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CONSECO(R)
Conseco Variable Insurance Company
Formerly
Great American Reserve Insurance Company
Annual Report to
Contract Owners
December 31, 1998
(Commenced operations February 12, 1998)
Great American Reserve Variable Annuity Account F
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Annual Report to Contract Owners
Table of Contents
December 31, 1998
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Great American Reserve Variable Annuity Account F Page
Statement of Assets and Liabilities as of December 31, 1998 ................ 2
Statement of Operations for the Period February 12, 1998,
through December 31, 1998 .................................................. 4
Statement of Changes in Net Assets for the Period
February 12, 1998, through December 31, 1998 ............................... 4
Notes to Financial Statements .............................................. 5
Report of Independent Accountants .......................................... 7
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GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT F
Statement of Assets and Liabilities
December 31, 1998
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SHARES COST VALUE
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Assets:
Market value adjustment cash account................................................ $ 120,019 $ 120,019
Investments in portfolio shares, at net asset value (Note 2):
The Alger American Fund:
Growth Portfolio................................................................ 114,219.6 5,158,600 6,078,770
Leveraged AllCap Portfolio...................................................... 46,592.2 1,343,565 1,626,068
MidCap Growth Portfolio......................................................... 66,801.8 1,704,451 1,928,568
Small Capitalization Portfolio.................................................. 39,050.4 1,555,610 1,717,050
American Century Variable Portfolios, Inc.:
International Fund.............................................................. 168,863.7 1,249,909 1,286,741
Value Fund...................................................................... 260,101.3 1,688,956 1,750,482
Income and Growth Fund.......................................................... 626,059.4 3,797,751 4,244,683
Berger Institutional Products Trust:
100 Fund........................................................................ 62,197.4 690,863 801,724
Growth and Income Fund.......................................................... 112,793.2 1,640,635 1,875,751
Small Company Growth Fund....................................................... 89,578.3 1,048,905 1,100,022
BIAM International Fund......................................................... 19,979.3 206,916 223,968
Conseco Series Trust:
Asset Allocation Portfolio...................................................... 307,340.7 4,080,368 4,200,729
Common Stock Portfolio.......................................................... 225,197.2 4,289,694 4,861,045
Corporate Bond Portfolio........................................................ 319,581.0 3,234,166 3,210,200
Government Securities Portfolio................................................. 132,405.0 1,624,581 1,608,197
Money Market Portfolio.......................................................... 8,068,401.7 8,068,402 8,068,402
Dreyfus Stock Index Fund.......................................................... 458,871.2 13,427,073 14,922,491
The Dreyfus Socially Responsible Growth Fund, Inc................................. 84,028.9 2,401,597 2,611,619
Dreyfus Variable Investment Fund:
Disciplined Stock Portfolio..................................................... 30,233.8 631,587 693,866
International Value Portfolio................................................... 10,435.8 140,686 140,361
Federated Insurance Series:
High Income Bond Fund II........................................................ 408,003.6 4,373,887 4,455,399
International Equity Fund II.................................................... 36,934.0 501,326 568,414
Utility Fund II................................................................. 169,884.2 2,407,864 2,594,132
Invesco Variable Investment Funds, Inc.:
High Yield Portfolio............................................................ 100,631.8 1,227,523 1,139,152
Industrial Income Portfolio..................................................... 44,540.0 795,029 828,889
Janus Aspen Series:
Aggressive Growth Portfolio..................................................... 88,455.0 2,016,298 2,440,473
Growth Portfolio................................................................ 228,817.8 4,586,279 5,386,372
Worldwide Growth Portfolio...................................................... 285,876.6 7,688,261 8,316,150
Lazard Retirement Series, Inc.:
Equity Portfolio................................................................ 93,247.5 918,253 1,030,385
Small Cap Portfolio............................................................. 44,590.6 415,147 424,503
Lord Abbett Series Fund, Inc.:
Growth and Income Portfolio..................................................... 125,804.8 2,575,285 2,597,742
Mitchell Hutchins Series Trust:
Growth & Income Portfolio....................................................... 17,622.4 254,859 260,988
Neuberger & Berman Advisers Management Trust:
Limited Maturity Bond Portfolio................................................. 228,925.9 3,123,523 3,163,756
Partners Portfolio.............................................................. 164,122.1 2,950,195 3,106,832
Strong Variable Insurance Funds, Inc.:
Growth Fund II.................................................................. 41,866.2 577,665 670,697
Strong Opportunity Fund II, Inc................................................... 91,192.0 1,867,677 1,980,691
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund............................................................. 28,186.3 338,407 346,128
Worldwide Emerging Markets Fund................................................. 34,233.7 253,667 243,744
Worldwide Hard Assets Fund...................................................... 9,580.0 88,437 88,136
Worldwide Real Estate Fund...................................................... 22,903.2 221,569 218,497
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Total assets............................................................................................... 102,931,836
Liabilities:
Amounts due to Conseco Variable Insurance Company................................................................ 112,378
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Net assets (Note 6)........................................................................................ $102,819,458
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The accompanying notes are an integral part of these financial statements.
2
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GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT F
Statement of Assets and Liabilities - Continued
December 31, 1998
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<CAPTION>
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UNITS UNIT VALUE REPORTED VALUE
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Net assets attributable to:
Contract owners' deferred annuity reserves:
Market value adjustment accounts - 1 Year......................................... $ 120,019
The Alger American Fund:
Growth Portfolio................................................................ 436,443.0 $ 13.912974 6,072,221
Leveraged AllCap Portfolio...................................................... 109,259.4 14.867397 1,624,403
MidCap Growth Portfolio......................................................... 155,495.9 12.390612 1,926,689
Small Capitalization Portfolio.................................................. 153,227.2 11.196182 1,715,560
American Century Variable Portfolios, Inc.:
International Fund.............................................................. 115,686.6 11.110331 1,285,316
Value Fund...................................................................... 171,138.0 10.217429 1,748,590
Income and Growth Fund.......................................................... 351,624.7 12.058202 4,239,961
Berger Institutional Products Trust:
100 Fund........................................................................ 74,888.9 10.694410 800,893
Growth and Income Fund.......................................................... 153,113.7 12.236958 1,873,646
Small Company Growth Fund....................................................... 112,139.8 9.799291 1,098,891
BIAM International Fund......................................................... 20,703.6 10.805593 223,714
Conseco Series Trust:
Asset Allocation Portfolio...................................................... 399,216.7 10.510299 4,195,887
Common Stock Portfolio.......................................................... 446,343.6 10.878030 4,855,339
Corporate Bond Portfolio........................................................ 308,575.7 10.392020 3,206,724
Government Securities Portfolio................................................. 153,270.2 10.479885 1,606,254
Money Market Portfolio.......................................................... 779,777.0 10.335375 8,059,287
Dreyfus Stock Index Fund.......................................................... 1,229,906.4 12.119694 14,906,089
The Dreyfus Socially Responsible Growth Fund, Inc................................. 212,780.0 12.260875 2,608,869
Dreyfus Variable Investment Fund:
Disciplined Stock Portfolio..................................................... 64,621.8 10.726492 693,166
International Value Portfolio................................................... 14,880.5 9.423371 140,225
Federated Insurance Series:
High Income Bond Fund II........................................................ 449,247.9 9.906275 4,450,373
International Equity Fund II.................................................... 49,555.0 11.457418 567,772
Utility Fund II................................................................. 227,544.8 11.387984 2,591,277
Invesco Variable Investment Funds, Inc.:
High Yield Portfolio............................................................ 119,636.8 9.512365 1,138,029
Industrial Income Portfolio..................................................... 80,397.0 10.299751 828,069
Janus Aspen Series:
Aggressive Growth Portfolio..................................................... 189,516.1 12.863730 2,437,884
Growth Portfolio................................................................ 424,913.2 12.663149 5,380,740
Worldwide Growth Portfolio...................................................... 698,806.4 11.887497 8,307,059
Lazard Retirement Series, Inc.:
Equity Portfolio................................................................ 93,996.5 10.950014 1,029,263
Small Cap Portfolio............................................................. 45,538.3 9.311319 424,022
Lord Abbett Series Fund, Inc. :
Growth and Income Portfolio..................................................... 240,000.3 10.812166 2,594,923
Mitchell Hutchins Series Trust:
Growth and Income Portfolio..................................................... 23,636.4 11.029509 260,698
Neuberger & Berman Advisers Management Trust:
Limited Maturity Bond Portfolio................................................. 308,952.7 10.228889 3,160,242
Partners Portfolio.............................................................. 308,590.6 10.056279 3,103,273
Strong Variable Insurance Funds, Inc.:
Growth Fund II.................................................................. 53,572.2 12.505960 669,972
Strong Opportunity Fund II, Inc................................................... 181,751.9 10.886238 1,978,595
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund............................................................. 31,389.1 11.014099 345,723
Worldwide Emerging Markets Fund................................................. 36,152.7 6.734480 243,470
Worldwide Hard Assets Fund...................................................... 12,475.6 7.058843 88,064
Worldwide Real Estate Fund...................................................... 25,254.3 8.642784 218,267
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Net assets................................................................................................. $102,819,458
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</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT F
Statement of Operations
For the Period February 12, 1998, through December 31,1998
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Investment income:
Dividends from investments in portfolio shares................................................................... $ 1,088,426
Expenses:
Mortality and expense risk fees.................................................................................. 378,316
Administrative fees.............................................................................................. 45,397
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Total expenses................................................................................................. 423,713
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Net investment income........................................................................................ 664,713
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Net realized gains (losses) and unrealized appreciation (depreciation) on
investments:
Net realized losses on sales of investments in portfolio shares.................................................. (516,677)
Net change in unrealized appreciation of investments in portfolio shares......................................... 7,646,351
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Net gain on investments in portfolio shares.................................................................... 7,129,674
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Net increase in net assets from operations................................................................... $ 7,794,387
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Statement of Changes in Net Assets
For the Period February 12, 1998, through December 31,1998
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<CAPTION>
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Changes from operations:
Net investment income............................................................................................ $ 664,713
Net realized losses on sales of investments in portfolio shares.................................................. (516,677)
Net change in unrealized appreciation of investments in portfolio shares......................................... 7,646,351
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Net increase in net assets from operations..................................................................... 7,794,387
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Changes from contract owners' transactions:
Net contract purchase payments................................................................................... 95,358,778
Contract redemptions............................................................................................. (690,158)
Net transfers from fixed account................................................................................. 356,451
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Net increase in net assets from contract owners' transactions.................................................. 95,025,071
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Net increase in net assets................................................................................... 102,819,458
Net assets, beginning of period..................................................................................... --
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Net assets, end of period.................................................................................... $102,819,458
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</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT F
Notes to Financial Statements
December 31, 1998
(1) General
Conseco Variable Insurance Company (the "Company") (formerly Great American
Reserve Insurance Company prior to its name change in October 1998) established
two separate accounts within Great American Reserve Variable Annuity Account F
("Account F"). It is anticipated that on May 1, 1999, a filing will be made with
the Securities and Exchange Commission to change the name of Great American
Reserve Variable Account F to Conseco Variable Account F. Both accounts were
established on September 26, 1997, and commenced operations on February 12,
1998. Account F is a segregated investment account for individual and group
variable annuity contracts which are registered under the Securities Act of
1933. One account, also named Great American Reserve Variable Annuity Account F
("Variable Account"), which serves the variable annuity portion of the contract,
is registered under the Investment Company Act of 1940, as amended, as a unit
investment trust. The other account, Conseco Variable Market Value Adjustment
Account ("MVA"), offers investment options which pay fixed rates of interest as
declared by the company for specified periods (one, three and five years) from
the date amounts are allocated to the MVA. The MVA is not registered as an
investment company under the Investment Company Act of 1940. The operations of
Account F are included in the operations 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.
Besides the three guarantee periods of the MVA option, the following
Variable Account investment options are currently available:
THE ALGER AMERICAN FUND
Growth Portfolio
Leveraged AllCap Portfolio
MidCap Growth Portfolio
Small Capitalization Portfolio
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
Income and Growth Fund
International Fund
Value Fund
BERGER INSTITUTIONAL PRODUCTS TRUST
100 Fund
Growth and Income Fund
Small Company Growth Fund
BIAM International Fund
CONSECO SERIES TRUST
Asset Allocation Portfolio
Common Stock Portfolio
Corporate Bond Portfolio
Government Securities Portfolio
Money Market Portfolio
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
DREYFUS STOCK INDEX FUND
DREYFUS VARIABLE INVESTMENT FUND
International Value Portfolio
Disciplined Stock Portfolio
FEDERATED INSURANCE SERIES
High Income Bond Fund II
International Equity Fund II
Utility Fund II
INVESCO VARIABLE INVESTMENT FUNDS, INC.
High Yield Portfolio
Industrial Income Portfolio
JANUS ASPEN SERIES
Aggressive Growth Portfolio
Growth Portfolio
Worldwide Growth Portfolio
LAZARD RETIREMENT SERIES, INC.
Equity Portfolio
Small Cap Portfolio
LORD ABBETT SERIES FUND, INC.
Growth and Income Portfolio
MITCHELL HUTCHINS SERIES TRUST
Growth and Income Portfolio
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Limited Maturity Bond Portfolio
Partners Portfolio
STRONG VARIABLE INSURANCE FUNDS, INC.
Growth Fund II
STRONG OPPORTUNITY FUND II, Inc.
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund
Worldwide Emerging Markets Fund
Worldwide Hard Assets Fund
Worldwide Real Estate Fund
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 increases and decreases in net assets from
operations 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 portfolios 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. The cost of investments in portfolio shares
sold is determined on a first-in first-out basis. Account F 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
Variable Account F as of the beginning of the valuation date.
5
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(2) Summary of Significant Accounting Policies (Continued)
FEDERAL INCOME TAXES
No provision for federal income taxes has been made in the accompanying
financial statements because the operations of the Contract 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 Contract 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 Portfolio Shares
The aggregate cost of purchases of investments in portfolio shares were
$110,554,029 for the period February 12, 1998, through December 31, 1998. The
aggregate proceeds from sales of investments in portfolio shares were
$14,871,886 for the period February 12, 1998, through December 31, 1998.
(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
sales and administrative expenses may prove insufficient to cover the actual
sales and administrative expenses. The Company deducts daily from the Variable
Account a fee, which is equal on an annual basis to 1.25 percent of the daily
value of the total investments of the Variable Account, for assuming the
mortality and expense risks. These fees were $378,316 for the period February
12, 1998, through December 31, 1998.
Pursuant to an agreement between the Variable Account and the Company
(which may be terminated by the Company at any time), the Company provides sales
and administrative services to the Variable Account, as well as a minimum death
benefit prior to retirement for the contracts. 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. In
addition, the Company deducts units from individual contracts annually and upon
full surrender to cover an administrative fee of $30, unless the value of the
contract is $50,000 or greater. This fee is recorded as a redemption in the
accompanying Statement of Changes of Net Assets. There were no sales and
administrative charges for the period February 12, 1998, through December 31,
1998. The Company also deducts daily from the Variable Account a fee, which is
equal on an annual basis to 0.15 percent of the daily value of the total
investments of the Variable Account, for administrative expenses. These expenses
were $45,397 for the period February 12, 1998, through December 31, 1998.
The MVA account is subject to a market value adjustment if the amounts are
withdrawn prior to the end of the guarantee period (with certain exceptions).
The adjustment can be positive or negative depending on the changes in the U.S.
Treasury rates during the holding period of the MVA contract. The adjustment
charge for the period February 12, 1998, through December 31, 1998, was $527.
(5) Other Transactions With Affiliates
Conseco Equity Sales, Inc., an affiliate of the Company, is the principal
underwriter and performs all variable annuity sales functions on behalf of the
Company through various retail broker/dealers including Conseco Financial
Services, Inc., an affiliate of the Company.
(6) Net Assets
Net assets consisted of the following at December 31, 1998:
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Proceeds from the sales of units since organization,
less cost of units redeemed ............................... $ 95,025,071
Undistributed net investment income .......................... 664,713
Undistributed net realized losses on sales of investments .... (516,677)
Net unrealized appreciation of investments ................... 7,646,351
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Net assets .............................................. $ 102,819,458
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6
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REPORT OF INDEPENDENT ACCOUNTANTS
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To The Board of Directors of Conseco Variable
Insurance Company and Contract Owners of
Great American Reserve Variable Annuity
Account F
In our opinion, the accompanying statement of assets and liabilities and
the related statements of operations and of changes in net assets present
fairly, in all material respects, the financial position of the Great American
Reserve Variable Annuity Account F (the "Account") at December 31, 1998, and the
results of its operations and the changes in its net assets from inception
(February 12, 1998) through December 31, 1998, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Account's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of portfolio shares owned at December 31,
1998 by correspondence with the custodians, provides a reasonable basis for the
opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Indianapolis, Indiana
February 10, 1999>>
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Great American Reserve
Variable Annuity Account F
Sponsor
Conseco Variable Insurance Company - Carmel, Indiana.
Distributor
Conseco Equity Sales, Inc. - Carmel, Indiana.
Independent Public Accountants
PricewaterhouseCoopers LLP - Indianapolis, Indiana.
9
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[LOGO]
CONSECO(R)
Conseco Variable Insurance Company is a
subsidiary of Conseco, Inc., a financial services
organization headquartered in Carmel, Indiana.
Conseco is dedicated to providing its customers
with solutions for both wealth protection and
wealth creation. Through its subsidiaries,
Conseco is one of the nation's leading providers
of supplemental health insurance, retirement
annuities, universal life insurance, and consumer
and commercial finance products and services.
Conseco Variable Insurance Company
11815 North Pennsylvania Street
Carmel, Indiana 46032
(C) 1999, Conseco Variable Insurance Company
05-8433 (2/99) 03863
