Washington National Insurance Company
One Presidential Parkway
P.O. Box 9019
Kokomo, IN 46904-9019
1-800-866-9922
February 26, 1998
Contract Owners
Separate Account I - WN V
Washington National Insurance Company
Attached is the Statement of Financial information for the
periods ending December 31, 1997 and 1996.
/s/ Joseph P. Clarke
Second Vice President
<PAGE>
SEPARATE ACCOUNT I OF
WASHINGTON NATIONAL INSURANCE COMPANY
December 31, 1997 and 1996
Report of Independent Accountants 1
Statement of Assets and Contract Owners' Equity 2
Statements of Operations 3
Statements of Changes in Contract Owners' Equity 4
Notes to Financial Statements 5
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Contract Owners of Separate Account I and
The Board of Directors 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, Capital Growth, and Income Sub-Accounts as of December
31, 1997, and the related statement of operations and statement
of changes in contract owners' equity for the year then ended.
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 audit. The statement
of operations and statement of changes in contract owners' equity
for the year ended December 31, 1996, was audited by other
auditors, whose report, dated February 3, 1997, expressed an
unqualified opinion on those statements.
We conducted our audit 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. Our
procedures include confirmation of portfolio shares owned at
December 31, 1997, 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
audit provides a reasonable basis for our opinion.
In our opinion, the December 31, 1997, financial statements
referred to above present fairly, in all material respects, the
financial position of each of the Sub-Accounts constituting
Separate Account I of Washington National Insurance Company as of
December 31, 1997, and the results of its operations and changes
in contract owners' equity for the year then ended in conformity
with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Indianapolis, Indiana
February 23, 1998
1
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SEPARATE ACCOUNT I OF WASHINGTON NATIONAL INSURANCE COMPANY
STATEMENT OF ASSETS AND CONTRACT OWNERS' EQUITY
December 31, 1997
<TABLE>
<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 D:
Bond portfolio (796,969.739 shares) $ 5,475,182
Money Market portfolio (430,742.280 shares) $ 430,742
Capital Growth portfolio (1,595,010.209 shares) $32,905,060
Growth and Income portfolio (177,405.505 shares) $ 2,036,615
$ 5,475,182 $ 430,742 $32,905,060 $ 2,036,615
CONTRACT OWNERS' EQUITY $ 5,475,182 $ 430,742 $32,905,060 $ 2,036,615
Accumulation units outstanding 1,984,883 225,365 6,063,747 1,378,506
Accumulation unit value $ 2.758441 $1.911308 $ 5.426523 $ 1.477407
Scudder Variable Life Investment Fund share price $ 6.87 $ 1.00 $ 20.63 $ 11.48
Scudder Variable Life Investment Fund cost $ 5,237,280 $ 430,742 $23,609,085 $ 1,558,550
See notes to financial statements.
</TABLE>
2
<PAGE>
SEPARATE ACCOUNT I OF WASHINGTON NATIONAL INSURANCE COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
July 1, 1996 to
Year Ended December 31, 1997 Year Ended December 31, 1996 December 31, 1996
-------------------------------------- ------------------------------- -----------------
Sub-Account Sub-Account Sub-Account
-------------------------------------- ------------------------------- -----------------
Growth Growth
Money Capital and Money Capital and
Bond Market Growth Income Bond Market Growth Income
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Interest $ - $ - $ - $ - $ 430,886 $43,907 $ 12,870 $ -
Dividends 386,147 24,242 2,281,928 90,925 190,786 12,441 551,808 9,274
386,147 24,242 2,281,928 90,925 621,672 56,348 564,678 9,274
Expenses--Note C
Annuity rate guarantee charge 47,287 3,870 254,276 13,737 74,443 8,596 238,641 3,290
Investment advisory and
management fee - - - - 30,152 4,096 83,739 -
Accounting service fee 20,266 1,659 108,976 5,887 32,334 3,742 103,471 1,412
General and administrative expenses - - - - 12,061 1,638 33,496 -
67,553 5,529 363,252 19,624 148,990 18,072 459,347 4,702
NET INVESTMENT INCOME 318,594 18,713 1,918,676 71,301 472,682 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 D
End of period 237,902 - 9,295,975 478,065 125,368 - 2,359,637 128,778
Beginning of period 125,368 - 2,359,637 128,778 585,246 - 14,143,729 -
Net unrealized gain (loss) 112,534 - 6,936,338 349,287 (459,878) - (11,784,092) 128,778
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS 112,534 - 6,936,338 349,287 (444,886) - 4,850,599 128,778
INCREASE IN NET ASSETS
FROM OPERATIONS $431,128 $18,713 $8,855,014 $420,588 $ 27,796 $38,276 $ 4,955,930 $133,350
See notes to financial statements.
</TABLE>
3
<PAGE>
SEPARATE ACCOUNT I OF WASHINGTON NATIONAL INSURANCE COMPANY
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
Period from
July 1, 1996 to
Year Ended December 31, 1997 Year Ended December 31, 1996 December 31, 1996
--------------------------------------------- ------------------------------------ ----------------
Sub-Account Sub-Account Sub-Account
--------------------------------------------- ------------------------------------ ----------------
Growth Growth
Money Capital and Money Capital and
Bond Market Growth Income Bond Market Growth Income
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ADDITIONS (DEDUCTIONS):
From investment activities:
Net investment income $ 318,594 $ 18,713 $ 1,918,676 $ 71,301 $ 472,682 $ 38,276 $ 105,331 $ 4,572
Net realized gain - - - - 14,992 - 16,634,691 -
Net unrealized
gain (loss) 112,534 - 6,936,338 349,287 (459,878) - (11,784,092) 128,778
INCREASE IN CONTRACT
OWNERS' EQUITY FROM
OPERATIONS 431,128 18,713 8,855,014 420,588 27,796 38,276 4,955,930 133,350
From capital transactions:
Contract purchase
payments 166,670 28,582 694,103 64,212 232,733 42,845 941,849 17,910
Withdrawals and contracts
surrendered - Note A (1,026,160) (67,842) (4,488,550) (34,813) (6,645,192) (1,128,015) (14,071,250) (20,578)
Death benefits (31,636) (2,677) (126,828) - (9,921) - (6,743) -
Net asset value of units
transferred, including
exchanges with the
Fixed Account (216,207) (21,387) 1,460,324 431,836 168,138 (152,562) 2,411,490 1,024,110
INCREASE (DECREASE) IN
CONTRACT OWNERS'
EQUITY FROM CAPITAL
TRANSACTIONS (1,107,333) (63,324) (2,460,951) 461,235 (6,254,242) (1,237,732) (10,724,654) 1,021,442
NET INCREASE (DECREASE)
IN CONTRACT OWNERS'
EQUITY (676,205) (44,611) 6,394,063 881,823 (6,226,446) (1,199,456) (5,768,724) 1,154,792
Contract owners' equity:
Beginning of period 6,151,387 475,353 26,510,997 1,154,792 12,377,833 1,674,809 32,279,721 -
End of period $5,475,182 $430,742 $32,905,060 $2,036,615 $ 6,151,387 $ 475,353 $26,510,997 $1,154,792
ANALYSIS OF CHANGES IN
UNITS OUTSTANDING
Units sold 64,278 15,363 145,443 48,926 101,221 23,836 282,867 16,527
Units redeemed (402,790) (37,406) (945,481) (26,970) (2,725,512) (641,984) (3,834,654) (18,493)
Units transferred (81,259) (11,327) 308,412 348,573 74,014 (68,741) 664,596 1,009,943
INCREASE (DECREASE) IN
UNITS OUTSTANDING (419,771) (33,370) (491,626) 370,529 (2,550,277) (686,889) (2,887,191) 1,007,977
Units outstanding at
beginning of period 2,404,654 258,735 6,555,373 1,007,977 4,954,931 945,624 9,442,564 -
UNITS OUTSTANDING AT
END OF PERIOD 1,984,883 225,365 6,063,747 1,378,506 2,404,654 258,735 6,555,373 1,007,977
See notes to financial statements.
</TABLE>
4
<PAGE>
SEPARATE ACCOUNT I OF
WASHINGTON NATIONAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 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 was a wholly-owned subsidiary of Washington
National Corporation ("WNC").
In December 1997, WNC merged with Conseco Services, L.L.C.
("Conseco"), a wholly owned subsidiary of Conseco, Inc. Under the
terms of the merger, the separate corporate existence of WNC shall
cease and Conseco shall continue as the surviving corporation.
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.
5
<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, or its successors, 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: Investments in portfolio shares are
valued using the net asset value of the respective portfolios of
the Fund at the end of each New York Stock Exchange business day.
Investment share transactions are accounted for on a trade date
basis (the date the order to purchase or redeem shares is
executed), interest income is recorded on the accrual basis and
dividend income is recorded on the ex-dividend date. The cost of
investments in portfolio shares sold is determined on a first-in
first-out basis. The Separate Account does not hold any
investments which are restricted as to resale.
Net investment income and net realized gains (losses) and
unrealized appreciation (depreciation) on investments are
allocated to the contracts on each valuation date based on each
contract's pro rata share of the assets of the Separate Account as
of the beginning of the valuation date.
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.
Accumulation Unit Valuation: Accumulation unit values reflect the
net asset value of each Sub-Account and are computed daily.
NOTE B -- MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities as of the date of the financial statements and the
reported amounts of income and expenses during the reporting
period. Actual results may differ from these estimates.
6
<PAGE>
SEPARATE ACCOUNT I OF
WASHINGTON NATIONAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE C -- 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 a 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.
7
<PAGE>
SEPARATE ACCOUNT I OF
WASHINGTON NATIONAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE D -- 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 1997.
Net asset value of Fund shares represents the year-end fair value
of the shares. At December 31, 1997, the net unrealized gain on
each fund was: Bond - $237,902, Capital Growth - $9,295,975, and
Growth and Income - $478,065.
NOTE E -- 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.
8
<PAGE>
The registrant hereby incorporates by reference the Scudder Variable
Life Investment Supplement to the May 1, 1997 Prospectus and the 1997
Annual Report of Scudder Variable Life Investment Fund, file number
811-4257, filed with the Commission on January 5, 1998 and on
February 17, 1998, respectively.
