[LOGO]
CONSECO(R)
WASHINGTON NATIONAL INSURANCE COMPANY
Annual Report to
Contract Owners
December 31, 1998
Separate Account I of Washington National Insurance Company
<PAGE>
ANNUAL REPORT TO CONTRACT OWNERS
Table of Contents
December 31, 1998
<TABLE>
<CAPTION>
==========================================================================================
Page
Separate Account I of Washington National Insurance Company
<S> <C>
Statement of Assets and Liabilities as of December 31, 1998 ........................ 1
Statements of Operations for the Years Ended December 31, 1998 and 1997 ............ 2
Statements of Changes in Net Assets for the Years Ended December 31, 1998 and 1997.. 2
Notes to Financial Statements ...................................................... 3
Report of Independent Accountants .................................................. 4
</TABLE>
<PAGE>
SEPARATE ACCOUNT I OF WASHINGTON NATIONAL INSURANCE COMPANY
Statement of Assets and Liabilities
December 31, 1998
<TABLE>
<CAPTION>
====================================================================================================================================
VALUE
-----
<S> <C>
Assets:
Investments in portfolio shares, at net asset value (Note 2)
Scudder Variable Life Portfolio:
Bond Portfolio, 798,778 shares (cost - $5,305,963)........................................................... $ 5,495,590
Money Market Portfolio, 491,535 shares (cost - $491,535)..................................................... 491,535
Capital Growth Portfolio, 1,523,874 shares (cost - $24,907,875).............................................. 36,496,780
Growth & Income Portfolio, 218,053 shares (cost - $2,327,266)................................................ 2,446,556
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets................................................................................................. $ 44,930,461
===================================================================================================================================
<CAPTION>
REPORTED
UNITS UNIT VALUE VALUE
-------------------------------------------
<S> <C> <C> <C>
Net assets attributable to:
Contract owners' deferred annuity reserves:
Scudder Variable Life Portfolio:
Bond Portfolio.................................................................. 1,891,405.40 $ 2.905559 $ 5,495,590
Money Market Portfolio.......................................................... 247,119.90 1.989054 491,535
Capital Growth Portfolio........................................................ 5,521,980.60 6.609364 36,496,780
Growth & Income Portfolio....................................................... 1,567,317.90 1.560982 2,446,556
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets.................................................................... $ 44,930,461
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
SEPARATE ACCOUNT I OF WASHINGTON NATIONAL INSURANCE COMPANY
Statements of Operations
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
====================================================================================================================================
1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment income:
Dividends from investments in portfolio shares.................................................... $ 2,598,105 $ 2,783,242
Expenses:
Mortality and expense risk fees................................................................... 497,481 455,958
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income................................................................................ 2,100,624 2,327,284
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation (depreciation) of
investments in portfolio shares:
Net realized gains on sales of investments in portfolio shares.................................... 1,765,635 1,349,291
Net change in unrealized appreciation of investments in portfolio shares.......................... 3,315,989 6,048,868
- -----------------------------------------------------------------------------------------------------------------------------------
Net gain on investments in portfolio shares..................................................... 5,081,624 7,398,159
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations.................................................... $ 7,182,248 $ 9,725,443
====================================================================================================================================
</TABLE>
Statements of Changes in Net Assets
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
====================================================================================================================================
1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Changes from operations:
Net investment income............................................................................. $ 2,100,624 $ 2,327,284
Net realized gains on sales of investments in portfolio shares ................................... 1,765,635 1,349,291
Net change in unrealized appreciation of investments in portfolio shares.......................... 3,315,989 6,048,868
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations...................................................... 7,182,248 9,725,443
- -----------------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments.................................................................... 1,344,507 2,608,133
Contract redemptions.............................................................................. (4,443,893) (5,778,506)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from contract owner's transactions................................... (3,099,386) (3,170,373)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets.................................................................... 4,082,862 6,555,070
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of year........................................................................ 40,847,599 34,292,529
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year....................................................................... $ 44,930,461 $ 40,847,599
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
SEPARATE ACCOUNT I OF WASHINGTON NATIONAL INSURANCE COMPANY
Notes to Financial Statements
December 31, 1998
================================================================================
(1) General
The Separate Account I of Washington National Insurance Company (the
"Account") was established in 1982 as a segregated investment account for
individual annuity contracts which are registered under the Securities Act of
1933. The Account is registered under the Investment Company Act of 1940, as
amended (the "Act"), as a unit investment trust. The Account was originally
registered with the U.S. Securities and Exchange Commission as a diversified
open-end management investment company under the Act. Effective July 1, 1996,
the Account was restructured into a single unit investment trust which invests
solely in shares of the portfolios of the Scudder Variable Life Investment Fund
(the "Fund"), a diversified open-end management investment company. The
investment options available are the Bond, Capital Growth, Growth & Income and
Money Market portfolios.
The operations of the Account are included in the operations of Washington
National Insurance Company ("WNIC") pursuant to the provisions of the Illinois
Insurance Code. WNIC is a wholly owned subsidiary of Washington National
Corporation, which is an indirect wholly owned subsidiary of Conseco, Inc., a
publicly-held specialized financial services holding company listed on the New
York Stock Exchange.
The 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 increases and decreases of net assets
during the reporting period. Actual results may differ from these estimates.
Certain 1997 amounts are reclassified to conform to the 1998 presentation.
(2) Summary of Significant Accounting Policies
INVESTMENT VALUATION, TRANSACTIONS, AND INCOME
Investments in portfolio shares are valued using the net asset value of the
respective portfolios of the 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) and dividend
income is recorded on the ex-dividend date. The cost of investments in portfolio
shares sold is determined on a first-in first-out basis. The Account does not
hold any investments which are restricted as to resale.
Net investment income and net realized gains (losses) and unrealized
appreciation (depreciation) on investments are allocated to the contracts on
each valuation date based on each contract's pro rata share of the assets of the
Account as of the beginning of the valuation date.
FEDERAL INCOME TAXES
No provision for federal income taxes has been made in the accompanying
financial statements because the operations of the Account are included in the
total operations of the Company, which is treated as a life insurance company
for federal income tax purposes under the Internal Revenue Code. Net investment
income and realized gains (losses) are retained in the Account and are not
taxable until received by the contract owner or beneficiary in the form of
annuity payments or other distributions.
ANNUITY RESERVES
Deferred annuity contract reserves are comprised of net contract purchase
payments less redemptions and benefits. These reserves are adjusted daily for
the net investment income and net realized gains (losses) and unrealized
appreciation (depreciation) on investments.
(3) Purchases and Sales of Investments in Portfolio Shares
The aggregate cost of purchases of investments in portfolio shares for the
years ended December 31, 1998 and 1997 were $6,249,235, and $7,802,809,
respectively. The aggregate proceeds from sales of investments in portfolio
shares for the years ended December 31, 1998 and 1997 were $7,247,998, and
$8,645,897, respectively.
(4) DEDUCTIONS AND EXPENSES
Although periodic retirement payments to contract owners vary according to
the investment performance of the portfolios, such payments are not affected by
expense or mortality experience because WNIC assumes the mortality risk and the
expense risk under the contracts.
The mortality risk assumed by WNIC results from the life annuity payment
option in the contracts in which WNIC agrees to make annuity payments regardless
of how long a particular annuitant or other payee lives. The annuity payments
are determined in accordance with annuity purchase rate provisions established
at the time the contracts are issued. Based on the actuarial determination of
expected mortality, WNIC is required to fund any deficiency in the annuity
payment reserves from its general account assets.
The expense risk assumed by WNIC is the risk that the deductions for
financial accounting services may prove insufficient to cover the actual
expenses.
WNIC deducts daily from the Account an annuity rate guarantee charge, which
is equal on an annual basis to 0.80 percent of the daily value of the total
investments of the Fund, for assuming the mortality and expense risks. These
fees were $348,238 and $319,170 for the years ended December 31, 1998 and 1997,
respectively.
WNIC deducts daily from the Account a financial accounting charge, which is
equal on an annual basis to 0.35 percent of the daily value of the total
investments of the Fund, for assuming the expense risk. These fees were $149,243
and $136,788 for the years ended December 31, 1998 and 1997, respectively.
An annual contract administrative charge of $30 is deducted 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. These fees were $20,931 and
$30,218 for the years ended December 31, 1998 and 1997, respectively. This fee
is recorded as a redemption in the accompanying Statement of Changes of Net
Assets.
WNIC deducts a contingent deferred sales charge of 6 percent on any amounts
withdrawn which are in excess of 10 percent 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. These fees were
$73,059 and $139,682 for the years ended December 31, 1998 and 1997,
respectively.
3
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
================================================================================
To The Board of Directors of Conseco Variable Insurance Company and Contract
Owners of Separate Account I of Washington National Insurance Company
In our opinion, the accompanying statement of assets and liabilities and
the related statements of operations and of changes in net assets present
fairly, in all material respects, the financial position of the Separate Account
I of Washington National Insurance Company (the "Account") at December 31, 1998
and the results of its operations and the changes in its net assets for each of
the two years in the period then ended in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Account's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of portfolio shares owned at December 31, 1998 by correspondence
with the custodian, provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Indianapolis, Indiana
February 15, 1999
4
<PAGE>
========================================================
Separate Account I of
Washington National Insurance Company
SPONSOR
Washington National Insurance Company - Carmel, Indiana.
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP - Indianapolis, Indiana.
5
<PAGE>
[LOGO]
CONSECO(R)
Washington National Insurance Company is
subsidiary of Conseco, Inc., a financial
services organization headquartered in
Carmel, Indiana. Conseco is dedicated to
providing its customers with solutions for
both wealth protection and wealth creation.
Through its subsidiaries, Conseco is one of
the nation's leading providers of
supplemental health insurance, retirement
annuities, universal life insurance, and consumer
and commercial finance products and services.
WASHINGTON NATIONAL INSURANCE COMPANY
11815 North Pennsylvania Street
Carmel, Indiana 46032
(C) 1999, Washington National Insurance Company
(2/99)
