SEPARATE ACCOUNT I OF
WASHINGTON NATIONAL INSURANCE COMPANY
December 31, 1996
Report of Independent Auditors.........................See below
Statement of Assets and Contract Owners' Equity........See below
Statement of Operations................................See below
Statement of Changes in Contract Owners' Equity........See below
Supplementary Information -- Selected Per Accumulation
Unit Data and Ratios.............................See below
Notes to Financial Statements..........................See below
<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
contract owners' equity of Separate Account I of Washington
National Insurance Company, comprising, respectively, the
Bond, Money Market (formerly known as the Short-Term Portfolio),
Capital Growth (formerly known as the Stock) and Growth and
Income Sub-Accounts as of December 31, 1996, and the related
statements of operations and changes in contract owners'
equity for each of the two years in the period then ended
for the Bond, Money Market and Capital Growth Sub-Accounts
and for the period from July 1, 1996 (date of inception) to
December 31, 1996 for the Growth and Income Sub-Account, and
the selected per accumulation unit data and ratios for each
of the five years in the period then ended for the
Bond, Money Market, and Capital Growth Sub-Accounts and for
the period July 1, 1996 to December 31, 1996 for the
Growth and Income Sub-Account. 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 include confirmation of investments owned as
of December 31, 1996, by correspondence with Scudder, Stevens
& Clark, Inc. 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, 1996, and the results of their operations and
changes in their contract owners' equity and the selected
per accumulation unit data and ratios for each of periods
described in the first paragraph, in conformity with generally
accepted accounting principles.
/c/Ernst & Young LLP
Chicago, Illinois
February 3, 1997
<PAGE>
SEPARATE ACCOUNT I OF WASHINGTON NATIONAL INSURANCE COMPANY
<TABLE>
STATEMENT OF ASSETS AND CONTRACT OWNERS' EQUITY
December 31, 1996
<CAPTION>
Sub-Account
-----------------------------------------------------------------
Money Capital Growth and
Bond Market Growth Income
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investment in Scudder Variable Life Investment Fund
- at net asset value - Note C:
Bond portfolio (914,024.860 shares) $6,151,387
Money Market portfolio (475,353.330 shares) $475,353
Capital Growth portfolio (1,606,727.092 shares) $26,510,997
Growth and Income portfolio (123,243.561 shares) $1,154,792
$6,151,387 $475,353 $26,510,997 $1,154,792
CONTRACT OWNERS' EQUITY $6,151,387 $475,353 $26,510,997 $1,154,792
Accumulation units outstanding 2,404,655 258,735 6,555,373 1,007,977
Accumulation unit value $2.558117 $1.837218 $4.044163 $1.145653
Scudder Variable Life Investment Fund share price $6.73 $1.00 $16.50 $9.37
Scudder Variable Life Investment Fund cost $6,026,019 $475,353 $24,151,360 $1,026,014
<FN>
See notes to financial statements.
</TABLE>
<PAGE>
SEPARATE ACCOUNT I OF WASHINGTON NATIONAL INSURANCE COMPANY
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
Period from
July 1, 1996 to
Year Ended December 31, 1996 December 31, 1996
--------------------------------- -----------------
Sub-Account Sub-Account
---------------------------------- -----------------
Money Capital Growth and
Bond Market Growth Income
<S> <C> <C> <C> <C>
Investment income:
Interest $430,886 $43,907 $12,870 $-
Dividends 190,786 12,441 551,808 9,274
Other - - - -
621,672 56,348 564,678 9,274
Expenses--Note B
Annuity rate guarantee charge 74,443 8,596 238,641 3,290
Investment advisory and management fee 30,152 4,096 83,739 -
Accounting service fee 32,334 3,742 103,471 1,412
General and administrative expenses 12,061 1,638 33,496 -
148,990 18,072 459,347 4,702
NET INVESTMENT INCOME 472,682 38,276 105,331 4,572
Realized and unrealized gain (loss) on investment:
Realized gain 14,992 - 16,634,691 -
Unrealized gain(loss) on investments- Note C
End of period 125,368 - 2,359,637 128,778
Beginning of period 585,246 - 14,143,729 -
Net unrealized gain(loss) (459,878) - (11,784,092) 128,778
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (444,886) - 4,850,599 128,778
INCREASE IN NET ASSETS
FROM OPERATIONS $27,796 $38,276 $4,955,930 $133,350
<FN>
See notes to financial statements.
</TABLE>
SEPARATE ACCOUNT I OF WASHINGTON NATIONAL INSURANCE COMPANY
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
Year Ended December 31, 1995
-------------------------------
Sub-Account
-------------------------------
Money Capital
Bond Market Growth
<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
Annuity rate guarantee charge 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 gain (loss) on investment:
Realized gain 789 - 721,695
Unrealized gain(loss) on investments- Note C
End of period 585,246 - 14,143,729
Beginning of period (477,813) - 6,657,961
Net unrealized gain(loss) 1,063,059 - 7,485,768
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS 1,063,848 - 8,207,463
INCREASE IN NET ASSETS
FROM OPERATIONS $1,735,198 $70,362 $8,508,233
<FN>
See notes to financial statements
</TABLE>
<PAGE>
SEPARATE ACCOUNT I OF WASHINGTON NATIONAL INSURANCE COMPANY
<TABLE>
STATEMENT OF CHANGES IN CONTRACT OWNERS' EQUITY
<CAPTION> Period from
July 1, 1996 to
Year Ended December 31, 1996 December 31, 1996
-------------------------------------- -----------------
Sub-Account Sub-Account
--------------------------------------- -----------------
Money Capital Growth and
Bond Market Growth Income
<S> <C> <C> <C> <C>
ADDITIONS (DEDUCTIONS):
From investment activities:
Net investment income $472,682 $38,276 $105,331 $4,572
Net realized gain 14,992 - 16,634,691 -
Net unrealized gain (loss) (459,878) - (11,784,092) 128,778
INCREASE IN CONTRACT OWNERS' EQUITY
FROM OPERATIONS 27,796 38,276 4,955,930 133,350
From capital transactions:
Contract purchase payments 232,733 42,845 941,849 17,910
Withdrawals and contracts surrendered - Note A (6,645,192) (1,128,015) (14,071,250) (20,578)
Death benefits (9,921) - (6,743) -
Net asset value of units transferred, including
exchanges with the Fixed Account 168,138 (152,562) 2,411,490 1,024,110
INCREASE (DECREASE) IN CONTRACT OWNERS' EQUITY
FROM CAPITAL TRANSACTIONS (6,254,242) (1,237,732) (10,724,654) 1,021,442
NET INCREASE (DECREASE) IN CONTRACT OWNERS' EQUITY (6,226,446) (1,199,456) (5,768,724) 1,154,792
Contract owners' equity:
Beginning of period 12,377,833 1,674,809 32,279,721 -
End of period $6,151,387 $475,353 $26,510,997 $1,154,792
ANALYSIS OF CHANGES IN UNITS OUTSTANDING
Units sold 101,221 23,836 282,867 16,527
Units redeemed (2,725,512) (641,984) (3,834,654) (18,493)
Units transferred 74,014 (68,741) 664,596 1,009,943
INCREASE (DECREASE) IN UNITS OUTSTANDING (2,550,277) (686,889) (2,887,191) 1,007,977
Units outstanding at beginning of period 4,954,931 945,624 9,442,564 -
UNITS OUTSTANDING AT END OF PERIOD 2,404,654 258,735 6,555,373 1,007,977
<FN>
See notes to financial statements.
</TABLE>
SEPARATE ACCOUNT I OF WASHINGTON NATIONAL INSURANCE COMPANY
<TABLE>
STATEMENT OF CHANGES IN CONTRACT OWNERS' EQUITY
<CAPTION>
Year Ended December 31, 1995
------------------------------------------
Sub-Account
------------------------------------------
Money Capital
Bond Market Growth
<S> <C> <C> <C>
ADDITIONS (DEDUCTIONS):
From investment activities:
Net investment income $671,350 $70,362 $300,770
Net realized gain 789 - 721,695
Net unrealized gain (loss) 1,063,059 - 7,485,768
INCREASE IN CONTRACT OWNERS' EQUITY
FROM OPERATIONS 1,735,198 70,362 8,508,233
From capital transactions:
Contract purchase payments 419,329 36,762 1,276,994
Withdrawals and contracts surrendered - Note A (1,084,252) (110,683) (2,733,504)
Death benefits - - -
Net asset value of units transferred, including
exchanges with the Fixed Account (139,525) (75,944) 141,268
INCREASE (DECREASE) IN CONTRACT OWNERS' EQUITY
FROM CAPITAL TRANSACTIONS (804,448) (149,865) (1,315,242)
NET INCREASE (DECREASE) IN CONTRACT OWNERS' EQUITY 930,750 (79,503) 7,192,991
Contract owners' equity:
Beginning of period 11,447,083 1,754,312 25,086,730
End of period $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
INCREASE (DECREASE) IN UNITS OUTSTANDING (341,697) (86,138) (439,867)
Units outstanding at beginning of period 5,296,628 1,031,762 9,882,431
UNITS OUTSTANDING AT END OF PERIOD 4,954,931 945,624 9,442,564
<FN>
See notes to financial statements.
</TABLE>
<PAGE>
SEPARATE ACCOUNT I OF WASHINGTON NATIONAL INSURANCE COMPANY
<TABLE>
SUPPLEMENTARY INFORMATION--SELECTED PER ACCUMULATION UNIT DATA AND RATIOS
<CAPTION>
Selected data per accumulation unit outstanding throughout the period
Period from
7/1/96 to
Year ended December 31, 1996 12/31/96 Year ended December 31, 1995
---------------------------- ----------- ----------------------------
Sub-Account Sub-Account Sub-Account
---------------------------- ----------- --------------------------
Money Capital Growth and Money Capital
Bond Market Growth Income Bond Market Growth
<S> <C> <C> <C> <C> <C> <C> <C>
Per accumulation unit data:
Investment income $0.16 $0.10 $0.07 $0.01 $0.17 $0.10 $0.09
Expenses (0.03) (0.03) (0.06) (0.01) (0.04) (0.03) (0.06)
NET INVESTMENT INCOME 0.13 0.07 0.01 0.00 0.13 0.07 0.03
Net realized and unrealized
gain(loss) on investments (0.08) 0.00 0.61 0.15 0.21 0.00 0.85
Net increase(decrease) in
accumulation unit value 0.06 0.07 0.62 0.15 0.34 0.07 0.88
Accumulation unit value at
beginning of period 2.50 1.77 3.42 1.00 2.16 1.70 2.54
ACCUMULATION UNIT VALUE
AT END OF PERIOD $2.56 $1.84 $4.04 $1.15 $2.50 $1.77 $3.42
Ratios:
Ratio of mortality and expense assurance to
average value of accumulation units 1.57% 1.61% 1.53% 1.05% 1.82% 1.86% 1.87%
Ratio of net investment income to
average value of accumulation units 4.98% 3.40% 0.35% 1.02% 5.58% 4.11% 1.03%
Portfolio turnover rate - - - - 1.25 0.00 7.41
Net assets, end of period ($000's omitted) $6,151 $475 $26,511 $1,155 $12,378 $1,675 $32,280
Number of accumulation units
outstanding at end of period
(000's omitted) 2,405 259 6,555 1,008 4,955 946 9,443
<FN>
Note: Growth and Income ratios have been annualized.
<FN>
See notes to financial statements.
</TABLE>
SEPARATE ACCOUNT I OF WASHINGTON NATIONAL INSURANCE COMPANY
<TABLE>
SUPPLEMENTARY INFORMATION--SELECTED PER ACCUMULATION UNIT DATA AND RATIOS
<CAPTION>
Selected data per accumulation unit outstanding throughout the period
Year ended December 31, 1994 Year ended December 31, 1993
---------------------------- -----------------------------
Sub-Account Sub-Account
---------------------------- ------------------------------
Money Capital Money Capital
Bond Market Growth Bond Market Growth
<S> <C> <C> <C> <C> <C> <C>
Per accumulation unit data:
Investment income $0.16 $0.07 $0.08 $0.16 $0.05 $0.07
Expenses (0.04) (0.03) (0.04) (0.04) (0.03) (0.04)
NET INVESTMENT INCOME 0.12 0.04 0.04 0.12 0.02 0.03
Net realized and unrealized
gain(loss) on investments (0.22) 0.00 (0.02) 0.03 0.00 0.21
Net increase(decrease) in
accumulation unit value (0.10) 0.04 0.02 0.15 0.02 0.24
Accumulation unit value at
beginning of period 2.26 1.66 2.52 2.11 1.64 2.28
ACCUMULATION UNIT VALUE
AT END OF PERIOD $2.16 $1.70 $2.54 $2.26 $1.66 $2.52
Ratios:
Ratio of mortality and expense assurance to
average value of accumulation units 1.87% 1.85% 1.83% 1.85% 1.85% 1.81%
Ratio of net investment income to
average value of accumulation units 5.28% 2.47% 1.41% 5.50% 1.28% 1.17%
Portfolio turnover rate - - 12.20 33.66 - 3.50
Net assets, end of period ($000's omitted) $11,447 $1,754 $25,087 $13,161 $1,626 $25,708
Number of accumulation units
outstanding at end of period
(000's omitted) 5,297 1,032 9,882 5,836 980 10,202
<FN>
Note: Growth and Income ratios have been annualized.
<FN>
See notes to financial statements.
</TABLE>
SEPARATE ACCOUNT I OF WASHINGTON NATIONAL INSURANCE COMPANY
<TABLE>
SUPPLEMENTARY INFORMATION--SELECTED PER ACCUMULATION UNIT DATA AND RATIOS
<CAPTION>
Selected data per accumulation unit outstanding throughout the period
Year ended December 31, 1992
-----------------------------
Sub-Account
-----------------------------
Money Capital
Bond Market Growth
<S> <C> <C> <C>
Per accumulation unit data:
Investment income $0.17 $0.06 $0.07
Expenses (0.04) (0.03) (0.04)
NET INVESTMENT INCOME 0.13 0.03 0.03
Net realized and unrealized
gain(loss) on investments (0.01) 0.00 0.12
Net increase(decrease) in
accumulation unit value 0.12 0.03 0.15
Accumulation unit value at
beginning of period 1.99 1.61 2.13
ACCUMULATION UNIT VALUE
AT END OF PERIOD $2.11 $1.64 $2.28
Ratios:
Ratio of mortality and expense assurance to
average value of accumulation units 1.85% 1.85% 1.85%
Ratio of net investment income to
average value of accumulation units 6.22% 1.82% 1.33%
Portfolio turnover rate 10.83 - 4.92
Net assets, end of period ($000's omitted) $13,632 $1,744 $23,873
Number of accumulation units
outstanding at end of period
(000's omitted) 6,457 1,065 10,457
<FN>
Note: Growth and Income ratios have been annualized.
<FN>
See notes to financial statements.
</TABLE>
<PAGE>
SEPARATE ACCOUNT I OF
WASHINGTON NATIONAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Account: The Separate Account I of Washington National
Insurance Company (the "Separate Account") is a series type
segregated investment account of Washington National Insurance
Company ("WNIC"). WNIC is a wholly-owned subsidiary of Washington
National Corporation ("WNC").
In November 1996, WNC announced a definitive agreement to
merge with PennCorp Financial Group, Inc. ("PennCorp").
Under the terms of the merger, the separate corporate
existence of WNC shall cease and PennCorp shall continue
as the surviving corporation. The merger is anticipated
to close during the first half of 1997, pending receipt of
the required shareholder and regulatory approval. The
merger is not expected to have any effect on the Separate Account.
On July 1, 1996, the Separate
Account converted from an open-end diversified
management investment company to a unit investment trust
and transferred its assets into specified portfolios
of the Scudder Variable Life Investment Fund ("the Fund"),
a mutual fund of the series type, in exchange for shares of
the portfolios. The fair value of the portfolio was
equal to the fair value of assets transferred. This transaction
was approved by contract holders at a special meeting held
March 12, 1996.
The Separate Account is registered as an unit investment trust
under the Investment Company Act of 1940. The Separate
Account no longer issues new contracts. There are four 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.
Money Market Sub-Account(formerly known as the
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.
Capital Growth Sub-Account(formerly known as the stock
sub-account)-- long-term capital growth and
income by investing principally in equity-type securities.
Growth and Income Sub-Account -- long-term growth of capital,
current income, and growth income by investing
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. This investment option became available July 1,
1996.
<PAGE>
SEPARATE ACCOUNT I OF
WASHINGTON NATIONAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--Continued
NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
In addition, a contract holder may elect to invest in a
fixed annuity held by WNIC, called the Fixed Account.
At December 31, 1995, WNIC was a contract holder in the
Separate Account, and held, at fair value, $5,576,669, $1,084,802,
and $9,654,392 in the Bond, Money Market and Capital Growth
Sub-Accounts, respectively. On June 25, 1996, WNIC
surrendered its contract and withdrew $5,454,177, $1,103,730
and $10,405,167 from the Bond, Money Market and Capital Growth
Sub-Accounts, respectively. At December 31, 1996,
WNIC had no investments in the Separate Account.
Valuation of Investments: Prior to July 1, 1996, securities
traded on a national securities exchange were 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
The fair value of the separate portfolios of the Fund are
determined daily based on the fair value of the
underlying securities held.
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.
<PAGE>
SEPARATE ACCOUNT I OF
WASHINGTON NATIONAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--Continued
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
$1,200 of payments and in which the accumulated value
is at least $20,000.
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 year, except
that no such charge is made for withdrawals of
purchase payments received 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.
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 compensation for providing financial
accounting services to the Separate Account,
WNIC deducts an amount, computed on daily basis,
equal to an annual rate of .35% of the average
net asset value of the Separate Account.
In addition to the above, prior to July 1, 1996, the
following additional deductions and charges were
made from the Separate Account and paid to WNIC:
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 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 1996, the Separate Account's
three external directors each received $500.
<PAGE>
SEPARATE ACCOUNT I OF
WASHINGTON NATIONAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS -- Continued
NOTE C -- INVESTMENTS
Effective July 1, 1996, 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 rates:
Percentage of the Portfolio's
Portfolio Average Daily Net Asset Value
--------- -----------------------------
Bond Portfolio .475%
Money Market Portfolio .370%
Capital Growth Portfolio .475%
Growth and Income Portfolio .469%
Proceeds from the sale of investments in 1996, other than United
States Government obligations and short-term notes, were
$10,741,428 and $34,557,689 in the Bond and Capital Growth
Sub-Accounts, respectively.
There were no purchases of investments, other than investments
in Fund shares, during 1996.
Net asset value of Fund shares represents the year-end fair value
of the shares. At December 31, 1996, the net unrealized gain
on each fund was: Bond - $125,368, Capital
Growth - $2,359,637, and Growth and Income - $128,778.
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.
<PAGE>
The registrant hereby incorporates by
reference the 1996 Annual Report
of Scudder Variable Life Investment
Fund, file number 811-4257, filed
with the Commission on
February 14, 1997.
