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Previous: AMERICAN TAX EXEMPT BOND TRUST SERIES 1, NSAR-U, 1998-03-05 |
Next: WASHINGTON NATIONAL VARIABLE ANNUITY FUND B, N-30B-2, 1998-03-05 |
<PAGE>
SEPARATE ACCOUNT B
December 31, 1997
Annual Report
Provident National Assurance Company
A Subsidiary of
Provident Companies, Inc.
<PAGE>
MANAGEMENT
BOARD OF MANAGERS OF SEPARATE ACCOUNT B
Henry E. Blaine
H. Grant Law, Jr.
David G. Fussell
Susan N. Roth, Secretary
to the Board of Managers
PRINCIPAL OFFICERS OF
PROVIDENT NATIONAL ASSURANCE COMPANY
J. Harold Chandler, Chairman, President and Chief
Executive Officer
Thomas R. Watjen, Vice Chairman and Chief Financial
Officer
Robert O. Best, Executive Vice President and Chief
Information Officer
F. Dean Copeland, Executive Vice President and General
Counsel
Thomas B. Heys, Jr., Executive Vice President, Risk
Management
Peter C. Madeja, Executive Vice President
Jeffrey F. Olingy, Executive Vice President, Sales
Management
Robert C. Greving, Senior Vice President and Chief
Actuary
Ralph A. Rogers, Senior Vice President and
Treasurer
Susan N. Roth, Vice President and Secretary
Vicki W. Corbett, Vice President and Controller
This report and the financial statements attached are
submitted solely for the general information of contract
owners of Separate Account B and are not authorized for other
use.
<PAGE>
MESSAGE TO PARTICIPANTS IN
PROVIDENT NATIONAL'S
VARIABLE ANNUITY CONTRACTS
This annual report of Separate Account B contains the financial statements
and portfolio information of Separate Account B for the year ended December 31,
1997. Comparative figures that relate to Separate Account B's activities during
1997 are provided below.
The accumulation unit value for Separate Account B increased 35.0% in 1997,
from $8.435567 at year end 1996 to $11.384926 on December 31, 1997. Reflecting
transfers to the fixed-dollar account, as well as withdrawals and retirements,
the number of accumulation units outstanding on December 31, 1997 was 1,310,831,
down from 1,538,926 twelve months earlier. As a result of net income from
investments, withdrawals, and net purchase payments received, total contract
owners' equity on December 31, 1997 was $16,453,121 compared to $13,917,113 on
December 31, 1996.
The S&P 500 Index grew 33.4% in 1997. This is the third year in a row of
greater than 20% returns for a combined three year return of 125%. This is the
strongest string of returns in at least 70 years. Returns were driven by double
digit earnings growth and lower interest rates. The market was dominated by
large-company stocks; the largest capitalization quintile (top 20%) was the only
quintile to outperform the market. Due to strong stock and bond markets, the
financial sector was the strongest sector in the market (up 48%), followed by
health care (up 44%), communication services (up 40%), consumer cyclicals (up
37%), and consumer staples (up 34%).
The outlook for 1998 is cloudier but still favorable. Despite Asian problems
and increased competition, the U.S. economy looks sound and inflation appears
under control. With moderate earnings growth and stable bond yields, the stock
market can have another good year.
Thank you for your continued support.
/s/ David Fussell
----------------------------------
David Fussell
Chairman, Board of Managers
Provident National Assurance Company
Separate Account B
<PAGE>
Provident National Assurance Company Separate Account B
Audited Financial Statements
December 31, 1997
<TABLE>
<S> <C>
Report of Independent Auditors........................................ 1
Statements of Assets and Liabilities.................................. 2
Statements of Operations.............................................. 3
Statements of Changes in Variable Annuity Contract Owners' Equity..... 4
Schedule of Investments............................................... 5
Supplementary Information............................................. 9
Notes to Financial Statements......................................... 11
</TABLE>
<PAGE>
[LETTERHEAD OF ERNST & YOUNG LLP]
REPORT OF INDEPENDENT AUDITORS
Board of Managers and Contract Owners
Provident National Assurance Company
Separate Account B
We have audited the accompanying statements of assets and liabilities of
Provident National Assurance Company Separate Account B as of December 31, 1997
and 1996, including the schedule of investments as of December 31, 1997, and the
related statements of operations and changes in variable annuity contract
owners' equity for each of the three years in the period ended December 31,
1997, and the supplementary information for each of the ten years in the period
then ended. These financial statements and supplementary information are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and supplementary information based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and supplementary
information are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997 and 1996, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and supplementary information referred
to above present fairly, in all material respects, the financial position of
Provident National Assurance Company Separate Account B at December 31, 1997 and
1996, the results of its operations and the changes in variable annuity contract
owners' equity for each of the three years in the period ended December 31,
1997, and the supplementary information for each of the ten years in the period
then ended, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
January 20, 1998
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
Provident National Assurance Company Separate Account B
<TABLE>
<CAPTION>
December 31
1997 1996
--------------------------
ASSETS
<S> <C> <C>
Investments:
Common stocks--at market value
(cost: 1997--$9,939,798;1996--$9,625,656) $16,402,456 $13,622,505
Bonds--at market value
(cost: 1997--$0; 1996--$100,000) 0 106,500
Short-term investments--at cost plus
accrued interest (approximately market) 0 196,934
---------- -----------
16,402,456 13,925,939
Cash 52,588 902
Receivable for securities sold 50 0
Accrued dividends and interest 17,788 22,888
Amounts due from Provident National Assurance Company 224 999
---------- -----------
TOTAL ASSETS 16,473,106 13,950,728
---------- -----------
LIABILITIES AND CONTRACT OWNERS' EQUITY
Amounts payable for terminations and variable annuity benefits 2,794 19,655
Management fee and other amounts due Provident
National Assurance Company 17,191 13,960
---------- -----------
TOTAL LIABILITIES 19,985 33,615
---------- -----------
Variable annuity contract owners' equity:
Deferred annuity contracts terminable by owners--(accumulation
units outstanding: 1997--1,310,831.075; 1996--1,538,926.064;
unit value: 1997--$11.384926; 1996--$8.435567) 14,923,715 12,981,714
Annuity contracts in pay-out period 1,529,406 935,399
----------- -----------
TOTAL CONTRACT OWNERS' EQUITY $16,453,121 $13,917,113
=========== ===========
</TABLE>
See notes to financial statements.
-2-
<PAGE>
STATEMENTS OF OPERATIONS
Provident National Assurance Company Separate Account B
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996 1995
-----------------------------------------------
INVESTMENT INCOME
<S> <C> <C> <C>
Income:
Dividends $ 147,564 $ 193,196 $ 240,725
Interest 3,995 8,347 24,937
----------- ----------- ------------
151,559 201,543 265,662
----------- ----------- ------------
Expenses--Note C:
Investment advisory services 72,873 67,237 63,922
Mortality and expense assurances 102,022 94,131 89,492
----------- ----------- ------------
174,895 161,368 153,414
----------- ----------- ------------
NET INVESTMENT INCOME (LOSS) (23,336) 40,175 112,248
----------- ----------- ------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--
NOTE A
Net realized gain from investment transactions
(excluding short-term securities):
Proceeds from sales 5,559,161 5,882,270 13,313,567
Cost of investments sold 3,512,353 4,404,304 11,434,739
Adjustment for impairment of value 0 0 (76,960)
----------- ----------- ------------
Net realized gain 2,046,808 1,477,966 1,801,868
----------- ------------ ------------
Net unrealized appreciation of investments:
At end of year 6,462,658 4,003,349 2,809,091
At beginning of year 4,003,349 2,809,091 1,635,016
----------- ------------ ------------
Increase in net unrealized appreciation of investments 2,459,309 1,194,258 1,174,075
----------- ------------ ------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 4,506,117 2,672,224 2,975,943
----------- ------------ ------------
NET INCOME $ 4,482,781 $ 2,712,399 $ 3,088,191
=========== ============ ============
Ratio of expenses to total investment income 115.40% 80.07% 57.75%
=========== ============ ============
See notes to financial statements.
</TABLE>
-3-
<PAGE>
STATEMENTS OF CHANGES IN VARIABLE ANNUITY CONTRACT OWNERS' EQUITY
Provident National Assurance Company Separate Account B
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996 1995
----------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of period $13,917,113 $13,151,831 $12,171,347
----------- ----------- -----------
From investment activities:
Net investment income (loss) (23,336) 40,175 112,248
Net realized gain on investments 2,046,808 1,477,966 1,801,868
Increase in net unrealized appreciation of investments 2,459,309 1,194,258 1,174,075
----------- ----------- -----------
Increase in contract owners' equity from
investment activities 4,482,781 2,712,399 3,088,191
----------- ----------- -----------
From variable annuity contract transactions:
Net contract purchase payments (Units purchased):
1997-- 16,110.275;
1996-- 4,869.798;
1995-- 8,835.033; 174,149 35,994 53,380
Terminations and death benefits (Units terminated):
1997--206,229.494;
1996--243,557.308;
1995--337,338.173; (1,974,221) (1,866,405) (2,054,839)
Variable annuity benefits paid (Number of units):
1997--14,527.206;
1996--15,310.532;
1995--17,171.953; (146,701) (116,706) (106,248)
----------- ----------- -----------
Decrease in contract owners' equity from variable
annuity contract transactions (1,946,773) (1,947,117) (2,107,707)
----------- ----------- -----------
Net increase in contract owners' equity
2,536,008 765,282 980,484
----------- ----------- -----------
Balance at end of period $16,453,121 $13,917,113 $13,151,831
=========== =========== ===========
</TABLE>
See notes to financial statements.
-4-
<PAGE>
SCHEDULE OF INVESTMENTS
Provident National Assurance Company Separate Account B
December 31, 1997
<TABLE>
<CAPTION>
Number of Market
Shares Value
--------- ------
<S> <C> <C>
COMMON STOCKS
CAPITAL GOODS (11.8%)
Corning, Inc. 2,800 $ 103,950
Emerson Electric Company 9,000 507,942
General Electric Company 7,800 572,325
Thermo Electron Corporation 1,300 57,200
Textron, Inc. 5,000 312,500
USA Waste Services, Inc. 4,900 192,325
USA Filter Corporation 6,600 197,591
---------
1,943,833
CONSUMER GOODS (9.0%)
Coca-Cola Company 7,000 466,816
Lear Corporation 3,200 152,000
Newell Company 4,000 170,000
PepsiCo, Inc. 8,000 290,000
Proctor & Gamble Company 5,000 399,065
---------
1,477,881
CONSUMER SERVICES (14.6%)
Cendant Corporation 3,604 123,887
Comcast Corporation Class A 14,500 457,664
Walt Disney Company 3,200 316,800
Gannett Company, Inc. 7,000 432,691
McDonald's Corporation 4,500 214,875
Safeway, Inc. 5,200 328,900
Wal-Mart Stores, Inc. 10,000 394,380
Viacom, Inc. Class B 3,000 124,314
---------
2,393,511
</TABLE>
See notes to financial statements.
-5-
<PAGE>
SCHEDULE OF INVESTMENTS - Continued
Provident National Assurance Company Separate Account B
December 31, 1997
<TABLE>
<CAPTION>
Number of Market
Shares Value
--------- --------
COMMON STOCKS - Continued
<S> <C> <C>
ENERGY (1.5%)
Atlantic Richfield Company 800 $ 64,100
EVI Inc. 500 25,875
Royal Dutch Petroleum Company 2,900 157,145
---------
247,120
FINANCIAL (12.5%)
American Express Company 8,000 714,000
Chase Manhattan Corporation 4,800 525,600
Corestates Financial Corporation 6,250 503,125
NationsBank Corporation 4,000 243,252
Washington Mutual, Inc. 1,200 76,576
---------
2,062,553
HEALTH CARE (17.9%)
Bristol-Myers Squibb Company 7,000 662,375
Eli Lilly & Company 2,700 187,987
HealthSouth Corporation 19,000 527,250
Johnson & Johnson 9,032 594,983
Medtronic Inc. 5,000 262,500
Merck & Company, Inc. 4,800 508,800
Tenet Healthcare Corporation 5,800 192,125
---------
2,936,020
TECHNOLOGY HARDWARE (8.2%)
Cisco Systems, Inc. 2,400 133,800
Compaq Computer Corporation 3,000 169,500
Hewlett Packard Company 3,000 187,125
</TABLE>
See notes to financial statements.
-6-
<PAGE>
SCHEDULE OF INVESTMENTS - Continued
Provident National Assurance Company Separate Account B
December 31, 1997
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------- -----------
COMMON STOCKS - Continued
<S> <C> <C>
TECHNOLOGY-HARDWARE (8.2%) - Continued
Lucent Technologies, Inc. 3,944 $ 315,027
SCI Systems, Inc. 10,000 435,630
3Com Corporation 3,250 113,549
-----------
1,354,631
TECHNOLOGY-SOFTWARE (8.1%)
Computer Associates International 10,500 556,500
First Data Corporation 2,900 84,825
Microsoft Corporation 4,000 517,000
Oracle Corporation 7,500 167,348
-----------
1,325,673
TECHNOLOGY-OTHER (8.6%)
Airtouch Communications, Inc. 11,000 457,193
Boeing Company 4,000 195,752
Intel Corporation 7,700 540,925
Motorola, Inc. 4,000 228,752
-----------
1,422,622
UTILITIES (7.5%)
Sprint Corporation 3,000 175,875
Teleport Communications Group, Inc. Class A 10,000 548,750
Tel-Save Holdings 2,900 57,637
Thermo Ecotek Corporation 1,800 32,850
Worldcom, Inc. 14,000 423,500
-----------
1,238,612
-----------
TOTAL COMMON STOCKS (99.7%) 16,402,456
-----------
</TABLE>
See notes to financial statements.
-7-
<PAGE>
SCHEDULE OF INVESTMENTS - Continued
Provident National Assurance Company Separate Account B
December 31, 1997
<TABLE>
<CAPTION>
Market
Value
-----------
<S> <C>
TOTAL INVESTMENTS (99.7%) $16,402,456
CASH AND RECEIVABLES LESS LIABILITIES (0.3%) 50,665
-----------
TOTAL VARIABLE ANNUITY CONTRACT
OWNERS' EQUITY (100.0%) $16,453,121
===========
</TABLE>
See notes to financial statements.
-8-
<PAGE>
SUPPLEMENTARY INFORMATION
Provident National Assurance Company Separate Account B
Selected data for an accumulation unit outstanding throughout each year
excluding sales loads:
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996 1995 1994 1993
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income $ .10 $ .11 $ .13 $ .15 $ .14
Expenses .12 .09 .07 .07 .06
------ ------ ------ ------ ------
Net investment income (loss) (.02) .02 .06 .08 .08
Net realized and unrealized
gain (loss) on investments 2.96 1.51 1.44 (.32) .54
------ ------ ------ ------ ------
Net increase (decrease) in
contract owners' equity 2.94 1.53 1.50 (.24) .62
Net contract owners' equity:
Beginning of year 8.44 6.91 5.41 5.65 5.03
------ ------ ------ ------ ------
End of year $11.38 $8.44 $6.91 $5.41 $5.65
====== ====== ====== ====== ======
Ratio of expenses to average
contract owners' equity 1.16% 1.20% 1.21% 1.21% 1.22%
Ratio of net investment income (loss) to
average contract owners' equity (0.16%) 0.30% 0.89% 1.72% 1.39%
Portfolio turnover 25% 28% 101% 70% 57%
Number of accumulation units
outstanding at end of year 1,310,831 1,538,926 1,767,394 2,097,793 2,242,809
</TABLE>
See notes to financial statements.
-9-
<PAGE>
SUPPLEMENTARY INFORMATION - Continued
Provident National Assurance Company Separate Account B
<TABLE>
<CAPTION>
Year Ended December 31
1992 1991 1990 1989 1988
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income $ .12 $ .13 $ .13 $ .12 $ .11
Expenses .06 .05 .04 .04 .04
------ ------ ------ ------ ------
Net investment income .06 .08 .09 .08 .07
Net realized and unrealized
gain (loss) on investments (.07) 1.22 (.16) .64 .29
------ ------ ------ ------ ------
Net increase (decrease) in
contract owners' equity (.01) 1.30 (.07) .72 .36
Net contract owners' equity:
Beginning of year 5.04 3.74 3.81 3.09 2.73
------ ------ ------ ------ ------
End of year $5.03 $5.04 $3.74 $3.81 $3.09
====== ====== ====== ====== ======
Ratio of expenses to average
contract owners' equity 1.21% 1.21% 1.22% 1.21% 1.22%
Ratio of net investment income to
average contract owners' equity 1.36% 1.91% 2.34% 2.36% 2.30%
Portfolio turnover 35% 42% 58% 104% 65%
Number of accumulation units
outstanding at end of year 2,655,895 2,854,559 3,031,469 3,667,660 4,191,222
</TABLE>
See notes to financial statements.
-10-
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Provident National Assurance Company Separate Account B
NOTE A--INVESTMENTS AND ACCOUNTING POLICIES
Separate Account B is a segregated investment account of Provident National
Assurance Company (a wholly-owned subsidiary of Provident Companies, Inc.) and
is registered under the Investment Company Act of 1940, as amended, as an open-
end diversified management investment company.
Common stocks and bonds are valued at published market quotations which
represent the closing sales price for securities traded on a national stock
exchange or the mean between the quoted bid and asked prices for those traded
over-the-counter. Short-term investments are valued at cost plus accrued
interest.
Realized and unrealized gains and losses are credited to or charged to variable
annuity contract owners' equity. The identified cost basis has been used in
determining realized gains and losses on sales of investments. If determined on
the average cost basis, the net realized gain would have been $2,046,415,
$1,369,834 and $1,798,019 for the years ended December 31, 1997, 1996, and 1995,
respectively. There were gross unrealized gains of $6,663,913 and gross
unrealized losses of $201,255 at December 31, 1997. Security transactions are
recorded on the date the securities are purchased or sold which is the common
practice of the industry. Dividends are taken into income on an accrual basis
as of the ex-dividend date.
A summary of the cost of investments purchased and proceeds from investments
sold for the three years in the period ended December 31, 1997 is shown below.
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996 1995
------------------------------------------
<S> <C> <C> <C>
Cost of investments purchased $12,440,923 $ 9,751,620 $32,935,068
Less: Short-term securities 8,714,428 6,012,666 20,637,665
----------- ----------- -----------
$ 3,726,495 $ 3,738,954 $12,297,403
=========== =========== ===========
Proceeds from investments sold $14,470,491 $11,698,035 $34,650,485
Less: Short-term securities 8,911,330 5,815,765 21,336,918
----------- ----------- -----------
$ 5,559,161 $ 5,882,270 $13,313,567
=========== =========== ===========
</TABLE>
The aggregate cost of investments for federal income tax purposes is the same as
that presented in the Statements of Assets and Liabilities.
-11-
<PAGE>
NOTES TO FINANCIAL STATEMENTS - Continued
Provident National Assurance Company Separate Account B
NOTE B--FEDERAL INCOME TAXES
Operations of Separate Account B will form a part of the income tax return of
Provident National Assurance Company, which is taxed as a "life insurance
company" under the Internal Revenue Code.
Under current law, no federal income taxes are payable with respect to Separate
Account B.
NOTE C--EXPENSES
Deductions are made by Provident National Assurance Company at the end of each
valuation period for investment advisory services and for mortality and expense
assurances, which on an annual basis are approximately .50% and .70%,
respectively, of the net assets of Separate Account B.
NOTE D--COMMITMENTS
On December 8, 1997 Provident signed an Asset Transfer and Acquisition Agreement
under which subsidiaries of American General Corporation will reinsure
Provident's individual and tax-sheltered annuity business and its two registered
separate accounts, Provident National Assurance Company Separate Account B and
The Paul Revere Variable Annuity Contract Accumulation Fund, as well as certain
group annuity business. The transaction is pending appropriate state approvals
and is expected to close late in the first quarter of 1998.
-12-
<PAGE>
ACCUMULATION UNIT VALUE TABLE
(Unaudited)
Provident National Assurance Company Separate Account B
<TABLE>
<CAPTION>
End of Month Accumulation Unit Value End of Month Accumulation Unit Value
- ------------ ----------------------- ------------ -----------------------
<S> <C> <C> <C>
December 1968 1.036279 December 5.028547
December 1969 1.080379 March 1993 5.208499
December 1970 1.030039 June 5.190340
December 1971 1.178612 September 5.441446
December 1972 1.403795 December 5.646864
December 1973 1.126624 March 1994 5.386379
December 1974 .863269 June 5.274454
December 1975 1.022844 September 5.475394
December 1976 1.156853 December 5.410722
December 1977 1.064425 March 1995 5.656995
December 1978 1.094150 June 6.194660
December 1979 1.219189 September 6.505252
December 1980 1.555258 December 6.908158
December 1981 1.473246 March 1996 7.309625
December 1982 1.812441 June 7.593667
December 1983 2.132092 September 7.851947
December 1984 2.029912 December 8.435567
December 1985 2.480050 January 1997 9.019615
December 1986 2.743444 February 8.984136
December 1987 2.734169 March 8.468896
December 1988 3.087892 April 9.126089
December 1989 3.812606 May 9.704040
December 1990 3.736441 June 10.238554
March 1991 4.312244 July 11.123990
June 4.243108 August 10.432361
September 4.513598 September 11.146167
December 5.036212 October 10.779981
March 1992 4.735470 November 11.172887
June 4.585274 December 11.384926
September 4.694884
</TABLE>
-13-
<PAGE>
ACCUMULATION UNIT VALUE TABLE - Continued
(Unaudited)
Provident National Assurance Company Separate Account B
Initial contributions to Separate Account B were received on February 1, 1968,
prior to which time the unit value was set at 1.000000.
The above indicates the accumulation unit value on the last valuation day of
each year from December 1968 through December 1990, on the last valuation day of
each quarter from March 1991 through December 1996, and on the last valuation
day of each month of 1997. The results shown should not be considered as a
representation of the results which may be realized in the future.
-14-
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