SEPARATE ACCOUNT I OF WASHINGTON NATIONAL INSURANCE CO
485APOS, 1996-05-01
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<PAGE>
 
      As filed with the Securities and Exchange Commission on May 1, 1996
                                                        REGISTRATION NO. 2-81129
                                                                        811-3640
                      SECURITIES AND EXCHANGE COMMISSION
                      ==================================
                            Washington, D.C.  20549

                                   FORM N-4

            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933         [X]
                        Pre-Effective Amendment No. __                      [_]
                        Post-Effective Amendment No. 17                     [X]
                                                     --     
                                      and
        REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940     [X]
                               Amendment No. 18                             [X]
                                             --     

                              SEPARATE ACCOUNT I
                              ------------------
                   OF WASHINGTON NATIONAL INSURANCE COMPANY
                   ----------------------------------------
                                        
                          (Exact Name of Registrant)

                     WASHINGTON NATIONAL INSURANCE COMPANY
                     -------------------------------------
                              (Name of Depositor)

             300 Tower Parkway, Lincolnshire, Illinois 60069-3665
             ----------------------------------------------------
             (Address of Depositor's Principal Executive Offices)

               Depositor's Telephone Number, including Area Code
                                (847) 793-3000

Name and Address of Agent for Service:        Copy to:
Craig R. Edwards, Esquire                     Frederick R. Bellamy, Esquire
Washington National Insurance Company         Sutherland, Asbill & Brennan
300 Tower Parkway                             1275 Pennsylvania Avenue, N.W.
Lincolnshire, Illinois  60069-3665            Washington, D.C.  20004-2404

                 Approximate date of proposed public offering:
   As soon as practicable after effectiveness of the Registration Statement

     It is proposed that this filing will become effective:
       __ immediately upon filing pursuant to paragraph (b) of Rule 485

       __ on __________pursuant to paragraph (b) of Rule 485

       __ 60 days after filing pursuant to paragraph (a)(1) of Rule 485

       x  on July 1, 1996, pursuant to paragraph (a)(1) of Rule 485
       __

       __ 75 days after filing pursuant to paragraph (a)(2) of Rule 485

       __ on __________ pursuant to paragraph (a)(2) of Rule 485

     If appropriate, check the following box:

       __ this Post-Effective Amendment designates a new effective date for a
previously filed post-effective amendment.

The Registrant has previously filed a declaration of indefinite registration of
its shares pursuant to Rule 24f-2 under the Investment Company Act of 1940.  The
Rule 24f-2 Notice for the year ended December 31, 1995 was filed on February 22,
1996.
<PAGE>
 
                             CROSS REFERENCE SHEET
                             Pursuant to Rule 495


                    Showing Location in Part A (Prospectus)
            Part B (Statement of Additional Information) and Part C
          of Registration Statement Information Required by Form N-4
          ----------------------------------------------------------

                                    PART A
                                    ------
<TABLE>
<CAPTION>

Item of Form N-4                          Prospectus Caption
- ----------------                          ------------------
<S> <C>                                   <C>
1.  Cover Page..........................  Cover Page

2.  Definitions.........................  Definitions

3.  Synopsis............................  Summary

4.  Condensed Financial Information.....  Condensed Financial Information

5.  General
    (a)  Depositor......................  The Company
    (b)  Registrant.....................  The Separate Account
    (c)  Portfolio Company..............  Scudder Variable Life Investment Fund
    (d)  Portfolio Prospectus...........  Scudder Variable Life Investment Fund
    (e)  Voting Rights..................  Voting Rights

6.  Deductions and Expenses
    (a)  General........................  Charges
    (b)  Sales Load %...................  Contingent Deferred Sales Charge
    (c)  Special Purchase Plan..........  Contingent Deferred Sales Charge
    (d)  Commissions....................  How Contracts Were Sold
    (e)  Deductions and Expenses-
           Portfolio Companies..........  Scudder Variable Life Investment Fund
                                          Summary; Investment Advisory Fees
    (f)  Operating Expenses-Registrant..  Summary; Charges

7.  Contracts
    (a)  Persons with Rights............  Voting Rights; The Contracts
    (b)(i)  Allocation of Premium
            Payments....................  Purchase Payments
      (ii)  Transfers...................  Transfers of Accumulated Values
     (iii)  Exchanges...................  Not Applicable
    (c)  Changes........................  Changes and Modifications
    (d)  Inquiries......................  Summary; Inquiries About Your Contract

8.  Annuity Period......................  After Maturity (Annuity Period)

9.  Death Benefit.......................  Payment at Death
</TABLE>
<PAGE>
 
<TABLE>
<CAPTION> 
<S>      <C>                                  <C>
10.     Purchase and Contract Value
        (a) Purchases........................  Purchase Payments
        (b) Valuation........................  Accumulated Value
        (c) Daily Calculation................  Purchase Payments
        (d) Underwriter......................  How Contracts Were Sold

11.     Redemptions
        (a) By Contract Owners...............  Cash Surrender and Withdrawals
            By Annuitant.....................  Not Applicable
        (b) Texas ORP........................  Federal Income Tax Matters
        (c) Check Delay......................  Time and Delay of Payment
        (d) Lapse............................  Termination of Participation
        (e) Free Look........................  Not Applicable
 
12.     Taxes................................  Federal Income Tax Matters
 
13.    Legal Proceedings.....................  Legal Proceedings

14.    Table of Contents of the
       Statement of Additional Information...  Table of Contents of the
                                               Statement of Additional
                                               Information


                                    PART B
                                    ------

                                               Statement of Additional
Item of Form N-4                               Information Caption
- ----------------                               -------------------
 
15.    Cover Page............................  Cover Page
 
16.    Table of Contents.....................  Table of Contents

17.    General Information and History.......  (Prospectus) The Company; General
                                               Information and History

18.    Services
       (a) Fees and Expenses of Registrant...  (Prospectus) Charges
       (b) Management Contracts..............  Administrative Services
       (c) Custodian.........................  Not Applicable
           Independent Auditors..............  Financial Statements; Experts
       (d) Assets of Registrant..............  Not Applicable
       (e) Affiliated Person.................  Administrative Services
       (f) Principal Underwriter.............  (Prospectus) How Contracts Were
                                               Sold; Underwriter
19.    Purchase of Securities Being Offered
       (a) Manner of Offering................  (Prospectus) The Contracts
       (b) Offering Sales Load...............  (Prospectus) Contingent Deferred
                                               Sales Charge
20.    Underwriters..........................  (Prospectus) How Contracts Were
                                               Sold; Underwriters
</TABLE>
<PAGE>
<TABLE> 
<CAPTION>
<S>   <C>                                   <C>        
21.   Calculation of Performance
      Data...............................    Not Applicable

22.   Annuity Payments...................    (Prospectus) After Maturity
                                             (Annuity Period); Annuity Payments

23.   Financial Statements...............    Financial Statements


                          PART C -- OTHER INFORMATION
                          ---------------------------

Item of Form N-4                             Part C Caption
- ----------------                             --------------

24.   Financial Statements
      and Exhibits.......................    Financial Statements and Exhibits
      (a) Financial Statements...........    Financial Statements
      (b) Exhibits.......................    Exhibits
 
25.   Directors and Officers of
      the Depositor......................    Directors and Officers of
                                             the Depositor
 
26.   Persons Controlled By or Under         Persons Controlled By or Under 
      Common Control with the Depositor      Common Control with the Depositor 
      or Registrant......................    or Registrant
 
27.   Number of Contract Owners..........    Number of Contract Owners
 
28.   Indemnification....................    Indemnification
 
29.   Principal Underwriters.............    Principal Underwriter
 
30.   Location of Accounts and Records...    Location of Accounts and Records
 
31.   Management Services................    Management Services
 
32.   Undertakings.......................    Undertakings

      Signature Page.....................    Signatures
</TABLE>
<PAGE>
 
                       WN PLAN DEFERRED VARIABLE ANNUITY
                       ---------------------------------

                                   Issued by
                     WASHINGTON NATIONAL INSURANCE COMPANY
                300 Tower Parkway, Lincolnshire, IL  60069-3665
Prospectus                                                          July 1, 1996
- ----------                              

  This Prospectus describes the WN Plan Deferred Variable Annuity Contract (the
"Contract"), offered by Washington National Insurance Company (the "Company") to
provide for the accumulation of capital on a tax-deferred basis for retirement
or other long-term purposes.  The Contracts were offered on a group or
individual basis, and may be paid by a single Purchase Payment or by periodic
Purchase Payments.  The Contracts are no longer being sold but Purchase Payments
can still be made on existing Contracts.

  You may allocate Purchase Payments to one or more Sub-Accounts of Separate
Account I of the Washington National Insurance Company (the "Separate Account")
and/or to the Fixed Account. The Separate Account has four different Sub-
Accounts (the "Sub-Accounts").  Assets of each Sub-Account are invested in a
corresponding portfolio (each, a "Portfolio") of a mutual fund, Scudder Variable
Life Investment Fund (the "Fund").  Each of the Sub-Accounts will invest all of
its assets exclusively in shares of the Bond Portfolio, the Money Market
Portfolio, the Capital Growth Portfolio, or the Growth and Income Portfolio of
the Fund.  The Portfolios are described in the Fund's prospectus that
accompanies this Prospectus.  The Accumulated Value allocated to the Separate
Account will vary up or down in accordance with the investment performance of
the Portfolio(s) you select.  Therefore, you bear the entire investment risk for
all amounts allocated to the Separate Account.  There is no guaranteed or
minimum Accumulated Value for the Sub-Accounts, so the value with respect to
amounts allocated to the Sub-Accounts could be less than the payments allocated
thereto.

  This Prospectus sets forth your rights under the Contract and provides
information that you should know before investing.  A Statement of Additional
Information dated July 1, 1996, has been filed with the Securities and Exchange
Commission ("SEC") and is available without charge by returning the enclosed
card or by calling the company at 1-800-866-9922.  The Table of Contents of the
Statement of Additional Information is included at the end of this Prospectus.
The Statement of Additional Information, as supplemented from time to time, is
incorporated herein by reference.

                THIS PROSPECTUS MUST BE ACCOMPANIED OR PRECEDED
       BY A CURRENT PROSPECTUS FOR SCUDDER VARIABLE LIFE INVESTMENT FUND

  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
               EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
             UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.  ANY
             REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

   Please Read This Prospectus Carefully And Retain It For Future Reference.

<PAGE>
 
TABLE OF CONTENTS
- -----------------

<TABLE>
<CAPTION>

                                                                           PAGE
                                                                           ----
<S>                                                                        <C>
DEFINITIONS.............................................................     4
SUMMARY.................................................................     5
   Separate Account I Fee Table.........................................     6
   Separate Account I...................................................     7
   Purchase Payments....................................................     8
   Allocation of Purchase Payments......................................     8
   Transfers of Contract Accumulated Values.............................     8
   Charges..............................................................     8
   Inquiries and Written Notices and Requests...........................     9
   Variations in Contract Provisions....................................     9
CONDENSED FINANCIAL INFORMATION.........................................    10
THE COMPANY.............................................................    11
THE SEPARATE ACCOUNT....................................................    11
SCUDDER VARIABLE LIFE INVESTMENT FUND...................................    12
   Portfolios of the Fund...............................................    12
   Bond Portfolio.......................................................    12
   Money Market Portfolio...............................................    12
   Capital Growth Portfolio.............................................    12
   Growth and Income Portfolio..........................................    13
   Investment Advisory Fees.............................................    13
   Addition, Deletion, or Substitution of Investments...................    13
   Resolving Material Conflicts.........................................    14
THE CONTRACTS...........................................................    14
   PRIOR TO MATURITY (ACCUMULATION PERIOD)..............................    14
       Purchase Payments................................................    15
       Sub-Account Allocations..........................................    15
       Transfers of Accumulated Values..................................    15
       Accumulated Value................................................    16
       Termination of Participation.....................................    16
       Cash Surrender and Withdrawals...................................    17
       Withdrawals May Be Taxable.......................................    17
       Loan From 403(b) Contracts.......................................    17
       Options on Discontinuance of Purchase Payments...................    18
       Payment at Death.................................................    18
       Time and Delay of Payment........................................    18
       Inquiries About Your Contract....................................    19
   AFTER MATURITY (ANNUITY PERIOD)......................................    19
       Maturity Date....................................................    19
       Election of Options..............................................    19
           Option 1--Income for a Fixed Period..........................    20
           Option 2--Income for Life....................................    20
           Option 3--Income of Fixed Amount.............................    20
           Option 4--Interest Income....................................    20
           Option 5--Joint and Survivor Income for Life.................    20

</TABLE>
                                      -2-
<PAGE>

<TABLE>
<CAPTION>

<S>                                                                        <C>
       Option 6--Joint and Two-thirds Survivor Income for Life..........    20
       Election of Fixed or Variable Annuity Payments...................    20
       Determination of Variable Annuity Payments.......................    21
HOW CONTRACTS WERE SOLD.................................................    21
CHARGES.................................................................    22
   Annuity Rate Guarantee Charge........................................    22
   Financial Accounting Service Charge..................................    22
   Contingent Deferred Sales Charge.....................................    23
   Contract Maintenance Charge..........................................    23
   Premium Taxes........................................................    24
CHANGES AND MODIFICATIONS...............................................    24
VOTING RIGHTS...........................................................    24
FEDERAL INCOME TAX MATTERS..............................................    25
   How We Are Taxed.....................................................    26
   How You Are Taxed....................................................    26
   Non-Qualified Contracts..............................................    26
   Qualified Contracts..................................................    27
   Other Considerations.................................................    29
LEGAL PROCEEDINGS.......................................................    30
THE FIXED ACCOUNT.......................................................    30
   Fixed Account Accumulated Value......................................    30
   Amount of Each Fixed Annuity Payment.................................    30
   Time and Delay of Payment............................................    31
   Fixed Account........................................................    31
STATEMENT OF ADDITIONAL INFORMATION.....................................    32
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL
INFORMATION.............................................................    32

</TABLE>

                                      -3-
<PAGE>
 
                                  DEFINITIONS
                                  -----------

WE, OUR, US -- the Washington National Insurance Company, or the Company.
YOU, YOUR -- the owner of the Contract, or Owner.
ACCUMULATED VALUE -- the value (prior to maturity) of all Accumulation Units
credited to the Contract or the Participant's Certificate under the Contract.
ACCUMULATION UNIT -- a unit used to measure the value of the Contract prior to
maturity.
ANNUITANT -- the person named to receive annuity payments.
ANNUITY UNIT -- a unit used to determine the amount of each annuity payment.
ATTAINED AGE -- the Annuitant's age on the Contract Date plus the number of
years and completed months from the Contract Date.
BENEFICIARY -- the person or entity to receive the Proceeds in the event of the
Annuitant's death.
CERTIFICATE -- certifies participation and represents a Participant's interest
under a group Contract.
CONTRACT -- the group or individual Contracts offered by this prospectus.
CONTRACT ANNIVERSARY -- the same day and month as the Contract Date for each
succeeding year the Contract remains in force.
CONTRACT DATE -- the effective date of the Contract and the date from which
Contract Anniversaries, Contract years and Contract months are determined.
FIXED ACCOUNT -- all of Our assets other than those allocated to any of Our
separate accounts.
FIXED ANNUITY -- an annuity with payments of a stated amount which are not based
on the investment results of Separate Account I, but are guaranteed by Us.
NET ACCUMULATED VALUE -- the Accumulated Value reduced by any applicable
charges.
PARTICIPANT -- a person who participates in and for whom benefits are being
accrued under one of the group contracts offered through this prospectus. Unless
otherwise indicated, the term is used interchangeable with the term Annuitant in
this prospectus.
PROCEEDS -- the amount We are obligated to pay under the terms of the Contract
when a full or partial withdrawal is made, when the contract matures or when the
Annuitant dies.
PURCHASE PAYMENT -- the amount paid to Us for the benefits under the Contract.
SEPARATE ACCOUNT I -- the separate account established by Us under Illinois law,
the assets of which are kept separate from Our other assets. The Separate
Account I meets the definition of a separate account under the federal
securities laws.
SUB-ACCOUNT -- a Separate Account I portfolio to which Purchase Payments are
allocated. The term Sub-Account also refers to a Sub-Account Division if a Sub-
Account has Divisions.
VALUATION DATE -- each day when the New York Stock Exchange is open for business
or when trades in the securities of any Sub-Account would materially change the
Accumulation and Annuity Unit Values of the Sub-Account.
VALUATION PERIOD -- the period of time between one Valuation Date and the next
Valuation Date.
VARIABLE ANNUITY -- an annuity with payments which vary in amount with the
investment experience of a separate account.
WRITTEN REQUEST -- in a written form satisfactory to Us, signed by You and/or
the Participant and filed in our Home Office in Lincolnshire, Illinois.

                                      -4-
<PAGE>
 
                  THE WASHINGTON NATIONAL INSURANCE COMPANY 
                  -----------------------------------------
                       WN PLAN DEFERRED VARIABLE ANNUITY
                       ---------------------------------

                                    SUMMARY
                                    -------

     The group and individual Variable Annuity Contracts described in this
prospectus are designed for use by retirement plans which receive favorable tax
treatment under the Internal Revenue Code, as well as by individuals and groups
that are not covered by such plans.

     During the Accumulation Period, which is the time between the date a
Contract is issued and the maturity date (the date on which We begin making
payments to the Annuitant), the full amount of every Purchase Payment paid to Us
is put to work. We make no deduction for sales charges from those payments. You
have a great deal of flexibility as to how payments are applied and have the
ability to move Accumulated Values around within the available Sub-Accounts and
the Fixed Account. A brief description of these and other features of the
Contract follows. This prospectus describes generally only the variable aspects
of this Contract. For information about the fixed aspects of this Contract, see
The Fixed Account, page 30.

                                      -5-

<PAGE>
 
<TABLE>
<CAPTION>
SEPARATE ACCOUNT I FEE TABLE
                                                                               GROWTH
                                                            MONEY     CAPITAL  AND
                                                  BOND      MARKET    GROWTH   INCOME
                                                  SUB-      SUB-      SUB-     SUB-
                                                  ACCOUNT   ACCOUNT   ACCOUNT  ACCOUNT
                                                  -------   -------   -------  -------
<S>                                               <C>       <C>       <C>       <C>
CONTRACT OWNER TRANSACTION EXPENSES
   Sales Load Imposed On Purchases                 $    0     $   0    $    0    $    0
   Maximum Contingent Deferred Sales                    6%        6%        6%        6%
   Load (as a percentage of Accumulated
   Value withdrawn)
   Transfer Fee                                    $    0     $   0    $    0    $    0
ANNUAL CONTRACT FEE                                         $30 Per Contract
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
   Annuity Rate Guarantees                           0.80%     0.80%     0.80%     0.80%
   Financial Accounting Fees                         0.35%     0.35%     0.35%     0.35%
   Total Separate Account Annual Expenses            1.15%     1.15%     1.15%     1.15%
SCUDDER VARIABLE LIFE INVESTMENT FUND
Annual Expenses (as a percentage of the Fund's
 average net assets)
   Management Fee                                   0.475%     0.37%    0.475%    0.469%
   Other Expenses (after reimbursement)/1/          0.085%     0.13%    0.095%    0.281%
   Total Portfolio Operating Expenses               0.560%     0.50%    0.570%    0.750%
TOTAL SEPARATE ACCOUNT AND
PORTFOLIO EXPENSES                                   1.71%     1.65%     1.72%     1.90%
- ----------------------------------------------------------------------------------------
</TABLE>
The purpose of this Table is to assist you in understanding the various costs
and expenses that you bear directly and indirectly. For more information on the
charges described in this Table, see Charges on page 22.
- --------------
/1/The amounts for "Other Expenses" are the amounts charged to the Portfolios
during 1995.  Participating Insurance Companies investing in the Portfolios of
the Fund have agreed to reimburse the Portfolios to the extent that their Total
Portfolio Operating Expenses exceed 0.75% of average net assets in a calendar
year.  In addition, Scudder, Stevens & Clark has agreed to waive part or all of
its fees for the Growth and Income Portfolio so that the Growth and Income
Portfolio's expenses will be maintained at 0.75%.

                                      -6-
<PAGE>
 
EXAMPLES

     You would pay the following expenses on a $1000 investment, assuming a 5%
annual return on assets:
<TABLE>
<CAPTION>
     1.  If you surrender your Contract at the end of the applicable time
period:*
                                   1 year  3 years  5 years  10 years
                                   ------  -------  -------  --------
<S>                                <C>     <C>      <C>      <C>
  Bond Sub-Account                  $72     $109     $149      $212
  Money Market Sub-Account          $71     $107     $146      $205
  Capital Growth Sub-Account        $72     $109     $150      $213
  Growth and Income Sub-Account     $74     $115     $160      $234
 
     2.  If you do not surrender your Contract:
                                   1 year  3 years  5 years  10 years
                                   ------  -------  -------  --------
  Bond Sub-Account                  $18     $ 56     $ 96      $212
  Money Market Sub-Account          $17     $ 54     $ 93      $205
  Capital Growth Sub-Account        $18     $ 56     $ 97      $213
  Growth and Income Sub-Account     $20     $ 62     $107      $234
</TABLE>
  THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE
  EXPENSES AND THE ACTUAL EXPENSES PAID MAY BE GREATER OR LESSER THAN THOSE
  SHOWN.

*    These expense amounts also apply if you annuitize your Contract under
certain settlement options during the first five contract years.

SEPARATE ACCOUNT I

     Separate Account I of Washington National Insurance Company is a unit
investment trust that invests exclusively in shares of certain portfolios of the
Scudder Variable Life Investment Fund.  Separate Account I currently has four
Sub-Accounts, each of which invests exclusively in shares of one of the
following Portfolios of the Fund:

                                 Bond Portfolio
                             Money Market Portfolio
                            Capital Growth Portfolio
                          Growth and Income Portfolio

     The Accumulated Value of Purchase Payments allocated to Separate Account I
varies with the investment performance of the Sub-Account(s) and is not
guaranteed. The Accumulated Value of the Purchase Payments is guaranteed as to
payments allocated to the Fixed Account.

     We are the issuer of the Contracts and the obligations under the Contracts
are our obligations.

                                      -7-
<PAGE>
 
PURCHASE PAYMENTS

     Each payment which you make must be at least $25 with no less than $300
paid each year. You may allocate no less than $25 to the Fixed Account or to any
Sub-Account of Separate Account I at any time. You may increase Your payments at
any time, but We reserve the right to refuse to accept any such increases. (See
Purchase Payments, page 15.)


ALLOCATION OF PURCHASE PAYMENTS

     You allocated all or a portion of the payment to be directed to one or more
of the Sub-Accounts of Separate Account I, to the Fixed Account or to a
combination of the Fixed Account and one or more of the Sub-Accounts. You may
change Your Purchase Payment allocation at any time without charge. (See Sub-
Account Allocations, page 15.)


TRANSFERS OF CONTRACT ACCUMULATED VALUES

     Transfers of all or a part of the Accumulated Value of the Contract are
permitted. There is no charge made for transfers, but there are some
limitations. (See Transfers of Accumulated Values, page 15.)


CHARGES

     We do not currently make any deductions from Your Purchase Payments, but
apply the full amount We receive in the manner which You have indicated. During
any Contract year prior to maturity, You may withdraw up to 10% of the
Accumulated Value of the Contract without a contingent deferred sales charge. A
contingent deferred sales charge, which is intended to reimburse Us for Our
expenses in the sale of the Contract, will be deducted from any amount withdrawn
in excess of 10% of the Accumulated Value of the Contract during each Contract
year. The contingent deferred sales charge is 6% of the amount withdrawn that is
subject to the charge. (You will find a detailed description of the method of
calculation and a list of the exceptions from the charge under Contingent
Deferred Sales Charge, page 23.) Withdrawals may be treated as taxable income
and they may be subject to a penalty tax under the Internal Revenue Code. (See
How You Are Taxed, page 26.)
 
     We deduct from the total value of each Sub-Account daily charges equal to
an annual rate of approximately .80% for the annuity rate guarantees (see
Annuity Rate Guarantee Charge, page 22), and .35% for financial accounting fees
(see Financial Accounting Service Charge, page 22); these rates are not subject
to change.
 
     An annual charge of $30 for administration and contract maintenance (see
Contract Maintenance Charge, page 23) is deducted from the Accumulated Value of
each Contract on the Contract Anniversary date, or on the date of surrender if
it occurs between Contract Anniversaries. The amount and frequency of this
charge is subject to change. We currently will waive this charge if, on the
Contract Anniversary date, the Contract has an Accumulated Value of $20,000 or
more, if

                                      -8-
<PAGE>
 
$1,200 or more in Purchase Payments were made during the Contract Year, or if
the Contract is an Individual Retirement Account.
 
     While We do not, at this time, make a deduction for any premium taxes which
We must pay on Purchase Payments received by Us, We reserve the right to do so
in the future. (See Premium Taxes, page 24.) We also retain the right to charge
for possible income taxes which may become payable for Separate Account I. (See
How We Are Taxed, page 26.)
 

INQUIRIES AND WRITTEN NOTICES AND REQUESTS

     Any questions about procedures or the Contract, or any Written Request
required to be directed to the Company, should be sent to the Company at
Washington National Service Center, Life and Annuity Administration, P.O. Box
9019, Kokomo, Indiana, 46904.  Telephone requests and inquiries may be made by
calling 1-800-866-9922.   All inquiries and Requests should include the Contract
number, Your name, the Annuitant's name and should be signed by You.

VARIATIONS IN CONTRACT PROVISIONS

     Certain provisions of the Contracts may vary from the descriptions in this
Prospectus in order to comply with different state laws.  Any such variations
will be included in the Contract itself or in riders or endorsements.

                                    *  *  *

The foregoing summary is qualified in its entirety by the detailed information
in the remainder of this Prospectus, in the Statement of Additional Information,
in the prospectus for the Fund, and in the Contract, all of which should be
referred to for more detailed information.  This Prospectus generally describes
only the Contract, the Separate Account, and the Fixed Account.  A separate
prospectus attached hereto describes the Fund.

                                      -9-
<PAGE>
 
                      CONDENSED FINANCIAL INFORMATION (A)
 
  The following audited information shows the value of an Accumulation Unit and
how it has changed in the last 10 years.

<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                           --------------------------------------------------------------------------------------
                                            1995    1994    1993     1992     1991     1990     1989     1988     1987      1986
                                           ------  ------  ------   ------   ------   ------   ------   ------   ------    ------
<S>                                        <C>     <C>     <C>      <C>      <C>      <C>      <C>      <C>      <C>       <C>
BOND SUB-ACCOUNT
- ----------------
Accumulation unit value at                 
  beginning of year                        $ 2.16  $ 2.26  $  2.11  $  1.99  $  1.72  $  1.70  $  1.53  $  1.43  $  1.43   $ 1.27
Accumulation unit value at                                                                                                       
  end of year                              $ 2.50  $ 2.16  $  2.26  $  2.11  $  1.99  $  1.72  $  1.70  $  1.53  $  1.43   $ 1.43
Number accumulation units                                                                                                        
  outstanding at end of year               
  (000's omitted)                           4,955   5,297    5,836    6,457    6,616    7,308    7,503    7,382    7,101    6,555
                                                                                                                                 
MONEY MARKET SUB-ACCOUNT                                                                                                         
- ------------------------                                                                                                         
(B)                                                                                                                              
Accumulation unit value at                                                                                                       
  beginning of year                        $ 1.70  $ 1.66  $  1.64  $  1.61  $  1.55  $  1.47  $  1.38  $  1.30  $  1.24   $ 1.18
Accumulation unit value at                                                                                                       
  end of year                              $ 1.77  $ 1.70  $  1.66  $  1.64  $  1.61  $  1.55  $  1.47  $  1.38  $  1.30   $ 1.24
Number accumulation units                                                                                                        
  outstanding at end of year               
  (000's omitted)                             946   1,032      980    1,065    1,130    1,505    1,496    1,569    1,571    1,005
                                                                                                                                 
CAPITAL GROWTH SUB-ACCOUNT                                                                                                       
- --------------------------                                                                                                       
(C)                                                                                                                              
Accumulation unit value at                                                                                                       
  beginning of year                        $ 2.54  $ 2.52  $  2.28  $  2.13  $  1.76  $  1.85  $  1.67  $  1.60  $  1.49   $ 1.32
Accumulation unit value at                                                                                                       
  end of year                              $ 3.42  $ 2.54  $  2.52  $  2.28  $  2.13  $  1.76  $  1.85  $  1.67  $  1.60   $ 1.49
Number accumulation units                                                                                                        
  outstanding at end of year               
  (000's omitted)                           9,443   9,882   10,202   10,457   10,564   10,693   11,111   11,618   11,588    9,026  
====================================================================================================================================

</TABLE>
(A)  The Growth and Income Sub-Account was initially offered July 1, 1996,
     therefore no historical data is presented.
(B)  Formerly the Short Term Portfolio Sub-Account.
(C)  Formerly the Stock Sub-Account.



         Our financial statements and those of Separate Account I may be found
    in the Statement of Additional Information.

                                     -10-
<PAGE>
 
                                  THE COMPANY
                                  -----------

     We, Washington National Insurance Company, of Lincolnshire, Illinois, are a
stock life insurance company founded in 1911 and organized under the laws of the
State of Illinois. Our Home Office is located at 300 Tower Parkway,
Lincolnshire, Illinois 60069-3665.  We are a wholly-owned subsidiary of
Washington National Corporation ("WNC"), a Delaware Corporation, located in
Lincolnshire, Illinois. WNC is a financial services corporation.


                             THE SEPARATE ACCOUNT
                             --------------------


     Separate Account I was established by Us as a separate account on November
5, 1982, under Illinois law.  It was registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940 until July 1, 1996.  On that date, it reorganized into a
unit investment trust by transferring all of its assets to specified Portfolios
of the Scudder Variable Life Investment Fund in exchange for shares of the
Portfolio equal in value to the assets transferred.  Registration with the
Securities and Exchange Commission does not involve supervision of management or
investment practices or policies of Separate Account I or Us by the Commission.

     Separate Account I is a series type investment company currently consisting
of four Sub-Accounts, the Bond, Money Market (formerly the Short Term Portfolio
Sub-Account), Capital Growth (formerly the Stock Sub-Account), and Growth and
Income.

     We own the assets of Separate Account I, but its income, gains and losses
(realized or unrealized), are credited to or charged against the assets held in
the Sub-Account for which they are held without regard to Our other income,
gains or losses.  The assets of the Separate Account I are not chargeable with
liabilities arising out of any other separate account, or other business which
We may conduct.  The obligations arising under the variable annuity contract
herein are Our obligations.

     At present there are four Sub-Accounts, but this number may be increased or
decreased by Us in the future.  Your Contract's investment results will depend
on the investment performance of the portfolio(s) of the Sub-Accounts You
select.  Each Sub-Account invests all of its assets in shares of a particular
mutual fund portfolio.

                                     -11-
<PAGE>
 
                     SCUDDER VARIABLE LIFE INVESTMENT FUND
                     -------------------------------------


     Each Sub-Account invests exclusively in shares of a specified portfolio of
the Scudder Variable Life Investment Fund (the "Fund"), a mutual fund of the
series type.  The Fund includes a Bond Portfolio, Money Market Portfolio, a
Capital Growth Portfolio, and a Growth and Income Portfolio (collectively, the
"Portfolios").  The assets of each Portfolio of the Fund are held separate from
the assets of the other Portfolios.  Thus, each Portfolio operates as a separate
investment portfolio, and the income or losses of one Portfolio have no effect
on the investment performance of any other Portfolio.

     The investment objectives and policies of each Portfolio are summarized
below.  There is no assurance that any of the Portfolios will achieve their
stated objectives.  More detailed information, including a description of risks,
is in the Fund's prospectus, which accompanies this Prospectus and which should
be read carefully in conjunction with this Prospectus and kept for future
reference.

     The Fund is designed to provide investment vehicles for variable annuity or
variable life insurance contracts of various insurance companies.  For more
information about the risks associated with the use of the same funding vehicle
for both variable annuity and variable life insurance contracts of various
insurance companies, see the Fund's prospectus.


PORTFOLIOS OF THE FUND

     The following four Portfolios of the Fund are available under the Contract:

     BOND PORTFOLIO - The Bond Portfolio pursues a policy of investing for a
high level of income consistent with a high quality portfolio of debt
securities.  Under normal circumstances, the Portfolio invests at least 65% of
its assets in bonds, including U.S. Government, corporate, and other notes and
bonds paying high current income.  The Portfolio may also invest in preferred
stocks consistent with the Portfolio's objectives.

     MONEY MARKET PORTFOLIO - The Money Market Portfolio seeks to maintain
stability of capital and, consistent therewith, to maintain liquidity of capital
and to provide current income.  The Money Market Portfolio purchases money
market securities such as U.S. Treasury obligations, commercial paper, and
certificates of deposits and banker's acceptances of domestic and foreign banks,
including foreign branches of domestic banks, and enters into repurchase
agreements.

     An investment in the Money Market Portfolio is neither insured nor
guaranteed by the U.S. government or any agency thereof, and there is no
assurance that the portfolio will be able to maintain a stable net asset value.


     CAPITAL GROWTH PORTFOLIO - The Capital Growth Portfolio seeks long-term
capital appreciation and, consistent therewith, current income through a broad
and flexible investment program.  The Portfolio seeks to achieve these
objectives by investing primarily in income producing, publicly-traded equity
securities, such as common stocks and securities convertible into common stock,
with an emphasis on securities of established companies.  However, in order to
reduce risk, as market or

                                      -12-
<PAGE>
 
economic conditions may periodically warrant, the Portfolio may also invest up
to 25% of its assets in short-term indebtedness.

     GROWTH AND INCOME PORTFOLIO - The Growth and Income Portfolio seeks long-
term growth of capital, current income and growth of income.  The Portfolio
invests primarily in common stocks, preferred stocks, and securities convertible
into common stocks of companies which offer the prospect for growth of earnings
while paying current dividends.

     The Portfolio allocates its investments among different industries and
companies, and changes its portfolio securities for investment considerations
and not for trading purposes.  The Portfolio attempts to achieve its investment
objective by investing primarily in dividend-paying common stocks, preferred
stocks and securities convertible into common stocks.  The Portfolio may also
invest in foreign securities and in repurchase agreements.


INVESTMENT ADVISORY FEES

     Scudder, Stevens & Clark, Inc. (the "Adviser") provides management and
investment advisory services to the Fund.  The Adviser provides investment
research and portfolio management services to a number of mutual funds and other
clients.  Each Portfolio pays the Adviser a fee for its investment advisory
services at the following annual rates:

<TABLE> 
<CAPTION> 
                                       Percentage of the Portfolio's
              Portfolio                Average Daily Net Asset Value
              ---------                -----------------------------
         <S>                          <C> 
          Bond Portfolio                            .475%
          Money Market Portfolio                    .370%
          Capital Growth Portfolio                  .475%
          Growth and Income Portfolio               .469%

</TABLE> 

ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS

     The Company does not control the Fund and cannot guarantee that the Fund or
any Portfolio thereof will be available for investment in the future or that the
Fund or any Portfolio thereof will accept premiums or transfers. In the event
that the Fund or any Portfolio is not available, the Company may take reasonable
action to secure a comparable or otherwise appropriate funding vehicle, although
it is not required to and may not do so. In the unlikely event that the Fund is
not available in the future and a substitute funding vehicle is not obtained,
then all Account Values could be maintained in Our general account. If the Fund
or other funding vehicle restricts or refuses to accept transfers or other
transactions, then the transfer privilege may be modified or revoked or other
changes made.

     The Company reserves the right, subject to compliance with applicable law,
to make additions to, deletions from, or substitutions for the shares of the
Fund that are held by the Separate Account (or any Sub-Account) or that the
Separate Account (or any Sub-Account) may purchase.  The Company reserves the
right to eliminate the shares of any of the Portfolios of the Fund and to
substitute shares of another Portfolio of the Fund or any other investment
vehicle or of another open-

                                      -13-
<PAGE>
 
end, registered investment company if laws or regulations are changed, if the
shares of the Fund or a Portfolio are no longer available for investment, or if
in our judgment further investment in any Portfolio should become inappropriate
in view of the purposes of the Sub-Account.  The Company will not substitute any
shares attributable to a Contract owner's interest in a Sub-Account of the
Separate Account without notice and prior approval of the Securities and
Exchange Commission and the insurance regulator of the state where the Contract
was delivered, if and where required.  Nothing contained herein shall prevent
the Separate Account from purchasing other securities for other series or
classes of policies, or from permitting a conversion between series or classes
of policies on the basis of requests made by Owners.

     The Company also reserves the right to establish additional Sub-Accounts of
the Separate Account, each of which would invest in a new Portfolio of the Fund,
or in shares of another investment company or suitable investment, with a
specified investment objective.  New Sub-Accounts may be established when, in
the sole discretion of the Company, marketing needs or investment conditions
warrant, and any new Sub-Account will be made available to existing Contract
owners on a basis to be determined by the Company.  The Company may also
eliminate one or more Sub-Accounts if, in its sole discretion, marketing, tax,
or investment conditions warrant.

     In the event of any such substitution or change, the Company may, by
appropriate endorsement, make such changes in this and other policies as may be
necessary or appropriate to reflect such substitution or change.  If deemed by
the Company to be in the best interests of persons having voting rights under
the Contract, the Separate Account may be operated as a management company under
the Investment Company Act of 1940, it may be deregistered under that Act in the
event such registration is no longer required, or it may be combined with other
Company separate accounts.


RESOLVING MATERIAL CONFLICTS

     The Fund is used as an investment vehicle for variable annuity policies
issued by the Company.  In addition, the Fund is also available to registered
separate accounts of insurance companies other than the Company offering
variable life insurance and annuity policies.  As a result, there is a
possibility that an irreconcilable material conflict may arise between the
interests of Owners whose cash values are allocated to Separate Account I and of
owners of policies whose cash values are allocated to different participating
separate accounts investing in the Fund.  In the event of a material conflict,
the Company will take any necessary actions, including the withdrawal of the
assets allocable from the Fund, to resolve the matter.

                                 THE CONTRACTS
                                 -------------

                    PRIOR TO MATURITY (ACCUMULATION PERIOD)
                    ---------------------------------------


     We offered both individual and group Contracts which may or may not be tax-
qualified. The Contracts are no longer being offered, but we continue to accept
Purchase Payments under existing Contracts.

                                      -14-
<PAGE>
 
PURCHASE PAYMENTS

     The first payment was due on the Contract Date. Future periodic Purchase
Payment due dates are determined by the mode or frequency You chose in the
application. If the application could be accepted in the form received, the
first Purchase Payment would be credited to purchase Accumulation Units within
two business days after receipt by Us. If, because the application was
incomplete, the first Purchase Payment was not applied to purchase Accumulation
Units within five business days after it was received by Us, the Purchase
Payment would be returned, unless You consented to Our retaining the Purchase
Payment and crediting it as soon as the necessary requirements were fulfilled.

     The Contracts were issued on a periodic basis only. However, if only one
payment was made, it would be considered a single Purchase Payment deferred
Variable Annuity. If you wished Variable Annuity payments to begin immediately
under an individual Contract, You could choose to do so by paying a single
Purchase Payment of $2,000 or more, and electing one of the settlement options
when applying for the Contract.

     Periodic Purchase Payments may be made every twelve, six or three months or
on one of the monthly modes which We permit. You may change the frequency of
payment on any due date.

     Increases in the periodic Purchase Payment may be made only with Our
consent, and we reserve the right to refuse to accept any subsequent increased
payment. The minimum amount of Purchase Payment which we will accept, during any
Contract year, is $300.


SUB-ACCOUNT ALLOCATIONS

     In the application for the Contract, You tell Us the portion of Your
Purchase Payments to be allocated to each Sub-Account of Separate Account I and
to the Fixed Account; this allocation may be changed at any time.  The amount to
be allocated to any Sub-Account or allocated to the Fixed Account must be at
least $25.  The number of Accumulation Units credited for each Sub-Account is
determined by dividing the net amount allocated to the Sub-Account by the
Accumulation Unit value for the Sub-Account for the Valuation Period during
which the Purchase Payment is received by Us.


TRANSFERS OF ACCUMULATED VALUES

     Transfers, requested in writing, of all or part of the Accumulated Value of
the Contract are permitted as follows (in $100 increments only):

     a.   Among the Bond, Money Market, Capital Growth and Growth and Income
          Sub-Accounts at any time;
     b.   From the Bond, Capital Growth, and Growth and Income Sub-Accounts to
          the Fixed Account at any time;
     c.   From the Fixed Account to the Bond, Capital Growth, and Growth and
          Income Sub-Accounts once every twelve months after the first Contract
          Year;
     d.   Not between the Fixed Account and the Money Market Sub-Account; and

                                      -15-
<PAGE>
 
     e.   Only if amounts of $100 or more are transferred to or from the Fixed
          Account or any Sub-Account.

     If a partial withdrawal will reduce the Accumulated Value of the Fixed
Account or any Sub-Account to less than $300, the total Accumulated Value of
that account, rather than the requested amount, will be transferred.  Transfer
will be based upon the Accumulation Unit value in effect on, and will be made as
of, the Valuation Date on which We received Your request.

     We reserve the right under any Contract or Certificate to limit, suspend,
or revoke the right to transfer among the Bond, Money Market, Capital Growth,
and Growth and Income Sub-Accounts.  From time to time, We may modify Our rules
and procedures regarding transfers.


ACCUMULATED VALUE

     The Accumulated Value is the sum of Accumulated Value held in each Sub-
Account plus the Accumulated Value of any Purchase Payments allocated to the
Fixed Account.  The Accumulated Value of a Sub-Account is the number of
Accumulation Units credited to the Contract times the value of the Accumulation
Unit.  The Net Accumulated Value is the Accumulated Value reduced by any
applicable charges, which include any contingent deferred sales charge, the
contract maintenance charge and any premium taxes.

     The value of an Accumulation Unit for each Sub-Account was established at
$1 on the first Valuation Date.  The value of each Accumulation Unit for the
Sub-Accounts will vary with the investment experience of the Sub-Account.
Subsequent Accumulation Unit values for the Sub-Accounts are determined by
multiplying:

     a.   the Accumulation Unit value for the previous Valuation Date; by
     b.   the net investment factor for the current Valuation Date, which
          reflects the investment performance of the Sub-Account less any
          deduction and charges made against the Sub-Account.

     The Accumulated Value of Purchase Payments Allocated to Separate Account I
vary with the investment performance of the Sub-Account(s) and are not
guaranteed. The Accumulated Value of the Purchase Payments is guaranteed as to
payments allocated to the Fixed Account.


TERMINATION OF PARTICIPATION

     We retain the right to terminate the Contract after the first contract year
and to pay the Accumulated Value to You if the Accumulated Value of all Sub-
Accounts and the Fixed Account is less than $300.  We will notify You of Our
intention to do so and grant a period of ninety days for You to make Purchase
Payments to increase the Accumulated Value to $300. The Contract will be
terminated automatically if the Accumulated Value, after deduction of the
Contract maintenance charge, is equal or less than zero.

                                      -16-
<PAGE>
 
CASH SURRENDERS AND WITHDRAWALS

     You or the Participant, if permitted under the plan, may withdraw part or
all (surrender) of the Contract's Net Accumulated Value prior to the Maturity
Date or payment of death proceeds.  From each withdrawal We will deduct any
applicable contingent deferred sales charge.

     We require that:
     a.   A written request be made;
     b.   You tell Us the amount and from which Sub-Account(s) and/or the Fixed
          Account We are to make a withdrawal;
     c.   The Contract be surrendered and sent to Us if a full withdrawal is
          made;
     d.   You withdraw at least $100; and
     e.   The Accumulated Value remaining in any Sub-Account or the Fixed
          Account be at least $300, unless a full withdrawal is made.


WITHDRAWALS MAY BE TAXABLE

     If at the time You make a surrender or withdrawal, You have not provided Us
with an election not to have federal income taxes withheld, We must by law
withhold such taxes from the taxable portion of any surrender or withdrawal and
remit that amount to the federal government.  Moreover, the Internal Revenue
Code provides that a 10% penalty tax may be imposed on certain early surrenders
or withdrawals.

     Participants in the Texas Optional Retirement Program are prohibited from
withdrawing part or all of the Accumulated Value of the Contract except at
death, retirement or termination of employment.

     Section 403(b) of the Internal Revenue Code provides for tax-deferred
retirement savings plans for employees of certain non-profit and educational
organizations.  In accordance with the requirements of Section 403(b), any
Contract used for a 403(b) plan will prohibit distributions of (i) elective
contributions made in years beginning after December 31, 1988, (ii) earnings on
those contributions, and (iii) earnings on amounts attributable to elective
contributions held as of the end of the last year beginning before January 1,
1989.  However, distributions of such amounts will be allowed upon death of the
employee, attainment of age 59 1/2, separation from service, disability or
financial hardship, except that income attributable to elective contributions
may not be distributed in the case of hardship.


LOAN FROM 403(b) CONTRACTS

     If You have a qualified contract issued pursuant to Section 403(b) of the
Internal Revenue Code, You may take a loan of from $5,000 to $50,000 from Your
Contract, subject to various conditions including the following:

     1)   You may have only one loan outstanding at a time from all of Your
          403(b) Contracts issued by Us.
     2)   Generally, the loan must be repaid within five years.

                                     -17-
<PAGE>
 
     3)   The current rate of interest credited on any Accumulated Value of this
          contract will not be affected by any outstanding loan.
     4)   You will be charged a rate of interest based on Moody's Corporate Bond
          Yield Average; the interest rate may be changed on the loan
          anniversary date.
     5)   The loan may affect your withdrawal privileges.
     6)   Our handling of the loan will be in accordance with Section 72(p) of
          the Internal Revenue Code which may limit the amount you may borrow.
          (See Federal Income Tax Matters, p.25.)
     7)   You will be charged a $200 loan fee in all states except Wisconsin,
          which has a separate fee schedule.


OPTIONS ON DISCONTINUANCE OF PURCHASE PAYMENTS


     If You discontinue Purchase Payments, you may choose one of these Options:

     a.  Surrender (full withdrawal) -- You may surrender the Contract and
         withdraw all of the Net Accumulated Value;
     b.  Paid-Up Annuity -- You may have the Contract continued so that the
         Accumulation Units will provide benefits at the maturity date. This
         Paid-Up Annuity may be surrendered at any time prior to maturity for
         its then Net Accumulated Value.

You can resume payments at any time prior to maturity unless the Contract has
been surrendered.


PAYMENT AT DEATH

     If the Annuitant dies prior to the date We begin to make annuity payments,
We will pay the Net Accumulated Value of the Contract, next determined on the
Valuation Date on which proof of death is received by Us.  If the Beneficiary
elects to receive payments under a Settlement Option, the election must be made
within 60 days after the date of death of the annuitant in order to receive
favorable tax treatment, during which time amounts will remain as previously
allocated and will be subject to investment experience and/or interest credits.

     For Contracts issued on or after January 19, 1985, federal tax law requires
that if the contract owner or any Joint contract owner dies before the maturity
date, generally the entire value of the Contract must be distributed within five
(5) years of the date of death of the contract owner.  Special rules may apply
to spouses of the deceased owner.  See "FEDERAL TAX MATTERS:  IRS Required
Distributions" in the Statement of Additional Information for greater details.


TIME AND DELAY OF PAYMENT

     We will generally pay all Proceeds within seven days of the date a Written
Request for withdrawal is received or the date an annuity payment or payment of
death and maturity Proceeds is due. Payments under the Contract of any Proceeds
derived from Purchase Payments made by check may be delayed until such time as
the check has cleared Your bank.
                            
                                      -18-
<PAGE>
 
     We have the right to delay payment when:

     a. The New York Stock Exchange is closed, other than customary weekend and
        holiday closings;
     b. Trading on the New York Stock Exchange is restricted;
     c. An emergency exists so that it is not reasonably practicable for
        Separate Account I to dispose of securities or fairly to determine the
        value of its net assets; or
     d. The Securities and Exchange Commission by order may permit for the
        protection of the owners of the Contracts.


INQUIRIES ABOUT YOUR CONTRACT

     If You have any questions regarding Your Contract, You may write to Us at
Washington National Service Center, Life and Annuity Administration, P.O. Box
9019, Kokomo, Indiana 46904.


                        AFTER MATURITY (ANNUITY PERIOD)
                        -------------------------------

MATURITY DATE

     On the maturity date, which unless otherwise changed is the date You
specify in the application, the Net Accumulated Value will be applied to the
annuity option You selected or, if requested by You, paid out as a single sum
settlement.

     While the Contract is in force, You may, by Written Request, elect to have
Annuity Payments begin at an optional maturity date, which may be any Contract
Anniversary on which the Annuitant's Attained Age is fifty-five or more.  Prior
to the due date of the first Annuity Payment, You may change a previously
elected optional maturity date to another optional maturity date.


ELECTION OF OPTIONS

     You may elect to have all or part of the Proceeds of the Contract applied
under one of the following settlement options.  You may cancel or change a
previous election, but only if You do so prior to the death of the Annuitant or
the maturity date of the Contract and only if You do so in writing.  If You do
not elect a settlement option prior to the Annuitant's death, the payee may do
so provided the election is made within one year after the date of death of the
Annuitant.  Any settlement option election will be subject to the limitations
and conditions set forth in the Contract.

     If the Annuitant dies after annuity payments have begun, the death benefit
will be as stated under the Settlement Option provision elected.  If the
contract owner dies after annuity payments have begun, the remaining interest in
the Contract must be distributed at least as rapidly as under the method of
distribution in effect at the time of the contract owner's death.

     Under Options 2(A) and 6, only one payment will be made if the Annuitant
and any joint Annuitant die(s) before the second payment is made; only two
payments will be made if the death(s) occur(s) before the third payment is made;
and so forth.
                
                                      -19-
<PAGE>
 
OPTION 1 - INCOME FOR A FIXED PERIOD

     We will pay the proceeds in equal installments over a period of from one to
thirty years.


OPTION 2 - INCOME FOR LIFE

     We will pay a monthly income during a person's lifetime.  The monthly
income may be a life annuity only, Option 2(A); a life annuity with a minimum
guaranteed period of five, ten or twenty years, Option 2(B); or an installment
refund life annuity with payments guaranteed until the number of Annuity Units
in each payment, multiplied by the number of payments made, equals the total
amount applied under the Option divided by the Annuity Unit value used to
determine the number of units in the first payment, Option 2(C).


OPTION 3 - INCOME OF FIXED AMOUNT

     We will pay the Proceeds in equal installments in the amount and at the
intervals agreed upon until the Proceeds applied under this option, with
interest at 3% per annum, are exhausted.  The final installment will be for the
remaining balance.


OPTION 4 - INTEREST INCOME

     We will hold the Proceeds on deposit and pay or credit interest at the rate
of 3% per annum.  Payment of interest will be at such time and for such periods
as are agreeable to You and Us.


OPTION 5 - JOINT AND SURVIVOR INCOME FOR LIFE

     We will pay an income during the lifetime of two payees, and continuing
until the death of the survivor.  This option includes a minimum guaranteed
period of 10 years.


OPTION 6 - JOINT AND TWO-THIRDS SURVIVOR INCOME FOR LIFE

     When a Fixed Annuity is elected, We will pay an income (the "original
amount") during the time two payees both remain alive, and two-thirds of the
original amount during the remaining lifetime of the survivor.  When a Variable
Annuity is elected, the number of units will be reduced by one-third at the
death of one payee.


ELECTION OF FIXED OR VARIABLE ANNUITY PAYMENTS

     You may choose when annuity payments begin, to have the Net Accumulated
Value applied, except under Options 1, 3 and 4, to provide for:

     a.  a Fixed Annuity;

                                      -20-
<PAGE>
 
     b.  a Variable Annuity; or
     c.  a mix of the above.

     If You do not make an election, the Net Accumulated Value will be paid
under Option 2(B) with payments guaranteed for a period of ten years.

     The net investment factor, or a factor which reflects a guaranteed annual
investment rate of 3%, will apply if Option 3 is chosen.

     Options 1, 3 and 4 are available as a Fixed Annuity only.  The Net
Accumulated Value needed to provide a Fixed Annuity or a guaranteed interest
rate will be withdrawn from Separate Account I.

     The Options described above are available only if We receive proper proof
of age and proof that the payee is living, the Accumulated Value is at least
$2,000, and, under the Option chosen, results in a periodic payment of at least
$20.


DETERMINATION OF VARIABLE ANNUITY PAYMENTS

     On the maturity date the Net Accumulated Value is applied to provide
annuity payments.  The dollar amount of the first variable Annuity Payment is
determined based on the annuity payment rates found in the Contract for the
option selected.  These rates are based on an assumed interest rate of 3.5% per
year.  All variable Annuity Payments after the first will reflect the investment
experience of the Sub-Accounts in which the Net Accumulated Value was held.
After the maturity date the investments may not be transferred among the Sub-
Accounts.  The dollar amount of each variable Annuity Payment after the first
may increase, decrease or remain constant, depending upon whether the investment
performance is greater than, less than or equal to the assumed interest rate of
3.5%.

     Accordingly, variable Annuity Payments vary with the investment performance
of Separate Account I and the option selected.  Options that involve greater
durations or frequency or life contingencies generally result in smaller
periodic payments.  Periodic payments will be greater for life annuities than
for joint and survivor annuities, because they are expected to be made for a
shorter period.  Also, the assumed interest rate affects the amount of the
payment.  If the assumed rate were higher than 3.5%, the initial Annuity Payment
would be greater, but subsequent payments may be more likely to decrease.

     We explain in detail how variable Annuity Payments are computed in the
Statement of Additional Information.


                            HOW CONTRACTS WERE SOLD
                            -----------------------

     The Contracts were sold by Our life insurance agents, who were licensed to
sell variable annuities and were registered representatives of Washington
National Equity Company, of Evanston, Illinois (a former, wholly-owned
subsidiary of WNC), which, until March 31, 1990, was registered as a broker-
dealer under the Securities Exchange Act of 1934, was the principal underwriter
of

                                      -21-
<PAGE>
 
Separate Account I and was a member of the National Association of Securities
Dealers, Inc. (NASD).  The commissions paid to the dealers do not exceed 6% of
Purchase Payments.

     The Contracts could also have been sold by registered representatives of
other NASD member broker-dealers who were authorized to sell Variable Annuity
Contracts.  The Contracts are no longer being sold; however, additional Purchase
Payments will continue to be accepted in accordance with contractual provisions.


                                    CHARGES
                                    -------


     The Company will make certain charges under the Contract in order to
compensate it for incurring expenses in distributing the Contract, bearing
mortality risks under the Contract, and administering the Accounts and the
Contracts.  Charges may also be made for Premium Taxes, and other federal, state
or local taxes.  Charges and expenses are also deducted from the Fund.


ANNUITY RATE GUARANTEE CHARGE

     Although Variable Annuity payments made to Annuitants will vary in
accordance with the investment performance of the investments of Separate
Account I, they will not be affected by the mortality experience (death rate) of
persons receiving such payments.  We assume this "mortality risk" by virtue of
annuity rates incorporated in the Contract which cannot be changed.  To
compensate Us for assuming this risk, a charge will be made daily from Separate
Account I for annuity rate guarantees, which is equal on an annual basis to
approximately .80% of the current asset value of Separate Account I.  If the
charges are insufficient to cover the actual cost of the mortality risk, We will
bear the loss; conversely, if the charges prove more than sufficient, the excess
will be a profit to Us.  We may not increase the rate of the annuity rate
guarantee charge.  This fee will be paid to Us periodically.

FINANCIAL ACCOUNTING SERVICE CHARGE

     We are responsible for providing financial accounting services to Separate
Account I under an Administrative Service Agreement between Separate Account I
and Us.  Such services include preparation and maintenance of all accounting,
bookkeeping, financial and other statements necessary to conduct the business
and operations of Separate Account I.

     For providing these services, a charge is made daily from Separate Account
I and paid to Us, periodically, which is equal on an annual basis to .35% of the
average net assets of Separate Account I.  The charge is designed to cover the
actual expenses incurred in providing these services and We do not expect to
profit from the charge.  The amount of the charge is guaranteed not to be
increased, but may be imposed on a more or less frequent basis.

                                      -22-
<PAGE>
 
CONTINGENT DEFERRED SALES CHARGE

     We do not make any deductions for sales charges from Purchase Payments when
We receive them.  The full amount is invested and credited to the Contracts,
although sales expenses for items such as commissions, preparation of sales
literature and other promotional activities are incurred in connection with
their sale.  The contingent deferred sales charge is made only when a
withdrawal, partial or full (including applying the Accumulated Value to a Paid-
Up Annuity under certain circumstances), is made from the Contract and is
designed to recover those sales expenses.  The proceeds received from such
charges are not sufficient to pay such expenses; We pay the excess out of Our
general funds, which includes proceeds derived from the annuity rate guarantee
charge.

     In connection with certain withdrawals, We assess a contingent deferred
sales charge.  The contingent deferred sales charge is made at the rate of 6% of
the amount withdrawn and is deducted from the amount withdrawn.

     In calculating the amount of any contingent deferred sales charge:

     1. Any amount which You withdraw will be treated as a withdrawal of
        Purchase Payments until You have withdrawn the total amount of all
        Purchase Payments received within seventy-two months of the date of
        withdrawal.  The maximum amount which You may withdraw cannot exceed the
        Contract's or Certificate's Net Accumulated Value.
     2. It will be assumed that the earliest Purchase Payment(s) is (are) the
        source of the first amounts withdrawn, even if amounts are withdrawn
        from the Fixed Account or a Sub-Account other than that to which such
        Purchase Payments were credited.
     3. The total of such charge will never exceed 6% of the total Purchase
        Payments.

We will not make a deduction for the contingent deferred sales charge:

     1. On the first 10% of the Accumulated Value withdrawn from a Contract or
        Certificate during any Contract or Certificate year. The amount which
        may be withdrawn without charge is determined as of the date of the
        first withdrawal during the year.
     2. On Purchase Payments received more than seventy-two months prior to the
        date of withdrawal.
     3. If the amount withdrawn is applied to:
        a. a settlement option after the Contract or Certificate has been in
           effect for five or more years, or
        b. Settlement Option 2, 5 or 6 at any time.
     4. If the Annuitant dies.


CONTRACT MAINTENANCE CHARGE

     On each Contract or Certificate Anniversary, or on the date of full
withdrawal or election of a settlement option if that date is not the Contract
or Certificate Anniversary, We will deduct from the Accumulated Value of the
Contract a charge for establishing and maintaining records.  The annual charge
is currently $30 for each Contract and Certificate.  The charge will be made
pro-rata from the Accumulated Value of each Sub-Account and the Fixed Account
and the number of Accumulated Units credited will be reduced accordingly.  This
charge is not guaranteed, may be changed in the

                                      -23-
<PAGE>
 
future and may be deducted more frequently than annually.  We currently will
waive this charge if, on the last day of the Contract Year, the Contract has an
Accumulated Value of $20,000 or more, if $1,200 or more in Purchase Payments
were made during the Contract Year, or if the Contract is an Individual
Retirement Account.


PREMIUM TAXES

     Various states and municipalities impose a premium tax of up to 3.5% upon
Purchase Payments received by insurance companies.  At present We will pay those
taxes, but, We reserve the right to deduct premium taxes from Purchase Payments
or to charge them against the Contracts or Certificates to which they are
attributable in the future.


                           CHANGES AND MODIFICATIONS
                           -------------------------


     We reserve the right, subject to applicable law, to:

     a. Deregister Separate Account I in the event registration under the
        Investment Company Act of 1940 is no longer required;
     b. Combine or divide, increase or decrease the number of Sub-Accounts or
        transfer assets and Contracts from one separate account or Sub-Account
        to another;
     c. Amend, or deliver a new Contract in exchange for the Contract, to: 1)
        assure that it qualifies for the benefits which the Internal Revenue
        Code provides annuity contracts; or 2) comply with the applicable law.
     d. Terminate the Contract if we determine that a change in applicable law
        or its interpretation makes it no longer feasible to continue the
        Contract and others like it in effect;
     e. Reorganize Separate Account I as an open-end management investment
        company.
 


                                 VOTING RIGHTS
                                 -------------


     There are no voting rights associated with the Fixed Account Accumulated
Value.

     With respect to the Separate Account I value, the Company will be the
"shareholder" of the Fund and as such, the Company will have certain voting
rights.  However, to the extent required by law, the Company will vote the Fund
shares held by Separate Account I at regular and special shareholder meetings of
the Fund in accordance with instructions received from persons having voting
interests in the Portfolios.  If, however, the 1940 Act or any regulation
thereunder should be amended, or if the present interpretation thereof should
change, and as a result the Company determines that it is permitted to vote the
Fund's shares in its own right, it may elect to do so.  The Company reserves the
right, when permitted by law, to restrict or eliminate any of the voting rights
of Contract Owners or other persons who have voting rights as to Separate
Account I.
                   
                                      -24-
<PAGE>
 
     Before annuity payments begin, You hold the voting interest in the selected
Portfolios.  The number of votes that You have the right to instruct will be
calculated separately for each Sub-Account.  The number of votes that You have
the right to instruct for a particular Sub-Account will be determined by
dividing Your Contract value in the Sub-Account by the net asset value per share
of the corresponding Portfolio in which the Sub-Account invests.  Fractional
shares will be counted.

     After annuity payments begin, the person receiving annuity payments has the
voting interest, and the number of votes decreases as annuity payments are made
and as the reserves for the Contract decrease.  The person's number of votes
will be determined by dividing the reserve for the Contract allocated to the
applicable Sub-Account by the net asset value per share of the corresponding
Portfolio of the Fund.  Fractional shares will be counted.

     The number of votes that You or the person receiving income payments has
the right to instruct will be determined as of the date established by the Fund
for determining shareholders eligible to vote at the meeting of the Fund.  The
Company will solicit voting instructions by sending You or other persons
entitled to vote written requests for instructions prior to that meeting in
accordance with procedures established by the Fund.  Portfolio shares as to
which no timely instructions are received may be voted in proportion to the
voting instructions that are received with respect to all Contracts
participating in the same Sub-Account.  Shares held by the Company or its
affiliates in which You or other persons entitled to vote have no beneficial
interest may be voted by the shareholder thereof (the Company or its affiliates)
in its sole discretion.

     Each person having a voting interest in a Sub-Account will receive proxy
material, reports, and other materials relating to the appropriate Portfolio.

     The Fund is not required to, and does not intend to, hold annual or other
regular meetings of shareholders.


                           FEDERAL INCOME TAX MATTERS
                           --------------------------


BECAUSE OF THE COMPLEXITY OF THE LAW AND THE FACT THAT THE TAX CONSEQUENCES MAY
VARY ACCORDING TO THE ACTUAL STATUS OF THE CONTRACT OWNER INVOLVED AND THE TYPE
OF PLAN, IF ANY, UNDER WHICH THE CONTRACT IS PURCHASED, ANY PERSON CONTEMPLATING
THE PURCHASE OF A CONTRACT DESCRIBED HEREIN IS ADVISED TO CONSULT A QUALIFIED
TAX ADVISOR.


     It should be understood that a complete description of the federal income
tax consequences of the purchase of these Contracts cannot be made in this
prospectus and that special tax rules may be applicable with respect to certain
purchase situations not discussed here.  In addition, no attempt is made here to
consider any applicable state or other tax laws. For more complete and detailed
information, a qualified tax advisor should always be consulted.  The discussion
here is general in nature and is based upon Our understanding of current federal
income tax laws as they are currently interpreted.  No representation is made
regarding the likelihood of continuation of current federal income tax laws or
of the current interpretations thereof by the Internal Revenue Service or the
courts.

                                      -25-
<PAGE>
 
HOW WE ARE TAXED

     We are taxed as a life insurance company under Subchapter L of the Internal
Revenue Code of 1986 (the "Code").  Separate Account I is not a separate taxable
entity; its operations form a part of, and are taxed with, Our total operations.
Under existing federal income tax law, no taxes are due on interest, dividends
or capital gains realized by Separate Account I with respect to the Contracts.
We reserve the right to levy a charge to cover any taxes that might be assessed
against Separate Account I in the future due to any change in the existing
federal tax law.


HOW YOU ARE TAXED

     The following discussion assumes that the Contracts will qualify as annuity
contracts for federal income tax purposes.  The Statement of Additional
Information discusses such qualifications.


NON-QUALIFIED CONTRACTS

     An annuity contract owner generally is not taxed on increases in the value
of a Contract until distribution occurs, either in the form of a lump sum
payment received by withdrawing all or part of the cash value or as annuity
payments under the annuity option elected.  For this purpose, the assignment or
pledge of, or the agreement to assign or pledge, any portion of the value of a
Contract will be treated as a distribution.  The taxed portion of a distribution
(in the form of a lump sum payment or an annuity) is taxed as ordinary income.
However, for Purchase Payments made after February 28, 1986, an owner of a
Contract who is not a natural person (subject to limited exceptions) generally
will be taxed on any increase in the Contract' s cash value over the "investment
in the contract" during the taxable year, even if no distribution occurs.  The
following discussion applies to Contracts owned by natural persons.

     Except as provided below, in the case of a surrender or withdrawal under a
Contract, amounts received are first treated as taxable income to the extent
that the Contract Value of the Contract immediately before the withdrawal
exceeds the "investment in the contract" at that time.  Any additional amount
withdrawn is not taxable.  However, in the case of a withdrawal under a Contract
issued before August 14, 1982, and allocable to an "investment in the contract"
made before that date, amounts received are treated as taxable income only to
the extent that they exceed the "investment in the contract."  The "investment
in the contract" generally equals the portion, if any, of any premium paid by or
on behalf of an individual under a Contract which is not excluded from the
individual's gross income.

     Although the tax consequences may vary depending on the form of annuity
selected under the Contract, the recipient of an Annuity Payment under a
Contract generally is taxed on the portion of such payment that exceeds the
"investment in the contract."  For Variable Annuity Payments, the taxable
portion is determined by a formula that establishes a specific dollar amount of
each payment that is not taxed.  The dollar amount is determined by dividing the
"investment in the contract" by the total number of expected periodic payments.
For Fixed Annuity Payments, in general, there is no tax on the amount of each
payment which represents the same ratio that the "investment in the contract"
bears to the total expected value of the Annuity Payment for the term of the
payment; however, the remainder of each Annuity Payment is taxable.  For
individuals whose Annuity Commencement Date

                                      -26-
<PAGE>
 
is after December 31, 1986, the entire distribution will be fully taxable once
the recipient is deemed to have recovered the dollar amount of his "investment
in the contract."

     There may be imposed a penalty tax on distributions equal to ten percent of
the amount treated as taxable income.  The penalty tax is not imposed in certain
circumstances, which generally include: (1) distributions received on or after
the taxpayer attains age 59 1/2; (2) distributions made on or after the holder's
death or that are attributable to the taxpayer's disability; (3) distributions
received in substantially equal installments as a life annuity (subject to
special "recapture" rules if the series of payments is subsequently modified);
and (4) distributions allocable to the "investment in the contract" before
August 14, 1982.

     Amounts may be distributed from a Contract because of the death of a
Contract Owner or an Annuitant. Generally, such amounts are includable in the
income of the recipient as follows: (1) if distributed in a lump sum, they are
taxed in the same manner as a full surrender of the Contract, as described
above, or (2) if distributed under an annuity option, they are taxed in the same
manner as annuity payments, as described above. For these purposes, the
investment in the contract is not affected by the owner's or annuitant's death.
That is, the investment in the contract remains the amount of any purchase
payments paid which were not excluded from gross income.

     A transfer of ownership or assignment of a Contract, the selection of
certain maturity dates, or the designation of an Annuitant or other beneficiary
who is not also the contract owner, may result in certain tax consequences to
the contract owner not discussed herein.  A contract owner contemplating any
such transfer, assignment, selection, or designation should contact a competent
tax advisor with respect to the potential tax effects of such a transaction.

     All non-qualified deferred annuity contracts entered into after October 21,
1988 that are issued by Us or an affiliated insurance company to the same
contract owner during any calendar year will be treated as one annuity contract,
and therefore aggregated for purposes of determining the amount includable in
gross income.  In addition, there may be other situations in which the Treasury
Department may conclude (under its authority to issue regulations) that it would
be appropriate to aggregate two or more annuity contracts purchased by the same
contract owner.

     We will withhold and remit to the U.S. Government a part of the taxable
portion of each distribution made under a Contract unless the contract owner or
Annuitant is permitted to elect not to have amounts withheld and notifies Us at
or before the time of the distribution that he or she chooses not to have any
amount withheld.


QUALIFIED CONTRACTS

     The Contracts are designed for use with several types of qualified plans.
The following are brief descriptions of qualified plans with which Our Contracts
may be used:

     a.  Corporate and H.R. 10 Pension and Profit-Sharing Plans-- Section 401
         and 403(a) of the Code permit corporate employers to establish various
         qualified plans for their employees, and self-employed individuals to
         establish qualified plans for themselves and their employees.  Taxation
         of plan Participants depends on the specific plan.  The Code governs
         such plans with respect to maximum contributions, distribution dates,

                                      -27-
<PAGE>
 
         non-forfeitability of interests, tax rates applicable to distributions,
         and in other respects.  In order to establish such a plan, a plan
         document, often in prototype form preapproved by the Internal Revenue
         Service, is adopted and implemented by the employer.  Such retirement
         plans may permit the purchaser of the Contract to accumulate retirement
         savings.  When issued in connection with Section 401 or 403(a) plans, a
         Contract will be amended to conform to the requirements under the Code.
         Purchasers of a Contract for such purposes will be provided with
         supplemental information required by the Internal Revenue Service or
         other appropriate agency.
     b.  Individual Retirement Annuities--Section 408 of the Code permits
         certain individuals to contribute to an individual retirement program
         known as an "Individual Retirement Annuity" or an "IRA."  IRAs are
         subject to limitations on eligibility, maximum contributions, time of
         distribution and other features.  Distributions from certain other
         types of qualified plans may be "rolled over" on a tax-deferred basis
         into an IRA.  Sales of a Contract for use with an IRA may be subject to
         special requirements of the Internal Revenue Service.  Purchasers of a
         Contract for such purposes will be provided with supplemental
         information required by the Internal Revenue Service or other
         appropriate agency.  Such purchasers will have the right to revoke the
         Contract within seven days of the earlier of the establishment of the
         IRA or the purchase of the Contract.
     c.  Plans of Public School Systems and Certain Tax Exempt Organizations--
         Section 403(b) of the Code permits public school systems and certain
         tax-exempt organizations to establish plans that provide retirement
         benefits for employees through the purchase of annuity contracts.  Such
         plans may permit the purchase of the Contracts in order to provide
         benefits under the plans.  However, distributions from Contracts used
         in Section 403(b) plans are severely restricted (see "Cash Surrender
         and Withdrawals" at page 19 of the prospectus).
     d.  Texas Optional Retirement Program--The Optional Retirement Program of
         the State of Texas will contribute an amount equal to the contribution
         of each Participant.  If a Participant is not a "faculty member," as
         defined in the Texas Education Code, at the beginning of the second
         year of participation, We will return the employer's contribution to
         the State.  In addition, the Program prohibits Participants from
         withdrawing part or all of the Accumulated Value of the Contract except
         at retirement or termination of employment.  Payment of Proceeds will
         also be made at the death of a Participant.
     e.  Deferred Compensation Plans of State and Local Governments--Section 457
         of the Code permits states, political subdivisions of the states,
         agencies and instrumentalities of states or of political subdivisions
         of states and certain tax exempt organizations to establish deferred
         compensation plans for individuals who perform services for such
         entities.  Such entities are the legal owners of Contracts issued under
         such plans.  Thus, Participants will be in the position of a general
         creditor of the entity rather than the actual or beneficial owner of
         the assets of the plan.

     Participants under such plans, as well as contract owners, annuitants and
beneficiaries, should be aware that the rights of any person to any benefits
under such plans may be subject to the terms and conditions of the plans
themselves, regardless of the terms and conditions of the Contracts.  Purchasers
of Contracts for use with any qualified plan, as well as plan participants and
beneficiaries, should consult counsel and other competent advisors as to the
suitability of the Contracts to their specific needs and as to applicable Code
limitations and tax consequences.

                                      -28-
<PAGE>
 
     The rules governing the tax treatment of contributions and distributions
under qualified plans, as set forth in the Code and applicable rulings and
regulations, vary according to the type of the plan and the terms and conditions
of the plan itself.  Generally, in the case of a distribution to a participant
or beneficiary under a Contract purchased in connection with these plans (other
than a Section 457 deferred compensation plan), only the portion of the payment
in excess of the "investment in the contract" allocated to that payment is
subject to tax.  The "investment in the contract" equals the portion of plan
contributions invested in the Contract that was not excluded from the
participant's gross income, and may be zero.  In general, for withdrawals or
surrenders, a ratable portion of the amount received is taxable, based on the
ratio of the investment in the contract to the total Contract Value.  For
contracts with annuity starting dates commencing after December 31, 1986, the
amount excluded from a taxpayer's income will be limited to an aggregate cap
equal to the investment in the contract.  The taxable portion of annuity
payments is generally determined under the same rules applicable to Non-
Qualified Contracts.  However, special favorable tax treatment may be available
for certain distributions (including lump sum distributions) Adverse tax
consequences may result from distributions prior to age 59 1/2 (subject to
certain exceptions), distributions that do not conform to specified commencement
and minimum distribution rules, aggregate distributions in excess of a specified
annual amount and in certain other circumstances.  Effective January 1, 1993,
certain distributions from Contracts used in plans that qualify for special tax
treatment under Sections 401(a), 403(a) and 403(b) of the Code are subject to
mandatory withholding, generally at a rate of 20% (that is, electing no
withholding is not permitted).


OTHER CONSIDERATIONS

     In past years, legislation has been proposed in the U.S. Congress that
would have adversely modified the federal taxation of certain annuities.  For
example, one such proposal would have changed that tax treatment of non-
qualified annuities that did not have "substantial life contingencies" by taxing
income as it is credited to the annuity.  Although, as of the date of this
Prospectus, Congress was not actively considering any legislation regarding the
taxation of annuities, there is always the possibility that the tax treatment of
annuities could change by legislation or other means (such as IRS regulations,
revenue rulings, judicial decisions, etc.).  Moreover, it is also possible that
any change could be retroactive (that is, effective prior to the date of the
change).

     Because of the complexity of the federal tax law, and the fact that tax
results will vary according to the factual status of the individual involved,
tax advice may be needed by a person contemplating purchase of a Contract or the
exercise of elections under the Contract.  It should be understood that the
above comments and the discussion in the Statement of Additional Information
concerning the federal income tax consequences are not an exhaustive discussion
of all tax questions that might arise under the Contracts and that special rules
are provided with respect to situations not discussed there.  No representation
is made regarding the likelihood of continuation of the present income tax laws
or of current interpretations by the Internal Revenue Service.  No attempt has
been made to consider any applicable state or other tax law except with respect
to the imposition of any state premium taxes.

     We do not make any guarantee regarding the tax status of any Contract, and
the "Federal Tax Matters" discussions in this prospectus and in the Statement of
Additional Information are not intended as tax advice.

                                      -29-
<PAGE>
 
                               LEGAL PROCEEDINGS
                               -----------------

     We and certain affiliated companies have been named in various pending
legal proceedings considered to be ordinary routine litigation incidental to the
business of such companies. A number of other legal actions have been filed that
demand compensatory and punitive damages aggregating material dollar amounts.
Our management and chief legal officer believe that such litigation will not
have a material affect on the consolidated results of operations or financial
position.  Separate Account I is not engaged in any litigation.


                               THE FIXED ACCOUNT
                               -----------------

     Purchase Payments which are allocated to the Fixed Account become part of
Our general account which supports insurance and annuity obligations. Because of
exemptive and exclusionary provisions, interests in the Fixed Account have not
been registered under the Securities Act of 1933 ("1933 Act"), nor is the Fixed
Account registered as an investment company under the Investment Company Act of
1940 ("1940 Act"). Accordingly, neither the Fixed Account nor any interests
therein are generally subject to the provisions of the 1933 or 1940 Acts.
Disclosures regarding the fixed portion of the annuity contract and the Fixed
Account have not been reviewed by the staff of the Securities and Exchange
Commission.


FIXED ACCOUNT ACCUMULATED VALUE

     The value of a fixed Accumulation Unit was established at $1 and is
adjusted daily to reflect the rate(s) of interest being credited to Contracts
with an interest in the Fixed Account. The Fixed Account Accumulated Value is
the total of periodic Purchase Payments and transfers to the account, increased
at rates of interest established by Us, reduced by the total of any charges,
withdrawals and transfers from the account. We reserve the right to deduct
premium or other taxes from Purchase Payments or to charge those taxes against
the Contracts to which they are attributable. The guaranteed interest rate for
the first Calendar Year is stated in the Contract. That rate may be changed by
Us at the end of the first Calendar year and at the end of each Calendar year
thereafter.  A Calendar Year is a period of one year from January 15 of one year
through January 14 of the next year.  We will credit interest daily at the
established rates, but interest will be compounded annually. We will notify You
of the rate of interest to be credited during the next Calendar year.

We guarantee that the interest rate will be at least 4%.


AMOUNT OF EACH FIXED ANNUITY PAYMENT

     a.  The amount of the first Fixed Annuity payment will be equal to:
         1. the amount of the Net Accumulated Value being used to purchase a
            Fixed Annuity, divided by
         2. $1,000, multiplied by

                                      -30-
<PAGE>
 
         3. a factor from the Fixed Annuity Settlement Option Table that appears
            in the Contract.

     b.  The dollar amount of Fixed Annuity payments remain fixed during the
         annuity payment period, except under:

         1. Option 4, and

         2. Options 2, 3 and 5, which may be increased by interest in excess of
            the guaranteed rates; and

         3. Option 6, under which the number of units is reduced one-third at
            the death of the first payee.


TIME AND DELAY OF PAYMENT


     FIXED ACCOUNT-We may delay paying the amount of any withdrawal or surrender
for up to six months after a request is received by Us.

                                      -31-
<PAGE>
 
                      STATEMENT OF ADDITIONAL INFORMATION
                      -----------------------------------

     A Statement of Additional Information is available (at no cost) which
contains more details concerning the subjects discussed in this Prospectus.
The following is the Table of Contents for that Statement:


                               TABLE OF CONTENTS
                               -----------------
                                       OF
                                       --
                    THE STATEMENT OF ADDITIONAL INFORMATION
                    ---------------------------------------
<TABLE>
<CAPTION>
 
                                                    Page
                                                    ====
<S>                                                 <C>
 
GENERAL INFORMATION AND HISTORY...................   B-3
  The Company.....................................   B-3
THE CONTRACT......................................   B-3
  Ownership.......................................   B-3
  Beneficiary.....................................   B-3
  Assignment......................................   B-3
  Calculation of the Accumulation Unit Value......   B-4
  Single Sum Settlement...........................   B-4
  Reports.........................................   B-4
ANNUITY PAYMENTS..................................   B-5
  Election of Fixed or Variable Annuity Payments..   B-5
  Limitations/Conditions..........................   B-5
  Variable Annuity Unit Value.....................   B-6
  Amount of Each Variable Annuity Payment.........   B-6
FEDERAL TAX MATTERS...............................   B-7
  Diversification Requirements....................   B-7
  IRS Required Distributions......................   B-7
ADMINISTRATIVE SERVICES...........................   B-8
UNDERWRITER.......................................   B-8
LEGAL MATTERS.....................................   B-8
STATE REGULATION..................................   B-9
REGISTRATION STATEMENT............................   B-9
EXPERTS...........................................   B-9
FINANCIAL STATEMENTS..............................   B-9
</TABLE>

                                      -32-
<PAGE>
 
                     WASHINGTON NATIONAL INSURANCE COMPANY
                     -------------------------------------
                       WN PLAN DEFERRED VARIABLE ANNUITY
                       ---------------------------------

                                   Offered by

                     Washington National Insurance Company


                               300 Tower Parkway
                          Lincolnshire, IL  60069-3665

                                   ----------


                      STATEMENT OF ADDITIONAL INFORMATION
                      -----------------------------------


     This Statement of Additional Information expands upon certain subjects
discussed in the current Prospectus for the WN Plan Deferred Variable Annuity
Contract (the "Contract") offered by Washington National Insurance Company.  You
may obtain a copy of the Prospectus dated July 1, 1996 by calling 1-800-866-
9922, or by writing to the Company at Washington National Service Center, Life
and Annuity Administration, P.O. Box 9019, Kokomo, Indiana 46904.  Terms used in
the current Prospectus for the Contract are incorporated in this Statement.

     THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE
READ ONLY IN CONJUNCTION WITH THE PROSPECTUSES FOR THE CONTRACT AND SCUDDER
VARIABLE LIFE INVESTMENT FUND
                            
Dated: July 1, 1996

                                      B-1
<PAGE>
 
                               TABLE OF CONTENTS
                               -----------------
<TABLE>
<CAPTION>
                                                                           PAGE
                                                                           ----
<S>                                                                        <C>
GENERAL INFORMATION AND HISTORY...........................................  B-3
  The Company.............................................................  B-3
THE CONTRACT..............................................................  B-3
  Ownership...............................................................  B-3
  Beneficiary.............................................................  B-3
  Assignment..............................................................  B-3
  Calculation of the Accumulation Unit Value..............................  B-4
  Single Sum Settlement...................................................  B-4
  Reports.................................................................  B-4
ANNUITY PAYMENTS..........................................................  B-5
  Election of Fixed or Variable Annuity Payments..........................  B-5
  Limitations/Conditions..................................................  B-5
  Variable Annuity Unit Value.............................................  B-6
  Amount of Each Variable Annuity Payment.................................  B-6
FEDERAL TAX MATTERS.......................................................  B-7
  Diversification Requirements............................................  B-7
  IRS Required Distributions..............................................  B-7
ADMINISTRATIVE SERVICES...................................................  B-8
UNDERWRITER...............................................................  B-8
LEGAL MATTERS.............................................................  B-8
STATE REGULATION..........................................................  B-9
REGISTRATION STATEMENT....................................................  B-9
EXPERTS...................................................................  B-9
FINANCIAL STATEMENTS......................................................  B-9
</TABLE>

                                      B-2

<PAGE>
 
                        GENERAL INFORMATION AND HISTORY
                        -------------------------------


THE COMPANY

     We, Washington National Insurance Company, are a wholly-owned subsidiary of
Washington National Corporation (WNC), a Delaware corporation, whose executive
offices are located at 300 Tower Parkway, Lincolnshire, Illinois 60069-3665.

     We are licensed to do business in all states of the United States (except
New York) and the District of Columbia.  We have total assets of approximately
$3.0 billion.


                                 THE CONTRACT
                                 ------------

OWNERSHIP

     You, as the owner of the Contract, are named as owner in the application.
You may exercise all the rights and options that the Contract provides.  If You
are the owner of an individual Contract, Your rights and options, while the
Annuitant is living, are subject to the rights of any irrevocable Beneficiary.
If You are not the Annuitant under an individual Contract and You die before the
Annuitant, Your estate will become the owner unless You have named a successor
owner.


BENEFICIARY

     The Beneficiary named in the application will receive the death Proceeds
unless You, or the Participant under a group Contract, name a new Beneficiary.
In that event, We will pay the death Proceeds to the Beneficiary named in the
last change of Beneficiary request as provided in the Contract.


ASSIGNMENT

     It is possible to assign or transfer the Contract according to its terms.
We must receive a copy of any assignment before We may be required to take
notice of or be responsible for honoring that transfer or assignment.
Assignments made after the death of the Annuitant will be valid only with Our
consent.  Of course, We are not responsible for the validity of any assignment.

     However, certain restrictions exist as to the assignment or transfer of
Contracts issued under a tax-qualified plan.  A Contract issued under a tax-
qualified plan must provide that it may not be sold, assigned or pledged to any
person or organization other than the insurance company issuing it, when owned
by any person other than the trustees of any trust described in Section 401(a),
the custodian of a custodial account as described in Section 401(f), or the
administrator of an annuity plan described in Section 403(a) of the Internal
Revenue Code.  Contracts issued pursuant to Section 403(b) or certain other
plans may also be subject to restrictions on assignments or transfers.

     The assignment or transfer of the Contract may result in adverse tax
consequences.

                                      B-3

<PAGE>
 
CALCULATION OF THE ACCUMULATION UNIT VALUE

     These are the factors which We use to determine the Accumulation Unit value
for each Valuation Date for the Sub-Accounts.  The Accumulation Unit value
varies with the investment performance of the Sub-Accounts, and with the
deductions and charges made against the Sub-Accounts.

     The gross investment rate is equal to:
       a.  investment income, plus
       b.  realized or unrealized gains, minus
       c.  realized or unrealized capital losses, adjusted for
       d.  any taxes paid or reserved on the Sub-Account (see Federal Income
           Tax Matters-How We Are Taxed, page 26 of the prospectus), divided by
       e.  the net asset value of the Sub-Account at the beginning of the
           Valuation Period.

     The net investment rate is:

       a.  the gross investment rate, minus
       b.  a daily charge of .000032 (.000022 for annuity rate guarantees and
           .000010 for financial accounting services).  (See Charges, page 8 of
           the prospectus.)

     Both the gross investment rate and the net investment rate may be more or
less than 0.

     The net investment factor is:
       a.  1.000000, plus
       b.  the net investment rate.

     We reserve the right to deduct premium or other taxes allocable to a Sub-
Account either in the computation of the net investment factor or as a charge
against the Contracts to which such taxes are attributable.


SINGLE SUM SETTLEMENT

     While it is in force, You, by surrendering the Contract and filing a
Written Request with Us within thirty days prior to the maturity date, may elect
to receive a single sum settlement at the maturity date equal to the Net
Accumulated Value of the Contract at that date.  The election will take effect
on the maturity date, if the Annuitant is living, and the annuity payments that
would otherwise have commenced at the maturity date will not be made.


REPORTS

     We will send You periodically, and no less than once each Contract Year
prior to the date of the first annuity payment, a statement of:

                                      B-4

<PAGE>
 
     a.  the number of fixed and variable Accumulation Units credited;
     b.  the current unit values; and
     c.  the total Accumulated Value.

     You will be sent semiannually a report containing financial statements and
a listing of portfolio securities of the applicable Portfolios of the Fund.


                               ANNUITY PAYMENTS
                               ----------------


ELECTION OF FIXED OR VARIABLE ANNUITY PAYMENTS

     You may choose, when annuity payments begin to have the Net Accumulated
Value applied, except under Options 1, 3 and 4, to provide for:
     a.  A Fixed Annuity;
     b.  A Variable Annuity; or
     c.  a mix of the above.

     If You do not make an election, the Net Accumulated Value will be paid
under Option 2(B) with payments guaranteed for a period of ten years, with the
portion of the Accumulated Value that was held in Separate Account I applied to
a Variable Annuity and the portion held in the Fixed Account applied to a Fixed
Annuity.

     The net investment factor, or a factor which reflects a guaranteed annual
investment rate of 3%, will apply if Option 3 is chosen.  Options 1, 3 and 4 are
available as a Fixed Annuity only.  The Net Accumulated Value needed to provide
a Fixed Annuity or a guaranteed interest rate will be withdrawn from Separate
Account I and placed in the general account of Washington National Insurance
Company.  Such withdrawn amounts are not subject to annuity rate guarantee
charges or other charges made against assets in Separate Account I, except the
annual maintenance charge.

     When a Fixed Annuity is elected, higher payments than those stated in the
Contract may be paid at Our discretion.


LIMITATIONS/CONDITIONS

     a.  The amount applied under any settlement option must be at least $2,000
         and must be sufficient to provide a periodic installment or interest
         payment of at least $20.
     b.  An option will be available without Our consent only if the Proceeds
         are payable to a natural person receiving them for his or her own
         benefit.
     c.  We may require proof of the age of any payee under Option 2, 5 or 6.
         We also may require evidence that the payee is living at the time any
         payment is due.
     d.  The first payment under an option will be due on the date the option
         becomes effective, except under Option 4 it will be due at the end of
         the first payment interval.
     e.  If a settlement option is elected during the lifetime of the Annuitant
         and prior to the Contract being in effect for five years, a contingent
         deferred sales charge will be

                                      B-5

<PAGE>
 
        deducted.  (See Contingent Deferred Sales Charge, page 23 of the
        prospectus for exceptions.)


VARIABLE ANNUITY UNIT VALUE

     The value of a Variable Annuity Unit for each Sub-Account was established
at $1 on the first Valuation Date.  Subsequent Annuity Unit values for each Sub-
Account are determined by multiplying:

     a. the Annuity Unit value for the previous Valuation Date, by
     b. the net investment factor for the current Valuation Date, divided by
     c. a factor to reflect the assumed interest rate of 3.5% used in the
        Variable Annuity Settlement Option Tables that appear in the Contract,
        which are based on the Progressive Annuity Table assuming age last
        birthday and births in the year 1900.


AMOUNT OF EACH VARIABLE ANNUITY PAYMENT

     a. The amount of the first Variable Annuity payment will be equal to:
        1. the amount of the Net Accumulated Value being used to purchase a
           Variable Annuity, divided by
        2. 1,000, multiplied by
        3. the rate of each $1,000 of Proceeds in the table for the option
           chosen.

     The amount under Options 2, 5 and 6 will depend on the sex(es) and age(s)
     of the payee(s).

     b. To determine the number of Variable Annuity Units in each payment:
        1. the Net Accumulated Value for each Sub-Account is divided by
        2. the Annuity Unit value for the Sub-Account

     The number of Annuity Units in each payment then remains fixed, except
     under Option 6, where upon the death of either payee, the number of Annuity
     Units is reduced by one-third.

     c. Each payment after the first is determined by multiplying:
        1. the number of Annuity Units for each Sub-Account, by
        2. the Annuity Unit value for the Sub-Account.

     Subsequent payments will be determined on the Valuation Date on or just
     prior to the seventh calendar day before the payment is due.

                                      B-6

<PAGE>
 
                              FEDERAL TAX MATTERS
                              -------------------

DIVERSIFICATION REQUIREMENTS

     Section 817(h) of the Code provides in substance that Section 72 of the
Code will not apply and We will not be treated as the owner of the assets of
Separate Account I unless the investments made by Separate Account I are
"adequately diversified" in accordance with regulations prescribed by the
Treasury.  Thus, if Separate Account I is not "adequately diversified," any
increase in the value of a variable annuity contract will be taxed to the
contract owner currently.  The Separate Account I, through the Fund, intends to
comply with the diversification requirements prescribed by the Treasury in Reg.
(S) 1.817-5, which affect how the Fund's assets may be invested.

     In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their contracts. In those circumstances, income
and gains from the separate account assets would be includable in the variable
contract owner's gross income. The IRS has stated in published rulings that a
variable contract owner will be considered the owner of separate account assets
if the contract owner possesses incidents of ownership in those assets, such as
the ability to exercise investment control over the assets. The Treasury
Department also announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control of the investments of a
segregated asset account may cause the investor (i.e., the Contract Owner),
rather than the insurance company, to be treated as the owner of the assets in
the account." This announcement also stated that guidance would be issued by way
of regulations or rulings on the "extent to which policyholders may direct their
investments to particular sub-accounts without being treated as owners of the
underlying assets."

     The ownership rights under the Contract are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, a Contract Owner has additional flexibility in allocating Purchase
Payments and the Contract values. These differences could result in a Contract
Owner being treated as the owner of the assets of the Separate Account. In
addition, we do not know what standards will be set forth, if any, in the
additional regulations or rulings which the Treasury Department has stated it
expects to issue. We, therefore, reserve the right to modify the Contract as
necessary to attempt to prevent a Contract Owner from being considered the owner
of a pro rata share of the assets of the Separate Account.


IRS REQUIRED DISTRIBUTIONS

     In addition to the requirements of Section 817(h) of the Code, in order to
be treated as an annuity contract for federal income tax purposes, Section 72(s)
of the Code requires any Non-qualified Contract issued after January 18, 1985 to
provide that (a) if any Contract owner dies on or after the Annuity Date but
prior to the time the entire interest in the Contract has been distributed, the
remaining portion of such interest will be distributed at least as rapidly as
under the method of distribution being used as of the date of that Contract
owner's death; and (b) if any contract owner dies prior to the Annuity Date, the
entire interest in the Contract will be distributed within the five years after
the date of that contract owner's death.  These requirements shall be considered
satisfied if any portion of the contract owner's interest which is payable to or
for the benefit of a "designated

                                      B-7

<PAGE>
 
beneficiary" is distributed over the life of such "designated beneficiary" or
over a period not extending beyond the life expectancy of that beneficiary and
such distributions begin within one year of the contract owner's death.  (The
contract owner's "designated beneficiary" is that person designated by such
contract owner as a beneficiary and to whom ownership of the Contract passes by
reason of death and must be a natural person.)  However, if the contract owner's
"designated beneficiary" is the surviving spouse of the contract owner, the
Contract may be continued with the surviving spouse as the new contract owner.

     The Non-qualified Contracts issued after January 18, 1985 contain
provisions which are intended to comply with the requirements of Section 72(s)
of the Code, although no regulations interpreting these requirements have yet
been issued.  We intend to review such provisions and modify them if necessary
to assure that they comply with the requirements of Code Section 72(s) when
clarified by regulation or otherwise.

     Other rules may apply to Qualified Contracts.


                            ADMINISTRATIVE SERVICES
                            -----------------------

     We have an agreement with our subsidiary, United Presidential Life
Insurance Company (UPI) of Kokomo, Indiana to provide administrative services.


                                  UNDERWRITER
                                  -----------


     Washington National Equity Company (WNEC), a Delaware Corporation, was a
wholly-owned subsidiary of WNC prior to WNEC's dissolution on June 29, 1990.  It
acted as principal underwriter to Separate Account I.  WNEC was a registered
broker-dealer under the Securities and Exchange Act of 1934 until March 31,
1990, and was a member of the National Association of Securities Dealers, Inc.
(NASD).

     Variable annuity contracts are no longer offered for sale.  No underwriting
commissions were paid by Us to WNEC since 1991, due to WNEC's dissolution.


                                 LEGAL MATTERS
                                 -------------


     Legal advice relating to certain matters under the federal securities and
tax laws applicable to the issue and sale of the Contracts has been provided to
the Company by Sutherland, Asbill & Brennan, of Washington, D.C.

                                      B-8

<PAGE>
 
                                STATE REGULATION
                                ----------------

     Washington National Insurance Company, an Illinois Company, is subject to
regulation by the Illinois Director of Insurance.  An annual statement is filed
with the Director on or before March 1st of each year covering Our operations
for the preceding year and Our financial condition on December 31st of such
year.  Our books and accounts are subject to review and examination by the
Illinois Insurance Department at all times and a full examination of Our
operations is conducted at periodic intervals.  In addition, We are subject to
the insurance laws and regulations of the other jurisdictions in which We are
licensed to operate.

                             REGISTRATION STATEMENT
                             ----------------------

     A registration statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended.  This Prospectus does
not include all of the information contained in the registration statements, its
amendments and exhibits, which were also filed.



                                    EXPERTS
                                    -------

     The consolidated financial statements of Washington National Insurance
Company and the financial statements and selected per accumulation unit data and
ratios of Separate Account I of Washington National Insurance Company appearing
herein have been audited by Ernst & Young LLP, independent auditors, to the
extent indicated in their reports thereon appearing elsewhere herein.  Such
financial statements and selected per accumulation unit data and ratios have
been included herein in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.


                              FINANCIAL STATEMENTS
                              --------------------

     The consolidated financial statements of Washington National Insurance
Company included herein should be distinguished from the financial statements of
Separate Account I and should be considered only as bearing upon the ability of
Washington National Insurance Company to meet its obligations under the
Contracts.

                                      B-9
<PAGE>
 
                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
 
 
SEPARATE ACCOUNT I OF WASHINGTON NATIONAL INSURANCE COMPANY
                                                                          PAGE
<S>                                                                       <C>
      Report of Ernst & Young LLP, Independent Auditors.................   B-11
      Statement of Assets and Liabilities...............................   B-12
      Portfolio of Investments..........................................   B-13
      Statement of Operations...........................................   B-18
      Statement of Changes in Net Assets................................   B-19
      Notes to Financial Statements.....................................   B-21
      Supplementary Information-Selected Per Accumulation Unit Data 
        and Ratios......................................................   B-24
 
 
WASHINGTON NATIONAL INSURANCE COMPANY
 
      Report of Independent Auditors....................................   B-26
      Consolidated Balance Sheet........................................   B-27
      Consolidated Statement of Income..................................   B-28
      Consolidated Statement of Cash Flows..............................   B-29
      Consolidated Statement of Shareholder's Equity....................   B-30
      Notes to Consolidated Financial Statements........................   B-31
 
</TABLE>



                                   Page B-10
<PAGE>
 
               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS



Contract Owners and Board of Directors
Separate Account I of Washington
National Insurance Company


We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Separate Account I of Washington National
Insurance Company (comprising, respectively, the Bond, Short-Term Portfolio and
Stock Sub-Accounts) as of December 31, 1995, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the selected per
accumulation unit data and ratios for each of the five years in the period then
ended. These financial statements and per accumulation unit data and ratios are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and per accumulation unit data and
ratios 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 per accumulation
unit data and ratios 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, 1995, by correspondence with the custodian. 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 selected per accumulation unit data
and ratios referred to above present fairly, in all material respects, the
financial position of each of the respective Sub-Accounts constituting Separate
Account I of Washington National Insurance Company at December 31, 1995, the
results of their operations of the year then ended, the changes in their net
assets for each of the two years in the period then ended, and the selected per
accumulation unit data and ratios for each of the five years in the period then
ended, in conformity with generally accepted accounting principles.


                                       /s/ Ernst & Young LLP

Chicago, Illinois
February 9, 1996


                                     B-11
<PAGE>
 
SEPARATE ACCOUNT I OF
WASHINGTON NATIONAL INSURANCE COMPANY
 
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
 
 
 
<TABLE> 
<CAPTION>
                                                       Sub-Account
                                          ------------------------------------
                                                       Short-Term
                                             Bond      Portfolio      Stock
                                          -----------  ----------  -----------
<S>                                       <C>          <C>         <C>
ASSETS                                               
                                                     
Investments, at fair value
 (cost: Bond-$11,586,900: Short-Term
 Portfolio-$1,672,826:
 Stock-$17,992,994) - Note C              $12,172,146  $1,672,826  $32,136,723
Cash                                            3,580         834       31,925
Dividends and interest receivable             195,593       1,266       68,117
Other receivables                               7,921       -           49,477
                                          -----------  ----------  -----------
                                           12,379,240   1,674,926   32,286,242
                                                     
LIABILITIES                                          
                                                     
Payable to Washington National                  1,407         117        6,521
 Insurance Company - Note B                          
                                          -----------  ----------  -----------
                                                     
  NET ASSETS                              $12,377,833  $1,674,809  $32,279,721
                                          ===========  ==========  ===========
                                                     
Accumulation units outstanding              4,954,931     945,624    9,442,564
                                          ===========  ==========  ===========
                                                     
Accumulation unit value                         $2.50       $1.77        $3.42
                                                =====       =====        =====
</TABLE>
 
 
See notes to financial statements.

                                     B-12
<PAGE>
 
SEPARATE ACCOUNT I OF
WASHINGTON NATIONAL INSURANCE COMPANY
 
PORTFOLIO OF INVESTMENTS
December 31, 1995
 
<TABLE>
<CAPTION>
                                                                                                            Principal       Fair
                                                                                                              Amount       Value
                                                                                                            ----------   ----------
<S>                                                                                                         <C>          <C>
BOND SUB-ACCOUNT
  U.S. Government and Government Agency Obligations--31.3% 
    U.S. Treasury, 6.13% note, due 7-31-00                                                                  $  750,000   $  772,500
    U.S. Treasury, 7.00% note, due 4-15-99                                                                     500,000      525,000
    U.S. Treasury, 8.00% note, due 1-15-97                                                                     500,000      515,000
    Federal Home Loan Mortgage Corporation, 6.2% debenture, due 9-8-08                                         500,000      495,000
    Federal Home Loan Mortgage Corporation, 8.75% debenture, due 4-1-08                                        146,895      143,916 
    Federal Home Loan Mortgage Corporation, 9.25% participation certificates, pool 160055, due 8-1-08           85,458       85,337
    Federal Home Loan Mortgage Corporation, 10.25% participation certificates, pool 160095, due 11-1-09         37,750       36,237
    Federal Home Loan Mortgage Corporation, 10.75% participation certificates, pool 170033, due 7-1-10          52,810       50,308
    Federal Home Loan Mortgage Corporation, 10% participation certificates, pool 170152, due 1-1-16             31,383       31,541 
    Government Trust Certificate, 9.25% certificate, due 11-15-01                                              500,000      555,000 
    Government National Mortgage Association, 7.5% participation certificates, pool 327726, due 8-15-22        667,759      673,307 
                                                                                                                         ----------

      TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (cost - $3,766,304)                                         3,883,146

  Corporate Bonds--60.0%
    General Motors Corporation, 9.63% debentures, due 12-1-00                                                  500,000      575,000
    DuPont De Nemours, 9.15% note, due 4-15-00                                                                 500,000      565,000
    American Home Products, 7.70% note, due 2-15-00                                                            500,000      535,000
    Hoechst Celanese Corporation, 9.63% note, due 9-1-99                                                       500,000      535,000
    Pacificorp, 6.75% 1st mtg & collateral trust, due 4-1-05                                                   500,000      515,000
    General Telephone Company of the Northwest, Inc., 8.25% first mortgage bonds, Series W, due 2-1-07         500,000      515,000
    Comerica, Inc., 7.13% note, due 12-1-13                                                                    500,000      505,000
    NCNB Texas National Bank, 9.5% note, due 6-1-04                                                            500,000      600,000
    Nationsbank Corporation, 6.63% note, due 1-15-98                                                           500,000      510,000
    Banc One Corporation, 7.25% note, due 8-1-02                                                               500,000      530,000
    Aon Corporation, 6.7% note, due 6-15-03                                                                    500,000      515,000
    Corestates Capital Corporation, 6.63% note, due 3-15-05                                                    500,000      510,000
    Equifax Inc., 6.5% note, due 6-15-03                                                                       500,000      510,000
    Morgan Stanley Group, 6.38% note, due 12-15-03                                                             500,000      505,000
                                                                                                                         ----------
                                                                                                                       
      TOTAL CORPORATE BONDS (cost - $6,956,596)                                                                           7,425,000
</TABLE>

See notes to financial statements.
Percentages shown are based on total net assets of each Sub-Account.

                                     B-13
<PAGE>
 
SEPARATE ACCOUNT I OF
WASHINGTON NATIONAL INSURANCE COMPANY
 
PORTFOLIO OF INVESTMENTS -- Continued
December 31, 1995
 
<TABLE>
<CAPTION>
                                                                                                         Principal        Fair
                                                                                                          Amount          Value
                                                                                                         ----------   -------------
<S>                                                                                                      <C>          <C>
Floating Rate Demand Notes--7.0%
      Associate Corporation of North America, 5.09% , due on demand                                      $  150,000   $     150,000
      General Electric Credit Corporation, 5.35%, due on demand                                             714,000         714,000
                                                                                                                      -------------

        TOTAL FLOATING RATE DEMAND NOTES (cost - $864,000)                                                                  864,000
                                                                                                                      -------------

        TOTAL INVESTMENTS--BOND SUB-ACCOUNT--98.3% (cost - $11,586,900)                                               $  12,172,146
                                                                                                                      =============

SHORT-TERM PORTFOLIO SUB-ACCOUNT
  Commercial Paper--83.4%
      American Express Credit Corporation, 5.70%, due 1-18-96                                               200,000   $     199,462
      Chevron Oil Finance Company, 5.77%, due 1-30-96                                                       200,000         199,070
      John Deere Credit Company, 5.78%, due 1-26-96                                                         200,000         199,197
      Ford Motor Credit Company, 5.61%, due 1-22-96                                                         200,000         199,346
      Household Finance Corporation, 5.65%, due 1-5-96                                                      200,000         199,874
      IBM Credit Corporation, 5.77%,  due 1-25-96                                                           200,000         199,231
      Prudential Funding Corporation, 5.79%, due 1-12-96                                                    200,000         199,646
                                                                                                                      -------------

        TOTAL COMMERICAL PAPER (cost - $1,395,826)                                                                        1,395,826
  
Floating Rate Demand Notes--16.5%
      Associates Corporation of North American, 5.09%, due on demand                                         10,000          10,000
      General Electric Credit Corporation, 5.94%, due on demand                                             267,000         267,000
                                                                                                                      -------------

        TOTAL FLOATING RATE DEMAND NOTES (cost - $277,000)                                                                  277,000
                                                                                                                      -------------

        TOTAL INVESTMENTS--SHORT-TERM PORTFOLIO SUB-ACCOUNT--99.9% (cost - $1,672,826)                                $   1,672,826
                                                                                                                      =============
</TABLE> 
 
<TABLE> 
<CAPTION> 
                                                                                                         Number of        Fair
                                                                                                          Shares          Value
                                                                                                         ----------   -------------
<S>                                                                                                      <C>           <C> 
STOCK SUB-ACCOUNT
  Common Stocks--99.4%
    Automobile--2.4%
      General Motors Corporation                                                                             15,000   $     780,000
</TABLE>

 
See notes to financial statements.
Percentages shown are based on total net assets of each Sub-Account


                                     B-14
<PAGE>
 
SEPARATE ACCOUNT I OF
WASHINGTON NATIONAL INSURANCE COMPANY
 
PORTFOLIO OF INVESTMENTS -- Continued
December 31, 1995

<TABLE> 
<CAPTION> 
                                                                     Number of         Fair
                                                                      Shares           Value
                                                                    ----------       ----------
<S>                                                                 <C>              <C>  
STOCK SUB-ACCOUNT--CONTINUED
  Common Stocks--99.4% - Continued
    Banks-3.8%
      Banc One Corporation                                             14,456        $  543,907
      Huntington Bancshare                                             27,859           668,616
                                                                                     ----------
                                                                                      1,212,523
    Beverages--2.7%
      Anheuser-Busch                                                   13,200           882,750
    
    Brokerage Firms--3.2%
      Merrill Lynch                                                    20,200         1,030,200
    
    Consumer Products--4.3%
      Newell Company                                                   16,000           414,000
      Rubbermaid, Inc.                                                 15,000           382,500
      Warner Lambert                                                    6,000           582,750
                                                                                     ----------
                                                                                      1,379,250
    Drugs--6.7%
      Bristol-Myers Squibb                                             10,000           858,750
      Merck & Co.                                                      10,400           682,500
      Pfizer, Inc.                                                     10,000           630,000
                                                                                     ----------
                                                                                      2,171,250
    Electrical--6.0%
      Emerson Electric                                                 10,100           825,675
      General Electric                                                 15,600         1,123,200
                                                                                     ----------
                                                                                      1,948,875
    Electronics and Instruments--7.1%
      Avnet, Inc.                                                      17,700           792,075
      Hewlett-Packard Company                                          18,000         1,507,500
                                                                                     ----------
                                                                                      2,299,575
    Entertainment--2.3%
      Walt Disney Company                                              12,800           755,200
</TABLE>

See notes to financial statements.
Percentages shown are based on total net assets of each Sub-Account.

                                     B-15
<PAGE>
 
 
SEPARATE ACCOUNT I OF
WASHINGTON NATIONAL INSURANCE COMPANY
 
PORTFOLIO OF INVESTMENTS -- Continued
December 31, 1995

<TABLE>
<CAPTION>
                                                   Number of       Fair
                                                    Shares        Value
                                                   ---------    ----------
<S>                                                <C>          <C>
STOCK SUB-ACCOUNT--CONTINUED
  Common Stocks -- 99.4% - Continued
    Financial--5.2 %
      Federal National Mortgage Association          8,500      $1,052,938
      Fleet Financial Group                         15,000         611,250
                                                                ----------
                                                                 1,664,188

    Foods--4.9%
      CPC International                             12,600         864,675
      Sysco Corporation                             22,000         715,000
                                                                ----------
                                                                 1,579,675

    Industrial--8.3%
      WMX Technologies, Inc.                        12,000         357,000
      Parker-Hannifin                               23,700         811,725
      Pitney Bowes, Inc.                            13,600         639,200
      Sherwin Williams                              21,600         880,200
                                                                ----------
                                                                 2,688,125

    Insurance--5.1%
      Aetna Life and Casualty Company                6,200         429,350
      General Reinsurance Corporation                4,400         682,000
      Lincoln National Corporation                  10,000         537,500
                                                                ----------
                                                                 1,648,850

    Mines and Minerals--2.3%
      Minnesota Mining and Manufacturing Company    11,000         730,125

    Oil--11.0%
      Amoco Corporation                             11,000         786,500
      Chevron Corporation                           18,600         974,175
      Exxon Corporation                             11,600         933,800
      Mobil Corporation                              7,600         849,300
                                                                ----------
                                                                 3,543,775

    Radio and Television--2.2%
      Interpublic Group Incorporated                16,000         694,000
 
    Restaurants--3.0%
      McDonald's Corporation                        21,400         965,675
</TABLE> 
 
See notes to financial statements.
Percentages shown are based on total net assets of each Sub-Account.

                                     B-16
<PAGE>
 
SEPARATE ACCOUNT I OF
WASHINGTON NATIONAL INSURANCE COMPANY
 
PORTFOLIO OF  INVESTMENTS -- Continued
December 31, 1995
<TABLE> 
<CAPTION> 
                                                Number of       Fair
                                                  Shares        Value
                                                ---------    -----------
<S>                                             <C>          <C> 
STOCK SUB-ACCOUNT--CONTINUED       
  Common Stocks--99.3%--Continued  
    Retail--2.2%                   
      Home Depot Incorporated                       8,000    $   382,000 
      Tandy Corporation                             8,000        332,000
                                                             -----------
                                                                 714,000
    Technology--6.6%                                                  
      Intel Corporation                            22,000      1,248,500
      Motorola Incorporated                        15,600        889,200   
                                                             -----------
                                                               2,137,700
    Telephone--3.3%                                                     
      Bell Atlantic Corporation                    10,500        702,187   
      Pacific Teleisis Group                       10,800        361,800   
                                                             -----------
                                                               1,063,987  
    Utilities--6.8%                                                     
      Central & Southwest                          19,600        546,350   
      Duke Power                                   12,400        587,450   
      Northeast Utilities                          17,400        421,950   
      Pennsylvania Power and Light Company         17,800        445,000   
      SCE Corp                                     10,000        176,250 
                                                             -----------
                                                               2,177,000

       TOTAL COMMON STOCKS (cost-$17,922,994)                 32,066,723

                                                Principal
                                                 Amount 
                                                ---------    
Floating Rate Demand Notes--.2%
  Associate Corporation of North                
   America, 5.09%, due on demand                $  42,000         42,000
  General Electric Credit Corportion,           
   5.35%, due on demand                            28,000         28,000
                                                             -----------
       TOTAL FLOATING RATE DEMAND NOTES
         (cost-$70,000)                                           70,000
                                                             -----------
       TOTAL INVESTMENTS-STOCK SUB-ACCOUNT-99.6% 
         (cost-$17,992,994)                                  $32,136,723
                                                             ===========
</TABLE> 
 
See notes to financial statements.
Percentages shown are based on total net assets of each Sub-Account.
 
                                     B-17
<PAGE>
 
 
SEPARATE ACCOUNT I OF
WASHINGTON NATIONAL INSURANCE COMPANY
 
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
<TABLE>
<CAPTION>
 
                                                                  Sub-Account
                                                     --------------------------------------
                                                                    Short-Term
                                                        Bond        Portfolio      Stock
                                                     ----------     ----------   ----------
<S>                                                  <C>            <C>          <C>  
Investment income:
  Interest                                           $  890,627     $102,093    $    57,515
  Dividends                                                  --           --        769,515
  Other                                                      --           --         18,301
                                                     ----------     --------    -----------
                                                        890,627      102,093        845,331
Expenses--Note B:
  Mortality and expense assurance                        96,554       13,722        233,914
  Investment advisory and management fee                 60,346        8,576        146,196
  Accounting service fee                                 42,242        6,003        102,337
  General and administrative expenses                    20,135        3,430         62,114
                                                     ----------     --------    -----------
                                                        219,277       31,731        544,561
                                                     ----------     --------    -----------
NET INVESTMENT INCOME                                   671,350       70,362        300,770
Realized and unrealized gains (losses):
  Net realized gains                                        789                     721,695
  Unrealized gains (losses)--Note C:
    Beginning of year                                  (477,813)                  6,657,961
    End of year                                         585,246                  14,143,729
                                                     ----------                 -----------
  Net unrealized gain                                 1,063,059                   7,485,768
                                                     ----------                 -----------
NET REALIZED AND UNREALIZED
 GAIN ON INVESTMENTS                                  1,063,848                   8,207,463
                                                     ----------     --------    -----------
                                                     
INCREASE IN NET ASSETS
 FROM OPERATIONS                                     $1,735,198     $ 70,362    $ 8,508,233       
                                                     ==========     ========    =========== 
</TABLE>  
 
 
See notes to financial statements.

                                     B-18

<PAGE>
 
SEPARATE ACCOUNT I OF
WASHINGTON NATIONAL INSURANCE COMPANY
 
STATEMENT OF CHANGES IN NET ASSETS
 
<TABLE>
<CAPTION>
                                                                       Year Ended December 31, 1995        
                                                               --------------------------------------------                       
                                                                               Sub-Account                                        
                                                               --------------------------------------------                       
                                                                               Short-Term                                         
                                                                   Bond        Portfolio          Stock                           
                                                               -------------   ------------   -------------                       
<S>                                                            <C>             <C>            <C>                                 
ADDITIONS (DEDUCTIONS)                                                                                                            
  From operations                                                                                                                 
    Net investment income                                      $     671,350   $     70,362   $     300,770                       
    Net realized gain                                                    789             --         721,695                       
    Net unrealized gain                                            1,063,059             --       7,485,768                       
                                                               -------------   ------------   -------------                       
                                                                                                                                  
INCREASE IN NET ASSETS FROM OPERATIONS                             1,735,198         70,362       8,508,233                        

  From capital transactions-Note A                                                                                                 
    Net proceeds from units sold                                     419,329         36,762       1,276,994                        
    Cost of units redeemed                                        (1,084,252)      (110,683)     (2,733,504)                       
    Net asset value of units transferred, including exchanges                                                                      
     with the Fixed Account                                         (139,525)       (75,944)        141,268                         
                                                               -------------   ------------   -------------                        
                                                                                                                                  
DECREASE IN NET ASSETS FROM CAPITAL TRANSACTIONS                    (804,448)      (149,865)     (1,315,242)                       
                                                               -------------   ------------   -------------                       
                                                                                                                                  
NET INCREASE (DECREASE) IN NET ASSETS                                930,750        (79,503)      7,192,991                       
                                                                                                                                  
Net assets at beginning of year                                   11,447,083      1,754,312      25,086,730                       
                                                               -------------   ------------   -------------                       
                                                                                                                                  
NET ASSETS AT END OF YEAR                                      $  12,377,833   $  1,674,809   $  32,279,721                       
                                                               =============   ============   =============                       
                                                                                                                                  
ANALYSIS OF CHANGES IN UNITS OUTSTANDING                                                                                          
  Units sold                                                         178,815         21,559         427,709                       
  Units redeemed                                                    (458,670)       (63,500)       (907,205)                       
  Units transferred                                                  (61,842)       (44,197)         39,629                       
                                                               -------------   ------------   -------------                       
                                                                                                                                  
DECREASE IN UNITS OUTSTANDING                                       (341,697)       (86,138)       (439,867)                       
                                                                                                                                  
  Units outstanding at beginning of year                           5,296,628      1,031,762       9,882,431                       
                                                               -------------   ------------   -------------                       
                                                                                                                                  
UNITS OUTSTANDING AT END OF YEAR                                   4,954,931        945,624       9,442,564                       
                                                               =============   ============   =============                        
</TABLE>
 
See notes to financial statements.
 

                                     B-19
<PAGE>
 
SEPARATE ACCOUNT I OF
WASHINGTON NATIONAL INSURANCE COMPANY
 
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>

                                                                    Year Ended December 31, 1994
                                                           --------------------------------------------
                                                                             Sub-Account
                                                           --------------------------------------------
                                                                            Short-Term
                                                              Bond          Portfolio         Stock
                                                           -----------      ----------     ------------
<S>                                                        <C>              <C>            <C>
ADDITIONS (DEDUCTIONS)
    From operations
      Net investment income                                $   644,387      $   41,670     $   359,394
      Net realized gain                                         26,252              --         237,338
      Net unrealized loss                                   (1,206,736)             --        (413,568)
                                                           -----------      ----------     ------------
 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS            (536,097)         41,670         183,164

    From capital transactions-Note A
      Net proceeds from units sold                             406,807          51,010       1,055,215
      Cost of units redeemed                                  (992,431)       (134,122)     (2,092,462)
      Net asset value of units transferred,
        including exchanges with the Fixed Account            (592,255)        170,143         233,261
                                                           -----------      ----------     -----------

INCREASE (DECREASE) IN NET ASSETS FROM
 CAPITAL TRANSACTIONS                                       (1,177,879)         87,031        (803,986)
                                                           -----------      ----------     ------------
NET INCREASE (DECREASE) IN NET ASSETS                       (1,713,976)        128,701        (620,822)
Net assets at beginning of year                             13,161,059       1,625,611      25,707,552
                                                           -----------      ----------     -----------
NET ASSETS AT END OF YEAR                                  $11,447,083      $1,754,312     $25,086,730
                                                           ===========      ==========     ===========

ANALYSIS OF CHANGES IN UNITS OUTSTANDING
  Units sold                                                   185,686          30,089         420,378
  Units redeemed                                              (454,958)        (80,108)       (831,402)
  Units transferred                                           (270,163)        101,699          91,183
                                                           -----------      ----------     -----------

INCREASE (DECREASE) IN UNITS OUTSTANDING                      (539,435)         51,680        (319,841)

  Units outstanding at beginning of  year                    5,836,063         980,082      10,202,272
                                                           -----------      ----------     -----------

UNITS OUTSTANDING AT END OF YEAR                             5,296,628       1,031,762       9,882,431
                                                           ===========      ==========     ===========
</TABLE>

See notes to financial statements.

                                     B-20
<PAGE>
 
SEPARATE ACCOUNT I OF
WASHINGTON NATIONAL INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS
December 31, 1995


NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Account:  The Separate Account I of Washington National Insurance Company
(the "Separate Account") is a segregated investment account of Washington
National Insurance Company ("WNIC"). WNIC is a wholly-owned subsidiary of
Washington National Corporation. The Separate Account is registered as an open-
end diversified management investment company pursuant to the provisions of the
Investment Company Act of 1940. The Separate Account no longer issues new
contracts. There are three Sub-Accounts within the Separate Account, each with
its own investment objectives and policies as follows:

     Bond Sub-Account -- high level of current income while preserving capital
     by investing in fixed income securities.

     Short-Term Portfolio Sub-Account -- moderate level of current income
     consistent with liquidity and preservation of capital by investing in one
     or more types of short-term instruments.

     Stock Sub-Account -- long-term capital growth and income by investing
     principally in equity-type securities.

In addition, a contract holder may elect to invest in a fixed annuity held by
WNIC, called the Fixed Account.

WNIC is a contract holder of the Separate Account. At December 31, 1995, the
fair value of WNIC's investments were $5,576,669, $1,084,802, and $9,654,392 in
the Bond, Short-Term Portfolio, and Stock Sub-Accounts, respectively. During
1995, WNIC made no deposits or withdrawals.

Valuation of Investments:  Securities traded on a national securities exchange
are valued at the closing price as of the valuation date. Investments traded in
the over-the-counter market are valued at the average between the bid and ask
prices. Commercial paper is valued at amortized cost and other short-term
investments are valued at cost. Differences, if any, from fair value are not
considered material in relation to net assets.

Investment Transactions and Income:  Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Interest income is
recorded on the accrual basis and dividend income is recorded on the ex-dividend
date. Realized gains and losses on investments are determined on a first-in,
first-out basis.

Accumulation Unit Valuation:  Accumulation unit values reflect the net asset
value of each Sub-Account and are computed daily.

                                     B-21

<PAGE>
 
SEPARATE ACCOUNT I OF
WASHINGTON NATIONAL INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS -- Continued
December 31, 1995



NOTE B -- DEDUCTIONS AND CHARGES

Deductions and charges are made from the Separate Account and paid to WNIC as
follows:

 .   As a fee for administration and contract maintenance, WNIC deducts $30
     annually from the accumulated value of each contract on the contract
     anniversary or on the date of surrender if it occurs between contract
     anniversaries. This fee does not apply to contracts for individual
     retirement accounts, or to contracts which at the end of any contract
     anniversary have received at least $1,000 of payments or in which the
     accumulated value is at least $20,000.

 .   As compensation for annuity rate guarantees, WNIC deducts an amount,
     computed on a daily basis, which is equal on an annual basis to .8% of the
     average net asset value of the Separate Account.


 .   As a fee for managing and administering the investment activities of the
     Separate Account, WNIC deducts an amount, computed on a daily basis, equal
     to an annual rate of .5% of the average net asset value of each Sub-
     Account.

 .   As compensation for providing financial accounting services to the Separate
     Account, WNIC deducts an amount, computed on a daily basis, equal to an
     annual rate of .35% of the average net asset value of the Separate Account.

 .   As reimbursement for incurring various other general and administrative
     expenses attributable to the Separate Account, WNIC deducts an amount,
     computed on a daily basis, equal to an annual rate of .2% of the average
     net asset value of the Separate Account. A component of these expenses is
     the fee paid to the Separate Account's Board of Directors. Only members of
     the Board of Directors who are not directors, officers, or employees of
     WNIC receive an annual retainer of $1,000, and a meeting fee of $350. In
     1995, the Separate Account's three external directors each received $1,700.

 .   A contingent deferred sales charge of 6% is made on any amounts withdrawn
     which are in excess of 10% of the contract's accumulated value on the date
     of the first withdrawal during the respective contract year, except that no
     such charge is made for withdrawals of purchase payments received more than
     72 months prior to the date of withdrawal and no such charge is made if the
     withdrawal amount is applied to a settlement option after the contract has
     been in force for five years or if the contract contains life
     contingencies.

                                     B-22
<PAGE>
 
SEPARATE ACCOUNT I OF
WASHINGTON NATIONAL INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS -- Continued
December 31, 1995


NOTE C -- INVESTMENTS

The aggregate cost of purchases and sales of investments other than United
States Government obligations and short-term notes was:
<TABLE>
<CAPTION>
 
                               Proceeds
                   Cost of       From
                 Investments  Investments
    Sub-Account   Acquired       Sold
  -------------  ------------  ----------
<S>               <C>          <C>
    Bond          $  499,370   $  130,224
    Stock          2,320,712    2,093,126
</TABLE>

The cost of purchases of United States Government obligations was $748,477 in
the Bond Sub-Account. The total unrealized gain on investments at December 31,
1995 consisted of unrealized appreciation of $590,246 and $14,284,704 and
unrealized depreciation of $5,000 and $140,975 in the Bond and Stock Sub-
Accounts, respectively.


NOTE D -- FEDERAL INCOME TAXES

The operations of the Separate Account form a part of, and are taxed with, the
operations of WNIC, which under the Internal Revenue Code is taxed as a "life
insurance company." The Separate Account is not taxed as a regulated investment
company under Subchapter M of the Code. Under existing federal income tax law,
no taxes are payable on the investment income or on the realized gains of the
Separate Account.


NOTE E -- SUBSEQUENT EVENT

A special meeting of the Separate Account contract holders has been scheduled on
March 12, 1996 to seek approval to reconstitute the Separate Account as a unit
investment trust which will invest all of its assets in an investment portfolio
of Scudder Variable Life Investment Fund.

Immediately following the restructuring of the Separate Account, the contract
holders will have beneficial interests in the same number of units in each Sub-
Account of the restructured Separate Account as they owned in that Sub-Account
immediately prior to the transaction.

The transaction was initiated to provide contract holders with experienced
mutual fund management, greater diversification of investments, and a reduction
in fees.

                                     B-23
<PAGE>
 
 
SEPARATE ACCOUNT I OF
WASHINGTON NATIONAL INSURANCE COMPANY
 
SUPPLEMENTARY INFORMATION--SELECTED PER ACCUMULATION UNIT DATA AND RATIOS

Selected data per accumulation unit
outstanding throughout the year

<TABLE>
<CAPTION>

<S>                                    <C>                           <C>                           <C>                    
 
 
For the year ended December 31,                  1995                          1994                          1993
                                    ------------------------------------------------------------------------------------------
                                              Sub-Account                   Sub-Account                   Sub-Account
                                    ------------------------------------------------------------------------------------------
                                              Short-Term                    Short-Term                     Short-Term
                                       Bond    Portfolio   Stock     Bond    Portfolio   Stock     Bond     Portfolio   Stock
                                    -----------------------------   ---------------------------   ----------------------------
Per accumulation unit data:
   Investment income                  $ 0.17      $ 0.10   $ 0.09   $ 0.16      $ 0.07   $ 0.08   $ 0.16      $ 0.05   $  0.07
   Expenses                            (0.04)      (0.03)   (0.06)   (0.04)      (0.03)   (0.04)   (0.04)      (0.03)    (0.04)
                                    -----------------------------   ---------------------------   ----------------------------
     NET INVESTMENT INCOME              0.13        0.07     0.03     0.12        0.04     0.04     0.12        0.02      0.03
 
   Net realized and unrealized
       gain (loss) on investments       0.21          --     0.85    (0.22)         --    (0.02)    0.03          --      0.21
                                    -----------------------------   ---------------------------   ----------------------------
   Net increase (decrease) in
       accumulation unit value          0.34        0.07     0.88    (0.10)       0.04     0.02     0.15        0.02      0.24
   Accumulation unit value at
       beginning of year                2.16        1.70     2.54     2.26        1.66     2.52     2.11        1.64      2.28
                                    -----------------------------   ---------------------------   ----------------------------
 
     ACCUMULATION UNIT VALUE
       AT END OF YEAR                 $ 2.50      $ 1.77   $ 3.42   $ 2.16      $ 1.70   $ 2.54   $ 2.26      $ 1.66   $  2.52
                                    =============================   ===========================   ============================
 
 
Ratios:
   Ratio of expenses to average
       net assets                       1.82%       1.86%    1.87%    1.87%       1.85%    1.83%    1.85%       1.85%     1.81%
   Ratio of net investment income
       to average net assets            5.58        4.11     1.03     5.28        2.47     1.41     5.50        1.28      1.17
   Portfolio turnover rate              1.25          --     7.41       --          --    12.20    33.66          --      3.50
 
Number of accumulation units
   outstanding at end of year
   (000's omitted)                     4,955         946    9,443    5,297       1,032    9,882    5,836         980    10,202
 
</TABLE> 
 
See notes to financial statements.

                                     B-24
<PAGE>
 
<TABLE>
<CAPTION>
 
 
WASHINGTON NATIONAL INSURANCE COMPANY
 
SUPPLEMENTARY INFORMATION--SELECTED PER ACCUMULATION UNIT DATA AND
RATIOS (cont.)
 
Selected data per accumulation unit
outstanding throughout the year
<S>                                 <C>                                    <C>                      

 
 
For the year ended December 31,                  1992                           1991
                                    -------------------------------   ---------------------------
                                              Sub-Account                     Sub-Account
                                    -------------------------------   ---------------------------
                                               Short-Term                     Short-Term
                                       Bond    Portfolio    Stock     Bond    Portfolio    Stock
                                    -------------------------------   ---------------------------
Per accumulation unit data:
   Investment income                  $ 0.17      $ 0.06   $  0.07   $ 0.16      $ 0.09   $  0.07
   Expenses                            (0.04)      (0.03)    (0.04)   (0.03)      (0.03)    (0.04)
                                    -------------------------------------------------------------
     NET INVESTMENT INCOME              0.13        0.03      0.03     0.13        0.06      0.03
 
   Net realized and unrealized
       gain (loss) on investments      (0.01)         --      0.12     0.14           --     0.34
                                    -------------------------------------------------------------
   Net increase in
       accumulation unit value          0.12        0.03      0.15     0.27        0.06      0.37
   Accumulation unit value at
       beginning of year                1.99        1.61      2.13     1.72        1.55      1.76
                                    -------------------------------------------------------------
 
ACCUMULATION UNIT VALUE
     AT END OF YEAR                   $ 2.11      $ 1.64   $  2.28   $ 1.99      $ 1.61   $  2.13
                                    ==============================   ============================
 
 
Ratios:
   Ratio of expenses to average
       net assets                       1.85%       1.85%     1.85%    1.85%       1.86%     1.86%
   Ratio of net investment income
       to average net assets            6.22        1.82      1.33     7.02        3.80      1.85
   Portfolio turnover rate             10.83          --      4.92       --          --      5.97
 
Number of accumulation units
   outstanding at end of year
   (000's omitted)                     6,457       1,065    10,457    6,616       1,130    10,564

</TABLE> 
 
See notes to financial statements.

                                     B-25

<PAGE>
 
Report of Independent Auditors


Board of Directors
Washington National Insurance Company


     We have audited the accompanying consolidated balance sheet of Washington
National Insurance Company as of December 31, 1995 and 1994, and the related
consolidated statements of income, shareholder's equity, and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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 are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. 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 referred to above present fairly,
in all material respects, the consolidated financial position of Washington
National Insurance Company at December 31, 1995 and 1994, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles.

     As discussed in Note C, the Company changed its method of accounting for
certain investments in debt and equity securities in 1994 and postemployment
benefits in 1993.

                                       /s/ ERNST & YOUNG LLP

Chicago, Illinois
February 8, 1996

                                     B-26
<PAGE>
 
Consolidated Balance Sheet

<TABLE> 
<CAPTION> 

(000s omitted)

               December 31,                                                  1995           1994
=================================================================================================
<S>                                                                    <C>            <C>
Assets         Investments
                 Fixed maturities-
                   Available for sale at fair value
                    (cost: $1,953,314; $1,768,181)                     $2,060,710     $1,649,453
                   Held to maturity at cost (fair value: $112,368)             --        113,116
                 Mortgage loans on real estate                            317,249        357,641
                 Real estate and joint ventures                            33,918         26,835
                 Policy loans                                              56,279         54,368
                 Other long-term                                           27,744         30,340
                 Short-term                                                47,920         51,642
               ----------------------------------------------------------------------------------
               Total Investments                                        2,543,820      2,283,395
               Cash                                                         4,852          3,669
               Deferred acquisition costs                                 235,499        293,850
               Reinsurance recoverables and prepaid premiums               49,502         54,842
               Accrued investment income                                   32,652         33,084
               Insurance premiums in course of collection                  14,718         14,857
               Property and equipment                                      18,259         22,988
               Goodwill                                                    18,385         19,092
               Separate Account                                            51,005         42,178
               Other                                                       40,781         38,402
               ----------------------------------------------------------------------------------
               Total Assets                                            $3,009,473     $2,806,357
- -------------------------------------------------------------------------------------------------
Liabilities    Policy liabilities                                      $2,363,329     $2,354,818
               General expenses and other liabilities                     123,310        119,069 
               Mortgage payable                                             1,309          1,907
               Short-term notes payable                                     1,175          1,175
               Income taxes (current: $1,094; $430)                        31,569        (15,874)
               Minority interest                                           56,381         44,157
               Separate Account                                            51,005         42,178
               ----------------------------------------------------------------------------------
               Total Liabilities                                        2,628,078      2,547,430
- -------------------------------------------------------------------------------------------------
Shareholder's  Common stock ($5.00 par value; authorized - 5,250
Equity           shares; issued and outstanding - 5,007 shares)            68,274         68,274
               Retained earnings                                          271,476        250,198
               Net unrealized investment gains (losses)                    45,250        (56,897)
               Unfunded pension loss                                       (3,605)        (2,648)
               ----------------------------------------------------------------------------------
               Total Shareholder's Equity                                 381,395        258,927
               ----------------------------------------------------------------------------------
               Total Liabilities and Shareholder's Equity              $3,009,473     $2,806,357
=================================================================================================
</TABLE> 

See notes to consolidated financial statements.
            
                                     B-27
<PAGE>
 
Consolidated Statement of Income

<TABLE> 
<CAPTION> 

(000s omitted)

              Year Ended December 31,                                      1995         1994        1993
=========================================================================================================
<S>                                                                    <C>          <C>
Revenues       Insurance premiums and policy charges                   $501,572     $468,386    $438,822
               Net investment income                                    184,146      181,524     183,430
               Realized investment gains (losses)                        (1,136)      (1,425)        896
               Other                                                     11,812        8,142       6,324
               ------------------------------------------------------------------------------------------
               Total Revenues                                           696,394      656,627     629,472
- ---------------------------------------------------------------------------------------------------------
Benefits and   Insurance benefits paid or provided                      466,285      435,802     420,358
Expenses       Insurance and general expenses                           139,688      137,239     129,584
               Amortization of deferred acquisition costs                40,952       38,053      37,943
               ------------------------------------------------------------------------------------------
               Total Benefits and Expenses                              646,925      611,094     587,885
- ---------------------------------------------------------------------------------------------------------
Earnings       Income before income taxes, minority interest,  
                and cumulative effect of change in
                 accounting principle                                    49,469       45,533      41,587
               Income taxes                                              15,525       13,062      10,728
               Minority interest                                          3,566        2,937         389
               ------------------------------------------------------------------------------------------
               Income before cumulative effect of change
                in accounting principle                                  30,378       29,534      30,470
               Cumulative effect of change in accounting
                principle--net of tax                                        --           --      (1,550)
               ------------------------------------------------------------------------------------------
               Net Income                                              $ 30,378     $ 29,534    $ 28,920
=========================================================================================================
</TABLE> 

See notes to consolidated financial statements.

                                     B-28

<PAGE>
 
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>  
                       
(000s omitted)
                       Year Ended December 31                                    1995            1994           1993     
====================================================================================================================
<S>                    <C>                                                   <C>             <C>            <C>  
Operating Activities   Net income                                            $ 30,378        $ 29,534       $ 28,920
                       Adjustments to reconcile to net cash provided
                        by operating activities
                         Increase in policy liabilities                        52,048          48,998         80,440
                         Deferred acquisition costs                           (11,561)         (3,894)       (15,282)
                         Change in reinsurance receivable                       4,058         (11,387)         4,587
                         Other, net                                            14,141          18,140         10,832
- --------------------------------------------------------------------------------------------------------------------
                       Net Cash Provided by Operating Activities               89,064          81,391        109,497
- --------------------------------------------------------------------------------------------------------------------
Investing Activities   Proceeds from sales
                         Fixed maturities - available for sale                308,663         113,375             --
                         Fixed maturities - held to maturity                    1,950              --        261,313
                         Mortgage loans, real estate, and other                 4,744          18,239         55,354
                       Proceeds from maturities and redemptions
                         Fixed maturities - available for sale                 96,188         155,684             --
                         Fixed maturities - held to maturity                   19,417          17,313        266,217
                         Mortgage loans, real estate, and other                46,828          58,666         73,763
                      Cost of purchases
                         Fixed maturities - available for sale               (507,084)       (399,418)            --
                         Fixed maturities - held to maturity                       --          (5,000)      (726,358)
                         Mortgage loans, real estate, and other                (6,495)        (26,068)       (40,661)
                      Increase in policy loans                                 (1,911)         (2,083)          (784)
                      Purchase of property and equipment                         (768)         (2,008)        (7,824)
                      Net change in short-term investments                      3,722          15,710         (4,350)
                      ----------------------------------------------------------------------------------------------
                      Net Cash Used by Investing Activities                   (34,746)        (55,590)      (123,330) 
- ---------------------------------------------------------------------------------------------------------------------
Financing Activities  Policyholder account deposits                           150,469         143,627        142,871
                      Policyholder account withdrawals                       (194,006)       (169,278)      (124,795)
                      Dividends to parent                                      (9,000)         (2,975)        (7,710)
                      Change in short-term notes payable                           --              --        (11,950)
                      Sale of common stock by subsidiary                           --              --         25,382
                      Repayment of long-term borrowings                          (598)           (527)        (9,536)
                      -----------------------------------------------------------------------------------------------
                      Net Cash Provided (Used) by Financing
                        Activities                                            (53,135)        (29,153)        14,262
- --------------------------------------------------------------------------------------------------------------------- 
Change in Cash         Increase (Decrease) in Cash                              1,183          (3,352)           429
                       Cash at Beginning of Year                                3,669           7,021          6,592
                       -----------------------------------------------------------------------------------------------  
                       Cash at End of Year                                   $  4,852        $  3,669      $   7,021
======================================================================================================================
</TABLE> 

See note to consolidated financial statements.

                                     B-29
<PAGE>
 
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY

<TABLE>
<CAPTION>  

(000s omitted)
                      Year Ended December 31,                                      1995            1994          1993
=====================================================================================================================
<S>                 <C>                                                        <C>             <C>           <C> 
Common Stock        Balance at beginning of year                               $ 68,274        $ 87,865      $ 87,865
and Additional        Subsidiary stock issuance                                      --         (19,591)           --
                -----------------------------------------------------------------------------------------------------
Paid-In Capital     Balance at end of year                                       68,274          68,274        87,865
- ---------------------------------------------------------------------------------------------------------------------
Retained Earnings   Balance at beginning of year                                250,198         226,639       205,429
                      Net income                                                 30,378          29,534        28,920
                      Dividends to parent                                        (9,100)         (5,975)       (7,710)
                -----------------------------------------------------------------------------------------------------
                    Balance at end of year                                      271,476         250,198       226,639
- ---------------------------------------------------------------------------------------------------------------------
Net Unrealized      Balance at beginning of year                                (56,897)             (9)          111
Investments Gains     Effect of change in accounting principle                       --          39,424            --
(Losses)              Change during year                                        102,147         (96,312)         (120)
                 ----------------------------------------------------------------------------------------------------
                    Balance at end of year                                       45,250         (56,897)           (9)
- ---------------------------------------------------------------------------------------------------------------------
Unfunded Pension    Balance at beginning of year                                 (2,648)         (2,791)       (1,269)
Loss                  Change during year                                           (957)            143        (1,522)
                 ----------------------------------------------------------------------------------------------------
                    Balance at end of year                                       (3,605)         (2,648)       (2,791)
- ---------------------------------------------------------------------------------------------------------------------
                    Total Shareholder's Equity at End of Year                  $381,395        $258,927      $311,704
=====================================================================================================================
</TABLE> 
 
See notes to consolidated financial statements.

                                     B-30
<PAGE>
 
Notes To Consolidated Financial Statements

Note A

Nature of Operations

Washington National Insurance Company (WNIC or the Company) is a wholly owned 
subsidiary of Washington National Corporation (WNC). WNIC and its subsidiaries 
are engaged primarily in marketing and underwriting specialty health insurance 
and life insurance and annuity products for individuals and groups throughout 
the United States. Based on assets and income, the life insurance and annuity 
products account for more than two-thirds of WNIC's business. The specialty 
health insurance products account for the remainder.

     The markets for WNIC's life insurance and annuities products include 
individuals and small businesses seeking universal life insurance and other 
interest-sensitive life insurance and annuity products.

     The markets for the Company's specialty health insurance products include: 
individuals without employer-sponsored insurance in need of major medical 
coverage; educators and other school district employees purchasing disability 
insurance and other specialty insurance products; and employers with from 2 to 
1,000 employees seeking employer-sponsored health insurance and associated life 
insurance and stop-loss insurance.

Note B

Significant Accounting Policies and Practices

Basis of Presentation

The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP) and include the
accounts and operations of the Company. Significant intercompany transactions
have been eliminated. The preparation of financial statements in conformity with
GAAP requires management to make estimates and assumptions that affect the
amounts reported. Actual results could differ from these estimates. Certain
amounts applicable to prior years' financial statements have been reclassified
to conform to the 1995 presentation.

     The Company owns a 71.3% interest in United Presidential Corporation (UPC),
the parent company of United Presidential Life Insurance Company (UPI), a life
insurance company domiciled in Indiana. The remaining 28.7% of UPC is owned by
WNC. WNC purchased its interest in UPC based on UPC's statutory book value,
which was less than UPC's GAAP book value. As a result of this difference, an
adjustment of $19,591,000 was recorded to WNIC's additional paid-in capital to
reflect the decrease in WNIC's GAAP-basis carrying value of UPC. The operations
of UPC are consolidated in the accompanying financial statements, with WNC's
interest in UPC represented by a minority interest.

Investments

Fixed Maturities. Fixed maturities include bonds, redeemable preferred stocks, 
and mortgage-backed securities with contractual maturities greater than one 
year. Fixed maturities classified as "available for sale" are carried at fair 
value and fixed maturities classified as "held to maturity" are carried at 
amortized cost. The carrying value of the Company's fixed maturity portfolio is 
inversely impacted by increases and decreases in market interest rates which may
change significantly in short time periods.

     The amortized cost of fixed maturities is adjusted for amortization of
premiums and accretion of discounts. This adjustment is included in investment
income. The difference between amortized cost for "available for sale"
securities and their fair value, net of applicable deferred income taxes and
certain deferred acquisition costs, is reflected as a component of shareholder's
equity as an unrealized investment gain or loss. If a security's fair value has
a decline that is considered to be other-than-temporary, the carrying value is
reduced to its net realizable value. Such reductions in value are included in
realized investment gains and losses.

     As a result of newly issued guidance from the Financial Accounting
Standards Board (FASB), the Company transferred its $84,146,000 of "held to
maturity" fixed maturities to "available for sale" at December 31, 1995,
resulting in a $5,337,000 increase to unrealized investment gains. The Company
no longer holds any fixed maturities as "held to maturity."

                                     B-31
<PAGE>
 
     Mortgage Loans on Real Estate. Mortgage loans on real estate are carried at
unpaid principal balances, net of allowance for losses. The allowance is based
on estimated uncollectible amounts considering past credit loss experience and
current economic conditions and is subject to fluctuation based on actual
experience. Loans considered permanently impaired are written down to their net
realizable value and the write-down is recognized as a realized investment loss.

     Real Estate and Joint Ventures. Real estate investments are principally 
carried at cost less allowances for depreciation and possible losses. Foreclosed
real estate is considered "available for sale" and is recorded at the lower of 
current carrying value or estimated fair value less expected costs of disposal. 
Joint ventures are accounted for principally using the equity method.

     Policy Loans. Loans to policyholders are carried at the unpaid principal 
balance.

     Other Long-term Investments. Other long-term investments consist of an 
investment of funds in the Company's Separate Account, equity securities 
reported at fair value, and venture capital investments that are accounted for 
under the equity method.

     Short-term Investments. Short-term investments include commercial paper,
variable demand notes, and money market funds and are carried at amortized cost.

     Net Investment Income. Net investment income consists primarily of interest
and dividends less expenses. Interest on fixed maturities and performing 
mortgage loans, adjusted for any amortization of discount or premium, is 
recorded as income when earned and includes adjustments resulting from  
prepayments or expected changes in prepayments on mortgage-backed securities. 
Dividends are recorded as income on ex-dividend dates. Income on impaired loans 
and real estate is recorded principally on a cash basis. Income on investments 
accounted for under the equity method is recognized as it becomes earned. 
Investment expenses are accrued as incurred.

     Realized Investment Gains and Losses. Realized investment gains and losses 
are recognized using the specific identification method and include write-downs 
on investments having an other-than-temporary decline in value.

Depreciation

Depreciation for real estate investments and property and equipment is based on 
the estimated useful life of the asset primarily using the straight-line method.
Information on depreciation follows:

========================================================
Accumulated Depreciation
(000s omitted)               1995       1994
- --------------------------------------------------------
Property and equipment      $ 3,571    $ 2,434
Real estate investments      12,635     24,777

========================================================
Depreciation Expense
(000s omitted)               1995       1994       1993
- --------------------------------------------------------
Property and equipment      $ 1,137    $ 1,333    $2,740
Real estate investments       1,320      1,453     1,480
- --------------------------------------------------------

Insurance Premiums and Policy Charges

Insurance premiums and policy charges include reinsurance premiums assumed and
are net of reinsurance ceded. Health insurance premiums are earned on a pro rata
basis over the policy period. Premiums for traditional life insurance products
are recognized as revenues when due. Revenues for certain interest-sensitive
products consist of charges earned and assessed against policy account balances
during the period for the cost of insurance, policy initiation fees, policy
administration expenses, and surrender charges.

Deferred Acquisition Costs (DAC)

Certain costs associated with acquiring new business are deferred and amortized
to income over time. Amortization of costs for traditional life insurance and
health products is over the premium paying period and is based on assumptions
consistent with those used in determining policy benefit reserves. Actual
results may differ significantly from these assumptions. For certain interest-
sensitive products, costs are amortized over the estimated life of those
products in proportion to the present value of estimated gross profits from
surrender charges and investment, mortality, and expense margins. Changes in the
amount or timing of estimated gross profits will result in adjustments in the
cumulative amortization of these costs.

     To the extent that unrealized investment gains or losses on fixed
maturities would result in an adjustment of DAC had those investment gains or
losses been realized, the related unamortized DAC is adjusted and included in
shareholder's equity.

                                     B-32
<PAGE>
 
     The unamortized cost of purchased insurance in force is included in DAC and
amortized in proportion to the present value of estimated gross profits over an 
estimated twenty-one year remaining life with interest rates ranging from 7.5% 
to 8.5%.

     The changes in the unamortized cost of purchased insurance in force for the
years ended December 31 follow:

==========================================================================
(000s omitted)                              1995        1994        1993
- --------------------------------------------------------------------------
Balance at beginning of year              $45,282     $41,902     $47,039
  Interest on unamortized balance           2,915       3,136       3,436
  Amortization                             (5,635)     (6,026)     (8,573)
  Effect of unrealized investment 
    (gains) losses                        (13,432)      6,270          --
- --------------------------------------------------------------------------
Balance at end of year                    $29,130     $45,282     $41,902
- --------------------------------------------------------------------------

     The estimated percentage of the December 31, 1995 balance before the effect
of unrealized investment gains and losses to be amortized over the next five 
years follows:

==========================================================================
1996                                  14.6%
1997                                  14.1%
1998                                  13.0%
1999                                  12.8%
2000                                  12.6%
- --------------------------------------------------------------------------

Policy Liabilities

Liabilities for future policy benefits for traditional life insurance products 
are provided on the net level premium method. The Company bases reserve 
calculations on the present value of future net premiums, benefits, and 
expenses, using estimates of future investment yield, mortality, and withdrawal 
rates, adjusted to provide for possible adverse deviation. Interest rate 
assumptions are graded and ranged from 4.5% to 7.5% at December 31, 1995. 
Withdrawal assumptions are based principally on Company experience and vary by 
issue age, type of coverage, and duration.

     Liabilities for future policy benefits of certain interest-sensitive 
products are based on policy account balances prior to applicable surrender 
charges, deferred policy initiation fees that are recognized as income over the 
term of the policies, and a provision for the return of insurance charges. 
Policy benefits and claims that are charged to expense include benefit claims in
excess of related policy accounts incurred in the period, interest credited to
policy balances, and a provision for the return of the cost of insurance
charges. Credited interest rates for these products ranged from 3.0% to 7.3% at
December 31, 1995.

     Liabilities for policy and contract claims are determined using statistical
analyses and case-basis evaluations and represent estimates of the expected cost
of incurred claims. Revisions to these estimates are recognized in the 
Consolidated Statement of Income in the period when the revisions are made.

Goodwill

The amount paid to acquire a company over the fair value of its net assets is 
reported as goodwill and is amortized on a straight-line basis, generally over a
thirty-five year period. The value of goodwill is considered appropriate based 
on the prospect of continued growth and the long-term nature of the insurance 
policies sold. Accumulated amortization of goodwill was $6,744,000 and 
$6,038,000 at December 31, 1995 and 1994, respectively.

Separate Account

Separate Account assets and liabilities are principally carried at fair value 
and represent funds that are separately administered for annuity contracts for 
which the contract holders bear the investment risk. The assets are legally 
segregated from the Company's assets and are not subject to any claims that 
arise from any other business of the Company. Investment income and realized 
investment gains and losses accrue directly to the contract holders and are 
excluded from the accompanying Consolidated Statement of Income.

Income Taxes

The Company files a consolidated life/nonlife federal income tax return with its
parent. The Company establishes deferred tax provisions for temporary 
differences between the financial reporting basis and the tax basis of assets 
and liabilities at the enacted tax rate expected to be in effect when the 
temporary differences reverse. A valuation allowance for deferred tax assets is 
provided for the portion of the asset not expected to be realized.

Reinsurance

In the normal course of business, WNIC minimizes its exposure to loss by 
reinsuring a portion of its life insurance, annuity, and health insurance risks 
with other insurance companies. The Company's policy on claim exposure for life 
insurance and

                                     B-33
<PAGE>
 
annuity products is to retain a maximum of $300,000 of life insurance exposure
on any one individual ($400,000 with accidental death coverage). Paid-claim
exposure for group insurance products is limited to $750,000 per claim for major
medical coverage and $250,000 per claim for individual stop-loss in any one
calendar year. The Company retains a maximum of 50% of all long-term disability
and long-term care claims. WNIC's reinsurance for individual health insurance
claims is designed to protect the Company from an excessive amount of claims
over $250,000 on an individual claim basis.

     The Company cedes reinsurance to entities with A. M. Best ratings of "A" or
better or to entities required to maintain assets in an independent trust fund 
whose fair value is sufficient to discharge the obligations of the reinsurer. 
Reinsurance contracts do not discharge the Company from its obligations to the 
policyholders.

     Benefit amounts paid directly by the Company for insurance claims covered 
under ceded reinsurance agreements are recorded as reinsurance recoverables to 
the extent not already reimbursed. The cost of reinsurance related to 
long-duration contracts is accounted for over the life of the underlying 
reinsured policies using assumptions consistent with those used to account for 
the underlying policies. Reinsurance costs related to short-duration contracts 
are amortized over the remaining contract period in proportion to the protection
provided.

     Substantially all of the reinsurance assumed by the Company as of December 
31, 1995, relates to individual health insurance. This reinsurance is on a 50% 
or 100% coinsurance basis and is accounted for in a manner similar to the direct
business.

Note C
New Accounting Standards

Effective January 1, 1995, the Company adopted Statement of Financial Accounting
Standards (SFAS) 114 and SFAS 118, issued by FASB, relating to the impairment of
mortgage loans. The statement requires that loans be identified as impaired when
it is probable that a creditor will be unable to collect all amounts 
contractually due. The impairment is measured based on the present value of 
expected future cash flows discounted at the loan's effective interest rate, at 
the loan's observable market price, or at the fair value of the collateral if 
the loan is collateral dependent. The adoption of this statement did not have an
effect on the Company at January 1, 1995, as the Company had no loans that met 
the criteria for impairment.

     In December 1995, the Company adopted SFAS 121, "Accounting for the 
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." 
This statement establishes guidance for recognizing and measuring impairment 
losses for long-lived assets, certain identifiable intangibles, and goodwill 
related to those assets. The statement applies to those assets to be held and 
used and those to be disposed. This statement did not have a material effect on 
the Company.

     Effective January 1, 1994, the Company adopted SFAS 115, "Accounting for 
Certain Investments in Debt and Equity Securities." The effect of the adoption 
resulted in an increase to shareholder's equity of $39,424,000.

     Effective January 1, 1993, the Company adopted SFAS 112, "Employers' 
Accounting for Postemployment Benefits" resulting in a one-time cumulative 
effect adjustment to net income of $1,550,000, net of taxes of $834,000.


                                     B-34
<PAGE>
 
Note D
Investments

Fixed Maturities
A comparison of amortized cost to fair value of fixed maturity investments by 
category at December 31 follows:

<TABLE> 
<CAPTION> 
=====================================================================================================================
                                                                                      Gross Unrealized          
                                                                   Amortized         ------------------          Fair
  (000s omitted)                                                        Cost         Gains       Losses         Value
- ---------------------------------------------------------------------------------------------------------------------
                                                                                           1995
- ---------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>          <C>         <C> 
United States government obligations                              $   75,750      $  4,860     $     66    $   80,544
Obligations of states and political subdivisions                      78,824         3,685           89        82,420
Public utilities                                                     147,206         8,216          296       155,126
Industrial and miscellaneous                                         989,348        71,124        2,510     1,057,962
Mortgage-backed securities                                           634,236        19,404          627       653,013
Other                                                                 27,950         3,695           --        31,645
- ---------------------------------------------------------------------------------------------------------------------
Total fixed maturities                                            $1,953,314      $110,984     $  3,588    $2,060,710
- ---------------------------------------------------------------------------------------------------------------------

                                                                                           1994
- ---------------------------------------------------------------------------------------------------------------------
Available for sale
   United States government obligations                           $   74,293      $    265     $  4,577    $   69,981
   Obligations of states and political subdivisions                   75,555         1,215        5,286        71,484
   Public utilities                                                  131,184            20       13,650       117,554
   Industrial and miscellaneous                                      798,018         5,091       53,406       749,703
   Mortgage-backed securities                                        655,286         3,232       49,315       609,203
   Other                                                              33,845            63        2,380        31,528
- ---------------------------------------------------------------------------------------------------------------------
Total available for sale                                           1,768,181         9,886      128,614     1,649,453
- ---------------------------------------------------------------------------------------------------------------------
Held to maturity
   United States government obligations                                  251            --           --           251
   Obligations of states and political subdivisions                   22,109           860           45        22,924
   Industrial and miscellaneous                                       86,027           845        2,591        84,281
   Mortgage-backed securities                                          4,529           181           --         4,710
   Other                                                                 200             2           --           202
- ---------------------------------------------------------------------------------------------------------------------
Total held to maturity                                               113,116         1,888        2,636       112,368
- ---------------------------------------------------------------------------------------------------------------------
Total fixed maturities                                            $1,881,297      $ 11,774     $131,250    $1,761,821
- ---------------------------------------------------------------------------------------------------------------------

</TABLE> 

     During 1995, the Company sold one "held to maturity" investment with an
amortized cost of $2,000,000. The sale, which resulted in a realized investment
loss of $50,000, was made as a result of significant deterioration of the bond
issuer's creditworthiness.

                                     B-35

<PAGE>
 
  The amortized cost and fair value of fixed maturities at December 31, 1995,
by contractual maturity, follow.  Expected maturities differ from contractual 
maturities as borrowers may have the right to call or prepay obligations with or
without penalties.

<TABLE> 
<CAPTION> 

==============================================================================
                                                        Amortized        Fair
(000s omitted)                                               Cost       Value
- ------------------------------------------------------------------------------
<S>                                                    <C>         <C> 
  Due in 1996                                          $    8,144  $    8,186
  Due in 1997 - 2000                                      201,403     210,561
  Due in 2001 - 2005                                      460,056     486,563
  Due after 2005                                          649,475     702,387
  Mortgage-backed securities                              634,236     653,013
- ------------------------------------------------------------------------------
Total fixed maturities                                 $1,953,314  $2,060,710
- ------------------------------------------------------------------------------
</TABLE> 

Mortgage Loans on Real Estate
Information on mortgage loans on real estate at December 31, 1995 is as 
follows:

<TABLE> 
<CAPTION> 

==============================================================================
(000s omitted)
- ------------------------------------------------------------------------------
<S>                                                                  <C>        
Impaired loans
  With allowance (net of $135 allowance)                             $  2,762
  Without allowance                                                     7,640
- ------------------------------------------------------------------------------
Total impaired loans                                                   10,402
Non-impaired loans (net of $7,171 allowance)                          306,847
- ------------------------------------------------------------------------------
Total mortgage loans                                                 $317,249
- ------------------------------------------------------------------------------
</TABLE> 

  In 1995, the Company's average investment in impaired mortgage loans was 
$5,812,000.  Income recognized and received on these loans was $732,000 and 
$714,000, respectively.

  A rollforward of the allowance for mortgage loan losses follows:
<TABLE> 
<CAPTION> 
==============================================================================
(000s omitted)                                   1995        1994        1993
- ------------------------------------------------------------------------------
<S>                                            <C>        <C>         <C> 

Balance at January 1                           $8,032     $12,031     $11,618
Additions                                         400       1,501       3,475
Deductions                                     (1,126)     (5,500)     (3,062)
- ------------------------------------------------------------------------------
Balance at December 31                         $7,306     $ 8,032     $12,031
- ------------------------------------------------------------------------------
</TABLE> 

Non-Cash Investing Activities
During 1995, 1994, and 1993, non-cash investing activities totaled $10,707,000, 
$4,009,000, and $4,869,000, respectively, and consisted of real estate acquired 
through foreclosure of fixed maturities and mortgage loans on real estate, 
purchase money mortgages, and venture capital distributions of common stock.


Realized Investment Gains and Losses
Details of realized investment gains (losses) for the years ended December 31 
follow:

<TABLE> 
<CAPTION>

==============================================================================
(000s omitted)                                   1995        1994        1993
- ------------------------------------------------------------------------------
<S>                                           <C>         <C>        <C> 
Fixed maturities
  Gross gains                                 $ 7,257     $ 2,026    $ 21,513
  Gross losses                                 (7,740)     (3,760)    (12,481)
- ------------------------------------------------------------------------------
Total fixed maturities                           (483)     (1,734)      9,032
Mortgage loans on real estate                     (52)        (82)      2,047
Real estate and other                            (601)        391     (10,183)
- ------------------------------------------------------------------------------
Realized investment     
  gains (losses)                              $(1,136)    $(1,425)    $   896
- ------------------------------------------------------------------------------
</TABLE> 

Investment Income
Major sources of net investment income for the years ended December 31 follow:

<TABLE> 
<CAPTION> 

==============================================================================
(000s omitted)                                   1995        1994        1993
- ------------------------------------------------------------------------------
<S>                                          <C>         <C>         <C> 
Fixed maturities                             $151,944    $147,396    $141,809
Mortgage loans on real estate                  30,587      34,982      42,030
Real estate and other                           7,103       8,181      12,906
Policy loans                                    3,643       3,459       3,460
Short-term                                      3,206       2,326       2,123
- ------------------------------------------------------------------------------
Gross investment income                       196,483     196,344     202,328
Investment expenses                            12,337      14,820      18,898
- ------------------------------------------------------------------------------
Net investment income                        $184,146    $181,524    $183,430
- ------------------------------------------------------------------------------
</TABLE> 

  Investment expenses consist primarily of real estate expenses.

  As of December 31, 1995, the carrying value of investments that produced no 
income for the previous twelve month period was $5,249,000 or less than 1% of 
invested assets.

Unrealized Investment Gains and Losses
The following table details the net unrealized investment gains and losses 
included in shareholder's equity:

<TABLE> 
<CAPTION> 

==============================================================================
(000s omitted)                                               1995        1994
- ------------------------------------------------------------------------------
<S>                                                      <C>         <C> 
Gross unrealized gains                                   $112,849   $   9,974
Gross unrealized losses                                    (4,316)   (128,873)
DAC                                                       (37,700)     33,000
Deferred income taxes                                     (21,035)     24,543
Minority interest                                          (4,548)      4,459
- ------------------------------------------------------------------------------
Net unrealized investment
  gains (losses)                                         $ 45,250    $(56,897)
- ------------------------------------------------------------------------------
</TABLE> 

  Fixed maturities had an increase (decrease) in unrealized investment gains of 
$226,872,000,

                                     B-36
<PAGE>
 
($201,808,000), and $25,438,000 in 1995, 1994, and 1993, respectively.
 
Note E
Income Taxes

Components of WNIC's deferred tax liabilities and
assets at December 31 follow:

<TABLE> 
<CAPTION> 

================================================================
(000s omitted)                               1995           1994
- ----------------------------------------------------------------
<S>                                      <C>            <C> 
Deferred tax liabilities:                
   DAC                                   $ 75,789       $ 97,322
   Unrealized investment gains             33,768             --
   Joint ventures and venture
      capital investments                   2,150          1,025
   Accrued bond discount                    1,630          1,312 
   Other                                    1,739          2,791
- ----------------------------------------------------------------               
Total deferred tax liabilities            115,076        102,450
Deferred tax assets:
   Policy liability adjustments            65,576         63,349
   Liabilities for employee benefits       13,723         13,643
   Realized investment losses               5,718         11,449
   Unrealized investment losses                --         41,452
   Other                                    4,672          4,459
- ----------------------------------------------------------------
Total deferred tax assets                  89,689        134,352
Valuation allowance                        (5,088)       (15,598)
- ----------------------------------------------------------------
Deferred tax assets, net of
   valuation allowance                     84,601        118,754
- ----------------------------------------------------------------
Net deferred tax (assets) liabilities    $ 30,475       $(16,304)
- ----------------------------------------------------------------
</TABLE> 

   Other than capital gain or loss items, the nature of WNIC's
deferred tax assets and liabilities is such that the general
reversal pattern for these temporary differences is expected to
result in a full realization of WNIC's deferred tax assets.
   
   At December 31, 1995, WNIC had capital loss carryforwards
for tax return purposes of $10,959,000, of which $1,498,000 will
expire in 1996 and the remainder in 2000.  For financial reporting
purposes, a valuation allowance has been recognized to offset the
deferred tax assets related to those carryforwards, investment
loss reserves, and other capital-loss-related deferred tax assets
not expected to be realized.  The valuation allowance was
decreased by $10,510,000 in 1995 and increased by $833,000 in
1994.

   The following reconciles the difference between actual tax
expense and the amounts obtained by applying the statutory federal 
income tax rate of 35%:

<TABLE> 
<CAPTION> 
  
=======================================================================      
(000s omitted)                                 1995      1994      1993
- -----------------------------------------------------------------------
<S>                                        <C>       <C>       <C>  
Income tax at statutory rate applied
   to income before income taxes and
   cumulative effect of change in
   accounting principle                    $16,067   $14,909   $14,419
Tax expense not recognized on certain
GAAP-basis capital gains or losses          (1,320)   (2,205)   (2,870)
Investment income not taxed                   (487)     (733)   (1,035)
Amortization of purchase
   accounting adjustments                      247       247       247
Other                                        1,018       844       (33)
- ----------------------------------------------------------------------
Income tax expense                         $15,525   $13,062   $10,728
- ----------------------------------------------------------------------
Comprised of:
   Current expense                         $13,632   $ 9,361   $ 4,476
   Deferred expense                          1,893     3,701     6,252
- ----------------------------------------------------------------------
Income tax expense                         $15,525   $13,062   $10,728
- ----------------------------------------------------------------------

</TABLE> 

   Prior to 1984, the Company was required to accumulate certain untaxed
amounts in a memorandum "policyholders' surplus account."  Under the Tax
Reform Act of 1984, the "policyholders' surplus account" balances were 
capped at December 31, 1983 and taxed only to the extent distributed to
shareholders or when they exceed certain prescribed limits.  The Company
does not intend to make any taxable distributions or to exceed the pre-
scribed limits in the foreseeable future; therefore, no income tax pro-
vision has been made for those purposes.  However, if such taxes were 
assessed, the amount of tax payable would be approximately, $20,000,000.
As of December 31, 1995, the combined "policyholders' surplus account"
of the Company approximates $57,000,000.

   Under current and prior law, income of the Company taxed on a current
basis is accumulated in a shareholder's surplus account and can be dis-
tributed without tax to WNIC.  At December 31, 1995, this shareholder's
surplus was $270,000,000.

   Income taxes paid by WNIC were $12,969,000, $8,120,000 and $4,100,000
in 1995, 1994, and 1993, respectively.  WNIC has a nonlife net operating
loss carryforward for tax purposes of $273,000 that will begin to expire
in 2008.

   The Internal Revenue Service is currently examining the Company's
tax returns for 1992 through 1994.

                                     B-37
 


<PAGE>
 
Note F
Reinsurance

The effect of reinsurance on insurance premiums and policy charges earned for 
short duration and long duration contracts for the years ended December 31 
follows:

<TABLE> 
<CAPTION> 

================================================================
                                     Short       Long
(000s omitted)                    Duration   Duration      Total
- ----------------------------------------------------------------
                                               1995            
- ----------------------------------------------------------------
<S>                               <C>        <C>        <C> 
Direct premiums and policy
 charges                          $302,151   $203,478   $505,629
Premiums assumed                    51,463      1,751     53,214
Premiums ceded                      (3,671)   (53,600)   (57,271)
- ----------------------------------------------------------------
Net premiums and policy
 charges                          $349,943   $151,629   $501,572
- ----------------------------------------------------------------
                                               1994            
- ----------------------------------------------------------------
Direct premiums and policy
 charges                          $272,400   $201,043   $473,443
Premiums assumed                    55,044      1,596     56,640
Premiums ceded                      (4,670)   (57,027)   (61,697)
- ----------------------------------------------------------------
Net premiums and policy
 charges                          $322,774   $145,612   $468,386
- ----------------------------------------------------------------
                                               1993            
- ----------------------------------------------------------------
Direct premiums and policy
 charges                          $274,828   $195,789   $470,617
Premiums assumed                    23,210      7,812     31,022
Premiums ceded                      (5,047)   (57,770)   (62,817)
- ----------------------------------------------------------------
Net premiums and policy
 charges                          $292,991   $145,831   $438,822
- ----------------------------------------------------------------

</TABLE> 

     The Company's written premiums for short duration contracts do not vary 
materially from premiums earned.

     Reinsurance benefits ceded were $20,862,000, $22,850,000, and $22,685,000, 
in 1995, 1994, and 1993, respectively.

     As a result of past divestitures, the Company reinsures 100% of certain 
supplemental health insurance, life insurance, and annuity business with 
unaffiliated companies. At December 31, 1995, 52% of WNIC's total reinsurance 
recoverables were due from Combined Insurance Company of America, and 14% were 
due from American Founders Life Insurance Company. In addition, 18% of 
reinsurance recoverables were due from UNUM Life Insurance Company in the normal
course of business.

     For 1995, 31% and 66% of reinsurance premiums assumed were from Harvest 
Life Insurance Company and National Casualty Company, respectively. These 
reinsurance agreements provide that the Company reinsure blocks of individual 
major medical business issued by National Casualty Company and Harvest Life 
Insurance Company on a 50% and 100% coinsurance basis, respectively. The Company
also administers 100% of the National Casualty Company business.

     The Company uses yearly renewable term reinsurance at its insurance 
subsidiary to maintain statutory profitability and other statutory financial 
requirements while sustaining growth. The cumulative contribution to statutory 
basis capital and surplus from this reinsurance was $8,202,000 and $9,044,000 at
December 31, 1995 and 1994, respectively. These transactions do not materially 
impact the Company's GAAP financial statements.

Note G
Defined Benefit and Contribution Plans

Retirement Plans
The Company has three qualified defined contribution retirement plans: a 
non-contributory money-purchase retirement plan, a non-contributory 
discretionary profit sharing plan, and a contributory 401(k) plan. The plans 
cover substantially all employees who have met the prescribed requirements for 
participation. The Company contribution to the money-purchase retirement plan is
3% of each employee's compensation plus an additional 3% of compensation in 
excess of the Social Security wage base. The Company contribution to the profit 
sharing plan is at the discretion of both WNIC and UPI's Boards of Directors in 
consultation with WNC's Board of Directors and is based on financial 
performance. Employees may contribute up to 12% of compensation to the 401(k) 
plan. The Company matches employee contributions dollar for dollar up to a 
maximum of 3% of compensation. The net pension expense for the defined 
contribution plans in 1995, 1994, and 1993 was $3,251,000, $3,006,000 and 
$3,760,000, respectively. The Company has a non-qualified supplemental 
retirement plan under which benefits are paid to certain employees equal to the 
amounts by which the qualified plan benefits are reduced due to provisions of 
the Internal Revenue Code (IRC). At both December 31, 1995 and 1994, the 
unfunded liability for the supplemental retirement plan was not material.

     The Company has defined benefit retirement plans that cover certain 
grandfathered employees and agents. Benefits are based principally on years

                                     B-38
<PAGE>
 
of service and compensation. The funding policies are to contribute annually at
least the minimum amounts required by the IRC. The plans have been amended to
terminate the accrual of future benefits which resulted in a curtailment gain.
Contributions are intended to provide benefits attributed to service to date.

     Plan assets are invested principally in mutual funds, bonds, and stocks.
The fair value of WNC Common and Preferred Stock held by one of the retirement
plans was $12,408,000 and $8,580,000, at December 31, 1995 and 1994,
respectively. Dividends of $492,000 were received on the WNC Common and 
Preferred Stock in both 1995 and 1994. No WNC shares were purchased or sold 
during 1995 or 1994.

     The components of net periodic pension income for the defined benefit plans
for the years ended December 31 follow:

================================================================
(000s omitted)                      1995       1994       1993
- ----------------------------------------------------------------
Interest cost on projected
 benefit obligations               $ 1,734    $ 1,824    $ 1,923
Actual return on plan assets        (3,419)      (419)    (2,035)
Net amortization and deferral        1,118     (2,054)      (642)
Curtailment gain                        --         --       (491)
Service cost for benefits earned        --         --         99
- ----------------------------------------------------------------
Net periodic pension
 income                            $  (567)   $  (649)   $(1,146)
- ----------------------------------------------------------------

     The funded status and the amounts reported in WNIC's Consolidated Balance 
Sheet as part of other liabilities for the defined benefit plans at December 31 
follow:

=========================================================
(000s omitted)                         1995        1994
- ---------------------------------------------------------
Actuarial present value of
 accumulated benefit obligations:
  Vested                             $(26,501)   $(23,759)
  Non-vested                              (78)       (118)
- ---------------------------------------------------------
Accumulated benefit obligations      $(26,579)   $(23,877)
- ---------------------------------------------------------
Projected benefit obligations        $(26,579)   $(23,877)
Plan assets at fair value              25,482      22,794
- ---------------------------------------------------------
Projected benefit obligations in
 excess of plan assets               $ (1,097)   $ (1,083)
- ---------------------------------------------------------
Comprised of:
  Prepaid pension cost               $  3,190    $  1,526
  Unrecognized actuarial net loss      (8,207)     (7,835)
  Unrecognized transition asset         3,920       5,226
- ---------------------------------------------------------
Total                                $ (1,097)   $ (1,083)
- ---------------------------------------------------------

     The actuarial assumptions used to measure the projected benefit obligation 
include:

======================================================
                                  1995    1994    1993
- ------------------------------------------------------
Weighted-average discount
 rate                              7.0%    7.5%    6.7%
Weighted-average expected
 rate of return on plan assets     7.6%    7.6%    7.5%
- ------------------------------------------------------

     The transition asset is being amortized over a fourteen-year period.
Actuarial gains and losses are deferred and then amortized over a fourteen-year
period when the cumulative deferred amounts exceed certain limits.

     GAAP required employers to recognize a minimum liability at least equal to
the unfunded accumulated benefit obligation. WNIC's prepaid pension cost was
less than the unfunded accumulated benefit obligation requiring a pretax
adjustment of $4,287,000 and $2,769,000 at December 31, 1995 and 1994,
respectively, with an offset to shareholder's equity.

Postretirement Benefit Plan

In addition to the Company's retirement programs, a contributory group life and
medical insurance plan is provided to certain eligible retirees and certain
grandfathered active employees who have met a combination of age and service
requirements. The plan was amended in 1992 to limit the future eligibility of
benefits for active employees. The plan pays a stated percentage of most medical
expenses, reduced for deductibles and payments made by government programs or
other group coverage. Certain active employees who are not included in the
grandfathered group are eligible for $10,000 of life insurance benefits under
the plan after reaching a combination of age and service requirements.

     In 1993, the Company established a Voluntary Employees' Beneficiary
Association (VEBA) trust under section 501(c)(9) of the IRC for the purpose of
paying out postretirement benefits to plan participants. The VEBA is funded
annually, based on the difference between the net periodic postretirement
benefit expense as measured by statutory accounting rules and the retiree
medical claims incurred during the respective periods, subject to certain IRC
limitations. Assets of the VEBA trust are invested in two-year U.S. Treasury
notes and corporate demand notes.

                                     B-39
<PAGE>
 
     The components of net periodic postretirement benefit expense for the years
ended December 31 follow:

===================================================================
(000s omitted)                     1995         1994         1993
- -------------------------------------------------------------------
Interest cost                     $1,904       $1,994       $2,061
Service cost                          49           56           61
Return on plan assets               (224)         (28)          --
Net amortization and deferral         84          227          (14)
- -------------------------------------------------------------------
Net periodic postretirement 
  benefit expense                 $1,813       $2,249       $2,108 
- -------------------------------------------------------------------

     The funded status of the plan and the amount recognized in WNIC's 
consolidated balance sheet as part of other liabilities at December 31 follow:

====================================================================
(000s omitted)                                  1995         1994
- --------------------------------------------------------------------
Accumulated postretirement 
  benefit obligation                          
    Retirees, dependents, and disabled 
      participants                            $(27,578)    $(25,022)
    Fully eligible active plan 
      participants                                (997)        (846) 
    Other active plan participants              (1,048)        (661)
- --------------------------------------------------------------------
Total accumulated postretirement 
  benefit obligation                           (29,623)     (26,529)
Fair value of plan assets                        4,516        2,726
- --------------------------------------------------------------------
Accumulated postretirement benefit 
  obligation in excess of plan assets         $(25,107)    $(23,803)
- --------------------------------------------------------------------
Comprised of
  Accrued postretirement benefit expense      $(23,074)    $(24,392)
  Unrecognized net gain (loss)                  (2,215)         393
  Unrecognized prior service cost                  182          196  
- --------------------------------------------------------------------
Accumulated postretirement benefit 
  obligation in excess of plan assets         $(25,107)    $(23,803) 
- --------------------------------------------------------------------

     The actuarial assumptions used to measure the postretirement benefit 
obligation include:

====================================================================
                                              1995         1994
- --------------------------------------------------------------------
Weighted-average discount rate                7.0%         7.5%
Weighted-average after-tax expected 
  rate of return on plan assets               4.6%         4.6%
Estimated income tax rate                      34%          34% 
- --------------------------------------------------------------------

  The health care trend rate used in 1995 was 11.5% for pre-age 65 and 9.7% for 
post-age 65 participants, graded evenly to 5% in 14 years. The health care cost 
trend rate in 1994 was 12% for pre-age 65 and 10% for post-age 65 participants, 
graded evenly to 5% in 15 years. The health care cost trend rate assumption has 
a significant effect on the amounts reported. Increasing the trend rate by 1% 
per year would increase the accumulated postretirement benefit obligation by 
$2,713,000 at December 31, 1995 and the aggregate of the service and interest 
cost components of net periodic postretirement benefit expense by $171,000 in 
1995.

Note H

Commitments and Contingencies

Leases

WNIC has noncancelable operating leases primarily for office space and office 
equipment, the most significant of which is a twenty-year lease of the home 
office building with a related party as lessor. Future minimum lease payments 
required under operating leases that have initial or remaining noncancelable 
lease terms in excess of one year at December 31, 1995 follow:

====================================================================
(000s omitted)
- --------------------------------------------------------------------
1996                                               $ 7,828
1997                                                 7,102
1998                                                 5,364
1990                                                 4,430
2000                                                 3,974
Thereafter                                          44,569
- --------------------------------------------------------------------
Total minimum lease commitments                    $73,267
- --------------------------------------------------------------------

     Rental expenses were $7,161,000, $6,189,000, and $6,900,000, in 1995, 1994,
and 1993, respectively.

Financial Guarantees

The Company has entered into certain financial guarantees. A financial guarantee
is a conditional commitment to guarantee the payment of an obligation by an 
unrelated entity to a third party and has off-balance sheet credit risk. The 
exposure to credit risk is represented by the amount the Company would be 
required to pay under certain circumstances.

     At December 31, 1995, the Company had three financial guarantees totaling 
$13,733,000, as well as a construction completion guarantee. At December 31, 
1994 the Company had two financial guarantees totaling $15,206,000.

     The Company feels it has adequate reserves for related potential losses.


                                     B-40
<PAGE>
 
Litigation

WNIC has been named in various pending legal proceedings considered to be 
ordinary routine litigation incidental to the business of such companies. A 
number of other legal actions have been filed which demand compensatory and 
punitive damages aggregating material dollar amounts. WNIC believes that such 
suits are substantially without merit and that valid defenses exist. WNIC's 
management and its chief legal officer are of the opinion that such litigation 
will not have a material effect on WNIC's results of operations or consolidated 
financial position.

State Guaranty Funds

Under insolvency or guaranty laws in most states in which the Company and its
insurance subsidiary operate, insurers can be assessed for policyholder losses
incurred by insolvent insurance companies. At present, most insolvency or
guaranty laws provide for assessments based on the amount of insurance
underwritten in a given jurisdiction. The Company paid $1,934,000, $2,850,000,
and $2,500,000 in state guaranty fund assessments in 1995, 1994, and 1993,
respectively, and had accrued liabilities of $3,478,000 and $3,128,000 for
estimated future assessments at December 31, 1995 and 1994, respectively.

     The Company's accounting policy with regard to payments to state guaranty 
funds is to treat as assets any such payments in those states where current law 
allows an offset against future premium taxes. At December 31, 1995 and 1994, 
other assets included $5,226,000 and $5,464,000, respectively, of deferred 
payments to state guaranty funds. Generally, these amounts will be used to 
offset future premium tax payments over periods from five to ten years. Under 
certain circumstances, including changes in state laws and a change in the 
Company's product mix, such amounts might become unrecoverable.

Health Care Reform

The Company's products are subject to governmental regulation at both the 
federal and state level. Currently, there are numerous health care reform 
proposals at both of these levels, some of which, if enacted, could have a 
significant impact on the Company's revenues and income.

Note I

Statutory Financial Information

WNIC and its insurance subsidiary prepare statutory financial statements in 
accordance with accounting principles and practices prescribed or permitted by 
the insurance department of the applicable state of domicile. Prescribed 
statutory accounting practices (SAP) currently include state laws, regulations, 
and general administrative rules applicable to all insurance enterprises 
domiciled in a particular state, as well as practices described in National 
Association of Insurance Commissioners' publications. Permitted practices 
include practices not prescribed, but allowed, by the domiciliary state 
insurance department. The prescribed and permitted statutory accounting 
practices differ from GAAP.

     Current statutory practice does not address reserves for certain endowment 
features of several life insurance products marketed by the Company's insurance 
subsidiary. The subsidiary uses a practice permitted by its state of domicile 
and discounts the future benefit using mortality and interest rate assumptions.

SAP to GAAP Reconciliation

A reconciliation of SAP capital and surplus to GAAP shareholder's equity at 
December 31 follows:

=======================================================================
(000s omitted)                                     1995           1994
- -----------------------------------------------------------------------
SAP capital and surplus                       $ 231,930      $ 221,270
DAC                                             235,499        293,850
Adjustments to policy liabilities              (115,937)      (119,521)
Unrealized gain (loss) on fixed 
  maturities                                    107,396       (118,728)
Asset valuation and interest maintenance 
  reserves                                       34,700         29,005   
Deferred income taxes                           (30,475)        16,304 
Postretirement and pension liabilities          (26,969)       (28,313)
Goodwill                                         18,385         19,092
Minority interest                               (56,381)       (44,157)
Other, net                                      (16,753)        (9,875)
- -----------------------------------------------------------------------
GAAP shareholder's equity                     $ 381,395      $ 258,927
- -----------------------------------------------------------------------


                                     B-41
<PAGE>
 
     A reconciliation of SAP net income to GAAP net income for the years ended 
December 31 follows:

===========================================================================
(000s omitted)                              1995         1994         1993
- ---------------------------------------------------------------------------
SAP net income                           $18,278      $18,633      $10,954
DAC                                       11,561        3,894       15,282
Adjustments to policy benefits             1,653        1,270          401
Financial reinsurance                      1,800           --       (3,500)
Deferred income taxes                     (1,893)      (3,700)      (6,262)
Cumulative effect of change 
  in accounting principle                     --           --       (1,550)
Other, net                                (1,021)       9,437       13,595 
- ---------------------------------------------------------------------------
GAAP net income                          $30,378      $29,534      $28,920 
- ---------------------------------------------------------------------------

Dividends To Parent

The amount of dividends available for distribution without prior regulatory 
approval is limited by regulatory restrictions. This amount is the greater of: 
a) 10% of the insurance subsidiary's statutory capital and surplus as of the 
preceding year end; or b) the insurance subsidiary's statutory net income from 
operations for the preceding year. WNIC is permitted a maximum of $20,832,000 in
dividend distributions to WNC in 1996.

Note J

Borrowings and Credit Arrangements

Borrowings

Borrowings of $2,484,000 at December 31, 1995 consist of a mortgage on 
investment real estate with an interest rate of 6.5% that matures in July, 1997 
and a non-interest bearing promissory note for $1,175,000 payable to WNC in May,
1996. Payments of $1,665,000 and $922,000 will be required in 1996 and 1997, 
respectively. For the mortgage loan, the property, with a carrying value of 
$14,007,000 is pledged as collateral.

     Interest paid on borrowings by WNIC was $110,000, $405,000, and $1,670,000,
in 1995, 1994, and 1993, respectively.

Credit Arrangements

WNIC has a $10,000,000 short-term line of credit with one bank which is also 
available to WNC. At December 31, 1995, WNC had used $3,100,000 of this line of 
credit. The interest rate on this borrowing was 6.9%. The line of credit 
arrangement is renewable annually, but credit can be withdrawn at the bank's 
option.

     In addition, WNIC has five letters of credit with varying terms and 
conditions totaling $2,821,000.

As of December 31, 1995, the entire amount was unused.

Note K

Policy Liabilities

Detail of WNIC's policy liabilities at December 31 follows:

===========================================================================
(000s omitted)                                         1995           1994
- ---------------------------------------------------------------------------
Future policy benefits
  Annuities                                      $1,228,947     $1,278,252
  Life                                              837,990        790,894
Policy and contract claims                          219,755        213,572
Unearned premiums                                    37,382         33,220
Other                                                39,255         38,880
- ---------------------------------------------------------------------------
Total policy liabilities                         $2,363,329     $2,354,818
- ---------------------------------------------------------------------------

     Activity in the liability for short duration unpaid claims and short 
duration claim adjustment expense (included in policy and contract claims and a 
component of general expenses and other liabilities) follows:

===========================================================================
(000s omitted)                              1995         1994         1993
- ---------------------------------------------------------------------------
Balance at January 1                    $215,351     $210,348     $202,322
Less: reinsurance recoverables            11,741       11,547       11,956
- ---------------------------------------------------------------------------
Net balance at January 1                 203,610      198,801      190,366
Incurred relating to:
  Current year                           313,291      291,209      260,144
  Prior years                            (19,562)     (31,296)     (26,638)
- ---------------------------------------------------------------------------
Total incurred                           293,729      259,913      233,506
- ---------------------------------------------------------------------------
Paid relating to:
  Current year                           203,924      179,762      151,989
  Prior years                             83,905       75,342       73,082
- ---------------------------------------------------------------------------
Total paid                               287,829      255,104      225,071
- ---------------------------------------------------------------------------
Net balance at December 31               209,510      203,610      198,801
- ---------------------------------------------------------------------------
Add: reinsurance recoverables             10,248       11,741       11,547
- ---------------------------------------------------------------------------
Balance at December 31                  $219,758     $215,351     $210,348
- ---------------------------------------------------------------------------


                                     B-42
<PAGE>
 
Note L

Fair Value of Financial Instruments

The fair values of certain financial instruments along with their corresponding 
carrying values at December 31, 1995 and 1994 follow. As the fair value of all 
WNIC's assets and liabilities is not presented, this information in the 
aggregate does not represent the underlying value of WNIC. WNIC does not have 
any financial instruments held or issued for trading purposes.

<TABLE>
<CAPTION>
========================================================================================================================
                                                             1995                          1994         
                                                   ------------------------      ------------------------
                                                         Fair      Carrying          Fair        Carrying      Valuation
(000s omitted)                                          Value         Value         Value           Value         Method
- ------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>           <C>             <C>           <C>             <C> 
Financial assets  
  Fixed maturities                                 $2,060,710    $2,060,710      $1,761,821    $1,762,569             (1)
  Equity securities                                     1,994         1,994           1,720         1,720             (1)
  Mortgage loans on real estate                       336,366       317,249         366,373       357,641             (2)
  Policy loans                                         53,665        56,279          52,600        54,368             (3)
  Separate Account investment                          11,840        11,840          11,327        11,327             (4)
  Cash and short-term investments                      52,772        52,772          55,311        55,311             (4)
  Investment proceeds receivable                        2,289         2,289           1,094         1,094             (4)
  Accrued investment income                            32,652        32,652          33,084        33,084             (4)
Financial liabilities
  Investment-type insurance contracts               1,131,665     1,161,263       1,174,017     1,203,608             (3)
  Mortgage payable                                      1,328         1,309           1,854         1,907             (2)
  Short-term borrowings                                 1,175         1,175           1,175         1,175             (4)
Off-balance sheet
  Real estate development guarantees                      157            --              80            --             (5)
  Lending commitments                                      15            --             105            --             (6)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE> 

(1)  Fair values are based on publicly quoted market prices at the close of
     trading on the last business day of the year. In cases where publicly
     quoted market prices are not available, fair values are based on estimates
     using values obtained from independent pricing services, or, in the case of
     private placements, by discounting expected future cash flows using a
     current market rate applicable to the yield, credit quality, and maturity
     of the investments.

(2)  Fair values are estimated using discounted cash flow analyses, based on
     interest rates currently being offered for similar loans to borrowers with
     similar credit ratings. A pricing cap is put on mortgage loans that carry
     significant above-market interest rate yields to reflect the prepayment
     risk.

(3)  Fair values are estimated using discounted cash flow calculations, based on
     interest rates currently being offered for similar contracts with similar
     maturities.

(4)  Carrying value approximates fair value.

(5)  Fair values are based on estimates of fees to guarantee similar
     developments. In addition, the Company has a construction completion
     guarantee pertaining to a joint venture investment. The Company does not
     feel that estimating a fair value for the instrument is practicable due to
     the inability to estimate cash flows. See Note H for further discussion of
     guarantees.

(6)  Fair values are based on commitment fees of the loans in question.

                                     B-43
<PAGE>
 
Note M
Segment Information

WNIC has three business segments: life insurance and annuities; specialty health
insurance; and corporate and other. The segments are based on WNIC's insurance 
products and organization. The corporate and other segment includes realized 
investment gains and losses and operations that do not specifically support the 
other segments. Assets not individually identifiable by segment are allocated, 
generally, based on the amount of segment liabilities. Depreciation expense and 
capital expenditures are not material. Revenues, income before income taxes and 
cumulative effect of change in accounting principle (net of minority interest 
in the life insurance and annuities segment), and assets by segment for the 
years ended and at December 31 follow:

<TABLE> 
<CAPTION> 

================================================================================
(000s omitted)                                    1995         1994         1993
- --------------------------------------------------------------------------------
<S>                                         <C>          <C>          <C> 
Revenues
   Life insurance and annuities             $  234,127   $  229,732   $  228,950
   Specialty health insurance                  453,993      420,982      394,562
   Corporate and other                           8,274        5,913        5,960
- --------------------------------------------------------------------------------
Consolidated total                          $  696,394   $  656,627   $  629,472
- --------------------------------------------------------------------------------
Income before income taxes
  and change in accounting principle
   Life insurance and annuities             $   30,408   $   30,240   $   27,739
   Specialty health insurance                    9,541        5,895       11,500
   Corporate and other                           5,954        6,461        1,959
- --------------------------------------------------------------------------------
Consolidated total                          $   45,903   $   42,596   $   41,198
- --------------------------------------------------------------------------------
Assets
   Life insurance and annuities             $2,431,653   $2,274,005   $2,291,529
   Specialty health insurance                  367,553      321,481      344,245
   Corporate and other                         210,267      210,871      205,618
- --------------------------------------------------------------------------------
Consolidated total                          $3,009,473   $2,806,357   $2,841,392
- --------------------------------------------------------------------------------

</TABLE> 

     Actuarial estimates are used in determining certain policy liabilities and
deferred acquisition costs which in turn effect the reported profitability of
the operating segments. Actual results can differ materially from these
actuarial estimates. In addition, changes in these estimates, where required,
may have a significant effect on reported net income, especially in the year of
the change.

     The profits of the life insurance and annuities segment are highly 
dependent on interest rate spreads, which is the difference between the amount 
earned on investments and the amount credited to policyholders. Increases in 
market interest rates could result in the need to credit higher rates to 
policyholders without a comparable increase in the rate earned on the Company's 
invested assets; they could also result in customers surrendering their policies
to obtain higher rates from other insurance companies or alternative products. 
Decreases in market interest rates could result in inadequate spreads due to the
inability to lower credited rates below certain minimum guarantees as to such 
rates.

     The Company's health insurance profits are dependent in part on the 
Company's ability to adequately predict and price medical care inflation and 
increased policyholder utilization of medical services. Actual results of these 
items can differ significantly from the Company's assumptions.

     The profitability of most of the Company's products depends on the ability 
to attract and retain customers at a price level sufficient to cover the various
expenses incurred by the Company. The nature of these products is such that 
customers can in most cases easily transfer to other insurance carriers offering
more attractive coverage. The profitability of the products may change over time
depending on the degree of competition in the markets for such products.

                                     B-44
<PAGE>
 
PART C OTHER INFORMATION

Item 24.  Financial Statements and Exhibits
          ---------------------------------

  (a)  Financial Statements:

     The following financial statements of Separate Account I of Washington
National Insurance Company and of Washington National Insurance Company,
together with the reports of independent auditors, are filed in Part B:

       Report of Ernst & Young LLP, Independent Auditors for Separate Account I
       of Washington National Insurance Company.

       Statement of Assets and Liabilities as of December 31, 1995 for Separate
       Account I of Washington National Insurance Company.

       Portfolio of Investments as of December 31, 1995 for Separate Account I
       of Washington National Insurance Company.

       Statement of Operations of Separate Account I of Washington National
       Insurance Company for the year ended December 31, 1995.

       Statement of Changes in Net Assets for Separate Account I of Washington
       National Insurance Company for each of the years ended December 31, 1995
       and 1994.

       Notes to Financial Statements of Separate Account I of Washington
       National Insurance Company.

       Supplementary Information--Selected Per Accumulation Unit Data and Ratios
       for Separate Account I of Washington National Insurance Company.

       Report of Independent Auditors for Washington National Insurance Company.

       Consolidated Balance Sheet of Washington National Insurance Company as of
       December 31, 1995 and 1994.

       Consolidated Statement of Income of Washington National Insurance Company
       for each of the three years in the period ended December 31, 1995.

       Consolidated Statement of Cash Flows for Washington National Insurance
       Company for each of the three years in the period ended December 31,
       1995.

       Consolidated Statement of Shareholder's Equity for Washington National
       Insurance Company for each of the three years in the period ended
       December 31, 1995.

                                      C-1
<PAGE>
 
       Notes to Consolidated Financial Statements of Washington National
       Insurance Company.

     There are no financial statements included in Part A.


(b)  Exhibits:
     -------- 

Exhibit Number                     Description of Exhibit
- --------------                     ----------------------

  (1)                     Resolution of Executive Committee of Board of
                          Directors of Washington National Insurance Company
                          establishing Separate Account I of Washington National
                          Insurance Company. (1)

  (2)                     Not applicable.

  (3)                     Not applicable.

  (4)(a)                  Non Qualified Individual Variable Annuity Contract.
                          (3)

     (b)                  Tax Qualified Individual Variable Annuity Contract.
                          (3)

     (c)                  Non Qualified Group Allocated Variable Annuity
                          Contract. (3)

     (d)                  Certificate for Non Qualified Group Allocated Variable
                          Annuity Contract. (3)

     (e)                  Tax Qualified Group Allocated Variable Annuity
                          Contract. (3)

     (f)                  Certificate for Tax Qualified Group Allocated Variable
                          Annuity Contract. (3)

     (g)                  Tax Qualified Group Unallocated Variable Annuity
                          Contract.(3)

     (h)                  Certificate for Tax Qualified Group Unallocated
                          Variable Annuity Contract. (3)

     (i)                  Total and Permanent Disability Benefit Rider on Form
                          ED30-1 for Non Qualified and Tax Qualified Individual
                          Variable Annuity Contracts. (2)

     (j)                  Tax Qualification Amendment on Form V32-1 for Tax
                          Qualified Individual Variable Annuity Contracts. (2)

                                      C-2
<PAGE>
 
     (k)                  Tax Qualification Amendment on Form V33-1 for Tax
                          Qualified Individual Variable Annuity Contract. (3)
 
     (1)                  Individual Retirement Annuity Rider on Form OFA7-2 for
                          Tax Qualified Individual Variable Annuity Contract.
                          (2)

     (m)                  Tax Qualification Amendment on Form V36-1 for Tax
                          Qualified Group Variable Annuity Contract. (2)

     (n)                  Tax Qualification Amendment on Form V42-1 for Tax
                          Qualified Group Variable Annuity Contract. (3)

     (o)                  Supplement to Application for Contracts under Texas
                          Optional Retirement Program. (3)

     (p)                  Amendment for Contracts under Texas Optional
                          Retirement Program. (3)

     (q)                  Distribution on Death of the Contract Owner Rider on
                          Form ED 188. (7)

     (r)                  Tax Qualification Amendment on Form V38-1. (7)

     (s)                  Tax Qualified Amendment (Joint and Survivor Annuity)
                          on Form OFA20-1. (7)

     (t)                  Amendment to Contracts regarding assignment and option
                          restriction on Form TDA-V32-1. (7)

     (u)                  Individual Retirement Annuity Rider on Form V116-2.
                          (7)

     (v)                  Annuity Loan Rider for certain states on Form ED224-1.
                          (8)

     (w)                  Annuity Loan Rider for Wisconsin only on Form
                          ED224A. (8)

  (5)(a)                  Application for Individual Variable Annuity Contract.
                          (2)

     (b)(l)               Application for Group Unallocated Variable Annuity
                          Contract. (2)

     (b)(2)               Application for Group Allocated Variable Annuity
                          Contract. (2)

     (b)(3)               Application for Participants of Group Allocated
                          Variable Annuity Contract. (2)

                                      C-3
<PAGE>
 
     (c)                  Supplement to Application on Form V34-2 for Tax
                          Qualified Individual Variable Annuity Contract. (2)

     (d)                  Supplement to Application on Form V39-1 for Tax
                          Qualified Individual Variable Annuity Contract. (2)

     (e)                  Supplement to Application on Form V43-1 for Tax
                          Qualified Group Variable Annuity Contract. (2)

  (6)                     Certified copy of the Amended Articles of
                          Incorporation and By-Laws of Washington National
                          Insurance Company. (6)

  (7)                     Not applicable.

  (8)(a)                  Administrative Services Agreement dated July 26, 1983
                          between Separate Account I of Washington National
                          Insurance Company and Washington National Insurance
                          Company. (2)

     (b)                  Administrative Services Agreement dated June 1, 1995
                          with United Presidential Life Insurance Company. (14)

     (c)                  Asset Transfer Agreement and Plan of Reorganization.
                          (13)

  (9)(a)                  Opinion of counsel. (7)

     (b)                  Consent of Sutherland, Asbill & Brennan. (15)

  (10)                    Consent of Ernst & Young LLP. (15)

  (11)                    Not applicable.

  (12)                    Contribution Agreement dated August 26, 1983 between
                          Separate Account I of Washington National Insurance
                          Company and Washington National Insurance Company. (3)

  (13)                    Not applicable.

  (14)(a)                 Certified resolution of Executive Committee of Board
                          of Directors of Washington National Insurance Company
                          authorizing execution of the Power of Attorney. (1)

      (b)                 Power of Attorney executed by certain Directors and
                          Officers of Washington National Insurance Company. (1)

      (c)                 Power of Attorney executed by certain Directors and
                          Officers of Washington National Insurance Company. (4)

                                      C-4
<PAGE>

     (d)                  Power of Attorney executed by certain Directors and
                          Officers of Washington National Insurance Company. (5)

     (e)                  Power of Attorney executed by certain Directors and
                          Officers of Washington National Insurance Company. (8)

     (f)                  Power of Attorney executed by the Directors of
                          Separate Account I of Washington National Insurance
                          Company in April 1990. (9)

     (g)                  Power of Attorney executed by certain Directors and
                          Officers of Washington National Insurance Company in
                          April 1990. (9)

Note 1 --  Incorporated herein by reference to the initial registration
           statement on Form N-3 for Separate Account I of Washington National
           Insurance Company (File No. 2-81129), filed with the Commission on
           December 30, 1982.

Note 2 --  Incorporated herein by reference to Pre-Effective Amendment No. 1 to
           the registration statement on Form N-3 for Separate Account I of
           Washington National Insurance Company (File No. 2-81129), filed with
           the Commission on July 29, 1983.

Note 3 --  Incorporated herein by reference to Pre-Effective Amendment
           No. 12 to the registration statement on Form N-3 for Separate Account
           I of Washington National Insurance Company (File No. 2-81129), filed
           with the Commission on October 31, 1983.

Note 4 --  Incorporated herein by reference to Post-Effective Amendment No. 2 to
           the registration statement for Separate Account I of Washington
           National Insurance Company (File No. 2-81129), filed with the
           Commission on May 1, 1985.

Note 5 --  Incorporated herein by reference to Post-Effective Amendment No. 3 to
           the registration statement on Form N-3 for Separate Account I of
           Washington National Insurance Company (File No. 2-81129), filed with
           the Commission on May 20, 1985.

Note 6 --  Incorporated herein by reference to Post-Effective Amendment No. 5 to
           the registration statement on Form N-3 for Separate Account I of
           Washington National Insurance Company (File No. 2-81129), filed with
           the Commission on March 2, 1987.

Note 7 --  Incorporated herein by reference to Post-Effective Amendment No. 6 to
           the registration statement on Form N-3 for Separate Account I of
           Washington National Insurance Company (File No. 2-81129), filed with
           the Commission on April 22, 1987.

Note 8 --  Incorporated herein by reference to Post-Effective Amendment No. 7 to
           the registration statement on Form N-3 for Separate Account I of
           Washington National Insurance Company (File No. 2-81129), filed with
           the Commission on April 29, 1988.

                                      C-5
<PAGE>
 
Note 9 --  Incorporated herein by reference to Post-Effective Amendment No. 10
           to the registration statement on Form N-3 for Separate Account I of
           Washington National Insurance Company (File No. 2-81129), filed with
           the Commission on April 27, 1990.

Note 10 -- Incorporated herein by reference to Post-Effective Amendment No. 11
           to the registration statement on Form N-3 for Separate Account I of
           Washington National Insurance Company (File No. 2-81129), filed with
           the Commission on April 29, 1991.

Note 11 -- Incorporated herein by reference to Post-Effective Amendment No. 12
           to the registration statement on Form N-3 for Separate Account I of
           Washington National Insurance Company (File No. 2-81129), filed with
           the Commission on April 30, 1992.

Note 12 -- Incorporated herein by reference to Post-Effective Amendment No. 14
           to the registration statement on Form N-3 for Separate Account I of
           Washington National Insurance Company (File No. 2-81129), filed with
           the Commission on April 26, 1994.

Note 13 -- Incorporated herein by reference to Post-Effective Amendment No. 1
           to the registration statement on Form N-14 for Separate Account I of
           Washington National Insurance Company (File No. 33-62861), filed with
           the Commission on November 30, 1995.

Note 14 -- Incorporated herein by reference to Post-Effective Amendment No. 16
           to the registration statement on Form N-3 for Separate Account I of
           Washington National Insurance Company (File No. 2-81129), filed with
           the Commission on April 26, 1996.

Note 15 -- Filed herewith.


Item 25.  Directors and Officers of the Depositor
          ---------------------------------------

Name and Principal
Business Address         Positions and Offices With Insurance Company
- ------------------       --------------------------------------------

Kenneth A. Grubb (1)     President, Education Division and Director
Barbara A. Cremin        Vice President, Life and Annuity Administration
Craig R. Edwards         Vice President, Corporate Counsel and Secretary
Curt L. Fuhrmann (1)     President, Health Division and Director
Robert W. Patin (1)      Chairman of the Board, President and Chief Executive
                           Officer and Director
Thomas Pontarelli (1)    Executive Vice President, Law & Administration and
                           Director
Joan K. Cohen            Vice President, Controller, and Treasurer
Thomas C. Scott (1)      Executive Vice President, Financial Division, Chief
                           Financial Officer and Director
James E. Dresmal         Vice President and Chief Investment Officer

________________________
(1) Member of Executive Committee and Investment Committee (Finance Committee)

                                      C-6
<PAGE>
 
Item 26.  Persons Controlled By or Under Common Control with the Depositor or
          Registrant

     Washington National Insurance Company, an Illinois stock life insurance
company ("WNIC"), owns the assets comprising Separate Account I.  WNIC is
controlled by Washington National Corporation, which controls the following:
<TABLE>
<CAPTION>
                                                   State of   Percent of
                                                    Incor-     Capital
Name of Company (1)                                poration     Owned
- -------------------                               ----------  ----------
<S>                                               <C>         <C>
David W. White and Associates, Inc.               California    50 (2)

Kouzmanoff Insurance Services, Inc.               California    75 (2)

United Presidential Corporation (4)                Indiana        100

United Presidential Life Insurance Company (3)     Indiana        100

Washington National Development Company (5)        Delaware       100

Washington National Financial Services, Inc.       Illinois       100

Washington National Insurance Company              Illinois       100
</TABLE>

Note 1 -  Ownership is by Washington National Corporation, and all
          subsidiaries are included in the consolidated financial statements of
          same, unless otherwise noted. A separate financial statement is also
          filed with the appropriate insurance commissioner for each insurance
          subsidiary.
 
Note 2 -  Owned by Washington National Financial Services, Inc.
 
Note 3 -  Owned 100% by United Presidential Corporation.
 
Note 4 -  Owned 71.3% by Washington National Insurance Company and 28.7% by
          Washington National Corporation.
 
Note 5 -  Owned 100% by Washington National Insurance Company.

Item 27.  Number of Contract Owners
          -------------------------

   The number of record holders of contracts funded by assets of Separate
Account I as of March 31, 1996, was 1,933.

                                      C-7
<PAGE>
 
Item 28.  Indemnification
          ---------------

  Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to members of the Board of Directors and Officers of WNIC,
WNIC has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities is asserted by such members of the Board of Directors
or Officers of WNIC in connection with the securities being registered, WNIC
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.


Item 29.  Principal Underwriter
          ---------------------

  (a)  Not applicable.

  (b)  Washington National Equity Company ("WNEC") acted as principal
       underwriter for the Registrant until March 31, 1990 and was dissolved on
       June 29, 1990.

  (c)  The following table lists the amount of commissions paid to the principal
       underwriting during the last fiscal year:

 Name of         Net Underwriting   Compensation on
 Principal       Discounts and      Redemption or     Brokerage     Other
 Underwriter     Commissions        Annuitization     Commissions   Compensation
- --------------------------------------------------------------------------------
[S]              [C]                [C]               [C]           [C]
WNEC             $0                 $0                $0            $0


Item 30.  Location of Accounts and Records
          --------------------------------

   The contract owner records are held by United Presidential Life Insurance
Company, One Presidential Parkway, Kokomo, Indiana 46904.  The portfolio
accounting records are held by Scudder, Stevens & Clark, Inc., Two International
Place, Boston, Massachusetts 02110-4103.  All other records are held by
Washington National Insurance Company, 300 Tower Parkway, Lincolnshire, Illinois
60069-3665.


Item 31.  Management Services
          -------------------

   None.

                                      C-8
<PAGE>
 
Item 32.  Undertakings
          ------------

     (a) Not applicable.
     (b) Registrant undertakes that it will include either (i) a postcard or
         similar written communication affixed to or included in the Prospectus
         that the applicant can remove to send for a Statement of Additional
         Information or (ii) a space in the Contract Application that an
         applicant can check to request a Statement of Additional Information.
     (c) The Registrant undertakes to deliver any Statement of Additional
         Information and any financial statements required to be made available
         under this Form N-4 promptly upon written or oral request.


Section 403(b) Representations
- ------------------------------

   Washington National represents that it is relying on a no-action letter dated
November 28, 1988, to the American Council of Life Insurance (Ref. No. IP-6-88)
regarding Sections 22(e), 27(c)(1), and 27(d) of the Investment Company Act of
1940, in connection with redeemability restrictions on Section 403(b) policies,
and that paragraphs numbered (1) through (4) of that letter will be complied
with.

                                      C-9
<PAGE>
 
Statement Pursuant to Rule 6c-7:  Texas Optional Retirement Program
- -------------------------------------------------------------------

   Washington National and Separate Account I rely on 17 C.F.R. Section 270.6c-7
and represent that the provisions of that Rule have been or will be complied
with.  Accordingly, Washington National and Separate Account I are exempt from
the provisions of Sections 22(e), 27(c)(1) and 27(d) of the Investment Company
Act of 1940 with respect to any variable annuity contract participating in such
account to the extent necessary to permit compliance with the Texas Optional
Retirement Program.

                                      C-10
<PAGE>
 
                                   SIGNATURES

   As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has duly caused this Registration Statement to be signed on
its behalf, in the Village of Lincolnshire, and State of Illinois on this 24th
day of April, 1996.


                            SEPARATE ACCOUNT I OF
                            WASHINGTON NATIONAL INSURANCE COMPANY
                            (Registrant)

                            By: WASHINGTON NATIONAL INSURANCE COMPANY
                                (Depositor)

                               
                            By: /s/ Craig R. Edwards
                               ----------------------------------------
                               Craig R. Edwards
                               Vice President, Corporate Counsel and Secretary
 

  As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons, Directors and officers of Washington
National Insurance Company, in the capacities and on the dates indicated.

<TABLE> 
<CAPTION> 
 
Signature                       Title                                                         Date
- ---------                       -----                                                         ----
<S>                             <C>                                             <C>  
/s/ Robert W. Patin                                                                         4/30/96
- -------------------------------  Chairman of the Board, President and           -------------------------------
Robert W. Patin                  Chief Executive Officer (Principal
                                 Executive Officer) and Director
/s/ Curt L. Fuhrmann                                                                        4/19/96 
- -------------------------------  Director                                       -------------------------------
Curt L. Fuhrmann

/s/ Kenneth A. Grubb                                                                        4/19/96 
- -------------------------------  Director                                       -------------------------------
Kenneth A. Grubb

/s/ Thomas Pontarelli                                                                       4/19/96 
- -------------------------------  Director                                       -------------------------------
Thomas Pontarelli

/s/ Thomas C. Scott                                                                         4/19/96 
- -------------------------------  Chief Financial Officer (Principal             _______________________________
Thomas C. Scott                  Financial Officer) and Director

/s/ Joan K. Cohen                                                                           4/19/96 
- -------------------------------  Controller and Treasurer                       -------------------------------
Joan K. Cohen                      (Principal Accounting Officer)
</TABLE> 
<PAGE>
 
Registration No. 2-81129
                 811-3640
- --------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION


                            WASHINGTON, D.C.  20549
                 
                                   ---------

                     WASHINGTON NATIONAL INSURANCE COMPANY


                               Separate Account I


                                    EXHIBITS


                                       TO


                           THE REGISTRATION STATEMENT


                                       ON


                                    FORM N-4


                                     UNDER


                           THE SECURITIES ACT OF 1933


                                      AND


                       THE INVESTMENT COMPANY ACT OF 1940

                                   ---------
- --------------------------------------------------------------------------------

                            Filed ____________ 1996
<PAGE>
 
                                 EXHIBIT INDEX
                                 -------------

Exhibit          Description of                                Page
  No.              Exhibit                                     No.*
- -------         --------------                                 ----

(9)(b)         Consent of Counsel

(10)           Consent of Independent Auditors

<PAGE>
 

                                Exhibit (9)(b)
                                --------------




                    Consent of Sutherland, Asbill & Brennan











<PAGE>
 
                 [LETTERHEAD OF SUTHERLAND, ASBILL & BRENNAN]

                                April 30, 1996

Washington National Insurance Company
300 Tower Parkway
Lincolnshire, IL 60069

Ladies and Gentlemen:

     We hereby consent to the reference to our name under the caption "Legal 
Matters" in the Prospectus filed as part of the Post-Effective Amendment No. 17
to Form N-4 for Separate Account I of Washington National Insurance Company 
(File No. 2-81129). In giving this consent, we do not admit that we are in the 
category of persons whose consent is required under Section 7 of the Securities 
Act of 1933.

                                       Very truly yours,

                                       SUTHERLAND, ASBILL & BRENNAN



                                       By: /s/ Frederick R. Bellamy
                                           ------------------------
                                           Frederick R. Bellamy




<PAGE>
 

                                 Exhibit (10)
                                 ------------




                         Consent of Ernst & Young LLP











<PAGE>
 
                                                                    EXHIBIT 10

                        CONSENT OF INDEPENDENT AUDITORS


We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 9, 1996, with respect to the financial
statements and selected per accumulation unit data and ratios of Separate
Account I of Washington National Insurance Company as of December 31, 1995 and
for the periods noted in the report, and our report dated February 8, 1996, with
respect to the consolidated financial statements of Washington National
Insurance Company as of December 31, 1995 and for the periods noted in the
report, in this Post-Effective Amendment to the Registration Statement on 
Form N-4 (No. 2-81129) under the Securities Act of 1933 and Registration
Statement (No. 811-3640) under the Investment Company Act of 1940 and related
Prospectus and Statement of Additional Information of Separate Account I of
Washington National Insurance Company.

                                               /s/ Ernst & Young LLP
                                                   Ernst & Young LLP
Chicago, Illinois
April 25, 1996




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