES AND EXPENSES............................................................................... 7
TABLE OF SEPARATE ACCOUNT INVESTMENT OPTIONS AND INVESTMENT ADVISERS...................................... 12
DESCRIPTION OF TRANSAMERICA, THE SEPARATE ACCOUNT
AND THE PORTFOLIOS............................................................................... 13
Transamerica Occidental Life Insurance Company................................................... 13
Insurance Marketplace Standards Association...................................................... 13
The Separate Account............................................................................. 13
The Portfolios................................................................................... 13
Voting Rights.................................................................................... 15
Addition, Deletion or Substitution............................................................... 15
Portfolios Not Publicly Available................................................................ 16
CHARGES AND DEDUCTIONS.................................................................................... 16
Administrative Charge............................................................................ 16
Surrender Penalty................................................................................ 17
Allocation Change Charge......................................................................... 17
Transfer Fee..................................................................................... 17
Additional Illustrations......................................................................... 17
Accelerated Death Benefit Rider.................................................................. 17
Mortality and Expense Risk Charge................................................................ 17
Monthly Deduction................................................................................ 18
Reinstatement Interest Charges................................................................... 19
Portfolio Expenses............................................................................... 19
Possible Tax Charge.............................................................................. 19
THE POLICY................................................................................................ 19
Owner............................................................................................ 19
Beneficiary...................................................................................... 20
Application for a Policy......................................................................... 20
Minimum Initial Face Amount...................................................................... 21
Effective Date of Coverage....................................................................... 21
Policy Date...................................................................................... 21
Backdating a Policy.............................................................................. 22
Reallocation Date................................................................................ 22
Free Look Period................................................................................. 22
Transfers........................................................................................ 22
Other Restrictions............................................................................... 23
Dollar Cost Averaging or DCA..................................................................... 23
Automatic Account Rebalancing or AAR............................................................. 24
Telephone Access Privilege....................................................................... 25
Guaranteed Exchange Option....................................................................... 26
Option to Split The Policy....................................................................... 27
DEATH BENEFIT............................................................................................. 29
Proof of Death................................................................................... 30
Death Benefit Options............................................................................ 30
Transfers After Survivor's Death................................................................. 31
Settlement Provisions............................................................................ 31
Simultaneous Deaths of the Joint Insureds........................................................ 32
Option to Change the Face Amount................................................................. 32
PREMIUMS 32
Premium Qualification Credit..................................................................... 33
Premium Limitation............................................................................... 33
Continuation of Insurance........................................................................ 34
Automatic Premium Loan Endorsement............................................................... 34
ALLOCATION OF NET PREMIUMS................................................................................ 34
Initial Premium.................................................................................. 34
Crediting of Net Premiums Before Reallocation Date............................................... 35
Subsequent Premiums.............................................................................. 35
UNIT AND UNIT VALUES...................................................................................... 35
Valuation of Units............................................................................... 35
Unit Values...................................................................................... 35
ACCUMULATION VALUE........................................................................................ 36
Determination of Accumulation Value.............................................................. 36
Sub-Accounts..................................................................................... 36
Fixed Account.................................................................................... 36
Loan Account..................................................................................... 36
Partial Surrenders............................................................................... 36
Surrender Penalty Free Withdrawals............................................................... 37
NONFORFEITURE OPTION-FULL SURRENDER....................................................................... 38
POLICY LOANS.............................................................................................. 38
Loan Repayment................................................................................... 38
Loan Interest Charged............................................................................ 38
Effect of Policy Loans........................................................................... 39
GRACE PERIOD.............................................................................................. 39
REINSTATEMENT............................................................................................. 40
OTHER BENEFITS............................................................................................ 41
Guaranteed Policy Split Option Rider............................................................. 41
Endorsement to Modify Grace Period............................................................... 43
Accelerated Death Benefit Option Endorsement..................................................... 44
Full Death Benefit Rider......................................................................... 47
Estate Protection Rider.......................................................................... 47
OTHER POLICY PROVISIONS................................................................................... 48
Incontestability of the Policy................................................................... 48
Suicide.......................................................................................... 48
Delay of Payments................................................................................ 48
FEDERAL TAX CONSIDERATIONS................................................................................ 48
Transamerica Occidental Life Insurance Company and
The Separate Account.......................................................................... 48
Taxation of the Policies......................................................................... 49
Withholding...................................................................................... 49
Policy Loans..................................................................................... 49
Interest Disallowance............................................................................ 49
Modified Endowment Contracts..................................................................... 50
Distributions Under Modified Endowment Contracts................................................. 50
REPORTS 50
DIRECTORS AND PRINCIPAL OFFICERS OF
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY................................................... 51
PERFORMANCE INFORMATION................................................................................... 52
DISTRIBUTION.............................................................................................. 55
LEGAL PROCEEDINGS......................................................................................... 55
INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS............................................................. 55
FURTHER INFORMATION....................................................................................... 56
APPENDIX A - THE FIXED ACCOUNT............................................................................ 57
APPENDIX B - SETTLEMENT OPTIONS........................................................................... 59
APPENDIX C - ILLUSTRATIONS OF DEATH BENEFIT,
ACCUMULATION VALUES AND ACCUMULATED PAYMENTS..................................................... 60
APPENDIX D - SURRENDER PENALTY............................................................................
DEFINITIONS
ACCUMULATION VALUE is the policy's total value on a specified date. The
accumulation value at any time is equal to the sum of:
o the value of the units of the sub-accounts credited to your policy; plus
o the value in the fixed account credited to your policy.
ADMINISTRATIVE OFFICE is our office at 1100 Walnut Street, 28th Floor, Kansas
City, Missouri 64106-2152.
o Our mailing address for all written requests and other correspondence is:
Transamerica Occidental Life Insurance Company
Administrative Office
Box 417002
Kansas City, Missouri 64141-7002
o Our address for express delivery is:
Transamerica Occidental Life Insurance Company
Attention: VUL Administration - K26
1100 Walnut Street
Kansas City, Missouri 64016-2152
o Our customer service telephone number is:
(800) XXX-XXXX
BASE POLICY is the policy issued without any riders.
BENEFICIARY is the person you designate to receive the death benefit.
CASH VALUE is the accumulation value, MINUS any surrender penalty.
DATE OF ISSUE is the date used to measure the period of time during which the
Incontestability and the Suicide exclusion provisions are in effect.
DEATH BENEFIT is the amount payable to the beneficiary when the last-to-die of
the joint insureds dies.
DEATH BENEFIT FACTORS for your policy are determined by us and are shown in your
policy. The death benefit factors are calculated separately for each policy.
DELIVERY REQUIREMENT is any requirement that must be completed before the policy
can become effective and before the policy may be delivered to you. Examples
include any application amendment or additional evidence of insurability that we
require. Except as otherwise provided in the conditional receipt, the policy
will not become effective until after all requirements are satisfied.
DESIGNATED INDIVIDUAL is the person upon whose life expectancy a settlement
option is based and upon whose life continued payments under a settlement option
may depend.
EXACT AGE is the age of the younger of the two joint insureds on that insured's
nearest birthday.
FIRST DEATH is the death of the first to die of the joint insureds.
FIXED ACCOUNt is one of the investment options under the policy. The fixed
account is a part of the general account. The net premiums you allocate to the
fixed account and the portion of the accumulation value in the fixed account
will earn interest at a fixed interest rate.
FREE LOOK PERIOD is the initial period of time after you first receive the
policy during which you have the right to examine and return the policy for a
refund.
GENERAL ACCOUNT represents all our assets other than those held in separate
accounts.
GROSS PREMIUM is 100% of any premium you pay.
INTERNAL REVENUE CODE (IRC OR CODE) is the Internal Revenue Code of 1986, as
amended, and its rules and regulations.
INVESTMENT OPTION is the fixed account or any sub-account of the separate
account.
JOINT INSUREDS are the two persons whose lives are insured under the policy.
LAPSE is the termination of the policy at the end of the grace period due to
insufficient premium or insufficient unloaned accumulation value.
LOAN ACCOUNT is a part of the fixed account. The loan account includes
outstanding loans. The loan account is not an investment option.
MAXIMUM LOAN VALUE is the largest amount you may borrow under the policy.
MONTHLY DEDUCTION is an amount we deduct from the accumulation value on the
policy date and on each monthly policy date thereafter.
MONTHLY POLICY DATE is the date monthly deductions are taken. The first monthly
policy date is the policy date. The monthly policy date occurs each month after
the policy date on the same day of the month as the policy date.
NET AMOUNT AT RISK is the difference, on a specified date, between the death
benefit and the accumulation value of the policy.
NET ASSET VALUE is the per share value of a portfolio as calculated by the
portfolio and reported to us.
NET CASH VALUE is the cash value, MINUS any outstanding loans.
NET LOAN AMOUNT is a policy loan, MINUS any loan interest due.
NET PREMIUM is any gross premium payment MINUS an administrative charge.
OWNER is the person or persons who are entitled to the rights granted under the
policy while either or both of the joint insureds are alive.
PAYEE is the person who has the right to elect a settlement option and to
receive payments under that settlement option. If you surrender the policy, you
are the payee under any settlement option you elect. After the survivor's death,
the beneficiary is the payee under the settlement option you elect.
POLICY ANNIVERSARY is an annual anniversary associated with the policy date.
POLICY LOAN is indebtedness to us for a loan secured by the policy.
PORTFOLIO is a mutual fund investment in which a sub-account invests.
PRO RATA ALLOCATION is a proportionate allocation among the investment options.
A pro-rata allocation is equal to the portion of the accumulation value in an
the investment option, divided by the total accumulation value of the policy,
excluding the portion of the accumulation value in the loan account. Any fees,
charges, reductions or deductions from the accumulation value will be allocated
on a pro-rata basis, unless you choose the investment options to which you want
to allocate these amounts according to the procedures we establish.
REALLOCATION DATE is the date that net premiums initially allocated to the money
market sub-account, PLUS any earnings on those net premiums, are transferred to
one or more other sub-accounts of the separate account according to the options
you choose in your application.
REINSTATE means to restore coverage after the policy has lapsed, subject to
certain requirements and limitations.
REQUIRED PREMIUM PER YEAR for the base policy is the minimum cumulative amount
of premium you must pay in each of the first five policy years. You may pay all
or any part of this premium in advance.
RIDER is an attachment to the policy that provides an additional benefit.
SEPARATE ACCOUNT is Transamerica Occidental Life Separate Account VUL-4 of
Transamerica Occidental Life Insurance Company, one of our separate investment
accounts. It consists of the sub-accounts under the policy.
SUB-ACCOUNT is an investment option under the policy. It is a subdivision of the
separate account investing exclusively in the shares of a specific portfolio.
The net premiums you allocate to any sub-account and the portion of the
accumulation value in any sub-account may increase or decrease depending on
investment results.
SURVIVOR is the insured who remains alive after the first death of one of the
joint insureds.
TELEPHONE ACCESS PRIVILEGE is an option to transfer amounts between or among
investment options, change your premium allocation or request a loan by
telephone, within limits. The telephone access privilege will apply, unless you
advise us in writing that you do not want this option. Unless you elect not to
have the option available, you or your registered representative may exercise
this option. We reserve the right to discontinue this option at any time.
UNIT is a measure of interest in a sub-account.
UNIT VALUE is the value of a unit on a given valuation date.
VALUATION DATE is any day that the New York Stock Exchange is open for business.
A valuation date ends when the stock market closes for the day, generally at 4
pm Eastern Time.
VALUATION PERIOD is the period between the close of business on one valuation
date and the close of business on the next valuation date.
WE, OUR, US, COMPANY and TRANSAMERICA refer to Transamerica Occidental Life
Insurance Company.
WRITTEN REQUEST is a signed request in a form satisfactory to us that is
received at our Administrative Office.
YOU and YOUR means the owner of the policy.
SUMMARY
GENERAL
TransSurvivorSM Life VUL is a joint and last survivor variable universal life
insurance policy issued by Transamerica Occidental Life Insurance Company. The
following summary is intended to provide a general description of the most
important features of the policy. The remainder of the prospectus and the policy
provide further detail. The policy's provisions may vary in some states.
We will pay a death benefit to the beneficiary if both joint insureds die while
the policy is in force. A death benefit is payable only upon the death of the
second of the joint insureds to die. We refer to this as the death of the
survivor. There is no death benefit payable upon the death of the first of the
joint insureds. We refer to this as the first death.
While the policy is in force, you may request partial surrenders, policy loans
and a full surrender, subject to applicable provisions and limitations. You may
also add to your coverage by electing optional benefits available.
DURING THE FIRST FIVE POLICY YEARS, YOU MUST PAY A REQUIRED PREMIUM PER YEAR TO
KEEP THE POLICY IN FORCE. Within limits, you may pay all or part of the premium
cumulatively in advance. You may pay more than the required premium per year,
subject to the Premium Limitations. At the end of each of the first five policy
years, we will determine whether you have paid the required premium per year
amount. If you do not pay the required premiums, your policy will enter the
grace period on the policy anniversary. If you do not pay the required premium
during the grace period, the policy will lapse and insurance coverage will
terminate. If you do pay the required premium, we will add a premium
qualification credit to your policy on the following policy anniversary.
PAYING THE REQUIRED PREMIUMS DURING THE FIRST FIVE POLICY YEARS DOES NOT
GUARANTEE THE POLICY WILL NOT LAPSE. EVEN IF YOU PAY THE REQUIRED PREMIUMS
DURING THE FIRST FIVE POLICY YEARS, THE POLICY CAN STILL LAPSE IF THE
ACCUMULATION VALUE, LESS ANY OUTSTANDING LOAN, IS NOT ENOUGH TO PAY THE MONTHLY
DEDUCTIONS DUE.
After the first five policy years, your premium payments are flexible, within
limits. Premiums may be paid until the policy anniversary nearest the 100th
birthday of the younger of the joint insureds. After the fifth policy year, we
will continue to provide you with a schedule of premium payments. Paying these
premiums does NOT guarantee that your policy will not lapse (except as provided
under the optional Endorsement to Modify Grace Period). Making additional
payments after the end of the first five policy years may be necessary to keep
your policy from entering the grace period and subsequently lapsing. You may add
the optional Endorsement to Modify Grace Period to your policy which will,
within limits, prevent your policy from entering the grace period, during the
time the Endorsement is in effect, if the monthly deductions due are greater
than the available policy value.
There are certain risks associated with purchasing a variable universal life
insurance policy. There is no guarantee that the investment objectives of the
portfolios will be achieved. The accumulation value may be less than the
aggregate premiums paid for the policy. BEFORE INVESTING, CAREFULLY READ THIS
PROSPECTUS AND THE PROSPECTUSES OF THE PORTFOLIOS THAT ACCOMPANY THIS
PROSPECTUS.
Because of the substantial nature of the surrender penalties, the policy is not
suitable for short-term investment purposes. Also, prospective purchasers should
note that it may not be advisable to purchase a policy as a replacement for
existing insurance. There may be important tax consequences of making loans,
assignments and partial surrenders, or surrendering the policy. See Taxation of
the Policies for important information about potential tax consequences of
exercising some of your rights under the policy.
53
TABLES OF FEES AND EXPENSES
The following table describes the fees and expenses you will pay when
purchasing, owning and surrendering the policy.
TRANSACTION FEES
- -------------------------------- ------------------------------ ------------------------------ ------------------------
WHEN CHARGE IS AMOUNT POLICIES FROM WHICH
TYPE OF FEE DEDUCTED DEDUCTED CHARGE IS DEDUCTED
- -------------------------------- ------------------------------ ------------------------------ ------------------------
- -------------------------------- ------------------------------ ------------------------------ ------------------------
Administrative Charge Each premium payment. 6% of premium, currently All
(5.5% of premium, currently,
if face amount $10,000,000
or greater)
12% of premium, maximum
- -------------------------------- ------------------------------ ------------------------------ ------------------------
- -------------------------------- ------------------------------ ------------------------------ ------------------------
Surrender Penalty Upon full surrender and $25 minimum. Policies surrendered
decreases in face amount, The full surrender penalty during first 15 policy
during policy years 1-15, is the surrender penalty years. Policies on
but no later than the policy factor times each $1,000 of which partial
anniversary nearest the base policy face amount. The surrenders in excess
100th birthday of the surrender penalty factor of surrender penalty
younger of the joint varies by the age of the free withdrawal
insureds. policy and each joint amounts are taken.
insured's: Policies on which face
Upon partial surrenders in amount decreases are
all policy years. o age at issue, taken during the first
o sex, 15 policy years.
o smoker or nonsmoker
status, and
o risk class.
The surrender
penalty for
partial
surrenders and
decreases in
face amount is a
proportionate
share of the
full surrender
penalty for the
policy.
- -------------------------------- ------------------------------ ------------------------------ ------------------------
- -------------------------------- ------------------------------ ------------------------------ ------------------------
Allocation Change Charge On each change of allocation $25 All policies on which
of new premiums. a change in allocation
of premium occurs.
Currently waived.
- -------------------------------- ------------------------------ ------------------------------ ------------------------
- -------------------------------- ------------------------------ ------------------------------ ------------------------
Transfer Fee On each transfer after 18 in $25 from transfer amount. All policies on which
a policy year. more than 18 transfers
occur during a policy
year.
- -------------------------------- ------------------------------ ------------------------------ ------------------------
- -------------------------------- ------------------------------ ------------------------------ ------------------------
Additional Illustrations At time of request for each $25 All policies on which
illustration of values the excess
requested in excess of one illustration is
illustration in a policy requested in a policy
year. year.
- -------------------------------- ------------------------------ ------------------------------ ------------------------
- -------------------------------- ------------------------------ ------------------------------ ------------------------
Riders and Other Benefits
o Accelerated Death At time of payment to you. $250 for each payment made All, if rider elected
Benefit Rider under the option. and option is
exercised.
- -------------------------------- ------------------------------ ------------------------------ ------------------------
The following table describes the charges you will pay periodically during the
time that you own the policy (not including portfolio expenses):
CHARGES OTHER THAN PORTFOLIO EXPENSES
- -------------------------------- ---------------------------- ------------------------------ ------------------------
WHEN CHARGE IS AMOUNT POLICIES FROM WHICH
TYPE OF FEE DEDUCTED DEDUCTED CHARGE IS DEDUCTED
- -------------------------------- ---------------------------- ------------------------------ ------------------------
- -------------------------------- ---------------------------- ------------------------------ ------------------------
Mortality and Expense Risk Daily deduction reflected 0.25% annualized on net All with accumulation
Charge in sub-account unit value assets in each sub-account. value in one or more
calculation. Charges taken at a daily sub-accounts. The
rate of 0.000685787%, for charge is reflected in
the number of days in the the unit value
valuation period, of net calculation for each
assets in each sub-account. sub-account.
- -------------------------------- ---------------------------- ------------------------------ ------------------------
Monthly Deduction Beginning with the policy Varies as described below. All, until the policy
date and each monthly Sum of these four charges: anniversary nearest
policy date thereafter the 100th birthday of
until the policy o Monthly Deduction the younger of the
anniversary nearest the Rate times each $1,000 joint insured's.
100th birthday of the of net amount at risk
younger of the joint on the base policy; plus
insured's. o Monthly deduction
for riders; plus
o Policy fee; plus
o Monthly expense
charge per thousand.
o Monthly Deduction The monthly deduction rate
Rate, times each $1,000 time each $1,000of the net
of the net amount at risk amount at risk on the
on the base policy (cost monthly policy date. The
of insurance) rate will depend on the face
amount of the
policy, the number
of years that the
policy has been in
force, and each
joint insured's:
o age at issue,
o sex,
o smoker or nonsmoker
status, and
o risk class,
adjusted as applicable
for extra ratings.
We may charge
rates that are
less than the
maximum.
- -------------------------------- ---------------------------- ------------------------------ ------------------------
CHARGES OTHER THAN PORTFOLIO EXPENSES
- -------------------------------- ---------------------------- ------------------------------ ------------------------
WHEN CHARGE IS AMOUNT POLICIES FROM WHICH
TYPE OF FEE DEDUCTED DEDUCTED CHARGE IS DEDUCTED
- -------------------------------- ---------------------------- ------------------------------ ------------------------
Monthly Deduction
(continued)
o Monthly Deduction for
Riders
>> Full Death Benefit Part of monthly deduction $1.00 times each $1,000 of All policies on which
Rider during policy years when net amount at risk on base the rider is in force
younger of joint insureds policy. during policy years
is between attained ages when the younger of
90 and 99. the joint insureds is
between attained ages
90 and 99.
>> Estate Protection Part of monthly deduction Rate times each $1,000 of All policies on which
Rider during first 4 policy rider coverage. Rates vary rider is in force.
years. by the same parameters as Rider expires after
the base policy monthly 4th policy year.
deduction rate.
o Policy Fee $6.00 per month, currently All
Policy Year 1: $6.00,
maximum
Policy Years 2+: $10.00,
maximum
o Monthly Expense The charge will depend on All
Charge Per Thousand the face amount of the base
policy, and each joint
insured's:
o age at issue;
o sex,
o smoker or nonsmoker
status,
o class of risk, and
o any extra ratings
assessed.
- -------------------------------- ---------------------------- ------------------------------ ------------------------
PORTFOLIO EXPENSES
(as a percentage of assets after fee waiver and/or expense reimbursement)(1)
TOTAL
PORTFOLIO
MANAGEMENT OTHER RULE ANNUAL
PORTFOLIO FEES EXPENSES 12B-1 FEES EXPENSES
- --------- ---- -------- ---------- --------
Alger American Income & Growth 0.625% 0.075% - 0.70%
Alliance VP Growth & Income - Class B 0.63% 0.09% 0.25% 0.97%
Alliance VP Premier Growth - Class B 1.00% 0.04% 0.25% 1.29%
Dreyfus VIF Appreciation 0.75% 0.03% - 0.78%
Dreyfus VIF Small Cap 0.75% 0.03% - 0.78%
Janus Aspen Series Balanced - Service Shares(2) 0.65% 0.02% 0.25% 0.92%
Janus Aspen Series Worldwide Growth - Service Shares(2) 0.65% 0.05% 0.25% 0.95%
MFS VIT Emerging Growth 0.75% 0.09% - 0.84%
MFS VIT Growth with Income 0.75% 0.13% - 0.88%
MFS VIT Research 0.75% 0.11% - 0.86%
MS UIF Emerging Markets Equity(3) 0.42% 1.37% - 1.79%
MS UIF Fixed Income(3) 0.14% 0.56% - 0.70%
MS UIF High Yield(3) 0.19% 0.61% - 0.80%
MS UIF International Magnum(3) 0.29% 0.87% - 1.16%
OCC Accumulation Trust Managed(3)(4) 0.77% 0.06% - 0.83%
OCC Accumulation Trust Small Cap(4) 0.80% 0.09% - 0.89%
PIMCO VIT StocksPLUS Growth & Income(5) 0.40% 0.25% - 0.65%
Transamerica VIF Growth 0.70% 0.15% - 0.85%
Transamerica VIF Money Market 0.00% 0.60% - 0.60%
We may receive payment 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.
The fee table information relating to the underlying portfolios was provided to
us by the portfolios or their investment advisers, as we have not and cannot
independently verify either the accuracy or completeness of such information.
Therefore, we disclaim any and all liability for such information. Actual future
expenses of the portfolios may be greater or less than those shown in the Table.
These expenses are for the year ended December 31, 1999.
Notes to Fee Table:
(1) From time to time, the portfolio's 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 1999. The expenses shown
in the table reflect a portfolio's adviser's waivers of fees or
reimbursement of expenses, if applicable. It is anticipated that such
waivers or reimbursements will continue for calendar year 1999. Without
such waivers or reimbursements, the annual expenses for 1999 for certain
portfolios would have been, as a percentage of assets, as follows:
TOTAL PORTFOLIO
MANAGEMENT FEES OTHER ANNUAL
PORTFOLIO EXPENSES EXPENSES
- --------- -------- --------
MS UIF Emerging Markets Equity 1.25% 1.37% 2.62%
MS UIF Fixed Income 0.40% 0.56% 0.96%
MS UIF High Yield 0.50% 0.61% 1.11%
MS UIF International Magnum 0.80% 0.87% 1.67%
Transamerica VIF Growth 0.75% 0.15% 0.90%
Transamerica VIF Money Market 0.35% 1.04% 1.39%
(2) Expenses are based on estimated expenses the service shares expect to incur
in the initial fiscal year.
(3) The management fee of certain of the portfolios includes breakpoints at
designated asset levels. Further information on these breakpoints is
provided in the prospectuses for the portfolios.
(4) The Adviser is contractually obligated to waive that portion of the
advisory fee and to assume any necessary expense to limit total operating
expenses of the portfolio to 1.00% of average net assets (net of expenses
offset) on an annual basis.
(5) PIMCO has contractually agreed to reduce total annual portfolio operating
expenses to the extent these expenses would exceed 0.65% of average daily
assets due to the payment of organizational expenses and Trustees' fees.
Without such reductions, total operating expenses for the fiscal year ended
December 31, 1999 were 0.65%. Under the Expense Limitation Agreement, PIMCO
may recoup these waivers and reimbursements in future periods, not
exceeding three years, provided total expenses, including such recoupment,
do not exceed the annual expense limit. Fees expressed are restated as of
April 1, 2000.
TABLE OF SEPARATE ACCOUNT INVESTMENT OPTIONS AND
INVESTMENT ADVISERS
INVESTMENT ADVISER TRUST/FUND PORTFOLIOS
Fred Alger Management, Inc. Alger American Fund o Income & Growth Portfolio
Alliance Capital Management, Alliance Variable Products o Growth and Income Portfolio
L.P. Series Fund, Inc. -
Class B
o Premier Growth Portfolio -
Class B
The Dreyfus Corporation Dreyfus Variable Investment o Appreciation Portfolio
Fund o Small Cap Portfolio
Janus Capital Corporation Janus Aspen Series o Balanced Portfolio -
Service Shares
o Worldwide Growth Portfolio
-
Service Shares
MFS Investment Management(R) MFS Variable Insurance o Emerging Growth Series
Trust Portfolio
o Growth with Income Series
Portfolio
o Research Series Portfolio
Morgan Stanley Asset Management The Morgan Stanley Universal o Emerging Markets Equity
Institutional Funds, Inc. Portfolio
o International Magnum
Portfolio
Miller Anderson & Sherrerd, LLP The Morgan Stanley Universal o Fixed Income Portfolio
Institutional Funds, Inc. o High Yield Portfolio
OpCap Advisors OCC Accumulation Trust o Managed Portfolio
o Small Cap Portfolio
Pacific Investment Management PIMCO Variable Insurance o StocksPLUS Growth and
Company ("PIMCO") Trust Income Portfolio
Transamerica Investment Transamerica Variable o Growth Portfolio
Management, LLC Insurance Fund, Inc. o Money Market Portfolio
- --------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF TRANSAMERICA,
THE SEPARATE ACCOUNT AND
THE PORTFOLIOS
TRANSAMERICA OCCIDENTAL LIFE INSURANCE
COMPANY
Transamerica Occidental Life Insurance Company, or Transamerica, is a stock life
insurance company incorporated under the laws of the State of California on June
30, 1906. Effective December 31, 2000, the state of domicile for Transamerica
was changed to Iowa. The home office of Transamerica is still at 1150 South
Olive Street, Los Angeles, California 90015.
Transamerica Corporation, a subsidiary of AEGON N.V., indirectly owns
Transamerica Occidental Life Insurance Company.
INSURANCE MARKETPLACE STANDARDS
ASSOCIATION
In recent years, the insurance industry has recognized the need to develop
specific principles and practices to help maintain the highest standards of
marketplace behavior and enhance credibility with consumers. As a result, the
industry established the Insurance Marketplace Standards Association, or IMSA.
As an IMSA member, we agree to follow a set of standards in our advertising,
sales and service for individual life insurance and annuity products. The IMSA
logo, which you will see on our advertising and promotional materials,
demonstrates that we take our commitment to ethical conduct seriously.
THE SEPARATE ACCOUNT
Transamerica Occidental Life Separate Account VUL-4, designated as the 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 Exchange Commission, or
SEC, under the Investment Company Act of 1940, or 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 variable benefits under this policy are provided through the separate
account. The assets of the separate account arethe property of Transamerica.
Transamerica is not a trustee with respect to the separate account assets. The
separate account does not have trustees. Transamerica maintains custody of all
securities of the separate account. Income, if any, together with gains and
losses, realized or unrealized, from assets in the separate account will be
credited to or charged against the amounts allocated to the separate account
without regard to other income, gains or losses of Transamerica Occidental Life
Insurance Company. Assets equal to the liabilities of the separate account will
not be charged with liabilities arising out of any other business we may
conduct. If the assets in the separate account exceed the liabilities arising
under the policies supported by the separate account, the excess may be used to
cover other liabilities of Transamerica Occidental Life Insurance Company. Any
amount we allocate to the separate account for state or federal income taxes may
be deducted from the separate account.
The separate account currently has nineteen 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. All
sub-accounts may not be available in all jurisdictions.
THE PORTFOLIOS
The sub-accounts invest in a variety of portfolios.
The portfolios are open-end management investment companies, or portfolios or
series of, 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.
BEFORE INVESTING, CAREFULLY READ THE PROSPECTUSES OF THE PORTFOLIOS THAT
ACCOMPANY THIS PROSPECTUS. THE PORTFOLIOS' PROSPECTUSES CONTAIN MORE DETAILED
INFORMATION ON THE PORTFOLIO'S INVESTMENT OBJECTIVES, RESTRICTIONS, RISKS,
EXPENSES AND ADVISERS. Statements of Additional Information for the portfolios
are available on request. There is no guarantee that the investment objectives
of the portfolios will be achieved. The accumulation value may be less than the
aggregate premiums made to the policy.
A summary of the portfolios is described below.
THE INCOME & GROWTH PORTFOLIO OF THE ALGER AMERICAN FUND seeks current income
with long-term capital appreciation by investing in dividend-paying equity
securities that also offer opportunities for capital appreciation.
THE GROWTH AND INCOME PORTFOLIO - CLASS B OF THE ALLIANCE VARIABLE PRODUCTS
SERIES FUND, INC. seeks capital growth with current income by investing in
dividend-paying common stocks of good quality.
THE PREMIER GROWTH PORTFOLIO - CLASS B OF THE ALLIANCE VARIABLE PRODUCTS SERIES
FUND, INC. seeks capital growth through active portfolio investment in equity
securities of carefully selected U.S. companies that are likely to achieve
superior earnings growth.
THE APPRECIATION PORTFOLIO OF THE DREYFUS VARIABLE INVESTMENT FUND seeks current
income and long-term capital growth consistent with preservation of capital by
investing in common stocks focusing on "blue chip" companies with total market
values of more than $5 billion at the time of purchase.
THE SMALL CAP PORTFOLIO OF THE DREYFUS VARIABLE INVESTMENT FUND seeks to
maximize capital appreciation by investing in common stocks of U.S. and foreign
companies characterized by new or innovative products or services which should
enhance prospects for growth of future earnings.
THE BALANCED PORTFOLIO - SERVICE SHARES OF THE JANUS ASPEN SERIES seeks
long-term growth consistent with preservation of capital and balanced by current
income by investing in equity and fixed-income securities selected primarily for
their income potential.
THE WORLDWIDE GROWTH PORTFOLIO - SERVICE SHARES OF THE JANUS ASPEN SERIES seeks
long-term growth of capital by investing in common stocks of foreign and
domestic companies. The portfolio has the flexibility to invest on a world-wide
basis in companies and other organizations of any size, regardless of the
country of organization or place of principal business activity.
THE EMERGING GROWTH SERIES OF THE MFS VARIABLE INSURANCE TRUST seeks long-term
growth of capital by investing in common stocks of companies that are early in
their life cycles that MFS believes have the potential to become major
enterprises.
THE GROWTH WITH INCOME SERIES OF THE MFS VARIABLE INSURANCE TRUST seeks current
income with long-term capital growth by investing in equity securities of
companies that are believed to have long-term potential for growth and income.
THE RESEARCH SERIES OF THE MFS VARIABLE INSURANCE TRUST seeks long-term growth
of capital and future income by investing in equity securities of companies
believed to possess better-than-average prospects for long-term growth.
THE EMERGING MARKETS EQUITY PORTFOLIO OF THE MORGAN STANLEY UNIVERSAL
INSTITUTIONAL FUNDS, INC. seeks long-term capital appreciation by investing
primarily in emerging market countries. The Adviser seeks to maximize returns by
investing in markets with improving fundamentals, attractive valuations, and low
investor recognition, and by selecting securities that demonstrate attractive
growth, reasonable valuations, and attractive fundamentals.
THE FIXED INCOME PORTFOLIO OF THE MORGAN STANLEY UNIVERSAL INSTITUTIONAL FUNDS,
INC. seeks above-average income and total return by investing in obligations of
the U.S. government and its agencies, corporate bonds, mortgage-backed
securities, foreign bonds, and other fixed income securities and derivatives.
THE HIGH YIELD PORTFOLIO OF THE MORGAN STANLEY UNIVERSAL INSTITUTIONAL FUNDS,
INC. seeks above-average income and total return by investing in high yield
securities, including corporate bonds and other fixed income securities and
derivatives.
THE INTERNATIONAL MAGNUM PORTFOLIO OF THE MORGAN STANLEY UNIVERSAL INSTITUTIONAL
FUNDS, INC. seeks long-term capital appreciation by investing in developed
market stocks, including equity securities of non-U.S. issuers comprising the
Morgan Stanley Capital International EAFE Index (which includes Australia,
Japan, New Zealand, most Western European nations, and certain developed Asian
countries, such as Hong Kong and Singapore).
THE MANAGED PORTFOLIO OF THE OCC ACCUMULATION TRUST seeks growth of capital over
time by investing primarily in common stocks, bonds and cash equivalents.
THE SMALL CAP PORTFOLIO OF THE OCC ACCUMULATION TRUST seeks capital appreciation
by investing primarily in equity securities of companies with a market
capitalization under $1 billion.
THE STOCKSPLUS GROWTH AND INCOME PORTFOLIO OF THE PIMCO VARIABLE INSURANCE TRUST
seeks to outperform the stock market as measured by the S&P 500 Index by
investing in S&P 500 derivatives in addition to or in place of S&P 500 stocks in
an attempt to equal or exceed the performance of the S&P 500.
THE GROWTH PORTFOLIO OF THE TRANSAMERICA VARIABLE INSURANCE FUND, INC. seeks
long-term capital growth by investing in listed and unlisted common stocks of
companies with superior growth potential.
THE MONEY MARKET PORTFOLIO OF THE TRANSAMERICA VARIABLE INSURANCE FUND, INC.
seeks to maximize current income, liquidity and preservation of capital by
investing in short-term money market instruments.
VOTING RIGHTS
Transamerica is the legal owner of all portfolio shares held in each
sub-account. As the owner, we have the right to vote at a portfolio's
shareholder meetings. However, to the extent required by federal securities laws
and regulations, we will vote portfolio shares that each sub-account holds
according to instructions received from policy owners with accumulation 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 are related to the policies.
Currently, we provide each policy owner with amounts allocated to a sub-account
with proxy materials and voting instructions applicable to the corresponding
portfolio. We will vote shares held in each sub-account for which no timely
instructions are received in proportion to all instructions received for the
sub-account. We will also vote in the same proportion our shares held in the
separate account that do not relate to the policies.
We will compute the number of votes that a policy owner may instruct on the
record date established for the portfolio. This number is equal to A divided B,
where:
A is each policy owner's value in the sub-account; and
B is the net asset value of one share in the portfolio in which the assets of
the sub-account are invested.
We may disregard voting instructions policy owners initiate in favor of any
change in the investment policies or in any investment adviser or principal
underwriter. Our disapproval of any change must be reasonable. Our disapproval
of a change in investment policies or investment adviser must be based on a good
faith determination that the change would not be contrary to state law or
otherwise is improper under the objective and purposes of the portfolios. If we
do disregard voting instructions, we will include a summary of and reasons for
that action in the next report to policy owners.
ADDITION, DELETION, OR SUBSTITUTION
We do not control the portfolios. For this reason, we cannot guarantee that any
of the sub-accounts offered under the policy or any of the portfolios will
always be available to you for investment purposes. We reserve the right to make
changes in the separate account and in its investments.
We reserve the right to eliminate the shares of any portfolio held by a
sub-account. We may also substitute shares of another portfolio or of another
investment company for the shares of any portfolio. We would do this if the
shares of the portfolio are no longer available for investment or if, in our
judgment, investment in any portfolio would be inappropriate in view of the
purposes of the separate account. To the extent required by the 1940 Act, if we
substitute shares in a sub-account that you own, we will provide you with
advance notice and seek advance permission from the Commission. This does not
prevent the separate account from purchasing other securities for other series
or classes of policies. Nor does it prevent the separate account from effecting
an exchange between series or classes of variable policies on the basis of
requests made by owners.
We reserve the right to create new sub-accounts for the policies when, in our
sole discretion, marketing, tax, investment or other conditions warrant that we
do. Any new sub-accounts will be made available to existing owners on a basis to
be determined by us. Each additional sub-account will purchase shares in a
mutual fund portfolio or other investment vehicle. We may also eliminate one or
more sub-accounts if, in our sole discretion, marketing, tax, investment or
other conditions warrant that we do.
In the event of any substitution or change, we may make the changes in the
policy that we deem necessary or appropriate to reflect substitutions or
changes. Furthermore, if we believe it to be in the best interest of persons
having voting rights under the policies, the separate account may be operated as
a management company under the 1940 Act or any other form permitted by law. It
may also be deregistered under such Act in the event that registration is no
longer required. Finally, it may also be combined with one or more other
separate accounts.
PORTFOLIOS NOT PUBLICLY AVAILABLE
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 and are sold directly to the public. The performance of
such publicly available funds, which may have different assets and expenses,
should not be considered as an indication of the performance of the portfolios.
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.
CHARGES AND DEDUCTIONS
The following charges will apply to your policy under the circumstances
described. Some of these charges apply throughout the policy's duration. Other
charges apply only if you choose certain options under the policy. The charges
are for the services and benefits provided, costs and expenses incurred and
risks assumed by us under or in connection with the policies. Services and
benefits provided by us include:
o the death benefits, cash and loan benefits provided by the policy;
o investment options, including net premium allocations;
o administration of various elective options under the policy; and
o the distribution of various reports to policy owners.
Costs and expenses incurred by us include:
o those associated with underwriting applications and riders;
o various overhead and other expenses associated with providing the
services and benefits related to the policy;
o sales and marketing expenses; and
o other costs of doing business, such as federal, state and local premium and
other taxes and fees.
Risks assumed by us include the risks that insureds may live for a shorter
period of time than estimated resulting in the payment of greater death benefits
than expected, and that the costs of providing the services and benefits under
the policies will exceed the charges deducted.
ADMINISTRATIVE CHARGE
Each time you make a premium payment to us, we impose a charge equal to 6% of
the premium payment for policies with a face amount under $10,000,000, and 5.5%
for face amounts $10,000,000 and over. We may change this charge, but it will
never be more than 12%. The administrative charge is designed to help offset our
state and local premium taxes, federal income tax treatment of deferred
acquisition costs, as well as a portion of the distribution costs associated
with the policies.
SURRENDER PENALTY
During the first 15 policy years, or until the policy anniversary nearest exact
age 100, whichever is earlier, we will assess a surrender penalty on:
o any decrease in face amount;
o partial surrenders that exceed the amount eligible for a surrender
penalty free withdrawal; and
o full surrenders.
The minimum surrender penalty is $25. After the 15th policy year, we assess a
$25 charge for partial surrenders in excess of the amount eligible for surrender
penalty free withdrawal.
We deduct the surrender penalty from the accumulation value.
The surrender penalty is a rate times each $1,000 of the face amount of the base
policy. The surrender penalty for a policy depends on a number of factors:
o the face amount of the base policy;
o each joint insured's age at issue, sex, smoker or non-smoker status,
and underwriting risk classification; and
o how many years the policy has been in force.
To calculate the surrender penalty that will apply on a full surrender of the
policy, you (a) divide the face amount of the base policy by $1,000 and (b)
multiply that amount by the surrender penalty factor for the policy year in
which the surrender occurs. The surrender penalty is deducted from the
accumulation value, less any outstanding loan, to determine the net cash value
payable upon a full surrender of the policy. An example of how to calculate the
surrender penalty amount is provided in Appendix D - SURRENDER PENALTY.
The surrender penalty factors for a policy are shown in the policy data pages
for the policy.
The surrender penalty is intended to help us recover a portion of our first year
acquisition expenses and sales expenses, including commissions.
ALLOCATION CHANGE CHARGE
We reserve the right to charge a fee of up to $25 for each change you make in
premium allocations for new net premiums. We do not currently impose this
charge. The charge is designed to recover the administrative expenses associated
with processing changes in allocation elections.
TRANSFER FEE
We will not charge you for the first 18 transfers you make during a policy year.
If you make more than 18 transfers during a policy year, we will charge you up
to $25 for each additional transfer.
This fee is designed to cover our administrative expenses associated with
processing more transfers than our other fees and charges for administrative
expenses are designed to offset.
ADDITIONAL ILLUSTRATIONS
Upon written request at any time, we will send you an illustration of your
policy's benefits and values. There is no charge for the first illustration in
each policy year. We reserve the right to charge up to $25 for each additional
illustration you request in a policy year.
This charge is designed to recover the administrative expenses associated with
providing such additional illustrations.
ACCELERATED DEATH BENEFIT RIDER
If the Accelerated Death Benefit Rider is in effect on your policy and you
receive an Accelerated Death Benefit payment, we will deduct an administrative
fee of $250 from each payment you receive.
The administrative fee is designed to help us recover the expenses associated
with gathering, reviewing, and evaluating the information necessary to approve
your request, as well as the expenses associated with processing the payment.
MORTALITY AND EXPENSE RISK CHARGE
We impose a daily charge at an effective annual rate of 0.25% of the average
daily net asset value of each sub-account. This charge compensates us for
assuming mortality and expense risks. We may realize a profit from this charge.
The mortality risk we assume is that insureds may live for a shorter time than
anticipated. If this happens, we will pay more net death benefits than
anticipated. The expense risk we assume is that the expenses incurred in issuing
and administering the policies will exceed those
compensated by the administration charges in the policies.
MONTHLY DEDUCTION
Beginning on the policy date and on each subsequent monthly policy date, we will
determine the monthly deduction for that policy month. The monthly deduction
will continue to the policy anniversary nearest the 100th birthday of the
younger of the joint insureds.
The monthly deduction is equal to the sum of four charges:
o........the monthly deduction rate, times .001, times the net amount at risk;
PLUS
o the monthly deduction for any riders; PLUS
o the policy fee; PLUS
o the monthly expense charge per thousand, times .001, times the face
amount of the policy.
The monthly deduction is taken from your investment options on a pro rata basis.
This deduction is a charge we assess for various expenses related to the
issuance of a policy, the cost of life insurance, the cost of any optional
benefits and administrative expenses. We may realize a profit from the monthly
deductions.
MONTHLY DEDUCTION RATE. This is the rate used to calculate the monthly cost of
insurance on the base policy. The cost of insurance for the base policy for a
policy month is equal to:
o the monthly deduction rate, TIMES
o .001, TIMES
o the net amount at risk.
The monthly deduction rates for a policy will depend on:
o the face amount of the policy;
o each joint insured's sex;
o each joint insured's smoker or nonsmoker status;
o each joint insured's class of risk, including any extra ratings;
o the number of years that the policy has been in force; and
o each joint insured's age at issue.
The maximum monthly deduction rates are based on the 1980 Commissioners Ordinary
Standard table for sex distinct, smoker distinct, age nearest birthday rates,
adjusted for extra ratings. The rates are determined for each joint insured and
then are converted to joint rates. We may use rates lower than these guaranteed
maximum monthly deduction rates. We will never use higher rates.
A table of guaranteed maximum monthly deduction rates for the base policy is
shown in the policy data pages. We may use rates lower than these guaranteed
maximum monthly deduction rates. We will never use higher rates.
Any change in the monthly deduction rates will be prospective and will be
subject to our expectations as to future cost factors. Such cost factors may
include, but are not limited to, mortality, expenses, interest, persistency, and
any applicable federal, state and local taxes.
The current monthly deduction rates for the first five policy years are
guaranteed not to be increased.
MONTHLY DEDUCTION FOR RIDERS. Additional benefits are available by riders or
endorsements to your policy. The fees for these optional riders pay for the cost
of these additional benefits.
o Full Death Benefit Rider - The fee for this rider is part of the monthly
deduction during the policy years when the younger of the joint insureds is
between the attained ages of 90 and 99. The monthly rate for the rider is
equal to $1.00 per $1,000 of net amount at risk on the base policy.
o Estate Protection Rider - The fee for this rider is part of the monthly
deduction during the first four policy years and is based on a rate per
$1,000 of rider coverage. Rates vary by the same parameters as the base
policy monthly deduction rates.
POLICY FEE - On each monthly policy date, we deduct a policy fee. Currently,
this monthly fee is $6. We reserve the right to change this fee, but we
guarantee it will never be more than $6 in the first policy year or $10 in each
policy year thereafter.
MONTHLY EXPENSE CHARGE PER THOUSAND. The monthly expense charge per thousand
varies by policy. The charge for a policy is based on:
o the face amount of the base policy;
o each joint insured's sex;
o each joint insured's smoker or nonsmoker status;
o each joint insured's class of risk;
o any extra ratings assessed on either joint insured; and
o each joint insured's age at issue.
REINSTATEMENT INTEREST CHARGES
If your policy lapses and you subsequently reinstate it, you will incur interest
charges if:
o you had an outstanding loan when the policy lapsed;
o you must pay us an amount necessary as a required premium per year;
and/or
o you must pay us the net cash value we paid to you at the time the
policy lapsed.
The interest rate for any outstanding loan is at an effective annual rate of
4.75% for the period from the date the policy lapsed to the date the loan is
repaid or reinstated under the REINSTATEMENT provisions. The interest rate for
the required premium per year and for the net cash value paid back to us is at
an effective annual rate of 6%.
These interest charges are designed to help us recover the expenses we incur to
underwrite and process the reinstatement request, as well as to help offset the
reduction in surrender penalty factors from the date the policy lapsed to the
date of reinstatement.
PORTFOLIO EXPENSES
The value of the units of the sub-accounts will reflect the management fee and
other expenses of the portfolios in which the sub-accounts invest. The
management fees and other expenses of the portfolios are listed above under the
Table of Portfolio Expenses. The prospectuses and statements of additional
Information of the portfolios contain more information concerning the fees and
expenses.
POSSIBLE TAX CHARGE
No charges are currently made against the sub-accounts for federal or state
income taxes. Should income taxes be imposed, we reserve the right to allocate a
proportionate share of the reserves that we establish for such taxes to your
policy. We may reflect the amount of such reserves in the calculation of the
unit values.
THE POLICY
Depending on the state of issue, your policy may be an individual policy or a
certificate issued under a group policy. The policy is subject to the insurance
laws and regulations of each state or jurisdiction in which it is available for
distribution. There may be differences between the policy issued and the general
policy description contained in this prospectus because of requirements of the
state where your policy is issued. Some of the state specific differences are
included in the prospectus, but the prospectus does NOT include references to
all state specific differences. All state specific policy features will be
described in your policy.
OWNER
The joint insureds together are the owners unless another owner has been named
in the application or in any supplemental agreement. As owner, you are entitled
to exercise all rights granted under the policy while either of the joint
insureds is alive. After one of the joint insureds dies, the survivor will be
the sole owner of the policy if the policy was jointly owned by the insureds. If
the owner is an individual other than both of the joint insureds, and dies
before the joint insureds, the rights of the owner belong to the executor or
administrator of the owner's estate, unless the policy provides otherwise. If
the owner is a partnership, the rights belong to the partnership as it exists
when a right is exercised.
If more than one person is named as an owner, all persons who are owners must
sign each written request to exercise any right under the policy. However, if
the telephone access privilege is in effect, it may be exercised by any one
person who is an owner, or by your registered representative.
You may change the owner while the survivor is alive by notifying us in a form
and manner acceptable to us. The change will not be effective until we record it
at our Administrative Office.
You may assign a policy as collateral or make an absolute assignment. All policy
rights will be transferred as to the assignee's interest. The consent of the
assignee may be required to make changes in premium allocations, make transfers
or to exercise other rights under the policy. We are not bound by an assignment
or release thereof, unless it is in writing and recorded at our Administrative
Office. When recorded, the assignment will take effect as of the date the
written request was signed. Any rights the assignment creates will be subject to
any payments we made or actions we took before the assignment was recorded. We
are not responsible for determining the validity of any assignment or release.
BENEFICIARY
If the survivor dies while the policy is in force, we will pay the death benefit
to the beneficiary. You select the beneficiary on the application and may change
the beneficiary at a later date. If the beneficiary is a partnership, we will
pay the death benefit to the partnership as it exists on the date the survivor
dies.
To the extent allowed by law, no death benefit will be subject to the claims of
the beneficiary's creditors or to any legal process against the beneficiary.
If any beneficiary dies before the survivor, that beneficiary's interest in the
death benefit will end. If any beneficiary dies at the same time as the
survivor, or within 30 days after the survivor, that beneficiary's interest in
the death benefit will end if no benefits have been paid to that beneficiary. If
the interests of all designated beneficiaries have ended when the survivor dies,
we will pay the death benefit to you. If you are not living at that time, we
will pay the death benefit to your estate.
You may change the beneficiary while the survivor is alive by sending us written
notice. The change will not be effective until we record it at our
Administrative Office. Even if the survivor is not living when we record the
change, the change will take effect as of the date it was signed. However, any
benefits we pay before we record the change will not be subject to the change.
An irrevocable beneficiary may not be changed without the written consent of
that beneficiary.
APPLICATION FOR A POLICY
We offer policies to proposed joint insureds who are between ages 16 and 89.
After receiving a completed application, we will begin underwriting to decide
the insurability of the proposed joint insureds. We may require medical
examinations and other information before deciding insurability. We issue a
policy only after underwriting has been completed. We may reject an application
that does not meet our underwriting standards.
If we approve the application, we will place each joint insured into one of six
underwriting classes:
o Preferred nonsmoker
o Preferred smoker
o Standard nonsmoker
o Standard smoker
o Uninsurable nonsmoker
o Uninsurable smoker
Additional adjustments for extra ratings due to increased mortality risk may
apply to persons classified into the preferred or the standard underwriting
classes.
We may approve an application on which one of the joint insureds is classified
as uninsurable, according to our underwriting guidelines, so long as the other
joint insured is not considered uninsurable.
The underwriting class assigned to each joint insured affects the monthly
deductions for the policy. The monthly deductions and surrender charges for a
policy are based on each joint insured's underwriting class, among other
factors. Generally, for the same joint insureds, our rates are lowest for
preferred nonsmokers.
We also charge lower rates for policies with higher face amounts of base policy
coverage. We offer the following bands for face amounts of base policy coverage:
o $100,000 - $249,999
o $250,000 - $999,999
o $1,000,000 - $2,999,999
o $3,000,000 - $4,999,999
o $5,000,000 - $9,999,999
o $10,000,000 and above
For the same joint insureds, the monthly deduction rates we use decrease at each
band, except that at the $10,000,000 band, we reduce the current administrative
charge from 6% of each premium paid to 5.5%.
If two or more TransSurvivor Life VUL policies are owned by the same owners and
provide coverage on the same joint insureds, we will determine the band for each
policy based on the total coverage on all the policies.
You may make a payment at the time of application, under certain circumstances,
subject to our rules. Under our underwriting rules, you may make a payment at
the time of application if you are requesting a face amount of base policy
coverage which is no more than $1,000,000. We may also refuse to accept initial
payments with the application for other situations.
If you make an initial payment in the amount of at least one monthly premium,
(or 10% of an annual premium), we will issue a conditional receipt which may
provide fixed conditional insurance, but not until after all its conditions are
met. Included in these conditions are:
o the completion of both parts of the application;
o completion of all underwriting requirements; and
o the proposed joint insureds must both be insurable under our rules for
insurance under the policy, in the amount, and in the underwriting class
applied for in the application.
After all conditions are met, the amount of fixed conditional insurance provided
by the conditional receipt will be the amount applied for, up to a maximum of
$250,000 for persons age 16 to 65 and insurable in a standard underwriting
class, and up to $100,000 for all other ages and underwriting classes.
You do not need to pay an initial payment at the time of application. If we
approve the application, you will need to pay us the minimum initial premium for
the policy before any coverage under the policy will be in effect.
MINIMUM INITIAL FACE AMOUNT
We will generally issue a policy only if it has a face amount of at least
$100,000.
EFFECTIVE DATE OF COVERAGE
Except as otherwise provided under the terms of the conditional receipt, no
insurance coverage is provided under the policy until after we approved the
application and:
o the minimum initial premium is paid to us; and
o the policy is delivered to you while:
a) both joint insureds are alive and in good health, and
b) the statements and answers in the application continue to be true and
complete.
POLICY DATE
The policy date is the date from which insurance coverage is provided under the
policy, subject to the conditions noted above. We take monthly deductions from
the policy for the period starting with the policy date.
Generally, except when you request and we approve backdating a policy, the
policy date will be:
o two calendar days after we approve the application if you submitted the
initial premium with the application and the policy is issued without
delivery requirements; or
o the date you accept the policy and pay us the initial premium, if you did
not submit the initial premium with the application and/or we issued the
policy subject to satisfactory completion of delivery requirements.
In the latter situation, when we receive the initial premium and any delivery
requirements, we will amend the policy date as originally issued. The amended
policy date will be the date on which the policy was delivered to you and you
had completed any delivery requirements and/or paid over to our agent the
required initial premiums. We will not amend the date forward beyond that date
which would cause either or both joint insureds to be a year older for purposes
of determining monthly deductions.
BACKDATING A POLICY
If you request, we may backdate a policy by assigning a policy date earlier than
the date the application is signed. However, in no event will a policy be
backdated earlier than the earliest date allowed by state law or by our
underwriting rules. Your request must be in writing and, if we approve the
request, will amend your application.
Monthly deductions are based in part on the age of each joint insured at issue.
Generally, monthly deductions are less at a younger age. We will deduct monthly
deductions for the period that the policy is backdated. This means that, while
the monthly deduction may be lower than what would have applied had we not
backdated the policy, you will be paying for insurance during a period when it
was not in force.
REALLOCATION DATE
When we approve and issue a policy, we establish a reallocation date for that
policy. Currently, the reallocation date is 25 calendar days from the date we
approve the policy for issue.
Any net premiums credited to your policy before the reallocation date will be
allocated initially to the money market sub-account for any portion of net
premiums you wish to allocate to the sub-account. Any portion of the net
premiums you elected to allocate to the fixed account will be allocated directly
to the fixed account. On the reallocation date, the value of those net premiums
initially allocated to the money market sub-account will be reallocated to the
sub-account options you elected on your application or subsequent premium
allocation election. Net premiums credited to your policy on or after the
reallocation date will be allocated to the fixed account and to your elected
sub-account options directly, based on your most recent premium allocation
election.
FREE LOOK PERIOD
The policy provides for a free look period. You have the right to examine and
cancel your policy by returning it to us or to one of our representatives within
10 days after you receive the policy, or a longer period as required by state
law for replacement policies or for other reasons.
If you exercise the free look option, we will void the policy and refund:
o the difference between any premiums paid, including fees or other charges,
and the amounts allocated to the separate account; PLUS
o the value of the amounts in the separate account on the date we receive the
returned policy at our administrative office; PLUS
o any fees or other charges imposed on amounts in the separate account.
If your policy provides for a full refund as required by state law, your refund
will be the total premiums paid to the policy. We may delay a refund of any
payment made by check until the check has cleared your bank.
TRANSFERS
After the end of the free-look period and after the reallocation date, you may
transfer amounts between or among the investment options available. Your request
must be in a form and manner acceptable to us. You may also exercise your
telephone access privilege. Each transfer will be subject to our transfer rules
in effect at the time the transfer is made. We may set rules specifying, among
other things:
o the minimum and maximum amounts you may transfer; and
o how frequently you may make transfers.
Different rules may apply to different investment options.
Except with our consent, transfers from the fixed account will be limited as
follows:
o at least 90 days must elapse between transfers from the fixed account;
and
o the maximum amount which may be transferred is the greater of 25% of the
portion of the accumulation value in the fixed account or the amount of the
last transfer from the fixed account.
These limitations do not apply to transfers from the loan account due to loan
repayments. The portion of the accumulation value in the fixed account excludes
the amounts, if any, in the loan account.
We will make the transfer on the day we receive your transfer request in good
order. If the day we receive your transfer request is not a valuation date, we
will make the transfer on the next following valuation date.
You will not be charged for the first 18 transfers you make during a policy
year. If you make more than 18 transfers during a policy year, we will charge up
to $25 for each additional transfer. Any transfer fee will be deducted from the
amount that you are transferring. The transfer fee will be allocated between or
among the investment options from which the amount is being transferred in
proportion of A divided by B, where:
A is the amount transferred from an investment option; and
B is the total amount transferred from all elected investment options.
The following transactions do not count towards the first 18 transfers during a
policy and will not be charged a transfer fee:
o Transfers made on the reallocation date from the money market sub-account to
other sub-accounts.
o Transfers to or from the loan account.
o Transfers under the dollar cost averaging or automatic account rebalancing
options.
o Transfers we may make after we receive notice of the survivor's death.
o Transfers due to material changes in the separate account or one or more of
the portfolios in which a sub-account invests.
You may apply for automatic transfers under either the dollar cost averaging, or
DCA option, or the automatic account rebalancing, or AAR option, by submitting
your written request to our Administrative Office. You may cancel your election
of an option by written request at any time with regard to future transfers.
OTHER RESTRICTIONS ON TRANSFERS
We reserve the right, without prior notice, to modify, restrict, suspend or
eliminate the transfer privileges, including the telephone access privilege, at
any time and for any reason. For example, restrictions may be necessary to
protect owners from adverse impacts on portfolio management of large and/or
numerous transfers by market timers or others. We have determined that the
movement of significant amounts from one sub-account to another may prevent the
underlying portfolio from taking advantage of investment opportunities. This is
likely to arise when the volume of transfers is high, since each portfolio must
maintain a significant cash position in order to handle redemptions. Such
movement may also cause a substantial increase in portfolio transaction costs
which must be indirectly borne by owners. Therefore, we reserve the right to
require that all transfer requests be made by you and not by a third party
holding a power of attorney. We may also require that each transfer you request
be made by a separate communication to us. We also reserve the right to require
that each transfer request be submitted in writing and be manually signed by
you. We may choose not to allow telephone or facsimile transfer requests.
DOLLAR COST AVERAGING OR DCA
This option allows you to systematically transfer a set dollar amount from the
money market sub-account on a monthly, quarterly, or semi-annual basis to one or
more other sub-accounts. The DCA option is designed to reduce the risk of your
purchasing units only when the price of the units is high, but you should
carefully consider your financial ability to continue the option over a long
enough period of time to purchase units when their value is low as well as when
it is high. The DCA option does not assure a profit or protect against a loss.
The DCA option will terminate automatically when the value of your money market
sub-account is zero.
There is no additional charge for electing the DCA option. Transfers to the
fixed account are not permitted under the DCA option. We reserve the right to
terminate the DCA option at any time and for any reason.
All DCA transfers are subject to the following requirements:
o You must specify the sub-accounts to which you want to transfer amounts
from the money market sub-account, the set dollar amount you want to
transfer from the money market sub-account, the frequency of the scheduled
transfers and the date you want the transfers to begin.
o The date that you want the transfer to begin may not be:
a) before the end of the free-look period or the reallocation date; or
b) less than one month after the date the initial premium was allocated to
your policy.
o You must have at least $1,000 in the money market sub-account:
a) when you elect this option; and
b) on the date of the first transfer.
o The minimum automatic transfer amount from the money market sub-account is
$100.
You may choose any date for your initial DCA transfer, subject to the following
limitations:
o The date you choose may not be:
a) a monthly policy date; or
b) the same date as the date you choose for automatic account rebalancing
transfers, if you choose that option.
We reserve the right to limit further the allowable dates on which DCA
transfers may take place.
o The first DCA transfer will be on the date you select if that date is a
valuation date. Subsequent DCA transfers will occur at the frequency and on
the date you select. If the date you select is not a valuation date, DCA
transfers will occur on the next following valuation date. If, however, the
value in the money market sub-account is less than the scheduled amount on
a scheduled date, no DCA transfer will occur on that scheduled date. If the
value in the money market sub-account subsequently increases to an amount
at least equal to the scheduled amount, then a DCA transfer will resume on
the next scheduled date.
The DCA option will automatically terminate on the earliest of:
o the date the money-market sub-account does not have any accumulation
value remaining;
o the date we receive notice of the survivor's death;
o the date the policy lapses;
o the date the policy is surrendered or terminated; or
o the date you request. Your request must be made in writing or by
exercising your telephone access privilege.
We will not process any DCA transfers after the date we receive your termination
request. You may submit a new request to recommence DCA transfers. However, we
may set minimum time periods after the termination date of the previous option
election before we allow the new election to become effective.
AUTOMATIC ACCOUNT REBALANCING OR AAR
Once your net premiums and requested transfers have been allocated among your
investment option choices, the performance of each investment option may cause
your allocation to shift such that the relative value of one or more investment
options is no longer consistent with your overall objectives. Under the AAR
option, the balances in your selected investment options can be restored to the
allocation percentages you elect on your written request by transferring values
among the investment options.
There is no additional charge for electing the AAR option. We reserve the right
to terminate the AAR option at any time and for any reason.
All AAR transfers are subject to the following requirements:
o You must specify the percentages by investment option of the accumulation
value (excluding amounts in the loan account) you want to maintain in the
selected investment options, the frequency of the scheduled transfers and
the date you want the transfers to begin. The percentages must be whole
numbers and must equal 100%.
o The date that you want the transfers to start may not be:
a) before the end of the free-look period or the reallocation date; or
b) less than three months after the date the initial premium was allocated
to the policy.
o The minimum automatic transfer amount is $100.
o We reserve the right to discontinue this option at any time.
You may choose any date for your initial AAR transfer, subject to the following
limitations:
o The date you choose may not be:
a) a monthly policy date; or
b) the same date as the date you choose for DCA transfers, if you choose
that option.
We reserve the right to limit further the allowable dates on which AAR
transfers may take place.
o The first AAR transfer will be on the date you select if that date is a
valuation date. Subsequent AAR transfers will occur at the frequency and on
the date you selected. If the date you select is not a valuation date, the
first AAR transfer will occur on the next following valuation date.
The AAR option will automatically terminate on the earliest of:
o the date we receive notice of the survivor's death;
o the date the policy lapses;
o the date the policy is surrendered or terminated; or
o the date you request. Your request must be made in writing or by
exercising your telephone access privilege.
We will not process any AAR transfers after the date we receive your termination
request. You may submit a new request to recommence AAR transfers. However, we
may set minimum time periods after the termination date of the previous option
election before we allow the new election to become effective.
TELEPHONE ACCESS PRIVILEGE
This option allows you or your registered representative, within limits, to:
o transfer amounts between or among investment options,
o change your premium allocations, and
o request a loan, up to limits established by us,
by telephone. The telephone access privilege will automatically apply unless you
inform us, in writing, that you do not want this option.
Partial surrenders and full surrenders are not permitted under this option.
We will employ reasonable procedures to confirm that instructions communicated
by telephone are genuine. If more than one person is the owner, the telephone
access privilege may be exercised by any one person who is an owner. We will not
be liable for any losses due to unauthorized or fraudulent instructions. The
procedures we will follow for telephone instructions may include requiring some
form of personal identification before acting on such instructions, providing
written confirmation of the transaction, and/or tape recording the instructions
given by telephone.
GUARANTEED EXCHANGE OPTION
Under the Guaranteed Exchange Option, you have a right to exchange your policy
to a fixed joint and last survivor policy offered by us. Under this option, you
would terminate your coverage under the policy in exchange for equal coverage
under a fixed policy not offering sub-accounts. You may exercise this option at
any time before the 20th policy anniversary or the policy anniversary nearest
exact age 95, whichever comes first, if all of the following conditions are met:
o both joint insureds are living;
o the current policy does not have any outstanding loans; and
o you have not elected to exchange the policy under the Option to Split the
Policy or the Guaranteed Policy Split Option Rider.
The accumulation value on the date the policy is exchanged will be transferred
to the new policy. After the exchange under this option, you will have a policy
which does not offer sub-accounts.
EFFECTIVE DATE. The effective date of the new policy will be the date the
current policy is exchanged. The policy date of the new policy will be the same
as the policy date of the current TransSurvivor Life VUL policy. We may limit
the effective date to the policy anniversary following the date we receive all
requirements in good order. Prior to the date of the exchange, you will continue
to have all rights under the current policy, including the right to allocate net
premiums to the sub-accounts and to transfer amounts among investment options.
If you wish to transfer accumulation values to the fixed account of your policy
until the date of the exchange, you must provide us with transfer instructions
to that effect.
APPLICATION. We must receive all of the following in order to process the
exchange:
o A policy change application indicating your request to exercise this option
and your request to surrender the policy.
o The release of any lien against or assignment of the current policy.
o The current policy.
o Payment of any amount due for the exchange, if applicable.
We will consider the application for the current policy and the policy change
application to be the application for the new policy.
NEW POLICY. The exchange must be to a joint and last survivor adjustable life
insurance policy that would have been available from us at the time you applied
for this option. The new policy will be based on the sex, age, class of risk and
smoking status of the joint insureds as of the policy date of the current
policy. The premiums for the new policy will be based on our published rates in
effect on the date you request to exchange the current policy. If the
Accelerated Death Benefit Rider or the Estate Protection Rider forms a part of
the current policy, they will automatically become part of the new policy,
unless you tell us otherwise. Any other riders that form a part of the current
policy, and any new riders requested, will become a part of the new policy only
if we agree to provide them on the date of the exchange. The new policy will
take effect immediately upon termination of the current policy. Under no
circumstances will we pay a death benefit under both the current policy and the
new policy.
ASSIGNMENT. If there is an assignment on the current policy and you want to
carry over that assignment to the new policy, you must execute a new assignment.
EXCHANGE ADJUSTMENTS. The minimum initial premium for the new policy will be
equal to:
o the cumulative total of the required annual premiums applicable for the
number of years that the current policy was in force; MINUS
o the total accumulation value transferred to the new policy.
SURRENDER PENALTY PERIOD. The period for which the joint insureds were covered
under the policy before the date of the exchange will be used to reduce the
surrender penalty period under the new policy.
EVIDENCE OF INSURABILITY. When you exercise this option, we will not require
evidence of insurability from either joint insured.
SUICIDE AND INCONTESTABILITY. The period for which the joint insureds were
covered before the date of exchange will be used to reduce the time period for
any suicide and incontestability provision under the new policy.
OWNERSHIP. The owner of the new policy will be the same as the owner of the
current policy. If you do not want the owner of the current policy to be the
owner of the new policy, you must indicate this on the application for the new
policy and complete a transfer of ownership form. We may also require that the
owner of the new policy provide us with evidence of insurable interest in the
lives of the joint insureds. A change in ownership may have tax consequences.
BENEFICIARY. The beneficiary of the new policy will be the same as the
beneficiary of the current policy. If you do not want the beneficiary of the
current policy to be the beneficiary of the new policy, you must indicate this
in the policy change form and complete a change of beneficiary form. We may also
require that the new beneficiary provide us with evidence of insurable interest
in the lives of the joint insureds.
TERMINATION. This Guaranteed Exchange Option terminates on the earliest:
o the date of the first death;
o the date you elect to exchange the current policy under the Option to Split
the Policy or the Guaranteed Policy Split Option Rider;
o the 20th policy anniversary;
o the policy anniversary nearest exact age 95;
o the date the current policy is changed to paid-up insurance, if applicable;
o the date the current policy is surrendered or terminated; or
o the date the current policy lapses under the GRACE PERIOD provision.
MISSTATEMENT OF AGE OR SEX. If a misstatement of either joint insured's age or
sex is found before this option is exercised and the current policy's death
benefit is reduced as a result, the face amount of the new policy will be based
on the adjusted face amount of the current policy.
If a misstatement of either joint insured's age or sex is found after this
option is exercised, the death benefit amount under the new policy will be
subject to the Misstatement of Age or Sex provision of the new policy.
POLICY CHANGES. If the face amount of the current policy is changed for any
reason, we will proportionately change the benefit amount of the option.
OPTION TO SPLIT THE POLICY
A policy split may have tax consequences. You should consult a qualified tax
adviser.
Subject to the following conditions and restrictions, you have the option to
exchange the policy for two individual policies, one on each of the lives of the
joint insureds, if either of the contingent events listed below occurs. THE NEW
POLICIES WILL NOT BE VARIABLE POLICIES. A new policy may not exceed 50% of the
face amount of the original policy.
The accumulation value less any outstanding loans under the original policy will
be credited to each new policy in the same ratio which the face amount of each
new policy bears to the face amount of the original policy. Any remaining net
cash value will be paid to you as a partial surrender.
CONTINGENT EVENTS. You may apply for the option if either of the following
events occurs:
o A final divorce decree has been issued with respect to the marriage of the
joint insureds. The joint insureds must have been married to each other
when the original policy was issued.
o A change to federal estate tax provisions of the Code has occurred which
results in either (a) or (b):
a) Code Section 2056(a), or its successor, is amended so as to eliminate or
reduce the federal estate tax unlimited marital deduction.
b) Code Section 2001, or its successor, is amended so that the federal
estate tax rates are reduced. The reduction must be such that the
amount of federal estate tax that would be due at the death of the
survivor is 50% or less of the tax that would have been due before the
change to the Code.
We will NOT notify you of any tax law changes that may affect the original
policy.
APPLICATION. To exercise this option, you must notify our Administrative Office
in writing within 6 months of the date that either of the contingent events
occur. In the case of events involving changes to the Code, we will count the 6
months from the date of the change in the Code.
We must also receive all of the following items in order to process the
exchange:
o The release of any lien against or assignment of the original policy.
However, you may, instead, submit written approval by the lienholders or
assignees of the exchange of policies in a form and manner satisfactory to
us with such other documents that we may require.
o Evidence of insurability, satisfactory to us, from each joint insured to be
covered under a new policy.
o The original policy.
o A policy change application indicating your request to exercise this option
and your request to surrender the original policy.
o A copy of the final divorce decree, if applicable.
o Payment of any amount due for the exchange, if applicable.
We will consider the application for the original policy and the policy change
application to be the application for each new policy.
EFFECTIVE DATE. The policy date and the effective date of the new policies will
be the date we approve the exchange.
NEW POLICY. The exchange must be to a flexible premium adjustable life policy,
on a form designated by us for such purpose. We will have at least one policy
form available for exchanges. Each new policy issued will be based on the sex,
age, class of risk and smoking status of the applicable joint insured as of the
date of the exchange. The premiums for each new policy will be based on our
published rates in effect on the date of the request to split the original
policy. Riders that form a part of the original policy, and any new riders
requested, will become a part of each new policy only if we agree to provide
them on the date of the exchange. Each new policy will take effect immediately
upon the termination of the original policy. Under no circumstances will we pay
a death benefit under both the original policy and the new policy.
LOANS. Any policy loan will be divided and transferred on a proportionate basis
to each new policy.
EXCHANGE ADJUSTMENTS. The following adjustments may be made at the time of the
exchange:
o If you receive a new policy on each joint insured for 50% of the face
amount of the original policy and the original policy is in the surrender
penalty period, we will waive the surrender penalty applicable to the
original policy.
o If you receive a new policy on either of the joint insureds for less than
50% of the face amount of the original policy and the original policy is
still in the surrender penalty period, we will deduct a proportionate
surrender penalty from the accumulation value, less any loans, not applied
to the new policy. We will also deduct the proportionate portion of the
loan not applied to the new policy from any cash value refund.
o If you receive a new policy on only one joint insured and the original
policy is still in the surrender penalty period, we will deduct a
proportionate surrender penalty from the portion of the accumulation value,
less any proportionate portion of the loans attributable to that joint
insured.
o The minimum initial premium for each new policy will be equal to:
a) the cumulative total of the required annual premiums applicable to the new
policy for the number of years that the original policy was in force; MINUS
b) the total accumulation value, net of any loans, transferred to the new
policy.
We will apply this one time premium to the new policy as a gross premium.
SURRENDER PENALTY PERIOD. Any surrender penalty period in the new policy will
begin on the policy date of the new policy.
OWNERSHIP. The owner of a new policy will be the same as the owner of the
current policy. If you do not want the owner of the current policy to be the
owner of the new policy, you must indicate this in the application for the new
policy and complete a transfer of ownership form. We may also require that the
owner of the new policy provide us with evidence of insurable interest in the
lives of the joint insureds.
BENEFICIARY. The beneficiary of the new policy will be the same as the
beneficiary of the current policy. If you do not want the beneficiary of the
current policy to be the beneficiary of the new policy, you must indicate this
in the policy change form and complete a change of beneficiary form. We may also
require that the new beneficiary provide us with evidence of insurable interest
in the lives of the joint insureds.
SUICIDE AND INCONTESTABILITY. If we approve the exchange, the period for which
the joint insureds were covered before the date of the exchange will be used to
reduce the time period for the suicide exclusion and incontestability provisions
under the new policies.
TERMINATION. This option terminates on the earliest of the following dates:
o the date of the first death;
o the date you elect to exchange the original policy under the Guaranteed
Exchange Option or the Guaranteed Policy Split Option Rider, if such rider
is attached to the policy;
o the date the original policy is changed to paid-up insurance, if
applicable;
o the date the original policy is surrendered or terminated; or
o the date the original policy lapses under the GRACE PERIOD provision.
MISSTATEMENT OF AGE OR SEX. We will follow these rules:
o If a misstatement of either joint insured's age or sex is found before this
option is exercised and the original policy's death benefit is reduced as a
result, the face amount of each new policy will be based on the adjusted
face amount of the current policy.
o If a misstatement of either joint insured's age or sex is found after this
option is exercised, the death benefit amount under the new policy will be
subject to the Misstatement of Age or Sex provision of the new policy.
POLICY CHANGES. If the face amount of the original policy is changed for any
reason, we will proportionately change the face amount available under the
option.
DEATH BENEFIT
If the policy is in force on the date the last-to-die of the joint insureds
dies, we will pay the death benefit to the named beneficiary. The death benefit
before the policy anniversary nearest exact age 100 will be based on the option
you choose. If you do not choose a death benefit option, the Option 1 death
benefit will automatically be in effect. We will reduce any death benefit
payable by any existing policy loans and by the portion of any grace period
premium payment necessary to provide insurance to the date of the survivor's
death. The amount of the death benefit may also be affected by other provisions
such as Misstatement of Age or Sex and Partial Surrenders.
The policy is intended to qualify under Code Section 7702 as a life insurance
contract for federal tax purposes. The death benefit is intended to qualify for
the federal income tax exclusion. The provisions of the policy and any attached
endorsement or rider will be interpreted to ensure such qualification.
To the extent the death benefit is increased to maintain qualification as a life
insurance policy, we will make appropriate adjustments to any monthly deductions
or supplemental benefits (retroactively and prospectively), that are consistent
with such an increase. We may deduct retroactive adjustments from the
accumulation value or from any death benefits payable. Prospective adjustments
will be reflected in the monthly deduction.
PROOF OF DEATH
We will pay any death benefit payable because of the death of the second of the
joint insureds to die when we receive due proof of the death of both joint
insureds while the policy is in force. When the survivor dies, proof of death
must be sent to our Administrative Office. We must be notified of the first
death within a reasonable time, and in no event later than one year after the
date of the first death. We will send the appropriate forms to the beneficiary
upon request.
DEATH BENEFIT OPTIONS
There are three death benefit options available under the policy before the
policy anniversary nearest exact age 100. You choose the desired option in the
application. By company practice, you may change the option once per policy year
after the first policy year by written request. Changes in the death benefit
option:
o will be effective on the policy anniversary following the date we approve
the change;
o may not increase the net amount at risk, unless we approve the increase
based on evidence of insurability of the joint insureds provided to us;
o will incur applicable surrender penalties if the change in option results
in a decrease in the face amount; and
o may result in changes in the monthly deductions, including the monthly
deduction rates.
Before the policy anniversary nearest exact age 100, the death benefit will be
as follows:
For Option 1 (level option), the death benefit is the GREATEST of:
a) the total face amount of the base policy on the date of the survivor's
death;
b) the death benefit factor multiplied by the accumulation value of the base
policy on the date of the survivor's death; or
c) the amount required for the policy to qualify as a life insurance contract
under Code Section 7702.
For Option 2 (plus option), the death benefit is the GREATEST of:
a) the total face amount of the base policy on the date of the survivor's
death, plus the accumulation value of the base policy on the date of the
survivor's death;
b) the death benefit factor multiplied by the accumulation value of the base
policy on the date of the survivor's death; or
c) the amount required for the policy to qualify as a life insurance contract
under Code Section 7702.
For Option 3 (plus premium option), the death benefit is the GREATEST of:
a) the total face amount of the base policy on the date of the survivor's
death, plus the excess, if any, of all gross premiums paid for the base
policy as of the date of the survivor's death, minus any partial
surrenders, proportionate surrender penalties, surrender penalty free
withdrawals and premium refunds;
b) the death benefit factor multiplied by the accumulation value of the base
policy on the date of the survivor's death; or
c) the amount required for the policy to qualify as a life insurance contract
under Code Section 7702. Beginning with the policy anniversary nearest exact age
100, the death benefit will be the greater of:
a) the death benefit factor multiplied by the accumulation value of the base
policy as of the date of the survivor's death; or
b) the amount required for the policy to qualify as a life insurance contract
under Code Section 7702.
If the Full Death Benefit Rider is in force on the policy anniversary nearest
exact age 100, however, the death benefit beginning on that date will be the
benefit as provided under the rider.
We will determine the accumulation value for the death benefit calculation using
the prices calculated at the end of the valuation date on which the survivor
died. If that date is not a valuation date, we use the prices calculated at the
end of the next valuation date.
The death benefit options permit you to tailor your policy to your needs.
Option 1 may be the preferable option for you if:
o you want a specified death benefit amount (the face amount of the base
policy), and
o you want to minimize your monthly deduction costs.
Under Option 1, the accumulation value generally reduces the net amount of risk.
Since monthly deductions for the cost of insurance are based on net amount of
risk, Option 1 results in smaller monthly deductions for the same face amount of
base policy coverage for the same joint insureds compared to Options 2 and 3.
Option 2 may be the preferable option for you if:
o you want a death benefit option which may increase over time; and
o you want the beneficiary to benefit from the potential investment growth of
the policy as well as to receive the face amount of the policy.
Under Option 2, your death benefit is generally the sum of the face amount of
the base policy coverage and the accumulation value. To the extent the
accumulation value increases, your death benefit will also increase. Since the
net amount of risk generally remains the face amount of the base coverage,
however, the monthly deductions for the cost of insurance will generally be
higher than they would be for the same joint insureds under either Option 1 or
Option 3.
Option 3 may be the preferable option for you if:
o you want a death benefit option which may increase over time; and
o you want the death benefit potentially to return the premium outlay as well
as the face amount.
Under Option 3, your death benefit will increase based on your cumulative
premiums paid, subject to any amounts you withdraw. These increases are not
subject to investment return fluctuations. Depending upon the growth of your
accumulation value, the monthly deductions you pay for the cost of insurance for
the base policy may be higher or lower than those you would pay under Option 2.
TRANSFERS AFTER SURVIVOR'S DEATH
After we receive notice of the survivor's death, we may:
o transfer any portion of the accumulation value in a any sub-account to our
general account; and
o not allow any portion of the accumulation value to be transferred into or
to remain in any sub-account.
SETTLEMENT PROVISIONS
The net death benefit payable may be paid in a single sum or under one or more
of the payment options we are currently offering. Payment options are paid from
our general account and are not based on the investment experience of the
separate account. These payment options also are available if the policy is
surrendered. We will pay the death benefit or surrender proceeds, as applicable,
in a single sum, unless we receive an election to receive the applicable
benefits under a settlement option.
SIMULTANEOUS DEATHS OF THE JOINT INSUREDS
If the joint insureds die simultaneously, any death benefit payable under the
base policy will be paid as though the older joint insured died first.
OPTION TO CHANGE THE FACE AMOUNT
INCREASING THE FACE AMOUNT. We will not allow an increase in the face amount of
the policy.
DECREASING THE FACE AMOUNT. You may request a decrease in the face amount of the
policy if all of the following conditions are met:
o You must make a written request to us.
o On the request date, the policy must be in force with at least one of the
joint insureds alive.
o The decrease of the face amount may only be effective as of a policy
anniversary.
o The amount of the reduction in face amount must be at least $25,000.
o The new face amount may not be less than our published minimum face amount.
The decrease of the face amount may cause a change in the monthly deduction
charged.
A surrender penalty will result from the decrease in face amount if the decrease
is made during the first 15 policy years or before the policy anniversary
nearest exact age 100, whichever is earlier.
We will deduct the surrender penalty from your investment options on a pro rata
basis on the date the decrease in face amount is effective.
The surrender penalty is equal to A times B divided by C, where:
A is the full surrender penalty;
B is the amount of the decrease; and
C is the face amount before the decrease.
After the decrease, the monthly deduction rates, monthly expense charges per
$1,000 and any future surrender penalties will be based on the new face amount.
If the face amount is decreased during any required premium period, we will
recalculate the required premium per year for the remainder of the required
premium period based on the new face amount. Face amount reductions may require
reductions in the amount of coverage under the Estate Protection Rider, if the
rider is in force at the time of the face amount decrease.
PREMIUMS
Premiums are payable to Transamerica Occidental Life Insurance Company. Premium
payments may be made by mail to our Administrative Office or through our
authorized representative.
When you apply for a policy, you must elect a required premium per year amount.
Your agent will tell you the minimum and maximum amounts that you may elect
based on your proposed policy. As described below, the cumulative required
premium per year must be paid during the first five policy years or the policy
will enter the grace period and may lapse.
PAYING THE REQUIRED PREMIUMS DURING THE FIRST FIVE POLICY YEARS DOES NOT
GUARANTEE THE POLICY WILL NOT LAPSE. EVEN IF YOU PAY THE REQUIRED PREMIUMS
DURING THE FIRST FIVE POLICY YEARS, THE POLICY CAN STILL LAPSE IF THE
ACCUMULATION VALUE, LESS ANY OUTSTANDING LOAN, IS NOT ENOUGH TO PAY THE MONTHLY
DEDUCTIONS DUE. If the Endorsement to Modify Grace Period is in effect on your
policy, however, the policy will not enter the grace period due to monthly
deduction exceeding the available accumulation value, subject to the provisions
of that endorsement.
We will accept any premium amount you send us while the policy is in force,
subject to the Premium Limitation provision and the following conditions:
o The policy will not become effective until you pay the minimum initial
premium shown on the policy's data page.
o You MUST pay the required premium per year for the base policy during the
first five policy years. These premiums may be paid cumulatively in
advance. At the end of each of the first five policy years, we will
calculate the cumulative total of all gross premiums paid for the base
policy, less any premium refunds, partial surrenders and surrender penalty
free withdrawals. We will divide this total by the number of years since
the policy date. THE RESULTING AMOUNT MUST EQUAL OR EXCEED THE REQUIRED
PREMIUM PER YEAR FOR THE BASE POLICY DURING THE REQUIRED PREMIUM PERIOD, OR
YOUR POLICY WILL ENTER THE GRACE PERIOD, EVEN IF THE ACCUMULATION VALUE IS
GREATER THAN THE MONTHLY DEDUCTIONS DUE. IF YOU DO NOT PAY THE REQUIRED
PREMIUM BY THE END OF THE GRACE PERIOD, YOUR POLICY COULD LAPSE. THE
ENDORSEMENT TO MODIFY GRACE PERIOD DOES NOT PREVENT THE POLICY FROM
ENTERING THE GRACE PERIOD, AND POTENTIALLY LAPSING, DUE TO FAILURE TO PAY
THE REQUIRED PREMIUM PER YEAR. If your policy lapses due to failure to pay
the required premium per year, any net cash value will be paid to you if
the Automatic Premium Loan Endorsement is not exercised.
o You may pay premiums at any time before the policy anniversary nearest
exact age 100. Each premium must be at least $25 and may not exceed the
limits described in the Premium Limitation section below.
After the end of the fifth policy year, premium payments are flexible as to
amount and frequency within limits, and no premiums may be paid into the policy
after the policy anniversary nearest exact age 100.
After the fifth policy year, we will continue to provide you with a schedule of
premium payments. Paying these premiums does NOT guarantee that your policy will
not lapse (except as provided under the Endorsement to Modify Grace Period). If
you stop paying premiums after the required premium period, your coverage will
continue until the net cash value is insufficient to pay the monthly deduction
due. At that time, your policy will enter the grace period. Beginning with the
policy anniversary nearest exact age 100, premium billing will stop and no
further premium payments will be accepted.
PREMIUM QUALIFICATION CREDIT
At the end of each of the first five policy years, we will calculate the total
of gross premiums paid for the base policy. From this total, we will subtract
any premium refunds, partial surrenders and surrender penalty free withdrawals.
If the result equals or exceeds the required premium per year for the base
policy during the first five policy years times the number of years since the
policy date, we will deposit a premium qualification credit to your accumulation
value at the beginning of the next policy year on the policy anniversary. The
premium qualification credit will be allocated among your investment options
according to your current allocation instructions. We will allocate the premium
qualification credit on the policy anniversary. If the policy anniversary is not
a valuation date, we will allocate the premium qualification credit on the next
valuation date.
The amount of the credit will be a specific percentage of the required premium
per year for the base policy during the first five policy years. The premium
qualification credit is currently equal to 2% of the required premium per year.
We will not credit the premium qualification credit if the amount of premium
required, as described above, is not received by the end of each policy year.
PREMIUM LIMITATION
We reserve the right to refund any unscheduled premium during any policy year if
the total premium paid:
o increases the difference between the death benefit and the accumulation
value; and
o is more than $10 per $1,000 of face amount and more than three times the
total of the monthly deductions for the previous policy year.
We also reserve the right to refund any unscheduled premiums that exceed $25,000
in any 12-month period. We will not refund any amount if doing so would cause
the policy to enter the grace period before the next policy anniversary.
The amount refundable will not exceed the net cash value of the policy. If the
entire net cash value is refunded, we will treat the transaction as a full
surrender of the policy.
CONTINUATION OF INSURANCE
If you do not make the required premium payments, we will automatically continue
your policy at the same face amount and with any additional benefits provided by
rider, subject to the grace period and any minimum premium requirements that may
be in effect.
AUTOMATIC PREMIUM LOAN ENDORSEMENT
You may elect on your application to add the Automatic Premium Loan (APL)
Endorsement to your policy. We may also permit you to add the endorsement at a
later date. If the endorsement is in effect on your policy, then, if any portion
of the required annual premium remains unpaid at the end of the grace period, we
will make an automatic premium loan to pay the required premium. The policy must
have enough net cash value to pay both the required annual premium due and the
interest due on the automatic premium loan. If the policy does not have enough
net cash value to pay both the required annual premium due and the interest due
on the automatic premium loan, the policy will lapse, subject to the
NONFORFEITURE provisions.
We will deduct the automatic premium loan, including the loan interest due in
advance, from your investment options on a pro-rata basis. We will then transfer
the automatic premium loan and applicable interest to the loan account. We will
credit the net loan amount under the APL provisions as a premium payment on the
same date that we take the loan. We will allocate the net premium amount under
the APL provisions according to your current premium allocation elections. The
automatic premium loan and applicable interest will be effective on the last day
of the grace period. If that day is not a valuation date, the automatic premium
loan with applicable interest, will be effective on the next valuation date.
The automatic premium loan will be subject to all other provisions and
limitations that apply to policy loans.
The Automatic Premium Loan Endorsement is only effective during the first five
policy years with regard to the required premium per year provision. The
Endorsement will terminate after the end of the fifth policy year.
ALLOCATION OF NET PREMIUMS
In the application for your policy, you elect the initial allocation of the net
premiums among the investment options. You may allocate net premiums to one or
more investment options. Allocation percentages must be in whole numbers (for
example, 331/3% may not be chosen) and the combined percentages must total 100%.
In the future, we may limit the number of sub-accounts you may invest in.
Currently, you may allocate your net premiums among any or all the sub-accounts
and the fixed account. The allocation percentages you elect will apply to all
premiums we receive unless you change your premium allocation instructions to
us.
You may change your premium allocation instructions at any time by sending us a
written request or by exercising your telephone access privilege. Any premium
allocation change will apply to all premiums we receive on or after the
effective date of change. We reserve the right to charge a fee up to $25 for
each premium allocation change, but we do not currently charge for allocation
change requests.
The accumulation value of each sub-account will vary with the investment
experience of the portfolio in which the sub-account invests. You bear this
investment risk. Investment performance may also affect the death benefit.
Review your allocations of premiums and accumulation value as market conditions
and your financial planning needs change.
INITIAL PREMIUM
The initial net premium will be credited to your policy no later than the second
valuation date following the latest of:
o the date we approve the issuance of the policy;
o the policy date;
o the date we receive the minimum initial premium; or
o the date we receive the final delivery requirement for the policy.
CREDITING OF NET PREMIUMS BEFORE
REALLOCATION DATE
If any net premium is credited before the reallocation date, any amounts you
elected to allocate to the separate account will be initially allocated solely
to the money market sub-account. On the reallocation date, we will reallocate
the portion of the accumulation value in the money market sub-account among the
investment options that you elected. If the reallocation date is not a valuation
date, we will make the reallocation on the next valuation date.
We will allocate any net premium credited to the policy on or after the
reallocation date directly to the investment options you elected.
SUBSEQUENT PREMIUMS
We will credit subsequent net premiums we receive on the date we receive them.
If the date we receive a premium is not a valuation date, we will make the
allocation on the next valuation date.
UNITS AND UNIT VALUES
VALUATION OF UNITS
We will use the net premiums you elect to allocate to the separate account to
purchase units in the sub-accounts you have elected. All net premiums will be
allocated according to the ALLOCATION OF NET PREMIUMS section.
The number of units purchased in a sub-account is equal to the net premium
allocated to that sub-account divided by the value of the applicable unit. The
value of the applicable unit will be determined on the day we receive the
premium. If we receive the premium on a day that is not a valuation date, the
value of the applicable unit will be determined on the next valuation date.
The number of units in a sub-account will remain fixed, unless:
a) increased by a net premium, premium qualification credit or a transfer
allocated to the sub-account;
b) reduced because of a partial surrender, surrender penalty free withdrawal,
surrender penalty, monthly deduction, transfer or policy loan allocated to
the sub-account; or
c) changed by a subsequent split of a unit value.
Any transaction described in c) above will result in the cancellation of a
number of units that are equal in value to the amount of the transaction.
On each valuation date, we will value the assets of each sub-account. The
portion of the policy's accumulation value in a sub-account on a valuation date
is equal to the number of units the policy has in that sub-account as of that
valuation date multiplied by the sub-account's unit value on that valuation
date.
UNIT VALUES
The unit values for all sub-accounts except the money market sub-account were
initially set at $10.00. The unit value for the money market sub-account was
initially set at $1.00. The unit value for a sub-account on any subsequent
valuation date is equal to:
{(A x B) minus C}
D
where
A is the number of shares of the underlying portfolio held by the sub-account at
the end of the valuation date.
B is the net asset value (NAV) per share of the underlying portfolio as of
the end of the valuation date, plus the per share amount of any capital
gains or dividend declared on that valuation date.
C is a charge for each day in the valuation period equal to the net assets of
the sub-account multiplied by the daily mortality and expense risk factor.
D is the number of units outstanding as of the end of the valuation date.
The unit value may increase or decrease from one valuation date to the next. You
bear this investment risk. We reserve the right to change the method we use to
determine the unit value, subject to any required regulatory approvals.
If we are required to pay federal taxes on the separate account, we reserve the
right to allocate a proportionate share of the reserves that we establish for
such taxes to the policy. We may reflect the amounts of such reserves in the
unit value calculation of the unit values.
ACCUMULATION VALUE
DETERMINATION OF ACCUMULATION VALUE
Each policy has an accumulation value, a portion of which may be available to
you by taking a loan, a surrender penalty free withdrawal or partial surrender,
or upon surrendering the policy. The accumulation value may affect the amount of
the death benefit. The accumulation value at the time the initial premium is
accepted is equal to:
o The initial net premiums; MINUS
o The monthly deduction(s) we start to take as of the policy date.
The accumulation value on any specified date after the initial premium is
allocated to the policy is equal to the sum of:
o the value of the units of the sub-accounts credited to your policy;
PLUS
o the value in the fixed account credited to your policy.
SUB-ACCOUNTS
The portion of your accumulation value in sub-accounts to which you have
allocated your net premiums or transferred amounts is equal to the value of the
units in the sub-accounts credited to your policy times the number of such
units.
FIXED ACCOUNT
Amounts in the fixed account do not vary with the investment performance of any
sub-account. Instead, these amounts are credited with interest at a rate
determined by us. For a detailed description of the fixed account, see APPENDIX
A The General Account - Fixed Account.
LOAN ACCOUNT
Amounts borrowed from the policy are transferred to the loan account. Amounts in
the loan account do not vary with the investment performance of any sub-account.
Instead, these amounts are part of the fixed account but credited with separate
interest rates. The loan account is excluded from the value of the policy used
to determine pro rata allocations.
PARTIAL SURRENDERS
At any time after the end of the free-look period, you may surrender a portion
of the policy's cash value by sending us a written request.
During the first 15 policy years, or until the policy anniversary nearest exact
age 100, whichever is earlier, we will assess a pro rata surrender penalty on
any surrender amount that exceeds the amount eligible for the surrender penalty
free withdrawal described below.
The surrender penalty is equal to A times B divided by C, where:
A is the surrender amount you request that exceeds the amount eligible for a
surrender penalty free withdrawal;
B is the surrender penalty factor; and
C is 1000 minus the surrender penalty factor for the current policy year.
The surrender penalty factors vary by policy year and are shown in the policy
data pages.
If the surrender penalty calculated is less than $25, then we will assess a $25
surrender penalty. We will assess a $25 surrender penalty charge for a partial
surrender in excess of the amount eligible for surrender penalty free withdrawal
if the partial surrender is taken after the 15th policy year.
We will deduct from the accumulation value:
o the surrender amount; and
o the surrender penalty on any surrender amount that exceeds the amount
eligible for surrender penalty free withdrawal.
We will deduct the requested surrender amount from your investment options on a
pro-rata basis, unless you provide us a different allocation in a form and
manner acceptable to us.
We will allocate any surrender penalty to your investment options in proportion
of A divided by B, where:
A is the dollar amount of the surrender amount requested allocated to an
investment option; and
B is the total surrender amount.
We will deduct the surrender amount and any surrender penalty from your
investment options on the day we receive your surrender request. If that day is
not a valuation date, we will deduct the surrender amount and any surrender
penalty from your investment options on the next valuation date.
If you choose death benefit Option 1, we will also deduct from the policy's face
amount:
o the partial surrender amount requested that exceeds the surrender penalty
free withdrawal amount; PLUS
o the surrender penalty on the surrender amount requested that exceeds the
surrender penalty free withdrawal amount.
If you choose death benefit Option 3, we will also deduct from the policy's face
amount:
o the surrender amount you request that exceeds the greater of:
a) the surrender penalty free withdrawal amount; or
b) all gross premiums paid minus the sum of all previous surrenders, surrender
penalties and premium refunds; PLUS
o any applicable surrender penalty.
If the new face amount would be less than our minimum allowed, then we will not
allow the partial surrender.
In any policy year, the maximum amount that you may request and receive by
partial surrender is:
o the accumulation value; MINUS
o any existing policy loans; MINUS
o the sum of three monthly deductions; and MINUS
o the greater of $25 or the full surrender penalty.
If you request an amount larger than the maximum described above, we will treat
it as a request for a full surrender.
SURRENDER PENALTY FREE WITHDRAWALS
At any time after the first policy year, you may make a partial surrender
without incurring a proportionate surrender penalty. Such a partial surrender is
subject to the limits described below. The minimum amount of a surrender penalty
free withdrawal is $100.
When you request a partial surrender after the first policy year, we will
calculate the amount eligible for a surrender penalty free withdrawal. This
amount will be the lesser of:
o 10% of the accumulation value as of the last monthly policy date, minus the
sum of all surrender penalty free withdrawals since the last policy
anniversary; or
o the maximum amount available as a partial surrender.
Whenever you request a partial surrender after the first policy year, we will
process the amount that is eligible as a surrender penalty free withdrawal. We
will process the remainder of any amount you request as a partial surrender.
We will deduct the entire partial surrender amount you request from the
accumulation value. The full partial surrender amount you request will be
deducted from your investment options on a pro-rata basis, unless you choose the
investment options you want to allocate the full partial surrender to. If you
choose this option:
o you must request it in a form and manner acceptable to us; and
o your request must be in good order.
We will deduct the surrender penalty free withdrawal from your investment
options in the same manner that we would deduct a partial surrender.
NONFORFEITURE OPTION - FULL SURRENDER
You may surrender the policy at any time for its net cash value on the valuation
date we receive the surrender request in good order. We will charge a surrender
penalty for surrenders during the first 15 policy years. There is no surrender
penalty for the base policy after the first 15 policy years, or the policy
anniversary nearest exact age 100, if earlier.
POLICY LOANS
You may borrow the net cash value of the policy. The maximum loan amount is the
accumulation value as of the date of the loan request, MINUS:
a) any existing policy loan;
b) interest on the amount of the loan to the end of the policy year; and
c) the full surrender penalty or two monthly deductions, whichever is
greater.
If the survivor dies, we will deduct the outstanding loan from the death benefit
before we pay the death benefit.
The loan will be secured by that portion of the accumulation value equal to the
amount of the loan.
We will deduct the net loan amount from your investment options on a pro rata
basis, unless you provide us with a different allocation election in a form and
manner acceptable to us, and transfer that amount to the loan account.
We will credit interest to the loan account at a rate equal to 4%. The loan
account is part of the fixed account. The loan account includes outstanding
loans.
LOAN REPAYMENT
You may repay any part of an outstanding loan at any time while either joint
insured is living.
If you want to make a loan repayment, you must inform us that the payment you
send us is for that purpose. If your payment is not clearly marked as a loan
repayment, we will assume it is a premium payment if it is received before the
policy anniversary nearest exact age 100. When we receive a loan repayment, we
will apply it to reduce the outstanding balance in the loan account. We will
allocate the amount of the loan repayment to your investment options according
to your current premium allocation instructions. We will allocate the loan
repayment on the date we receive it. If the date we receive the repayment is not
a valuation date, we will allocate the loan repayment on the next following
valuation date.
Your policy will not automatically lapse if you do not repay a loan. However,
the net cash value must be large enough to cover the monthly deduction due and
any loan interest due that is not paid in cash.
If any loan interest due is not paid in cash, we will add the interest to the
loan. We will deduct the loan interest from your investment options on a pro
rate basis, and then transfer the loan interest to the loan account. The loan
interest deduction and transfer will be effective on the policy anniversary. If
the policy anniversary is not a valuation date, the loan interest deduction and
transfer will be effective on the next valuation date. Any loan interest paid in
cash will be applied to the loans in the order in which they were made.
LOAN INTEREST CHARGED
You must pay interest on the total loan balance each year in advance. The
interest is due on the policy anniversary. The loan interest rate depends on the
policy year during which the loan interest is due, as follows:
o For loan interest due during policy years 1 through 10, the loan interest
rate is 4.75% (4.53% in advance).
o For loan interest due during policy years 11 through 20, the loan interest
rate is 4.50% (4.30% in advance).
o For loan interest due during policy years 21 and later, the loan interest
rate is 4.25% (4.07% in advance).
We may charge lower rates than those shown above, but we will never charge
higher rates.
If you do not pay the interest in cash when it is due, we will add the amount of
the interest to the loan. We will charge interest on this amount based on the
loan interest rate in effect for the policy year during which the loan interest
is due. Any loan interest added to your loan will be deducted from your
investment options on a pro rata basis.
Currently, we charge loan interest rates of 4.50% (4.30% in advance) during
policy years 1 through 10; 4.25% (4.07% in advance) during policy years 11
through 20; and 4.00% (3.85% in advance) during policy years 21 and later.
EFFECT OF POLICY LOANS
Policy loans will affect the accumulation value and surrender value, and may
permanently affect the death benefit. The effect could be favorable or
unfavorable, depending on whether the investment performance of the sub-accounts
is less than or greater than the interest credited to the portion of the policy
in the fixed account that secures the loan.
We will deduct any outstanding policy loan from the proceeds payable when the
survivor dies or from a full surrender.
If the outstanding policy loan exceeds the accumulation value minus surrender
penalties, the policy will be in default. There is no charge imposed solely
because the policy goes into default. If you do not pay the required premium
within the grace period, however, the policy will terminate without value.
If you have an outstanding policy loan, decreases in accumulation value,
including decreases due to negative investment results in your sub-account
allocations, could result in default of your policy. If you have an outstanding
policy loan and do not pay loan interest when due, unpaid interest will be added
to your loan. If your investment gains are not sufficient, the outstanding
policy loan could be greater than your net cash value, resulting in your policy
entering the grace period.
In the event the policy lapses or is otherwise terminated while a policy loan is
outstanding, the policy loan will be treated as cash received from the policy
for income tax purposes. Any cash received, that is, the outstanding policy loan
plus any other accumulation value less surrender penalties in excess of the
policy's tax basis, should be taxable as ordinary income.
For a discussion of the federal tax considerations of policy loans, see FEDERAL
TAX CONSIDERATIONS - Policy Loans.
GRACE PERIOD
During the first five policy years, a grace period is a period of 61 days
starting on:
o a policy anniversary on which the cumulative required premium per year for
the base policy has not been paid; or
o a monthly policy date when the accumulation value minus any existing loan
is less than the monthly deduction due.
DURING THE FIRST FIVE POLICY YEARS, FAILURE TO PAY SUFFICIENT PREMIUM TO MEET
THE CUMULATIVE REQUIRED PREMIUM PER YEAR AMOUNTS WILL CAUSE YOUR POLICY TO ENTER
THE GRACE PERIOD, EVEN IF THE ACCUMULATION VALUE IS GREATER THAN THE MONTHLY
DEDUCTIONS DUE.
After the fifth policy year and before the policy anniversary nearest exact age
100, the policy will enter the grace period on any monthly policy date when the
net cash value is less than the monthly deductions due.
By current practice, however, we will continue the coverage and the policy will
not enter the grace period beginning in the sixth policy year because the
monthly deduction is greater than the net cash value so long as the following
conditions are met:
o the policy owner continues to pay sufficient premium such that at the end
of each policy year the cumulative premium paid satisfies the amount of the
cumulative required premium per year for the number of years since the
policy date;
o the monthly deductions due are not greater than the accumulation value
minus any outstanding loan; and
o the policy owner does not take any partial surrenders, including surrender
penalty free withdrawals.
For this purpose, the amount of required premium is based on the minimum
required premium that you could have chosen for the policy, not the amount you
committed to pay at the time of the application if you elected to pay a higher
amount.
After the policy anniversary nearest exact age 100, a grace period is a period
of 61 days starting on a policy anniversary on which any loan interest due has
not been paid in cash, and the accumulation value minus any existing loan is
less than the loan interest due.
If the policy enters the grace period, we will let you know by sending a notice
to your last known address. The notice will state the amount you must pay to
keep the policy in force. You must pay this amount before the grace period ends.
If you do not pay enough, the policy will lapse at the end of the 61 days. If
there is any net cash value remaining at the end of the grace period, we will
apply it to the nonforfeiture option. If there is not net cash value remaining
at the end of the grace period, the policy will lapse.
During the grace period, we will not charge interest on the amount due. If the
survivor dies during the grace period and before you pay the amount due, we will
subtract from the death benefit the amount required to provide insurance to the
date the survivor died.
REINSTATEMENT
If the policy lapses, it may be reinstated provided it was not surrendered. To
reinstate the policy, you must meet the following conditions:
o You must request reinstatement in writing within three years after the date
of lapse and before the policy anniversary nearest exact age 100.
o If only one joint insured is alive when you request reinstatement, the
first death must have occurred before the end of the grace period, and you
must submit proof of such death before the reinstatement.
o Evidence of insurability satisfactory to us must be given to us by:
a) both joint insureds, if the lapse occurred while both joint insureds were
living; or
b) the survivor, if lapse occurred after the first death.
o If any loans existed when the policy lapsed, you must repay or reinstate
such loans, with interest. Interest will be compounded annually from the
date of lapse. Interest will be at the loan reinstatement rate for your
loan. The loan reinstatement interest rate will not exceed an effective
annual rate of 4.75% (4.53% in advance).
o The reinstated policy will be subject to the minimum premium requirement
during the first five policy years. This means that the required premium
period will be calculated from the original policy date. It does not start
over.
If the policy lapsed during the required premium period, and is reinstated
in a different policy year, you must pay a premium large enough to meet the
minimum premium requirement at the time of reinstatement, with interest.
Interest will be compounded annually at the reinstatement interest rate of
6%. If the policy lapsed after the required premium period, or if it lapsed
during one of the first 5 policy years and is reinstated in the same policy
year, you must pay a premium large enough to cover two monthly deductions
due when the policy lapsed and three monthly deductions due when the policy
is reinstated.
o If you reinstate the policy during the required premium period, you must
repay any net cash value given to you at the time of lapse, with interest.
Interest will be compounded annually at the reinstatement interest rate of
6%.
o If the policy is reinstated within the first 15 policy years or before the
policy anniversary nearest exact age 100, whichever is first, any
applicable surrender penalties in effect for the reinstated policy will be
calculated from the original policy date.
The effective date of a reinstatement will be the date we approve your request.
The accumulation value of the reinstated policy will be:
o any surrender penalty assessed at the time of lapse; PLUS
o any net cash value we paid to you at the time of lapse; PLUS
o any loan repaid or reinstated; PLUS
o any net premium you pay at reinstatement; MINUS
o any monthly deductions due at the time of lapse.
We will allocate any loan repaid or reinstated and any net premium you pay at
reinstatement according to the most recent premium allocation election we have
received from you. We will restore any surrender penalty assessed at the time of
lapse. We will allocate any restored surrender penalty and any net cash value
you repay at reinstatement among your investment options in the same proportion
as these amounts were deducted at the time of lapse.
We will allocate the amount you pay within one valuation date after the later
of:
o the valuation date that we approve the reinstatement; or
o the valuation date that we receive the required premium and other
payments.
OTHER BENEFITS
Other benefits are available under the policy by riders or endorsements attached
to the policy. Any costs of these riders or endorsements become part of the
monthly deductions, unless we specify otherwise. All riders and endorsements may
not be available in all jurisdictions, and the names of the riders and
endorsements may vary by jurisdiction.
GUARANTEED POLICY SPLIT OPTION RIDER
A policy split may have tax consequences. You should consult a qualified tax
adviser.
This rider will be added by us at issue to your policy at no additional charge
to you if the joint insureds each qualify for the rider under our current
underwriting guidelines. There are no monthly deductions associated with this
rider. Under this rider, you may apply, subject to the following conditions and
restrictions, to exchange the original policy for two individual fixed life
insurance policies, one on each of the lives of the joint insureds, if either of
the contingent events listed below occurs. A new policy may not exceed 50% of
the face amount of the original policy. THE NEW POLICIES WILL NOT BE VARIABLE
POLICIES.
Under this rider, you will not need to submit new underwriting evidence on
either joint insured to qualify for either individual policy. Additionally, the
new policies would have the same policy date as the current policy.
The accumulation value less any outstanding loans under the original policy will
be allocated to each new policy in the same ratio which the face amount of each
new policy bears to the face amount of the original policy. Any remaining net
cash value will be paid to you as a partial surrender.
CONTINGENT EVENTS. You may apply for the option if either of the following
events occurs:
o A final divorce decree has been issued with respect to the marriage of the
joint insureds. The joint insureds must have been married to each other
when the original policy was issued.
o A change to federal estate tax provisions of the Code has occurred which
results in either (a) or (b):
a) Code Section 2056(a), or its successor, is amended so as to eliminate or
reduce the federal estate tax unlimited marital deduction.
b) Code Section 2001, or its successor, is amended so that the federal
estate tax rates are reduced. The reduction must be such that the
amount of federal estate tax that would be due at the death of the
survivor is 50% or less of the tax that would have been due before the
change to the Code.
We will NOT notify you of any tax law changes that may affect the original
policy.
APPLICATION. To exercise this option, you must notify our Administrative Office
in writing within 6 months of the date that either of the contingent events
occur. In the case of events involving changes to the Code, we will count the 6
months from the date of the change in the Code.
We must also receive all of the following items in order to process the
exchange:
o The release of any lien against or assignment of the original policy.
However, you may, instead, submit written approval by the lienholders or
assignees of the exchange of policies in a form and manner satisfactory to
us with such other documents that we may require.
o The original policy.
o A policy change application containing your request to exercise this option
and your request to surrender the original policy.
o A copy of the final divorce decree, if applicable.
o Payment of any amount due for the exchange, if applicable.
We will consider the application for the original policy and the policy change
application to be the application for each new policy.
EFFECTIVE DATE. If we approve the exchange, the effective date of the new
policies will be the date the option is exercised.
NEW POLICY. The exchange must be to a flexible premium adjustable life policy,
on a policy form designated by us for such purpose. We will have at least one
form available for exchanges. Each new policy issued will be based on the age,
class of risk and smoking status of the applicable joint insured as of the date
the original policy was issued. The premiums for each new policy will be based
on our published rates in effect on the date of the request to split the
original policy. Riders that form a part of the original policy, and any new
riders requested, will become a part of each new policy only if we agree to
provide them on the date of the exchange. Each new policy will take effect
immediately upon the termination of the original policy. Under no circumstances
will we pay a death benefit under both the original policy and the new policy.
The policy date of each new policy will be the same as the policy date of the
original policy.
LOANS. Any policy loan will be divided and transferred on a proportionate basis
to each new policy.
EXCHANGE ADJUSTMENTS. The following adjustments may be made at the time of the
exchange:
o If you receive a new policy on each joint insured for 50% of the face
amount of the original policy and the original policy is in the surrender
penalty period, we will waive the surrender penalty applicable to the
original policy.
o If you receive a new policy on either of the joint insureds for less than
50% of the face amount of the original policy and the original policy is
still in the surrender penalty period, we will deduct a proportionate
surrender penalty from the accumulation value, less any loans, not applied
to the new policy. We will also deduct the proportionate portion of the
loan not applied to the new policy from any cash value refund.
o If you receive a new policy on only one joint insured and the original
policy is still in the surrender penalty period, we will deduct a
proportionate surrender penalty from the portion of the accumulation value,
less any proportionate portion of the loan attributable to that joint
insured.
o The minimum initial premium for each new policy will be equal to:
a) the cumulative total of the required annual premiums applicable to the new
policy for the number of years that the original policy was in force; MINUS
b) the total accumulation value, net of any loans, transferred to the new
policy.
We will apply this one time premium to the new policy as a gross premium.
OWNERSHIP. The owner of a new policy will be the same as the owner of the
current policy. If you do not want the owner of the current policy to be the
owner of the new policy, you must indicate this in the application for the new
policy and complete a transfer of ownership form. We may also require that the
owner of the new policy provide us with evidence of insurable interest in the
lives of the joint insureds.
BENEFICIARY. The beneficiary of the new policy will be the same as the
beneficiary of the current policy. If you do not want the beneficiary of the
current policy to be the beneficiary of the new policy, you must indicate this
in the policy change form and complete a change of beneficiary form. We may also
require that the new beneficiary provide us with evidence of insurable interest
in the lives of the joint insureds.
SUICIDE AND INCONTESTABILITY. If we approve the exchange, the period for which
the joint insureds were covered before the date of the exchange will be used to
reduce the time period for the suicide exclusion and incontestability provision
under the new policies.
If the original policy is contested, subject to the incontestability provision
of the original policy, we will cancel the rider. If the original policy's
premiums are refunded under its suicide exclusion, we will cancel the rider.
TERMINATION. The rider terminates on the earliest of the following dates:
o the date of the first death;
o the date you elect to exchange the original policy under the Guaranteed
Exchange Option Rider or the Option to Split Policy under the original
policy;
o the date the original policy is changed to paid-up insurance, if
applicable;
o the date the original policy is surrendered or terminated; or
o the date the original policy lapses under the GRACE PERIOD provision.
REINSTATEMENT OF THE RIDER. If the original policy and the attached rider lapse,
you may reinstate the rider at the same time the original policy is reinstated.
We will, however, require acceptable proof of insurability on both joint
insureds.
MISSTATEMENT OF AGE. We will follow these rules:
o If a misstatement of either joint insured's age is found before this option
is exercised and the original policy's death benefit is reduced as a
result, the face amount of each new policy will be based on the adjusted
face amount of the current policy.
o If a misstatement of either joint insured's age is found after this option
is exercised, the death benefit amount under the new policy will be subject
to the Misstatement of Age provision of the new policy.
POLICY CHANGES. If the face amount of the original policy is changed for any
reason, we will proportionately change the face amount available under the
option.
ENDORSEMENT TO MODIFY GRACE PERIOD
You may elect to add this endorsement to the policy at the time of issue if the
death benefit option selected is Option 1. If the death benefit Option 1 is
changed, the endorsement will terminate. While there is no direct charge or
additional monthly deduction for the endorsement, the Select Monthly Premiums
must be paid to maintain the benefits of the endorsement, subject to all other
terms of the endorsement.
For purposes of the endorsement, the following definitions will apply:
NET DEPOSITS mean the total premiums paid, less the sum of any premium refunds,
partial surrenders, and surrender penalty free withdrawals, since the policy
date. In calculating the net deposits, premium paid in a policy year prior to
the policy year in which the select monthly premium is due will reflect a time
value of money at 4 % per year.
SELECT MONTHLY PREMIUM is the amount you must pay each month during the select
period to maintain this endorsement. This amount is shown in the policy data
page. This amount may be paid cumulatively in advance.
During the select period, the policy will not enter its grace period due to lack
of accumulation value if:
o there is no outstanding loan;
o the select monthly premium requirement has been met. The select monthly
premium requirement will be met if, at the start of each policy month, the
net deposits equal or exceed the cumulative select monthly premiums due
since the policy date; and
o the death benefit Option 1 is, and has always been in effect.
If all three of the above requirements are met, the grace period will be
modified so that the base policy and the endorsement will remain in force. If
the grace period is modified, all other riders, except for the Full Death
Benefit Rider, will be terminated. Any conversion privilege included in the
terminated riders must be exercised at that time or they will be forfeited.
THE ENDORSEMENT DOES NOT PREVENT THE POLICY FROM ENTERING THE GRACE PERIOD
DURING THE FIRST FIVE POLICY YEARS DUE TO FAILURE TO MEET THE REQUIRED PREMIUM
PER YEAR PAYMENT AMOUNTS.
The select period is the first 20 policy years or the policy anniversary nearest
the 100th birthday of the younger of the joint insureds, if earlier. The select
monthly premium will vary by policy and will be specified on the policy data
pages.
We will continue to deduct the monthly deductions from the accumulation value as
they come due. We will offset the amount of the monthly deductions in excess of
the accumulation value when there is sufficient accumulation value.
The endorsement does NOT prevent the policy from entering the grace period
during the first five policy years due to failure to meet the required premiums
per year payment amounts.
POLICY CHANGES. If you request an increase or decrease in the face amount of the
policy during the select period, the select monthly premium will be adjusted
from that point forward. The select period will not be adjusted.
AUTOMATIC TERMINATION. The endorsement will automatically terminate when the
first of the following events occurs:
o the cumulative net deposits on any monthly date is less than the cumulative
total of all select monthly premiums due since the policy date;
o the select period ends;
o you change the death benefit option from Option 1 to another option;
o the policy is exchanged under the Guaranteed Exchange Option, the Option to
Split the Policy, or the Guaranteed Policy Split Option Rider, if
applicable;
o the policy is changed to paid-up insurance, if applicable; or
o the policy terminates.
REINSTATEMENT. If the endorsement terminates solely due to the select monthly
premium requirement not being met, you may reinstate the endorsement within 30
days of the termination date.
To reinstate the endorsement, you must, within 30 days from the termination
date:
o request reinstatement in writing; and
o pay us the necessary premium to reinstate the endorsement.
The necessary premium to reinstate the endorsement is equal to:
o the difference between the cumulative select monthly premiums due and the
net deposits as of the termination date; PLUS
o two select monthly premiums or, if less, the select monthly premiums due to
the end of the select period.
Reinstatement of the endorsement will be subject to all other provisions of the
endorsement.
ACCELERATED DEATH BENEFIT OPTION
ENDORSEMENT
This endorsement will be added to your policy at issue so long as the
endorsement is approved in the state in which you apply for the policy. There is
no monthly deduction or other charge for the endorsement unless you take an
accelerated death benefit payment. Exercising the option and receiving an
accelerated death benefit will permanently affect the remaining death benefit
under the policy and will also result in a reduction of the policy's
accumulation value.
An accelerated death benefit is only payable:
o after the death of the first of the joint insureds; and
o upon submission of satisfactory evidence that the survivor has a terminal
illness qualifying for the benefit.
Other conditions apply which determine whether an accelerated death benefit is
payable.
NOTE. Any amount payable under this option is intended to qualify for federal
income tax exclusion to the maximum extent possible. Benefits under some
business related policies may not be excluded. To that end, the provisions of
the endorsement and the policy are to be interpreted to ensure or maintain such
tax qualification, notwithstanding any other provisions to the contrary. We
reserve the right to amend the endorsement and the policy to reflect any
clarifications that may be needed or are appropriate to maintain such
qualification, or to conform the endorsement and the policy to any applicable
changes in the tax qualification requirements. You will be sent a copy of such
notice. Benefits paid under this rider may be taxable. As with all tax matters,
you should consult a tax adviser to assess the impact of this benefit on you and
the policy.
AMOUNT OF BENEFIT. While the policy is in force and upon your request, we will
pay an accelerated death benefit to you, subject to the conditions and
limitations in the endorsement. You may request an accelerated death benefit in
any amount, subject to a minimum amount of $10,000 and a maximum amount equal to
the lesser of:
o $250,000; or
o 75% of the combined policy basic death benefit for all policies insuring
the survivor that were issued by us as of the first accelerated death
benefit payment.
If the first accelerated death benefit payment is less than the maximum, then no
more than the remaining balance of the maximum can be paid out on a later date
as an accelerated death benefit.
If there is an outstanding loan, the accelerated death benefit payment may be
reduced to repay a proportionate portion of the policy loan.
At the time we pay the accelerated death benefit, if the policy is in the grace
period, we will deduct any unpaid premium in accordance with the grace period
provisions.
We will deduct a $250 administrative fee from each accelerated death benefit
payment.
EXERCISING THE OPTION. We must receive your written request at our Home Office
or at our Administrative Office within 30 days after the certification of
diagnosis of terminal illness, or as soon thereafter as reasonably possible. The
request should include the survivor's name and the policy number and must be
signed and dated by you. If the policy has an irrevocable beneficiary, that
person(s) must also sign the request. If the policy is assigned, we must receive
a completed and signed release of assignment. If the policy was issued in a
community property state, we may require your spouse to sign the request.
We must also receive written proof of the terminal illness before we make a
payment under this option. This proof must consist of a physician's certificate
acceptable to us, and indicate that the survivor has a medical condition
resulting from bodily injury or disease, or both, and:
o which has been diagnosed by the physician after the issue date of the
policy;
o for which the diagnosis is supported by clinical, radiological, laboratory
or other evidence of the medical condition which is satisfactory to us;
o which is not curable by any means available to the medical profession; and
o which the physician certifies is expected to result in the survivor's death
within 12 months of diagnosis.
We may request additional medical information from the physician submitting the
certification or any physician we consider qualified. The physician providing
the certification must be:
o an individual other than you, the survivor or member of either your or the
survivor's immediate family, and
o who is a doctor of medicine or osteopathy,
o licensed in the jurisdiction in which the advice is given or diagnosis is
made, and
o who is acting within the scope of his or her license.
LIMITATIONS. The following limitations apply to this option:
o The availability of this option is subject to the terms of the policy,
including the Incontestability and Suicide provisions.
o No benefit will be paid if terminal illness is the result of intentionally
self-inflicted injury(ies) at any time.
o At each request to exercise this option, there must be at least two years
remaining from the effective date to the expiration date or maturity date
of each portion of the basic death benefit.
o You may not exercise this option:
a) if required by law to use the Accelerated Death Benefit to meet the claims
of creditors, whether in bankruptcy or otherwise; or
b) if required by a government agency to use the Accelerated Death Benefit
in order to apply for, or obtain or otherwise keep a government benefit
or entitlement.
o This option is not available if the maximum Accelerated Death Benefit has been
paid.
o The face amount of the policy must be at least $50,000 at the time of the
first written request.
EFFECT OF BENEFIT PAYMENT ON POLICY. After an Accelerated Death Benefit is paid,
the policy and any riders and benefits will remain in effect, subject to the
following adjustments.
The basic death benefit after payment of an Accelerated Death Benefit will equal
the amount of the basic policy death benefit before the payment of the
Accelerated Death Benefit, minus the result of multiplying (a) by (b), where:
a) is the Accelerated Death Benefit; and
b) is 1 (one) plus an interest rate that is the greater of:
1) the current yield of 90 day treasury bills; or
2) the policy loan effective interest rate.
The adjustment to the policy will be proportional to the amount of the
Accelerated Death Benefit. The basic death benefit and, if applicable, the
policy's face amount, accumulation value, cash value, policy loan, and required
premium will be adjusted as of the effective date of this option. The
adjustments to the basic death benefit will be made in the following order:
o level term rider(s) on the survivor, if any, beginning with the most recent
rider; and
o remaining portions of the basic death benefit.
New policy charges and premiums will be based on the rates in effect for the
resulting face amount.
PHYSICAL EXAMINATION. While a claim is pending, we reserve the right to obtain a
additional medical opinions and to have the survivor examined at our expense by
a physician of our choice.
PAYMENT OF CLAIMS. We will pay the Accelerated Death Benefit in a lump sum to
you. If the survivor dies before payment is made, we will pay the entire death
benefit of the policy to the beneficiary.
LEGAL ACTIONS. No legal action may be brought to recover the payment requested
under this option within 60 days after written proof of the survivor's terminal
illness has been given to us. No such action may be brought after 3 years from
the time we receive written proof of the survivor's terminal illness.
FULL DEATH BENEFIT RIDER
This rider may only be added to the policy at the time the policy is issued.
Adding this rider will increase your minimum required premium per year for the
first five policy years. It will also affect your monthly deduction, as
described below.
If you elect this rider and the rider is still in force, then, beginning with
the policy anniversary nearest the 100th birthday of the younger of the joint
insureds, the death benefit will be the death benefit as defined on the day
before the policy anniversary nearest exact age 100. The death benefit will be
subject to adjustments after age 100 for misstatement of age or sex, the grace
period and the reinstatement provisions.
MONTHLY DEDUCTION. We will take the monthly deduction for this rider starting on
the policy anniversary nearest exact age 90. We will continue to take the
monthly deduction for this rider until the policy anniversary nearest exact age
100.
TERMINATION. The rider will terminate on the earliest of:
o the date the survivor dies;
o the date the policy is continued under a nonforfeiture option, if
applicable;
o the date we receive your written request to terminate the rider; or
o the date we receive your written request to surrender or terminate the
policy.
ESTATE PROTECTION RIDER
This rider may only be added to the policy at the time the policy is issued.
Adding this rider will increase your minimum required premium per year for the
first five policy years. It will also affect your monthly deduction, as
described below.
This rider is generally available to proposed owners between the ages of 16 and
80 at issue. If you elect and we approve coverage under this rider and if the
survivor dies during the first four policy years while the rider is in effect,
we will pay the rider amount to the beneficiary. No death benefit is payable on
the first death. The rider benefit is payable only on the death of the surviving
insured (the second insured to die), if both deaths occur during the first four
policy years. The rider amount is in addition to the death benefit payable. The
maximum rider benefit is 125% of the face amount of the base policy. The rider
amount is shown in the policy data page.
RIDER PREMIUM. While this rider is in force, each month, we will take the
monthly deduction for this rider as part of the total monthly deduction from the
policy's accumulation value.
REINSTATEMENT. If the rider lapses, you may reinstate it at any time before its
expiration date. However, we will require acceptable proof of insurability from
both joint insureds.
NO CASH VALUE OR DIVIDENDS. The rider does not have cash value, and does not
participate in our profits or surplus.
BENEFICIARY. The beneficiary will be the same as the beneficiary for the base
policy.
TERMINATION OF THE RIDER. The rider terminates on the earliest of the following
dates:
o the end of the fourth policy year;
o the date the policy lapses;
o the date the policy is changed to paid-up insurance, if applicable;
o the date the policy is surrendered;
o the date the policy is exchanged under the Option to Split the Policy or
the Guaranteed Policy Split Option;
o the date the benefit provided under the Endorsement to Modify the Grace
Period becomes effective, if elected; or
o the date we receive your written request to terminate this rider.
OTHER POLICY PROVISIONS
THE FOLLOWING POLICY PROVISIONS MAY VARY BY STATE.
INCONTESTABILITY OF THE POLICY
Except for fraud or nonpayment of premiums, the policy will be incontestable
with respect to either joint insured after it has been in force during the
lifetime of that joint insured for two years from the date of issue. This
provision does not apply to any rider or endorsement providing benefits
specifically for disability or death by accident.
We must be notified of the first death if it occurs during the first two policy
years. If the policy is rescinded for any contestable reason (e.g. material
misrepresentation), we will be liable only for the amount of premiums paid, less
any partial surrenders and any outstanding loans and loan interest due. The
policy will be rescinded as of the policy date.
SUICIDE
If either joint insured dies by suicide, while sane or insane, within two years
from the date of issue, we will be liable only for the amount of premiums paid,
less any partial surrenders, surrender penalty free withdrawals, loans and loan
interest due. The policy will be rescinded as of the policy date.
DELAY OF PAYMENTS
We may postpone any transaction involving the separate account during any period
when:
o trading on the New York Stock Exchange is restricted as determined by the
Securities and Exchange Commission, or the New York Stock Exchange is
closed for days other than weekends or holidays;
o the Securities and Exchange Commission has allowed or ordered the
suspension described above; or
o the Securities and Exchange Commission has determined an emergency exists
such that disposal of mutual fund securities or valuation of assets is not
reasonably practical.
Transactions involving the separate account include the following, to the extent
the amounts of the transactions come from the portion of the accumulation value
in the separate account:
o transfers between or among sub-accounts;
o transfers to or from the separate account;
o loans;
o partial or full surrenders; and
o death benefits.
We may delay paying you any portion of a partial or full surrender that comes
from the accumulation value of the fixed account for up to six months after we
receive your written request for the surrender.
We may delay making a loan to you to the extent that the loan is deducted from
the portion of the accumulation value in the fixed account for up to six months
after we receive your written request for the loan. We will not delay any loan
made to pay premiums due on the policy.
We may delay any payment until all premium checks have cleared.
FEDERAL TAX CONSIDERATIONS
The following is a summary of federal tax considerations for U.S. persons based
on our understanding of the present federal income tax laws as they are
currently interpreted. Legislation may be proposed which, if passed, could
adversely and possibly retroactively affect the taxation of the policies. This
summary is not exhaustive, does not purport to cover all situations, and is not
intended as tax advice. We do not address tax provisions that may apply if the
policy owner is a corporation. You should consult a qualified tax adviser to
apply the law to your circumstances.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY AND THE SEPARATE ACCOUNT
Transamerica is taxed as a life insurance company under Subchapter L of the
Code. We file a consolidated tax return with our life insurance company
subsidiaries. We do not currently charge for any income tax on the earnings or
realized capital gains in the Separate Account. A charge may apply in the future
for any federal income taxes we incur. The charge may become necessary, for
example, if there is a change in our tax status. Any charge would be designed to
cover the federal income taxes on the investment results of the separate
account.
Under current laws, we may incur state and local taxes besides premium taxes.
These taxes are not currently significant. If there is a material change in
these taxes affecting the separate account, we may charge for taxes paid or for
tax reserves.
TAXATION OF THE POLICIES
We believe that the policies described in this prospectus are life insurance
contracts under Code Section 7702. Section 7702 affects the taxation of life
insurance contracts and places limits on the relationship of the accumulation
value to the death benefit. As life insurance contracts, the death benefits of
the policies are generally excludable from the gross income of the
beneficiaries. In the absence of any guidance from the Internal Revenue Service
(IRS) on the issue, we believe that providing the same amount at risk after age
99 as is provided at age 99 should be sufficient to maintain the 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 accumulation value should not be taxable until received by you or
your designee, unless the policy is a modified endowment contract.
Federal tax law requires that the investment of each sub-account funding the
policies is adequately diversified according to Treasury regulations. We believe
that the portfolios currently meet the Treasury's diversification requirements.
We will monitor continued compliance with these requirements.
The Treasury Department has announced that previous regulations on
diversification do not provide guidance concerning the extent to which policy
owners may direct their investment assets to divisions of a separate investment
account without being treated as the owner of such assets who is taxed directly
on the income from such assets. Regulations may provide such guidance in the
future. The policies or our administrative rules may be modified as necessary to
prevent a policy owner from being treated as the owner of
any assets of the separate account who is taxed directly on their income.
A surrender, partial withdrawal, distribution, payment, change in the death
benefit option, change in the face amount, lapse with policy loan outstanding,
or assignment of the policy may have tax consequences. Within the first fifteen
policy years, a distribution of cash required under Code Section 7702 because of
a reduction of benefits under the policy may be taxable to the policy owner as
ordinary income respecting any investment earnings. Federal, state and local
income, estate, inheritance, and other tax consequences of ownership or receipt
of policy proceeds depend on the circumstances of each insured, policy owner or
beneficiary.
WITHHOLDING
If all or part of a distribution from the policy is includible in gross income,
the Code requires us to withhold federal income tax unless the policy owner
elects, in writing, not to have tax withholding apply. The federal income tax
withholding rate is generally 10% of the taxable amount of the distribution.
Withholding applies only if the taxable amount of all distributions are at least
$200 during a taxable year. Some states also require withholding for state
income taxes.
If payments are delivered to foreign countries, however, the tax withholding
rate will generally be 10% unless you certify to us that you are not a U.S.
person residing abroad or a "tax avoidance expatriate" as defined in Code
Section 877. Such certification may result in withholding of federal income
taxes at a different rate.
POLICY LOANS
We believe that loans received under the policy will be treated as an
indebtedness of the policy owner for federal income tax purposes. Under current
law, these loans will not constitute income for the policy owner while the
policy is in force, but see Modified Endowment Contracts.
INTEREST DISALLOWANCE
Interest on policy loans is generally nondeductible. You should consult your tax
adviser on how the rules governing the non-deductibility of interest would apply
in your individual situation.
MODIFIED ENDOWMENT CONTRACTS
Special rules described below apply to the tax treatment of loans and other
distributions under any life insurance contract that is classified as a modified
endowment contract, or MEC. A MEC is a life insurance contract that either fails
the 7-pay test or is received in exchange for a MEC. In general, a policy will
fail this 7-pay test if:
o the cumulative premiums and other amounts paid for the policy at any time
during the first seven policy years; or
o during any subsequent 7-year test period resulting from a material change
in the policy;
exceed the sum of the net level premiums which would have been paid up to such
time if the policy had provided for certain paid-up future benefits after the
payment of 7 level annual premiums. If to comply with this 7-pay test limit any
premium amount is refunded with applicable interest no later than 60 days after
the end of the policy year in which it is received, such refunded amount,
excluding interest, will reduce the cumulative amount of premiums that is
compared against such 7-pay test limit.
If there is any reduction in the policy's benefits during a 7-pay test period,
the 7-pay test limit will be recalculated and the policy will be retested
retroactively from the start of such period by taking into account such reduced
benefit level from such starting date. Generally, any material change in the
policy may be treated as producing a new contract for 7-pay test purposes,
requiring the start of a new 7-pay test period as of the date of such change.
DISTRIBUTIONS UNDER MODIFIED ENDOWMENT
CONTRACTS
The amount of partial surrenders, loans, withdrawals and other distributions
made before the survivor's death under a MEC, or the assignment or pledge of any
portion of the value of a MEC, are includible in gross income on an
income-out-first basis. The amount received or pledged is treated as allocable
first to the income
in the contract and then to a tax-free recovery of the policy's investment in
the contract, or tax basis. Generally, a policy's tax basis is equal to its
total premiums less amounts recovered tax-free. To the extent that the policy's
cash value (ignoring surrender penalties except upon a full surrender) exceeds
its tax basis, such excess constitutes its income in the contract. However,
where more than one MEC has been issued to the same policyholder by the same
insurer, or an affiliate, during a calendar year, all such MEC's are aggregated
for purposes of determining the amount of a distribution from any such MEC that
is includible in gross income.
In addition, any amount includible in gross income from a MEC distribution is
subject to a 10% penalty tax on premature distributions, 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, 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.
REPORTS
We maintain the records for the separate account.
We will send you a statement at least once a year, without charge, showing the
face amount, accumulation value, cash value, loans, partial surrenders,
surrender penalty free withdrawals, premium qualification credits, premiums paid
and charges as of the statement date. The statement will also include summary
information about the portions of your accumulation value in the fixed account,
the sub-accounts and the loan account. We may include additional information.
Upon written request at any time, we will send you an illustration of your
policy's benefits and values. There will be no charge for the first illustration
in each policy year. We reserve the right to charge a fee up to $25 for any
illustration after the first in any policy year.
DIRECTORS AND PRINCIPAL OFFICERS OF
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
Patrick S. Baird***** Director of TOLIC since 1999. Director, Senior Vice
President and Chief Operating Officer of PFL Life Insurance Company since 1996.
Executive Vice President and Chief Operating Officer of AEGON USA since 1995.
Chief Financial Officer of AEGON USA from 1992 to 1995. President and Chief Tax
Officer of AEGON USA from 1984 to 1995.
Brenda K. Clancy***** Director of TOLIC since 1999. Senior Vice President, Corporate, of
PFL Life Insurance Company since 1991. Treasurer and Chief Financial
Officer of PFL Life Insurance Company since 1996.
James W. 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.
Douglas C. Kolsrud***** Director of TOLIC since 1999. Director, Senior Vice President, Chief
Investment Officer and Corporate Actuary, Investment Division, of
PFL Life Insurance Company.
Richard N. Latzer*** Director, Senior Vice President and Chief Investment Officer of
Transamerica Corporation since 1989. Director, President and Chief
Executive Officer of Transamerica Investment Services, Inc. since
1988.
Karen O. MacDonald* Director, Executive Vice President and Chief Operating Officer since
1999. 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.
Paul E. Rutledge III** Director and President, Reinsurance Division since 1998. President,
Life Insurance Company of Virginia, 1991-1997.
Craig D. Vermie***** Director of TOLIC since 1999. Director, Vice President and General
Counsel, Corporate, of PFL Life Insurance Company since 1990.
Ron F. Wagley, CLU* President and Director
since 1999. Chief Agency Officer of TOLIC
since 1993. Vice President of TOLIC from
1989 to 1993.
*The business address is 1150 South Olive Street, Los Angeles, California 90015.
**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.
*****The business address is 4333 Edgewood Road, N.W., Cedar Rapids, Iowa 52449.
Transamerica is insured under a broad manuscript fidelity bond program with
coverage limits of $80,000,000. The lead underwriter is Capital CNA.
PERFORMANCE INFORMATION
We may advertise total return and average annual total return performance
information based on the periods that the portfolios have been in existence. The
results for any period prior to the policies being offered will be calculated as
if the policies had been offered during that period of time, with all charges
assumed to be those applicable to the sub-accounts and the portfolios.
The average total returns shown will reflect sub-account performance, and will
include deductions for portfolios expenses and separate account's mortality and
expense risk charge. The performance numbers will generally NOT include any of
the charges, fees or deductions associated with the policies. Specifically, they
will not include the administrative charge of 6% or 5.5% of premium; the monthly
deductions; any other fees or charges, nor the surrender charges for surrenders
during the first 15 policy years. If these charges, fees and deductions were
taken into consideration, the performance would
have been substantially less. We may advertise other performance calculations.
We will provide prospective owners with customized illustrations showing how
charges, fees, deductions, premiums and other policy activity could affect death
benefits.
We may compare performance information for a sub-account in reports and
promotional literature to:
o Standard & Poor's 500 Stock Index, or S&P 500;
o Dow Jones Industrial Average, or DJIA;
o Shearson Lehman Aggregate Bond Index;
o other unmanaged indices of unmanaged securities widely regarded by
investors as representative of the securities markets;
o other groups of variable life separate accounts or other investment
products tracked by Lipper Analytical Services;
o other services, companies, publications, or persons such as Morningstar,
Inc., who rank the investment products on performance or other criteria;
and
o the Consumer Price Index.
Unmanaged indices may assume the reinvestment of dividends but generally do not
reflect deductions for insurance and administration charges, separate account
charges and portfolio management costs and expenses. Performance information for
any sub-account reflects only the performance of a hypothetical investment in
the sub-account during a period. It is not representative of what may be
achieved in the future. However, performance information may be helpful in
reviewing market conditions during a period and in considering a portfolio's
success in meeting its investment objectives.
In advertising, sales literature, publications or other materials, we may give
information on various topics of interest to policy owners and prospective
policy owners. These topics may include:
o the relationship between sectors of the economy and the economy as a whole
and its effect on various securities markets, investment strategies and
techniques, such as value investing, market timing, dollar cost averaging,
asset allocation and automatic account rebalancing;
o the advantages and disadvantages of investing in tax-deferred and taxable
investments;
o customer profiles and hypothetical payment and investment scenarios;
o financial management and tax and retirement planning; and
o investment alternatives to certificates of deposit and other financial
instruments, including comparisons between the policies and the
characteristics of, and market for, the financial instruments.
In the table below, One-Year Total Return refers to the total of the income
generated by a sub-account, based on certain charges and assumptions as
described in the table, for the one-year period ended December 31, 1999. Average
Annual Total Return is based on the same charges and assumptions, but reflects
the hypothetical annually compounded return that would have produced the same
cumulative return if the sub-account's performance had been constant over the
entire period. Because average annual total returns tend to smooth out
variations in annual performance return, they are not the same as actual
year-by-year results.
56
57
SUB-ACCOUNT PERFORMANCE
EXCLUDING MONTHLY DEDUCTIONS, ADMINISTRATIVE 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
ADMINISTRATIVE CHARGES DEDUCTED FROM PREMIUMS, MONTHLY DEDUCTIONS UNDER THE
POLICIES OR SURRENDER CHARGES. Returns are for the period ending December 31,
1999.
10 Year or Life
of the Portfolio
(if Less than 10 Number
5 Year Years Since of
Average Inception) Years Since
Portfolio 1 Year Annual Average Annual Inception
Sub-Account Inception Total Total Total Return (if Less
Investing in the Date Return Return than 10
Corresponding Portfolio Years)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Alger American Income & Growth 11/15/88 42.09% 32.64% 18.63% N/A
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Alliance VP Growth and Income - Class B 6/1/99 N/A N/A 1.68%* 0.51
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Alliance VP Premier Growth - Class B 7/14/99 N/A N/A 12.97%* 0.45
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Appreciation 4/5/93 11.18% 25.19% 19.73% 6.74
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 8/31/90 22.84% 15.64% 35.30% N/A
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced - Service Shares 12/31/99 N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide Growth - Service Shares 12/31/99 N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 7/24/95 76.27% N/A 36.04% 4.44
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
MFS VIT Growth With Income 10/9/95 6.43/% N/A 20.79% 4.23
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
MFS VIT Research 7/26/95 23.74% N/A 22.52% 4.43
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
MS UIF Emerging Markets Equity 10/1/96 95.19% N/A 12.02% 3.25
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
MS UIF Fixed Income 1/2/97 -1.87% N/A 5.02% 2.99
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
MS UIF High Yield 1/2/97 6.84% N/A 8.15% 2.99
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
MS UIF International Magnum 1/2/97 24.88% N/A 13.28% 2.99
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Managed(1) 8/1/88 4.73% 19.41% 16.31% N/A
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Small Cap(2) 8/1/88 -2.08% 8.08% 10.84% N/A
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
PIMCO VIT StocksPLUS Growth and Income 1/2/98 19.55% N/A 24.60% 2.00
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth(3) 2/26/69 37.44% 41.15% 26.49% N/A
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money Market 1/2/98 4.36% N/A 4.53% 0.99
- -------------------------------------------------------------------------------------------------------------------------
*Not Annualized
(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.
DISTRIBUTION
Transamerica Securities Sales Corporation, or TSSC, acts as the principal
underwriter and general distributor of the policy. TSSC is registered with the
SEC as a broker-dealer and is a member of the National Association of Securities
Dealers, or NASD. TSSC was organized on February 26, 1986, under the laws of the
state of Maryland. Broker-dealers sell the policies through their registered
representatives who are appointed by us.
We pay to broker-dealers who sell the policy commissions based on a commission
schedule which provides for commissions of up to 90% of premium payments made up
to a level we set; 4.5% of the excess over that for premiums paid in the first
year; and 4.5% of premiums paid after the first policy year. We may also provide
additional compensation through bonuses.
To the extent permitted by NASD rules, promotional incentives or payments may
also be provided to broker-dealers based on sales volumes, the assumption of
wholesaling functions or other sales-related criteria. Other payments may be
made for other services that do not directly involve the sale of the policies.
These services may include the recruitment and training of personnel, production
of promotional literature, and similar services.
We intend to recoup commissions and other sales expenses primarily, but not
exclusively, through:
o the administrative charge;
o the surrender penalty; and
o investment earnings on amounts allocated under policies to the fixed
account.
Commissions paid on the policy, including other incentives or payments, are not
charged to the policy owners or the separate account.
Pending regulatory approvals, TSSC intends to distribute the policy in all
states, except New York, and in certain possessions and territories.
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.
INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
The statutory-basis financial statements of Transamerica Occidental Life
Insurance Company as of December 31, 1999 and 1998, and for each of the three
years in the periods ended December 31, 1999, included in this prospectus have
been audited by Ernst & Young LLP, Independent Auditors, as set forth in their
report appearing herein. Transamerica Separate Account VUL-4 had not commenced
operations as of December 31, 1999, and, therefore, no financial statements are
included for the separate account. The financial statements audited by Ernst &
Young LLP have been included in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
Also appearing in this prospectus are unaudited statutory-basis financial
statements of Transamerica for the nine month period ended September 30, 2000.
Statutory-basis financial statements for Transamerica are included in this
prospectus, starting on the next page. The statutory-basis financial statements
of Transamerica should be considered only as bearing on our ability to meet our
obligations under the policy. They should not be considered as bearing on the
investment performance of the assets held in the separate account.
FURTHER INFORMATION
We have filed a 1933 Act registration statement for this offering with the SEC.
Under SEC rules and regulations, we have omitted from this prospectus parts of
the registration statement and amendments. Statements contained in this
prospectus are summaries of the policy and other legal documents. The complete
documents and omitted information may be obtained from the SEC's principal
office in Washington, D.C., on payment of the SEC's prescribed fees.
Transamerica Occidental Life Insurance Company
Balance Sheet - Statutory Basis
As of September 30, 2000
(In Thousands)(Unaudited)
Admitted Assets
Cash and invested assets:
Cash and short-term investments $ 303,125
Bonds 14,316,158
Stocks:
Preferred 58,219
Common, at market 1,047,585
Unaffiliated entities, at market 1,269,382
Mortgage loans on real estate 868,473
Home office properties, at cost less accumulated
depreciation 92,085
Investment real estate 4,810
Policy loans 417,268
Other invested assets 264,337
------------
Total cash and invested assets 18,641,442
Premiums deferred and uncollected 338,592
Transfers from separate accounts 160,076
Accrued investment income 233,897
Federal income tax recoverable 10,682
Other assets 554,127
Separate account assets 4,094,426
------------
Total admitted assets $24,033,242
============
Transamerica Occidental Life Insurance Company
Balance Sheet - Statutory Basis
As of September 30, 2000
(In Thousands)(Unaudited)
Liabilities and capital and surplus
Liabilities:
Aggregate reserves for policies and contracts:
Life $ 7,633,326
Annuity 2,143,404
Accident and health 57,435
Policy and contract claim reserves 447,011
Other policyholders' funds 83,188
Remittances and items not allocated 82,677
Asset valuation reserve 600,553
Interest maintenance reserve 35,164
Funds held under coinsurance 2,259,598
Funding agreements 3,855,433
Commissions and expense allowances payable
on reinsurance assumed 91,961
Payable to affiliate 52,643
Borrowed money 250,602
Payable for securities 219,563
Other liabilities 466,862
Separate account liabilities 3,932,361
-----------
Total liabilities 22,211,781
Capital and surplus:
Common stock, $12.50 par value, 4,000,000 shares
authorized, 2,206,933 issued and outstanding 27,587
Paid-in surplus 509,600
Unassigned surplus 1,284,274
-----------
Total capital and surplus 1,821,461
-----------
Total liabilities and capital and surplus $24,033,242
===========
Transamerica Occidental Life Insurance Company
Statement of Operations - Statutory Basis
for the Nine Months Ended September 30, 2000
(In Thousands)(Unaudited)
Revenues:
Premiums and other considerations, net of reinsurance
Life $ 1,790,238
Annuity 481,700
Net investment income 807,120
Amortization of interest maintenance reserve (1,570)
Commissions and expense allowances on
reinsurance ceded 194,186
Income from fees associated with investment management,
administration and contract guarantees for separate accounts 14,421
Other income 66,128
------------
3,352,223
Benefits and expenses:
Benefits paid or provided for:
Life and accident and health 743,518
Surrender benefits 886,543
Other benefits 631,837
Increase (decrease) in aggregate reserves for
policies and contracts:
Life 4,855,604
Annuity (4,533,724)
Accident and health (46,878)
Other (101,169)
------------
2,435,731
Insurance expenses:
Commissions 506,457
General insurance expenses 240,231
Taxes, licenses and fees 33,712
Transfer to separate accounts 200,807
Other 9,162
------------
990,369
------------
3,426,100
------------
Loss from operations before federal income
tax expense and net realized capital gains on
investments (73,877)
Federal income tax expense (736)
------------
Loss from operations before net realized
capital gains on investments (73,141)
Net realized capital gains on investments
(net of related federal income taxes and
amounts transferred to interest maintenance
reserve) 367,735
------------
Net income $ 294,594
============
Transamerica Occidental Life Insurance Company
Statement of Changes in Capital and Surplus - Statutory Basis
(In Thousands)(Unaudited)
Total
Capital
Common Paid-in Unassigned and
Stock Surplus Surplus Surplus
-----------------------------------------------------------------
Balance at January 1, 2000 $ 27,587 $ 509,600 $ 1,426,737 $ 1,963,924
Net income 0 0 294,594 294,594
Change in non-admitted assets 0 0 55,605 55,605
Change in net realized capital gains 0 0 (288,376) (288,376)
Change in asset valuation reserve 0 0 (21,595) (21,595)
Dividend to stockholder 0 0 (135,000) (135,000)
Other adjustments 0 0 (47,691) (47,691)
-----------------------------------------------------------------
Balance at September 30, 2000 $ 27,587 $ 509,600 $ 1,284,274 $ 1,821,461
=================================================================
Transamerica Occidental Life Insurance Company
Statement of Cash Flow - Statutory Basis
for the Nine Months Ended September 30, 2000
(In Thousands)(Unaudited)
Operating Activities
Premiums and other considerations, net of reinsurance $ 7,633,076
Net investment income 798,092
Life and accident and health claims (644,026)
Surrender benefits to policyholders (4,585,301)
Other benefits to policyholders (390,247)
Commissions, other expenses and other taxes (842,087)
Federal income taxes, excluding tax on capital gains 150,353
Other, net (6,982)
Net transfers to separate accounts (197,904)
-----------
Net cash provided by operating activities 1,914,974
Investing Activities
Proceeds from investments sold, matured or repaid:
Bonds and preferred stocks 4,423,060
Common stocks 1,292,711
Mortgage loans on real estate 10,782
Other (150,587)
-----------
5,575,966
Cost of investments acquired:
Bonds and preferred stocks 5,933,547
Common stocks 1,015,243
Policy loans 7,734
Mortgage loans on real estate 492,939
Real estate 387
Other 105,010
-----------
7,554,860
-----------
Net cash used in investing activities (1,978,894)
-----------
Financing Activities
Dividends to stockholders (135,000)
Borrowed money 250,602
Other, net 118,989
-----------
Net cash provided by financing activities 234,591
Increase in cash and short-term investments 170,671
Cash and short-term investments at beginning of year 132,454
-----------
Cash and short-term investments at end of year $ 303,125
===========
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis
for the Nine Months Ended September 30, 2000
(In Thousands)(Unaudited)
1. Basis of Presentation
The accompanying unaudited statutory basis financial statements have been
prepared in accordance with statutory accounting principles for interim
financial information and the instructions to Article 10 of Regulation S-X.
Accordingly, they do not include all the information and notes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine month period ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000. For further information, refer to the accompanying
statutory basis financial statements and notes thereto for the year ended
December 31, 1999.
Transamerica Occidental Life Insurance Company
Financial Statements - Statutory Basis
Years ended December 31, 1999, 1998 and 1997
CONTENTS
Report of Independent Auditors..........................................................................1
Audited Financial Statements
Balance Sheets - Statutory Basis........................................................................3
Statements of Operations - Statutory Basis..............................................................5
Statements of Changes in Capital and Surplus - Statutory Basis..........................................6
Statements of Cash Flow - Statutory Basis...............................................................7
Notes to Financial Statements - Statutory Basis.........................................................9
Statutory Basis Financial Statement Schedules
Summary of Investments - Other Than Investments in Related Parties -
Statutory Basis.....................................................................................39
Supplementary Insurance Information - Statutory Basis..................................................40
Reinsurance - Statutory Basis..........................................................................42
2
Report Of Independent Auditors
Board of Directors
Transamerica Occidental Life Insurance Company
We have audited the accompanying statutory-basis balance sheets of Transamerica
Occidental Life Insurance Company as of December 31, 1999 and 1998, and the
related statutory-basis statements of operations, changes in capital and
surplus, and cash flow for each of the three years in the period ended December
31, 1999. Our audits also included the accompanying statutory-basis financial
statement schedules required by Article 7 of Regulation S-X. These financial
statements and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the California Department of Insurance, which practices differ from
accounting principles generally accepted in the United States. The variances
between such practices and accounting principles generally accepted in the
United States also are described in Note 1. The effects on the financial
statements of these variances are not reasonably determinable but are presumed
to be material.
In our opinion, because of the effects of the matters described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with accounting principles generally accepted in the United States,
the financial position of Transamerica Occidental Life Insurance Company at
December 31, 1999 and 1998, or the results of its operations or its cash flows
for each of the three years in the period December 31, 1999.
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Transamerica
Occidental Life Insurance Company at December 31, 1999 and 1998, and the results
of its operations and its cash flow for each of the three years in the period
ended December 31, 1999, in conformity with accounting practices prescribed or
permitted by the California Department of Insurance. Also, in our opinion, the
related financial statement schedules, when considered in relation to the basic
statutory-basis financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
March 31, 2000
3
Transamerica Occidental Life Insurance Company
Balance Sheets - Statutory Basis
(Dollars in thousands, except per share amounts)
DECEMBER 31
1999 1998
--------------------------------------
ADMITTED ASSETS Cash and invested assets:
Bonds $ 12,820,804 $ 12,135,178
Preferred stocks - unaffiliated 77,231 40,941
Preferred stocks - subsidiaries 58,219 56,860
Common stocks - unaffiliated 1,270,039 773,490
Common stocks - subsidiaries 984,400 965,485
Mortgage loans on real estate 385,590 387,038
Real estate 101,195 102,748
Policy loans 409,534 410,628
Cash and short-term investments 132,454 513,557
Other investments 218,997 194,264
--------------------------------------
Total cash and invested assets 16,458,463 15,580,189
Federal income tax receivable 160,075 -
Accrued investment income 226,823 210,932
Deferred and uncollected premiums 227,722 (807,951)
Reinsurance receivable 249,225 1,201,639
Other admitted assets 245,696 255,744
Separate account assets 4,229,395 3,443,277
--------------------------------------
Total admitted assets $ 21,797,399 $ 19,883,830
======================================
15
DECEMBER 31
1999 1998
--------------------------------------
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Reserves for future policy benefits $ 9,695,196 $ 9,428,282
Policy and contract claims payable 296,789 156,147
Supplementary contracts without life contingencies 208,349 215,548
Funding agreements 2,228,261 1,927,054
Other policy liabilities 114,442 115,361
Funds held under coinsurance 2,274,229 2,123,810
Asset valuation reserve 578,958 400,616
Interest maintenance reserve 58,721 61,514
Other liabilities 310,404 285,030
Separate account liabilities 4,068,126 3,326,306
--------------------------------------
Total liabilities 19,833,475 18,039,668
Capital and surplus:
Common Stock ($12.50 par value):
Authorized - 4,000,000 shares
Issued and outstanding - 2,206,933 shares 27,587 27,587
Contributed surplus 509,600 372,538
Unassigned surplus 1,426,737 1,444,037
--------------------------------------
Total capital and surplus 1,963,924 1,844,162
--------------------------------------
Total liabilities and capital and surplus $ 21,797,399 $ 19,883,830
======================================
See accompanying notes.
Transamerica Occidental Life Insurance Company
Statements of Operations - Statutory Basis
(Dollars in thousands)
YEAR ENDED DECEMBER 31
1999 1998 1997
-------------------------------------------------
Revenues:
Premiums and annuity considerations $ 1,368,016 $ 1,608,525 $ 1,715,745
Fund deposits 351,170 363,889 395,162
Considerations for supplementary contracts without life
contingencies 212,513 259,660 240,065
Net investment income 1,125,042 1,078,543 1,028,054
Commissions and expense allowances on reinsurance ceded
469,910 471,943 283,794
Other 550,544 900,281 228,649
-------------------------------------------------
4,077,195 4,682,841 3,891,469
Benefits and expenses:
Benefits paid or provided for:
Death benefits 392,276 595,585 432,019
Annuity benefits 582,542 570,424 754,609
Disability benefits 10,199 36,590 139,278
Surrender benefits and other fund withdrawals 694,766 616,224 429,449
Increase (decrease) in reserves 266,814 (447,419) (631,054)
Payments on supplementary contracts 231,717 243,383 235,594
Endowments 2,397 2,504 2,000
Other 112,059 102,093 96,546
-------------------------------------------------
2,292,770 1,719,384 1,458,441
Expenses:
Commissions and expense allowances 691,802 728,533 554,979
Reinsurance reserve transfer - 671,651 792,425
Other operating expenses 857,912 1,300,821 758,855
Net transfers to separate accounts 50,572 200,243 152,998
-------------------------------------------------
1,600,286 2,901,248 2,259,257
-------------------------------------------------
3,893,056 4,620,632 3,717,698
-------------------------------------------------
Gain from operations before dividends to policyholders,
federal income tax expense (benefit) and net realized
capital gains (losses) 184,139 62,209 173,771
Dividends to policyholders 9,294 8,206 9,453
-------------------------------------------------
Gain from operations before federal income tax expense
(benefit) and net realized capital gains (losses) 174,845 54,003 164,318
Federal income tax expense (benefit) 30,330 (70,408) 58,514
-------------------------------------------------
Gain from operations before net realized capital gains
(losses) 144,515 124,411 105,804
Net realized capital gains (losses) 17,515 76,071 (9,332)
-------------------------------------------------
Net income $ 162,030 $ 200,482 $ 96,472
=================================================
See accompanying notes.
Transamerica Occidental Life Insurance Company
Statements of Changes in Capital and Surplus - Statutory Basis
(Dollars in thousands)
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
Capital and surplus at beginning of year $ 1,844,162 $ 1,556,228 $ 1,249,045
Net income 162,030 200,482 96,472
Increase in net unrealized capital gains 119,420 261,540 246,829
Increase in non-admitted assets and
related items (2,824) (45,392) (41,778)
(Decrease) increase in liability for reinsurance in
unauthorized companies (4,646) (3,137) 1,038
Increase in asset valuation reserve (178,342) (39,153) (66,577)
Increase in surplus in separate account statement
16,637 32,572 29,459
Contributed capital 137,062 3,800 127,194
Prior year adjustments (14,710) (21,276) (47,998)
Dividends paid to parent (79,000) (80,000) (61,311)
Change in benefit reserve valuation basis - - (7,782)
Increase (decrease) as a result of
reinsurance (35,865) (21,502) 31,637
------------------------------------------------------
Capital and surplus at end of year $ 1,963,924 $ 1,844,162 $ 1,556,228
======================================================
See accompanying notes.
Transamerica Occidental Life Insurance Company
Statements of Cash Flow - Statutory Basis
(Dollars in thousands)
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
OPERATING ACTIVITIES
Premiums and annuity considerations $ 319,552 $ 2,642,142 $ 1,612,975
Fund deposits 351,170 363,889 395,162
Other policy proceeds and considerations 212,546 259,627 240,280
Allowances and reserve adjustments received on
reinsurance ceded 1,861,584 93,368 249,623
Investment income received 1,088,846 1,068,856 996,628
Other income received 141,247 194,037 274,793
Life and accident and health claims paid (266,727) (661,006) (487,861)
Surrender benefits and other fund withdrawals paid
(695,777) (618,854) (442,793)
Annuity and other benefits paid (962,151) (948,840) (1,046,532)
Commissions, other expenses and taxes
paid (1,027,317) (950,827) (777,851)
Dividends paid to policyholders (9,136) (8,102) (10,101)
Federal income taxes received (paid) (146,945) 15,764 (12,411)
Reinsurance reserve transfers and other (618,898) (1,891,421) (1,552,528)
------------------------------------------------------
Net cash provided by (used in) operating activities
247,994 (441,367) (560,616)
INVESTING ACTIVITIES
Proceeds from investments sold, matured
or repaid:
Bonds 2,993,985 3,938,693 3,525,839
Stocks 220,666 488,559 138,284
Mortgage loans 11,248 37,335 34,216
Real estate 3,050 20,300 3,660
Other invested assets 200 3,984 8,580
Miscellaneous proceeds 407 (25,830) 7,140
------------------------------------------------------
Total investment proceeds 3,229,556 4,463,041 3,717,719
Taxes paid on capital gains - - (7,481)
------------------------------------------------------
Net proceeds from sales, maturities, or repayments
of investments 3,229,556 4,463,041 3,710,238
Transamerica Occidental Life Insurance Company
Statements of Cash Flow - Statutory Basis (continued)
(Dollars in thousands)
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
Cost of investments acquired:
Bonds $ (3,656,035) $ (4,225,623) $ (4,103,637)
Stocks (611,404) (331,131) (311,708)
Mortgage loans (9,800) (121,139) (40,000)
Real estate (5,064) (7,030) (2,765)
Other invested assets (35,204) (36,752) (2,031)
Miscellaneous applications (93,194) - -
------------------------------------------------------
Total cost of investments acquired (4,410,701) (4,721,675) (4,460,141)
Net decrease (increase) in policy loans 1,094 (3,174) (7,996)
------------------------------------------------------
Net cost of investments acquired (4,409,607) (4,724,849) (4,468,137)
------------------------------------------------------
Net cash used in investing activities (1,180,051) (261,808) (757,899)
Financing and miscellaneous activities:
Other cash provided:
Capital and surplus paid-in 137,062 3,800 127,194
Other sources 562,978 1,485,965 1,558,615
------------------------------------------------------
Total other cash provided 700,040 1,489,765 1,685,809
Other cash provided (applied):
Dividends paid to shareholders (79,000) (80,000) (61,311)
Other applications, net (70,086) (347,482) (162,103)
------------------------------------------------------
Total other cash provided (applied) (149,086) (427,482) (223,414)
------------------------------------------------------
Net cash provided by financing and miscellaneous
activities 550,954 1,062,283 1,462,395
------------------------------------------------------
Net (decrease) increase in cash and short-term
investments (381,103) 359,108 143,880
Cash and short-term investments:
Beginning of year 513,557 154,449 10,569
------------------------------------------------------
End of year $ 132,454 $ 513,557 $ 154,449
======================================================
See accompanying notes.
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis
December 31, 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Transamerica Occidental Life Insurance Company (the Company) is domiciled in
California. The Company is a wholly owned subsidiary of Transamerica Insurance
Corporation of California, which is a wholly owned subsidiary of Transamerica
Corporation. The Company has three wholly owned insurance subsidiaries:
Transamerica Life Insurance and Annuity Company (TALIAC), Transamerica Life
Insurance Company of Canada and Transamerica Life Insurance Company of New York.
TALIAC has one wholly owned insurance subsidiary, Transamerica Assurance
Company. During 1999, Transamerica Corporation was merged with an indirect
wholly owned subsidiary of AEGON N.V., a holding company organized under the
laws of the Netherlands.
NATURE OF BUSINESS
The Company engages in providing life insurance, pension and annuity products,
reinsurance, structured settlements and investment products 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 are distributed in 50 states (reinsurance is the only product distributed in
New York).
BASIS OF PRESENTATION
Certain amounts reported in the accompanying financial statements are based on
management's best estimates and judgment, subject to the minimum requirements
imposed by regulatory authorities. Actual results could differ from those
estimates.
The accompanying financial statements have been prepared in conformity with
statutory accounting practices (SAP) prescribed or permitted by the California
Department of Insurance (the California Department), which vary in some respects
from accounting principles generally accepted in the United States (GAAP). The
more significant variances from GAAP are as follows:
The accounts and operations of the Company's subsidiaries are not
consolidated but are included in investments in common stocks at the
statutory net carrying value. Changes in the subsidiaries' net carrying
values are charged or credited directly to unassigned surplus.
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION (CONTINUED)
Bonds, where permitted, are carried at amortized cost, rather than
segregating the portfolio into held-to-maturity (reported at amortized
cost), available-for-sale (reported at fair value) and trading (reported at
fair value) classifications.
The costs of acquiring new and renewal business, such as commissions and
underwriting and policy issue costs, are expensed when incurred rather than
deferred and amortized over the terms of the related policies.
Certain assets recognized under GAAP, principally agents' debit balances
and computer software, are "non-admitted" and excluded from the
accompanying financial statements under SAP and are charged directly to
unassigned surplus.
Reserves for future policy benefits generally are calculated based on
mortality and interest assumptions that are statutorily required rather
than using estimated expected experience or actual account balances. The
policy liabilities are reported net, rather than gross, of ceded amounts.
Revenues for interest-sensitive life policies and investment-type contracts
consist of the entire premium received and benefits represent the benefits
paid and the change in policy reserves. Under GAAP, premiums received in
excess of policy charges are not recognized as revenue and benefits
represent the excess of benefits paid over the policy account value and
interest credited to the account value.
An Interest Maintenance Reserve (IMR) is provided which defers certain
realized capital gains and losses attributable to changes in the general
level of interest rates. Such deferred gains or losses are amortized into
investment income over the remaining period to maturity based on groupings
of individual securities sold in five-year bands.
An Asset Valuation Reserve (AVR) is provided which reclassifies a portion
of surplus to liabilities. The AVR is calculated according to a specified
formula as prescribed by the National Association of Insurance
Commissioners (NAIC) and is intended to stabilize the Company's surplus
against possible fluctuations in the market values of bonds, equity
securities, mortgage loans, real estate, and other invested assets. Changes
in the required AVR balance are charged or credited directly to unassigned
surplus.
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION (CONTINUED)
Deferred federal income taxes are not provided for differences between the
financial statement amounts and tax bases of assets and liabilities.
Policyholder dividends are recognized when declared rather than over the
term of the related policies.
A liability for reinsurance balances has been provided for unsecured policy
reserves ceded to reinsurers unauthorized by license to assume such
business. Changes to those amounts are credited or charged directly to
unassigned surplus. Under GAAP, an allowance for amounts deemed
uncollectible would be established through a charge to earnings.
Other significant accounting policies are as follows:
INVESTMENTS
Investments are shown on the following bases:
Bonds - where permitted, at amortized cost; all others are carried at
values prescribed by the Securities Valuation Office of the NAIC (SVO);
premiums and discounts are amortized using the interest method. For
loan-backed bonds, the interest method including anticipated prepayments at
the date of purchase is used. Prepayment assumptions for loan-backed bonds
are estimated using broker dealer survey values and are based on the
current interest rate and economic environment. The retrospective
adjustment method is used to value all securities, except for interest-only
securities which are valued using the prospective method.
Preferred stocks - where permitted at cost, all others are carried at fair
value based on NAIC values.
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS (CONTINUED)
Common stocks - at fair value based on NAIC market values, except for
investments in subsidiaries which are at statutory net carrying values.
Mortgage loans on real estate - at the aggregate unpaid balances.
Real estate - at depreciated cost less encumbrances, except for properties
acquired in satisfaction of debt, which are carried at the lower of fair
value or cost, less encumbrances.
Policy loans - at the aggregate unpaid principal balances.
Other investments - primarily at the lower of cost or fair value.
Derivative instruments, included in other investments in the accompanying
balance sheet, are valued in accordance with the NAIC Accounting Practices
and Procedures manual and Purposes and Procedures manual of the SVO. All
derivative instruments are used for hedging purposes and valued on a basis
consistent with the hedged item.
The Company uses interest rate swaps, caps and floors, options and certain other
derivatives as part of its overall interest rate risk management strategy for
certain life insurance and annuity products. As the Company only uses
derivatives for hedging purposes, the Company values all derivative instruments
on a consistent basis as the hedged item. Upon termination, gains and losses on
those instruments are included in the carrying values of the underlying hedged
items and are amortized over the remaining lives of the hedged items as
adjustments to investment income or benefits from the hedged items. Any
unamortized gains or losses are recognized when the underlying hedged items are
sold.
Interest rate swap contracts are used to convert the interest rate
characteristics (fixed or variable) of certain investments to match those of the
related insurance liabilities that the investments are supporting. The net
interest effect of such swap transactions is reported as an adjustment of
interest income from the hedged items as incurred.
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS (CONTINUED)
Interest rate caps and floors are used to limit the effects of changing interest
rates on yields of variable rate or short-term assets or liabilities. The
initial cost of any such agreements is amortized to net investment income over
the life of the agreement. Periodic payments that are receivable as a result of
the agreements are accrued as an adjustment of interest income or benefits from
the hedged item.
Gains and losses on disposal of investments are recognized on the
specific-identification basis. Changes in the statutory fair values of stocks
and those bonds carried at values prescribed by the SVO, rather than amortized
cost, are reported as unrealized gains or losses directly in unassigned surplus
and, accordingly, have no effect on net income.
Short-term investments include investments with maturities of less than one year
at date of acquisition.
SEPARATE ACCOUNTS
The Company administers segregated asset accounts for pension and other clients.
The assets of the separate accounts are not subject to liabilities arising out
of any business the Company may conduct and are reported at fair value.
Investment risks associated with fair value changes are primarily borne by the
clients. The liabilities of the separate accounts represent reserves established
to meet withdrawal and future benefit payment provisions of the contracts.
POLICY RESERVES AND CONTRACT CLAIMS
Life, annuity, and accident and health benefit reserves are calculated based
upon published tables using such interest rate assumptions and valuation methods
that will provide, in the aggregate, reserves that meet the amounts required by
the California Department. The Company waives deduction of deferred fractional
premiums upon death of the insureds and returns any portion of the final premium
beyond the date of death. Additional reserves are established where the gross
premiums on any insurance in force are less than the net premiums according to
the standard valuation set by the California Department.
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
POLICY RESERVES AND CONTRACT CLAIMS (CONTINUED)
Contract claim liabilities include provisions for reported claims and claims
incurred but not reported, net of reinsurance ceded.
PREMIUM REVENUES
Premiums from life insurance policies are recognized as revenue when due, and
premiums from annuity contracts are recognized when received. Accident and
health premiums are earned pro rata over the terms of the policies.
OTHER REVENUES
Other revenues consist primarily of profit sharing on reinsurance ceded and
reserve adjustments on ceded modified coinsurance transactions.
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.
Gains associated with reinsurance of inforce blocks of business are included in
surplus rather than gain from operations. Premiums ceded and recoverable losses
have been reported as a reduction of premium income and benefits, respectively.
PRIOR YEAR ADJUSTMENTS
Prior year adjustments charged directly to surplus in 1999 related primarily to
expenses incurred for sales practices litigation of $7 million (after tax) and a
suspense asset adjustment of $7 million (after tax).
Prior year adjustments in 1998 relate primarily to expenses incurred for sales
practices litigation of $8 million (after-tax) and a reserve valuation
adjustment of $13 million (after-tax) on single premium immediate annuities.
Prior year adjustments in 1997 relate primarily to expenses incurred for sales
practices litigation of $15 million (after-tax) and a reserve valuation
adjustment of $30 million (after-tax) on single premium immediate annuities.
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECLASSIFICATIONS
Certain reclassifications of 1997 and 1998 amounts have been made to conform
with the 1999 presentation.
2. FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values for bonds are based on market values prescribed by the SVO (NAIC
market values) rather than on actual or estimated market values. For bonds
without available NAIC market values, amortized costs are used as estimated fair
values. As of December 31, 1999 and 1998, the fair value of investments in bonds
includes $5,366 million and $5,215 million, respectively, of bonds that were
valued at amortized cost.
Fair values for preferred and common stocks are based on NAIC market values,
except for investment in subsidiaries which are at statutory net carrying
values.
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.
Fair values for derivative instruments are estimated using values obtained from
independent pricing services.
The carrying amounts of cash and short-term investments and accrued investment
income approximate their fair value.
Fair values for liabilities under investment-type contracts, included in
reserves for future policy benefits and other policy liabilities, are estimated
using discounted cash flow calculations, based on interest rates currently being
offered by similar contracts with maturities consistent with those remaining for
the contracts being valued.
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
The carrying values and fair values of financial instruments are as follows (in
thousands):
DECEMBER 31
1999 1998
-----------------------------------------------------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-----------------------------------------------------------------------
Financial assets:
Bonds $ 12,820,804 $ 12,681,458 $ 12,135,178 $ 12,834,818
Preferred stocks 135,450 93,071 97,801 100,909
Common stocks 2,254,439 2,254,439 1,738,975 1,738,975
Mortgage loans on real estate 385,590 363,650 387,038 409,714
Policy loans 409,534 396,956 410,628 388,076
Floors, caps and swaptions 56,964 60,129 57,311 149,447
Cash on hand and on deposit 132,454 132,454 513,557 513,557
Accrued investment income 226,823 226,823 210,932 210,932
DECEMBER 31
1999 1998
-----------------------------------------------------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-----------------------------------------------------------------------
Financial liabilities (liabilities for investment-type contracts):
Single and flexible premium
deferred annuities $ 2,074,622 $ 1,881,238 $ 2,112,347 $ 1,927,980
Single premium immediate annuities
4,035,133 4,217,004 3,924,227 4,820,607
Other deposit contracts 2,219,143 2,222,305 1,917,574 1,915,954
Off-balance sheet assets (liabilities):
Exchange derivatives designated as hedges that are in a:
Receivable position - 30,253 - 88,062
Payable position - (96,206) - (17,025)
The Company enters into various interest-rate agreements in the normal course of
business primarily as a means of managing its interest rate exposure.
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
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. Interest rate swap agreements are intended
primarily for asset and liability management. 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 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.
Generally, the Company is subject to basis risk when an interest rate swap
agreement is not funded. As of December 31, 1999, there were no unfunded
interest rate swap agreements.
Interest rate floor 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. These agreements enable
the Company to transfer, modify, or reduce its interest rate risk and generally
require up front premium payments. The costs of interest rate floor agreements
are amortized over the contractual periods and resulting amortization expenses
are included in net investment income. The 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.
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
The information on derivative instruments is summarized as follows (in
thousands):
AGGREGATE NOTIONALWEIGHTED AVERAGE
AMOUNT FIXED RATE
FAIR VALUE
------------------------------------------------------
DECEMBER 31, 1999
Interest rate swap agreements designated as hedges of financial assets, where
the Company pays:
Fixed rate interest $ 296,133 6.46% $ 28,092
Floating rate interest 1,516,308 5.95 (90,055)
Floating rate interest based on one index and
receives floating rate interest on another
index 4,525 6.05 20
Interest rate swap agreements designated as hedges
of financial liabilities, where the Company pays:
Floating rate interest 710,981 6.40 (4,394)
Floating rate interest based on one index and
receives floating rate interest on another
index 237,500 6.13 (260)
Interest rate floor agreements 400,000 - 3,065
Swaptions 6,500,000 6.64 25,211
Call options 31,999 - 31,853
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
AGGREGATE NOTIONALWEIGHTED AVERAGE
AMOUNT FIXED RATE
FAIR VALUE
------------------------------------------------------
DECEMBER 31, 1998
Interest rate swap agreements designated as hedges of financial assets, where
the Company pays:
Fixed rate interest $ 44,950 5.95% $ 280
Fixed rate interest 212,488 5.01 (13,525)
Floating rate interest (1,495,000) 5.40 80,717
Floating rate interest based on one index and
receives floating rate interest on another
index 15,833 5.06 110
Interest rate swap agreements designated as hedges
of financial liabilities, where the Company pays:
Floating rate interest 1,204,456 5.42 3,781
Floating rate interest based on one index and
receives floating rate interest on another
index 37,500 4.84 (339)
Interest rate floor agreements 400,000 - 21,705
Swaptions 6,500,000 5.19 101,754
Call options 30,710 - 25,988
Generally, notional amounts indicate the volume of transactions and estimated
fair values indicate the amounts subject to credit risk.
Financial instruments which potentially subject the Company to concentration of
credit risk consist principally of temporary cash investments, fixed maturities,
derivatives, mortgage loans on real estate and reinsurance receivables. The
Company places its temporary cash investments with high credit quality financial
institutions. Concentration of credit risk with respect to investments in fixed
maturities and mortgage loans on real
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
estate is 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,
1999, the Company had no significant concentration of credit risk.
3. INVESTMENTS
The carrying value and fair value of investments in debt securities are
summarized as follows (in thousands):
GROSS GROSS
CARRYING UNREALIZED UNREALIZED FAIR
VALUE GAINS LOSSES VALUE
-----------------------------------------------------------------------
DECEMBER 31, 1999
U.S. Treasury securities and
obligations of U.S. government
corporations
and agencies $ 189,325 $ 11,396 $ 1,968 $ 198,753
Obligations of states and political
subdivisions 106,484 3,673 1,482 108,675
Foreign governments 50,820 353 3,328 47,845
Corporate securities 9,345,228 103,079 230,148 9,218,159
Public utilities 1,718,582 20,020 38,842 1,699,760
Mortgage and other asset- backed
securities 1,410,365 - 2,099 1,408,266
-----------------------------------------------------------------------
$ 12,820,804 $ 138,521 $ 277,867 $ 12,681,458
=======================================================================
3. INVESTMENTS (CONTINUED)
GROSS GROSS
CARRYING UNREALIZED UNREALIZED FAIR
VALUE GAINS LOSSES VALUE
-----------------------------------------------------------------------
DECEMBER 31, 1998
U.S. Treasury securities and
obligations of U.S. government
corporations
and agencies $ 148,427 $ 57,226 $ - $ 205,653
Obligations of states and political
subdivisions 123,255 11,752 - 135,007
Foreign governments 39,940 2,115 1,486 40,569
Corporate securities 8,430,358 476,428 22,687 8,884,099
Public utilities 2,206,740 176,863 571 2,383,032
Mortgage and other asset- backed
securities 1,186,458 - - 1,186,458
-----------------------------------------------------------------------
$ 12,135,178 $ 724,384 $ 24,744 $ 12,834,818
=======================================================================
Included in bonds is a $150 million note due from Transamerica Corporation at
December 31, 1998.
The carrying value and fair value of bonds at December 31, 1999, by contractual
maturity, are as follows (in thousands):
CARRYING FAIR
VALUE VALUE
------------------------------------
Due in one year or less $ 137,778 $ 138,280
Due after one year through five years 2,021,208 2,019,633
Due after five years through ten years 2,769,210 2,708,056
Due after ten years 6,482,243 6,407,223
Mortgage and other asset-backed securities 1,410,365 1,408,266
------------------------------------
$ 12,820,804 $ 12,681,458
====================================
Expected maturities may differ from contractual maturities because certain
borrowers have the right to call or prepay obligations with or without call or
prepayment penalties.
3. INVESTMENTS (CONTINUED)
The costs and fair values of preferred stocks and common stocks (unaffiliated
companies) are as follows (in thousands):
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-----------------------------------------------------------------------
DECEMBER 31, 1999
Preferred stocks $ 77,231 $ 6,399 $ 41,182 $ 42,448
Common stocks 662,215 640,014 32,190 1,270,039
DECEMBER 31, 1998
Preferred stocks $ 40,941 $ 3,506 $ 18 $ 44,429
Common stocks 299,048 483,421 8,979 773,490
The components of investment in real estate are as follows (in thousands):
ACCUMULATED CARRYING
COST DEPRECIATION VALUE
------------------------------------------------------
DECEMBER 31, 1999
Properties occupied by the
Company $ 207,709 $ 111,331 $ 96,378
Other 7,450 2,633 4,817
------------------------------------------------------
$ 215,159 $ 113,964 $ 101,195
======================================================
DECEMBER 31, 1998
Properties occupied by the
Company $ 202,933 $ 105,330 $ 97,603
Other 8,514 3,369 5,145
------------------------------------------------------
$ 211,447 $ 108,699 $ 102,748
======================================================
3. INVESTMENTS (CONTINUED)
The maximum and minimum lending rates for mortgage loans during 1999 were 8.48%
and 7.13%, respectively. The maximum percentage of any one loan to the value of
security at the time of the loan, exclusive of any purchase money or insured or
guaranteed mortgages, was 80%. Fire insurance is carried in every case at least
equal to the excess of the loan over the maximum loan which would be permitted
by law on the land without the buildings.
Net investment income (expense) by major category of investments is summarized
as follows (in thousands):
YEAR ENDED DECEMBER 31
1999 1998 1997
-----------------------------------------------------
Bonds $ 989,340 $ 950,923 $ 934,229
Preferred stocks 5,078 1,312 790
Common stocks 53,192 53,000 43,938
Mortgage loans on real estate 28,314 28,713 25,031
Real estate 28,008 27,288 29,447
Policy loans 27,086 24,780 26,061
Cash and short-term investments 10,526 10,939 4,094
Other investments 16,343 17,198 (533)
-----------------------------------------------------
1,157,887 1,114,153 1,063,057
Investment expense (32,845) (35,610) (35,003)
-----------------------------------------------------
$ 1,125,042 $ 1,078,543 $ 1,028,054
=====================================================
3. INVESTMENTS (CONTINUED)
The realized gains and losses and other information related to investments are
summarized as follows (in thousands):
YEAR ENDED DECEMBER 31
1999 1998 1997
-----------------------------------------------------
Net gains (losses) on disposition of investments in:
Bonds $ 2,993 $ 16,522 $ (27,875)
Preferred stocks (6,085) (2,405) (579)
Common stocks 41,011 164,984 9,792
Other (90,400) (7,021) (1,308)
-----------------------------------------------------
(52,481) 172,080 (19,970)
Related income (taxes) recovery 71,941 (84,425) (7,480)
Transfer to the IMR (1,945) (11,584) 18,118
-----------------------------------------------------
Net realized capital gains (losses) $ 17,515 $ 76,071 $ (9,332)
=====================================================
The other loss of $90.4 million in 1999 primarily results from the net pretax
loss incurred on an ineffective equity collar hedge (see Note 12).
YEAR ENDED DECEMBER 31
1999 1998 1997
-----------------------------------------------------
Proceeds from disposition of investment in bonds
$ 2,993,985 $ 3,938,693 $ 3,525,839
Gross gains on disposition of investment
in bonds 46,135 44,290 24,157
Gross losses on disposition of investment
in bonds (43,142) (27,768) (52,032)
Change in net unrealized gains (losses):
Bonds (5,756) (871) -
Preferred stocks 2,271 (2,741) 518
Common stocks 125,177 257,582 242,773
Real estate - - 3,727
Other (2,272) 7,570 (189)
------------------------------------------------------
$ 119,420 $ 261,540 $ 246,829
======================================================
3. INVESTMENTS (CONTINUED)
Change in net unrealized gains on common stocks in 1999, 1998 and 1997, includes
$(34) million, $156 million and $107 million, respectively, related to the
increase (decrease) in TALIAC's statutory capital and surplus for those years.
4. REINSURANCE
The Company is involved in both the cession and assumption of reinsurance with
other companies, including affiliated companies. Risks are reinsured with other
companies to permit the recovery of a portion of the direct losses. These
reinsured risks are treated as though, to the extent of the reinsurance, they
are risks for which the Company is not liable.
Policy liabilities and accruals are reported in the accompanying financial
statements net of reinsurance ceded. The Company remains liable to the extent
the reinsuring companies do not meet their obligations under these reinsurance
treaties.
The following summarizes the effect of reinsurance transactions (in thousands):
CEDED/RETROCEDED TO ASSUMED FROM
-------------------------------------------------------------
DIRECT AFFILIATED UNAFFILIATED AFFILIATED UNAFFILIATED NET
AMOUNT COMPANIES COMPANIES COMPANIES COMPANIES AMOUNT
----------------------------------------------------------------------------------------------
Year ended
December 31, 1999:
Premium revenue $ 1,409,419 $ 112,947 $ 1,965,697 $ 157,197 $ 1,880,044 $ 1,368,016
==============================================================================================
At December 31, 1999:
Life insurance in force $ 547,304,907 $ 4,881,384 $ 365,336,549 $ 17,212,668 $ 465,086 $194,764,728
==============================================================================================
Reserves for future policy
benefits $ 14,241,446 $ 4,124,327 $ 3,056,908 $ 233,126 $ 2,401,859 $ 9,695,196
Policy and contract claims
payable 127,030 40,341 137,047 1,824 345,323 296,789
----------------------------------------------------------------------------------------------
$ 14,368,476 $ 4,164,668 $ 3,193,955 $ 234,950 $ 2,747,182 $ 9,991,985
==============================================================================================
4. REINSURANCE (CONTINUED)
CEDED/RETROCEDED TO ASSUMED FROM
--------------------------------------------------------------
DIRECT AFFILIATED UNAFFILIATED AFFILIATED UNAFFILIATED NET
AMOUNT COMPANIES COMPANIES COMPANIES COMPANIES AMOUNT
----------------------------------------------------------------------------------------------
Year ended
December 31, 1998:
Premium revenue $ 1,401,733 $ 298,339 $ 2,193,006 $ 198,460 $ 2,499,677 $ 1,608,525
==============================================================================================
At December 31, 1998:
Life insurance in force $ 190,331,317 $ 950,789 $ 307,374,066 $ 25,093,946 $ 282,821,689 $ 189,922,097
==============================================================================================
Reserves for future policy
benefits $ 14,778,562 $ 4,978,700 $ 2,931,865 $ 136,208 $ 2,424,077 $ 9,428,282
Policy and contract claims
payable 121,330 45,187 316,533 11,018 385,519 156,147
----------------------------------------------------------------------------------------------
$ 14,899,892 $ 5,023,887 $ 3,248,398 $ 147,226 $ 2,809,596 $ 9,584,429
==============================================================================================
Year ended
December 31, 1997:
Premium reserve $ 1,434,511 $ 245,606 $ 1,296,529 $ 75,853 $ 1,747,516 $ 1,715,745
==============================================================================================
At December 31, 1997:
Life insurance in force $ 175,258,666 $ - $ 272,918,826 $ 26,199,512 $ 223,688,654 $ 152,228,006
==============================================================================================
Reserves for future policy
benefits $ 15,117,147 $ 5,457,334 $ 2,731,647 $ 15,306 $ 2,922,166 $ 9,865,638
Policy and contract claims
payable 94,040 42,804 197,351 20,854 357,125 231,864
----------------------------------------------------------------------------------------------
$ 15,211,187 $ 5,500,138 $ 2,928,998 $ 36,160 $ 3,279,291 $ 10,097,502
==============================================================================================
4. REINSURANCE (CONTINUED)
CEDED TO ASSUMED
DIRECT OTHER FROM OTHER NET
AMOUNT COMPANIES COMPANIES AMOUNT
-----------------------------------------------------------------------
Year ended December 31, 1999:
Benefits paid or provided $ 1,632,298 $ 1,499,809 $ 1,086,642 $ 1,219,131
=======================================================================
Year ended December 31, 1998:
Benefits paid or provided $ 1,576,300 $ 1,147,899 $ 1,020,085 $ 1,448,486
=======================================================================
Year ended December 31, 1997:
Benefits paid or provided $ 1,631,249 $ 955,287 $ 887,538 $ 1,563,500
=======================================================================
5. INCOME TAXES
The Company's taxable income or loss is included in the consolidated return of
Transamerica Corporation for the period ended July 21, 1999. The method of
allocation between the companies for the period ended July 21, 1999, is subject
to written agreement approved by the Board of Directors. Tax payments are made
to, or refunds received from, Transamerica Corporation in amounts which would
result from filing separate tax returns with federal taxing authorities, except
that tax benefits attributable to operating losses and other carryovers are
recognized currently since utilization of these benefits is assured by
Transamerica Corporation. The provision does not purport to represent a
proportionate share of the consolidated tax.
For the period beginning July 22, 1999, the Company will join in a consolidated
tax return with certain life affiliates: TALIAC, Transamerica Assurance Company
and Transamerica Life Insurance Company of New York. The method of allocation
between the companies for the period beginning July 22, 1999, will be subject to
written agreement to be approved by the Board of Directors. It is anticipated
that this agreement will require that tax payments are made to, or refunds are
received from, TOLIC, in amounts which would results from filing separate tax
returns with federal taxing authorities.
5. INCOME TAXES (CONTINUED)
Amounts due from Transamerica Corporation for federal income taxes are $160
million at December 31, 1999. Amounts due to Transamerica Corporation for
federal income taxes were $28.5 million at December 31, 1998, and are included
in accounts payable and other liabilities in the accompanying balance sheet.
Following is a reconciliation of federal income taxes computed at the statutory
rate with the income tax provision, excluding income taxes related to net
realized gains on investment transactions (in thousands):
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
Federal income taxes at statutory rate $ 61,196 $ 18,901 $ 57,511
Difference between statutory and tax reserves
(1,153) (3,463) 10,045
Deferred acquisition costs capitalized,
net of amortization 13,326 4,677 10,652
Reinsurance adjustments (14,442) (7,525) 12,900
Difference in statutory and tax bases
of investments (2,399) (10,990) (4,149)
Adjustment to prior year tax provision 24,640 (13,055) 4,689
Tax credits (16,000) (17,698) (11,127)
Nontaxable affiliate dividends (17,500) (17,500) (14,000)
Other (17,338) (23,755) (8,007)
------------------------------------------------------
Provision (benefit) for income taxes $ 30,330 $ (70,408) $ 58,514
======================================================
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 would become subject to tax
when it exceeds a certain maximum or when cash dividends are paid therefrom. The
policyholders' surplus account balance at December 31, 1999, was $118 million.
Should the entire amount in the policyholders' surplus account become taxable,
the tax thereon computed at current rates would amount to approximately $41.3
million. No income taxes have been provided on the policyholders' surplus
account since the conditions that would cause such taxes are remote.
6. INVESTMENTS IN SUBSIDIARIES
The Company's investment in common stocks of its wholly owned subsidiaries with
carrying values, based on the statutory capital and surplus of the subsidiaries,
is summarized as follows (in thousands):
CARRYING VALUE
COST
------------------------------------
At December 31, 1999:
TALIAC $ 238,418 $ 797,109
Other 206,041 187,291
------------------------------------
$ 444,459 $ 984,400
====================================
At December 31, 1998:
TALIAC $ 237,448 $ 830,829
Others 179,891 134,656
------------------------------------
$ 417,339 $ 965,485
====================================
The Company received a $50 million dividend in 1999 and 1998 from its wholly
owned subsidiary, TALIAC.
The Company's investment in preferred stocks of subsidiaries is substantially
all represented by an investment in Transamerica Life Insurance Company of
Canada.
Certain financial information with respect to TALIAC, the Company's principal
subsidiary, is as follows (in thousands):
DECEMBER 31
1999 1998
---------------------------------------
Cash and investments $ 14,046,255 $ 13,582,175
Other assets 6,339,057 4,783,063
---------------------------------------
Total assets 20,385,312 18,365,238
Aggregate reserves 9,221,606 8,084,356
Other liabilities 10,366,597 9,450,053
---------------------------------------
Total liabilities 19,588,203 17,534,409
---------------------------------------
Total capital and surplus $ 797,109 $ 830,829
=======================================
7. DEFERRED AND UNCOLLECTED PREMIUMS
Components of deferred and uncollected premiums are as follows:
GROSS LOADING NET
------------------------------------------------------
DECEMBER 31, 1999
Life and annuity:
Ordinary first-year business $ 8,630 $ - $ 8,630
Ordinary renewal business 183,107 36,000 147,107
Group life direct business 2,095 - 2,095
------------------------------------------------------
193,832 36,000 157,832
Accident and health 69,890 - 69,890
------------------------------------------------------
$ 263,722 $ 36,000 $ 227,722
======================================================
DECEMBER 31, 1998
Life and annuity:
Ordinary first-year business $ (828,090) $ 14,537 $ (842,627)
Ordinary renewal business 9,900 8,929 971
Group life direct business 5,637 - 5,637
------------------------------------------------------
(812,553) 23,466 (836,019)
Accident and health 28,068 - 28,068
------------------------------------------------------
$ (784,485) $ 23,466 $ (807,951)
======================================================
The gross deferred and uncollected premiums balance at December 31, 1999, of
$263,722,000 is composed of $431,756,000 direct deferred and uncollected
premiums less reinsurance premiums payable of $168,034,000.
The gross deferred and uncollected premiums balance at December 31, 1998, of
$(784,485,000) is composed of $379,199,000 direct deferred and uncollected
premiums less reinsurance premiums payable of $(1,163,684,000).
8. ANNUITY RESERVES AND DEPOSIT LIABILITIES
A portion of the Company's policy reserves and other policyholders' funds
(including separate account liabilities) relates to liabilities established on a
variety of the Company's products that are not subject to significant mortality
or morbidity risk; however, there may be certain restrictions placed upon the
amount of funds that can be withdrawn without penalty. The amount of reserves on
these products, by withdrawal characteristics, are summarized as follows (in
thousands):
DECEMBER 31
1999 1998
----------------------------------------------------------------
AMOUNT PERCENT AMOUNT PERCENT
----------------------------------------------------------------
Subject to discretionary withdrawal - with adjustment:
With market value adjustment $ 9,134 -% $ 2,955,445 21%
At book value less surrender charge 435,717 3 565,977 4
At market value 7,385,279 53 2,319,944 16
----------------------------------------------------------------
7,830,130 56 5,841,366 41
Subject to discretionary withdrawal -
without adjustment 1,748,102 13 1,839,270 13
Not subject to discretionary withdrawal
provision 4,417,004 31 6,710,422 46
----------------- ------------------
---------------- ----------------
Total annuity reserves and deposit 13,995,236 100% 14,391,058 100%
liabilities
================ ================
Less reinsurance (5,820,180) (6,736,704)
-----------------
------------------
Net annuity reserves and deposit liabilities $ 8,175,056* $ 7,654,354*
================= ==================
* Includes $3,364 million and $2,622 million of annuity reserves and deposit
liabilities reported in the separate account liability at December 31, 1999
and 1998, respectively. Funding agreement liabilities that are a part of the
separate account liabilities are excluded from the above amounts.
Included in other liabilities is $2,228 million and $1,927 million at December
31, 1999 and 1998, respectively, held pursuant to funding agreements. Funding
agreements are obligations that contain no mortality or morbidity risks.
9. CAPITAL AND SURPLUS
The Company is subject to the requirements of the NAIC approved Risk Based
Capital (RBC) rules and at December 31, 1999 and 1998, the Company met the RBC
requirement.
The amount of dividends which can be paid by the Company without prior approval
of the California Department is subject to restrictions related to statutory
surplus and gains from operations. The Company could pay $184 million in
dividends in 2000 without prior approval.
10. PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS
Substantially all employees are covered by noncontributory defined benefit plans
sponsored by the Company and the Retirement Plan for Salaried Employees of
Transamerica Corporation and Affiliates in which the Company also participates.
Pension benefits are based on the employee's compensation during the highest
paid 60 consecutive months during the 120 months before retirement. The general
policy is to fund current service costs currently and prior service costs over
periods ranging from 10 to 30 years. Assets of those plans are invested
principally in publicly traded stocks and bonds.
The Company's total pension costs were $0.8 million, $0.6 million and $0 million
for the years ended December 31, 1999, 1998 and 1997, respectively.
The Company also participates in various contributory defined benefit programs
sponsored by Transamerica Corporation that provide medical and certain other
benefits to eligible retirees. The Company accounts for the costs of such
benefit programs under the accrual method and amortizes its transition
obligation for retirees and fully eligible or vested employees over 20 years.
Postretirement benefit costs charged to income was $3 million for each of the
years ended December 31, 1999, 1998 and 1997.
11. ASSETS ON DEPOSIT
At December 31, 1999 and 1998, $4 million and $4 million of the Company's assets
were on deposit with public officials in compliance with regulatory
requirements.
12. RELATED PARTY TRANSACTIONS
The Company has various transactions with Transamerica Corporation and its
affiliated companies in the normal course of operations. These transactions
include the assumption and cession of reinsurance and the performance of certain
administrative and support services for affiliated companies. Such
reimbursements are recorded as a reduction of operating expenses.
Transactions with Transamerica Corporation and its affiliates also include
transactions related to pension plans, investments in a money market fund
managed by an affiliated company, and rental of computer services. Pension funds
administered by a subsidiary for affiliated companies amounted to $1.8 billion,
$1.6 billion and $1.3 billion at December 31, 1999, 1998 and 1997, respectively.
The investment in an affiliated money market fund was not material.
The Company had amounts due from affiliates of $41 million as of December 31,
1999, and $16 million as of December 31, 1998.
In March 1999, the Company entered into an equity collar (which expired December
17, 1999), with an unrelated party to hedge the price fluctuations of their
unaffiliated equity securities portfolio. In addition, Transamerica Corporation
agreed to protect the Company from any ineffectiveness in the hedge that would
expose the Company to loss net of tax benefit. As a result of the
ineffectiveness of the collar with the unrelated party and the payment that the
Company was required to make upon settlement, Transamerica Corporation made a
payment of $172 million to the Company in December 1999.
13. LEASES
Rental expense for equipment and properties occupied by the Company was $17
million in 1999, $14 million in 1998, and $19 million in 1997. 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, 1999 (in thousands):
Year ending December 31:
2000 $ 12,203
2001 9,998
2002 7,745
2003 6,728
2004 6,624
Later years 41,701
------------------
$ 84,999
==================
14. LITIGATION
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 plaintiff's 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 $7 million, $8 million and $15 million after-tax have been
incurred in 1999, 1998 and 1997, respectively, and reflected in these statements
as prior period adjustments. Additional costs related to the settlement are not
expected to be material and will be incurred over a period of years. 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.
15. SEPARATE ACCOUNTS
Separate accounts held by the Company represent primarily funds which are
administered for pension plans. The assets consist primarily of fixed maturities
and equity securities and are carried at estimated fair value. The Company
provides a minimum guaranteed return to policyholders of certain separate
accounts. Certain other separate accounts do not have any minimum guarantees and
the investment risks associated with market value changes are borne entirely by
the policyholder.
15. SEPARATE ACCOUNTS (CONTINUED)
Information regarding the separate accounts of the Company as of and for the
year ended December 31, 1999, is as follows (in thousands):
SEPARATE ACCOUNTS WITH GUARANTEES
-------------------------------------------------
NONINDEXED NONINDEXED
GUARANTEE GUARANTEE NONGUARANTEED
LESS THAN OR GREATER THAN SEPARATE
INDEXED EQUAL TO 4% 4% ACCOUNTS TOTAL
--------------- ---------------- ---------------- ----------------- ------------------
Premiums, deposits and other
considerations $ - $ - $ - $ 254,076 $ 254,076
=============== ================ ================ ================= ==================
Reserves for separate accounts with assets at:
Fair value $ - $ - $ - $ 3,364,426 $ 3,364,426
Amortized cost - - - - -
Other - - - 703,700 703,700
--------------- ---------------- ---------------- ----------------- ------------------
Total $ - $ - $ - $ 4,068,126 $ 4,068,126
=============== ================ ================ ================= ==================
Reserves for separate accounts by withdrawal characteristics:
Subject to discretionary withdrawal (with adjustment):
With market value
adjustment $ - $ - $ - $ - $ -
At book value less
current surrender
charge of 5% or more
- - - - -
At market value 3,364,426 3,364,426
At book value without
adjustment and with
current surrender
charges less than 5% - - - - -
--------------- ---------------- ---------------- ----------------- ------------------
Subtotal - - - 3,364,426 3,364,426
Not subject to
discretionary withdrawal - - - - -
Other - - - 703,700 703,700
--------------- ---------------- ---------------- ----------------- ------------------
Total separate account $ - $ - $ - $ 4,068,126 $ 4,068,126
liabilities
=============== ================ ================ ================= ==================
15. SEPARATE ACCOUNTS (CONTINUED)
A reconciliation of the amounts transferred to and from the separate accounts is
presented below (in thousands):
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
Transfer as reported in the summary of operations of the separate accounts
statement:
Transfers to separate accounts $ 255,210 $ 352,298 $ 454,749
Transfers from separate accounts 217,729 173,152 240,381
------------------------------------------------------
Net transfers to separate accounts 37,481 179,146 214,368
Reconciling adjustments:
Deposits (withdrawals) from separate
accounts 13,091 21,097 (61,370)
------------------------------------------------------
Transfers as reported in the statements of income
$ 50,572 $ 200,243 $ 152,998
======================================================
16. DIRECT PREMIUM WRITTEN BY MANAGING GENERAL AGENTS/THIRD-PARTY ADMINISTRATORS
The Company has the following direct premiums written through managing general
agents (in thousands):
TYPES OF DIRECT
EXCLUSIVE BUSINESS AUTHORITY WRITTEN
CONTRACT WRITTEN GRANTED PREMIUMS
----------------------------------------------------------------
National Benefit Resources No Specific and * $ 38
Aggregate
Excess of Loss
Insurance
R. E. Moulton Insurance Agency, Inc. No Specific and * 6,698
Aggregate
Excess of Loss
Insurance
16. DIRECT PREMIUM WRITTEN BY MANAGING GENERAL AGENTS/THIRD-PARTY ADMINISTRATORS (CONTINUED)
TYPES OF DIRECT
EXCLUSIVE BUSINESS AUTHORITY WRITTEN
CONTRACT WRITTEN GRANTED PREMIUMS
----------------------------------------------------------------
Intermediary Insurance Services, Inc. No Specific and * 2,969
Aggregate
Excess of Loss
Insurance
Excess Reinsurance Underwriters No Specific and * 12,536
Agency, Inc. Aggregate
Excess of Loss
Insurance
Risk Assessment Strategies No Specific and * 576
Aggregate
Excess of Loss
Insurance
North American Insurance Management Yes Occupational * 1,453
Accident -
Excess of Loss
Insurance
Health Reinsurance Management Partnership No Provider Excess * 25,173
Self Funding Systems No Specific and * 119
Aggregate
Excess of Loss
Insurance
*Premium collection, underwriting and commission/claim payments authority
granted.
17. NAIC CODIFICATION
In 1998, the NAIC adopted codified statutory accounting principles
(Codification) effective January 1, 2001. Codification will likely change, to
some extent, prescribed statutory accounting practices and may result in changes
to the accounting practices that the Company uses to prepare its statutory-basis
financial statements. Codification will require adoption by the various states
before it becomes the prescribed statutory basis of accounting for insurance
companies domesticated within those states. Accordingly, before Codification
becomes effective for the Company, the state of California must adopt
Codification as the prescribed basis of accounting on which domestic insurers
must report their statutory-basis results to the Insurance Department. The state
of California has stated affirmatively that it will adopt Codification effective
January 1, 2001. Management believes that the impact of Codification will not be
material to the Company's statutory-basis financial statements
18. YEAR 2000 (UNAUDITED)
In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In 1999, the Company completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company is not
aware of any material problems resulting from Year 2000 issues, either with its
products, its internal systems, or the products and services of third parties.
The Company will continue to monitor its mission critical computer applications
and those of its suppliers and vendors throughout the year 2000 to ensure that
any latent Year 2000 matters that may arise are addressed promptly.
Statutory Basis
Financial Statement Schedules
39
Transamerica Occidental Life Insurance Company
Summary of Investments - Other Than Investments in Related Parties - Statutory Basis
(Dollars in thousands)
December 31, 1999
SCHEDULE I
AMOUNT AT
WHICH SHOWN
MARKET IN THE
TYPE OF INVESTMENT COST (1) VALUE BALANCE SHEET
- -----------------------------------------------------------------------------------------------------------
FIXED MATURITIES
Bonds:
United States government and government
agencies and authorities $ 189,325 $ 198,753 $ 189,325
States, municipalities and political
subdivisions 106,484 108,675 106,484
Foreign governments 50,820 47,845 50,820
Public utilities 1,718,582 1,699,760 1,718,582
All other corporate bonds 9,345,228 9,218,159 9,345,228
Mortgage and other asset-backed securities
1,410,365 1,408,266 1,410,365
Redeemable preferred stock 66,841 30,448 66,371
-----------------------------------------------------------
Total fixed maturities 12,887,645 12,711,906 12,887,175
EQUITY SECURITIES
Common stocks:
Affiliated entities 444,459 984,400 984,400
Banks, trust and insurance 36,481 38,892 38,892
Industrial, miscellaneous and all other 625,734 1,231,147 1,231,147
Nonredeemable preferred stock 69,079 62,623 69,079
-----------------------------------------------------------
Total equity securities 1,175,753 2,317,062 2,323,518
Mortgage loans on real estate 385,590 363,650 385,590
Real estate 101,195 50,000 101,195
Policy loans 409,534 396,956 409,534
Other long-term investments 218,997 155,562 218,997
Cash and short-term investments 132,454 132,454 132,454
-----------------------------------------------------------
Total investments $ 15,311,168 $ 16,127,590 $ 16,458,463
===========================================================
(1) Original cost of equity securities and, as to fixed maturities, original
cost reduced by repayments and adjusted for amortization of premiums or
accrual discounts.
40
Transamerica Occidental Life Insurance Company
Supplementary Insurance Information - Statutory Basis
(Dollars in thousands)
December 31, 1999
SCHEDULE III
FUTURE POLICY POLICY AND
BENEFITS AND UNEARNED CONTRACT
EXPENSES PREMIUMS LIABILITIES
- -----------------------------------------------------------------------------------------------------------
Year ended December 31, 1999
Individual life $ 4,988,602 $ - $ 240,452
Individual health 42,065 28,046 33,481
Group life and health 31,586 2,616 32,963
Annuity 4,602,281 - (10,107)
-----------------------------------------------------------
9,664,534 30,662 296,789
Year ended December 31, 1998
Individual life 4,595,349 - 121,089
Individual health 26,439 41,669 (9,445)
Group life and health 12,953 3,675 47,840
Annuity 4,748,197 - (3,337)
-----------------------------------------------------------
9,382,938 45,344 156,147
Year ended December 31, 1997
Individual life 4,207,937 - 155,424
Individual health 27,254 31,297 2,606
Group life and health 16,964 2,124 51,052
Annuity 5,580,062 - 22,781
-----------------------------------------------------------
$ 9,832,217 $ 33,421 $ 231,863
===========================================================
41
BENEFITS, CLAIMS
LOSSES AND
NET SETTLEMENT EXPENSES OTHER
PREMIUM INVESTMENT OPERATING PREMIUMS
REVENUE INCOME* EXPENSES* WRITTEN
- --------------------------------------------------------------------------------------------------
$ 891,749 $ 405,705 $ 909,143 $ 703,605 $ 1,178,607
(10,184) 2,770 (33,811) 35,665 80,328
158,775 10,967 134,414 124,689 65,217
327,676 705,600 1,283,024 736,327 85,267
- --------------------------------------------------------------------------------------------------
1,368,016 1,125,042 2,292,770 1,600,286 1,409,419
905,725 400,313 1,242,592 492,976 1,087,850
51,827 4,483 3,265 100,839 63,828
195,431 4,003 160,581 89,231 50,433
455,542 669,744 312,946 2,218,202 199,622
- --------------------------------------------------------------------------------------------------
1,608,525 1,078,543 1,719,384 2,901,248 1,401,733
761,853 370,027 933,474 383,255 1,042,734
23,988 6,216 19,252 49,460 56,861
236,688 5,074 200,224 123,772 111,314
693,216 646,737 305,491 1,702,770 223,602
- --------------------------------------------------------------------------------------------------
$ 1,715,745 $ 1,028,054 $ 1,458,441 $ 2,259,257 $ 1,434,511
==================================================================================================
*Allocations of net investment income and other operating expenses are based on
a number of assumptions of estimates, and the results would change if
different methods were applied.
42
Transamerica Occidental Life Insurance Company
Reinsurance - Statutory Basis
(Dollars in thousands)
December 31, 1999
SCHEDULE IV
ASSUMED PERCENTAGE
CEDED TO FROM OF AMOUNT
GROSS OTHER OTHER NET ASSUMED
AMOUNT COMPANIES COMPANIES AMOUNT TO NET
- -------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
1999
Life insurance in force $ 547,304,907 $ 370,217,933 $ 17,677,754 $ 194,764,728 9%
Premiums:
Individual life $ 1,178,607 $ 1,220,329 $ 933,471 $ 891,749 105%
Individual health 80,328 97,296 6,784 (10,184) -%
Group life and health 65,217 247,870 341,428 158,775 215%
Annuity 85,267 513,149 755,558 327,676 231%
-----------------------------------------------------------------------------------------
$ 1,409,419 $ 2,078,644 $ 2,037,241 $ 1,368,016 149%
=========================================================================================
Year ended December 31,
1998
Life insurance in force $ 190,331,317 $ 308,297,855 $ 307,915,635 $ 189,922,097 162%
Premiums:
Individual life $ 1,087,850 $ 958,929 $ 776,803 $ 905,725 86%
Individual health 63,828 134,991 122,991 51,827 237%
Group life and health 50,433 268,973 413,971 195,431 212%
Annuity 199,622 1,128,452 1,384,372 455,542 304%
-----------------------------------------------------------------------------------------
$ 1,401,733 $ 2,491,345 $ 2,698,137 $ 1,608,525 168%
=========================================================================================
Year ended December 31,
1997
Life insurance in force $ 175,258,666 $ 272,918,826 $ 249,888,166 $ 152,228,006 164%
Premiums:
Individual life $ 1,042,734 $ 967,543 $ 686,662 $ 761,853 90%
Individual health 56,861 47,651 14,778 23,988 61%
Group life and health 111,314 274,270 399,644 236,688 169%
Annuity 223,602 252,671 722,285 693,216 104%
-----------------------------------------------------------------------------------------
$ 1,434,511 $ 1,542,135 $ 1,823,369 $ 1,715,745 106%
=========================================================================================
APPENDIX A
THE FIXED ACCOUNT
This prospectus is generally intended to serve as a disclosure document only
for the policy and the separate account. For complete details regarding the
fixed account, see the policy itself.
THE FIXED ACCOUNT BECOMES PART OF OUR GENERAL ACCOUNT. BECAUSE OF EXEMPTIVE AND
EXCLUSIONARY PROVISIONS, INTERESTS IN THE GENERAL ACCOUNT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT"), NOR IS THE GENERAL
ACCOUNT REGISTERED AS AN INVESTMENT COMPANY UNDER THE 1940 ACT.
ACCORDINGLY, NEITHER THE GENERAL ACCOUNT NOR ANY INTERESTS THEREIN ARE GENERALLY
SUBJECT TO THE PROVISIONS OF THE 1933 ACT OR THE 1940 ACT, AND WE HAVE BEEN
ADVISED THAT THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
REVIEWED THE DISCLOSURES IN THIS PROSPECTUS WHICH RELATE TO THE FIXED ACCOUNT.
GENERAL DESCRIPTION
Allocations to the fixed account become part of our general account assets and
are used to support insurance and annuity obligations.
You may allocate any portion your net premiums to the fixed account. The fixed
account is a part of our general account. The general account consists of all
assets that we own, except those in the separate account and other separate
accounts we may have. Except as limited by law, we have sole control over
investment of the assets in our general account. Although you do not share
directly in the investment experience of our general account, you are allowed to
allocate net premiums to the fixed account and to transfer funds between the
separate account and the fixed account, within limits.
FIXED ACCOUNT ACCUMULATION VALUE
The accumulation value of the fixed account (including the loan account) on a
specified date after the date the initial net premium was allocated to the
policy, is equal to:
o the accumulation value on the last monthly policy date, plus accrued
interest from the last monthly policy date to the specified date; PLUS
o any premium qualification credit amount deposited to it on the last monthly
policy date, plus accrued interest on that amount; PLUS
o all net premiums paid into it less any premium refunds since the last
monthly policy date, plus accrued interest from the date each net premium
was allocated to it; PLUS
o any amounts transferred from the separate account, plus accrued interest on
those amounts since the date of the transfer; MINUS
o the monthly deduction charged against it on the last monthly policy date,
plus accrued interest on that amount; MINUS
o any partial surrenders and surrender penalty free withdrawals charged
against it, including pro rata surrender penalties, since the last monthly
policy date, plus accrued interest on that amount from each partial
surrender date and/or surrender penalty free withdrawal date to the
specified date; MINUS
o any amounts transferred from the fixed account to the separate account,
plus accrued interest on those amounts since the date of the transfer.
FIXED ACCOUNT INTEREST
The net premium you allocate to the fixed account will accrue interest from the
valuation date we allocate it to the fixed account. Interest is credited monthly
on each monthly policy date. The guaranteed minimum interest rate for the fixed
account for all policy years is 4% per year. We may declare an interest rate
that is higher than the guaranteed minimum interest rate at any time before the
policy anniversary nearest exact age 100. You bear the risk that we will not
declare an interest higher than 4% per year. We will never declare an interest
rate is lower than the guaranteed minimum interest rate. We may change the
declared interest rate at any time without notice. Beginning on the policy
anniversary nearest exact age 100, the accumulation value of the fixed account
will accrue interest at the guaranteed minimum interest rate.
TRANSFERS FROM THE FIXED ACCOUNT
Except with our consent, transfers from the fixed account will be limited as
follows: o at least 90 days must elapse between transfers from the fixed
account; and
o the maximum amount which may be transferred is the greater of 25% of the
portion of the accumulation value in the fixed account or the amount of the
last transfer from the fixed account.
These limitations do not apply to transfers from the loan account due to loan
repayments. The portion of the accumulation value in the fixed account excludes
the amounts, if any, in the loan account.
We will make the transfer on the day we receive your transfer request in good
order. If the day we receive your transfer request is not a valuation date, we
will make the transfer on the next following valuation date.
APPENDIX B
SETTLEMENT OPTIONS
BENEFIT PAYMENT OPTIONS
When the survivor dies while the policy is in force, we will pay the death
benefit in a lump sum unless you or the beneficiary choose a settlement option.
You may choose a settlement option while the survivor is living. The beneficiary
may choose a benefit option after the survivor has died. The beneficiary's right
to choose will be subject to any benefit payment option restrictions in effect
at the survivor's death.
You may also choose one of these options as a method of receiving the surrender
proceeds, if any are available under the policy. Settlement options are paid
from our general account and are not based on the investment experience of the
separate account.
When we receive a satisfactory written request, we will pay the benefit
according to one of these options:
OPTION A: INSTALLMENTS 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 the survivor's death or the date you surrender the policy. 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 payment 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 that depend on the designated individual's age are based on age
nearest birthday on the date of the survivor's death or the date you surrender
the policy. If the net death benefit is payable, the settlement option will
start on the date of the survivor's death. If you surrender the policy, the
settlement option will start on the date we receive your written surrender
request.
We will pay the first installment under any option on the date of the survivor's
death or the date you surrender the policy. 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 account.
If the payee does not live to receive all guaranteed payments under Options A, B
or D or any amount deposited under Option C, plus any accumulated interest, we
will pay the remaining benefit as scheduled to the payee's estate. If the
designated individual does not live to receive all guaranteed payments under
Option E, 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 C
ILLUSTRATIONS OF
DEATH BENEFIT, ACCUMULATION VALUES
AND ACCUMULATED PREMIUMS
The following tables illustrate the way in which a policy's death benefit and
accumulation value could vary over an extended period.
ASSUMPTIONS
The tables illustrate a policy issued to a male, age 55, and to a female, age
55, each qualifying in a preferred nonsmoker underwriting class. One set of
tables illustrates the Option 1 (level) death benefit option; another
illustrates the Option 2 (plus) death benefit option; and the last set
illustrates the Option 3 (plus premium) death benefit option. In each case, one
table illustrates the guaranteed monthly deductions and administrative charge.
The other table illustrates the current monthly deductions and administrative
charge as presently in effect.
The tables assume that no policy loan has been made; that you have not requested
a decrease in the face amount; that no partial surrenders have been made; and
that no transfers above 18 have been made in any policy year (so that no related
transaction or transfer charges have been incurred). The tables assume that the
Full Death Benefit Rider and the Estate Protection Rider are not in effect on
the policy.
The tables assume that a $7,500 premium is paid at the beginning of each policy
year and that all premiums are allocated to and remain in the separate account
for the entire period shown. The tables are based on hypothetical gross
investment rates of return for the portfolios (i.e., investment income and
capital gains and losses, realized or unrealized) equivalent to constant gross
(after tax) annual rates of 0%, 6%, and 12%. The tables also shown the amount
that would accumulate if premiums accumulated at 5% interest.
The accumulation values and death benefits would be different from those shown
if the gross annual investment rates of return averaged 0%, 6%, and 12% over a
period of years, but fluctuated above or below such averages for individual
policy years. The values also would be different depending on the allocation of
the policy's total accumulation value amount the sub-accounts if the actual
rates of return averaged 0%, 6, or 12%, but the rates of each portfolio varied
above and below such averages
DEDUCTIONS FOR CHARGES
The amounts shown for the death proceeds and accumulation values take into
account:
1. an administrative charge deducted from each premium; and
2. the monthly deductions.
The administrative charge currently is 6% of each premium payment. On a
guaranteed basis, the administrative charge is equal to 12% of each premium
payment.
The amounts shown for the death proceeds and the accumulation values also take
into account the daily charge against the sub-accounts for mortality and expense
risks equivalent to 0.25% 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 0.91%
of the average daily net assets of the portfolios. The rate of 0.91% 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 and takes into
account expense reimbursement arrangements. The fees and expenses of each
portfolio vary, and, in 1999 ranged from an annual rate of 0.60% to an annual
rate of 1.79% 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. Without these expense waivers or
reimbursements, if applicable, the expenses for those portfolios would be higher
and the simple average would have been at the annual rate of 1.05% of average
daily net assets. As discussed in Note (1) to the Portfolio Expenses Table, such
waivers or reimbursements are expected to continue for 2001. The fees and
expenses associated with the policy may be more or less than 0.91% in the
aggregate, depending upon how you make allocations of the accumulation value
among the sub-accounts. For more information on portfolio expenses, see the
Portfolio Expenses Table in this prospectus and the prospectuses for the
portfolios.
NET ANNUAL RATES OF INVESTMENT
Taking into account the separate account mortality and expense risk charge of
0.25%, and the assumed 0.91% 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 -1.16%, 4.84% AND 10.84%, respectively.
Upon request, we 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.
69
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VUL-4
SURVIVORSHIP VARIABLE UNIVERSAL LIFE POLICY
Male, Non-Tobacco User, Age 55
Female, Non-Tobacco User, Age
55
Face Amount: $1,000,000
Death Benefit: Option 1
BASED ON CURRENT MONTHLY DEDUCTIONS (WITHOUT RIDERS) AND ADMINISTRATIVE CHARGE,
AND PORTFOLIO EXPENSES AND MORTALITY & EXPENSE RISK CHARGE
- -----------------------------------------------------------------------------------------------------------------------------------
Premiums Hypothetical 0% Hypothetical 6% Hypothetical 12%
Paid Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest
Policy At 5% Per Net Cash Accumulation Death Net Cash Accumulation Death Net Cash Accumulation Death
Year Year Value Value Benefit Value Value Benefit Value Value Benefit
---- ---- ----- ----- ------- ----- ----- ------- ----- ----- -------
1 $7,875 $0 $5,895 $1,000,000 $0 $6,283 $1,000,000 $0 $6,672 $1,000,000
2 $16,144 $0 $11,865 $1,000,000 $583 $13,023 $1,000,000 $1,788 $14,228 $1,000,000
3 $24,826 $6,321 $17,761 $1,000,000 $8,644 $20,084 $1,000,000 $11,159 $22,599 $1,000,000
4 $33,942 $13,140 $23,580 $1,000,000 $17,037 $27,477 $1,000,000 $21,427 $31,867 $1,000,000
5 $43,514 $19,737 $29,317 $1,000,000 $25,634 $35,214 $1,000,000 $32,545 $42,125 $1,000,000
6 $53,565 $26,387 $34,967 $1,000,000 $34,725 $43,305 $1,000,000 $44,895 $53,475 $1,000,000
7 $64,118 $32,797 $40,377 $1,000,000 $44,023 $51,603 $1,000,000 $58,282 $65,862 $1,000,000
8 $75,199 $38,969 $45,689 $1,000,000 $53,547 $60,267 $1,000,000 $72,837 $79,557 $1,000,000
9 $86,834 $45,172 $50,892 $1,000,000 $63,585 $69,305 $1,000,000 $88,970 $94,690 $1,000,000
10 $99,051 $51,256 $55,976 $1,000,000 $74,000 $78,720 $1,000,000 $106,686 $111,406 $1,000,000
11 $111,878 $57,077 $60,937 $1,000,000 $84,669 $88,529 $1,000,000 $126,014 $129,874 $1,000,000
12 $125,347 $62,895 $65,755 $1,000,000 $95,868 $98,728 $1,000,000 $147,407 $150,267 $1,000,000
13 $139,490 $68,554 $70,414 $1,000,000 $107,462 $109,322 $1,000,000 $170,919 $172,779 $1,000,000
14 $154,339 $73,904 $74,904 $1,000,000 $119,318 $120,318 $1,000,000 $196,635 $197,635 $1,000,000
15 $169,931 $79,161 $79,161 $1,000,000 $131,675 $131,675 $1,000,000 $225,037 $225,037 $1,000,000
16 $186,303 $83,156 $83,156 $1,000,000 $143,383 $143,383 $1,000,000 $255,247 $255,247 $1,000,000
17 $203,493 $86,873 $86,873 $1,000,000 $155,445 $155,445 $1,000,000 $288,569 $288,569 $1,000,000
18 $221,543 $90,243 $90,243 $1,000,000 $167,814 $167,814 $1,000,000 $325,304 $325,304 $1,000,000
19 $240,495 $93,262 $93,262 $1,000,000 $180,506 $180,506 $1,000,000 $365,848 $365,848 $1,000,000
20 $260,394 $95,875 $95,875 $1,000,000 $193,491 $193,491 $1,000,000 $410,608 $410,608 $1,000,000
Age 60 $43,514 $19,737 $29,317 $1,000,000 $25,634 $35,214 $1,000,000 $32,545 $42,125 $1,000,000
Age 65 $99,051 $51,256 $55,976 $1,000,000 $74,000 $78,720 $1,000,000 $106,686 $111,406 $1,000,000
Age 70 $169,931 $79,161 $79,161 $1,000,000 $131,675 $131,675 $1,000,000 $225,037 $225,037 $1,000,000
Age 75 $260,394 $95,875 $95,875 $1,000,000 $193,491 $193,491 $1,000,000 $410,608 $410,608 $1,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Assumes a $7,500 premium is paid at the beginning of each policy year.
Values will be different if premiums are paid with a different frequency or in
different amounts.
(2) Assumes that no policy loan has been made. Excessive loans or withdrawals
may cause this policy to lapse because of insufficient accumulation value or net
cash 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. The death benefit, accumulation
value, and net cash value for a policy would be different from those shown if
actual gross rates of return averaged 0%, 6%, or 12 % over a period of years but
fluctuated above or below those averages for individual policy years. They would
also be different if any partial surrenders or policy loans were made.
(1)
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VUL-4
VARIABLE UNIVERSAL LIFE POLICY
Male, Non-Tobacco User, Age 55
Female, Non-Tobacco User, Age
55
Face Amount: $1,000,000
Death Benefit: Option 1
BASED ON GUARANTEED MONTHLY DEDUCTIONS (WITHOUT RIDERS) AND ADMINISTRATIVE CHARGE,
AND PORTFOLIO EXPENSES AND MORTALITY & EXPENSE RISK CHARGE
- -----------------------------------------------------------------------------------------------------------------------------------
Premiums Hypothetical 0% Hypothetical 6% Hypothetical 12%
Paid Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest
Policy At 5% Per Net Cash Accumulation Death Net Cash Accumulation Death Net Cash Accumulation Death
Year Year Value Value Benefit Value Value Benefit Value Value Benefit
---- ---- ----- ----- ------- ----- ----- ------- ----- ----- -------
1 $7,875 $0 $5,450 $1,000,000 $0 $5,811 $1,000,000 $0 $6,173 $1,000,000
2 $16,144 $0 $10,933 $1,000,000 $0 $12,007 $1,000,000 $686 $13,126 $1,000,000
3 $24,826 $4,907 $16,347 $1,000,000 $7,058 $18,498 $1,000,000 $9,387 $20,827 $1,000,000
4 $33,942 $11,250 $21,690 $1,000,000 $14,853 $25,293 $1,000,000 $18,914 $29,354 $1,000,000
5 $43,514 $17,376 $26,956 $1,000,000 $22,823 $32,403 $1,000,000 $29,210 $38,790 $1,000,000
6 $53,565 $22,792 $31,372 $1,000,000 $30,468 $39,048 $1,000,000 $39,842 $48,422 $1,000,000
7 $64,118 $27,731 $35,311 $1,000,000 $37,996 $45,576 $1,000,000 $51,068 $58,648 $1,000,000
8 $75,199 $32,141 $38,861 $1,000,000 $45,353 $52,073 $1,000,000 $62,916 $69,636 $1,000,000
9 $86,834 $36,220 $41,940 $1,000,000 $52,732 $58,452 $1,000,000 $75,667 $81,387 $1,000,000
10 $99,051 $39,728 $44,448 $1,000,000 $59,884 $64,604 $1,000,000 $89,169 $93,889 $1,000,000
11 $111,878 $42,416 $46,276 $1,000,000 $66,549 $70,409 $1,000,000 $103,263 $107,123$1,000,000
12 $125,347 $44,446 $47,306 $1,000,000 $72,869 $75,729 $1,000,000 $118,204 $121,064$1,000,000
13 $139,490 $45,552 $47,412 $1,000,000 $78,553 $80,413 $1,000,000 $133,827 $135,687$1,000,000
14 $154,339 $45,460 $46,460 $1,000,000 $83,298 $84,298 $1,000,000 $149,966 $150,966$1,000,000
15 $169,931 $44,282 $44,282 $1,000,000 $87,179 $87,179 $1,000,000 $166,851 $166,851$1,000,000
16 $186,303 $40,643 $40,643 $1,000,000 $88,777 $88,777 $1,000,000 $183,242 $183,242$1,000,000
17 $203,493 $35,150 $35,150 $1,000,000 $88,644 $88,644 $1,000,000 $199,906 $199,906$1,000,000
18 $221,543 $27,540 $27,540 $1,000,000 $86,441 $86,441 $1,000,000 $216,734 $216,734$1,000,000
19 $240,495 $17,188 $17,188 $1,000,000 $81,456 $81,459 $1,000,000 $233,329 $233,329$1,000,000
20 $260,394 $3,446 $3,446 $1,000,000 $72,932 $72,932 $1,000,000 $249,287 $249,287$1,000,000
Age 60 $43,514 $17,376 $26,956 $1,000,000 $22,823 $32,403 $1,000,000 $29,210 $38,790 $1,000,000
Age 65 $99,051 $39,728 $44,448 $1,000,000 $59,884 $64,604 $1,000,000 $89,169 $93,889 $1,000,000
Age 70 $169,931 $44,282 $44,282 $1,000,000 $87,179 $87,179 $1,000,000 $166,851 $166,851$1,000,000
Age 75 $260,394 $3,446 $3,446 $1,000,000 $72,932 $72,932 $1,000,000 $249,287 $249,287$1,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Assumes a $7,500 premium is paid at the beginning of each policy year.
Values will be different if premiums are paid with a different frequency or in
different amounts.
(2) Assumes that no policy loan has been made. Excessive loans or withdrawals
may cause this policy to lapse because of insufficient accumulation value or net
cash 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-4
VARIABLE UNIVERSAL LIFE POLICY
Male, Non-Tobacco User, Age 55
Female, Non-Tobacco User, Age
55
Face Amount: $1,000,000
Death Benefit: Option 2
BASED ON CURRENT MONTHLY DEDUCTIONS (WITHOUT RIDERS) AND ADMINISTRATIVE CHARGE,
AND PORTFOLIO EXPENSES AND MORTALITY & EXPENSE RISK CHARGE
- -----------------------------------------------------------------------------------------------------------------------------------
Premiums Hypothetical 0% Hypothetical 6% Hypothetical 12%
Paid Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest
Policy At 5% Per Net Cash Accumulation Death Net Cash Accumulation Death Net Cash Accumulation Death
Year Year Value Value Benefit Value Value Benefit Value Value Benefit
---- ---- ----- ----- ------- ----- ----- ------- ----- ----- -------
1 $7,875 $0 $5,895 $1,005,895 $0 $6,283 $1,006,283 $0 $6,671 $1,006,672
2 $16,144 $0 $11,864 $1,011,865 $582 $13,022 $1,013,022 $1,787 $14,227 $1,014,228
3 $24,826 $6,319 $17,759 $1,017,760 $8,641 $20,081 $1,020,082 $11,156 $22,596 $1,022,597
4 $33,942 $13,136 $23,576 $1,023,577 $17,033 $27,473 $1,027,473 $21,422 $31,862 $1,031,863
5 $43,514 $19,731 $29,311 $1,029,311 $25,626 $35,206 $1,035,207 $32,536 $42,116 $1,042,117
6 $53,565 $26,377 $34,957 $1,034,958 $34,712 $43,292 $1,043,293 $44,880 $53,460 $1,053,460
7 $64,118 $32,782 $40,362 $1,040,362 $44,003 $51,583 $1,051,584 $58,256 $65,836 $1,065,837
8 $75,199 $38,946 $45,666 $1,045,666 $53,516 $60,236 $1,060,236 $72,794 $79,514 $1,079,514
9 $86,834 $45,138 $50,858 $1,050,859 $63,536 $69,256 $1,069,257 $88,901 $94,621 $1,094,622
10 $99,051 $51,206 $55,926 $1,055,927 $73,926 $78,646 $1,078,647 $106,577 $111,297 $1,111,298
11 $111,878 $57,006 $60,866 $1,060,866 $84,560 $88,420 $1,088,420 $125,848 $129,708 $1,129,708
12 $125,347 $62,795 $65,655 $1,065,655 $95,709 $98,569 $1,098,569 $147,154 $150,014 $1,150,014
13 $139,490 $68,415 $70,275 $1,070,275 $107,233 $109,093 $1,109,093 $170,541 $172,401 $1,172,401
14 $154,339 $73,713 $74,713 $1,074,714 $118,994 $119,994 $1,119,994 $196,078 $197,078 $1,197,078
15 $169,931 $78,901 $78,901 $1,078,901 $131,216 $131,216 $1,131,217 $224,218 $224,218 $1,224,219
16 $186,303 $82,804 $82,804 $1,082,804 $142,739 $142,739 $1,142,739 $254,049 $254,049 $1,254,049
17 $203,493 $864,103 $86,403 $1,086,403 $154,551 $154,551 $1,154,552 $286,838 $286,838 $1,286,838
18 $221,543 $89,619 $89,619 $1,089,619 $166,584 $166,584 $1,166,584 $322,818 $322,818 $1,322,819
19 $240,495 $92,447 $92,447 $1,092,448 $178,836 $178,836 $1,178,837 $362,326 $362,326 $1,362,327
20 $260,394 $94,824 $94,824 $1,094,825 $191,250 $191,250 $1,191,251 $405,671 $405,671 $1,405,671
Age 60 $43,514 $19,731 $29,311 $1,029,311 $25,626 $35,206 $1,035,207 $32,536 $42,116 $1,042,117
Age 65 $99,051 $51,206 $55,926 $1,055,927 $73,926 $78,646 $1,078,647 $106,577 $111,297 $1,111,298
Age 70 $169,931 $78,901 $78,901 $1,078,901 $131,216 $131,216 $1,131,217 $224,218 $224,218 $1,224,219
Age 75 $260,394 $94,824 $94,824 $1,094,825 $191,250 $191,250 $1,191,251 $405,671 $405,671 $1,405,671
- ------------------------------------------------------------------------------------------------------------------------------------
(1)
(1) Assumes a $7,500 premium is paid at the beginning of each policy year.
Values will be different if premiums are paid with a different frequency or in
different amounts.
(2) Assumes that no policy loan has been made. Excessive loans or withdrawals
may cause this policy to lapse because of insufficient accumulation value or net
cash 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-4
VARIABLE UNIVERSAL LIFE POLICY
Male, Non-Tobacco User, Age 55
Female, Non-Tobacco User, Age
55
Face Amount: $1,000,000
Death Benefit: Option 2
BASED ON GUARANTEED MONTHLY DEDUCTIONS (WITHOUT RIDERS) AND ADMINISTRATIVE CHARGE,
AND PORTFOLIO EXPENSES AND MORTALITY & EXPENSE RISK CHARGE
- ------------------------------------------------------------------------------------------------------------------------------------
Premiums Hypothetical 0% Hypothetical 6% Hypothetical 12%
Paid Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest
Policy At 5% Per Net Cash Accumulation Death Net Cash Accumulation Death Net Cash Accumulation Death
Year Year Value Value Benefit Value Value Benefit Value Value Benefit
---- ---- ----- ----- ------- ----- ----- ------- ----- ----- -------
1 $7,875 $0 $5,450 $1,005,450 $0 $5,811 $1,005,811 $0 $6,173 $1,006,173
2 $16,144 $0 $10,932 $1,010,933 $0 $12,006 $1,012,007 $685 $13,125 $1,013,125
3 $24,826 $4,907 $16,346 $1,016,346 $7,056 $18,496 $1,018,496 $9,385 $20,825 $1,020,825
4 $33,942 $11,246 $21,686 $1,021,687 $14,849 $25,289 $1,025,290 $18,909 $29,349 $1,029,350
5 $43,514 $17,370 $26,950 $1,026,951 $22,816 $32,396 $1,032,396 $29,201 $38,781 $1,038,782
6 $53,565 $22,757 $31,337 $1,031,338 $30,425 $39,005 $1,039,005 $39,788 $48,368 $1,048,368
7 $64,118 $27,653 $35,233 $1,035,234 $37,894 $45,474 $1,045,475 $50,937 $58,517 $1,058,517
8 $75,199 $32,001 $38,721 $1,038,722 $45,163 $51,883 $1,051,883 $62,659 $69,379 $1,069,380
9 $86,834 $35,994 $41,714 $1,041,714 $52,411 $58,131 $1,058,131 $75,214 $80,937 $108,035
10 $99,051 $39,383 $44,103 $1,044,104 $59,375 $64,095 $1,064,096 $88,418 $93,138 $1,093,139
11 $111,878 $41,916 $45,776 $1,045,777 $65,777 $69,637 $1,069,638 $102,071 $105,931 $1,105,932
12 $125,347 $43,746 $46,606 $1,046,607 $71,737 $74,597 $1,074,597 $116,374 $119,234 $1,119,234
13 $139,490 $44,603 $46,463 $1,046,463 $76,941 $78,801 $1,078,801 $131,093 $132,953 $1,132,953
14 $154,339 $44,210 $45,210 $1,045,211 $81,062 $62,062 $1,082,062 $145,977 $146,977 $1,146,977
15 $169,931 $42,681 $42,681 $1,042,682 $84,148 $84,148 $1,084,148 $161,147 $161,147 $1,161,147
16 $186,303 $38,646 $38,646 $1,038,647 $84,750 $84,750 $1,084,750 $175,218 $175,218 $1,175,219
17 $203,493 $32,720 $32,720 $1,032,721 $83,379 $83,379 $1,083,380 $188,752 $188,752 $1,188,753
18 $221,543 $24,677 $24,677 $1,024,677 $79,685 $79,685 $1,079,686 $201,426 $201,426 $1,201,426
19 $240,495 $13,939 $13,939 $1,013,939 $72,935 $72,935 $1,072,935 $212,506 $212,506 $1,212,507
20 $260,394 $0 $0 $0 $62,378 $62,378 $1,062,378 $221,201 $221,201 $1,221,201
Age 60 $43,514 $17,370 $26,950 $1,026,951 $22,816 $32,396 $1,032,396 $29,201 $38,781 $1,038,782
Age 65 $99,051 $39,383 $44,103 $1,044,104 $59,375 $64,095 $1,064,096 $88,418 $93,138 $1,093,139
Age 70 $169,931 $42,681 $42,681 $1,042,682 $84,148 $84,148 $1,084,148 $161,147 $161,147 $1,161,147
Age 75 $260,394 $0 $0 $0 $62,378 $62,378 $1,062,378 $221,201 $221,201 $1,221,201
- ------------------------------------------------------------------------------------------------------------------------------------
(1)
(1) Assumes a $7,500 premium is paid at the beginning of each policy year.
Values will be different if premiums are paid with a different frequency or in
different amounts.
(2) Assumes that no policy loan has been made. Excessive loans or withdrawals
may cause this policy to lapse because of insufficient accumulation value or net
cash 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-4
VARIABLE UNIVERSAL LIFE POLICY
Male, Non-Tobacco User, Age 55
Female, Non-Tobacco User, Age
55
Face Amount: $1,000,000
Death Benefit: Option 3
BASED ON CURRENT MONTHLY DEDUCTIONS (WITHOUT RIDERS) AND ADMINISTRATIVE CHARGE,
AND PORTFOLIO EXPENSES AND MORTALITY & EXPENSE RISK CHARGE
- ------------------------------------------------------------------------------------------------------------------------------------
Premiums Hypothetical 0% Hypothetical 6% Hypothetical 12%
Paid Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest
Policy At 5% Per Net Cash Accumulation Death Net Cash Accumulation Death Net Cash Accumulation Death
Year Year Value Value Benefit Value Value Benefit Value Value Benefit
---- ---- ----- ----- ------- ----- ----- ------- ----- ----- -------
1 $7,875 $0 $5,895 $1,007,500 $0 $6,283 $1,007,500 $0 $6,671 $1,007,500
2 $16,144 $0 $11,864 $1,015,000 $582 $13,022 $1,150,000 $1,787 $14,227 $1,015,000
3 $24,826 $6,319 $17,759 $1,022,500 $8,641 $20,081 $1,022,500 $11,156 $22,596 $1,022,500
4 $33,942 $13,135 $23,575 $1,030,000 $17,032 $27,472 $1,030,000 $21,422 $31,862 $1,030,000
5 $43,514 $19,729 $29,309 $1,037,500 $25,625 $35,205 $1,037,500 $32,536 $42,116 $1,037,500
6 $53,565 $26,375 $34,955 $1,045,000 $34,711 $43,291 $1,045,000 $44,880 $53,460 $1,045,000
7 $64,118 $32,778 $40,358 $1,052,500 $44,002 $51,582 $1,052,500 $58,258 $65,838 $1,052,500
8 $75,199 $38,940 $45,660 $1,060,000 $53,514 $60,234 $1,060,000 $72,799 $79,519 $1,060,000
9 $86,834 $45,129 $50,849 $1,067,500 $63,535 $69,255 $1,067,500 $88,912 $94,632 $1,067,500
10 $99,051 $51,192 $55,912 $1,075,000 $73,926 $78,646 $1,075,000 $106,599 $111,319 $1,075,000
11 $111,878 $56,984 $60,844 $1,082,500 $84,560 $88,420 $1,082,500 $125,887 $129,747 $1,082,500
12 $125,347 $62,763 $65,623 $1,090,000 $95,713 $98,573 $1,090,000 $147,222 $150,082 $1,090,000
13 $139,490 $68,369 $70,229 $1,097,500 $107,243 $109,103 $1,097,500 $170,657 $172,517 $1,097,500
14 $154,339 $73,648 $74,648 $1,105,000 $119,013 $120,013 $1,105,000 $196,267 $197,267 $1,105,000
15 $169,931 $78,808 $78,808 $1,112,500 $131,252 $131,252 $1,112,500 $224,523 $224,523 $1,112,500
16 $186,303 $82,672 $82,672 $1,120,000 $142,799 $142,799 $1,120,000 $254,532 $254,532 $1,120,000
17 $203,493 $86,217 $86,217 $1,127,500 $154,650 $154,650 $1,127,500 $287,588 $287,588 $1,127,500
18 $221,543 $89,361 $89,361 $1,135,000 $166,738 $166,738 $1,135,000 $323,966 $323,966 $1,135,000
19 $240,495 $92,093 $92,093 $1,142,500 $179,071 $179,071 $1,142,500 $364,047 $364,047 $1,142,500
20 $260,394 $94,341 $94,341 $1,150,000 $191,596 $191,596 $1,150,000 $408,209 $408,209 $1,150,000
Age 60 $43,514 $19,729 $29,309 $1,037,500 $25,625 $35,205 $1,037,500 $32,536 $42,116 $1,037,500
Age 65 $99,051 $51,192 $55,912 $1,075,000 $73,926 $78,646 $1,075,000 $106,599 $111,319 $1,075,000
Age 70 $169,931 $78,808 $78,808 $1,112,500 $131,252 $131,252 $1,112,500 $224,523 $224,523 $1,112,500
Age 75 $260,394 $94,341 $94,341 $1,150,000 $191,596 $191,596 $1,150,000 $408,209 $408,209 $1,150,000
- ------------------------------------------------------------------------------------------------------------------------------------
(1)
(1) Assumes a $7,500 premium is paid at the beginning of each policy year.
Values will be different if premiums are paid with a different frequency or in
different amounts.
(2) Assumes that no policy loan has been made. Excessive loans or withdrawals
may cause this policy to lapse because of insufficient accumulation value or net
cash 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-4
VARIABLE UNIVERSAL LIFE POLICY
Male, Non-Tobacco User, Age 55
Female, Non-Tobacco User, Age
55
Face Amount: $1,000,000
Death Benefit: Option 3
BASED ON GUARANTEED MONTHLY DEDUCTIONS (WITHOUT RIDERS) AND ADMINISTRATIVE CHARGE,
AND PORTFOLIO EXPENSES AND MORTALITY & EXPENSE RISK CHARGE
- ------------------------------------------------------------------------------------------------------------------------------------
Premiums Hypothetical 0% Hypothetical 6% Hypothetical 12%
Paid Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest
Policy At 5% Per Net Cash Accumulation Death Net Cash Accumulation Net Cash Net Cash Accumulation Death
Year Year Value Value Benefit Value Value Benefit Value Value Benefit
---- ---- ----- ----- ------- ----- ----- ------- ----- ----- -------
1 $7,875 $0 $5,450 $1,007,500 $0 $5,811 $1,007,500 $0 $6,173 $1,007,500
2 $16,144 $0 $10,932 $1,015,000 $0 $12,006 $1,015,000 $685 $13,125 $1,015,000
3 $24,826 $4,905 $16,345 $1,022,500 $7,055 $18,495 $1,022,500 $9,384 $20,824 $1,022,500
4 $33,942 $11,245 $21,685 $1,030,000 $14,848 $25,288 $1,030,000 $18,908 $29,348 $1,030,000
5 $43,514 $17,368 $26,948 $1,037,500 $22,815 $32,395 $1,037,500 $29,201 $38,781 $1,037,500
6 $53,565 $22,744 $31,324 $1,045,000 $30,418 $38,998 $1,045,000 $39,789 $48,369 $1,045,000
7 $64,118 $27,621 $35,201 $1,052,500 $37,878 $45,458 $1,052,500 $50,943 $58,523 $1,052,500
8 $75,199 $31,939 $38,659 $1,060,000 $45,133 $51,853 $1,060,000 $62,677 $69,397 $1,060,000
9 $86,834 $35,884 $41,604 $1,067,500 $52,361 $58,081 $1,067,500 $75,258 $80,978 $1,067,500
10 $99,051 $39,201 $43,921 $1,075,000 $59,295 $64,015 $1,075,000 $88,507 $93,227 $1,075,000
11 $111,878 $41,624 $45,484 $1,082,500 $65,651 $69,511 $1,082,500 $102,240 $106,100 $1,082,500
12 $125,347 $43,291 $46,151 $1,090,000 $71,542 $74,402 $1,090,000 $116,673 $119,533 $1,090,000
13 $139,490 $43,911 $45,771 $1,097,500 $76,645 $78,505 $1,097,500 $131,596 $133,456 $1,097,500
14 $154,339 $43,179 $44,179 $1,105,000 $80,615 $81,615 $1,105,000 $146,787 $147,787 $1,105,000
15 $169,931 $41,169 $41,169 $1,112,500 $83,476 $83,476 $1,112,500 $162,405 $162,405 $1,112,500
16 $186,303 $36,455 $36,455 $1,120,000 $83,741 $83,741 $1,120,000 $177,116 $177,116 $1,120,000
17 $203,493 $29,564 $29,564 $1,127,500 $81,860 $81,860 $1,127,500 $191,550 $191,550 $1,127,500
18 $221,543 $20,165 $20,165 $1,135,000 $77,395 $77,395 $1,135,000 $205,453 $205,453 $1,135,000
19 $240,495 $7,498 $7,498 $1,142,500 $69,465 $69,465 $1,142,500 $218,193 $218,193 $1,142,500
20 $260,394 $0 $0 $0 $57,100 $57,100 $1,150,000 $229,077 $229,077 $1,150,000
Age 60 $43,514 $17,368 $26,948 $1,037,500 $22,815 $32,395 $1,037,500 $29,201 $38,781 $1,037,500
Age 65 $99,051 $39,201 $43,921 $1,075,000 $59,295 $64,015 $1,075,000 $88,507 $93,227 $1,075,000
Age 70 $169,931 $41,169 $41,169 $1,112,500 $83,476 $83,476 $1,112,500 $162,405 $162,405 $1,112,500
Age 75 $260,394 $0 $0 $0 $57,100 $57,100 $1,150,000 $229,077 $229,077 $1,150,000
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(1) Assumes a $7,500 premium is paid at the beginning of each policy year.
Values will be different if premiums are paid with a different frequency or in
different amounts.
(2) Assumes that no policy loan has been made. Excessive loans or withdrawals
may cause this policy to lapse because of insufficient accumulation value or net
cash 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.
Appendix D - Surrender Penalty
The surrender penalty factors for each policy are based on the unique
combination of the age, sex, smoker or non-smoker status, and risk class for
each joint insured. The surrender penalty factors generally decrease each policy
year on the policy anniversary. A surrender penalty applies to full surrenders,
partial surrenders in excess of the surrender penalty free withdrawal amount,
and face amount decreases that occur during the first 15 policy years.
The following example shows how the surrender penalty is calculated for a full
surrender of a policy. The surrender penalty factors listed below are those that
apply on a policy which covers a male and a female as joint insureds, each age
55 on the Policy Date, and each qualifying for our preferred, non-smoker
underwriting class. This is only an example; see your own policy data page for
the surrender penalty factors that apply to your policy.
Surrender Penalty Factor for Each $1,000 of
Face Amount on the Base Policy
Policy Year
Year 1 $14.30
Year 2 $13.30
Year 3 $12.44
Year 4 $11.44
Year 5 $10.44
Year 6 $9.58
Year 7 $8.58
Year 8 $7.58
Year 9 $6.72
Year 10 $5.72
Year 11 $4.72
Year 12 $3.86
Year 13 $2.86
Year 14 $1.86
Year 15 $1.00
To determine the amount of the surrender penalty for a full surrender of the
policy, you follow these steps:
(a) Determine the face amount of the base policy;
(b) Divide (a) by $1,000;
(c) Determine the policy year during which the surrender occurs;
(d) Determine the surrender penalty factor for each $1,000 of face amount from
the table of surrender penalty factors;
(e) Multiply (b) times (d).
Let us assume that the base policy's face amount is $1,000,000 and that
the policy is surrendered during the 10th policy year.
Following the steps, above, we determine the surrender penalty as
follows:
(a) The face amount of the base policy is $1,000,000;
(b) Divide (a) by $1,000; the result is 1,000 ($1,000,000 divided by $1,000);
(c) The policy year is Year 10;
(d) The surrender penalty factor for Year 10 is $5.72 for each $1,000 of face
amount;
(e) The result of (b) times (d) is $5,720 (1,000 times $5.72).
The surrender penalty is deducted from the accumulation value, less any
outstanding loan, to provide the net cash value available on a full surrender.
The method of calculating a surrender penalty for a partial surrender is shown
in the Partial Surrenders section of the prospectus. The method of calculating a
surrender penalty for a face amount decrease is shown in the Option to Change
the Face Amount section of the prospectus.