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[SENTRY LOGO]
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Sentry Variable Account I
THE PATRIOT
A FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
FUNDED BY NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
[GRAPHIC]
ANNUAL REPORT
DECEMBER 31, 1995
SENTRY LIFE INSURANCE COMPANY OF NEW YORK
<PAGE> 2
Dear Contract Owner: February 15, 1996
Thank you for selecting the Patriot for your long-term investment needs. Your
confidence in Sentry to provide this service is appreciated.
The comments below on the performance of the underlying investment are provided
by its investment advisor, Neuberger and Berman Management, Incorporated.
The stock and bond markets took off in 1995 after relatively unmemorable
performances in 1994. Investors will certainly look back on the harmony of the
dual bull market with fondness, as will our AMT Portfolio shareholders.
Dropping interest rates, coupled with growing company earnings despite a
cooling overall economy was music to investor's ears. All major indices reached
record highs (the S&P 500 jumped 34%, the Dow topped 33%, and the Nasdaq was up
nearly 40% for the year), and just about every sector of industry locked in
higher share prices for the year. The same decline in rates created a rebound
from 1994's dismal bond results; so good, in fact, that it was one of the best
bond market performance years in history. The Federal Reserve Board cut rates
by 0.25% in July and December, and bond investors were further encouraged by
slowing economic growth and fiscal restraint. Long-term rates went just over
7.9% at the peak in January, and ended the year at 5.94%.
The advantages of a favorable bond environment were not lost to the management
behind Neuberger & Berman AMT Limited Maturity Bond Investments or the fixed
income portion of Neuberger & Berman AMT Balanced Investments, which both took
advantage of bond price appreciation by lengthening duration in the first half
of the year, and again in the Fall. Duration (the measure of how bond prices
respond to shifts in interest rates, taking into account maturity, coupon, call
protection and other factors) was raised from 1.79 years (a weighted average
maturity of 2.1 years) in January to 2.18 years (or 2.4 years weighted average
maturity) by the end of June. The rally subsided during the third quarter as
market participants became concerned about a pick up in economic activity.
However, by the end of the third quarter, inflationary concerns waned and the
rally resumed. Duration was extended again in October -- this time to 2.6 years
(2.9 years average weighted maturity); which greatly benefited fourth-quarter
performance. We remain bullish heading into 1996, and have been adding
corporate and asset-backed positions while avoiding the prepayment-plagued
mortgage arena (an area which hindered performance last year as well).
The strategy for Neuberger & Berman AMT Liquid Asset Investments during this
time was to continue to take advantage of higher yields which persisted despite
the two Federal Funds rate cuts. As the bond rally set in, the portfolio's
dollar-weighted average maturity was raised from 44 days to 62 days, then
remained between 40 and 63 days during the bond market's fits and starts
during Summer. During the last quarter, the money market yield curve inverted,
meaning higher interest rates could be found in shorter maturities --
accordingly we ended the year with a 24-day average maturity.
Among companies, the market certainly fell in love with technology and finance,
even if the affair ended by the fourth quarter and profit-taking took the froth
off of their valuations. Lowering interest rates and strong earnings results
provided the impetus for equities in 1995. Neuberger & Berman AMT Growth
Investments and the stock portion of Neuberger & Berman AMT Balanced
Investments were heavily weighted in both, as well as other prime contributors
such as HMO and other health care names, and specialty retailers which defied
the doldrums in the general retail sector. Gaming and restaurant investments
lost some ground in the fourth quarter, but it was not enough to dampen the
excellent total return performance results for the entire year.
Even though market valuations are at an all-time high, we continue to find
attractive investments selling below their intrinsic worth. This
growth-at-a-reasonable-price strategy will best serve to enhance the portfolios
and provide a solid foundation for long-term results. As always, we continue to
tackle each stock individually on a fundamental ("bottom-up") basis.
Your account with us is appreciated.
Sincerely,
HAROLD A. RICE
Harold A. Rice
President, Sentry Life of New York
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SENTRY LIFE INSURANCE COMPANY OF NEW YORK
SENTRY VARIABLE ACCOUNT I
STATEMENT OF ASSETS, LIABILITIES
AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
Neuberger & Berman Advisers Management Trust:
Liquid Asset Portfolio, 240,161
shares (cost $240,161) $ 240,161
Growth Portfolio, 56,691
shares (cost $1,240,712) 1,466,024
Limited Maturity Bond Portfolio, 21,006
shares (cost $297,412) 309,005
Balanced Portfolio, 16,141
shares (cost $248,128) 282,790
----------
Total investments 2,297,980
Dividends receivable 976
----------
Total assets 2,298,956
LIABILITIES:
Accrued expenses 973
----------
CONTRACT OWNERS' EQUITY (NET ASSETS) $2,297,983
==========
</TABLE>
The accompanying notes are an integral part of these financial statements
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SENTRY LIFE INSURANCE COMPANY OF NEW YORK
SENTRY VARIABLE ACCOUNT I
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
SUB-ACCOUNTS INVESTING IN:
--------------------------
LIQUID ASSET GROWTH
PORTFOLIO PORTFOLIO
----------------------- -----------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income:
Dividends $ 14,308 $ 10,122 $ 2,714 $ 6,883
Expenses:
Mortality and expense risk 3,483 3,541 16,478 14,374
---------- ---------- ---------- ----------
Net investment income (loss) 10,825 6,581 (13,764) (7,491)
---------- ---------- ---------- ----------
Realized net investment gain -- -- 55,298 56,523
Unrealized appreciation (depreciation), net -- -- 264,104 (290,729)
Capital gain distributions received -- 235 36,370 161,162
---------- ---------- ---------- ----------
Realized and unrealized gain (loss)
on investments and capital
gain distributions, net -- 235 355,772 (73,044)
---------- ---------- ---------- ----------
Net increase (decrease) in contract owners'
equity from operations 10,825 6,816 342,008 (80,535)
---------- ---------- ---------- ----------
Purchase payments 25,819 12,491 68,166 26,956
Transfers between subaccounts, net (75,873) 72,544 35,954 155,410
Withdrawals (63,002) (10,438) (106,589) (206,168)
Contract maintenance fees (665) (504) (2,090) (2,389)
Surrender charges (1,173) (80) (532) (1,463)
---------- ---------- ---------- ----------
Net increase (decrease) in contract owners'
equity derived from principal transactions (114,894) 74,013 (5,091) (27,654)
---------- ---------- ---------- ----------
Total increase (decrease) in contract
owners' equity (104,069) 80,829 336,917 (108,189)
Contract owners' equity at beginning of year 345,028 264,199 1,128,695 1,236,884
---------- ---------- ---------- ----------
Contract owners' equity at end of year $ 240,959 $ 345,028 $1,465,612 $1,128,695
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
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<TABLE>
<CAPTION>
LIMITED MATURITY BALANCED
BOND PORTFOLIO PORTFOLIO TOTAL
----------------------- ----------------------- -----------------------
1995 1994 1995 1994 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 15,713 $ 14,827 $ 3,731 $ 7,020 $ 36,466 $ 38,852
Expenses:
Mortality and expense risk 3,657 4,398 3,073 5,299 26,691 27,612
---------- ---------- ---------- ---------- ---------- ----------
Net investment income (loss) 12,056 10,429 658 1,721 9,775 11,240
---------- ---------- ---------- ---------- ---------- ----------
Realized net investment gain 678 9,306 8,595 14,364 64,571 80,193
Unrealized appreciation (depreciation), net 14,549 (27,188) 34,855 (50,807) 313,508 (368,724)
Capital gain distributions received -- 2,197 1,199 11,597 37,569 175,191
---------- ---------- ---------- ---------- ---------- ----------
Realized and unrealized gain (loss)
on investments and capital
gain distributions, net 15,227 (15,685) 44,649 (24,846) 415,648 (113,340)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in contract owners'
equity from operations 27,283 (5,256) 45,307 (23,125) 425,423 (102,100)
---------- ---------- ---------- ---------- ---------- ----------
Purchase payments 490 954 17,923 40,949 112,398 81,350
Transfers between subaccounts, net 13,132 (152,708) 26,787 (75,246) -- --
Withdrawals (16,059) (28,747) (214,339) (19,173) (399,989) (264,526)
Contract maintenance fees (391) (627) (664) (860) (3,810) (4,380)
Surrender charges (145) (268) (3,410) (142) (5,260) (1,953)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in contract owners'
equity derived from principal transactions (2,973) (181,396) (173,703) (54,472) (296,661) (189,509)
---------- ---------- ---------- ---------- ---------- ----------
Total increase (decrease) in contract
owners' equity 24,310 (186,652) (128,396) (77,597) 128,762 (291,609)
Contract owners' equity at beginning of year 284,405 471,057 411,093 488,690 2,169,221 2,460,830
---------- ---------- ---------- ---------- ---------- ----------
Contract owners' equity at end of year $ 308,715 $ 284,405 $ 282,697 $ 411,093 $2,297,983 $2,169,221
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</TABLE>
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NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and 1994
1. ORGANIZATION AND CONTRACTS
The Sentry Variable Account I (the Variable Account) is a segregated
investment account of the Sentry Life Insurance Company of New York (the
Company) and is registered with the Securities and Exchange Commission as a
unit investment trust pursuant to the provisions of the Investment Company
Act of 1940. The Variable Account was established by the Company on August
24, 1983 and commenced operations on May 3, 1984. Accordingly, it is an
accounting entity wherein all segregated account transactions are reflected.
The assets of the Variable Account are invested in one or more of the
portfolios of Neuberger & Berman Advisers Management Trust (the Trust) at
the portfolio's net asset value in accordance with the selection made by the
contract owners.
A copy of the Neuberger & Berman Advisers Management Trust Annual Report
is included in the Variable Account's Annual Report.
2. SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS
Investments in the Trust are valued by using net asset values which are
based on the daily closing prices of the underlying securities in the
Trust's portfolios.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded on the trade date (the date the order
to buy and sell is executed). Dividend income is recorded on the
ex-dividend date. The cost of investments sold and the corresponding capital
gains and losses are determined on a specific identification basis.
FEDERAL INCOME TAXES
The Company is taxed as a life insurance company under the provisions of
the Internal Revenue Code. The operations of the Variable Account are part
of the total operations of the Company and are not taxed as a separate
entity.
Under Federal income tax law, net investment income and net realized
capital gains of the Variable Account which are applied to increase contract
owners' equity are not taxed.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995 and 1994
3. EXPENSES
A mortality and expense risk premium is deducted by the Company from the
Variable Account on a daily basis which is equal, on an annual basis, to
1.20% (.80% mortality and .40% expense risk) of the daily net asset value
of the Variable Account. This mortality and expense risk premium compensates
the Company for assuming these risks under the variable annuity contract.
The liability for accrued mortality and expense risk premium amounted to
$973 at December 31, 1995.
The Company deducts, on the contract anniversary date, an annual contract
maintenance charge of $30, per contract holder, from the contract value by
canceling accumulation units. If the contract is surrendered for its
full surrender value, on other than the contract anniversary, the contract
maintenance charge will be deducted at the time of such surrender. This
charge reimburses the Company for administrative expenses relating to
maintenance of the contract.
There are no deductions made from purchase payments for sales charges at the
time of purchase. However, a contingent deferred sales charge may be
deducted in the event of a surrender to reimburse the Company for expenses
incurred which are related to contract sales. Contingent deferred sales
charges apply to each purchase payment and are graded from 6% during the
first contract year to 0% in the seventh contract year.
Any premium tax payable to a governmental entity as a result of the
existence of the contracts or the Variable Account will be charged against
the contract value. Premium taxes up to 4% are currently imposed by certain
states. Some states assess their premium taxes at the time purchase payments
are made; others assess their premium taxes at the time of annuitization. In
the event contracts would be issued in states assessing their premium taxes
at the time purchase payments are made, the Company currently intends to
advance such premium taxes and to deduct the premium taxes from a contract
owner's contract value at the time of annuitization or surrender.
4. INITIAL CAPITALIZATION
Initial capital of $100,000 was provided by the Company for the
establishment of the Variable Account. As an investor in the Variable
Account, the Company shares pro rata in the investment performance of the
Variable Account and is subject to the same valuation procedures and the
same periodic charges as are other contract owners in the Variable Account.
The Company's investment, at market value, was $254,360 at December 31,
1995.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995 and 1994
5. CONTRACT OWNERS' EQUITY
Contract owners' equity is represented by accumulation units in the related
Variable Account.
At December 31, 1995 ownership of the Variable Account was represented
by the following accumulation units and accumulation unit values:
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION
UNITS UNIT VALUE VALUE
------------ ----------- ----------
<S> <C> <C> <C>
Liquid Asset Portfolio 14,831 $16.25 $ 240,959
Growth Portfolio 39,845 36.78 1,465,612
Limited Maturity Bond Portfolio 13,818 22.34 308,715
Balanced Portfolio 17,273 16.37 282,697
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Total contract owners' equity $2,297,983
==========
</TABLE>
At December 31, 1995 significant concentrations of ownership were as
follows:
<TABLE>
<CAPTION>
NUMBER OF
CONTRACT OWNERS PERCENTAGE OWNED
--------------- ----------------
<S> <C> <C>
Liquid Asset Portfolio 6 43.7
Growth Portfolio 1 14.5
Limited Maturity Bond Portfolio 4 33.4
Balanced Portfolio 5 46.9
</TABLE>
At December 31, 1994 ownership of the Variable Account was represented by
the following accumulation units and accumulation unit values:
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION
UNITS UNIT VALUE VALUE
------------ ------------ ----------
<S> <C> <C> <C>
Liquid Asset Portfolio 22,043 $15.65 $ 345,028
Growth Portfolio 39,944 28.26 1,128,695
Limited Maturity Bond Portfolio 13,955 20.38 284,405
Balanced Portfolio 30,719 13.38 411,093
----------
Total contract owners' equity $2,169,221
==========
</TABLE>
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995 and 1994
6. PURCHASES AND SALES OF SECURITIES
In 1995, purchases and proceeds on sales of the Trust's shares aggregated
$463,219 and $713,431, respectively, and were as follows:
<TABLE>
LIQUID ASSET GROWTH LIMITED MATURITY BALANCED
PORTFOLIO PORTFOLIO BOND PORTFOLIO PORTFOLIO TOTAL
------------ --------- ---------------- --------- --------
<S> <C> <C> <C> <C> <C>
Purchases $130,408 $224,221 $44,776 $ 63,814 $463,219
Proceeds on sales 234,578 207,230 36,035 235,588 713,431
</TABLE>
In 1994, purchases and proceeds on sales of the Trust's shares aggregated
$977,287 and $980,601, respectively, and were as follows:
<TABLE>
LIQUID ASSET GROWTH LIMITED MATURITY BALANCED
PORTFOLIO PORTFOLIO BOND PORTFOLIO PORTFOLIO TOTAL
------------ --------- ---------------- --------- --------
<S> <C> <C> <C> <C> <C>
Purchases $287,498 $494,329 $ 81,419 $114,041 $977,287
Proceeds on sales 206,977 367,937 249,791 155,896 980,601
</TABLE>
7. FINANCIAL STATEMENT PRESENTATION
Certain prior year amounts have been reclassified to conform to the 1993
presentation.
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[SENTRY LIFE INCURANCE COMPANY OF NEW YORK LOGO]
251 Salina Meadows Parkway, Suite 100
P.O. Box 4944
Syracuse, NY 13221
(315) 453-6301
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REPORT OF INDEPENDENT ACCOUNTANTS
THE BOARD OF DIRECTORS
SENTRY LIFE INSURANCE COMPANY OF NEW YORK
AND
THE CONTRACT OWNERS OF
SENTRY VARIABLE ACCOUNT I:
We have audited the accompanying statement of assets, liabilities and contract
owners' equity of the Liquid Asset Portfolio, Growth Portfolio, Limited
Maturity Bond Portfolio and Balanced Portfolio of the Sentry Variable Account I
as of December 31, 1995, and the related statements of operations and changes
in contract owners' equity for each of the two years in the period then ended.
These financial statements are the responsibility of Sentry Life Insurance
Company of New York's management. Our responsibility is to express an opinion
on these financial statements based on our audit.
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 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Liquid Asset Portfolio,
Growth Portfolio, Limited Maturity Bond Portfolio and Balanced Portfolio of the
Sentry Variable Account I as of December 31, 1995, and the results of their
operations and the changes in their contract owners' equity for each of the two
years in the period then ended in conformity with generally accepted accounting
principles.
COOPERS AND LYBRAND L.L.P.
Chicago, Illinois
February 9, 1996
