INVESTORS
LIFE INSURANCE COMPANY
OF NORTH AMERICA
(Herein called Investors Life)
SEPARATE ACCOUNT I
FINANCIAL STATEMENTS
December 31, 1998
(Audited)
This report is submitted for the general information of owners of Investors Life
Insurance Company of North America Separate Account I variable annuity
contracts. This report is not authorized for distribution to prospective
purchasers of such contracts unless it is accompanied by a current prospectus.
Investors Life Insurance
Company of North America
Administrative Offices: Austin, TX
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Report of Independent Accountants
To the Contract Owners of Investors Life Insurance Company of North America
Separate Account I and the Board of Directors of Investors Life Insurance
Company of North America
In our opinion, the accompanying combined balance sheet and the related
individual statements of operations and of changes in total assets present
fairly, in all material respects, the combined financial position of the
subdivisions comprising the Investors Life Insurance Company of North America
Separate Account I (the Separate Account) at December 31, 1998, the results of
each of their operations for the year then ended and the changes in each of
their total assets for the two years in the period then ended, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Separate 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 management, and
evaluating the overall financial statement presentation. We believe that our
audits which included confirmation of securities at December 31, 1998 by
correspondence with the underlying funds provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Dallas, Texas
February 19, 1999
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INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT I
COMBINED BALANCE SHEET
Year Ended December 31, 1998
ASSETS
Investments at Market Value (Notes 1 and 2):
Portfolios of Putnam Capital Manager Trust:
Putnam Variable Trust Money Market
1,325,566 qualified shares (Cost $1,325,566) 1,325,566
2,148,545 non-qualified shares (Cost $2,148,545) 2,148,545
Putnam Variable Trust U.S. Government and High Quality Bond
204,894 qualified shares (Cost $2,773,678) 2,813,192
467,082 non-qualified shares (Cost $6,141,977) 6,413,033
Putnam Variable Trust Growth and Income
675,900 qualified shares (Cost $15,168,803) 19,445,646
77,035 shares owned by Investors Life (Cost $1,728,852) 2,216,302
325,810 non-qualified shares (Cost $7,213,430) 9,373,558
77,208 shares owned by Investors Life(Cost $1,709,394) 2,221,288
Putnam Variable Trust Voyager
17,926 qualified shares (Cost $493,688) 821,912
41,816 shares owned by Investors Life(Cost $1,151,634) 1,917,283
14,984 non-qualified shares (Cost $413,645) 687,009
41,765 shares owned by Investors Life(Cost $1,152,975) 1,914,933
Total Assets 51,298,267
CONTRACT OWNERS' EQUITY
Contract Owners' Equity (Notes 3 and 6):
Putnam Variable Trust Money Market
593,464 qualified accumulation
units outstanding (2.2336077 Per Unit) 1,325,566
968,809 non-qualified accumulation
units outstanding (2.2177178 Per Unit) 2,148,545
Putnam Variable Trust U.S. Government and High Quality Bond
772,236 qualified accumulation
units outstanding (3.6429178 Per Unit) 2,813,192
1,781,007 non-qualified accumulation
units outstanding (3.6007904 Per Unit) 6,413,033
Putnam Variable Trust Growth and Income
2,241,534 qualified accumulation
units outstanding (8.6751509 Per Unit) 19,445,646
255,477 Investors Life equity (8.6751509 Per Unit) 2,216,302
1,259,354 non-qualified accumulation
units outstanding (7.4431478 Per Unit) 9,373,558
298,434 Investors Life equity (7.4431478 Per Unit) 2,221,288
Putnam Variable Trust Voyager
214,343 qualified accumulation
units outstanding (3.8345659 Per Unit) 821,912
500,000 Investors Life equity (3.8345659 Per Unit) 1,917,283
179,382 non-qualified accumulation
units outstanding (3.8298664 Per Unit) 687,009
500,000 Investors Life equity (3.8298664 Per Unit) 1,914,933
Contract Owners' Equity 51,298,267
The accompanying notes are an integral part of these financial statements
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT I
INDIVIDUAL STATEMENTS OF OPERATIONS
Year Ended December 31, 1998
Putnam Putnam
Variable Trust Variable Trust
Money Money
Market Market
Qualified Non-Qualified
Investment Income:
Dividends $74,230 $121,194
Expenses:
Mortality risk and expense
fees guarantees (Notes 1 and 3) 17,239 28,456
Investment income - net 56,991 92,738
Net Realized and Unrealized Gain (Loss)
on Investments:
Net realized capital gain distribution 0 0
Net realized gain (loss) on investments:
Proceeds from sale of shares 451,762 679,673
Cost of shares sold 451,762 679,673
Net realized gain (loss) on investment 0 0
Net unrealized gain (loss) on investme 0 0
Net realized and unrealized
gain (loss) on investments 0 0
Net Increase (Decrease) in Net Assets
from Investment Operations $56,991 $92,738
Putnam Variable Putnam Variable
Trust U.S. Trust U.S.
Govmt and High Govmt and High
Quality Bond Quality Bond
Qualified Non-Qualified
Investment Income:
Dividends $161,920 $363,023
Expenses:
Mortality risk and expense
fees guarantees (Notes 1 and 3) 35,058 77,891
Investment income - net 126,862 285,132
Net Realized and Unrealized Gain (Loss)
on Investments:
Net realized capital gain distribution 0 0
Net realized gain (loss) on investments:
Proceeds from sale of shares 758,168 773,705
Cost of shares sold 684,652 700,907
Net realized gain (loss) on investment 73,516 72,798
Net unrealized gain (loss) on investme (3,021) 81,679
Net realized and unrealized
gain (loss) on investments 70,495 154,477
Net Increase (Decrease) in Net Assets
from Investment Operations $197,357 $439,609
Putnam Variable Putnam Variable
Trust Growth Trust Growth
and Income and Income
Qualified* Non-Qualified*
Investment Income:
Dividends $822,998 $450,029
Expenses:
Mortality risk and expense
fees guarantees (Notes 1 and 3) 254,063 135,542
Investment income - net 568,935 314,487
Net Realized and Unrealized Gain (Loss)
on Investments:
Net realized capital gain distribution 1,899,116 1,038,467
Net realized gain (loss) on investments:
Proceeds from sale of shares 3,170,923 1,745,101
Cost of shares sold 2,002,374 1,112,663
Net realized gain (loss) on investment 1,168,549 632,438
Net unrealized gain (loss) on investme (842,800) (471,025)
Net realized and unrealized
gain (loss) on investments 2,224,865 1,199,880
Net Increase (Decrease) in Net Assets
from Investment Operations $2,793,800 $1,514,367
Putnam Putnam
Variable Trust Variable Trust
Voyager Voyager
Qualified * Non-Qualified *
Investment Income:
Dividends $5,815 $5,193
Expenses:
Mortality risk and expense
fees guarantees (Notes 1 and 3) 29,472 25,997
Investment income - net (23,657) (20,804)
Net Realized and Unrealized Gain (Loss)
on Investments:
Net realized capital gain distribution 141,877 126,718
Net realized gain (loss) on investments:
Proceeds from sale of shares 238,304 180,879
Cost of shares sold 138,926 103,941
Net realized gain (loss) on investment 99,378 76,938
Net unrealized gain (loss) on investme 292,657 302,163
Net realized and unrealized
gain (loss) on investments 533,912 505,819
Net Increase (Decrease) in Net Assets
from Investment Operations $510,255 $485,015
The accompanying notes are an integral part of these financial statements
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT I
INDIVIDUAL STATEMENTS OF CHANGES IN TOTAL ASSETS
Year Ended December 31, 1998
Putnam Putnam
Variable Trust Variable Trust
Money Money
Market Market
Qualified Non-Qualified
Investment Operations:
Investment income-net $56,991 $92,738
Realized capital gain distributions 0 0
Net realized gain (loss) on investment 0 0
Net unrealized gain (loss) on investme 0 0
Net increase (decrease) in net assets
from investment operations 56,991 92,738
Accumulation Unit Transactions:
Net contract considerations
and transfers in (Note 3) 198,798 436,426
Net contract surrenders
and transfers out (Note 3) (394,261) (618,288)
Benefit payments to annuitants (7,075) (34,277)
Net increase (decrease)
from accumulation unit transactions (202,538) (216,139)
Net Increase (Decrease) in Net Assets ($145,547) ($123,401)
Net assets at December 31, 1997 1,471,113 2,271,946
Net assets at December 31, 1998 $1,325,566 $2,148,545
* Includes shares owned by Investors Life
Year Ended December 31, 1997
Putnam Putnam
Variable Trust Variable Trust
Money Money
Market Market
Qualified Non-Qualified
Investment Operations:
Investment income-net $62,277 $95,862
Realized capital gain distributions 0 0
Net realized gain (loss) on investment 0 0
Net unrealized gain (loss) on investme 0 0
Net increase (decrease) in net assets
from investment operations 62,277 95,862
Accumulation Unit Transactions:
Net contract considerations
and transfers in (Note 3) 100,446 34,792
Net contract surrenders
and transfers out (Note 3) (440,229) (465,907)
Benefit payments to annuitants (2,159) (36,608)
Net increase (decrease)
from accumulation unit transactions (341,942) (467,723)
Net Increase (Decrease) in Net Assets ($279,665) ($371,861)
Net assets at December 31, 1996 1,750,778 2,643,807
Net assets at December 31, 1997 $1,471,113 $2,271,946
Putnam Variable Putnam Variable
Trust U.S. Trust U.S.
Government and Government and
High Quality Bond High Quality Bond
Qualified Non-Qualified
Investment Operations:
Investment income-net $126,862 $285,132
Realized capital gain distributions 0 0
Net realized gain (loss) on investment 73,516 72,798
Net unrealized gain (loss) on investme (3,021) 81,679
Net increase (decrease) in net assets
from investment operations 197,357 439,609
Accumulation Unit Transactions:
Net contract considerations
and transfers in (Note 3) 119,096 15,992
Net contract surrenders
and transfers out (Note 3) (614,443) (612,664)
Benefit payments to annuitants (23,515) (99,141)
Net increase (decrease)
from accumulation unit transactions (518,862) (695,813)
Net Increase (Decrease) in Net Assets ($321,505) ($256,204)
Net assets at December 31, 1997 3,134,697 6,669,237
Net assets at December 31, 1998 $2,813,192 $6,413,033
* Includes shares owned by Investors Life
Year Ended December 31, 1997
Putnam Variable Putnam Variable
Trust U.S. Trust U.S.
Government and Government and
High Quality Bond High Quality Bond
Qualified Non-Qualified
Investment Operations:
Investment income-net $214,909 $390,590
Realized capital gain distributions 0 0
Net realized gain (loss) on investment 95,026 103,799
Net unrealized gain (loss) on investme (50,657) 1,802
Net increase (decrease) in net assets
from investment operations 259,278 496,191
Accumulation Unit Transactions:
Net contract considerations
and transfers in (Note 3) 23,639 145,621
Net contract surrenders
and transfers out (Note 3) (1,310,074) (1,422,542)
Benefit payments to annuitants (5,189) (55,995)
Net increase (decrease)
from accumulation unit transactions (1,291,624) (1,332,916)
Net Increase (Decrease) in Net Assets ($1,032,346) ($836,725)
Net assets at December 31, 1996 4,167,043 7,505,962
Net assets at December 31, 1997 $3,134,697 $6,669,237
Putnam Variable Putnam Variable
Trust Growth Trust Growth
and Income and Income
Qualified Non-Qualified
Investment Operations:
Investment income-net $568,935 $314,487
Realized capital gain distributions 1,899,116 1,038,467
Net realized gain (loss) on investment 1,168,549 632,438
Net unrealized gain (loss) on investme (842,800) (471,025)
Net increase (decrease) in net assets
from investment operations 2,793,800 1,514,367
Accumulation Unit Transactions:
Net contract considerations
and transfers in (Note 3) 217,936 261,081
Net contract surrenders
and transfers out (Note 3) (2,719,592) (1,493,533)
Benefit payments to annuitants (106,044) (128,522)
Net increase (decrease)
from accumulation unit transactions (2,607,700) (1,360,974)
Net Increase (Decrease) in Net Assets $186,100 $153,393
Net assets at December 31, 1997 21,475,848 11,441,453
Net assets at December 31, 1998 $21,661,948 $11,594,846
* Includes shares owned by Investors Life
Year Ended December 31, 1997
Putnam Variable Putnam Variable
Trust Growth Trust Growth
and Income and Income
Qualified Non-Qualified
Investment Operations:
Investment income-net $357,791 $189,484
Realized capital gain distributions 820,977 433,146
Net realized gain (loss) on investment 1,486,456 589,042
Net unrealized gain (loss) on investme 1,749,996 1,104,254
Net increase (decrease) in net assets
from investment operations 4,415,220 2,315,926
Accumulation Unit Transactions:
Net contract considerations
and transfers in (Note 3) 634,334 130,374
Net contract surrenders
and transfers out (Note 3) (3,900,090) (1,537,206)
Benefit payments to annuitants (14,478) (119,771)
Net increase (decrease)
from accumulation unit transactions (3,280,234) (1,526,603)
Net Increase (Decrease) in Net Assets $1,134,986 $789,323
Net assets at December 31, 1996 20,340,862 10,652,130
Net assets at December 31, 1997 $21,475,848 $11,441,453
Putnam Putnam
Variable Trust Variable Trust
Voyager Voyager
Qualified * Non-Qualified *
Investment Operations:
Investment income-net ($23,657) ($20,804)
Realized capital gain distributions 141,877 126,718
Net realized gain (loss) on investment 99,378 76,938
Net unrealized gain (loss) on investme 292,657 302,163
Net increase (decrease) in net assets
from investment operations 510,255 485,015
Accumulation Unit Transactions:
Net contract considerations
and transfers in (Note 3) 33,436 229,908
Net contract surrenders
and transfers out (Note 3) (106,935) (148,405)
Benefit payments to annuitants (3,988) 0
Net increase (decrease)
from accumulation unit transactions (77,487) 81,503
Net Increase (Decrease) in Net Assets $432,768 $566,518
Net assets at December 31, 1997 2,306,427 2,035,424
Net assets at December 31, 1998 $2,739,195 $2,601,942
* Includes shares owned by Investors Life
Year Ended December 31, 1997
Putnam Putnam
Variable Trust Variable Trust
Voyager Voyager
Qualified * Non-Qualified *
Investment Operations:
Investment income-net ($18,840) ($16,213)
Realized capital gain distributions 87,856 71,570
Net realized gain (loss) on investment 59,862 30,400
Net unrealized gain (loss) on investme 355,156 323,702
Net increase (decrease) in net assets
from investment operations 484,034 409,459
Accumulation Unit Transactions:
Net contract considerations
and transfers in (Note 3) 87,480 105,653
Net contract surrenders
and transfers out (Note 3) (139,414) (57,462)
Benefit payments to annuitants 0 0
Net increase (decrease)
from accumulation unit transactions (51,934) 48,191
Net Increase (Decrease) in Net Assets $432,100 $457,650
Net assets at December 31, 1996 1,874,327 1,577,774
Net assets at December 31, 1997 $2,306,427 $2,035,424
* Includes shares owned by Investors Life
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT I
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
Note 1. Organization
Investors Life Insurance Company of North America ("Investors Life") established
Investors Life Insurance Company of North America - Separate Account I (the
"Separate Account") as a unit investment trust registered under the Investment
Company Act of 1940, as amended. Operations of the Separate Account commenced on
September 15, 1982. The Separate Account currently has four Divisions each
corresponding to a portfolio of Putnam Variable Trust (formerly known as Putnam
Capital Manager Trust). Prior to the substitution of shares of Putnam Variable
Trust for shares of CIGNA Annuity Funds Group as the underlying funding vehicle
for the Separate Account (the "Substitution"), the Separate Account contained
five divisions. The Substitution was effective as of April 18, 1995, following
approvals of the Substitution by the U.S. Securities and Exchange Commission and
the contractholders having their contract values determined by the affected
portfolios of the CIGNA Annuity Funds Group. In connection with the
Substitution, the Equity Division was merged with the Growth and Income
Division; thereafter, the Equity Division was renamed the Growth and Income
Division II. Each Division contains two subdivisions, one for the allocation of
tax qualified and one for the allocation of non-tax qualified net payments made
under variable annuity contracts.
Net purchase payments to the Separate Account may be allocated to one or more of
the following classes of shares of the Putnam Variable Trust: Putnam Variable
Trust Money Market Fund, Putnam Variable Trust U.S. Government and High Quality
Bond Fund, Putnam Variable Trust Growth and Income Fund or Putnam Variable Trust
Voyager Fund. The contract owners' equity of each subdivision of the Separate
Account is affected by the investment results of the appropriate portfolio(s) of
shares of Putnam Variable Trust designated for the subdivision and the mortality
risk and expense fees guarantees assessed on the Separate Account assets (See
Note 3), and the administrative charge deductions.
Under the current provisions of the Internal Revenue Code (the "Code"),
transfers of contract values from one division of the Separate Account to
another division are not subject to current taxation. There can be no assurance
that future changes in the Code will not subject such transfers to current
taxation.
Note 2. Significant Accounting Policies
Following is a summary of the significant accounting policies of the Separate
Account:
(a) the market value of the investments is based on closing bid prices (net
asset value) at December 31, 1998; (b) investment transactions are accounted for
on the trade date and income is recorded on the ex-dividend date; (c) the cost
of investments sold is determined on the specific identification method. See
Notes 4 and 5 with respect to income taxes.
Note 3. Contract Owner Transactions
Net contract considerations represent gross contributions under variable annuity
contracts less deductions by Investors Life for any applicable premium taxes.
Net contract considerations for the period ended December 31, 1998, were $ after
deductions for premium taxes of $ . Contract owners have limited rights to
transfer their contract values between Separate Account Divisions. For the
period ended December 31, 1998, the total of all transfers was $ . Contract
surrender benefits amounted to $ . Annuity benefits amounted to $ . Investors
Life charges a fee to each Separate Account subdivision for assuming the
mortality risk and expense fees guarantees. The daily equivalent of the annual
charge of 1.2% is made against the average net value of the Separate Account.
Note 4. Income Taxes
Investors Life is taxed as a life insurance company under the Code. The Separate
Account is taxed as a part of Investors Life. Under the current provisions of
the Code, no federal income taxes are payable by Investors Life with respect to
the operations of the Separate Account when such operations are used to
determine the contract values of the Separate Account. Investors Life retains
the right to make adjustments for taxes to Separate Account assets should future
changes in the Internal Revenue Code so warrant.
Note 5. Diversification Requirements
Under the provisions of Section 817(h) of the Code, a variable annuity contract,
other than a contract issued in connection with certain types of employee
benefit plans, will not be treated as an annuity contract for federal tax
purposes for any period for which the investments of the segregated asset
account on which the contract is based are not adequately diversified. The Code
provides that the "adequately diversified" requirement may be met if the
underlying investments satisfy either a statutory safe harbor test or
diversification requirements set forth in regulations issued by the Secretary of
Treasury.
The Internal Revenue Service has issued regulations under section 817(h) of the
Code. Investors Life believes that the Separate Account satisfies the current
requirements of the regulations.
Note 6. Accumulation Unit Transactions
Year Ending December 31, 1998
The changes in the number of accumulation units (the measure of ownership in the
Separate Account) during the twelve months of 1998 and units outstanding at
December 31, 1998 were as follows:
Putnam Putnam
Variable Trust Variable Trust
Money Money
Market Market
Qualified Non-Qualified
Units outstanding at December 31, 1997 684,786 1,065,062
Units purchased and transfers in 90,662 200,761
Benefits, surrenders and transfers out (181,984) (297,014)
Units outstanding at December 31, 1998 593,464 968,809
* Includes shares owned by Investors Life
Putnam Variable Putnam Variable
Trust U.S. Trust U.S.
Government Government
and High and High
Quality Bond Quality Bond
Qualified Non-Qualified
Units outstanding at December 31, 1997 920,186 1,981,587
Units purchased and transfers in 33,814 4,651
Benefits, surrenders and transfers out (181,764) (205,231)
Units outstanding at December 31, 1998 772,236 1,781,007
* Includes shares owned by Investors Life
Putnam Variable Putnam Variable
Trust Growth Trust Growth
and Income and Income
Qualified Non-Qualified
Units outstanding at December 31, 1997 2,818,975 1,753,068
Units purchased and transfers in 39,464 39,640
Benefits, surrenders and transfers out (361,428) (234,920)
Units outstanding at December 31, 1998 2,497,011 1,557,788
* Includes shares owned by Investors Life
Putnam Putnam
Variable Trust Variable Trust
Money Money
Market Market
Qualified Non-Qualified
Units outstanding at December 31, 1997 684,786 1,065,062
Units purchased and transfers in 90,662 200,761
Benefits, surrenders and transfers out (181,984) (297,014)
Units outstanding at December 31, 1998 593,464 968,809
* Includes shares owned by Investors Life
Putnam Putnam
Variable Trust Variable Trust
Voyager Voyager
Qualified * Non-Qualified *
Units outstanding at December 31, 1997 738,882 653,214
Units purchased and transfers in 14,819 71,184
Benefits, surrenders and transfers out (39,358) (45,016)
Units outstanding at December 31, 1998 714,343 679,382
* Includes shares owned by Investors Life
The accumulation units for six of the subdivisions include units applicable to
contract owners who are "on benefit annuitants." At December 31, 1998 the number
of accumulation units, the aggregate value of the subdivisions' equity and the
number of monthly annuity units and value per unit of "on benefit annuitants"
are as follows:
Accumulation Aggregate
Units Value
Putnam Variable Trust
Money Market, Qualified 41,320 $92,293
Putnam Variable Trust
Money Market, Non-Qualified 196,266 $435,263
Putnam Variable Trust
Growth and Income II, Qualified 123,951 $1,075,293
Putnam Variable Trust
Growth and Income II, Non-Qualified 88,359 $657,669
Putnam Variable Trust U.S. Government
and High Quality Bond, Qualified 78,595 $286,316
Putnam Variable Trust U.S. Government
and High Quality Bond, Non-Qualified 177,387 $638,731
Putnam Variable Trust Voyager, Qualified 30,398 $116,564
Monthly Annuity
Annuity Units Unit Value
Putnam Variable Trust
Money Market, Qualied 774 $0.8161456
Putnam Variable Trust
Money Market, Non-Qualified 3,958 $0.8165745
Putnam Variable Trust
Growth and Income II, Qualified 4,883 $1.9570484
Putnam Variable Trust
Growth and Income II, Non-Qualified 5,706 $2.1000633
Putnam Variable Trust U.S. Government
and High Quality Bond, Qualified 1,466 $1.4199439
Putnam Variable Trust U.S. Government
and High Quality Bond, Non-Qualified 4,707 $1.4209644
Putnam Variable Trust Voyager, Qualified 462 $1.0780159
