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CONSECO(R)
WASHINGTON NATIONAL INSURANCE COMPANY
Annual Report to
Contract Owners
December 31, 1998
Washington National Variable Annuity Fund B
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ANNUAL REPORT TO CONTRACT OWNERS
Table of Contents
December 31, 1998
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Washington National Variable Annuity Fund B
Statement of Assets and Liabilities as of December 31, 1998.................................... 1
Statements of Operations for the Years Ended December 31, 1998 and 1997........................ 2
Statements of Changes in Net Assets for the Years Ended December 31, 1998 and 1997............. 2
Notes to Financial Statements.................................................................. 3
Report of Independent Accountants.............................................................. 4
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WASHINGTON NATIONAL VARIABLE ANNUITY FUND B
Statement of Assets and Liabilities
December 31, 1998
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VALUE
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Assets:
Investments in portfolio shares, at net asset value (Note 2)
Fundamental Investors, 34,464 shares (cost - $307,001) .............................................. $ 996,709
Cash .................................................................................................. 35,814
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Total assets .................................................................................... $1,032,523
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UNITS UNIT VALUE REPORTED VALUE
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Net assets attributable to:
Contract owners' deferred annuity reserves:
Fundamental Investors ............................................................ 27,239.40 $ 24.866566 $ 677,350
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Net assets attributable to contract owners' deferred annuity reserves .......... 677,350
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Contract owners' annuity payment reserves:
Fundamental Investors ............................................................ 355,173
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Net assets attributable to contract owners' annuity payment reserves ........... 355,173
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Net assets ................................................................... $1,032,523
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The accompanying notes are an integral part of these financial statements.
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WASHINGTON NATIONAL VARIABLE ANNUITY FUND B
Statements of Operations
For the Years Ended December 31, 1998 and 1997
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1998 1997
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Investment income:
Dividends from investments in portfolio shares ............................................................ $ 95,785 $111,668
Expenses:
Mortality and expense risk fees ........................................................................... 10,033 9,237
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Net investment income ................................................................................... 85,752 102,431
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Net realized gains (losses) and unrealized appreciation (depreciation) of investments in portfolio shares:
Net realized gains on sales of investments in portfolio shares ............................................ 6,541 18,557
Net change in unrealized appreciation of investments in portfolio shares .................................. 48,693 78,369
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Net gain on investments in portfolio shares ............................................................. 55,234 96,926
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Net increase in net assets from operations ............................................................ $140,986 $199,357
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Statements of Changes in Net Assets
For the Years Ended December 31, 1998 and 1997
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1998 1997
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Changes from operations:
Net investment income ................................................................. $ 85,752 $102,431
Net realized gains on sales of investments in portfolio shares ........................ 6,541 18,557
Net change in unrealized appreciation of investments in portfolio shares .............. 48,693 78,369
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Net increase in net assets from operations .......................................... 140,986 199,357
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Changes from contract owners' transactions:
Contract redemptions .................................................................. (73,113) (94,625)
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Net decrease in net assets from contract owners' transactions ....................... (73,113) (94,625)
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Net increase in net assets ........................................................ 67,873 104,732
Net assets, beginning of year ............................................................ 964,650 859,918
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Net assets, end of year ............................................................... $1,032,523 $964,650
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The accompanying notes are an integral part of these financial statements.
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WASHINGTON NATIONAL VARIABLE ANNUITY FUND B
Notes to Financial Statements
December 31, 1998
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(1) General
The Washington National Variable Annuity Fund B (the "Fund") is a
segregated investment account for individual variable annuity contracts which
are registered under the Securities Act of 1933. The Fund is registered as a
unit investment trust under the Investment Company Act of 1940, as amended. The
Fund invests solely in shares of Fundamental Investors, Inc., a diversified
open-end management investment company.
The operations of the Fund are included in the operations of the Washington
National Insurance Company ("WNIC") pursuant to the provisions of the Illinois
Insurance Code. WNIC is a wholly owned subsidiary of Washington National
Corporation, which is an indirect wholly owned subsidiary of Conseco, Inc., a
publicly-held specialized financial services holding company listed on the New
York Stock Exchange.
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 as of the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
these estimates.
(2) Summary of Significant Accounting Policies
INVESTMENT VALUATION, TRANSACTIONS, AND INCOME
Investments in portfolio shares are valued using the net asset value of
Fundamental Investors, Inc., 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 last-in first-out basis. The Fund 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
Fund 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 Fund are included in the
total operations of WNIC, 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 Fund 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.
Annuity payment reserves for contracts under which contract owners are
receiving periodic retirement payments are computed according to the Progressive
Annuity Mortality Table.
(3) Purchases and Sales of Investments in Portfolio Shares
The aggregate cost of purchases of investments in portfolio shares for the
years ended December 31, 1998 and 1997 were $95,785 and $111,668, respectively.
The aggregate proceeds from sales of investments in portfolio shares for the
years ended December 31, 1998 and 1997 were $89,138 and $111,244, respectively.
(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
expense or mortality experience because WNIC assumes the mortality risk and the
expense risk under the contracts.
The mortality risk assumed by WNIC results from the life annuity payment
option in the contracts in which WNIC 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, WNIC is required to fund any deficiency in the annuity
payment reserves from its general account assets.
The expense risk assumed by WNIC is the risk that the deductions for
contract administrative charges may prove insufficient to cover the actual
expenses.
WNIC deducts daily from the Fund a fee, which is equal on an annual basis
to 1.022 percent of the daily value of the total investments of the Fund, for
assuming the mortality and expense risks. These fees were $10,033 and $9,237 for
the years ended December 31, 1998 and 1997, respectively.
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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
Washington National Variable Annuity Fund B
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 Washington
National Variable Annuity Fund B (the "Account") at December 31, 1998 and the
results of its operations and the changes in its net assets for each of the two
years in the period then ended 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 audits. We conducted our audits 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 audits, which included
confirmation of portfolio shares owned at December 31, 1998 by correspondence
with the custodian, provide a reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
Indianapolis, Indiana
February 15, 1999
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Washington National Variable Annuity Fund B
SPONSOR
Washington National Insurance Company - Carmel, Indiana.
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP - Indianapolis, Indiana.
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CONSECO(R)
Washington National 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.
WASHINGTON NATIONAL INSURANCE COMPANY
11815 North Pennsylvania Street
Carmel, Indiana 46032
(C) 1999, Washington National Insurance Company
WN-020 (2/99) 04013
