[Logo Omitted]
CONSECO(R)
Step up.(SM)
WASHINGTON NATIONAL INSURANCE COMPANY
ANNUAL REPORT
TO CONTRACT OWNERS
DECEMBER 31, 1999
Separate Account 1 of Washington National Insurance Company
<PAGE>
ANNUAL REPORT TO CONTRACT OWNERS
TABLE OF CONTENTS
DECEMBER 31, 1999
================================================================================
SEPARATE ACCOUNT 1 OF WASHINGTON NATIONAL INSURANCE COMPANY PAGE
Statement of Assets and Liabilities as of December 31, 1999 ............... 1
Statements of Operations and Statements of Changes in Net Assets
for the Year Ended December 31, 1999 ..................................... 2
Statements of Operations and Statements of Changes in Net Assets
for the Year Ended December 31, 1998 ..................................... 3
Notes to Financial Statements ............................................. 4
Report of Independent Accountants ......................................... 5
<PAGE>
SEPARATE ACCOUNT 1 OF WASHINGTON NATIONAL INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
================================================================================
NET ASSET
SHARES COST VALUE
--------------------------------------
Assets:
Investments in portfolio shares,
at net asset value (Note 2) Scudder Variable
Life Investment Fund:
Bond Portfolio ................... 736,277.9 $ 4,902,272 $ 4,778,443
Capital Growth Portfolio ......... 1,515,373.0 26,639,270 44,142,818
Growth and Income Portfolio ...... 206,778.2 2,327,377 2,266,289
Money Market Portfolio ........... 182,701.7 182,702 182,702
- --------------------------------------------------------------------------------
Total assets............................................ $51,370,252
================================================================================
Liabilities:
Amounts due to Washington National Insurance Company.......... 51,864
- --------------------------------------------------------------------------------
Net assets.............................................. $51,318,388
================================================================================
UNIT TOTAL VALUE
UNITS VALUE OF UNITS
-------------------------------------
Net assets attributable to:
Contract owners' deferred annuity
reserves:
Scudder Variable Life Investment
Fund:
Bond Portfolio.................... 1,678,026.0 $2.844802 $ 4,773,651
Capital Growth Portfolio.......... 4,991,248.6 8.835121 44,098,284
Growth and Income Portfolio....... 1,383,231.7 1.636791 2,264,061
Money Market Portfolio............ 88,378.3 2.063768 182,392
- --------------------------------------------------------------------------------
Net assets.............................................. $51,318,388
================================================================================
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
SEPARATE ACCOUNT 1 OF WASHINGTON NATIONAL INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
===================================================================================================================================
SCUDDER VARIABLE LIFE INVESTMENT FUND
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL GROWTH AND MONEY
BOND GROWTH INCOME MARKET TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Income:
Dividends from investments in portfolio shares........... $ 262,958 $ 3,808,972 $ 195,239 $18,844 $ 4,286,013
Expenses:
Mortality and expense risk fees ......................... 60,821 443,461 27,255 4,605 536,142
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income.................................. 202,137 3,365,511 167,984 14,239 3,749,871
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized appreciation
(depreciation) of investments:
Net realized gains (losses) on sales of investments in
portfolio shares ....................................... (3,514) 2,142,618 135,022 -- 2,274,126
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares...................... 313,456) 5,914,642 (180,377) -- 5,420,809
- -----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares... (316,970) 8,057,260 (45,355) -- 7,694,935
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $(114,833) $11,422,771 $ 122,629 $14,239 $11,444,806
===================================================================================================================================
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
===================================================================================================================================
SCUDDER VARIABLE LIFE INVESTMENT FUND
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL GROWTH AND MONEY
BOND GROWTH INCOME MARKET TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Changes from operations:
Net investment income.................................... $ 202,137 $ 3,365,511 $ 167,984 $ 14,239 $ 3,749,871
Net realized gains (losses) on sales of investments
in portfolio shares (3,514) 2,142,618 135,022 -- 2,274,126
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares...................... (313,456) 5,914,642 (180,377) -- 5,420,809
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (114,833) 11,422,771 122,629 14,239 11,444,806
- -----------------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments........................... 117,858 494,458 59,417 24,017 695,750
Contract redemptions..................................... (918,368) (5,160,295) (339,844) (284,123) (6,702,630)
Net transfers............................................ 193,404 844,570 (24,697) (63,276) 950,001
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from contract owners'
transactions.......................................... (607,106) (3,821,267) (305,124) (323,382) (5,056,879)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets.............. (721,939) 7,601,504 (182,495) (309,143) 6,387,927
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of year............................... 5,495,590 36,496,780 2,446,556 491,535 44,930,461
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year............................ $4,773,651 $44,098,284 $2,264,061 $ 182,392 $51,318,388
===================================================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
2
<PAGE>
SEPARATE ACCOUNT 1 OF WASHINGTON NATIONAL INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
===================================================================================================================================
SCUDDER VARIABLE LIFE INVESTMENT FUND
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL GROWTH AND MONEY
BOND GROWTH INCOME MARKET TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Income:
Dividends from investments in portfolio shares........... $338,992 $2,029,609 $ 205,611 $23,893 $2,598,105
Expenses:
Mortality and expense risk fees.......................... 64,388 398,751 28,924 5,418 497,481
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income.................................. 274,604 1,630,858 176,687 18,475 2,100,624
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) and unrealized
appreciation (depreciation) of investments:
Net realized gains on sales of investments
in portfolio shares................................. 32,272 1,616,066 117,297 -- 1,765,635
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares.................. (19,263) 3,522,505 (187,253) -- 3,315,989
- -----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares... 13,009 5,138,571 (69,956) -- 5,081,624
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations......... $287,613 $6,769,429 $ 106,731 $18,475 $7,182,248
===================================================================================================================================
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
===================================================================================================================================
SCUDDER VARIABLE LIFE INVESTMENT FUND
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL GROWTH AND MONEY
BOND GROWTH INCOME MARKET TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Changes from operations:
Net investment income.................................... $ 274,604 $ 1,630,858 $ 176,687 $ 18,475 $ 2,100,624
Net realized gains on sales of investments in
portfolio shares 32,272 1,616,066 117,297 -- 1,765,635
Net change in unrealized appreciation (depreciation)
of investments in portfolio shares..................... (19,263) 3,522,505 (187,253) -- 3,315,989
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations........... 287,613 6,769,429 106,731 18,475 7,182,248
- -----------------------------------------------------------------------------------------------------------------------------------
Changes from contract owners' transactions:
Net contract purchase payments........................... 152,379 733,726 75,815 24,536 986,456
Contract redemptions..................................... (509,961) (3,741,351) (110,947) (81,634) (4,443,893)
Net transfers............................................ 90,377 (170,084) 338,342 99,416 358,051
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from contract owners'
transactions......................................... (267,205) (3,177,709) 303,210 42,318 (3,099,386)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets......................... 20,408 3,591,720 409,941 60,793 4,082,862
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, beginning of year............................... 5,475,182 32,905,060 2,036,615 430,742 40,847,599
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year............................ $5,495,590 $36,496,780 $2,446,556 $ 491,535 $44,930,461
===================================================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
3
<PAGE>
SEPARATE ACCOUNT 1 OF WASHINGTON NATIONAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 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 and Income and
Money Market portfolios.
The operations of the Account are included in the operations of Washington
National Insurance Company ("the Company") pursuant to the provisions of the
Illinois Insurance Code. The Company 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 increases and decreases in net assets during the reporting period.
Actual results could differ from these estimates.
(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, 1999 and 1998, was $6,781,814 and $6,249,235,
respectively. The aggregate proceeds from sales of investments in portfolio
shares for the years ended December 31, 1999 and 1998, were $8,029,201 and
$7,247,998, 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 the Company assumes the mortality risk
and the expense risk under the contracts.
The mortality risk assumed by the Company results from the life annuity
payment option in the contracts in which the Company 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, the Company is required to fund
any deficiency in the annuity payment reserves from its general account assets.
The expense risk assumed by the Company is the risk that the deductions for
financial accounting services may prove insufficient to cover the actual
expenses.
The Company 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 $375,299 and $348,238 for the years ended December 31, 1999 and
1998, respectively.
The Company 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
$160,843 and $149,243 for the years ended December 31, 1999 and 1998,
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 $18,510 and
$20,931 for the years ended December 31, 1999 and 1998, respectively. This fee
is recorded as a redemption in the accompanying Statements of Changes in Net
Assets.
The Company 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 $65,789 and $73,059 for the years ended December 31, 1999 and
1998, respectively.
4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
================================================================================
TO THE BOARD OF DIRECTORS OF WASHINGTON NATIONAL 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, 1999 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 accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 1999 by correspondence with the fund, provide a reasonable basis
for the opinion expressed above.
/s/ PRICEWATERHOUSE COOPER LLP
- -------------------------------
PRICEWATERHOUSE COOPER LLP
Indianapolis
February 10, 2000
5
<PAGE>
================================================================================
THIS PAGE INTENTIONALLY LEFT BLANK.
6
<PAGE>
================================================================================
THIS PAGE INTENTIONALLY LEFT BLANK.
7
<PAGE>
================================================================================
THIS PAGE INTENTIONALLY LEFT BLANK.
8
<PAGE>
================================================================================
SEPARATE ACCOUNT 1 OF
WASHINGTON NATIONAL INSURANCE COMPANY
SPONSOR
Washington National Insurance Company - Carmel, Indiana.
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP - Indianapolis, Indiana.
9
<PAGE>
WASHINGTON NATIONAL INSURANCE COMPANY IS AN INDIRECT WHOLLY OWNED
SUBSIDIARY OF CONSECO, INC., A FINANCIAL SERVICES ORGANIZATION HEADQUARTERED
IN CARMEL, INDIANA. CONSECO, THROUGH ITS SUBSIDIARY COMPANIES, IS ONE OF
MIDDLE AMERICA'S LEADING SOURCES FOR INSURANCE, INVESTMENT AND LENDING
PRODUCTS, HELPING 12 MILLION CUSTOMERS STEP
UP TO A BETTER, MORE SECURE FUTURE.
Washington National Insurance Company
11815 North Pennsylvania Street
Carmel, Indiana 46032
WNIC003 (2/00) 06104
(c) 1999 Washington National Insurance Company
WWW.CONSECO.COM
INSURANCE INVESTMENTS LENDING
- ------------------------------------------------------------------------ [LOGO]
CONSECO(c)
Step up.(SM)
