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CONSECO(R)
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CONSECO VARIABLE INSURANCE COMPANY
FORMERLY
GREAT AMERICAN RESERVE INSURANCE COMPANY
SEMIANNUAL REPORT
TO CONTRACT OWNERS
June 30, 1999
Rydex Advisor Variable Annuity Account
<PAGE>
SEMIANNUAL REPORT TO CONTRACT OWNERS
TABLE OF CONTENTS
JUNE 30, 1999
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RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT PAGE
Statement of Assets and Liabilities as of June 30, 1999....................... 2
Statements of Operations for the Six Months Ended June 30, 1999,
and the Year Ended December 31, 1998........................................ 3
Statements of Changes in Net Assets for the Six Months Ended June 30,
1999, and the Year Ended December 31, 1998.................................. 5
Notes to Financial Statements................................................. 7
<PAGE>
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
=========================================================================================================================
NET ASSET
SHARES COST VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments in Rydex Variable Trust portfolio shares (Note 2):
Juno Fund............................................................... 34,185.2 $ 323,562 $ 321,341
Money Market I Fund..................................................... 80,994,826.6 80,994,827 80,994,827
Nova Fund............................................................... 1,364,017.7 23,510,523 24,647,799
OTC Fund................................................................ 1,183,595.0 27,936,936 29,151,945
Precious Metals Fund.................................................... 145,735.0 791,972 836,519
Ursa Fund............................................................... 1,923,458.5 11,018,522 10,790,601
U.S. Government Bond Fund............................................... 206,517.6 2,327,177 2,310,932
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Total assets ...................................................................................... 149,053,964
Liabilities:
Amounts due to Conseco Variable Insurance Company ..................................................... 167,344
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Net assets (Note 6) ............................................................................... $148,886,620
=========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
TOTAL VALUE
UNITS UNIT VALUE OF UNITS
-----------------------------------------
<S> <C> <C> <C>
Net assets attributable to: Contract owners' deferred annuity reserves:
Juno Fund............................................................... 34,464.9 $ 9.313607 $ 320,993
Money Market I Fund..................................................... 7,588,365.8 10.661414 80,902,706
Nova Fund............................................................... 1,374,878.6 17.904082 24,615,940
OTC Fund................................................................ 1,193,368.1 24.404093 29,123,067
Precious Metals Fund.................................................... 146,772.7 5.687031 834,701
Ursa Fund............................................................... 1,939,486.5 5.558294 10,780,237
U.S. Government Bond Fund............................................... 203,767.7 11.331414 2,308,976
- -------------------------------------------------------------------------------------------------------------------------
Net assets attributable to contract owners' deferred annuity reserves $148,886,620
=========================================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
2
<PAGE>
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999, AND THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
===================================================================================================================================
SIX MONTHS ENDED RYDEX MONEY
JUNE 30, 1999 VARIABLE TRUST JUNO MARKET I
(UNAUDITED) 1998(1) 1998(2) 1998(2)
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<S> <C> <C> <C> <C>
Investment income:
Interest from investments in securities.............................. $ -- $ -- $ 8,048 $ 1,176,135
Dividends from investments in securities............................. -- -- -- --
Dividends from investments in portfolio shares....................... 1,035,414 232,050 -- --
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Total investment income............................................ 1,035,414 232,050 8,048 1,176,135
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Expenses:
Mortality and expense risk fees...................................... 792,136 183,695 1,918 271,471
Administrative fees.................................................. 95,056 22,044 230 32,576
OTHER................................................................ -- -- 3,505 347,483
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Total expenses..................................................... 887,192 205,739 5,653 651,530
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Net investment income............................................ 148,222 26,311 2,395 524,605
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Net realized gains (losses) and unrealized appreciation (depreciation)
on investments:
Net realized gains (losses) on sales of investments in securities.... -- -- (21,692) --
Net change in unrealized appreciation (depreciation) of investments
in securitie -- -- 1,819 --
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NET GAIN (LOSS) ON INVESTMENTS IN SECURITIES....................... -- -- (19,873) --
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Net realized gains on sales of investments in portfolio shares....... 4,495,139 9,159,007 -- --
Net change in unrealized depreciation of investments in portfolio
shares .......................................................... (382,715) (1,573,770) -- --
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Net gain on investments in portfolio shares........................ 4,112,424 7,585,237 -- --
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Net increase (decrease) in net assets from operations............ $ 4,260,646 $ 7,611,548 $ (17,478) $ 524,605
===================================================================================================================================
</TABLE>
(1) Period from November 2, 1998, through December 31, 1998.
(2) Period from January 1, 1998, through November 2, 1998.
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS - CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 1999, AND THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
===================================================================================================================================
U.S.
PRECIOUS GOVERNMENT
NOVA OTC METALS URSA BOND
1998(2) 1998(2) 1998(2) 1998(2) 1998(2)
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<S> <C> <C> <C> <C> <C>
Investment income:
Interest from investments in securities ............... $ 422,178 $ 22,106 $ 220 $ 219,060 $ 12,680
Dividends from investments in securities .............. 9,338 5,412 6,396 -- 48,402
Dividends from investments in portfolio shares ........ -- -- -- -- --
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Total investment income ......................... 431,516 27,518 6,616 219,060 61,082
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Expenses:
Mortality and expense risk fees ....................... 151,616 119,669 9,169 64,878 16,279
Administrative fees ................................... 18,194 14,360 1,100 7,785 1,953
OTHER ................................................. 263,278 199,277 16,991 107,515 23,416
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Total expenses .................................. 433,088 333,306 27,260 180,178 41,648
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Net investment income ......................... (1,572) (305,788) (20,644) 38,882 19,434
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Net realized gains(losses) and unrealized appreciation
(depreciation) on investments:
Net realized gains (losses) on sales of investments
in securities ..................................... (1,384,843) 465,853 53,198 (1,045,533) 118,373
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
OF INVESTMENTS IN SECURITIES ...................... 944,617 3,223,602 19,034 (108,381) (46,092)
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Net gain (loss) on investments in securities .... (440,226) 3,689,455 72,232 (1,153,914) 72,281
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Net realized gains on sales of investments in portfolio shares -- -- -- -- --
Net change in unrealized depreciation of investments
in portfolio shares ................................. -- -- -- -- --
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Net gain on investments in portfolio shares ..... -- -- -- -- --
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Net increase (decrease) in net assets from
operations ................................. $ (441,798) $ 3,383,667 $ 51,588 $(1,115,032) $ 91,715
===================================================================================================================================
</TABLE>
(2) PERIOD FROM JANUARY 1, 1998, THROUGH NOVEMBER 2, 1998.
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS - CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 1999, AND THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
===================================================================================================================================
SIX MONTHS ENDED RYDEX MONEY
JUNE 30, 1999 VARIABLE TRUST JUNO MARKET I
(UNAUDITED) 1998(1) 1998(2) 1998(2)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Changes from operations:
Net investment income................................................ $ 148,222 $ 26,310 $ 2,395 $ 524,605
Net realized gains (losses) on sales of investments.................. 4,495,139 9,159,007 (21,692) --
Net change in unrealized appreciation (depreciation)
of investments..................................................... (382,715) (1,573,770) 1,819 --
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Net increase (decrease) in net assets from operations............ 4,260,646 7,611,547 (17,478) 524,605
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Changes from contract owners' transactions:
Net contract purchase payments....................................... 48,327,117 15,167,095 2,976 53,901,012
Contract redemptions................................................. (9,115,765) (2,204,222) (1,268) (4,910,715)
Net transfers (to) from fixed account................................ 12,728 11,808 111,042 (35,290,688)
Net assets transferred to Rydex Variable Trust....................... -- 84,815,666 (95,272) (32,127,586)
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Net increase (decrease) in net assets
from contract owners' transactions............................. 39,224,080 97,790,347 17,478 (18,427,977)
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Net increase (decrease) in net assets........................ 43,484,726 105,401,894 -- (17,903,372)
Net assets, beginning of period......................................... 105,401,894 -- -- 17,903,372
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Net assets, end of period.................................... $148,886,620 $105,401,894 $ -- $ --
===================================================================================================================================
</TABLE>
(1) Period from November 2, 1998, through December 31, 1998.
(2) Period from January 1, 1998, through November 2, 1998.
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS - CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 1999, AND THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
===================================================================================================================================
U.S.
PRECIOUS GOVERNMENT
NOVA OTC METALS URSA BOND
1998(2) 1998(2) 1998(2) 1998(2) 1998(2)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Changes from operations:
Net investment income ................................. $ (1,572) $ (305,788) $ (20,644) $ 38,882 $ 19,434
Net realized gains (losses) on sales of investments ... (1,384,843) 465,853 53,198 (1,045,533) 118,373
Net change in unrealized appreciation (depreciation)
of investments ...................................... 944,617 3,223,602 19,034 (108,381) (46,092)
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Net increase (decrease) in net assets from operations (441,798) 3,383,667 51,588 (1,115,032) 91,715
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Changes from contract owners' transactions:
Net contract purchase payments ........................ 79,915 30,385 (657) 22,859 69
Contract redemptions .................................. (810,397) (346,725) (10,139) (400,593) (23,708)
Net transfers (to) from fixed account ................. 15,083,137 10,730,100 608,988 4,285,421 4,269,799
Net assets transferred to Rydex Variable Trust ........ (24,358,893) (16,164,832) (1,167,690) (5,671,499) (5,229,894)
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Net increase (decrease) in net assets
from contract owners' transactions .............. (10,006,238) (5,751,072) (569,498) (1,763,812) (983,734)
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Net increase (decrease) in net assets ......... (10,448,036) (2,367,405) (517,910) (2,878,844) (892,019)
Net assets, beginning of period .......................... 10,448,036 2,367,405 517,910 2,878,844 892,019
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Net assets, end of period ..................... $ -- $ -- $ -- $ -- $ --
===================================================================================================================================
</TABLE>
(2) Period from January 1, 1998, through November 2, 1998.
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(UNAUDITED)
================================================================================
(1) GENERAL
Rydex Advisor Variable Annuity Account (the "Account") is registered under
the Investment Company Act of 1940, as amended, as a unit investment trust. The
Account was established on April 15, 1996, as a segregated investment account
for individual variable annuity contracts issued by Conseco Variable Insurance
Company (the "Company") (formerly Great American Reserve Insurance Company prior
to its name change in October 1998) and commenced operations on May 7, 1997. The
Account was originally registered as a diversified, open-ended investment
company. On November 2, 1998, the Account was reorganized as a unit investment
trust pursuant to an Agreement and Plan of Reorganization approved by the
contract owners of the Account on October 26, 1998 (the "Reorganization"). On
November 2, 1998, the Account transferred its assets into the corresponding
portfolios of the Rydex Variable Trust in exchange for shares of the portfolios.
The respective interests of the contract owners in the Account immediately after
the Reorganization were equal to their interests in the Juno, Money Market I,
Nova, OTC, Precious Metals, Ursa and the U.S. Government Bond subaccounts
immediately before the Reorganization.
The operations of the Account are included in the operations of the Company
pursuant to the provisions of the Texas Insurance Code. The Company is an
indirect wholly owned subsidiary of Conseco, Inc., a publicly-held specialized
financial services holding company listed on the New York Stock Exchange.
Since November 2, 1998, the Account invests solely in the Rydex Variable
Trust (the "Trust"). The Trust consists of seven funds: Juno, Money Market I,
Nova, OTC, Precious Metals, Ursa and U.S. Government Bond. The Trust is managed
by PADCO Advisors II, Inc. ("PADCO").
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increases and decreases in net assets during the
reporting period. Actual results could differ from those estimates.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION, TRANSACTIONS AND INCOME
Investments in portfolio shares are valued using the net asset value of the
respective funds of the Trust at the end of each New York Stock Exchange
business day. Investment share transactions are accounted for on a trade date
basis (the date the order to purchase or redeem shares is executed) and dividend
income is recorded on the ex-dividend date. Prior to November 2, 1998, interest
income was accrued on a daily basis. The cost of investments in portfolio shares
sold is determined on a first-in, first-out basis. The Account does not hold any
investments which are restricted as to resale.
Net investment income and net realized gains (losses) and unrealized
appreciation (depreciation) on investments are allocated to the contracts on
each valuation date based on each contract's pro rata share of the assets of the
Account as of the beginning of the valuation date.
FEDERAL INCOME TAXES
No provision for federal income taxes has been made in the accompanying
financial statements because the operations of the Account are included in the
total operations of the Company, which is treated as a life insurance company
for federal income tax purposes under the Internal Revenue Code. Net investment
income and realized gains (losses) are retained in the Account and are not
taxable until received by the contract owner or beneficiary in the form of
annuity payments or other distributions.
ANNUITY RESERVES
Deferred annuity contract reserves are comprised of net contract purchase
payments less redemptions and benefits. These reserves are adjusted daily for
the net investment income and net realized gains (losses) and unrealized
appreciation (depreciation) on investments.
(3) PURCHASES AND SALES OF INVESTMENTS
IN SECURITIES AND INVESTMENTS IN
PORTFOLIO SHARES
The aggregate cost of purchases of investments in portfolio shares was
$859,809,301 for the six months ended June 30, 1999. For the period November 2,
1998, through December 31, 1998, the aggregate cost of purchases of investments
in portfolio shares was $297,900,921 (including transfers related to the
Reorganization of $80,508,735). The aggregate proceeds from sales of investments
in portfolio shares were $820,375,839 for the six months ended June 30, 1999.
For the period November 2, 1998 through December 31, 1998, the aggregate
proceeds from sales of investments in portfolio shares were $204,085,011.
The aggregate cost of purchases of investments in securities was $116,032,035
for the period January 1, 1998 through November 2, 1998. The aggregate proceeds
from sales of investments in securities were $120,715,273 for the period January
1, 1998 through November 2, 1998.
7
<PAGE>
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1999
(UNAUDITED)
================================================================================
(4) DEDUCTIONS AND EXPENSES
Although periodic retirement payments to contract owners vary according to
the investment performance of the portfolios, such payments are not affected by
mortality or expense experience because the Company assumes the mortality and
expense risks under the contracts.
The mortality risk assumed by the Company results from the life annuity
payment option in the contracts in which the Company agrees to make annuity
payments regardless of how long a particular annuitant or other payee lives. The
annuity payments are determined in accordance with annuity purchase rate
provisions established at the time the contracts are issued. Based on the
actuarial determination of expected mortality, the Company is required to fund
any deficiency in the annuity payment reserves from its general account assets.
The expense risk assumed by the Company is the risk that the deductions for
contract administrative charges and transfer processing fees may prove
insufficient to cover the actual administrative and transfer processing
expenses.
The Company deducts daily from the Account a fee, which is equivalent on an
annual basis to 1.25 percent of the daily value of the total investments of the
Account, for assuming the mortality and expense risks. These fees were $792,136
and $818,697 for the six months ended June 30, 1999, and the year ended December
31, 1998, respectively.
Pursuant to an agreement between the Account and the Company, the Company
provides sales and administrative services to the Account. The Company may
deduct a percentage of amounts surrendered to cover sales expenses. The
percentage varies up to 7.00 percent based upon the number of years the contract
has been held. These fees were $507,600 and $344,498 for the six months ended
June 30, 1999, and the year ended December 31, 1998, respectively. The Company
also deducts daily from the Account a fee, which is equivalent on an annual
basis to 0.15 percent of the daily value of the total investments of the
Account, for administrative expenses. These fees were $95,056 and $98,244 for
the six months ended June 30, 1999, and the year ended December 31, 1998,
respectively.
Under the terms of an investment advisory contract, the Account paid PADCO
investments advisory fees calculated at an annual percentage rate of 0.50
percent of the average net assets of the Money Market and the U.S. Government
Bond subaccounts, 0.75 percent of the average net assets of the Nova, Precious
Metals and OTC subaccounts, and 0.90 percent of the average net assets of the
Ursa and the Juno subaccounts.
PADCO Services, Inc. (the "Servicer") provided tactical allocation
administrative services to the account during the period January 1, 1998 through
November 2, 1998, the fees of which were calculated at an annual percentage rate
of 0.20 percent of the average net assets of the money market, U.S. Government
Bond, precious metals and the OTC subaccounts; and at an annual rate of 0.25
percent of the average net assets of the Nova, Ursa and the Juno subaccounts.
the servicer also provided other necessary services to the account, such as
accounting and auditing services, custody, printing and mailing, etc. during
these periods.
Effective January 1, 1998, PADCO and the Servicer voluntarily agreed to waive
their investment advisory and tactical allocation administrative service fees
and, if necessary, to reimburse any subaccount expenses which would cause the
ratios of expenses to average net assets to exceed 3.60 percent in the Nova, OTC
and Precious Metals subaccounts, 3.70 percent in the Juno and Ursa subaccounts,
3.00 percent in the Money Market subaccount, and 3.20 percent in the U.S.
Government Bond subaccount. The investment advisory fees were $331,465 during
the period January 1, 1998, through November 2, 1998, and the Account was
reimbursed $85,124 from PADCO during this period. Expenses paid to the Servicer
during the period January 1, 1998, through November 2, 1998 were $200,318 and
the Account was reimbursed $20,511 during this period. These fees and expenses
are reported as other expenses in the Statements of Operations.
(5) OTHER TRANSACTIONS WITH AFFILIATES
Conseco Equity Sales, Inc., a wholly owned subsidiary of Conseco, Inc., acts
as principal underwriter for the Account.
6) NET ASSETS
Net assets consisted of the following at June 30, 1999:
- --------------------------------------------------------------------------------
Proceeds from the sales of units since organization,
less cost of units redeemed.................................. $134,830,874
Undistributed net investment income............................. 663,665
Undistributed net realized gains on sales of investments........ 11,241,636
Net unrealized appreciation of investments...................... 2,150,445
- --------------------------------------------------------------------------------
Net assets................................................. $148,886,620
================================================================================
8
<PAGE>
================================================================================
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
SPONSOR
Conseco Variable Insurance Company - Carmel, Indiana.
DISTRIBUTOR
Conseco Equity Sales, Inc. - Carmel, Indiana.
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP - Indianapolis, Indiana.
9
<PAGE>
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT IS ISSUED BY CONSECO VARIABLE
INSURANCE COMPANY. THE PRODUCT IS UNDERWRITTEN, AND THE SECURITIES WITHIN
ARE OFFERED, BY CONSECO EQUITY SALES, INC., A BROKER-DEALER FOR CONSECO
VARIABLE INSURANCE COMPANY. BOTH COMPANIES ARE SUBSIDIARIES OF CONSECO, INC.,
A FINANCIAL SERVICES ORGANIZATION HEADQUARTERED IN CARMEL, INDIANA. CONSECO,
THROUGH ITS SUBSIDIARY COMPANIES, IS ONE OF MIDDLE AMERICA'S LEADING SOURCES FOR
INSURANCE,INVESTMENT AND LENDING PRODUCTS, HELPING 12 MILLION CUSTOMERS STEP UP
TO A BETTER, MORE SECURE FUTURE.
CONSECO EQUITY SALES, INC., IS A MEMBER OF THE NASD.
CONSECO VARIABLE INSURANCE COMPANY
11815 North Pennsylvania Street
Carmel, Indiana 46032
CV-027 (8/99) 05961
(C) 1999 Conseco Variable Insurance Company
WWW.CONSECO.COM
INSURANCE INVESTMENT LENDING [LOGO]
- ------------------------------------------------------------------------
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