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The BalancedChoice Annuity 12™ Explanation Guide

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Issued by American National Insurance Company, Galveston, Texas


The BalancedChoice Annuity 12 TM Product Explanation Guide is an interactive tool to help you better understand the features and benefits available with this annuity contract. Please click on the highlighted topics throughout the guide to obtain more detailed information. 1. Guarantees 2. Accumulation 3. Flexibility 4. Income 5. Wealth Transfer

Table of Contents

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Important information you should read can be obtained by clicking on the highlighted topics below:

qq Is the BalancedChoice AnnuityTM Right for Me?..........................................................................................1 qq What Risks Are Generally Associated with the BalancedChoice AnnuityTM?.........................................2 qq Strong Guarantees..........................................................................................................................................3 qq How Will Interest Credited to My Annuity Contract Be Determined?.......................................................4 mm

What Is a Balanced Allocation Strategy ®?

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Sample Balanced Allocation Strategy ® and Fees Chart

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When Will Interest Be Credited to My Contract?

qq How Are Interest Earnings Calculated?.......................................................................................................5 How Is the Rate of Interest Calculated on Withdrawals? How Does Averaging Impact My Starting Index Value?

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Sample Calculation Balanced Allocation Strategy ® Option C — S&P 500 ® Index Increasing Scenario

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Sample Calculation Balanced Allocation Strategy ® Option C — S&P 500 ® Index Decreasing Scenario

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Sample Calculation Balanced Allocation Strategy ® Option A — S&P 500 ® Index Increasing Scenario

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Sample Calculation Balanced Allocation Strategy ® Option A — S&P 500 ® Index Decreasing Scenario

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qq What Is the Lock-In Feature?.......................................................................................................................11 How does Lock-In impact my Interest Earnings?

Sample Calculation of 100% Locked-In Interest Earnings Using Balanced Allocation Strategy ® Option C — and a S&P 500 ® Index Increasing Scenario

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Sample Calculation of 100% Locked-In Interest Earnings Using Balanced Allocation Strategy ® Option C — and a S&P 500 ® Index Increasing Scenario (Assumes request is prior to the end of the Indexing Term)

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Sample Calculation of 100% Locked-In Interest Earnings Using Balanced Allocation Strategy ® Option A — and a S&P 500 ® Index Increasing Scenario

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Sample Calculation of 100% Locked-In Interest Earnings Using Balanced Allocation Strategy ® Option A — and a S&P 500 ® Index Increasing Scenario (Assumes request is prior to the end of the Indexing Term)

qq What Is the TargetLockTM Feature?..............................................................................................................16 mm

How Do I Make a TargetLockTM Request?

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How Would the Exercise of a Partial Lock-In Impact My TargetLockTM?

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If I Have Elected “Averaging” for My Starting Index Value, When Can I Elect TargetLockTM?

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Sample Calculation of TargetLockTM Achieved Interest Earnings Using Balanced Allocation Strategy ® Option C — and a S&P 500 ® Index Increasing Scenario after TargetLockTM achieved

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Sample Calculation of TargetLockTM Achieved Interest Earnings Using Balanced Allocation Strategy ® Option C — and a S&P 500 ® Index Decreasing Scenario after TargetLockTM achieved

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Sample Calculation of TargetLockTM Not Achieved Interest Earnings Using Balanced Allocation Strategy ® Option C

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Sample Calculation of TargetLockTM Achieved Interest Earnings Using Balanced Allocation Strategy ® Option A — and a S&P 500 ® Index Increasing Scenario after TargetLockTM achieved

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Sample Calculation of TargetLockTM Achieved Interest Earnings Using Balanced Allocation Strategy ® Option A — and a S&P 500 ® Index Decreasing Scenario after TargetLockTM

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Sample Calculation of TargetLockTM Not Achieved Interest Earnings Using Balanced Allocation Strategy ® Option A


qq What Are Surrender Charges and Market Value Adjustments (MVA)?..................................................23 mm

What Is a Surrender Charge?

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What Is a Market Value Adjustment (MVA)?

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What if I Decide to Surrender My Contract?

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What Are the Market Value Interest Difference and the Market Value Adjustment Factor?

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Sample Calculation 1 — Assumes no MVA

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Sample Calculation 2 — Assumes a Negative MVA

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Sample Calculation 3 — Assumes a Positive MVA

qq Surrender-Charge-Free Withdrawals.........................................................................................................27 How Are Surrender-Charge-Free Withdrawals Calculated? What Events Will Allow Surrender Charges to Be Waived?

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qq How Are Pro-Rata Interest Earnings Calculated?.....................................................................................29 mm

Pro-Rata Interest Earnings Sample Calculation Balanced Allocation Strategy ® Option A

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Pro-Rata Interest Earnings Sample Calculation Balanced Allocation Strategy ® Option A — Without Pro-Rata Factor

qq What Are My Annuity Options?...................................................................................................................31 mm

Payment Plan Options

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Can I Choose How Often I Receive Annuity Payments?

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Is There a Death Benefit Once Annuity Payments Start?

qq What Is My Standard Death Benefit Under This Contract?.......................................................................32 What Is the Death Benefit Prior to Annuity Date? Who Receives the Death Benefit?

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qq What Are the Optional Riders Available With this Contract?..................................................................33 qq What Is the Family Endowment Rider (Guaranteed Minimum Death Benefit Rider)?..........................34 mm

How Much Does It Cost?

qq What Is the Family Endowment Rider with Premium Enhancement (Guaranteed Minimum Death Benefit Rider with Premium Enhancement)?.........................................35 How Much Does It Cost?

Recapture Charge

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Numerical Example of Withdrawals from the Family Endowment Rider

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Numerical Example of Recapture Charge

qq Tax Matters.....................................................................................................................................................38 How Are Annuities Generally Treated Under U.S. Federal Tax Laws?

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How Does the Federal Tax Code Treat Withdrawals?

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Am I Ever Required to Take Money Out of the Contract?

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Will I Ever Have to Pay a Tax Penalty?

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Do I Pay Taxes on Payments from Annuity Option I Elect?

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Do I Pay Taxes on Death Benefit Proceeds?

qq BalancedChoice Annuity 12™ Glossary...................................................................................................40


Is the BalancedChoice AnnuityTM Right for Me? You should carefully consider your financial goals, time horizon and risk tolerance before you purchase this product. The following discussion may assist you when determining if this product aligns with your goals and objectives: • The BalancedChoice AnnuityTM is usually suitable for purchasers seeking a long-term solution for their retirement savings or seeking a way to ensure that they will never outlive their income. If you are looking for a short-term retirement solution, this contract is not appropriate for your situation.

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• You might consider purchasing the BalancedChoice AnnuityTM if you are looking for a safe way to save money for the long-term but prefer the risks and rewards associated with interest credited based on the performance of an Index. • You should have other sources of liquidity or income to comfortably meet your needs beyond the Surrender-Charge-Free Withdrawal Amount provided by this contract. If you anticipate needing more than the Surrender-Charge-Free Withdrawal Amount, this product is not the right solution for your needs. • If you currently have your retirement savings in an investment that provides tax-deferral then there are no additional tax benefits gained from this product. It is important that other benefits within the product align with your financial goals and objectives.

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• If you are replacing an existing annuity contract with this Contract you need to determine if your existing annuity is subject to any fees or penalties upon termination and surrender. Replacing an existing contract may not be beneficial to you. You need to compare the fees, charges, coverage and limitations, if any, of your existing annuity to this contract to make an informed decision. • You should understand how the interest on your premium will be calculated before you purchase. Read this guide and talk to your agent if you have any questions.

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• You may wish to consider other annuity contracts that are available in the market prior to purchasing this annuity contract. Interest credited under this annuity contract is based in part upon the performance of the S&P 500 ® Index and will depend on the specific Balanced Allocation Strategy ® you select. If the performance of the S&P 500 ® Index is strong you may earn more interest than with a traditional fixed annuity. A traditional fixed annuity will offer a guaranteed minimum interest rate, and may credit a higher rate of interest than is credited under this annuity contract for a specific Indexing Term or other time period. It is possible that you may earn zero interest during an Indexing Term with this Index annuity product. You may consider other fixed and or Index annuities before purchasing this contract. Neither American National nor its agents provide tax or legal advice. We recommend you seek professional tax and legal advice for applicability to your personal situation.

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What Risks Are Generally Associated with the BalancedChoice AnnuityTM? The BalancedChoice AnnuityTM does have risk. You should generally bear in mind that:

Can I Lose Part of My Premium? • You can lose a part of your premium (including interest) if you withdraw your money from the contract during the Surrender Charge Period. Withdrawals during the Surrender Charge Period are subject to a fee, called a Surrender Charge, which is equal to a percentage of your Accumulation Value. The Surrender Charge generally declines the longer you hold the contract. Withdrawals made during the Surrender Charge Period are also subject to a Market Value Adjustment. The Market Value Adjustment may increase the amount of your withdrawal, reduce the amount of your withdrawal or, in some cases, have no effect on the amount withdrawn. The effect depends on the change in interest rates between the time your contract was issued and the time you make a withdrawal.

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• This is not an investment. You have no guarantee that you will earn more interest by purchasing the BalancedChoice Annuity 12™ than by purchasing a traditional fixed rate annuity or other investment. The actual amount of interest credited will be determined by applying the established crediting factors to the performance on the underlying Index over the Indexing Term. There could be times when your Contract would earn zero interest because the performance of the underlying Index is negative or flat or because the Total Annual Fees are greater than or equal to the interest generated by the selected Balanced Allocation Strategy ®.

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• The crediting factors of the Balanced Allocation Strategy ® are established at the sole discretion of the company at the beginning of each Indexing Term, subject to the guarantees in your contract. These specific parameters are the Index Allocation Percentage, the Declared Rate Allocation Percentage, the Declared Rate and the Strategy Fee. Since the Indexing Term is generally shorter than the Surrender Charge Period, you may not be able to withdraw all of your money free of charge if you decide that the new crediting factors are not right for you. The crediting factors may vary for contracts with different issue dates.

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• Currently the underlying Index is the S&P 500 ®. If the S&P 500 ® is discontinued, if we are unable to utilize it, or if the calculation of the Index is changed substantially, we will substitute a different Index. Any substitute Index will be submitted for prior approval to the insurance regulatory authority of the state in which this Contract is issued.

• All payments and guarantees are backed solely by the claims paying ability of American National Insurance Company. The BalancedChoice Annuity 12™ is not a CD, a bank deposit or a savings account and is not insured by the FDIC.

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• The length of the Surrender Charge Period depends on which version of the BalancedChoice Annuity™ you purchased. Neither the Surrender Change nor the Market Value Adjustment will be applied if you withdraw an amount less than or equal to the Surrender-Charge-Free Withdrawal Amount. This provision gives you access to a portion of the annuity’s values without a penalty. If you don’t think the Surrender-Charge-Free-Withdrawal Amount is sufficient to meet your liquidity needs, then this product is not suitable for you. In no case can you ever receive less than the Minimum Guaranteed Value. In addition to the contractual provisions within the annuity, the IRS may impose a 10% penalty on the taxable amounts withdrawn from the annuity prior to you reaching the age of 59½.

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Strong Guarantees How does the insurance company provide me with these key features and important guarantees?

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The insurance company expects the BalancedChoice AnnuityTM to be used over a number of years as a long-term component of your retirement savings. As such, the company invests their assets over the long term to provide the income that is necessary to support the underlying guarantees and benefits provided by the contract. The company has a number of tools at its disposal to support these benefits and guarantees including the ability to adjust the Contract’s Index allocations and fees, the Market Value Adjustment, hedging transactions and Surrender Charges.

Are My Principal & Earnings Protected?

Your BalancedChoice Annuity 12™ guarantees both your principal (premium paid) and interest credited to your contract provided that you do not surrender the contract during the Surrender Charge Period. Withdrawals made from your Contract will reduce your Contract value. Withdrawals in excess of the Surrender-Charge-Free Withdrawal Amount will be assessed a penalty during the Surrender Charge Period and may be subject to a Market Value Adjustment (MVA). èèGo to Surrender Charge Examples

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Minimum Guaranteed Value

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Your contract’s Minimum Guaranteed Value is equal to 87.5% of your single premium accumulated with interest on a daily basis at the Minimum Guaranteed Value Interest Rate. The Minimum Guaranteed Value Interest Rate will be determined on the date your contract is issued, this value is shown on the data page of your contract. The Minimum Guaranteed Value Interest Rate is guaranteed to not be less than 1% and is guaranteed not to change once your contract is issued.

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How Will Interest Credited to My Annuity Contract Be Determined? The interest credited to your annuity will be determined based on the change in value of the Balanced Allocation Strategy ® you select.

What Is a Balanced Allocation Strategy ® ?

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A Balanced Allocation Strategy ® is a method that determines the amount of interest that is credited to the contract. The parameters of the Balanced Allocation Strategy ® you select, together with the performance of the S&P 500 ® Index, will determine the interest you earn by using a formula that combines three elements — an Index portion, a declared rate portion, less any applicable fees. These elements determine your Balanced Allocation Value.

increased possibility that less or no interest will be credited at the end of the Indexing Term. This is due to potential fluctuations in the S&P 500 ® Index used to determine interest under the Balanced Allocation Strategy ®. In no case will your Contract’s Cash Surrender Value be less than the Guaranteed Minimum Value. We charge a Strategy Fee with some of the Balanced Allocation Strategies ®. The Strategy Fee will vary depending on the Balanced Allocation Strategy ® selected. The greater the Index allocation, the higher the fee will be.

Strategy Options

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• The Index portion is related to the performance of the S&P 500 ® Index (excluding dividends).

Sample Balanced Allocation Strategy & Fees

• The declared rate portion is based on a declared interest rate established by American National Insurance Company.

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• These elements, added together and reduced by any applicable fees, determine the interest, if there is any, to be credited to your Contract’s Accumulation Value.

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The allocation percentages, declared rate and any fees associated with each Balanced Allocation Strategy are established at the beginning of an Indexing Term and are guaranteed for that Indexing Term. For subsequent Indexing Terms, new rates and percentages are set and may differ from those available on newly-issued Contracts.

Several Balanced Allocation Strategies ® are available for you to choose from when your Contract is issued. Only one Balanced Allocation Strategy ® may be selected each Indexing Term. For future Indexing Terms, you may elect a new Balanced Allocation Strategy ® by notifying us in writing. A Balanced Allocation Strategy ® change will become effective on the first day of the new Indexing Term and may not be changed until the end of that Indexing Term. In general, selecting a strategy with a greater Index allocation will provide you with the potential for better longterm accumulation. However, there will be an > previous

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Index Component

Fixed Component

Annual Fee

Option A

60%

40%

Option B

50%

50%

3.0% 1.0%

Option C

30%

70%

0.25%

When Will Interest Be Credited to My Annuity Contract? Generally, we automatically calculate and pay Interest Earnings on the Crediting Dates shown in the table below. Interest Earnings are either added to the Accumulation Value or distributed to you as part of your withdrawal or benefit payment. On the following Crediting Dates:

Your Interest Earnings Are:

The Indexing Term End Date

Added to Accumulation Value

The date we pay the Death Benefit

Paid as part of the Death Benefit

The date Annuity Payments begin

Applied to the selected Annuity Option

The date you surrender the Contract for its Cash Surrender Value

Included in the Cash Surrender Value

On Crediting Dates other than the Indexing Term End Date, you may receive prorated Interest Earnings on the portion of the Accumulation Value that exceeds the Surrender-Charge-Free Withdrawal Amount.

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How Are Interest Earnings Calculated? The actual rate of interest you will earn is determined by applying an interest crediting formula described by the Contract using the elements of the Balanced Allocation Strategy® you have selected and the Index Value on the date the calculation is made.

STEP 6:

STEP 7: Annualize the result.

- TAF] - 1} ET

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max {0, [(1+C1)

Multiply the answer in step 4 by the Declared Rate Allocation Percentage Add the results from steps 3 and 5. This is equal to item C1 in the Base Crediting Formula above

Base Crediting Formula — The interest on your Contract is calculated in accordance with the following formula: (1/ET)

STEP 5:

This formula is easier understood and applied in steps. The following discussion explains how the Base Crediting Formula would be applied. The presentation in this section of the guide does not address how the Lock-In feature or Starting Index Averaging effect the determination of the amount of interest credited. See the “How does Lock-In impact my Interest Earnings” and “How does Averaging impact my Starting Index Value” sections of this guide for more information.

STEP 1:

[(1+(C1)](1/ET)-1]

Where C1 = the result in Step 6; and ET = the number of days since the start of the Indexing Term divided by 365

STEP 8:

Subtract the Strategy Fee and any applicable rider fees. A-TAF

Where A = the result in step 7; and TAF = Strategy Fee + rider fees.

STEP 9:

(A-B)/B

STEP 10:

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Calculate the Index Change by subtracting the most recent closing value of the S&P 500 ® from the most recent closing value of the S&P 500 ® Index on the first day of the Indexing Term and dividing that answer by the most recent closing value of the S&P 500 ® Index on the first day of the Indexing Term

Where A = the most recent closing value of the S&P 50 0 ® Index; and B = the MOST RECENT closing value of the S&P 50 0 ® Index on the first day of the Indexing Term

STEP 2:

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Calculate the Pro-rata Factor by dividing the number of days that have elapsed since the beginning of the Indexing Term by total number of days in the Indexing Term.

(Note: For certain events the Pro-rate Factor will be one regardless of the amount of time elapsed. Please see the “How is the rate of interest calculated on withdrawals” section of this guide for more information.)

STEP 3:

Multiply the Index Change by the Index Allocation Percentage and the Pro-rata Factor.

STEP 4: Compound the Declared Rate over the Elapsed Indexing Term.

Compound the result over the Elapsed Indexing Term. [(1+A-TAF)ET – 1] Where A = the result in step 7; TAF = Strategy Fee + rider fees; and ET = the number of days since the start of the Indexing Term divided by 365

Calculate the Interest Earnings. = Accumulation Value multiplied by results of STEP 9

Interest Earnings are not designed to mirror the performance of the Index. Your Interest Earnings will always be less than the total return on the S&P 500 ® when the Index performs well, but your Interest Earnings will never be less than zero percent as a result of the Index’s decline. In the interest crediting formula, Interest Earnings are reduced by the amount of the Strategy Fee and any applicable rider fees. It is possible for the S&P 500 ® Index to increase over an Indexing Term, and for a Contract to receive zero interest due to the Strategy Fee and any applicable rider fees. Once Interest Earnings are credited to your Contract at the end of an Indexing Term, they can never be lost as a result of the S&P 500 ® Index declining in value during a subsequent Indexing Term.

[(1 + D)ET -1] Where D = the Declared Rate; and ET = the number of days since the start of the Indexing Term divided by 365

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How Is the Rate of Interest Calculated on Withdrawals? If you withdraw money from your Contract or elect an Annuity Option prior to the Indexing Term End Date, the Index Change is multiplied by the Index Allocation Percentage and a Pro-rata Factor. The Pro-rata Factor is based on the length of the Indexing Term that has elapsed. The Pro-rata Factor will be between 0 and 1. The rate of interest that will be credited on withdrawals up to the Surrender-Charge-Free Withdrawal Amount is based on a Pro-rata Factor equal to 1. The rate of interest that will be credited on full surrenders in excess of the Surrender-Charge-Free Withdrawal Amount (unless the surrender is processed at the end of an Indexing Term), withdrawals in excess of the Surrender-Charge-Free Withdrawal Amount and amounts applied to an Annuity Option before the Indexing Term End Date will be less than 1.

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The rate of interest will not be pro-rated on Death Benefit payments or on Withdrawal Amounts that qualify for a terminal illness or confinement waiver, meaning you receive the full Balanced Allocation Value on those triggering events. For more information on the Pro-rata Factor please see your Contract.

How Does Averaging Impact My Starting Index Value?

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If you have selected averaging, your Starting Index Value will be the arithmetic average of the Index Values on each Averaging Date. The Averaging Dates will be consecutive and will fall on the same day of the month as the Contract Date. For example, if your Contract is issued on the 5th day of the month, the Averaging Date used will be the 5th day of the month in each subsequent month of the averaging period. Your Contract will specify how many Averaging Dates are used to calculate the starting Index Value. If an event, such as death or a withdrawal from the Contract, occurs prior to the end of the averaging period, the number of Averaging Dates will be reduced to the number of Averaging Dates that have elapsed prior to the event. The averaging method applies only to the initial Indexing Term under the Contract. After the initial Indexing Term, the starting Index Value is the most recent closing value of the Index on the first day of the new Indexing Term. èèSample Calculation of Interest Earnings Using Balanced Allocation Strategy ® Option C — and a S&P 500 ® Index Increasing Scenario

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èèSample Calculation of Interest Earnings Using Balanced Allocation Strategy ® Option C — and a S&P 500 ® Index Decreasing Scenario èèSample Calculation of Interest Earnings Using Balanced Allocation Strategy ® Option A — and a S&P 500 ® Index Increasing Scenario

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èèSample Calculation of Interest Earnings Using Balanced Allocation Strategy ® Option A — and a S&P 500 ® Index Decreasing Scenario

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Sample Calculation of Interest Earnings Using Balanced Allocation Strategy ® Option C — and a S&P 500 ® Index Increasing Scenario Assumptions:

Calculations:

• Indexing Term.................. 4 years

STEP 1 Calculate the Index Change

• Declared Rate Percentage............................70% • Declared Rate....................1.50% • Strategy Fee.......................0.25% • Additional Optional Riders.................................. None • S&P 500 Index on the first day of the Indexing Term........... 1000 ®

• Most recent closing value of the S&P 500 ® Index..............1400 • Elapsed Indexing Term... 4 years • Accumulation Value at start of Indexing Term................$100,000

STEP 2: Calculate the Pro-rata Factor =4/4 =1

STEP 3: Multiply the Index Change by the Index Allocation Percentage and the Pro-rata Factor = 40% x 30% x 1 = 12%

STEP 4: Compound the Declared Rate over the Elapsed Indexing Term = [(1 + 1.5%)4 - 1] = 0.0614 or 6.14%

STEP 5: Multiply the answer in step 4 by the Declared Rate Allocation Percentage

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The sample calculation is for illustrative purposes only and is not representative of a specific time period. Values used are hypothetical and not based upon historical performance of the S&P 500 ® Index. The Index Allocation portion is based upon the movement of the Index from the Index Start Value through the Index End Value multiplied by the Index Allocation Percentage. The Declared Rate Allocation portion is based on the Declared Rate multiplied by the Declared Rate Allocation Percentage. In the event that the Indexed and declared portions are not sufficient to offset the Total Annual Fee, any fees not covered will be waived.

= (1400 – 1000) / 1000 = 0.40 or 40%

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• Index Allocation Percentage............................30%

= 6.14% x 70% = 4.30%

STEP 6: Add the results from steps 3 and 5

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= 12% + 4.30% = 16.30%

The subsequent Indexing Term will have an Index Start Value equal to the End Index Value of the previous Indexing Term. The allocation percentages, Declared Rate, and annual fees will be determined at the renewal of each Indexing Term. Past performance of the Index is not a guarantee of future results.

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STEP 7: Annualize the result

= [(1 + 16.30%)(1/4) – 1] = 3.85%

STEP 8: Subtract the Strategy Fee and any applicable rider fees = 3.85% – 0.25% = 3.60%

STEP 9: Compound the result over the Elapsed Indexing Term = [(1 + 3.60%)4 – 1] = 0.1520 or 15.20%

STEP 10: Calculate the Interest Earnings = Accumulation Value multiplied by result from Step 9 = $100,000 x 15.20% = $15,200 Interest Earnings

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Sample Calculation of Interest Earnings Using Balanced Allocation Strategy ® Option C — and a S&P 500 ® Index Decreasing Scenario Assumptions:

Calculations:

• Indexing Term.................. 4 years

Step 1: Calculate the Index Change

• Declared Rate Percentage............................70% • Declared Rate....................1.50% • Strategy Fee.......................0.25% • Additional Optional Riders.................................. None • S&P 500 Index on the first day of the Indexing Term........... 1000 ®

• Most recent closing value of the S&P 500 ® Index............... 700 • Elapsed Indexing Term... 4 years • Accumulation Value at start of Indexing Term...........$100,000

Step 2: Calculate the Pro-rata Factor =4/4 =1

Step 3: Multiply the Index Change by the Index Allocation Percentage and the Pro-rata Factor = -30% x 30% x 1 = -9%

Step 4: Compound the Declared Rate over the Elapsed Indexing Term = [(1 + 1.5%)4 – 1] = 0.0614 or 6.14%

Step 5: Multiply the answer in step 4 by the Declared Rate Allocation Percentage

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The sample calculation is for illustrative purposes only and is not representative of a specific time period. Values used are hypothetical and not based upon historical performance of the S&P 500 ® Index. The Index Allocation portion is based upon the movement of the Index from the Index Start Value through the Index End Value multiplied by the Index Allocation Percentage. The Declared Rate Allocation portion is based on the Declared Rate multiplied by the Declared Rate Allocation Percentage. In the event that the Indexed and declared portions are not sufficient to offset the Total Annual Fee, any fees not covered will be waived.

= (700 – 1000) / 1000 = -0.30 or -30%

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• Index Allocation Percentage............................30%

= 6.14% x 70% = 4.30%

Step 6: Add the results from steps 3 and 5

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= -9% + 4.30% = -4.70%

The subsequent Indexing Term will have an Index Start Value equal to the End Index Value of the previous Indexing Term. The allocation percentages, Declared Rate, and annual fees will be determined at the renewal of each Indexing Term. Past performance of the Index is not a guarantee of future results.

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Step 7: Annualize the result

= [(1 + -4.70%)(1/4) – 1] = -1.20%

Step 8: Subtract the Strategy Fee and any applicable rider fees = -1.20% – 0.25% = -1.45% (Interest cannot be less than 0%)

Step 9: Compound the result over the Elapsed Indexing Term = [(1 + 0%)4 – 1] = .00 or 0.00%

Step 10: Calculate the Interest Earnings = Accumulation Value multiplied by result from Step 9 = $100,000 x 0.00% = $0.00 Interest Earnings

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Sample Calculation of Interest Earnings Using Balanced Allocation Strategy ® Option A — and a S&P 500 ® Index Increasing Scenario Assumptions:

Calculations:

• Indexing Term.................. 4 years

Step 1: Calculate the Index Change

• Declared Rate Percentage............................40% • Declared Rate....................1.50% • Strategy Fee.......................3.00% • Additional Optional Riders.................................. None • S&P 500 Index on the first day of the Indexing Term... 1000 ®

• Most recent closing value of the S&P 500 ® Index..........1400 • Elapsed Indexing Term... 4 years • Accumulation Value at start of Indexing Term...$100,000

Step 2: Calculate the Pro-rata Factor =4/4 =1

Step 3: Multiply the Index Change by the Index Allocation Percentage and the Pro-rata Factor = 40% x 60% x 1 = 24%

Step 4: Compound the Declared Rate over the Elapsed Indexing Term = [(1 + 1.5%)4 – 1] = 0.0614 or 6.14%

Step 5: Multiply the answer in step 4 by the Declared Rate Allocation Percentage

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The sample calculation is for illustrative purposes only and is not representative of a specific time period. Values used are hypothetical and not based upon historical performance of the S&P 500 ® Index. The Index Allocation portion is based upon the movement of the Index from the Index Start Value through the Index End Value multiplied by the Index Allocation Percentage. The Declared Rate Allocation portion is based on the Declared Rate multiplied by the Declared Rate Allocation Percentage. In the event that the Indexed and declared portions are not sufficient to offset the Total Annual Fee, any fees not covered will be waived.

= (1400 – 1000) / 1000 = 0.40 or 40%

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• Index Allocation Percentage............................60%

= 6.14% x 40% = 2.45%

Step 6: Add the results from steps 3 and 5

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= 24% + 2.45% = 26.45%

The subsequent Indexing Term will have an Index Start Value equal to the End Index Value of the previous Indexing Term. The allocation percentages, Declared Rate, and annual fees will be determined at the renewal of each Indexing Term. Past performance of the Index is not a guarantee of future results.

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Step 7: Annualize the result

= [(1 + 26.45%)(1/4) – 1] = 6.04%

Step 8: Subtract the Strategy Fee and any applicable rider fees = 6.04% – 3.00% = 3.04%

Step 9: Compound the result over the Elapsed Indexing Term = [(1 + 3.04%)4 – 1] = 0.1274 or 12.74%

Step 10: Calculate the Interest Earnings = Accumulation Value multiplied by result from Step 9 = $100,000 x 12.74% = $12,740 Interest Earnings

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Sample Calculation of Interest Earnings Using Balanced Allocation Strategy ® Option A — and a S&P 500 ® Index Decreasing Scenario Assumptions:

Calculations:

• Indexing Term.................. 4 years

Step 1: Calculate the Index Change

• Declared Rate Percentage............................40% • Declared Rate....................1.50% • Strategy Fee.......................3.00% • Additional Optional Riders.................................. None • S&P 500 Index on the first day of the Indexing Term... 1000 ®

• Most recent closing value of the S&P 500 ® Index........... 700 • Elapsed Indexing Term... 4 years • Accumulation Value at start of Indexing Term...........$100,000

= (700 – 1000) / 1000 = -0.30 or -30%

Step 2: Calculate the Pro-rata Factor =4/4 =1

FT

• Index Allocation Percentage............................60%

Step 3: Multiply the Index Change by the Index Allocation Percentage and the Pro-rata Factor = -30% x 60% x 1 = -18%

Step 4: Compound the Declared Rate over the Elapsed Indexing Term = [(1 + 1.5%)4 – 1] = 0.0614 or 6.14%

Step 5: Multiply the answer in step 4 by the Declared Rate Allocation Percentage

The subsequent Indexing Term will have an Index Start Value equal to the End Index Value of the previous Indexing Term. The allocation percentages, Declared Rate, and annual fees will be determined at the renewal of each Indexing Term.

Step 9: Compound the result over the Elapsed Indexing Term

A

The sample calculation is for illustrative purposes only and is not representative of a specific time period. Values used are hypothetical and not based upon historical performance of the S&P 500 ® Index. The Index Allocation portion is based upon the movement of the Index from the Index Start Value through the Index End Value multiplied by the Index Allocation Percentage. The Declared Rate Allocation portion is based on the Declared Rate multiplied by the Declared Rate Allocation Percentage. In the event that the Indexed and declared portions are not sufficient to offset the Total Annual Fee, any fees not covered will be waived.

= 6.14% x 40% = 2.45%

Step 6: Add the results from steps 3 and 5

D

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= -18% + 2.45% = -15.55%

Past performance of the Index is not a guarantee of future results.

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Step 7: Annualize the result = [(1 + -15.55%)(1/4) – 1] = -4.14%

Step 8: Subtract the Strategy Fee and any applicable rider fees = -4.14% – 3.00% = -7.14% (Interest cannot be less than 0%)

= [(1 + 0%)4 – 1] = .00 or 0.00%

Step 10: Calculate the Interest Earnings = Accumulation Value multiplied by result from Step 9 = $100,000 x 0.00% = $0.00 Interest Earnings

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What Is the Lock-In Feature? • You can only exercise Lock-In once per Indexing Term. • You may Lock-In all or a portion of the Index Value used to determine Interest Earnings on the Accumulated Value. • Interest will not be credited until the end of the Indexing Term, even though you have locked in the Index value for calculation purposes. • Once elected, a Lock-In cannot be reversed.

FT

• The Locked-In portion will not receive the benefit of any additional interest that could have resulted from any future upward movement of the S&P 500 ® Index during the remainder of the Indexing Term. Likewise, the Locked-In portion will not decrease due to downward movement of the S&P 500 ® Index during the remainder of the Indexing Term. • The Lock-In feature is not available during the Starting Index Averaging Period

• You may request a Lock-In by completing section 9 of the BCA Service Request Form (10360). A Lock-In request is not effective until received by American National Insurance Company at its Administrative Office, 4500 Lockhill-Selma Rd., San Antonio, TX 78249-2073, or P.O. Box 696763, San Antonio, TX 78269-6763. • The Locked-In Index Value is based upon the most recent closing value of the S&P 500 Index on the date American National Insurance Company receives the written request for Lock-In. The Lock-In could occur at a lower value than you expect.

A

How Does Lock-In Impact My Interest Earnings?

If a Lock-In has occurred, the interest-crediting formula, which is described in the Base Crediting Formula section of this Guide, is calculated twice and Interest Earnings are equal to the weighted average of the calculations. The first calculation is exactly as described in the Base Crediting Formula. In the second calculation in Step 1, the Index Change is calculated by using the Locked-In Index Value instead of the most recent closing value of the S&P 500 ® Index.

R

The weighted average is calculated as follows: [A x (1–L)] + [B x L] where

A = interest earnings using the most recent closing value of the S&P 50 0 ® Index B = interest earnings using the Locked - In Index Value

D

L = the percentage Locked - In

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Sample Calculation of 100% Locked-In Interest Earnings Using Balanced Allocation Strategy ® Option C — and a S&P 500 ® Index Increasing Scenario Assumptions:

Calculations:

• Indexing Term.................. 4 years

Step 1: Calculate the Index Change

• Declared Rate Percentage............................70% • Declared Rate....................1.50% • Strategy Fee.......................0.25% • Additional Optional Riders.................................. None • S&P 500 Index on the first day of the Indexing Term... 1000 ®

• Locked-In S&P 500 ® Index value:..........................1300 • Most recent closing value of the S&P 500 ® Index..........1400 • Elapsed Indexing Term... 4 years

Step 2: Calculate the Pro-rata Factor =4/4 =1

Step 3: Multiply the Index Change by the Index Allocation Percentage and the Pro-rata Factor = 30% x 30% x 1 = 9 %

Step 4: Compound the Declared Rate over the Elapsed Indexing Term = [(1 + 1.5%)4 – 1] = 0.0614 or 6.14%

Step 5: Multiply the answer in step 4 by the Declared Rate Allocation Percentage

A

• Accumulation Value at start of Indexing Term...$100,000

= (1300 – 1000) / 1000 = 0.30 or 30%

FT

• Index Allocation Percentage............................30%

= 6.14% x 70% = 4.30%

Step 6: Add the results from steps 3 and 5 = 9% + 4.30% = 13.30%

D

R

The sample calculation is for illustrative purposes only and is not representative of a specific time period. Values used are hypothetical and not based upon historical performance of the S&P 500 ® Index. The Index Allocation portion is based upon the movement of the Index from the Index Start Value through the Index End Value multiplied by the Index Allocation Percentage. The Declared Rate Allocation portion is based on the Declared Rate multiplied by the Declared Rate Allocation Percentage. In the event that the Indexed and declared portions are not sufficient to offset the Total Annual Fee, any fees not covered will be waived. The subsequent Indexing Term will have an Index Start Value equal to the End Index Value of the previous Indexing Term. The allocation percentages, Declared Rate, and annual fees will be determined at the renewal of each Indexing Term. Past performance of the Index is not a guarantee of future results.

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Step 7: Annualize the result = [(1 + 13.30%)(1/4) – 1] = 3.17%

Step 8: Subtract the Strategy Fee and any applicable rider fees = 3.17% – 0.25% = 2.92%

Step 9: Compound the result over the Elapsed Indexing Term = [(1 + 2.92%)4 – 1] = 0.1220 or 12.20%

Step 10: Calculate the Interest Earnings = Accumulation Value multiplied by result from Step 9 = $100,000 x 12.20%% = $12,200 Interest Earnings

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Sample Calculation of 100% Locked-In Interest Earnings Using Balanced Allocation Strategy ® Option C — and a S&P 500 ® Index Increasing Scenario Assumptions:

Calculations:

• Indexing Term.................. 4 years

Step 1: Calculate the Index Change

• Declared Rate Percentage............................70% • Declared Rate....................1.50% • Strategy Fee.......................0.25% • Additional Optional Riders.................................. None • S&P 500 Index on the first day of the Indexing Term... 1000 ®

• Locked-In S&P 500 ® Index value...........................1300 • Most recent closing value of the S&P 500 ® Index........... 700 • Elapsed Indexing Term... 4 years

Step 2: Calculate the Pro-rata Factor =4/4 =1

Step 3: Multiply the Index Change by the Index Allocation Percentage and the Pro-rata Factor = 30% x 30% x 1 = 9 %

Step 4: Compound the Declared Rate over the Elapsed Indexing Term = [(1 + 1.5%)4 – 1] = 0.0614 or 6.14%

Step 5: Multiply the answer in step 4 by the Declared Rate Allocation Percentage

A

• Accumulation Value at start of Indexing Term...$100,000

= (1300 – 1000) / 1000 = 0.30 or 30%

FT

• Index Allocation Percentage............................30%

= 6.14% x 70% = 4.30%

Step 6: Add the results from steps 3 and 5 = 9% + 4.30% = 13.30%

D

R

The sample calculation is for illustrative purposes only and is not representative of a specific time period. Values used are hypothetical and not based upon historical performance of the S&P 500 ® Index. The Index Allocation portion is based upon the movement of the Index from the Index Start Value through the Index End Value multiplied by the Index Allocation Percentage. The Declared Rate Allocation portion is based on the Declared Rate multiplied by the Declared Rate Allocation Percentage. In the event that the Indexed and declared portions are not sufficient to offset the Total Annual Fee, any fees not covered will be waived. The subsequent Indexing Term will have an Index Start Value equal to the End Index Value of the previous Indexing Term. The allocation percentages, Declared Rate, and annual fees will be determined at the renewal of each Indexing Term. Past performance of the Index is not a guarantee of future results.

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Step 7: Annualize the result = [(1 + 13.30%)(1/4) – 1] = 3.17%

Step 8: Subtract the Strategy Fee and any applicable rider fees = 3.17% – 0.25% = 2.92%

Step 9: Compound the result over the Elapsed Indexing Term = [(1 + 2.92%)4 – 1] = 0.1220 or 12.20%

Step 10: Calculate the Interest Earnings = Accumulation Value multiplied by result from Step 9 = $100,000 x 12.20% = $12,200 Interest Earnings

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Sample Calculation of 100% Locked-In Interest Earnings Using Balanced Allocation Strategy ® Option A — and a S&P 500 ® Index Increasing Scenario Assumptions:

Calculations:

• Indexing Term.................. 4 years

Step 1: Calculate the Index Change

• Declared Rate Percentage............................40% • Declared Rate....................1.50% • Strategy Fee.......................3.00% • Additional Optional Riders.................................. None • S&P 500 Index on the first day of the Indexing Term... 1000 ®

• Locked-In S&P 500 ® Index value...........................1300 • Most recent closing value of the S&P 500 ® Index..........1400 • Elapsed Indexing Term... 4 years

Step 2: Calculate the Pro-rata Factor =4/4 =1

Step 3: Multiply the Index Change by the Index Allocation Percentage and the Pro-rata Factor = 30% x 60% x 1 = 18%

Step 4: Compound the Declared Rate over the Elapsed Indexing Term = [(1 + 1.5%)4 – 1] = 0.0614 or 6.14%

Step 5: Multiply the answer in step 4 by the Declared Rate Allocation Percentage

A

• Accumulation Value at start of Indexing Term...$100,000

= (1300 – 1000) / 1000 = 0.30 or 30%

FT

• Index Allocation Percentage............................60%

= 6.14% x 40% = 2.45%

Step 6: Add the results from steps 3 and 5 = 18% + 2.45% = 20.45%

D

R

The sample calculation is for illustrative purposes only and is not representative of a specific time period. Values used are hypothetical and not based upon historical performance of the S&P 500 ® Index. The Index Allocation portion is based upon the movement of the Index from the Index Start Value through the Index End Value multiplied by the Index Allocation Percentage. The Declared Rate Allocation portion is based on the Declared Rate multiplied by the Declared Rate Allocation Percentage. In the event that the Indexed and declared portions are not sufficient to offset the Total Annual Fee, any fees not covered will be waived. The subsequent Indexing Term will have an Index Start Value equal to the End Index Value of the previous Indexing Term. The allocation percentages, Declared Rate, and annual fees will be determined at the renewal of each Indexing Term. Past performance of the Index is not a guarantee of future results.

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Step 7: Annualize the result

= [(1 + 20.45%)(1/4) – 1] = 4.76%

Step 8: Subtract the Strategy Fee and any applicable rider fees = 4.76% – 3.00% = 1.76%

Step 9: Compound the result over the Elapsed Indexing Term = [(1 + 1.76%)4 – 1] = 0.0724 or 7.24%

Step 10: Calculate the Interest Earnings = Accumulation Value multiplied by result from Step 9 = $100,000 x 7.24% = $7,240 Interest Earnings

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Sample Calculation of 100% Locked-In Interest Earnings Using Balanced Allocation Strategy ® Option A — and a S&P 500 ® Index Increasing Scenario Assumptions:

Calculations:

• Indexing Term.................. 4 years

Step 1: Calculate the Index Change

• Declared Rate Percentage............................40% • Declared Rate....................1.50% • Strategy Fee.......................3.00% • Additional Optional Riders.................................. None • S&P 500 Index on the first day of the Indexing Term... 1000 ®

• Locked-In S&P 500 ® Index value...........................1300 • Most recent closing value of the S&P 500 ® Index........... 700 • Elapsed Indexing Term... 4 years

Step 2: Calculate the Pro-rata Factor =4/4 =1

Step 3: Multiply the Index Change by the Index Allocation Percentage and the Pro-rata Factor = 30% x 60% x 1 = 18%

Step 4: Compound the Declared Rate over the Elapsed Indexing Term = [(1 + 1.5%)4 – 1] = 0.0614 or 6.14%

Step 5: Multiply the answer in step 4 by the Declared Rate Allocation Percentage

A

• Accumulation Value at start of Indexing Term...$100,000

= (1300 – 1000) / 1000 = 0.30 or 30%

FT

• Index Allocation Percentage............................60%

= 6.14% x 40% = 2.45%

Step 6: Add the results from steps 3 and 5 = 18% + 2.45% = 20.45%

D

R

The sample calculation is for illustrative purposes only and is not representative of a specific time period. Values used are hypothetical and not based upon historical performance of the S&P 500 ® Index. The Index Allocation portion is based upon the movement of the Index from the Index Start Value through the Index End Value multiplied by the Index Allocation Percentage. The Declared Rate Allocation portion is based on the Declared Rate multiplied by the Declared Rate Allocation Percentage. In the event that the Indexed and declared portions are not sufficient to offset the Total Annual Fee, any fees not covered will be waived. The subsequent Indexing Term will have an Index Start Value equal to the End Index Value of the previous Indexing Term. The allocation percentages, Declared Rate, and annual fees will be determined at the renewal of each Indexing Term. Past performance of the Index is not a guarantee of future results.

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Step 7: Annualize the result

= [(1 + 20.45%)(1/4) – 1] = 4.76%

Step 8: Subtract the Strategy Fee and any applicable rider fees = 4.76% – 3.00% = 1.76%

Step 9: Compound the result over the Elapsed Indexing Term. = [(1 + 1.76%)4 – 1] = 0.0724 or 7.24%

Step 10: Calculate the Interest Earnings = Accumulation Value multiplied by result from Step 9 = $100,000 x 7.24% = $7,240 Interest Earnings

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What Is the TargetLockTM Feature? TargetLock™ is designed to give you more control over your retirement savings. It allows you to automatically Lock-In 100% of the Index Value on the day a specified net annualized rate of interest or S&P 500 ® Index closing value is reached.

FT

If the Index Value doesn’t reach the target, then there will not be a TargetLock™ for that Indexing Term. A TargetLock™ request is good for the Indexing Term for which it’s elected; a new request will be required for each subsequent Indexing Term you wish to have a TargetLock™ set. If you make withdrawals or take other benefits after a TargetLock™ is executed, your net annualized rate of interest may be affected.

How Do I Make a TargetLock TM Request?

You may request a TargetLock™ by completing section 9 of the BCA Service Request Form (10360). A TargetLock™ will only be executed after we have received your request.

How Would the Exercise of a Partial Lock-In Impact My TargetLock TM?

A

You may implement one Lock-In per Indexing Term. This also applies to a partial Lock-In (click here for more information on Lock-In) or a TargetLock™.

If I Have Elected “Averaging” for My Starting Index Value, When Can I Elect TargetLock TM?

D

R

Start Averaging sets your beginning Index Value. Although TargetLockTM instructions may be provided during the averaging period, they will not be effective until the end of the first year of the Contract.

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Sample Calculation of TargetLock TM Achieved Interest Earnings Using Balanced Allocation Strategy ® Option C — and a S&P 500 ® Index Increasing Scenario after TargetLockTM achieved Assumptions:

Calculations:

• Indexing Term.................. 4 years

Step 1: Calculate the Index Change

• Declared Rate Percentage............................70% • Declared Rate....................1.50% • Strategy Fee.......................0.25% • Additional Optional Riders.................................. None • S&P 500 Index on the first day of the Indexing Term... 1000 ®

• TargetLock TM instructions S&P 500 ® Index Value..........1300 • Most recent closing value of the S&P 500 ® Index..........1400 • Elapsed Indexing Term... 4 years

Step 2: Calculate the Pro-rata Factor =4/4 =1

Step 3: Multiply the Index Change by the Index Allocation Percentage and the Pro-rata Factor = 30% x 30% x 1 = 9%

Step 4: Compound the Declared Rate over the Elapsed Indexing Term = [(1 + 1.5%)4 - 1] = 0.0614 or 6.14%

Step 5: Multiply the answer in step 4 by the Declared Rate Allocation Percentage

A

• Accumulation Value at start of Indexing Term...$100,000

= (1300 – 1000) / 1000 = 0.30 or 30%

FT

• Index Allocation Percentage............................30%

= 6.14% x 70% = 4.30%

Step 6: Add the results from steps 3 and 5 = 9% + 4.30% = 13.30%

D

R

The sample calculation is for illustrative purposes only and is not representative of a specific time period. Values used are hypothetical and not based upon historical performance of the S&P 500 ® Index. The Index Allocation portion is based upon the movement of the Index from the Index Start Value through the Index End Value multiplied by the Index Allocation Percentage. The Declared Rate Allocation portion is based on the Declared Rate multiplied by the Declared Rate Allocation Percentage. In the event that the Indexed and declared portions are not sufficient to offset the Total Annual Fee, any fees not covered will be waived. The subsequent Indexing Term will have an Index Start Value equal to the End Index Value of the previous Indexing Term. The allocation percentages, Declared Rate, and annual fees will be determined at the renewal of each Indexing Term. Past performance of the Index is not a guarantee of future results.

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Step 7: Annualize the result = [(1 + 13.30%)(1/4) – 1] = 3.17%

Step 8: Subtract the Strategy Fee and any applicable rider fees = 3.17% – 0.25% = 2.92%

Step 9: Compound the result over the Elapsed Indexing Term = [(1 + 2.92%)4 – 1] = 0.1220 or 12.20%

Step 10: Calculate the Interest Earnings = Accumulation Value multiplied by result from Step 9 = $100,000 x 12.20% = $12,200 Interest Earnings

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Sample Calculation of TargetLock TM Achieved Interest Earnings Using Balanced Allocation Strategy ® Option C — and a S&P 500 ® Index Decreasing Scenario after TargetLockTM achieved Assumptions:

Calculations:

• Indexing Term.................. 4 years

Step 1: Calculate the Index Change

• Declared Rate Percentage............................70% • Declared Rate....................1.50% • Strategy Fee.......................0.25% • Additional Optional Riders.................................. None • S&P 500 ® Index on the first day of the Indexing Term... 1000 • TargetLock TM instructions S&P 500 ® Index Value..........1300 • Most recent closing value of the S&P 500 ® Index........... 700 • Elapsed Indexing Term... 4 years

Step 2: Calculate the Pro-rata Factor =4/4 =1

Step 3: Multiply the Index Change by the Index Allocation Percentage and the Pro-rata Factor = 30% x 30% x 1 = 9 %

Step 4: Compound the Declared Rate over the Elapsed Indexing Term = [(1 + 1.5%)4 - 1] = 0.0614 or 6.14%

Step 5: Multiply the answer in step 4 by the Declared Rate Allocation Percentage

A

• Accumulation Value at start of Indexing Term...$100,000

= (1300 – 1000) / 1000 = 0.30 or 30%

FT

• Index Allocation Percentage............................30%

= 6.14% x 70% = 4.30%

Step 6: Add the results from steps 3 and 5 = 9% + 4.30% = 13.30%

D

R

The sample calculation is for illustrative purposes only and is not representative of a specific time period. Values used are hypothetical and not based upon historical performance of the S&P 500 ® Index. The Index Allocation portion is based upon the movement of the Index from the Index Start Value through the Index End Value multiplied by the Index Allocation Percentage. The Declared Rate Allocation portion is based on the Declared Rate multiplied by the Declared Rate Allocation Percentage. In the event that the Indexed and declared portions are not sufficient to offset the Total Annual Fee, any fees not covered will be waived. The subsequent Indexing Term will have an Index Start Value equal to the End Index Value of the previous Indexing Term. The allocation percentages, Declared Rate, and annual fees will be determined at the renewal of each Indexing Term. Past performance of the Index is not a guarantee of future results.

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Step 7: Annualize the result = [(1 + 13.30%)(1/4) – 1] = 3.17%

Step 8: Subtract the Strategy Fee and any applicable rider fees = 3.17% – 0.25% = 2.92%

Step 9: Compound the result over the Elapsed Indexing Term = [(1 + 2.92%)4 – 1] = 0.1220 or 12.20%

Step 10: Calculate the Interest Earnings = Accumulation Value multiplied by result from Step 9 = $100,000 x 12.20% = $12,200 Interest Earnings

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Sample Calculation of TargetLock TM Not Achieved Interest Earnings Using Balanced Allocation Strategy ® Option C Assumptions:

Calculations:

• Indexing Term.................. 4 years

Step 1: Calculate the Index Change

• Index Allocation Percentage............................30% • Declared Rate....................1.50%

Step 2: Calculate the Pro-rata Factor

• Strategy Fee.......................0.25%

=4/4 =1

• Additional Optional Riders.................................. None • S&P 500 ® Index on the first day of the Indexing Term... 1000 • TargetLock TM instructions S&P 500 ® Index Value..........1300 • Most recent closing value of the S&P 500 ® Index........... 700 • Elapsed Indexing Term... 4 years • Accumulation Value at start of Indexing Term...$100,000

Step 3: Multiply the Index Change by the Index Allocation Percentage and the Pro-rata Factor = -30% x 30% x 1 = -9 %

Step 4: Compound the Declared Rate over the Elapsed Indexing Term = [(1 + 1.5%)4 – 1] = 0.0614 or 6.14%

Step 5: Multiply the answer in step 4 by the Declared Rate Allocation Percentage

A

The sample calculation is for illustrative purposes only and is not representative of a specific time period. Values used are hypothetical and not based upon historical performance of the S&P 500 ® Index. The Index Allocation portion is based upon the movement of the Index from the Index Start Value through the Index End Value multiplied by the Index Allocation Percentage. The Declared Rate Allocation portion is based on the Declared Rate multiplied by the Declared Rate Allocation Percentage. In the event that the Indexed and declared portions are not sufficient to offset the Total Annual Fee, any fees not covered will be waived.

FT

• Declared Rate Percentage.. 70%

= (700 – 1000) / 1000 = -0.30 or -30%

= 6.14% x 70% = 4.30%

Step 6: Add the results from steps 3 and 5 = -9% + 4.30% = -4.70%

D

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Step 7: Annualize the result

The subsequent Indexing Term will have an Index Start Value equal to the End Index Value of the previous Indexing Term. The allocation percentages, Declared Rate, and annual fees will be determined at the renewal of each Indexing Term. Past performance of the Index is not a guarantee of future results.

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= [(1 + -4.70%)(1/4) – 1] = -1.20%

Step 8: Subtract the Strategy Fee and any applicable rider fees = -1.20% – 0.25% = -1.45% (Interest cannot be less than 0%)

Step 9: Compound the result over the Elapsed Indexing Term = [(1 + 0%)4 – 1] = 0.00 or 0.00%

Step 10: Calculate the Interest Earnings = Accumulation Value multiplied by result from Step 9 = $100,000 x 0.00% = $0 Interest Earnings

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Sample Calculation of TargetLock TM Achieved Interest Earnings Using Balanced Allocation Strategy ® Option A — and a S&P 500 ® Index Increasing Scenario after TargetLockTM achieved Assumptions:

Calculations:

• Indexing Term.................. 4 years

Step 1: Calculate the Index Change

• Declared Rate Percentage............................40% • Declared Rate....................1.50% • Strategy Fee.......................3.00% • Additional Optional Riders.................................. None • S&P 500 Index on the first day of the Indexing Term... 1000 ®

• TargetLock TM instructions S&P 500 ® Index Value..........1300 • Most recent closing value of the S&P 500 ® Index..........1400 • Elapsed Indexing Term... 4 years

Step 2: Calculate the Pro-rata Factor =4/4 =1

Step 3: Multiply the Index Change by the Index Allocation Percentage and the Pro-rata Factor = 30% x 60% x 1 = 18%

Step 4: Compound the Declared Rate over the Elapsed Indexing Term = [(1 + 1.5%)4 – 1] = 0.0614 or 6.14%

Step 5: Multiply the answer in step 4 by the Declared Rate Allocation Percentage

A

• Accumulation Value at start of Indexing Term...$100,000

= (1300 – 1000) / 1000 = 0.30 or 30%

FT

• Index Allocation Percentage............................60%

= 6.14% x 40% = 2.45%

Step 6: Add the results from steps 3 and 5 = 18% + 2.45% = 20.45%

D

R

The sample calculation is for illustrative purposes only and is not representative of a specific time period. Values used are hypothetical and not based upon historical performance of the S&P 500 ® Index. The Index Allocation portion is based upon the movement of the Index from the Index Start Value through the Index End Value multiplied by the Index Allocation Percentage. The Declared Rate Allocation portion is based on the Declared Rate multiplied by the Declared Rate Allocation Percentage. In the event that the Indexed and declared portions are not sufficient to offset the Total Annual Fee, any fees not covered will be waived. The subsequent Indexing Term will have an Index Start Value equal to the End Index Value of the previous Indexing Term. The allocation percentages, Declared Rate, and annual fees will be determined at the renewal of each Indexing Term. Past performance of the Index is not a guarantee of future results.

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Step 7: Annualize the result

= [(1 + 20.45%)(1/4) – 1] = 4.76%

Step 8: Subtract the Strategy Fee and any applicable rider fees = 4.76% – 3.00% = 1.76%

Step 9: Compound the result over the Elapsed Indexing Term = [(1 + 1.76%)4 – 1] = 0.0724 or 7.24%

Step 10: Calculate the Interest Earnings = Accumulation Value multiplied by result from Step 9 = $100,000 x 7.24% = $7,240 Interest Earnings

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Sample Calculation of TargetLock TM Achieved Interest Earnings Using Balanced Allocation Strategy ® Option A — and a S&P 500 ® Index Decreasing Scenario after TargetLockTM achieved Assumptions:

Calculations:

• Indexing Term.................. 4 years

Step 1: Calculate the Index Change

• Declared Rate Percentage............................40% • Declared Rate....................1.50% • Strategy Fee.......................3.00% • Additional Optional Riders.................................. None • S&P 500 Index on the first day of the Indexing Term... 1000 ®

• TargetLock TM instructions S&P 500 ® Index Value..........1300 • Most recent closing value of the S&P 500 ® Index........... 700 • Elapsed Indexing Term... 4 years

Step 2: Calculate the Pro-rata Factor =4/4 =1

Step 3: Multiply the Index Change by the Index Allocation Percentage and the Pro-rata Factor = 30% x 60% x 1 = 18%

Step 4: Compound the Declared Rate over the Elapsed Indexing Term = [(1 + 1.5%)4 – 1] = 0.0614 or 6.14%

Step 5: Multiply the answer in step 4 by the Declared Rate Allocation Percentage

A

• Accumulation Value at start of Indexing Term...$100,000

= (1300 – 1000) / 1000 = 0.30 or 30%

FT

• Index Allocation Percentage............................60%

= 6.14% x 40% = 2.45%

Step 6: Add the results from steps 3 and 5 = 18% + 2.45% = 20.45%

D

R

The sample calculation is for illustrative purposes only and is not representative of a specific time period. Values used are hypothetical and not based upon historical performance of the S&P 500 ® Index. The Index Allocation portion is based upon the movement of the Index from the Index Start Value through the Index End Value multiplied by the Index Allocation Percentage. The Declared Rate Allocation portion is based on the Declared Rate multiplied by the Declared Rate Allocation Percentage. In the event that the Indexed and declared portions are not sufficient to offset the Total Annual Fee, any fees not covered will be waived. The subsequent Indexing Term will have an Index Start Value equal to the End Index Value of the previous Indexing Term. The allocation percentages, Declared Rate, and annual fees will be determined at the renewal of each Indexing Term. Past performance of the Index is not a guarantee of future results.

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Step 7: Annualize the result

= [(1 + 20.45%)(1/4) – 1] = 4.76%

Step 8: Subtract the Strategy Fee and any applicable rider fees = 4.76% – 3.00% = 1.76%

Step 9: Compound the result over the Elapsed Indexing Term = [(1 + 1.76%)4 – 1] = 0.0724 or 7.24%

Step 10: Calculate the Interest Earnings = Accumulation Value multiplied by result from Step 9 = $100,000 x 7.24% = $7,240 Interest Earnings

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Sample Calculation of TargetLock TM Not Achieved Interest Earnings Using Balanced Allocation Strategy ® Option A Assumptions:

Calculations:

• Indexing Term.................. 4 years

Step 1: Calculate the Index Change

• Declared Rate Percentage............................40% • Declared Rate....................1.50% • Strategy Fee.......................3.00% • Additional Optional Riders.................................. None • S&P 500 Index on the first day of the Indexing Term... 1000 ®

• TargetLock TM instructions S&P 500 ® Index Value..........1300 • Most recent closing value of the S&P 500 ® Index........... 700 • Elapsed Indexing Term... 4 years • Accumulation Value at start of Indexing Term...$100,000

Step 2: Calculate the Pro-rata Factor =4/4 =1

Step 3: Multiply the Index Change by the Index Allocation Percentage and the Pro-rata Factor = -30% x 60% x 1 = -18%

Step 4: Compound the Declared Rate over the Elapsed Indexing Term = [(1 + 1.5%)4 – 1] = 0.0614 or 6.14%

Step 5: Multiply the answer in step 4 by the Declared Rate Allocation Percentage

A

The sample calculation is for illustrative purposes only and is not representative of a specific time period. Values used are hypothetical and not based upon historical performance of the S&P 500 ® Index. The Index Allocation portion is based upon the movement of the Index from the Index Start Value through the Index End Value multiplied by the Index Allocation Percentage. The Declared Rate Allocation portion is based on the Declared Rate multiplied by the Declared Rate Allocation Percentage. In the event that the Indexed and declared portions are not sufficient to offset the Total Annual Fee, any fees not covered will be waived.

= (700 – 1000) / 1000 = -0.30 or -30%

FT

• Index Allocation Percentage............................60%

= 6.14% x 40% = 2.45%

Step 6: Add the results from steps 3 and 5 = -18% + 2.45% = -15.55%

D

R

Step 7: Annualize the result

The subsequent Indexing Term will have an Index Start Value equal to the End Index Value of the previous Indexing Term. The allocation percentages, Declared Rate, and annual fees will be determined at the renewal of each Indexing Term. Past performance of the Index is not a guarantee of future results.

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= [(1 + -15.55%)(1/4) – 1] = -4.14%

Step 8: Subtract the Strategy Fee and any applicable rider fees = -4.14% – 3.00% = -7.14% (Interest cannot be less than 0%)

Step 9: Compound the result over the Elapsed Indexing Term = [(1 + 0%)4 – 1] = .00 or 0.00%

Step 10: Calculate the Interest Earnings = Accumulation Value multiplied by result from Step 9 = $100,000 x 0.00% = $0.00 Interest Earnings

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What Are Surrender Charges and Market Value Adjustments (MVA)? What Is a Surrender Charge? A Surrender Charge is the cost you incur if you surrender your Contract or if you withdraw more than the Surrender-Charge-Free Withdrawal Amount during the first twelve (12) Contract years.

Contract Year

1

2

3

Surrender Charge

13.5

13.0

12.5

FT

The Surrender Charge is applied at the time of a Surrender or Partial Withdrawal. It is calculated by multiplying the applicable percentage shown in the table below by the amount withdrawn in excess of the Surrender-Charge-Free Withdrawal Amount. 4

5

6

7

8

9

10

11

12

12.0

11.0

10.0

9.0

8.0

7.0

6.0

5.0

3.0

What Is a Market Value Adjustment (MVA)?

The MVA can impact the value of any withdrawal you take that exceeds the Surrender-Charge-Free Withdrawal Amount. This adjustment can be positive if interest rates decline after your Contract Date. It can be negative if interest rates increase after the Contract Date. This is why it is important for you to know how the MVA will impact any Partial Withdrawal or Surrender you are considering.

A

The MVA measures how the change in interest rates impacts the value of the company’s assets. It modifies the value of any excess withdrawal accordingly. The MVA is based on a comparison of the interest rate conditions at the time of the Surrender or Partial Withdrawal to the interest rate conditions on the date your annuity was issued.

R

Remember that the MVA does not apply to Partial Withdrawals equal to or less than the SurrenderCharge-Free Withdrawal Amount, Required Minimum Distribution Withdrawals or to payments received under the Confinement or Terminal Illness Waivers. The MVA is not applicable in all states.

What if I Decide to Surrender My Contract?

D

If you decide to Surrender your Contract, American National Insurance Company will pay you the Contract’s Cash Surrender Value. The Cash Surrender Value is equal to the Accumulation Value plus interest credited minus Surrender Charges and Market Value Adjustments. Your Cash Surrender Value can never be less than the Minimum Guaranteed Value. The Minimum Guaranteed Value is equal to 87.5% of your Premiums accumulated at the Minimum Guaranteed Value Interest Rate. The Minimum Guaranteed Value Interest Rate will be established at issue and will be guaranteed for the life of your annuity. You may receive less than the premium paid if you surrender during the early years of your annuity due to Surrender Charges or Market Value Adjustment.

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What Are the Market Value Interest Difference and the Market Value Adjustment Factor? The Market Value Interest Difference is equal to 0.75 x (A – B – 0.005) where A is the Treasury Constant Maturity Series rate (expressed as a decimal, e.g., 1% = 0.01) for a 10-year treasury bond. This rate will be determined on the fifth day on which such rates are published prior to the calendar month of the Contract Date; and B is the Treasury Constant Maturity Series rate (expressed as a decimal) for a 10-year treasury bond. This rate will be determined on the fifth day on which such rates are published prior to the calendar month in which the Market Value Adjustment is calculated.

FT

The Market Value Interest Difference will never exceed 1%, positive or negative. The Market Value Adjustment Factor is equal to the Market Value Interest Difference x (N/12) where N is the number of complete months from the date the Market Value Adjustment calculation is needed to the end of the Market Value Adjustment Period.

Sample Calculation 1 — Assumes no MVA Assumptions:

Calculations:

• Market Value Adjustment......................... None

Step 1: Determine Surrender-Charge-Free Withdrawal Amount

• Premium full surrender request after second contract anniversary....................$100,000

A

• Assume Balanced Allocation Factor(BAF)....................... 12.26%

(10%) of Accumulation Value ($100,000) = $10,000 which is made up of principal and BAF earnings Principal = $10,000 ÷ (1 + BAF) = $10,000 ÷ (1 + 12.26%) = $8,907.89 BAF earnings equal Surrender-Charge-Free Withdrawal Amount minus principal = $10,000 – $8,907.89 = $1,092.11

• Assume Index Earnings Factor(IEF)........................... 3.76%

Step 2: Accumulation Value After Surrender-Charge-Free Withdrawal

R

The sample calculation is for illustrative purposes only and is not representative of a specific time period. Values used are hypothetical and not based upon historical performance of the S&P 500 ® Index.

D

Past performance of the Index is not a guarantee of future results.

$100,000 – $8,907.89 = $91,092.11

Step 3: Add IEF Earnings To Adjusted Accumulation Value IEF earnings equal adjusted Accumulation Value x IEF = $91,092.11 x 3.76% = $3,425.06 Total of IEF earnings and adjusted Accumulation Value = $91,092.11 + $3,425.06 = $94,517.17

Step 4: Determine Surrender Charges Amount subject to Surrender Charges x appropriate Surrender Charge Percentage = $94,517.17 x 12.5% = $11,814.65

Step 5: Calculate Surrender Value Amount subject to Surrender Charges less Surrender Charge plus Surrender-Charge-Free Withdrawal = $94,517.17 – $11,814.65 + $10,000 = $92,702.52

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Sample Calculation 2 — Assumes a Negative MVA Assumptions:

Calculations:

• Market Value Adjustment...................Negative

Step 1: Determine amount subject to charges

• Premium full surrender request after second contract anniversary....................$100,000

Step 2: Determine surrender value

• Assume Index Earnings Factor(IEF)........................... 3.76%

The sample calculation is for illustrative purposes only and is not representative of a specific time period. Values used are hypothetical and not based upon historical performance of the S&P 500 ® Index. Past performance of the Index is not a guarantee of future results.

Same as Sample Calculation 1 = $92,702.52

Step 3: Compare treasur y rates At issue = 5.0%; At surrender = 5.8%

Step 4: Calculate Market Value Interest Difference

FT

• Assume Balanced Allocation Factor(BAF)....................... 12.26%

Same as Sample Calculation 1 = $94,517.17

0.75 x (A – B – 0.005) where A = 5% and B = 5.8% = .75% x (5% - 5.8% - .50%) = -0.975%

Step 5: Calculate MVA Factor

= Market Value Interest Difference x N/12 where N = 120 (in this example) = -0.975% x (120÷12) = -9.75%

Step 6: Calculate MVA amount

= Amount subject to MVA x MVA Factor = $94,517.17 x -9.75% = -$9,215.42

A

Step 7: Apply the MVA to the Surrender Value

D

R

$92,702.52 – $9,215.42 = 83,487.10 = Net Surrender Value

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Sample Calculation 3 — Assumes a Positive MVA Assumptions:

Calculations:

• Market Value Adjustment......................Positive

Step 1: Determine amount subject to charges

• Premium full surrender request after second contract anniversary....................$100,000

Step 2: Determine surrender value

• Assume Index Earnings Factor(IEF)........................... 3.76%

The sample calculation is for illustrative purposes only and is not representative of a specific time period. Values used are hypothetical and not based upon historical performance of the S&P 500 ® Index. Past performance of the Index is not a guarantee of future results.

Same as Sample Calculation 1 = $92,702.52

Step 3: Compare treasur y rates At issue = 5.0%; At surrender = 3.5%

Step 4: Calculate Market Value Interest Difference

FT

• Assume Balanced Allocation Factor(BAF)....................... 12.26%

Same as Sample Calculation 1 = $94,517.17

0.75 x (A – B – 0.005) where A = 5% and B = 3.5% = .75% x (5% - 3.5% - .50%) = 0.75%

Step 5: Calculate MVA Factor

= Market Value Interest Difference x N/12 where N = 120 (in this example) = 0.75% x (120÷12) = 7.5%

Step 6: Calculate MVA amount

A

= Amount subject to MVA x MVA Factor = $94,517.17 x 7.5% = $7,088.79

Step 7: Apply the MVA to the Surrender Value

D

R

= $92,702.52 + $7,088.79 = $99,791.31 equals Net Surrender Value

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Surrender-Charge-Free Withdrawals Your Surrender-Charge-Free Withdrawal Amount is 10% of your Accumulation Value on the first day of each Contract Year. If you withdraw more than the Surrender-Charge-Free Withdrawal Amount, the balance of the withdrawal is subject to a Surrender Charge and Market Value Adjustment. To reflect the Interest Earnings on a withdrawal, We will calculate the interest on the Surrender-Charge-Free Withdrawal taken and reduce the deduction from your Accumulation Value from the amount actually withdrawn. This will reflect the Interest Earnings on the withdrawal.

FT

If you elect to add the optional Guaranteed Minimum Death Benefit with Premium Enhancement Rider to your Contract, the Surrender-Charge-Free Withdrawal Amount is guaranteed to never be less than 5%. Please see the Surrender Charge and the MVA section for details on withdrawals greater than the Surrender-Charge-Free Withdrawals percentages mentioned above.

How Are Surrender-Charge-Free Withdrawals Calculated? Assumptions:

Calculations:

• Premium.........................$100,000

Step 1: Determine Surrender-Charge-Free Withdrawal Amount = $10,000 which is made up of principal and BAF earnings Principal = $10,000 ÷ (1 + BAF) = $10,000 ÷ (1 + 12.26%) = $8,907.89 BAF earnings equal Surrender-Charge-Free Withdrawal Amount minus principal = $10,000 – $8,907.89 = $1,092.11

A

• Withdrawal requested at the 2 nd year anniversary............10% ($10,000)

R

• Balanced Allocation Factor................................ 12.26%

Step 2: Adjusted Accumulation Value $100,000 – $8,907.89 = $91,092.11

D

Step 3: Contract owner receives distribution of $10,000

The sample calculation is for illustrative purposes only and is not representative of a specific time period. Values used are hypothetical and not based upon historical performance of the S&P 500 ® Index. The Index Allocation portion is based upon the movement of the Index from the Index Start Value through the Index End Value multiplied by the Index Allocation Percentage. The Declared Rate Allocation portion is based on the Declared Rate multiplied by the Declared Rate Allocation Percentage. In the event that the Indexed and declared portions are not sufficient to offset the Total Annual Fee, any fees not covered will be waived. The subsequent Indexing Term will have an Index Start Value equal to the End Index Value of the previous Indexing Term. The allocation percentages, Declared Rate, and annual fees will be determined at the renewal of each Indexing Term. Past performance of the Index is not a guarantee of future results.

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What Events Will Allow Surrender Charges to Be Waived? Required Minimum Distributions If IRS Required Minimum Distributions are higher than the Surrender-Charge-Free Withdrawal Amount, We will raise the Surrender-Charge-Free Withdrawal Amount to equal the IRS Required Minimum Distributions. This will let you withdraw them without incurring a Surrender Charge or Market Value Adjustment. Your Minimum Required Distribution is the minimum amount, if any, that We calculate for the Contract. We calculate it by using applicable Internal Revenue Code Sections and current IRS rules regarding minimum distributions that must be distributed to you. Only this Contract may be considered when determining the minimum distribution amount that may be withdrawn from this Contract.

FT

Any Required Minimum Distribution Withdrawal will be included and treated as a Surrender-Charge-Free Withdrawal. It is not in addition to the Contract’s Surrender-Charge-Free Withdrawal Amount.

Confinement & Terminal Illness Waivers

Concession will be made for you in certain instances of physical illness.* You can request a payment of up to 100% of the Cash Surrender Value or the Balanced Allocation Value** (whichever one is greater) if: • The Owner or Joint Owner is diagnosed with a Terminal Illness after your Contract has been in force for one year, or • If an illness or serious accident requires a stay in a qualified care facility for at least 60 consecutive days after the Contract has been in force for 90 days.

A

For complete details on the Confinement and Terminal Illness waivers, see the specimen contract. * The Confinement and Terminal Illness Waivers are not available in all states

D

R

** Your Balanced Allocation Value is the Contract’s Accumulation Value plus any Interest Earnings not yet credited for the current Indexing Term.

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How Are Pro-Rata Interest Earnings Calculated? In the event you request a withdrawal or partial surrender in excess of the Surrender-Charge-Free Withdrawal Amount, or if you request a Full Surrender of your contract, we will credit your Accumulation Value with a pro-rata portion of the Index Earnings Factor. The pro-rata factor ONLY applies to the Index Allocation portion of the Index Earnings Factor.

FT

Pro-Rata Interest Earnings Sample Calculation Balanced Allocation Strategy ® Option A — Using a Pro-Rata Factor of ¾ Assumptions:

Calculations:

• S&P 500 ® Index Start Value.........................$1,000

Pro-Rata Factor used in this calculation is ¾ (i.e. Elapsed Indexing Term divided by Indexing Term) This is an example of withdrawals in excess of the Surrender-Charge-Free Withdrawal Amount:

• S&P 500 ® Index End Value (after year 3).....................$1,400 • Declared Rate...................... 1.5%

Step 1: Index Allocation portion

• Total Annual Fee................3.00%

($1,400 – $1,000) / $1,000 x 60% x (¾) = 18%

A

• Indexing Term (calculation done after year 3)............ 4-year

Step 2: Declared Rate Allocation portion

• Index Allocation....................60%

[(1 + 1.5%)3 - 1] x 40% = 1.83%

• Declared Rate Allocation..............................40%

Step 3: Annualized Interest [(1 + 18% + 1.83%)(1/3) - 1] = 6.21%

Step 4: Net Annualized Rate

R

6.21% – 3.00% = 3.21%

Step 5: Index Earnings Factor (1 + 3.21%)3 - 1 = 9.96%

D

The sample calculation is for illustrative purposes only and is not representative of a specific time period. Values used are hypothetical and not based upon historical performance of the S&P 500 ® Index. The Index Allocation portion is based upon the movement of the Index from the Index Start Value through the Index End Value multiplied by the Index Allocation Percentage. The Declared Rate Allocation portion is based on the Declared Rate multiplied by the Declared Rate Allocation Percentage. In the event that the Indexed and declared portions are not sufficient to offset the Total Annual Fee, any fees not covered will be waived. The subsequent Indexing Term will have an Index Start Value equal to the End Index Value of the previous Indexing Term. The allocation percentages, Declared Rate, and annual fees will be determined at the renewal of each Indexing Term. Past performance of the Index is not a guarantee of future results. * Interest is not realized until applied to the contract. Interest is applied at the end of the Indexing Term.

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Pro-Rata Interest Earnings Sample Calculation Balanced Allocation Strategy ® Option A — Using a Pro-Rata Factor of 1 Assumptions:

Calculations:

• S&P 500 ® Index Start Value.........................$1,000

Pro-Rata Factor used in this calculation is 1. This is an example of withdrawals up to the Surrender-Charge-Free Withdrawal Amount:

• Declared Rate...................... 1.5% • Total Annual Fee................3.00% • Indexing Term (calculation done after year 3)............ 4-year • Index Allocation....................60% • Declared Rate Allocation..............................40%

Step 1: Index Allocation portion ($1,400 – $1,000) / $1,000 = 40% x 60% x (1) = 24%

Step 2: Declared Rate Allocation portion

FT

• S&P 500 ® Index End Value (after year 3).....................$1,400

[(1 + 1.5%)3 - 1] x 40% = 1.83%

Step 3: Annualized Interest [(1 + 24% + 1.83%)(1/3) - 1] = 7.96%

Step 4: Net Annualized Rate 7.96% - 3.00% = 4.96%

Step 5: Index Earnings Factor (1 + 4.96%)3 - 1 = 15.63%

A

The sample calculation is for illustrative purposes only and is not representative of a specific time period. Values used are hypothetical and not based upon historical performance of the S&P 500 ® Index. The Index Allocation portion is based upon the movement of the Index from the Index Start Value through the Index End Value multiplied by the Index Allocation Percentage. The Declared Rate Allocation portion is based on the Declared Rate multiplied by the Declared Rate Allocation Percentage. In the event that the Indexed and declared portions are not sufficient to offset the Total Annual Fee, any fees not covered will be waived.

R

The subsequent Indexing Term will have an Index Start Value equal to the End Index Value of the previous Indexing Term. The allocation percentages, Declared Rate, and annual fees will be determined at the renewal of each Indexing Term. Past performance of the Index is not a guarantee of future results.

D

* Interest is not realized until applied to the contract. Interest is applied at the end of the Indexing Term.

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What Are My Annuity Options? Payment Plan Options

Option 1: Fixed-Period Payments Equal payments will be paid for a fixed number of years. Payments will include interest at the effective rate of 1.5% per year.

FT

The Contract offers a variety of payment plan options, including payments for a fixed period and payments for life. You may select one Annuity Option among those offered by the Contract. Once annuity payments begin, your Annuity Option cannot be changed. Please call your agent or see your Contract for details about each Annuity Option.

payments are not linked to the performance of the S&P 500 ÂŽ Index. If you do not select an Annuity Option on or before the Annuity Date, we will automatically apply the life annuity with 10 years certain.

Can I Choose How Often I Receive Annuity Payments?

We will pay equal periodic payments for as long as the Annuitant lives with payments made for a period certain of not less than 10 or 20 years as elected.

Option 3: Life Annuity

We will pay equal periodic payments as long as the Annuitant is living. You receive nothing upon the Annuitant’s death. You could receive only one payment if the Annuitant dies before the second payment is due.

R

A

You may choose to have your periodic annuity payments made on an annual, semi-annual, quarterly or monthly basis. By default, we will pay you monthly. You cannot select an Annuity Option or payment frequency if the amount of the periodic payment will be less than $100. To avoid making payments of less than $100, we may change the payment frequency or reduce the number of payments. In addition, you may elect to postpone your first annuity payment for up to ten (10) years with our consent. Interest will accumulate on the postponed amounts compounded at an effective rate of [1.5%] per year.

Option 2: Life Annuity with 10 or 20 Years Certain

Is There a Death Benefit Once Annuity Payments Start?

D

If the Owner dies (or if the Annuitant dies in the event the Owner is not a natural person) before all guaranteed annuity payments have been made pursuant to the selected Annuity Option, we will continue to make annuity payments until all guaranteed payments are made. Annuity payments will be paid to the Beneficiary according to the Annuity Option at least as frequently as before the death of the Owner or Annuitant, as applicable. If an Annuity Option without a guaranteed fixed period is elected, then there is no Death Benefit once the Owner elects to begin receiving annuity payments. You may select one of the Annuity Options described below. Once annuity payments begin, your Annuity Option cannot be changed. Annuity

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Option 4: Fixed-Amount Payments You may request your annuity value to be paid at a specific dollar amount. Payments will be made until the total of the following amount is exhausted: 1) The amount applied to this option, plus 2) Interest at the effective rate of 1.5% per year. The final payment will be the balance of the amount applied to this option plus interest. It may be more or less than the other payments.

Option 5: Interest Payments We will hold the amount applied to this option at interest. Interest will be paid at an effective rate of 1.5% per year. On interest due dates, the Annuitant may make a withdrawal from the amount held. Withdrawals must be a minimum of $100. If the account value drops below $2,000, We may pay the entire amount to the annuitant and will have no further liability.

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What Is My Standard Death Benefit Under This Contract? This section describes the Contract’s standard Death Benefit. You have the option of purchasing a Guaranteed Minimum Death Benefit Rider (“GMDB”) or a Guaranteed Minimum Death Benefit with Premium Enhancement Rider. With either of these Riders, prior to the Annuity Date, your Death Benefit is equal to the standard Death Benefit or the GMDB Rider Death Benefit, whichever one

FT

is higher. See “Death Benefit Riders” for a full explanation of how the GMDB Rider and GMDB with Premium Enhancement Rider work.

What Is the Death Benefit Prior to Annuity Date?

death until paid or applied to a settlement option described below. Interest on the Death Benefit is paid in accordance with the state law in which the policy was issued.

If the Owner dies (or if the Annuitant dies in the event the Owner is not a natural person) before the Annuity Date, we will pay the Beneficiary a Death Benefit equal to the greatest of:

Who Receives the Death Benefit?

A

We pay the Death Benefit to the Beneficiary. In the case of Joint Owners, the surviving Owner will be deemed the Beneficiary. If the sole Beneficiary is the spouse of the deceased Owner, the spouse may elect to continue the Contract as the Owner (See the “Do I pay taxes on Death Benefit Proceeds?” section of this guide for more information). The Owner or the Beneficiary may request the Death Benefit to be settled under one of the following options:

• The Minimum Guaranteed Contract Value;

• The Accumulation Value (including Interest Earnings to date); or • The Cash Surrender Value.

D

R

You may also select a Guaranteed Minimum Death Benefit Rider, in which case we will pay you the amount specified by the Rider if higher than the foregoing values. See “Death Benefit Riders” for a discussion of the riders that are available under the Contract. We calculate the amount of the Death Benefit as of the date we receive Proof of Death, which includes, but is not limited to: • A certified death certificate; or • A certified decree of a court of competent jurisdiction as to the finding of death; or • A written statement by a medical doctor who attended to the deceased; or

• Any other document constituting proof of death under applicable state law. Proof of Death requirements may vary by state, please refer to your contract. We will pay the Death Benefit promptly upon receipt of proof of death and this Contract at our Administrative Office. The Death Benefit will earn interest from the date we receive proof of > previous

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• A lump sum payment (which may be deferred for up to five (5) years following the date of death); or • By applying the Death Benefit to an Annuity Option. The Annuity Option must be selected no later than one (1) year after the date of the Owner’s death. At least $5,000 must be applied to the Annuity Option. If the Death Benefit is used to purchase an Annuity Option, the Beneficiary will be deemed to be the Annuitant and • The annuity payments may not be paid over a period extending beyond the life expectancy of the Beneficiary; and Distributions must begin within one (1) year of the date of the Owner’s death. By default, we will pay the Death Benefit in a single lump sum payment.

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What Are the Optional Riders Available With This Contract?

D

R

A

FT

The optional riders on the following pages may be available in your state.

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What Is the Family Endowment Rider — (Guaranteed Minimum Death Benefit Rider)? The Family Endowment Rider ® is a rider that can be added to your contract that provides a Guaranteed Minimum Death Benefit. The Guaranteed Minimum Death Benefit is equal to the Premium paid for your contract accumulated at a guaranteed interest rate of 3%, reduced to reflect any Withdrawals.

FT

Interest will accumulate until the Rider Completion Date. The Rider Completion Date is the earlier of the contract anniversary following the oldest owner’s 90th birthday or the date the Contract is terminated. Following the completion date, the Guaranteed Minimum Death Benefit adjusted for withdrawals will not grow any further but will continue to be the minimum Death Benefit. See the “What happens to the Death Benefit if you take withdrawals from your annuity” section of this guide for more information.

How Much Does It Cost?

D

R

A

The Fee for this Rider is automatically included in the interest earnings calculation. The Rider Fee is included in the Total Annual Fee as described in your Contract. The Rider Fee, which is guaranteed to never exceed 0.60% of the Contract’s Accumulation Value per year, is deducted from interest earnings each Indexing Term. In the event there are no interest earnings for the Indexing Term, there will be no Rider Fee.

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What Is the Family Endowment Rider with Premium Enhancement — (Guaranteed Minimum Death Benefit Rider with Premium Enhancement)? The Family Endowment Rider ® is a rider that can be added to your contract that provides a Guaranteed Minimum Death Benefit. èèClick here to see a numeric example of the recapture charge in the Family Endowment Rider with Premium Enhancement.

FT

The Guaranteed Minimum Death Benefit is equal to the Premium paid for your contract accumulated at a guaranteed interest rate of 3%, reduced to reflect any Withdrawals. Interest will accumulate until the Rider Completion Date. The Rider Completion Date is the earlier of the contract anniversary following the oldest owner’s 85th birthday or the date the Contract is terminated. Following the completion date, the Guaranteed Minimum Death Benefit adjusted for withdrawals will not grow any further but will continue to be the minimum Death Benefit. See the “What happens to the Death Benefit if you take withdrawals from your annuity” section of this guide for more information. In addition to the Guaranteed Minimum Death Benefit, this Rider credits your Accumulation Value with a Premium Enhancement at policy issue. For issue ages 0-65 the Premium Enhancement is 10% and for issue ages 65 and older the Premium Enhancement is 7%.

What happens to the Death Benefit if you take withdrawals from your annuity?

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It is important for you to note that Withdrawals of any type from your Contract will reduce the Guaranteed Minimum Death Benefit for each rider. The amount of the reduction will be based on the amount you withdraw. The first 3% of the Accumulation Value withdrawn in any Contract Year will reduce the Guaranteed Minimum Death Benefit on a dollar-for- dollar basis. Withdrawals in excess of 3% in any Contract Year will reduce the Guaranteed Minimum Death Benefit proportionally, Proportional Withdrawals are described in more detail below.

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How Much Does It Cost?

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The Fee for this Rider is automatically included in the interest earnings calculation. The Rider Fee is included in the Total Annual Fee as described in your Contract. The Rider Fee, which is guaranteed to never exceed 1.25% of the Contract’s Accumulation Value per year, is deducted from interest earnings each Indexing Term. In the event there are no interest earnings for the Indexing Term, there will be no Rider Fee.

Recapture Charge The Premium Enhancement is subject to a recapture charge during the Surrender Charge Period if you access more than the Surrender-Charge-Free Withdrawal Amount. The recapture charge will offset the benefits of the Premium Enhancement. However, the Premium Enhancement is fully vested and the recapture charge will not apply to any Death Benefit, terminal illness or confinement waiver distributions.

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On any day, the Guarantee Minimum Death Benefit (after any Dollar-for-Dollar Withdrawal on the same day) is reduced for a Proportional Withdrawal by an amount equal to the Guaranteed Minimum Death Benefit multiplied by [1-(A/B)] where : (A) Is the Accumulation Value after the Proportional Withdrawal ;and

(B) Is the Accumulation Value prior to the Proportional Withdrawal, but after any Dollar-for-Dollar Withdrawal on that day. Surrender Charges will not apply to Dollar-forDollar Withdrawals and Proportional Withdrawals to the extent such Withdrawals are less than the Surrender-Charge-Free Withdrawal Amount under the Contract. Once purchased, these riders may not be cancelled except under limited circumstances such as surrender for full cash value.

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Numerical Examples of Withdrawals from the Family Endowment Rider The following is an example of how the Proportional Withdrawals provided by the Family Endowment Rider reduces the Accumulation Value and the Guaranteed Minimum Death Benefit.

Assumptions: • Accumulated value prior to the Proportional Withdrawal................................................................... $120,000 • Guaranteed Minimum Death Benefit...................................................................................................... $150,000 • The Balanced Allocation Factor (BAF) at the time of withdrawal................................................................. 0%

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Calculations: Example 1:

A withdrawal of $5,000 is requested. The Guaranteed Minimum Death Benefit will be reduced proportionately after the 3% dollar-for-dollar amount is exceeded. The hypothetical example assumes the withdrawal falls within the contract’s Surrender-Charge-Free Withdrawal Amount; please remember withdrawals in excess of the Surrender-Charge-Free Withdrawal Amount may be subject to a Surrender Charge and a Market Value Adjustment. Hypothetical Example of the impact of Withdrawals on the Guaranteed Minimum Death Benefit Total Withdrawal Amount

$5,000.00

Accumulation Value

Guaranteed Minimum Death Benefit

$120,000.00

$150,000.00

-$3,600.00

-$3,600.00

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Value Before Withdrawal

Maximum Dollar-for-Dollar Withdrawal*

Value After Dollar-for-Dollar withdrawal

$116,400.00

$146,400.00

Proportional Withdrawal

-$1,400.00

-$1,760.82**

$115,000.00

$144,639.18

Value After Proportional Withdrawal

*Maximum dollar-for-dollar withdrawal is 3% of Accumulation Value

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** The Guaranteed Minimum Death Benefit after the Proportional Withdrawal is equal to the Accumulation Value (after the Proportional Withdrawal) divided by the Accumulation Value (after the dollar-for-dollar Withdrawal but before the Proportional Withdrawal) multiplied by the Guaranteed Minimum Death Benefit (after the dollar-for-dollar Withdrawal but before the Proportional Withdrawal)

Example 2:

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In this example, the Withdrawal Amount requested is equal to the Accumulation Value. Both the Accumulation Value and the Guaranteed Minimum Death Benefit are reduced to zero after this withdrawal. Hypothetical Example of the impact of Withdrawals on the Guaranteed Minimum Death Benefit Total Withdrawal Amount

$ 120,000.00 Accumulation Value

Guaranteed Minimum Death Benefit

Value Before Withdrawal

$120,000.00

$150,000.00

Maximum Dollar-for-Dollar Withdrawal*

-$3,600.00

-$3,600.00

Value After Dollar-for-Dollar withdrawal

$116,400.00

$146,400.00

Proportional Withdrawal

$116,400.00

$146,400.00**

Value After Proportional Withdrawal

$0

$0

*Maximum dollar-for-dollar withdrawal is 3% of Accumulation Value ** The reduction in the Guaranteed Minimum Death Benefit for the Proportional Withdrawal is equal to [1 – the Accumulation Value (after the Proportional Withdrawal) divided by the Accumulation Value (after the dollar-for-dollar Withdrawal but before the Proportional Withdrawal) multiplied by the Guaranteed Minimum Death Benefit (after the dollar-for-dollar Withdrawal but before the Proportional Withdrawal)]. > previous

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Numerical Example of Recapture Charge The Recapture Charge Percentage is added to the Surrender Charge Percentage. The sum of the two is then used to calculate the total Surrender Charge and Recapture Charge.

Assumptions:

Calculations:

• Premium Enhancement........ 10%

Step 1: Accumulation Value equals Premium x (1 + Premium Enhancement Percentage)

• Premium.........................$100,000

• Premium Enhancement............ $10,000 • Accumulation Value at 2 nd Contract Anniversary (Premium + Premium Enhancement).............. $110,000 • Surrender Request at the 2 nd contract anniversary............. Full • Surrender Charge percentage........................ 12.5%

• Balanced Allocation Factor – (BAF).................................12.26%

Step 2: Determine Surrender-Charge-Free Withdrawal Amount (10%) of Accumulation Value ($110,000) = $11,000 which is made up of principal and BAF earnings Principal = $11,000 ÷ (1 + BAF) = $11,000 ÷ (1 + 12.26%) = $9,798.68 BAF earnings equal Surrender-Charge-Free Withdrawal Amount minus principal = $11,000 – $9,798.68 = $1,201.32

Step 3: Accumulation Value After Surrender-ChargeFree Withdrawal

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• Index Earnings Factor (IEF)....................................3.76%

= $100,000 x (1+10%) = $110,000

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• Recapture Charge Percentage............................ 10%

Step 4: Add IEF Earnings to Adjusted Accumulation Value IEF earnings equal adjusted Accumulation Value x IEF = $100,201.32 x 3.76% = $3,767.57 Total of IEF earnings and adjusted Accumulation Value =$100,201.32 + $3,767.57 = $103,968.89

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The sample calculation is for illustrative purposes only and is not representative of a specific time period. Values used are hypothetical and not based upon historical performance of the S&P 500 ® Index. The Index Allocation portion is based upon the movement of the Index from the Index Start Value through the Index End Value multiplied by the Index Allocation Percentage. The Declared Rate Allocation portion is based on the Declared Rate multiplied by the Declared Rate Allocation Percentage. In the event that the Indexed and declared portions are not sufficient to offset the Total Annual Fee, any fees not covered will be waived.

$110,000 – $9,798.68 = $100,201.32

The subsequent Indexing Term will have an Index Start Value equal to the End Index Value of the previous Indexing Term. The allocation percentages, Declared Rate, and annual fees will be determined at the renewal of each Indexing Term.

Step 5: Determine Total Surrender Charges Amount subject to total Surrender Charges x (appropriate Surrender Charge Percentage and appropriate Recapture Charge Percentage) = $103,968.89 x (12.5% + 10%) = $23,393.00

Step 5a: Surrender Charge = $103,968.89 x 12.5% = $12,996.11

Step 5b: Recapture Charge = $103,968.89 x 10% = $10,396.89

Step 6: Calculate Surrender Value Amount subject to surrender charges less Surrender Charge less Recapture Charge plus Surrender-Charge-Free Withdrawal = $103,968.89 – $12,996.11 – $10,396.89 + $11,000 = $91,575.89

Past performance of the Index is not a guarantee of future results.

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Tax Matters How Are Annuities Generally Treated Under U.S. Federal Tax Laws? This Discussion Is General and Is Not Tax Advice.

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The tax rules that apply to annuities and annuity distributions can be complicated. If you have questions about how your annuity will be taxed, please consult a tax professional. This summary describes some of the federal income tax rules that apply to a Contract. This summary is not complete and does not cover all tax situations. This discussion is based upon our understanding of the present federal income tax laws. We do not know if these laws will change or how the Internal Revenue Service will interpret them. Moreover, the discussion does not consider any applicable state or other tax laws. This discussion assumes that the Contract will qualify as an annuity Contract for federal income tax purposes. We make no guarantee regarding the tax status of the Contract. If you are a natural person, you generally will not be taxed on increases in the Accumulation Value until you receive payments under the Contract. Any distribution of payments, including a full or partial surrender of a Contract, may subject you to income tax. If you assign or pledge (or agree to assign or pledge) any portion of a Contract’s Accumulation Value, this generally will be considered a distribution of payments to you and may be taxable.

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Corporations, partnerships, trusts, and other entities that own a Contract generally must include any income increases in excess of the Accumulation Value over the basis in the Contract. There are some exceptions to this rule. A prospective Owner should discuss these with a tax adviser. The “basis in the Contract” generally equals the amount, if any, of any premiums paid with after-tax dollars (that is, premiums that were not excluded from the individual’s gross income) less any amounts withdrawn that were not taxable. For purposes of this discussion, the “Code” means the Internal Revenue Code of 1986.

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How Does the Federal Tax Code Withdrawals?

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Generally, if you take a partial withdrawal from a Contract, the amount received will be taxed as ordinary income, up to an amount equal to the excess (if any) of the Accumulation Value immediately before the distribution over the investment in the Contract at that time. In the case of a full surrender under a Contract, the amount received generally will be taxable as ordinary income to the extent it exceeds the investment in the Contract. Contracts that are defined as “qualified contracts” under the Code are treated differently.

Am I Ever Required to Take Money Out of the Contract? In order to be treated as an annuity Contract for federal income tax purposes, the Code requires any annuity Contract to contain certain provisions concerning how an interest in the Contract is distributed on the Owner’s death. The Contracts contain provisions that are intended to comply with these Code requirements, although no regulations interpreting these requirements have yet been issued. We may modify the Contracts if necessary to assure that they comply with the applicable requirements when such requirements are clarified by regulation or otherwise. Annuity payments from Qualified Contracts are generally taxed in the same manner as under a Non-Qualified Contract. When a withdrawal from a Qualified Contract occurs, all or some of the amount received is taxable. For Qualified Contracts, the basis in the Contract can be zero; in that case, the full amount of all distributions would be taxable. Distributions from certain qualified

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plans are generally subject to mandatory withholding. The Code requires that distributions generally must begin by the later of April 1 of the calendar year following the calendar year in which the Contract Owner (or plan participant): (a) reaches age 70½; or (b) retires. Distributions must be made in a specified form and manner.

Will I Ever Have to Pay a Tax Penalty? For all distributions from Contracts under the Code, there is a federal tax penalty equal to 10% of the amount treated as taxable income. However, in general, there is no penalty tax on distributions: • Made after the taxpayer reaches age 59½; • Made because of the death of the Owner;

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• Attributable to the taxpayer becoming disabled; or

• Made as part of a series of substantially equal periodic payments for the life, or life expectancy, of the taxpayer. There are other exceptions and special rules may apply to the exceptions listed above.

Do I Pay Taxes on Payments from Annuity Option I Elect?

A

Although the tax consequences may vary depending on the annuity payment method elected under the Contract, generally only the portion of the annuity payment that represents the amount by which the Accumulation Value exceeds the basis in the Contract will be taxed. In general there is no tax on the portion of each annuity payment which reflects the ratio that the basis in the Contract bears to the total expected value of annuity payments for the term of the payments; however, the remainder of each annuity payment is taxable. In all cases, after the basis in the Contract is recovered, the full amount of any additional annuity payments is taxable.

Do I Pay Taxes on Death Benefit Proceeds?

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Amounts may be distributed from a Contract because of your death or the death of the Annuitant. Generally, such amounts are taxable to the recipient as follows: • If distributed in a lump sum, they are taxed in the same manner as a full surrender of the Contract • If distributed under an annuity option, they are taxed in the same way as annuity payments, as described above.

D

If your primary beneficiary is your surviving spouse, your surviving spouse may choose to continue the contract under IRC 72(s). The surviving spouse will become the owner of the contract. The surviving spouse can then continue the contract throughout his or her lifetime and is not forced to take a distribution. The Federal Defense of Marriage Act states that neither civil union partners nor same-gender married couples are considered married under federal law. Therefore favorable tax treatment provided by federal tax law to a surviving spouse is not available to a surviving civil union partner or the surviving spouse of a samegender marriage. For information regarding federal tax laws consult a tax advisor.

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BalancedChoice Annuity 12™ Glossary Accumulation Value

on the data pages and is guaranteed for the first Indexing Term only.

The premium plus accrued Index Earnings less withdrawals and charges (including premium tax deductions) and increased or decreased for any Market Value Adjustment.

Strategy Fee A periodic fee you pay for owning the Contract based on the Balanced Allocation Strategy ® Option you select.

Premium The amount you pay to Us in consideration of the Contract.

The change in the Index value from the beginning of the Indexing Term to the closing value of the Index on the Indexing Term end date.

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S&P 500 Index Starting Value ®

Index Change

The Starting Index Value is the most recent closing value of the S&P 500 ® on the day the Contract is issued. For any Indexing Term other than the initial Indexing Term, the Starting Index Value is the Index Value computed on the first day of the Indexing Term.

Index Earnings

The interest that has accrued to the Contract based on the selected Balanced Allocation Strategy ® Option.

Total Annual Fee

Start Averaging

The sum of all applicable fees, including the Balanced Allocation Strategy ® Fee and applicable Rider Fees.

S&P 500 ® Index Ending Value

Surrender Charge Period

The Ending Index Value is the most recent closing value of the S&P 500 ® on the Indexing Term End Date.

The period of time withdrawals are subject to the Surrender Charge. The Surrender Charge Period starts on the Contract Date and ends when the Surrender Charge Percentage first becomes zero.

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A

An optional feature used to determine your Starting Index Value. The Starting Index Value will be the average index value of the first 12 monthly index values (the issue date and the same date in the subsequent 11 months). This is an administrative feature that must be elected at the time of application and is only applicable to the first term period.

Index Allocation

D

One of the factors used in the calculation of Index Earnings. The Initial Index Allocation Percentage for the selected Balanced Allocation Strategy ® is shown on the data page and is guaranteed for the first Indexing Term only.

One of the factors used in the calculation of the Index Earnings. The Initial Declared Rate Allocation Percentage for the selected Balanced Allocation Strategy ® is shown on the data page and is guaranteed for the first Indexing Term only.

Declared Interest Rate One of the factors used in the calculation of the Index Earnings. The Initial Declared Rate for the selected Balanced Allocation Strategy ® is shown

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The amount of the Accumulation Value you can withdraw without incurring a Surrender Charge or Market Value Adjustment.

Cash Surrender Value The amount you receive upon full Surrender of the Contract.

Locked-In Percentage

Declared Rate Allocation

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The percentage of the accumulated value for which you elect to lock the Index Value. Note: “Standard & Poor’s ®”, “S&P ®”, “S&P 500 ®”, and “Standard & Poor’s 500TM” are trademarks of Standard & Poor’s Financial Services LLC (“Standard & Poor’s”) and have been licensed for use by American National Insurance Company. The BalancedChoice Annuity 12TM is not sponsored, endorsed, sold or promoted by Standard & Poor’s and Standard & Poor’s makes no representation regarding the advisability of purchasing the BalancedChoice Annuity 12TM.

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