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VOLUME 1 OF 2
Sentry Life Insurance
Company of New York [LOGO]
THE PATRIOT
SENTRY VARIABLE ACCOUNT I
[PHOTO]
SEMI-ANNUAL REPORT
A flexible premium deferred Variable Annuity funded by
Neuberger Berman Advisers Management Trust
JUNE 30, 1999
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Dear Contract Owner: August 13, 1999
We are pleased to present you with the following comments of Neuberger Berman
Management Inc., the investment advisers for your Patriot variable annuity.
Jennifer Silver and Brooke Cobb took over management of Neuberger Berman
Advisers Management Trust (AMT) Growth Portfolio and the equity portion of AMT
Balanced Portfolio in July 1997.
Neuberger Berman AMT Growth Portfolio co-managers, Jennifer Silver and Brooke
Cobb, attribute the portfolio's performance to their stock selection strategy,
which favors a diverse array of companies in a variety of industries. Silver and
Cobb increased their AMT Growth holdings of Internet-related stocks during the
first quarter. When Internet stocks began to give back some of their previous
gains, Silver and Cobb sold some of their larger positions that had previously
provided strong returns. During the second half of the six-month period,
domestic interest rates began to rise. The stocks of many consumer cyclical
companies, such as retailers, experienced heightened volatility. Silver and Cobb
attempted to take advantage of this volatility by increasing existing holdings
and establishing new positions on perceived price weakness. Looking forward,
Silver and Cobb remain optimistic. In their view, the shift in market leadership
from large-cap to smaller stocks may persist, especially if interest rates
remain at or near current levels. Silver and Cobb report that they have
continued to seek fundamentally strong companies in the mid-cap market that have
good earnings and are selling at attractive valuations.
When 1999 began, the Neuberger Berman AMT Balanced Portfolio's assets were
apportioned 61.9% to equity and 38.1% to fixed income. Fixed income securities
provided competitive returns in a moderately rising interest rate environment,
and growth stocks continued to lead the equity markets.
Neuberger Berman AMT Limited Maturity Bond Portfolio co-managers are Ted
Giuliano and Catherine Waterworth, who also co-manage the fixed-income portion
of AMT Balanced Portfolio. During the first quarter, the portfolio's allocation
to U.S. Government Agency securities was reduced and those assets were
redeployed into mortgage-backed securities. During the second half of the
reporting period, the relative peace and quiet in the bond market was shattered
when fixed-income investors awoke to the conclusion that faster-than-expected
economic growth in domestic and overseas markets might rekindle inflation
pressures. The portfolio co-managers believe that investment environments such
as the one that dominated the second quarter provide true tests of fixed-income
managers' skills. According to Giuliano, "higher interest rates are like a
receding tide. You don't know which portfolio manager is exposed until the tide
goes out." When interest rates rise, bond prices fall. Giuliano and Waterworth
gradually reduced the portfolio's average duration to 2.0 years. If interest
rates rise further, Giuliano and Waterworth believe that the portfolio's current
posture should help it maintain competitive yields. If interest rates decline,
the portfolio co-managers stand ready to make the changes required to lock in
high yields.
Thank you for choosing Sentry to help meet your long-term investment needs. We
value your business and appreciate your confidence in Sentry to provide this
service.
Sincerely,
/s/ Harold A. Rice
- -----------------------------------------------------
Harold A. Rice, President and Chief Operating Officer
Sentry Life of New York
The investments for the Portfolios are managed by the same portfolio manager(s)
who manage one or more other mutual funds that have similar names, investment
objectives and investment styles as the Portfolio. You should be aware that the
Portfolios are likely to differ from the other mutual funds in size, cash flow
pattern and tax matters. Accordingly, the holdings and performance of the
Portfolios can be expected to vary from those of the other mutual funds.
The composition, industries and holdings of the Portfolios are subject to
change. Shares of the separate Portfolios of Neuberger Berman Advisers
Management Trust are sold only through the currently effective prospectus and
are not available to the general public. Shares of the Advisers Management Trust
Portfolios may be purchased only by life insurance companies to be used with
their separate accounts which fund variable annuity and variable life insurance
policies. Shares of the Balanced Portfolio are also available as an underlying
investment fund for certain qualified retirement plans. This material is
authorized for distribution only when preceded or accompanied by a prospectus.
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SENTRY LIFE INSURANCE COMPANY OF NEW YORK
SENTRY VARIABLE ACCOUNT I
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999 (Unaudited)
ASSETS:
Investments at market value:
Neuberger Berman Advisers Management Trust:
Liquid Asset Portfolio, 105,261
shares (cost $105,261) $ 105,261
Growth Portfolio, 58,235
shares (cost $1,366,989) 1,486,750
Limited Maturity Bond Portfolio, 7,179
shares (cost $97,741) 93,971
Balanced Portfolio, 17,347
shares (cost $268,967) 277,205
-------------
Total investments 1,963,187
Dividends receivable 334
-------------
Total assets 1,963,521
LIABILITIES:
Accrued expenses 1,987
-------------
NET ASSETS $1,961,534
=============
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 NET ASSETS
For the six months ended June 30, 1999 and 1998 (Unaudited)
<TABLE>
<CAPTION>
SUB-ACCOUNTS INVESTING IN:
--------------------------
LIQUID ASSET GROWTH
PORTFOLIO PORTFOLIO
-------------------------- ---------------------
1999 1998 1999 1998
--------- ------------- --------- ---------
<S> <C> <C> <C> <C>
Income:
Dividends 2,251 2,536 -- --
Expenses:
Mortality and expense risk 683 667 8,438 9,019
--------- ------------- --------- ---------
Net investment income (loss) 1,568 1,869 (8,438) (9,019)
--------- ------------- --------- ---------
Realized net investment gain (loss) -- -- 5,165 3,972
Unrealized depreciation, net -- -- (41,166) (172,928)
Capital gain distributions received -- -- 77,879 392,328
--------- ------------- --------- ---------
Realized and unrealized gain (loss)
on investments and capital
gains distributions, net -- -- 41,878 223,372
--------- ------------- --------- ---------
Net increase (decrease) in net assets from
operations 1,568 1,869 33,440 214,353
--------- ------------- --------- ---------
Purchase payments 5,501 5,461 8,390 7,321
Transfers between subaccounts, net -- -- -- 926
Withdrawals (20,889) (568) (33,857) (89,577)
Contract maintenance fees (164) (194) (1,191) (1,247)
Surrender charges (133) -- (114) (1,447)
--------- ------------- --------- ---------
Net increase (decrease) in net assets
derived from principal transactions (15,685) 4,699 (26,772) (84,024)
--------- ------------- --------- ---------
Total increase (decrease) in net assets (14,117) 6,568 6,668 130,329
Net assets at beginning of period 119,466 108,749 1,479,545 1,454,779
--------- ------------- --------- ---------
Net assets at end of period 105,349 115,317 1,486,213 1,585,108
========= ============= ========= =========
</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
- ------------------------------- ------------------------------ ------------------------------
1999 1998 1999 1998 1999 1998
- ----------- ---------- --------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
5,439 6,445 4,547 6,179 12,237 15,160
576 626 1,633 1,647 11,330 11,959
- ----------- ---------- --------- ------------ ------------- ------------
4,863 5,819 2,914 4,532 907 3,201
- ----------- ---------- --------- ------------ ------------- ------------
(70) (3) (1,110) 1,148 3,985 5,117
(5,025) (3,883) (4,367) (23,061) (50,558) (199,872)
-- -- 6,736 43,400 84,615 435,728
- ----------- ---------- --------- ------------ ------------- ------------
(5,095) (3,886) 1,259 21,487 38,042 240,973
- ----------- ---------- --------- ------------ ------------- ------------
(232) 1,933 4,173 26,019 38,949 244,174
- ----------- ---------- --------- ------------ ------------- ------------
-- -- 5,242 5,277 19,133 18,059
-- (926) -- -- -- --
(8,044) (1,895) (27,330) (9,560) (90,120) (101,600)
(81) (118) (214) (213) (1,650) (1,772)
(74) -- (240) (99) (561) (1,546)
- ----------- ---------- --------- ------------ ------------- ------------
(8,199) (2,939) (22,542) (4,595) (73,198) (86,859)
- ----------- ---------- --------- ------------ ------------- ------------
(8,431) (1,006) (18,369) 21,424 (34,249) 157,315
101,590 102,797 295,182 263,142 1,995,783 1,929,467
- ----------- ---------- --------- ------------ ------------- ------------
93,159 101,791 276,813 284,566 1,961,534 2,086,782
=========== ========== ========= ============ ============= ============
</TABLE>
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1999 and 1998
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 net assets are
not taxed.
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED - CONTINUED)
June 30, 1999 and 1998
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 $1,987
at June 30, 1999.
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.
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED - CONTINUED)
June 30, 1999 and 1998
4. NET ASSETS
Net assets are represented by accumulation units in the related Variable
Account.
At June 30, 1999 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>
Neuberger Berman
Advisers Management Trust:
Liquid Asset Portfolio 5,787 $ 18.20 $ 105,349
Growth Portfolio 25,144 59.11 1,486,213
Limited Maturity Bond Portfolio 3,729 24.98 93,159
Balanced Portfolio 12,053 22.97 276,813
-----------
Total net assets $ 1,961,534
===========
</TABLE>
At June 30, 1998 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>
Neuberger Berman
Advisers Management Trust:
Liquid Asset Portfolio 6,531 $ 17.66 $ 115,317
Growth Portfolio 27,268 58.13 1,585,108
Limited Maturity Bond Portfolio 4,114 24.74 101,791
Balanced Portfolio 12,688 22.43 284,566
-----------
Total net assets $ 2,086,782
===========
</TABLE>
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED - CONTINUED)
JUNE 30, 1999 AND 1998
5. PURCHASES AND SALES OF SECURITIES
In 1999, purchases and proceeds on sales of the Trust's shares aggregated
$116,086 and $103,331, respectively, and were as follows:
<TABLE>
<CAPTION>
LIQUID ASSET GROWTH LIMITED MATURITY BALANCED
PORTFOLIO PORTFOLIO BOND PORTFOLIO PORTFOLIO TOTAL
------------ ---------- ---------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Purchases $ 7,854 $ 86,269 $ 5,438 $ 16,525 $ 116,086
Proceeds on sales 22,186 43,163 8,199 29,783 103,331
</TABLE>
In 1998, purchases and proceeds on sales of the Trust's shares aggregated
$469,879 and $117,843, respectively, and were as follows:
<TABLE>
<CAPTION>
LIQUID ASSET GROWTH LIMITED MATURITY BALANCED
PORTFOLIO PORTFOLIO BOND PORTFOLIO PORTFOLIO TOTAL
------------ ---------- ----------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Purchases $ 8,002 $400,575 $ 6,445 $54,857 $469,879
Proceeds on sales 761 101,271 3,939 11,872 117,843
</TABLE>
