As filed with the Securities and Exchange Commission on January 7, 2002
Registration No. 333-71956 and 811-10557
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
Pre-Effective Amendment No. 1
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
INITIAL REGISTRATION STATEMENT
TRANSAMERICA OCCIDENTAL LIFE SEPARATE ACCOUNT VUL-6 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
Approximate date of proposed public offering:
As soon as practicable after the effective date of the
Registration Statement.
Title of securities being registered:
Flexible Premium Variable Life Insurance Policy
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such dates as the Commission, acting pursuant to said Section 8(a),
shall determine.
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 1/
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-6. 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 on Form S-6 File No. 333-71956 (Filed October
19, 2001).
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-6, 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 7th day of
January, 2002.
Transamerica Occidental Life Separate Account VUL-6
(Registrant)
(SEAL)
Attest:/s/ Gina Grusman By: /s/ David M. Goldstein
(Title) SEC Filing Coordinator (Name) David M. Goldstein
(Title) Senior 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 7th day of January, 2002.
Transamerica Occidental Life Insurance Company
(SEAL)
Attest:/s/ Gina Grusman By: /s/ David M. Goldstein
(Title) SEC Filing Coordinator (Name) David M. Goldstein
(Title) Senior 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 7, 2002
President and Director
Patrick S. Baird* ___________________________ January 7, 2002
Director
Brenda K. Clancy* ___________________________ January 7, 2002
Director and Senior Vice President
Douglas C. Kolsrud* __________________________ January 7, 2002
Director and Senior Vice President
Karen O. MacDonald _________________________ January 7, 2002
Chief Operating Officer and
Acting Chief Financial Officer
Craig D. Vermie* _________________________ January 7, 2002
Director, Vice President and Counsel
/s/ David M. Goldstein On January 7, 2002 as Attorney-in-Fact pursuant to
*By: David M. Goldstein powers of attorney filed herewith.
PROSPECTUS FOR
TRANSACCUMULATOR VUL cv
A Flexible Premium Variable Universal Life Insurance Policy
Issued By
Transamerica Occidental Life Insurance Company
Offering 24 Sub-Accounts Under Separate Account VUL-6
In Addition to a Fixed Account
Please note that the policies and the portfolios are not guaranteed to achieve
their goals and are subject to risks, including possible loss of amount
invested. Please read this prospectus carefully and keep it for future
reference. It should be read with the current prospectus for the portfolios.
Neither the SEC nor the state securities commissions have approved this
investment offering or determined that this prospectus is accurate or complete.
Any representation to the contrary is a criminal offense.
The Securities and Exchange Commission maintains a web site (http:\\www.sec.gov)
that contains material incorporated by reference and other information regarding
registrants that file electronically with the Commission.
Portfolios Associated with Sub-Accounts
AEGON/Transamerica Van Kampen
Emerging Growth
Alger American Income & Growth
Alliance VP Growth and Income - Class B
Alliance VP Premier Growth - Class B
Dreyfus Investment Portfolios - MidCap Stock
Portfolio - Initial Shares
The Dreyfus Socially Responsible Growth Fund,
Inc. - Initial Shares
Dreyfus Variable Investment Fund - Appreciation
Portfolio - Initial Shares
Dreyfus Variable Investment Fund - Small Cap Portfolio - Initial Shares
Franklin Small Cap Fund - Class 2
Franklin Technology Securities Fund - Class 2
Janus Aspen Series Balanced - Service Shares
Janus Aspen Series Worldwide Growth - Service
Shares
MFS(R) Emerging Growth Series
MFS(R) Investors Trust Series
MFS(R) Research Series
Morgan Stanley UIF Emerging Markets Equity
Morgan Stanley UIF Fixed Income
Morgan Stanley UIF High Yield
Morgan Stanley UIF International Magnum
OCC Accumulation Trust Managed
OCC Accumulation Trust Small Cap
PIMCO VIT StocksPLUS Growth & Income -
Admin Class
Transamerica VIF Growth
Transamerica VIF Money Market
3
Transamerica Occidental Life Insurance Company
4333 Edgewood Rd., N.E.
Cedar Rapids, IA 52499
http://www.transamerica.com
January 10, 2002
TABLE OF CONTENTS
DEFINITIONS............................................................................................... 4
SUMMARY 8
TABLES OF FEES AND EXPENSES............................................................................... 11
TABLE OF SEPARATE ACCOUNT INVESTMENT OPTIONS AND INVESTMENT ADVISERS...................................... 19
DESCRIPTION OF TRANSAMERICA, THE SEPARATE
ACCOUNT AND THE PORTFOLIOS............................................................................... 21
Transamerica Occidental Life Insurance Company................................................... 21
Insurance Marketplace Standards Association...................................................... 21
The Separate Account............................................................................. 21
The Portfolios................................................................................... 21
Portfolios Not Publicly Available................................................................ 24
CHARGES AND DEDUCTIONS.................................................................................... 24
Administrative Charge............................................................................ 24
Surrender Penalty................................................................................ 25
Monthly Deductions Allocation Election Change Charge............................................. 27
Allocation Change Charge......................................................................... 27
Transfer Fee..................................................................................... 27
Additional Illustrations......................................................................... 27
Accelerated Death Benefit Rider.................................................................. 27
Monthly Deduction................................................................................ 27
Example of Monthly Deduction Calculation......................................................... 32
Reinstatement Interest Charges................................................................... 34
Portfolio Expenses............................................................................... 34
Possible Tax Charge.............................................................................. 34
THE POLICY................................................................................................ 34
Owner............................................................................................ 34
Beneficiary...................................................................................... 35
Application for a Policy......................................................................... 35
Life Insurance Qualification..................................................................... 36
Conversions of Term Life Insurance Policies...................................................... 38
Minimum Initial Face Amount...................................................................... 39
Supplemental Adjustable Life Insurance Rider..................................................... 39
Effective Date of Coverage....................................................................... 39
Policy Date...................................................................................... 40
Backdating a Policy.............................................................................. 40
Reallocation Date................................................................................ 40
Free Look Period................................................................................. 40
Transfers........................................................................................ 41
Other Restrictions on Transfers.................................................................. 42
Dollar Cost Averaging or DCA..................................................................... 42
Automatic Account Rebalancing or AAR............................................................. 43
Telephone Access Privilege....................................................................... 44
DEATH BENEFIT............................................................................................. 44
Proof of Death................................................................................... 44
Death Benefit Options............................................................................ 44
Transfers After Insured's Death.................................................................. 46
Settlement Provisions............................................................................ 46
Option to Change the Face Amount................................................................. 46
PREMIUMS 48
No-Lapse Guarantee............................................................................... 48
Cumulative Premium Test.......................................................................... 48
Premium Limitations.............................................................................. 49
Continuation of Insurance........................................................................ 50
ALLOCATION OF PREMIUMS.................................................................................... 50
ALLOCATION OF NET PREMIUMS................................................................................ 51
Initial Premium.................................................................................. 52
Subsequent Premiums.............................................................................. 52
Crediting of Net Premiums Before Reallocation Date............................................... 52
UNITS AND UNIT VALUES..................................................................................... 52
Valuation of Units............................................................................... 52
Unit Values...................................................................................... 53
ACCUMULATION VALUE........................................................................................ 53
Determination of Accumulation Value.............................................................. 53
Sub-Accounts..................................................................................... 53
Fixed Account.................................................................................... 53
Loan Account..................................................................................... 53
Partial Surrenders............................................................................... 53
Surrender Penalty Free Withdrawals............................................................... 55
NONFORFEITURE OPTION - FULL SURRENDER..................................................................... 55
POLICY LOANS.............................................................................................. 56
Loan Repayment................................................................................... 57
Loan Interest.................................................................................... 57
Effect of Policy Loans........................................................................... 58
GRACE PERIOD.............................................................................................. 58
REINSTATEMENT............................................................................................. 59
OTHER BENEFITS............................................................................................ 60
Supplemental Adjustable Life Insurance Rider..................................................... 60
Extended No-Lapse Guarantee...................................................................... 63
Accelerated Death Benefit Option Endorsement..................................................... 64
Guaranteed Insurability Rider.................................................................... 66
Accident Indemnity Rider......................................................................... 67
Waiver Provision Rider........................................................................... 67
Insurance on Children Rider...................................................................... 67
Extra Surrender Penalty Free Withdrawal Endorsement.............................................. 68
Option for Additional Insurance Endorsement...................................................... 68
OTHER POLICY PROVISIONS................................................................................... 69
Guaranteed Exchange Option....................................................................... 69
Incontestability of the Policy................................................................... 70
Suicide.......................................................................................... 71
Delay of Payments................................................................................ 71
Misstatement of Age or Sex in the Application.................................................... 72
FEDERAL TAX CONSIDERATIONS................................................................................ 72
Transamerica Occidental Life Insurance Company and
The Separate Account.......................................................................... 72
Taxation of the Policies......................................................................... 72
Withholding...................................................................................... 73
Policy Loans..................................................................................... 73
Interest Disallowance............................................................................ 73
Modified Endowment Contracts..................................................................... 73
Distributions Under Modified Endowment Contracts................................................. 74
Special Rules for Pension Plans.................................................................. 74
VOTING RIGHTS............................................................................................. 74
REPORTS 75
DIRECTORS AND PRINCIPAL OFFICERS OF
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY................................................... 76
PERFORMANCE INFORMATION................................................................................... 77
DISTRIBUTION.............................................................................................. 78
LEGAL PROCEEDINGS......................................................................................... 78
ADDITION, DELETION OR SUBSTITUTION OF PORTFOLIOS.......................................................... 78
INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS............................................................. 79
FURTHER INFORMATION....................................................................................... 79
APPENDIX A - THE FIXED ACCOUNT............................................................................A-1
APPENDIX B - SETTLEMENT OPTIONS...........................................................................B-1
APPENDIX C - ILLUSTRATIONS OF DEATH BENEFIT,
ACCUMULATION VALUES AND ACCUMULATED PAYMENTS.....................................................C-1
APPENDIX D - DEATH BENEFIT FACTORS........................................................................D-1
APPENDIX E - SURRENDER PENALTY............................................................................E-1
DEFINITIONS
Accumulation Value of the policy is the sum of the accumulation value of the
base policy and the accumulation value of each layer.
Administrative Office is our office at 1100 Walnut Street, 23rd Floor, Kansas
City, Missouri 64106-2152.
o ________ Our mailing address for all written requests and other correspondence
is:
Transamerica Occidental Life Insurance Company
Attention: VUL Administration Unit, K-26
Box 417002
Kansas City, Missouri 64141-7002
o Our address for express delivery is:
Transamerica Occidental Life Insurance Company
Attention: VUL Administration Unit, K-26
1100 Walnut Street, Suite 2300
Kansas City, Missouri 64016-2152
o We have a separate address for premium and loan payments. That address is:
Transamerica Occidental Life Insurance Company
P.O. Box 847546
Dallas, Texas 75284-7546
o ________ For express delivery of premium and loan payments, please use:
Transamerica Occidental Life Insurance Company
c/o Bank of America Lock Box Services
Lock Box 847546
1401 Elm Street, 5th Floor
Dallas, Texas 75202
o ________ Our toll-free customer service telephone number is:
(866) TIIG-VUL
or
(866) 844-4885
Age is the insured's age on his or her nearest birthday.
Age at Issue is the insured's age on the policy date for the base policy, on the
layer date for a layer, on the rider date for the supplemental coverage rider,
and on the rider layer date for a rider layer.
Associated Supplemental Coverage Segment is:
a) _______ for the base policy, a supplemental coverage rider having a rider
date the same as the policy date; and b) for a layer, a supplemental coverage
rider having a rider date the same as a layer date, or a supplemental
coverage rider layer having a rider layer date the same as a layer date.
Base Policy is the policy excluding any layers, riders and rider layers.
Base Policy Total Amount is the sum of:
a) the face amount of the base policy; plus
b) the face amount of any associated supplemental coverage segment.
These face amounts are shown in the policy data pages.
Basic Coverage is insurance provided on the insured under the base policy or a
layer, excluding any riders.
Beneficiary is the person you designate to receive the policy death benefit.
Cash Value of the base policy or a layer is its accumulation value, less any
surrender penalty that would be assessed on:
a) the base policy and any associated supplemental coverage segment; or
b) a layer and any associated supplemental coverage segment.
The policy's cash value is the policy's accumulation value less the surrender
penalties that would be assessed on a full surrender of the policy. The policy's
cash value reflects the effect of surrender penalties on each coverage segment
from the policy's accumulation value.
Coverage Segment is each separate portion of coverage on the policy. Each of the
following is a coverage segment: (a) the base policy; (b) each layer; (c)
supplemental coverage rider; and (d) each rider layer under a supplemental
coverage rider.
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 insured dies.
Policy debt and any amounts due during the grace period to pay for insurance
coverage will be deducted from the death benefit before payment is made.
Death Benefit Discount Factor is 0.99754. This factor is used in the calculation
of the net amount at risk for purposes of determining the monthly deductions.
Death Benefit Factors are used to determine the death benefit under the life
insurance qualification test, as described in the DEATH BENEFIT - Death Benefit
Options section. The death benefit factors are shown in APPENDIX D - DEATH
BENEFIT FACTORS.
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 delivery requirements are satisfied.
Designated Individual is the person upon whose life expectancy a settlement
option may be based and upon whose life continued payments under a settlement
option may depend.
Extended No-Lapse Period is the total number of months during which timely
payment of the monthly extended no-lapse premium, adjusted for partial
withdrawals, policy debt and premium refunds, may prevent the policy from going
into default. The period begins on the policy date and ends immediately before
the anniversary nearest the insured's 100th birthday.
Face Amount is used to determine the death benefit. The face amount of the
policy is the sum of the face amounts for each coverage segment. These amounts
are shown in the data pages for your policy.
Fixed Account is one of the investment options under the policy. The fixed
account is a part of our 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 fixed interest rates declared by us from time to time. The
total accumulation value in the fixed account is equal to the accumulation value
in the fixed account for the base policy and the accumulation value in the fixed
account for all layers.
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
Account VUL-6 and our various other separates accounts. Gross Premium is 100% of
any premium.
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.
Lapse is the termination of the policy at the end of the grace period.
Layer is coverage provided by an increase in the face amount after the policy
has been issued.
Layer Date is the effective date of a layer. It is used to determine layer
anniversaries and layer years.
Layer Total Amount for each layer is the sum of:
a) the face amount of basic coverage under a layer; plus
b) the face amount of any associated supplemental coverage.
We will issue new policy data pages showing this amount.
Layer Year is a twelve-month period beginning on the layer date, and each
twelve-month period thereafter.
Loan Account is part of the fixed account. The loan account includes outstanding
loans. The loan account of the policy is equal to the sum of the loan account
for the base policy and the loan account for each layer. The loan account is not
an investment option.
Maximum Loan Amount is the largest amount you may borrow under the policy. There
is a maximum loan amount for the base policy and for each layer.
Monthly Deduction is the set of charges we deduct from the accumulation value of
the policy on the policy date and on each succeeding monthly policy date.
Monthly deductions cease on the policy anniversary nearest age 100.
Monthly Extended No-Lapse Premium is the minimum amount of premium that you must
pay for the policy each month during the extended no-lapse period to keep the
Extended No-Lapse Guarantee Rider in effect. The initial amount of the monthly
extended no-lapse premium is shown in the policy data pages. The monthly
extended no-lapse premium will be adjusted for partial withdrawals, policy debt
and premium refunds. You may pay all or any part of this premium in advance,
subject to the Premium Limitations provision.
Monthly No-Lapse Premium is the minimum amount of premium that you must pay for
the policy each month during the 10-year no-lapse period to prevent the policy
from going into default if the monthly deductions exceed the net cash value on
any monthly policy date during the no-lapse period. The initial amount of the
no-lapse premium is shown in the policy data pages. This amount will be adjusted
for partial withdrawals, policy debt and premium refunds. You may pay all or any
part of this premium in advance, subject to the Premium Limitations provision.
Monthly Policy Date is the date monthly deductions are taken. The first monthly
policy date is the policy date. The monthly policy date is based on the policy
date.
Net Amount at Risk is the difference between:
a) the death benefit multiplied by the monthly death benefit discount factor;
and
b) the accumulation value.
For purposes of determining the monthly deduction, the net amount at risk is
determined separately for the base policy total amount and the layer total
amount, based on the portion of the death benefit attributable to each.
Net Asset Value is the per share value of a portfolio as calculated by the
portfolio and reported to us.
Net Cash Value of the policy is the cash value of the policy, less any policy
debt. The net cash value of the base policy or a layer is its cash value less
any policy debt allocated to the base policy or layer.
Net Premium is any gross premium minus an administrative charge.
No-Lapse Period is the total number of months during which timely payment of the
monthly no-lapse premium will prevent the policy from going into default. The
monthly no-lapse premium is adjusted to reflect partial withdrawals, policy debt
and premium refunds. The period is the first ten policy years (first 120 policy
months). The period is shown in the policy data pages and begins on the policy
date.
Owner is the person or persons entitled to the rights under the policy while the
insured is alive.
Partial Withdrawal is a withdrawal from the policy, including any surrender
penalties assessed. A partial withdrawal is equal to the sum of a partial
surrender in excess of the surrender penalty free withdrawal amount, plus the
amount of surrender penalties associated with such partial surrender, plus the
portion, if any, of the partial surrender which is a surrender penalty free
withdrawal amount.
Payee is the person who has the right to receive payments under a settlement
option. If you surrender the policy, you are the payee under any settlement
option you elect. After the insured's death, the beneficiary is the payee under
any settlement option you elect.
Policy Anniversary is an annual anniversary of the policy date.
Policy Date is the effective date of the policy. It is used to determine policy
anniversaries and policy years.
Policy Debt is the sum of all outstanding policy loans plus accrued loan
interest.
Policy Loan is indebtedness to us for a loan secured by the policy.
Portfolio is a mutual fund investment or other investment pool held in a
sub-account.
Pro-rata is a proportionate allocation among the investment options. For the
base policy, a pro-rata allocation is equal to the portion of the accumulation
value in the base policy in an investment option, divided by the total
accumulation value of the base policy, excluding the portion of the accumulation
value equal to the outstanding loan. For a layer, a pro-rata allocation is equal
to the portion of the accumulation value in the layer in an investment option
divided by the total accumulation value for the layer, excluding the portion of
the accumulation value equal to the outstanding loan. Except as otherwise
provided in the policy, 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 premium
allocation election then in effect. The Reallocation Date is the 25th calendar
day following the date we approve the policy for issue. The date we approve the
policy for issue is the first of the 25 calendar days.
Reinstate means to restore coverage after the policy has lapsed, subject to
certain requirements.
Rider is an attachment to the policy that provides an additional benefit.
Rider Date is the effective date of the supplemental coverage rider added to the
policy. The rider date is the same as the policy date if the rider is added when
the base policy is issued. The rider date is the same as a layer date if the
rider is added when a layer is added to the policy. The rider date is used to
determine rider anniversaries and rider years.
Rider Layer Date is the effective date of a rider layer under the supplemental
coverage rider. The rider layer date is the same date as the layer date of a
layer added to the policy at the same time as the rider layer. The rider layer
date is the date used to determine rider anniversaries and rider years
Rider Layer is coverage provided by an increase in face amount of the rider.
Separate Account is Transamerica Occidental Life Separate Account VUL-6 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 which holds shares of a specific portfolio. The portion of the
accumulation value in any sub-account may increase or decrease depending on the
investment performance of the underlying portfolio.
Supplemental Coverage is the total amount of insurance provided under a
supplemental adjustable life insurance rider (supplemental coverage rider) and
rider layer.
Supplemental Coverage Rider is the Supplemental Adjustable Life Insurance Rider.
Target Amounts are amounts established by us that we use:
1. To allocate the following among coverage segments:
o premiums;
o partial surrenders and surrender penalty free withdrawals; and
2. To determine the applicable administrative charges to deduct from gross
premiums.
Target amounts vary. Each coverage segment has its own target amount based on
the face amount of the coverage segment; the insured's sex; the age at issue and
underwriting classification. We may also use additional criteria to determine
target amounts. The target amounts are shown in the policy data pages. The
target amount for a coverage segment will change due to an increase or decrease
in the face amount for that coverage segment or changes in underwriting
classification for that coverage segment. Changes re reflected prospectively
from the date of change.
Telephone Access Privilege is an option to transfer amounts between or among
investment options, change your premium allocation, change your monthly
deductions 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 stock market (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
TransAccumulator VUL cv is a 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.
The policy provides life insurance protection on the insured. We will pay a
death benefit to the beneficiary if the insured dies while the policy is in
force. While the policy is in force before the insured's death, you may request
partial surrenders, policy loans and a full surrender, subject to applicable
provisions and limitations.
When you apply for your policy, you choose, among other things:
o The beneficiary for the policy;
o The death benefit option you want on your policy;
o The life insurance qualification test you want to apply to your policy;
and
o ________ Any optional benefits and riders, including the Supplemental
Adjustable Life Insurance Rider, you want to add to your policy.
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 if required by state
law. The amount you will receive if you exercise this right to cancel your
policy varies according to state law. See Free Look Period on page 42 for more
information.
Beneficiary
You select the beneficiary on the application and may generally change the
beneficiary later. See the Beneficiary provisions on page 35 for more
information.
Death Benefit Option
There are three death benefit options available. You must choose one option but,
subject to our approval, you may change death benefit options until the policy
anniversary nearest the insured's 100th birthday. The death benefit options are
described in the DEATH BENEFIT section on page 44. The death benefit option
chosen will affect the amount of the death benefit, the monthly no-lapse
premiums and the monthly deductions for the policy. The death benefit option may
also affect the amount and frequency of premium payments you must make to keep
the policy in-force and the maximum premiums you may pay under the policy.
Life Insurance Qualification Test
At the time of application, you choose the life insurance qualification test for
your policy to comply with Code Section 7702. You may elect either the guideline
premium test or the cash value accumulation test. The election may not be
changed after your policy is issued. Your election may affect the maximum amount
of premium you may pay into the policy, the amount of the death benefit and the
monthly deductions for the policy. See Life Insurance Qualification on page 36
for more information.
Optional Riders - Supplemental Coverage
You may elect additional insurance coverage under the supplemental adjustable
life insurance rider, subject to our approval. This additional coverage is
available only at the time of issue for the base policy or later only if you add
a "layer" (discussed below). Monthly deductions, one of the charges under your
policy, are increased for the supplemental coverage.
Supplemental coverage may result in higher accumulation values over time than
would be achieved with an equal amount of basic coverage on the same insured
with the same premium payments. These potential benefits arise because:
o ________ Currently, the administrative charges on premiums up to target
amounts during the first ten years are lower for supplemental coverage than
for an equal amount of basic coverage for the same insured.
o ________ Currently, we do not assess a monthly expense charge per thousand on
the supplemental coverage.
As a result, the net premiums (premiums minus an administrative charge) credited
to your accumulation value during the first ten years will be larger under the
supplemental coverage segment of your policy than under an equivalent basic
coverage segment, within limits. Also, the monthly expense charge per thousand
for the supplemental coverage is less than the charge for an equivalent amount
of basic coverage. The "monthly expense charge per thousand" is part of the
monthly deduction taken from your policy's accumulation value.
However, the surrender penalty periods associated with the rider are longer than
those for the basic coverage. You also bear the risk that we will increase the
current administrative charges and monthly expense charges per thousand to their
guaranteed maximums. The guaranteed maximum administrative charges on premiums
each year to target amounts, as well as the guaranteed maximum monthly expense
per thousand charges, are higher for the supplemental coverage than they are for
basic coverage of the same amount for the same insured.
Optional Benefits - Layers
Subject to our approval, you may increase the face amount of insurance by adding
one or more layers of additional coverage, beginning in the second policy year.
Increases in face amount may include supplemental coverage in addition to the
basic coverage issued under the new layer. You may also request a reduction of
face amount. Generally, you will incur a surrender penalty if you reduce the
face amount of your policy while a surrender penalty period is in effect on your
policy.
Policy Provisions - Paying Premiums
After you pay the initial premium required to put the policy in force, you may
pay subsequent premiums in any amount and at any time before the policy
anniversary nearest the insured's 100th birthday, subject to the Premium
Limitations provision.
Policy Provisions - Policy Lapse
If the net cash value of your policy is less than the monthly deductions due on
any monthly policy date, your policy will go into default, except as otherwise
provided under the no-lapse guarantee provision. If you wish to bring your
policy out of default, you must pay the required amount before the end of the
grace period. If you do not pay the required amount by the end of the grace
period, your policy will lapse and you will not have any insurance coverage.
During the first ten policy years, if the premiums you pay, adjusted for premium
refunds, partial withdrawals and policy debt, meet the cumulative premium
requirements of the no-lapse guarantee, then your policy will not go into
default, even if the monthly deductions exceed the net cash value of your policy
on a monthly policy date. The monthly no-lapse premium varies by policy and is
shown in the policy data pages.
An extended no-lapse guarantee rider is available if you elect the option at the
time of application and you also elect the level death benefit option (Option
1). This rider guarantees that your policy will not go into default due to
monthly deductions exceeding net cash value on any monthly policy date before
the policy anniversary nearest the insured's 100th birthday provided the rider
provisions are satisfied. These provisions include satisfaction of a cumulative
premium requirement as of each monthly policy date. The monthly extended
no-lapse premium amount will vary by policy and will be shown in the policy data
pages if you elect the rider. This rider also results in an increase in the
monthly deductions taken from your policy's accumulation value. The rider will
terminate if you change the death benefit option from the level option (Option
1).
Paying premiums, adjusted for premium refunds, partial withdrawals and policy
loans, at least equal to the minimum no-lapse premiums for your policy can help
prevent your policy from going into default during the no-lapse guaranteed
period. Paying only the minimum no-lapse premium amount, adjusted for premium
refunds, partial withdrawals and policy debt, limits the potential for policy
accumulation value and could result in your policy going into default
immediately when the no-lapse guarantee period ends or when the no-lapse
guarantee period is otherwise terminated.
Even if you pay the premiums necessary to meet the cumulative premium
requirements under a no-lapse guarantee provision or rider, your policy will
still go into default if the policy debt exceeds the policy's accumulation
value.
You should periodically review your policy to make sure that it is performing as
expected and to determine whether you should adjust the amount or frequency of
premium payments or reduce the policy debt by repaying some or all of the policy
debt. We will send you premium notices based on the amounts you indicate on your
application that you plan to pay, within limits. Except as otherwise provided
under a no-lapse option, payment of premiums in specific amounts or on specific
schedules does not assure you that your policy will remain in force. Likewise,
failure to make scheduled premium payments does not automatically mean that your
policy will go into default.
Risks of Purchasing the Policy
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.
Tax Considerations
The death benefit is generally excludible from the gross income of the
beneficiary although the death benefit may be subject to federal and state
estate taxes. Under current law, you will generally not be taxed on partial or
full surrenders until the cumulative surrender amount exceeds your tax basis in
the policy. Amounts received on full or partial surrenders in excess of your tax
basis in the policy are treated as ordinary income. However, during the first 15
policy years, distributions from the policy that are required under Section 7702
of the Internal Revenue Code because of a reduction in policy benefits may be
taxable as ordinary income without regard to the amount of prior partial
surrenders, total premium paid or tax basis. Further, if your policy is a
modified endowment contract, a MEC, you will pay income taxes on partial and
full surrenders, loans or assignments of the policy to the extent of any gains
in the policy on an "income out first" basis and without regard to prior partial
surrenders or total premium paid. Also, a 10% penalty tax may apply. A policy
can become a MEC if premium paid into the policy within the first seven policy
years or at certain other times exceeds limits established by the Internal
Revenue Code. For more information, see FEDERAL TAX CONSIDERATIONS. As with any
tax matter, you should consult with your own qualified tax advisor to apply the
law to your particular circumstances.
Unit values may decline, and policy performance may be worse than illustrated. A
significant decline in unit values may cause the policy to lapse in a short
period of time unless additional premiums are paid or loan repayments, if
applicable, are made. If you choose the guideline premium test for your policy,
you may not be able to pay additional premiums and may need to make loan
repayments in order to keep the policy from going into default and ultimately
lapsing.
If the policy terminates while a loan is outstanding, you will realize taxable
income to the extent the loan balance (including accrued interest) exceeds your
basis in the policy. Due to the possible volatility in the investment
performance of the underlying portfolios, the policy could terminate (giving
rise to tax consequences) at an unexpected time.
TABLES OF FEES AND EXPENSES
The following table lists the fees and expenses which apply to most policies and
which you will pay when purchasing, owning and surrendering the policy. Refer to
the CHARGES AND DEDUCTIONS section on page 24 for additional information.
Transaction Fees
- -------------------------------- ------------------------------ ------------------------------ ------------------------
When Charge is Amount Policies From Which
Type of Fee Deducted Deducted Charge is Deducted*
- ----------- -------- -------- -------------------
- -------------------------------- ------------------------------ ------------------------------ ------------------------
- -------------------------------- ------------------------------ ------------------------------ ------------------------
Administrative Charge for Each premium payment to 7.6% of premiums. These are All policies.
Premiums Allocated to Basic target amount each year for guaranteed maximum rates we
Coverage Segments first 10 policy or layer may charge. We are currently
years. charging these rates on
premiums allocated to the
basic coverage segments.
3.6% of premiums. These are
Premium payments after 10 ______ guaranteed
maximum rates we policy years and excess
________ may charge. We are currently premiums
over target amount ____ charging these rates on
each year during first 10 ______ premiums
allocated to the policy or layer years.
_________ basic coverage segments.
Currently, 3.6% of premiums
Each premium payment to for each rider or rider
Administrative Charge for target for first 10 rider or layer year. The guaranteed
Premiums Allocated to rider layer years. maximum we may charge is
Supplemental Coverage Segments 8.6% of premiums.
3.6% of premiums.
Premium payments after 10 rider years and
excess premiums over target amount during first
10 rider or rider layer years.
- -------------------------------- ------------------------------ ------------------------------ ------------------------
- -------------------------------- ------------------------------ ------------------------------ ------------------------
Surrender Penalty for base Upon full surrender, partial Equal to the surrender All policies.
policy and layers surrenders in excess of penalty factor times each
surrender penalty free $1,000 of basic coverage on
withdrawal amounts and the base policy and on each
decreases in face amount layer. The factor generally
during policy and layer decreases each policy or
years 1-12. layer year on the policy or
layer anniversary until the
end of the 12th policy or
layer year.
Surrender
penalty factors
vary by policy
and layer, based
on the
insured's:
o age at issue,
o sex,
o smoker or
non-smoker status, and
o underwriting risk
classification; and
by how many years the policy
and each layer, if any, have
been in force.
The maximum
surrender
penalty factor
is $45.50 for
each $1,000 of
basic coverage.
This surrender
penalty factor
applies to a
policy or a
layer consisting
of basic
coverage only,
issued to a
male, age 59,
qualifying for
our preferred
non-smoker risk
class. The
maximum
surrender
penalty factor
applies during
the first policy
or layer year.
Equal to the surrender
penalty factor times each
Surrender Penalty for $1,000 of supplemental
supplemental coverage coverage on a supplemental
Upon full surrender, partial coverage rider or rider
surrenders in excess of layer.
surrender penalty free
withdrawal amounts and The factor generally
decreases in face amount decreases each rider or
during rider or rider layer rider layer year on the
years 1-16. rider or rider layer
anniversary until the end of
the 16th rider or rider
layer year.
Surrender
penalty factors
vary by rider
and rider layer,
based on the
insured's:
o age at issue,
o sex,
o smoker or
non-smoker status, and
o underwriting
classification; and
by how many years the rider
and each rider layer, if any
have been in force.
The maximum
surrender
penalty factor
for supplemental
coverage will
never be more
than the maximum
surrender
penalty factor
for basic
coverage shown
above.
- -------------------------------- ------------------------------ ------------------------------ ------------------------
*For this column, the policies for which charge is deducted will be all policies
on which the indicated transaction occurs.
Transaction Fees (continued)
- -------------------------------- ------------------------------ ------------------------------ ------------------------
When Charge is Amount Policies From Which
Type of Fee Deducted Deducted Charge is Deducted*
- ----------- -------- -------- -------------------
- -------------------------------- ------------------------------ ------------------------------ ------------------------
- -------------------------------- ------------------------------ ------------------------------ ------------------------
Allocation Change Charge On each change of allocation $25. Currently waived. All policies.
of new premiums.
- -------------------------------- ------------------------------ ------------------------------ ------------------------
- -------------------------------- ------------------------------ ------------------------------ ------------------------
Monthly Deductions Allocation On each change of $25. Currently waived. All policies.
Change Charge allocations of monthly
deductions.
- -------------------------------- ------------------------------ ------------------------------ ------------------------
- -------------------------------- ------------------------------ ------------------------------ ------------------------
Transfer Fee On each transfer after 18 in $25 from transfer amount. All policies.
a policy year.
- -------------------------------- ------------------------------ ------------------------------ ------------------------
- -------------------------------- ------------------------------ ------------------------------ ------------------------
Additional Illustrations At time of request for each $25. Currently waived. All policies.
illustration of values in
excess of one each policy
year.
- -------------------------------- ------------------------------ ------------------------------ ------------------------
Riders and Other Benefits
o Accelerated Death At time of payment. $250 for each payment made All policies on which
Benefit Rider under the option. benefit is paid.
- -------------------------------- ------------------------------ ------------------------------ ------------------------
The following table describes the charges and fees 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*
- ----------- -------- -------- -------------------
- -------------------------------- ---------------------------- ------------------------------ ------------------------
- -------------------------------- ---------------------------- ------------------------------ ------------------------
Monthly Deduction On each monthly policy Varies as described below. All policies.
date starting with the Sum of these five charges:
policy date until the
policy anniversary nearest o Monthly deduction
the insured's 100th rate times each $1,000
birthday. of net amount at risk
for the base policy and
for each layer,
respectively; plus
o Monthly deduction
for riders; plus
o Policy fee; plus
o Monthly Expense
Charge Per Thousand of
face amount on the base
policy and for each
layer, if any; plus
o Monthly mortality
and expense risk charge.
- -------------------------------- ---------------------------- ------------------------------ ------------------------
o Monthly Deduction The monthly deduction rate All policies.
Rate, times each $1,000 times each $1,000 of the net
of the net amount at risk amount at risk attributable
for basic coverage on the to basic coverage on the
base policy and Monthly monthly policy date; rates
Deduction Rate, times vary by policy and insured.
each $1,000 of the net
amount at risk for basic Different rates may apply to
coverage on each layer, the base policy and to each
respectively. layer, respectively. The
current monthly
deduction rate for
the base policy or
a layer will be
guaranteed for the
first policy or
layer year.
- -------------------------------- ---------------------------- ------------------------------ ------------------------
Charges Other than Portfolio Expenses (continued)
- -------------------------------- ---------------------------- ------------------------------ ------------------------
When Charge is Amount Policies From Which
Type of Fee Deducted Deducted Charge is Deducted*
- ----------- -------- -------- -------------------
- -------------------------------- ---------------------------- ------------------------------ ------------------------
Monthly Deduction
(continued)
o Monthly Deduction for
Riders
>> Supplemental Part of monthly deduction 1. A rate per $1,000 of All policies on which
Adjustable Life from the base policy or net amount at risk the rider is in force.
Insurance Rider layer accumulation value attributable to the
during policy years when rider or rider layer
rider or any rider layer associated with the
is in effect. base policy and each
layer, respectively.
The rate will
vary by
policy and
insured.
Different
rates may
apply to the
rider and to
each rider
layer,
respectively.
The current
monthly
deduction
rate for the
rider or each
rider layer
will be
guaranteed
for the first
rider or
rider layer
year.
2. Monthly Expense
Charge Per Thousand for
each $1,000 of face
amount of the
supplemental coverage
rider and for each
$1,000 of face amount
of each supplemental
coverage rider layer,
respectively.
The charge
will vary by
policy and
insured.
Different
Monthly
Expense
Charges Per
Thousand may
apply to the
rider and to
each rider
layer,
respectively.
- -------------------------------- ---------------------------- ------------------------------ ------------------------
Charges Other than Portfolio Expenses (continued)
- -------------------------------- ---------------------------- ------------------------------ ------------------------
When Charge is Amount Policies From Which
Type of Fee Deducted Deducted Charge is Deducted*
- ----------- -------- -------- -------------------
- -------------------------------- ---------------------------- ------------------------------ ------------------------
Monthly Deduction
(continued)
>> _______ Extended No-Lapse _______ Part of monthly deduction ____ A
monthly charge equal to ______ All policies on which Guarantee Rider
_________ from base policy _____________ $0.06 for each $1,000 of
_______ the rider is in force.
accumulation value during face amount of the policy.
policy years when rider is
in effect.
>> _______ Accident Indemnity ______ Part of monthly deduction ____ A
monthly charge equal to ______ All policies on which Rider from base
policy _____________ the rider monthly deduction ____ the rider is in
force.
accumulation value during rate times the number of
policy years when rider is thousands of dollars of
in effect. coverage amount under the
rider. The rate varies by
issue age (age on the layer
date for each layer,
respectively).
>> _______ Guaranteed ______________ Part of the monthly __________ A
monthly charge equal to ______ All policies on which Insurability Rider
______ deduction from base policy the rider monthly deduction ____ the
rider is in force.
accumulation value during rate times the number of
policy years when rider is thousands of dollars of
in effect. insurance which may be
elected under the
rider. The rate
varies based on
the issue age and,
in California, by
the sex of the
insured. If the
Waiver Provision
Rider is issued on
the base policy,
the Waiver
Provision must
also be issued on
the Guaranteed
Insurability
Rider. An
additional charge
is assessed for
this, and the
rates for the
additional charge
vary by sex and
issue
>> Insurance on Children Part of monthly deduction age. All policies on which
Rider from base policy the rider is in force.
accumulation value during A monthly charge equal to
policy years when rider is $0.45 for each $1,000 of
in effect. coverage.
>> Waiver Provision Rider Part of the monthly All policies on which
deduction from base policy the rider is in force.
accumulation value during A monthly charge equal to
policy years when rider is the rider monthly deduction
in effect. rate times the number of
thousands of
dollars of net
amount at risk on
each coverage
segment,
respectively. The
rate varies by the
insured's attained
age, sex, and
smoker or
non-smoker status
on the base
policy.
o Policy Fee Monthly fee is deducted $6.00 per month during the All
from base policy first policy year. $10.00
accumulation value. per month maximum thereafter.
o Monthly Expense Monthly deduction from the A rate for each $1,000 of All
Charge Per Thousand. accumulation value of the face amount of the base
Charge is a charge per base policy or each layer, policy and for each $1,000
$1,000 of face amount of respectively. of face amount of each
base policy and per layer, respectively.
$1,000 of face amount of
each layer. The rate will vary by policy
and insured.
Different rates
may apply to the
base policy and to
each layer,
respectively.
- -------------------------------- ---------------------------- ------------------------------ ------------------------
o Monthly Mortality and Monthly deduction from the All with accumulation
Expense Risk Charge accumulation value of the value in one or more
base policy and each layer sub-accounts on the
based on sub-account monthly policy date.
values and amount of
charge:
o First 10 policy Currently, one-twelfth of
years 0.65%; maximum guaranteed
monthly rate is one-twelfth
of 0.65%.
Currently, one-twelfth of
o ________ Policy
years 11-20 0.15%;
maximum guaranteed
monthly rate is
one-twelfth of
0.40%.
Currently, 0.0%; maximum
o Policy years 21 guaranteed monthly rate is
and later one-twelfth of 0.25%.
- -------------------------------- ---------------------------- ------------------------------ ------------------------
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
- --------- ---- -------- ---------- --------
AEGON/Transamerica Van Kampen Emerging Growth 0.80% 0.05% - 0.85%
Alger American Income & Growth 0.625% 0.075% - 0.70%
Alliance VP Growth & Income - Class B 0.63% 0.07% 0.25% 0.95%
Alliance VP Premier Growth - Class B 1.00% 0.05% 0.25% 1.30%
Dreyfus Investment Portfolios - MidCap Stock Portfolio - Initial 0.75% 0.25% - 1.00%
Shares(2) (3)
The Dreyfus Socially Responsible Growth Fund, Inc. - Initial 0.75% 0.03% - 0.78%
Shares(2)
Dreyfus VIF - Appreciation Portfolio - Initial Shares(2) 0.75% 0.03% - 0.78%
Dreyfus VIF - Small Cap Portfolio - Initial Shares(2) 0.75% 0.03% - 0.78%
Franklin Small Cap Fund - Class 2(4) (5) (6) 0.49% 0.28% 0.25% 1.02%
Franklin Technology Securities Fund - Class 2(4) (7) (8) 0.51% 0.48% 0.25% 1.24%
Janus Aspen Series Balanced - Service Shares(9) 0.65% 0.02% 0.25% 0.92%
Janus Aspen Series Worldwide Growth - Service Shares(9) 0.65% 0.05% 0.25% 0.95%
MFS(R)Emerging Growth Series(10) 0.75% 0.10% - 0.85%
MFS(R)Investors Trust Series(10) 0.75% 0.12% - 0.87%
MFS(R)Research Series(10) 0.75% 0.10% - 0.85%
Morgan Stanley UIF Emerging Markets Equity(11) 1.09% 0.71% - 1.80%
Morgan Stanley UIF Fixed Income(11) 0.21% 0.49% - 0.70%
Morgan Stanley UIF High Yield(11) 0.26% 0.54% - 0.80%
Morgan Stanley UIF International Magnum(11) 0.50% 0.68% - 1.18%
OCC Accumulation Trust Managed(11)(12) 0.78% 0.08% - 0.86%
OCC Accumulation Trust Small Cap(11) (12) 0.80% 0.10% - 0.90%
PIMCO VIT StocksPLUS Growth & Income - Admin Class(13) 0.40% 0.25% - 0.65%
Transamerica VIF Growth 0.74% 0.11% - 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.
Actual expenses in future years may be higher or lower than these figures. These
expenses are for the year ended December 31, 2000.
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 2000. 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 2001. Without
such waivers or reimbursements, the annual expenses for 2000 for certain
portfolios would have been, as a percentage of assets, as follows:
Total Portfolio
Management Other Rule 12b-1 Annual
Portfolio Fees Expenses Fees Expenses
--------- ---- -------- ---- --------
Dreyfus Investment Portfolios - MidCap Stock 0.75% 0.29% - 1.04%
Portfolio - Initial Shares
Franklin Small Cap Fund - Class 2 0.53% 0.28% 0.25% 1.06%
Franklin Technology Securities Fund - Class 2 0.55% 0.48% 0.25% 1.28%
Morgan Stanley UIF Emerging Markets Equity 1.25% 0.71% - 1.96%
Morgan Stanley UIF Fixed Income 0.40% 0.49% - 0.89%
Morgan Stanley UIF High Yield 0.50% 0.54% - 1.04%
Morgan Stanley UIF International Magnum 0.80% 0.68% - 1.48%
PIMCO VIT StocksPLUS Growth & Income - 0.40% 0.26% - 0.66%
Admin Class
Transamerica VIF Growth 0.75% 0.11% - 0.86%
Transamerica VIF Money Market 0.35% 0.81% - 1.16%
(2) ______ The figures in the above Portfolio Expenses are for the initial
share class for the fiscal year ended December 31, 2000. Actual expenses in
the future may be higher or lower than the figures given.
(3) ______ For the fiscal year ended December 31, 2000, Dreyfus further
reimbursed the portfolio for other expenses so that the total annual
portfolio operating expenses for the Initial Share Class was 0.98% instead
of 1.00%. This additional expense reimbursement was voluntary and the
expense information provided in the table has been restated to reflect the
amount the fees would have been without such voluntary reimbursement. The
Dreyfus Corporation has agreed, until December 31, 2001, to waive receipt
of its fees and/or assume the expenses of the portfolio so that the
expenses of the Initial Share Class (excluding taxes, brokerage
commissions, extraordinary expenses, interest expenses and commitment fees
on borrowings) do not exceed 1.00%.
(4) The Fund's Class 2 distribution plan or "Rule 12b-1 plan" is described in
the Fund's prospectus.
(5) Total annual Fund operating expenses differ from the ratio of expenses to
average net assets shown in the Financial Highlights table included in the
Fund's Annual Report to Shareholders for the fiscal year ended December 31,
2000 because they have been restated due to a new management agreement
effective May 1, 2000.
(6) ______ The manager has agreed in advance to make an estimated reduction of
0.04% in its fee to reflect reduced services resulting from the Fund's
investment in a Franklin Templeton money fund. This reduction is required
by the Fund's Board of Trustees and an order of the SEC. Without this
reduction, the total annual fund operating expenses are estimated to be
1.06%.
(7) Operating expenses are annualized.
(8) ______ The manager and administrator have agreed in advance to waive or
limit their respective fees and to assume as their own expense certain
expenses otherwise payable by the Fund so that total annual Fund operating
expenses do not exceed 1.30% of average net assets for the current fiscal
year. After December 31, 2001, the manager and administrator may end this
arrangement at any time. The manager also has agreed in advance to make an
estimated reduction of 0.04% of its fee to reflect reduced services
resulting from the Fund's investment in a Franklin Templeton money fund.
The manager is required by the Fund's Board of Trustees and an order of the
SEC to reduce its fee if the Fund invests in a Franklin Templeton money
fund. Without this reduction, the total annual fund operating expenses are
estimated to be 1.28%.
(9) ______ Expenses are based on estimated expenses for the fiscal year ended
December 31, 2000, restated to reflect a reduction in the management fee.
(10) _____ Each series has an expense offset arrangement which reduces the
series custodian fee based upon the amount of cash maintained by the series
with its custodian and dividend disbursing agent. Each series may enter
into other such arrangements and directed brokerage arrangements, which
would also have the effect of reducing the series' expenses. "Other
Expenses" do not take into account these expense reductions, and are
therefore, higher than the actual expenses of the series. Had these fee
reductions been taken into account, the fee shown in the "Portfolio
Expenses" table, which are a percentage of assets after fee waivers and
expense reimbursements, would be lower for certain series and would equal
to 0.85% for Emerging Growth Series, 0.86% for Investors Trust Series and
0.84% for Research Series.
(11) _____ 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.
(12) _____ 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.
(13) _____ 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, 2000 were 0.66%. 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. "Other
Expenses" reflect a 0.10% administrative fee.
TABLE OF SEPARATE ACCOUNT INVESTMENT OPTIONS AND
INVESTMENT ADVISERS
Portfolios Investment Advisers Trusts/Funds
AEGON/Transamerica Van Kampen Emerging AEGON/Transamerica Fund Advisers, AEGON/Transamerica Series Fund, Inc.
Growth Inc.
(Van Kampen Asset Management
Inc., sub-adviser)
Alger American Income & Growth Fred Alger Management, Inc. The Alger American Fund
Alliance VP Growth and Income - Class B Alliance Capital Management, Alliance Variable Products
L.P. Series Fund, Inc.
Alliance VP Premier Growth - Alliance Capital Management, Alliance Variable Products
Class B L.P. Series Fund, Inc.
Dreyfus Investment Portfolios MidCap The Dreyfus Corporation Dreyfus Investment Portfolios
Stock Portfolio - Initial Shares
The Dreyfus Socially Responsible The Dreyfus Corporation Dreyfus Socially Responsible Growth
Growth Fund, Inc. - Initial Shares (NCM Capital Management, Inc., Fund, Inc
sub-adviser.)
Dreyfus Variable Investment Fund The Dreyfus Corporation Dreyfus Variable Investment
Appreciation Portfolio - Initial Shares (Fayez Sarofim & Co., sub- Fund
adviser)
Dreyfus Variable Investment Fund Small The Dreyfus Corporation Dreyfus Variable Investment
Cap Portfolio - Initial Shares Fund
Franklin Small Cap Fund - Franklin Advisers, Inc. Franklin Templeton Variable
Class 2 Insurance Products Trust
Franklin Technology Securities Fund - Franklin Advisers, Inc. Franklin Templeton Variable
Class 2 Insurance Products Trust
Janus Aspen Series Worldwide Growth - Janus Capital Corporation Janus Aspen Series
Service Shares
Janus Aspen Series Balanced - Service Janus Capital Corporation Janus Aspen Series
Shares
MFS(R)Emerging Growth Series MFS Investment Management(R) MFS(R)Variable Insurance
TrustSM
MFS(R)Investors Trust Series MFS Investment Management(R) MFS(R)Variable Insurance
TrustSM
MFS(R)Research Series MFS Investment Management(R) MFS(R)Variable Insurance
TrustSM
TABLE OF SEPARATE ACCOUNT INVESTMENT OPTIONS AND
INVESTMENT ADVISERS
Portfolios Investment Advisers Trusts/Funds
Morgan Stanley UIF Emerging Markets Morgan Stanley The Morgan Stanley Universal
Equity Institutional Funds, Inc.
Morgan Stanley UIF Fixed Income Miller Anderson & Sherred, LLP The Morgan Stanley Universal
Institutional Funds, Inc.
Morgan Stanley UIF High Yield Miller Anderson & Sherred, LLP The Morgan Stanley Universal
Institutional Funds, Inc.
Morgan Stanley UIF International Magnum Morgan Stanley The Morgan Stanley Universal
Institutional Funds, Inc.
OCC Accumulation Trust Managed OpCap Advisors OCC Accumulation Trust
OCC Accumulation Trust Small Cap OpCap Advisors OCC Accumulation Trust
PIMCO VIT StocksPLUS Pacific Investment Management PIMCO Variable Insurance
Growth and Income - Admin Company, LLC ("PIMCO") Trust
Class
Transamerica VIF Growth Transamerica Investment Transamerica Variable
Management, LLC Insurance Fund, Inc.
Transamerica VIF Money Market Transamerica Investment Transamerica Variable
Management, LLC Insurance Fund, Inc.
- ---------------------------------------- -------------------------------------- --------------------------------------
DESCRIPTION OF TRANSAMERICA,
THE SEPARATE ACCOUNT AND
THE PORTFOLIOS
Transamerica Occidental Life Insurance
Company
Transamerica Occidental Life Insurance Company, or Transamerica, is an Iowa
stock life insurance company originally incorporated under the laws of the State
of California on June 30, 1906. Transamerica is principally engaged in the sale
of life insurance and annuity policies.
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-6, designated as the separate
account, was established by us as a separate account under the laws of the State
of Iowa, 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.
You may allocate any portion of your net premiums to the separate account. The
portion of the accumulation value in the separate account will be based on the
values of the sub-accounts to which your net premiums are allocated.
The variable benefits under this policy are provided through the separate
account. The assets of the separate account are the property of Transamerica
Occidental Life Insurance Company, but they are segregated from our other
assets. 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 24 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.
The boards of the portfolios have responsibility for the supervision of the
affairs of the portfolios. These boards have entered into management agreements
with the investment advisers. These advisers, subject to their board's review,
are responsible for the daily affairs and general management of the portfolios.
The advisers perform the respective administrative and management services for
the portfolios, furnish to the portfolios office space, facilities and
equipment, and pay the compensation, if any, of officers and board members who
are affiliated with the advisers.
Each portfolio bears expenses incurred in its operation, other than the expenses
its advisers assume under the management agreement. Portfolio expenses include:
o costs to register and qualify the portfolio's shares under the Securities
Act of 1933, or 1933 Act.
o other fees payable to the SEC.
o independent public accountants, legal and custodian fees.
o association membership dues, taxes, interest, insurance payments and
brokerage commissions.
o fees and expenses of the board members who are not affiliated with the
advisers.
The portfolios are described below.
The AEGON/Transamerica Van Kampen Emerging Growth Fund of the AEGON/
Transamerica Series Fund, Inc. seeks to achieve the portfolio's objective by
investing at least 80% of the portfolio's total assets in common stocks of
emerging growth companies. Emerging growth companies are those companies in the
early stages of their life cycles that the portfolio's sub-adviser believes have
the potential to become major enterprises.
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 of the Alliance Variable Products Series Fund,
Inc. seeks reasonable current income and reasonable opportunity for appreciation
through investments primarily in dividend-paying common stocks of good quality.
The Premier Growth Portfolio of the Alliance Variable Products Series Fund, Inc.
seeks growth of capital by pursuing aggressive investment policies.
The Mid-Cap Stock Portfolio - Initial Shares of the Dreyfus Investment
Portfolios seeks investment results that are greater than the total return
performance of publicly traded common stocks of medium-size domestic companies
in the aggregate, as represented by the Standard & Poor's MidCap(R) 400 Index
(S&P 400).
The Dreyfus Socially Responsible Growth Fund Inc. - Initial Shares seeks to
provide capital growth, with current income as a secondary goal. To pursue these
goals, the fund invests primarily in the common stock of companies that, in the
opinion of the fund's management, meet traditional investment standards and
conduct their business in a manner that contributes to the enhancement of the
quality of life in America.
The Appreciation Portfolio - Initial Shares of the Dreyfus Variable Investment
Fund seeks long-term capital growth consistent with preservation of capital;
current income is a secondary goal. To pursue these goals, the portfolio
primarily invests 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 - Initial Shares of the Dreyfus Variable Investment Fund
seeks to maximize capital appreciation. To pursue this goal, the portfolio
primarily invests in small-cap companies with total market values of less than
$2 billion at the time of purchase. The portfolio may continue to hold the
securities of companies as their market capitalizations grow and, thus, at any
given time, a substantial portion of the portfolio's holdings may have
capitalizations in excess of $2 billion.
The Franklin Small Cap Fund - Class 2 of the Franklin Templeton Variable
Insurance Products Trust seeks long-term capital growth. The fund invests
primarily in the equity securities of U.S. small capitalization (small cap)
companies.
The Franklin Technology Securities Fund - Class 2 of the Franklin Templeton
Variable Insurance Products Trust seeks capital appreciation. The fund invests
primarily in equity securities of companies expected to benefit from the
development, advancement, and use of technology.
The Balanced Portfolio - Service Shares of the Janus Aspen Series seeks
long-term capital growth consistent with preservation of capital and 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(R) Variable Insurance Trust seeks
long-term growth of capital by investing in common stocks of companies that are
early in their life cycles but which MFS believes have the potential to become
major enterprises.
The Investors Trust Series of the MFS(R) Variable Insurance Trust seeks
long-term growth of capital with a secondary objective to seek reasonable
current income.
The Research Series of the MFS(R) 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 seeks long-term capital appreciation by investing primarily
in growth oriented equity securities of issuers in emerging market countries.
The Adviser's investment approach combines top-down country allocation with
bottom-up stock selection. Investment selection criteria include attractive
growth characteristics, reasonable valuations, and company management with
strong shareholder value orientation.
The Fixed Income Portfolio of the Morgan Stanley Universal Institutional Funds
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
seeks above-average income and total return by investing primarily 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 seeks long-term capital appreciation by investing primarily in 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 $2 billion.
The StocksPLUS Growth and Income Portfolio - Admin Class 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 to
maximize long-term growth by investing at least 80% of its assets in equity
securities of growth companies of any size.
The Money Market Portfolio of the Transamerica Variable Insurance Fund, Inc.
seeks to maximize current income consistent with liquidity and preservation of
principal by investing in money market instruments with remaining maturities of
13 months or less.
Since all of the portfolios are available to certain other registered separate
accounts offering variable annuity and variable life products of Transamerica
and to other insurance companies as well, there is a possibility of a material
conflict. If such a conflict arises between the interests of Separate Account
VUL-6 and one or more other separate accounts investing in the portfolios, the
affected insurance companies will take steps to resolve the matter. These steps
may include stopping their separate accounts from investing in the portfolios.
See the portfolios' prospectuses for greater detail on this subject.
We may receive payments from some or all of the portfolios or their advisers, in
varying amounts. These payments may be based on the amount of assets allocated
to the portfolios. The payments are for administrative or distribution services.
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 with very
similar names that 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 until the policy anniversary nearest the
insured's 100th birthday. 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
taxes, premium taxes and other taxes and fees.
Some of the risks that we assume include the risks that insureds may live for a
shorter period of time than estimated resulting in the payment of greater death
benefits sooner than expected, and that the costs of providing the services and
benefits under the policies will exceed the charges deducted.
Administrative Charge
An administrative charge is assessed on each premium payment you make to us. The
amount of the administrative charge varies by: o how long your policy, any
layers, and any associated supplemental coverage segments have been in force;
o the target amounts for the coverage segments on your policy; and
o whether part of your coverage is provided under the supplemental adjustable
life insurance rider.
We allocate each premium received among the coverage segments as described in
the Premiums section.
The administrative charge we currently deduct from premiums allocated to the
basic coverage segment of the base policy or a layer is:
o 7.6% of premiums up to the target amount per year during each of the first
10 policy or layer years; and
o ________ 3.6% of all other premiums. This includes premiums in excess of
the target amounts per year during the first 10 years, and all premiums
allocated to a basic coverage segment after the 10th year.
These charges are also the guaranteed maximum administrative charges we may
assess on premiums allocated to the basic coverage under the base policy or a
layer.
The administrative charge we currently deduct from all premiums allocated to the
supplemental coverage segments, if any, is 3.6% of premiums.
However, the guaranteed maximum administrative charge we can deduct from
premiums allocated to a supplemental coverage segment is:
o 8.6% of premiums up to the target amount per year during each of the first
10 rider or rider layer years; and
o ________ 3.6% of all other premiums. This includes premiums in excess of
the target amounts per year during the first 10 years, and all premiums
allocated to a supplemental coverage segment after the 10th year.
Currently, the administrative charge for premiums allocated to supplemental
coverage segments is less than the administrative charge for premiums allocated
to basic coverage segments. But, because we reserve the right to increase the
administrative charge for supplemental coverage to its maximum guaranteed rate,
you bear the risk in the future that the administrative charge for supplemental
coverage will be higher for premiums allocated to such coverage segment than the
maximum guaranteed administrative charge for premiums allocated to basic
coverage segments.
For example, if the target amount for the base policy is $3,000, and you pay a
premium allocated to the base policy of $4,000 during the first policy year, we
assess an administrative charge of 7.6% against the first $3,000 of premium, and
an administrative charge of 3.6% on the next $1,000 of premium. Beginning on the
next policy anniversary, the premium you pay will be subject to the 7.6% charge
on the amount of premium received by us during that policy year, until the total
premium for the base policy in that policy year equals the target amount for the
base policy. If that same premium were allocated to a supplemental coverage
rider, and that rider also had a target amount of $3,000, we would currently
deduct a charge of 3.6% on the full amount of the premium. The guaranteed
maximum charges, however, would be 8.6% of the amount of premium to the target
amount of $3,000 and 3.6% on the remaining $1,000. Again, beginning on the rider
anniversary through the 10th rider year, the premium paid during that rider year
would be subject to the maximum charge of 8.6% of premium up to the target
amount for that year.
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 surrender penalty period, we will assess a surrender penalty on (a)
any surrender amount that exceeds the amount eligible for a surrender penalty
free withdrawal, (b) a decrease in face amount, and/or (c) a full surrender of
the policy. Separate surrender penalty factors and surrender penalty periods
apply to the base policy and to each layer. Additionally, separate surrender
penalty factors and surrender penalty periods apply to basic coverage and to
supplemental coverage. The minimum surrender penalty is $25.
The surrender penalty period for basic coverage segments is the first 12 policy
or layer years. The surrender penalty period for supplemental coverage segments
is the first 16 rider or rider layer years.
We deduct the surrender penalty from the base policy and layer, if any,
accumulation value.
The surrender penalty that will apply upon a full surrender of the policy is the
total of the surrender penalties calculated for the base policy and each layer.
If supplemental coverage rider has been added to the policy, the surrender
penalty that will apply upon a full surrender of the policy will also include
the total of the surrender penalties calculated for the rider and each rider
layer.
Partial surrenders in excess of the surrender penalty free withdrawal amount
will incur a proportionate surrender penalty during a surrender penalty period
for a coverage segment to which the partial surrender is attributed for
surrender penalty purposes. Please see ACCUMULATION VALUE - Partial Surrenders
on page 54 for a discussion of partial surrenders, attribution of the partial
surrender among coverage segments, the calculation of the proportionate
surrender penalty, and the allocation of the surrender penalty among
accumulation values of the base policy and layers.
Face amount decreases will also incur a proportionate surrender penalty during a
surrender penalty period for a coverage segment to which the face amount
decrease is allocated. Please see DEATH BENEFIT - Option to Change the Face
Amount on page 47 for a discussion of face amount decreases, the calculation of
the proportionate surrender penalty and the allocation of the surrender penalty
among accumulation values of the base policy and layers.
If you surrender your policy in full, the surrender penalty is a factor times
each $1,000 of the face amount of the base policy or layer, if no supplemental
coverage is in force on the policy. The surrender penalty factors for a policy
depend on:
o ________ the insured's age at issue, sex, smoker or non-smoker status, and
underwriting risk classification as determined separately for the base
policy and each layer, respectively; and
o how many years the policy and each layer, if any, have been in force.
If a supplemental coverage rider is added to the policy, then the surrender
penalty for the rider is a surrender penalty factor times each $1,000 of the
face amount of the rider and each rider layer, if any. The surrender penalty
factor for a rider or rider layer depends on:
o ________ the insured's age at issue, sex, smoker or non-smoker status, and
underwriting risk classification as determined separately for the rider and
each rider layer, respectively; and
o how many years the rider and each rider layer, if any, have been in force.
The surrender penalty is calculated in the same manner for the base policy, any
layers and supplemental coverage associated with the base policy and any layers.
To calculate the surrender penalty that will apply on a full surrender of the
policy, you add up the surrender penalties that apply on each coverage segment.
To calculate the surrender penalty that applies for a coverage segment, you:
a) divide the face amount of the coverage segment by $1,000 and
b) _______ multiply that result by the surrender penalty factor for the
coverage segment for the applicable policy, layer, rider or rider year in
which the surrender occurs.
Surrender penalty factors generally decrease each policy, layer, rider or rider
layer year on the coverage segment's anniversary until the factor is zero at the
end of the surrender penalty period.
Listed below are the surrender penalty factors per thousand dollars of face
amount that apply during the first year for an insured who qualifies for the
preferred non-smoker risk class at the issue ages shown:
Male Insured
- --------------- ---------------- -------------------
Basic Coverage Supplemental
Segment Coverage Segment
Surrender Surrender Penalty
Age at Issue Penalty Factor Factor
- --------------- ---------------- -------------------
- --------------- ---------------- -------------------
25 $19.00 $18.90
- --------------- ---------------- -------------------
- --------------- ---------------- -------------------
35 23.20 23.20
- --------------- ---------------- -------------------
- --------------- ---------------- -------------------
45 28.80 28.70
- --------------- ---------------- -------------------
- --------------- ---------------- -------------------
55 39.90 39.70
- --------------- ---------------- -------------------
- --------------- ---------------- -------------------
65 40.60 40.30
- --------------- ---------------- -------------------
- --------------- ---------------- -------------------
75 32.70 32.30
- --------------- ---------------- -------------------
Female Insured
- --------------- ---------------- -------------------
Basic Coverage Supplemental
Segment Coverage Segment
Surrender Surrender Penalty
Age at Issue Penalty Factor Factor
- --------------- ---------------- -------------------
- --------------- ---------------- -------------------
25 $18.10 $18.10
- --------------- ---------------- -------------------
- --------------- ---------------- -------------------
35 21.80 21.70
- --------------- ---------------- -------------------
- --------------- ---------------- -------------------
45 26.70 26.60
- --------------- ---------------- -------------------
- --------------- ---------------- -------------------
55 35.70 35.60
- --------------- ---------------- -------------------
- --------------- ---------------- -------------------
65 42.70 42.40
- --------------- ---------------- -------------------
- --------------- ---------------- -------------------
75 36.50 36.10
- --------------- ---------------- -------------------
The maximum surrender penalty factor is $45.50 for each $1,000 of basic
coverage. This surrender penalty factor applies to a policy or a layer
consisting of basic coverage only, issued to a male, age 59, qualifying for our
preferred nonsmoker risk class. The maximum surrender penalty factor applies
during the first policy or layer year.
The surrender penalty factors will be shown in the policy data pages.
An example of how to calculate the surrender penalty amount is shown in APPENDIX
E - SURRENDER PENALTY.
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
When you apply for your policy, you make an election as to the allocation of
your premium payments, net of administrative charges deducted, among the
investment options available under the policy. You may change your allocation by
giving us written notice or by exercising your telephone access privilege.
We reserve the right to impose a charge of up to $25 for each change you make in
premium allocations for new net premiums. We will deduct such charge from the
accumulation value of the base policy on a pro rata basis. Currently, we do not
impose this charge.
The charge is designed to recover the administrative expenses associated with
processing changes in allocation elections.
Monthly Deductions Allocation Election Change Charge
You may elect to allocate your monthly deductions among specific investment
options on your policy. You may make this election at the time of application
for the policy or at a later date after the policy is issued. You may change
your election by giving us written notice or by exercising your telephone access
privilege.
We reserve the right to impose a charge of up to $25 for each change you make in
allocations for monthly deductions. We will deduct such charge from the
accumulation value of the base policy on a pro-rata basis. Currently, we do not
impose this charge.
The charge is designed to recover the administrative expenses associated with
processing changes in monthly deductions allocations 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 may charge you up to
$25 for each additional transfer. Currently, we do not assess a charge but we
may impose a charge, up to the maximum amount, at any time prospectively on
transfers in excess of 18 per policy year.
This fee is designed to recover 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. We will deduct any such fee from the
accumulation value of the base policy on a pro-rata basis.
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.
Monthly Deduction
Beginning on the policy date and on each subsequent monthly policy date, we will
determine and assess the monthly deduction for that policy month. If that date
is not a valuation date, we will take the monthly deduction on the next
valuation date. The monthly deduction is the sum of the monthly deduction for
the base policy and the monthly deduction for each layer. The monthly deduction
will continue to the policy anniversary nearest the insured's 100th birthday.
The monthly deduction is a set of charges 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.
The monthly deduction for the base policy is equal to the sum of up to five
charges:
o the monthly deduction rate for the base policy, times .001, multiplied by:
- the net amount at risk for the base policy total amount on the applicable
monthly deduction date, multiplied by
- - the ratio of the face amount of the base policy to the base policy total
amount; plus
o the monthly deduction for any riders excluding the portion of the
supplemental coverage rider monthly deduction that is associated with a
layer; plus
o the policy fee; plus
o the monthly expense charge per thousand for the base policy, times .001,
times the face amount of the base policy; plus
o the monthly mortality and expense risk charge for the base policy.
The monthly deduction for each layer is equal to:
o the monthly deduction rate for the layer, times .001, multiplied by:
- - the net amount at risk for the layer total amount on the applicable monthly
deduction date, multiplied by
- - the ratio of the face amount of the layer to the layer total amount; plus
o the portion of the supplemental coverage rider monthly deduction that is
associated with the layer; plus
o the monthly expense charge per thousand for the layer, times .001, times
the face amount of the layer; plus
o the monthly mortality and expense risk charge for the layer.
Beginning with the policy anniversary nearest age 100, we will not take any
further monthly deductions.
If the monthly deduction amount for a layer exceeds the layer's accumulation
value minus any policy debt on the layer, the excess portion of the monthly
deduction for the layer will be taken first from the accumulation value of the
most recently added layers, in order, and then from the accumulation value of
the base policy. Unless you specify otherwise, the amount we take from the
accumulation value of the base policy and from any layers will be deducted from
your investment options within the base policy or layers on a pro-rata basis. We
will deduct the monthly mortality and expense risk charge proportionately from
the sub-accounts. If you wish to specify the investment options from which you
want the monthly deductions taken, you may submit a monthly deductions
allocation election to us. A monthly deductions allocation election will not be
effective before the reallocation date.
On or after the reallocation date, you may allocate your monthly deductions
among the investment options we make available from time to time. The monthly
deduction allocation percentages you elect must be whole numbers. The total
allocation to all elected investment options must equal 100%. We may limit the
number of investment options to which you may allocate your monthly deductions.
Your monthly deduction election applies to the base policy and all layers. The
monthly deduction allocation percentages you elect will apply to all monthly
deductions taken on or after the valuation date on which we receive your
request, unless you provide us with a change to your monthly deduction
allocation election.
While your monthly deductions allocation election is in effect, we will take
your monthly deductions on a pro-rata basis, rather than in accordance with your
monthly deductions allocation election, if:
o the monthly deduction amount for a layer exceeds the layer's accumulation
value minus any policy debt; or
o ________ the value in any of the investment options on any layer or the
base policy is less than the amount of the monthly deduction allocated to
that investment option.
We will not notify you if the accumulation value in one or more layers or
investment options is not sufficient to allow the monthly deductions to be taken
according to your elections. You need to monitor the accumulation values in the
investment options on your policy.
We reserve the right to charge up to $25 for each change you request in monthly
deductions allocations. If we assess this charge, we will deduct the charge from
the accumulation value of the base policy.
Monthly Deduction Rate. This rate is used to calculate a portion of the monthly
deduction on the base policy and on each layer, respectively.
We will determine the monthly deduction rate for the base policy and each layer
on each monthly date. The monthly deduction rates may differ for the base policy
and for each layer.
The monthly deduction rates will depend on:
o the insured's sex;
o the insured's class of risk, as of the policy date or layer date, adjusted
for any extra ratings;
o the number of years that the policy and each layer, respectively, have been
in force; and
o the insured's age as of the policy date or layer date.
The maximum monthly deduction rates for the base policy, layers, supplemental
coverage rider and rider layers are based on the 1980 Commissioners Standard
Ordinary table for sex distinct, unismoker, age nearest birthday rates, adjusted
for extra ratings. The current monthly deduction rates, but not the guaranteed
maximum monthly deduction rates, vary by smoker or non-smoker status of the
insured.
A table of guaranteed maximum monthly deduction rates for the base policy is
shown in the policy data pages. A table of guaranteed maximum monthly deduction
rates for each layer will be 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, including those under a supplemental
coverage rider or any rider layers 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 monthly deduction rates in effect for the base policy and for each layer,
respectively, at the time they are issued are guaranteed not to be increased
during the first policy or layer year.
Monthly Deduction for Riders. Additional benefits are available by riders to
your policy. The fees for these optional riders pay for the cost of these
additional benefits. The monthly deduction for riders, except for the monthly
deduction rate for the Supplemental Adjustable Life Insurance Rider, is deducted
solely from the accumulation value of the base policy. The monthly deduction for
the Supplemental Adjustable Life Insurance Rider is deducted from the
accumulation value of the base policy or of a layer with which the rider or
rider layer is associated. The rider is associated with the base policy or layer
having the same policy or layer date as the rider date. A rider layer is
associated with a layer having the same layer date as the rider layer.
o Supplemental Adjustable Life Insurance Rider. The rider monthly deduction
is the sum of the monthly deductions for the rider and for each rider
layer.
The monthly deduction for the rider, if the rider is part of the base
policy total amount, is equal to:
1. the monthly deduction rate for the rider, times .001, times:
a. the net amount at risk for the base policy total amount on the applicable
monthly deduction date, times
b. the ratio of the face amount of the rider to the base policy total amount;
plus
2. The monthly expense charge per thousand for the rider.
The monthly deduction for the rider, if the rider is part of a layer total
amount, is equal to:
1. the monthly deduction rate for the rider, times .001, times:
a. the net amount at risk for the layer total amount on the applicable monthly
deduction date, times
b. the ratio of the face amount of the rider to the layer total amount; plus
2. The monthly expense charge per thousand for the rider.
The monthly deduction for a rider layer is equal to:
1. the monthly deduction rate for the rider layer, times .001, times:
a. the net amount at risk for the layer total amount on the applicable monthly
deduction date, times
b. the ratio of the face amount of the rider layer to the layer total amount;
plus
2. the monthly expense charge per thousand for the rider.
We will determine the monthly deduction rate for the rider and each rider
layer on each monthly policy date.
The monthly deduction rate for the rider and each rider layer will depend
on:
o the insured's sex;
o the insured's class of risk as of the rider date or rider layer date,
adjusted for any extra ratings;
o the number of years that the rider or rider layer has been in force; and
o the insured's age on the rider date or rider layer date.
A table of guaranteed maximum monthly deduction rates for the rider and a
table of maximum guaranteed monthly deduction rates for each rider layer
are shown in the policy data pages. We may use rates lower than these
guaranteed maximum monthly deduction rates. We will never use higher rates.
Monthly Expense Charge Per Thousand. For the rider, this charge is equal to:
o the monthly expense charge per thousand for the rider, times .001, times
o the rider face amount.
For a rider layer, this charge is equal to:
o the monthly expense charge per thousand for the rider layer, times .001,
times
o the rider layer face amount.
The guaranteed maximum monthly expense charge per thousand for this rider
or for each rider layer will be shown in the policy data pages. We may
assess lesser charges than the guaranteed maximum monthly expense charge.
We will never assess a higher charge than the one shown.
The monthly expense charge per thousand varies by policy. The charge for a
rider or rider layer is based on:
o the total face amount of the base policy, layers, and any supplemental
coverage rider and rider layers;
o the number of years the rider or rider layer has been in force;
o the insured's age at issue;
o the insured's sex;
o the insured's smoker or nonsmoker status on the rider and, separately, on
each rider layer; and
o the insured's class of risk on the rider and, separately, on each rider
layer.
Currently, we do not assess a monthly expense charge per thousand for the
supplemental coverage. We may, however, assess the charge for supplemental
coverage at any time in the future, but any charge we assess will not
exceed the maximum guaranteed monthly expense charge per thousand for the
supplemental coverage segment. The maximum monthly expense charge per
thousand will be higher than the maximum monthly expense charge per
thousand for an equal amount of basic coverage for the same insured with
the same age at issue and for the same duration.
o ________ Accident Indemnity Rider - The charge for this rider is part of
the monthly deduction during the policy years while the rider is in effect.
The rider terminates on the policy anniversary nearest the insured's 70th
birthday, if not terminated sooner. The monthly deduction rate for the
rider varies by issue age (age on the layer date for each layer,
respectively). The charge is equal to the monthly rate for the rider times
the number of thousands of dollars of coverage amount under the rider.
o ________ Guaranteed Insurability Rider - The charge for this rider is part
of the monthly deduction during the policy years during which the rider is
in effect. The rider will terminate on the policy anniversary nearest the
insured's 40th birthday, if it has not been terminated sooner. The monthly
deduction rate varies based on the issue age and, in California, by the sex
of the insured. The monthly rate is applied to the number of thousands of
dollars of insurance which may be elected under the rider. If the Waiver
Provision Rider is issued on the base policy, Waiver Provision must also be
issued on the Guaranteed Insurability Rider. An additional charge is
assessed for this, and the rates for the additional charge vary by sex and
issue age.
o ________ Insurance on Children Rider -The charge for this rider is part of
the monthly deduction during the policy years during which the rider is in
effect. The rider will terminate on the policy anniversary nearest the
insured's 65th birthday, if not terminated sooner. The monthly deduction
rate for the rider is equal to $0.45 for each unit of coverage (one unit is
$1,000) elected.
o ________ Waiver Provision Rider - The charge for this rider is part of the
monthly deduction during the policy years during which the rider is in
effect. The rider will terminate on the policy anniversary nearest the
insured's 60th birthday, if not terminated sooner. The charge is equal to
the monthly deduction rate times the number of thousands of dollars of net
amount at risk on each coverage segment, respectively. The rate varies by
the insured's attained age, sex, and smoker or nonsmoker classification on
the base policy.
o ________ Extended No-Lapse Guarantee Rider - The charge for this rider is
part of the monthly deduction during the policy years during which the
rider is in effect. The maximum guaranteed charge is $0.06 per $1,000 of
face amount per month. Face amount includes the face amount of all coverage
segments on the policy, including those under a supplemental coverage rider
or rider layer. Currently, we assess a monthly charge equal to $0.06 per
$1,000 of total face amount of the policy.
Policy Fee - On each monthly policy date, we deduct a policy fee as a part of
the monthly deduction for the base policy. Currently, this monthly fee is $6. We
reserve the right to change this fee, but we guarantee it will never be more
than (a) $6 per month during the first policy year, or (b) $10 per month
thereafter. There are no separate policy fees for layers.
Monthly Expense Charge Per Thousand. The monthly expense charge per thousand
varies by policy. The charge for the base policy or a layer is based on:
o the total face amount of the base policy, layers, and any supplemental
coverage rider and rider layers;
o the number of years the base policy or layer has been in force;
o the insured's age at issue;
o the insured's sex;
o the insured's smoker or non-smoker status; and
o the insured's class of risk.
The charge is calculated separately for the base policy and for each layer. We
currently assess a monthly expense charge per thousand on the base policy and
any layers during the first five policy or layer years. We do not currently
assess this charge after the fifth policy year.
We retain the right to assess a monthly expense charge per thousand up to the
guaranteed maximum amount in any policy year or layer year, until the policy
anniversary nearest the insured's 100th birthday. Mortality and Expense Risk
Charge. We assess a monthly charge on each monthly policy date against the
accumulation value of the sub-accounts of the base policy and each layer. The
rate varies by the length of time the policy has been in force. The monthly rate
is one-twelfth of the annual rate. For policy years 1 through 10, the annual
rate is 0.65%. The annual rate we currently intend to charge during policy years
11 through 20 is 0.15% and for policy years 21 and later, 0.0%. However, we may
charge any rate not in excess of the maximum guaranteed mortality and expense
risk charge. The maximum guaranteed mortality and expense risk charge on an
annual basis is 0.65% during policy years 1 through 10; 0.40% in policy years
11-20; and 0.25% in policy years 21 and later.
The charge assessed for a sub-account is the monthly rate times the
sub-account's accumulation value on the date the monthly deductions are taken.
The monthly charge is taken proportionately from each sub-account, unless you
elected to allocate your monthly deductions among specific investment options.
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 a
greater amount of net death benefits sooner 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.
Example of a Monthly Deduction
Calculation
Let us assume that a policy was issued with a female insured, age 45 at issue,
qualifying for our preferred nonsmoker risk class. Let's further assume that the
policy issued consists of a base policy with a face amount of $200,000 and a
supplemental coverage layer with a face amount of $50,000. The death benefit
option selected was the level option (Option 1). The policy issued uses the
guideline premium test for the life insurance qualification test. No other
riders were added to the policy; no layers were added after the first policy
year; and there have been no decreases in face amount and no partial withdrawals
taken. On the monthly policy date, the accumulation value is $15,000 and is
allocated fully to the sub-accounts of the policy, and the policy is in its
third policy year.
The current monthly deduction rate for the base policy during the third policy
year is $0.050833 per $1,000 of the net amount at risk attributable to the base
policy. The current monthly deduction rate for the supplemental coverage is
$0.050833 per $1,000 of the net amount at risk attributable to the rider.
The current monthly expense charge per thousand for the base policy is $0.1725
per $1,000 of base policy face amount. The current monthly expense charge per
thousand for the supplemental coverage rider is $0.00 per $1,000 of supplemental
coverage face amount.
The net amount at risk on the base policy total amount is:
o the death benefit times the monthly death benefit discount factor; minus
o accumulation value.
The death benefit in this case is $250,000. The death benefit for the level
death benefit option is the face amount of the policy so long as the
accumulation value times the death benefit factor is less than the face amount
of the policy.
The net amount at risk on the base policy total amount is, therefore:
o ($250,000 times 0.99754), minus
o $15,000.
This equals $234,385.
The net amount at risk on the base policy is:
o $234,385 times
o the base policy face amount ($200,000) divided by the base policy total
amount ($250,000).
This is equal to $187,508.
The net amount at risk on the supplemental coverage rider is:
o $234,385 times
o the supplemental coverage rider face amount ($50,000) divided by the base
policy total amount ($250,000).
This is equal to $46,877.
The monthly deduction, then, is equal to:
1. The current monthly deduction rate for the base policy of $0.050833 times
.001 times $187,508, or $9.53; plus
2. The monthly deduction for the rider:
a. The current monthly deduction rate for the rider of $0.050833 times .001
times $46,877, or $2.38; plus
b. The monthly expense charge per thousand for the rider, which is $0.00 based
on the charges we currently assess; plus
3. The monthly policy fee of $6.00 based on the charges we currently assess;
plus
4. The monthly expense charge per thousand for the base policy of $0.1725 per
$1,000 of base policy face amount, which is equal to:
o $0.1725 times .001 times $200,000, or $34.50; plus
5. The monthly mortality and expense risk charge, which is equal to:
o 0.0065 divided by twelve times $15,000, or $8.13.
The total monthly deduction using charges and fees that we are currently
assessing is $60.54. The total is equal to the sum of the different current
charges shown:
o $9.53, plus
o $2.38, plus
o $6.00, plus
o $34.50, plus
o $8.13.
If we assessed the maximum guaranteed charges and fees, the following fees and
charges would be higher than the current charges:
o ________ The monthly deduction rate for the base policy would be $0.338333; o
The monthly deduction rate for the supplemental coverage rider would be
$0.338333;
o The monthly expense charge per thousand for the supplemental coverage rider
would be $0.17425; and
o The policy fee would be $10.
As a result, the total monthly deduction in our example using guaranteed maximum
charges and fees would be:
1. The monthly deduction rate for the base policy of $0.338333 times .001
times $187,508, or $63.44; plus
2. The monthly deduction for the rider:
a. The monthly deduction rate for the rider of $0.338333 times .001 times
$46,877; or $15.86; plus
b. The monthly expense charge per thousand for the rider of $0.17425 per
$1,000 of the rider face amount, which is equal to:
o $0.17425 times .001 times $50,000, or $8.71; plus
3. The monthly policy fee of $10.00; plus
4. The monthly expense charge per thousand for the base policy of $0.1725 per
$1,000 of the base policy face amount, which is equal to:
o $0.1725 times .001 times $200,000, or $34.50 plus
5. The monthly mortality and expense risk charge, which is equal to:
o 0.0065 divided by twelve times $15,000, or $8.13.
The total monthly deduction using the maximum guaranteed charges and fees is
$140.64. The total is equal to the sum of the different guaranteed charges
shown:
o $63.44, plus
o $15.86, plus
o $8.71, plus
o $10.00, plus
o $34.50, plus
o $8.13.
Reinstatement Interest Charges
If your policy lapses and you subsequently reinstate it, you will incur interest
charges if you had an outstanding loan when the policy lapsed.
The reinstatement interest rate for an outstanding loan is at an effective
annual rate of 8.00% for the period from the date the policy lapsed to the date
the loan is repaid or reinstated under the REINSTATEMENT provisions.
These interest charges are designed to help offset the loss of loan interest we
otherwise would have earned from the date the policy lapsed to the date of
reinstatement. The interest charges also help us recover a portion of the
expenses we incur to underwrite and process the reinstatement request.
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 deduct a
charge for such taxes from your policy. We may reflect the amount of such taxes
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 this prospectus does not include references to
all state specific differences. All state specific policy features will be
described in your policy.
Owner
The insured is the owner unless another owner has been named in the application
or in a supplemental agreement filed with us in accordance with the policy. As
owner, you are entitled to exercise all rights granted under the policy while
the insured is alive. If the owner is an individual other than the insured, and
dies before the insured, 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 ownership of the policy is shared by more than one person, all such persons
must sign each written request to exercise any right under the policy. The
telephone access privilege may be exercised by any one person who shares
ownership, or by your registered representative.
You may change the owner while the insured 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. The written consent of any irrevocable beneficiary
will be required.
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 the adequacy of any assignment. However, if you file an
assignment with us and we record it at our administrative office, your rights
and those of any revocable beneficiary will be subject to it. The written
consent of any irrevocable beneficiaries will be required.
Beneficiary
If the insured 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 insured
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 insured, that beneficiary's interest in the
death benefit will end. If any beneficiary dies at the same time as the insured,
or within 30 days after the insured, 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 insured dies, we
will pay the death benefit to you, as owner. If you are not living at that time,
we will pay the death benefit to your estate.
You may change the beneficiary while the insured is alive by sending us written
notice. The change will not be effective until we record it at our
Administrative Office. Even if the insured 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 insureds who are between the ages of 0 and 80.
After receiving a completed application, we will begin underwriting to decide
the insurability of the proposed insured. We may require medical examinations
and other information before deciding insurability. We issue a policy only after
underwriting has been completed. We may reject an application that does not meet
our underwriting standards.
If we approve the application, we will place the insured into one of four
underwriting classes:
o Preferred nonsmoker (ages 0-80)
o Preferred smoker (ages 16-80)
o Standard nonsmoker (ages 0-80)
o Standard smoker (ages 16-80)
Additional adjustments for extra ratings due to increased mortality risk may
apply to persons classified into the standard underwriting classes.
If a face increase is requested on the policy, the face increase will also be
subject to our underwriting requirements and review. No face increase amount
will be effective until we have completed our underwriting review and have
approved the face increase amount. We will assign the insured to one of the four
underwriting classes for the face increase amount approved. Additional
adjustments for extra ratings may apply for an insured placed into one of the
standard underwriting classes for the face increase amount approved.
An insured may be classified into different underwriting classes and be assigned
different extra ratings on the base policy and on each layer, respectively.
The underwriting class assigned to the insured affects the monthly deductions
for the policy. The monthly deductions and surrender charges for a policy are
based on the insured's underwriting class, among other factors.
Generally, our rates are lowest for preferred nonsmokers.
We also assess lower monthly expense charges per thousand for policies with
higher face amounts of coverage on the insured. We offer the following bands for
face amounts of coverage on the insured:
o $25,000 - $99,999
o $100,000 - $249,999
o $250,000 - $499,999
o $500,000 - $999,999
o $1,000,000 - $2,999,999
o $3,000,000 - and above
The band for a policy is generally determined based on the total face amount for
the base policy plus all layers on the policy, plus any additional coverage
provided under the supplemental coverage rider or rider layer. Changes in band
due to face amount increase or decreases will be applied prospectively for
monthly deductions that become due on or after the effective date of the face
amount increase or decrease.
If requested, we may agree to determine the band for two or more policies by
using the aggregate face amount of all the policies involved. The band
determined in this fashion will apply to each of the policies and will not
change in the future due to changes in the face amount of any of the policies.
Generally, we will agree to determine the band for these policies in this
fashion when the applications are submitted to us at the same time, for the same
insured, and, except for special ownership or beneficiary designations, the
total coverage would otherwise be able to be issued as a single policy.
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 that is no more than $1,000,000. We may 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 the completion of all underwriting requirements; and
o the proposed insured must 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.
Life Insurance Qualification
In order for a policy to qualify as a life insurance contract under Code Section
7702, it must satisfy either one of two tests. At the time of application, you
must choose either the cash value accumulation test or the guideline premium
test. After the policy is issued, you cannot change your election. This election
will apply to the base policy, any layers, and any supplemental coverage under
the supplemental coverage rider or rider layers.
Cash Value Accumulation Test. Under the cash value accumulation test, the
accumulation value may not at any time exceed the net single premium. The net
single premium is the one payment that you would need to pay as of the policy
date in order to fund future benefits, assuming guaranteed charges and 4% net
interest. If the accumulation value is ever greater than the net single premium,
the death benefit will be increased by multiplying the policy's accumulation
value by the death benefit factors for the policy at the insured's attained age.
The death benefit factors are included in the policy. The death benefit factors
are also included in APPENDIX D. The factors vary by the insured's sex and
attained age. The increase in death benefit may be temporary, based on changes
in the death benefit factor and/or accumulation value. Under the Premium
Limitations provision, we may refuse to accept certain premium payments that
would cause the death benefit to increase.
Changes to the terms or benefits under the policy may require a redetermination
of the net single premium for the policy. The net single premium may increase or
decrease as a result. If the change is a reduction in benefits during the first
15 policy years, a distribution from the policy may be required to maintain
qualification as a life insurance contract for tax purposes. The required
distribution may be taxable in whole or in part.
Guideline Premium Test. Under the guideline premium test, the sum of premiums
paid into the policy, minus the total of all premium refunds and partial
withdrawals, excluding surrender penalties, taken from the policy, may not at
any time exceed the guideline premium limitation as of such time. The guideline
premium limitation is, as of any date, the greater of:
o the guideline single premium; or
o the sum of the guideline level premiums to such date.
The guideline premium test also requires a life insurance policy to meet minimum
ratios of life insurance coverage to accumulation value. This is achieved by
ensuring that the death benefit is at all times at least equal to the minimum
death benefit. The minimum death benefit on any date is the accumulation value
on that date times the applicable death benefit factor for the insured's
attained age. The death benefit factors are shown in APPENDIX D. These factors
vary by attained age but not by the insured's sex.
If total premiums paid as of the end of a policy year exceed the guideline
premium limits under the policy, we will refund any excess premiums paid during
such year with interest, not later than 60 days following the end of the policy
year in which the excess premiums are paid.
Changes to the terms or benefits under the policy may require adjustment of the
guideline premium limitations. The change may cause an increase or a decrease in
the guideline premium limits. In addition, if the change is a reduction in
benefits during the first 15 policy years, a distribution from the policy may be
required to maintain qualification as a life insurance contract for tax
purposes. The distribution may be taxable in whole or in part. These changes may
include:
o a change in the face amount;
o a change in death benefit option resulting in a change in the face amount;
o partial withdrawals;
o improvement in risk class assigned to the insured, but not changes from
smoker to non-smoker status; and
o addition, change or non-scheduled termination of supplemental benefits
provided through riders.
Differences Between the Tests. The cash value accumulation test and the
guideline premium test differ as follows:
o ________ The guideline premium test limits the amount of premium you may
pay into your policy, while the cash value accumulation test does not.
Premiums paid into the policy, however, remain subject to the Premium
Limitations provision.
o ________ The death benefit factors differ between the two tests. Generally,
required increases in the death benefit due to increases in the
accumulation value will be greater under the cash value accumulation test.
This also means that increases in accumulation value are more likely to
increase the net amount at risk and, therefore, the amount of the monthly
deductions for the cash value accumulation test compared to the guideline
premium test. Generally, this means your accumulation value may grow more
slowly under the cash accumulation test.
o ________ If you wish to pay premiums in excess of the guideline premium
limitation and do not wish to increase the face amount or add supplemental
coverage, you should elect the cash value accumulation test. If you do not
wish to pay premiums in excess of the guideline premium limitation, or if
you do not want to reflect increases in accumulation value to as large an
extent in the minimum death benefit, you should consider choosing the
guideline premium test.
The following example illustrates how the death benefit is determined under each
of the life insurance qualification tests. The example is for a TransAccumulator
VUL cv policy with a face amount of $250,000, issued to a male qualifying for
the preferred non-smoker risk class who is 45 years old at the time the death
benefit is calculated. The policy is assumed to be in its 10th policy year, and
we further assume that there is no policy debt on the policy, and there have
been no partial withdrawals taken. We also assume that premiums equal to $30,000
have been paid into the policy.
The death benefit factor under the assumptions listed above is 2.94 for the cash
value accumulation test and 2.15 for the guideline premium test.
For death benefit option 1, the death benefit will be the face amount of the
policy if the accumulation value is less than $85,035 under the cash value
accumulation test or less than $116,280 under the guideline premium test. If the
accumulation value is at least equal to the amounts shown, then the death
benefit would be the accumulation value times the death benefit factor:
a) 2.94 times $85,035 is $250,003. This is greater than the face amount of
$250,000.
b) 2.15 times $116,280 is $250,002. This is greater than the face amount of
$250,000.
For death benefit option 2, the death benefit will be the face amount plus the
accumulation value if the accumulation value is less than $128,867 under the
cash value accumulation test or less than $217,393 under the guideline premium
test. If the accumulation value is at least equal to the amounts shown, then the
death benefit would be the accumulation value times the death benefit factor.
a. 2.94 times $128,867 is $378,869. This is greater than the face amount
($250,000) plus the accumulation value ($128,867), or $378,867.
b. 2.15 times $217,393 is $467,395. This is greater than the face amount
($250,000) plus the accumulation value ($217,393), or $467,393.
For death benefit option 3, the death benefit will be the face amount plus the
premium (reduced by the amount of any premium refunds and by the amount of any
partial withdrawals excluding any surrender penalties) if the accumulation value
is less than $95,239 under the cash value accumulation test or less than
$130,233 under the guideline premium test. If the accumulation value is at least
equal to the amounts shown, then the death benefit would be the accumulation
value times the death benefit factor.
a. 2.94 times $95,239 is $280,003. This is greater than the face amount
($250,000) plus the premiums paid adjusted for partial withdrawals and
premium refunds ($30,000), or $280,000.
b. 2.15 times $130,233 is $280,001. This is greater than the face amount
($250,000) plus the premiums paid adjusted for partial withdrawals and
premium refunds ($30,000), or $280,000.
You should also refer to the DEATH BENEFIT provisions.
Conversions of Term Life Insurance
Policies
Owners of convertible term life insurance policies issued by us may convert
their term insurance coverage to coverage under a TransAccumulator VUL cv policy
without providing new evidence of insurability, within limits. Conversions are
subject to the provisions of any conversion option attached to the term life
insurance policy or to any change of plan option attached to certain term-like
insurance policies, and certain term policies may not be convertible to
TransAccumulator VUL cv. Generally, a conversion option permits an owner of a
term life insurance policy to replace the term life insurance coverage with up
to an equal amount of life insurance coverage issued under a TransAccumulator
VUL cv policy if the conversion occurs before the insured reaches a specified
age. The TransAccumulator VUL cv policy would be issued on the same insured at
the same underwriting class, if available under the TransAccumulator VUL cv
policy, as on the term policy, without the insured providing new evidence of
insurability. Requests for a change in underwriting class or other changes
generally will require submission to us of new evidence of insurability.
Minimum Initial Face Amount
We will generally issue a policy only if it has a face amount of basic coverage
of at least $25,000.
Supplemental Adjustable Life Insurance
Rider
Subject to our approval, you may request additional coverage under the
supplemental adjustable life insurance rider. This is optional coverage. If you
want this coverage, it may be added in association with the base policy at the
time the policy is issued. It may also be added in association with a layer at
the time a layer is issued.
The effective date of the supplemental coverage segment will be the policy
date or the layer date for the associated basic coverage segment.
The benefit to you of adding supplemental coverage under the rider rather than
adding additional basic coverage is that your accumulation value may grow more
quickly under the rider coverage. Currently, the administrative charge deducted
from premiums allocated to supplemental coverage is 3.6% of such premiums.
During the first ten years of coverage, therefore, the administrative charge we
assess on premiums each year up to target amounts is less under the supplemental
coverage rider or rider layer than under the base policy or layer. The net
premiums credited to the accumulation value of the base policy or layer are
higher under these circumstances for premiums allocated to supplemental coverage
compared to the same premium amount allocated to basic coverage with the same
target amount.. Currently, we do not assess any monthly expense charge per
thousand for supplemental coverage. These charges are lower than the equivalent
charges for basic coverage. Because the charges are lower, more accumulation
value is available on your policy which may allow your total accumulation value
to grow faster using supplemental coverage for part of your insurance coverage.
In considering supplemental coverage, however, you also need to be aware that
the surrender penalty period is longer for the rider than for basic coverage.
The surrender penalty period for the rider is the first 16 rider or rider layer
years while the surrender period for the base policy and each layer is 12 policy
or layer years.
Also, if the rider is added to your policy, you bear the risk that:
o ________ We will increase the administrative charge deducted from premiums
allocated to the rider coverage to the maximum amounts permitted under the
rider; and
o ________ We will increase the monthly expense charge per thousand to the
maximum charges permitted under the rider.
The maximum administrative charge during the first ten rider or rider layer
years is higher for premiums up to target amounts per year for premiums
allocated to the rider compared to premiums allocated to basic coverage. The
maximum monthly expense charge per thousand is higher for the rider compared to
the basic coverage for the same insured and the same face amount.
The supplemental adjustable life insurance rider may only be added to the policy
at the time of policy issue or at the time a layer is added to the policy. The
rider may only be added in association with the approval of basic coverage on
the policy. The class of risk assigned to the insured for the base policy also
applies to the insured for supplemental coverage associated with the base
policy. The class of risk assigned to the insured for a layer also applies to
the insured for supplemental coverage associated with the layer. The ratio of
supplemental coverage to basic coverage does not need to be the same for the
base policy and each layer. You may request supplemental coverage on the base
policy but not on a layer, or vice versa. Once issued, the ratio of basic
coverage and supplemental coverage on the base policy or on a layer will not
change. You may not increase or decrease coverage under the rider separately
from increases or decreases in the associated basic coverage on the base policy
or layer, as applicable.
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 approve the
application and:
o the minimum initial premium is paid to us; and
o the policy is delivered to you while:
a) the insured is 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 the insured 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.
Generally, backdating of layers is restricted to certain situations involving
the exercise of an option under the Guaranteed Insurability Rider or under the
Option for Additional Insurance, where the option is exercised within 31 days
after a policy anniversary.
Monthly deductions are based in part on the age of the insured at issue or on
the layer date, if applicable. Generally, monthly deductions are less at a
younger age. We will deduct monthly deductions for the period that the policy or
layer is backdated. This means that, while the monthly deduction may be lower
than what would have applied had we not backdated the policy or layer, you will
be paying for insurance during a period when the policy or layer 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.
Before the reallocation date, any portion of net premiums you wish to allocate
to the sub-accounts will be allocated initially to the money market 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 an
amount equal to:
o the net cash value of the policy on the valuation date we receive, in good
order, your request to cancel your policy; plus
o ________ any fees or other charges deducted from premiums paid or from
accumulation values. Such fees and charges include administrative charges,
monthly deductions and surrender penalties.
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, not
including the loan 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.
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 may not transfer amounts between the accumulation value of the base policy
and/or the accumulation value of the layers.
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 may charge up
to $25 for each additional transfer. Currently, we do not assess a transfer fee.
We reserve the right to begin assessing such fee at any time on transfers made
in excess of 18 in a policy year. Such fee would only apply to transfers subject
to the charge that are made on or after we institute the charge.
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 investment options.
The following transactions do not count toward the first 18 transfers during a
policy year 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 insured'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 or by exercising your telephone access privilege
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 at no extra charge. The DCA option is designed to reduce
the risk of purchasing units only when the price of the units is high. But you
should carefully consider your financial ability to continue the option over a
long enough period of time to purchase units when their value is low as well as
when they are high. The DCA option does not assure a profit or protect against a
loss. The DCA option will terminate automatically when the value of your money
market sub-account is zero.
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 and the set amount you want
to transfer into specified sub-accounts, the frequency of the scheduled
transfers and the date you want the transfers to begin.
o DCA transfers cannot begin:
a) before the end of the free-look period or the reallocation date;
b) less than one month after the date the initial premium was allocated to
your policy;
c) on a monthly policy date; or
d) on the same date that automatic account rebalancing transfers are made, if
you elect that option.
We reserve the right to limit further the allowable dates on which DCA
transfers may take place.
o You must have at least $1,000 in the money market sub-account on the date
of the first transfer.
o ________ The minimum automatic transfer amount from the money market
sub-account is $100.
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 be made 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 be made on that
scheduled date. When 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 value in the money-market sub-account is zero;
o the date we receive notice of the insured's death;
o the date the policy lapses;
o the date the policy is surrendered or terminated; or
o the date you request the termination of the DCA option. 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 DCA
termination request. You may submit a new request to restart 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. These balances will be restored separately on the
base policy and on each layer. You may elect to make transfers under the AAR
option quarterly, semi-annually, or annually.
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 AAR transfers cannot begin:
a) before the end of the free-look period or the reallocation date;
b) less than three months after the date the initial premium was allocated to
the policy;
c) on a monthly policy date; or
d) the same date that DCA transfers are made, if you elect that option.
We reserve the right to limit further the allowable dates on which AAR
transfers may take place.
o ________ The minimum automatic transfer amount from an investment option is
$5. If the amount of the transfer from an investment option would be less
than $5, that transfer from that investment option will not occur.
o ________ We reserve the right to discontinue this option at any time.
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 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 insured's death;
o the date the policy lapses;
o the date the policy is surrendered or terminated; or
o the date you request termination of the AAR option. 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 AAR
termination request. You may submit a new request to restart 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,
o change your monthly deductions 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.
You may not request partial withdrawals or full surrenders 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. You, as the owner, bear the risk for results of all
transactions initiated through the telephone access privilege.
DEATH BENEFIT
If the policy is in force on the date the insured dies, we will pay the death
benefit to the named beneficiary. The death benefit will be based on the option
you choose. If you do not choose a death benefit option, the Option 1 death
benefit option will automatically be in effect. We will reduce any death benefit
payable by any existing policy debt and by the portion of any grace period
premium payment necessary to provide insurance to the date of the insured'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 under the policy is
intended to qualify for the federal income tax exclusion. The provisions of the
policy and any attached endorsement or rider will be interpreted or amended to
ensure such qualification, regardless of any language to the contrary. We
reserve the right to amend the policy to reflect any clarifications that are
needed or appropriate to maintain such tax qualification or to conform the
policy to any requirements. We will send you a copy of any such amendment. If
you refuse such amendment, you must do so by giving us notice in writing, and
your refusal may have adverse tax consequences for you.
To the extent that the death benefit is increased to maintain qualification as a
life insurance policy, we will make appropriate adjustments to any monthly
deductions and any supplemental benefits (retroactively and prospectively) that
are consistent with such an increase. Retroactive adjustments to the monthly
deductions may be deducted from the accumulation value or may be made by right
of off set against any death benefits payable. Prospective adjustments to the
monthly deductions will be reflected in the monthly deduction.
Proof Of Death
If the insured dies while the policy is in force, we will pay the death benefit
after we receive due proof of the insured's death. We will send appropriate
forms to the beneficiary upon request. Any of our agents will help the
beneficiary fill out the forms without charge.
Death Benefit Options
There are three death benefit options available under the policy. You choose the
desired option in the application. The same death benefit option will apply to
the base policy and to each layer, respectively, as well as to any supplemental
coverage under the supplemental coverage rider or rider layer. If you do not
choose a death benefit option on the application, Option 1 will apply.
You may change the death benefit option by written request, subject to our
approval. Changes in the death benefit option:
o generally will be effective on the monthly policy date following the date
we approve the change;
o may not increase the net amount at risk, unless we approve the increase
based on the insured's evidence of insurability provided to us;
o will incur applicable surrender penalties if the change in option results
in a decrease in the face amount;
o ________ may result in changes in the monthly no-lapse premium amounts,
target amounts per year and guideline single and guideline level premiums,
if you chose the guideline premium test for your policy; any changes will
apply prospectively following the change; and
o may result in changes in the monthly deductions, including the monthly
expense charge per thousand.
For Option 1 (the level option), the death benefit is the greatest of:
a) the face amount of the policy on the date of the insured's death;
b) the death benefit factor multiplied by the policy's accumulation value on
the date of the insured's death; or
c) the amount required for the policy to qualify as a life insurance contract
under Code Section 7702.
For Option 2 (the plus option), the death benefit is the greatest of:
a) the face amount of the policy on the date of the insured's death, plus the
policy's
accumulation value on the date of the insured's death;
b) the death benefit factor multiplied by the policy's accumulation value on
the date of the insured's death; or
c) the amount required for the policy to qualify as a life insurance contract
under Code Section 7702.
For Option 3 (the plus premium option), the death benefit is the greatest of:
a) _______ the face amount of the policy on the date of the insured's death,
plus the excess, if any, of all gross premiums paid over the sum of any
partial surrenders, surrender penalty free withdrawals and/or premium
refunds; or
b) the death benefit factor multiplied by the policy's accumulation value on
the date of the insured's death; or
c) the amount required for the policy to qualify as a life insurance contract
under Code Section 7702.
The face amount of each coverage segment is included in item (a) for each death
benefit option. Each of the following is a coverage segment: (i) the base
policy; (ii) each layer; (iii) a supplemental coverage rider; and (iv) each
rider layer under a supplemental coverage rider.
The applicable death benefit factors will be based on the insured's age as of
the last policy anniversary and, for policies issued using the cash value
accumulation test, will also be based on the insured's sex.
We will reduce the death benefit by any existing policy debt and by the portion
of any grace period premium payment necessary to provide insurance to the date
of the insured's death.
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 policy),
and
o you want to minimize your monthly deduction costs.
Under Option 1, the accumulation value generally reduces the net amount at risk.
Since portions of the monthly deductions are based on the net amount at risk,
Option 1 results in smaller monthly deductions for the same face amount of
coverage for the same insured compared to Options 2 and 3.
Option 2 may be the preferable option for you if:
o you want a death benefit which may increase over time; and
o ________ you want the beneficiary to benefit from the potential investment
growth of the policy in addition to receiving the face amount of the
policy.
Under Option 2, your death benefit is generally the sum of the face amount of
coverage and the policy's accumulation value. If the accumulation value
increases, your death benefit will also increase. Since the net amount at risk
generally remains equal to the face amount of coverage, however, the portions of
the monthly deductions based on the net amount at risk will generally be higher
than they would be for the same insured under Option 1. Depending on the rate of
growth of your accumulation value, the monthly deductions under Option 2 may be
higher or lower than they would be under Option 3.
Option 3 may be the preferable option for you if:
o you want a death benefit which may increase over time; and
o you want the death benefit to return the premium outlay as well as the face
amount of the policy.
Under Option 3, your death benefit will increase based on your cumulative
premiums paid, reduced by any amounts you withdraw or which we refund to you.
These increases are not subject to investment return fluctuations. Depending
upon the growth of your accumulation value, the portions of the monthly
deductions based on the net amount at risk may be higher or lower than those you
would be charged under Option 2.
Transfers After Insured's Death
After we receive notice of the insured's death, we may:
o transfer any portion of the accumulation value in 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. If we do not receive a settlement option election, we will pay the
death benefit or surrender proceeds, as applicable, in a single sum. See
APPENDIX B - SETTLEMENT OPTIONS.
Option to Change the Face Amount
Increasing the Face Amount. You may request an increase in the face amount of
the policy on or after the first policy anniversary if the policy is still in
force and the insured is living and no older than age 80. The following
conditions apply:
o You must make a written request to us.
o ________ The amount of the increase in basic coverage face amount must be at
least $25,000.
o ________ You must submit evidence of insurability satisfactory to us.
o ________ The amount of the increase will be contestable and subject to the
suicide limitation for two years after the effective date of the increase
with respect to answers in the application for the increase in face amount.
o ________ The death benefit option for the layer must be the same as the base
policy.
o ________ If the base policy has a Waiver Provision, the layer must also
have a Waiver Provision, subject to our underwriting rules.
Subject to our approval, you may request that additional coverage be issued as
supplemental coverage under a supplemental coverage rider or rider layer, as
applicable. The rider or rider layer will be effective at the same time as the
layer, and the ratio of the associated supplemental coverage to basic coverage
under the layer will not change over the life of the policy. Please also refer
to Supplemental Adjustable Life Insurance Rider provision on page 60.
The increase in coverage will be issued as a separate layer on the policy. It
will generally be effective on the monthly policy date following the date we
approve the increase in face amount. The layer will have its own surrender
penalty period for 12 years, beginning on the layer date for the amount of the
increase issued as basic coverage and its own surrender penalty period for 16
years, beginning on that same date, for the amount of the increase, if any,
issued as supplemental coverage. The change in coverage will cause a change in
the net single premium, the guideline single premium, the guideline level
premium and the monthly no-lapse guarantee premium. The monthly deductions for
that layer will be based on:
o the face amount and accumulation value of the layer;
o the insured's sex;
o the insured's class of risk as of the layer date; and
o the insured's age at issue.
After the increase, the monthly deductions for the base policy and for the layer
will be based on the new total 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:
a) You make a written request to us.
b) At the request date, the policy must be in force and the insured must be
living.
c) The amount of the reduction in face amount must be at least $25,000.
d) The new face amount may not be less than our published minimum face amount.
The decrease in the face amount will be effective on the monthly policy date
next following the valuation date we approve your written request in good order.
If we approve your written request on a monthly policy date, the request will be
effective on the date we approve it.
The decrease of the face amount may cause a change in the net single premium,
the guideline single premium, the guideline level premium and any monthly
no-lapse premiums on the policy. The decrease in the face amount may cause a
change in the monthly expense charge per thousand to be charged. A decrease in
the death benefit may also require a distribution that may be taxable in whole
or in part.
The decrease will be allocated first to the most recent layer, if any. To the
extent the decrease exceeds the face amount of the most recent layer, the
additional amount of the decrease will be allocated to the next most recent
layers in order, and then to the base policy. The decrease amount is further
allocated between coverage segments within a layer or the base policy in
proportion of the face amounts for each.
The decrease in face amount will be subject to a surrender penalty on the
portion of the face amount reduction allocated to a coverage segment during the
surrender penalty period for that coverage segment.
We will deduct the surrender penalty from the accumulation values of the base
policy and any layers based on the face amount of the decrease allocated to the
base policy or the layers. If the surrender penalty for a layer exceeds the
accumulation value minus any policy debt for the layer, the excess surrender
penalty amount will be allocated to the next most recently added layers, in
order, and then to the base policy. After we have allocated the surrender
penalty among the base policy and any layers, 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. If that date is not a valuation date, we
will deduct the surrender penalty amounts on the next valuation date.
The surrender penalty for the coverage segment is equal to A times B divided by
C, where:
A ____ is the full surrender penalty for the current policy, layer, rider or
rider layer year, as applicable;
B is the amount of the requested decrease allocated to the coverage segment;
C ____ is the face amount of the coverage segment before the requested decrease.
The face amount decrease will be applied so that the ratio of basic and
supplemental coverage segments on any remaining layer total amount or base
policy total amount after the decrease will be the same as before the decrease.
If a decrease in face amount reduces a layer's face amount to zero but the
layer's accumulation value exceeds zero, we will transfer the remaining
accumulation value in the layer to the base policy accumulation value. We will
transfer the amounts in each investment option directly to the same investment
options in the base policy.
We will issue new policy data pages showing the new face amount. After the
decrease, the monthly deductions and any future surrender penalties will be
based on the new face amount of the policy.
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.
The policy will not be in force until you pay the minimum initial premium.
Subsequent premiums may be sent to our Administrative Office or you may deliver
them to our authorized representative.
After you pay the initial premium, you may make subsequent premiums payments any
time and in any amount at least equal to $25, subject to any limitations of the
life insurance qualification test you elect and other restrictions in the
Premium Limitation provision.
We will not accept any premium payments on or after the policy anniversary
nearest the insured's 100th birthday.
No-Lapse Guarantee
The policy includes a no-lapse guarantee. The no-lapse period is the first ten
policy years (first 120 policy months). The monthly no-lapse premium amounts are
shown in the policy data pages. During the no-lapse period, the policy will not
be in default and will not enter the grace period even if the monthly deductions
are more than the net cash value on a monthly policy date provided the
cumulative premium requirement is satisfied as of that monthly policy date.
Cumulative Premium Requirement
In order for the no-lapse guarantee to prevent a default on a monthly policy
date, the cumulative premiums paid must equal or exceed the sum of the monthly
no-lapse premiums due from the policy date to that date.
Cumulative premiums are:
o the sum of premiums paid; less
o any policy debt as of the monthly policy date; less
o any partial withdrawals taken or premiums refunded on or before the monthly
policy date.
If the policy contains a Waiver Provision Rider and a disability claim is
approved during the no-lapse period, we will exclude the period of time the
policy is on waiver from the above calculation. Any waiver of a monthly no-lapse
premium is subject to the terms of the policy. The no-lapse period will not be
extended.
During the no-lapse period, the monthly no-lapse premium will change if any of
the following changes occur on your policy:
o We agree to increase in the face amount;
o We agree to a decrease in the face amount;
o There is a decrease in the face amount of insurance due to a partial
withdrawal;
o We agree to add, terminate or change a rider;
o There is a change in the insured's underwriting classification; or
o ________ We agree to a change in the death benefit option.
We will adjust the monthly no-lapse premium prospectively beginning with the
date of change. The no-lapse period will not be extended.
If the policy satisfies the cumulative premium requirement and, as a result, the
policy is not in default and does not enter the grace period even though the
monthly deductions exceed the net cash value on the monthly policy date, the
death benefit will be maintained under the no-lapse guarantee provisions. All
riders, except the Supplemental Adjustable Life Insurance Rider, the Extended
No-Lapse Guarantee Rider and the Waiver Provision Rider may terminate on the
date the death benefit begins to be maintained under the no-lapse guarantee
provision.
We will continue to take monthly deductions from your accumulation value even if
the death benefit is being maintained under the no-lapse guarantee provisions.
As a result, the accumulation value and the net cash value could fall below
zero.
Premium Limitations
We reserve the right not to accept any premium payment if the premium would
immediately increase the difference between the death benefit and the
accumulation value. We may also require submission of evidence of insurability
to us before accepting such premium payment. If evidence of insurability is
required, the premium will be treated as received by us on the valuation date on
which we approve the evidence and accept the premium for credit to the policy.
We will accept any premium if failure to do 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 policy is subject to the guideline premium test in order to qualify as a
life insurance contract under the Code, the total premiums paid, less any
premium refunds, partial surrenders, excluding any surrender penalties, and
surrender penalty free withdrawals, may not exceed the greater of:
o the guideline single premium; or
o the sum of the guideline level premiums to the date of payment.
As of the end of any policy year, if the premiums paid during such policy year
exceed the amount allowable if this policy is to continue to qualify as a life
insurance contract under the guideline premium test of Code Section 7702, we
will remove the excess amount of premiums paid from the policy, with interest,
as of the end of that policy year. We will refund to you this excess amount,
including interest, within 60 days after the end of that policy year.
Under both the guideline premium and cash value test provisions, certain changes
in benefits or other terms of the contract during the first 15 policy years,
including partial surrenders and surrender penalty free withdrawals, may also
require distributions to be made from the policy to maintain the qualification
of the policy as a life insurance contract for tax purposes. These required
distributions may be taxable in whole or in part. These distributions will
reduce the total premiums paid for purposes of comparing premiums paid to
guideline premium limits.
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 your policy.
If we believe any portion of a premium payment will cause a policy to become a
Modified Endowment Contract, or MEC, under the tax laws, we will not accept that
portion of the premium payment and will immediately notify you. We will refund
the excess portion when the premium payment check has had time to clear the
banking system (but in no case more than two weeks after receipt), except in the
following circumstances:
o The premium payment would no longer cause the policy to become a MEC as of
the date the refund is to be made; or
o ________ We receive a signed acknowledgment from you before the refund date
instructing us to process the premium notwithstanding the potential tax
issues involved.
In the above cases, we will treat the excess premium as having been received on
the date the excess premium would no longer create a MEC or the date we receive
the signed acknowledgment. We will then process it accordingly. You may submit a
written authorization to us with the premium instructing us to apply the premium
to the policy even though applying that premium would cause the policy to become
a MEC. In that event, we will treat such authorization as the signed
acknowledgement noted above and will credit the net premium to the policy
according to our regular premium allocation rules.
Continuation of Insurance
If you stop paying premiums, we will continue your policy at the face amount
then in effect and with any additional benefits provided by rider, subject to
the No-Lapse Guarantee, the Grace Period and the Monthly Deductions provisions.
ALLOCATION OF PREMIUMS
We will allocate premiums among the coverage segments of the base policy and any
layers in the same proportion as the target amounts for each. We deduct
administrative charges from gross premiums based on the coverage segment to
which premiums are allocated before crediting net premiums to the accumulation
value of the base policy or the layer.
As an example, assume your policy was issued three years ago and that your
coverage includes basic coverage under the base policy and supplemental coverage
under a supplemental coverage rider. Also assume that after the first year we
approved a face amount increase as a layer of coverage and also approved an
increase in supplemental overage as a rider layer.
The target amounts for each coverage segment are assumed to be:
- ------------------ ---------------- ----------------
Target Amount
as % of Total
Assumed Target Target Amount
Coverage Segment Amount
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
Base Policy -
Basic Coverage $3,000 48%
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
Supplemental
Coverage Rider $1,000 16%
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
Layer - Basic
Coverage $750 12%
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
Rider Layer -
Supplemental $1,500 24%
Coverage
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
Total Target
Amounts $6,250 100%
- ------------------ ---------------- ----------------
To determine the percentage allocation for each coverage segment, you divide the
target amount for the coverage segment by the "total target amounts" (the sum of
the target amounts for each coverage segments and then multiply that result by
100.
Let us assume that you have made no premium payments in the current policy or
layer years. If we then assume that you make a premium payment of $8,000, we
will allocate that premium among the coverage segments as follows:
- ------------------ ---------------- ----------------
Target Amount
as % of Total Premium
Target Amount Allocated to
Coverage Segment Coverage
Segment
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
Base Policy -
Basic Coverage 48% $3,840
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
Supplemental
Coverage Rider 16% $1,280
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
Layer - Basic
Coverage 12% $960
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
Rider Layer -
Supplemental 24% $1,920
Coverage
- ------------------ ---------------- ----------------
- ------------------ ---------------- ----------------
Total Target
Amounts 100% $8,000
- ------------------ ---------------- ----------------
The administrative charge deducted from the gross premium allocated to a basic
coverage segment is 7.6% of the premium, up to the target amount each year for
the coverage segment during the first 10 years for the coverage segment. All
other premiums allocated to a basic coverage segment are assessed an
administrative charge of 3.6% of the premium.
The premium allocated to the base policy basic coverage segment is $3,840. The
target amount for the coverage segment is $3,000. The current premium is the
only premium paid for this policy year and, therefore, we will deduct an
administrative charge equal to $258.24 from the premium allocated to the base
policy basic coverage. This is equal to 7.6% of $3,000, or $228, plus 3.6% of
$840, or $30.24. Any further premiums paid during the same policy year would be
assessed an administrative charge of 3.6% since the premiums paid in this year
have exceeded the target amount for the coverage segment. Premiums received
during the next policy year, however, will again be subject to the 7.6%
administrative charge on premiums paid during that policy year, until the total
premiums paid equal the target amount for the coverage segment.
In a similar manner, the administrative charges for premiums allocated to the
other coverage segments would be determined. The premium allocated to the
supplemental coverage rider is $1,280. The target amount for the coverage
segment is $1,000. Currently, we assess an administrative charge of 3.6% on all
premiums allocated to supplemental coverage segments. The current administrative
charge is, therefore, $46.08. The maximum guaranteed charge we could charge,
however, is 8.6% of premiums up to target amounts during each of the first 10
rider years, and 3.6% on any other premiums. The maximum guaranteed charge we
could charge in this example would be $96.08. This is equal to 8.6% of the
target amount of $1,000 and 3.6% on the remaining amount of $280.
These same type calculations for the premiums allocated to the layer result in
an administrative charge of $64.56; for the current administrative charge for
premiums allocated to the rider layer of $69.12, while the maximum guaranteed
charges would be $144.12.
The premium minus the administrative charge is the net premium credited to the
base policy or layer accumulation value. In our example, the net premium
allocated to the base policy accumulation value is the net premium for the base
policy plus the net premium for the supplemental coverage rider, since the rider
coverage segment was issued at the same time as the base policy. The net premium
allocated to the base policy accumulation value, using the current
administrative charges we assess is:
o $3,840 minus $258.24; plus
o $1,280 minus $46.08; equals
o $4,815.68.
The net premium we allocate to the layer accumulation value is the net premium
for the layer plus the net premium for the supplemental coverage rider layer,
since the rider layer was issued at the same time as the layer. The net premium
we allocate to the layer accumulation value, using the current administrative
charges we assess is:
o $960 minus $64.56; plus
o $1,920 minus $69.12; equals
o $2,746.32.
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, 33 1/3% 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. We will deduct any such fee from the accumulation value of the
base policy on a pro-rata basis.
The accumulation value in 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. You
should review your allocations of premiums and accumulation value as market
conditions and your financial planning needs change.
Initial Premium
We will allocate the initial net premium 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 premium; or
o the date we approve the last delivery requirement returned to us, if the
policy was issued with delivery requirements.
Delivery requirements are 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 delivery
requirements are satisfied.
We may deduct from the initial net premium the amount of the monthly deductions
due prior to allocating the remaining net premium to your policy's accumulation
value.
Subsequent Premiums
We will allocate subsequent net premiums on the date we receive them. If the
date we receive a premium is not a valuation date, we will allocate the net
premium on the next valuation date.
Crediting of Net Premiums Before
Reallocation Date
If we credit any net premium 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
sub-accounts 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.
UNITS AND UNIT VALUES
Valuation of Units
We will allocate net premiums and transfers to the sub-accounts you have
elected. All net premiums will be allocated according to the ALLOCATION OF NET
PREMIUMS section on page 51.
Your policy will be credited with a number of units in a sub-account equal to
the amounts 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 the amount
is allocated. If day we allocate the amount 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 or a transfer allocated to the sub-account;
b) _______ reduced because of a partial surrender, surrender penalty free
withdrawal, surrender penalty, monthly deduction, policy loan, or other
charges or fees allocated to the sub-account, or because of a transfer from
the sub-account; or
c) changed by a subsequent split of a unit value.
Any transaction described in b) 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 and
determine the value of each unit.
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)
C
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 dividends declared on that valuation date.
C ____ is the number of units outstanding as of the end of the prior 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 deduct a charge for such taxes. We may reflect the amounts of such
charges in the calculation of the unit values.
ACCUMULATION VALUE
Determination of Accumulation Value
The base policy and each layer have separate accumulation values, 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 of the base policy at the time the initial premium is
accepted is equal to:
o the initial net premium; minus
o the monthly deduction(s) that start on the policy date.
The accumulation value of the base policy or a layer on any specified date after
the initial premium is allocated to the policy is equal to the sum of:
o the accumulation values in the separate account; and
o ________ the accumulation values in the fixed account, including the loan
account, for the base policy or layer on that date.
Sub-Accounts
The portion of your accumulation value in the 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 FIXED ACCOUNT.
Loan Account
Amounts you borrow 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 are
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 and after the reallocation
date, you may surrender a portion of the policy's value by sending us a written
request, subject to the limitations described below. We will deduct the
surrender amount and any surrender penalty from the policy's accumulation value
and allocate it among your investment options on the day we receive your
surrender request in good order. 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.
In any policy year, the maximum amount that you may receive by partial surrender
is:
o the accumulation value of the policy; minus
o any existing policy debt, plus estimated additional interest on existing
policy loans to the end of the policy year; minus
o three times the most recent monthly deductions; and minus
o the greater of $25 or the surrender penalty that would apply for a full
surrender of the policy.
If you request an amount larger than the maximum described above, we will treat
it as a request for a full surrender.
We will calculate the maximum partial surrender amount for the base policy and
each layer in a similar manner.
The amount of the partial surrender will be deducted from the policy's
accumulation value. This amount will be deducted from the accumulation value of
the base policy and any layers based on the proportion that the maximum partial
surrender amount for each bears to the total maximum of the partial surrender
amounts available for the base policy and all layers. Within the base policy or
a layer, we will allocate the partial surrender amount between the basic
coverage segment and any supplemental coverage segment in proportion of the
target amount for each.
The amount of a partial surrender that exceeds the amount eligible for a
surrender penalty free withdrawal, as described below, will be subject to a
surrender penalty. This amount is called the "excess amount". Surrender
penalties will apply:
o ________ during the first 12 policy years for the base policy and during
the first 12 layers years for a layer on the excess amounts attributed to
the basic coverage segment of the base policy or a layer; and
o ________ during the first 16 rider years and during the first 16 rider
layer years for a rider layer on the excess amount attributed to the
supplemental coverage rider.
We will determine the surrender penalties based on the coverage segments to
which we attribute the excess amount. This excess will be attributed first to
the most recent layer, if any. To the extent the excess is greater than the face
amount of the most recent layer (adjusted for purposes of calculating surrender
penalties to reflect the amount of any surrender penalty free withdrawal
amount), the remainder will be attributed to the next most recent layers in
order, and then to the base policy.
For each coverage segment where the amount attributed equals the face amount,
the surrender penalty will be equal to A times B divided by C, below. For each
coverage segment to which any lesser amount is attributed, the surrender penalty
will be equal to A times B divided by D below, but not more than A times B
divided by C. For purposes of these calculations:
A is the amount of the excess attributed to the base policy, layer, or any
associated supplemental coverage segment;
B is the coverage segment's surrender penalty factor for the current coverage
segment year, as applicable;
C is 1000; and
D ____ is 1000 minus the coverage segment's surrender penalty factor for the
current coverage segment year.
We calculate surrender penalties separately for the basic coverage and for any
associated supplemental coverage segment within the base policy or a layer. The
surrender penalties for the base policy or a layer are the sum of the surrender
penalties for the basic coverage plus the surrender penalties for the
supplemental coverage, if any, associated with the base policy or layer.
The surrender penalty factors for the base policy, layers and any associated
supplemental coverage segments vary by policy year, layer year, rider year
and/or rider layer year and are shown in the policy data pages. However, if the
sum of the surrender penalties for the base policy and any layers, and all
associated supplemental coverage segments, is less than $25, the surrender
penalty will be $25.
We will deduct the surrender penalty first from the accumulation value of the
newest layer. If the accumulation value of that layer is insufficient, we will
deduct the remainder successively from the next most recent layer(s), and then
from the base policy. After we have allocated the surrender amount and surrender
penalty among the base policy and any layers, we will deduct the allocated
amounts from your investment options on a pro-rata basis.
We may permit you to specify the investment options from which the partial
surrender and surrender penalties, if any, are to be deducted. Such
specifications must be in a form and manner acceptable to us. If any part of
your specified allocation cannot be processed, we will reject the entire request
and not process any portion of the partial surrender. For example, if you
elected to allocate a portion of the partial surrender to a sub-account that, in
fact, had no accumulation value in it, we would reject your request. In this
event, we will notify you and will require a new instruction from you before
processing the partial surrender request. Your partial surrender request will be
effective on the valuation date on which we receive your new request.
If you have one or more layers on the policy, your partial surrender may only be
allocated pro-rata. You will not be permitted to specify the investment options
from which you want to allocate the partial surrender amount.
If you chose Death Benefit Option 1, we will also reduce the face amount of the
most recent layer and any associated supplemental coverage segment by the amount
of the partial withdrawal. If the amount of the reduction exceeds the face
amount of the most recent layer, including the face amount of any associated
supplemental coverage segment, the excess amount will reduce the face amount of
the next most recently added layers, in order, and then the face amount of the
base policy.
If you chose Death Benefit Option 3, we will also reduce the face amount of the
most recent layer and any associated supplemental coverage segment by:
a) _______ the partial withdrawal amount, not including any surrender
penalties, that exceeds the cumulative gross premiums paid minus the sum of
all previous partial withdrawals (not including surrender penalties) and
premium refunds; and
b) the amount of the surrender penalties on the partial withdrawal.
If the amount of the reduction exceeds the face amount of the most recent layer
and any associated supplemental coverage segment, the excess amount will reduce
the face amount of the next most recently added layers, in order, and then the
face amount of the base policy, along with the face amounts of any associated
supplemental coverage segments.
The face amount decrease, including reductions for surrender penalties, will be
applied so that the ratio of basic and supplemental coverage segments on any
remaining layer total amount or base policy total amount after the decrease will
be the same as before the decrease.
If the new face amount would be less than our minimum allowed, then we will not
allow the partial surrender.
The accumulation value, if any, remaining on a layer after that layer's face
amount is reduced to zero will be transferred to the base policy.
Surrender Penalty Free Withdrawals
After the first policy year, a portion of any partial surrender amount you
request over $100 is available without surrender charges. The amount available
is:
o 10% of the accumulation value, minus
o 100% of the sum of all surrender penalty free withdrawals since the last
policy anniversary.
This amount may not exceed the maximum amount available as a partial surrender.
There may be important tax consequences of making a partial surrender of the
policy. Consult with a tax adviser regarding these tax consequences.
NONFORFEITURE OPTION - FULL
SURRENDER
You may surrender the policy at any time for its net cash value. The surrender
penalty for a full surrender of the policy is equal to the surrender penalty, if
any, for the base policy, plus the surrender penalty, if any, for each layer,
plus the surrender penalties, if any, for any supplemental coverage rider or
rider layer.
The surrender penalty factors for your policy, layers, the supplemental cover
rider and rider layers appear in the policy data pages. We will use the factors
to determine the surrender penalty we will apply.
To calculate the surrender penalty for the base policy and any layer, find the
factor for the current policy year or layer year. Multiply this factor by the
number of thousands of face amount of the base policy or layer. This is the
surrender penalty for that coverage segment. There is no surrender penalty for
the base policy or a layer after the first 12 policy years or layer years.
To calculate the surrender penalty for any supplemental coverage rider or rider
layer, find the surrender penalty factor for the current rider year or rider
layer year. Multiply this factor by the number of thousands of face amount of
the supplemental coverage rider or rider layer. This is the surrender penalty
for that coverage segment. There is no surrender penalty for the supplemental
coverage rider or rider layer after the first 16 rider years or rider layer
years.
We will process the surrender on the day we receive your written request in good
order. If that date is not a valuation date, then the request will be effective
on the next following valuation date.
If you request a full surrender within 30 days after a policy anniversary, the
net cash value of the fixed account will not be less than the net cash value of
the fixed account on that anniversary less any policy debt, partial surrenders,
including any surrender penalty, surrender penalty free withdrawals and
transfers, including transfer fees, deducted from the fixed account after than
anniversary.
There may be important tax consequences of taking a full surrender of the
policy. Consult with a tax adviser regarding these tax consequences.
POLICY LOANS
You may borrow any portion of the net cash value of the policy. We will process
a loan on the day we receive your loan request in good order. If that day is not
a valuation date, we will process the loan on the next valuation date.
We will require the written consent of any irrevocable beneficiaries.
There are two types of policy loans, preferred loans and regular loans.
Preferred loans are:
o all existing and new policy loans beginning on the tenth policy anniversary
(the start of the 11th policy year); and
o loans to pay the policy loan interest due on preferred loans.
Regular loans are policy loans that do not qualify as preferred loans. During
the first ten policy years, all requested loans are regular loans. Loans taken
to pay loan interest on regular loans will also be processed as regular loans.
The following terms and conditions apply to policy loans:
o ________ The maximum loan amount is the policy's accumulation value as of
the date of the loan request, minus the total of:
a) any existing policy debt plus estimated additional interest on existing
policy loans to the end of the policy year; plus
b) interest on the amount of the requested loan to the end of the policy year;
plus
c) _______ the surrender penalty that would be assessed on a full
surrender of the policy or, if greater, two monthly deductions for the
base policy and for all layers.
We will calculate the maximum loan amount for the base policy and each
layer in a similar manner.
o ________ We will allocate the requested loan amount to the base policy and
any layers in the same proportion that the maximum loan amount for each
bears to the total of the maximum loan amounts for the base policy and all
layers. We will then deduct the allocated amount from the base policy's or
layer's investment options on a pro-rata basis, unless you specify, in a
form and manner acceptable to us, the investment options to which you want
to allocate the loan amount. We will transfer the loan amount to the loan
account.
If any part of your specified allocation cannot be processed, we will
reject the entire request and not process any portion of the loan request.
For example, if you elected to allocate a portion of the loan to a
sub-account that, in fact, had no accumulation value in it, we would reject
your request. In this event, we will notify you and will require a new
instruction from you before processing the loan request. The loan request
will then be effective on the valuation date on which we receive your new
request.
If you have one or more layers on your policy, your loan may only be
allocated pro-rata. You will not be permitted to specify the investment
options from which you want to allocate the loan amount.
o ________ We will credit loan interest to the policy on the outstanding loan
amount in the loan account. For preferred loans, we will credit interest at
an annual effective interest rate of no less than 7.75%. For regular loans,
we will credit interest at an annual effective interest rate of no less
than 6.75%. The loan account is part of the fixed account. The loan account
includes outstanding loans.
o ________ Interest on policy loans accrues daily and is charged in arrears
on the policy anniversary, or, if earlier, the date the policy lapses or
otherwise terminates, or the date of the insured's death. The annual
effective loan interest rate is 8.0%. This rate applies to both preferred
loans and to regular loans. We may charge a lower rate. We will never
charge a higher interest rate. If you do not pay interest when it is due,
we will add the amount of the interest to the loan.
We will allocate any loan interest due on the policy anniversary (or
earlier, if applicable) to the base policy and any layers in the same
proportion that the outstanding loan amount for each bears to the
outstanding loan amount for the policy. We will then deduct the allocated
amount from the base policy's or layer's investment options on a pro-rata
basis. We will transfer the loan interest to the loan account. The loan
interest will become part of the loan.
o ________ If the insured dies, we will deduct the policy debt from the death
benefit before we pay the death benefit to the beneficiary.
Loan Repayment
You may repay any part of the policy debt at any time while the insured is
living. We will allocate the loan repayment on the day we receive it. If that
day is not a valuation date, we will allocate it on the next valuation date.
If you want to make a loan repayment, you must tell us that the payment you send
us is for that purpose. Unless your payment is clearly marked as a loan
repayment, we will assume it is a premium payment if it is received before the
policy anniversary nearest the insured's 100th birthday. When we receive a loan
repayment, we will apply it to the outstanding loan. The loan repayment will be
allocated first to the most recent portion of the outstanding loan and then to
the next most recent portions. For each such portion of the loan being repaid,
the loan repayment is first allocated to the portion of that loan amount in the
base policy, and then successively to any layers in the order of their layer
dates. After we have allocated the loan repayment among the base policy and any
layers, we will allocate those amounts to your investment options according to
the allocation percentages provided in the most recent premium allocation
election we have received from you.
Your policy will not automatically lapse if you do not repay a loan. However, it
will go into default if the net cash value is not large enough to cover the
monthly deduction due and any loan interest due that is not paid in cash.
Loan Interest
On each policy anniversary, we will calculate the interest due on any
outstanding loans and add it to the loan balance. Interest on loans is due on
the policy anniversary at the annual effective rate of 8.0%. This is the maximum
guaranteed loan interest rate we will charge. This is the rate we currently
charge. We will deduct the loan interest from your investment options on a
pro-rata basis, and then transfer the loan interest to the loan account. We do
not allow you to elect an allocation for a loan taken to pay loan interest due.
The loan interest deduction and transfer will be effective on the policy
anniversary if that day is a valuation date. If the policy anniversary is not a
valuation date, the loan interest deduction and transfer will be effective on
the next valuation date. You may choose to pay an amount equal to the loan
interest due in cash. Any amount paid will be credited to the policy debt at the
time it is received.
Effect of Policy Loans
Policy loans will affect the accumulation value and net cash value, and may
permanently affect the death benefit. The effect could be favorable or
unfavorable, depending on whether the investment performance of the underlying
portfolios in which the sub-accounts are invested 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 policy debt from the proceeds payable upon a full surrender
or when the insured dies. The policy will be in default, will enter the grace
period and may lapse at the end of that period if the net cash value is not
large enough to cover the monthly deduction due and any loan interest due that
is not paid in cash. As a result, increases in the outstanding loan and/or
decreases in the accumulation value may make it more likely that your policy
will lapse. Assuming you do not make loan repayments, the outstanding loan will
increase if you receive additional loan amounts from your policy. The
outstanding loan amount will also increase if you do not pay loan interest due
in cash. Monthly deductions reduce your accumulation value. Your accumulation
value, net of outstanding loans, will decrease if you take additional loans from
your policy or you take partial surrenders from your policy or, in certain
situations, you decrease the face amount of your policy. The accumulation value
in a sub-account on the policy may decline based on the investment performance
of the underlying portfolio.
In the event the policy lapses or is otherwise terminated while a policy loan is
outstanding, the policy debt will be treated as cash received from the policy
for income tax purposes. Any cash received, that is, the outstanding policy loan
and accrued loan interest 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
If the policy goes into default, 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 base policy, any layers and any supplemental coverage rider and rider layers
in force. You must pay this amount before the grace period ends. The grace
period is a period of 61 days beginning on the date we send you the notice. If
you do not pay enough, your policy will lapse at the end of the 61 days and your
insurance coverage under the policy and any riders will terminate.
The policy will go into default on a monthly policy date if the net cash value
is less than the monthly deductions due, unless:
o the policy is in its no-lapse period; and
o the cumulative premium requirement is satisfied.
The amount you must pay to bring the policy out of default is equal to A plus B
plus C, where:
A ____ is the amount necessary to bring the net cash value to zero, if it is
less than zero at the date of default;
B is an amount equal to five times the monthly deduction due on the date of
default; and
C ____ is an amount sufficient to cover the administrative charges associated
with the premiums under A and B above.
The amount equal to five times the monthly deduction due on the date of
default includes the two monthly deductions due for the insurance provided
during the grace period plus three monthly deductions due when the policy
is brought out of default.
If the policy goes into default during the first ten policy years (the no-lapse
period), you may pay the following alternative amount to bring the policy out of
default if this amount is less than the amount stated above. This alternative
amount is equal to D plus E, where:
D ____ is the amount, if any, necessary to satisfy the cumulative premium
requirement for the no-lapse period on the date of default; and
E ____ is the amount equal to three times the monthly no-lapse premium amount.
The policy will also go into default if the policy debt exceeds the accumulation
value or, beginning with the policy anniversary nearest the insured's 100th
birthday, the loan interest due on a policy anniversary is not paid in cash and
the accumulation value less the outstanding loans is less than the loan interest
due.
During the grace period, we will not charge you interest on the amount due. If
the insured dies during the grace period and before you pay the amount due, we
will subtract the amount required to provide insurance to the date the insured
died from the death benefit.
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 age 100.
o ________ The insured must submit evidence of insurability satisfactory to us.
o ________ The reinstated policy will be subject to the no-lapse provisions
during the no-lapse period. Any increase in the face amount of the base
policy will also be subject to the no-lapse provisions during the policy's
no-lapse period. The no-lapse period will be calculated from the original
policy date. It does not start over.
If the policy lapsed during the 10 year no-lapse period and is reinstated
before the end of that period, you must pay a premium equal to the lesser
of A or B, where:
A ___ is the amount necessary to satisfy the cumulative premium
requirement as of the date of reinstatement, plus an amount equal to
three monthly no-lapse premiums; and
B is an amount equal to:
(i) the amount that was required to bring the net cash value to zero on the
date the policy went into default; plus
(ii) _____ an amount sufficient to cover the two monthly deductions
that were due when the policy lapsed and three monthly deductions
due when the policy is reinstated; plus
(iii) ____ an amount sufficient to cover the administrative charges associated
with the reinstatement premium.
The amount equivalent to the two monthly deductions due when the policy
lapsed will be used to reimburse us for the insurance provided during
the grace period.
If the policy is reinstated after the end of the first ten policy years (the
no-lapse period), you must pay a premium equal to B above.
If any loans existed when the policy lapsed, you must repay or reinstate the
policy debt, with interest. Interest will be compounded annually from the date
of lapse at the loan reinstatement interest rate of 8%.
Surrender penalty periods in the reinstated policy and supplemental coverage
rider, if any, will be calculated from the original policy and layer dates, as
applicable, as well as the original rider and rider layer dates for any
supplemental coverage rider.
The effective date of a reinstatement will be the date we approve your request.
We will resume taking monthly deductions for the policy as of the nearest
monthly policy date. If a person other than the insured is covered by any
attached rider, that person's coverage may be reinstated under the reinstatement
terms of that rider.
The accumulation value of the reinstated policy will be:
o any surrender penalty assessed 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.
If the Supplemental Adjustable Life Insurance Rider was effect on your policy at
the time the policy lapsed, the rider and any rider layer will be reinstated
when the policy is reinstated. At reinstatement, the face amount of the rider or
any rider layer will be the same as at the time of lapse, and the ratio of basic
coverage segments and associated supplemental coverage segments will be the same
as at the time of lapse. The rider and any rider layers may only be reinstated
together with the policy, and they must be reinstated if the policy is
reinstated.
We will allocate any loan repaid 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 at reinstatement between the base
policy and any layers in the same proportion as these amounts were deducted at
the time of lapse. We will then allocate the base policy and layer amounts 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 reinstatement premium and any other
payments.
OTHER BENEFITS
Other benefits are available under the policy by riders or endorsements attached
to the policy. Any costs of these riders become part of the monthly deductions,
unless we specify otherwise. Benefits provided by the riders and endorsements
are payable only if the policy and the rider or endorsement is in force at the
time the benefit is exercised. All riders and endorsements may not be available
in all jurisdictions, and the names of the riders and endorsements may vary by
jurisdiction.
Supplemental Adjustable Life Insurance
Rider
This rider provides a death benefit in addition to the basic coverage under the
policy. While the rider is in force and subject to the terms of the rider and
the policy, we will pay the rider death benefit after we receive due proof that
the insured's death occurred while the rider was in force. The rider death
benefit will be payable to the same person, and in the same manner, as the death
benefit.
For purposes of the rider, the following definitions will apply:
Age at Issue is the insured's age on the rider date for the rider or on the
rider layer date for a rider layer.
Monthly Deduction for the rider is an amount we withdraw from the accumulation
value of the base policy and the accumulation value of each layer as described
in the Rider Monthly Deductions provision.
Reinstate means to restore coverage after the policy and the rider have lapsed.
Death Benefit. The face amount of the rider is shown in the policy data pages.
The rider death benefit consists of the difference between:
o ________ the death benefit generated by including the rider face amount and
the face amount of any rider layers in the "face amount" in the
calculations shown in the Death Benefit Option provisions; and
o the death benefit that would be generated by excluding such amounts.
Monthly Deduction. The rider monthly deduction is the sum of the monthly
deductions for the rider and for each rider layer.
The monthly deduction for the rider, if the rider is part of the base policy
total amount, is equal to:
a. the monthly deduction rate for the rider, times .001, multiplied by:
o the net amount at risk for the base policy total amount on the applicable
monthly deduction date, multiplied by
o the ratio of the face amount of the rider to the base policy total amount;
plus
b. The monthly expense charge per thousand for the rider.
The monthly deduction for the rider, if the rider is part of a layer total
amount, is equal to:
a. the monthly deduction rate for the rider, times .001, multiplied by:
o the net amount at risk for the layer total amount on the applicable monthly
deduction date, multiplied by
o the ratio of the face amount of the rider to the layer total amount; plus
b. The monthly expense charge per thousand for the rider.
The monthly deduction for a rider layer is equal to:
a. the monthly deduction rate for the rider layer, times .001, multiplied by:
o the net amount at risk for the layer total amount on the applicable monthly
deduction date, multiplied by
o the ratio of the face amount of the rider layer to the layer total amount;
plus
b. the monthly expense charge per thousand for the rider layer.
We will determine the monthly deduction rate for the rider and each rider layer
on each monthly policy date. The monthly deduction rate for the rider and each
rider layer will depend on:
o the insured's sex;
o the insured's class of risk as of the rider date or rider layer date;
o the number of years that the rider or rider layer has been in force; and
o the insured's age at issue.
A table of guaranteed maximum monthly deduction rates for the rider and each
rider layer will be shown in the policy data pages or in supplemental policy
data pages. We may use rates lower than these guaranteed maximum monthly
deduction rates. We will never use higher rates.
Monthly Expense Charge Per Thousand. For the rider, this charge is equal to the
monthly expense charge per thousand for the rider, times .001, times the rider
face amount. For a rider layer, this charge is equal to the monthly expense
charge per thousand for the rider layer, times .001, times the rider layer face
amount. The guaranteed maximum monthly expense charge per thousand for the rider
or for each rider layer is shown in the policy data pages. We may assess lower
charges than the guaranteed maximum monthly expense charge. We will never assess
a higher charge than the one shown.
Increasing the Face Amount. If you increase the total face amount of the policy,
a new layer will be added to the policy. Subject to our rules, you may allocate
a portion of the increase to a new rider layer.
The new rider layer will have its own surrender penalty period for 16 years,
beginning on the rider layer date. The monthly deduction for the new layer will
take into account:
o the total face amount of the policy;
o the insured's sex;
o the insured's class of risk as of the rider or rider layer date;
o the insured's age on the rider layer date; and
o how long the rider or rider layer has been in force.
We will issue new policy data pages showing the face amount of the new rider
layer. After the increase, the monthly expense charge per thousand for the rider
and any rider layers will be based on the new total face amount of the policy,
including the rider and any rider layers.
Effect of Face Amount Increase. If the face amount of the rider or the rider
layer is increased during the no-lapse period for the policy, the monthly
no-lapse premiums on the policy will be recalculated for the remainder of the
no-lapse period. The no-lapse period for the policy will not be extended. The
increase in the face amount of the policy may cause a change in the monthly
expense charge per thousand.
Decreasing the Face Amount. The rider or rider layer face amounts may be
decrease according to the Decreasing the Face Amount provisions for the policy.
Any decrease of the face amount of the rider or a rider layer may cause a change
in the maximum monthly expense charge per thousand and the maximum monthly
expense charge per thousand to be charged for the rider or rider layer.
A surrender penalty will apply on the amount of the face amount reduction
allocated to the rider during the first 16 rider years or to a rider layer
during the first 16 rider layer years. Surrender penalties will be determined as
described in the Decreasing the Face Amount provisions for the policy. There are
Tables of Surrender Penalty Factors for the rider in the policy data pages. We
will use these factors to determine the surrender penalty we will apply. There
is no surrender penalty after 16 rider or rider layer years.
The face amount decrease will be applied such that the ratio of basic and
supplemental coverage segments on any remaining layer total amount or base
policy total amount after the decrease will be the same as before the decrease.
We will issue new policy data pages showing the new rider face amount and any
new rider layer face amounts. After the decrease:
o ________ The monthly expense charge per thousand for the rider or for a
rider layer will be based on the new total face amount of the policy; and
o ________ Any future surrender penalties for the rider or any rider layer
will be based on the new face amount of the rider or rider layer.
Effect of Face Amount Decrease. If the face amount of the rider or a rider layer
is decreased during the no-lapse period for the policy, the monthly no-lapse
premiums on the policy will be recalculated for the remainder of the no-lapse
period. The no-lapse period will not be extended. The decrease in the face
amount of the policy may cause a change in the monthly expense charge per
thousand to be charged.
Surrenders and Surrender Penalties. A partial surrender or surrender penalty
free withdrawal may result in a reduction in the face amount of the rider or of
a rider layer, as provided in the Partial Surrender provisions.
If a partial withdrawal results in a reduction in the base policy total amount
or any layer total amount, the reduction will be applied so that, for any
remaining base policy total amount or any remaining layer total amount, the
ratio of basic coverage to supplemental coverage will be the same as before the
reduction.
During the first 16 rider or rider layer years, we will assess a proportionate
surrender penalty on any surrender amount that is attributable to the rider or
to a rider layer. Surrender penalties will be determined as described in the
Partial Surrender section. There are Tables of Surrender Penalty Factors for the
rider and rider layers in the policy data pages. We will use the factors in the
table to determine the surrender penalty we will apply. There is no surrender
penalty after 16 rider layer years.
A full surrender of the policy under the NONFORFEITURE OPTION - FULL SURRENDER
will result in a surrender penalty being assessed on any surrender amount that
is attributable to the rider during the first 16 rider years, or to a rider
layer during the first 16 rider layer years.
To calculate the surrender penalty for the rider, find the surrender factor for
the current rider year. Multiply this factor by the number of thousands of rider
face amount. This is the surrender penalty for the rider. There is no surrender
penalty for the rider after the first 16 rider years.
To calculate the surrender penalty for a rider layer, find the surrender factor
for the current rider layer year. Multiply this factor by the number of
thousands of rider layer face amount. This is the surrender penalty for the
rider layer. There is no surrender penalty for a rider layer after 16 rider
layer years.
Guaranteed Exchange Option. In addition to the conditions in the Guaranteed
Exchange Option section, the following conditions will also apply.
If the policy includes any supplemental coverage under the rider and the new
policy allows for a supplemental coverage rider, the minimum initial premium for
the new policy will be determined with reference to the required annual premiums
for the basic coverage and for the supplemental coverage under the new policy.
If the policy includes any supplemental coverage under the rider and the new
policy also allows for a supplemental coverage rider, the surrender penalty
period offset under the new policy will be determined with reference to the
surrender penalty periods for the basic coverage and for the supplemental
coverage under the policy.
Amount We Pay is Limited in the Event of Suicide. If the insured dies by
suicide, while sane or insane, within two years from the issue date of the
rider, we will be liable only for the amount of premiums paid for the rider. If
you request an increase in the face amount of the rider, this suicide provision
will start anew, beginning on the rider layer date, but any extension of the
original exclusion period will be applicable only to the face amount of that
rider layer.
Misstatement of Age or Sex in the Application. If there is a misstatement of the
insured's age or sex in the application, we will adjust the excess of:
o the portion of the policy's death benefit that is attributable to the rider
over
o the portion of the policy's accumulation value that is attributable to the
rider
to that which would be purchased by the most recent monthly deduction at the
correct age or sex.
Termination of Insurance. The rider will terminate when the policy terminates.
If the rider is issued with a rider date that is the same as a layer date, the
rider will terminate when the layer total amount is reduced to zero.
Reinstatement. The rider is subject to the REINSTATEMENT provision. When
reinstated, the face amount of the rider or any rider layer will be the same as
at the time of lapse.
No Cash Value or Dividends. This rider has no cash value and does not
participate in our profits or surplus.
Extended No-Lapse Guarantee
This rider provides an extended no-lapse guarantee for the policy. During the
extended no-lapse guarantee period and while the rider is in force, the policy
will not enter the grace period even if the monthly deductions are greater than
the net cash value on a monthly policy date, provided the cumulative premium
requirement is satisfied as of that monthly policy date. You elect to add this
rider at the time of issue if you request it on your application and you select
the level death benefit option (Option 1). There is a monthly deduction for this
rider, and your monthly deductions will increase to reflect the cost of the
rider. In addition, to keep the rider in force, you must meet a cumulative
premium requirement each monthly policy date. The monthly extended no-lapse
premium amount varies by policy and is shown in the policy data pages.
Cumulative Extended Premium No-Lapse Requirement. To keep the rider in force,
you must meet the following cumulative premium requirement. On the policy date
and each succeeding monthly policy date, the cumulative premiums paid must equal
or exceed the sum of the monthly extended no-lapse guarantee premiums to that
date.
Cumulative premiums are:
o the sum of premiums paid; less
o any policy debt as of the monthly policy date; less
o any partial withdrawals taken or premiums refunded on or before the monthly
policy date.
If the policy contains a waiver provision rider and a disability claim is
approved during the extended no-lapse period while the rider is in force, the
monthly extended no-lapse premium will be waived for the same length of time
that the policy is on waiver. Any waiver of a monthly extended no-lapse premium
is subject to the terms of this rider. The extended no-lapse period will not be
extended.
During the extended no-lapse period, the monthly extended no-lapse premium will
change if any of the following changes occur on your policy:
o we agree to an increase in the face amount;
o we agree to a decrease in the face amount;
o there is a decrease in the face amount due to a partial withdrawal;
o we agree to add, terminate or change a rider; and
o there is a change in the insured's underwriting classification.
We will adjust the monthly extended no-lapse premium prospectively starting with
the date of change. The extended no-lapse guarantee period will not be extended.
If the extended no-lapse guarantee causes the policy not to be in default, the
following will apply:
o ________ Provided you continue to satisfy the cumulative premium
requirement, the death benefit under the policy will be maintained under
the rider until the monthly policy date when the net cash value exceeds the
monthly deductions then due or until the end of the extended no-lapse
period, whichever is earlier. If the death benefit is begin maintained
under the rider on the policy anniversary nearest age 100, it will continue
to be maintained.
o ________ All other riders except the Supplemental Adjustable Life Insurance
Rider and any Waiver Provision Rider will terminate.
o ________ We will continue to take monthly deductions from your accumulation
value even if the death benefit is being maintained under the rider. As a
result, your accumulation value and your net cash value could fall below
zero.
o ________ The policy may still go into default if the policy debt ever exceeds
the accumulation value.
Monthly Rider Charge. There is a monthly charge of $0.06 for each $1,000 of face
amount of the policy to which this rider applies. Face amount of the policy
includes the face amount of the base policy, each layer, any supplemental
coverage rider, and each rider layer under a supplemental coverage rider. This
charge is taken monthly on the monthly policy date. If that date is not a
valuation date, the charge will be taken on the next valuation date. The charge
is a monthly rider deduction described in the Monthly Deductions section.
Automatic Termination. The rider will terminate on the first of the following:
o the policy terminates for any reason;
o failure to meet the cumulative premium requirements on a monthly policy
date;
o you change the death benefit option from Option 1 to any other option; and
o the extended no-lapse guarantee period ends.
Reinstatement. If the rider terminates solely because the cumulative premium
test was not met, you may reinstate the rider within 30 days of the termination
date.
To reinstate the rider, you must, within 30 days of the termination date:
o request reinstatement in writing; and
o pay us the premium required to reinstate the rider.
The premium required to reinstate the rider is equal to A plus B, where:
A is the amount required to satisfy the cumulative premium requirement as of
the termination date; and
B ____ is an amount equal to two times the monthly extended no-lapse premium.
Reinstatement of the rider will be subject to all of the other provisions of
this section.
Cancellation. You may cancel the rider by written request. Cancellation will be
effective on the monthly policy date following the date we receive your written
request to cancel the rider.
Accelerated Death Benefit Option
Endorsement
This endorsement provides for the payment of an accelerated death benefit if we
receive satisfactory evidence that the insured has a terminal illness that is
expected to result in the insured's death within 12 months. Other conditions
apply which determine whether an accelerated death benefit is payable.
There is no charge for the endorsement unless an accelerated death benefit is
paid. There is a charge of $250, deducted from each accelerated death benefit
payment, each time the benefit is paid. Adding the endorsement does not increase
your monthly deductions.
This endorsement will be added to your policy at issue as long as the
endorsement is approved in the state in which you apply for the policy and the
face amount of your policy is at least $50,000. Exercising the option and
receiving an accelerated death benefit will permanently affect the remaining
death benefit under the policy, resulting in a reduction of the policy's
accumulation value and a decrease in the net single premium and the guideline
premium limits.
Note. Any amount payable under this option is intended to qualify for federal
income tax exclusion to the maximum extent possible. 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. Benefits under some
business related policies 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 death benefit for all policies insuring
the insured that were issued by us as of the first accelerated death
benefit payment.
The maximum amount applies cumulatively to all policies issued by us.
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 debt.
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.
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 insured's name and the policy number and must be
signed and dated by you, the owner. 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 insured 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 insured'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 insured or member of either your or the
insured'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 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 monthly
no-lapse 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 policy layers, if any, beginning with the most recently added layer; 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
additional medical opinions and to have the insured 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 insured 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 insured'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 insured's terminal illness.
Guaranteed Insurability Rider
This rider allows you to apply for additional insurance on the insured without
providing evidence of insurability. The rider may only be added at the time of
application for the policy and is available to insureds between the ages of 0
and 33 who meet our underwriting requirements on the policy date. There is an
additional charge for this rider and the monthly no-lapse premiums and monthly
deductions for the policy will be increased as a result. You may apply for the
additional insurance on the available option dates and such insurance may be on
any plan of level premium, level face amount whole life, endowment or flexible
premium life insurance we are offering on the option date. The additional
insurance may be issued as a new layer on your TransAccumulator VUL cv policy.
You may cancel this rider by sending us a written request for cancellation. The
rider will terminate as of the monthly policy date following our receipt of your
cancellation request.
This rider will automatically terminate:
o if any premium remains unpaid after the end of the grace period; or
o when the policy is surrendered; or
o if the policy terminates; or
o ________ on the policy anniversary nearest insured's age 40, or when the
maximum number of options have been exercised, whichever is sooner.
Accident Indemnity Rider
This rider provides an accidental death benefit if it is effect on the date the
insured dies as a result of accidental bodily injury. The rider is available for
insureds who meet our underwriting requirements and are between the ages of 5
and 65 on the policy date. The rider is only added to your policy if you apply
for it and we approve your request. There is an additional charge for this rider
and the monthly no-lapse premiums and monthly deductions for the policy will be
increased as a result.
The accidental death benefit under the rider is in addition to any death benefit
under the policy. The amount of the rider is shown in the policy data pages. The
death benefit under the rider will be twice the amount shown in the policy data
pages if the insured dies as a result of bodily injury sustained while the
insured was a fare-paying passenger on a common carrier. There are various
limitations on causes of death which qualify for death by accidental injury.
You may cancel the rider on any monthly policy date by sending us a written
request for cancellation.
This rider will automatically terminate:
o if any premium for the rider remains unpaid after the end of the grace
period;
o if the policy is surrendered;
o when the policy terminates or matures; or
o at the policy anniversary nearest the insured's age 70.
Waiver Provision Rider
This rider provides that we will waive each monthly deduction due immediately on
or after the insured's 10th birthday if the insured becomes totally disabled.
While monthly deductions are being waived, premium payments are not required.
The rider is available to insureds who meet our underwriting requirements and
are between the ages of 0 and 55 on the policy date. There is an additional
charge for this rider and the monthly no-lapse premiums and monthly deductions
for the policy will be increased as a result. For purposes of this benefit, a
disability is considered to be total when the insured becomes so disabled by
injury or disease that he or she is unable to perform substantially all of the
material duties of any gainful work for which the insured is, or becomes, fitted
by reason of education, training or experience. If the insured is a student,
then "any gainful work" includes going to school. A total disability includes
the insured's loss of sight in both eyes, or the use of both feet or both hands,
or of one hand and one foot. The beginning of total disability will be the
beginning of the disability which totally disables the insured for not less than
six months. We will not pay any benefit under the rider if the insured's total
disability results directly or indirectly from:
o intentionally self-inflicted injury;
o participation in an insurrection; or
o war, declared or undeclared, or any act of war.
Benefits will end if the insured is no longer totally disabled, or if the
insured does not give us due proof, or refuses to submit a requested medical
examination.
You may cancel the rider on any monthly policy date by sending us a written
request for cancellation.
This rider will automatically terminate:
o if the policy is surrendered;
o if the policy lapses.
o at the policy anniversary nearest age 60 of the insured, subject to any
claims under the rider.
Insurance on Children Rider
This rider provides for a benefit to be paid if a covered child dies before his
or her 25th birthday and before the policy anniversary nearest the insured's age
65. It is available on insureds who meet our underwriting requirements and are
between the ages of 16 and 55 on the policy date. There is an additional charge
for this rider and the monthly no-lapse premiums and monthly deductions for the
policy will be increased as a result.
Under this rider, you purchase term insurance for any child we approve for
coverage under the rider. The term insurance is convertible to permanent plans
of insurance we make available for this purpose. Conversion privileges exist
when the child reaches age 25 or the policy anniversary nearest the insured's
65th birthday, provided the rider is in force on those dates.
You may cancel this rider on any monthly policy date by sending us a written
request for cancellation. This rider will automatically terminate:
o if any premium remains unpaid after the grace period;
o when the policy is surrendered;
o if the policy terminates;
o on the policy anniversary nearest age 65 of the insured;
o at the insured's death, subject to the provisions for paid-up term life
insurance;
o on the child's 25th birthday; or
o when all or part of such insurance is converted.
Extra Surrender Penalty Free Withdrawal
Endorsement
This endorsement allows you to take an extra surrender penalty free withdrawal
after the first policy year, in addition to the standard penalty free withdrawal
amount. The endorsement will be added to your policy at issue if it has been
approved in the state in which you apply for the policy. There is no additional
charge for this endorsement. You may request an extra surrender penalty free
withdrawal if you send us satisfactory written proof that the insured requires
medical care for one of the following conditions:
o heart attack;
o stroke;
o cancer (malignant tumor);
o renal failure; or
o major organ transplant.
This proof must consist of a doctor's certification acceptable to us.
Subject to a minimum $100 withdrawal amount, the maximum amount available for an
extra withdrawal is:
o 10% of the policy's current accumulation value as of the date we approve
the request; less
o the sum of all extra withdrawals since the last policy anniversary.
There may be important tax consequences of making taking an extra surrender
penalty free withdrawal under this endorsement. Consult a tax adviser regarding
this endorsement.
Option For Additional Insurance
Endorsement
This endorsement will be added to your policy if the insured is between the ages
of 0 and 65 on the policy date and meets our underwriting requirements for this
endorsement. There are no charges for the endorsement and adding the endorsement
will not increase the monthly deductions or the monthly no-lapse premiums on
your policy.
If this endorsement is in effect on your policy, you may request us to issue
additional insurance on the first, second or third policy anniversary, subject
to the terms of the endorsement.
The maximum amount of insurance available under the endorsement will be the
lesser of:
o the original face amount; or
o $100,000.
If the insured is 50 years old or less on the policy date, no evidence of
insurability will be required if you exercise the option for additional
insurance. If the insured is between the ages of 51 and 65 on the policy date,
we will require certain evidence of insurability before we will approve the
request to exercise the option for additional insurance.
The additional coverage will be issued as a new TransAccumulator VUL cv policy
or, if you request, as a new layer of coverage on your current policy. The new
policy or layer, as applicable, will be dated and effective on the chosen option
date.
OTHER POLICY PROVISIONS
Guaranteed Exchange Option
Under the Guaranteed Exchange Option, you may exchange your current policy for a
fixed policy offered by us without providing us evidence of insurability. The
exchange must be to an adjustable life insurance policy on a form designated by
us for such purpose. Under this option, you terminate your coverage under the
current 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 age 95, whichever comes first, if
all of the following conditions are met:
o the insured is living;
o the current policy does not have any outstanding loans;
o monthly deductions are not being waived under a Waiver Provision Rider; and
o the death benefit under the policy is not being maintained under a no-lapse
option.
We will transfer the accumulation value on the date the current policy is
exchanged to the new policy. If the current policy includes one or more layers,
and the new policy allows for layers, the accumulation value in each layer and
in the base policy will be transferred accordingly to layers and the base policy
on the new policy.
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 TransAccumulator VUL cv policy. If the new
policy allows for layers, the layer date for each layer on the new policy will
be the same as the layer date for the equivalent layer in the current policy. We
may limit the effective date to the policy anniversary following the date we
receive all requirements in good order. Before 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 current 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 together with the policy
change application to be the application for the new policy.
New Policy. The new policy will be based on the sex, age and class of risk of
the insured as of the policy date of the current policy. If the current policy
includes one or more layers, and the new policy allows for layers, the sex, age
and class of risk of the insured under a layer will apply to the equivalent
layer on the new policy. The premiums for the new policy will be based on our
published rates in effect on the date you request the exchange. If the
Accelerated Death Benefit Option Endorsement is part of the current policy, it
will automatically become a part of the new policy. 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. We
will not 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 any required 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.
If the current policy includes one or more layers and the new policy allows for
layers, then the minimum initial premium for the new policy will be equal to:
o ________ the cumulative total of any required premiums applicable to the
new policy for the number of years that the current policy was in force
minus the total accumulation value transferred to the new policy from the
current policy's base policy; plus
o ________ the cumulative total of any required premiums applicable to each
layer on the new policy for the number of years that the applicable layer
on the current policy was in force minus the total accumulation value
transferred to each layer on the new policy from the applicable layer on
the current policy.
If the current policy includes supplemental coverage under a supplemental
coverage rider and the new policy allows for supplemental coverage under a
supplemental coverage rider, then the minimum initial premium will be determined
with reference to any required premiums for the basic coverage and for the
supplemental coverage under the new policy.
Surrender Penalty Period. The period for which the coverage segment under the
current policy was in effect before the date of the exchange will be used to
reduce the surrender penalty period under the applicable coverage segment in new
policy.
Suicide and Incontestability. The period for which the current policy and any
layers was in effect before the date of exchange will be used to reduce the time
period for any suicide and incontestability provision under the new policy and
any layers on the new policy.
Ownership. The owner of the new policy will be the same as the owner of the
current policy. You may change the owner for the new policy if you 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 life of the insured. 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. You may change the beneficiary for the new
policy if you 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 life of the insured.
Termination. This Guaranteed Exchange Option terminates on the earliest:
o the 20th policy anniversary;
o the policy anniversary nearest age 95;
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 the insured's age or sex is
found before this option is exercised and the current policy's death benefit is
changed 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 the 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.
The following policy provisions may vary by state.
Incontestability of the Policy
Except for fraud or nonpayment of premiums, the policy will be incontestable
after it has been in force during the insured's lifetime for two years from the
date of issue. This provision does not apply to any rider providing benefits
specifically for disability or accidental death. If the policy was issued to you
as a result of a contractual conversion from another policy we issued to you,
the period for which the new policy was in force before the date of conversion
will be used to offset the time period for incontestability under the new
policy.
When a layer is added to the policy, this incontestability provision will start
anew with respect to that layer, based on statements made in the application for
that layer, beginning on the layer date.
If a supplemental coverage rider is in effect, the rider will be incontestable
after it has been in force during the insured's lifetime for two years from the
rider issue date.
If you request an increase in the face amount of the supplemental coverage
rider, the incontestability provision will start over, beginning on the rider
layer date. An extension of the original incontestability period will apply only
to the face amount of that rider layer.
If the base policy is rescinded for any contestable reason (e.g. material
misrepresentation), we will be liable only for the amount of premiums, less any
partial surrenders, surrender penalty free withdrawals, loans and loan interest
due, allocated to the base policy. The base policy will be rescinded as of the
policy date. If a layer is rescinded for any contestable reason, we will be
liable only for the amount of premiums, less any partial surrenders, surrender
penalty free withdrawals, loans and loan interest due, allocated to the layer.
The layer will be rescinded as of the layer date.
If the policy lapses and is reinstated during the first two years it is in
force, the reinstated policy may be rescinded only for a contestable reason that
is in the application or reinstatement application. If a policy lapses and is
reinstated after the first two years it is in force, the reinstated policy may
be rescinded only for a contestable reason that is in the reinstatement
application. When a policy is reinstated, this incontestability provision will
start anew with respect to statements in the reinstatement application for that
layer, beginning on the date the layer is reinstated.
If a supplemental coverage rider lapses and is reinstated during the first two
years it is in force, the reinstated rider may be rescinded only for a
contestable reason that is in the application or reinstatement application. If a
rider lapses and is reinstated after the first two years it is in force, the
reinstated rider may be rescinded only for a contestable reason that is in the
reinstatement application. When a rider is reinstated, this incontestability
provision will start anew with respect to statements in the reinstatement
application for that rider, beginning on the date the rider is reinstated.
Suicide
If the 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.
If the policy is issued to you as a result of a contractual conversion from
another policy we issued to you, the period for the old policy was in force
before the date of conversion will be used to offset the time period for the
suicide exclusion under the new policy.
When a layer is added to the policy, the suicide provision will start anew with
respect to that layer, beginning on the layer date. If the insured dies by
suicide, while sane or insane, within two years from the layer date, we will be
liable only for the amount of premiums, less any partial surrenders, surrender
penalty free withdrawals, loans and loan interest due, that have been allocated
to that layer.
If a supplemental insurance rider is in effect on the date the insured dies by
suicide and within two years from the rider issue date, we will be liable only
for the amount of premiums paid for the rider. If you request an increase in the
face amount of the rider, the suicide provision will start over, beginning on
the rider layer date. An extension of the original exclusion period will apply
only to the face amount of that rider layer.
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 that 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 policy loans;
o exchange of the policy under the Guaranteed Exchange Option;
o partial or full surrenders; and
o death benefits payments.
We may delay paying you any portion of a partial or full surrender that comes
from the accumulation value in 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
allocated solely to the fixed account made to pay premiums due on the policy.
We may delay any payment until all premium checks have cleared.
Misstatement of Age or Sex in the
Application
If there is a misstatement of the insured's age or sex in the application, we
will adjust the excess of the death benefit over the accumulation value to that
which would be purchased by the most recent monthly deduction at the correct age
or sex.
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 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 such taxes.
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,
or IRS, on the issue, we believe that providing an amount at risk after age 99
in the manner 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. However, see Distributions Under Modified
Endowment Contracts below.
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, surrender penalty free withdrawal,
distribution, change in the death benefit option, change in the face amount or
other terms of the policy, 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.
When excess premium paid during a policy year is refunded with interest within
60 days after the end of the policy year, the interest will be taxable. 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.
Taxable payments or distributions to non-resident aliens under the policy are
generally subject to tax withholding at a 30% rate unless the rate is reduced or
eliminated by an international tax treaty with the United States.
The payment of death benefits is generally non-taxable and not subject to
withholding.
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 at any time during the first seven policy years or
during any subsequent 7-year test period resulting from a material change in the
policy the cumulative premiums paid for the policy, less any non-taxable
withdrawals, exceed the sum of the net level premiums which would have been paid
up to such time if the policy had provided for 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, whether or not subject to surrender penalties,
loans, and other distributions or refunds made before the insured's death under
a MEC, or the assignment or pledge of any portion of the value of a MEC, are
considered distributions from a MEC. Distributions, including assignments and
pledges wherein no cash is received, are includible in gross income to the
extent of any income in the contract on an income-out-first basis. A
distribution 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. If the policy is part of a collateral assignment split dollar
arrangement, the initial assignment as well as increases in cash value during
the assignment may be distributions and taxable. 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 distribution from a MEC which is includible in gross income 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.
Under Code Section 7702A(d) the MEC distribution rules apply not only to:
o all distributions made during the policy year in which the policy fails the
7-pay test, and during subsequent years; but also to
o ________ any distributions made in anticipation of such failure, which is
deemed to include any distributions made during the two years prior to such
failure.
The Treasury Department has not yet issued regulations or other guidance
indicating what other distributions can be treated as made in anticipation of
such a failure or how (that is, as of what date) income in the contract should
be determined for purposes of any distribution that is deemed to be made in
anticipation of a failure.
Special Rules for Pension Plans
If the policy is purchased in connection with a section 401(a) qualified pension
or profit sharing plan, including a section 401(k) plan, federal and state
income and estate tax consequences could differ from those stated in this
prospectus. The purchase may also affect the qualified status of the plan. You
should consult a qualified tax advisor in connection with such purchase.
Policies owned under these types of plans may be subject to the Employee
Retirement Income Security Act of 1974, or ERISA, which may impose additional
requirements on the purchase of policies by such plans. You should consult a
qualified advisor regarding ERISA.
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 values
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 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.
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, net cash value, loans, partial surrenders,
surrender penalty free withdrawals, 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.
Scheduled periodic transactions, such as monthly premiums under the
pre-authorized withdrawal program and monthly deductions, will be confirmed
quarterly in lieu of an immediate transaction confirmation.
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(1) Director of TOLIC since 1999. Director, Senior Vice
President and Chief Operating Officer of Transamerica Life Insurance Company,
(formerly 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. Vice President and Chief Tax Officer of AEGON USA
from 1984 to 1995.
Brenda K. Clancy(1) Senior Vice President since 2000. Director of TOLIC since
1999. Senior Vice President, Corporate, of Transamerica Life Insurance Company,
(formerly PFL Life Insurance Company) since 1991. Treasurer and Chief Financial
Officer of Transamerica Life Insurance Company since 1996.
Douglas C. Kolsrud(1) _________________ Director since 1999 and Senior Vice
President of TOLIC since 2000. Director, Senior Vice President, Chief Investment
Officer and Corporate Actuary, Investment Division, of Transamerica Life
Insurance Company, (formerly PFL Life Insurance Company) since 1998.
Karen O. MacDonald(2) Director, Executive Vice President and Chief Operating
Officer since 2000. Senior Vice President and Corporate Actuary from 1995 to
2000.
Craig D. Vermie(1) ____________________ Director of TOLIC since 1999. Director,
Vice President and General Counsel, Corporate, of Transamerica Life Insurance
Company, (formerly PFL Life Insurance Company) since 1990.
Ron F. Wagley, CLU(2) Director and President since 1999. Senior Vice President
and Chief Agency Officer of TOLIC since 1993. Vice President of TOLIC from 1989
to 1993.
John R. Kenney(6) _____________________ Executive Vice President (February 2000
- - present) of Transamerica; Chairman of the Board and Chief Executive Officer
(June 1962 - present) of Western Reserve.
Janet M. Soppe(7) _____________________ Executive Vice President (January 2000 -
President) of Transamerica; President and Actuary (1991 - present) of AEGON
Insurance Group - Long Term Care Division.
Larry N. Norman(1) ____________________ Executive Vice President, Financial
Markets Division (1999 - present) of Transamerica; and Director and Executive
Vice President (1998 - present) of Transamerica Life Insurance Company.
Roy Chong-Kit(2) ______________________ Senior Vice President and Actuary (1997
- - and Actuary present); Vice President (1995 - 1997); and Actuary (1988 - 1997)
of Transamerica.
Daniel E. Jund, FLMI(1) Senior Vice President (1988 - present) of Transamerica.
William R. Wellnitz, FSA(5) ___________ Senior Vice President and Actuary (1996
- - and Actuary present) of Transamerica; and Vice President and Reinsurance
Actuary (1988 - 1996).
Sandy C. Brown(2) _____________________ Senior Vice President (February 2001 -
present), Vice President (September 1998 - February 2001) of Transamerica.
Kent G. Callahan(8) ___________________ Senior Vice President (September 2000 -
present), Vice President (September 1998 - September 2000) of Transamerica.
Bruce Clark(2) Chief Financial Officer and Senior Vice President (February 2001
- - present), Vice President (October 2000 - February 2001) of Transamerica.
Catherine Collinson(2) ________________ Senior Vice President (September 2000 -
present), Vice President (March 1998 - September 2000) of Transamerica.
David M. Goldstein(2) _________________ Senior Vice President (February 2001 -
present), Vice President (January 1988 - February 2001) of Transamerica.
Frank J. LaRusso(9) ___________________ Senior Vice President (February 2001 -
present), Vice President (December 1994 - February 2001) of Transamerica.
Thomas P. O'Neill(5) __________________ Senior Vice President (March 1999 -
present), Vice President (December 1998 - March 1999) of Transamerica.
Frank Rosa(9) _________________________ Senior Vice President (February 2001 -
present), Vice President (August 2000 - February 2001) of Transamerica.
Joel D. Seigle(2) _____________________ Senior Vice President (February 2001 -
present), Vice President (March 1994 - February 2001) of Transamerica.
William H. Tate(2) ____________________ Senior Vice President (August 2000 -
present), Vice President (March 1998 - August 2000) of Transamerica.
Transamerica Life Insurance Company previously was known as PFL Life Insurance
Company.
Located at:
(1) 4333 Edgewood Road, N.W., Cedar Rapids, Iowa 52449.
(2) 1150 South Olive Street, Los Angeles, California 90015.
(3) 300 Consilium Place, Scarborough, Ontario, Canada M1H3G2.
(4) 600 Montgomery Street, San Francisco, California 94111.
(5) 401 North Tryon Street, Charlotte, North Carolina 28202.
(6) 570 Carillon Parkway, St. Petersburg, Florida 33716.
(7) 2705 Brown Trail, Bedford, Texas 76021.
(8) Two Ravinia Drive, Atlanta, Georgia 30346.
(9) 1100 Walnut, Kansas City, Missouri 64106.
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 annual returns and average total returns shown will reflect
sub-account performance, and will include deductions for expenses of the
portfolios and may include deductions for the mortality and expense risk charge
of the separate account. The performance numbers will generally NOT include any
of the charges, fees or deductions associated with the policies. Specifically,
they will not include the applicable administrative charge of up to 7.6% of
premium for basic coverage or up to 8.6% of premium for supplemental coverage;
the monthly deductions, other than the mortality and expense risk charges; any
other fees or charges; nor the surrender charges for surrenders during the first
12 policy or layer years for basic coverage or the first 16 rider or rider layer
years for supplemental coverage. If these charges, fees and deductions were
taken into consideration, the performance would have been substantially less. We
may advertise other performance calculations.
Average annual returns assume that a sub-account's performance is constant over
the entire period for which returns are shown. 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.
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 a representation of what may be achieved in the future.
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 light
of 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.
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 in the
first year made up to a level we set; up to 5.0% of the excess over that for
premiums paid in the first year; up to 4.0% of premiums paid after the first
policy year, and trail commissions of 0.25% of the policy's accumulation value,
net of outstanding loans, beginning in the sixth policy year. We may also
provide additional compensation through bonuses. TSSC's expenses related to its
role as principal underwriter of variable insurance products are covered by
those affiliated insurance companies which issue the contract. No amounts are
retained by TSSC.
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 monthly deductions;
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, as well as in the District of Columbia 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.
ADDITION, DELETION OR SUBSTITUTION OF
PORTFOLIOS
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 to which you have amounts allocated, 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.
INDEPENDENT AUDITORS AND FINANCIAL
STATEMENTS
The statutory-basis financial statements and schedules of Transamerica
Occidental Life Insurance Company as of December 31, 2000 and for each of the
three years in the period ended December 31, 2000, appearing in this prospectus
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report appearing herein. The financial statements as of September 30, 2001
and for the nine month period then ended, appearing in this prospectus have not
been audited by Ernst & Young LLP. Transamerica Separate Account VUL-6 had not
commenced operations as of December 31 2000, and, therefore, no financial
statements are included for the separate account. The financial statements that
are audited by Ernst & Young LLP are included in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
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.
E-4
Transamerica Occidental Life Insurance Company
Balance Sheet - Statutory Basis
(Dollars in thousands, except per share amounts)(Unaudited)
As of September 30, 2001
Admitted Assets
Cash and invested assets:
Cash and short-term investments $ 426,779
Bonds 14,527,225
Preferred stock 79,748
Common stock, at market 1,260,924
Mortgage loans on real estate 1,576,044
Home office properties 86,830
Investment properties 5,147
Policy loans 414,819
Other invested assets 598,101
Total cash and invested assets 18,975,617
Net deferred taxes 75,631
Accrued investment income 241,556
Premiums deferred and uncollected 238,832
Reinsurance receivable 140,577
Accounts receivable 53,537
General agents pension fund 83,633
Funds withheld by affiliates 266,536
Transfers from separate accounts due or accrued 79,774
Other assets 174,142
Separate account assets 3,789,470
Total admitted assets $ 24,119,305
- ------------------------------------------------------------------------------------===================
- ------------------------------------------------------------------------------------===================
Liabilities and capital and surplus
Liabilities:
Aggregate reserves for policies and contracts:
Life 7,046,025
Annuity 1,955,602
Accident and Health 91,811
Policy and contract claim reserves
Life 241,997
Accident and Health 104,260
Liability for deposit-type contracts 5,440,422
Other policyholders' funds 16,956
Municipal reverse repurchase agreements 362,180
Remittances and items not allocated 522,659
Asset valuation reserve 142,924
Interest maintenance reserve 79,696
Funds held under coinsurance and other
reinsurance treaties 2,322,428
Commissions and expense allowances payable
on reinsurance assumed 21,875
Payable for securities 5,299
Payable to affiliates 26,809
Short-term payable to affiliate 133,205
Other liabilities 389,559
Separate account liabilities 3,644,365
Total liabilities 22,548,072
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 589,600
Unassigned surplus 954,046
Total capital and surplus 1,571,233
Total liabilities and capital and surplus $ 24,119,305
- ------------------------------------------------------------------------------------===================
- ------------------------------------------------------------------------------------===================
Transamerica Occidental Life Insurance Company
Statement of Operations - Statutory Basis
(Dollars in thousands)(Unaudited)
For the Nine Months Ended September 30, 2001
Revenues:
Premiums and other considerations, net of reinsurance
Life $ 782,931
Annuity 355,349
Accident and Health 28,110
Net investment income 906,437
Amortization of interest maintenance reserve (627)
Commissions and expense allowances on
reinsurance ceded 221,404
Income from fees associated with investment management,
administration and contract guarantees for separate accounts 326
Modco reinsurance reserve adjustment 284,160
Consideration on reinsurance recaptured 70,992
Other income 37,553
----------------
2,686,635
Benefits and expenses:
Benefits paid or provided for:
Life and accident and health benefits 442,300
Surrender benefits 858,035
Other benefits 789,997
Increase (decrease) in aggregate reserves for
policies and contracts:
Life (1,170,315)
Annuity 1,284,495
Accident and Health (26,112)
Other (132,801)
----------------
2,045,599
Insurance expenses:
Commissions 360,782
General insurance expenses 191,010
Taxes, licenses and fees 35,035
Transfer to separate accounts 24,747
Other 34,003
----------------
645,577
----------------
2,691,176
----------------
Loss from operations before dividends to policyholders,
federal and foreign income tax benefit and net
net realized capital losses on investments (4,541)
Dividends to policyholders 6,728
----------------
Loss from operations before federal income tax
expense and net realized capital gains (11,269)
Federal and foreign income tax expense 28,450
----------------
Loss from operations before net realized
capital losses on investments (39,719)
Net realized capital losses on investments (net of related federal income taxes
and amounts transferred to interest maintenance
reserve) (28,949)
----------------
----------------
Net loss $ (68,668)
================
Transamerica Occidental Life Insurance Company
Statement of Changes in Capital and Surplus - Statutory Basis
(Dollars in thousands)(Unaudited)
Total
Unassigned Capital
Common Paid-in Surplus and
Stock Surplus (Deficit) Surplus
---------------------------------------------------
Balance at January 1, 2001 $ 27,587 $ 589,600 $ 927,278 $1,544,465
Net loss 0 0 (68,668) (68,668)
Change in net unrealized capital gains/losses 0 0 (167,845) (167,845)
Change in net unrealized foreign exchange capital gain 0 0 1,557 1,557
Change in net deferred income tax 0 0 88,591 88,591
Change in non-admitted assets 0 0 (78,195) (78,195)
Change in asset valuation reserve 0 0 188,701 188,701
Change in surplus in separate accounts 0 0 (160) (160)
Change in accounting principles 0 0 66,076 66,076
Tax benefits on stock options exercised 0 0 2 2
Change in surplus due to reinsurance 0 0 (7,490) (7,490)
Prior period adjustment 0 0 4,199 4,199
---------------------------------------------------
Balance at September 30, 2001 $ 27,587 $ 589,600 $ 954,046 $1,571,233
===================================================
Transamerica Occidental Life Insurance Company
Statement of Cash Flow - Statutory Basis
(Dollars in thousands)(Unaudited)
For the Nine Months Ended September 30, 2001
Operating Activities
Premiums and other considerations $4,069,124
Allowances and reserve adjustments
received on reinsurance ceded 251,876
Net investment income 873,082
Other income received 424,741
Life and accident and health claims (438,996)
Surrender benefits and withdrawals for life contracts (2,404,958)
Annuity and other benefits paid (721,037)
Commissions, other expenses and other taxes (597,940)
Dividends paid to policyholders (6,891)
Net transfers to separate accounts (309,598)
Federal income taxes (47,309)
Reinsurance reserve transfers and other (641,748)
-------------
Net cash provided by operating activities 450,346
Investing Activities
Proceeds from investments sold, matured or repaid:
Bonds 6,902,757
Stocks 367,411
Mortgage loans 64,618
Real estate 4,242
Policy loans 3,335
Other invested assets 24,707
Miscellaneous proceeds 69,373
-------------
7,436,443
Taxes paid on net realized capital gains (95,184)
Net proceeds from sales, maturities, or
-------------
repayments of investments 7,341,259
Cost of investments acquired:
Bonds (6,948,500)
Stocks (324,682)
Mortgage loans (497,399)
Other invested assets (368,202)
Miscellaneous applications (4,406)
-------------
(8,143,189)
-------------
Net cash used in investing activities (801,930)
Financing Activities
Other cash provided:
Payment of short-term note payable to
affiliate, net 133,205
Deposits on deposit-type contracts and other liabilities
without life or disability contingencies 289,845
Other sources 698,595
-------------
Total other cash provided 1,121,645
Other cash applied:
Withdrawals on deposit-type contracts and other liabilities
without life or disability contingencies (248,254)
Other applications, net (195,709)
-------------
-------------
Total other cash applied (443,963)
-------------
-------------
Net cash provided by financing activities 677,682
-------------
Increase in cash and short-term investments 326,098
Cash and short-term investments at beginning of year 100,681
-------------
Cash and short-term investments at end of period $ 426,779
=============
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis
(Dollars in thousands)(Unaudited)
For the Nine Months Ended September 30, 2001
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
accounting principles generally accepted in the United States 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,
2001 are not necessarily indicative of the results that may be expected for the
year ended December 31, 2001. For further information, refer to the accompanying
statutory basis financial statements and notes thereto for the year ended
December 31, 2000.
2. Accounting Changes
The Company prepares its statutory financial statements in conformity with
accounting practices prescribed or permitted by the State of Iowa. ___ Effective
January 1, 2001, the State of Iowa required that insurance companies domiciled
in the State of Iowa prepare their statutory basis financial statements in
accordance with the NAIC Accounting Practices and Procedures manual - Version
effective January 1, 2001, subject to any deviations prescribed or permitted by
the State of Iowa Commissioner of Insurance.
Accounting changes adopted to conform to the provisions of the NAIC Accounting
Practices and Procedures manual - version effective January 1, 2001 are reported
as changes in accounting principles. The cumulative effect of changes in
accounting principles is reported as an adjustment to unassigned funds (surplus)
in the period of the change in accounting principle. The cumulative effect is
the difference between the amount of capital and surplus that would have been
reported at that date if the new accounting principles had been applied
retroactively for all prior periods. ____ As a result of these changes, the
Company reported a change of accounting principle, as an adjustment that
increased unassigned funds (surplus), by $66,076 as of January 1, 2001. Making
up the majority of this amount was the establishment of deferred tax assets of
$58,010 and investment adjustments of $38,637 offset by the establishment of a
provision for guaranty fund accruals of $4,317, the release of mortgage loan
origination fees of $1,789, the adjustment of a pension asset in the amount of
$6,200, bond write downs of $11,551 and the establishment of a vacation accrual
liability of $6,713.
3. Capital Contribution
The Company received a capital contribution of $300,000 from its parent in
December, 2001.
Financial Statements
Transamerica Occidental Life Insurance Company
Years ended December 31, 2000, 1999 and 1998
with Report of Independent Auditors
Transamerica Occidental Life Insurance Company
Financial Statements - Statutory Basis
Years ended December 31, 2000, 1999 and 1998
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..........................................7
Statements of Cash Flow - Statutory Basis...............................................................8
Notes to Financial Statements - Statutory Basis........................................................10
Statutory-Basis Financial Statement Schedules
Schedule I - Summary of Investments - Other Than Investments in
Related Parties.....................................................................................37
Schedule III - Supplementary Insurance Information.....................................................38
Schedule IV - Reinsurance..............................................................................40
0008-0087588 2
Report of Independent Auditors
The Board of Directors
Transamerica Occidental Life Insurance Company
We have audited the accompanying statutory-basis balance sheets of Transamerica
Occidental Life Insurance Company, an indirect wholly-owned subsidiary of AEGON
N.V., as of December 31, 2000 and 1999, 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, 2000. 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 Insurance Division, Department of Commerce, of the State of
Iowa, 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 matter 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, 2000 and 1999, or the results of its operations or its cash flow
for each of the three years in the period ended December 31, 2000.
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, 2000 and 1999, and the results
of its operations and its cash flow for each of the three years in the period
ended December 31, 2000, in conformity with accounting practices prescribed or
permitted by the Insurance Division, Department of Commerce, of the State of
Iowa. 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.
Des Moines, Iowa
April 13, 2001
3 0008-0087588
Transamerica Occidental Life Insurance Company
Balance Sheets - Statutory Basis
(Dollars in thousands, except per share amounts)
December 31
2000 1999
--------------------------------------
Admitted assets Cash and invested assets:
Bonds $14,404,438 $12,820,804
Preferred stocks:
Affiliated entities 1,740 58,219
Other 77,603 77,231
Common stocks:
Affiliated entities (cost: 2000 - $335,248;
1999 - $444,459) 849,503 984,400
Other (cost: 2000 - $479,874; 1999 - $662,215) 600,594 1,270,039
Mortgage loans on real estate 1,140,481 385,590
Real estate 96,219 101,195
Policy loans 417,849 409,534
Cash and short-term investments 100,681 132,454
Receivables for securities 4,454 50,510
Net short-term notes receivable from affiliates 23,702 -
Other investments 278,629 168,487
--------------------------------------
Total cash and invested assets 17,995,893 16,458,463
Federal income tax recoverable - 160,075
Accrued investment income 230,386 226,823
Premiums deferred and uncollected 215,315 227,722
Reinsurance receivable 271,365 249,225
Accounts receivable 159,949 15,487
General agents pension fund 109,553 79,865
Funds withheld by affiliates 262,448 -
Transfers from separate accounts due or accrued 81,118 73,163
Other admitted assets 166,998 150,344
Separate account assets 4,191,889 4,229,395
--------------------------------------
--------------------------------------
Total admitted assets $23,684,914 $21,870,562
======================================
0008-0087588 44
December 31
2000 1999
--------------------------------------
Liabilities and capital and surplus
Liabilities:
Aggregate reserves for policies and contracts:
Life $ 5,341,927 $ 4,993,074
Annuity 4,411,716 4,597,808
Accident and health 100,681 104,314
Policy and contract claim reserves 419,172 296,789
Supplementary contracts without life contingencies 227,909 208,349
Other policyholders' funds 74,696 69,705
Funding agreements and municipal reverse repurchase agreements
3,915,394 2,228,261
Remittances and items not allocated 124,862 48,424
Asset valuation reserve 331,625 578,958
Interest maintenance reserve 16,139 58,721
Funds held under coinsurance and other reinsurance treaties
2,520,027 2,274,229
Commissions and expense allowances payable on reinsurance assumed
95,725 77,588
Payable for securities - 36,997
Federal income taxes payable 22,694 -
Payable to affiliates 26,084 -
Other liabilities 465,198 265,295
Separate account liabilities 4,046,600 4,068,126
--------------------------------------
Total liabilities 22,140,449 19,906,638
Commitments and contingencies (Note 10)
Capital and surplus:
Common stock, $12.50 par value, 4,000,000 shares authorized,
2,206,933 issued and outstanding 27,587 27,587
Paid-in surplus 589,600 509,600
Unassigned surplus 927,278 1,426,737
--------------------------------------
Total capital and surplus 1,544,465 1,963,924
--------------------------------------
Total liabilities and capital and surplus $23,684,914 $21,870,562
======================================
See accompanying notes.
Transamerica Occidental Life Insurance Company
Statements of Operations - Statutory Basis
(Dollars in thousands)
Year ended December 31
2000 1999 1998
-------------------------------------------------
Revenues:
Premiums and other considerations, net of reinsurance:
Life $1,270,078 $1,192,299 $1,208,356
Annuity 1,179,915 681,901 914,547
Accident and health 118,827 57,531 109,138
Net investment income 1,108,214 1,125,042 1,078,543
Amortization of interest maintenance reserve (2,359) 4,739 5,052
Commissions and expense allowances on reinsurance ceded
415,788 469,910 471,943
Income from fees associated with investment management,
administration and contract guarantees for separate
accounts 36,536 16,821 3,818
Other income 153,589 528,951 891,442
-------------------------------------------------
-------------------------------------------------
4,280,588 4,077,195 4,682,841
Benefits and expenses:
Benefits paid or provided for:
Life and accident and health 723,471 402,475 632,175
Surrender benefits 1,136,953 694,766 616,224
Other benefits 924,707 935,940 908,946
Increase (decrease) in aggregate reserves for policies and
contracts:
Life 328,852 392,921 421,442
Annuity (181,511) (145,685) (852,725)
Accident and health (3,632) 19,578 (16,136)
Other 10,792 (7,225) 9,458
-------------------------------------------------
-------------------------------------------------
2,939,632 2,292,770 1,719,384
Insurance expenses
Commissions 680,635 691,802 728,533
General insurance expenses 331,316 272,168 222,471
Taxes, licenses and fees 42,636 53,309 35,957
Net transfer to separate accounts 175,350 50,572 200,243
Reinsurance reserve adjustments 47,887 509,668 1,009,559
Other 138,410 22,767 704,485
-------------------------------------------------
-------------------------------------------------
1,416,234 1,600,286 2,901,248
-------------------------------------------------
4,355,866 3,893,056 4,620,632
-------------------------------------------------
Gain (loss) from operations before dividends to policyholders,
federal income tax expense (benefit)
and net realized capital gains (75,278) 184,139 62,209
Transamerica Occidental Life Insurance Company
Statements of Operations - Statutory Basis (continued)
(Dollars in thousands)
Year ended December 31
2000 1999 1998
-------------------------------------------------
Dividends to policyholders $ 9,377 $ 9,294 $ 8,206
-------------------------------------------------
Gain (loss) from operations before federal income tax expense
(benefit) and net realized capital gains (84,655) 174,845 54,003
Federal income tax expense (benefit) 6,152 30,330 (70,408)
-------------------------------------------------
Gain (loss) from operations before net realized capital gains
on investments (90,807) 144,515 124,411
Net realized capital gains on investments (net of related
federal income taxes and amounts transferred from/to
interest maintenance reserve) 292,197 17,515 76,071
-------------------------------------------------
Net income $ 201,390 $ 162,030 $ 200,482
=================================================
See accompanying notes.
Transamerica Occidental Life Insurance Company
Statements of Changes in Capital and Surplus - Statutory Basis
(Dollars in thousands)
Total Capital
Common Stock Paid-in Unassigned and Surplus
Surplus Surplus
-------------- ------------- ----------------- ----------------
-------------- ------------- ----------------- ----------------
Balance at January 1, 1998 $27,587 $368,738 $1,159,903 $1,556,228
Net income - - 200,482 200,482
Change in non-admitted assets - - (45,392) (45,392)
Change in unrealized capital gains - - 261,540 261,540
Change in asset valuation reserve - - (39,153) (39,153)
Dividend to stockholder - - (80,000) (80,000)
Change in liability for reinsurance in
unauthorized companies - - (3,137) (3,137)
Change in surplus in separate accounts - - 32,572 32,572
Change in surplus due to reinsurance - - (21,502) (21,502)
Prior year adjustments - - (21,276) (21,276)
Capital contribution - 3,800 - 3,800
-------------- ------------- ----------------- ----------------
-------------- ------------- ----------------- ----------------
Balance at December 31, 1998 27,587 372,538 1,444,037 1,844,162
Net income - - 162,030 162,030
Change in non-admitted assets - - (2,824) (2,824)
Change in unrealized capital gains - - 119,420 119,420
Change in asset valuation reserve - - (178,342) (178,342)
Dividend to stockholder - - (79,000) (79,000)
Change in liability for reinsurance in
unauthorized companies - - (4,646) (4,646)
Change in surplus in separate accounts - - 16,637 16,637
Change in surplus due to reinsurance - - (35,865) (35,865)
Prior year adjustments - - (14,710) (14,710)
Capital contribution - 137,062 - 137,062
-------------- ------------- ----------------- ----------------
-------------- ------------- ----------------- ----------------
Balance at December 31, 1999 27,587 509,600 1,426,737 1,963,924
Net income - - 201,390 201,390
Change in non-admitted assets - - 42,867 42,867
Change in unrealized capital gains - - (528,752) (528,752)
Change in asset valuation reserve - - 247,333 247,333
Dividend to stockholder - - (135,000) (135,000)
Dividend of subsidiary to stockholder - - (210,386) (210,386)
Change in liability for reinsurance in
unauthorized companies - - (19,364) (19,364)
Change in surplus in separate accounts - - (16,755) (16,755)
Change in surplus due to reinsurance - - 9,587 9,587
Partnership termination - - (46,671) (46,671)
Prior year adjustments - - (43,708) (43,708)
Capital contribution - 80,000 - 80,000
-------------- ------------- ----------------- ----------------
-------------- ------------- ----------------- ----------------
Balance at December 31, 2000 $27,587 $589,600 $ 927,278 $1,544,465
============== ============= ================= ================
See accompanying notes.
Transamerica Occidental Life Insurance Company
Statements of Cash Flow - Statutory Basis
(Dollars in thousands)
Year ended December 31
2000 1999 1998
------------------------------------------------------
Operating activities
Premiums and annuity considerations $1,676,491 $ 319,552 $2,642,142
Fund deposits 627,634 351,170 363,889
Other policy proceeds and considerations 278,093 212,546 259,627
Allowances and reserve adjustments received on
reinsurance ceded 443,651 1,861,584 93,368
Investment income received 1,119,095 1,088,846 1,068,856
Other income received 1,851,376 141,247 194,037
Life and accident and health claims paid (665,369) (266,727) (661,006)
Surrender benefits and other fund withdrawals paid
(1,137,020) (695,777) (618,854)
Annuity and other benefits paid (653,975) (962,151) (948,840)
Commissions, other expenses and taxes paid
(1,083,271) (1,027,317) (950,827)
Dividends paid to policyholders (9,820) (9,136) (8,102)
Federal income taxes received (paid) 208,049 (146,945) 15,764
Reinsurance reserve transfers and other (546,720) (618,898) (1,891,421)
------------------------------------------------------
Net cash provided by (used in) operating activities
2,108,214 247,994 (441,367)
Investing activities
Proceeds from investments sold, matured or repaid:
Bonds 5,872,493 2,993,985 3,938,693
Stocks 2,122,089 220,666 488,559
Mortgage loans 15,173 11,248 37,335
Real estate - 3,050 20,300
Other invested assets 6,394 200 3,984
Miscellaneous proceeds 1,079 407 (25,830)
------------------------------------------------------
Total investment proceeds 8,017,228 3,229,556 4,463,041
Taxes paid on net realized capital gains (178,914) - -
------------------------------------------------------
Net proceeds from sales, maturities, or repayments
of investments 7,838,314 3,229,556 4,463,041
Transamerica Occidental Life Insurance Company
Statements of Cash Flow - Statutory Basis (continued)
(Dollars in thousands)
Year ended December 31
2000 1999 1998
------------------------------------------------------
Cost of investments acquired:
Bonds $(7,506,987) $(3,656,035) $(4,225,623)
Stocks (1,273,183) (611,404) (331,131)
Mortgage loans (771,604) (9,800) (121,139)
Real estate (1,287) (5,064) (7,030)
Other invested assets (132,908) (35,204) (36,752)
Miscellaneous applications (1,242) (93,194) -
------------------------------------------------------
Total cost of investments acquired (9,687,211) (4,410,701) (4,721,675)
Net decrease (increase) in policy loans (8,315) 1,094 (3,174)
------------------------------------------------------
Net cost of investments acquired (9,695,526) (4,409,607) (4,724,849)
------------------------------------------------------
Net cash used in investing activities (1,857,212) (1,180,051) (261,808)
Financing and miscellaneous activities Other cash provided:
Capital and surplus paid-in 80,000 137,062 3,800
Other sources 1,343,871 562,978 1,485,965
------------------------------------------------------
Total other cash provided 1,423,871 700,040 1,489,765
Other cash applied:
Dividends paid to stockholder (135,000) (79,000) (80,000)
Other applications, net (1,571,646) (70,086) (347,482)
------------------------------------------------------
Total other cash applied (1,706,646) (149,086) (427,482)
------------------------------------------------------
Net cash provided by (used in) financing and
miscellaneous activities (282,775) 550,954 1,062,283
------------------------------------------------------
Net increase (decrease) in cash and short-term
investments (31,773) (381,103) 359,108
Cash and short-term investments:
Beginning of year 132,454 513,557 154,449
------------------------------------------------------
End of year $ 100,681 $ 132,454 $ 513,557
======================================================
See accompanying notes.
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis
(Dollars in thousands)
December 31, 2000
1. Organization and Summary of Significant Accounting Policies
Transamerica Occidental Life Insurance Company (the "Company") is a stock life
insurance company domiciled in Iowa. The Company is a wholly-owned subsidiary of
Transamerica Insurance Corporation, which is a wholly-owned subsidiary of
Transamerica Corporation ("Transamerica"). Transamerica is an indirect
wholly-owned subsidiary of AEGON N.V., a holding company organized under the
laws of The Netherlands. The Company has two wholly-owned insurance
subsidiaries: Transamerica Life Insurance and Annuity Company ("TALIAC") and
Transamerica Life Insurance Company of New York ("TONY"). As discussed in Note
11, in 2000, the Company transferred its entire ownership interest in its
subsidiary, Transamerica Life Insurance Company of Canada, in the form of a
dividend to its parent. Also in 2000, the Company was redomiciled from
California to Iowa.
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 49 states.
Basis of Presentation
The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.
Significant estimates and assumptions are utilized in the calculation of
aggregate policy reserves, policy and contract claim reserves, guaranty fund
assessment accruals and valuation allowances on investments. It is reasonably
possible that actual experience could differ from the estimates and assumptions
utilized which could have a material impact on the financial statements.
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
The accompanying financial statements have been prepared on the basis of
accounting practices prescribed or permitted by the Insurance Division,
Department of Commerce, of the State of Iowa ("Insurance Department"), which
practices differ in some respects from accounting principles generally accepted
in the United States. The more significant of these differences are as follows:
(a) bonds are generally reported 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;
(b) acquisition costs of acquiring new business are charged to current
operations as incurred rather than deferred and amortized over the life of the
policies or over the expected gross profit stream; (c) policy reserves on
traditional life products are based on statutory mortality rates and interest
which may differ from reserves based on reasonable assumptions of expected
mortality, interest, and withdrawals which include a provision for possible
unfavorable deviation from such assumptions; (d) policy reserves on certain
investment products use discounting methodologies based on statutory interest
rates rather than full account values; (e) reinsurance amounts are netted
against the corresponding asset or liability rather than shown as gross amounts
on the balance sheet; (f) deferred income taxes are not provided for the
difference between the financial statement and income tax bases of assets and
liabilities; (g) net realized gains or losses attributed to changes in the level
of interest rates in the market are deferred and amortized over the remaining
life of the bond or mortgage loan, rather than recognized as gains or losses in
the statement of operations when the sale is completed; (h) potential declines
in the estimated realizable value of investments are provided for through the
establishment of a formula-determined statutory investment reserve (reported as
a liability), changes to which are charged directly to surplus, rather than
through recognition in the statement of operations for declines in value, when
such declines are judged to be other than temporary; (i) certain assets
designated as "non-admitted assets" have been charged to surplus rather than
being reported as assets; (j) revenues for universal life and investment
products consist of premiums received rather than policy charges for the cost of
insurance, policy administration charges, amortization of policy initiation fees
and surrender charges assessed; (k) pension expense is recorded as amounts are
paid; (l) adjustments to federal income taxes of prior years are charged or
credited directly to unassigned surplus, rather than reported as a component of
expense in the statement of operations; (m) policyholder dividends are
recognized when declared rather than over the term of the related policies; (n)
a liability is established for "unauthorized reinsurers" and changes in this
liability are charged or credited directly to unassigned surplus; and (o) the
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
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 to which are charged or credited directly to unassigned surplus.
The effects of these variances have not been determined by the Company but are
presumed to be material.
The National Association of Insurance Commissioners ("NAIC") has revised the
Accounting Practices and Procedures Manual in a process referred to as
Codification. The revised manual will be effective January 1, 2001. The State of
Iowa has adopted the provisions of the revised manual. The revised manual has
changed, to some extent, prescribed statutory accounting practices and will
result in changes to the accounting practices that the Company uses to prepare
its statutory-basis financial statements. The cumulative effect of changes in
accounting principles adopted to conform to the revised Accounting Practices and
Procedures Manual, will be reported as an adjustment to surplus as of January 1,
2001. Management believes the effect of these changes will not result in a
significant reduction in the Company's statutory-basis capital and surplus as of
adoption.
Other significant accounting policies are as follows:
Cash and Short-Term Investments
For purposes of the statements of cash flow, the Company considers all highly
liquid investments with remaining maturity of one year or less when purchased to
be short-term investments.
Investments
Investments in bonds (except those to which the Securities Valuation Office of
the NAIC has ascribed a value), mortgage loans on real estate and short-term
investments are reported at cost adjusted for amortization of premiums and
accrual of discounts. Amortization is computed using methods which result in a
level yield over the expected life of the investment. The Company reviews its
prepayment assumptions on mortgage
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
and other asset-backed securities at regular intervals and adjusts amortization
rates retrospectively when such assumptions are changed due to experience and/or
expected future patterns. Investments in preferred stocks in good standing are
reported at cost. Investments in preferred stocks not in good standing are
reported at the lower of cost or market. Common stocks of unaffiliated companies
are carried at market value. Common stock of the Company's affiliated insurance
subsidiaries are recorded at the equity in statutory-basis net assets. Real
estate is reported at cost less allowances for depreciation. Depreciation of
real estate is computed principally by the straight-line method. Policy loans
are reported at unpaid principal. Other investments consist of investments in
various joint ventures and limited partnerships, which are recorded at equity in
underlying net assets, and derivative instruments, which 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, interest rate caps and floors, options,
swaptions 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.
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.
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
Net realized capital gains and losses are determined on the basis of specific
identification and are recorded net of related federal income taxes. The Asset
Valuation Reserve ("AVR") is established by the Company to provide for potential
losses in the event of default by issuers of certain invested assets. These
amounts are determined using a formula prescribed by the NAIC and are reported
as a liability. The formula for the AVR provides for a corresponding adjustment
for realized gains and losses. Under a formula prescribed by the NAIC, the
Company defers, in the Interest Maintenance Reserve ("IMR"), the portion of
realized gains and losses on sales of fixed income investments, principally
bonds and mortgage loans, attributable to changes in the general level of
interest rates and amortizes those deferrals over the remaining period to
maturity of the security.
Interest income is recognized on an accrual basis. The Company does not accrue
income on bonds in default, mortgage loans on real estate in default and/or
foreclosure or which are delinquent more than twelve months, or on real estate
where rent is in arrears for more than three months. Further, income is not
accrued when collection is uncertain. During 2000, the Company excluded
investment income due and accrued of $1,518 with respect to such practices. No
such investment income due and accrued was excluded during 1999 and 1998.
Aggregate Policy Reserves
Life, annuity and accident and health benefit reserves are developed by
actuarial methods and are determined based on published tables based on
statutorily specified interest rates and valuation methods that will provide, in
the aggregate, reserves that are greater than or equal to the minimum required
by law.
The aggregate policy reserves for life insurance policies are based principally
upon the 1941, 1958 and 1980 Commissioners' Standard Ordinary Mortality Tables.
The reserves are calculated using interest rates ranging from 2.00 to 6.00
percent and are computed principally on the Net Level Premium Valuation and the
Commissioners' Reserve Valuation Methods. Reserves for universal life policies
are based on account balances adjusted for the Commissioners' Reserve Valuation
Method.
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
Deferred annuity reserves are calculated according to the Commissioners' Annuity
Reserve Valuation Method including excess interest reserves to cover situations
where the future interest guarantees plus the decrease in surrender charges are
in excess of the maximum valuation rates of interest. Reserves for immediate
annuities and supplementary contracts with life contingencies are equal to the
present value of future payments assuming interest rates ranging from 2.00 to
11.25 percent and mortality rates, where appropriate, from a variety of tables.
Accident and health policy reserves are equal to the greater of the gross
unearned premiums or any required midterminal reserves plus net unearned
premiums and the present value of amounts not yet due on both reported and
unreported claims.
Policy and Contract Claim Reserves
Claim reserves represent the estimated accrued liability for claims reported to
the Company and claims incurred but not yet reported through the statement date.
These reserves are estimated using either individual case-basis valuations or
statistical analysis techniques. These estimates are subject to the effects of
trends in claim severity and frequency. The estimates are continually reviewed
and adjusted as necessary as experience develops or new information becomes
available.
Funding Agreements and Municipal Reverse Repurchase Agreements
Funding agreements and municipal reverse repurchase agreements are investment
contracts issued to municipalities, corporations, mutual funds and other
institutional investors that pay either a fixed or floating rate of interest on
the guaranteed deposit balance. The floating interest rate is based on a market
index. The related liabilities are equal to the policyholder deposit and
accumulated interest on the contract. As of December 31, 2000, funding
agreements totaling $1,690,548 contained provisions which allow the policyholder
to withdraw their funds at book value after certain advance notice periods which
range up to one year in duration.
Separate Accounts
Assets held in trust for purchases of variable annuity contracts and the
Company's corresponding obligation to the contract owners are shown separately
in the balance sheets. The assets in the separate accounts are valued at market.
Income and gains and
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
losses with respect to the assets in the separate accounts accrue to the benefit
of the contract owners and, accordingly, the operations of the separate accounts
are not included in the accompanying financial statements. The Company received
variable contract premiums of $350,784, $255,210 and $352,298 in 2000, 1999 and
1998, respectively.
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 Income
Other income consists 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 2000 relate to expenses
incurred for sales practices litigation of $8,199, the write off of software of
$30,043 and suspense adjustments of $5,466. There was no overall impact to
surplus resulting from the software write off as this item was previously
nonadmitted.
Prior year adjustments charged directly to surplus in 1999 relate primarily to
expenses incurred for sales practices litigation of $7,710 and a suspense asset
adjustment of $7,000.
Prior year adjustments in 1998 relate primarily to expenses incurred for sales
practices litigation of $8,276 and a reserve valuation adjustment of $13,000 on
single premium immediate annuities.
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
Reclassifications
Certain reclassifications have been made to the 1999 and 1998 financial
statements to conform to the 2000 presentation.
2. Fair Values of Financial Instruments
Statement of Financial Accounting Standard ("SFAS") No. 107, Disclosures about
Fair Value of Financial Instruments, requires disclosure of fair value
information about financial instruments, whether or not recognized in the
statutory-basis balance sheet, for which it is practicable to estimate that
value. SFAS No. 119, Disclosures about Derivative Financial Instruments and Fair
Value of Financial Instruments, requires additional disclosure about
derivatives. In cases where quoted market prices are not available, fair values
are based on estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. In that regard, the derived
fair value estimates cannot be substantiated by comparisons to independent
markets and, in many cases, could not be realized in immediate settlement of the
instrument. SFAS No. 107 and No. 119 exclude certain financial instruments and
all nonfinancial instruments from their disclosure requirements and allow
companies to forego the disclosures when those estimates can only be made at
excessive cost. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and short-term investments: The carrying amounts reported in the balance
sheet for these instruments approximate their fair values.
Investment securities: Fair values for fixed maturity securities (including
preferred stocks) are based on quoted market prices, where available. For
fixed maturity securities not actively traded, fair values are estimated
using values obtained from independent pricing services or, in the case of
private placements, are estimated by discounting expected future cash flows
using a current market rate applicable to the yield, credit quality, and
maturity of the investments. The fair values for equity securities, other
than affiliated entities, are based on quoted market prices.
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
2. Fair Values of Financial Instruments (continued)
Mortgage loans and policy loans: The fair values for mortgage loans are
estimated utilizing discounted cash flow analyses, using interest rates
reflective of current market conditions and the risk characteristics of the
loans. The fair value of policy loans is assumed to equal their carrying
amount.
Net short-term notes receivable from affiliates: The fair value for net
short-term notes receivable from affiliates approximate their carrying value.
Investment contracts: Fair values for the Company's liabilities under
investment-type insurance contracts, including separate account liabilities,
are estimated using discounted cash flow calculations, based on interest
rates currently being offered for similar contracts with maturities
consistent with those remaining for the contracts being valued.
Derivatives: Estimated fair value of interest rate swaps, caps, floors,
options and swaptions are based upon the latest quoted market price.
Estimated fair value of interest rate swaps are based upon the pricing
differential for similar swap agreements.
Fair values for the Company's insurance contracts other than investment
contracts are not required to be disclosed. However, the fair values of
liabilities under all insurance contracts are taken into consideration in the
Company's overall management of interest rate risk, which minimizes exposure to
changing interest rates through the matching of investment maturities with
amounts due under insurance contracts.
The following sets forth a comparison of the fair values and carrying amounts of
the Company's financial instruments subject to the provisions of SFAS No. 107
and No. 119:
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
2. Fair Values of Financial Instruments (continued)
The carrying amounts and fair values of financial instruments are as follows (in
thousands):
December 31
2000 1999
-------------------------------- --------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------------------------------- --------------------------------------
Admitted assets
Bonds $14,404,438 $14,562,288 $12,820,804 $12,681,458
Preferred stocks other than affiliates
77,603 78,621 77,231 42,448
Common stocks other than affiliates
600,594 600,594 1,270,039 1,270,039
Mortgage loans on real estate 1,140,481 1,170,426 385,590 363,650
Policy loans 417,849 417,849 409,534 396,956
Floors, caps, options and swaptions
47,543 109,800 56,964 60,129
Interest rate swaps 10,994 11,367 - (65,953)
Cash and short-term investments 100,681 100,681 132,454 132,454
Net short-term notes receivable from
affiliates 23,702 23,702 - -
Separate account assets 4,191,889 4,191,889 4,229,395 4,229,395
Liabilities
Investment contract liabilities 7,275,853 7,187,031 8,807,732 8,800,196
Separate account liabilities 3,919,092 4,022,404 3,941,489 3,941,489
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments
The Company's investment in common stocks of its wholly owned subsidiaries,
based on the statutory capital and surplus of the subsidiaries, is summarized as
follows:
Carrying Amount
Cost
------------------------------------
At December 31, 2000:
TALIAC $238,418 $823,859
TONY 83,600 25,470
Other 13,230 174
------------------------------------
$335,248 $849,503
====================================
At December 31, 1999:
TALIAC $238,418 $797,109
TONY 83,600 50,142
Transamerica Life Insurance Company of Canada 113,711 135,565
Others 8,730 1,584
------------------------------------
$444,459 $984,400
====================================
In 1999 and 1998, the Company received a dividend of $50,000 from its
wholly-owned subsidiary, TALIAC.
Certain financial information with respect to TALIAC and TONY, the Company's
wholly-owned insurance subsidiaries, is as follows:
December 31
2000 1999
--------------------------------------
Cash and investments $15,244,044 $14,869,284
Other assets 6,492,031 6,948,284
--------------------------------------
Total assets 21,736,075 21,817,568
Aggregate reserves 11,067,366 9,977,508
Other liabilities 9,819,380 10,992,809
--------------------------------------
Total liabilities 20,886,746 20,970,317
--------------------------------------
Total capital and surplus $ 849,329 $ 847,251
======================================
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments (continued)
The carrying value and estimated fair value of investments in debt securities
are summarized as follows (in thousands):
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
-----------------------------------------------------------------------
December 31, 2000
United States Government and
agencies $ 722,783 $ 8,263 $ 959 $ 730,087
State, municipal and other
government 344,859 53,300 669 397,490
Public utilities 1,453,514 56,108 28,252 1,481,370
Industrial and miscellaneous 9,255,458 296,606 285,486 9,266,578
Mortgage and other asset- backed
securities 2,627,824 77,521 18,582 2,686,763
-----------------------------------------------------------------------
14,404,438 491,798 333,948 14,562,288
Preferred stocks 77,603 6,622 5,604 78,621
-----------------------------------------------------------------------
-----------------------------------------------------------------------
$14,483,781 $498,420 $341,292 $14,640,909
=======================================================================
December 31, 1999
United States Government and
agencies $ 189,325 $ 11,396 $ 1,968 $ 198,753
State, municipal and other
government 106,484 3,673 1,482 108,675
Foreign governments 50,820 353 3,328 47,845
Public utilities 1,718,582 20,020 38,842 1,699,760
Industrial and miscellaneous 9,345,228 103,079 230,148 9,218,159
Mortgage and other asset- backed
securities 1,410,365 - 2,099 1,408,266
-----------------------------------------------------------------------
-----------------------------------------------------------------------
12,820,804 138,521 277,867 12,681,458
Preferred stocks 77,231 6,399 41,182 42,448
-----------------------------------------------------------------------
-----------------------------------------------------------------------
$12,898,035 $144,920 $319,049 $12,723,906
=======================================================================
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments (continued)
The carrying value and estimated fair value of bonds at December 31, 2000, by
contractual maturity, are shown below. 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.
Estimated
Carrying Fair
Amount Value
------------------------------------
Due in one year or less $ 293,736 $ 293,384
Due after one year through five years 2,573,899 2,614,419
Due after five years through ten years 2,648,540 2,617,591
Due after ten years 6,260,439 6,350,131
Mortgage and other asset-backed securities 2,627,824 2,686,763
------------------------------------
$14,404,438 $14,562,288
====================================
A detail of net investment income is presented below:
Year ended December 31
2000 1999 1998
-----------------------------------------------------
Interest on bonds and preferred stocks $1,068,590 $ 994,418 $ 952,235
Dividends from common stocks 5,332 53,192 53,000
Interest on mortgage loans 49,068 28,314 28,713
Rental income on real estate 30,180 28,008 27,288
Interest on policy loans 22,994 27,086 24,780
Cash and short-term investments 5,938 10,526 10,939
Other investments 18,427 16,343 17,198
-----------------------------------------------------
1,200,529 1,157,887 1,114,153
Less investment expenses (92,315) (32,845) (35,610)
-----------------------------------------------------
Net investment income $1,108,214 $1,125,042 $1,078,543
=====================================================
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments (continued)
Proceeds from sales and maturities of bonds and related gross realized capital
gains and losses were as follows:
Year ended December 31
2000 1999 1998
------------------------------------------------------
Proceeds $5,872,493 $2,993,985 $3,938,693
Gross realized gains $ 94,531 $ 46,135 $ 44,290
Gross realized losses (157,019) (43,142) (27,768)
------------------------------------------------------
------------------------------------------------------
Net realized capital gains (losses) $ (62,488) $ 2,993 $ 16,522
======================================================
At December 31, 2000, investments with an aggregate carrying value of $9,236
were on deposit with regulatory authorities or were restrictively held in bank
custodial accounts for the benefit of such regulatory authorities as required by
statute.
Realized capital gains (losses) and changes in unrealized gains (losses) for
investments are summarized below:
Realized
-------------------------------------------
-------------------------------------------
Year ended December 31
2000 1999 1998
-------------------------------------------
-------------------------------------------
Bonds $ (62,488) $ 2,993 $ 16,522
Preferred stocks 6,124 (6,085) 2,405
Common stocks 499,621 41,011 164,984
Other (17,086) (90,400) (7,021)
-------------------------------------------
-------------------------------------------
426,171 (52,481) 172,080
Tax effect (178,914) 71,941 (84,425)
Transfer from (to) interest maintenance reserve 44,940 (1,945) (11,584)
-------------------------------------------
-------------------------------------------
Net realized gains $292,197 $17,515 $ 76,071
===========================================
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments (continued)
The other loss of $90,400 in 1999 primarily resulted from the net pretax loss
incurred on an ineffective equity collar hedge (see Note 9).
Unrealized
--------------------------------------------
--------------------------------------------
Year ended December 31
2000 1999 1998
--------------------------------------------
Bonds $ (10,264) $ (5,756) $ (871)
Preferred stocks (4,499) 2,271 (2,741)
Common stocks (512,790) 125,177 257,582
Mortgage loans (1,791) - -
Other invested assets 592 (2,272) 7,570
--------------------------------------------
Change in unrealized $(528,752) $119,420 $261,540
============================================
Gross unrealized gains and gross unrealized losses on common stock of
unaffiliated entities are as follows:
December 31
2000 1999
----------------------------
----------------------------
Unrealized gains $172,202 $640,014
Unrealized losses (51,482) (32,190)
----------------------------
----------------------------
Net unrealized gains $120,720 $607,824
============================
During 2000, the Company issued mortgage loans with interest rates ranging from
7.39% to 9.51%. The maximum percentage of any one mortgage loan to the value of
the underlying real estate at origination was 85%. The Company requires all
mortgaged properties to carry fire insurance equal to the value of the
underlying property.
At December 31, 2000 and 1999, the Company held a mortgage loan loss reserve in
the asset valuation reserve of $6,792 and $4,586, respectively. The mortgage
loan portfolio is diversified by geographic region and specific collateral
property type as follows:
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments (continued)
Geographic Distribution Property Type Distribution
----------------------------------------------------- -----------------------------------------------
December 31 December 31
2000 1999 2000 1999
------------------ -------------------
Pacific 35% 42% Office 38% 22%
South Atlantic 24 26 Apartment 18 40
Middle Atlantic 11 15 Retail 18 7
Mountain 7 - Other 17 28
E. North Central 5 2 Industrial 9 3
W. South Central 5 1
W. North Central 5 6
New England 5 8
E. South Central 3 -
At December 31, 2000, the Company had no investments (excluding U. S. Government
guaranteed or insured issues) which individually represented more than ten
percent of capital and surplus and the asset valuation reserve, collectively.
The operations of the Company are subject to risk of interest rate fluctuations
to the extent that there is a difference between the cash flows from the
Company's interest-earning assets and the cash flows related to its liabilities.
In the normal course of its operations, the Company hedges some of its interest
rate risk with derivative financial instruments. These derivatives comprise
primarily of interest rate swap agreements, interest rate floor agreements,
foreign currency swap agreements, call option agreements, S&P 500 call option
agreements, and options to enter into interest rate swap agreements (swaptions).
The Company does not use derivatives financial instruments for trading or
speculative purposes, nor is the Company a party to any leveraged derivative
contracts.
Interest swap agreements are intended to help the Company more closely match the
cash flows received from its assets to the payments on its liabilities. The
Company's interest rate swap agreements generally provide that one party pays
interest at a floating rate in relation to movements in an underlying index and
the other party pays interest at a fixed rate. Generally, no cash is exchanged
at the outset of the contract, and no principal payments are made by either
party. A single net payment is made usually by one counterparty at each
settlement date. Interest rate swaps that terminate prior to maturity are
generally settled for the fair value of the swap on the termination date.
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments (continued)
Interest rate floor agreements purchased by the Company provide for the receipt
of payments in the event interest rates fall below specified levels. Interest
rate floors are intended to mitigate the Company's risk of reinvesting the cash
flow it receives from calls, mortgage prepayments, and redemptions on its
investment portfolio at lower interest rates. A single premium payment is made
by the Company at the beginning of the contract. Once the interest rate floor
becomes effective, if the actual rate moves below the agreed upon floor rate,
the Company receives payment equal to the difference between the actual rate and
the floor rate times the notional amount of the agreement.
The Company purchases swaptions to help manage the risk of interest rate
fluctuations by providing an option to enter into an interest rate swap in the
event of unfavorable interest rate movements. A single premium payment is made
by the purchaser at the beginning of the contract. Once the option is exercised,
the parties enter into an interest rate swap agreement.
The Company has credit risk exposure to the extent that a counterparty fails to
make payment on its obligation. While the Company is exposed to credit risk in
the event of nonperformance by the other party, nonperformance is not
anticipated due to the credit rating of the counterparties. At December 31,
2000, all of the Company's derivative financial instruments were with financial
institutions rated A or better by one or more of the major credit rating
agencies.
Market risk is the risk the Company faces from a change in the market value of a
derivative instrument. The Company uses derivatives as hedges, consequently,
when the value of the derivative changes, the value of a corresponding hedged
asset or liability will move in the opposite direction. Market risk is a
consideration when changes in the value of the derivative and the hedged item do
not completely offset (correlation or basis risk). The Company mitigates this
risk by actively measuring and monitoring correlation and taking corrective
action as necessary.
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments (continued)
At December 31, 2000 and 1999, the Company's outstanding financial instruments
with on and off balance sheet risks, shown in notional amounts are summarized as
follows:
Notional Amount
2000 1999
------------------------------------
Derivative securities Interest rate swaps:
Receive float-pay float $ 15,833 $ 298,631
Receive fixed-pay float 3,342,842 2,195,954
Receive float-pay fixed 700,742 270,862
Interest rate floor agreements 500,445 400,000
Swaptions 6,500,000 6,500,000
Call options 32,199 31,999
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.
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
4. Reinsurance (continued)
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.
Premiums earned reflect the following reinsurance assumed and ceded amounts:
Ceded/Retroceded to Assumed from
-------------------------------------------------------------
Direct Affiliated Unaffiliated Affiliated Unaffiliated Net
Amount Companies Companies Companies Companies Amount
----------------------------------------------------------------------------------------------
Year ended
December 31, 2000:
Premium revenue $ 2,623,910 $ 199,290 $1,574,257 $359,387 $1,359,070 $ 2,568,820
==============================================================================================
==============================================================================================
At December 31, 2000:
Reserves for future
policy benefits $13,967,778 $3,402,793 $3,590,670 $524,069 $2,355,940 $ 9,854,324
Policy and contract
claims payable 313,976 34,769 267,285 4,844 402,406 419,172
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
$14,281,754 $3,437,562 $3,857,955 $528,913 $2,758,346 $10,273,496
==============================================================================================
Year ended
December 31, 1999:
Premium revenue $ 2,281,775 $ 112,947 $2,274,338 $157,197 $1,880,044 $ 1,931,731
==============================================================================================
==============================================================================================
At December 31, 1999:
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
==============================================================================================
Year ended
December 31, 1998:
Premium revenue $ 2,314,662 $ 298,339 $2,482,419 $198,460 $2,499,677 $ 2,232,041
==============================================================================================
==============================================================================================
At December 31, 1998:
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
==============================================================================================
In 2000, the Company entered into a reinsurance transaction with two affiliated
companies in which the company assumed certain structured settlement liabilities
on a funds withheld basis. As a result, the Company has recorded a related asset
of $262,448.
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
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, including TALIAC and TONY. The method
of allocation between the companies for the period beginning July 22, 1999, is
subject to a written agreement as approved by the Board of Directors. This
agreement requires that tax payments are made to, or refunds are received from
the Company, in amounts which would results from filing separate tax returns
with federal taxing authorities.
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
2000 1999 1998
------------------------------------------------------
Computed tax at federal statutory rate (35%) $(29,629) $61,196 $ 18,901
Tax reserve adjustment 11,844 (1,153) (3,463)
Deferred acquisition costs - tax basis 6,082 13,326 4,677
Reinsurance adjustments - (14,442) (7,525)
Difference in statutory and tax bases
of investments - (2,399) (10,990)
Prior year under (over) accrual 46,125 24,640 (13,055)
Tax credits (27,111) (16,000) (17,698)
Dividend received deduction (1,420) (17,500) (17,500)
IMR amortization 826 - -
Other items - net (565) (17,338) (23,755)
------------------------------------------------------
Federal income tax expense (benefit) $ 6,152 $30,330 $(70,408)
======================================================
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
5. Income Taxes (continued)
Prior to 1984, as provided for under the Life Insurance Company Tax Act of 1959,
a portion of statutory income was not subject to current taxation but was
accumulated for income tax purposes in a memorandum account referred to as the
policyholder's surplus account. No federal income taxes have been provided for
in the financial statements on income deferred in the policyholders' surplus
account ($117,701 at December 31, 2000). To the extent dividends are paid from
the amount accumulated in the policyholders' surplus account, net earnings would
be reduced by the amount of tax required to be paid. Should the entire amount in
the policyholders' surplus account become taxable, the tax thereon computed at
current rates would amount to approximately $41,195.
The Company's federal income tax returns have been examined and closing
agreements have been executed with the Internal Revenue Service through 1993.
The examination fieldwork for 1994 and 1995 has been completed and a tentative
settlement has been reached at Appeals. The examination fieldwork for 1995
through 1997 has been completed and a petition has been filed in the tax court.
An examination is underway for 1998 and for the period from January 1 through
July 21, 1999 (short tax period).
6. Policy and Contract Attributes
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 annuity and deposit fund products. 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:
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
6. Policy and Contract Attributes (continued)
December 31
2000 1999
----------------------------------------------------------------
Amount Percent Amount Percent
----------------------------------------------------------------
Subject to discretionary withdrawal - with adjustment:
With market value adjustment $ 994,166 7% $ 9,134 -
At book value less surrender charge 537,251 4 435,717 3%
At market value 3,367,374 26 7,385,279 53
Subject to discretionary withdrawal -
without adjustment 1,419,091 11 1,748,102 13
Not subject to discretionary withdrawal
provision 6,760,644 52 4,417,004 31
----------------- ------------------
---------------- ----------------
Total annuity reserves and deposit 13,078,526 100% 13,995,236 100%
liabilities
================ ================
Less reinsurance ceded (5,209,341) (5,820,180)
-----------------
------------------
Net annuity reserves and deposit liabilities $ 7,869,185 $8,175,056
================= ==================
Certain separate accounts held by the Company represent 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.
Information regarding the separate accounts of the Company is as follows:
Nonindexed
Guaranteed Guaranteed More
Indexed Than 4% Nonguaranteed Total
--------------
------------------- ------------------- --------------
Premiums, deposits and other
considerations for the year
ended December 31, 2000 $ - $ - $ 349,535 $ 349,535
============== =================== =================== ==============
Reserves for separate accounts as
of December 31, 2000 $17,528 $754,619 $3,188,901 $3,961,048
============== =================== =================== ==============
Reserves by withdrawal characteristics as of December 31, 2000:
At market value $ - $ - $3,188,901 $3,188,901
Not subject to discretionary
withdrawal 17,528 754,619 - 17,528
-------------- ------------------- ------------------- --------------
-------------- ------------------- ------------------- --------------
$17,528 $754,619 $3,188,901 $3,961,048
============== =================== =================== ==============
Comparative information for 1999 and 1998 is not available.
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
6. Policy and Contract Attributes (continued)
A reconciliation of the amounts transferred to and from the separate accounts is presented below:
Year ended December 31
2000 1999 1998
----------------------------------------------
Transfer as reported in the summary of operations of the separate accounts
statement:
Transfers to separate accounts $350,784 $255,210 $352,298
Transfers from separate accounts 181,133 217,729 173,152
----------------------------------------------
Net transfers to separate accounts 169,651 37,481 179,146
Reconciling adjustments:
Deposits (withdrawals) from separate accounts 5,287 13,091 21,097
Other fund adjustment 412 - -
----------------------------------------------
Net transfers as reported in the statements of operations
$175,350 $ 50,572 $200,243
==============================================
Components of deferred and uncollected premiums are as follows:
Gross Loading Net
------------------------------------------------------
December 31, 2000
Life and annuity:
Ordinary first-year business $ 30,778 $17,890 $ 12,888
Ordinary renewal business 411,229 17,145 394,084
Group life direct business 4,968 - 4,968
Reinsurance ceded (212,969) - (212,969)
------------------------------------------------------
234,006 35,035 198,971
Accident and health 16,344 - 16,344
------------------------------------------------------
$250,350 $35,035 $215,315
======================================================
December 31, 1999
Life and annuity:
Ordinary first-year business $ 52,710 $ - $ 52,710
Ordinary renewal business 263,678 36,000 227,678
Group life direct business 759 - 759
Reinsurance ceded (123,315) - (123,315)
------------------------------------------------------
193,832 36,000 157,832
Accident and health 69,890 - 69,890
------------------------------------------------------
$263,722 $36,000 $227,722
======================================================
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
7. Dividend Restrictions
The Company is subject to limitations, imposed by the State of Iowa, on the
payment of dividends to its parent company. Generally, dividends during any
twelve-month period may not be paid, without prior regulatory approval, in
excess of the greater of (a) 10 percent of statutory surplus as of the preceding
December 31, or (b) statutory gain from operations before net realized capital
gains (losses) on investments for the preceding year. Subject to the
availability of unassigned surplus at the time of such dividend, the maximum
payment which may be made in 2001, without the prior approval of insurance
regulatory authorities, is $156,700.
8. 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 approximately $1,100, $800 and $600 for
the years ended December 31, 2000, 1999 and 1998, 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 approximately $3,000 for each
of the years ended December 31, 2000, 1999 and 1998.
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
9. Related Party Transactions
The Company shares certain offices, employees and general expenses with
affiliated companies.
Beginning in 2000, the Company receives data processing, investment advisory and
management, marketing and administration services from affiliates. During 2000,
the Company paid $21,323 for these services, which approximates their costs to
the affiliates.
Payables to affiliates bear interest at the thirty-day commercial paper rate of
6.40% at December 31, 2000.
At December 31, 2000, the Company has short-term notes receivable from
affiliates of $155,000 and short-term notes payable to affiliates of $131,298.
Interest on these notes accrue at rates ranging from 6.49% to 6.52%.
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 approximately $172,000 to the Company in December 1999.
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
10. Commitments and Contingencies
The Company is a defendant in various legal actions arising from its operations.
These include legal actions similar to those faced by many other major life
insurers which allege damages related to sales practices for universal life
policies sold between January 1981 and June 1996. In 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 $8,199, $7,710 and $8,276 after-tax have been incurred in 2000,
1999 and 1998, 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.
11. Stock Dividend of Subsidiary to Stockholder
On December 1, 2000, the Company paid a stock dividend to its stockholder,
Transamerica Insurance Corporation, consisting of 100% of the outstanding common
and preferred stock of Transamerica Life Insurance Company of Canada. The
dividend of $210,386 represented the Company's equity basis carrying value for
the stock at the time it was distributed.
12. Partnership Termination
During 2000, the Company increased its ownership of its Taiwan branch operations
to 100% through a buyout of its 60% partner, Pacific Life Insurance Ltd., for a
payment of $19,192. A receivable from the partner of $35,510 was also written
off in conjunction with the buy-out. Additional costs of $17,100 were incurred
as a result of the scheduled termination of reinsurance treaties with three
unaffiliated companies. These items were recorded as a charge to unassigned
surplus on a net of tax basis.
Transamerica Occidental Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
13. Reconciliation to Insurance Department Annual Statement
The following table reconciles net income and total capital and surplus as
reported in the Annual Statement filed with the Insurance Department to the
amounts reported in the accompanying financial statements as of and for the year
ended December 31, 2000:
Total Capital and
Net Income Surplus
------------------------------------
Amounts reported in Annual Statement $251,510 $1,594,585
Adjustments related to reinsurance treaties (97,108) (97,108)
Adjustments to policy and contract claim reserves 20,000 20,000
Tax effect of adjustments 26,988 26,988
------------------------------------
------------------------------------
Amounts reported herein $201,390 $1,544,465
====================================
0008-0087588
Statutory-Basis
Financial Statement Schedules
0008-0087588 37
Transamerica Occidental Life Insurance Company
Summary of Investments - Other Than Investments in Related Parties
(Dollars in thousands)
December 31, 2000
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 $ 776,949 $ 784,961 $ 776,949
States, municipalities and political
subdivisions 1,007,229 1,090,510 1,007,229
Foreign governments 91,391 95,359 91,391
Public utilities 1,453,514 1,481,370 1,453,514
All other corporate bonds 11,075,355 11,110,088 11,075,355
Preferred stock 79,343 78,621 79,343
-----------------------------------------------------------
Total fixed maturities 14,483,781 14,640,909 14,483,781
Equity securities
Common stocks:
Banks, trust and insurance 42,398 43,817 43,817
Industrial, miscellaneous and all other 437,476 556,777 556,777
-----------------------------------------------------------
-----------------------------------------------------------
Total equity securities 479,874 600,594 600,594
Mortgage loans on real estate 1,140,481 1,140,481
Real estate 96,219 96,219
Policy loans 417,849 417,849
Other long-term investments 278,629 278,629
Cash and short-term investments 100,681 100,681
-------------------- ---------------------
Total investments $16,997,514 $17,118,234
==================== =====================
(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.
38 0008-0087588
Transamerica Occidental Life Insurance Company
Supplementary Insurance Information
(Dollars in thousands)
December 31, 2000
Schedule III
Future Policy Policy and
Benefits and Unearned Contract
Expenses Premiums Liabilities
- -----------------------------------------------------------------------------------------------------------
Year ended December 31, 2000:
Individual life $5,330,707 $ - $328,828
Individual health 39,295 48,256 16,298
Group life and health 15,770 8,580 53,306
Annuity 4,411,716 - 20,740
-----------------------------------------------------------
-----------------------------------------------------------
$9,797,488 $56,836 $419,172
===========================================================
===========================================================
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
===========================================================
0008-0087588
Benefits, Claims
Losses and
Net Settlement Expenses Other
Premium Investment Operating Premiums
Revenue Income* Expenses* Written
- --------------------------------------------------------------------------------------------------
$1,241,149 $ 447,840 $1,245,378 $ 934,952
43,836 8,517 84,424 89,362 $91,282
103,920 11,522 (55,633) 114,131 49,345
1,179,915 640,335 1,665,463 277,789
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$2,568,820 $1,108,214 $2,939,632 $1,416,234
===============================================================================
===============================================================================
$ 894,532 $ 405,705 $ 909,143 $ 703,605
(10,184) 2,770 (33,811) 35,665 $80,328
158,775 10,967 134,414 124,689 65,217
888,608 705,600 1,283,024 736,327
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$1,931,731 $1,125,042 $2,292,770 $1,600,286
===============================================================================
===============================================================================
$1,070,236 $ 400,313 $1,242,592 $ 492,976
51,827 4,483 3,265 100,839 $63,828
195,431 4,003 160,581 89,231 50,433
914,547 669,744 312,946 2,218,202
- -------------------------------------------------------------------------------
$2,232,041 $1,078,543 $1,719,384 $2,901,248
===============================================================================
*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.
Transamerica Occidental Life Insurance Company
Reinsurance
(Dollars in thousands)
December 31, 2000
Schedule IV
Assumed Percentage
Ceded to From of Amount
Gross Other Other Net Assumed
Amount Companies Companies Amount to Net
- -------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
2000:
Life insurance in force $626,744,294 $455,425,869 $ 21,882,466 $193,200,891 11%
Premiums:
Individual life $ 1,457,065 $ 1,119,760 $ 903,844 $ 1,241,149 74%
Individual health 91,282 95,419 47,973 43,836 109%
Group life and health 49,345 124,268 178,843 103,920 172%
Annuity 1,026,218 434,100 587,797 1,179,915 49%
-----------------------------------------------------------------------------------------
$ 2,623,910 $ 1,773,547 $ 1,718,457 $ 2,568,820 67%
=========================================================================================
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 $ 1,181,390 $ 1,220,329 $ 933,471 $ 894,532 104%
Individual health 80,328 97,296 6,784 (10,184) -%
Group life and health 65,217 247,870 341,428 158,775 215%
Annuity 954,840 513,149 755,558 888,608 85%
-----------------------------------------------------------------------------------------
$ 2,281,775 $ 2,078,644 $ 2,037,241 $ 1,931,731 149%
=========================================================================================
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 $ 1,253,362 $ 958,929 $ 776,803 $ 1,070,236 73%
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 948,039 1,128,452 1,384,372 914,547 151%
-----------------------------------------------------------------------------------------
$ $ 2,491,345 $ 2,698,137 $ 2,232,041 168%
=========================================================================================
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 is 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 all of our obligations, including insurance and annuity
obligations.
You may allocate any portion of 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 may allocate
net premiums to the fixed account and transfer funds between the separate
account and the fixed account, within limits.
Fixed Account Accumulation Value
For the base policy and each layer, the accumulation value in 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 ________ all net premiums paid into it less any 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 specified date if
that date is a monthly policy date, or, if applicable, on the valuation
date immediately following the monthly policy date; minus
o ________ any partial surrenders and surrender penalty free withdrawals
charged against it, including 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; and minus
o ________ any transfer fees or other charges allocated to the fixed account,
plus accrued interest on those amounts since the date they were deducted.
Fixed Account Interest Rates
The net premium you allocate to the fixed account will accrue interest from the
valuation date on which we allocate it to the fixed account (not including the
loan account). Interest is credited monthly on each monthly policy date. The
guaranteed minimum interest rate for the fixed account, not including the loan
account, for all policy years is 3% per year. We may declare interest rates that
are higher than the guaranteed minimum interest rate at any time before the
policy anniversary nearest the insured's 100th birthday. But there is no
assurance that we will declare an interest rate higher than the 3% per year
minimum. We will never declare an interest rate is that 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 age 100,
the accumulation value in the fixed account will accrue interest at the
guaranteed minimum interest rate. For regular loans, we will credit interest to
the loan account at an annual effective interest rate of no less than 6.75%. For
preferred loans, we will credit interest to the loan account at an annual
effective interest rate of return of no less than 7.75%.
A-1
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 (not
including the accumulation value in the loan account) or the amount of the
last transfer from the fixed account.
These limitations do not apply to transfers in connection with automatic account
rebalancing or from the loan account due to loan repayments.
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.
A-2
APPENDIX B
SETTLEMENT OPTIONS
Benefit Payment Options
When the insured 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 insured is living. You may also
choose one of these options as a method of receiving any surrender proceeds that
are available under the policy. The beneficiary may choose a benefit option
after the insured has died. The beneficiary's right to choose will be subject to
any benefit payment option restrictions in effect at the insured's death.
Settlement options are obligations of and 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 insured'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 payments available under
our then current annuity contracts.
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 his or
her age nearest birthday on the date of the insured's death or the date you
surrender the policy. If the death benefit is payable, the settlement option
will start on the date of the insured'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 the option
starts. 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.
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 payee
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.
B-1
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 45, under a preferred
underwriting class and qualifying for the non-smoker rates. The policy uses the
guideline premium test as the life insurance qualification test. One set of
tables illustrates the Option 1 (level) Death Benefit Option; another set
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 values on the basis of the guaranteed monthly deduction rates
and other charges, while the other table illustrates values on the basis of the
current monthly deduction rates and other charges presently in effect.
The tables assume that no layers have been added to the policy; 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 no portion of the coverage is
provided under a supplemental adjustable life insurance rider. The tables
further assume that no other riders are in effect on the policy.
The tables assume that a premium in the amount shown in each table is paid at
the beginning of each policy year for the first 20 policy years 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 show 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 among the sub-accounts if the actual rates
of return averaged 0%, 6%, or 12%, but the rates of each portfolio varied above
and below such averages.
Deductions for Charges
The 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, including the monthly mortality and expense risk
charge.
The administrative charge is 7.6% of each premium payment, up to the target
amount each policy year for the first 10 policy years, 3.6% of each premium
payment in excess of the target amount each policy year during the first 10
policy year; and 3.6% of each premium payment in policy years 11 and later. The
target amount for each of these illustrations is $4,000.
The mortality and expense risk charge is a monthly charge at a rate equal to
one-twelfth of the annual rate. The charge is a percentage of the accumulation
value in the sub-accounts on the monthly policy date. The annual charge for
illustrations using guaranteed monthly deduction rates and other charges is
0.65% in policy years 1-10; 0.40% in policy year 11-20; and 0.15% in policy
years 21 and later. The annual charge for illustrations using current monthly
deductions rates is 0.65% in policy years 1-10; 0.25% in policy years 11-20; and
0.0% in policy years 21 and later. On both a guaranteed and current basis, no
mortality and expense risk charges are taken from the policy's accumulation
value beginning with the policy anniversary nearest the insured's 100th
birthday.
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 0.92%
of the average daily net assets of the portfolios. The rate of 0.92% 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 2000, ranged from an annual rate of 0.60% to an annual
rate of 1.80% 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
C-1
reimbursements, if applicable, the expenses for those portfolios would be higher
and the simple average would have been at the annual rate of 0.99% 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 0.92% 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 assumed 0.92% 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 __________ -0.92%, 5.08% and 11.08%,
respectively.
Upon request, we will provide a comparable illustration based upon the proposed
insured's age and underwriting classification, the premium amount and the
allowable requested face amount.
C-2
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VUL-6
VARIABLE UNIVERSAL LIFE POLICY
Annual Premium Each Year for 20 Policy Years: $5,500.00 Male, Preferred Nonsmoker, Age 45
Guideline Single Premium: $62,589.65 Face Amount: $250,000
Guideline Level Premium: $5,577.12 Death Benefit: Option 1
7-Pay Premium Limits: $13,998.60
BASED ON CURRENT MONTHLY DEDUCTIONS, INCLUDING MORTALITY & EXPENSE RISK CHARGE, AND ADMINISTRATIVE CHARGE AND
CURRENT AVERAGE PORTFOLIO EXPENSES
- ----------- ----------- ------------------------------------- -------------------------------------- -------------------------------
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 $5,775 $0 $3,110 $250,000* $0 $3,353 $250,000* $0 $3,598 $250,000*
2 $11,839 $371 $7,297 $250,000 $1,091 $8,016 $250,000 $1,841 $8,766 $250,000
3 $18,206 $4,603 $11,378 $250,000 $6,068 $12,844 $250,000 $7,654 $14,429 $250,000
4 $24,891 $8,730 $15,355 $250,000 $11,217 $17,843 $250,000 $14,013 $20,639 $250,000
5 $31,911 $12,772 $19,248 $250,000 $16,565 $23,040 $250,000 $20,995 $27,471 $250,000
6 $39,281 $17,301 $23,626 $250,000 $22,708 $29,033 $250,000 $29,274 $35,599 $250,000
7 $47,020 $21,732 $27,907 $250,000 $29,089 $35,264 $250,000 $38,372 $44,547 $250,000
8 $55,146 $27,156 $32,081 $250,000 $36,807 $41,732 $250,000 $49,466 $54,391 $250,000
9 $63,678 $32,456 $36,156 $250,000 $44,757 $48,457 $250,000 $61,537 $65,237 $250,000
10 $72,637 $37,658 $40,108 $250,000 $52,976 $55,426 $250,000 $74,719 $77,169 $250,000
11 $82,044 $43,071 $44,296 $250,000 $61,891 $63,116 $250,000 $89,697 $90,922 $250,000
12 $91,921 $48,359 $48,359 $250,000 $71,121 $71,121 $250,000 $106,146 $106,146 $250,000
13 $102,292 $52,303 $52,303 $250,000 $79,468 $79,468 $250,000 $123,021 $123,021 $250,000
14 $113,182 $56,120 $56,120 $250,000 $88,171 $88,171 $250,000 $141,744 $141,744 $250,000
15 $124,616 $59,846 $59,846 $250,000 $97,285 $97,285 $250,000 $162,560 $162,560 $250,000
16 $136,622 $63,487 $63,487 $250,000 $106,840 $106,840 $250,000 $185,727 $185,727 $250,000
17 $149,228 $67,030 $67,030 $250,000 $116,856 $116,856 $250,000 $211,486 $211,486 $266,474
18 $162,465 $70,495 $70,495 $250,000 $127,378 $127,378 $250,000 $240,025 $240,025 $297,632
19 $176,363 $73,869 $73,869 $250,000 $138,431 $138,431 $250,000 $271,636 $271,636 $331,397
20 $190,956 $77,149 $77,149 $250,000 $150,049 $150,049 $250,000 $306,653 $306,653 $367,985
Age 60 $124,616 $59,846 $59,846 $250,000 $97,285 $97,285 $250,000 $162,560 $162,560 $250,000
Age 65 $190,956 $77,149 $77,149 $250,000 $150,049 $150,049 $250,000 $306,653 $306,653 $367,985
Age 70 $243,713 $65,812 $65,812 $250,000 $187,913 $187,913 $250,000 $514,226 $514,226 $591,360
Age 75 $311,047 $48,239 $48,239 $250,000 $237,108 $237,108 $250,000 $862,353 $862,353 $905,471
- ----------- ----------- ---------- -------------- ----------- ---------- --------------- ----------- ---------- --------------------
(1) 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 the policy to lapse because of insufficient net cash value.
*The death benefit is maintained under the 10 year no-lapse guarantee.
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.
C-3
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VUL-6
VARIABLE UNIVERSAL LIFE POLICY
Annual Premium Each Year for 20 Policy Years: $5,500.00 Male, Preferred Nonsmoker, Age 45
Guideline Single Premium: $62,589.65 Face Amount: $250,000
Guideline Level Premium: $5,577.12 Death Benefit: Option 1
7-Pay Premium Limits: $13,998.60
BASED ON GUARANTEED MONTHLY DEDUCTIONS, INCLUDING MORTALITY & EXPENSE RISK CHARGE, AND ADMINISTRATIVE CHARGE AND
CURRENT AVERAGE PORTFOLIO EXPENSES
- ----------- ----------- -------------------------------------- ------------------------------------- ----------------------------
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 $5,775 $0 $3,110 $250,000* $0 $3,353 $250,000* $0 $3,598 $250,000*
2 $11,839 $0 $6,237 $250,000* $0 $6,924 $250,000* $717 $7,643 $250,000
3 $18,206 $2,459 $9,234 $250,000 $3,796 $10,572 $250,000 $5,252 $12,027 $250,000
4 $24,891 $5,476 $12,101 $250,000 $7,673 $14,299 $250,000 $10,163 $16,788 $250,000
5 $31,911 $8,355 $14,830 $250,000 $11,624 $18,100 $250,000 $15,484 $21,959 $250,000
6 $39,281 $11,092 $17,417 $250,000 $15,650 $21,975 $250,000 $21,257 $27,582 $250,000
7 $47,020 $13,672 $19,847 $250,000 $19,738 $25,913 $250,000 $27,519 $33,694 $250,000
8 $55,146 $17,181 $22,106 $250,000 $24,979 $29,904 $250,000 $35,416 $40,341 $250,000
9 $63,678 $20,480 $24,180 $250,000 $30,238 $33,938 $250,000 $43,873 $47,573 $250,000
10 $72,637 $23,600 $26,050 $250,000 $35,550 $38,000 $250,000 $52,996 $55,446 $250,000
11 $82,044 $26,715 $27,940 $250,000 $41,140 $42,365 $250,000 $63,155 $64,380 $250,000
12 $91,921 $29,607 $29,607 $250,000 $46,773 $46,773 $250,000 $74,179 $74,179 $250,000
13 $102,292 $31,047 $31,047 $250,000 $51,227 $51,227 $250,000 $84,961 $84,961 $250,000
14 $113,182 $32,245 $32,245 $250,000 $55,725 $55,725 $250,000 $96,855 $96,855 $250,000
15 $124,616 $33,188 $33,188 $250,000 $60,265 $60,265 $250,000 $110,012 $110,012 $250,000
16 $136,622 $33,849 $33,849 $250,000 $64,834 $64,834 $250,000 $124,603 $124,603 $250,000
17 $149,228 $34,196 $34,196 $250,000 $69,419 $69,419 $250,000 $140,828 $140,828 $250,000
18 $162,465 $34,186 $34,186 $250,000 $73,998 $73,998 $250,000 $158,924 $158,924 $250,000
19 $176,363 $33,769 $33,769 $250,000 $78,547 $78,547 $250,000 $179,177 $179,177 $250,000
20 $190,956 $32,893 $32,893 $250,000 $83,045 $83,045 $250,000 $201,935 $201,935 $250,000
Age 60 $124,616 $33,188 $33,188 $250,000 $60,265 $60,265 $250,000 $110,012 $110,012 $250,000
Age 65 $190,956 $32,893 $32,893 $250,000 $83,045 $83,045 $250,000 $210,935 $210,935 $250,000
Age 70 $243,713 $0 $0 $0 $71,244 $71,244 $250,000 $323,532 $323,532 $372,062
Age 75 $311,047 $0 $0 $0 $32,112 $32,112 $250,000 $522,086 $522,086 $548,191
- ----------- ----------- ---------- --------------- ----------- ---------- -------------- ----------- ---------- --------------------
(1) 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 the policy to lapse because of insufficient net cash
value..
*The death benefit is maintained under the 10 year no-lapse guarantee.
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.
C-4
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VUL-6
VARIABLE UNIVERSAL LIFE POLICY
Annual Premium Each Year for 20 Policy Years: $13,750.00 Male, Preferred Nonsmoker, Age 45
Guideline Single Premium: $62,589.65 Face Amount: $250,000
Guideline Level Premium: $17,396.37 Death Benefit: Option 2
7-Pay Premium Limits: $13,998.60
BASED ON CURRENT MONTHLY DEDUCTIONS, INCLUDING MORTALITY & EXPENSE RISK CHARGE, AND ADMINISTRATIVE CHARGE AND
CURRENT AVERAGE PORTFOLIO EXPENSES
- ----------- ----------- ------------------------------------- -------------------------------------- -------------------------------
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 $14,438 $3,861 $10,936 $260,937 $4,579 $11,654 $261,654 $5,297 $12,372 $262,373
2 $29,597 $15,899 $22,824 $272,824 $18,053 $24,979 $274,979 $20,295 $27,220 $277,220
3 $45,514 $27,706 $34,481 $284,481 $32,068 $38,843 $288,843 $36,783 $43,559 $293,559
4 $62,227 $39,284 $45,909 $295,909 $46,644 $53,269 $303,269 $54,914 $61,540 $311,540
5 $79,776 $50,654 $57,129 $307,129 $61,824 $68,299 $318,299 $74,877 $81,352 $331,352
6 $98,203 $62,387 $68,712 $318,712 $78,221 $84,546 $334,546 $97,465 $103,790 $353,791
7 $117,550 $73,899 $80,074 $330,074 $95,292 $101,467 $351,467 $122,336 $128,511 $378,511
8 $137,865 $86,280 $91,205 $341,205 $114,151 $119,076 $369,077 $150,810 $155,735 $405,735
9 $159,196 $98,415 $102,115 $352,115 $133,712 $137,412 $387,412 $182,030 $185,730 $435,730
10 $181,593 $110,322 $112,772 $362,773 $154,020 $156,470 $406,470 $216,296 $218,746 $468,746
11 $205,110 $122,706 $123,931 $373,931 $176,080 $177,305 $427,305 $255,298 $256,523 $506,523
12 $229,804 $134,856 $134,856 $384,856 $199,049 $199,049 $449,049 $298,301 $298,301 $548,302
13 $255,731 $145,553 $145,553 $395,553 $221,748 $221,748 $471,748 $344,522 $344,522 $594,522
14 $282,955 $156,007 $156,007 $406,007 $245,432 $245,432 $495,433 $395,650 $395,650 $645,650
15 $311,541 $166,263 $166,263 $416,263 $270,193 $270,193 $520,193 $452,267 $452,267 $702,267
16 $341,555 $176,325 $176,325 $426,326 $296,086 $296,086 $546,086 $514,974 $514,974 $764,974
17 $373,070 $186,176 $186,176 $436,176 $323,147 $323,147 $573,147 $584,415 $584,415 $834,415
18 $406,161 $195,840 $195,840 $445,840 $351,456 $351,456 $601,456 $661,349 $661,349 $911,349
19 $440,907 $205,297 $205,297 $455,297 $381,052 $381,052 $631,052 $746,570 $746,570 $996,571
20 $477,390 $214,539 $214,539 $464,540 $411,987 $411,987 $661,988 $840,973 $840,973 $1,090,974
Age 60 $311,541 $166,263 $166,263 $416,263 $270,193 $270,193 $520,193 $452,267 $452,267 $702,267
Age 65 $477,390 $214,539 $214,539 $464,540 $411,987 $411,987 $661,987 $840,973 $840,973 $1,090,974
Age 70 $609,284 $194,010 $194,010 $444,010 $515,376 $515,376 $765,376 $1,407,990 $1,407,990 $1,657,991
Age 75 $777,618 $166,454 $166,454 $416,455 $638,707 $638,707 $888,707 $2,356,595 $2,356,595 $2,606,595
- ----------------- ---------- -------------- ----------- ---------- --------------- ----------- ----------- ------------------------
(1) 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 the policy to lapse because of insufficient 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.
C-5
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VUL-6
VARIABLE UNIVERSAL LIFE POLICY
Annual Premium Each Year for 20 Policy Years: $13,750.00 Male, Preferred Nonsmoker, Age 45
Guideline Single Premium: $62,589.65 Face Amount: $250,000
Guideline Level Premium: $17,396.37 Death Benefit: Option 2
7-Pay Premium Limits: $13,998.60
BASED ON GUARANTEED MONTHLY DEDUCTIONS, INCLUDING MORTALITY & EXPENSE RISK CHARGE, AND ADMINISTRATIVE CHARGE AND
CURRENT AVERAGE PORTFOLIO EXPENSES
- ----------- ----------- ------------------------------------- ------------------------------------- -------------------------------
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 $14,438 $3,861 $10,936 $260,937 $4,579 $11,654 $261,654 $5,297 $12,372 $262,373
2 $29,597 $14,809 $21,734 $271,734 $16,928 $23,853 $273,853 $19,135 $26,060 $276,060
3 $45,514 $25,488 $32,264 $282,264 $29,711 $36,487 $286,487 $34,285 $41,061 $291,061
4 $62,227 $35,899 $42,525 $292,525 $42,943 $49,568 $299,568 $50,878 $57,504 $307,504
5 $79,776 $46,033 $52,508 $302,508 $56,629 $63,105 $313,105 $69,051 $75,526 $325,526
6 $98,203 $55,886 $62,211 $312,211 $70,783 $77,108 $327,108 $88,959 $95,284 $345,284
7 $117,550 $65,441 $71,616 $321,616 $85,401 $91,576 $341,576 $110,757 $116,932 $366,933
8 $137,865 $75,784 $80,709 $330,710 $101,586 $106,511 $356,511 $135,724 $140,649 $390,649
9 $159,196 $85,774 $89,474 $339,475 $118,210 $121,910 $371,911 $162,924 $166,624 $416,625
10 $181,593 $95,440 $97,890 $347,890 $135,318 $137,768 $387,769 $192,616 $195,066 $445,066
11 $205,110 $105,150 $106,375 $356,375 $153,422 $154,647 $404,648 $225,736 $226,961 $476,961
12 $229,804 $114,500 $114,500 $364,501 $172,058 $172,058 $422,058 $261,986 $261,986 $511,987
13 $255,731 $122,261 $122,261 $372,261 $190,014 $190,014 $440,014 $300,464 $300,464 $550,464
14 $282,955 $129,644 $129,644 $379,644 $208,523 $208,523 $458,523 $342,742 $342,742 $592,742
15 $311,541 $136,633 $136,633 $386,634 $227,589 $227,589 $477,590 $389,204 $389,204 $639,204
16 $341,555 $143,201 $143,201 $393,202 $247,205 $247,205 $497,205 $440,260 $440,260 $690,260
17 $373,070 $149,316 $149,316 $399,316 $267,356 $267,356 $517,357 $496,358 $496,358 $746,359
18 $406,161 $154,934 $154,934 $404,934 $288,018 $288,018 $538,019 $557,985 $557,985 $807,986
19 $440,907 $160,005 $160,005 $410,006 $309,157 $309,157 $559,158 $625,669 $625,669 $875,670
20 $477,390 $164,483 $164,483 $414,484 $330,739 $330,739 $580,740 $699,998 $699,998 $949,999
Age 60 $311,541 $136,633 $136,633 $386,634 $227,589 $227,589 $477,590 $389,204 $389,204 $639,204
Age 65 $477,390 $164,483 $164,483 $414,484 $330,739 $330,739 $580,740 $699,998 $699,998 $949,999
Age 70 $609,284 $113,940 $113,940 $363,940 $371,111 $371,111 $621,111 $1,114,846 $1,114,846 $1,364,846
Age 75 $777,618 $43,877 $43,877 $293,877 $396,595 $396,595 $646,596 $1,778,890 $1,778,890 $2,028,891
- ------------------- ---------- --------------- ---------- ---------- --------------- ---------- ----------- --------------------
(1)
(1) 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 the policy to lapse
because of
insufficient 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.
C-6
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VUL-6
VARIABLE UNIVERSAL LIFE POLICY
Annual Premium Each Year for 20 Policy Years: $11,500.00 Male, Preferred Nonsmoker, Age 45
Guideline Single Premium: $62,589.65 Face Amount: $250,000
Guideline Level Premium: $11,579.85 Death Benefit: Option 3
7-Pay Premium Limits: $13,998.60
BASED ON CURRENT MONTHLY DEDUCTIONS, INCLUDING MORTALITY & EXPENSE RISK , AND ADMINISTRATIVE CHARGE AND CURRENT
AVERAGE PORTFOLIO EXPENSES
- ----------- ----------- ------------------------------------- -------------------------------------- -----------------------------
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 $12,075 $1,725 $8,800 $261,500 $2,314 $9,389 $261,500 $2,903 $9,978 $261,500
2 $24,754 $11,658 $18,584 $273,000 $13,422 $20,347 $273,000 $15,257 $22,183 $273,000
3 $38,066 $21,391 $28,167 $284,500 $24,966 $31,741 $284,500 $28,830 $35,606 $284,500
4 $52,045 $30,925 $37,550 $296,000 $36,961 $43,587 $296,000 $43,746 $50,372 $296,000
5 $66,722 $40,278 $46,754 $307,500 $49,448 $55,924 $307,500 $60,166 $66,641 $307,500
6 $82,133 $50,022 $56,347 $319,000 $63,035 $69,360 $319,000 $78,854 $85,179 $319,000
7 $98,315 $59,571 $65,746 $330,500 $77,175 $83,350 $330,500 $99,435 $105,610 $330,500
8 $115,305 $70,012 $74,937 $342,000 $92,980 $97,905 $342,000 $123,198 $128,123 $342,000
9 $133,146 $80,230 $83,930 $353,500 $109,359 $113,059 $353,500 $149,249 $152,949 $353,500
10 $151,878 $90,239 $92,689 $365,000 $126,358 $128,808 $365,000 $177,860 $180,310 $365,000
11 $171,547 $100,626 $101,851 $376,500 $144,826 $146,051 $376,500 $210,475 $211,700 $376,500
12 $192,199 $110,784 $110,784 $388,000 $164,053 $164,053 $388,000 $246,503 $246,503 $388,000
13 $213,884 $119,488 $119,488 $399,500 $182,862 $182,862 $399,500 $285,127 $285,127 $399,500
14 $236,653 $127,943 $127,943 $411,000 $202,513 $202,513 $411,000 $327,947 $327,947 $439,450
15 $260,561 $136,197 $136,197 $422,500 $223,095 $223,095 $422,500 $375,386 $375,386 $488,002
16 $285,664 $144,251 $144,251 $434,000 $244,667 $244,667 $434,000 $427,955 $427,955 $547,783
17 $312,022 $152,080 $152,080 $445,500 $267,274 $267,274 $445,500 $486,168 $486,168 $612,573
18 $339,699 $159,709 $159,709 $457,000 $290,998 $290,998 $457,000 $550,652 $550,652 $682,809
19 $368,758 $167,110 $167,110 $468,500 $315,896 $315,896 $468,500 $622,077 $622,077 $758,935
20 $399,271 $174,269 $174,269 $480,000 $342,037 $342,037 $480,000 $701,199 $701,199 $841,439
Age 60 $260,561 $136,197 $136,197 $422,500 $223,095 $223,095 $422,500 $375,386 $375,386 $488,002
Age 65 $399,271 $174,269 $174,269 $480,000 $342,037 $342,037 $480,000 $701,199 $701,199 $841,439
Age 70 $509,583 $152,749 $152,749 $480,000 $433,222 $433,222 $498,205 $1,176,445 $1,176,445 $1,352,912
Age 75 $650,371 $120,135 $120,135 $480,000 $550,274 $550,274 $577,789 $1,973,501 $1,973,501 $2,072,176
- -------------------- ---------- -------------- ----------- ---------- --------------- ----------- ----------- ----------- ---------
(1) 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 the policy to lapse
because of
insufficient 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.
C-7
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VUL-6
VARIABLE UNIVERSAL LIFE POLICY
Annual Premium Each Year for 20 Policy Years: $11,500.00 Male, Preferred Nonsmoker, Age 45
Guideline Single Premium: $62,589.65 Face Amount: $250,000
Guideline Level Premium: $11,579.85 Death Benefit: Option 3
7-Pay Premium Limits: $13,998.60
BASED ON GUARANTEED MONTHLY DEDUCTIONS, INCLUDING MORTALITY & EXPENSE RISK CHARGE, AND ADMINISTRATIVE CHARGE AND
CURRENT AVERAGE PORTFOLIO EXPENSES
- ----------- ----------- ------------------------------------- -------------------------------------- -------------------------------
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 $12,075 $1,725 $8,800 $261,500 $2,314 $9,389 $261,500 $2,903 $9,978 $261,500
2 $24,754 $10,550 $17,476 $273,000 $12,283 $19,208 $273,000 $14,088 $21,014 $273,000
3 $38,066 $19,123 $25,898 $284,500 $22,572 $29,347 $284,500 $26,310 $33,086 $284,500
4 $52,045 $27,438 $34,064 $296,000 $33,189 $39,815 $296,000 $39,677 $46,303 $296,000
5 $66,722 $35,483 $41,958 $307,500 $44,139 $50,614 $307,500 $54,304 $60,780 $307,500
6 $82,133 $43,248 $49,573 $319,000 $55,427 $61,752 $319,000 $70,325 $76,650 $319,000
7 $98,315 $50,708 $56,883 $330,500 $67,049 $73,224 $330,500 $87,875 $94,050 $330,500
8 $115,305 $58,940 $63,865 $342,000 $80,101 $85,026 $342,000 $108,217 $113,142 $342,000
9 $133,146 $66,792 $70,492 $353,500 $93,452 $97,152 $353,500 $130,403 $134,103 $353,500
10 $151,878 $74,278 $76,728 $365,000 $107,145 $109,595 $365,000 $154,689 $157,139 $365,000
11 $171,547 $81,699 $82,924 $376,500 $121,613 $122,838 $376,500 $181,911 $183,136 $376,500
12 $192,199 $88,686 $88,686 $388,000 $136,460 $136,460 $388,000 $211,877 $211,877 $388,000
13 $213,884 $93,992 $93,992 $399,500 $150,478 $150,478 $399,500 $243,718 $243,718 $399,500
14 $236,653 $98,808 $98,808 $411,000 $164,901 $164,901 $411,000 $279,067 $279,067 $411,000
15 $260,561 $103,092 $103,092 $422,500 $179,742 $179,742 $422,500 $318,396 $318,396 $422,500
16 $285,664 $106,783 $106,783 $434,000 $195,000 $195,000 $434,000 $362,017 $362,017 $463,383
17 $312,022 $109,807 $109,807 $445,500 $210,675 $210,675 $445,500 $410,022 $410,022 $516,629
18 $339,699 $112,070 $112,070 $457,000 $226,760 $226,760 $457,000 $462,837 $462,837 $573,919
19 $368,758 $113,456 $113,456 $468,500 $243,244 $243,244 $468,500 $520,944 $520,944 $635,552
20 $399,271 $113,841 $113,841 $480,000 $260,126 $260,126 $480,000 $584,886 $584,886 $701,864
Age 60 $260,561 $103,092 $103,092 $422,500 $179,742 $179,742 $422,500 $318,396 $318,396 $422,500
Age 65 $399,271 $113,841 $113,841 $480,000 $260,126 $260,126 $480,000 $584,886 $584,886 $701,864
Age 70 $509,583 $43,363 $43,363 $480,000 $289,614 $289,614 $480,000 $945,946 $945,946 $1,087,838
Age 75 $650,371 $0 $0 $0 $313,536 $313,536 $480,000 $1,535,299 $1,535,299 $1,612,064
- ------------ ---------- -------------- ----------- ---------- --------------- ----------- ----------- ----------- ------------
(1)
(1) 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 the policy to lapse because of insufficient 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.
C-8
APPENDIX D
DEATH BENEFIT FACTORS
For policies on which the guideline premium test applies.
Insured's Insured's Insured's
Attained Death Benefit Attained Death Benefit Attained Death Benefit
Age Factor Age Factor Age Factor
40 or less 2.50 60 1.30 80 1.05
41 2.43 61 1.28 81 1.05
42 2.36 62 1.26 82 1.05
43 2.29 63 1.24 83 1.05
44 2.22 64 1.22 84 1.05
45 2.15 65 1.20 85 1.05
46 2.09 66 1.19 86 1.05
47 2.03 67 1.18 87 1.05
48 1.97 68 1.17 88 1.05
49 1.91 69 1.16 89 1.05
50 1.85 70 1.15 90 1.05
51 1.78 71 1.13 91 1.04
52 1.71 72 1.11 92 1.03
53 1.64 73 1.09 93 1.02
54 1.57 74 1.07 94 1.01
55 1.50 75 1.05 95 1.00
56 1.46 76 1.05
57 1.42 77 1.05
58 1.38 78 1.05
59 1.34 79 1.05
The death benefit factor for ages after 95 is 1.00.
D-1
For policies on which the cash value accumulation test applies.
----------- ----------- ----------- ---------- ----------- -----------
Attained Attained
Age Male Female Age Male Female
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
0 12.16 14.66 51 2.46 2.87
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
1 11.86 14.30 52 2.39 2.78
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
2 11.52 13.89 53 2.32 2.70
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
3 11.18 13.49 54 2.26 2.63
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
4 10.85 13.09 55 2.20 2.55
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
5 10.52 12.69 56 2.14 2.48
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
6 10.19 12.30 57 2.08 2.41
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
7 9.87 11.91 58 2.03 2.34
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
8 9.55 11.54 59 1.97 2.27
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
9 9.23 11.17 60 1.92 2.21
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
10 8.93 10.81 61 1.88 2.15
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
11 8.63 10.46 62 1.83 2.09
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
12 8.35 10.12 63 1.79 2.03
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
13 8.08 9.79 64 1.75 1.98
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
14 7.83 9.47 65 1.71 1.93
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
15 7.59 9.17 66 1.67 1.87
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
16 7.36 8.87 67 1.63 1.83
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
17 7.14 8.59 68 1.60 1.78
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
18 6.93 8.31 69 1.56 1.73
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
19 6.74 8.05 70 1.53 1.69
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
20 6.54 7.79 71 1.50 1.65
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
21 6.36 7.55 72 1.47 1.61
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
22 6.17 7.30 73 1.45 1.57
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
23 5.99 7.07 74 1.42 1.54
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
24 5.81 6.84 75 1.40 1.50
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
25 5.63 6.62 76 1.38 1.47
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
26 5.45 6.41 77 1.36 1.44
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
27 5.28 6.20 78 1.34 1.41
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
28 5.11 5.99 79 1.32 1.39
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
29 4.94 5.80 80 1.30 1.36
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
30 4.78 5.61 81 1.25 1.31
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
31 4.63 5.42 82 1.24 1.29
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
32 4.48 5.25 83 1.22 1.27
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
33 4.33 5.07 84 1.21 1.25
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
34 4.19 4.91 85 1.19 1.23
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
35 4.05 4.75 86 1.18 1.21
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
36 3.92 4.59 87 1.17 1.19
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
37 3.80 4.44 88 1.16 1.18
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
38 3.67 4.30 89 1.15 1.16
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
39 3.56 4.16 90 1.14 1.15
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
40 3.44 4.03 91 1.13 1.14
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
41 3.34 3.90 92 1.12 1.13
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
42 3.23 3.78 93 1.11 1.11
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
43 3.13 3.66 94 1.10 1.10
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
44 3.03 3.55 95 1.09 1.09
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
45 2.94 3.44 96 1.07 1.07
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
46 2.85 3.34 97 1.06 1.06
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
47 2.77 3.24 98 1.05 1.05
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
48 2.69 3.14 99 1.04 1.04
----------- ----------- ----------- ---------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
49 2.61 3.05 100 1.04 1.04
----------- ----------- -----------
----------- ----------- ----------- ---------- ----------- -----------
50 2.53 2.95
----------- ----------- -----------
The death benefit factor for ages after age 100 is 1.04.
D-2
APPENDIX E
SURRENDER PENALTY
To calculate the surrender penalty that will apply on a full surrender of the
policy, you total the surrender penalty calculated for the base policy, the
surrender penalty calculated for each layer, if any, and the surrender penalty
for each supplemental coverage segment, if any.
To calculate the surrender penalty of the base policy, you (a) find the
surrender penalty factor for the current policy year; and (b) multiply this
factor by the number of thousands of face amount of the base policy. This is the
surrender penalty for the base policy. There is no surrender penalty for the
base policy basic coverage after the first 12 policy years.
To calculate the surrender penalty that will apply on a full surrender of each
layer, you (a) find the surrender penalty factor for the current layer year; and
(b) multiply this factor by the number of thousands of face amount of that
layer. This is the surrender penalty for that coverage segment on the layer.
There is no surrender penalty for a layer after 12 layer years.
Surrender penalties also apply to coverage, if any, provided under a
supplemental adjustable life insurance rider. To calculate the surrender penalty
that will apply on a full surrender of the supplemental coverage under the
rider, you (a) find the surrender penalty factor for the current rider year; and
(b) multiply this factor by the number of thousands of face amount of the
supplemental coverage under the rider. This is the surrender penalty for the
rider coverage. There is no surrender penalty for the rider coverage after the
first 16 rider years.
To calculate the surrender penalty that will apply on a full surrender of the
supplemental coverage under a rider layer, you (a) find the surrender penalty
factor for the current rider layer year; and (b) multiply this factor by the
number of thousands of face amount of the supplemental coverage under the rider
layer. This is the surrender penalty for the rider layer coverage. There is no
surrender penalty for the rider layer coverage after the first 16 rider layer
years.
The total of the surrender penalties for the base policy and any layers, plus
the surrender penalties for the supplemental coverage, if any, under the
supplemental coverage rider and any rider layers, are deducted from the policy's
accumulation value, less any policy debt, to determine the net cash value
payable upon a full surrender of the policy.
The surrender penalty factors that apply to your policy can be found in your
policy data pages. The surrender penalty factors vary on the base policy and on
each layer, as well as on the supplemental coverage rider and on each rider
layer, by the insured's age at issue, sex, smoker or non-smoker status, and risk
class, as well as how long the base policy, layer, supplemental coverage rider
or supplemental coverage rider layer, as applicable, has been in force. Age at
issue is determined separately for the base policy, each layer, the supplemental
coverage rider, and each supplemental coverage rider layers. The smoker or
non-smoker status and risk class also may vary among the base policy, each
layer, the supplemental coverage rider, and each supplemental coverage rider
layer. The surrender penalty factors for the base policy generally decrease each
policy year on the policy anniversary. The surrender penalty factors for a layer
generally decrease each layer year on the layer's anniversary. The surrender
penalty factors for the supplemental coverage rider generally decrease each
rider year on the rider's anniversary. The surrender penalty factors for a rider
layer generally decrease each rider layer year on the rider layer's anniversary.
The surrender penalty factors for any coverage segment are zero after the end of
the surrender penalty period for the coverage segment.
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 a surrender penalty period for the base policy, any layer, the
supplemental coverage rider or any supplemental coverage rider layer. If the
request for a surrender or partial surrender is effective on the last day of a
policy year, layer year, rider year, or rider layer year, as applicable, the
surrender or partial surrender will be determined using the surrender penalty
factor that is effective on the following policy anniversary, layer anniversary,
rider anniversary, or rider layer anniversary (the day following the effective
date of the surrender or partial surrender).
E-1
Example of surrender penalty on a "sample" policy.
The following example shows how the surrender penalty is calculated for a full
surrender of a policy. The example assumes that the policy has a base policy
face amount of $400,000 and includes a supplemental coverage rider with a rider
face amount of $100,000. The total face amount of the policy is, therefore,
$500,000. This example assumes that no layers have been added to the policy and,
therefore, it also assumes that no rider layers have been added to the rider.
The surrender penalty factors listed below are those that apply on this policy
assuming the insured is a male, age 45 on the policy and rider dates, and who
qualifies 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
Base Policy Face Amount
Policy Year Surrender Penalty Factor
----------- ------------------------
1 $28.80
2 $28.30
3 $27.70
4 $27.10
5 $26.50
6 $25.90
7 $25.30
8 $24.70
9 $19.70
10 $14.80
11 $9.80
12 $4.90
13+ $0.00
Surrender Penalty Factor for Each $1,000 of
Supplemental Coverage Rider Face Amount
Policy Year Surrender Penalty Factor
----------- ------------------------
1 $28.70
2 $28.10
3 $27.60
4 $27.00
5 $26.40
6 $25.80
7 $25.20
8 $24.60
9 $24.00
10 $23.30
11 $22.70
12 $22.10
13 $17.60
14 $13.20
15 $8.80
16 $4.40
17+ $0.00
E-2
To determine the amount of the surrender penalty for a full surrender of the
policy, you follow these steps:
1. For the base policy,
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 for the policy year in (c);
e. Multiply the result of (b) times (d).
2. For the supplemental coverage rider:
a. Determine the face amount of the rider;
b. Divide (a) by $1,000;
c. Determine the rider 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 for the policy year in (c);
e. Multiply the result of (b) times (d).
Let us assume the policy is surrendered during the 7th policy and rider year.
Following the steps, above, we determine the surrender penalty as follows:
1. The surrender penalty for the base policy:
a. The face amount of the base policy is $400,000;
b. Divide (a) by $1,000; the result is 400 ($400,000 divided by $1,000);
c. The policy year is Year 7;
d. The surrender penalty factor for Year 7 is $25.30 for each $1,000 of base
policy face amount;
e. The result of (b) times (d) is $10,120 (400 times $25.30).
2. The surrender penalty for the rider:
a. The face amount of the rider is $100,000;
b. Divide (a) by $1,000; the result is 100 ($100,000 divided by $1,000);
c. The rider year is Year 7;
d. The surrender penalty factor for Year 7 is $25.20 for each $1,000 of rider
face amount;
e. The result of (b) times (d) is $2,520 (100 times $25.20).
The full surrender penalty for the policy is $12,640. This is the sum of the
surrender penalty for the base policy ($10,120) plus the surrender penalty for
the rider ($2,520).
The surrender penalty is deducted from the accumulation value, less any policy
debt, 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.
Maximum Surrender Penalty Example
The maximum surrender penalty factor for the base policy applies to a policy
issued insuring a male, age 59, qualifying for our preferred nonsmoker rating
class. The maximum surrender penalty factor applies for surrenders, partial
surrenders and decreases in face amounts that occur during the first policy
year. Listed below are the surrender penalty factors that apply to a policy
issued, without riders, to such a person.
Surrender Penalty Factor for Each $1,000 of
Base Policy Face Amount
Policy Year Surrender Penalty Factor
----------- ------------------------
1 $45.50
2 $44.00
3 $42.60
4 $41.20
5 $39.70
6 $38.30
7 $36.90
8 $35.50
9 $28.40
10 $21.30
11 $14.20
12 $7.10
13+ $0.00
If this hypothetical policy had a face amount of $500,000 of basic coverage, and
if it were surrendered during the first policy year, the maximum surrender
penalty factor applicable to the TransAccumulator VUL cv policy would apply and
would be $22,750.