Document/Exhibit Description Pages Size
1: 485BPOS Acl Variable Annuity Account 1 76 471K
2: EX-99 Exhibit Index 1 5K
4: EX-99.10 AUD CONSENT Consent of Independent Registered Public 1 7K
Accounting Firm
5: EX-99.13.1 PWR ATTY Power of Attorney 2± 10K
6: EX-99.13.2 PWR ATTY Power of Attorney 1 5K
3: EX-99.9 OPIN COUNSEL Opinion of Counsel and Consent 1 8K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 10 (File No. 333-00041) [x]
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 11 (File No. 811-07475) [x]
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(Check appropriate box or boxes)
ACL VARIABLE ANNUITY ACCOUNT 1
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(Exact Name of Registrant)
American Centurion Life Assurance Company
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(Name of Depositor)
20 Madison Avenue Extension, Albany NY 12203
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(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 671-3678
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Mary Ellyn Minenko, 50607 AXP Financial Center, Minneapolis, MN 55474
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on April 29, 2005 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
If appropriate check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
PROSPECTUS
APRIL 29, 2005
PRIVILEGED ASSETS(R) SELECT ANNUITY
GROUP FLEXIBLE PREMIUM DEFERRED COMBINATION FIXED/VARIABLE ANNUITY
ISSUED BY: AMERICAN CENTURION LIFE ASSURANCE COMPANY (AMERICAN CENTURION LIFE)
20 Madison Avenue Extension
Albany, NY 12203
Telephone: (518) 452-4150 (Albany area)
(800) 633-3563
ACL VARIABLE ANNUITY ACCOUNT 1
This prospectus contains information that you should know before investing.
Prospectuses are also available for:
o American Express(R) Variable Portfolio Funds
o AIM Variable Insurance Funds
o American Century(R) Variable Portfolios, Inc.
o Credit Suisse Trust
o Janus Aspen Series: Institutional Shares
Please read the prospectuses carefully and keep them for future reference.
THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THIS CERTIFICATE IS NOT A DEPOSIT OF A BANK OR FINANCIAL
INSTITUTION AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THIS CERTIFICATE
INVOLVES INVESTMENT RISK INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
A Statement of Additional Information (SAI), dated the same date as this
prospectus, is incorporated by reference into this prospectus. It is filed with
the SEC, and is available without charge by contacting American Centurion Life
at the telephone number and address listed above. The table of contents of the
SAI is on the last page of this prospectus. The SEC maintains an Internet site.
This prospectus, the SAI and other information about the product are available
on the EDGAR Database on the SEC's Internet site at (http://www.sec.gov).
Variable annuities are insurance products that are complex investment vehicles.
Before you invest, be sure to ask about the variable annuity's features,
benefits, risks and fees, and whether the variable annuity is appropriate for
you, based upon your financial situation and objectives.
This prospectus provides a general description of the certificate. Your actual
certificate and any riders or endorsements are the controlling documents.
American Centurion Life has not authorized any person to give any information or
to make any representation regarding the certificate other than those contained
in this prospectus or the fund prospectuses. Do not rely on any such information
or representations.
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1 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
TABLE OF CONTENTS
KEY TERMS .....................................................................3
THE CERTIFICATE IN BRIEF ......................................................4
EXPENSE SUMMARY ...............................................................5
CONDENSED FINANCIAL INFORMATION (UNAUDITED) ...................................8
FINANCIAL STATEMENTS ..........................................................9
THE VARIABLE ACCOUNT AND THE FUNDS ...........................................10
THE FIXED ACCOUNT ............................................................13
BUYING YOUR CERTIFICATE ......................................................13
CHARGES ......................................................................15
VALUING YOUR INVESTMENT ......................................................16
MAKING THE MOST OF YOUR CERTIFICATE ..........................................17
SURRENDERS ...................................................................20
CHANGING OWNERSHIP ...........................................................20
BENEFITS IN CASE OF DEATH ....................................................21
THE ANNUITY PAYOUT PERIOD ....................................................22
TAXES ........................................................................23
VOTING RIGHTS ................................................................25
SUBSTITUTION OF INVESTMENTS ..................................................25
ABOUT THE SERVICE PROVIDERS ..................................................26
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION .................27
CORPORATE REORGANIZATION
On Feb. 1, 2005, American Express Company announced plans to pursue a spin-off
of 100% of the common stock of American Express Financial Corporation (AEFC).
AEFC is the parent company of IDS Life Insurance Company (IDS Life). IDS Life is
the parent company of American Centurion Life. American Centurion Life issues
your certificate.
The spin-off of AEFC, expected to be completed in the third quarter of 2005, is
subject to certain regulatory and other approvals, as well as final approval by
the board of directors of American Express Company.
Upon completion of the spin-off, AEFC will be a publicly traded company separate
from American Express Company. AEFC will continue to own all the outstanding
stock of IDS Life and will replace American Express Company as the ultimate
control person of American Centurion Life.
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2 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
KEY TERMS
THESE TERMS CAN HELP YOU UNDERSTAND DETAILS ABOUT YOUR CERTIFICATE.
ACCUMULATION UNIT: A measure of the value of each subaccount before annuity
payouts begin.
AMERICAN CENTURION LIFE: In this prospectus, "we," "us," "our" and "American
Centurion Life" refer to American Centurion Life Assurance Company.
ANNUITANT: The person on whose life or life expectancy the annuity payouts are
based.
ANNUITY PAYOUTS: A fixed amount paid at regular intervals under one of several
plans.
ANNUITY START DATE: The date when annuity payouts are scheduled to begin. This
date is established when you start your certificate. You can change it in the
future.
BENEFICIARY: The person you designate to receive benefits in case of the owner's
or annuitant's death while the certificate is in force.
CERTIFICATE VALUE: The total value of your certificate before we deduct any
applicable charges.
CERTIFICATE YEAR: A period of 12 months, starting on the effective date of your
certificate and on each anniversary of the effective date.
CLOSE OF BUSINESS: The time the New York Stock Exchange (NYSE) closes (4 p.m.
Eastern time unless the NYSE closes earlier).
CODE: The Internal Revenue Code of 1986, as amended.
FIXED ACCOUNT: An account to which you may allocate purchase payments. Amounts
you allocate to this account earn interest at rates that we declare
periodically.
FUNDS: Investment options under your certificate. You may allocate your purchase
payments into subaccounts investing in shares of any or all of these funds.
OWNER (YOU, YOUR): The person who controls the certificate (decides on
investment allocations, transfers, payout options, etc.). Usually, but not
always, the owner is also the annuitant. The owner is responsible for taxes,
regardless of whether he or she receives the certificate's benefits.
QUALIFIED ANNUITY: A certificate that you purchase to fund one of the following
tax-deferred retirement plans that is subject to applicable federal law and any
rules of the plan itself:
o Individual Retirement Annuities (IRAs) under Section 408(b) of the Code,
including rollovers from qualified plans
o Simplified Employee Pension (SEP) plans under Section 408(k) of the Code
A qualified annuity will not provide any necessary or additional tax deferral if
it is used to fund a retirement plan that is already tax deferred.
All other certificates are considered NONQUALIFIED ANNUITIES.
SURRENDER VALUE: The amount you are entitled to receive if you make a full
surrender from your certificate. It is the certificate value minus any
applicable charges.
VALUATION DATE: Any normal business day, Monday through Friday, on which the
NYSE is open, up to the close of business. At the close of business, the next
valuation date begins. We calculate the accumulation unit value of each
subaccount on each valuation date. If we receive your purchase payment or any
transaction request (such as a transfer or surrender request) at our home office
before the close of business, we will process your payment or transaction using
the accumulation unit value we calculate on the valuation date we received your
payment or transaction request. On the other hand, if we receive your purchase
payment or transaction request at our home office at or after the close of
business, we will process your payment or transaction using the accumulation
unit value we calculate on the next valuation date. If you make a transaction
request by telephone (including by fax), you must have completed your
transaction by the close of business in order for us to process it using the
accumulation unit value we calculate on that valuation date. If you were not
able to complete your transaction before the close of business for any reason,
including telephone service interruptions or delays due to high call volume, we
will process your transaction using the accumulation unit value we calculate on
the next valuation date.
VARIABLE ACCOUNT: Consists of separate subaccounts to which you may allocate
purchase payments; each subaccount invests in shares of one fund. The value of
your investment in each subaccount changes with the performance of the
particular fund.
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3 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
THE CERTIFICATE IN BRIEF
PURPOSE: The purpose of the certificate is to allow you to accumulate money for
retirement. You do this by making one or more purchase payments. You may
allocate your purchase payments to the fixed account and/or subaccounts under
the certificate. These accounts, in turn, may earn returns that increase the
value of the certificate. Beginning at a specified time in the future called the
retirement date, the certificate provides lifetime or other forms of payout of
your certificate value on a fixed basis.
It may not be advantageous for you to purchase this certificate in exchange for,
or in addition to, an existing annuity or life insurance policy. Generally, you
can exchange one annuity for another in a "tax-free" exchange under Section 1035
of the Code. You also generally can exchange a life insurance policy for an
annuity. However, before making an exchange, you should compare the contract
and certificate carefully because the features and benefits may be different.
Fees and charges may be higher or lower on your old contract than on this
certificate. You may have to pay a surrender charge when you exchange out of
your old contract. If the exchange does not qualify for Section 1035 treatment,
you also may have to pay federal income tax on the exchange. You should not
exchange your old contract for this certificate, or buy this certificate in
addition to your old contract, unless you determine it is in your best interest.
TAX-DEFERRED RETIREMENT PLANS: Most annuities have a tax-deferred feature. So do
many retirement plans under the Code. As a result, when you use a qualified
annuity to fund a retirement plan that is tax-deferred, your certificate will
not provide any necessary or additional tax deferral for that retirement plan. A
qualified annuity has features other than tax deferral that may help you reach
your retirement goals. In addition, the Code subjects retirement plans including
IRAs to required withdrawals triggered at a certain age. These mandatory
withdrawals are called required minimum distributions (RMDs). RMDs may reduce
the value of certain death benefits (see "Taxes -- Qualified Annuities --
Required minimum distributions"). You should consult your tax advisor before you
purchase the certificate as a qualified annuity for an explanation of the
potential tax implications to you.
FREE LOOK PERIOD: You may return your certificate for a full refund within 30
days after you receive it. You must invest the portion of the purchase payment
you allocate to the variable account in the AXP(R) Variable Portfolio - Cash
Management Fund subaccount for the period we estimate or calculate your free
look right to be in existence (generally 35 days after the certificate issue
date.)
If you choose not to keep your certificate, return it to us within the free look
period. We will cancel the certificate and we promptly will refund the greater
of (1) your purchase payment without investment earnings, or (2) your
certificate value plus any amount we deducted from your payment prior to
allocation to the variable account or the fixed account.
ACCOUNTS: Currently, you may allocate your purchase payments among any or all
of:
o the subaccounts, each of which invests in a fund with a particular investment
objective. The value of each subaccount varies with the performance of the
particular fund in which it invests. We cannot guarantee that the value at
the retirement date will equal or exceed the total purchase payments you
allocate to the subaccounts. (p. 10)
o the fixed account, which earns interest at a rate that we adjust
periodically. (p. 13)
BUYING YOUR CERTIFICATE: You can purchase a certificate by submitting a complete
application. Applications are subject to acceptance at our home office. You may
buy a nonqualified annuity or a qualified annuity. You must make an initial
lump-sum purchase payment. You have the option of making additional purchase
payments in the future.
PURCHASE PAYMENTS:
MINIMUM ALLOWABLE PURCHASE PAYMENTS:
If paying by installments under a scheduled payment plan:
$100 per month
$50 biweekly
If paying by any other method:
$2,000 initial payment for nonqualified annuities
$1,000 initial payment for qualified annuities
$100 for any additional payments
Installments must total at least $1,000 in the first year.
MAXIMUM ALLOWABLE PURCHASE PAYMENTS:
For the first year:
$1,000,000 for issue ages through 75
$500,000 for issue ages 76 to 85
For each subsequent year:
$50,000
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4 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
TRANSFERS: Subject to certain restrictions, you currently may redistribute your
certificate value among the accounts until annuity payouts begin. You may
establish automated transfers among the accounts. (p. 17)
SURRENDERS: You may surrender all or part of your certificate value at any time
before the annuity start date. You may also establish systematic surrenders.
There is no surrender charge. Surrenders may be taxable (and include a 10% IRS
penalty if made prior to your reaching age 59 1/2) and may have other tax
consequences; also, certain restrictions apply. (p. 20)
CHANGING OWNERSHIP: You may change ownership of a nonqualified annuity by
written instruction, but this may have federal income tax consequences.
Restrictions apply to changing ownership of a qualified annuity. (p. 20)
BENEFITS IN CASE OF DEATH: If you or the annuitant die before annuity payouts
begin, we will pay the beneficiary the greater of the certificate value or total
purchase payments made less partial surrenders. (p. 21)
ANNUITY PAYOUTS: You can apply your certificate value to an annuity payout plan
that begins on the annuity start date. You may choose from a variety of plans to
make sure that payouts continue as long as you like. If you purchased a
qualified annuity, the payout schedule must meet IRS requirements. Payouts will
be made on a fixed basis. (p. 22)
TAXES: Generally, income earned on your certificate value grows tax deferred
until you surrender it or begin to receive payouts. (Under certain
circumstances, IRS penalty taxes may apply.) The tax treatment of qualified and
nonqualified annuities differs. Even if you direct payouts to someone else, you
will be taxed on the income if you are the owner. (p. 23)
LIMITATIONS ON USE OF CERTIFICATE: If mandated by applicable law, including, but
not limited to, federal anti-money laundering laws, we may be required to reject
a purchase payment. We may also be required to block an owner's access to
certificate values. We may also be required to satisfy other statutory
obligations. Under these circumstances we may refuse to implement requests for
transfers, surrenders or death benefits until instructions are received from the
appropriate governmental authority or a court of competent jurisdiction.
EXPENSE SUMMARY
THE FOLLOWING TABLES DESCRIBE THE FEES AND EXPENSES YOU WILL PAY WHEN BUYING,
OWNING AND SURRENDERING THE CERTIFICATE. THE FIRST TABLE DESCRIBES THE FEES AND
EXPENSES YOU WILL PAY AT THE TIME THAT YOU BUY THE CERTIFICATE OR SURRENDER THE
CERTIFICATE.
CERTIFICATE OWNER TRANSACTION EXPENSES
SURRENDER CHARGE 0%
THE NEXT TABLES DESCRIBE THE FEES AND EXPENSES THAT YOU WILL PAY PERIODICALLY
DURING THE TIME THAT YOU OWN THE CERTIFICATE, NOT INCLUDING FUND FEES AND
EXPENSES.
ANNUAL CERTIFICATE ADMINISTRATIVE CHARGE
$30
(We currently waive this charge when purchase payments less partial surrenders
is at least $10,000.)
ANNUAL VARIABLE ACCOUNT EXPENSES
(As a percentage of average daily subaccount value)
MORTALITY AND EXPENSE RISK FEE 1%
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5 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
ANNUAL OPERATING EXPENSES OF THE FUNDS
THE NEXT TWO TABLES DESCRIBE THE OPERATING EXPENSES OF THE FUNDS THAT YOU MAY
PAY PERIODICALLY DURING THE TIME THAT YOU OWN THE CERTIFICATE. THE FIRST TABLE
SHOWS THE MINIMUM AND MAXIMUM TOTAL OPERATING EXPENSES CHARGED BY THE FUNDS FOR
THE LAST FISCAL YEAR. THE SECOND TABLE SHOWS THE FEES AND EXPENSES CHARGED BY
EACH FUND FOR THE LAST FISCAL YEAR. MORE DETAIL CONCERNING EACH FUND'S FEES AND
EXPENSES IS CONTAINED IN THE PROSPECTUS FOR EACH FUND.
[Enlarge/Download Table]
MINIMUM AND MAXIMUM TOTAL ANNUAL OPERATING EXPENSES FOR THE FUNDS
(Including management fee, distribution and/or service (12b-1) fees and other expenses)
MINIMUM MAXIMUM
Total expenses before fee waivers and/or expense reimbursements .63% 1.57%
[Enlarge/Download Table]
TOTAL ANNUAL OPERATING EXPENSES FOR EACH FUND
(Before fee waivers and/or expense reimbursements, if applicable, as a percentage of average daily net assets)
MANAGEMENT 12B-1 OTHER
FEES FEES EXPENSES TOTAL
AXP(R) Variable Portfolio - Cash Management Fund .51% .13% .05% .69%(1)
AXP(R) Variable Portfolio - Diversified Bond Fund .60 .13 .08 .81(1)
AXP(R) Variable Portfolio - Large Cap Equity Fund .65 .13 .07 .85(1)
(previously AXP(R) Variable Portfolio - Capital Resource Fund)
AXP(R) Variable Portfolio - Managed Fund .59 .13 .06 .78(1)
AXP(R) Variable Portfolio - Strategy Aggressive Fund .51 .13 .08 .72(1)
AXP(R) Variable Portfolio - Threadneedle International Fund .75 .13 .10 .98(1)
(previously AXP(R) Variable Portfolio - International Fund)
AIM V.I. Core Stock Fund, Series I Shares .75 -- .46 1.21(2)
(previously INVESCO VIF - Core Equity Fund, Series I Shares)
American Century(R) VP Capital Appreciation, Class I 1.00 -- -- 1.00(3)
American Century(R) VP Value, Class I .93 -- -- .93(3)
Credit Suisse Trust - Global Small Cap Portfolio 1.25 -- .32 1.57(4)
(previously Credit Suisse Trust - Global Post-Venture Capital Portfolio)
Janus Aspen Series Large Cap Growth Portfolio: Institutional Shares .64 -- .02 .66(5)
(previously Janus Aspen Series Growth Portfolio: Institutional Shares)
Janus Aspen Series Worldwide Growth Portfolio: Institutional Shares .60 -- .03 .63(5)
(1) The Fund's expense figures are based on actual expenses for the fiscal
year ended Aug. 31, 2004.
(2) Figures shown in the table are for the year ended Dec. 31, 2004 and are
expressed as a percentage of Fund average daily net assets. There is no
guarantee that actual expenses will be the same as those shown in the
table. The Fund's advisor has contractually agreed to waive advisory fees
and/or reimburse expenses of Series I shares to the extent necessary to
limit Total Annual Fund Operating Expenses (excluding certain items
discussed below) of Series I shares to 1.30% of average daily nets assets
for each series portfolio of AIM Variable Insurance Funds. In determining
the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could
cause the Total Annual Fund Operating Expenses to exceed the limit stated
above: (i) Rule 12b-1 plan fees, if any; (ii) interest; (iii) taxes; (iv)
dividend expense on short sales; (v) extraordinary items (these are
expenses that are not anticipated to arise from the Fund's day-to day
operations), or items designated as such by the Fund's Board of Trustees;
(vi) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vii) expenses that the Fund has incurred
but did not actually pay because of an expense offset arrangement.
Currently, the only expense offset arrangements from which the Fund
benefits are in the form of credits that the Fund receives from banks
where the Fund or its transfer agent has deposit accounts in which it
holds uninvested cash. Those credits are used to pay certain expenses
incurred by the Fund. The expense limitation is in effect through April
30, 2006. Effective Jan.1, 2005 through Dec. 31, 2009, the adviser has
contractually agreed to waive a portion of its advisory fees to the
extent that total expenses exceed 1.15 for AIM V.I. Core Stock Fund,
Series I Shares average daily net assets.
(3) Based on expenses incurred by the Fund, as stated in the most recent
shareholder report. The Fund has a stepped fee schedule. As a result, the
Fund's management fee generally decreases as fund assets increase.
(4) Fee waivers and/or expense reimbursements reduced expenses for the
Portfolio, without which performance would be lower. Waivers and/or
reimbursements may be discontinued at any time. The expense ratios after
the waiver and reimbursements would have been: Credit Suisse Trust -
Global Small Cap Portfolio (1.08%, 0%, .32% and 1.40%).
(5) Fees and expenses shown were determined based on net assets as of the
fiscal year ended Dec. 31, 2004, restated to reflect reductions in the
Portfolios' management fees effective July 1, 2004. Expenses for the
Portfolios are based upon expenses for the fiscal year ended Dec. 31,
2004. All expenses are shown without the effect of any expense offset
arrangements.
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6 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
COMPENSATION DISCLOSURE
We and/or our affiliates may receive compensation when you allocate purchase
payments or certificate value to subaccounts which invest in the funds listed in
the table above. The amount of this compensation varies by fund, may be
significant and may create potential conflicts of interest. For example, the
amount of compensation potentially available under a compensation arrangement
may influence our decision on which funds to include or retain in the
certificate (see "The Variable Account and the Funds -- The funds"). This
compensation is in addition to any revenues we receive from the charges you pay
when buying, owning and surrendering the certificate.
This compensation may be paid to us and/or our affiliates from various sources
including:
o fund assets (but only for those funds with 12b-1 plans as disclosed in the
table above. See the fund's prospectus for details about these plans. Because
12b-1 fees are paid out of fund assets on an on-going basis, certificate
owners who select subaccounts investing in funds that have adopted 12b-1
plans may pay more than certificate owners who select subaccounts investing
in funds that have not adopted 12b-1 plans);
o assets of the fund's adviser, subadviser or an affiliate of either;
o assets of the fund's distributor or an affiliate.
In accordance with applicable laws, regulations and the terms of the agreements
under which such compensation is paid, we or our affiliates may receive this
compensation for various purposes including:
o activities or services we or our affiliates provide which assist in the
promotion and distribution of the certificates including the funds available
under the certificates;
o advertising, printing and mailing sales literature, printing and distributing
prospectuses and reports;
o furnishing personal services to certificate owners, including education of
certificate owners, answering routine inquiries regarding a fund, maintaining
accounts or providing such other services eligible for service fees as
defined under the rules of the National Association of Securities Dealers,
Inc. (NASD);
o subaccounting, transaction processing, recordkeeping and administrative
services.
EXAMPLES
THESE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE
CERTIFICATE WITH THE COST OF INVESTING IN OTHER VARIABLE ANNUITY CONTRACTS.
THESE COSTS INCLUDE YOUR TRANSACTION EXPENSES, CERTIFICATE ADMINISTRATIVE
CHARGES*, VARIABLE ACCOUNT ANNUAL EXPENSES AND FUND FEES AND EXPENSES.
THESE EXAMPLES ASSUME THAT YOU INVEST $10,000 IN THE CERTIFICATE FOR THE TIME
PERIODS INDICATED. THESE EXAMPLES ALSO ASSUME THAT YOUR INVESTMENT HAS A 5%
RETURN EACH YEAR.
MAXIMUM EXPENSES. This example assumes the maximum fees and expenses of any of
the funds for the last fiscal year. Although your actual costs may be higher or
lower, based on this assumption your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$276.24 $847.39 $1,444.40 $3,057.79
MINIMUM EXPENSES. This example assumes the minimum fees and expenses of any of
the funds for the last fiscal year. Although your actual costs may be higher or
lower, based on this assumption your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$179.89 $557.12 $958.89 $2,081.41
* In these examples, the $30 administrative charge is approximated as a .125%
charge. This percentage was determined by dividing the total amount of the
administrative charges collected during the year that are attributable to the
certificate by the total average net assets that are attributable to the
certificate.
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7 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
CONDENSED FINANCIAL INFORMATION
(UNAUDITED)
The following tables give per-unit information about the financial history of
each subaccount. The date in which operations commenced in each price level is
noted in parentheses.
[Enlarge/Download Table]
VARIABLE ACCOUNT CHARGES OF 1.00% OF THE DAILY NET ASSETS OF THE VARIABLE ACCOUNT.
Year ended Dec. 31, 2004 2003 2002 2001 2000 1999 1998 1997 1996
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AXP(R) Variable Portfolio - Cash Management Fund* (12/9/1996)
Accumulation unit value at beginning of period $1.20 $1.21 $1.21 $1.18 $1.12 $1.08 $1.04 $1.00 $1.00
Accumulation unit value at end of period $1.20 $1.20 $1.21 $1.21 $1.18 $1.12 $1.08 $1.04 $1.00
Number of accumulation units outstanding at end of period (000 omitted) 9 9 9 9 8 46 170 189 --
* The 7-day simple and compound yields for AXP(R) Variable Portfolio -
Cash Management Fund at Dec. 31, 2004 were 0.53% and 0.53%, respectively.
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AXP(R) Variable Portfolio - Diversified Bond Fund (12/9/1996)
Accumulation unit value at beginning of period $1.29 $1.25 $1.19 $1.12 $1.07 $1.07 $1.06 $0.99 $1.00
Accumulation unit value at end of period $1.34 $1.29 $1.25 $1.19 $1.12 $1.07 $1.07 $1.06 $0.99
Number of accumulation units outstanding at end of period (000 omitted) 21 53 33 30 14 19 21 15 --
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AXP(R) Variable Portfolio - Large Cap Equity Fund (12/9/1996)
(previously AXP(R) Variable Portfolio - Capital Resource Fund)
Accumulation unit value at beginning of period $1.18 $0.92 $1.20 $1.48 $1.81 $1.48 $1.20 $0.98 $1.00
Accumulation unit value at end of period $1.24 $1.18 $0.92 $1.20 $1.48 $1.81 $1.48 $1.20 $0.98
Number of accumulation units outstanding at end of period (000 omitted) 40 53 55 62 75 82 50 23 --
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AXP(R) Variable Portfolio - Managed Fund (12/9/1996)
Accumulation unit value at beginning of period $1.34 $1.13 $1.31 $1.48 $1.53 $1.34 $1.17 $0.99 $1.00
Accumulation unit value at end of period $1.46 $1.34 $1.13 $1.31 $1.48 $1.53 $1.34 $1.17 $0.99
Number of accumulation units outstanding at end of period (000 omitted) 48 52 57 58 64 69 63 44 --
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AXP(R) Variable Portfolio - Strategy Aggressive Fund (12/9/1996)
Accumulation unit value at beginning of period $0.88 $0.69 $1.02 $1.54 $1.91 $1.13 $1.11 $1.00 $1.00
Accumulation unit value at end of period $0.95 $0.88 $0.69 $1.02 $1.54 $1.91 $1.13 $1.11 $1.00
Number of accumulation units outstanding at end of period (000 omitted) 62 92 100 129 121 58 65 42 --
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AXP(R) Variable Portfolio - Threadneedle International Fund (12/9/1996)
(previously AXP(R) Variable Portfolio - International Fund)
Accumulation unit value at beginning of period $0.91 $0.72 $0.89 $1.26 $1.69 $1.17 $1.03 $1.01 $1.00
Accumulation unit value at end of period $1.06 $0.91 $0.72 $0.89 $1.26 $1.69 $1.17 $1.03 $1.01
Number of accumulation units outstanding at end of period (000 omitted) 24 17 19 18 15 11 15 14 --
------------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Core Stock Fund, Series I Shares (12/10/1996)
(previously INVESCO VIF - Core Equity Fund, Series I Shares)
Accumulation unit value at beginning of period $1.49 $1.23 $1.54 $1.70 $1.64 $1.44 $1.26 $1.00 $1.00
Accumulation unit value at end of period $1.54 $1.49 $1.23 $1.54 $1.70 $1.64 $1.44 $1.26 $1.00
Number of accumulation units outstanding at end of period (000 omitted) 39 68 86 126 140 194 221 155 --
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American Century(R) VP Capital Appreciation, Class I (12/10/1996)
Accumulation unit value at beginning of period $1.05 $0.88 $1.13 $1.58 $1.46 $0.90 $0.93 $0.97 $1.00
Accumulation unit value at end of period $1.12 $1.05 $0.88 $1.13 $1.58 $1.46 $0.90 $0.93 $0.97
Number of accumulation units outstanding at end of period (000 omitted) 51 57 52 67 85 49 51 42 --
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American Century(R) VP Value, Class I (12/10/1996)
Accumulation unit value at beginning of period $1.86 $1.46 $1.69 $1.51 $1.29 $1.31 $1.27 $1.01 $1.00
Accumulation unit value at end of period $2.11 $1.86 $1.46 $1.69 $1.51 $1.29 $1.31 $1.27 $1.01
Number of accumulation units outstanding at end of period (000 omitted) 79 134 160 94 26 53 50 33 --
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8 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
[Enlarge/Download Table]
VARIABLE ACCOUNT CHARGES OF 1.00% OF THE DAILY NET ASSETS OF THE VARIABLE ACCOUNT. (CONTINUED)
Year ended Dec. 31, 2004 2003 2002 2001 2000 1999 1998 1997 1996
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Credit Suisse Trust - Global Small Cap Portfolio (12/10/1996)
(previously Credit Suisse Trust - Global Post-Venture Capital Portfolio)
Accumulation unit value at beginning of period $1.01 $0.69 $1.06 $1.50 $1.87 $1.16 $1.10 $0.98 $1.00
Accumulation unit value at end of period $1.18 $1.01 $0.69 $1.06 $1.50 $1.87 $1.16 $1.10 $0.98
Number of accumulation units outstanding at end of period (000 omitted) 66 67 76 74 68 67 75 65 --
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Janus Aspen Series Large Cap Growth Portfolio: Institutional Shares
(12/10/1996)
(previously Janus Aspen Series Growth Portfolio: Institutional Shares)
Accumulation unit value at beginning of period $1.39 $1.06 $1.46 $1.96 $2.32 $1.63 $1.21 $1.00 $1.00
Accumulation unit value at end of period $1.44 $1.39 $1.06 $1.46 $1.96 $2.32 $1.63 $1.21 $1.00
Number of accumulation units outstanding at end of period (000 omitted) 345 365 391 492 594 472 352 230 --
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Janus Aspen Series Worldwide Growth Portfolio: Institutional Shares
(12/10/1996)
Accumulation unit value at beginning of period $1.47 $1.20 $1.63 $2.12 $2.54 $1.56 $1.22 $1.00 $1.00
Accumulation unit value at end of period $1.53 $1.47 $1.20 $1.63 $2.12 $2.54 $1.56 $1.22 $1.00
Number of accumulation units outstanding at end of period (000 omitted) 209 250 286 355 390 462 339 252 --
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FINANCIAL STATEMENTS
You can find our audited financial statements and the audited financial
statements of the subaccounts in the SAI.
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9 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
THE VARIABLE ACCOUNT AND THE FUNDS
THE VARIABLE ACCOUNT: The variable account was established under New York law on
Dec. 1, 1995, and the subaccounts are registered together as a single unit
investment trust under the Investment Company Act of 1940 (the 1940 Act). This
registration does not involve any supervision of our management or investment
practices and policies by the SEC. All obligations arising under the contracts
are general obligations of American Centurion Life.
The variable account meets the definition of a separate account under federal
securities laws. We credit or charge income, capital gains and capital losses of
each subaccount only to that subaccount. State insurance law prohibits us from
charging a subaccount with liabilities of any other subaccount or of our general
business. The variable account includes other subaccounts that are available
under contracts that are not described in this prospectus.
Although the Internal Revenue Service (IRS) has issued some guidance on investor
control, the U.S. Treasury and the IRS may continue to examine this aspect of
variable contracts and provide additional guidance on investor control. Their
concern involves how many investment choices (subaccounts) may be offered by an
insurance company and how many exchanges among those subaccounts may be allowed
before the certificate owner would be currently taxed on income earned within
the certificate. At this time, we do not know what the additional guidance will
be or when action will be taken. We reserve the right to modify the certificate,
as necessary, so that the owner will not be subject to current taxation as the
owner of the subaccount assets.
We intend to comply with all federal tax laws so that the certificate continues
to qualify as an annuity for federal income tax purposes. We reserve the right
to modify the certificate as necessary to comply with any new tax laws.
THE FUNDS: The certificate currently offers subaccounts investing in shares of
the funds listed in the table below.
O INVESTMENT OBJECTIVES: The investment managers and advisers cannot guarantee
that the funds will meet their investment objectives. Please read the funds'
prospectuses for facts you should know before investing. These prospectuses
are available by contacting us at the address or telephone number on the
first page of this prospectus.
O FUND NAME AND MANAGEMENT: A fund underlying your certificate in which a
subaccount invests may have a name, portfolio manager, objectives, strategies
and characteristics that are the same or substantially similar to those of a
publicly-traded retail mutual fund. Despite these similarities, an underlying
fund is not the same as any publicly-traded retail mutual fund. Each
underlying fund will have its own unique portfolio holdings, fees, operating
expenses and operating results. The results of each underlying fund may
differ significantly from any publicly-traded retail mutual fund.
O FUND SELECTION: We select the underlying funds in which the subaccounts
initially invest and upon any substitution (see "Substitution of
Investments"). In doing so, we may consider various objective and subjective
factors. These factors include compensation we and our affiliates may receive
from a fund's investment adviser, subadviser, distributor or an affiliate.
This compensation benefits us and our affiliates (see "About the Service
Providers -- Principal Underwriter"). The amount of this compensation differs
by fund and depending on the amount of average daily net assets invested in a
particular fund, this compensation may be significant. For example, the
compensation we receive from affiliates of funds other than the AXP(R)
Variable Portfolio Funds currently ranges up to 0.50% of the average daily
net assets invested in the fund through this certificate and other contracts
we or our affiliates issue. This compensation is in addition to revenues we
receive from the charges you pay when buying, owning and surrendering the
certificate (see "Expense Summary").
O ALLOCATION OF PURCHASE PAYMENTS AND CERTIFICATE VALUE: Purchase payments and
certificate value you allocate to subaccounts investing in any of the AXP(R)
Variable Portfolio Funds are generally more profitable for us and our
affiliates. For example, we may receive compensation from our affiliates in
connection with purchase payments and certificate value you allocate to the
AXP(R) Variable Portfolio Funds that exceeds the range disclosed in the
previous paragraph for funds our affiliates do not manage. This may influence
recommendations your sales representative makes regarding whether you should
invest in the certificate, and whether you should allocate purchase payments
or certificate value to a particular subaccount.
O ELIGIBLE PURCHASERS: All funds are available to serve as the underlying
investments for variable annuities and variable life insurance policies. The
funds are not available to the public (see "Fund name and management" above).
Some funds also are available to serve as investment options for tax-deferred
retirement plans. It is possible that in the future for tax, regulatory or
other reasons, it may be disadvantageous for variable annuity accounts and
variable life insurance accounts and/or tax-deferred retirement plans to
invest in the available funds simultaneously. Although we and the funds do
not currently foresee any such disadvantages, the boards of directors or
trustees of each fund will monitor events in order to identify any material
conflicts between annuity owners, policy owners and tax-deferred retirement
plans and to determine what action, if any, should be taken in response to a
conflict. If a board were to conclude that it should establish separate funds
for the variable annuity, variable life insurance and tax-deferred retirement
plan accounts, you would not bear any expenses associated with establishing
separate funds. Please refer to the funds' prospectuses for risk disclosure
regarding simultaneous investments by variable annuity, variable life
insurance and tax-deferred retirement plan accounts. Each fund intends to
comply with the diversification requirements under Section 817(h) of the
Code.
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10 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
YOU MAY ALLOCATE PURCHASE PAYMENTS AND TRANSFERS TO ANY OR ALL OF THE
SUBACCOUNTS OF THE VARIABLE ACCOUNT THAT INVEST IN SHARES OF THE FOLLOWING
FUNDS:
[Enlarge/Download Table]
------------------------------- ------------------------------------------------------------- ---------------------------
FUND NAME INVESTMENT OBJECTIVES AND POLICIES INVESTMENT ADVISER OR
MANAGER
------------------------------- ------------------------------------------------------------- ---------------------------
AXP(R) Variable Portfolio - Maximum current income consistent with liquidity and AEFC
Cash Management Fund stability of principal. Invests primarily in money market
instruments, such as marketable debt obligations issued by
corporations or the U.S. government or its agencies, bank
certificates of deposit, bankers' acceptances, letters of
credit, and commercial paper, including asset-backed
commercial paper.
------------------------------- ------------------------------------------------------------- ---------------------------
AXP(R) Variable Portfolio - High level of current income while attempting to conserve AEFC
Diversified Bond Fund the value of the investment and continuing a high level of
income for the longest period of time. Under normal market
conditions, the Fund invests at least 80% of its net assets
in bonds and other debt securities. At least 50% of the
Fund's net assets will be invested in securities like those
included in the Lehman Brothers Aggregate Bond Index,
which are investment grade and denominated in U.S.
dollars. The Index includes securities issued by the U.S.
government, corporate bonds, and mortgage- and asset-backed
securities. Although the Fund emphasizes high- and
medium-quality debt securities, it will assume some credit
risk to achieve higher yield and/or capital appreciation by
buying lower-quality bonds.
------------------------------- ------------------------------------------------------------- ---------------------------
AXP(R) Variable Portfolio - Capital appreciation. Under normal market conditions, the AEFC
Large Cap Equity Fund Fund invests at least 80% of its net assets in equity
securities of companies with market capitalization greater
(previously AXP(R) Variable than $5 billion at the time of purchase.
Portfolio - Capital Resource
Fund)
------------------------------- ------------------------------------------------------------- ---------------------------
AXP(R) Variable Portfolio - Maximum total investment return through a combination of AEFC
Managed Fund capital growth and current income. Invests primarily in a
combination of common and preferred stocks, bonds and other
debt securities.
------------------------------- ------------------------------------------------------------- ---------------------------
AXP(R) Variable Portfolio - Capital appreciation. Under normal market conditions, at AEFC
Strategy Aggressive Fund least 65% of the Fund's total assets are invested in equity
securities.
------------------------------- ------------------------------------------------------------- ---------------------------
AXP(R) Variable Portfolio - Capital appreciation. Invests primarily in equity AEFC, adviser;
Threadneedle International securities of foreign issuers that offer strong growth Threadneedle
Fund potential. International Limited, an
indirect wholly-owned
(previously AXP(R) Variable subsidiary of AEFC,
Portfolio - International subadviser.
Fund)
------------------------------- ------------------------------------------------------------- ---------------------------
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11 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
[Enlarge/Download Table]
------------------------------- ------------------------------------------------------------- ---------------------------
FUND NAME INVESTMENT OBJECTIVES AND POLICIES INVESTMENT ADVISER OR
MANAGER
------------------------------- ------------------------------------------------------------- ---------------------------
AIM V.I. Core Stock Fund, High total return through both growth and current income. A I M Advisors, Inc.,
Series I Shares The Fund normally invests at least 80% of its assets in advisor; INVESCO
common and preferred stocks. At least 50% of common and Institutional (N.A.),
(previously INVESCO VIF - preferred stocks which the Fund holds will be dividend Inc., subadvisor.
Core Equity Fund, Series I paying. Stocks selected for the Fund generally are expected
Shares) to produce income and consistent, stable returns. Although
the Fund focuses on the stocks of larger companies with a
history of paying dividends, it also may invest in
companies that have not paid regular dividends. The Fund's
equity investments are limited to equity securities that
can be traded easily in the United States. It may however,
invest in foreign securities in the form of American
Depository Receipts ("ADRs").
------------------------------- ------------------------------------------------------------- ---------------------------
American Century(R) VP Capital growth, with income as a secondary objective. American Century
Capital Appreciation, Class I Invests primarily in common stocks that are considered by Investment Management,
management to have better-than-average prospects for Inc.
appreciation.
------------------------------- ------------------------------------------------------------- ---------------------------
American Century(R) VP Value, Capital growth, with income as a secondary objective. American Century
Class I Invests primarily in stocks of companies that management Investment Management,
believes to be undervalued at the time of purchase. Inc.
------------------------------- ------------------------------------------------------------- ---------------------------
Credit Suisse Trust - Global Long-term growth of capital. Invests primarily in equity Credit Suisse Asset
Small Cap Portfolio securities of small companies from at least three countries Management, LLC,
including the U.S. investment adviser;
(previously Credit Suisse Credit Suisse Asset
Trust - Global Post-Venture Management Limited ("CSAM
Capital Portfolio) London," and "CSAM
Australia"),
sub-investment adviser.
------------------------------- ------------------------------------------------------------- ---------------------------
Janus Aspen Series - Large Long-term growth of capital in a manner consistent with the Janus Capital
Cap Growth Portfolio: preservation of capital. Invests under normal circumstances
Institutional Shares at least 80% of its net assets in large-sized companies.
Large-sized companies are those whose market capitalization
(previously Janus Aspen falls within the range of companies in the Russell 1000(R)
Series - Growth Portfolio: Index at the time of purchase.
Institutional Shares)
------------------------------- ------------------------------------------------------------- ---------------------------
Janus Aspen Series - Long-term growth of capital in a manner consistent with the Janus Capital
Worldwide Growth Portfolio: preservation of capital. Invests primarily in common stocks
Institutional Shares of companies of any size located throughout the world. The
Portfolio normally invests in issuers from at least five
different countries, including the United States. The
Portfolio under unusual circumstances invests in fewer than
five countries or even a single country.
------------------------------- ------------------------------------------------------------- ---------------------------
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12 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
THE FIXED ACCOUNT
You also may allocate purchase payments to the fixed account. We back the
principal and interest guarantees relating to the fixed account. These
guarantees are based on the continued claims-paying ability of the company. The
value of the fixed account increases as we credit interest to the account.
Purchase payments and transfers to the fixed account become part of our general
account. We credit interest daily and compound it annually. The interest rate we
apply to each purchase payment and transfer to the fixed account is guaranteed
for one year. Thereafter, we will change the rates from time to time at our
discretion. These rates will be based on various factors including, but not
limited to, the interest rate environment, returns earned on investments backing
these annuities, the rates currently in effect for new and existing company
annuities, product design, competition, and the company's revenues and expenses.
Interests in the fixed account are not required to be registered with the SEC.
The SEC staff does not review the disclosures in this prospectus on the fixed
account. Disclosures regarding the fixed account, however, may be subject to
certain generally applicable provisions of the federal securities laws relating
to the accuracy and completeness of statements made in prospectuses. (See
"Making the Most of Your Certificate -- Transfer policies" for restrictions on
transfers involving the fixed account.)
BUYING YOUR CERTIFICATE
Our representative can help you prepare and submit your application.
Alternatively, you may ask us for the forms and prepare them yourself. As the
owner, you have all rights and may receive all benefits under the certificate.
You can own a nonqualified annuity in joint tenancy with rights of survivorship
only in spousal situations. You cannot own a qualified annuity in joint tenancy.
When you apply, you may select:
o the fixed account and/or subaccounts in which you want to invest;
o how you want to make purchase payments;
o the date you want to start receiving annuity payouts (the annuity start
date); and
o a beneficiary.
If your application is complete, we will process it and apply your purchase
payment to the fixed account and subaccounts you selected within two business
days after we receive it at our home office. If we accept your application, we
will send you a certificate. If your application is not complete, you must give
us the information to complete it within five business days. If we cannot accept
your application within five business days, we will decline it and return your
payment unless you specifically ask us to keep the payment and apply it once
your application is complete. We will credit additional purchase payments you
make to your accounts on the valuation date we receive them. If we receive an
additional purchase payment at our home office before the close of business, we
will credit any portion of that payment allocated to the subaccounts using the
accumulation unit value we calculate on the valuation date we received the
payment. If we receive an additional purchase payment at our home office at or
after the close of business, we will credit any portion of that payment
allocated to the subaccounts using the accumulation unit value we calculate on
the next valuation date after we received the payment.
THE ANNUITY START DATE
Annuity payouts are to begin on the annuity start date. Your selected date can
align with your actual retirement from a job, or it can be a different date,
depending on your needs and goals and on certain restrictions. You also can
change the date, provided you send us written instructions at least 30 days
before annuity payouts begin.
FOR NONQUALIFIED ANNUITIES, the annuity start date must be:
o no earlier than the 30th day after the certificate's effective date; and
o no later than the annuitant's 85th birthday.
FOR QUALIFIED ANNUITIES, to comply with IRS regulations, the annuity start date
generally must be:
o by April 1 of the year following the calendar year when the annuitant reaches
age 70 1/2.
If you satisfy your RMDs in the form of partial surrenders from this
certificate, annuity payouts can start as late as, but not later than, the
annuitant's 85th birthday.
BENEFICIARY
If death benefits become payable before the annuity start date while the
certificate is in force and before annuity payouts begin, we will pay your named
beneficiary all or part of the certificate value. If there is no named
beneficiary, then the default provisions of your contract apply. (See "Benefits
in Case of Death" for more about beneficiaries.)
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13 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
PURCHASE PAYMENTS
MINIMUM ALLOWABLE PURCHASE PAYMENTS(1)
If paying by installments under a scheduled payment plan:
$100 per month
$50 biweekly
If paying by any other method:
$2,000 initial payment for nonqualified annuities
$1,000 initial payment for qualified annuities
$100 for any additional payments
Installments must total at least $1,000 in the first year.
(1) If you do not make any purchase payments for the most recent 36 months, and
your previous payments total $1,000 or less, we have the right to give you
30 days' written notice and pay you the total value of your certificate in
a lump sum.
MAXIMUM ALLOWABLE PURCHASE PAYMENTS(2) (for the first year, this is based on
your age or the age of the annuitant (whoever is older) on the effective date of
the certificate):
For the first year:
$1,000,000 through age 75
$500,000 for ages 76 to 85
For each subsequent year:
$50,000
(2) These limits apply in total to all American Centurion Life annuities and
certificates you own. We reserve the right to increase maximum limits or
reduce age limits. For qualified annuities the tax-deferred retirement
plan's or the Code's limits on annual contributions also apply.
HOW TO MAKE PURCHASE PAYMENTS
1 BY LETTER
Send your check along with your name and certificate number to:
Regular mail:
AMERICAN CENTURION LIFE ASSURANCE COMPANY
BOX 5550
ALBANY, NY 12205
Express mail:
AMERICAN CENTURION LIFE ASSURANCE COMPANY
20 MADISON AVENUE EXTENSION
ALBANY, NY 12203
2 BY SCHEDULED PAYMENT PLAN
Through:
o a bank authorization.
3 OTHER METHOD ACCEPTABLE TO US
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14 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
CHARGES
ADMINISTRATIVE CHARGE
We charge this fee for establishing and maintaining your records. We deduct $30
from the certificate value on your certificate anniversary at the end of each
certificate year. We prorate this charge among the subaccounts and the fixed
account in the same proportion your interest in each account bears to your total
certificate value.
We will waive this charge for any certificate year where:
o the total purchase payments (less partial surrenders) on the current
certificate anniversary is $10,000 or more, or
o a death benefit is payable, or
o you surrender the certificate in full.
This charge does not apply after annuity payouts begin.
We reserve the right to impose the administrative charge on all certificates,
including those with purchase payments equal to or greater than $10,000.
MORTALITY AND EXPENSE RISK FEE
We charge this fee daily to the subaccounts. The unit values of your subaccounts
reflect this fee and it totals 1% of their average daily net assets on an annual
basis. This fee covers the mortality risk and expense risk that we assume.
Approximately two-thirds of this amount is for our assumption of mortality risk,
and one-third is for our assumption of expense risk. This fee does not apply to
the fixed account.
Mortality risk arises because of our guarantee to pay a death benefit and our
guarantee to make annuity payouts according to the terms of the contract and
certificates, no matter how long a specific annuitant lives and no matter how
long our entire group of annuitants live. If, as a group, annuitants outlive the
life expectancy we assumed in our actuarial tables, then we must take money from
our general assets to meet our obligations. If, as a group, annuitants do not
live as long as expected, we could profit from the mortality risk fee.
Expense risk arises because the administrative charge may not cover our
expenses. We would have to make up any deficit from our general assets. We could
profit from the expense risk fee if future expenses are less than expected.
The subaccounts pay us the mortality and expense risk fee they accrued as
follows:
o first, to the extent possible, the subaccounts pay this fee from any
dividends distributed from the funds in which they invest;
o then, if necessary, the funds redeem shares to cover any remaining fees
payable.
We may use any profits we realize from the subaccounts' payment to us of the
mortality and expense risk fee for any proper corporate purpose, including,
among others, payment of distribution (selling) expenses.
OTHER INFORMATION ON CHARGES
There is no surrender charge if you take a total or a partial surrender from
your certificate.
In some cases, we may incur lower sales and administrative expenses. In those
cases, we may, at our discretion, reduce or eliminate the administrative charge.
However, we expect this to occur infrequently.
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15 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
VALUING YOUR INVESTMENT
We value your fixed account and subaccounts as follows:
FIXED ACCOUNT
We value the amounts allocated to the fixed account directly in dollars. The
fixed account value equals:
o the sum of your purchase payments and transfer amounts allocated to the fixed
account;
o plus interest credited;
o minus the sum of amounts surrendered and amounts transferred out, and
o minus any prorated portion of the administrative charge.
SUBACCOUNTS
We convert amounts you allocated to the subaccounts into accumulation units.
Each time you make a purchase payment or transfer amounts into one of the
subaccounts, we credit a certain number of accumulation units to your
certificate for that account. Conversely, we subtract a certain number of
accumulation units from your certificate each time you take a partial surrender,
transfer amounts out of a subaccount or we assess an administrative charge.
The accumulation units are the true measure of investment value in each
subaccount during the accumulation period. They are related to, but not the same
as, the net asset value of the fund in which the subaccount invests. The dollar
value of each accumulation unit can rise or fall daily depending on the variable
account expenses, performance of the fund and on certain fund expenses. Here is
how we calculate accumulation unit values:
NUMBER OF UNITS: to calculate the number of accumulation units for a particular
subaccount we divide your investment by the current accumulation unit value.
ACCUMULATION UNIT VALUE: the current accumulation unit value for each subaccount
equals the last value times the subaccount's current net investment factor.
WE DETERMINE THE NET INVESTMENT FACTOR BY:
o adding the fund's current net asset value per share, plus the per share
amount of any accrued income or capital gain dividends to obtain a current
adjusted net asset value per share; then
o dividing that sum by the previous adjusted net asset value per share; and
o subtracting the percentage factor representing the mortality and expense risk
fee from the result.
Because the net asset value of the fund may fluctuate, the accumulation unit
value may increase or decrease. You bear all the investment risk in a
subaccount.
FACTORS THAT AFFECT SUBACCOUNT ACCUMULATION UNITS: accumulation units may change
in two ways -- in number and in value.
The number of accumulation units you own may fluctuate due to:
o additional purchase payments you allocate to the subaccounts;
o transfers into or out of the subaccounts;
o partial surrenders; and/or
o deduction of a prorated portion of the administrative charge.
Accumulation unit values will fluctuate due to:
o changes in fund net asset value;
o fund dividends distributed to the subaccounts;
o fund capital gains or losses;
o fund operating expenses; and
o mortality and expense risk fees.
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16 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
MAKING THE MOST OF YOUR CERTIFICATE
AUTOMATED DOLLAR-COST AVERAGING
Currently, you can use automated transfers to take advantage of dollar-cost
averaging (investing a fixed amount at regular intervals). For example, you
might transfer a set amount monthly from a relatively conservative subaccount to
a more aggressive one, or to several others, or from the fixed account to one or
more subaccounts. There is no charge for dollar-cost averaging.
This systematic approach can help you benefit from fluctuations in accumulation
unit values caused by fluctuations in the market values of the funds. Since you
invest the same amount each period, you automatically acquire more units when
the market value falls and fewer units when it rises. The potential effect is to
lower your average cost per unit.
[Download Table]
HOW DOLLAR-COST AVERAGING WORKS
NUMBER
AMOUNT ACCUMULATION OF UNITS
MONTH INVESTED UNIT VALUE PURCHASED
By investing an equal number
of dollars each month ... Jan $ 100 $ 20 5.00
Feb 100 18 5.56
you automatically buy more Mar 100 17 5.88
units when the per unit market
price is low ... ----> Apr 100 15 6.67
May 100 16 6.25
Jun 100 18 5.56
Jul 100 17 5.88
Aug 100 19 5.26
and fewer units when the per
unit market price is high. ----> Sept 100 21 4.76
Oct 100 20 5.00
You paid an average price of $17.91 per unit over the 10 months, while the
average market price actually was $18.10.
Dollar-cost averaging does not guarantee that any subaccount will gain in value
nor will it protect against a decline in value if market prices fall. Because
dollar-cost averaging involves continuous investing, your success will depend
upon your willingness to continue to invest regularly through periods of low
price levels. Dollar-cost averaging can be an effective way to help meet your
long-term goals. For specific features contact our home office. Some
restrictions may apply.
TRANSFERRING BETWEEN ACCOUNTS
You may transfer certificate value from any one subaccount, or the fixed
account, to another subaccount before annuity payouts begin.
When your request to transfer will be processed depends on when we receive it:
o If we receive your transfer request at our home office before the close of
business, we will process your transfer using the accumulation unit value we
calculate on the valuation date we received your transfer request.
o If we receive your transfer request at our home office at or after the close
of business, we will process your transfer using the accumulation unit value
we calculate on the next valuation date after we received your transfer
request.
There is no charge for transfers. Before making a transfer, you should consider
the risks involved in changing investments.
We may suspend or modify transfer privileges at any time.
WE SEEK TO PREVENT MARKET TIMING. MARKET TIMING IS FREQUENT OR SHORT-TERM
TRADING ACTIVITY. WE DO NOT ACCOMMODATE SHORT-TERM TRADING ACTIVITIES. DO NOT
BUY A CERTIFICATE IF YOU WISH TO USE SHORT-TERM TRADING STRATEGIES TO MANAGE
YOUR INVESTMENT.
Market timing may hurt the performance of an underlying fund in which a
subaccount invests in several ways, including but not necessarily limited to:
o diluting the value of an investment in an underlying fund in which a
subaccount invests;
o increasing the transaction costs and expenses of an underlying fund in which
a subaccount invests; and,
o preventing the investment adviser(s) of an underlying fund in which a
subaccount invests from fully investing the assets of the fund in accordance
with the fund's investment objectives.
Market timing can reduce the value of your investment in the certificate. If
market timing causes the returns of an underlying fund to suffer, certificate
value you have allocated to a subaccount that invests in that underlying fund
will be lower, too. Market timing can cause you, any joint owner of the
certificate and your beneficiary(ies) under the certificate a financial loss.
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17 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
WE APPLY THE FOLLOWING MARKET TIMING POLICY TO DISCOURAGE FREQUENT TRANSFERS OF
CERTIFICATE VALUE AMONG THE SUBACCOUNTS:
We try to distinguish market timing from transfers that we believe are not
harmful, such as periodic rebalancing for purposes of asset allocation or
dollar-cost averaging. There is no set number of transfers that constitutes
market timing. Even one transfer in related accounts may be market timing. We
seek to restrict the transfer privileges of a certificate owner who makes more
than three subaccount transfers in any 90 day period.
If we determine, in our sole judgment, that your transfer activity constitutes
market timing, we may modify, restrict or suspend your transfer privileges to
the extent permitted by applicable law, which may vary based on the state law
that applies to your certificate and the terms of your certificate. These
restrictions or modifications may include, but not be limited to:
o requiring transfer requests to be submitted only by first-class U.S. mail;
o not accepting hand-delivered transfer requests or requests made by overnight
mail;
o not accepting telephone or electronic transfer requests;
o requiring a minimum time period between each transfer;
o not accepting transfer requests of an agent acting under power of attorney;
o limiting the dollar amount that you may transfer at any one time; or
o suspending the transfer privilege.
Subject to applicable state law and the terms of each certificate, we will apply
the policy described above to all certificate owners uniformly in all cases. We
will notify you in writing after we impose any modification, restriction or
suspension of your transfer rights.
We cannot guarantee that we will be able to identify and restrict all market
timing activity. Because we exercise discretion in applying the restrictions
described above, we cannot guarantee that we will be able to restrict all market
timing activity. In addition, state law and the terms of some certificates may
prevent us from stopping certain market timing activity. Market timing activity
that we are unable to identify and/or restrict may impact the performance of the
funds and harm certificate owners.
IN ADDITION TO THE MARKET TIMING POLICY WE APPLY TO DISCOURAGE FREQUENT
TRANSFERS AMONG THE SUBACCOUNTS, THE FUNDS AVAILABLE AS INVESTMENT OPTIONS UNDER
THE CERTIFICATE MAY HAVE ADOPTED THEIR OWN MARKET TIMING POLICIES AND
PROCEDURES. MARKET TIMING POLICIES AND PROCEDURES ADOPTED BY UNDERLYING FUNDS
MAY AFFECT YOUR INVESTMENT IN THE CERTIFICATE IN SEVERAL WAYS, INCLUDING BUT NOT
LIMITED TO:
o Each fund may restrict or refuse trading activity that the fund determines,
in its sole discretion, represents market timing.
o Even if we determine that your transfer activity does not constitute market
timing, it is possible that the underlying fund's policy might cause us to
reject your transfer request. Orders we place to purchase fund shares for the
variable account are subject to acceptance by the fund. We reserve the right
to reject without prior notice to you any transfer request if the fund does
not accept our order.
o Each underlying fund is responsible for its own market timing policy, and we
cannot guarantee that we will be able to implement specific market timing
policies and procedures that a fund has adopted. As a result, a fund's
returns might be adversely affected, and a fund might terminate our right to
offer its shares through the variable account.
o Funds that are available as investment options under the certificate may also
be offered to other intermediaries including unaffiliated insurance company
separate accounts. Even if we are able to implement a fund's market timing
policies, there can be no guarantee that other eligible purchasers of the
fund's shares will be able to do so, and the returns of that fund could be
adversely affected.
Funds available as investment options under the certificate that invest in
securities that trade in overseas securities markets may be at greater risk of
loss from market timing, as market timers may seek to take advantage of changes
in the values of securities between the close of overseas markets and the close
of U.S. markets. Further the risks of market timing may be greater for
underlying funds that invest in securities, such as small cap stocks, high yield
bonds, or municipal securities, that may be traded infrequently.
FOR MORE INFORMATION ABOUT WHETHER A PARTICULAR UNDERLYING FUND HAS ADOPTED A
MARKET TIMING POLICY, WHAT THAT POLICY IS IF ONE HAS BEEN ADOPTED, AND THE RISKS
THAT MARKET TIMING POSES TO THAT FUND, SEE THAT FUND'S PROSPECTUS.
TRANSFER POLICIES
o Before annuity payouts begin, you may transfer certificate values between the
subaccounts, from the subaccounts to the fixed account or from the fixed
account to the subaccounts.
o The amount transferred to any one account must be at least $100.
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18 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
HOW TO REQUEST A TRANSFER OR SURRENDER
1 BY LETTER
Send your name, certificate number, Social Security Number or Taxpayer
Identification Number (TIN)* and signed request for a transfer or surrender to:
Regular mail:
AMERICAN CENTURION LIFE ASSURANCE COMPANY
P.O. BOX 5550
ALBANY, NY 12205
Express mail:
AMERICAN CENTURION LIFE ASSURANCE COMPANY
20 MADISON AVENUE EXTENSION
ALBANY, NY 12203
MINIMUM AMOUNT
Transfers or surrenders: $100 or entire account balance
MAXIMUM AMOUNT
Transfers or surrenders: Certificate value or entire account balance
* Failure to provide your Social Security Number or TIN may result in mandatory
tax withholding on the taxable portion of the distribution.
2 BY AUTOMATED TRANSFERS AND AUTOMATED PARTIAL SURRENDERS
You can set up automated transfers among your subaccounts or fixed account or
partial surrenders from the accounts.
You can start or stop this service by written request or other method acceptable
to us. You must allow 30 days for us to change any instructions that are
currently in place.
o Automated surrenders may be restricted by applicable law under some
certificates.
o Automated partial surrenders may result in IRS taxes and penalties on all or
part of the amount surrendered.
o The balance in any account from which you make an automated transfer or
automated partial surrender must be sufficient to satisfy your instructions.
If not, we will suspend your entire automated arrangement until the balance
is adequate.
o If we must suspend your automated transfer or automated partial surrender
arrangement for six months, we reserve the right to discontinue the
arrangement in its entirety.
MINIMUM AMOUNT
Transfers or surrenders: $100
3 BY PHONE
Call between 8 a.m. and 4:30 p.m. Eastern time:
(800) 633-3565
MINIMUM AMOUNT
Transfers or surrenders: $100 or entire account balance
MAXIMUM AMOUNT
Transfers: Certificate value or entire account balance
Surrenders: $5,000
We answer telephone requests promptly, but you may experience delays when the
call volume is unusually high. If you are unable to get through, use the mail
procedure as an alternative.
We will honor any telephone transfer or surrender requests that we believe are
authentic and we will use reasonable procedures to confirm that they are. This
includes asking identifying questions and recording calls. We will not allow a
telephone surrender within 30 days of a phoned in address change. As long as we
follow the procedures, we (and our affiliates) will not be liable for any loss
resulting from fraudulent requests.
Telephone transfers or surrenders are automatically available. You may request
that telephone transfers or surrenders NOT be authorized from your account by
writing to us.
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19 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
SURRENDERS
You may surrender all or part of your certificate at any time before annuity
payouts begin by sending us a written request or by calling us. We will process
your surrender request on the valuation date we receive it. If we receive your
surrender request at our home office before the close of business, we will
process your surrender using the accumulation unit value we calculate on the
valuation date we received your surrender request. If we receive your surrender
request at our home office at or after the close of business, we will process
your surrender using the accumulation unit value we calculate on the next
valuation date after we received your surrender request. We may ask you to
return the certificate. You may have to pay administrative charges (see
"Charges") and IRS taxes and penalties (see "Taxes"). You cannot make surrenders
after annuity payouts begin.
Any partial surrenders you take under the certificate will reduce your
certificate value. As a result, the value of your death benefit will also be
reduced. In addition, surrenders you are required to take to satisfy RMDs under
the Code may reduce the value of your death benefit (see "Taxes -- Qualified
Annuities -- Required minimum distributions").
SURRENDER POLICIES
If you have a balance in more than one account and you request a partial
surrender, we will withdraw money from all your subaccounts and/or the fixed
account in the same proportion as your value in each account correlates to your
total certificate value, unless you request otherwise.
RECEIVING PAYMENT
By regular or express mail:
o payable to you.
o mailed to address of record.
NOTE: We will charge you a fee if you request express mail delivery.
Normally, we will send the payment within seven days after receiving your
request. However, we may postpone the payment if:
-- the surrender amount includes a purchase payment check that has not
cleared;
-- the NYSE is closed, except for normal holiday and weekend closings;
-- trading on the NYSE is restricted, according to SEC rules;
-- an emergency, as defined by SEC rules, makes it impractical to sell
securities or value the net assets of the accounts; or
-- the SEC permits us to delay payment for the protection of security
holders.
CHANGING OWNERSHIP
You may change ownership of your nonqualified annuity at any time by completing
a change of ownership form we approve and sending it to our home office. The
change will become binding on us when we receive and record it. We will honor
any change of ownership request that we believe is authentic and we will use
reasonable procedures to confirm authenticity. If we follow these procedures, we
will not take any responsibility for the validity of the change.
If you have a nonqualified annuity, you may incur income tax liability by
transferring, assigning or pledging any part of it. (See "Taxes.")
If you have a qualified annuity, you may not sell, assign, transfer, discount or
pledge your certificate as collateral for a loan, or as security for the
performance of an obligation or for any other purpose except as required or
permitted by the Code. However, if the owner is a trust or custodian, or an
employer acting in a similar capacity, ownership of a certificate may be
transferred to the annuitant.
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20 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
BENEFITS IN CASE OF DEATH
If you or the annuitant die before annuity payouts begin while the certificate
is in force, we will pay the beneficiary the greater of:
o certificate value; or
o purchase payments minus partial surrenders.
IF YOU DIE BEFORE YOUR RETIREMENT DATE: When paying the beneficiary, we will
process the death claim on the valuation date our death claim requirements are
fulfilled. We will determine the certificate's value using the accumulation unit
value we calculate on that valuation date. We pay interest, if any, at a rate no
less than required by law. If requested, we will mail payment to the beneficiary
within seven days after our death claim requirements are fulfilled.
NONQUALIFIED ANNUITIES: If your spouse is sole beneficiary and you die before
the retirement date, your spouse may keep the certificate as owner. To do this
your spouse must, within 60 days after we receive proof of death, give us
written instructions to keep the certificate in force.
If your beneficiary is not your spouse, we will pay the beneficiary in a lump
sum unless you give us other written instructions. We must fully distribute the
death benefit within five years of your death. However, the beneficiary may
receive payouts under any annuity payout plan available under this certificate
if:
o the beneficiary asks us in writing within 60 days after we receive proof of
death; and
o payouts begin no later than one year after your death, or other date as
permitted by the Code; and
o the payout period does not extend beyond the beneficiary's life or life
expectancy.
QUALIFIED ANNUITIES
o SPOUSE BENEFICIARY: If you have not elected an annuity payout plan, and if
your spouse is the sole beneficiary, your spouse may either elect to treat
the certificate as his/her own or elect an annuity payout plan or another
plan agreed to by us. If your spouse elects a payout plan, the payouts must
begin no later than the year in which you would have reached age 70 1/2. If
you attained age 70 1/2 at the time of death, payouts must begin no later
than Dec. 31 of the year following the year of your death.
o NON-SPOUSE BENEFICIARY: If you have not elected an annuity payout plan, and
if death occurs prior to the year you would have attained age 70 1/2, the
beneficiary may elect to receive payouts from the certificate over a five
year period. If your beneficiary does not elect a five year payout, or if
your death occurs after attaining age 70 1/2, we will pay the beneficiary in
a lump sum unless the beneficiary elects to receive payouts under any annuity
payout plan available under this certificate if:
o the beneficiary asks us in writing within 60 days after we receive proof
of death; and
o payouts begin no later than one year following the year of your death; and
o the payout period does not extend beyond the beneficiary's life or life
expectancy.
o ANNUITY PAYOUT PLAN: If you elect an annuity payout plan, the payouts to your
beneficiary will continue pursuant to the annuity payout plan you elect.
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21 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
THE ANNUITY PAYOUT PERIOD
As owner of the certificate, you have the right to decide how and to whom
annuity payouts will be made starting at the annuity start date. You may select
one of the annuity payout plans outlined below, or we may mutually agree on
other payout arrangements.
The amount available to purchase payouts under the plan you select is the
certificate value on your annuity start date. We will make annuity payouts on a
fixed basis.
Amounts of payouts depend on:
o the annuity payout plan you select;
o the annuitant's age and, in most cases, sex; and
o the annuity table in the certificate.
ANNUITY PAYOUT PLANS
You may choose any one of these annuity payout plans by giving us written
instructions at least 30 days before certificate values are used to purchase the
payout plan:
o PLAN A -- LIFE ANNUITY -- NO REFUND: We make monthly payouts until the
annuitant's death. Payouts end with the last payout before the annuitant's
death. We will not make any further payouts. This means that if the annuitant
dies after we have made only one monthly payout, we will not make any more
payouts.
o PLAN B -- LIFE ANNUITY WITH FIVE, TEN OR 15 YEARS CERTAIN: We make monthly
payouts for a guaranteed payout period of five, ten or 15 years that you
elect. This election will determine the length of the payout period to the
beneficiary if the annuitant should die before the elected period expires. We
calculate the guaranteed payout period from the annuity start date. If the
annuitant outlives the elected guaranteed payout period, we will continue to
make payouts until the annuitant's death.
o PLAN C -- LIFE ANNUITY -- INSTALLMENT REFUND: We make monthly payouts until
the annuitant's death, with our guarantee that payouts will continue for some
period of time. We will make payouts for at least the number of months
determined by dividing the amount applied under this option by the first
monthly payout, whether or not the annuitant is living.
o PLAN D -- JOINT AND LAST SURVIVOR LIFE ANNUITY -- NO REFUND: We make monthly
payouts while both the annuitant and a joint annuitant are living. If either
annuitant dies, we will continue to make monthly payouts at the full amount
until the death of the surviving annuitant. Payouts end with the death of the
second annuitant.
o PLAN E -- PAYOUTS FOR A SPECIFIED PERIOD: We make monthly payouts for a
specific payout period of ten to 30 years that you elect. We will make
payouts only for the number of years specified whether the annuitant is
living or not. Depending on the selected time period, it is foreseeable that
an annuitant can outlive the payout period selected. In addition, a 10% IRS
penalty tax could apply under this payout plan. (See "Taxes.")
ANNUITY PAYOUT PLAN REQUIREMENTS FOR QUALIFIED ANNUITIES: If your certificate is
a qualified annuity, you must select a payout plan as of the retirement date set
forth in your certificate. You have the responsibility for electing a payout
plan that complies with your certificate and with applicable law. Your
certificate describes your payout plan options. The options will meet certain
IRS regulations governing RMDs if the payout plan meets the incidental
distribution benefit requirements, if any, and the payouts are made:
o in equal or substantially equal payments over a period not longer than the
life of the annuitant or over the life of the annuitant and designated
beneficiary; or
o in equal or substantially equal payments over a period not longer than the
life expectancy of the annuitant or over the life expectancy of the annuitant
and designated beneficiary; or
o over a period certain not longer than the life expectancy of the annuitant or
over the life expectancy of the annuitant and designated beneficiary.
IF WE DO NOT RECEIVE INSTRUCTIONS: You must give us written instructions for the
annuity payouts at least 30 days before the annuitant's retirement date. If you
do not, we will make payouts under Plan B, with 120 monthly payouts guaranteed.
IF MONTHLY PAYOUTS WOULD BE LESS THAN $20: We will calculate the amount of
monthly payouts at the time the certificate value is used to purchase a payout
plan. If the calculations show that monthly payouts would be less than $20, we
have the right to pay the certificate value to the owner in a lump sum.
DEATH AFTER ANNUITY PAYOUTS BEGIN: If you or the annuitant die after annuity
payouts begin, we will pay any amount payable to the beneficiary as provided in
the annuity payout plan in effect.
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22 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
TAXES
Generally, under current law, your certificate has a tax-deferral feature. This
means any increase in the value of the fixed account and/or subaccounts in which
you invest is taxable to you only when you receive a payout or surrender (see
detailed discussion below). Any portion of the annuity payouts and any
surrenders you request that represent ordinary income normally are taxable. We
will send you a tax information reporting form for any year in which we made a
taxable distribution according to our records.
NONQUALIFIED ANNUITIES
Tax law requires that all nonqualified deferred annuity contracts or
certificates issued by the same company (and possibly its affiliates) to the
same owner during a calendar year be taxed as a single, unified contract when
you take distributions from any one of those contracts or certificates.
ANNUITY PAYOUTS: A portion of each payout will be ordinary income and subject to
tax, and a portion of each payout will be considered a return of part of your
investment and will not be taxed. Under Annuity Payout Plan A: Life annuity - no
refund, where the annuitant dies before your investment in the certificate is
fully recovered, the remaining portion of the unrecovered investment may be
available as a federal income tax deduction to the owner for the last taxable
year of the annuitant. Under all other annuity payout plans, where the annuity
payouts end before your investment in the certificate is fully recovered, the
remaining portion of the unrecovered investment may be available as a federal
income tax deduction to the taxpayer for the tax year in which the payouts end.
(See "Annuity Payout Plans.") All amounts you receive after your investment in
the certificate is fully recovered will be subject to tax.
SURRENDERS: If you surrender part or all of your nonqualified annuity before
your annuity payouts begin, your surrender payment will be taxed to the extent
that the certificate value immediately before the surrender exceeds your
investment. You also may have to pay a 10% IRS penalty for surrenders of taxable
income you make before reaching age 59 1/2 unless certain exceptions apply.
WITHHOLDING (INCLUDING IRAS AND SEPS): If you receive taxable income as a result
of an annuity payout or a surrender, we may deduct withholding against the
taxable income portion of the payment. Any withholding represents a prepayment
of your tax due for the year. You take credit for these amounts on your annual
income tax return.
If the payment is part of an annuity payout plan, we generally compute the
amount of withholding using payroll tables. You may provide us with a statement
of how many exemptions to use in calculating the withholding. As long as you've
provided us with a valid Social Security Number or TIN, you can elect not to
have any withholding occur.
If the distribution is any other type of payment (such as a partial or full
surrender) we compute withholding using 10% of the taxable portion. Similar to
above, as long as you have provided us with a valid Social Security Number or
TIN, you can elect not to have this withholding occur.
The withholding requirements differ if we deliver the payment outside the United
States and/or you are a non-resident alien.
Some states also may impose withholding requirements similar to the federal
withholding described above. If this should be the case, we may deduct state
withholding from the payment.
DEATH BENEFITS TO BENEFICIARIES: The death benefit under a certificate is not
exempt from estate or income taxes. Any amount your beneficiary receives that
represents deferred earnings within the certificate is taxable as ordinary
income to the beneficiary in the year he or she receives the payments.
ANNUITIES OWNED BY CORPORATIONS, PARTNERSHIPS OR TRUSTS: For nonqualified
annuities, any annual increase in the value of annuities held by such entities
generally will be treated as ordinary income received during that year. However,
if the trust was set up for the benefit of a natural person only, the income
will remain tax-deferred.
PENALTIES: If you receive amounts from your nonqualified annuity before reaching
age 59 1/2, you may have to pay a 10% IRS penalty on the amount includable in
your ordinary income. However, this penalty will not apply to any amount
received:
o because of your death or, in the event of non-natural ownership, the death of
the annuitant;
o because you become disabled (as defined in the Code);
o if the distribution is part of a series of substantially equal periodic
payments, made at least annually, over your life or life expectancy (or joint
lives or life expectancies of you and your beneficiary);
o if it is allocable to an investment before Aug. 14, 1982; or
o if annuity payouts begin before the first certificate anniversary.
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23 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
TRANSFER OF OWNERSHIP: If you transfer a nonqualified annuity without receiving
adequate consideration, the transfer is a gift and also may be treated as a
surrender for federal income tax purposes. If the gift is a currently taxable
event for income tax purposes, the original owner will be taxed on the amount of
deferred earnings at the time of the transfer and also may be subject to the 10%
IRS penalty discussed earlier. In this case, the new owner's investment in the
certificate will be the value of the certificate at the time of the transfer. In
general, this rule does not apply to transfers between spouses or former
spouses. Please consult your tax advisor for further details.
COLLATERAL ASSIGNMENT: If you collaterally assign or pledge your certificate,
earnings on purchase payments you made after Aug. 13, 1982 will be taxed to you
like a withdrawal and you may have to pay a 10% IRS penalty.
QUALIFIED ANNUITIES
Adverse tax consequences may result if you do not ensure that contributions,
distributions and other transactions under the certificate comply with the law.
Qualified annuities have minimum distribution rules that govern the timing and
amount of distributions. You should refer to your IRA disclosure statement or
consult a tax advisor for additional information about the distribution rules
applicable to your situation.
When you use your certificate to fund a retirement plan or IRA that is already
tax-deferred under the Code, the certificate will not provide any necessary or
additional tax deferral.
ANNUITY PAYOUTS: Under a qualified annuity, the entire payout generally is
includable as ordinary income and is subject to tax unless: (1) the certificate
is an IRA to which you made non-deductible contributions; or (2) you rolled
after-tax dollars from a retirement plan into your IRA.
SURRENDERS: Under a qualified annuity, the entire surrender will generally be
includable as ordinary income and is subject to tax unless: (1) the certificate
is an IRA to which you made non-deductible contributions; or (2) you rolled
after-tax dollars from a retirement plan into your IRA.
REQUIRED MINIMUM DISTRIBUTIONS: Retirement plans are subject to required
withdrawals called required minimum distributions (RMDs) generally beginning at
age 70 1/2. In addition, a new tax regulation, effective for RMDs calculated in
2006 and after, may cause the RMDs for some certificates with certain death
benefits to increase. RMDs may reduce the value of certain death benefits. You
should consult your tax advisor for an explanation of the potential tax
implications to you.
PENALTIES: If you receive amounts from your qualified annuity before reaching
age 59 1/2, you may have to pay a 10% IRS penalty on the amount includable in
your ordinary income. However, this penalty will not apply to any amount
received:
o because of your death,
o because you become disabled (as defined in the Code);
o if the distribution is part of a series of substantially equal periodic
payments made at least annually, over your life or life expectancy (or joint
lives or life expectancies of you and your beneficiary); or
o to pay certain medical or education expenses (IRAs only).
DEATH BENEFITS TO BENEFICIARIES: The entire death benefit generally is taxable
as ordinary income to the beneficiary in the year he or she receives payments
from the qualified annuity. If you made non-deductible contributions to a
traditional IRA, the portion of any distribution from the certificate that
represents after-tax contributions is not taxable as ordinary income to your
beneficiary.
COLLATERAL ASSIGNMENT: You may not collaterally assign or pledge your qualified
annuity.
IMPORTANT: Our discussion of federal tax laws is based upon our understanding of
current interpretations of these laws. Federal tax laws or current
interpretations of them may change. For this reason and because tax consequences
are complex and highly individual and cannot always be anticipated, you should
consult a tax advisor if you have any questions about taxation of your
certificate.
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24 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
AMERICAN CENTURION LIFE'S TAX STATUS: We are taxed as a life insurance company
under the Code. For federal income tax purposes, the subaccounts are considered
a part of our company, although their operations are treated separately in
accounting and financial statements. Investment income is reinvested in the fund
in which each subaccount invests and becomes part of that subaccount's value.
This investment income, including realized capital gains, is not taxed to us,
and therefore no charge is made against the subaccounts for federal income
taxes. We reserve the right to make such a charge in the future if there is a
change in the tax treatment of variable annuities.
TAX QUALIFICATION: We intend that the certificate qualify as an annuity for
federal income tax purposes. To that end, the provisions of the certificate are
to be interpreted to ensure or maintain such tax qualification, in spite of any
other provisions of the certificate. We reserve the right to amend the
certificate to reflect any clarifications that may be needed or are appropriate
to maintain such qualification or to conform the certificate to any applicable
changes in the tax qualification requirements. We will send you a copy of any
amendments.
VOTING RIGHTS
As an owner with investments in the subaccounts, you may vote on important fund
policies. We will vote fund shares according to your instructions.
The number of votes you have is determined by applying your percentage interest
in each subaccount to the total number of votes allowed to the subaccount.
We calculate votes separately for each subaccount. We will send notice of these
meetings, proxy materials and a statement of the number of votes to which the
voter is entitled.
We will vote shares for which we have not received instructions in the same
proportion as the votes for which we received instructions. We also will vote
the shares for which we have voting rights in the same proportion as the votes
for which we received instructions.
SUBSTITUTION OF INVESTMENTS
We may substitute the funds in which the subaccounts invest if:
o laws or regulations change,
o the existing funds become unavailable, or
o in our judgment, the funds no longer are suitable for the subaccounts.
If any of these situations occur and if we believe it is in the best interest of
persons having voting rights under the certificate, we have the right to
substitute a fund currently listed in this prospectus (existing fund) for
another fund (new fund). The new fund may have higher fees and/or operating
expenses than the existing fund. Also, the new fund may have investment
objectives and policies and/or investment advisers which differ from the
existing fund.
We may also:
o change the funds in which the subaccounts invest, and
o make additional subaccounts investing in additional funds.
We will notify you of any substitution or change. If we notify you that a
subaccount will be eliminated or closed, you will have a certain period of time
to tell us where to reallocate purchase payments or contract value currently
allocated to that subaccount. If we do not receive your reallocation
instructions by the due date, we automatically will reallocate to the subaccount
investing in the AXP(R) Variable Portfolio - Cash Management Fund. You may then
transfer this reallocated amount in accordance with the transfer provisions of
your certificate (see "Transferring Between Accounts" above).
In the event of substitution of any of these changes, we may amend the
certificate and take whatever action is necessary and appropriate without your
consent or approval. However, we will not make any substitution or change
without the necessary approval of the SEC and state insurance departments.
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25 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
ABOUT THE SERVICE PROVIDERS
PRINCIPAL UNDERWRITER
American Express Financial Advisors Inc. (AEFA) serves as the principal
underwriter and distributes the certificates. Its offices are located at 70100
AXP Financial Center, Minneapolis, MN 55474. AEFA is a wholly-owned subsidiary
of AEFC which is a wholly-owned subsidiary of American Express Company, a
financial services company headquartered in New York City.
The AEFC family of companies offers not only insurance and annuities, but also
mutual funds, investment certificates, and a broad range of financial management
services.
ISSUER
American Centurion Life issues the certificates. American Centurion Life is a
wholly-owned subsidiary of IDS Life, which is a wholly-owned subsidiary of AEFC.
American Centurion Life is a stock life insurance company organized in 1969
under the laws of the State of New York. Our home office is located at 20
Madison Avenue Extension, Albany, NY 12203. American Centurion Life conducts a
conventional life insurance business in New York.
LEGAL PROCEEDINGS
The SEC, the NASD and several state attorneys general have brought proceedings
challenging several mutual fund and variable account financial practices,
including suitability generally, late trading, market timing, disclosure of
revenue sharing arrangements and inappropriate sales. American Centurion Life
has received requests for information and has been contacted by regulatory
authorities concerning its practices and is cooperating fully with these
inquiries.
American Centurion Life and its affiliates are involved in a number of other
legal and arbitration proceedings concerning matters arising in connection with
the conduct of their respective business activities. American Centurion Life
believes it has meritorious defenses to each of these actions and intends to
defend them vigorously. American Centurion Life believes that it is not a party
to, nor are any of its properties the subject of, any pending legal or
arbitration proceedings that would have a material adverse effect on American
Centurion Life's consolidated financial condition, results of operations or
liquidity. However, it is possible that the outcome of any such proceedings
could have a material impact on results of operations in any particular
reporting period as the proceedings are resolved.
--------------------------------------------------------------------------------
26 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Calculating Annuity Payouts............................p. 3
Rating Agencies........................................p. 3
Principal Underwriter..................................p. 3
Independent Registered Public Accounting Firm..........p. 3
Financial Statements...................................p. 4
--------------------------------------------------------------------------------
27 ACL PRIVILEGED ASSETS SELECT ANNUITY -- PROSPECTUS
(logo)
AMERICAN
EXPRESS
(R)
AMERICAN CENTURION LIFE ASSURANCE COMPANY
20 MADISON AVENUE EXTENSION
ALBANY, NY 12203
(800) 633-3563
S-6102 L (4/05)
STATEMENT OF ADDITIONAL INFORMATION
FOR
PRIVILEGED ASSETS(R) SELECT ANNUITY
ACL VARIABLE ANNUITY ACCOUNT 1
APRIL 29, 2005
ACL Variable Annuity Account 1 is a separate account established and maintained
by American Centurion Life Assurance Company (American Centurion Life).
This Statement of Additional Information (SAI) is not a prospectus. It should be
read together with the prospectus dated the same date as this SAI, which may be
obtained by writing or calling us at the address and telephone number below.
American Centurion Life Assurance Company
20 Madison Avenue Extension
Albany, NY 12203
518-452-4150 (Albany area)
(800) 633-3563
TABLE OF CONTENTS
Calculating Annuity Payouts p. 3
Rating Agencies p. 3
Principal Underwriter p. 3
Independent Registered Public Accounting Firm p. 3
Financial Statements p. 4
CORPORATE REORGANIZATION
On Feb. 1, 2005, American Express Company announced plans to pursue a spin-off
of 100% of the common stock of American Express Financial Corporation (AEFC).
AEFC is the parent company of IDS Life Insurance Company (IDS Life). IDS Life is
the parent company of American Centurion Life. American Centurion Life issues
your certificate.
The spin-off of AEFC, expected to be completed in the third quarter of 2005, is
subject to certain regulatory and other approvals, as well as final approval by
the board of directors of American Express Company.
Upon completion of the spin-off, AEFC will be a publicly traded company separate
from American Express Company. AEFC will continue to own all the outstanding
stock of IDS Life and will replace American Express Company as the ultimate
control person of American Centurion Life.
--------------------------------------------------------------------------------
2 -- ACL VARIABLE ANNUITY ACCOUNT 1
CALCULATING ANNUITY PAYOUTS
We guarantee the fixed annuity payout amounts. Once calculated, the payout will
remain the same and never change. To calculate annuity payouts we:
o take the total value of the fixed account and the subaccounts at the annuity
start date or the date selected to begin receiving annuity payouts; then
o using an annuity table we apply the value according to the annuity payout
plan selected.
The annuity payout table we use will be the one in effect at the time chosen to
begin annuity payouts. The table will be equal to or greater than the table in
the contract.
RATING AGENCIES
We receive ratings from independent rating agencies. These agencies evaluate the
financial soundness and claims-paying ability of insurance companies based on a
number of different factors. The ratings reflect each agency's estimation of our
ability to meet our contractual obligations such as making annuity payouts and
paying death benefits and other distributions. As such, the ratings relate to
our fixed account and not to the subaccounts. This information generally does
not relate to the management or performance of the subaccounts.
For detailed information on the agency ratings given to us, contact your sales
representative. Or view our current ratings by visiting the agency websites
directly at:
A.M. Best www.ambest.com
Fitch www.fitchratings.com
A.M. Best -- Rates insurance companies for their financial strength.
Fitch -- Rates insurance companies for their claims-paying ability.
PRINCIPAL UNDERWRITER
American Express Financial Advisors Inc. (AEFA) serves as principal underwriter
for the certificate, which it offers on a continuous basis. AEFA is registered
with the Securities and Exchange Commission under the Securities Exchange Act of
1934 as a broker-dealer and is a member of the National Association of
Securities Dealers, Inc. (NASD). Our sales representatives are licensed
insurance and annuity agents and are registered with the NASD as our
representatives. AEFA is an affiliate of ours. Both AEFA and American Centurion
Life are ultimately controlled by American Express Company. The principal
business address of AEFA is 70100 AXP Financial Center, Minneapolis, MN 55474.
American Centurion Life does not pay AEFA any underwriting commissions for its
role as principal underwriter of the certificate.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The financial statements appearing in this SAI have been audited by Ernst &
Young LLP, 220 South Sixth Street, Suite 1400, Minneapolis, MN 55402,
independent registered public accounting firm, as stated in their report
appearing herein.
--------------------------------------------------------------------------------
3 -- ACL VARIABLE ANNUITY ACCOUNT 1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THE BOARD OF DIRECTORS
AMERICAN CENTURION LIFE ASSURANCE COMPANY
We have audited the accompanying individual statements of assets and liabilities
of the 12 segregated asset subaccounts of ACL Variable Annuity Account 1,
referred to in Note 1, as of December 31, 2004, and the related statements of
operations and changes in net assets for the periods indicated therein. These
financial statements are the responsibility of the management of American
Centurion Life Assurance Company. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (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. We were not engaged to perform an
audit of ACL Variable Annuity Account 1's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of ACL Variable Annuity Account 1's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2004 by correspondence with the affiliated
and unaffiliated mutual fund managers. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the individual financial position of the 12 segregated
asset subaccounts of ACL Variable Annuity Account 1, referred to in Note 1, at
December 31, 2004, and the individual results of their operations and the
changes in their net assets for the periods indicated therein, in conformity
with U.S. generally accepted accounting principles.
/s/ Ernst& Young LLP
Minneapolis, Minnesota
March 31, 2005
--------------------------------------------------------------------------------
4 -- ACL VARIABLE ANNUITY ACCOUNT 1
[Enlarge/Download Table]
STATEMENTS OF ASSETS AND LIABILITIES
SEGREGATED ASSET SUBACCOUNTS
------------------------------------------------------------------
AXP VP
AXP VP AXP VP AXP VP AXP VP STRATEGY
DECEMBER 31, 2004 CASH MGMT DIV BOND LG CAP EQ MANAGED AGGR
ASSETS
Investments, at value(1),(2) $10,478 $28,544 $50,064 $70,016 $ 59,113
Dividends receivable 13 107 -- -- --
Receivable for share redemptions -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total assets 10,491 28,651 50,064 70,016 59,113
====================================================================================================================================
LIABILITIES
Payable to American Centurion Life for mortality and expense risk fee 9 24 42 59 50
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to contracts in accumulation period $10,482 $28,627 $50,022 $69,957 $ 59,063
====================================================================================================================================
(1) Investment shares 10,482 2,681 2,391 4,640 7,388
------------------------------------------------------------------------------------------------------------------------------------
(2) Investments, at cost $10,478 $28,269 $66,505 $69,745 $100,193
------------------------------------------------------------------------------------------------------------------------------------
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SEGREGATED ASSET SUBACCOUNTS
------------------------------------------------------------------
AIM VI
AXP VP CORE STOCK, AC VP CAP AC VP CS GLOBAL
DECEMBER 31, 2004 (CONTINUED) THDL INTL SER I APPR, CL I VAL, CL I SM CAP
ASSETS
Investments, at value(1),(2) $25,676 $60,659 $56,591 $167,364 $78,470
Dividends receivable -- -- -- -- --
Receivable for share redemptions -- 52 48 144 67
------------------------------------------------------------------------------------------------------------------------------------
Total assets 25,676 60,711 56,639 167,508 78,537
====================================================================================================================================
LIABILITIES
Payable to American Centurion Life for mortality and expense risk fee 21 52 48 144 67
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to contracts in accumulation period $25,655 $60,659 $56,591 $167,364 $78,470
====================================================================================================================================
(1) Investment shares 2,663 3,277 7,388 19,127 7,038
------------------------------------------------------------------------------------------------------------------------------------
(2) Investments, at cost $28,281 $58,655 $74,482 $144,455 $87,831
------------------------------------------------------------------------------------------------------------------------------------
[Enlarge/Download Table]
SEGREGATED ASSET
SUBACCOUNTS
--------------------------------
JANUS ASPEN JANUS ASPEN
LG CAP WORLD
DECEMBER 31, 2004 (CONTINUED) GRO, INST GRO, INST
ASSETS
Investments, at value(1),(2) $494,785 $319,262
Dividends receivable -- --
Receivable for share redemptions 424 273
------------------------------------------------------------------------------------------------------------------------------------
Total assets 495,209 319,535
====================================================================================================================================
LIABILITIES
Payable to American Centurion Life for mortality and expense risk fee 424 273
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to contracts in accumulation period $494,785 $319,262
====================================================================================================================================
(1) Investment shares 24,653 11,922
------------------------------------------------------------------------------------------------------------------------------------
(2) Investments, at cost $594,929 $419,114
------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
5 -- ACL VARIABLE ANNUITY ACCOUNT 1
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STATEMENTS OF OPERATIONS
SEGREGATED ASSET SUBACCOUNTS
---------------------------------------------------------------
AXP VP
AXP VP AXP VP AXP VP AXP VP STRATEGY
YEAR ENDED DECEMBER 31, 2004 CASH MGMT DIV BOND LG CAP EQ MANAGED AGGR
INVESTMENT INCOME
Dividend income $ 76 $ 1,231 $ 493 $ 1,668 $ --
Variable account expenses 103 324 572 726 720
------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss) -- net (27) 907 (79) 942 (720)
====================================================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET
Realized gain (loss) on sales of investments:
Proceeds from sales 370 45,437 19,804 19,452 33,974
Cost of investments sold 370 44,847 28,591 20,394 64,843
------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investments -- 590 (8,787) (942) (30,869)
Distributions from capital gains -- -- -- -- --
Net change in unrealized appreciation or depreciation of investments -- (89) 10,541 5,900 35,669
------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments -- 501 1,754 4,958 4,800
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (27) $ 1,408 $ 1,675 $ 5,900 $ 4,080
====================================================================================================================================
[Enlarge/Download Table]
SEGREGATED ASSET SUBACCOUNTS
---------------------------------------------------------------
AIM VI
AXP VP CORE STOCK, AC VP CAP AC VP CS GLOBAL
YEAR ENDED DECEMBER 31, 2004 (CONTINUED) THDL INTL SER I APPR, CL I VAL, CL I SM CAP
INVESTMENT INCOME
Dividend income $ 224 $ 513 $ -- $ 2,928 $ --
Variable account expenses 194 849 542 1,934 725
------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss) -- net 30 (336) (542) 994 (725)
====================================================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET
Realized gain (loss) on sales of investments:
Proceeds from sales 3,121 49,990 13,095 205,377 13,002
Cost of investments sold 4,015 50,161 18,763 188,294 16,811
------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investments (894) (171) (5,668) 17,083 (3,809)
Distributions from capital gains -- -- -- 2,272 --
Net change in unrealized appreciation or depreciation of investments 4,462 2,010 9,828 1,449 15,756
------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 3,568 1,839 4,160 20,804 11,947
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $3,598 $ 1,503 $ 3,618 $ 21,798 $11,222
====================================================================================================================================
[Enlarge/Download Table]
SEGREGATED ASSET
SUBACCOUNTS
-------------------------------
JANUS ASPEN JANUS ASPEN
LG CAP WORLD
YEAR ENDED DECEMBER 31, 2004 (CONTINUED) GRO, INST GRO, INST
INVESTMENT INCOME
Dividend income $ 713 $ 3,253
Variable account expenses 4,975 3,300
------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss) -- net (4,262) (47)
====================================================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET
Realized gain (loss) on sales of investments:
Proceeds from sales 75,659 76,507
Cost of investments sold 97,756 106,004
------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investments (22,097) (29,497)
Distributions from capital gains -- --
Net change in unrealized appreciation or depreciation of investments 41,549 40,410
------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 19,452 10,913
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 15,190 $ 10,866
====================================================================================================================================
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
6 -- ACL VARIABLE ANNUITY ACCOUNT 1
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STATEMENTS OF CHANGES IN NET ASSETS
SEGREGATED ASSET SUBACCOUNTS
---------------------------------------------------------------
AXP VP
AXP VP AXP VP AXP VP AXP VP STRATEGY
YEAR ENDED DECEMBER 31, 2004 CASH MGMT DIV BOND LG CAP EQ MANAGED AGGR
OPERATIONS
Investment income (loss) -- net $ (27) $ 907 $ (79) $ 942 $ (720)
Net realized gain (loss) on sales of investments -- 590 (8,787) (942) (30,869)
Distributions from capital gains -- -- -- -- --
Net change in unrealized appreciation or depreciation of investments -- (89) 10,541 5,900 35,669
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (27) 1,408 1,675 5,900 4,080
====================================================================================================================================
CERTIFICATE TRANSACTIONS
Certificate purchase payments 539 2,453 2,384 2,037 3,537
Net transfers(1) -- (36,989) (2,826) (7,626) 4,569
Certificate charges (25) (79) (62) (69) (110)
Certificate terminations:
Surrender benefits (242) (6,466) (14,277) (249) (33,284)
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from certificate transactions 272 (41,081) (14,781) (5,907) (25,288)
------------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year 10,237 68,300 63,128 69,964 80,271
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $10,482 $ 28,627 $ 50,022 $69,957 $ 59,063
====================================================================================================================================
ACCUMULATION UNIT ACTIVITY
Units outstanding at beginning of year 8,511 52,913 53,421 52,113 91,640
Certificate purchase payments 450 1,874 2,027 1,486 4,096
Net transfers(1) -- (28,399) (2,407) (5,340) 5,333
Certificate charges (21) (60) (53) (50) (129)
Certificate terminations:
Surrender benefits (202) (4,889) (12,599) (186) (38,686)
------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 8,738 21,439 40,389 48,023 62,254
====================================================================================================================================
[Enlarge/Download Table]
SEGREGATED ASSET SUBACCOUNTS
---------------------------------------------------------------
AIM VI
AXP VP CORE STOCK, AC VP CAP AC VP CS GLOBAL
YEAR ENDED DECEMBER 31, 2004 (CONTINUED) THDL INTL SER I APPR, CL I VAL, CL I SM CAP
OPERATIONS
Investment income (loss) -- net $ 30 $ (336) $ (542) $ 994 $ (725)
Net realized gain (loss) on sales of investments (894) (171) (5,668) 17,083 (3,809)
Distributions from capital gains -- -- -- 2,272 --
Net change in unrealized appreciation or depreciation of investments 4,462 2,010 9,828 1,449 15,756
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 3,598 1,503 3,618 21,798 11,222
====================================================================================================================================
CERTIFICATE TRANSACTIONS
Certificate purchase payments 732 6,996 4,944 2,970 3,489
Net transfers(1) 6,919 (17,882) (53) 89,961 (698)
Certificate charges (9) (179) (122) (44) (96)
Certificate terminations:
Surrender benefits (1,140) (31,900) (11,752) (197,310) (3,670)
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from certificate transactions 6,502 (42,965) (6,983) (104,423) (975)
------------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year 15,555 102,121 59,956 249,989 68,223
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $25,655 $ 60,659 $ 56,591 $ 167,364 $78,470
====================================================================================================================================
ACCUMULATION UNIT ACTIVITY
Units outstanding at beginning of year 17,046 68,423 57,275 134,303 67,463
Certificate purchase payments 779 4,767 4,777 1,520 3,336
Net transfers(1) 7,562 (12,210) (90) 46,612 (789)
Certificate charges (9) (121) (117) (23) (92)
Certificate terminations:
Surrender benefits (1,191) (21,476) (11,088) (103,025) (3,487)
------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 24,187 39,383 50,757 79,387 66,431
====================================================================================================================================
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
7 -- ACL VARIABLE ANNUITY ACCOUNT 1
[Enlarge/Download Table]
STATEMENTS OF CHANGES IN NET ASSETS
SEGREGATED ASSET
SUBACCOUNTS
--------------------------------
JANUS ASPEN JANUS ASPEN
LG CAP WORLD
YEAR ENDED DECEMBER 31, 2004 (CONTINUED) GRO, INST GRO, INST
OPERATIONS
Investment income (loss) -- net $ (4,262) $ (47)
Net realized gain (loss) on sales of investments (22,097) (29,497)
Distributions from capital gains -- --
Net change in unrealized appreciation or depreciation of investments 41,549 40,410
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 15,190 10,866
====================================================================================================================================
CERTIFICATE TRANSACTIONS
Certificate purchase payments 22,413 13,843
Net transfers(1) 7,396 (39,558)
Certificate charges (538) (532)
Certificate terminations:
Surrender benefits (55,790) (33,651)
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from certificate transactions (26,519) (59,898)
------------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year 506,114 368,294
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $494,785 $319,262
====================================================================================================================================
ACCUMULATION UNIT ACTIVITY
Units outstanding at beginning of year 364,890 249,736
Certificate purchase payments 16,491 9,527
Net transfers(1) 4,982 (27,237)
Certificate charges (400) (365)
Certificate terminations:
Surrender benefits (41,215) (22,959)
------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 344,748 208,702
====================================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from
(to) American Centurion Life's fixed account.
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
8 -- ACL VARIABLE ANNUITY ACCOUNT 1
[Enlarge/Download Table]
STATEMENTS OF CHANGES IN NET ASSETS
SEGREGATED ASSET SUBACCOUNTS
---------------------------------------------------------------
AXP VP
AXP VP AXP VP AXP VP AXP VP STRATEGY
YEAR ENDED DECEMBER 31, 2003 CASH MGMT DIV BOND LG CAP EQ MANAGED AGGR
OPERATIONS
Investment income (loss) -- net $ (54) $ 1,355 $ (215) $ 819 $ (735)
Net realized gain (loss) on sales of investments -- 160 (3,862) (2,453) (25,690)
Net change in unrealized appreciation or depreciation of investments 1 74 18,187 13,224 44,271
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (53) 1,589 14,110 11,590 17,846
====================================================================================================================================
CERTIFICATE TRANSACTIONS
Certificate purchase payments 795 4,940 2,715 2,018 3,683
Net transfers(1) (1,590) 30,713 1,398 (2,437) 4,137
Certificate charges (29) (149) (62) (36) (116)
Certificate terminations:
Surrender benefits -- (9,775) (5,497) (4,973) (13,733)
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from certificate transactions (824) 25,729 (1,446) (5,428) (6,029)
------------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year 11,114 40,982 50,464 63,802 68,454
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $10,237 $68,300 $63,128 $69,964 $ 80,271
====================================================================================================================================
ACCUMULATION UNIT ACTIVITY
Units outstanding at beginning of year 9,194 32,844 54,631 56,578 99,656
Certificate purchase payments 659 3,880 2,618 1,693 4,875
Net transfers(1) (1,318) 23,986 1,284 (2,229) 4,921
Certificate charges (24) (118) (60) (32) (158)
Certificate terminations:
Surrender benefits -- (7,679) (5,052) (3,897) (17,654)
------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 8,511 52,913 53,421 52,113 91,640
====================================================================================================================================
[Enlarge/Download Table]
SEGREGATED ASSET SUBACCOUNTS
---------------------------------------------------------------
AIM VI
AXP VP CORE STOCK, AC VP CAP AC VP CS GLOBAL
YEAR ENDED DECEMBER 31, 2003 (CONTINUED) THDL INTL SER I APPR, CL I VAL, CL I SM CAP
OPERATIONS
Investment income (loss) -- net $ (13) $ 41 $ (520) $ 315 $ (625)
Net realized gain (loss) on sales of investments (3,017) (4,343) (2,610) (4,384) (7,933)
Net change in unrealized appreciation or depreciation of investments 6,461 24,470 12,544 60,998 32,973
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 3,431 20,168 9,414 56,929 24,415
====================================================================================================================================
CERTIFICATE TRANSACTIONS
Certificate purchase payments 810 7,420 5,108 1,889 4,065
Net transfers(1) 1 1,495 3,395 (37,679) 1,396
Certificate charges (8) (170) (143) (80) (92)
Certificate terminations:
Surrender benefits (2,013) (32,390) (3,081) (4,573) (14,348)
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from certificate transactions (1,210) (23,645) 5,279 (40,443) (8,979)
------------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year 13,334 105,598 45,263 233,503 52,787
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $15,555 $102,121 $59,956 $249,989 $ 68,223
====================================================================================================================================
ACCUMULATION UNIT ACTIVITY
Units outstanding at beginning of year 18,527 85,871 51,571 160,172 76,304
Certificate purchase payments 1,089 5,602 5,529 1,224 5,286
Net transfers(1) -- 761 3,688 (24,013) 1,426
Certificate charges (10) (133) (161) (55) (132)
Certificate terminations:
Surrender benefits (2,560) (23,678) (3,352) (3,025) (15,421)
------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 17,046 68,423 57,275 134,303 67,463
====================================================================================================================================
See accompanying notes to financial statements.
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9 -- ACL VARIABLE ANNUITY ACCOUNT 1
[Enlarge/Download Table]
STATEMENTS OF CHANGES IN NET ASSETS
SEGREGATED ASSET
SUBACCOUNTS
--------------------------------
JANUS ASPEN JANUS ASPEN
LG CAP WORLD
YEAR ENDED DECEMBER 31, 2003 (CONTINUED) GRO, INST GRO, INST
OPERATIONS
Investment income (loss) -- net $ (4,175) $ 378
Net realized gain (loss) on sales of investments (29,943) (39,317)
Net change in unrealized appreciation or depreciation of investments 156,702 111,217
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 122,584 72,278
------------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE TRANSACTIONS
Certificate purchase payments 22,526 16,294
Net transfers(1) (2,971) (6,367)
Certificate charges (624) (576)
Certificate terminations:
Surrender benefits (51,452) (57,078)
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from certificate transactions (32,521) (47,727)
------------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year 416,051 343,743
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $506,114 $368,294
------------------------------------------------------------------------------------------------------------------------------------
ACCUMULATION UNIT ACTIVITY
Units outstanding at beginning of year 391,183 286,112
Certificate purchase payments 19,016 12,967
Net transfers(1) (2,764) (5,253)
Certificate charges (541) (474)
Certificate terminations:
Surrender benefits (42,004) (43,616)
------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 364,890 249,736
------------------------------------------------------------------------------------------------------------------------------------
(1) Includes transfer activity from (to) other subaccounts and transfers from
(to) American Centurion Life's fixed account.
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
10 -- ACL VARIABLE ANNUITY ACCOUNT 1
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
ACL Variable Annuity Account 1 (the Account) was established under New York law
and the subaccounts are registered together as a single unit investment trust of
American Centurion Life under the Investment Company Act of 1940, as amended
(the 1940 Act) and exists in accordance with the rules and regulations of the
New York State Insurance Department.
The Account is used as a funding vehicle for Privileged Assets(R) Select Annuity
contracts issued by American Centurion Life.
The Account is comprised of various subaccounts. Each subaccount invests
exclusively in shares of the following funds or portfolios (collectively, the
Funds), which are registered under the 1940 Act as open-end management
investment companies. The name of each Fund and the corresponding subaccount
name are provided below.
[Enlarge/Download Table]
SUBACCOUNT FUND
----------------------------------------------------------------------------------------------------------------
AXP VP Cash Mgmt AXP(R) Variable Portfolio - Cash Management Fund
AXP VP Div Bond AXP(R) Variable Portfolio - Diversified Bond Fund
AXP VP Lg Cap Eq AXP(R) Variable Portfolio - Large Cap Equity Fund
(previously AXP(R) Variable Portfolio - Capital Resource Fund)
AXP VP Managed AXP(R) Variable Portfolio - Managed Fund
AXP VP Strategy Aggr AXP(R) Variable Portfolio - Strategy Aggressive Fund
AXP VP THDL Intl AXP(R) Variable Portfolio - Threadneedle International Fund
(previously AXP(R) Variable Portfolio - International Fund)
AIM VI Core Stock, Ser I AIM V.I. Core Stock Fund, Series I Shares
(previously INVESCO VIF - Core Equity Fund, Series I Shares)
AC VP Cap Appr, Cl I American Century(R) VP Capital Appreciation, Class I
AC VP Val, Cl I American Century(R) VP Value, Class I
CS Global Sm Cap Credit Suisse Trust - Global Small Cap Portfolio
(previously Credit Suisse Trust - Global Post-Venture Capital Portfolio)
Janus Aspen Lg Cap Gro, Inst Janus Aspen Series Large Cap Growth Portfolio: Institutional Shares
(previously Janus Aspen Series Growth Portfolio: Institutional Shares)
Janus Aspen World Gro, Inst Janus Aspen Series Worldwide Growth Portfolio: Institutional Shares
----------------------------------------------------------------------------------------------------------------
The assets of each subaccount of the Account are not chargeable with liabilities
arising out of the business conducted by any other segregated asset account or
by American Centurion Life.
American Centurion Life serves as issuer of the contracts.
On Feb. 1, 2005, American Express Company announced plans to pursue a spin-off
of 100% of the common stock of AEFC. AEFC is the parent company of IDS Life. IDS
Life is the parent company of American Centurion Life.
The spin-off of AEFC, expected to be completed in the third quarter of 2005, is
subject to certain regulatory and other approvals, as well as final approval by
the board of directors of American Express Company.
Upon completion of the spin-off, AEFC will be a publicly traded company separate
from American Express Company. AEFC will continue to own all the outstanding
stock of IDS Life and will replace American Express Company as the ultimate
control person of American Centurion Life.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS IN THE FUNDS
Investments in shares of the Funds are stated at market value which is the net
asset value per share as determined by the respective Funds. Investment
transactions are accounted for on the date the shares are purchased and sold.
Realized gains and losses on the sales of investments are computed using the
average cost method. Income from dividends and gains from realized capital gain
distributions are reinvested in additional shares of the Funds and are recorded
as income by the subaccounts on the ex-dividend date.
Unrealized appreciation or depreciation of investments in the accompanying
financial statements represents the subaccounts' share of the Funds'
undistributed net investment income, undistributed realized gain or loss and the
unrealized appreciation or depreciation on their investment securities.
FEDERAL INCOME TAXES
American Centurion Life is taxed as a life insurance company. The Account is
treated as part of American Centurion Life for federal income tax purposes.
Under existing tax law, no income taxes are payable with respect to any
investment income of the Account to the extent the earnings are credited under
the certificates. Based on this, no charge is being made currently to the
Account for federal income taxes. American Centurion Life will review
periodically the status of this policy in the event of changes in the tax law. A
charge may be made in future years for any federal income taxes that would be
attributable to the certificates.
--------------------------------------------------------------------------------
11 -- ACL VARIABLE ANNUITY ACCOUNT 1
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets from
operations during the period. Actual results could differ from those estimates.
3. VARIABLE ACCOUNT EXPENSES
American Centurion Life makes contractual assurances to the Account that
possible future adverse changes in administrative expenses and mortality
experience of the certificate owners and annuitants will not affect the Account.
American Centurion Life deducts a daily mortality and expense risk fee equal, on
an annual basis, to 1% of the average daily net assets of each subaccount.
4. CERTIFICATE CHARGES
American Centurion Life deducts a certificate administrative charge of $30 per
year. This charge reimburses American Centurion Life for expenses incurred in
establishing and maintaining the annuity records. The charge may be waived based
upon the underlying certificate value.
5. RELATED PARTY TRANSACTIONS
Management fees were paid indirectly to AEFC, an affiliate of American Centurion
Life, in its capacity as investment manager for the American Express(R) Variable
Portfolio Funds. The Fund's Investment Management Services Agreement provides
for a fee at a percentage of each Fund's average daily net assets that declines
annually as each Fund's assets increase. The percentage range for each Fund is
as follows:
FUND PERCENTAGE RANGE
--------------------------------------------------------------------------------
AXP(R) Variable Portfolio - Cash Management Fund 0.510% to 0.440%
AXP(R) Variable Portfolio - Diversified Bond Fund 0.610% to 0.535%
AXP(R) Variable Portfolio - Large Cap Equity Fund 0.630% to 0.570%
AXP(R) Variable Portfolio - Managed Fund 0.630% to 0.550%
AXP(R) Variable Portfolio - Strategy Aggressive Fund 0.650% to 0.575%
AXP(R) Variable Portfolio - Threadneedle International Fund 0.870% to 0.795%
--------------------------------------------------------------------------------
For the following Funds the fee may be adjusted upward or downward by a maximum
performance incentive adjustment of 0.08% for AXP(R) Variable Portfolio -
Managed Fund and 0.12% for each remaining Fund. The adjustment is based on a
comparison of the performance of each Fund to an index of similar funds up to a
maximum percentage of each Fund's average daily net assets.
AXP(R) Variable Portfolio - Large Cap Equity Fund
AXP(R) Variable Portfolio - Managed Fund
AXP(R) Variable Portfolio - Strategy Aggressive Fund
AXP(R) Variable Portfolio - Threadneedle International Fund
The American Express(R) Variable Portfolio Funds also have an agreement with IDS
Life, an affiliate of American Centurion Life, for distribution services. Under
a Plan and Agreement of Distribution pursuant to Rule 12b-1, each Fund pays a
distribution fee at an annual rate up to 0.125% of each Fund's average daily net
assets.
The American Express(R) Variable Portfolio Funds have an Administrative Services
Agreement with AEFC. Under this agreement, each Fund pays AEFC a fee for
administration and accounting services at a percentage of each Fund's average
daily net assets that declines annually as each Fund's assets increase. The
percentage range for each Fund is as follows:
FUND PERCENTAGE RANGE
--------------------------------------------------------------------------------
AXP(R) Variable Portfolio - Cash Management Fund 0.030% to 0.020%
AXP(R) Variable Portfolio - Diversified Bond Fund 0.050% to 0.025%
AXP(R) Variable Portfolio - Large Cap Equity Fund 0.050% to 0.030%
AXP(R) Variable Portfolio - Managed Fund 0.040% to 0.020%
AXP(R) Variable Portfolio - Strategy Aggressive Fund 0.060% to 0.035%
AXP(R) Variable Portfolio - Threadneedle International Fund 0.060% to 0.035%
--------------------------------------------------------------------------------
The American Express(R) Variable Portfolio Funds pay custodian fees to American
Express Trust Company, an affiliate of American Centurion Life.
--------------------------------------------------------------------------------
12 -- ACL VARIABLE ANNUITY ACCOUNT 1
6. INVESTMENT TRANSACTIONS
The subaccounts' purchases of Funds' shares, including reinvestment of dividend
distributions, for the year ended Dec. 31, 2004 were as follows:
[Enlarge/Download Table]
SUBACCOUNT FUND PURCHASES
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AXP VP Cash Mgmt AXP(R) Variable Portfolio - Cash Management Fund $ 606
AXP VP Div Bond AXP(R) Variable Portfolio - Diversified Bond Fund 5,336
AXP VP Lg Cap Eq AXP(R) Variable Portfolio - Large Cap Equity Fund 4,989
AXP VP Managed AXP(R) Variable Portfolio - Managed Fund 14,482
AXP VP Strategy Aggr AXP(R) Variable Portfolio - Strategy Aggressive Fund 7,944
AXP VP THDL Intl AXP(R) Variable Portfolio - Threadneedle International Fund 9,660
AIM VI Core Stock, Ser I AIM V.I. Core Stock Fund, Series I Shares 6,689
AC VP Cap Appr, Cl I American Century(R) VP Capital Appreciation, Class I 5,570
AC VP Val, Cl I American Century(R) VP Value, Class I 104,220
CS Global Sm Cap Credit Suisse Trust - Global Small Cap Portfolio 11,302
Janus Aspen Lg Cap Gro, Inst Janus Aspen Series Large Cap Growth Portfolio: Institutional Shares 44,878
Janus Aspen World Gro, Inst Janus Aspen Series Worldwide Growth Portfolio: Institutional Shares 16,562
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7. FINANCIAL HIGHLIGHTS
The table below shows certain financial information regarding the subaccounts.
[Enlarge/Download Table]
AXP VP AXP VP AXP VP AXP VP AXP VP AXP VP
CASH MGMT DIV BOND LG CAP EQ MANAGED STRATEGY AGGR THDL INTL
----------------------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE
At Dec. 31, 2001 $1.21 $1.19 $1.20 $1.31 $1.02 $0.89
At Dec. 31, 2002 $1.21 $1.25 $0.92 $1.13 $0.69 $0.72
At Dec. 31, 2003 $1.20 $1.29 $1.18 $1.34 $0.88 $0.91
At Dec. 31, 2004 $1.20 $1.34 $1.24 $1.46 $0.95 $1.06
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UNITS (000S)
At Dec. 31, 2001 9 30 62 58 129 18
At Dec. 31, 2002 9 33 55 57 100 19
At Dec. 31, 2003 9 53 53 52 92 17
At Dec. 31, 2004 9 21 40 48 62 24
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NET ASSETS (000S)
At Dec. 31, 2001 $11 $36 $74 $75 $132 $16
At Dec. 31, 2002 $11 $41 $50 $64 $ 68 $13
At Dec. 31, 2003 $10 $68 $63 $70 $ 80 $16
At Dec. 31, 2004 $10 $29 $50 $70 $ 59 $26
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INVESTMENT INCOME RATIO(1)
For the year ended Dec. 31, 2001 3.89% 6.44% 0.29% 2.90% 0.20% 1.24%
For the year ended Dec. 31, 2002 1.14% 5.10% 0.53% 2.60% -- 0.99%
For the year ended Dec. 31, 2003 0.51% 3.53% 0.62% 2.26% -- 0.91%
For the year ended Dec. 31, 2004 0.74% 3.82% 0.86% 2.31% -- 1.16%
------------------------------------------------------------------------------------------------------------------------------------
EXPENSE RATIO(2)
For the year ended Dec. 31, 2001 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
For the year ended Dec. 31, 2002 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
For the year ended Dec. 31, 2003 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
For the year ended Dec. 31, 2004 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(3)
For the year ended Dec. 31, 2001 2.54% 6.25% (18.92%) (11.49%) (33.77%) (29.37%)
For the year ended Dec. 31, 2002 0.00% 5.04% (23.33%) (13.74%) (32.35%) (19.10%)
For the year ended Dec. 31, 2003 (0.83%) 3.20% 28.26% 18.58% 27.54% 26.39%
For the year ended Dec. 31, 2004 (0.26%) 3.45% 4.83% 8.51% 8.32% 16.24%
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--------------------------------------------------------------------------------
13 -- ACL VARIABLE ANNUITY ACCOUNT 1
[Enlarge/Download Table]
AIM VI AC VP AC VP CS GLOBAL JANUS ASPEN JANUS ASPEN
CORE STOCK, SER I CAP APPR, CL I VAL, CL I SM CAP LG CAP GRO, INST WORLD GRO, INST
ACCUMULATION UNIT VALUE
At Dec. 31, 2001 $1.54 $1.13 $1.69 $1.06 $1.46 $1.63
At Dec. 31, 2002 $1.23 $0.88 $1.46 $0.69 $1.06 $1.20
At Dec. 31, 2003 $1.49 $1.05 $1.86 $1.01 $1.39 $1.47
At Dec. 31, 2004 $1.54 $1.12 $2.11 $1.18 $1.44 $1.53
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UNITS (000S)
At Dec. 31, 2001 126 67 94 74 492 355
At Dec. 31, 2002 86 52 160 76 391 286
At Dec. 31, 2003 68 57 134 67 365 250
At Dec. 31, 2004 39 51 79 66 345 209
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NET ASSETS (000S)
At Dec. 31, 2001 $194 $76 $159 $78 $720 $578
At Dec. 31, 2002 $106 $45 $234 $53 $416 $344
At Dec. 31, 2003 $102 $60 $250 $68 $506 $368
At Dec. 31, 2004 $ 61 $57 $167 $78 $495 $319
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INVESTMENT INCOME RATIO(1)
For the year ended Dec. 31, 2001 0.22% -- 0.55% -- 0.07% 0.47%
For the year ended Dec. 31, 2002 1.18% -- 0.89% -- -- 0.86%
For the year ended Dec. 31, 2003 1.05% -- 1.15% -- 0.09% 1.12%
For the year ended Dec. 31, 2004 0.61% -- 1.53% -- 0.14% 0.99%
------------------------------------------------------------------------------------------------------------------------------------
EXPENSE RATIO(2)
For the year ended Dec. 31, 2001 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
For the year ended Dec. 31, 2002 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
For the year ended Dec. 31, 2003 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
For the year ended Dec. 31, 2004 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(3)
For the year ended Dec. 31, 2001 (9.41%) (28.48%) 11.92% (29.33%) (25.51%) (23.11%)
For the year ended Dec. 31, 2002 (20.13%) (22.12%) (13.61%) (34.91%) (27.40%) (26.38%)
For the year ended Dec. 31, 2003 21.14% 19.32% 27.40% 46.38% 31.13% 22.50%
For the year ended Dec. 31, 2004 3.20% 6.51% 13.20% 16.82% 3.48% 3.74%
------------------------------------------------------------------------------------------------------------------------------------
(1) These amounts represent the dividends, excluding distributions of capital
gains, received by the subaccount from the underlying fund, net of
management fees assessed by the fund manager, divided by the average net
assets. These ratios exclude variable account expenses that result in
direct reductions in the unit values. The recognition of investment income
by the subaccount is affected by the timing of the declaration of dividends
by the underlying fund in which the subaccounts invest.
(2) These ratios represent the annualized certificate expenses of the separate
account, consisting primarily of mortality and expense charges, for each
period indicated. The ratios include only those expenses that result in a
direct reduction to unit values. Charges made directly to certificate owner
accounts through the redemption of units and expenses of the underlying
fund are excluded.
(3) These amounts represent the total return for the periods indicated,
including changes in the value of the underlying fund, and reflect
deductions for all items included in the expense ratio. The total return
does not include any expenses assessed through the redemption of units;
inclusion of these expenses in the calculation would result in a reduction
in the total return presented. The total return is calculated for the
period indicated.
--------------------------------------------------------------------------------
14 -- ACL VARIABLE ANNUITY ACCOUNT 1
American Centurion Life Assurance Company
--------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm
THE BOARD OF DIRECTORS
AMERICAN CENTURION LIFE ASSURANCE COMPANY
We have audited the accompanying balance sheets of American Centurion Life
Assurance Company (a wholly-owned subsidiary of IDS Life Insurance Company) as
of December 31, 2004 and 2003, and the related statements of income,
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 2004. These financial statements are the responsibility of
American Centurion Life Assurance Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with 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. We were not engaged to perform an audit of the
Company's internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Centurion Life
Assurance Company at December 31, 2004 and 2003, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2004, in conformity with accounting principles generally accepted
in the United States.
As discussed in Note 1 to the financial statements, in 2004 American Centurion
Life Assurance Company adopted the provision of the American Institute of
Certified Public Accountants Statement of Position 03-1, "Accounting and
Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration
Contracts and for Separate Accounts," and in 2003 adopted the provisions of
Financial Accounting Standards Board Interpretation No. 46 (Revised December
2003), "Consolidation of Variable Interest Entities."
/s/ Ernst & Young LLP
Minneapolis, Minnesota
February 18, 2005
--------------------------------------------------------------------------------
1
American Centurion Life Assurance Company
--------------------------------------------------------------------------------
[Enlarge/Download Table]
BALANCE SHEETS
December 31, (In thousands, except share data) 2004 2003
ASSETS
Investments:
Available-for-Sale: (Note 2)
Fixed maturities, at fair value (amortized cost: 2004, $542,451; 2003, $490,584) $558,381 $508,092
Preferred stock, at fair value (cost: 2004, $1,000; 2003, $1,000) 1,041 1,031
Mortgage loans on real estate, at cost (less reserves: 2004, $920; 2003, $920) 71,283 62,619
---------------------------------------------------------------------------------------------------------------------------
Total investments 630,705 571,742
Cash and cash equivalents 5,808 22,554
Amounts recoverable from reinsurers 2,220 2,125
Amounts due from brokers 8 2,145
Accrued investment income 6,729 5,959
Deferred policy acquisition costs (Note 3) 18,342 17,774
Deferred sales inducement costs (Note 4) 2,195 1,965
Other assets 330 124
Separate account assets 55,034 29,900
---------------------------------------------------------------------------------------------------------------------------
Total assets $721,371 $654,258
===========================================================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Future policy benefits:
Fixed annuities $565,676 $528,165
Variable annuity guarantees (Note 4) 98 --
Traditional life insurance 1,691 1,579
Deferred income taxes, net 971 1,622
Other liabilities 1,975 2,047
Separate account liabilities 55,034 29,900
---------------------------------------------------------------------------------------------------------------------------
Total liabilities 625,445 563,313
Commitments and contingencies
Stockholder's equity:
Capital stock, $10 par value; 100,000 shares authorized, issued and outstanding 1,000 1,000
Additional paid-in capital 56,600 56,600
Accumulated other comprehensive income, net of tax:
Net unrealized securities gains 9,228 10,467
Retained earnings 29,098 22,878
---------------------------------------------------------------------------------------------------------------------------
Total stockholder's equity 95,926 90,945
---------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity $721,371 $654,258
===========================================================================================================================
See accompanying Notes to Financial Statements.
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2
American Centurion Life Assurance Company
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STATEMENTS OF INCOME
Years ended December 31, (In thousands) 2004 2003 2002
REVENUES
Net investment income $33,875 $29,915 $29,225
Contractholder charges 663 489 615
Mortality and expense risk and other fees 673 339 404
Traditional life insurance premiums 1 1 1
Net realized gain (loss) on investments 274 (369) (5,529)
---------------------------------------------------------------------------------------------------------------------------
Total 35,486 30,375 24,716
---------------------------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Interest credited on investment contracts 20,077 20,085 19,739
Amortization of deferred policy acquisition costs 3,215 2,420 2,734
Death and other benefits for investment contracts 439 (48) (20)
Other operating expenses 2,221 2,300 1,686
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Total 25,952 24,757 24,139
---------------------------------------------------------------------------------------------------------------------------
Income before income tax provision and accounting change 9,534 5,618 577
Income tax provision 3,291 1,902 216
---------------------------------------------------------------------------------------------------------------------------
Income before accounting change 6,243 3,716 361
Cumulative effect of accounting change, net of tax benefit (Note 1) (23) -- --
---------------------------------------------------------------------------------------------------------------------------
Net income $ 6,220 $ 3,716 $ 361
===========================================================================================================================
See accompanying Notes to Financial Statements.
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3
American Centurion Life Assurance Company
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STATEMENTS OF CASH FLOWS
Years ended December 31, (In thousands) 2004 2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,220 $ 3,716 $ 361
Adjustments to reconcile net income to net cash provided by operating activities:
Change in amounts recoverable from reinsurers (95) 63 80
Change in accrued investment income (770) (1,118) (11)
Change in deferred policy acquisition costs, net (673) (3,459) 286
Change in liabilities for future policy benefits for traditional life
and disability income insurance 112 (66) (55)
Change in policy claims and other policyholder's funds -- 283 1,823
Deferred income tax provision (benefit) 29 875 (1,115)
Change in other assets and liabilities, net (86) (883) (3,624)
Amortization of premium (accretion of discount), net 1,869 677 (684)
Net realized (gain) loss on investments (274) 369 5,529
Cumulative effect of accounting change, net of tax benefit (Note 1) 23 -- --
---------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 6,355 457 2,590
---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Available-for-Sale securities:
Sales 25,987 38,080 53,790
Purchases (132,250) (213,462) (146,462)
Maturities, sinking fund payments and calls 52,801 91,078 59,959
Mortgage loans on real estate:
Sales, maturities, sinking fund payments and calls 1,879 2,375 3,584
Purchases (10,543) (16,605) (13,325)
Change in amounts due to and from brokers, net 2,137 (17,557) 5,460
---------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (59,989) (116,091) (36,994)
---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Activity related to investment contracts:
Considerations received 72,612 114,369 58,264
Surrenders and other benefits (55,801) (38,855) (28,761)
Interest credited to account values 20,077 20,085 19,739
Capital contribution -- 20,000 --
---------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 36,888 115,599 48,242
---------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (16,746) (35) 14,838
Cash and cash equivalents at beginning of year 22,554 22,589 7,751
---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 5,808 $ 22,554 $ 22,589
===========================================================================================================================
Supplemental disclosures:
Income taxes paid $ 3,864 $ 711 $ 4,297
Interest on borrowings -- 6 3
See accompanying Notes to Financial Statements.
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4
American Centurion Life Assurance Company
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STATEMENTS OF STOCKHOLDER'S EQUITY
Accumulated
Other
Additional Comprehensive Total
Capital Paid-in Income (Loss), Retained Stockholder's
For the three years ended December 31, 2004 (In thousands) Stock Capital Net of Tax Earnings Equity
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2001 $1,000 $36,600 $ 1,271 $18,801 $57,672
Comprehensive income:
Net income -- -- -- 361 361
Net unrealized holding gains on Available-for-Sale
securities arising during the year, net of deferred policy
acquisition costs of ($975) and income tax provision of ($4,177) -- -- 7,756 -- 7,756
Reclassification adjustment for losses on Available-for-Sale securities
included in net income, net of income tax benefit of $1,892 -- -- 3,513 -- 3,513
Other comprehensive income -- -- 11,269 -- 11,269
----------
Total comprehensive income -- -- -- -- 11,630
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Balance, December 31, 2002 $1,000 $36,600 $12,540 $19,162 $69,302
Comprehensive income:
Net income -- -- -- 3,716 3,716
Net unrealized holding losses on Available-for-Sale securities arising
during the year, net of deferred policy acquisition costs
of $245 and income tax benefit of $1,022 -- -- (1,897) -- (1,897)
Reclassification adjustment for gains on Available-for-Sale securities
included in net income, net of income tax provision of ($95) -- -- (176) -- (176)
Other comprehensive loss -- -- (2,073) -- (2,073)
----------
Total comprehensive income -- -- -- -- 1,643
Cash contribution from parent -- 20,000 -- -- 20,000
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2003 $1,000 $56,600 $10,467 $22,878 $90,945
Comprehensive income:
Net income -- -- -- 6,220 6,220
Net unrealized holding losses arising on Available-for-Sale securities
during the year, net of income tax benefit of $571 and net
of adjustments to deferred policy acquisition costs of ($137)
and deferred sales inducement costs of ($201) -- -- (1,061) -- (1,061)
Reclassification adjustment for gains on Available-for-Sale securities
included in net income, net of income tax provision of ($96) -- -- (178) -- (178)
Other comprehensive income -- -- (1,239) -- (1,239)
----------
Total comprehensive income -- -- -- -- 4,981
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Balance, December 31, 2004 $1,000 $56,600 $ 9,228 $29,098 $95,926
===================================================================================================================================
See accompanying Notes to Financial Statements
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5
American Centurion Life Assurance Company
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of business
American Centurion Life Assurance Company (American Centurion Life) is a stock
life insurance company organized under the laws of the State of New York and
licensed to transact insurance business in New York, Alabama and Delaware.
American Centurion Life is a wholly-owned subsidiary of IDS Life Insurance
Company (IDS Life), a Minnesota corporation. IDS Life is a wholly-owned
subsidiary of American Express Financial Corporation (AEFC). AEFC is a
wholly-owned subsidiary of American Express Company. American Centurion Life
offers fixed and variable annuity contracts directly to American Express(R)
Cardmembers and others in New York, as well as fixed and variable annuity
contracts for sale through non-affiliated representatives and agents of third
party distributors, in New York.
American Centurion Life's principal products are deferred annuities, which are
issued primarily to individuals. It offers single premium and flexible premium
deferred annuities on both a fixed and variable dollar basis. Immediate
annuities are offered as well. American Centurion Life's fixed deferred
annuities guarantee a relatively low annual interest rate during the
accumulation period (the time before the annuity payments begin). However,
American Centurion Life has the option of paying a higher rate set at its
discretion.
Under American Centurion Life's variable annuity products described above, the
purchaser may choose among investment options that include American Centurion
Life's "general account" as well as from a variety of portfolios including
common stocks, bonds, managed assets and/or short-term securities.
Basis of presentation
The accompanying Financial Statements have been prepared in conformity with
accounting principles generally accepted in the U.S. (GAAP) which vary in
certain respects from reporting practices prescribed or permitted by the New
York Department of Insurance (American Centurion Life's primary regulator) as
reconciled in Note 13. Certain prior year amounts have been reclassified to
conform to the current year's presentation.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Revenues
Net investment income
Net investment income predominantly consists of interest income earned on fixed
maturity securities classified as Available-for-Sale and mortgage loans on real
estate. Interest income is accrued as earned using the effective interest
method, which makes an adjustment of the yield for security premiums and
discounts on all performing fixed maturity securities classified as
Available-for-Sale, excluding structured securities, and mortgage loans on real
estate so that the related security or loan recognizes a constant rate of return
on the outstanding balance throughout its term. Interest income on structured
securities is recognized according to Emerging Issues Task Force (EITF) Issue
No. 99-20, "Recognition of Interest Income and Impairment on Purchased and
Retained Beneficial Interests in Securitized Financial Assets".
Contractholder charges
Contractholder charges include administrative charges and surrender charges on
annuities and are recognized as revenue when collected.
Mortality and expense risk and other fees
Mortality and expense risk and other fees include risk fees and administrative
fees, which are generated directly and indirectly from American Centurion Life's
separate account assets. American Centurion Life's mortality and expense risk
and other fees are generally computed as a contractual rate based on the
underlying asset values and are generally received monthly.
Net realized gain (loss) on investments
Realized gains and losses are recognized using the specific identification
method on a trade date basis, and charges are recorded when securities are
determined to be other-than-temporarily impaired.
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6
American Centurion Life Assurance Company
--------------------------------------------------------------------------------
Balance Sheet
Investments
Available-for-Sale fixed maturity and equity securities
Available-for-Sale investment securities are carried at fair value on the
balance sheet with unrealized gains (losses) recorded in other accumulated
comprehensive income (loss) within equity, net of income tax provisions
(benefits) and net of adjustments in asset balances, such as deferred policy
acquisition costs (DAC), to reflect the expected impact on their carrying values
had the unrealized gains (losses) been realized immediately. Gains and losses
are recognized in results of operations upon disposition of the securities. In
addition, losses are also recognized when management determines that a decline
in value is other-than-temporary, which requires judgment regarding the amount
and timing of recovery. Indicators of other-than-temporary impairment for debt
securities include significant issuer downgrade, default or bankruptcy. American
Centurion Life also considers the extent to which cost exceeds fair value, the
duration and size of that gap, and management's judgment about the issuer's
current and prospective financial condition. Other-than-temporary impairment
charges are recorded in net realized gains (losses) on investments within the
Statements of Income. Fair value is generally based on quoted market prices.
However, American Centurion Life's investment portfolio also contains structured
investments of various asset quality, including collateralized debt obligations
(CDOs) and securitized loan trusts (SLTs) (backed by high-yield bonds and bank
loans), which are not readily marketable. As a result, the carrying values of
these structured investments are based on future cash flow projections that
require a significant degree of management judgment as to the amount and timing
of cash payments, default and recovery rates of the underlying investments and,
as such, are subject to change.
Mortgage loans on real estate
Mortgage loans on real estate reflect principal amounts outstanding less
reserves for losses. The estimated fair value of the mortgage loans is
determined by discounted cash flow analyses using mortgage interest rates
currently offered for mortgages of similar maturities.
The reserve for losses is measured as the excess of the loan's recorded
investment over its present value of expected principal and interest payments
discounted at the loan's effective interest rate or the fair value of
collateral. Additionally, the level of the reserve for losses considers other
factors, including historical experience and current economic and political
conditions. Management regularly evaluates the adequacy of the reserve for
mortgage loan losses and believes it is adequate to absorb estimated losses in
the portfolio.
American Centurion Life generally stops accruing interest on mortgage loans for
which interest payments are delinquent more than three months. Based on
management's judgment as to the ultimate collectibility of principal, interest
payments received are either recognized as income or applied to the recorded
investment in the loan.
Cash and cash equivalents
American Centurion Life has defined cash equivalents to include other highly
liquid investments with original maturities of 90 days or less.
Deferred policy acquisition costs
Deferred policy acquisition costs (DAC) represent the costs of acquiring new
annuity business, principally direct sales commissions and other distribution
and underwriting costs that have been deferred on the sale of annuity products.
These costs are deferred to the extent they are recoverable from future profits.
DAC for certain annuities are amortized as a percentage of estimated gross
profits or as a portion of product interest margins depending on the product
characteristics.
For American Centurion Life's annuity products, the DAC balances at any
reporting date are supported by projections that show management expects there
to be adequate estimated gross profits or interest margins after that date to
amortize the remaining DAC balances. These projections are inherently uncertain
because they require management to make assumptions about financial markets,
anticipated mortality and morbidity levels, and policyholder behavior over
periods extending well into the future. Projection periods used for American
Centurion Life's annuity business are typically 10 to 25 years. Management
regularly monitors financial market conditions and actual policyholder behavior
experience and compares them to its assumptions. For annuity products, the
assumptions made in projecting future results and calculating the DAC balance
and DAC amortization expense are management's best estimates. Management is
required to update these assumptions whenever it appears that, based on actual
experience or other evidence, earlier estimates should be revised. When
assumptions are changed, the percentage of estimated gross profits or portion of
interest margins used to amortize DAC might also change. A change in the
required amortization percentage is applied retrospectively; an increase in
amortization percentage will result in a decrease in DAC balance and an increase
in DAC amortization expense while a decrease in amortization percentage will
result in an increase in DAC balance and a decrease in DAC amortization expense.
The impact on results of operations of changing assumptions can be either
positive or negative in any particular period and is reflected in the period in
which such changes are made.
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7
American Centurion Life Assurance Company
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Deferred sales inducement costs
Sales inducement costs consist of bonus interest credits and deposit credits
added to certain annuity contract values. These benefits are capitalized to the
extent they are incremental to amounts that would be credited on similar
contracts without the applicable feature. These costs were previously included
in DAC and were reclassified as part of the adoption of the American Institute
of Certified Public Accountants Statement of Position 03-1, "Accounting and
Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration
Contracts and for Separate Accounts" (SOP 03-1). The amounts capitalized are
amortized using the same methodology and assumptions used to amortize DAC.
Separate account assets and liabilities
Separate account assets and liabilities are funds held for exclusive benefit of
variable annuity contractholders. American Centurion Life receives fund
administrative fees, mortality and expense risk fees, and minimum death benefit
guarantee fees from the related accounts.
American Centurion Life provides contractual mortality assurances to the
variable annuity contractholders that the net assets of separate accounts will
not be affected by future variations in the actual life expectancy experience of
the annuitants and beneficiaries from the mortality assumptions implicit in the
annuity contracts. American Centurion Life makes periodic fund transfers to, or
withdrawals from, the separate account assets for such actuarial adjustments for
variable annuities that are in the benefit payment period. American Centurion
Life also guarantees that the rates at which administrative charges are deducted
from contract funds will not exceed contractual maximums.
Liabilities for future policy benefits
Fixed annuities and variable annuity guarantees
Liabilities for fixed and variable deferred annuities are equal to accumulation
values, which are the cumulative gross deposits, credited interest and fund
performance less withdrawals and mortality and expense risk charges.
The majority of the variable annuity contracts offered by American Centurion
Life contain guaranteed minimum death benefit (GMDB) provisions. When market
values of the customer's accounts decline, the death benefit payable on a
contract with a GMDB may exceed the contract accumulation value. In addition,
American Centurion Life offers contracts containing guaranteed minimum income
benefit (GMIB) provisions.
Effective January 1, 2004, liabilities for these variable annuity death benefits
have been established under SOP 03-1. Actuarial models to simulate various
equity market scenarios are used to project these benefits and contract
assessments and include making significant assumptions related to customer asset
value growth rates, mortality, persistency and investment margins. These
assumptions, as well as their periodic review by management, are consistent with
those used for DAC purposes. Prior to the adoption of SOP 03-1, amounts paid in
excess of contract value were expensed. See Application of Recent Accounting
Standards section below for further discussion on SOP 03-1.
Liabilities for fixed annuities in a benefit or payout status are based on
future estimated payments using established industry mortality tables and
interest rates, ranging from 4.6% to 6.9% at December 31, 2004, depending on
year of issue, with an average rate of approximately 5.5% at December 31, 2004.
Income Taxes
American Centurion Life's taxable income is included in the consolidated federal
income tax return of American Express Company. American Centurion Life provides
for income taxes on a separate return basis, except that, under an agreement
between AEFC and American Express Company, tax benefit is recognized for losses
to the extent they can be used on the consolidated tax return. It is the policy
of AEFC and its subsidiaries that AEFC will reimburse subsidiaries for all tax
benefits.
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8
American Centurion Life Assurance Company
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Application of recent accounting standards
In June 2004, the Financial Accounting Standards Board (FASB) issued FASB Staff
Position (FSP) FAS No. 97-1, "Situations in Which Paragraphs 17(b) and 20 of
FASB Statement No. 97, Accounting and Reporting by Insurance Enterprises for
Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale
of Investments (SFAS No. 97), Permit or Require Accrual of an Unearned Revenue
Liability" (FSP 97-1). The implementation of SOP 03-1 raised a question
regarding the interpretation of the requirements of SFAS No. 97 concerning when
it is appropriate to record an unearned revenue liability. FSP 97-1 clarifies
that SFAS No. 97 is clear in its intent and language, and requires the
recognition of an unearned revenue liability for amounts that have been assessed
to compensate insurers for services to be performed over future periods. SOP
03-1 describes one situation, when assessments result in profits followed by
losses, where an unearned revenue liability is required. SOP 03-1 does not amend
SFAS No. 97 or limit the recognition of an unearned revenue liability to the
situation described in SOP 03-1. The guidance in FSP 97-1 is effective for
financial statements for fiscal periods beginning after June 18, 2004. The
adoption of FSP 97-1 did not have a material impact on American Centurion Life's
financial condition or results of operations.
In July 2003, the American Institute of Certified Public Accountants (AICPA)
issued SOP 03-1 effective for fiscal years beginning after December 15, 2003.
SOP 03-1 provides guidance on separate account presentation and accounting for
interests in separate accounts. Additionally, SOP 03-1 provides clarifying
guidance as to the recognition of bonus interest and other sales inducement
benefits and the presentation of any deferred amounts in the financial
statements. Lastly, SOP 03-1 requires insurance enterprises to establish
additional liabilities for benefits that may become payable under variable
annuity death benefit guarantees or other insurance or annuity contract
provisions. Where an additional liability is established, the recognition of
this liability will then be considered in amortizing DAC and any deferred sales
inducement costs associated with those annuity contracts.
The adoption of SOP 03-1 as of January 1, 2004, resulted in a cumulative effect
of accounting change that reduced the first quarter 2004 results by $23 thousand
($36 thousand pretax). Prior to the adoption of SOP 03-1, amounts paid in excess
of contract value were expensed when payable. Amounts expensed in 2004 to
establish and maintain additional liabilities for certain variable annuity
guaranteed benefits amounted to $60 thousand as compared to amounts expensed in
2003 and 2002 of $34 thousand and $22 thousand, respectively. American Centurion
Life's accounting for separate accounts was already consistent with the
provisions of SOP 03-1 and, therefore, there was no impact related to this
requirement. See Note 4 for a further discussion regarding SOP 03-1.
The AICPA released a series of technical practice aids (TPAs) in September 2004
which provide additional guidance related to, among other things, the definition
of an insurance benefit feature and the definition of policy assessments in
determining benefit liabilities, as described within SOP 03-1. The TPAs did not
have a material effect on American Centurion Life's calculation of liabilities
that were recorded in the first quarter of 2004 upon adoption of SOP 03-1.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" (FIN 46), which addresses consolidation by business
enterprises of variable interest entities (VIEs) and was subsequently revised in
December 2003. The determination as to whether an entity is a VIE is based on
the amount and characteristics of the entity's equity. In general, FIN 46
requires a VIE to be consolidated when an enterprise has a variable interest for
which it is deemed to be the primary beneficiary which means that it will absorb
a majority of the VIE's expected losses or receive a majority of the VIE's
expected residual return.
The entities considered VIE's under FIN 46 include SLTs for which American
Centurion Life has a 1.2% ownership interest in each of two SLT structures which
are in the process of being liquidated as of December 31, 2004. The SLTs provide
returns to investors primarily based on the performance of an underlying
portfolio of high-yield loans, which are managed by a related party. However,
American Centurion Life is not required to consolidate the SLTs as it is not the
primary beneficiary. As of December 31, 2004 American Centurion Life's pro rata
interest in the underlying portfolio consists of $12.4 million in high-yield
loans which have a market value of $12.5 million. American Centurion Life's
maximum exposure to loss as a result of its investments in SLT's is represented
by the carrying value which is $3.4 million.
In November 2003, the FASB ratified a consensus on the disclosure provisions of
Emerging Issues Task Force Issue 03-1, "The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments" (EITF 03-1). American
Centurion Life complied with the disclosure provisions of this rule in Note 3 to
the Financial Statements for the year ended December 31, 2003. In March 2004,
the FASB reached a consensus regarding the application of a three-step
impairment model to determine whether investments accounted for in accordance
with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," and other cost method investments are other-than-temporarily
impaired. However, with the issuance of FSP EITF 03-1-1 on September 30, 2004,
the provisions of the consensus relating to the measurement and recognition of
other-than-temporary impairments were deferred pending further clarification
from the FASB. The remaining provisions of this rule, which primarily relate to
disclosure requirements, are required to be applied prospectively to all current
and future investments accounted for in accordance with SFAS No. 115 and other
cost method investments. American Centurion Life will evaluate the potential
impact of EITF 03-1 after the FASB completes its reassessment.
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American Centurion Life Assurance Company
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2. INVESTMENTS
Available-for-Sale investments
Investment classified as Available-for-Sale at December 31, 2004 are distributed
by type as presented below:
[Enlarge/Download Table]
December 31, 2004
---------------------------------------------------------------------------------------------------------------------------
Gross Gross
Unrealized Unrealized Fair
(Thousands) Cost Gains Losses Value
---------------------------------------------------------------------------------------------------------------------------
Fixed maturities:
Corporate debt securities $255,507 $11,773 $ (541) $266,739
Mortgage and other asset-backed securities 201,972 3,940 (682) 205,230
Foreign corporate bonds and obligations 46,752 1,883 (221) 48,414
Structured investments(a) 15,212 -- (178) 15,034
U.S. Government and agencies obligations 22,008 72 (80) 22,000
State and municipal obligations 1,000 -- (36) 964
---------------------------------------------------------------------------------------------------------------------------
Total fixed maturities 542,451 17,668 (1,738) 558,381
Preferred stock 1,000 41 -- 1,041
---------------------------------------------------------------------------------------------------------------------------
Total $543,451 $17,709 $(1,738) $559,422
===========================================================================================================================
(a) Includes unconsolidated CDOs and SLTs.
Investment classified as Available-for-Sale at December 31, 2003 are distributed
by type as presented below:
[Enlarge/Download Table]
December 31, 2003
---------------------------------------------------------------------------------------------------------------------------
Gross Gross
Unrealized Unrealized Fair
(Thousands) Cost Gains Losses Value
---------------------------------------------------------------------------------------------------------------------------
Fixed maturities:
Corporate debt securities $222,788 $12,292 $ (908) $234,172
Mortgage and other asset-backed securities 208,799 5,589 (480) 213,908
Foreign corporate bonds and obligations 37,912 1,810 (445) 39,277
Structured investments(a) 18,070 10 (391) 17,689
U.S. Government and agencies obligations 2,015 75 -- 2,090
State and municipal obligations 1,000 -- (44) 956
---------------------------------------------------------------------------------------------------------------------------
Total fixed maturities 490,584 19,776 (2,268) 508,092
Preferred stock 1,000 31 -- 1,031
---------------------------------------------------------------------------------------------------------------------------
Total $491,584 $19,807 $(2,268) $509,123
===========================================================================================================================
(a) Includes unconsolidated CDOs and SLTs.
The following table provides information about Available-for-Sale securities
with gross unrealized losses and the length of time that individual securities
have been in a continuous unrealized loss position as of December 31, 2004:
[Enlarge/Download Table]
Less than 12 months 12 months or more Total
---------------------------------------------------------------------------------------------------------------------------
Fair Unrealized Fair Unrealized Fair Unrealized
(Thousands) Value Losses Value Losses Value Losses
---------------------------------------------------------------------------------------------------------------------------
Description of securities:
Corporate debt securities $ 33,453 $ (266) $ 9,232 $(275) $ 42,685 $ (541)
Mortgage and other asset-backed securities 67,901 (681) -- -- 67,901 (681)
Foreign corporate bonds and obligations 9,525 (80) 6,451 (141) 15,976 (221)
Structured investments -- -- 11,642 (178) 11,642 (178)
U.S. Government and agencies obligations 9,887 (80) -- -- 9,887 (80)
State and municipal obligations -- -- 964 (37) 964 (37)
---------------------------------------------------------------------------------------------------------------------------
Total $120,766 $(1,107) $28,289 $(631) $149,055 $(1,738)
===========================================================================================================================
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American Centurion Life Assurance Company
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In evaluating potential other-than-temporary impairments, American Centurion
Life considers the extent to which amortized costs exceeds fair value and the
duration and size of that difference. A key metric in performing this evaluation
is the ratio of fair value to amortized cost. The following table summarizes the
unrealized losses by ratio of fair value to cost as of December 31, 2004:
[Enlarge/Download Table]
(Millions, except
number of securities) Less than 12 months 12 months or more Total
------------------------------------------------------------------------------------------------------------------------------
Gross Gross Gross
Ratio of Fair Value Number of Unrealized Number of Unrealized Number of Unrealized
to Amortized Cost Securities Fair Value Losses Securities Fair Value Losses Securities Fair Value Losses
------------------------------------------------------------------------------------------------------------------------------
95% - 100% 83 $121 $ (1) 18 $ 28 $ (1) 101 $149 $ (2)
90% - 95% -- -- -- -- -- -- -- -- --
80% - 90% -- -- -- -- -- -- -- -- --
Less than 80% -- -- -- -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
Total 83 $121 $ (1) 18 $ 28 $ (1) 101 $149 $ (2)
==============================================================================================================================
Substantially all of the gross unrealized losses on the securities are
attributable to changes in interest rates. Credit spreads and specific credit
events associated with individual issuers can also cause unrealized losses
although these impacts are not significant as of December 31, 2004. As noted in
the table above, all of the unrealized loss relates to securities that have a
fair value to cost ratio of 95% or above resulting in an overall 99% ratio of
fair value to cost for all securities with an unrealized loss. The holding with
the largest unrealized loss relates to the retained interest in a CDO
securitization trust which has $178 thousand of the $631 thousand in unrealized
losses for securities with an unrealized loss for twelve months or more. With
regard to this security, American Centurion Life estimates future cash flows
through maturity (2014) on a quarterly basis using judgment as to the amount and
timing of cash payments and defaults and recovery rates of the underlying
investments. These cash flows support full recovery of American Centurion Life's
carrying value related to the retained interest in the CDO securitization trust
as of December 31, 2004.
American Centurion Life monitors the investments and metrics discussed above on
a quarterly basis to identify and evaluate investments that have indications of
possible other-than-temporary impairment. See the Investments section of Note 1
for information regarding American Centurion Life's policy for determining when
an investment's decline in value is other-than-temporary. Additionally, American
Centurion Life has the ability and intent to hold these securities for a time
sufficient to recover its amortized cost and has, therefore, concluded that none
are other-than-temporarily impaired at December 31, 2004.
The change in net unrealized securities gains (losses) recognized in accumulated
other comprehensive income includes three components: (i) unrealized gains
(losses) that arose from changes in market value of securities that were held
during the period (holding gains (losses)), (ii) gains (losses) that were
previously unrealized, but have been recognized in current period net income due
to sales and other-than-temporary impairments of Available-for-Sale securities
(reclassification for realized (gains) losses) and (iii) other items primarily
consisting of adjustments in assets and liability balances such as DAC, to
reflect the expected impact on their carrying values had the unrealized gains
(losses) been realized immediately.
The following is a distribution of investments classified as Available-for-Sale
by maturity as of December 31, 2004:
[Enlarge/Download Table]
Fair
(Thousands) Cost Value
------------------------------------------------------------------------------------------------------------------------------
Due within one year $ 8,512 $ 8,687
Due from one to five years 84,110 88,361
Due from five to ten years 199,831 207,757
Due in more than ten years 32,814 33,312
------------------------------------------------------------------------------------------------------------------------------
325,267 338,117
Mortgage and other asset-backed securities 201,972 205,230
Structured investments 15,212 15,034
Preferred stock 1,000 1,041
------------------------------------------------------------------------------------------------------------------------------
Total $543,451 $559,422
==============================================================================================================================
The expected payments on mortgage and other asset-backed securities and
structured investments may not coincide with their contractual maturities. As
such, these securities, as well as preferred stocks were not included in the
maturities distribution.
At December 31, 2004 and 2003, bonds carried at $1.0 million were on deposit
with the State of New York as required by law.
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American Centurion Life Assurance Company
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At December 31, 2003 and 2004, fixed maturity securities comprised approximately
51 percent and 89 percent of American Centurion Life's total investments. These
securities are rated by Moody's and Standard & Poor's (S&P), except for
approximately $7.5 million and $12.0 million of securities at December 31, 2004
and 2003, respectively, which are rated by AEFC's internal analysts using
criteria similar to Moody's and S&P. Ratings on investment grade securities
(excluding net unrealized appreciation and depreciation) are presented using
S&P's convention and, if the two agencies' ratings differ, the lower rating is
used. A summary, by rating on December 31, is as follows:
[Enlarge/Download Table]
Rating 2004 2003
---------------------------------------------------------------------------------------------------------------------------
AAA 42% 44%
AA 3 2
A 18 18
BBB 29 29
Below investment grade 8 7
---------------------------------------------------------------------------------------------------------------------------
Total 100% 100%
---------------------------------------------------------------------------------------------------------------------------
At December 31, 2004 and 2003, approximately 51 and 89 percent, respectively, of
the securities rated AAA are GNMA, FNMA and FHLMC mortgage-backed securities. No
holdings of any other issuer were greater than ten percent of stockholder's
equity.
The table below includes sales, maturities and purchases of investments
classified as Available-for-Sale for the years ended December 31:
[Enlarge/Download Table]
(Thousands) 2004 2003 2002
---------------------------------------------------------------------------------------------------------------------------
Sales $ 25,987 $ 38,080 $ 53,790
Maturities $ 52,801 $ 91,078 $ 59,959
Purchases $132,250 $213,462 $146,462
---------------------------------------------------------------------------------------------------------------------------
Included in net realized gains and losses are gross realized gains and losses on
sales of securities, as well as other-than-temporary losses on investments,
classified as Available-for-Sale as noted in the following table for the years
ended December 31:
[Enlarge/Download Table]
(Thousands) 2004 2003 2002
---------------------------------------------------------------------------------------------------------------------------
Gross realized gains from sales $ 474 $ 2,817 $ 2,123
Gross realized losses from sales $(200) $(1,219) $(4,353)
Other-than-temporary impairments $ -- $(1,327) $(3,265)
---------------------------------------------------------------------------------------------------------------------------
As of December 31, 2004, American Centurion Life's structured investments, which
are classified as Available-for-Sale, include interests in CDOs. CDOs are
investments backed by high-yield bonds or loans and are not readily marketable.
American Centurion Life invested in CDOs as part of its overall investment
strategy in order to offer competitive rates to insurance and annuity
contractholders.
During 2001, American Centurion Life placed a majority of its rated CDO
securities and related accrued interest, (collectively referred to as
transferred assets), having an aggregate book value of $14.9 million, into a
securitization trust. In return, American Centurion Life received $1.9 million
in cash relating to sales to unaffiliated investors and retained interests with
allocated book amounts aggregating $12.9 million. As of December 31, 2004, the
retained interests had a carrying value of approximately $11.6 million, of which
approximately $8.6 million is considered investment grade. The book amount is
determined by allocating the previous carrying value of the transferred assets
between assets sold and the retained interests based on their relative fair
values. Fair values are based on the estimated present value of future cash
flows. The retained interests are accounted for in accordance with EITF Issue
99-20 "Recognition of Interest Income and Impairment on Purchased and Retained
Beneficial Interests in Securitized Financial Assets". One of the results of
this transaction is that increases and decreases in future cash flows of the
individual CDOs are combined into one overall cash flow for purposes of
determining the carrying value of the retained interests and related impact on
results of operations.
Mortgage loans on real estate
Mortgage loans are first mortgages on real estate. American Centurion Life holds
the mortgage document, which gives it the right to take possession of the
property if the borrower fails to perform according to the terms of the
agreements. Mortgage loan fundings are restricted by state insurance regulatory
authorities to 80 percent or less of the market value of the real estate at the
time of origination of the loan. Commitments to fund mortgages are made in the
ordinary course of business. The estimated fair value of the mortgage
commitments as of December 31, 2004 and 2003 was not material.
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American Centurion Life Assurance Company
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The following is a summary of mortgage loans on real estate and syndicated loans
at December 31:
[Enlarge/Download Table]
(Thousands) 2004 2003
---------------------------------------------------------------------------------------------------------------------------
Mortgage loans on real estate $72,203 $63,539
Mortgage loans on real estate reserves (920) (920)
---------------------------------------------------------------------------------------------------------------------------
Net mortgage loans $71,283 $62,619
---------------------------------------------------------------------------------------------------------------------------
At December 31, 2004 and 2003, American Centurion Life's recorded investment in
impaired mortgage loans on real estate was $nil. During 2004 and 2003, the
average recorded investment in impaired mortgage loans on real estate was $nil.
American Centurion Life recognized $nil of interest income related to impaired
mortgage loans on real estate for the years ended December 31, 2004, 2003 and
2002, respectively.
The balances of and changes in the total reserve for mortgage loan losses as of
and for the years ended December 31, are as follows:
[Enlarge/Download Table]
(Thousands) 2004 2003 2002
---------------------------------------------------------------------------------------------------------------------------
Balance, January 1 $920 $278 $149
Provision for mortgage loan losses -- 642 129
---------------------------------------------------------------------------------------------------------------------------
Balance, December 31 $920 $920 $278
---------------------------------------------------------------------------------------------------------------------------
Concentration of credit risk of mortgage loans on real estate by region at
December 31, were:
[Enlarge/Download Table]
(Thousands) December 31, 2004 December 31, 2003
---------------------------------------------------------------------------------------------------------------------------
On Balance Funding On Balance Funding
Region Sheet Commitments Sheet Commitments
---------------------------------------------------------------------------------------------------------------------------
East North Central $ 4,241 $-- $ 4,335 $ --
West North Central 8,302 -- 8,547 --
South Atlantic 16,154 -- 12,870 1,350
Middle Atlantic 4,892 -- 4,980 --
New England 1,777 -- 1,829 --
Pacific 12,687 -- 11,121 --
West South Central 5,465 -- 5,634 --
East South Central 2,748 -- 2,861 --
Mountain 15,937 -- 11,362 --
---------------------------------------------------------------------------------------------------------------------------
72,203 -- 63,539 1,350
Less reserves for losses 920 -- 920 --
---------------------------------------------------------------------------------------------------------------------------
Total $71,283 $-- $62,619 $1,350
===========================================================================================================================
Concentration of credit risk of mortgage loans on real estate by property type
at December 31 were:
[Enlarge/Download Table]
(Thousands) December 31, 2004 December 31, 2003
---------------------------------------------------------------------------------------------------------------------------
On Balance Funding On Balance Funding
Property type Sheet Commitments Sheet Commitments
---------------------------------------------------------------------------------------------------------------------------
Office buildings $25,079 $-- $21,110 $1,350
Department/retail stores 18,180 -- 17,997 --
Apartments 2,550 -- 2,613 --
Industrial buildings 19,821 -- 14,972 --
Medical buildings 2,398 -- 2,560 --
Mixed use 4,175 -- 4,287 --
---------------------------------------------------------------------------------------------------------------------------
72,203 -- 63,539 1,350
Less reserves for losses 920 -- 920 --
---------------------------------------------------------------------------------------------------------------------------
Total $71,283 $-- $62,619 $1,350
===========================================================================================================================
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American Centurion Life Assurance Company
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Sources of investment income and realized gains on investments
Net investment income for the years ended December 31 is summarized as follows:
[Enlarge/Download Table]
(Thousands) 2004 2003 2002
---------------------------------------------------------------------------------------------------------------------------
Income on fixed maturities $28,702 $25,649 $25,178
Income on mortgage loans on real estate 4,615 4,278 3,300
Other investments 726 358 1,050
---------------------------------------------------------------------------------------------------------------------------
34,043 30,285 29,528
Less investment expenses 168 370 303
---------------------------------------------------------------------------------------------------------------------------
Total $33,875 $29,915 $29,225
===========================================================================================================================
Net realized gains (losses) on investments for the years ended December 31 is
summarized as follows:
[Enlarge/Download Table]
(Thousands) 2004 2003 2002
---------------------------------------------------------------------------------------------------------------------------
Fixed maturities $274 $ 271 $(5,405)
Mortgage loans on real estate -- (642) (129)
Other -- 2 5
---------------------------------------------------------------------------------------------------------------------------
Total $274 $(369) $(5,529)
===========================================================================================================================
3. DEFERRED POLICY ACQUISITION COSTS
The balances of and changes in deferred policy acquisition costs as of and for
the years ended December 31, were:
[Enlarge/Download Table]
(Thousands) 2004 2003 2002
---------------------------------------------------------------------------------------------------------------------------
Balance, January 1, $17,744 $14,039 $15,301
Capitalization of expenses 3,950 5,880 2,447
Amortization (3,215) (2,420) (2,734)
Change in unrealized investment gains and losses (137) 245 (975)
---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, $18,342 $17,744 $14,039
---------------------------------------------------------------------------------------------------------------------------
4. VARIABLE ANNUITY GUARANTEES AND SALES INDUCEMENT COSTS
The majority of the variable annuity contracts offered by American Centurion
Life contain GMDB provisions. When market values of the customer's accounts
decline, the death benefit payable on a contract with a GMDB may exceed the
contract accumulation value. In addition, American Centurion Life offers
contracts containing GMIB provisions. If elected by the contract owner and after
a stipulated waiting period from contract issuance, a GMIB guarantees a minimum
lifetime annuity based on a specified rate of contract accumulation value growth
and predetermined annuity purchase rates. American Centurion Life has
established additional liabilities for these variable annuity death and GMIB
benefits under SOP 03-1. American Centurion Life has not established additional
liabilities for other insurance or annuitization guarantees for which the risk
is currently immaterial.
The variable annuity death benefit liability is determined each period by
estimating the expected value of death benefits in excess of the projected
contract accumulation value and recognizing the excess over the estimated
meaningful life based on expected assessments (e.g., mortality and expense fees,
contractual administrative charges and similar fees). Similarly, the GMIB
liability is determined each period by estimating the expected value of
annuitization benefits in excess of the projected contract accumulation value at
the date of annuitization and recognizing the excess over the estimated
meaningful life based on expected assessments.
The majority of the GMDB contracts provide for six year reset contract values.
In determining the additional liabilities for variable annuity death benefits
and GMIB, American Centurion Life projects these benefits and contract
assessments using actuarial models to simulate various equity market scenarios.
Significant assumptions made in projecting future benefits and assessments
relate to customer asset value growth rates, mortality, persistency and
investment margins and are consistent with those used for DAC asset valuation
for the same contracts. As with DAC, management will review, and where
appropriate, adjust its assumptions each quarter. Unless management identifies a
material deviation over the course of quarterly monitoring, management will
review and update these assumptions annually in the third quarter of each year.
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14
American Centurion Life Assurance Company
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The following provides summary information related to variable annuity contracts
for which American Centurion Life has established additional liabilities for
death benefits and GMIB as of December 31:
[Enlarge/Download Table]
Variable Annuity GMDB and GMIB by Benefit Type 2004 2003
(Dollar amounts in millions)
---------------------------------------------------------------------------------------------------------------------------
Contracts with GMDB Providing for Return of Premium Total Contract Value $15.1 $15.5
Contract Value in Separate Accounts $ 7.0 $ 3.8
Net Amount at Risk* $ 0.2 $ --
Weighted Average Attained Age 61 61
---------------------------------------------------------------------------------------------------------------------------
Contracts with GMDB Providing for One Year Ratchet Total Contract Value $66.3 $43.0
Contract Value in Separate Accounts $48.0 $26.0
Net Amount at Risk* $ 1.4 $ 2.5
Weighted Average Attained Age 61 61
---------------------------------------------------------------------------------------------------------------------------
Contracts with GMIB Total Contract Value $23.8 $ 7.9
Contract Value in Separate Accounts $20.0 $ 5.3
Net Amount at Risk* $ -- $ --
Weighted Average Attained Age 55 55
---------------------------------------------------------------------------------------------------------------------------
* Represents current death benefit less total contract value for GMDB and accumulated guaranteed minimum benefit base less
total contract value for GMIB and assumes the actuarially remote scenario that all claims become payable on the same day.
---------------------------------------------------------------------------------------------------------------------------
Additional Liabilities and Incurred Benefits GMDB GMIB
---------------------------------------------------------------------------------------------------------------------------
For the year ended December 31, 2004 Liability balance at January 1 $ -- $--
Reported claims $ -- $--
Liability balance at December 31 $ 0.1 $--
Incurred claims (reported + change in liability) $ 0.1 $--
---------------------------------------------------------------------------------------------------------------------------
The additional liabilities for guaranteed benefits established under SOP 03-1
are supported by general account assets. Changes in these liabilities are
included in death and other benefits in the Statements of Income.
Contract values in separate accounts were invested in various equity, bond and
other funds as directed by the contract holder. No gains or losses were
recognized on assets transferred to separate accounts for the periods presented.
Sales inducement costs consist of bonus interest credits and premium credits
added to certain annuity contract values. These benefits are capitalized to the
extent they are incremental to amounts that would be credited on similar
contracts without the applicable feature. Deferred sales inducement costs were
$2.2 million and $2.0 million at December 31, 2004 and 2003, respectively. These
costs were previously included in DAC and were reclassified as part of the
adoption of SOP 03-1. The amounts capitalized are amortized using the same
methodology and assumptions used to amortize DAC. American Centurion Life
capitalized $0.8 million and $0.6 million for the years ended December 31, 2004
and 2003, respectively. American Centurion Life amortized $0.4 million and $0.2
million for the years ended December 31, 2004 and 2003, respectively.
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15
American Centurion Life Assurance Company
--------------------------------------------------------------------------------
5. INCOME TAXES
American Centurion Life qualifies as a life insurance company for federal income
tax purposes. As such, American Centurion Life is subject to the Internal
Revenue Code provisions applicable to life insurance companies.
The components of income tax provision included in the Statements of Income for
the years ended December 31 were as follows:
[Enlarge/Download Table]
(Thousands) 2004 2003 2002
----------------------------------------------------------------------------------------------------------------------------
Federal income taxes
Current $2,949 $1,053 $ 1,242
Deferred 16 875 (1,115)
----------------------------------------------------------------------------------------------------------------------------
2,965 1,928 127
State income taxes-current 313 (26) 89
----------------------------------------------------------------------------------------------------------------------------
Income tax provision before accounting change $3,278 $1,902 $ 216
============================================================================================================================
A reconciliation of the expected federal income tax provision using the U.S.
federal statutory rate of 35% to American Centurion Life's actual income tax
provision for the years ended December 31 were as follows:
[Enlarge/Download Table]
(Thousands) 2004 2003 2002
----------------------------------------------------------------------------------------------------------------------------
Combined tax at U.S. statutory rate $3,324 35.0% $1,966 35.0% $202 35.0%
Changes in taxes resulting from:
Tax-exempt interest and dividend income (14) (0.2) (22) (0.4) (6) 1.9
State income tax, net of federal benefit 203 2.2 (17) (0.3) 58 (17.4)
All other (235) (2.5) (25) (0.5) (38) 11.1
----------------------------------------------------------------------------------------------------------------------------
Income tax provision before accounting change $3,278 34.5% $1,902 33.8% $216 30.6%
============================================================================================================================
A portion of American Centurion Life's income earned prior to 1984 was not
subject to current taxation but was accumulated, for tax purposes, in a
"policyholders' surplus account". At December 31, 2004, American Centurion Life
had a policyholders' surplus account balance of $1.1 million. The American Jobs
Creation Act of 2004 which was enacted on October 22, 2004, provided a two-year
suspension of the tax on policyholders' surplus account distribution. American
Centurion Life is evaluating making distributions, which will not be subject to
tax under the two-year suspension. Previously the policyholders' surplus account
was only taxable if dividends to shareholders exceed the shareholders' surplus
account and/or if American Centurion Life is liquidated. Deferred taxes of $379
thousand had not been established because no distributions of such amounts were
contemplated.
Deferred income tax provision (benefit) results from differences between assets
and liabilities measured for financial reporting and for income tax return
purposes. The significant components of American Centurion Life's deferred tax
assets and liabilities as of December 31, 2004 and 2003 are reflected in the
following table:
[Enlarge/Download Table]
(Thousands) 2004 2003
----------------------------------------------------------------------------------------------------------------------------
Deferred tax assets:
Policy reserves $ 4,276 $ 3,274
Other Investments 5,460 5,559
Other 652 360
----------------------------------------------------------------------------------------------------------------------------
Total 10,388 9,193
----------------------------------------------------------------------------------------------------------------------------
Deferred income tax liabilities:
Deferred policy acquisition costs 4,845 5,179
Deferred taxes related to net unrealized securities gains 4,969 5,636
Other 1,545 --
----------------------------------------------------------------------------------------------------------------------------
Total 11,359 10,815
----------------------------------------------------------------------------------------------------------------------------
Net deferred tax liabilities $ 971 $ 1,622
============================================================================================================================
American Centurion Life is required to establish a valuation allowance for any
portion of the deferred income tax assets that management believes will not be
realized. In the opinion of management, it is more likely than not that American
Centurion Life will realize the benefit of the deferred income tax assets and,
therefore, no such valuation allowance has been established.
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16
American Centurion Life Assurance Company
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6. STATUTORY CAPITAL AND SURPLUS
Statutory capital and surplus available for distribution or dividends to IDS
Life are limited to American Centurion Life's surplus as determined in
accordance with accounting practices prescribed by state insurance regulatory
authorities. American Centurion Life's statutory unassigned surplus aggregated
$(8.1) million and $(14.7) million as of December 31, 2004 and 2003,
respectively.
Statutory net income for the years ended December 31 and capital and surplus as
of December 31 are summarized as follows:
[Enlarge/Download Table]
(Thousands) 2004 2003 2002
----------------------------------------------------------------------------------------------------------------------------
Statutory net income (loss) $ 7,768 $(11,745) $(5,354)
Statutory capital and surplus 49,550 42,904 33,752
7. RELATED PARTY TRANSACTIONS
American Centurion Life participates in the American Express Company Retirement
Plan which covers all permanent employees age 21 and over who have met certain
employment requirements. Company contributions to the plan are based on
participants' age, years of service and total compensation for the year. Funding
of retirement costs for this plan complies with the applicable minimum funding
requirements specified by ERISA. American Centurion Life's share of the total
net periodic pension cost was $4 thousand, $5 thousand, and $5 thousand for the
years 2004, 2003, and 2002, respectively.
American Centurion Life also participates in defined contribution pension plans
of American Express Company which cover all employees who have met certain
employment requirements. Company contributions to the plans are a percent of
either each employee's eligible compensation or basic contributions. Costs of
these plans charged to operations in 2004, 2003, and 2002 were $13 thousand, $25
thousand, and $21 thousand, respectively.
American Centurion Life participates in defined benefit health care plans of
AEFC that provide health care and life insurance benefits to retired employees.
The plans include participant contributions and service related eligibility
requirements. Upon retirement, such employees are considered to have been
employees of AEFC. AEFC expenses these benefits and allocates the expenses to
its subsidiaries. Costs of these plans charged to operations in 2004, 2003, and
2002 were $nil.
Charges by IDS Life and AEFC for use of joint facilities, technology support,
marketing services and other services aggregated $2.6 million, $3.0 million, and
$2.2 million for 2004, 2003, and 2002, respectively. Certain of these costs are
included in deferred policy acquisition costs. Expenses allocated to American
Centurion Life may not be reflective of expenses that would have been incurred
by American Centurion Life on a stand-alone basis.
Included in other liabilities at December 31, 2004 and 2003 are payables of $474
thousand and $636 thousand, respectively, payable to IDS Life for federal income
taxes.
8. LINES OF CREDIT
American Centurion Life has an available line of credit with AEFC of $10
million. The interest rate for the line of credit is established by reference to
various indices plus 20 to 45 basis points, depending on the term. There were no
borrowings outstanding under this agreement at December 31, 2004 and 2003.
9. REINSURANCE
American Centurion Life has an agreement whereby it ceded 100 percent of a block
of individual life insurance and individual annuities to an unaffiliated
company. At December 31, 2004, 2003, and 2002, traditional life insurance in
force aggregated $97.2 million, $105.4 million and $119.6 million, respectively,
of which $97.1 million, $105.3 million, and $119.6 million, was reinsured at the
respective year ends. Under all reinsurance agreements, premiums ceded to
reinsurers amounted to $1.2 million, $1.1 million, and $1.3 million and
reinsurance recovered from reinsurers amounted to $610 thousand, $920 thousand,
and $2.0 million for the years ended December 31, 2004, 2003, and 2002,
respectively. Reinsurance contracts do not relieve American Centurion Life from
its primary obligation to policyholders.
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17
American Centurion Life Assurance Company
--------------------------------------------------------------------------------
10. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following table discloses fair value information for financial instruments.
Certain items, such as life insurance obligations, employee benefit obligations,
investments accounted for under the equity method, deferred policy acquisition
costs and deferred sales inducement costs are specifically excluded by SFAS No.
107, "Disclosure about Fair Value of Financial Instruments". The fair values of
financial instruments are estimates based upon market conditions and perceived
risks at December 31, 2004 and 2003 and require management judgment. These
figures may not be indicative of their future fair values. Additionally,
management believes the value of excluded assets and liabilities is significant.
The fair value of American Centurion Life, therefore, cannot be estimated by
aggregating the amounts presented. The following table discloses fair value
information for financial instruments as of December 31:
[Enlarge/Download Table]
(Thousands) 2004 2003
---------------------------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Financial Assets Amount Value Amount Value
---------------------------------------------------------------------------------------------------------------------------
Available for sale investments $559,422 $559,422 $509,123 $509,123
Mortgage loans on real estate, net 71,283 77,127 62,619 68,380
Separate account assets 55,034 55,034 29,900 29,900
Cash and cash equivalents 5,808 5,808 22,554 22,554
Financial Liabilities
---------------------------------------------------------------------------------------------------------------------------
Fixed annuities $564,282 $551,784 $527,047 $514,126
Separate account liabilities 55,034 52,957 29,900 28,730
The following methods were used to estimate the fair values of financial assets
and financial liabilities.
Financial assets
Generally, investments are carried at fair value on the Balance Sheets. Gains
and losses are recognized in the results of operations upon disposition of the
securities. In addition, losses are recognized when management determines that a
decline in value is other-than-temporary. See Note 2 for carrying value and fair
value information regarding investments.
The fair values of mortgage loans on real estate, except those with significant
credit deterioration, are estimated using discounted cash flow analysis, based
on current interest rates for loans with similar terms to borrowers of similar
credit quality. For loans with significant credit deterioration, fair values are
based on estimates of future cash flows discounted at rates commensurate with
the risk inherent in the revised cash flow projections, or for collateral
dependent loans on collateral values.
Separate account assets are carried at fair value on the Balance Sheets.
The carrying values for cash and cash equivalents approximate fair value due to
the short-term nature of these investments.
Financial liabilities
The fair values of fixed annuities in deferral status are estimated as the
accumulated value less applicable surrender charges and loans. For annuities in
payout status, fair value is estimated using discounted cash flows, based on
current interest rates. The carrying value and fair value of these reserves
excludes life insurance related elements of $1.4 million and $1.1 million at
December 31, 2004 and 2003, respectively.
The fair values of separate account liabilities are estimated as the accumulated
value less applicable surrender charges.
11. COMMITMENTS AND CONTINGENCIES
At December 31, 2004 and 2003, American Centurion Life had no commitments to
purchase investments other than mortgage loan fundings (see Note 2).
The Securities and Exchange Commission (SEC), the National Association of
Securities Dealers (NASD) and several state attorneys general have brought
proceedings challenging several mutual fund and variable account financial
practices, including suitability generally, late trading, market timing,
disclosure of revenue sharing arrangements and inappropriate sales of B shares.
American Centurion Life has received requests for information and has been
contacted by regulatory authorities concerning its practices and is cooperating
fully with these inquiries.
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18
American Centurion Life Assurance Company
--------------------------------------------------------------------------------
American Centurion Life is involved in a number of other legal and arbitration
proceedings concerning matters arising in connection with the conduct of their
respective business activities. American Centurion Life believes it has
meritorious defenses to each of these actions and intends to defend them
vigorously. American Centurion Life believes that it is not a party to, nor are
any of its properties the subject of, any pending legal or arbitration
proceedings that would have a material adverse effect on American Centurion
Life's financial condition, results of operations or liquidity. However, it is
possible that the outcome of any such proceedings could have a material impact
on results of operations in any particular reporting period as the proceedings
are resolved.
The IRS routinely examines American Centurion Life's federal income tax returns
and is currently conducting an audit for the 1993 through 1996 tax years and in
February of 2005 began the exam of the 1997 through 2002 tax years. Management
does not believe there will be a material adverse effect on American Centurion
Life's consolidated financial position as a result of these audits.
12. SUBSEQUENT EVENTS
On February 1, 2005, the American Express Company announced plans to pursue a
tax-free spin-off of the common stock of American Express Company's AEFC's unit
through a special dividend to American Express common shareholders. The final
transaction, which is subject to certain conditions including receipt of a
favorable tax ruling and approval by American Express Company's Board of
Directors, is expected to close in the third quarter of 2005.
Also, on February 1, 2005, A.M. Best placed American Centurion Life's financial
strength rating of "A+" under review with negative implications, Moody's
affirmed American Centurion Life's financial strength rating at "Aa3" and Fitch
lowered American Centurion Life's financial strength rating to "AA-" and placed
them on "Rating Watch Negative" following American Express Company's
announcement that it intends to spin-off its full ownership of AEFC, the holding
company for American Centurion Life. In connection with the spin-off, American
Express Company intends to provide additional capital to American Centurion Life
to confirm its current financial strength ratings.
13. STATUTORY INSURANCE ACCOUNTING PRACTICES
Reconciliations of net income for the years ended December 31 and stockholder's
equity at December 31, as shown in the accompanying financial statements, to
that determined using statutory accounting practices are as follows:
[Enlarge/Download Table]
(Thousands) 2004 2003 2002
----------------------------------------------------------------------------------------------------------------------------
Net income (loss), per accompanying financial statements $ 6,220 $ 3,716 $ 361
Deferred policy acquisition costs (687) (3,618) 290
Adjustments of future policy benefit liabilities (236) (11,953) (574)
Deferred federal income tax provision (expense) 2,907 875 (1,433)
Interest maintenance reserve loss transfer and amortization (535) (1,306) (95)
Deferred surrender charge (37) (68) (433)
Other, net 135 609 (3,470)
----------------------------------------------------------------------------------------------------------------------------
Statutory-basis net gain (loss) $ 7,767 $(11,745) $ (5,354)
============================================================================================================================
Stockholder's equity, per accompanying
financial statements $ 95,926 $ 90,945 $ 69,302
Deferred policy acquisition costs (18,342) (17,744) (14,040)
Deferred sales inducement costs (2,195) (1,965) (1,578)
Adjustments of future policy benefit liabilities (9,643) (9,983) 5,804
Adjustments of reinsurance ceded reserves (2,220) (2,125) (2,188)
Deferred federal income tax provision 4,245 2,519 2,326
Asset valuation reserve (3,888) (2,762) (630)
Net unrealized gain on investments (15,051) (16,618) (20,695)
Other, net 718 637 (4,549)
----------------------------------------------------------------------------------------------------------------------------
Statutory-basis capital and surplus $ 49,550 $ 42,904 $ 33,752
============================================================================================================================
--------------------------------------------------------------------------------
19
S-6313 C (4/05)
PART C.
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in Part B of this Registration Statement:
ACL Variable Annuity Account 1
Report of Independent Registered Public Accounting Firm dated March 31,
2005.
Statements of Assets and Liabilities as of Dec. 31, 2004.
Statements of Operations for the year ended Dec. 31, 2004.
Statements of Changes in Net Assets for the years ended Dec. 31, 2004
and 2003.
Notes to Financial Statements.
American Centurion Life Assurance Company:
Report of Independent Registered Public Accounting Firm dated Feb. 18,
2005.
Balance Sheets as of Dec. 31, 2004 and 2003.
Statements of Income for the years ended Dec. 31, 2004, 2003 and 2002.
Statements of Cash Flows for the years ended Dec. 31, 2004, 2003 and
2002.
Statements of Stockholder's Equity for the three years ended Dec. 31,
2004.
Notes to Financial Statements.
(b) Exhibits:
1. Certificate, establishing the ACL Variable Annuity Account 1 dated
December 1, 1995, filed electronically as Exhibit 1 to Registrant's
Initial Registration Statement No. 333-00041, is incorporated herein
by reference.
2. Not Applicable.
3. Variable Annuity and Life Insurance Distribution and Administrative
Services Agreement, dated April 10, 1997, is filed electronically as
Exhibit 3 to Post-Effective Amendment No. 2 to Registration Statement
No. 333-00041, is incorporated herein by reference.
4.1 Form of Group Deferred Annuity Certificate for nonqualified contract
(form 38502-NY 10/95), filed electronically as Exhibit 4.1 to
Registrant's Initial Registration Statement No. 333-00041, is
incorporated herein by reference.
4.2 Form of Group Deferred Annuity Certificate for qualified contract (form
38503-IRA-NY 10/95), filed electronically as Exhibit 4.2 to
Registrant's Initial Registration Statement No. 333-00041, is
incorporated herein by reference.
4.3 Form of Group Deferred Annuity Contract (form 38501 10/95), filed
electronically as Exhibit 4.3 to Registrant's Initial Registration
Statement No. 333-00041, is incorporated herein by reference.
4.4 Form of Traditional IRA or SEP-IRA Annuity Endorsement (form 272170
12/02) filed electronically as Exhibit 4.4 to Post-Effective Amendment
No. 8 to Registration Statement No. 333-00041 is incorporated herein by
reference.
5.1 Form of Group Deferred Variable Annuity Application (form 32041
10/95), filed electronically as Exhibit 5.1 to Registrant's Initial
Registration Statement No. 333-00041, is incorporated herein by
reference.
5.2 Form of Variable Annuity Participant Enrollment Form (form 32027C
10/95), filed electronically as Exhibit 5.2 to Registrant's Initial
Registration Statement No. 333-00041, is incorporated herein by
reference.
6.1 Amended and Restated Articles of Incorporation of American Centurion
Life, filed electronically as Exhibit 6.1 to Registrant's Initial
Registration Statement No. 333-00041, is incorporated herein by
reference.
6.2 Amended By-Laws of American Centurion Life, filed electronically as
Exhibit 6.2 to Registrant's Initial Registration Statement No.
333-00041, is incorporated herein by reference.
6.3 Emergency By-Laws of American Centurion Life, filed electronically as
Exhibit 6.3 to Registrant's Initial Registration Statement No.
333-00041, is incorporated herein by reference.
6.4 Amended and Restated By-Laws of American Centurion Life Assurance
Company filed electronically as Exhibit 6.4 to the Initial Registration
Statement No. 333-101051, filed on or about February 6, 2003, is
incorporated herein by reference.
7. Not Applicable.
8.1 Participation Agreement, dated Oct. 7, 1996, by and among American
Centurion Life and Warburg Pincus Trust and Warburg, Pincus
Counsellors, Inc. and Counsellors Securities, Inc., filed
electronically as Exhibit 8.1 to Post-Effective Amendment No. 2 to
Registration Statement No. 333-00041, is incorporated herein by
reference.
8.2 Fund Participation Agreement, dated July 31, 1996, by and among
American Centurion Life, TCI Portfolios, Inc. and Investors Research
Corporation, filed electronically as Exhibit 8.2 to Post-Effective
Amendment No. 2 to Registration Statement No. 333-00041, is
incorporated herein by reference.
8.3 Fund Participation Agreement, dated Oct. 23, 1996, between Janus Aspen
Series and American Centurion Life, filed electronically as Exhibit
8.3 to Post-Effective Amendment No. 2 to Registration Statement No.
333-00041, is incorporated herein by reference.
8.4 Participation Agreement, dated Dec. 4, 1996, among INVESCO Variable
Investment Funds, Inc., INVESCO Funds Group, Inc. and American
Centurion Life, filed electronically as Exhibit 8.4 to Post-Effective
Amendment No. 2 to Registration Statement No. 333-00041, is
incorporated herein by reference.
9. Opinion of counsel and consent to its use as to the legality of the
securities being registered is filed electronically herewith.
10. Consent of Independent Registered Public Accounting Firm is filed
electronically herewith.
11. None.
12. Not Applicable.
13.1 Power of Attorney to sign Amendments to this Registration Statement,
dated April 13, 2005, is filed electronically herewith.
13.2 Power of Attorney to sign Amendments to this Registration Statement,
dated July 7, 2004, is filed electronically herewith.
[Enlarge/Download Table]
Item 25. Directors and Officers of the Depositor (American Centurion Life Assurance Company)
Name Principal Business Address* Positions and Offices with Depositor
------------------------------- --------------------------------------- ------------------------------------------
Gumer C. Alvero 1765 AXP Financial Center Director, Vice President - Annuities
Minneapolis, MN 55474
Timothy V. Bechtold 249 AXP Financial Center Director, President and Chief Executive
Minneapolis, MN 55474 Officer
Walter S. Berman AMEX Tower W.F.C. Vice President and Treasurer
200 Vesey St.
New York, NY
Maureen A. Buckley 20 Madison Ave. Extension Director, Vice President, Chief
P.O. Box 5555 Operating Officer, Consumer Affairs
Albany, NY 12205-0555 Officer and Money Laundering Prevention Officer
Rodney P. Burwell Xerxes Corporation Director
7901 Xerxes Ave. So.
Suite 201
Bloomington, MN 55431-1253
Robert R. Grew Carter, Ledyard & Milburn Director
2 Wall Street
New York, NY 10005-2072
Ronald L. Guzior Bollam, Sheedy, Torani Director
& Co. LLP CPA's
26 Computer Drive West
Albany, NY 12205
Lorraine R. Hart 257 AXP Financial Center Vice President-Investments
Minneapolis, MN 55474
Paul R. Johnston 50605 AXP Financial Center Secretary
Minneapolis, MN 55474
Michelle M. Keeley 257 AXP Financial Center Vice President - Investments
Minneapolis, MN 55474
Jean B. Keffeler 3820 Grand Way Apt. 409 Director
Saint Louis Park, MN 55416
Eric L. Marhoun 50605 AXP Financial Center General Counsel
Minneapolis, MN 55474
Thomas R. McBurney 4900 IDS Center Director
80 South Eighth Street
Minneapolis, MN 55402
Mary Ellyn Minenko 50607 AXP Financial Center Counsel and Assistant Secretary
Minneapolis, MN 55474
Thomas W. Murphy 264 AXP Financial Center Vice President - Investments
Minneapolis, MN 55474
Thomas V. Nicolosi American Express Director
Financial Advisors Inc.
Suite 220
500 Mamaroneck Avenue
Harrison, NY 10528
Stephen P. Norman 90 Hudson Street Director
Jersey City, NJ 07032
Scott R. Plummer 38a-1 Chief Compliance Officer
Richard M. Starr 40 Wall Street Director
New York, NY 10005
David K. Stewart Vice President and Controller
Heather M. Somers Assistant General Counsel
Michael R. Woodward 32 Ellicot St. Director
Suite 100
Batavia, NY 14020
* Unless otherwise noted, the principal business address is 70100 AXP
Financial Center, Minneapolis, MN 55474.
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant (Continued)
The following list includes the names of major subsidiaries of American Express
Company.
[Enlarge/Download Table]
Jurisdiction of
Name of Subsidiary Incorporation
I. Travel Related Services
American Express Travel Related Services Company, Inc. New York
II. International Banking Services
American Express Bank Ltd. Connecticut
III. Companies engaged in Financial Services
Advisory Capital Income Delaware
Advisory Capital Partners LLC Delaware
Advisory Capital Strategies Group Inc. Minnesota
Advisory Convertible Arbitage, LLC Delaware
Advisory Credit Opportunities GP LLC Delaware
Advisory European (General Partner) LLC George Town
Advisory Quantitive Equity (General Partner) LLC Delaware
Advisory Select LLC Delaware
AEXP Affordable Housing LLC Delaware
American Centurion Life Assurance Company New York
American Enterprise Investment Services Inc. Minnesota
American Enterprise Life Insurance Company Indiana
American Enterprise REO 1, LLC Minnesota
American Express Asset Management (Australia) NSW Australia
American Express Asset Management Company S.A. Luxembourg
American Express Asset Management Group Inc. Minnesota
American Express Asset Management International Inc. Delaware
American Express Asset Management International (Japan) Ltd. Japan
American Express Asset Management Ltd. England
American Express Certificate Company Delaware
American Express Client Service Corporation Minnesota
American Express Corporation Delaware
American Express Financial Advisors Inc. Delaware
American Express Financial Advisors Japan Inc. Delaware
American Express Financial Corporation Delaware
American Express Insurance Agency of Alabama Inc. Alabama
American Express Insurance Agency of Arizona Inc. Arizona
American Express Insurance Agency of Idaho Inc. Idaho
American Express Insurance Agency of Maryland Inc. Maryland
American Express Insurance Agency of Massachusetts Inc. Massachusetts
American Express Insurance Agency of Nevada Inc. Nevada
American Express Insurance Agency of New Mexico Inc. New Mexico
American Express Insurance Agency of Oklahoma Inc. Oklahoma
American Express Insurance Agency of Texas Inc. Texas
American Express Insurance Agency of Wyoming Inc. Wyoming
American Express International Deposit Corporation Cayman Island
American Express Property Casualty Insurance Agency of Kentucky Inc. Kentucky
American Express Property Casualty Insurance Agency of Maryland Inc. Maryland
American Express Property Casualty Insurance Agency of Mississippi Inc. Mississippi
American Express Property Casualty Insurance Agency of Pennsylvania Inc. Pennsylvania
American Express Property Casualty Insurance Agency Wisconsin
American Express Trust Company Minnesota
American Partners Life Insurance Company Arizona
AMEX Assurance Company Illinois
Attica Asset Management Ltd. United Kingdom
Boston Equity General Partner LLC Delaware
IDS Cable Corporation Minnesota
IDS Cable II Corporation Minnesota
IDS Capital Holdings Inc. Minnesota
IDS Futures Brokerage Group Minnesota
IDS Futures Corporation Minnesota
IDS Insurance Agency of Utah, Inc. Utah
IDS Life Insurance Company Minnesota
IDS REO1, LLC Minnesota
IDS REO2, LLC Minnesota
IDS Life Insurance Company of New York New York
IDS Management Corporation Minnesota
IDS Partnership Services Corporation Minnesota
IDS Property Casualty Insurance Company Wisconsin
IDS Realty Corporation Minnesota
Investors Syndicate Development Corporation - NV Nevada
Kenwood Capital Management LLC Delaware
Northwinds Marketing Group, LLC Delaware
Realty Assets, Inc. Nebraska
Securities America Financial Corporation Nebraska
Securities America Inc. Delaware
Securities America Advisors, Inc. Nebraska
Threadneedle International Limited England and Wales
Item 27. Number of Contract owners
As of March 31, 2005, there were 3 certificate owners of qualified
certificates and 116 certificate owners of non-qualified certificates.
Item 28. Indemnification
The amended and restated By-Laws of the depositor provide that the depositor
will indemnify, to the fullest extent now or hereafter provided for or permitted
by law, each person involved in, or made or threatened to be made a party to,
any action, suit, claim or proceeding, whether civil or criminal, including any
investigative, administrative, legislative, or other proceeding, and including
any action by or in the right of the depositor or any other corporation, or any
partnership, joint venture, trust, employee benefit plan, or other enterprise
(any such entity, other than the depositor, being hereinafter referred to as an
"Enterprise"), and including appeals therein (any such action or process being
hereinafter referred to as a "Proceeding"), by reason of the fact that such
person, such person's testator or intestate (i) is or was a director or officer
of the depositor, or (ii) is or was serving, at the request of the depositor, as
a director, officer, or in any other capacity, or any other Enterprise, against
any and all judgments, amounts paid in settlement, and expenses, including
attorney's fees, actually and reasonably incurred as a result of or in
connection with any Proceeding, except as provided below.
No indemnification will be made to or on behalf of any such person if a judgment
or other final adjudication adverse to such person establishes that such
person's acts were committed in bad faith or were the result of active and
deliberate dishonesty and were material to the cause of action so adjudicated,
or that such person personally gained in fact a financial profit or other
advantage to which such person was not legally entitled. In addition, no
indemnification will be made with respect to any Proceeding initiated by any
such person against the depositor, or a director or officer of the depositor,
other than to enforce the terms of this indemnification provision, unless such
Proceeding was authorized by the Board of Directors of the depositor. Further,
no indemnification will be made with respect to any settlement or compromise of
any Proceeding unless and until the depositor has consented to such settlement
or compromise.
The depositor may, from time to time, with the approval of the Board of
Directors, and to the extent authorized, grant rights to indemnification, and to
the advancement of expenses, to any employee or agent of the depositor or to any
person serving at the request of the depositor as a director or officer, or in
any other capacity, of any other Enterprise, to the fullest extent of the
provisions with respect to the indemnification and advancement of expenses of
directors and officers of the depositor.
Insofar as indemnification for liability arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the depositor or 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.
[Enlarge/Download Table]
Item 29. Principal Underwriters.
(a) American Express Financial Advisors acts as principal underwriter for
the following investment companies:
AXP California Tax-Exempt Trust; AXP Dimensions Series, Inc.; AXP
Discovery Series, Inc.; AXP Equity Series, Inc.; AXP Fixed Income
Series, Inc.; AXP Global Series, Inc.; AXP Government Income Series,
Inc.; AXP Growth Series, Inc.; AXP High Yield Income Series, Inc.; AXP
High Yield Tax-Exempt Series, Inc.; AXP Income Series, Inc.; AXP
International Series, Inc.; AXP Investment Series, Inc.; AXP Managed
Series, Inc.; AXP Market Advantage Series, Inc.; AXP Money Market
Series, Inc.; AXP Partners Series, Inc.; AXP Partners International
Series, Inc.; AXP Progressive Series, Inc.; AXP Sector Series, Inc.;
AXP Selected Series, Inc.; AXP Special Tax-Exempt Series Trust; AXP
Stock Series, Inc.; AXP Strategy Series, Inc.; AXP Tax-Exempt Series,
Inc.; AXP Tax-Free Money Series, Inc.; Growth Trust; Growth and Income
Trust; Income Trust; Tax-Free Income Trust; World Trust; American
Express Certificate Company; Advisory Hedged Opportunity Fund.
(b) As to each director, officer or partner of the principal underwriter:
Name and Principal Position and Offices with
Business Address* Underwriter
Gumer C. Alvero Vice President - General
Manager Annuities
Ward D. Armstrong Senior Vice President -
Retirement Services and
Asset Management Group
John M. Baker Vice President - Chief
Client Service Officer
Dudley Barksdale Vice President - Service
Development
Timothy V. Bechtold Vice President -
Insurance Products
Arthur H. Berman Senior Vice President
Walter S. Berman Director and Senior Vice President
Robert C. Bloomer Vice President - Technologies III
Leslie H. Bodell Vice President - Technologies I
Rob Bohli Group Vice President -
10375 Richmond Avenue #600 South Texas
Houston, TX 77042
Walter K. Booker Group Vice President -
61 South Paramus Road New Jersey
Mack-Cali Office Center IV,
3rd Floor
Paramus, NJ 07652
Bruce J. Bordelon Group Vice President -
1333 N. California Blvd., Northern California
Suite 200
Walnut Creek, CA 94596
Randy L. Boser Vice President - Mutual Fund
Business Development
Kenneth J. Ciak Vice President and
IDS Property Casualty General Manager - IDS
1400 Lombardi Avenue Property Casualty
Green Bay, WI 54304
Paul A. Connolly Vice President - RL HR/US Retail
James M. Cracchiolo Director, President, Chairman of
the Board and Chief Executive
Officer
Colleen Curran Vice President and
Assistant General Counsel
Luz Maria Davis Vice President - Employee
Communications
Arthur E. DeLorenzo Group Vice President -
4 Atrium Drive, #100 Upstate New York/Vermont
Albany, NY 12205
Scott M. DiGiammarino Group Vice President -
Suite 500, 8045 Leesburg Washington D.C./Baltimore
Pike
Vienna, VA 22182
Paul James Dolan Vice President - CAO Product Sales
Kenneth Dykman Group Vice President -
6000 28th Street South East Greater Michigan
Suite 200
Grand Rapids, MI 49546
William V. Elliot Vice President - Financial
Planning and Advice
Benjamin R. Field Vice President - Finanace
Education and Planning Services
Gordon M. Fines Vice President - Senior
Portfolio Manager I
Giunero Floro Vice President - Creative
Services
Terrence J. Flynn Vice President - Brokerage
Clearing Operations
Jeffrey P. Fox Vice President - Investment
Accounting
Barbara H. Fraser Executive Vice President -
AEFA Products and Corporate
Marketing
Peter A. Gallus Vice President - CAO - AEFA
Investment Management
Gary W. Gassmann Group Vice President -
2677 Central Park Boulevard Detroit Metro
Suite 350
Southfield, MN 48076
Diana T. Gossett Group Vice President -
Great Plains
John C. Greiber Group Vice President -
Minnesota/Iowa
Steven Guida Vice President -
New Business and Service
Teresa A. Hanratty Senior Vice President -
Suites 6&7 Field Management
169 South River Road
Bedford, NH 03110
Lorraine R. Hart Vice President - Fixed Income
Investments Administration
Officer
Janis K. Heaney Vice President -
Incentive Management
Brian M. Heath Senior Vice President -
Suite 150 Advisor Group
801 E. Campbell Road
Richardson, TX 75081
Jon E. Hjelm Group Vice President -
655 Metro Place South Ohio Valley
Suite 570
Dublin, OH 43017
David X. Hockenberry Group Vice President -
830 Crescent Centre Drive Mid South
Suite 490
Franklin, TN 37067-7217
Debra A. Hutchinson Vice President - Technologies I
Theodore M. Jenkin Group Vice President -
6000 Freedom Square Drive Steel Cities
Suite 300
Cleveland, OH 44131
James M. Jensen Vice President -
Compensation and Licensing
Services
Jody M. Johnson Group Vice President -
Twin Cities Metro
Paul R. Johnston Secretary
Nancy E. Jones Vice President - Advisor
Marketing
William A. Jones Vice President - Technologies III
John C. Junek Senior Vice President and
General Counsel
Ora J. Kaine Vice President -
Retail Distribution Services
Michelle M. Keeley Senior Vice President -
Fixed Income
Raymond G. Kelly Group Vice President -
Suite 250 Northern Texas
801 East Campbell Road
Richardson, TX 75081
Claire Kolmodin Vice President - Strategic
Initiatives
Christopher J. Kopka Money Laundering Prevention
Officer
Mitre Kutanovski Group Vice President -
125 South Wacker Drive Chicago Metro
Suite 1550
Chicago, IL 60606
Lori J. Larson Vice President - Advisor
Field Force Growth and
Retention
Daniel E. Laufenberg Vice President - Chief
U.S. Economist
Jane W. Lee Vice President - General
Manager Platinum Financial
Services
Catherine M. Libbe Vice President - Marketing
& Product Retirement Services
Diane D. Lyngstad Chief Financial Officer and
Vice President - Comp and
Licensing Services
Thomas A. Mahowald Vice President - Equity Research
Timothy J. Masek Vice President -
Fixed Income Research
Frank A. McCarthy Vice President - External
Products Group and Personal
Trust Services
Mark T. McGannon Vice President and General
Manager - Products Sales
Brian J. McGrane Vice President and LFO
Officer - Finance
Dean O. McGill Group Vice President -
11835 W. Olympic Blvd Los Angeles Metro
Suite 900 East
Los Angeles, CA 90064
Sarah M. McKenzie Vice President - Managed and
Brokerage Products
Penny J. Meier Vice President - Business
Transformation/Six Sigma
Paula R. Meyer Senior Vice President and
General Manager - Mutual Funds
Holly Morris Senior Vice President -
Technologies
Rebecca A. Nash Vice President - Service
Operations
Roger Natarajan Vice President - Finance
Thomas V. Nicolosi Group Vice President -
Suite 220 New York Metro Area
500 Mamaroneck Ave.
Harrison, NY 10528
Patrick H. O'Connell Group Vice President -
Commerce Center One Southern New England
333 East River
Hartford, CT 06108-4200
Francois B. Odouard Vice President - Brokerage
Michael J. O'Keefe Vice President -
Advisory Business Systems
Geoffery Oprandy Group Vice President - Southwest
11811 N. Tatum Blvd. Suite 1030
Phoenix, AZ 85028
Kristi L. Petersen Vice President - ONE Account
and Cash
John G. Poole Group Vice President -
14755 North Outer Forty Road Gateway/Springfield
Suite 500
Chesterfield, MO 63017
Larry M. Post Group Vice President -
2 Constitution Plaza New England
Charlestown, MA 02129
Michael J. Rearden Group Vice President -
1800 S. Pine Island Road, Suite 510 Southern Florida
Plantation, FL 33324
Ralph D. Richardson III Group Vice President -
Suite 800 Carolinas
Arboretum Plaza One
9442 Capital of Texas
Hyw. N.
Austin, TX 78759
Mark A. Riordan Vice President - Finance
Emerging Technologies
ReBecca K. Roloff Senior Vice President -
GFS
Maximillian G. Roth Group Vice President -
1400 Lombardi Avenue Wisconsin/Upper Michigan
Suite 202
Green Bay, WI 54304
Russell L. Scalfano Group Vice President -
Suite 201 Illinois/Indiana/Kentucky
101 Plaza East Blvd.
Evansville, IN 47715
Andrew C. Schell Vice President - Strategy
and Planning
Mark E. Schwarzmann Senior Vice President -
Insurance and Annuities
Gary A. Scott Vice President - Client
Acquisition Marketing and
Services
Jacqueline M. Sinjem Vice President - Plan
Sponsor Services
Albert L. Soule Group Vice President -
6925 Union Park Center Western Frontier
Suite 200
Midvale, UT 84047
Bridget M. Sperl Senior Vice President -
Client Service Organization
Kathy Stalwick Vice President
Paul J. Stanislaw Group Vice President -
Suite 1100 Southern California/Hawaii
Two Park Plaza
Irvine, CA 92614
Lisa A. Steffes Vice President -
Marketing Officer
Development
David K. Stewart Vice President - AEFA Controller
and Treasurer
Caroline Stockdale-Boon Senior Vice President -
Human Resources
Jeffrey J. Stremcha Vice President - Technologies I
John T. Sweeney Vice President, Lead Financial
Officer - Banking, Brokerage
and Managed Products
Joseph E. Sweeney Senior Vice President,
General Manager - U.S. Brokerage
and Membership Banking
Craig P. Taucher Group Vice President -
Suite 150 Georgia/North Florida
4190 Belfort Rd.
Jackonville, FL 32216
Neil G. Taylor Group Vice President -
188 106th Avenue NE Pacific Northwest
Suite 640
Bellevue, WA 98004-5902
William F. "Ted" Truscott Senior Vice President and
Chief Investment Officer
George F. Tsafaridis Vice President - Quality &
Service Support
Janet M. Vandenbark Group Vice President -
3951 Westerre Parkway, Suite 250 Virginia
Richmond, VA 23233
Ramanathan Venkataramanan Vice President - Technologies III
Peter S. Velardi Senior Vice President -
Field Management
Andrew O. Washburn Vice President -
Mutual Fund Marketing
Donald F. Weaver Group Vice President -
3500 Market Street, Eastern Pennsylvania/
Suite 200 Delaware
Camp Hill, PA 17011
Beth E. Weimer Vice President and
Chief Compliance Officer
Phil Wentzel Vice President - Finance
Jeffrey A. Williams Senior Vice President -
Cross-Sell/Strategic
Management
William J. Williams Senior Vice President -
Field Management
Dianne L. Wilson Vice President - Insurance
Operations
Gayle W. Winfree Group Vice President -
1 Galleria Blvd. Suite 1900 Delta States
Metairie, LA 70001
Michael D. Wolf Vice President - Equity Senior
Portfolio Manager
Abraham L. Wons Vice President - Investments Risk
Management
Michael R. Woodward Senior Vice President -
32 Ellicott St Field Management
Suite 100
Batavia, NY 14020
* Business address is: 70100 AXP Financial Center, Minneapolis, MN 55474
unless otherwise noted.
Item 29 (c).
[Download Table]
Net Underwriting
Name of Principal Discounts and Compensation on Brokerage
Underwriter Commissions Redemption Commissions Compensation
----------- ----------- ---------- ----------- ------------
American Express None None None None
Financial Advisors
Inc.
Item 30. Location of Accounts and Records
American Centurion Life Assurance Company
20 Madison Avenue Extension
Albany, NY 12203
Item 31. Management Services
Not Applicable
Item 32. Undertakings
(a)(b)&(c) These undertakings were filed with Registrant's
Initial Registration Statement, File No. 333-00041.
(d) The sponsoring insurance company represents that
the fees and charges deducted under the contract,
in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be
incurred, and the risks assumed by the insurance
company.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, American Centurion Life Assurance Company, on behalf of the Registrant
certifies that it meets the requirements of Securities Act Rule 485(b) for
effectiveness of this Amendment to its Registration Statement and has caused
this Amendment to its Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized in the City of Minneapolis, and State of
Minnesota, on the 28th day of April, 2005.
ACL VARIABLE ANNUITY ACCOUNT 1
------------------------------
(Registrant)
By American Centurion Life Assurance Company
--------------------------------------------
(Depositor)
By /s/ Timothy V. Bechtold*
------------------------------------------
Timothy V. Bechtold
President and Chief
Executive Officer
As required by the Securities Act of 1933, this Amendment to the Registration
Statement has been signed by the following persons in the capacities indicated
on the 28th day of April, 2005.
Signature Title
/s/ Gumer C. Alvero* Director and Vice President - Annuities
----------------------
Gumer C. Alvero
/s/ Timothy V. Bechtold* Director, President and Chief Executive
---------------------- Officer
Timothy V. Bechtold (Chief Executive Officer)
/s/ Maureen A. Buckley* Director, Vice President, Chief Operating
---------------------- Officer, Consumer Affairs Officer, Claims
Maureen A. Buckley Officer and Money Laundering Prevention
Officer
/s/ Rodney P. Burwell* Director
----------------------
Rodney P. Burwell
/s/ Robert R. Grew* Director
----------------------
Robert R. Grew
/s/ Ronald L. Guzior* Director
----------------------
Ronald L. Guzior
/s/ Jean B. Keffeler* Director
----------------------
Jean B. Keffeler
/s/ Thomas R. McBurney* Director
----------------------
Thomas R. McBurney
/s/ Thomas V. Nicolosi* Director
----------------------
Thomas V. Nicolosi
/s/ Stephen P. Norman* Director
----------------------
Stephen P. Norman
/s/ Richard M. Starr* Director
----------------------
Richard M. Starr
/s/ David K. Stewart** Vice President and Controller
---------------------- (Principal Accounting Officer)
David K. Stewart (Principal Financial Officer)
/s/ Michael R. Woodward* Director
----------------------
Michael R. Woodward
* Signed pursuant to Power of Attorney, dated April 13, 2005, filed
electronically herewith as Exhibit 13.1 to Registrant's Post-Effective
Amendment No. 10, by:
** Signed pursuant to Power of Attorney, dated July 7, 2004, filed
electronically herewith as Exhibit 13.2 to Registrant's Post-Effective
Amendment No. 10, by:
/s/ Mary Ellyn Minenko
-------------------------------------
Mary Ellyn Minenko
Counsel
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 10
TO REGISTRATION STATEMENT NO. 333-00041
This Post-Effective Amendment is comprised of the following papers and
documents:
The Cover Page.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements.
Part C.
Other Information.
The signatures.
Dates Referenced Herein and Documents Incorporated by Reference
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