[LOGO]
CONSECO(R)
CONSECO VARIABLE INSURANCE COMPANY
Formerly
GREAT AMERICAN RESERVE INSURANCE COMPANY>>
Annual Report to
Contract Owners
December 31, 1998
Great American Reserve Variable Annuity Account C
<PAGE>
ANNUAL REPORT TO CONTRACT OWNERS
Table of Contents
December 31, 1998
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Great American Reserve Variable Annuity Account C Page
Statement of Assets and Liabilities as of December 31, 1998 ................ 2
Statements of Operations for the Years Ended
December 31, 1998 and 1997 ................................................ 5
Statements of Changes in Net Assets for the Years Ended
December 31, 1998 and 1997 ................................................ 5
Notes to Financial Statements .............................................. 6
Report of Independent Accountants .......................................... 8
<PAGE>
GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT C
Statement of Assets and Liabilities
December 31, 1998
<TABLE>
<CAPTION>
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Shares Cost Value
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<S> <C> <C> <C>
Assets:
Investments in portfolio shares, at net asset value (Note 2):
The Alger American Fund:
Growth Portfolio .................................................... 11,149.7 $ 508,822 $ 593,389
Leveraged AllCap Portfolio .......................................... 39,844.0 962,015 1,390,555
MidCap Growth Portfolio ............................................. 4,597.4 118,610 132,726
Small Capitalization Portfolio ...................................... 54,628.7 2,256,203 2,402,023
American Century Variable Portfolios, Inc.:
International Fund .................................................. 17,811.0 134,749 135,720
Value Fund .......................................................... 21,090.5 145,345 141,939
Income and Growth Fund .............................................. 14,667.6 84,886 99,447
Berger Institutional Products Trust:
100 Fund ............................................................ 19,930.8 234,935 256,907
Growth and Income Fund .............................................. 10,470.9 151,123 174,132
Small Company Growth Fund ........................................... 9,380.0 114,894 115,186
BIAM International Fund ............................................. 0.1 1 2
Conseco Series Trust:
Asset Allocation Portfolio .......................................... 1,191,919.6 15,988,448 16,291,143
Common Stock Portfolio .............................................. 8,510,918.6 170,109,446 183,714,329
Corporate Bond Portfolio ............................................ 1,468,555.5 14,655,047 14,751,679
Government Securities Portfolio ..................................... 77,402.6 948,349 940,135
Money Market Portfolio .............................................. 5,468,639.0 5,468,639 5,468,639
The Dreyfus Socially Responsible Growth Fund, Inc. .................... 59,457.2 1,643,784 1,847,929
Dreyfus Stock Index Fund .............................................. 436,107.6 11,638,392 14,182,220
Dreyfus Variable Investment Fund:
Disciplined Stock Portfolio ......................................... 843.8 16,621 19,365
Federated Insurance Series:
High Income Bond Fund II ............................................ 51,180.6 559,449 558,892
International Equity Fund II ........................................ 14,940.2 227,873 229,930
Utility Fund II ..................................................... 49,327.1 691,854 753,226
Invesco Variable Investment Funds, Inc.:
High Yield Portfolio ................................................ 1,914.5 22,854 21,673
Industrial Income Portfolio ......................................... 1,925.8 34,526 35,840
Janus Aspen Series:
Aggressive Growth Portfolio ......................................... 108,325.8 2,148,101 2,988,707
Growth Portfolio .................................................... 164,036.6 3,145,770 3,861,423
Worldwide Growth Portfolio .......................................... 526,760.7 12,582,299 15,323,468
Lazard Retirement Series Inc.:
Small Cap Portfolio ................................................. 388.4 3,336 3,697
Lord Abbett Series Fund, Inc.:
Growth and Income Portfolio ......................................... 677.2 13,488 13,983
Mitchell Hutchins Series Trust:
Growth and Income Portfolio ......................................... 354.6 5,096 5,252
Neuberger & Berman Advisers Management Trust:
Limited Maturity Bond Portfolio ..................................... 17,670.4 243,155 244,205
Partners Portfolio .................................................. 22,810.5 429,570 431,803
Strong Variable Insurance Funds, Inc.:
Growth Fund II ...................................................... 14,719.9 231,540 235,813
Strong Opportunity Fund II, Inc. ...................................... 5,707.3 115,417 123,962
Van Eck Worldwide Insurance Trust:
Worldwide Hard Assets Fund .......................................... 18,153.3 234,575 167,010
Worldwide Bond Fund ................................................. 2,945.2 32,708 36,167
Worldwide Emerging Markets Fund ..................................... 13,168.3 112,040 93,758
Worldwide Real Estate Fund .......................................... 293.4 2,635 2,799
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Total assets ...................................................... 267,789,073
Liabilities:
Amounts due to Conseco Variable Insurance Company ....................... 215,506
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Net assets (Note 6) ............................................... $267,573,567
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</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT C
Statement of Assets and Liabilities - Continued
December 31, 1998
<TABLE>
<CAPTION>
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UNITS UNIT VALUE REPORTED VALUE
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<S> <C> <C> <C>
Net assets attributable to:
Contract owners' deferred annuity reserves:
The Alger American Fund:
Growth Portfolio ............................................................... 335,852.3 $ 1.765379 $ 592,907
Leveraged AllCap Portfolio ..................................................... 479,431.7 2.898075 1,389,429
Midcap Growth Portfolio ........................................................ 85,728.9 1.546930 132,617
Small Capitalization Portfolio ................................................. 1,509,931.8 1.589518 2,400,064
American Century Variable Portfolios, Inc.:
International Fund ............................................................. 105,232.7 1.288519 135,594
Value Fund ..................................................................... 111,174.7 1.275597 141,814
Income and Growth Fund ......................................................... 91,593.4 1.084816 99,362
Berger Institutional Products Trust:
100 Fund ....................................................................... 196,341.6 1.307378 256,693
Growth and Income Fund ......................................................... 115,344.2 1.508510 173,998
Small Company Growth Fund ...................................................... 83,064.3 1.385556 115,090
BIAM International Fund ........................................................ 0.0 1.118101 0
Conseco Series Trust:
Asset Allocation Portfolio ..................................................... 7,300,113.8 2.218603 16,196,057
Common Stock Portfolio
Qualified .................................................................... 7,294,849.0 24.295266 177,230,301
Nonqualified ................................................................. 223,506.1 19.231766 4,298,417
Corporate Bond Portfolio
Qualified .................................................................... 2,455,410.8 5.738363 14,090,040
Nonqualified ................................................................. 93,115.4 5.513550 513,396
Government Securities Portfolio ................................................ 702,664.8 1.336418 939,054
Money Market Portfolio
Qualified .................................................................... 1,791,071.6 2.821406 5,053,340
Nonqualified ................................................................. 131,045.9 2.821405 369,734
The Dreyfus Socially Responsible Growth Fund, Inc. ............................... 802,406.0 2.301103 1,846,419
Dreyfus Stock Index Fund ......................................................... 5,996,869.5 2.351933 14,104,234
Dreyfus Variable Investment Fund:
Disciplined Stock Portfolio .................................................... 18,002.3 1.074802 19,349
Federated Insurance Series:
High Income Bond Fund II ....................................................... 402,613.1 1.387018 558,432
International Equity Fund II ................................................... 153,805.0 1.493697 229,738
Utility Fund II ................................................................ 428,132.7 1.757846 752,591
Invesco Variable Investment Funds, Inc.:
High Yield Portfolio ........................................................... 22,718.7 0.953146 21,654
Industrial Income Portfolio .................................................... 34,697.3 1.032042 35,809
Janus Aspen Series:
Aggressive Growth Portfolio .................................................... 1,484,764.6 2.011276 2,986,271
Growth Portfolio ............................................................... 1,722,620.7 2.239752 3,858,243
Worldwide Growth Portfolio ..................................................... 6,332,820.3 2.393977 15,160,624
Lazard Retirement Series Inc.:
Small Cap Portfolio ............................................................ 4,307.2 0.857665 3,694
Lord Abbett Series Fund, Inc.:
Growth and Income Portfolio .................................................... 13,870.3 1.007282 13,971
Mitchell Hutchins Series Trust:
Growth and Income Portfolio .................................................... 5,287.1 0.992464 5,247
Neuberger & Berman Advisers Management Trust:
Limited Maturity Bond Portfolio ................................................ 225,717.1 1.080994 243,999
Partners Portfolio ............................................................. 336,370.8 1.282632 431,440
Strong Variable Insurance Funds, Inc.:
Growth Fund II ................................................................. 145,329.2 1.622454 235,790
Strong Opportunity Fund II, Inc. ................................................. 89,350.2 1.386225 123,859
Van Eck Worldwide Insurance Trust:
Worldwide Hard Assets Fund ..................................................... 198,619.0 0.840028 166,846
Worldwide Bond Fund ............................................................ 30,830.4 1.172096 36,136
Worldwide Emerging Markets Fund ................................................ 177,923.9 0.526522 93,681
Worldwide Real Estate Fund ..................................................... 3,276.4 0.853728 2,797
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Net assets attributable to contract owners' deferred annuity reserves ...... $265,058,731
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</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT C
Statement of Assets and Liabilities - Continued
December 31, 1998
<TABLE>
<CAPTION>
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REPORTED
VALUE
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<S> <C>
Net assets attributable to contract owners' deferred annuity reserves (from page 3) $265,058,731
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Contract owners' annuity payment reserves:
Conseco Series Trust:
Asset Allocation Portfolio
Qualified ................................................................ 95,125
Common Stock Portfolio
Qualified ................................................................ 2,123,088
Nonqualified ............................................................. 22,287
Corporate Bond Portfolio
Qualified ................................................................ 95,748
Money Market Portfolio
Qualified ................................................................ 26,603
Dreyfus Stock Index Fund ................................................... 49,385
Janus Aspen Worldwide Growth Portfolio ..................................... 102,600
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Net assets attributable to contract owners' annuity payment reserves ... 2,514,836
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Net assets .......................................................... $267,573,567
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</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT C
Statements of Operations
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
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1998 1997
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Investment income:
<S> <C> <C>
Dividends from investments in portfolio shares .............................................. $ 19,540,381 $ 48,081,385
Expenses:
Mortality and expense risk fees ............................................................. 1,827,897 1,556,503
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Net investment income ..................................................................... 17,712,484 46,524,882
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Net realized gains (losses) and unrealized appreciation (depreciation) of investments:
Net realized gains on sales of investments in portfolio shares .............................. 9,273,245 2,417,325
Net change in unrealized appreciation (depreciation) of investments in portfolio shares ..... 8,806,324 (14,329,631)
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Net gain (loss) on investments in portfolio shares ........................................ 18,079,569 (11,912,306)
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Net increase in net assets from operations .............................................. $ 35,792,053 $ 34,612,576
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</TABLE>
Statements of Changes in Net Assets
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
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1998 1997
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<S> <C> <C>
Changes from operations:
Net investment income ....................................................................... $ 17,712,484 $ 46,524,882
Net realized gains on sales of investments in portfolio shares .............................. 9,273,245 2,417,325
Net change in unrealized appreciation (depreciation) of investments in portfolio shares ..... 8,806,324 (14,329,631)
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Net increase in net assets from operations ................................................ 35,792,053 34,612,576
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Changes from contract owners' transactions:
Net contract purchase payments .............................................................. 25,628,081 26,160,248
Contract redemptions ........................................................................ (34,314,124) (14,213,522)
Net transfers ............................................................................... (8,796,326) 4,514,784
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Net increase (decrease) in net assets from contract owners' transactions .................. (17,482,369) 16,461,510
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Net increase in net assets .............................................................. 18,309,684 51,074,086
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Net assets, beginning of year .................................................................. 249,263,883 198,189,797
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Net assets, end of year (Note 6) ...................................................... $ 267,573,567 $ 249,263,883
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</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT C
Notes to Financial Statements
December 31, 1998
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(1) General
Conseco Variable Insurance Company (formerly Great American Reserve
Insurance Company prior to its name change in October 1998) Variable Annuity
Account C ("Account C") was established in 1980 as a segregated investment
account for individual and group variable annuity contracts which are registered
under the Securities Act of 1933. It is anticipated that on May 1, 1999, a
filing will be made with the Securities and Exchange Commission to change the
name of Great American Reserve Variable Account C to Conseco Variable Account C.
Account C is registered under the Investment Company Act of 1940, as amended
(the "Act"), as a unit investment trust. Account C was originally registered
with the U.S. Securities and Exchange Commission as a diversified open-end
management investment company under the Act. Effective May 1, 1993, Account C
was restructured into a single unit investment trust which invested solely in
shares of the portfolios of the Conseco Series Trust, a diversified open-end
management investment company. Thereafter, additional investment options were
offered.
The operations of Account C are included in the operations of Conseco
Variable Insurance Company (the "Company") pursuant to the provisions of the
Texas 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.
Currently, the following investment options are available (effective date
in parenthesis):
THE ALGER AMERICAN FUND
Growth Portfolio (May 1, 1997)
Leveraged AllCap Portfolio (June 1, 1995)
MidCap Growth Portfolio (May 1, 1997)
Small Capitalization Portfolio (June 1, 1995)
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
Income and Growth Fund (May 1, 1998)
International Fund (May 1, 1997)
Value Fund (May 1, 1997)
BERGER INSTITUTIONAL PRODUCTS TRUST (MAY 1, 1997)
100 Fund
Growth and Income
Fund Small Company Growth Fund
BIAM International Fund
CONSECO SERIES TRUST
Asset Allocation Portfolio
Common Stock Portfolio
Corporate Bond Portfolio
Government Securities Portfolio
Money Market Portfolio
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
(JUNE 1, 1995)
DREYFUS STOCK INDEX FUND (JUNE 1, 1995)
DREYFUS VARIABLE INVESTMENT FUND (MAY 1, 1998)
International Value Portfolio
Disciplined Stock Portfolio
FEDERATED INSURANCE SERIES (JUNE 1, 1995)
High Income Bond Fund II
International Equity Fund II
Utility Fund II
INVESCO VARIABLE INVESTMENT FUNDS, INC. (MAY 1, 1998)
High Yield Portfolio
Industrial Income Portfolio
JANUS ASPEN SERIES (JUNE 1, 1995)
Aggressive Growth Portfolio
Growth Portfolio
Worldwide Growth Portfolio
LAZARD RETIREMENT SERIES, INC. (MAY 1, 1998)
Equity Portfolio
Small Cap Portfolio
LORD ABBETT SERIES FUND, INC. (MAY 1, 1998)
Growth and Income Portfolio
MITCHELL HUTCHINS SERIES TRUST (MAY 1, 1998)
Growth and Income Portfolio
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
(MAY 1, 1997)
Limited Maturity Bond Portfolio
Partners Portfolio
STRONG VARIABLE INSURANCE FUNDS, INC.
Growth Fund II (May 1, 1997)
STRONG OPPORTUNITY FUND II, Inc. (MAY 1, 1997)
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund (June 1, 1995)
Worldwide Emerging Markets Fund (June 1, 1996)
Worldwide Hard Assets Fund (June 1,1995)
Worldwide Real Estate Fund (May 1, 1998)
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 at the date of the financial
statements and the reported increases and decreases in net assets from
operations during the reporting period. Actual results could differ from those
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 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. Account C 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
Account C 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 Account C 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 Account C and are not taxable
until received by the contract owner or beneficiary in the form of annuity
payments or other distributions.
6
<PAGE>
GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT C
Notes to Financial Statements (continued)
December 31, 1998
================================================================================
(2) Summary of Significant Accounting Policies
(Continued)
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.
Annuity payment reserves for contracts under which contract owners are
receiving periodic retirement payments are computed according to the Progressive
Annuity Mortality Table and the 1983 Group Annuity Mortality Table. The assumed
net investment rate is equal to the assumed rate of accumulation. The annuity
unit values for periodic retirement payments are as follows:
December 31, December 31,
1998 1997
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Conseco Series Trust:
Asset Allocation ............................ $1.043 $0.999
Common Stock
Qualified ................................. 7.308 6.600
Nonqualified .............................. 6.766 6.111
Corporate Bond
Qualified ................................. 5.012 4.934
Nonqualified .............................. 5.016 4.937
Money Market
Qualified ................................. 1.019 1.012
Dreyfus Stock Index Fund ....................... 1.097 N/A
Janus Aspen Worldwide Growth ................... 1.660 0.999
================================================================================
(3) Purchases and Sales of Investments in
Portfolio Shares
The aggregate cost of purchases of investments in portfolio shares were
$63,530,550 and $80,455,901 for the years ended December 31, 1998 and 1997,
respectively. The aggregate proceeds from sales of investments in portfolio
shares were $63,152,626 and $17,579,585 for the years ended December 31, 1998
and 1997, 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
mortality or expense experience because the Company assumes the mortality and
expense risks 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
sales and administrative expenses may prove insufficient to cover the actual
sales and administrative expenses.
The Company deducts daily from Account C a fee, which is equal on an annual
basis to 1.00 percent of the daily value of the total investments of Account C,
for assuming the mortality and expense risks except for the Common Stock,
Corporate Bond, and Money Market portfolios of the Conseco Series Trust which
the fees are 0.64 percent, 0.74 percent and 0.99 percent, respectively. These
fees were $1,827,897 and $1,556,503 for the years ended December 31, 1998 and
1997, respectively.
Pursuant to an agreement between Account C and the Company (which may be
terminated by the Company at any time), the Company provides sales and
administrative services to Account C, as well as a minimum death benefit prior
to retirement for certain contracts. Under individual contracts and group
deferred compensation contracts, the Company may deduct a percentage of amounts
surrendered to cover sales expenses. The percentage varies up to 8.00 percent
based on the type of contract and the number of years the contract has been
held. In addition, the Company deducts units from certain contracts annually and
upon full surrender to cover an administrative fee of $15, $20, or $25. This fee
is recorded as a redemption in the accompanying Statement of Changes of Net
Assets. Under group contracts no longer being sold, the Company deducts a
percentage of the renewal contract purchase payments to cover sales and
administrative expenses and the minimum death benefit prior to retirement of the
contract owners. Sales and administrative charges were $597,806 and $226,805 for
the years ended December 31, 1998 and 1997, respectively.
(5) Other Transactions With Affiliates
Conseco Equity Sales, Inc., an affiliate of the Company, is the principal
underwriter and performs all variable annuity sales functions on behalf of the
Company through various retail broker/dealers including Conseco Financial
Services, Inc., an affiliate of the Company.
(6) Net Assets
Net assets consisted of the following at December 31, 1998:
- --------------------------------------------------------------------------------
Proceeds from the sales of units since organization,
less cost of units redeemed ................................ $ 62,371,700
Undistributed net investment income ........................... 138,040,184
Undistributed net realized gains on sales of investments ...... 45,389,205
Net unrealized appreciation of investments .................... 21,772,478
- --------------------------------------------------------------------------------
Net assets ............................................... $267,573,567
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7
<PAGE>
Report of Independent Accountants
================================================================================
To The Board of Directors of Conseco Variable Insurance Company and Contract
Owners of Great American Reserve Variable Annuity Account C
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 Great American
Reserve Variable Annuity Account C (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 custodians, provide a reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
Indianapolis, Indiana
February 10, 1999>>
8
<PAGE>
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Great American Reserve
Variable Annuity Account C
SPONSOR
Conseco Variable Insurance Company - Carmel, Indiana.
DISTRIBUTOR
Conseco Equity Sales, Inc. - Carmel, Indiana.
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP - Indianapolis, Indiana.
9
<PAGE>
[LOGO](SM)
CONSECO(R)
Conseco Variable Insurance Company is a
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.
Conseco Variable Insurance Company
11815 North Pennsylvania Street
Carmel, Indiana 46032
(C) 1999, Conseco Variable Insurance
Company VA410 (2/99) 03861
