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CONSECO(R)
BANKERS NATIONAL LIFE INSURANCE COMPANY
Annual Report to
Contract Owners
December 31, 1998
Bankers National Variable Account B
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ANNUAL REPORT TO CONTRACT OWNERS
Table of Contents
December 31, 1998
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Page
Bankers National Variable Account B Page
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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BANKERS NATIONAL VARIABLE ACCOUNT B
Statement of Assets and Liabilities
December 31, 1998
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<TABLE>
<CAPTION>
Value
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<S> <C>
Assets:
Investments in portfolio shares, at net asset value (Note 2):
Asset Allocation Portfolio, 175,931 shares, (cost - $2,189,938) ............................................. $ 2,404,629
Common Stock Portfolio, 331,954 shares, (cost - $6,486,409) ................................................. 7,165,477
Corporate Bond Portfolio, 322 shares, (cost - $3,272) ....................................................... 3,239
Government Securities Portfolio, 271,234 shares, (cost - $3,227,214) ........................................ 3,294,416
Money Market Portfolio, 619,600 shares, (cost - $619,600) ................................................... 619,600
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Total assets ............................................................................................ 13,487,361
Liabilities:
Amounts due to Bankers National Life Insurance Company ...................................................... 39,140
Net assets (Note 5) ................................................................................... $13,448,221
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<CAPTION>
Reported
Units Unit Value Value
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<S> <C> <C> <C>
Net assets attributable to: Contract owners' deferred annuity reserves:
Contracts issued prior to August 20, 1984:
Government Securities Portfolio ................................................. 442.0 $ 31.08999 $ 13,742
Money Market Portfolio .......................................................... 87.7 19.97808 1,753
Contracts issued on or after August 20, 1984:
Asset Allocation Portfolio ...................................................... 70,920.0 33.80005 2,397,099
Common Stock Portfolio .......................................................... 94,638.9 75.43661 7,139,239
Corporate Bond Portfolio ........................................................ 232.0 13.91810 3,229
Government Securities Portfolio ................................................. 113,844.8 27.92712 3,179,358
Money Market Portfolio .......................................................... 34,269.2 17.97073 615,843
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Net assets attributable to contract owners' deferred annuity reserves .................................... 13,350,263
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Contract owners' annuity payment reserves:
Common Stock Portfolio ....................................................................................... 5,322
Government Securities Portfolio .............................................................................. 92,636
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Net assets attributable to contract owners' annuity payment reserves ....................................... 97,958
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Net assets ............................................................................................... $13,448,221
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</TABLE>
The accompanying notes are an integral part of these financial statements.
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BANKERS NATIONAL VARIABLE ACCOUNT B
Statements of Operations
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
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1998 1997
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<S> <C> <C>
Investment income:
Dividends from investments in portfolio shares .............................................. $ 1,013,985 $ 2,308,498
Expenses:
Mortality and expense risk fees ............................................................. 161,782 122,641
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Net investment income ..................................................................... 852,203 2,185,857
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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 .............................. 175,208 288,084
Net change in unrealized appreciation (depreciation) of investments in portfolio shares ..... 325,739 (801,587)
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Net gain (loss) on investments in portfolio shares ........................................ 500,947 (513,503)
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Net increase in net assets from operations .............................................. $ 1,353,150 $ 1,672,354
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</TABLE>
Statements of Changes in Net Assets
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
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1998 1997
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<S> <C> <C>
Changes from operations:
Net investment income ....................................................................... $ 852,203 $ 2,185,857
Net realized gains on sales of investments in portfolio shares .............................. 175,208 288,084
Net change in unrealized appreciation (depreciation) of investments in portfolio shares ..... 325,739 (801,587)
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Net increase in net assets from operations ................................................ 1,353,150 1,672,354
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Changes from contract owners' transactions:
Net contract purchase payments .............................................................. 13,631 47,005
Contract redemptions ........................................................................ (1,185,183) (1,851,716)
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Net decrease in net assets from contract owners' transactions ............................. (1,171,552) (1,804,711)
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Net increase (decrease) in net assets ................................................... 181,598 (132,357)
Net assets, beginning of year .................................................................. 13,266,623 13,398,980
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Net assets, end of year (Note 5) ...................................................... $ 13,448,221 $ 13,266,623
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</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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BANKERS NATIONAL VARIABLE ACCOUNT B
Notes to Financial Statements
December 31, 1998
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(1) General
Bankers National Variable Account B (the "Account") is registered under the
Investment Company Act of 1940, as amended, as a unit investment trust. The
Account was established on June 8, 1982, as a segregated investment account for
individual variable annuity contracts issued by Bankers National Life Insurance
Company (the "Company"). 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.
The Account invests solely in shares of the portfolios of Conseco Series
Trust (the "Trust"), a diversified, open-end management investment company.
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 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. 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.
Annuity payment reserves for the contracts under which the contract owners
are receiving periodic retirement payments are computed according to the 1983
Group Annuity Mortality Table. The assumed net investment rate is equal to the
assumed rate of accumulation. The annuity unit values for periodic retirement
payments were as follows:
December 31, December 31,
1998 1997
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Common Stock Portfolio ........................... $1.768 $1.603
Government Securities Portfolio .................. $1.177 $1.152
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(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 $1,220,705 and $2,686,967,
respectively. The aggregate proceeds from sales of investments in portfolio
shares for the years ended December 31, 1998 and 1997 were $1,406,528 and
$2,446,423, 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 the Company assumes the mortality risk
and the expense risk 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 equal on an
annual basis to 1.25 percent (0.75 percent for those contracts issued prior to
August 20, 1984) of the daily value of the total investments of the Account, for
assuming the mortality and expense risks. These fees were $161,782 and $122,641
for the years ended December 31, 1998 and 1997, respectively.
The Company does not deduct a sales charge from purchase payments received
on contracts issued after August 20, 1984. However, upon surrender, the Company,
with certain exceptions, deducts from the contract value a contingent deferred
sales charge equal to the lesser of: (a) 5.0 percent of the total of all
purchase payments made within 72 months prior to the date of the request for
surrender; or (b) 5.0 percent of the amount surrendered. No charge is made for
such part of a surrender in a contract year that does not exceed 10.0 percent of
the net sum of purchase payments made more than one year prior to the date of
the surrender. A sales charge of 6.5 percent is deducted by the Company on
purchase payments received on contracts issued before August 20, 1984. The sales
charges were $1,176 for the year ended December 31, 1998. There were no such
sales charges in 1997.
An annual contract administrative charge of $30 ($12 on Individual
Retirement Accounts or "IRAs") on contracts issued after August 20, 1984 and $36
($12 on IRAs) on contracts issued prior to August 20, 1984 is deducted in units
from each contract owner's account. Such charges were $10,716 and $11,844 for
the years ended December 31, 1998 and 1997, respectively.
A transfer processing fee (currently $5 and guaranteed not to exceed $15)
for each transfer between portfolios is deducted from the amount transferred.
These fees were $25 and $15 for the years ended December 31, 1998 and 1997,
respectively.
(5) NET ASSETS
Net assets consisted of the following at December 31, 1998:
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Proceeds from sale of units since organization,
less proceeds of units redeemed ........................... $(13,478,842)
Undistributed net investment income .......................... 24,224,958
Undistributed net realized gains on sales of investments ..... 1,741,177
Net unrealized appreciation of investments ................... 960,928
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Net assets .............................................. $ 13,448,221
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3
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
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To The Board of Directors of Bankers National Life Insurance Company and
Contract Owners of Bankers National Variable Account 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 Bankers National
Variable Account 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 custodians, provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Indianapolis, Indiana
February 10, 1999
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Bankers National Variable Account B
SPONSOR
Bankers National Life Insurance Company - Carmel, Indiana.
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP - Indianapolis, Indiana.
5
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[LOGO]
CONSECO(R)
Banker National Life 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.
Bankers National Life Insurance Company
11815 North Pennsylvania Street
Carmel, Indiana 46032
(C) 1999, Bankers National Life
Insurance Company
VA-1001 (2/99) 03860
