January 27, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Midland National Life Insurance Company
and Separate Account A Thereof,
File No. 333-14061
Gentlemen:
Midland National Life Insurance Company is filing Pre-Effective Amendment
No. 1 to the above-referenced Form S-6 Registration Statement concurrently
with this letter. Pursuant to Rule 461 under the Securities Act of 1933,
Registrant respectfully requests that the effective date of the Registration
Statement be accelerated and that the Registration Statement be declared
effective on January 31, 1997 or as soon as possible thereafter.
Very truly yours,
Midland National Life
Insurance Company
By:__Steven_C._Palmitier__
Steven C. Palmitier
Senior Vice President, Marketing
Walnut Street Securities
By:__Nancy_L._Gucwa__
Nancy L. Gucwa
Chief Operating Officer
cc: Frederick R. Bellamy, Esq.
MNLACC LTR
<PAGE>
As filed with the Securities and Exchange Commission on January 31, 1997
Registration No. 333-14061
Pre-Effective Amendment #1
811-5271
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
--------
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
MIDLAND NATIONAL LIFE SEPARATE ACCOUNT A
________________________________________
(Exact Name of Trust)
MIDLAND NATIONAL LIFE INSURANCE COMPANY
(Name of Depositor)
One Midland Plaza
Sioux Falls, SD 57193
(Address of Principal Executive Office)
_________________________
Jack L. Briggs, Vice President, Secretary and General Counsel
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
(Name and Address of Agent for Service of Process)
Copy to:
Frederick R. Bellamy
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
Approximate date of proposed public offering:
As soon as practicable after effectiveness of the Registration Statement.
An indefinite amount of securities is being registered pursuant to Rule
24f-2 under the Investment Company Act of 1940. A filing fee of $500 was
paid with the filing of the initial registration statement on October 21,
1996.
- ------------------------------------------------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), shall determine.
S-6CVR VUL3VEUL
<PAGE>
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
Item No. of
Form N-8B-2 Caption in Prospectus
1. Cover Page
2. Cover Page
3. Not Applicable
4. Midland's Sales And Other Agreements
5. Midland National Life Insurance Company; Our Separate
Account And Its Investment Divisions
6. Our Separate Account And Its Investment Divisions
7. Not Applicable
8. Not Applicable
9. Legal Proceedings
10. Summary; Our Separate Account And Its Investment
Divisions; Your Right To Examine The Policy;
Withdrawing Money From Your Contract Fund;
Surrendering Your Policy for Its Net Cash Surrender
Value; Death Benefits; The Fund; Transfers Of
Contract Fund Value Among Investment Divisions; Your
Policy May Lapse; You May Reinstate Your Policy;
Right To Change How We Operate Our Separate
Account; Flexible Premium Payments; Maturity
Benefits; Your Contract Fund Value; Borrowing From
Your Payment Options; Additional Benefits May Be
Available
11. Summary; The Funds; Investment Policies Of The Funds'
Portfolios
12. Summary; The Funds
13. Summary; Deductions And Charges
14. Summary; Policy Periods, Anniversaries
15. Summary; Flexible Premium Payments
16. Our Separate Account Investment Choices
17. Summary; Withdrawing Money From Your Contract Fund;
Surrendering Your Policy For Its Net Cash
Surrender Value; Your Right To Examine The Policy
18. The Funds; Flexible Premium Payments
19. Our Reports To Contractowners; Separate Account Voting
Rights
20. Not Applicable
21. Borrowing From Your Contract Fund; How To Request A
Loan; Policy Loan Interest; When Interest Is Due;
Repaying The Loan; The Effects Of A Policy Loan On
Your Contract Fund
22. Not Applicable
23. Additional Information
24. Limits On Our Right To Challenge The Policy
25. Midland National Life Insurance Company
26. Not Applicable
27. Midland National Life Insurance Company
28. Management Of Midland
29. Our Parent
30. Not Applicable
31. Not Applicable
32. Not Applicable
33. Not Applicable
34. Not Applicable
35. Midland's Sales And Other Agreements
36. Not Applicable
37. Not Applicable
38. Midland's Sales And Other Agreements
39. Midland's Sales And Other Agreements
40. Not Applicable
41. Midland's Sales And Other Agreements
42. Not Applicable
43. Not Applicable
44. Flexible Premium Payments
45. Not Applicable
46. Withdrawing Money From Your Contract Fund;
Surrendering Your Policy For Its Net Cash Surrender
Value
47. The Funds
48. Not Applicable
49. Not Applicable
50. We Own The Assets Of Our Separate Account
51. Cover Page; Summary; Death Benefits; Deductions And
Charges; Your Beneficiary
52. The Funds
53. Not Applicable
54. Not Applicable
55. Not Applicable
56. Not Applicable
57. Not Applicable
58. Not Applicable
59. Financial Statements
X_REFER VUL3VEUL
<PAGE>
Flexible Premium Variable Life Insurance Contract
(Variable Universal Life 3)
Issued By:
Midland National Life Insurance Company
One Midland Plaza Sioux Falls, SD 57193 (605) 335-5700
This prospectus describes Variable Universal Life 3, an individual
flexible premium variable life insurance contract issued by
Midland National Life Insurance Company (Midland). We have
designed Variable Universal Life 3 to provide insurance coverage
with flexibility in death benefits and premiums. Variable Universal
Life 3 can also provide substantial cash build-up.
This prospectus generally describes only the variable portion of the
Contract, except where the General Account is specifically
mentioned.
Variable Universal Life 3 pays a death benefit if the Insured Person
dies while the contract is still in effect. You may choose Option 1,
a fixed death benefit that equals the Specified Amount, or Option
2, a variable death benefit that equals the Specified Amount plus
the value of your Contract Fund. A death benefit equal to a
percentage of the Contract Fund on the day the Insured Person dies
will be paid if that benefit would be greater.
You may borrow against Your contract, withdraw part of the Net
Cash Surrender Value, or completely surrender Your contract for
its Net Cash Surrender Value.
After the sales charge, a premium tax charge and any per premium
expense charge is deducted, Your net premiums are put in Your
Contract Fund. You may allocate Your Contract Fund to Our
General Account or to one or more of the investment divisions of
Our Separate Account A.
We invest each of the investment divisions of Our Separate
Account in shares of a corresponding portfolio of the Variable
Insurance Products Fund or Variable Insurance Products Fund II
(collectively called the "Funds"), mutual funds with a choice of
portfolios.
The prospectus for the Funds, which accompanies this prospectus,
describes the investment objectives, policies, and risks of the
Funds' portfolios associated with the ten divisions of Our Separate
Account: the Money Market Portfolio, the High Income Portfolio,
the Equity-Income Portfolio, the Growth Portfolio, the Overseas
Portfolio, the Asset Manager Portfolio, the Investment Grade Bond
Portfolio, Contrafund Portfolio, Asset Manager:Growth Portfolio,
and the Index 500 Portfolio. An investment in the portfolios,
including the Money Market Portfolio, is neither insured nor
guaranteed by the U.S. Government, and there is no assurance that
the Money Market Portfolio will be able to maintain a stable net
asset value.
You bear the investment risk of this contract for all amounts
allocated to Our Separate Account A. To the extent that Your
Contract Fund is in Separate Account A, the value of Your
Contract Fund will vary with the investment performance of the
corresponding portfolios of the Funds; there is no minimum
guaranteed cash value for amounts allocated to the investment
divisions of Our Separate Account. Your Contract Fund will also
reflect deductions for the cost of insurance and expenses and
increases for additional premium payments. You may incur a
Surrender Charge if You surrender Your contract or allow it to
lapse.
After the first premium, You may decide how much Your premium
payments will be and how often You wish to make them, within
limits. You may also increase or decrease the amount of insurance
protection, within limits.
Depending on the amount of premiums paid, this may or may not
be a modified endowment contract. If it is a modified endowment
contract, loans and withdrawals may result in more adverse tax
consequences than would apply if the contract was not a modified
endowment contract.
You have a limited right to examine this contract and return it to
Us for a refund.
Replacing your existing insurance or, if You already own a flexible
premium variable insurance contract, acquiring additional
insurance through the contract described in this prospectus, may
not be to your advantage.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PLEASE READ THIS PROSPECTUS FOR DETAILS ON THE
CONTRACT BEING OFFERED TO YOU, AND KEEP IT FOR
FUTURE REFERENCE. THIS PROSPECTUS IS VALID ONLY
WHEN ACCOMPANIED BY A CURRENT PROSPECTUS FOR
VARIABLE INSURANCE PRODUCTS FUND AND
VARIABLE INSURANCE PRODUCTS FUND II.
The date of this prospectus is.
Table of Contents
Definitions
PART 1: SUMMARY
DEDUCTIONS AND CHARGES
PART 2: DETAILED INFORMATION ABOUT VARIABLE
UNIVERSAL LIFE 3
THE COMPANY THAT ISSUES VARIABLE UNIVERSAL
LIFE 3
Midland National Life Insurance Company
Our Parent
THE FEATURES OF VARIABLE UNIVERSAL LIFE 3
How Variable Universal Life 3 Differs From Whole Life
Insurance
Death Benefits
Maturity Benefit
Changes In Variable Universal Life 3
Changing Your Death Benefit Option
When Contract Changes Go Into Effect
Flexible Premium Payments
Premium Provisions During The Minimum Premium Period
Premium Provisions Beyond The Minimum Premium Period
Allocation of Premiums
Additional Benefits May Be Available
SEPARATE ACCOUNT INVESTMENT CHOICES
Our Separate Account And Its Investment Divisions
The Funds
Investment Policies Of The Funds' Portfolios
We Own The Assets Of Our Separate Account
Our Right To Change How We Operate Our Separate Account
DEDUCTIONS AND CHARGES
Charges Against The Separate Account
Charges In The Funds
Deductions From Your Premiums
Deductions From Your Contract Fund
Other Transaction Charges
How Contract Fund Charges Are Allocated
Surrender Charge
YOUR CONTRACT FUND VALUE
Amounts In Our Separate Account
How We Determine The Accumulation Unit Value
CONTRACT FUND TRANSACTIONS
Changing Your Premium And Deduction Allocation Percentages
Transfers Of Contract Fund Value
Dollar Cost Averaging.
Borrowing From Your Contract Fund
How To Request A Loan
Contract Loan Interest
When Interest Is Due
Repaying The Loan
The Effects Of A Contract Loan On Your Contract Fund
Your Contract May Lapse
Withdrawing Money From Your Contract Fund
Withdrawal Charges
The Effects Of A Partial Withdrawal
Surrendering Your Contract For Its Net Cash Surrender Value
THE GENERAL ACCOUNT
Amounts In The General Account
Adding Interest To Your Amounts In The General Account
Transfers
ADDITIONAL INFORMATION ABOUT VARIABLE
UNIVERSAL LIFE 3
Your Right To Examine The Contract
Your Contract Can Lapse
You May Reinstate Your Contract
Contract Periods, Anniversaries
Application for Insurance
Maturity Date
TAX EFFECTS
Contract Proceeds
Possible Charge for Midland's Taxes
Other Tax Considerations
PART 3: ADDITIONAL INFORMATION
YOUR VOTING RIGHTS AS AN OWNER
Fund Voting Rights
How We Determine Your Voting Shares
Voting Privileges Of Participants In Other Companies
OUR REPORTS TO CONTRACTOWNERS
LIMITS ON OUR RIGHT TO CHALLENGE THE CONTRACT
YOUR PAYMENT OPTIONS
YOUR BENEFICIARY
ASSIGNING YOUR CONTRACT
WHEN WE PAY PROCEEDS FROM THIS CONTRACT
DIVIDENDS
MIDLAND'S SALES AND OTHER AGREEMENTS
Sales Agreements
REGULATION
DISCOUNT FOR MIDLAND EMPLOYEES
LEGAL MATTERS
LEGAL PROCEEDINGS
FINANCIAL AND ACTUARIAL
ADDITIONAL INFORMATION
Management of Midland
Appendix
Financial Statements
Definitions
Accumulation Unit means the units credited to each investment
division in the Separate Account.
Age means the age of the Insured Person on his/her birthday which
immediately precedes the Contract Date.
Attained Age means the age of the Insured Person on his/her
birthday preceding a Contract Anniversary date.
Beneficiary means the person or persons to whom the contract's
death benefit is paid when the Insured Person dies.
Business Day means any day We are open and the New York Stock
Exchange is open for trading.
Contract Fund means the total amount of monies in Our Separate
Account A attributable to Your in force contract. It also includes
monies in our General Account for Your contract.
Cash Surrender Value means the Contract Fund on the date of
surrender, less any Surrender Charges.
Contract Date means the date from which Contract Anniversaries
and Contract Years are determined.
Contract Month means a month that starts on a Monthly
Anniversary and ends on the following Monthly Anniversary.
Contract Year means a year that starts on the Contract Date or on
each anniversary thereafter.
Death Benefit means the amount payable under Your contract
when the Insured Person dies.
Minimum Premium Period is to Attained
Age 70 or 5 years from the Contract Date if later.
Funds mean the mutual funds available for investment by Separate
Account A on the Contract Date or as later changed by us. The
Funds available as of the date of the prospectus are the Variable
Insurance Products Fund and the Variable Insurance Products Fund
II.
Home Office means where You write to Us to pay premiums or
take other action, such as transfers between investment divisions,
changes in Specified Amount, or other such action regarding Your
contract. The address is:
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
In Force means the Insured Person's life remains insured under the
terms of the contract.
Insured Person means the person whose life is insured by the
contract.
Investment Division means a division of Separate Account A
which invests exclusively in the shares of a specified Portfolio of
the Fund.
Maturity Date initially set at the date on which the Insured Person
reaches Attained Age 100. However, this date may be extended if
doing so will not result in adverse tax consequences.
Monthly Anniversary means the day of each month that has the
same numerical date as the Contract Date.
Net Cash Surrender Value means the Cash Surrender Value less
any outstanding contract loan.
Net Premium means the premium paid less any deduction for
premium taxes, less any deduction for the sales charge and less any
per premium expenses.
Record Date means the date the contract is recorded on Our books
as an In Force contract.
Separate Account means Our Separate Account A which receives
and invests Your net premiums under the contract.
Specified Amount means the face amount of the contract which is
the minimum death benefit payable under the contract.
Surrender Charges means a charge made only upon surrender of
the contract. It includes a charge for sales related expenses and
issue related expenses.
PART 1: SUMMARY
In this prospectus "We", "Our", and "Us" mean Midland National
Life Insurance Company.
"You" and "Your" mean the owner of the contract. We refer to the
person who is covered by the contract as the "Insured Person",
because the Insured Person and the Owner may not be the same.
The following summary is qualified in its entirety by the detailed
information appearing later in this prospectus. This summary must
be read in conjunction with that detailed information. Unless
otherwise indicated, the description of the contract in this
prospectus assumes that the contract is in force and that there is no
outstanding contract loan.
FEATURES OF VARIABLE UNIVERSAL LIFE 3
Insurance Benefit Options
Variable Universal Life 3 offers insurance on the life of the Insured
Person. We will pay a death benefit when the Insured dies while
the contract is in force. We pay a maturity benefit in lieu of a death
benefit when the Insured Person reaches the Maturity Date. Two
death benefit options are available:
The Option 1 death benefit equals the Specified Amount of the
insurance contract.
The Option 2 death benefit equals the Specified Amount of the
contract, plus the value of the Contract Fund.
Provisions in the Federal tax law may require the benefit to be even
greater. A death benefit equal to a percentage multiple of the
Contract Fund on the day the Insured Person dies will be paid if
that benefit would be greater. See "Death Benefits" on page 7.
We will deduct any outstanding loans or unpaid charges before
paying any benefits. Proceeds may be paid in a lump sum or under
a variety of payment plans. The length of time Your contract will
remain in force depends on the amount of Your Net Cash
Surrender Value and, during the Minimum Premium
Period, the amount of premiums You have paid.
The minimum Specified Amount is $50,000. For Insured Persons
age 0 to 14 at issue, the minimum Specified Amount is $25,000.
Your Contract Fund
Your Contract Fund is established after We receive Your first
premium payment. After We deduct the sales charge, a premium
tax charge and any per premium expenses from Your premiums,
We put the balance into Your Contract Fund.
Your Contract Fund reflects the amount and frequency of premium
payments, deductions for the cost of insurance and expense
charges, the investment experience of amounts allocated to Our
Separate Account, interest earned on amounts allocated to the
General Account, loans, and partial withdrawals. You bear the
investment risk under Variable Universal Life 3 as the value of
Your Contract Fund will vary according to the investment
experience of the divisions of Our Separate Account You have
selected. There is no minimum guaranteed Contract Fund value
with respect to any amounts allocated to the Separate Account. See
"YOUR CONTRACT FUND VALUE" on page 16.
Contract Changes
You may change the death benefit option You have chosen. You
may also increase or decrease the Specified Amount of Your
contract, within limits.
Flexible Premium Payments
You may pay premiums whenever You want, in whatever amount
You want, within certain limits. We require an initial minimum
premium based on the age and sex of the Insured Person and the
Specified Amount of the contract.
You will also choose a planned periodic premium. You need not
pay premiums of any set amount or according to the planned
schedule or any other set schedule, but You may have to make
additional premium payments to keep Your contract in force
because payment of the planned premiums does not ensure that
Your contract will remain in force. However, You have the option
of ensuring that Your contract stays in force during the Minimum
Premium Period by paying premiums
equal to the accumulated minimum premium amounts. Beyond the
Minimum Premium Period, additional
premiums may be required to keep the contract in force. See
"Flexible Premium Payments" on page 9.
Additional Benefits May Be Available
You may choose to include additional benefits in the contract by
rider. These benefits may include an accidental death benefit, life
insurance for additional insured persons, life insurance for
children, family life insurance coverage, a monthly disability
benefit, a disability waiver benefit to waive the cost of monthly
deductions, and an accelerated death benefit in the event of a
terminal illness. Any cost of additional benefits will be deducted
monthly from Your Contract Fund. See "Additional Benefits May
Be Available" on page 10.
INVESTMENT CHOICES OF VARIABLE UNIVERSAL
LIFE 3
You may allocate amounts in Your Contract Fund to either our
General Account, which pays interest at a declared rate, or any one
or more of the investment divisions of Our Separate Account. Each
of these investment divisions invests in shares of a corresponding
portfolio of the Variable Insurance Products Fund or the Variable
Insurance Products Fund II, "series" type mutual funds. The
portfolios have different investment objectives. Fidelity
Management & Research Company receives fees from each
portfolio for providing investment management services. These
fees are taken monthly in proportion to the average daily net assets
of each portfolio throughout the month.
For a full description of the Funds, see the Funds' prospectus,
which accompanies this prospectus. See "The Funds" on page 11.
The current investment divisions which invest in Portfolios of the
Variable Insurance Products Fund are:
Money Market Portfolio
High Income Portfolio
Equity-Income Portfolio
Growth Portfolio
Overseas Portfolio
The current investment divisions which invest in Portfolios of the
Variable Insurance Products Fund II are:
Asset Manager Portfolio
Investment Grade Bond Portfolio
Contrafund Portfolio
Asset Manager: Growth Portfolio
Index 500 Portfolio
Each portfolio charges a different investment advisory fee. The fee
for the Money Market Portfolio is the sum of a group fee rate based
on the average net assets of all mutual funds advised by Fidelity, an
individual fund fee rate of .03%, and an income component of 6%
of the Portfolio's gross income in excess of a 5% annual yield. The
fee for the High Income Portfolio and Investment Grade Bond
Portfolio is the sum of a group component based on assets under
management for all the Fidelity funds, .16% as of December, 1995,
and individual components of .45% and .30%, respectively. The
Equity-Income, Growth, Overseas, Contrafund, Asset Manager:
Growth and Asset Manager Portfolios' fees are made up of a group
component, .32% as of December, 1995 and individual
components of .20%, .30%, .45%, .30%, .40% and .40%
respectively. The fee for the Index 500 Portfolio will be .28%.
These charges are reflected in the net asset value of each Portfolio.
See "Investment Policies Of The Funds' Portfolios" on page 12,
"Charges In The Funds" on page 13, and "THE GENERAL
ACCOUNT" on page 20.
DEDUCTIONS AND CHARGES
Deductions From Your Premiums
We deduct a sales charge of 4% from each premium payment. This
charge is to partially reimburse Us for the cost incurred in selling
and distributing this contract. A charge for any applicable premium
taxes is deducted from each premium payment. The current
premium tax We take is 2.5%. We may increase this charge at any
time if Our premium tax expenses increase. We reserve the right to
vary this charge by state.
A charge of $.46 is also deducted from each premium payment if
you have elected to pay premiums by Civil Service Allotment. We
do not expect to profit from this charge. See "Deductions From
Your Premiums" on page 14.
Deductions From Your Contract Fund
Certain amounts are deducted from Your Contract Fund each
month. These are:
an expense charge of $7.00 each month (currently We plan to
make this deduction for the first 15 years only). This charge is
intended to reimburse Us for costs incurred in maintaining Your
contract, and We do not expect to profit from this charge.
a cost of insurance charge, which is based on the Insured Person's
attained age and sex, risk class, and the amount of insurance You
are buying, and
a charge for additional benefits, if any.
We guarantee that the insurance deductions from Your Contract
Fund will never be more than the maximum amounts shown in
Your contract.
In addition, We make charges when You:
make a partial withdrawal of Net Cash Surrender Value more than
once in a contract year.
make more than twelve transfers a year between investment
divisions. On a current basis an unlimited number of transfers are
allowed without a charge.
See "Deductions From Your Contract Fund" on page 14.
Deductions From The Separate Account
We make a charge at an effective annual rate of 0.90% of the value
of the assets of Our Separate Account for certain mortality and
expense risks We assume. On a current basis, We intend to reduce
this charge to 0.50% after the tenth Contract Year. See "Charges
Against The Separate Account" on page 13.
Charges In The Funds
The Funds make a charge for managing investments and providing
services. See Charges In The Funds on page 13.
Surrender Charges
The Surrender Charge is made up of two pieces: The Deferred
Sales Charge and the Deferred Issue Charge. The Deferred Sales
Charge is to partially reimburse Us for the cost We incur in selling
and distributing this contract. The Deferred Issue Charge is to
reimburse Us for underwriting and other costs We have when We
issue the contract. We do not expect to profit from these charges.
During the first 15 years, We will subtract a Surrender Charge
from Your Contract Fund if You give up Your contract for its Net
Cash Surrender Value, or let Your contract lapse at the end of a
grace period.
The Deferred Sales Charge is based on the premiums You have
paid:
26% of any premium payment in the first two contract years up to
one guideline annual premium.
5% of all other premium payments.
This sum cannot exceed 5% times the guideline annual premium
times the lesser of 20 or the Insured Person's life expectancy. The
sum is multiplied by a percentage - 100% for the first ten years,
decreasing to 0% after the fifteenth year. The amount of the
Deferred Sales Charge You pay depends on the amount of
premiums You pay, when You pay Your premiums and when You
surrender or lapse Your contract. You will not incur any Deferred
Sales Charge, regardless of the amount and timing of premiums if
You keep this contract in force for fifteen years.
The Deferred Issue Charge is a fixed schedule per thousand dollars
of Specified Amount starting at $3.00 per thousand for the first ten
years, decreasing to zero after the fifteenth year. This discussion of
the Deferred Sales Charge and the Deferred Issue Charge assumes
no changes in Specified Amount. See "Surrender Charge" on page
15.
USING YOUR CONTRACT FUND
Transfers
You may transfer amounts in Your Contract Fund between the
General Account and the investment divisions of the Separate
Account, and among the investment divisions of the Separate
Account. Transfers take effect on the date We receive Your
request. We require minimum amounts for each transfer, usually
$200. Currently, We allow unlimited transfers without a charge.
However, We reserve the right to assess a $25 charge after the
twelfth transfer in a Contract Year. There are other limitations on
transfers to and from the General Account. See "Transfers Of
Contract Fund Value" on page 17.
Borrowing Against Your Contract
You may borrow a total amount up to 92% of the Cash Surrender
Value, using Your contract as security for the loan. A minimum
loan amount, usually $200, will be stated in Your contract.
Contract loan interest accrues daily at a rate adjusted annually. See
"Borrowing From Your Contract Fund" on page 18. Contract loan
interest is not deductible on Contracts owned by an individual.
It should be noted, however, that loans taken from, or secured by, a
contract may have Federal tax consequences. See "TAX
EFFECTS" on Page 21.
Withdrawing Cash From Your Contract Fund
You may make a partial withdrawal from Your Contract Fund. The
current minimum for Your withdrawal is $200. The maximum
withdrawal You can make is 50% of the Net Cash Surrender
Value. Your withdrawal is subject to certain other requirements. A
charge (currently $25 or 2 percent of the amount withdrawn,
whichever is less) will be deducted from Your Contract Fund if
You make more than one withdrawal in a Contract Year. See
"Withdrawing Money From Your Contract Fund" on page 19.
Withdrawals and Surrenders may have adverse tax consequences.
See "TAX EFFECTS" on page 21.
Surrendering Your Contract
Variable Universal Life 3 has a Cash Surrender Value, which is the
difference between the value of Your Contract Fund and any
Surrender Charge which applies during the first 15 Contract Years.
If You surrender the contract for cash, We will pay You the Net
Cash Surrender Value, which is the Cash Surrender Value less any
outstanding loan and loan interest due. See "Surrendering Your
Contract For Its Net Cash Surrender Value" on page 20.
ADDITIONAL INFORMATION ABOUT VARIABLE
UNIVERSAL LIFE 3
Your Right To Examine This Contract
You have a right to examine the contract and, if You wish, return it
to Us. Your request must be postmarked by the latest of:
10 days after You receive Your contract.
10 days after We mail You a notice of this right, or
45 days after You signed the application for the contract.
When You return your contract, We will return the sum of all
charges deducted from premiums paid, from the Separate Account,
and from the Contract Fund, plus the Contract Fund. Charges
deducted in the Funds are not returned.
See "Your Right To Examine The Contract" on page 20.
Tax Effects of Variable Universal Life 3
With respect to a contract that is issued on the basis of a standard
rate class, Midland believes such a contract should meet the
definition of a life insurance contract for Federal income tax
purposes. As for a contract that is issued on a substandard basis, it
is not clear whether or not such a contract would qualify as a life
insurance contract for Federal tax purposes, particularly if the
owner of such a contract pays the full amount of premiums
permitted under the contract. If it is subsequently determined that a
contract does not satisfy section 7702 of the Internal Revenue code
(which defines life insurance for tax purposes), Midland will take
appropriate and reasonable steps to attempt to cause such a contract
to comply with section 7702.
Assuming that a contract qualifies as a life insurance contract for
Federal income tax purposes, the death benefit paid to the
beneficiary of this contract is not subject to federal income tax. In
addition, under current federal tax law, You do not have to pay
income tax on any earnings in Your Contract Fund as long as they
remain in Your Contract Fund. A contract may be treated as a
"modified endowment contract" depending upon the amount of
premiums paid in relation to the death benefit. If the contract is a
modified endowment contract, then all pre-death distributions,
including contract loans, will be treated first as a distribution of
taxable income and then as a return of investment in the contract.
In addition, prior to age 59 1/2 any such distributions generally will
be subject to a 10% penalty tax.
If the contract is not a modified endowment contract, distributions
generally will be treated first as a return of investment in the
contract and then as disbursing taxable income. Moreover, loans
will not be treated as distributions. Finally, neither distributions nor
loans from a contract that is not a modified endowment contract
are subject to the 10% penalty tax. See "TAX EFFECTS" on page
21.
Your Contract Can Lapse
During the Minimum Premium Period,
this contract will remain in force unless the Net Cash Surrender
Value is insufficient to pay monthly charges and You fail to meet
certain minimum premium requirements which apply. Beyond the
Minimum Premium Period, this contract
will remain in force as long as the Net Cash Surrender Value is
sufficient to pay monthly charges. See "Your Contract May Lapse"
on page 19.
Illustrations
Sample projections of hypothetical Death Benefits and Cash
Surrender Values are included starting at page 28 of this
prospectus. These are only hypothetical figures and are not
indications of either past or anticipated future investment
performance. However, these projections of hypothetical values
may be helpful in understanding the long-term effects of different
levels of investment performance and the charges and deductions,
and also in comparing this contract to other life insurance
contracts. These projections also show the value of premiums
accumulated with interest and indicate that if the contract is
surrendered in the early contract years, the Net Cash Surrender
Value may be low compared to premiums accumulated at interest.
This reflects the cost of insurance protection and other charges, and
demonstrates that this contract should not be purchased as a short-
term investment.
Performance
Performance information for the investment divisions may appear
in reports and advertising to current and prospective Owners. The
performance information is based on historical investment
experience of the investment division and the Funds and does not
indicate or represent future performance.
Total return quotations reflect changes in Fund share price, the
automatic reinvestment by the Separate Account of all distributions
and the deduction of the Mortality and Expense Risk charge. The
quotations will not reflect deductions from premiums (the sales
charge, premium tax charge, and any per premium expense
charge), the monthly deduction from the Contract Fund (the
expense charge, the cost of insurance charge, and any charges for
additional benefits), the Surrender Charge, or other transaction
charges. Therefore, these returns do not show how actual
investment performance will affect Contract benefits.
A cumulative total return reflects performance over a stated period
of time. An average annual total return reflects the hypothetical
annually compounded return that would have produced the same
cumulative total return if the performance had been constant over
the entire period. Because average annual total returns tend to
smooth out variations in an investment division's returns, You
should recognize that they are not the same as actual year-by-year
results.
Midland may also advertise performance figures for the investment
divisions based on the performance of a Portfolio prior to the time
the Separate Account commenced operations.
Midland may also provide individual hypothetical illustrations of
Contract Fund Value, Cash Surrender Value, and Death Benefit
based on historical investment returns of the Funds. The
illustrations will reflect the deductions of expenses in the Funds
and the deduction of Contract charges, including the Mortality and
Expense Risk Charge, the deductions from premiums, the monthly
deduction from the Contract Fund and the Surrender Charge. The
illustrations do not indicate what contract benefits will be in the
future.
PART 2: DETAILED INFORMATION
ABOUT VARIABLE UNIVERSAL LIFE 3
THE COMPANY THAT ISSUES VARIABLE UNIVERSAL
LIFE 3
Midland National Life Insurance Company
We are Midland National Life Insurance Company, a stock life
insurance company. Midland was organized in 1906 in South
Dakota as a mutual life insurance company at that time named
"The Dakota Mutual Life Insurance Company". We were
reincorporated as a stock life insurance company in 1909. Our
name "Midland" was adopted in 1925. We are licensed to do
business in 49 states, the District of Columbia, and Puerto Rico.
Our Parent
Midland is a subsidiary of Sammons Enterprises, Inc., Dallas,
Texas. Sammons has controlling or substantial stock interests in a
large number of other companies engaged in the areas of insurance,
corporate services, and industrial distribution.
THE FEATURES OF VARIABLE UNIVERSAL LIFE 3
This prospectus describes Our regular Variable Universal Life 3
contract. There may be differences because of requirements of the
state where Your contract is issued, which will be included in Your
contract.
How Variable Universal Life 3 Differs From Whole Life Insurance
Variable Universal Life 3 is designed to provide insurance
coverage with flexibility in death benefits and premium payments.
It is different from traditional whole life insurance in that You are
not required to pay scheduled premiums and may, within limits,
choose the amount and frequency of premium payments. Variable
Universal Life 3 also provides for two different types of insurance
benefit options. You may switch back and forth between these
options. Another feature of Variable Universal Life 3 which is not
available under traditional whole life insurance is Your ability to
increase or decrease the Specified Amount without purchasing a
new contract. However, evidence of insurability may be required.
The built-in flexibilities of Variable Universal Life 3 enable You to
respond to changes in lifestyle and take advantage of favorable
financial conditions.
Death Benefits
We pay a benefit (net of indebtedness) to the beneficiary of this
contract when the Insured Person dies. As the Owner, You may
choose from two death benefit options: Option 1 and Option 2.
Option 1 provides a benefit that equals the Specified Amount of
the contract. Except as described below, the Option 1 benefit is
fixed. Owners who prefer to have insurance coverage that does not
vary in amount and lower cost of insurance charges should choose
Option 1.
Option 2 provides a benefit that equals the Specified Amount of
the contract plus the amount in Your Contract Fund on the day the
Insured Person dies. Under Option 2, the value of the benefit is
variable and fluctuates with the amount in Your Contract Fund.
Owners who prefer to have investment experience reflected in the
amount of their insurance coverage should choose Option 2.
Under both options, a provision of the federal tax law may require
a greater benefit than the option selected. This benefit is a corridor
percentage multiple of the amount in Your Contract Fund. The
corridor percentage declines as the Insured Person gets older. The
benefit will be the amount in Your Contract Fund on the day the
Insured Person dies times the percentage for the attained age (last
birthday) at the beginning of the Contract Year of the Insured
Person's death. The percentages are in the following table:
Table of Death Benefits
Based on Contract Fund Value
The Death The Death
Benefit Will Benefit Will
Be At Least Be At Least
If The Equal To If The Equal To
Insured This Percent Insured This Percent
Person's of The Person's of The
Age Is Contract Fund Age Is Contract Fund
0-40 250% 60 130%
41 243 61 128
42 236 62 126
43 229 63 124
44 222 64 122
45 215 65 120
46 209 66 119
47 203 67 118
48 197 68 117
49 191 69 116
50 185 70 115
51 178 71 113
52 171 72 111
53 164 73 109
54 157 74 107
55 150 75-90 105
56 146 91 104
57 142 92 103
58 138 93 102
59 134 94 101
95-99 100
These percentages are based on provisions of federal tax law which
require a minimum death benefit in relation to cash value for Your
contract to qualify as life insurance.
For example, assume the insured person is 55 years old and the
Specified Amount is $100,000. Under Option 1, the death benefit
will generally be $100,000. However, when the Contract Fund is
greater than $66,666.67, the corridor percentage applies. In this
case, age 55, the factor We multiply with the Contract Fund is 150
percent. If the Contract Fund was $70,000 the death benefit at that
time would be $105,000.
Under Option 2, the death benefit is the Specified Amount,
$100,000 in the example, plus the Contract Fund. If the contract on
this 55-year-old insured person had a Contract Fund greater than
$200,000, the corridor percentage applies.
Under either option, the length of time Your contract remains in
force depends on the Net Cash Surrender Value of Your contract
and, during the Minimum Premium
Period, Your ability to meet the minimum premium requirements.
Because the charges that maintain Your contract are deducted from
Your Contract Fund, Your coverage will last as long as Your Net
Cash Surrender Value (the amount in Your Contract Fund minus
the Surrender Charge and any outstanding loan and loan interest)
can cover these deductions. However, during the Minimum
Premium Period, as long as You pay
premiums more than the sum of monthly minimum premiums to
that Contract Date, the contract will remain in force.
The investment experience of any amounts in the investment
divisions of Our Separate Account and the interest earned on any
amounts in the General Account will affect the amount in Your
Contract Fund. As a result, the returns from these investment
options will affect the length of time Your contract remains in
force.
The minimum Specified Amount at issue is $50,000. For issue
ages 0 to 14, the minimum is $25,000. The maximum issue age is
80.
Maturity Benefit
If the Insured Person is still living on the Maturity Date, We will
pay You the amount in the Contract Fund net of loans. This
contract will then end.
Changes In Variable Universal Life 3
Variable Universal Life 3 provides You the flexibility to choose
from a variety of strategies, described in the sections that follow,
which enable You to increase or decrease Your insurance
protection.
A reduction in Specified Amount lessens emphasis on the
contract's insurance coverage by reducing both the death benefit
and the amount at risk (the difference between Contract Fund and
death benefit). The reduced amount at risk results in lower cost of
insurance deductions from the Contract Fund. A partial withdrawal
reduces the Contract Fund and death benefit, while providing You
with a cash payment, but does not reduce the amount at risk.
Choosing not to make premium payments may have the effect of
reducing the Contract Fund. Reducing the Contract Fund will,
under Option 1, increase the amount at risk (and therefore increase
the cost of insurance deductions) while leaving the death benefit
unchanged; under Option 2, it will decrease the death benefit while
leaving the amount at risk unchanged.
Increases in the Specified Amount emphasize insurance coverage
by increasing both the death benefit and the amount at risk.
Additional premium payments may increase the Contract Fund,
which has the effect, under Option 1, of reducing the amount at
risk while leaving the death benefit unchanged, or under Option 2,
of increasing the death benefit while leaving the amount at risk
unchanged.
Changing The Specified Amount of Insurance
Any time after Your contract is issued, You may change its
Specified Amount. You may do this by sending a written request to
Our Home Office. You are limited to two changes in Specified
Amount each Contract Year. Any change will be subject to Our
approval and the following conditions:
If You increase the Specified Amount, You must provide
satisfactory evidence that the Insured Person is still insurable. Our
current procedure, if the Insured Person has become a more
expensive risk, is to charge higher cost of insurance charges for the
additional amounts of insurance.
Any increase must be at least $25,000. Monthly deductions from
Your Contract Fund for the cost of insurance will increase,
beginning on the date the increase in the Specified Amount takes
effect. An increase in Specified Amount will also result in an
increase in Surrender Charges.
The rights to examine and exchange this contract which apply at
issue do not apply to increases in Specified Amount.
If You reduce the Specified Amount You may not reduce it below
the minimum We require to issue this contract at the time of the
reduction. Monthly deductions from Your Contract Fund for the
cost of insurance will decrease.
If You request a decrease in Specified Amount, it may be limited
by federal tax law. In such a case, Your new death benefit will be
Your Contract Fund multiplied by the corridor percentage the
federal tax law specifies for the Insured's age at the time of the
change.
Our current procedure, if You request a Specified Amount decrease
when an increased Specified Amount is at substandard (i.e., higher)
risk charges and the original Specified Amount was at standard risk
charges, is to first decrease the Specified Amount that is at
substandard risk charges.
Changing Your Death Benefit Option
You may change Your death benefit option by sending a written
request to our Home Office. We will require satisfactory evidence
of the Insured Person's insurability to make this change.
If You change from Option 1 to Option 2, the Specified Amount
will be decreased by the amount in Your Contract Fund on the date
of the change. We may not allow such a change if it would reduce
the Specified Amount below the minimum We require to issue this
contract at the time of the reduction.
If You change from Option 2 to Option 1, the Specified Amount of
insurance will be increased by the amount in the Contract Fund on
the date of the change. These increases and decreases in Specified
Amount are made so that the amount of the death benefit remains
the same on the date of the change. When the death benefit remains
the same, there is no change in the net amount at risk, which is the
amount on which Your cost of insurance charges are based.
When Contract Changes Go Into Effect
Any changes in the Specified Amount or death benefit option of
Your contract will go into effect on the Monthly Anniversary
following the date We approve Your request for the change. After
Your request is approved, You will receive a written notice of the
approval showing each change. You should attach this notice to
Your contract. We may also ask You to return Your contract to us
at our Home Office so that We can make a change.
In some cases, We may not approve a change You request because
it might disqualify Your contract as life insurance under applicable
federal tax law. We will send You a written notice of Our decision
about making the change.
Contract changes may have adverse tax consequences. See "TAX
EFFECTS" on page 21.
Flexible Premium Payments
You may choose the amount and frequency of premium payments,
as long as they are within the limits described below. You may
specify the frequency to be on a quarterly, semi-annual or annual
basis. Planned periodic premiums may also be monthly if paid by
pre-authorized check or premiums may be paid bi-weekly if paid
by Civil Service Allotment.
Even though Your premiums are flexible, the contract information
page of Your contract will show a "planned" periodic premium.
The planned premium is determined by You within limits set by Us
when You apply for the contract and is not necessarily designed to
equal the amount of premiums that will keep Your contract in
effect. Planned premiums are generally the amount You decide
You want to pay and You can change them at any time. Payment of
the planned premiums does not guarantee that Your contract will
stay in force, so additional premium payments may be necessary.
You must pay a minimum initial premium on or before the date on
which the contract is delivered to You. The insurance will not go
into effect until We receive this minimum initial premium. We
determine the applicable minimum initial premium based on the
age, sex, and premium class of the Insured Person, the initial
Specified Amount of the contract and any additional benefits
selected. Your first premium payment may be by Your check or
money order payable to Midland. Any additional premiums should
be payable to Midland and should be sent directly to Our Home
Office.
We will send You premium reminder notices based on Your
planned premium. You may make the planned payment, skip the
planned payment, or change the frequency or the amount of the
payment. Generally, You may pay other premiums at any time.
Amounts must be at least $50 or may be $30 through a monthly
automatic payment plan.
You may send Us a premium payment that would cause Your
contract to cease to qualify as life insurance under federal tax law.
If so, We will notify You and return to You the portion of the
premium that would cause the disqualification.
Premium Provisions During The Minimum Premium
Period
During the Minimum Premium Period,
Your contract may be kept in force by meeting a minimum
premium requirement. A monthly minimum premium is shown on
the Contract Information page of Your contract. The minimum
premium requirement will be satisfied if the sum of premiums You
have paid less any loans or withdrawals you have taken exceeds a
total equal to the sum of these monthly minimums had they been
paid each month the contract was In Force.
If You stop paying premiums during the Minimum Premium
Period, Your contract will continue in effect
until both of two conditions are true: The Net Cash Surrender
Value can no longer cover the monthly deductions from Your
Contract Fund for the benefits selected; and, the total premiums
You have paid are less than the total monthly minimum premiums
required to that date.
Premium Provisions Beyond The Minimum Premium
Period
Beyond the Minimum Premium Period,
Your contract will lapse if the Net Cash Surrender Value can no
longer cover the monthly deductions from Your Contract Fund for
the benefits selected. You should note that Your planned premiums
may not be sufficient to maintain Your contract because of
investment experience, contract changes, or other factors.
Therefore, premiums in addition to the planned premiums may be
necessary to keep Your contract in force.
Allocation of Premiums
Each net premium, except any premium received before the Record
Date, will be allocated to Our Separate Account or General
Account on the day We receive Your premium.
After the sales charge, the premium tax charge and any expense
charges are deducted from each of Your premiums, the balance,
called Your net premium, is put into Your Contract Fund. Net
premiums may be allocated to Our General Account or to one or
more of the investment divisions of Our Separate Account
according to the directions You provided on Your contract
application. These instructions will apply to any subsequent
premiums You pay until You write to Our Home Office with new
instructions. Allocation percentages may be any whole number
from 10 to 100, but the sum must equal 100. You may choose not
to allocate any premium to any particular investment division. See
"THE GENERAL ACCOUNT" on page 20.
Any premium received before the Record Date will be held in the
General Account from the day We receive it until the day after the
Record Date and will earn interest during this period. When this
period has expired, the premium received prior to the Record Date
and any interest earned during the period will be allocated to the
investment divisions of Our Separate Account and the General
Account according to the instructions You have given Us.
Additional Benefits May Be Available
Your contract may include additional benefits. A charge will be
deducted from Your Contract Fund monthly for certain additional
benefits You choose. You may cancel these benefits at any time.
More details will be included in Your contract if You choose any
of these benefits. The following additional benefits are currently
available:
Disability Waiver Benefit. With this benefit, We waive monthly
charges from the Contract Fund if the Insured Person becomes
totally disabled on or after the Insured Person's fifteenth birthday
and the disability continues for six months. If the disability starts
before the Contract Anniversary following the Insured Person's
65th birthday, We will waive monthly deductions for life as long as
the disability continues.
Monthly Disability Benefit. With this benefit, We will pay into
your Contract Fund an amount on Your Contract Information page.
The benefit is payable when the Insured Person becomes totally
disabled on or after the Insured Person's fifteenth birthday and the
disability continues for six months. Disability must start before the
Contract Anniversary following the Insured Person's 65th birthday.
The benefit will continue until the Insured Person is age 65. If the
amount of benefit paid into the Contract Fund exceeds the amount
allowed by Federal Guidelines, the monthly benefit will be paid to
the Insured Person.
Accidental Death Benefit. We will pay an additional benefit if the
Insured Person dies from bodily injury that results from an
accident, provided the Insured Person dies before the Contract
Anniversary nearest his or her 70th birthday.
Children's Insurance Rider. This benefit provides term life
insurance on the lives of the Insured Person's children, including
natural children, stepchildren, and legally adopted children,
between the ages of 15 days and 21 years. They are covered only
until the Insured Person reaches age 65 or the child reaches age 25.
Family Insurance Rider. This benefit provides term life insurance
on the Insured Person's children as does the Children's Term
Insurance. It also provides decreasing term life insurance on the
Insured's spouse.
Additional Insured Rider. You may provide term insurance for
another person, such as the Insured Person's spouse, under Your
contract. A separate charge will be deducted for each additional
insured.
Guaranteed Insurability Rider. This benefit provides for the
issuance of additional amounts of insurance without further
evidence of insurability.
Cost of Living Rider. This benefit provides for limited annual
increases in the amount of insurance.
Living Needs Rider. This benefit provides an accelerated death
benefit in the event the Insured Person is expected to die within 12
months.
You choose the amount of the Death Benefit to accelerate at the
time of the claim. The Maximum Advanced Sum is 50% of the
Eligible Death Benefit (which is the death benefit of the contract
plus the sum of any additional death benefits on the life of the
Insured Person provided by any Eligible Riders) currently subject
to a maximum of $250,000 and a minimum of $5,000.
There is no charge for this benefit prior to the time of a payment.
The amount of the Advanced Sum paid is reduced by expected
future interest and may be reduced by a charge for administrative
expenses.
On the day We pay the accelerated benefit, We will reduce the
following in proportion to the reduction in the Eligible Death
Benefit:
a. the death benefit of the Contract and of each Eligible Rider
b. the Specified Amount
c. any contract values
d. any outstanding loan
When We reduce the Contract Fund, We will allocate the reduction
based on the proportion that Your unloaned amounts in the General
Account and Your amounts in the Investment Divisions of Our
Separate Account bear to the total unloaned value of Your Contract
Fund.
The tax treatment of adding or receiving benefits under this rider
are not clear. Whether or not You incur a tax liability when
benefits are advanced depends on how the IRS interprets applicable
portions of the Tax Code. You should consult a competent tax
advisor for further information.
SEPARATE ACCOUNT INVESTMENT CHOICES
Our Separate Account And Its Investment Divisions
The Separate Account is Our Separate Account A, established
under the Insurance Laws of the State of South Dakota, and is a
unit investment trust registered with the Securities and Exchange
Commission (SEC) under the Investment Company Act of 1940.
Our Separate Account A meets the definition of a 'separate account'
under the Federal securities laws but this registration does not
involve any supervision by the SEC of the management or
investment contracts of the Separate Account. A unit investment
trust is a type of investment company. The Separate Account has a
number of investment divisions, each of which invests in shares of
a corresponding portfolio of the Variable Insurance Products Fund
or the Variable Insurance Products Fund II. You may allocate part
or all of Your net premiums to one or more of the ten investment
divisions of Our Separate Account. Our Separate Account
divisions invest in the Money Market Portfolio, the High Income
Portfolio, the Equity-Income Portfolio, the Growth Portfolio, the
Asset Manager Portfolio, the Overseas Portfolio, the Investment
Grade Bond Portfolio, the Contrafund Portfolio, the Asset
Manager: Growth Portfolio and the Index 500 Portfolio.
The Funds
The Variable Insurance Products Fund and the Variable Insurance
Products Fund II are open-end diversified management investment
companies, more commonly called mutual funds. As "series" types
of mutual funds, they issue several different "series" of portfolios.
The Funds' shares are bought and sold by Our Separate Account at
net asset value. More detailed information about the Variable
Insurance Products Fund and the Variable Insurance Products Fund
II, their investment objectives, policies, risks, expenses and all
other aspects of their operations, appears in their prospectus, which
accompanies this prospectus, and in the Funds' Statement of
Additional Information.
The Funds sell their shares to separate accounts of various
insurance companies to support both variable life insurance
contracts and variable annuity contracts. We currently do not
foresee any disadvantages to Our owners arising out of this. If We
believe that the Funds do not sufficiently respond to protect Our
owner's interests, We will see to it that appropriate action is taken
to protect Our owners. The Funds will also monitor this possibility.
See the section entitled "FMR and Its Affiliates"" in the prospectus
for the Variable Insurance Products Fund and the Variable
Insurance Products Fund II. Also, if We ever believe that any of the
Funds' portfolios are so large as to materially impair its investment
performance of a portfolio or the Fund, We will examine other
investment options.
Investment Policies Of The Funds' Portfolios
Each portfolio has a different investment objective which it tries to
achieve by following separate investment policies. The objectives
and policies of each portfolio will affect its return and its risks.
Remember that the investment experience of the investment
divisions of Our Separate Account depends on the performance of
the corresponding Funds' portfolios. The objectives of the Funds'
portfolios are as follows:
Portfolio
Objective
Money Market
Seeks to obtain as high a level of current income as is consistent
with preserving capital and providing liquidity by investing in high
quality money market instruments. (An investment in the Money
Market or any other Portfolio is neither insured nor guaranteed by
the U.S. Government, and there is no assurance that the Money
Market Portfolio will be able to maintain a constant net asset
value.)
High Income
Seeks to obtain a high level of current income by investing
primarily in high-yielding, lower-rated, fixed-income securities,
while also considering growth of capital. For a description of the
special risks involved in investing in these securities, see the
prospectus for the Funds.
Equity-Income
Seeks to obtain reasonable income by investing primarily in
income-producing equity securities. In choosing these securities,
the Manager will consider the potential for capital appreciation.
The Portfolio's goal is to achieve a yield which exceeds the
composite yield on the securities comprising the Standard & Poor's
Composite Index of 500 Stocks.
Growth
Seeks to achieve capital appreciation, normally through the
purchase of common stocks, although the Portfolio's investments
are not restricted to any one type of security. Capital appreciation
also may be found in other types of securities, including bonds and
preferred stocks.
Overseas
Seeks long-term growth of capital, primarily through investments
in foreign securities.
Asset Manager
Seeks high total return with reduced risk over the long-term by
allocating its assets among domestic and foreign stocks, bonds and
short-term fixed-income instru-ments.
Investment Grade Bond
Seeks as high a level of current income as is consistent with the
preservation of capital by investing in a broad range of investment
grade fixed income securities.
Contrafund
Seeks to achieve capital appreciation over the long term by
investing in securities of companies that are undervalued or out-of-
favor.
Asset Manager:
Growth
Seeks to maximize total return over the long term through
investments in stocks, bonds, and short-term instruments. This
portfolio has a heavier emphasis on stocks than the Asset Manager
Portfolio.
Index 500
Seeks to provide investment results that correspond to the total
return of common stocks publicly traded in the United States by
duplicating the composition and total return of the Standard &
Poor's Composite Index of 500 Stocks. This is designed as a long-
term investment option.
We Own The Assets Of Our Separate Account
Under South Dakota law, We own the assets of Our Separate
Account and use them to support Your contract and other variable
life contracts. Under certain unlikely circumstances, one
investment division of the Separate Account may be liable for
claims relating to the operations of another division. We may also
permit charges owed to Us to stay in the Separate Account. Thus,
We may also participate proportionately in the Separate Account.
These accumulated amounts belong to Us and We may transfer
them from the Separate Account to Our General Account.
Our Right To Change How We Operate Our Separate Account
In addition to changing or adding investment companies, We have
the right to modify how We or Our Separate Account operate. We
intend to comply with applicable law in making any changes and, if
necessary, We will seek contractowner approval. We have the right
to:
add investment divisions to, or remove investment divisions from,
Our Separate Account, combine two or more divisions within Our
Separate Account, or withdraw assets relating to Variable
Universal Life 3 from one investment division and put them into
another;
eliminate the shares of the portfolio and substitute shares of
another portfolio of the Funds or another open-end, registered
investment company, if the shares of the portfolio are no longer
available for investment or, if in Our judgment, further investment
in the portfolio should become inappropriate in view of the
purposes of Separate Account A;
register or end the registration of Our Separate Account under the
Investment Company Act of 1940;
operate Our Separate Account under the direction of a committee
or discharge such a committee at any time (the committee may be
composed entirely of persons who are "interested persons" of
Midland under the Investment Company Act of 1940);
disregard instructions from contractowners that would otherwise
require that a Fund's shares be voted so as to cause a change in the
investment objectives of the Portfolio of a Fund or approval or
disapproval of an investment advisory policy for the Portfolio of a
Fund. We would do so only if required by state insurance
regulatory authorities pursuant to insurance law or regulation; or
operate Our Separate Account or one or more of the investment
divisions in any other form the law allows, including a form that
allows Us to make direct investments. We may make any legal
investments We wish. In choosing these investments, We will rely
on Our own or outside counsel for advice. In addition, We may
disapprove any change in investment advisers or in investment
contract unless a law or regulation provides differently.
If any changes are made that result in a material change in the
underlying investments of any investment division, You will be
notified. We may, for example, cause the investment division to
invest in a mutual fund other than or in addition to the Variable
Insurance Products Fund or the Variable Insurance Products Fund
II.
If You then wish to transfer the amount You have in that
investment division to another division of Our Separate Account,
or to Our General Account, You may do so, without charge, by
writing to Our Home Office. At the same time, You may also
change how Your net premiums and deductions are allocated.
DEDUCTIONS AND CHARGES
Charges Against The Separate Account
The amount in Your Contract Fund which is allocated to the
investment divisions of Our Separate Account will be reduced by
any fees and charges allocated to the investment divisions of Our
Separate Account.
Mortality and Expense Risks. We make a charge for assuming
mortality and expense risks. We guarantee that monthly
administrative and insurance deductions from Your Contract Fund
will never be greater than the maximum amounts shown in Your
contract. The mortality risk We assume is that Insured Persons will
live for shorter periods than We estimated. When this happens, We
have to pay a greater amount of death benefits than We expected to
in relation to the cost of insurance charges We received. The
expense risk We assume is that the cost of issuing and
administering contracts will be greater than We expected. We
make a charge for mortality and expense risks at an effective
annual rate of 0.90% of the value of the assets in the Separate
Account attributable to Variable Universal Life 3. Currently We
intend to reduce this charge to 0.50% after the tenth Contract Year.
This charge is reflected in the Accumulation Unit values for the
investment divisions of the Separate Account. See "Your Contract
Fund Value -How We Determine The Accumulation Unit Value"
on page 17. If the money We collect from this charge is not
needed, it will be to Our gain, and We expect a profit from this
charge. To the extent sales expenses are not covered by the sales
charge and the Deferred Sales Charge, Our General Account funds,
which may include amounts derived from this mortality and
expense risk charge, will be used to cover sales expenses.
Tax Reserve. We reserve the right to make a charge in the future
for taxes or reserves set aside for taxes, which if made will reduce
the investment experience of the investment divisions of Our
Separate Account. Currently no such charge is made.
Charges In The Funds
The Funds make a charge for managing investments and providing
services. These charges vary by portfolio.
Money Market Portfolio's management fee is calculated as follows:
(a) the sum of a group fee rate and an individual fund fee rate of
.03%, and (b) the addition of an income component of 6% of the
Portfolio's gross income in excess of a 5% annual yield. The result
is multiplied by the Portfolio's average net assets. The group fee
rate cannot rise above .37%, and it drops as total assets under
management increase. The income component cannot rise above
.24%.
The High Income Portfolio and Investment Grade Bond Portfolio's
annual fee is the sum of the following two components:
1. A group fee based on the monthly average net assets of all the
mutual funds advised by Fidelity Management & Research
Company. On an annual basis this rate cannot rise above .37%, and
it drops as total assets in all these funds rise. For example, the
effective group fee rate for December, 1995 was .15%.
2. An individual fund fee rate of .45% for the High Income
Portfolio and .30% for the Investment Grade Bond Portfolio.
The Equity-Income, Growth, Overseas, Contrafund, Asset
Manager: Growth and Asset Manager Portfolios' fee is the sum of
two components:
1. A group fee rate based on the monthly average net assets of all
the mutual funds advised by the Manager. This rate cannot rise
above .52%, and it drops as total assets in all these funds rise. The
effective group fee rate for December, 1995 was .31%.
2. An individual Portfolio fee rate of .20% for the Equity-Income
Portfolio, .30% for the Growth Portfolio, .45% for the Overseas
Portfolio, .30% for the Contrafund Portfolio, .40% for the Asset
Manager: Growth Portfolio and .40% for the Asset Manager
Portfolio.
The Index 500 Portfolio fee is based on the monthly average net
assets of the Index 500 Portfolio. On an annual basis this rate will
be .28%.
Each portfolio's total operating expenses will include fees for
management, shareholder services and other expenses, such as
custodial, legal, accounting and other miscellaneous fees.
Deductions From Your Premiums
We deduct a sales charge of 4% from each premium payment. This
charge is to partially reimburse Us for the cost incurred in selling
and distributing this contract, including commissions, the cost of
preparing sales literature and printing of prospectuses. A Deferred
Sales Charge will also be incurred if You give up Your contract for
its Net Cash Surrender Value or let Your contract lapse. See
Surrender Charge on page 15.
A 2.5% charge for premium taxes is also deducted from all of Your
premiums and $.46 is deducted from each premium payment if
You have chosen the Civil Service Allotment Mode. The rest of
each premium (the net premium) is placed in Your Contract Fund.
The $.46 deducted from each premium payment under the Civil
Service Allotment Mode is intended to cover the extra expenses
We incur in processing bi-weekly premium payments. We do not
expect to profit from this charge.
Applicable Taxes. All states and certain jurisdictions (cities,
counties, municipalities) tax premium payments and some levy
other charges. Currently, as indicated above, We deduct a charge of
2.5% of each premium for these. These tax rates currently range
from 0.75% to 4%. Because of certain retaliatory provisions in the
premium tax regulations, We expect to pay at least 2.5% of each
premium in premium tax.
This is a tax to Midland so You cannot deduct it on Your income
tax return. Since the charge is a percentage of Your premium, the
amount of the charge will also vary with the amount of the
premium.
We may increase this charge at any time if Our premium tax
expenses increase and We reserve the right to vary this charge by
state. If We make such a change, We will notify You.
Deductions From Your Contract Fund
At the beginning of each Contract Month (including the Contract
Date), the following three Contract Fund charges are deducted
from Your Contract Fund.
1. Expense Charge. This charge is $7.00 per month (currently
We plan to make this deduction for the first 15 years only, but we
reserve the right to deduct it throughout the life of the contract).
This charge is designed to cover the continuing costs of
maintaining Your contract, such as premium billing and
collections, claim processing, contract transactions, recordkeeping,
communications with owners and other expense and overhead
items. This charge is designed to reimburse Us for expenses and
We do not expect to gain from it.
2. Charges for Additional Benefits. The cost for any additional
benefits You choose will be deducted monthly. We may change
these charges, but Your contract contains tables showing the
guaranteed maximum rates for all of these insurance costs.
3. Cost of Insurance Charge. The cost of insurance is Our current
monthly cost of insurance rate times the amount at risk at the
beginning of the Contract Month. Amount at risk is the difference
between the current death benefit and the amount in Your Contract
Fund. If the current death benefit for the month is increased due to
the requirements of federal tax law, Your amount at risk for the
month will also increase. For this purpose the amount in Your
Contract Fund is determined before deduction of the cost of
insurance charge but after all of the other deductions due on that
date. The amount of the cost of insurance charge will vary from
month to month with changes in the amount at risk and with
increasing attained age of the Insured Person.
The cost of insurance rate is based on the sex, attained age, and
rating class of the Insured Person at the time of the charge. We
currently place the Insured Person that is a standard risk in the
following rate classes: preferred non-smoker, non-smoker, and
smoker. The Insured Person may also be placed in a rate class
involving a higher mortality risk, known as a substandard class.
We may change the cost of insurance rates from time to time, but
they will never be more than the guaranteed maximum rates set
forth in Your contract. The maximum charges are equal to the
charges specified in the Commissioner's 1980 Standard Ordinary
Mortality Table. The table below shows the current and guaranteed
maximum monthly cost of insurance rates per $1,000 of amount at
risk for a male preferred nonsmoker standard risk at various ages.
In Montana, there will be no distinctions based on sex. Employers
and employee organizations should consider, in consultation with
counsel, the impact of Title VII of the Civil Rights Act of 1964 on
the purchase of Variable Universal Life 3 in connection with an
employment-related insurance or benefit plan. The United States
Supreme Court held, in a 1983 decision, that under Title VII,
optional annuity benefits under a deferred compensation plan could
not vary on the basis of sex.
Illustrative Table of Monthly Cost of Insurance Rates (Rounded)
per $1,000 of Amount at Risk
Male Guaranteed Current
Attained Maximum (Preferred Non-Smoker)
Age Rate Rate
5 $.07 $.05
15 .11 .11
25 .13 .09
35 .14 .10
45 .29 .23
55 .69 .39
65 1.87 1.01
For a male preferred non-smoker, age 35, with a $100,000
Specified Amount Option 1 contract and an initial premium of
$1,000, the cost of insurance for the first month will be $9.9 1 .
This example assumes the expense charge ( $7.00 per month)
and current cost of insurance rate ($.10 per $1,000).
We offer lower current cost of insurance rates at most ages for
insured people who qualify as non-smokers. To qualify, an insured
must be a standard risk and must meet additional requirements that
relate to smoking habitsThe reduced cost of insurance rates depend
on such variables as the attained age and sex of the insured.
The preferred non-smoker cost of insurance rates are lower than
the non-smoker cost of insurance rates. To qualify for the preferred
non-smoker class, the Insured Person must be age 20 or over and
meet certain underwriting requirements.
Changes in Monthly Charges. Any changes in the cost of
insurance, charges for additional benefits or expense charges will
be by class of insured and will be based on changes in future
expectations about such things as investment earnings, mortality,
the length of time contracts will remain in effect, expenses and
taxes.
Other Transaction Charges
In addition to the deductions described above, We charge fees for
certain contract transactions:
Partial Withdrawal of Net Cash Surrender Value. You may make
one partial withdrawal during each Contract Year without a charge.
There is an administrative charge of $25 or 2 percent of the amount
withdrawn, whichever is less, each time You make a partial
withdrawal if more than one withdrawal is made during a year.
Transfers. Currently, We do not charge when You make transfers
of Contract Fund value among investment divisions. We reserve
the right to assess a $25 charge after the twelfth transfer in a
Contract Year.
How Contract Fund Charges Are Allocated
Generally, deductions from Your Contract Fund for monthly
charges or partial withdrawal charges are made from the
investment divisions of Our Separate Account and the unloaned
portion of the General Account in accordance with the deduction
allocation percentages specified by You in Your application unless
You instruct Us to do otherwise. Your allocation percentages for
deductions may be any whole numbers (from 10 to 100) which add
up to one hundred. You may change Your deduction allocation
percentages by writing to Our Home Office. Changes will be
effective as of the date We receive them.
If We cannot make a deduction in accordance with these
percentages, We will make it based on the proportion that Your
unloaned amounts in the General Account and Your amounts in the
investment divisions of Our Separate Account bear to the total
unloaned value of Your Contract Fund.
Deductions for transfer charges are allocated to the investment
divisions from which the transfer is being made in equal proportion
to such investment divisions. For example, if the transfer is made
from two investment divisions, the transfer charge allocated to
each of the investment divisions will be $12.50.
Surrender Charge
We incur various sales and promotional expenses in connection
with selling Variable Universal Life 3, such as commissions, the
cost of preparing sales literature, other promotional activities and
other direct and indirect distribution expenses. We also incur
expenses for underwriting, printing of contract forms and
prospectuses, and putting information in Our records.
There is a difference between the amount in Your Contract Fund
and the Cash Surrender Value of Your contract for the first 15
Contract Years. This difference is the Surrender Charge, which is a
contingent deferred issue charge and sales load designed to
partially recover Our expenses in distributing and issuing contracts
which are terminated by surrender in their early years (the sales
charge is also designed to partially reimburse Us for these
expenses). It is a contingent load because You pay it only if You
surrender Your contract (or let it lapse) during the first 15 Contract
Years. It is a deferred load because We do not deduct it from Your
premiums. The amount of the load in a Contract Year is not
necessarily related to Our actual sales expense in that year. We
anticipate that the sales charge and Surrender Charge will not fully
cover Our sales expenses. To the extent sales expenses are not
covered by the sales charge and Surrender Charge, We will cover
them from other funds including any funds in Our General
Account, which may include amounts derived from the mortality
and expense risk charge.
The Net Cash Surrender Value, which is the amount We pay You
if You surrender Your contract for cash, equals the Cash Surrender
Value minus any outstanding loan and loan interest.
In the first 15 Contract Years, You will incur a Surrender Charge if
You give up Your contract for its Net Cash Surrender Value, or let
Your contract lapse.
The Surrender Charge You pay includes Deferred Sales Charges
and Deferred Issue Charges. The Deferred Sales Charge is based
on the sum of two pieces.
The Deferred Sales Charge is:
26% of any premium payment in the first two Contract Years up to
one guideline annual premium.
5% of all other premium payments.
The sum of the above pieces is also limited by the Guideline
Annual Premium, times 5%, times the expected future lifetime at
issue as determined by the 1980 CSO Mortality Table or 20 years,
whichever is less.
The guideline annual premium varies for each contract. It is
specified on the contract information page of Your contract.
During the first ten contract years, the Deferred Sales Charge will
be 100% of the sum of these two pieces or the maximum charge
described in the second preceding paragraph, whichever is less.
Beginning in the eleventh year, the sum or maximum will be
multiplied by a percentage. The percentage is 83.33% for year
eleven, 66.67% for year twelve, 50% for year thirteen, 33.33% for
year fourteen, and 16.67% for year fifteen. After the 15th Contract
Year, there is no Surrender Charge.
If there is an increase in Specified Amount (at any time), there will
also be an increase in the Guideline Annual Premium. All additions
to the Deferred Sales Charge due to this increase will be 5% of
premiums. The maximum limit will also increase by the additional
Guideline Annual Premium, times 5%, times the expected future
lifetime at the time of the increase as determined by the 1980 CSO
Mortality Table or 20 years, whichever is less. The total in the
Deferred Sales Charge prior to the increase in Specified Amount
will not be affected.
If there is a decrease in Specified Amount, there will also be a
decrease in Guideline Annual Premium. Future additions to the
Deferred Sales Charge will follow the same rules as at issue with
the new Guideline Annual Premium. Prior totals in the Deferred
Sales Charge will not be affected.
You will not incur any Deferred Sales Charge, regardless of the
amount and timing of premiums, if You keep this contract in force
for fifteen years.
The following table shows the Deferred Issue Charge which is a
dollar amount for each thousand dollars of the Specified Amount.
After the 15th Contract Year, there is no Deferred Issue Charge.
Table of Deferred Issue Charges
Per Thousand of Specified Amount
Contract Contract Contract
Year Charge Year Charge Year Charge
1 $3.00 6 $3.00 11 $2.50
2 3.00 7 3.00 12 2.00
3 3.00 8 3.00 13 1.50
4 3.00 9 3.00 14 1.00
5 3.00 10 3.00 15 .50
If there has been a change in Specified Amount during the life of
the contract, the Deferred Issue Charge is applied against the
highest Specified Amount in force during the life of the contract.
YOUR CONTRACT FUND VALUE
The amount in Your Contract Fund is the sum of the amounts You
have in the General Account and in the various investment
divisions of Our Separate Account (plus the amount in Our
General Account securing any contract loan). Your Contract Fund
also reflects the various charges described above. Monthly
deductions are made as of the first day of each Contract Month.
Transaction charges or Surrender Charges are made as of the
effective date of the transaction. Charges against Our Separate
Account are reflected daily. Any amount allocated to an investment
division of Our Separate Account will go up or down depending on
the investment experience of that division. You bear this
investment risk. For amounts allocated to the investment divisions
of Our Separate Account, there is no guaranteed minimum cash
value. Any amount allocated to the General Account is guaranteed.
Amounts In Our Separate Account
Amounts allocated, transferred or added to the investment
divisions of Our Separate Account are used to purchase
Accumulation Units. The amount You have in each division is
represented by the value of the Accumulation Units credited to
Your Contract Fund for that division. The number of
Accumulation Units purchased or redeemed in an investment
division of Our Separate Account is calculated by dividing the
dollar amount of the transaction by the division's Accumulation
Unit Value calculated at the end of that day. The number of
Accumulation Units for an investment division at any time is the
number of Accumulation Units purchased less the number of
Accumulation Units redeemed. The value of Accumulation Units
fluctuates with the investment performance of the corresponding
portfolios of the Variable Insurance Products Fund and the
Variable Insurance Products Fund II, which reflects the investment
income and realized and unrealized capital gains and losses of the
portfolio and Funds' expenses. The Accumulation Unit Values also
reflect deductions and charges We make to Our Separate Account.
The number of Accumulation Units credited to You, however, will
not vary because of changes in Accumulation Unit Values. On any
given day, the value You have in an investment division of Our
Separate Account is the Accumulation Unit Value times the
number of Accumulation Units credited to You in that division.
The Accumulation Units of each investment division of Our
Separate Account have different Accumulation Unit Values.
Accumulation Units of an investment division are purchased when
You allocate premiums, repay loans or transfer amounts to that
division. Accumulation Units are redeemed or sold when you make
withdrawals or transfer amounts from an investment division of the
Separate Account (including transfers for loans) and to pay the
death benefit when the Insured Person dies. We also redeem
Accumulation Units for monthly deductions or other charges.
How We Determine The Accumulation Unit Value
We determine Accumulation Unit Values for the investment
divisions of our Separate Account at the end of each business day.
The Accumulation Unit Value for each investment division will be
set at $10.00 on the first day there are contract transactions in Our
Separate Account associated with these contracts. After that, the
Accumulation Unit Value for any business day is equal to the
Accumulation Unit Value for the preceding business day
multiplied by the net investment factor for that division on that
business day.
We determine the net investment factor for each investment
division every business day as follows:
First, We take the value of the shares belonging to the division in
the corresponding Fund portfolio at the close of business that day
(before giving effect to any contract transaction for that day, such
as premium payments or surrenders). For this purpose, We use the
share value reported to Us by the Fund.
Next, We add any dividends or capital gains distributions paid by
the Fund on that day.
Then, We divide this amount by the value of the amounts in the
investment division at the close of business on the preceding
business day (after giving effect to any contract transactions on that
day).
Then, We subtract a daily asset charge for each calendar day
between business days (for example, a Monday calculation may
include charges for Saturday and Sunday). The daily charge is
.0024547%, which is an effective annual rate of 0.90%. On a
current basis We intend to reduce this charge to 0.50% annually
(.0013664% daily) after the tenth Contract Year. This charge is for
mortality and expense risks assumed by Us under the contract and
to cover administrative costs We incur for transactions related to
the Separate Account.
Finally, We subtract any daily charge for taxes or amounts set aside
as a reserve for taxes.
Generally, this means that We adjust Accumulation Unit Values to
reflect what happens to the Fund, and also for the mortality and
expense risk charge and any other charges.
CONTRACT FUND TRANSACTIONS
The transactions described below may have different effects on
Your Contract Fund, death benefit, Specified Amount or cost of
insurance. You should consider the net effects before combining
Contract Fund transactions. Certain transactions also have fees.
Changing Your Premium And Deduction Allocation Percentages
You may change the allocation percentages of Your net premiums
or of Your monthly deductions by writing to Our Home Office and
telling Us what changes You wish to make. These changes will go
into effect as of the date We receive Your request at Our Home
Office and will affect transactions on and after that date.
Transfers Of Contract Fund Value
Currently, You may make an unlimited number of transfers of
Contract Fund value in each Contract Year without charge. We
reserve the right to assess a $25 charge after the twelfth transfer in
a Contract Year. During the first two Contract Years, if a transfer is
all of Your value in Our Separate Account to the General Account,
We will not make a charge for that transfer. To make a transfer,
write to Our Home Office.
If We charge You for making a transfer, We will allocate the
charge as described under "Deductions and Charges - How
Contract Fund Charges Are Allocated" on page 15. All transfers
included in one transfer request count as one transfer for purposes
of any fee.
You may ask Us to transfer amounts between the General Account
and any investment divisions of Our Separate Account, and among
investment divisions of Our Separate Account. The transfer will
take effect as of the date We receive Your request. The minimum
amount We will transfer on any date is $200. A smaller transfer
may be made under special circumstances mentioned in "Our Right
to Change How We Operate Our Separate Account". This
minimum need not come from any one investment division or be
transferred to any one investment division as long as the total
amount transferred that day equals the minimum.
The amount that can be transferred from the General Account to
the Separate Account in any Contract Year cannot exceed the
larger of:
1. 25% of the unloaned amount in the General Account at the
beginning of the Contract Year, or
2. $1,000.
Dollar Cost Averaging.
The Dollar Cost Averaging (DCA) program enables You to make
monthly transfers of a predetermined dollar amount from the
Money Market investment division into one or more of the other
investment divisions (not the General Account). By allocating
monthly, as opposed to allocating the total amount at one time,
You may reduce the impact of market fluctuations.
DCA can be elected at any time by completion of the DCA
Request Form (form number 5856) and by insuring that a sufficient
amount is in the Money Market investment division, either through
payment of a premium with the DCA request form, allocation of
premiums, or transfer of amounts to the Money Market investment
division. Copies of form 5856 can be obtained by contacting Us at
Our Home Office. The election will specify:
a. that any money received with the form is to be placed into the
Money Market investment division
b. the monthly amount to be transferred to the other investment
divisions, and
c. how that monthly amount is to be allocated among the
investment divisions
Since the DCA program is only suitable for substantial, infrequent
premium payments, DCA is only available when the premium
payment mode is annual or if the amount in the Money Market
investment division is at least equal to the sum of $2,400 and the
minimum premium. The DCA Request Form must be received
with any premium payment You intend to apply to DCA.
The minimum monthly amount to be transferred using DCA is
$200. In order to begin the DCA program, the value in the Money
Market investment division must be at least equal to the sum of 12
monthly transfers plus the minimum premium. When DCA is
elected, all amounts in the Money Market investment division will
be available for transfer under the DCA program. Once DCA is
elected, additional premiums can be deposited into the Money
Market investment division for DCA by sending them in with a
DCA request form.
You may change the DCA allocation percentages or DCA transfer
amounts twice each Contract Year. Any premium payments
received while the DCA program is in effect will be allocated
using the allocation percentages from the DCA request form,
unless You specify otherwise.
If requested at issue, DCA will start at the beginning of the second
Contract Month. If requested after issue, DCA will start at the
beginning of the first Contract Month which occurs at least 30 days
from the day the request is received.
DCA will last until the value in the Money Market investment
division is exhausted or until a request for termination is received
in writing from You. DCA will automatically be terminated on the
Maturity Date.
We reserve the right to end the DCA program at any time by
sending You a notice one month in advance.
Borrowing From Your Contract Fund
At any time Your contract has a Net Cash Surrender Value, You
may borrow up to 92% of the Cash Surrender Value using only
Your contract as security for the loan. If You request an additional
loan, the amounts of any outstanding loan and loan interest will be
added to the additional amount You have requested and the
original loan will be canceled. Thus, You will have only one loan
outstanding at any time. Any amount that secures a loan remains
part of Your Contract Fund, but is automatically transferred out of
Our Separate Account and put in Our General Account as
collateral. We pay You interest on this loaned amount, currently at
an annual rate of 6%. However, after the tenth Contract Year, the
annual rate of interest paid on the loaned portion of the Contract
Fund will equal 8% for the portion of any loan that does not exceed
the Contract Fund minus the total premiums paid.
A loan taken from, or secured by, a contract may have Federal
Income Tax consequences. See "TAX EFFECTS" on page 21.
How To Request A Loan
You may request a loan by contacting Our Home Office. You may
tell Us how much of the loan You want taken from Your unloaned
amount in the General Account or from Your amounts in the
investment divisions of Our Separate Account. We will redeem
units from an investment division of Our Separate Account
sufficient to cover that part of the loan. The amounts You have in
each division will be determined as of the day We receive Your
request for a loan at Our Home Office.
If You do not tell Us how to allocate Your loan, the loan will be
allocated according to Your deduction allocation percentages. If
the loan cannot be allocated based on these percentages, We will
allocate it based on the proportions of Your unloaned amounts in
the General Account and Your value in each investment division of
Our Separate Account to the unloaned value of Your Contract
Fund.
Contract Loan Interest
Interest on a contract loan accrues daily at an annual interest rate of
8%.
When Interest Is Due
Interest is due on each Contract Anniversary. If You do not pay the
interest when it is due, it will be added to Your outstanding loan
and allocated based on the deduction allocation percentages for
Your Contract Fund then in effect. This means We make an
additional loan to pay the interest and We transfer amounts from
the General Account or the investment divisions to make the loan.
If we cannot allocate the interest based on these percentages, We
will allocate it as described above for allocating Your loan.
Repaying The Loan
You may repay all or part of a contract loan at any time while Your
contract is In Force. While You have a contract loan, We assume
that any money You send Us is meant to repay the loan. If You
wish to have any of these payments be premium payments, You
must tell Us in writing.
You may choose how You want Us to allocate Your repayments. If
You do not give us instructions, We will allocate Your repayments
based on Your premium allocation percentages.
The Effects Of A Contract Loan On Your Contract Fund
A loan against Your contract will have a permanent effect on the
value of Your Contract Fund and, therefore, on Your benefits
under this contract, even if the loan is repaid. When You borrow
on Your contract, the amount of Your loan is set aside where it
earns a declared rate for loaned amounts. The loan amount will not
be available for You to invest in the divisions of Our Separate
Account or the unloaned portion of the General Account. Whether
You earn more or less with the loan amount set aside depends on
the investment experience of the investment divisions of Our
Separate Account and the rates declared for the unloaned portion of
the General Account.
Your Contract May Lapse
Your loan may also affect the amount of time that Your insurance
remains in force. For example, Your contract may lapse more
quickly when You have a loan because the loaned amount cannot
be used to cover the monthly deductions that are taken from Your
Contract Fund. If these deductions exceed the Net Cash Surrender
Value of Your contract, then the lapse provisions of the contract
may apply. Since the contract permits loans up to 92% of the Cash
Surrender Value , loan repayments or additional premium
payments may be required to keep the contract in force if You
borrow the maximum.
Withdrawing Money From Your Contract Fund
You may request a partial withdrawal of Your Net Cash Surrender
Value by writing to Our Home Office. You will not incur either the
Deferred Sales Charge or Deferred Issue Charge upon a partial
withdrawal. Partial withdrawals are subject to certain conditions.
They must:
be at least $200
total no more than 50% of the Net Cash Surrender Value in any
Contract Year
not cause the death benefit to fall below the minimum for which
we would issue the contract at the time
not cause the contract to fail to qualify as life insurance under
applicable tax law.
You may specify how much of the withdrawal You want taken
from each investment division. If You do not tell Us, We will
make the withdrawal on the basis of Your deduction allocation
percentages. If We cannot withdraw the amount based on Your
directions or on Your deduction allocation percentages, We will
withdraw the amount based on the proportions of Your unloaned
amounts in the General Account and the investment divisions of
Our Separate Account to the total unloaned value of Your Contract
Fund.
Withdrawal Charges
When You make a partial withdrawal more than once in a Contract
Year, a charge of $25 or 2 percent of the amount withdrawn,
whichever is less, will be deducted from Your Contract Fund. If
You do not give Us instructions for deducting the charge, it will be
deducted as described under "Deductions and Charges -How
Contract Fund Charges Are Allocated" on page 15.
In general, We do not permit You to make a withdrawal on monies
for which Your premium check has not cleared your bank.
The Effects Of A Partial Withdrawal
A partial withdrawal reduces the amount You have in Your
Contract Fund. It also reduces the Cash Surrender Value and the
death benefit on a dollar-for-dollar basis. If the death benefit is
based on a percentage multiple, the reduction in death benefit
could be greater. If you selected death benefit Option 1, We will
also reduce the Specified Amount of Your contract so there will be
no change in the net amount at risk. We will send You a new
contract information page to Your contract to reflect this change.
We may ask You to return Your contract to Our Home Office to
make a change. The withdrawal and these reductions will be
effective as of the date We receive Your request at Our Home
Office.
A contract loan might be better if Your need for cash is temporary.
Surrendering Your Contract For Its Net Cash Surrender Value
You may surrender Your contract for its Net Cash Surrender Value
at any time while the Insured Person is living. You may do this by
sending a written request and the contract to Our Home Office. The
Net Cash Surrender Value of Your contract equals the Cash
Surrender Value minus any outstanding loan and loan interest.
During the first 15 Contract Years, the Cash Surrender Value is the
amount in Your Contract Fund minus the Surrender Charge. After
15 years, the Cash Surrender Value and Contract Fund are equal.
We will compute the Net Cash Surrender Value as of the date We
receive Your request and the contract at Our Home Office, and all
insurance coverage under Your contract will end on that date.
THE GENERAL ACCOUNT
You may allocate some or all of Your Contract Fund to the General
Account, which pays interest at a declared rate. The principal, after
deductions, is guaranteed. The General Account supports Our
insurance and annuity obligations. Because of applicable
exemptive and exclusionary provisions, interests in the General
Account have not been registered under the Securities Act of 1933,
and the General Account has not been registered as an investment
company under the Investment Company Act of 1940.
Accordingly, neither the General Account nor any interests therein
are generally subject to regulation under the 1933 Act or the 1940
Act. We have been advised that the staff of the SEC has not made a
review of the disclosures which are included in this prospectus for
Your information and which relate to the General Account.
Amounts In The General Account
You may accumulate amounts in the General Account by:
allocating net premium and loan repayments,
transferring amounts from the investment divisions of Our
Separate Account, or
earning interest on amounts You already have in the General
Account.
The amount You have in the General Account at any time is the
sum of all net premiums and loan repayments allocated to that
Account, all transfers and earned interest, and includes amounts
securing any contract loan You have. This amount is reduced by
amounts transferred out or withdrawn and deductions allocated to
this Account.
Adding Interest To Your Amounts In The General Account
We pay interest on all amounts that You have in the General
Account. The annual interest rates will never be less than the
minimum guaranteed interest rate of 3.5% We may, at the sole
discretion of Our Board of Directors, credit interest in excess of
3.5% . You assume the risk that interest credited may not
exceed 3.5% . We pay different rates on unloaned and loaned
amounts in the General Account. Interest is compounded daily at
an effective annual rate that equals the annual rate declared by Our
Board of Directors.
Transfers
You may request a transfer between the General Account and one
or more of the investment divisions of Our Separate Account. See
"Transfers Of Contract Fund Value" on Page 17.
ADDITIONAL INFORMATION ABOUT VARIABLE
UNIVERSAL LIFE 3
Your Right To Examine The Contract
You have a right to examine the contract. If for any reason You are
not satisfied with it, You may cancel the contract within the time
limits described below. You may cancel the contract by sending it
to Our Home Office with a written request to cancel.
Your request to cancel this contract must be postmarked no later
than the latest of the following three dates:
10 days after You receive Your contract,
10 days after We mail You a written notice telling You about Your
rights to cancel (Notice of Withdrawal Right), or
45 days after You sign Part 1 of the contract application.
If You cancel Your contract, We will return the sum of all charges
deducted from premiums paid and Your Contract Fund, plus the
Contract Fund.
Insurance coverage ends when You send Your request.
Your Contract Can Lapse
Your insurance coverage under Variable Universal Life 3 continues
as long as the Net Cash Surrender Value of your contract is enough
to pay the deductions that are taken out of your Contract Fund each
month or, during the Minimum Premium
Period, as long as your premiums paid exceed the schedule of
required minimum premiums. If neither of these conditions are true
at the beginning of any Contract Month, a 61-day grace period will
start, beginning on the day We send You notice that the grace
period is starting. We will notify You and any assignees on Our
records in writing that the grace period has begun and tell You the
amount of premium payment that will be sufficient to satisfy the
minimum requirement for two months.
If We receive payment of this amount before the end of the grace
period, We will use the amount You send Us to make the overdue
deductions. We will put any balance left in Your Contract Fund
and allocate it in the same manner as Your previous premium
payments.
If We do not receive payment within the 61 days, Your contract
will lapse without value. We will withdraw any amount left in
Your Contract Fund. We will apply this amount to the deductions
owed to Us, including any applicable Surrender Charge. We will
inform You and any assignee at last known address that Your
contract has ended without value.
If the Insured Person dies during the grace period, We will pay the
insurance benefits to the beneficiary, minus any loan, loan interest
and overdue deductions.
You May Reinstate Your Contract
You may reinstate the contract within five years after it lapses if:
You provide evidence that the Insured Person is still insurable,
You complete an application for reinstatement, You pay premium
enough to pay all overdue monthly deductions including the
premium tax on those deductions, plus increase the Contract Fund
to a level where the Contract Fund less any contract debt equals the
surrender charges, plus cover the next two months' deductions,
You pay or restore any contract debt,
You did not end the contract by payment of the Net Cash Surrender
Value.
The Contract Date of the reinstated contract will be the beginning
of the Contract Month which coincides with or follows the date We
approve Your reinstatement application. Upon reinstatement, there
will be no further Surrender Charges applied against the contract.
Previous loans will not be reinstated.
Contract Periods, Anniversaries
We measure Contract Years, Contract Months and Contract
Anniversaries (annual and monthly) from the Contract Date shown
on the contract information page of Your contract. Each Contract
Month begins on the same day in each calendar month as the day
of the month in the Contract Date. The calendar days of 29, 30, and
31 are not used. Our right to challenge a contract is measured from
the Contract Date, as is the suicide exclusion. These provisions are
mentioned in "LIMITS ON OUR RIGHT TO CHALLENGE THE
CONTRACT" on page 24.
Application for Insurance
When an application for one of Our contracts is completed, it is
submitted to Us. We make the decision to issue a contract based on
the information in the application and Our standards for issuing
insurance and classifying risks. If We decide not to issue a
contract, We will return the sum of all charges deducted from
premiums paid, plus the net premiums, plus interest credited to the
net premiums.
Maturity Date
The Maturity Date is the Contract Anniversary after the Insured
Person's 100th birthday. The contract ends on that date if the
Insured Person is still alive and the maturity benefit is paid.
If the Insured Person survives to the Maturity Date, and You would
like to continue the contract, We will extend the Maturity Date if in
doing so this contract still qualifies as life insurance according to
the Internal Revenue Service and your state. By extending the
Maturity Date, the contract may not qualify as life insurance and
may be subject to tax consequences. A tax advisor should be
consulted prior to electing to extend the Maturity Date. In order to
continue the contract beyond the original Maturity Date, We will
require that the death benefit not exceed the Contract Fund on the
original Maturity Date.
Generally, when We refer to the age of the insured person, We
mean his or her age on the birthday prior to that particular date.
TAX EFFECTS
Contract Proceeds
The Internal Revenue Code of 1986 (Code) (in Section 7702)
defines life insurance for tax purposes. Amendments to the Code
made in 1988 place limits on certain contract charges used in
determining the maximum amount of premiums that may be paid
under section 7702 for Contracts described in this prospectus. The
Secretary of the Treasury ("Treasury") has issued proposed
regulations that would specify what will be considered reasonable
mortality charges for these limits. Guidance as to how section 7702
is to be applied is, however, limited.
With respect to a contract that is issued on the basis of a standard
rate class, while there is some uncertainty due to the lack of
guidance under section 7702, Midland believes that such a contract
should meet the section 7702 definition of a life insurance contract.
With respect to a contract that is issued on a substandard basis (i.e.,
a rate class involving higher than standard mortality risk), there is
even less guidance, in particular as to how the new charge
requirements are to be applied in determining whether such a
contract meets the section 7702 definition of a life insurance
contract. Thus, it is not clear whether or not such a contract would
satisfy section 7702, particularly if the contract owner pays the full
amount of premiums permitted under the contract.
If it is subsequently determined that only a lower amount of
premiums may be paid for a contract to satisfy section 7702,
Midland may take whatever steps are appropriate and reasonable to
attempt to cause the contract to comply with section 7702,
including possibly refunding any premiums paid which exceed that
lower amount (together with interest or such other earnings on any
such premiums as is required by law).
If the Specified Amount of a contract is increased or decreased, the
applicable premium limitation may change. During the first fifteen
years of the contract, there are certain events that may create
taxable ordinary income to You if at the time of the event there has
been a gain in the contract. These events include:
A decrease in the Specified Amount;
A partial withdrawal;
A change from Option 2 to Option 1; or,
Any change that otherwise reduces benefits under the contract and
that results in a cash distribution in order for the contract to
continue to comply with Section 7702 relating to premium and
cash value limitations.
Such income inclusion will also result, in certain circumstances,
with respect to cash distributions made in anticipation of
reductions in benefits under the contract.
Code Section 7702A affects the taxation of distributions (other
than proceeds paid at the death of the insured) from certain
variable life insurance contracts:
1. If premiums are paid more rapidly than the rate defined by a "7-
Pay Test," the contract will be treated as a "modified endowment
contract."
2. Any contract received in exchange for a contract classified as a
modified endowment contract will be treated as a modified
endowment contract regardless of whether the contract received in
the exchange meets the 7-Pay Test.
3. Loans, including unpaid loan interest, (as well as surrenders and
withdrawals) from a modified endowment contract will be
considered distributions.
4. Distributions (including loans) from a modified endowment
contract will be taxed first as distribution of gain from the contract
(to the extent that gain exists), and then as non-taxable recovery of
basis.
5. An extra tax of 10% of any distribution includable in income
will be imposed, unless such distributions are made (1) after You
attain age 59 1/2, (2) on account of You becoming disabled, or (3)
as substantially equal annuity payments over Your life or life
expectancy.
For contracts not classified as modified endowment contacts,
distributions will be taxed in accordance with the rules in effect
prior to the enactment of Section 7702A.
A contract that is not a modified endowment contract may be
classified as a modified endowment contract if it is "materially
changed" and the materially changed contract fails to meet the 7-
Pay Test and any distributions from such a contract will be taxed as
explained above.
Material changes include a requested increase in death benefit or a
change from Option 1 to Option 2. Before making any change to a
contract, a competent tax advisor should be consulted.
Additionally, any life insurance contracts which are treated as
modified endowment contracts and which are issued by Midland
National Life or any of its affiliates:
with the same person designated as the owner;
on or after June 21, 1988; and
within any single calendar year
will be aggregated and treated as one contract for purposes of
determining any tax on distributions.
Even if a contract is not a modified endowment contract, loans at
very low or no net cost may be treated as distributions for federal
income tax purposes.
The Code (Section 817(h)) also authorizes the Secretary of the
Treasury to set standards by regulation or otherwise for the
investments of Separate Account A to be "adequately diversified"
in order for Variable Universal Life 3 to be treated as a life
insurance contract for federal tax purposes. Separate Account A,
through the Funds, intends to comply with the diversification
requirements established by the Secretary although We do not
control the Funds. We believe Separate Account A will be
adequately diversified to be treated as a life insurance contract for
federal tax purposes.
In certain circumstances, owners of variable life insurance
contracts may be considered the owners, for federal income tax
purposes, of the assets of the separate account used to support their
contracts. In those circumstances, income and gains from the
separate account assets would be includable in the variable contract
owner's gross income. The IRS has stated in published rulings that
a variable contract owner will be considered the owner of separate
account assets if the contract owner possesses incidents of
ownership in those assets, such as the ability to exercise investment
control over the assets. The Treasury Department also announced,
in connection with the issuance of regulations concerning
diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor
(i.e., the Policyowner), rather than the insurance company, to be
treated as the owner of the assets in the account." This
announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may
direct their investments to particular subaccounts without being
treated as owners of the underlying assets." As of the date of this
prospectus, no such guidance has been issued.
The ownership rights under Variable Universal Life 3 are similar
to, but different in certain respects from, those described by the
IRS in rulings in which it was determined that contract owners
were not owners of separate account assets. For example, the
owner has additional flexibility in allocating premium payments
and contract values. These differences could result in an owner
being treated as the owner of a pro rata portion of the assets of
Separate Account A. In addition, Midland does not know what
standards will be set forth, if any, in the regulations or rulings
which the Treasury Department has stated it expects to issue.
Midland therefore reserves the right to modify the contract as
necessary to attempt to prevent an owner from being considered
the owner of a pro rata share of the assets of Separate Account A or
to otherwise qualify Variable Universal Life 3 for favorable tax
treatment.
Assuming a contract is a life insurance contract for federal income
tax purposes, the contract should receive the same federal income
tax treatment as fixed benefit life insurance. As a result, the life
insurance proceeds payable under either benefit option should be
excludable from the gross income of the beneficiary under Section
101 of the Code, and You should not be deemed to be in
constructive receipt of the cash values under a contract until actual
distribution.
A change of owners as well as a surrender or withdrawal, an
assignment of the contract, a change from one death benefit option
to another, and other changes reducing future death benefits may
have tax consequences depending on the circumstances of such
surrender or change. Upon complete surrender or when maturity
benefits are paid, if the amount received plus the contract debt
exceeds the total premiums paid that are not treated as previously
withdrawn by You, the excess generally will be treated as ordinary
income.
Federal estate and state or local estate, inheritance and other tax
consequences of ownership or receipt of contract proceeds depend
on the circumstances of each contract owner or beneficiary.
A contract may be used in various arrangements, including
nonqualified deferred compensation or salary continuance plans,
split dollar insurance plans, executive bonus plans, retiree medical
benefit plans and others. The tax consequences of such plans may
vary depending on the particular facts and circumstances of each
individual arrangement. Therefore, if You are contemplating the
use of a contract in any arrangement the value of which depends in
part on its tax consequences, You should be sure to consult a
qualified tax advisor regarding the tax attributes of the particular
arrangement.
Possible Charge for Midland's Taxes
At the present time, Midland makes no charge to the Separate
Account for any Federal, state or local taxes (other than premium
taxes) that it incurs which may be attributable to such Account or
to the contracts. Midland, however, reserves the right in the future
to make a charge for any such tax or other economic burden
resulting from the application of the tax laws that it determines to
be properly attributable to the Separate Account or to the contracts.
If such a charge is made, it would be set aside as a provision for
taxes which We would keep in the affected division rather than in
Our General Account. We anticipate that Our flexible premium
variable life contractowners would benefit from any investment
earnings that are not needed to maintain this provision.
Other Tax Considerations
The foregoing discussion is general and is not intended as tax
advice. If You are concerned about these tax implications, You
should consult a competent tax adviser. This discussion is based on
Our understanding of the present federal income tax laws as they
are currently interpreted by the Internal Revenue Service. No
representation is made as to the likelihood of continuation of these
current laws and interpretations, and We do not make any
guarantee as to the tax status of the contract. It should be further
understood that the foregoing discussion is not exhaustive and that
special rules not described in this prospectus may be applicable in
certain situations. Moreover, no attempt has been made to consider
any applicable state or other tax laws.
PART 3: ADDITIONAL INFORMATION
YOUR VOTING RIGHTS AS AN OWNER
Fund Voting Rights
We invest the assets in the divisions of Our Separate Account in
shares of the corresponding portfolios of the Funds. Midland is the
legal owner of the shares and, as such, has the right to vote on
certain matters. Among other things, We may vote to:
elect the Funds' Board of Directors,
ratify the selection of independent auditors for the Funds, and
vote on any other matters described in the Funds' current
prospectuses or requiring a vote by shareholders under the
Investment Company Act of 1940.
Even though We own the shares, We give You the opportunity to
tell Us how to vote the number of shares that are allocated to Your
contract. We will vote those shares at meetings of Fund
shareholders according to Your instructions.
The Funds will determine how often shareholder meetings are held.
As We receive notice of these meetings, We will solicit Your
voting instructions. The Funds are not required to hold a meeting
in any given year.
If We do not receive instructions in time from all contractowners,
We will vote shares for which no instructions have been received
in a portfolio in the same proportion as We vote shares for which
We have received instructions in that portfolio. We will also vote
any Fund shares that We are entitled to vote directly due to
amounts We have accumulated in Our Separate Account in the
same proportions that contractowners vote. If the federal securities
laws or regulations or interpretations of them change so that We
are permitted to vote shares of the Fund in Our own right or to
restrict contractowner voting, We may do so.
How We Determine Your Voting Shares
You may participate in voting only on matters concerning the Fund
portfolios in which Your assets have been invested. We determine
the number of Fund shares in each division that are attributable to
Your contract by dividing the amount in Your Contract Fund
allocated to that division by the net asset value of one share of the
corresponding Fund portfolio as of the record date set by the Fund's
Board for the Fund's shareholders meeting. The record date for this
purpose must be at least 10 and no more than 90 days before the
meeting of the Fund. We count fractional shares.
If You have a voting interest, We will send You proxy material and
a form for giving Us voting instructions. In certain cases, We may
disregard instructions relating to changes in the Fund's adviser or
the investment policies of its portfolios. We will advise You if We
do and give Our reasons in the next semiannual report to You.
Voting Privileges Of Participants In Other Companies
Currently, shares in the Variable Insurance Products Fund and the
Variable Insurance Products Fund II are owned by other insurance
companies to support their variable insurance products as well as
Our Separate Account. Those shares generally will be voted
according to the instructions of the owners of insurance contracts
and contracts issued by those other insurance companies. In certain
cases, an insurance company or some other owner of Fund shares
may vote as they choose. This will dilute the effect of the voting
instructions of the owners of Variable Universal Life 3. We do not
foresee any disadvantage to this. Nevertheless, the Fund's Board of
Directors will monitor events to identify conflicts that may arise
and determine appropriate action. If We think any Fund action is
insufficient, We will see that appropriate action is taken to protect
Our contractowners.
OUR REPORTS TO CONTRACTOWNERS
Shortly after the end of the third, sixth, ninth, and twelfth Contract
Month, We will send you a report that shows the current Death
Benefit for Your contract, the value of Your Contract Fund,
information about investment divisions, the Cash Surrender Value
of Your contract, the amount of any outstanding contract loans that
You may have, the amount of any interest that You owe on the
loan and information about the current loan interest rate. The
annual report will also show any transactions involving Your
Contract Fund that occurred during the year. Transactions include
Your premium allocations, Our deductions, and any transfers or
withdrawals that You made in that year.
We will also send You semi-annual reports with financial
information on the Funds, including a list of the investments held
by each portfolio.
In addition, Our report will also contain any other information that
is required by the insurance supervisory official in the jurisdiction
in which this insurance contract is delivered.
Notices will be sent to You for transfers of amounts between
investment divisions and certain other contract transactions.
LIMITS ON OUR RIGHT TO CHALLENGE THE CONTRACT
We can challenge the validity of Your insurance contract (based on
material misstatements in the application) if it appears that the
Insured Person is not actually covered by the contract, under Our
rules. However, there are some limits on how and when We can
challenge the contract.
We cannot challenge the contract after it has been in effect, during
the Insured Person's lifetime, for two years from the date the
contract was issued or reinstated. (Some states may require Us to
measure this in some other way.)
We cannot challenge any contract change that requires evidence of
insurability (such as an increase in Face Amount) after the change
has been in effect for two years during the Insured Person's
lifetime.
We can challenge at any time (and require proof of continuing
disability) an additional benefit that provides benefits to the
Insured Person in the event that the Insured Person becomes totally
disabled.
If the Insured Person dies within the time that We may challenge
the validity of the contract, We may delay payment until We decide
whether to challenge the contract.
If the Insured Person's age or sex is misstated on any application,
the death benefit and any additional benefits provided will be those
which would be purchased by the most recent deduction for the
cost of insurance and the cost of any additional benefits at the
Insured Person's correct age and sex.
If the Insured Person commits suicide within two years after the
date on which the contract was issued or reinstated, the death
benefit will be limited to the total of all premiums that have been
paid to the time of death minus the amount of any outstanding
contract loan and loan interest and minus any partial withdrawals
of Net Cash Surrender Value. If the Insured Person commits
suicide within two years after the effective date of an increase in
Specified Amount that You requested, We will pay the Specified
Amount which was in effect before the increase, plus the monthly
cost of insurance deductions for the increase (Some states require
Us to measure this time by some other date.)
YOUR PAYMENT OPTIONS
Contract benefits or other payments such as the Net Cash
Surrender Value or Death Benefit may be paid immediately in one
sum or You may choose another form of payment for all or part of
the money. Payments under these options are not affected by the
investment experience of any investment division of Our Separate
Account. Instead, interest accrues pursuant to the options chosen. If
You do not arrange for a specific form of payment before the
Insured Person dies, the beneficiary will have this choice.
However, if You do make an arrangement with Us for how the
money will be paid, the beneficiary cannot change Your choice
after the Insured Person dies. Payment Options will also be subject
to Our rules at the time of selection. Our consent is required when
optional payment is selected and the payee is either an assignee or
not a natural person. Currently, these alternate payment options are
only available if the proceeds applied are $1,000 or more and any
periodic payment will be at least $20.
You have the following payment options:
1. Deposit Option: The money will stay on deposit with Us for a
period that You and We agree upon. You will receive interest on
the money at a declared interest rate.
2. Installment Options: There are two ways that We pay
installments:
a. Fixed Period: We will pay the amount applied in equal
installments plus applicable interest, for a specific number of years,
for up to 30 years.
b. Fixed Amount: We will pay the sum in installments in an
amount that You and We agree upon. We will pay the installments
until We pay the original amount, together with any interest You
have earned.
3. Monthly Life Income Option: We will pay the money as monthly
income for life. You may choose any one of 4 ways to receive the
income: We will guarantee payments for at least 10 years (called
"10 Years Certain"); at least 20 years (called "20 Years Certain");
at least 5 years (called "5 Years Certain"); or payment only for life.
4. Other: You may ask Us to apply the money under any option
that We make available at the time the benefit is paid.
We guarantee interest under the Deposit Option at the rate of
2.75% a year, and under either Installment Option at 2.75% a year.
We may also allow interest under the Deposit Option and under
either Installment Option at a rate that is above the guaranteed rate.
The beneficiary or any other person who is entitled to receive
payment may name a successor to receive any amount that We
would otherwise pay to that person's estate if that person died. The
person who is entitled to receive payment may change the
successor at any time.
We must approve any arrangements that involve more than one of
the payment options, or a payee who is not a natural person (for
example, a corporation), or a payee who is a fiduciary. Also, the
details of all arrangements will be subject to our rules at the time
the arrangements take effect. This includes rules on the minimum
amount We will pay under an option, minimum amounts for
installment payments, withdrawal or commutation rights (Your
rights to receive payments over time, for which We may offer You
a lump sum payment), the naming of people who are entitled to
receive payment and their successors, and the ways of proving age
and survival.
You will make Your choice of a payment option (or any later
changes) and Your choice will take effect in the same way as it
would if You were changing a beneficiary. (See Your Beneficiary
below). Any amounts that We pay under the payment options will
not be subject to the claims of creditors or to legal process, to the
extent that the law provides.
YOUR BENEFICIARY
You name Your beneficiary when You apply for Your contract.
The beneficiary is entitled to the insurance benefits of the contract.
You may change the beneficiary during the Insured Person's
lifetime by writing to Our Home Office. If no beneficiary is living
when the Insured Person dies, We will pay the Death Benefit in
equal shares to the Insured Person's surviving children. If there are
no surviving children, We will pay the Death Benefit to the Insured
Person's estate.
ASSIGNING YOUR CONTRACT
You may assign (transfer) Your rights in this contract to someone
else as collateral for a loan or for some other reason. If You do,
You must send a copy of the assignment to Our Home Office. We
are not responsible for any payment We make or any action We
take before We receive notice of the assignment or for the validity
of the assignment. An absolute assignment is a change of
ownership.
WHEN WE PAY PROCEEDS FROM THIS CONTRACT
We will generally pay any death benefits, Net Cash Surrender
Value or loan proceeds within seven days after We receive the
required form or request (and other documents that may be
required for payment of death benefits) at Our Home Office. Death
benefits are determined as of the date of death of the Insured
Person and will not be affected by subsequent changes in the
Accumulation Unit values of the investment divisions of Our
Separate Account. We pay interest from the date of death to the
date of payment.
We may, however, delay payment for one of more of the following
reasons:
We contest the contract.
We cannot determine the amount of the payment because the New
York Stock Exchange is closed, because trading in securities has
been restricted by the Securities and Exchange Commission, or
because the SEC has declared that an emergency exists.
The SEC by order permits us to delay payment to protect our
contractowners.
We may also delay any payment until Your premium checks have
cleared Your bank.
We may defer payment of any loan amount, or withdrawal or
surrender from the General Account, for up to six months after We
receive Your request.
DIVIDENDS
We do not pay any dividends on the contract described in this
prospectus.
MIDLAND'S SALES AND OTHER AGREEMENTS
Sales Agreements
The contract will be sold by individuals who, in addition to being
licensed as life insurance agents for Midland National Life, are also
registered representatives of Walnut Street Securities (WSS), the
principal underwriter of the contracts, or broker-dealers which have
entered into written sales agreements with WSS. WSS is registered
with the SEC as a broker-dealer under the Securities Exchange Act
of 1934 and is a member of the National Association of Securities
Dealers, Inc.
During the first Contract Year, We will pay agents a commission
of up to 70% of premiums paid. For subsequent years, the
commission allowance may equal an amount up to 5% of
premiums paid. Beyond the fifteenth Contract Year, We pay no
commission. Certain persistency and production bonus may also be
paid.
We may also sell Our contracts through broker-dealers registered
with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 which enter into selling agreements with us.
The commission for broker-dealers will be no more than that
described above.
REGULATION
We are regulated and supervised by the South Dakota Insurance
Department. In addition, We are subject to the insurance laws and
regulations in every jurisdiction where We sell contracts. This
contract has been filed with and approved by insurance officials in
such states. As a result, the provisions of this contract may vary
somewhat from jurisdiction to jurisdiction.
We submit annual reports on Our operations and finances to
insurance officials in all the jurisdictions where We sell contracts.
The officials are responsible for reviewing our reports to be sure
that we are financially sound and that We are complying with
applicable laws and regulations.
We are also subject to various federal securities laws and
regulations.
DISCOUNT FOR MIDLAND EMPLOYEES
Midland employees may receive a discount of up to 45 percent of
first year premium. The discount will be effected by Midland
paying the discount as the employee pays the qualifying premium.
All other contract provisions will apply.
LEGAL MATTERS
The law firm of Sutherland, Asbill & Brennan, Washington, DC,
has provided advice regarding certain matters relating to federal
securities laws.
LEGAL PROCEEDINGS
We are not involved in any material legal proceedings.
FINANCIAL AND ACTUARIAL
The financial statements of Midland National Life Separate
Account A and Midland National Life Insurance Company
included in this prospectus and the registration statement have been
audited by Coopers & Lybrand LLP, independent auditors, for the
periods indicated in their report which appears in this prospectus
and in the registration statement. Such financial statements have
been included herein in reliance upon such report given upon the
authority of the firm as experts in accounting and auditing.
Actuarial matters in this prospectus have been examined by Russell
A. Evenson, F.S.A., M.A.A.A., who is Senior Vice President and
Actuary of Midland. His opinion on actuarial matters is filed as an
exhibit to the Registration Statement We filed with the Securities
and Exchange Commission.
ADDITIONAL INFORMATION
We have filed a Registration Statement relating to the Separate
Account and the variable life insurance contract described in this
prospectus with the Securities and Exchange Commission. The
Registration Statement, which is required by the Securities Act of
1933, includes additional information that is not required in this
prospectus under the rules and regulations of the SEC. If You
would like the additional information, You may obtain it from the
SEC's main office in Washington, DC You will have to pay a fee
for the material.
Management of Midland
Here is a list of our directors and officers.
Directors
Name Principal Occupation and Business Address
John C. Watson Chief Executive Officer & Chairman
of the Board
Midland National Life, One Midland Plaza, Sioux
Falls, SD 57193
Michael M. Masterson President and Chief
Operating Officer
Midland National Life, One Midland Plaza, Sioux
Falls, SD 57193
William D. Sims Senior Vice President,
Administration
Midland National Life, One Midland Plaza Sioux
Falls, SD 57193
Russell A. Evenson Senior Vice President & Actuary
Midland National Life, One Midland Plaza Sioux
Falls, SD 57193
John J. Craig, II Senior Vice President & Chief
Financial Officer
Midland National Life, One Midland Plaza Sioux
Steven C. Palmitier Senior Vice President & Chief
Marketing Officer
Midland National Life, One Midland Plaza Sioux
Falls, SD 57193
Robert W. Korba Board of Directors Member
Sammons Enterprises, Inc., 300 Crescent CT.,
Dallas, TX 75201
James N. Whitson Board of Directors Member
Sammons Enterprises, Inc., 300 Crescent CT.,
Dallas, TX 75201
Executive Officers (other than Directors)
Jack L. Briggs Vice President, Secretary and General
Counsel
Gary W. Helder Vice President, Policy
Administration
E John Fromelt Senior Vice President & Chief
Investment Officer
Appendix
Illustrations of Contract Funds, Cash Surrender Values and Death
Benefits
Following are a series of tables that illustrate how the contract
funds, cash surrender values, and death benefits of a contract
change with the investment performance of the Funds. The tables
show how the contract funds, cash surrender values, and death
benefits of a contract issued to an insured of a given age and given
premium would vary over time if the return on the assets held in
each Portfolio of the Funds were a constant gross, after tax annual
rate of 0%, 6%, or 12%. The tables on pages 29 through 31
illustrate a contract issued to a male, age 25, under a standard rate
preferred non-smoker underwriting risk classification. The tables
on pages 32 through 34 illustrate a contract issued to a male, age
40, under a standard rate preferred non-smoker underwriting risk
classification. The contract funds, cash surrender values, and death
benefits would be different from those shown if the returns
averaged 0%, 6%, and 12% over a period of years, but fluctuated
above and below those averages for individual contract years.
The amount of the contract fund exceeds the cash surrender value
during the first fifteen contract years due to the surrender charge.
For contract years sixteen and after, the contract fund and cash
surrender value are equal, since the surrender charge has reduced to
zero.
The second column shows the accumulation value of the premiums
paid at the stated interest rate. The third and sixth columns
illustrate the contract funds and the fourth and seventh columns
illustrate the cash surrender values of the contract over the
designated period. The contract funds shown in the third column
and the cash values shown in the fourth column assume the
monthly charge for cost of insurance is based upon the current cost
of insurance rates. The contract funds shown in the sixth column
and the cash surrender values shown in the seventh column assume
the monthly charge for cost of insurance is based upon the cost of
insurance rates that we guarantee. The maximum cost of insurance
rates allowable under the contract are based on the Commissioner's
1980 Standard Ordinary Mortality Table. The fifth and eighth
columns illustrate the death benefit of a contract over the
designated period. The illustrations of death benefits reflect the
same assumptions as the contract fund and cash surrender values.
The death benefit values also vary between tables, depending upon
whether Option 1 or Option 2 death benefits are illustrated.
The amounts shown for the death benefit, contract funds, and cash
surrender values reflect the fact that the net investment return of
the divisions of our Separate Account is lower than the gross, after-
tax return on the assets in the Funds, as a result of expenses paid by
the Funds and charges levied against the divisions of our Separate
Account. The illustrations also reflect the 4% sales charge
deduction from each premium, the 2.5% premium tax deduction
from each premium and the $7.00 per month expense charge
(for the first fifteen years on a current basis) as well as current and
guaranteed cost of insurance charges.
The contract values shown assume daily investment advisory fees
and operating expenses equivalent to an annual rate of .66% of the
aggregate average daily net assets of the Portfolios of the Funds
(the average rate of the Portfolios for December, 1995). The actual
fees and expenses associated with the contract may be more or less
than .66% and will depend on how allocations are made to each
investment division. The contract values also take into account a
daily charge to each division of Separate Account A for assuming
mortality and expense risks and administrative charges which is
equivalent to a charge at an annual rate of .90% (.50% after year 10
on a current basis) of the average net assets of the divisions of
Separate Account A. After deductions of these amounts, the
illustrated gross investment rates of 0%, 6%, and 12% correspond
to approximate net annual rates of -1.56%, 4.44%, and 10.44%,
respectively (-1.16%, 4.84%, 10.84% after year 10 on a current
basis).
The hypothetical values shown in the tables do not reflect any
charges for federal income taxes against Separate Account A since
Midland is not currently making such charges. However, if, in the
future, such charges are made, the gross annual investment rate of
return would have to exceed the stated investment rates by a
sufficient amount to cover the tax charges in order to produce the
contract funds, cash surrender values, and death benefits
illustrated.
The tables illustrate the contract values that would result based on
hypothetical investment rates of return if premiums are paid in full
at the beginning of each year and if no contract loans have been
made. The values would vary from those shown if the assumed
annual premium payments were paid in installments during a year.
The values would also vary if the contract owner varied the amount
or frequency of premium payments. The tables also assume that the
contract owner has not requested an increase or decrease in
Specified Amount, that no withdrawals have been made and no
withdrawal charges imposed, that no contract loans have been
taken, and that no transfers have been made and no transfer charges
imposed.
<TABLE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
CONTRACT
DEATH BENEFIT OPTION 1 ASSUMED
HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 25
ANNUAL RATE OF RETURN: 0%
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED
ANNUAL PREMIUM(1): $ 750
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED
OF AT 5% INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH
YEAR PER YEAR FUND(2) VALUE(2) BENEFIT(2) FUND(2) VALUE(2) BEN (2)
<S> <C> <C> <C> <C> <C> <C> <C>
1 788 495 19 100,000 453 0 100,000
2 1,614 982 469 100,000 912 399 100,000
3 2,483 1,451 900 100,000 1,364 814 100,000
4 3,394 1,913 1,325 100,000 1,810 1,222 100,000
5 4,351 2,368 1,742 100,000 2,249 1,624 100,000
6 5,357 2,816 2,153 100,000 2,682 2,019 100,000
7 6,412 3,259 2,558 100,000 3,109 2,409 100,000
8 7,520 3,694 2,956 100,000 3,519 2,781 100,000
9 8,683 4,124 3,349 100,000 3,923 3,147 100,000
10 9,905 4,547 3,734 100,000 4,309 3,496 100,000
11 11,188 4,985 4,276 100,000 4,691 3,982 100,000
12 12,535 5,407 4,815 100,000 5,055 4,463 100,000
13 13,949 5,813 5,351 100,000 5,404 4,941 100,000
14 15,434 6,205 5,886 100,000 5,736 5,417 100,000
15 16,993 6,581 6,421 100,000 6,053 5,894 100,000
16 18,630 7,031 7,031 100,000 6,343 6,343 100,000
17 20,349 7,467 7,467 100,000 6,619 6,619 100,000
18 22,154 7,876 7,876 100,000 6,868 6,868 100,000
19 24,049 8,270 8,270 100,000 7,092 7,092 100,000
20 26,039 8,639 8,639 100,000 7,292 7,292 100,000
21 28,129 8,983 8,983 100,000 7,467 7,467 100,000
22 30,323 9,313 9,313 100,000 7,618 7,618 100,000
23 32,626 9,629 9,629 100,000 7,734 7,734 100,000
24 35,045 9,921 9,921 100,000 7,827 7,827 100,000
25 37,585 10,200 10,200 100,000 7,886 7,886 100,000
30 52,321 11,299 11,299 100,000 7,469 7,469 100,000
35 71,127 11,691 11,691 100,000 5,310 5,310 100,000
40 95,130 10,597 10,597 100,000 100 100 100,000
<FN>
ASSUMES A $750 PREMIUM IS PAID AT THE BEGINNING
OF EACH CONTRACT YEAR. VALUES WOULD BE
DIFFERENT IF PREMIUMS ARE PAID WITH A DIFFERENT
FREQUENCY OR IN DIFFERENT AMOUNTS.
ASSUMES THAT NO CONTRACT LOANS OR
WITHDRAWALS HAVE BEEN MADE. ZERO VALUES
INDICATE LAPSE IN THE ABSENCE OF AN ADDITIONAL
PREMIUM PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN
SHOWN ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL
INVESTMENT RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS BY THE OWNER AND DIFFERENT
INVESTMENT RATES OF RETURN FOR THE FUND SERIES.
THE CONTRACT FUND, SURRENDER VALUE AND DEATH
BENEFIT FOR A CONTRACT WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT
RATES OF RETURN AVERAGED OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR THE INDIVIDUAL CONTRACT YEARS. NO
REPRESENTATION CAN BE MADE BY MIDLAND, THE
SEPARATE ACCOUNT, OR THE FUND THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
</TABLE>
<TABLE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
CONTRACT
DEATH BENEFIT OPTION 1 ASSUMED
HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 25
ANNUAL RATE OF RETURN: 6%
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED
ANNUAL PREMIUM(1): $ 750
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED
OF AT 5% INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH
YEAR PER YEAR FUND(2) VALUE(2) BENEFIT(2) FUND(2) VALUE(2) BEN (2)
<S> <C> <C> <C> <C> <C> <C> <C>
1 788 530 55 100,000 488 12 100,000
2 1,614 1,085 572 100,000 1,010 497 100,000
3 2,483 1,652 1,102 100,000 1,556 1,006 100,000
4 3,394 2,246 1,658 100,000 2,127 1,539 100,000
5 4,351 2,867 2,241 100,000 2,725 2,099 100,000
6 5,357 3,516 2,853 100,000 3,350 2,687 100,000
7 6,412 4,194 3,494 100,000 4,003 3,303 100,000
8 7,520 4,904 4,166 100,000 4,675 3,937 100,000
9 8,683 5,646 4,870 100,000 5,378 4,602 100,000
10 9,905 6,422 5,609 100,000 6,102 5,289 100,000
11 11,188 7,261 6,552 100,000 6,859 6,150 100,000
12 12,535 8,131 7,539 100,000 7,639 7,047 100,000
13 13,949 9,033 8,570 100,000 8,445 7,982 100,000
14 15,434 9,968 9,649 100,000 9,276 8,957 100,000
15 16,993 10,940 10,780 100,000 10,136 9,976 100,000
16 18,630 12,042 12,042 100,000 11,013 11,013 100,000
17 20,349 13,188 13,188 100,000 11,921 11,921 100,000
18 22,154 14,371 14,371 100,000 12,850 12,850 100,000
19 24,049 15,604 15,604 100,000 13,801 13,801 100,000
20 26,039 16,879 16,879 100,000 14,777 14,777 100,000
21 28,129 18,198 18,198 100,000 15,779 15,779 100,000
22 30,323 19,576 19,576 100,000 16,809 16,809 100,000
23 32,626 21,014 21,014 100,000 17,857 17,857 100,000
24 35,045 22,507 22,507 100,000 18,937 18,937 100,000
25 37,585 24,068 24,068 100,000 20,040 20,040 100,000
30 52,321 32,947 32,947 100,000 25,778 25,778 100,000
35 71,127 43,890 43,890 100,000 31,591 31,591 100,000
40 95,130 57,198 57,198 100,000 36,779 36,779 100,000
<FN>
ASSUMES A $750 PREMIUM IS PAID AT THE BEGINNING
OF EACH CONTRACT YEAR. VALUES WOULD BE
DIFFERENT IF PREMIUMS ARE PAID WITH A DIFFERENT
FREQUENCY OR IN DIFFERENT AMOUNTS.
ASSUMES THAT NO CONTRACT LOANS OR
WITHDRAWALS HAVE BEEN MADE. ZERO VALUES
INDICATE LAPSE IN THE ABSENCE OF AN ADDITIONAL
PREMIUM PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN
SHOWN ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL
INVESTMENT RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS BY THE OWNER AND DIFFERENT
INVESTMENT RATES OF RETURN FOR THE FUND SERIES.
THE CONTRACT FUND, SURRENDER VALUE AND DEATH
BENEFIT FOR A CONTRACT WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT
RATES OF RETURN AVERAGED OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR THE INDIVIDUAL CONTRACT YEARS. NO
REPRESENTATION CAN BE MADE BY MIDLAND, THE
SEPARATE ACCOUNT, OR THE FUND THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
</TABLE>
<TABLE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
CONTRACT
DEATH BENEFIT OPTION 1 ASSUMED
HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 25
ANNUAL RATE OF RETURN: 0%
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED
ANNUAL PREMIUM(1): $ 750
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED
OF AT 5% INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH
YEAR PER YEAR FUND(2) VALUE(2) BENEFIT(2) FUND(2) VALUE(2) BEN (2)
<S> <C> <C> <C> <C> <C> <C> <C>
1 788 566 91 100,000 522 47 100,000
2 1,614 1,192 679 100,000 1,112 599 100,000
3 2,483 1,872 1,321 100,000 1,765 1,214 100,000
4 3,394 2,623 2,035 100,000 2,486 1,899 100,000
5 4,351 3,454 2,829 100,000 3,285 2,659 100,000
6 5,357 4,373 3,710 100,000 4,168 3,505 100,000
7 6,412 5,389 4,688 100,000 5,144 4,444 100,000
8 7,520 6,512 5,774 100,000 6,212 5,474 100,000
9 8,683 7,754 6,979 100,000 7,393 6,618 100,000
10 9,905 9,127 8,314 100,000 8,689 7,876 100,000
11 11,188 10,685 9,976 100,000 10,121 9,413 100,000
12 12,535 12,402 11,810 100,000 11,695 11,103 100,000
13 13,949 14,297 13,834 100,000 13,425 12,962 100,000
14 15,434 16,389 16,070 100,000 15,329 15,010 100,000
15 16,993 18,702 18,543 100,000 17,425 17,265 100,000
16 18,630 21,355 21,355 100,000 19,724 19,724 100,000
17 20,349 24,291 24,291 100,000 22,259 22,259 100,000
18 22,154 27,532 27,532 100,000 25,047 25,047 100,000
19 24,049 31,124 31,124 100,000 28,116 28,116 100,000
20 26,039 35,097 35,097 100,000 31,497 31,497 100,000
21 28,129 39,496 39,496 100,000 35,227 35,227 100,000
22 30,323 44,378 44,378 100,000 39,345 39,345 100,000
23 32,626 49,798 49,798 101,091 43,888 43,888 100,000
24 35,045 55,798 55,798 109,923 48,911 48,911 100,000
25 37,585 62,434 62,434 119,248 54,462 54,462 104,022
30 52,321 107,795 107,795 169,238 91,725 91,725 144,008
35 71,127 183,096 183,096 245,348 151,775 151,775 203,378
40 95,130 307,657 307,657 375,341 248,319 248,319 302,949
<FN>
ASSUMES A $750 PREMIUM IS PAID AT THE BEGINNING
OF EACH CONTRACT YEAR. VALUES WOULD BE
DIFFERENT IF PREMIUMS ARE PAID WITH A DIFFERENT
FREQUENCY OR IN DIFFERENT AMOUNTS.
ASSUMES THAT NO CONTRACT LOANS OR
WITHDRAWALS HAVE BEEN MADE. ZERO VALUES
INDICATE LAPSE IN THE ABSENCE OF AN ADDITIONAL
PREMIUM PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN
SHOWN ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL
INVESTMENT RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS BY THE OWNER AND DIFFERENT
INVESTMENT RATES OF RETURN FOR THE FUND SERIES.
THE CONTRACT FUND, SURRENDER VALUE AND DEATH
BENEFIT FOR A CONTRACT WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT
RATES OF RETURN AVERAGED OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR THE INDIVIDUAL CONTRACT YEARS. NO
REPRESENTATION CAN BE MADE BY MIDLAND, THE
SEPARATE ACCOUNT, OR THE FUND THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
</TABLE>
<TABLE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
CONTRACT
DEATH BENEFIT OPTION 1 ASSUMED
HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 25
ANNUAL RATE OF RETURN: 0%
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED
ANNUAL PREMIUM(1): $ 750
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED
OF AT 5% INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH
YEAR PER YEAR FUND(2) VALUE(2) BENEFIT(2) FUND(2) VALUE(2) BEN (2)
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,575 1,115 459 100,000 1,062 406 100,000
2 3,229 2,203 1,472 100,000 2,099 1,368 100,000
3 4,965 3,253 2,447 100,000 3,099 2,293 100,000
4 6,788 4,278 3,397 100,000 4,063 3,182 100,000
5 8,703 5,267 4,310 100,000 4,993 4,037 100,000
6 10,713 6,220 5,189 100,000 5,888 4,857 100,000
7 12,824 7,150 6,044 100,000 6,751 5,645 100,000
8 15,040 8,057 6,876 100,000 7,570 6,389 100,000
9 17,367 8,931 7,675 100,000 8,358 7,102 100,000
10 19,810 9,783 8,452 100,000 9,105 7,774 100,000
11 22,376 10,659 9,487 100,000 9,801 8,629 100,000
12 25,069 11,506 10,518 100,000 10,447 9,459 100,000
13 27,898 12,325 11,547 100,000 11,044 10,266 100,000
14 30,868 13,118 12,574 100,000 11,572 11,029 100,000
15 33,986 13,884 13,611 100,000 12,044 11,771 100,000
16 37,261 14,714 14,714 100,000 12,439 12,439 100,000
17 40,699 15,508 15,508 100,000 12,759 12,759 100,000
18 44,309 16,267 16,267 100,000 13,004 13,004 100,000
19 48,099 16,982 16,982 100,000 13,155 13,155 100,000
20 52,079 17,643 17,643 100,000 13,213 13,213 100,000
21 56,258 18,243 18,243 100,000 13,167 13,167 100,000
22 60,646 18,782 18,782 100,000 12,998 12,998 100,000
23 65,253 19,252 19,252 100,000 12,685 12,685 100,000
24 70,091 19,644 19,644 100,000 12,215 12,215 100,000
25 75,170 19,949 19,949 100,000 11,565 11,565 100,000
30 104,641 19,854 19,854 100,000 4,840 4,840 100,000
35 142,254 16,717 16,717 100,000 0 0 0
40 190,260 8,451 8,451 100,000 0 0 0
<FN>
ASSUMES A $1500 PREMIUM IS PAID AT THE BEGINNING
OF EACH CONTRACT YEAR. VALUES WOULD BE
DIFFERENT IF PREMIUMS ARE PAID WITH A DIFFERENT
FREQUENCY OR IN DIFFERENT AMOUNTS.
ASSUMES THAT NO CONTRACT LOANS OR
WITHDRAWALS HAVE BEEN MADE. ZERO VALUES
INDICATE LAPSE IN THE ABSENCE OF AN ADDITIONAL
PREMIUM PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN
SHOWN ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL
INVESTMENT RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS BY THE OWNER AND DIFFERENT
INVESTMENT RATES OF RETURN FOR THE FUND SERIES.
THE CONTRACT FUND, SURRENDER VALUE AND DEATH
BENEFIT FOR A CONTRACT WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT
RATES OF RETURN AVERAGED OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR THE INDIVIDUAL CONTRACT YEARS. NO
REPRESENTATION CAN BE MADE BY MIDLAND, THE
SEPARATE ACCOUNT, OR THE FUND THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
</TABLE>
<TABLE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
CONTRACT
DEATH BENEFIT OPTION 1 ASSUMED
HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 25
ANNUAL RATE OF RETURN: 0%
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED
ANNUAL PREMIUM(1): $ 750
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED
OF AT 5% INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH
YEAR PER YEAR FUND(2) VALUE(2) BENEFIT(2) FUND(2) VALUE(2) BEN (2)
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,575 1,191 535 100,000 1,136 480 100,000
2 3,229 2,425 1,693 100,000 2,314 1,582 100,000
3 4,965 3,692 2,886 100,000 3,523 2,717 100,000
4 6,788 5,007 4,126 100,000 4,766 3,884 100,000
5 8,703 6,360 5,404 100,000 6,045 5,088 100,000
6 10,713 7,755 6,723 100,000 7,362 6,331 100,000
7 12,824 9,204 8,097 100,000 8,720 7,614 100,000
8 15,040 10,710 9,529 100,000 10,110 8,929 100,000
9 17,367 12,267 11,011 100,000 11,546 10,290 100,000
10 19,810 13,888 12,557 100,000 13,021 11,690 100,000
11 22,376 15,636 14,464 100,000 14,526 13,354 100,000
12 25,069 17,455 16,468 100,000 16,064 15,077 100,000
13 27,898 19,349 18,571 100,000 17,640 16,862 100,000
14 30,868 21,323 20,779 100,000 19,235 18,691 100,000
15 33,986 23,382 23,109 100,000 20,864 20,591 100,000
16 37,261 25,625 25,625 100,000 22,511 22,511 100,000
17 40,699 27,961 27,961 100,000 24,180 24,180 100,000
18 44,309 30,396 30,396 100,000 25,875 25,875 100,000
19 48,099 32,929 32,929 100,000 27,582 27,582 100,000
20 52,079 35,560 35,560 100,000 29,306 29,306 100,000
21 56,258 38,290 38,290 100,000 31,042 31,042 100,000
22 60,646 41,129 41,129 100,000 32,781 32,781 100,000
23 65,253 44,080 44,080 100,000 34,509 34,509 100,000
24 70,091 47,147 47,147 100,000 36,226 36,226 100,000
25 75,170 50,338 50,338 100,000 37,921 37,921 100,000
30 104,641 68,520 68,520 100,000 45,858 45,858 100,000
35 142,254 92,460 92,460 100,000 51,592 51,592 100,000
40 190,260 124,196 124,196 130,405 51,239 51,239 100,000
<FN>
ASSUMES A $1500 PREMIUM IS PAID AT THE BEGINNING
OF EACH CONTRACT YEAR. VALUES WOULD BE
DIFFERENT IF PREMIUMS ARE PAID WITH A DIFFERENT
FREQUENCY OR IN DIFFERENT AMOUNTS.
ASSUMES THAT NO CONTRACT LOANS OR
WITHDRAWALS HAVE BEEN MADE. ZERO VALUES
INDICATE LAPSE IN THE ABSENCE OF AN ADDITIONAL
PREMIUM PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN
SHOWN ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL
INVESTMENT RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS BY THE OWNER AND DIFFERENT
INVESTMENT RATES OF RETURN FOR THE FUND SERIES.
THE CONTRACT FUND, SURRENDER VALUE AND DEATH
BENEFIT FOR A CONTRACT WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT
RATES OF RETURN AVERAGED OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR THE INDIVIDUAL CONTRACT YEARS. NO
REPRESENTATION CAN BE MADE BY MIDLAND, THE
SEPARATE ACCOUNT, OR THE FUND THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
</TABLE>
<TABLE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
CONTRACT
DEATH BENEFIT OPTION 1 ASSUMED
HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 25
ANNUAL RATE OF RETURN: 0%
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED
ANNUAL PREMIUM(1): $ 750
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED
OF AT 5% INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH
YEAR PER YEAR FUND(2) VALUE(2) BENEFIT(2) FUND(2) VALUE(2) BEN (2)
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,575 1,266 610 100,000 1,210 554 100,000
2 3,229 2,655 1,924 100,000 2,538 1,806 100,000
3 4,965 4,168 3,361 100,000 3,983 3,177 100,000
4 6,788 5,830 4,948 100,000 5,560 4,678 100,000
5 8,703 7,646 6,690 100,000 7,282 6,326 100,000
6 10,713 9,634 8,603 100,000 9,168 8,137 100,000
7 12,824 11,824 10,718 100,000 11,236 10,129 100,000
8 15,040 14,239 13,058 100,000 13,494 12,313 100,000
9 17,367 16,893 15,636 100,000 15,977 14,721 100,000
10 19,810 19,823 18,491 100,000 18,700 17,369 100,000
11 22,376 23,144 21,972 100,000 21,681 20,509 100,000
12 25,069 26,819 25,832 100,000 24,952 23,964 100,000
13 27,898 30,890 30,112 100,000 28,547 27,769 100,000
14 30,868 35,403 34,859 100,000 32,490 31,946 100,000
15 33,986 40,410 40,137 100,000 36,833 36,560 100,000
16 37,261 46,067 46,067 100,000 41,612 41,612 100,000
17 40,699 52,346 52,346 100,000 46,884 46,884 100,000
18 44,309 59,325 59,325 100,000 52,716 52,716 100,000
19 48,099 67,083 67,083 100,000 59,171 59,171 100,000
20 52,079 75,715 75,715 101,458 66,337 66,337 100,000
21 56,258 85,294 85,294 110,882 74,309 74,309 100,000
22 60,646 95,882 95,882 122,729 83,173 83,173 106,462
23 65,253 107,586 107,586 135,559 92,921 92,921 117,081
24 70,091 120,523 120,523 149,449 103,630 103,630 128,502
25 75,170 134,824 134,824 164,485 115,397 115,397 140,784
30 104,641 232,169 232,169 269,317 193,859 193,859 224,876
35 142,254 393,421 393,421 420,960 319,735 319,735 342,117
40 190,260 662,394 662,394 695,514 524,305 524,305 550,520
<FN>
ASSUMES A $1500 PREMIUM IS PAID AT THE BEGINNING
OF EACH CONTRACT YEAR. VALUES WOULD BE
DIFFERENT IF PREMIUMS ARE PAID WITH A DIFFERENT
FREQUENCY OR IN DIFFERENT AMOUNTS.
ASSUMES THAT NO CONTRACT LOANS OR
WITHDRAWALS HAVE BEEN MADE. ZERO VALUES
INDICATE LAPSE IN THE ABSENCE OF AN ADDITIONAL
PREMIUM PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN
SHOWN ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL
INVESTMENT RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS BY THE OWNER AND DIFFERENT
INVESTMENT RATES OF RETURN FOR THE FUND SERIES.
THE CONTRACT FUND, SURRENDER VALUE AND DEATH
BENEFIT FOR A CONTRACT WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT
RATES OF RETURN AVERAGED OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR THE INDIVIDUAL CONTRACT YEARS. NO
REPRESENTATION CAN BE MADE BY MIDLAND, THE
SEPARATE ACCOUNT, OR THE FUND THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
Financial Statements
The financial statements of Midland National Life Insurance
Company included in this prospectus should be distinguished from
the financial statements of the Midland National Life Separate
Account A and should be considered only as bearing upon the
ability of Midland to meet its obligations under the Contracts. They
should not be considered as bearing upon the investment
performance of the assets held in the separate account.
<PAGE>
28 VARIABLE UNIVERSAL LIFE 3
VARIABLE UNIVERSAL LIFE 3 1
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securi-
ties Exchange Act of 1934, the undersigned registrant hereby undertakes
to file with the Securities and Exchange Commission such supplementary
and periodic information, documents, and reports as may be prescribed by
any rule or regulation of the Commission heretofore, or hereafter duly
adopted pursuant to authority conferred in that section.
RULE 484 UNDERTAKING
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling per-
sons of the registrant pursuant to the foregoing provisions, or other-
wise, the registrant has been advised that in the opinion of the Securi-
ties and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such indemnifi-
cation by it is against public policy as expressed in the Act and will
be governed by the final jurisdiction of such issue.
UNDRTAKE VULVUL2
<PAGE>
REPRESENTATIONS PURSUANT TO SECTION 26 (e) OF THE INVESTMENT COMPANY
ACT
Midland National Life Insurance Company hereby represents that the
fees and charges deducted under the Contract, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected
to be incurred, and the risks assumed by Midland National Life Insurance
Company.
REP26E VUL3VEUL
<PAGE>
VUL3/VEUL
CONTENTS OF REGISTRATION STATEMENT
----------------------------------
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
The prospectus consisting of 35 pages.
The undertaking to file reports.
Representations pursuant to Section 26(e) pf the Investment Company Act
The signatures.
Written consents of the following persons:
(a) Jack L. Briggs **
(b) Messrs. Sutherland, Asbill & Brennan. **
(c) Russell A. Evenson, FSA. **
(d) Coopers & Lybrand. **
The following exhibits:
1. The following exhibits correspond to those required by paragraph A of
the instructions as to the exhibits in Form N-8B-2:
(1) Resolution of the Board of Directors of Midland National Life
establishing the Separate Account A. *
(2) Not applicable.
(3) (a) Principal Underwriting Agreement. **
(b) Selling Agreement. **
(c) Commission schedule. **
(4) Not applicable.
(5) Form of Contract and riders **
(6) (a) Articles of Incorporation of Midland National Life. *
(b) By-Laws of Midland National Life. *
(7) Not applicable.
(8) Participation Agreements for Fidelity Distributors Corporation/
Variable Insurance Products Fund, and Variable Products Fund II. *
(9) Not applicable.
(10) Application Form. **
(11) Memorandum describing Midland National Life's issuance, transfer
and redemption procedures for the Contract. *
2. See Exhibit 1(5).
---
3. Opinion and Consent of Jack L. Briggs. **
4. No financial statements are omitted from the Prospectus pursuant to
Instruction 1(b) or (c) or Part I.
5. Not applicable.
6. Opinion and Consent of Russell A. Evenson, Senior Vice President and Actuary
of Midland National Life. **
7. Consent of Messrs. Sutherland, Asbill & Brennan. **
8. Consent of Coopers & Lybrand. **
- -----------------------
* Incorporated by reference File No. 33-76318
** Filed herewith
CONTENTS VUL3VEUL
<PAGE>
January 06, 1997
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
Gentlemen:
With reference to the Registration Statement on Form S-6 as amended,
filed by Midland National Life Insurance Company and Midland National
Life Separate Account A with the Securities and Exchange Commission
covering flexible premium variable life insurance contracts, I have
examined such documents and such law as I considered necessary and
appropriate, and on the basis of such examination, it is my opinion
that:
1. Midland National Life Insurance Company is duly organized and
validly existing under the laws of the State of South Dakota and
has been duly authorized to issue individual flexible premium
variable life insurance policies by the Insurance Department of
the state of South Dakota.
2. Midland National Life Separate Account A is a duly authorized and
existing separate account established pursuant to the provisions
of Chapter 58-28 of the Insurance Code of South Dakota.
3. The flexible premium variable life insurance contracts, when
issued as contemplated by said Form S-6 Registration Statement,
will constitute legal, validly issued and binding obligations of
Midland National Life Insurance Company.
I hereby consent to the filing of this opinion as an exhibit to said S-6
Registration Statement and the use of my name under the caption "Legal
Matters" in the Prospectus contained in the Registration Statement.
Sincerely,
__Jack_L._Briggs__
Jack L. Briggs
Vice President, Secretary and General Counsel
VULJLB LTR
<PAGE>
January 3, 1997
Midland National Life
Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
RE: VUL3
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus included as part of Pre-Effective Amendment
No. 1 to the Registration Statement on Form S-6 filed by Midland National
Life Insurance Company Separate Account A for certain variable life
insurance contracts (File No. 333-14061). In giving this consent, we do
not admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933.
Very Truly Yours,
SUTHERLAND, ASBILL & BRENNAN, L.L.P.
By: __Frederick_R._Bellamy__
Frederick R. Bellamy
VUL3FRED CONSENT
<PAGE>
January 08, 1997
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
Gentlemen:
This opinion is furnished in connection with the filing of Pre-
Effective Amendment No. 1 to Registration Statement No. 333-14061
S-6 ("Registration Statement") which covers premiums expected to be
received under the flexible premium Variable Life Insurance 3 policy
("Policy") to be offered by Midland National Life Insurance Company.
The Prospectus included in the Registration Statement describes policies
which will be offered by Midland in each State where they have been
approved by appropriate State insurance authorities. The policy form
was prepared under my direction, and I am familiar with the Registration
Statement and Exhibits thereto. In my opinion:
The illustrations of death benefits, contract fund and accumulated
premiums in Appendix A of the Prospectus included in the Registration
Statement (the "Prospectus"), based on the assumptions stated in the
illustrations, are consistent with the provisions of the Contract.
The rate structure of the Contracts has not been designed so as to
make the relationship between premiums and benefits, as shown in
the illustrations, appear to be correspondingly more favorable to
prospective purchasers of Contracts aged 25 or 40 in the underwriting
classes illustrated than to prospective purchasers of Contracts at
other ages or underwriting classes.
I hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to use of my name under the heading "Experts"
in the Prospectus.
Sincerely,
__Russell_ A._Evenson__
Russell A. Evenson, FSA, CLU, ChFC
Senior Vice President and Actuary
SEC0501 VUL3RAE
<PAGE>
Consent of Independent Accountants
We consent to the inclusion in this Registration Statement under the
Securities Act of 1933 (Pre Effective Amendement Number 1) on Form
S-6 (file number 333-14061) and related Prospectus of our reports dated
March 8, 1996, on our audits of the financial statements of Midland
National Life Separated Account A and the consolidated financial
statements of Midland National Life Insurance Company. We also consent
to the reference to our firm under the caption "Financial and Actuarial."
Coopers & Lybrand L.L.P.
Minneapolis, Minnesota
January 31, 1997
<PAGE>
PRINCIPAL UNDERWRITING AGREEMENT
THIS UNDERWRITING AGREEMENT made this 1st
day of June ,
1996, by and between Walnut Street Securities (hereinafter called WSS)
and Midland National Life Insurance Company (hereinafter called the
Company), on its own behalf and on behalf of Midland National Life
Insurance Separate Account A and Separate Account C (hereinafter
Separate Accounts), separate accounts of the Company, witnessed that:
WHEREAS, the Separate Accounts were established under
authority of a resolution of the Companys Board of Directors so the
Company could set aside and invest assets attributable to certain flexible
premium variable life contracts and variable deferred annuity contracts
(hereinafter called the Contracts) issued by the Company;
WHEREAS, the Company has registered the Separate
Accounts as unit investment trusts under the Investment Company Act of
1940 (the Investment Company Act) and has registered the Contracts
under the Securities Act of 1933;
WHEREAS, the Company and the Separate Accounts desire to
have Contracts sold and distributed through WSS and WSS is willing to
sell and distribute such Contracts under the terms stated hereinafter.
NOW THEREFORE, for and in consideration of these premises
and the covenants and agreements hereinafter stated, the parties hereto
agree as follows:
1. The Company grants to WSS the right to be, and WSS agrees to
serve as, a distributor and principal underwriter of the Contracts
during the term of this Agreement. WSS agrees to use its best
efforts to solicit applications for the Contracts, and to undertake, at
its own expense, to provide all sales services relative to the
Contracts and otherwise to perform all duties and functions which
are necessary and proper for the distribution of the Contracts.
2. All premiums for the Contracts shall be remitted promptly in full
together with such application forms and any other required
documentation to the Company. Checks or money orders in
payment of premium shall be drawn to the order of Midland National
Life Insurance Company.
3. WSS agrees to offer the Contracts for sale in accordance with the
prospectus therefor then in effect. WSS is not authorized to give any
information or to make any representations concerning the Contracts
other than those contained in the current prospectus therefor filed
with the Securities and Exchange Commission or in such sales
literature as may be authorized by the Company. Neither WSS nor
any person, entity, agent or representative or associated through it
shall make, use or provide any advertisement, sales document,
circular, or any other document to a customer in connection with a
solicitation or sale unless with the prior approval of the Company.
4. On behalf of the Separate Accounts, the Company shall furnish
WSS with copies of all prospectuses, financial statements and other
documents which WSS reasonably requests for use in connection
with the distribution of the Contracts.
5. WSS represents that it is duly registered as a broker-dealer under
the Securities Exchange Act and is a member in good standing of
the NASD and, to the extent necessary to offer the Contracts, shall
be duly registered or otherwise qualified under the securities and
insurance laws of any state or other jurisdiction. WSS shall be
responsible for carrying out its sales and underwriting obligations
hereunder in continued compliance with the NASD Rules of Fair
Practice and federal and state securities and insurance laws and
regulations. Without limiting the generality of the foregoing, WSS
agrees that it shall be fully responsible for:
(a) ensuring that no person shall offer or sell the Contracts on its
behalf until such person is duly registered as a representative
of WSS, duly licensed and appointed by the Company, and
appropriately licensed, registered, or otherwise qualified to offer
and sell such Contracts under the federal securities and
insurance laws and any applicable securities and insurance
laws of each state or other jurisdiction in which such Contracts
may be lawfully sold, in which the Company is licensed to sell
the Contracts, and in which such persons shall offer or sell the
Contracts; and
(b) training, supervising, and controlling of all such persons for
purposes of complying on a continuous basis with the NASD
Rules of Fair Practice and with federal and state securities and
insurance law requirements applicable in connection with the
offering and sale of the Contracts. In this connection WSS
shall:
(1) conduct such training (including the preparation and
utilization of training materials) as in the opinion of WSS is
necessary to accomplish the purposes of this Agreement;
(2) establish and implement reasonable written procedures
for supervision of sales practices of WSS agents,
representatives, or brokers selling the Contracts; and
(3) take all reasonable and appropriate steps to ensure that
its associated persons shall not sell a Contract in the
absence of reasonable grounds to believe that the
purchase of the Contract is suitable for such applicant.
6. Notwithstanding anything in this Agreement to the contrary, the
Company through WSS, may enter into sales agreements with other
independent broker-dealers for the sale of the Contracts. All such
sales agreements entered into by WSS shall provide that each
independent broker-dealer will assume full responsibility for
continued compliance by itself and its associated persons with the
NASD Rules of Fair Practice and applicable federal and state
securities and insurance laws. All associated persons of such
independent broker-dealers soliciting applications for the Contracts
shall be duly and appropriately licensed, contracted or appointed by
the Company for the sale of the Contracts under the insurance laws
of the applicable states or jurisdictions in which such Contracts may
be lawfully sold.
7. The Company shall apply for the proper insurance licenses in the
appropriate states or jurisdictions for the designated persons
associated with WSS or with other independent broker-dealers
which have entered into agreements with WSS for the sale of the
Contracts, provided that the Company reserves the right in its sole
discretion to refuse to appoint any proposed registered
representative as an agent or broker, and to terminate the insurance
license, contract or appointment of an agent or broker once
appointed. Agents and representatives associated with WSS and
other independent broker-dealers are deemed independent
contractors and nothing in this Agreement shall be construed to
create the relationship of employer and employee.
8. The Company and WSS shall cause to be maintained and preserved
for the periods prescribed such accounts, books, and other
documents as are required of them by the Investment Company Act,
the Security Exchange Act, the NASD, and any other applicable laws
and regulations. The books, accounts and records of the Company,
the Separate Accounts, and WSS as to all transactions hereunder
shall be maintained so as to disclose clearly and accurately the
nature and details of the transactions. The Company shall maintain
such books and records of WSS pertaining to the sale of the
Contracts and required by the Security Exchange Act or the NASD
as may be mutually agreed upon from time to time by the Company
and WSS; provided that such books and records shall be jointly
owned property of WSS and the Company, and shall at all times be
subject to such reasonable periodic, special or other examination by
the SEC, the NASD, and all other regulatory bodies having
jurisdiction. The Company shall have complete use of, and right to
the information contained in such books and records. The Company
shall be responsible for sending all required confirmations on
customer transactions in compliance with applicable regulations, as
modified by any exemptions or other relief obtained by the
Company. WSS shall cause the Company to be promptly furnished
with such reports as the Company may reasonably request for the
purpose of meeting its reporting and recordkeeping requirements
under all Federal and State Laws and Regulations, the Investment
Company Act, Security Exchange Act, the NASD, and the insurance
laws of the State of South Dakota and any other applicable states or
jurisdictions.
9. The Company shall have the responsibility for paying (i) all
commissions or other fees to its licensed or appointed
representatives and agents which are due for the sale of the
Contracts and (ii) any compensation to other independent broker-
dealers and their associated persons due for the sale of the
Contracts under the terms of any sales agreements between the
Company and with such broker-dealers. Notwithstanding the
preceding sentence, no associated person or broker-dealer shall
have an interest in any deductions or other fees payable to WSS as
set forth herein.
10. WSS and the Company agree to cooperate fully in any insurance
regulatory investigation or proceeding or judicial proceeding arising
in connection with the Contracts distributed under this Agreement.
WSS and the Company further agree to cooperate fully in any
securities regulatory inspection, inquiry, investigation or proceeding
or any judicial proceeding with respect to the Company, WSS, their
affiliates and their representatives to the extent that such inspection,
inquiry, investigation or proceeding is in connection with Contracts
distributed under this Agreement. Without limiting the foregoing:
(a) WSS will be notified promptly of any customer complaint or
notice of any regulatory inspection, inquiry, investigation or
proceeding received by the Company with respect to WSS or
any representative or which may affect the Companys
issuance of any Contract marketed under this Agreement.
(b) WSS will promptly notify the Company of any customer
complaint or notice of any regulatory inspection, inquiry,
investigation or proceeding received by WSS or its affiliates
with respect to WSS or any representative in connection with
any Contract distributed under this Agreement or any activity in
connection with any such Contract. In the case of a customer
complaint, WSS and the Company will cooperate in
investigating such complaint and arrive at a mutually
satisfactory response.
11. The services of WSS to the Separate Accounts hereunder are not to
be deemed exclusive and WSS shall be free to render similar
services to others so long as its services hereunder are not impaired
or interfered with thereby.
12. (a) This Agreement may be terminated by either party hereto upon
60 days written notice to the other party.
(b) This Agreement may be terminated upon written notice of one
party to the other party hereto in the event of bankruptcy or
insolvency of such party to which notice is given.
(c) This Agreement may be terminated at any time upon the
mutual written consent of the parties thereto.
(d) This Agreement shall automatically be terminated in the event
of its assignment.
(e) Upon termination of this Agreement, all authorizations, rights
and obligations shall cease except the obligations to settle
accounts hereunder, including payments of premiums or
contributions subsequently received for Contracts in effect at
the time of termination of the Contracts issued pursuant to
applications received by the Company prior to termination.
13. All notices, requests, demands, and other communications required
or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given and made upon being delivered
either by courier or fax delivery to the Party for whom it is intended,
provided that a copy thereof is deposited, postage prepaid, certified
or registered mail, return receipt requested, in the United States
mail, bearing the address shown in this Section 13 for, or such other
address as may be designated in writing hereafter by, such part;
(a) If to WSS: Walnut Street Securities, Inc.
670 Mason Ridge Center Drive
Suite 300
St. Louis, Missouri 63141
Attention: Nancy L. Gucwa
(b) If to the Company: Midland National Life Insurance
Company
One Midland Plaza
Sioux Falls, South Dakota 57193
Attention: Michael M. Masterson
14. This Agreement shall be subject to the provisions of Investment
Company Act and the Securities Exchange Act and the rules,
regulations, and rulings thereunder and of the NASD, from time to
time in effect, including such exemptions from the Investment
Company Act as the Securities and Exchange Commission may
grant, and the terms hereof shall be interpreted and construed in
accordance therewith. Without limiting the generality of the
foregoing, the term assigned shall not include any transaction
exempted from section 15(b)(2) of the Investment Company Act.
WSS shall submit to all regulatory and administrative bodies having
jurisdiction over the operations of the Separate Accounts, present or
future, any information, reports or other material which any such
body by reason of this Agreement may request or require pursuant
to applicable laws or regulations.
15. The Company agrees to reimburse WSS the estimated annual costs
WSS incurs in connection with certain financial reporting WSS has to
make relating to the sale of the Contracts described herein. Such
estimated annual costs shall be mutually agreed upon by WSS and
the Company for each calendar year on or before September of the
preceding year, except that the estimated costs for 1996 of Sixty-
Five Hundred Dollars ($6,500) shall be paid by the Company to
WSS within 20 days following the execution of this Agreement by
both parties. Within 20 days following the end of each calendar year
during the term of this Agreement, the Company shall make a
payment to WSS for the mutually agreed upon estimated costs.
16. Company shall indemnify and hold WSS, its officers, employees,
agents, and affiliated companies, harmless from all claims, actions,
suits, judgments, liabilities, losses, costs and expenses, including
reasonable attorneys fees, which result, directly or indirectly, from
any negligent act, omission or misrepresentation of Company,
arising out of the sale of the Contracts or for breach of the
Agreement.
WSS shall indemnify and hold the Company, its officers, employees,
agents, and its affiliated companies harmless from any and all
claims, actions, suits, judgments, liabilities, losses, costs and
expenses, including reasonable attorneys fees, which result, directly
or indirectly, from any negligent act, omission or misrepresentation of
WSS arising out of the sale of the Contracts or any of its
representatives or agents, or for breach of the Agreement.
The agreements of indemnification contained in this Paragraph 16
shall survive the termination of this Agreement and be binding on the
successors and assigns of the parties hereto.
17. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
18. This Agreement shall be construed and enforced in accordance with
the governed by the laws of the State of South Dakota.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their respective officials thereunder duly
authorized and seals to be affixed, as of the day and year first above
written.
MIDLAND
NATIONAL LIFE INSURANCE COMPANY
Attest:
Jack L. Briggs, Secretary
By:
Michael M.Masterson, President
WALNUT STREET
SECURITIES
Attest:
, Secretary
By:
Nancy L. Gucwa,
Chief Operating Officer
<PAGE>
REGISTERED REPRESENTATIVE AGREEMENT
BETWEEN
WALNUT STREET SECURITIES, INC.
AND
MIDLAND NATIONAL LIFE INSURANCE COMPANY
This Agreement is by and between Walnut Street Securities, Inc.
(hereafter referred to as "Company" , and the undersigned Registered
Representative (hereafter referred to as "Contractor" .
Whereas, Company is a securities broker/dealer licensed and
qualified to transact business pursuant to rules and regulations
promulgated by the Securities and Exchange Commission (SEC , the
National
Association of Securities Dealers, Inc. (NASD , and certain state
administrative authorities; and
Whereas, Contractor is currently a duly qualified and licensed
Registered Representative in good standing pursuant to the rules and
regulations of all applicable State and Federal administrative
authorities and regulatory associations; and
Whereas, the parties mutually desire to enter into this Agreement
so that Contractor may transact securities sales through Company under
the following terms and conditions:
Now therefore, in consideration of the mutual promises, conditions
and covenants as hereinafter set forth, the parties hereto agree as
follows:
1. BASIC ENGAGEMENT
Contractor is hereby engaged by the Company as an independent
contractor to solicit and obtain applications and orders for the
purchase and sale of investment company shares and other securities
and investments approved by Company. Contractor will represent
Company only in states where Company and Contractor are properly
licensed, and only with respect to the types of activities in which
Company and Contractor are legally permitted to engage. Contractor
shall make no solicitation for any securities until he/she has been
authorized by Company to do so.
2. DUTIES OF CONTRACTOR
Regulatory Compliance: Contractor shall familiarize himself/
herself with and at all times during the term of this Agreement
shall comply with, the rules and interpretations of the NASD,
regulations and rules of the SEC, and all other statutes,
regulations, and rules of the federal government and any state
governmental or regulatory agency which may now or thereafter
apply to Contractor's activities.
Licenses: Contractor shall timely apply for, obtain, and maintain
all necessary licenses, permits, and registrations as are required
by any statute, rule or regulation in connection with Contractor's
activities thereunder.
Supervisory Procedures Manual: Contractor shall at all times
strictly follow and adhere to the requirements and standards set
forth in Company's Supervisory Procedures Manual, including any
amendments added to it in the future, and any company policies not
contained in the Manual.
Sales Literature: Contractor shall not use in connection with his
activities hereunder, whether by direct mail, personal distribu-
tion of printed material, newspaper, radio, telephone, television,
or by any other media, any sales or advertising literature not
specifically authorized by Company for that purpose.
Selling Through Registered Representatives: Contractor shall
perform all securities selling and distribution activities alone
or only in conjunction with other Registered Representatives or
associated persons of Company unless otherwise approved in writing
by a Supervisory Officer of Company.
Work Schedule: Contractor shall be free to determine his/her own
working hours. However, Contractor shall be expected to attend
all staff meetings, briefings, and supervisory and educational
sessions to which he is invited by a Supervisory Officer of
Company.
Record Keeping: Contractor shall complete and maintain such files
and records as Company may require in its written supervisory
procedures.
Solicitation:
In soliciting the purchase or sale of any security, Contractor
shall fully disclose all material facts relating thereto (which
shall include delivery of a current prospectus, memorandum or
offering circular relating to such security , shall not make
any untrue statement or misrepresentation, or omit any material
fact concerning the securities involved, and shall fully
explain the terms of any contractual arrangements relating
thereto to the prospective purchaser or seller.
Contractor agrees, in connection with all solicitations, not to
take or recommend any action which he/she has reason to believe
is not suitable for or in the best interests of his/her client
or customer.
Contractor agrees to indemnify Company against any violations
of Paragraphs 2(H (I) or 2(H) (ii).
Approved Products: Contractor shall offer for sale and sell only
products that have been approved in advance by Company. Without
express prior written approval of Company, Contractor shall not
act for any customer in any dealings in securities except as a
representative of Company, and will not accept remuneration in any
form, directly or indirectly, on account of dealings in unapproved
securities.
Prohibition Against Commingling: Under no circumstances shall
Contractor commingle funds received from investors for securities
purchased with Contractor's own funds, whether in a personal,
business, trust, or special account. All funds so received shall
forthwith be forwarded to Company.
Production Standards: Contractor shall meet such sales production
standards as are announced by Company from time to time.
Indemnification: Contractor shall indemnify, protect, defend and
hold harmless Company against any claims, charges, fines,
damages, assessments, and any legal expenses incurred by Company
arising from Contractor's negligence or failure to comply with the
provisions of any applicable law or regulation, the rules of the
NASD or any other regulatory association, or the procedures and
policies established by Company.
Customer Fails: Contractor shall be liable and fully responsible
for any loss which the Company sustains as a result of any
transaction entered into involving a customer or customer account
which is under Contractor's management including, but not limited
to, all costs of client reneges, failure to comply with margin
calls and all other matters which involve the failure of a
customer to meet his or her just financial responsibility, and
Contractor will indemnify the Company for any and all such losses
including the Company's attorney's fees and other related legal
fees and costs, damages, expenses, claims or liabilities resulting
from such customer transactions.
3. COMPENSATION
Rate: Contractor's sole compensation from Company shall be in the
form of commissions earned on securities sold by Contractor and such
bonuses as Company shall determine. Company's commission schedule
may vary according to production standards or the type of security
being sold. However, unless otherwise agreed between the parties,
Contractor shall receive a percentage of the dealer's concession or
other commission received by Company on account of his sales. This
percentage and other compensation terms are set forth in the
commission schedule hereto and incorporated herein by reference.
For these purposes, a securities "sale" shall occur if and only if a
transaction has been concluded, all applicable offering and
subscription documents have been duly executed, and the issuer or
escrow agent has distributed the dealer's concession to Company in
connection with such transaction. Company reserves the right to
impose a service charge on certain transactions executed through
Company's clearing correspondent(s .
For "staged" or installment sales of securities, Company shall owe
the agreed-upon share of the dealers concession to Contractor only
as to the portion of the installment which is then paid in cash to
the issuer and provided the issuer in turn has paid a dealer's
concession to Company. If Company and issuer agree to any form of
accelerated payment schedule regarding dealer's concessions paid on
staged-payment transactions, the Contractor shall also participate
in such accelerated payment schedule.
In the event that any securities transaction is rescinded or revoked
and Company is required to refund its dealer's concession to the
issuer as to such sale, then Company has the right to require
Contractor to refund any commission he/she received in connection
with such securities transaction, and may offset this amount against
money owed to Contractor.
When Due: Contractor hereby waives any and all rights to receive
payment of commissions due until such time as Company is in receipt
of the dealer's concessions. Contractor affirms that Company's
liability of dealer's concessions payable is limited to the proceeds
of dealer's concessions associated with his sales actually received.
Furthermore, no commissions shall be payable by Company relative to
any security sale for which all documentation required by Company
is incomplete, not in Company's possessions, or the transaction was
completed in a manner not consistent with Company's policies and
procedures.
Offsets and Minimums: Company shall have the right to offset
against commissions any charges to the Contractor occasioned by
improper activity, dishonored installment payments, failed trades
or deliveries, and similar items, including expenses. Company shall
also have the right of offset against commissions due to Company's
parent (General American Life Insurance Company or any of
Company's affiliates which have arisen by or on behalf of Contractor.
Company will pay no commissions on securities sales which generate
commissions of less than $1.00. The Company will pay no commission
for any payment period in which the total of commissions due
Contractor is less than $100.00. Commissions due of less than
$100.00 per payment period will be carried forward by Company and
paid to Contractor when the total due exceeds this amount.
Payment of Commissions Upon Termination: All unpaid commissions
earned by Contractor, including, but not limited to, commissions
earned in customer accounts by reason of subsequent installment
payments, dividend reinvestment, etc., shall be paid by Company to
Contractor for one month following termination of this Agreement
unless this Agreement is terminated by Company due to violation of
its terms or for production which does not meet Company standards,
in which event all unpaid commissions due Contractor shall be
forfeited.
Company shall have the right to offset against commission any
charges to Contractor occasioned by improper activity or dishonored
installment payments, failed trades or deliveries, expenses of
termination, and similar items. Company shall also have the right
to offset all expenses of investigation and reasonable attorney's
fees.
The minimum payment standards outlined in 3(C above will apply to
payments after termination.
Death or Disability of Contractor: In the event that this Agreement
is terminated by reason of the death or permanent and total dis-
ability of Contractor, Company shall pay to the legal representative
of the deceased or to the former Contractor as the case may be, all
commissions due pursuant to this Agreement, subject to the limita-
tions contained in Paragraph 3(C . The rate of commissions shall be
the same rate the Contractor was receiving at the time of his death,
disability or termination.
4. COMPANY'S OBLIGATIONS
The Company's only obligation hereunder is to pay the agreed-upon
compensation and to take all steps necessary to assure that
Company always complies with all requirements of the SEC, the
NASD, and the various state securities regulators.
5. RELATIONSHIP OF THE PARTIES
Nothing herein shall be construed to create the relation of
employer and employee between Company and Contractor.
Contractor
may exercise his/her own judgment as to those persons from whom
he/she will solicit subscriptions and orders for securities, the
method of solicitation, and the time and place of solicitation;
provided however, that in such activities Contractor shall conform
to such supervision and policies as may be established by Company
in order to comply with all applicable statutes, rules and
regulations governing the solicitation of subscriptions and orders
for the purchase or sale of securities.
"Supervision" as used herein is a technical term defined by the
Rules of Fair Practice of the NASD and certain securities
regulators, and relates only to the propriety or impropriety of
making offers, sales and purchases of securities. Contractor will
not have to report to any employee of the Company on matters not
related to securities compliance. He/she is free to work as much
or as little as he/she chooses in any location he/she chooses.
Contractor will have complete control over the details of her/her
work.
Fringe Benefits: Contractor shall receive no fringe benefits
under this Agreement whatsoever: no insurance benefits, no
disability income, no vacation pay, and no expense reimbursement.
Contractor is not entitled to participate in any profit-sharing
or pension retirement plan provided for Company's employees.
Contractor's Expenses: Contractor shall be solely responsible for
all his/her expenses, including but not limited to travel, enter-
tainment, office expense, telephone, education expense, dues,
subscriptions, and shall receive no renumeration or reimbursement
of any nature whatsoever other than the commission referred to
herein.
Area: Contractor is neither assigned nor limited to any
geographical or demographically territory for client soliciations
other than those imposed by his/her licenses or registrations.
Records: Contractor shall maintain his/her own books and records
in whatever format he/she elects, provided he/she supplies
Company the information it specifies in a readiliy accessible and
recognizable form.
UNIQUE RELATIONSHIP
This Agreement and Contractor's relationship with Company are unique
and separate from any Agreement Company may have with any other
person. Contractor's rights and obligations with respect to the
Company are entirely dependent upon this Agreement. Contractor
agrees, however, not to sell any securities except through Company
unless Company agrees in writing to a sale through another broker/
dealer. Company maintains the right to enter into other independent-
contractor agreements with other Registered Representatives on terms
which may be more or less favorable than those contained herein,
without affording Contractor any rights under such other Agreements.
EMPLOYEES OF CONTRACTOR
Contractor agrees that any persons whom Contractor shall employ to
assist him in the performance of his/her duties hererunder shall be
the employees of Contractor and not employees or agents of Company.
Contractor shall take such steps as are necessary and appropriate to
ensure that none of his/her employees thinks himself/herself to be a
Company employee, and that no employee who does not have his/her
own contract with Company purports to represent Company in dealing
with the public.
NO IMPLIED AUTHORITY TO CONTRACT
Contractor shall have no authority to bind Company by any statement,
promise, representation, agreement or contract of any kind, or to
waive any of Company's rights, or to obligate Company in any way
unless specifically authorized to do so by Company in writing.
NO AUTHORITY TO ASSIGN
This Agreement is one for the services of Contractor, who shall not
be entitled to assign or delegate to any other person the authority
and obligations assumed or any rights, claims or interests granted
or arising hereunder without first obtaining Company's written
consent.
AUTHORIZATION TO RECORD
Contractor acknowledges and agrees that telephone conversation with
company and its employees in which purchase or sale orders or their
requests in conjunction with this Agreement are made, or may be
made, may be recorded by Company in order to resolve any questions
which may arise out of such orders or requests. Contractor hereby
consents to the recording of such telephone conversations, and
agrees to be bound by the statements made and recorded.
TERMINATION
This Agreement shall continue indefinitely unless and until
terminated by either party. Termination of this Agreement by either
party may be with or without cause and is accomplished at such time
either party mails or delivers to the other written notice.
Upon termination of this Agreement, Contractor agrees to return to
Company the Supervisory Procedures Manual and any other manuals
or records as may be requested by Company. Contractor also agrees
that all stationery, brochures, etc. which disclose Contractor's
relationship with Company shall be immediately destroyed upon
termination of this Agreement.
APPLICABLE LAW
This Agreement shall be controlled, construed, and enforced in
accordance with the laws of the State of Missouri.
NO WAIVER
No waiver, express or implied, by Company of a default by Contractor
under this Agreement shall constitute a waiver of any subsequent
default; and following a waiver, express or implied, a demand for
strict compliance thereafter need not be served on Contractor.
PARTIAL INVALIDITY
If any term, condition, or provision of this Agreement is held by a
court of competent jurisdiction to be invalid, void, or unenforce-
able, the remainder of the provisions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired
or invalidated.
CAPTIONS
The captions of this Agreement are for convenience and reference
only, and the words contained therein shall in no way be held to
explain, modify, amplify, or aid in the interpretation, construction,
or meaning of the provisions of this Agreement.
INTERPRETATION AND DEFINITIONS
Unless otherwise provided in this Agreement, the masculine gender
includes the feminine, the singular number includes the plural, and
the word "person" includes corporation, partnership, firm, or
association wherever the context so requires.
ENTIRE AGREEMENT
This Agreement supersedes all previous agreements, whether oral or
written, between Company and Contractor, and embodies all
representations, inducements, understandings and agreements of
the parties hereto relating to the subject matter hereof. The
terms hereof may not be changed except in writing duly signed by
Company and Contractor or as otherwise specified by the terms of
this Agreement.
TIME OF THE ESSENCE NOTICE
Time is of the essence with respect to this Agreement.
NOTICE
Contractor shall immediately advise Company of any action or fact
whatsoever which comes to Contractor's knowledge which may
possibly
constitute a violation of any securities laws or regulations with
respect to Company or Contractor or with respect to any party who is,
has been, or may be doing business with Company. Contractor shall
promptly notify Company of any past, present, or future investiga-
tions or inquires by governmental agencies and will send to Company
copies of all correspondence sent to or received from such govern-
mental agencies as and when sent or received. All notices called for
in this Agreement shall be in writing and shall be sufficient if sent
by ordinary mail to the addresses specified below or to such other
address as shall be designated by one party in writing to the other
party.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in its corporate name by one of its corporate officers, and the
Contractor has set his hand to this Agreement as of the day and year
written below.
Dated: _____________________________
"CONTRACTOR" "COMPANY"
___________________________________
_________________________________
Signature Signature
___________________________________ Name:
___________________________
Print Name
Title: _____________________________
Walnut Street Securities, Inc.
1801 Park 270 Drive, Ste. 220
St. Louis, MO 63146
Address:
___________________________________
___________________________________
SEC WSSREP
<PAGE>
COMMISSION SCHEDULE FOR VARIABLE UNIVERSAL LIFE 3
First year commissions up to Target Premium are 70 percent.
Commissions on first year premium in excess of target and on renewal
premiums received in years 2-15 are 5 percent.
Below is a list of Target Premiums per $1,000 for Variable Universal Life
3.
Male Female Male Female
PF/NS PF/NS SM SM
0 1.97 1.62 0.00 0.00
1 2.03 1.67 0.00 0.00
2 2.09 1.72 0.00 0.00
3 2.16 1.77 0.00 0.00
4 2.23 1.83 0.00 0.00
5 2.31 1.90 0.00 0.00
6 2.40 1.97 0.00 0.00
7 2.49 2.04 0.00 0.00
8 2.60 2.12 0.00 0.00
9 2.71 2.21 0.00 0.00
10 2.83 2.30 0.00 0.00
11 2.96 2.39 0.00 0.00
12 3.09 2.49 0.00 0.00
13 3.22 2.60 0.00 0.00
14 3.35 2.72 0.00 0.00
15 3.49 2.83 4.92 3.46
16 3.62 2.96 5.05 3.54
17 3.76 3.09 5.21 3.66
18 3.90 3.22 5.37 3.79
19 4.05 3.35 5.54 3.92
20 4.21 3.49 5.71 4.06
21 4.37 3.62 5.90 4.21
22 4.54 3.76 6.10 4.37
23 4.72 3.90 6.30 4.55
24 4.91 4.05 6.52 4.74
25 5.12 4.21 6.78 4.96
26 5.35 4.37 7.05 5.16
27 5.60 4.54 7.36 5.39
28 5.88 4.72 7.68 5.64
29 6.17 4.91 8.03 5.90
30 6.49 5.12 8.39 6.18
31 6.82 5.35 8.78 6.47
32 7.18 5.60 9.19 6.78
33 7.56 5.88 9.64 7.11
34 7.96 6.17 10.11 7.45
35 8.39 6.49 10.63 7.83
36 8.85 6.82 11.16 8.21
37 9.34 7.18 11.74 8.61
38 9.85 7.56 12.35 9.02
39 10.39 7.96 13.01 9.44
40 10.97 8.39 13.70 9.89
41 11.59 8.85 14.43 10.36
42 12.24 9.34 15.20 10.86
43 12.93 9.85 16.01 11.39
44 13.66 10.39 16.85 11.94
45 14.44 10.97 17.79 12.54
46 15.26 11.59 18.69 13.12
47 16.13 12.24 19.68 13.76
48 17.07 12.93 20.72 14.43
49 18.06 13.66 21.82 15.14
50 18.74 14.15 22.97 15.88
51 19.44 14.65 24.18 16.68
52 20.16 15.16 25.45 17.52
53 20.92 15.70 26.79 18.41
54 21.70 16.25 28.23 19.37
55 23.02 17.21 29.77 20.39
56 24.38 18.23 31.45 21.47
57 25.84 19.31 33.24 22.62
58 27.39 20.47 35.17 23.84
59 29.04 21.70 37.24 25.14
60 30.83 23.02 39.44 26.52
61 32.74 24.38 41.77 28.00
62 34.79 25.84 44.23 29.57
63 36.99 27.39 46.81 31.22
64 39.35 29.04 49.47 32.98
65 41.88 30.83 52.21 34.90
66 43.61 32.01 54.47 36.83
67 45.43 33.25 56.30 38.93
68 47.35 34.52 58.19 41.15
69 49.38 35.85 60.16 43.52
70 51.54 37.22 62.20 46.03
71 52.34 39.65 64.34 48.69
72 53.10 42.26 66.57 51.53
73 53.82 45.10 68.94 54.56
74 54.50 48.18 71.45 57.78
75 55.14 51.54 74.32 61.63
76 55.74 52.34 76.95 63.56
77 56.30 53.10 79.78 65.99
78 56.82 53.82 82.67 68.53
79 57.30 54.50 87.98 71.17
80 57.74 55.14 93.65 73.95
VUL3COMM SCHED
<PAGE>
In this Contract, the terms "We", "Our", and "Us" are
used to refer to Midland National Life Insurance Company; the
terms "You" and "Your" refer to the Owner of this Contract.
We agree to pay the Proceeds of this Contract to the
Beneficiary if We receive due proof of the Insured's death prior
to the Maturity Date and while this Contract is in force. If the
Insured is living on the Maturity Date, We will pay the Net Cash
Surrender Value to You. Other rights and benefits will be provided
according to the terms of this Contract.
This Contract is a legal contract between You and Midland
National Life Insurance Company. READ YOUR CONTRACT
CAREFULLY. A
guide to its contents is on Page 2. A summary is on Page 3.
If there is a question about it, or if there is
a claim, contact Your Midland Agent or Our Home Office.
Right To Examine Contract
You may examine this Contract and if for any reason You are not
satisfied with it, You may return it to Us by delivering or mailing it
to the Agent through whom it was purchased or to Our Home Office. This
must be done by the later of the 10th day after You receive it or the
45th day after Part 1 of the application was signed. We will then deem
this Contract void from the start and refund the Contract Fund plus
the sum of all charges
deducted from Your premiums, the Contract Fund and the Investment
Divisions.
Signed for the Company at its Home Office on the Contract
Date.
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
Proceeds Payable Upon Death Prior to the Maturity Date. Adjustable
Death Benefit. Contract Values will Reflect the Investment Experience
of Our Separate Account and Interest Earned in the General Account.
Flexible Premiums Payable During the Lifetime of the Insured Prior
to the Maturity Date. Non-Participating.
<PAGE>
Contract Summary
We offer this summary to help You understand this Contract.
This summary does not go into detail. We do not intend that it
change any of the provisions of this Contract. You should read the
actual provisions for full information and any limits which may
apply. The "Contract Provisions" section on the inside of the
front cover shows where the provisions may be found.
This is a Contract of life insurance. We will pay a death
benefit (Proceeds) if the Insured dies while this Contract is in
force. This money often is not taken in one sum. For all or part
of it, another form of payment may be available. If the Insured
dies and the choice of payment has not been made, the person who
is entitled to receive the money may be able to make the choice
of payment.
Premium payments for this Contract are flexible. We allow an
extra 61 days (Grace Period) beyond the first Monthly Anniversary on
which the Net Cash Surrender Value is insufficient to cover the
Monthly Deduction for payment of enough premium to keep the Contract
in force. If the Additional Required Premium
is not paid by the end of the Grace Period, all
coverage under this Contract ends.
This Contract has guaranteed Cost of Insurance Rates. Rates more
favorable than these may be declared by Us. Your Contract Fund will
change in proportion to the investment experience of the Investment
Divisions You have chosen.
There are other rights available to You.
Unless We amend it to say otherwise, this Contract
gives You these rights among others:
a. You may request a change in the Death Benefit;
b. You may assign the Contract;
c. You may change the Owner or Beneficiary; or
d. You may borrow or withdraw part or all of the Net Cash Surrender
Value.
This Contract, as issued, may or may not have extra benefits. If it
does, We add them by Rider.
<PAGE>
Definitions
Some of the main words and phrases used in this Contract are defined
here. Many other words and phrases are explained in the Contract
provisions themselves.
Insured- the person whose life is insured by
this basic Contract (not including Riders). The Insured is specified
on the Contract Information page. He or she need not be the Owner.
Suppose We issue a Contract on the life of Your spouse. You
applied for it and named no one else as Owner. Your spouse is the
Insured and You are the Owner.
Issue Age- the Insured's age, on the last
birthday prior
to the Contract Date, as shown on the Contract Information page.
Attained Age - the Issue Age plus the number of complete
Contract Years since the Contract Date.
Owner - the person who has control of the rights and values
provided in this Contract. Often the Insured is the Owner, but not
always. The Owner is specified on the Contract Information page.
"You" or "Your" is used to refer to the Owner in this Contract.
Beneficiary - as specified in the application unless changed
as provided in this contract.
Policy - this basic document plus any amendments, but
excluding the application or any Riders.
Contract - this Policy, plus any endorsements, and Riders.
"Contract" also includes the application, and any future supplemental
applications for changes in Specified Amount.
Record Date - the date the Contract is recorded on Our
books as an in force Contract.
Rider(s)- the form(s) attached to this Contract
which describe any additional benefits provided by Rider.
Anniversary or Contract Anniversary - the same month
and day as the Contract Date, in each later year.
If the Contract Date is June 3, 1997, the first Anniversary is
June 3, 1998; the second Anniversary is June 3, 1999, and so on.
Contract Year - a year which begins on an Anniversary.
If the Contract Date is June 3, 1997, the first Contract Year
starts on June 3, 1997, and ends on June 2, 1998, the second
Contract Year starts on June 3, 1998, and ends on June 2, 1999,
and so on.
Monthly Anniversary - the day of each month that has the
same numerical date as the Contract Date.
Contract Month - a month which begins on a Monthly
Anniversary.
If the Contract Date is June 3, 1997, the first Contract Month
starts on June 3, 1997, and ends on July 2, 1997; the second
Contract Month starts on July 3, 1997, and ends on August 2, 1997,
and so on.
Business Day - a day when We and the New York Stock Exchange
are open for business.
Valuation Period - A Valuation Period is the interval of
time beginning at the close of the New York Stock Exchange on each
Business Day and ending at the close of the New York Stock Exchange
on
the next Business Day.
<PAGE>
Premiums
Payment of Premiums. The first premium is due on the
Contract Date. You may pay premiums after the first at any time. You
may pay any amount over $50 subject to the maximum and minimum
premium
limits. Premiums must be paid to Us at Our Home Office.
We will send premium notices to You annually, semi-annually, or
quarterly. You may ask Us to change the amount or frequency. The
amount
must be at least $100. You may also pay premiums using a monthly
automatic payment plan. The amount must be at least $30.
Maximum Premium Limits. Federal law limits the premiums
that can be paid if this Contract is to qualify as life insurance for
tax purposes. We will not accept a premium which would cause this
limitation to be violated. We may also refuse to accept a premium if
the Death Benefit is equal to the Contract Fund multiplied by the
Corridor Percentage.
If We accept a
premium in error, We will refund it as soon as the error is discovered.
Additional Information regarding Maximum Premiums and their affect
on the qualification of this Contract as life insurance for tax purposes
will be provided upon request.
Minimum Premium Period.
The Minimum Premium Period is the time from the Contract Date to the
later
of Attained Age 70 or the fifth anniversary.
Regardless of
the amount of Net Cash Surrender Value, this Contract is guaranteed to
remain in force during the Minimum Premium
Period if the sum of the premiums paid, less any Contract
Debt and any withdrawals, is equal to or greater than the Minimum
Premium
Requirement. The Minimum Premium Requirement is:
a. The Minimum Premium shown on Page 1, times
b. The number of Contract Months completed plus one.
Termination of Insurance. Even if You stop paying premiums, this
Contract will continue as long as:
a. The Net Cash Surrender Value is sufficient to make Monthly
Deductions, or
b. The Contract is within the Minimum Premium Period and the sum of
the
premiums paid less any Contract Debt and any withdrawals is equal to
or greater than the Minimum Premium Requirement.
The Grace Period will begin on
any Monthly Anniversary where this Contract does not meet the
conditions
in a. or b. above. If the Grace
Period expires without payment of the Additional Required Premium, this
contract will terminate at the end of the Grace Period without value.
Grace Period. Before this Contract will terminate for insufficient
payment of premium, a Grace Period of 61 days will be given for the
payment
of additional premiums. If this Contract is within the Minimum Premium
Period, the Additional Required Premium to keep this Contract in force
will be the lesser of:
a. The Minimum Premium Requirement at the beginning of the Grace
Period,
plus any Contract Debt and withdrawals, less the sum of the premiums
paid; and
b. The premium needed to increase the Net Cash Surrender Value to
an
amount that allows the Monthly Deduction to be made.
If the Contract is beyond the Minimum Premium Period, the Additional
Required Premium will be the premium needed
to increase the Net Cash Surrender Value to an amount that allows the
Monthly Deduction to be made.
At least 30 days before this Contract ends without value, We will mail to
Your last known address a notice showing the Additional Required
Premium.
We will send a copy of the notice to the
last known address of any assignee of record. That premium will be due
on the date the Grace Period began.
Reinstatement. If the Grace Period expires without payment of the
Additional Required Premium, this Contract may be reinstated within five
years
after its expiration. Reinstatement is subject to these conditions:
a. Receipt by Us of Your application for reinstatement;
b. Receipt by Us of satisfactory evidence of the Insured's
insurability;
c. Payment of a premium that is enough to keep the Contract
in force for two months following reinstatement;
d. Payment or restoration of any Contract Debt; and
e. Deduction from the Contract Fund of all overdue Monthly
Deductions.
If this Contract lapses during the Minimum Premium Period,
We will reinstate the Minimum Premium Guarantee Period, but in no
event
will it extend beyond the later of Attained Age 70 or the fifth anniversary.
To reinstate the Minimum Premium Period, the total premium paid less
any
Contract Debt or withdrawals must exceed the Total Minimum Premium
Requirement.
If this Contract lapses after the Minimum Premium Period, no
Minimum Premium Period will apply.
Reinstatement is effective on the first Monthly Anniversary
on or following Our approval of the reinstatement.
The Deferred Sales Charge is in effect during the first 15
Contract Years and is not affected by Reinstatement.
<PAGE>
Proceeds
Proceeds Defined. The Proceeds is the sum of:
a. The amount of the Death Benefit; and
b. Any benefit provided by Rider(s) at the death
of the Insured;
less:
c. Any Contract Debt; and
d. Any past due Monthly Deductions.
CORRIDOR PERCENTAGE TABLE
Attained Corridor Attained Corridor
Age Percentage Age Percentage
0-40 250 60 130
41 243 61 128
42 236 62 126
43 229 63 124
44 222 64 122
45 215 65 120
46 209 66 119
47 203 67 118
48 197 68 117
49 191 69 116
50 185 70 115
51 178 71 113
52 171 72 111
53 164 73 109
54 157 74 107
55 150 75-90 105
56 146 91 104
57 142 92 103
58 138 93 102
59 134 94 101
95+ 100
Death Benefit Defined. Under Death Benefit
Option 1 the Death Benefit is the greater of:
a. The Specified Amount; or
b. The Contract Fund multiplied by the Corridor Percentage.
Under Death Benefit Option 2 the Death Benefit is the
greater of:
a. The Specified Amount plus the Contract Fund; or
b. The Contract Fund multiplied by the Corridor Percentage.
Corridor Percentages. The Corridor Percentage
changes on each Contract Anniversary. The Corridor Percentage
depends
upon the Attained Age of the Insured on the Contract Anniversary.
(See accompanying table.)
<PAGE>
Beneficiary
Designation. The Beneficiary named in the application
for this
Contract will receive the Proceeds upon the death of the Insured
unless You have changed this designation.
Change. You may change any Beneficiary designation
while the
Insured is alive, unless the previous designation provides
otherwise. Such change will take effect only after We receive Your
written request in a form approved by Us. Any previous
Beneficiary's interest will end then even if the Insured is not
living
when We receive the request. We reserve the right to require that
this
Contract accompany such request.
Class of Beneficiary. The priority of a Beneficiary
may be shown
by using numbered classes. The class of first priority is called
Class 1, the class of second priority is called
Class 2, and so on.
The following statements apply to
Beneficiaries unless otherwise stated:
a. One will have the right to be paid only if he or she survives
the Insured and only if no one in a prior class survives the Insured;
b. One who has the right to be paid will be the only one paid
if no one else in the same class survives the Insured;
c. Two or more in the same class who have the right to be
paid will be paid in equal shares, unless otherwise requested; and
d. If none survives the Insured, the Owner will be paid.
Suppose the Class 1 Beneficiary is Jane and the Class 2
Beneficiaries are Paul and John. We owe Jane the Proceeds if she
is living at the Insured's death. We owe Paul and John the
Proceeds if they are living then but Jane is not. But if only one
of them is living, We owe him the Proceeds. If none of them is
living, We owe the Owner.
<PAGE>
Right to Change Death Benefit
Changes in Specified Amount. You may change the Specified
Amount. You must send Us a written request for the change. You may
not
make changes more often than twice a year. If We approve the change,
We
will send You an amended Contract Information page. The amended
Contract
Information page will show the change and the effective date of the
change. Any change in Specified Amount is subject to the following
conditions:
a. If the Specified Amount is to be decreased:
1. The Specified Amount cannot be decreased to less than $50,000;
2. The Specified Amount cannot be decreased to an amount that
would cause the Maximum Premium Limits to be violated;
3. All decreases in Specified Amount will decrease previous
increases in reverse order before decreasing the initial
Specified Amount; and
4. The Minimum Premium shown on Page 1 will not decrease.
b. If the Specified Amount is to be increased:
1. The increase must be applied for on a supplemental application;
2. We will need satisfactory evidence of the Insured's
insurability; and
3. The portion of the Specified Amount representing the increase may
be assigned a Premium Class different from the Premium Class assigned
to
the original Specified Amount or to any other increases; and
4. The Minimum Premium shown on Page 1 will increase.
Changes in Death Benefit Option. You may change the Death
Benefit Option. You must send Us a written request for the change.
The change will be effective on the date shown on the amended Contract
Information page. We will require satisfactory evidence of the Insured's
insurability to make this change. We will not allow a change if it would
cause the Maximum Premium Limits to be violated.
a. If the change is from Option 1 to Option 2, the Specified Amount
will be reduced to equal the current Specified Amount minus the
current Contract Fund. This change will not be
allowed if it would result in the Specified Amount being less
than $50,000.
b. If the change is from Option 2 to Option 1, the Specified Amount
will be increased to equal the current Specified Amount plus the
current Contract Fund.
<PAGE>
Your Investment Options
The Separate Account
The Separate Account. The Separate Account is Our Separate
Account
A, established under the Insurance Laws of the State of South Dakota,
and
is a unit
investment trust registered with the SEC under the Investment Company
Act of 1940. It is also subject to the laws of South Dakota. We own
the assets of the account; We keep them separate from the assets of Our
General Account. We established the account to support variable life
insurance contracts.
Initial Allocation. If any premium is received on or
prior to the Record Date, the Invested Premium will be allocated to
the General Account regardless of the allocation percentages You have
indicated. The day following the Record Date, the value in the General
Account will be reallocated among the Investment Divisions and the
General Account as specified by You in the application.
Allocations. The Separate Account has several Investment
Divisions. We list them on the application and in the Prospectus.
You determine, using
percentages, how Invested Premiums will be allocated to Our General
Account or among the Investment Divisions. You may choose to allocate
nothing to Our General Account or to a particular Investment Division.
But any allocation You make must be at least 10 percent; You may not
choose a fractional percent.
Example: You may choose a percentage of 0, or 100, or 10, 11, 12,
and so on, up to 90. But You may not choose a percentage of 1 through
9, or 91 through 99, or any percent that is not a whole number. The
total for all percentages must be 100 percent.
We reserve the right to limit the number of Investment Divisions in
which you have funds invested.
The allocation of Invested Premiums that took effect the day
following the Record Date is shown in the application. You may change
the allocation for future Invested Premiums at any time if the
Contract is in force. To do so, You must notify Us in writing in
a form that meets Our needs. The change will take effect on the date We
receive Your notice at Our Home Office.
A premium might be paid when the Contract Fund amount is less than
zero. In that case, when We receive that premium, We first use as much
of the Invested Premium as We need to eliminate the deficit in the
Contract Fund. We will then allocate any remainder of the Invested
Premium in accordance with Your most recent request.
Deductions are made from the unloaned portion of the General
Account and the Investment Divisions of Our Separate Account for
cost of insurance, expense charges and other fees. You determine,
using percentages, how these charges will be deducted from the
Investment Options. Similar to premium allocation, You may choose
a percentage of 0, or 100, or 10, 11, 12, and so on, up to 90. The
total for all allocations must be 100 percent. You may change these
allocations at any time if the Contract is not in default. Notification
must be in writing and sent to Our Home Office. The change will take
effect on the date We receive Your notice.
Transfers. You may request in writing to transfer monies
from one Investment Division to another or between the Investment
Divisions and the General Account. The minimum amount You may
transfer is $200. This minimum need not come from any one Investment
Division or be transferred to any one Investment Division. The minimum
applies to the net amounts being transferred in Your request. You
may make up to twelve transfers in each year without charge. For each
additional transfer there is a charge of $25. This charge will be
deducted from the Investment Divisions from which the transfer is
being made in equal proportion to the number of such Investment
Divisions on the day of the transfer. The amount remaining in the
Investment Division after deducting the transfer and any transfer charge
must be greater than zero.
The maximum amount that can be transferred from the General
Account to the Separate Account in any Contract Year is the larger of:
a. 25 percent of the unloaned amount in the General Account at the
beginning of the Contract Year; or
b. $1,000.
The Funds. The word Funds, where We use it in this Contract
without qualification, means the Funds We identify in the application.
The Funds are registered with the SEC under the Investment Company
Act
of 1940 as open-end diversified management investment companies.
The
Funds have several portfolios; there is a portfolio that corresponds to
each of the Investment Divisions of Our Separate Account.
Account Investments. We use the assets of Our Separate
Account to buy shares in the Funds. Each Investment Division is
invested in a corresponding specific portfolio. Income and realized
and unrealized gains and losses from Our shares in each portfolio
are credited to, or charged against, the Investment Division.
This is without regard to income, gains, or losses in Our other
investment accounts.
We will always keep assets in the Separate Account with a total
value at least equal to the Contract Fund under Contracts like this
one. To the extent those assets do not exceed this amount, We use
them only to support those Contracts; We do not use those assets to
support any other business We conduct. We may use any excess over
this
amount in any way We choose.
Change in Investment Policy. A portfolio of the Funds might
make a material change in its investment policy. In that case, We
will send You a notice of the change. Within 60 days after You receive
the notice, or within 60 days after the effective date of the change,
if later, You may exchange monies You have allocated to another
Investment Division of Our Separate Account.
Change of Fund. A portfolio might, in Our judgement, become
unsuitable for investment by an Investment Division. This might happen
because of a change in investment contract, or a change in the laws or
regulations, or because the shares are no longer available for investment,
or for some other reason. If that occurs, We have the right to
substitute another portfolio of the Funds, or to invest in a Fund other
than the ones We show on the application. But We would first seek
approval from the SEC and, where required, the insurance regulator
where this Contract is delivered.
<PAGE>
Contract Values
The Value of Your Contract Fund. The amount in
Your Contract Fund at any time is equal to the sum of the amounts You
then have in Our General Account and in the Investment Divisions of Our
Separate Account under this Policy.
The Contract Fund on the Contract Date is any Invested Premium
received on or before the Contract Date minus the Monthly Deduction
due on the Contract Date, plus or minus any investment experience
since We received Your premium.
Your Value in Our General Account. The amount You
have in Our General Account at any time is equal to the accumulation at
interest of:
a. The Contract Fund in the General Account from the end of the
previous Contract Month; plus
b. Invested Premiums allocated to, or transfers made to the
General Account during the current Contract Month; minus
c. Any Monthly Deduction allocated to the General Account at the
beginning of the current Contract Month; minus
d. Any partial withdrawals, transfers, or transfer charges taken
from the General Account during the current Contract Month; minus
e. Any amount charged against the General Account for Federal or
State Income Taxes.
We will credit the amount in Our General Account with interest
We determine based on Our future expectations.
The rates may be different for unloaned and loaned
amounts. Such interest rates will not be less than an effective annual rate
of
3.5 percent. Any interest in excess of 3.5 percent will be at the SOLE
DISCRETION of Our Board of Directors and will also be stated as an
effective
annual rate.
Your Value in Our Separate Account. The Separate Account
portion of the Contract Fund at any time is equal to the sum of the
values of all Accumulation Units assigned to the Policy.
The number of Accumulation Units in any Investment Division is
equal to:
a. The number of Accumulation Units in the Investment Division at
the end of the previous Contract Month; plus
b. The number of Accumulation Units from Invested Premiums
allocated
to, or transfers made to the Investment Division during the current
Contract Month; minus
c. The number of Accumulation Units from any Monthly Deduction
allocated
to the Investment Division at the beginning of the current Contract
Month; minus
d. The number of Accumulation Units from any partial withdrawals,
transfers or transfer charges allocated to the Investment Division
during the current Contract Month, minus
e. The number of Accumulation Units from any amount charged against
the
Investment Division for Federal or State income taxes.
Accumulation Units. We will credit amounts to or deduct
amounts from the Investment Divisions in the form of Accumulation Units.
The number of Accumulation Units to be credited to or deducted from
any Investment Division will be determined by dividing the amount to
be credited to or deducted from that Investment Division by the
Accumulation Unit Value of the Investment Division. Accumulation Units
will be credited or deducted using the Unit Value for the day the
transaction
occurs.
Accumulation Unit Value.
The Accumulation Unit Value of each Investment Division was set
at the end of the first Valuation Period of the Investment Division.
The Accumulation Unit Value for each subsequent Valuation Period is
then
determined at the end of the Valuation Period and is the Net Investment
Factor for that period multiplied by the Accumulation Unit Value for the
immediately preceding Valuation Period. The Accumulation Unit Value
for a
Valuation Period applies to each day in the period. The Accumulation
Unit Value may increase or decrease from one Valuation Period to the
next.
Net Investment Factor.
The Net Investment Factor is an index used to measure the investment
performance of an Investment Division from one Valuation Period to the
next. The Net Investment Factor can be greater or less than one;
therefore, the value of an Investment Division unit may increase or
decrease.
The Net Investment Factor for each Investment Division for a
Valuation Period is determined by adding (a) and (b), subtracting (c)
and then dividing the result by (a) where:
a. is the value of the assets at the end of the preceding Valuation
Period;
b. is the investment income and capital gains, realized or
unrealized, credited during the current Valuation Period;
c. is the sum of:
1. the capital losses, realized or unrealized, charged during
the current Valuation Period plus any amount charged or set
aside for taxes during the current Valuation Period; plus
2. the deduction from the Investment Division during the current
Valuation Period representing a daily charge equivalent to an
effective annual rate of 0.90 percent.
Charges Against The Investment Division. In determining
the values for the Accumulation Units, We make a daily charge equivalent
to an effective annual rate of 0.90 percent against the assets of each
Investment Division. This charge is for
mortality and expense risks that We assume. At our sole discretion We
may
charge less than 0.90 percent after the tenth Contract Year.
The earnings of the Separate Account are taxed as part of Our
operations. At the present time, We do not expect to incur taxes on
earnings of any Investment Division to the extent the earnings are
credited under the Contract. If We incur additional taxes due to the
operation of the Separate Account, We may make charges for such taxes
against the Investment Divisions.
Monthly Deduction. The Monthly Deduction for a Contract
Month is equal to:
a. An Expense Charge; plus
b. The Risk Charge for that Contract Month; plus
c. The Rider Charge for that Contract Month. The Rider Charge is the
cost of additional benefits provided by Rider(s).
Expense Charge. The Expense Charge will not be more than $7.00.
Risk Charge. The Risk Charge is determined on each Monthly
Anniversary. It is equal to a. multiplied by the difference between
b. and c., divided by $1,000.
a. The Risk Rate;
b. The Insured's Death Benefit;
c. The Contract Fund after deducting the Expense Charge and the
Rider Charge.
Invested Premium. This is the portion of each premium
paid that We will add to the Contract Fund. It is equal to the
premium paid, minus a deduction for premium taxes, minus a deduction
for the Sales Charge.
Sales Charge. The Sales Charge is 4 percent of each
premium paid.
Risk Rates. Risk Rates are based on the Attained Age,
sex, and Premium Class of the Insured.
If We change
Risk Rates, the change will be based on sex, Attained Age, and Premium
Class. The Risk Rates for an Insured in a Premium Class other than
Special or Modified will never be more than those shown in the Table
of Guaranteed Monthly Risk Rates.
GUARANTEED MONTHLY RISK RATES
Male Female Male Female
Attained Non Non Attained Non Non
Age Smoker Smoker Smoker Smoker Age Smoker Smoker
Smoker Smoker
0 .22 .16 50 .43 .84 .36 .57
1 .09 .07 51 .47 .92 .39 .61
2 .08 .07 52 .51 1.00 .42 .65
3 .08 .07 53 .57 1.10 .46 .71
4 .08 .06 54 .62 1.21 .49 .76
5 .07 .06 55 .69 1.33 .53 .81
6 .07 .06 56 .76 1.46 .57 .87
7 .07 .06 57 .83 1.59 .61 .92
8 .06 .06 58 .92 1.73 .65 .97
9 .06 .06 59 1.01 1.87 .69 1.02
10 .06 .06 60 1.11 2.04 .74 1.08
11 .07 .06 61 1.23 2.23 .80 1.16
12 .08 .06 62 1.37 2.44 .88 1.27
13 .09 .06 63 1.52 2.68 .97 1.39
14 .10 .07 64 1.69 2.94 1.08 1.53
15 .11 .15 .07 .08 65 1.87 3.21 1.20 1.68
16 .12 .16 .08 .08 66 2.08 3.51 1.32 1.82
17 .13 .18 .08 .09 67 2.29 3.81 1.44 1.97
18 .14 .18 .08 .09 68 2.53 4.12 1.57 2.12
19 .14 .19 .08 .10 69 2.79 4.47 1.71 2.28
20 .14 .19 .08 .10 70 3.09 4.85 1.87 2.46
21 .14 .19 .09 .10 71 3.43 5.29 2.08 2.70
22 .14 .19 .09 .10 72 3.83 5.78 2.33 3.00
23 .13 .19 .09 .10 73 4.27 6.33 2.63 3.35
24 .13 .18 .09 .11 74 4.77 6.93 2.98 3.75
25 .13 .18 .09 .11 75 5.31 7.58 3.36 4.20
26 .12 .17 .09 .11 76 5.87 8.25 3.79 4.67
27 .12 .17 .10 .12 77 6.47 8.93 4.24 5.17
28 .12 .17 .10 .12 78 7.10 9.62 4.74 5.69
29 .12 .17 .10 .13 79 7.78 10.34 5.29 6.27
30 .12 .18 .10 .13 80 8.55 11.13 5.92 6.92
31 .12 .18 .11 .14 81 9.41 12.01 6.66 7.67
32 .13 .19 .11 .14 82 10.39 12.99 7.51 8.52
33 .13 .20 .12 .15 83 11.49 14.06 8.48 9.52
34 .14 .21 .12 .16 84 12.70 15.19 9.56 10.61
35 .14 .23 .13 .17 85 13.98 16.35 10.74 11.79
36 .15 .24 .13 .18 86 15.33 17.49 12.03 13.04
37 .16 .26 .14 .20 87 16.72 18.68 13.41 14.36
38 .17 .29 .16 .22 88 18.15 19.94 14.90 15.76
39 .18 .31 .17 .24 89 19.65 21.21 16.52 17.23
40 .20 .35 .18 .26 90 21.23 22.51 18.27 18.89
41 .21 .38 .20 .29 91 22.95 23.88 20.22 20.72
42 .23 .42 .21 .32 92 24.87 25.50 22.45 22.79
43 .25 .46 .23 .34 93 27.20 27.62 25.15 25.28
44 .27 .50 .24 .37 94 30.43 30.60 28.74 28.74
45 .29 .55 .26 .40 95 35.49 35.49 34.16 34.16
46 .31 .60 .28 .43 96 44.52 44.52 43.54 43.54
47 .34 .65 .29 .46 97 62.83 62.83 62.19 62.19
48 .36 .71 .31 .49 98 83.33 83.33 83.33 83.33
49 .39 .77 .34 .53 99 83.33 83.33 83.33 83.33
Cash Surrender Value. The Cash Surrender Value
is the Contract Fund less:
a. Deferred Sales Charge;
b. Deferred Issue Charge.
Net Cash Surrender Value. Net Cash Surrender
Value is the Cash Surrender Value less any Contract Debt.
Deferred Sales Charge. During the first 15 Contract
Years, You will incur a Deferred Sales Charge if You:
a. Give up the Contract for its Net Cash Surrender Value; or
b. Let the Contract lapse.
The Deferred Sales Charge is a percentage shown in the Deferred
Sales Charge Table, which varies by Contract Year, multiplied by the
sum of the following items:
a. 26 percent of all premiums paid up to the SEC Guideline
Premium shown on the Contract information page limited
to premiums paid in the first two Contract Years;
b. 5 percent of all other premiums.
The sum of items a. and b. is also limited by the SEC Guideline
Premium, times 5 percent, times the expected future lifetime at issue
as determined by the 1980 CSO Mortality Table or 20 years, whichever
is less.
If there is an increase in Specified Amount, there will also be an
increase in the SEC Guideline Premium. All additions to the Deferred
Sales Charge due to this increase will be 5 percent of premiums. The
maximum limit will also increase by the additional SEC Guideline
Premium, times 5 percent, times the expected future lifetime at the
time of the increase as determined by the 1980 CSO Mortality Table or
20 years, whichever is less. Totals in the Deferred Sales Charge prior
to the increase in Specified Amount will not be affected.
If there is a decrease in Specified Amount, there will also be a
decrease in SEC Guideline Premium. Future additions to the
Deferred Sales Charge will follow the same rules as at issue with
the new SEC Guideline Premium. Prior totals in the Deferred
Sales Charge will not be affected.
DEFERRED SALES CHARGE TABLE
Contract Contract Contract
Year Percentage Year Percentage Year Percentage
1 100 % 6 100 % 11 83.33 %
2 100 7 100 12 66.67
3 100 8 100.00 13 50.00
4 100 9 100.00 14 33.33
5 100 10 100.00 15 16.67
16+ 0.00
DEFERRED ISSUE CHARGE TABLE
Deferred Deferred Deferred
Contract Issue Contract Issue Contract Issue
Year Charge Year Charge Year Charge
1 $3.00 6 $3.00 11 $2.50
2 3.00 7 3.00 12 2.00
3 3.00 8 3.00 13 1.50
4 3.00 9 3.00 14 1.00
5 3.00 10 3.00 15 .50
16+ 0.00
Deferred Issue Charge. The Deferred Issue Charge varies
by Contract Year. You will incur this charge if You:
a. Give up the Contract for its Net Cash Surrender Value;
b. Let the Contract lapse.
The Deferred Issue Charge is equal to:
a. The dollar amount shown in the Deferred Issue Charge table;
multiplied by
b. The number of thousands of the highest Specified Amount during
the life of the Contract. (See the accompanying Deferred
Issue Charge Table.)
Withdrawal of Cash Surrender Value. You may request
in writing a withdrawal of part or all of the Cash Surrender Value
on any Monthly Anniversary before the Maturity Date while the Insured
is living.
If the total Cash Surrender Value is withdrawn, the amount payable
will be:
a. The Cash Surrender Value on the date of withdrawal; minus
b. Any Contract Debt.
A partial withdrawal of up to 50 percent of the Net Cash Surrender
Value, will be allowed in any one Contract Year. Withdrawals in excess
of this amount will not be allowed. The withdrawal must be at least
$200. The amount payable upon a partial withdrawal will be:
a. The amount of withdrawal requested; minus
b. A Withdrawal Charge.
When a partial withdrawal is made, the amount of the withdrawal
will be deducted from the Contract Fund. The Specified Amount
will be reduced by the amount of the withdrawal unless:
a. Death Benefit Option 2 is in effect; or
b. The Contract Fund after withdrawal times the Corridor
Percentage for the next Contract Year exceeds the
Specified Amount prior to withdrawal.
A partial withdrawal will not be allowed if it would result in the
Specified Amount being less than $50,000 or if it would cause the
Minimum Premium Limits to be violated.
For any withdrawal from the General Account, We reserve the right
to defer payment for up to six months after We receive Your request.
We will not defer payment if a partial withdrawal is to be used to pay
premiums on Contracts with Us. If the withdrawal is requested within
30 days of a Contract Anniversary, the amount payable on withdrawal
will not be less than what would have been payable on that Contract
Anniversary, less any Contract Loans or partial withdrawals made on
or after that date.
Withdrawal Charge. There is no Withdrawal Charge for the
first withdrawal made in a Contract Year. There is a Withdrawal Charge
of $25 or 2 percent of the amount withdrawn, whichever is less, for
each subsequent withdrawal made in that Contract Year.
<PAGE>
Annual Report of Contract Status
Annual Report of Contract Status
We will send You an annual report, at no charge, which gives a summary
of this Contract's status as of the end of each Contract Year. This report
will give information regarding the Death Benefit, Cash Surrender Value,
premium payments, Cost of Insurance Charges, Monthly Deductions, and
investment performance.
In addition to the annual report, We will prepare at Your request a
projection of the results of this Contract for future years. We will not
charge more than $25 for the preparation of this report.
<PAGE>
Contract Loans
Contract Loans. While this Contract is in force, and the
Insured is living, You may make written request for a Contract Loan.
The amount of the loan can be any amount up to 92 percent of the
Cash Surrender Value.
This Contract must then be assigned to Us as sole
security for the loan. We reserve the right to defer payment for up
to six months after the request. We will not defer payment if a loan
is to be used to pay premiums on Contracts with Us. The interest rate
that We charge on Contract Loans is 8 percent per year from the date
of the loan, payable in arrears.
When You make a loan, You may tell Us how much of the loan is
to be allocated to Your unloaned value in Our General Account and
Your value in each Investment Division.
If You do not otherwise notify Us in writing, We will determine
the allocation by Your instructions for other deductions. If this
is not possible, We will use a pro rata method.
The loaned portion of Your Contract Fund will be kept as a part
of Our General Account where it will earn interest of at least 3.5 percent
per year. After the tenth Contract Year, for the portion of any
Contract Loan that does not exceed the Contract Fund, minus the
premiums
paid, the rate credited to that portion of the Contract Fund will equal
the rate charged for Contract Loans.
Repayment of Loans. At any time, the total Contract Debt
is the sum of all Contract Loans and all interest that has accrued
on them. Any unpaid interest will be added and bear interest at the
same rate. All or part of the Contract Debt may be repaid at any time
while this Contract is in effect and the Insured is living.
Loan repayments will be allocated according to the instructions You
have given Us for premium allocations.
If the Insured dies before the loan is repaid, the loan will be
deducted from the Proceeds of this Contract.
Excess Contract Debt. The Contract Debt may grow to be more
than the Cash Surrender Value. If this should happen, Your Contract will
enter the Grace Period.
<PAGE>
Maturity Date
The Maturity Date of this Contract will be set at Attained Age 100 on
the Contract Date.
If the Insured survives to Attained Age 100 and You ask Us to continue
this Contract, We will extend the Maturity Date if in doing so this
Contract still qualifies as Life Insurance according to the Internal
Revenue Service and Your State.
By extending the Maturity Date, this Contract may not qualify as life
insurance and may be subject to tax consequences.
A tax advisor should be consulted prior to electing to
extend the Maturity Date.
In order to continue this Contract
beyond Attained Age 100, We will require that the Death Benefit not
exceed the Contract Fund. Thus, if the Contract Fund decreases due
to the investment experience, the Death Benefit may also decrease.
<PAGE>
General Provisions
The Contract. This Contract is issued in consideration of
the application,
any supplemental applications, and payment of the initial
premium. The Policy, the application and any supplemental
applications for changes in Specified Amount and any Rider(s)
attached to this Policy form the entire Contract.
We assume that all statements in the application were made to the best
knowledge and belief of the persons who made them; in the absence
of fraud, they are deemed to be representations and not warranties.
We relied on those statements when We issued the Contract. We will not
use any statement to void the Contract or deny a claim unless that
statement is made in the application or a supplemental application and
a copy of such application is attached.
Incontestability. If the Insured's death occurs within
the first two Contract Years, We have the right to deny payment of the
Proceeds based on the information provided to Us in the application.
We will not contest this
Contract after it has been in force during the Insured's lifetime
for two years from the Contract Date except for any provisions
granting disability benefits or accidental death benefits.
Any change in Specified Amount or any reinstatement effective
after the Contract Date will be incontestable after such change
or any reinstatement has been in effect during the Insured's lifetime
for two years following the effective date of such change, or
such reinstatement.
Termination of Contract. All benefits provided by this
Contract will cease if:
a. You request that this Contract be terminated; or
b. The Insured dies. If Riders are attached to this Contract,
Rider forms may provide for continuation of Rider
benefits; or
c. This Contract matures; or
d. The Grace Period expires; or
e. You withdrawal all the Cash Surrender Value; or
f. The Contract Debt exceeds the Cash Surrender Value.
Contract Modifications. Only Our President, Vice-
President, Secretary or Assistant Secretary can agree to modify this
Contract, and then only in writing.
Right to Request this Contract for Change. If You request a
change that would cause the information given on Contract
Information page, the application or any supplemental applications
to be incorrect, We reserve the right to require that this
Contract be returned to Us so that the appropriate change(s)
can be made.
Right to Exchange this Contract. During the first two
Contract Years, You may request to exchange this Contract for a
Flexible Premium Adjustable Life Insurance contract that was available
at the time this Contract was issued. The new contract will
have the same Contract Date and Issue Age as this contract.
On the date of exchange, the new contract will also have the
same Specified Amount, Death Benefit Option, and Contract Fund.
Ownership and Control. Unless inconsistent with
the terms of any Beneficiary designation or any assignment or change in
ownership:
a. The Owner of this Contract is shown on the Contract
Information page; and
b. While the Insured is living, You alone are entitled to:
1. Any Contract benefits or value; and
2. The exercise of any right and privilege granted in the Contract
or by Us.
Contingent Owner. The Owner, if other than the Insured,
may name or change the Contingent Owner while the Insured is alive.
Upon the death of the Owner, the Contingent Owner will become the
Owner. If no Contingent Owner has been named or is living, ownership
will pass to the Owner's estate.
Assignment. We will not be bound by any Assignment of
this Contract unless We receive the Assignment, or a copy of it, at Our
Home Office. We are not obliged to see that an Assignment is valid or
sufficient.
Suicide Exclusion. If the Insured commits suicide,
while sane or insane, within two years of the Contract Date, Our
total liability will be limited to the premium paid prior
to death, less any Contract Debt and partial withdrawals.
If the Insured commits suicide, while sane or insane, within two
years of the effective date of any increase in Specified Amount,
Our total liability with respect to such increase will be limited
to the Risk Charge made for such increase.
Misstatement of Age or Sex. If the Contract is
in error with regard to the Insured's age or sex, the Death Benefit will
be the amount provided based on the most recent Risk Charge at the
correct age or sex.
Non-participation. Nonparticipation is defined as follows:
a. Risk Rates, Expense Charges, and interest rates are determined
and redetermined only prospectively.
b. You are not entitled to participate in company profits.
c. We will not recoup losses by means of premium or factor changes.
<PAGE>
Payment Options
Payee.
A Payee is person who has the
right to receive the Proceeds under this Contract.
Option Date. The Option Date is the date of
death of
the Insured or the date of any other ending of this Contract.
Payment of Proceeds.
<BP2/BD>Payment. The Proceeds may be paid in one sum or all or
part of
this sum may be applied to any Payment Option. If no Payment
Option is chosen, We will pay interest on the Proceeds from the
Option Date to the date of payment. The interest rate will be
that being paid on Payment Option 4 on the Option Date.
Claims of Creditors. To the extent allowed by Law, the
Proceeds
will not be subject to any claims of a Payee's creditors.
Payment Options Available.
Election of Payment Options.
By Owner: While the Insured is living, You may choose,
or change the choice of, any Payment Option, unless the previous
choice provides otherwise.
By Payee: If the Proceeds are payable
in one sum, the Payee may choose any Payment Option.
Conditions. Any choice must be in writing in a form
approved by
Us. Our consent is needed for a Payment Option to be used for
any Payee under any of these conditions
a. The Payee is not a natural person;
b. The Payee will be paid as assignee;
c. The amount to be applied for the Payee is less than
$10,000;
d. Each payment to the Payee would be less than $50.
Payment Option 1. -- Payment for a Specified Period.
We will make equal monthly payments which will start on the
Option Date and will run for one to 30 years, as shown. The
guaranteed minimum monthly payments will be based on 2.75 percent.
The
payments may be increased by additional interest.
Payment Option 2. -- Payment of Life Income. <lt>We will
make equal monthly payments which will start on the Option Date
and will run as long as the Payee lives.
The amount of the payment will depend on the age and sex of
the Payee on the Option Date.
We must have proof of the Payee's date of birth. Either of
the
following terms may be chosen:
a. Life Income, Guaranteed Period. -- The payments will run
for the life of the Payee with guaranteed payments for
five, ten, or twenty years, as chosen;
b. Life Income Only. -- The payments will run only during
the lifetime of the Payee.
We reserve the right to require proof that the Payee is alive
when each payment is due.
Payment
Option 3. -- Payment of a Specified Amount. We will make equal
payments every one, three, six, or twelve months, as chosen. The
payments will start on the Option
Date and will
run until the Proceeds applied, together with interest at the rate
of at least 2.75 percent a year on the unpaid balance, are fully paid.
The final payment will be any balance equal to or less than one
payment. The payments may be increased by additional interest.
Payment Option 4. -- Proceeds Left at Interest. The
Proceeds may be left with Us for any length of time agreed upon.
Interest will be at the rate of at least 2.75 percent a year or the
minimum as required by the state the Insured resides in. The
interest may be left with Us to accumulate, or it may be paid
every one, three, six, or twelve months, as chosen. If the
interest is to be paid, the first payment will be at the end of
the first interest period.
Payment Option 5. -- Annuity. We will make payments
like those of any life annuity We then regularly issue which is
bought by a single sum. (This does not include contracts which are
used to qualify for special Federal Income Tax treatment as a
retirement plan.) Each payment will be 103 percent of the amount We
would
pay if the Proceeds were used to buy such an annuity on the Option
Date. The first payment
will be at the end of the first installment period. We must have
proof of the Payee's date of birth.
Other Payment Options Available. We may agree to pay
the
Proceeds in any other manner.
Payment Contracts.
Issue. When a Payment Option is chosen, We will issue
a Payment
Contract in exchange for this Contract. The effective date of
the Payment Contract will be the Option Date.
Assignment. Payment Contracts may not be assigned.
Withdrawal of Proceeds. The Payee has the right to
withdraw the Proceeds under a Payment Option if so provided in the
Payment Contract. We may
postpone payment of any amount to be withdrawn for not more
than six months from the date We receive the written request for
withdrawal at Our Home Office.
Changing Options. A Payee under Option 1, 3, or 4 may
change to another option on using the sum which the Payee could
withdraw on the date the new option is to start. In some cases,
the Payee will need Our consent to change an option. We describe
these cases under Conditions.
Death of Payee. If any payments remain to be paid
under a Payment Option at the death of the Payee, payment will be
made
according to the terms of the Payment Contract.
VUL3 FORM
<PAGE>
Disability Benefit Rider
Benefit.
This Rider provides disability insurance on the Insured. If the
Insured becomes totally disabled while this Contract and Rider are in
force, We will
waive any Monthly Deductions which become due during the continued
Total
Disability of the Insured. While Monthly Deductions are being waived,
the Death Benefit Option in effect must be Option 2. If this requires
a change in Death Benefit Option, the Specified Amount will be reduced
to equal the current Specified Amount minus the current Contract Fund.
Total Disability. Total Disability means that the
Insured is unable to engage for gain or profit in any occupation for
which the Insured is or could become qualified by reason of education,
training or experience. Being a homemaker or student is considered
engaging for gain or profit in an occupation.
To approve a claim for benefits under this Rider, We require that:
a. You send Us proof of disability;
b. The disability has continued for six consecutive months;
c. The disability resulted from bodily injury or disease; and
d. The disability began while this Contract and Rider were
in force and after age 15 of the Insured.
If the Insured becomes totally disabled while this Contract is
in the Grace Period, You must pay enough premium so that all Monthly
Deduction then due can be made.
Total disability is presumed if the Insured suffers a total and
permanent loss while this Contract and Rider are in force after age 15,
of:
a. The use of both hands or both feet;
b. The use of one hand and one foot; or
c. Sight in both eyes.
Causes of Disability Not Covered. The Monthly Deduction will
not be waived if the Total Disability results from:
a. Intentionally self-inflicted injury; or
b. Insurrection or war, declared or undeclared, or any act incident
to war, whether or not the Insured is in military service.
Notice and Proof of Claim.
Initial Proof of Total Disability. Written notice and proof
of claim must be given to Us at Our Home Office:
a. While the Insured is living;
b. While total disability continues; and
c. Not more than one year after the beginning of the disability.
Failure to give notice and proof within one year will not
void a claim if it is
shown that the notice and proof were given as soon as was
reasonably possible.
We will waive the Monthly Deduction on each Monthly Anniversary after
the
start of Total Disability as if We had received earlier notice of proof.
However, We will not waive the Monthly Deduction on more than 12
Monthly
Anniversaries preceding the date We actually did receive notice and
proof.
Proof of Continuance of Total Disability. Proof of
continuance of total disability will be required at reasonable intervals.
We may require that the Insured be examined at reasonable
intervals. Any such examination
will be at Our expense by an examiner whom We will name. If proof is not
furnished on request or the Insured fails to submit to examination, all
benefits under this Rider will end.
Cost of This Rider.
The cost for this Rider is determined on each Monthly
Anniversary. The Monthly
Deduction for this Contract is increased by the cost of this
Rider. The cost
of this Rider is equal to the rate shown in the following table
multiplied by
the number of thousands of the Insured's Death Benefit divided
by 1.0036748
less the Contract Fund. In addition to this amount, the following
costs are added for any Riders that are a part of this Contract.
If this Contract includes:
a. Term Insurance For Additional Insureds - Add the amount shown
in the following table multiplied by the total number of
thousands of Benefit Amount for Additional Insureds;
b. Family Insurance Rider - Add $.09 per Unit of Family Insurance
Rider;
c. Children's Insurance Rider - Add $.03 per Unit of Children's
Insurance Rider.
MONTHLY DISABILITY RATES PER $1,000
Attained Standard Ordinary
Age of Premium Class Premium Class
Insured Male Female Male Female
15-32 .01 .01 .01 .01
33 .01 .01 .01 .02
34 .01 .01 .01 .02
35-39 .01 .01 .01 .02
40 .01 .01 .02 .02
41 .02 .02 .02 .02
42 .02 .02 .02 .02
43 .02 .02 .03 .02
44 .02 .02 .03 .03
45 .02 .02 .03 .03
46 .04 .03 .05 .04
47 .04 .04 .05 .05
48 .04 .04 .05 .05
49 .04 .04 .06 .05
50 .05 .04 .07 .06
51 .05 .05 .07 .07
52 .06 .05 .08 .08
53 .06 .06 .10 .09
54 .07 .07 .11 .11
55 .09 .07 .12 .11
56 .10 .08 .13 .12
57 .11 .09 .15 .14
58 .12 .10 .16 .16
59 .14 .12 .19 .18
General Provisions.
Effective Date. The Effective Date of this Rider is the Contract
Date of this Policy unless otherwise shown on Page 1.
Termination of Coverage Under this Rider. This Rider will
terminate on the earliest of the following dates:
a. The Anniversary next following the Insured's 60th birthday;
b. The Monthly Anniversary next following Our receipt of Your request
that this Rider be terminated; or
c. The date this Contract terminates.
Other General Provisions.
a. This Rider is a part of this Contract;
b. This Rider is issued in consideration of the application and
payment of the first month's cost for this Rider;
c. The terms and conditions of this Contract apply to this Rider
unless specifically excluded;
d. When the Insured has recovered from Total Disability, You should
immediately give Us written notice; and
e. This Rider does not pay dividends.
WPT-21
<PAGE>
Accidental Death Benefit Rider
ADB Insured - any person insured under this Rider. Page 1
of this Contract lists each ADB Insured.
Benefit Amount - the amount of accidental death insurance
provided on the life of an ADB Insured by this Rider. The Benefit Amount
can vary from one ADB Insured to another. Page 1 of this Contract
lists the Benefit Amount of this Rider for each ADB Insured.
Effective Date - the Contract Date unless otherwise shown on
Page 1.
Benefit.
This Rider provides monthly renewable Accidental Death Insurance
on the
life of each ADB Insured. We will pay the Benefit Amount for that ADB
Insured if we receive due proof that the death of that ADB Insured:
a. Was a direct result of accidental bodily injury, independent of
all other causes, and the injury is evidenced by a visible bruise
or wound on the body except in the case of drowning or internal
injuries evidenced by an autopsy;
b. Occurred within 90 days from the date of the injury; and
c. The injury occurred while this Contract and Rider were in effect.
We will pay twice the Benefit Amount in lieu of the amount We would
otherwise pay if:
a. The death of the ADB Insured occurred under the above conditions;
and
b. The injury occurred while the ADB Insured was riding as a
fare-paying passenger in a plane, train, bus, taxi, or other
vehicle licensed and operating as a common carrier.
TABLE OF ACCIDENTAL DEATH BENEFIT RATES
(STANDARD PREMIUM CLASS)
Monthly Rates Per $1,000 of Benefit Amount
Attained Attained Attained
Age Rate Age Rate Age Rate
5 .03 27 .08 49 .08
6 .03 28 .08 50 .08
7 .03 29 .07 51 .08
8 .03 30 .07 52 .08
9 .03 31 .07 53 .08
10 .03 32 .07 54 .08
11 .03 33 .07 55 .08
12 .03 34 .07 56 .08
13 .04 35 .07 57 .08
14 .06 36 .07 58 .09
15 .09 37 .07 59 .09
16 .11 38 .07 60 .09
17 .11 39 .07 61 .09
18 .11 40 .08 62 .10
19 .12 41 .08 63 .10
20 .12 42 .08 64 .10
21 .12 43 .08 65 .11
22 .12 44 .08 66 .11
23 .11 45 .08 67 .11
24 .10 46 .08 68 .12
25 .09 47 .08 69 .12
26 .08 48 .08 70 .13
Deaths Not Covered.
We will not pay the Benefit Amount if the ADB Insured's death
results from:
a. Operating, descending from (while in flight), or riding in any
aircraft in which the ADB Insured has any duties;
b. Committing, or attempting to commit, a felony or resisting or
fleeing from arrest;
c. Infirmity or disease of the body or mind;
d. Voluntarily taking, inhaling, or absorbing into the body any
hallucinogen, narcotic, or other drug unless prescribed for
the ADB Insured by a physician;
e. Suicide or intentional self-inflicted injury, while sane or
insane; or
f. Insurrection or war, declared or undeclared, or any act incident
to war whether or not the ADB Insured is in military service.
Cost of This Rider.
The total cost of this Rider is the sum of the Rider cost for each
ADB Insured. This cost is determined on each Monthly Anniversary, and
the
Monthly Deduction for this Contract is increased by the total monthly
cost for this Rider. The monthly cost for each ADB Insured is equal to:
a. The Accidental Death Benefit rate, shown below, for the ADB
Insured's Attained Age; multiplied by
b. The Benefit Amount of this Rider for the ADB Insured.
General Provisions.
Termination of Coverage Under This Rider. The date of
termination of coverage under this Rider is determined for each ADB
Insured individually. Coverage under this Rider will terminate on
the earliest of the following dates, as these dates apply to each ADB
Insured:
a. The Contract Anniversary next following the ADB Insured's 70th
birthday; or
b. The Monthly Anniversary next following Our receipt of Your request
that coverage under this Rider be terminated for the ADB Insured.
Other General Provisions.
a. This Rider is a part of this Contract;
b. This Rider is issued in consideration of the application and
payment of the first month's cost for this Rider;
c. This Rider is subject to all of the provisions of this Contract
except where specifically excluded; and
d. This Rider does not pay dividends.
ADBT-12
<PAGE>
Term Life Insurance Rider For Additional Insured(s)
Additional Insured - any person insured under this Rider.
Page 1 of this Contract lists each Additional Insured.
Benefit Amount - the amount of term life insurance provided
on the life of an Additional Insured by this Rider. The Benefit Amount
can vary from one Additional Insured to another. Page 1 of this Contract
lists the Benefit Amount of this Rider for each Additional Insured.
Effective Date -
the Contract Date unless otherwise shown on Page 1.
Benefit. This Rider provides term life insurance on the
life of each Additional Insured. Upon the death of an Additional
Insured, We will pay the Benefit Amount of this Rider for that
Additional Insured if We receive due proof that the death occurred
while this Contract and Rider were in effect. We will pay the
Benefit Amount according to the Beneficiary designation shown in
the deceased Additional Insured's application for this Rider, or any
later change in that designation.
Cost of This Rider.
The total cost of this Rider is the sum of the Rider cost for each
Additional Insured. This cost is determined on each Monthly Anniversary,
and the Monthly Deduction for this Contract is increased by the total
monthly cost for this Rider. The monthly cost for each Additional
Insured is equal to:
a. The Risk Rate as described in the Contract Values Provision of this
Contract for the Additional Insured's Attained Age and sex;
multiplied by
b. The Benefit Amount of this Rider for the Additional Insured.
Conversion.
An Additional Insured may submit an application to convert the
coverage under this Rider to a new contract, without evidence of
insurability, at any time prior to the Additional Insured's age 70. This
Contract and Rider must be in effect at the time of conversion. You
must send Us a written request for conversion. We may require that
this Contract be returned to Us at the time of conversion. The new
contract will be subject to the following conditions:
a. The new contract can be any plan We then have available for
conversion. At least one plan of insurance will be available;
b. The premium will be at the rate in use by Us, on the date of
conversion and at the Attained Age of the Insured, for the new
contract chosen;
c. The Amount of Insurance of the new contract may not be greater
than the Benefit Amount of this Rider for the Additional Insured
at the time of conversion;
d. The first premium must be paid for the new contract at the time of
conversion;
e. The Benefit Amount of this Rider for the Additional Insured making
the conversion will be reduced by the amount of the new contract;
f. Riders providing disability or Accidental Death Benefits will be
included in the new contract if evidence of insurability is
furnished;
g. For the Amount of Insurance You are entitled to convert, the
Suicide and Incontestable periods of the new contract will be
measured from the Effective Date of this Rider.
If this Rider is terminated because this Contract has terminated due
to the death of the Insured or the maturity of this Contract, each
Additional Insured may convert his or her coverage under this Rider,
subject to the conversion rules above the following conditions:
a. We receive the application for conversion within 31 days of the
termination of this Contract. If an Additional Insured dies during
this 31 day conversion period without requesting conversion, We will pay
the Benefit Amount of this Rider for that Additional Insured; and
b. The age 70 limitations will be waived for conversion under this
provision.
General Provisions.
Termination of Coverage Under This Rider. The date of
termination of coverage under this Rider is determined for each
Additional Insured individually. Coverage under this Rider will
terminate on the earliest of the following dates, as these dates apply to
each Additional Insured:
a. The Anniversary next following the Additional Insured's 100th
birthday;
b. The Monthly Anniversary next following Our receipt of Your request
that coverage under this Rider be terminated for the Additional
Insured; or
c. The date that this Contract terminates.
Applicability of Contract Provisions to this Rider. This
Rider is subject to all of the provisions of this Contract except where
specifically excluded. In particular, the provisions regarding the
Insured's coverage under this Contract are equally applicable to the
Additional Insured's coverage under this Rider, unless stated otherwise.
Other General Provisions.
a. This Rider is a part of this Contract;
b. This Rider is issued in considerations of the application and
payment of the first month's cost of this Rider; and
c. This Rider does not pay dividends.
TRT-66
<PAGE>
Cost of Living Rider
Benefits. On each Increase Date, all benefits that are
eligible for increase
will be increased, unless Monthly Deductions are being waived.
The maximum amount of increase on each Increase Date for any
benefit will be $25,000. No benefit will be increased such
that the total amount of the benefit would be in excess of
$500,000. "Increase Date" means every Contract Anniversary,
that is the first, second, etc., Contract Anniversaries.
Unless this Rider has terminated with respect to any of the
benefits below, the initial Specified Amount is eligible for
increases if these benefits were issued in the Nonsmoker or Ordinary
Premium Class as shown on Page 1.
TABLE OF COST OF LIVING RIDER RATES
Monthly Rates per Monthly Rates per
$1,000 of Initial $1,000 of Initial
Attained Specified Amount Attained Specified Amount
Age of Eligible for Increase Age of Eligible for Increase
Insured Male Female Insured Male Female
0-30 .01 .01
31 .02 .01 46 .07 .05
32 .02 .01 47 .08 .05
33 .02 .01 48 .09 .06
34 .02 .01 49 .10 .06
35 .02 .02 50 .11 .07
36 .03 .02 51 .12 .07
37 .03 .02 52 .13 .08
38 .03 .02 53 .14 .09
39 .04 .03 54 .15 .10
40 .04 .03 55 .16 .11
41 .04 .03 56 .17 .11
42 .05 .03 57 .18 .12
43 .05 .04 58 .19 .13
44 .06 .04 59 .20 .14
45 .07 .04 60 .22 .15
61 .23 .16
62 .24 .17
63 .26 .18
64 .28 .19
65 .30 .20
Calculation of Increase Amount.
The increase in Specified Amount for the Insured on any Increase
Date will be equal to a. times b.
a. The portions of the initial Specified Amount in effect
at the issue that are in the Nonsmoker or Ordinary Premium
Class.
b. 6 percent.
Rejection of Increase.
On each Increase Date, We will mail You a revised Page 1
reflecting the benefits that have been increased. Acceptance of
these increases is automatic unless You reject any increase by
written notice and return the revised Page 1 to Us within 30
days of the Increase Date.
Effective Date of This Rider.
This Rider is effective on the Contract Date unless otherwise shown
on Page 1. Increases will begin on the first Increase Date which
occurs one year after the effective date.
Termination of This Rider.
A Specified Amount will be ineligible for any further increase
when any of the following occur:
a. An increase in the Specified Amount provided by this
Rider is rejected.
b. The Specified Amount is decreased.
c. The Anniversary following the 65th birthday
of a person covered under this Rider.
d. This Contract terminates.
e. We receive Your written request that coverage under
this Rider be terminated.
Cost of This Rider.
The cost of this Rider is determined on each Monthly
Anniversary and the Monthly Deduction for this Contract is increased
by the total monthly cost for this Rider. The monthly cost for
this Rider is equal to:
a. The Cost of Living Rider premium rate, as shown
In the Cost of Living Rider Rates Table,
for the person's attained age and sex; multiplied by,
b. the number of thousands of initial Specified Amount
eligible for increase for that person.
Reinstatement.
If the benefits of this Rider have been terminated, they may be
reinstated by providing Us satisfactory proof of the insurability
of the person for which they are being reinstated.
General Provisions.
a. This Rider is part of this Contract.
b. This Rider is issued in consideration of the application
and payment of the first month's cost for this Rider.
c. This Rider is subject to all of the provisions of this
Contract unless specifically excluded.
d. This Rider does not pay dividends.
TRT-75
<PAGE>
Guaranteed Insurability Rider
Additional insurance on the life of the Insured, without evidence
of insurability may be purchased on each Regular and Special
Option Date specified in this Rider. The additional insurance
purchased on any Option Date may not be more than the Benefit
Amount shown on Page 1 of this Contract and may not be less than
$5,000.
SCHEDULE OF REGULAR OPTION DATES
Option Date: Contract Anniversary on
Age At Which Insured's Age is Shown Below
Issue 1st 2nd 3rd 4th 5th 6th
Of This Option Option Option Option Option Option
Policy Date Date Date Date Date Date
0-24 25 28 31 34 37 40
25-27 28 31 34 37 40 ---
28-30 31 34 37 40 --- ---
31-33 34 37 40 --- --- ---
34-36 37 40 --- --- --- ---
Option Dates
Regular Option Dates. The Regular Option Dates
are shown in the Schedule of Regular Option Dates above. Each Regular
Option Date will occur if:
a. Such date has not been voided by the choice of a Special
Option Date, as described under "Choosing Option Dates";
and
b. This Rider is in force.
Special Option Dates. Special Option Dates
will occur 3 months after the date of:
a. The Insured's marriage; or
b. The birth of each living child born of the Insured's
marriage; or
c. The legal adoption of a child by the Insured.
This Rider must be in force. If a Special Option Date would
occur after the 28th calendar day of a month, the Special Option
Date will automatically be changed to the first day of the next
calendar month.
Before a Special Option can be elected, We have the right to
require due proof of marriage (resulting from a marriage
ceremony conducted by a third person legally authorized to do
so), birth, or adoption which created the Special Option.
Choosing Option Dates.
Additional insurance may be requested in writing. This written
request must be signed by the Insured, any assignee, and the
Owner if other than the Insured. We must receive such request
within three months before the Option Date on which the
additional insurance will be issued. Each choice of a Special
Option Date will void the Regular Option Date which occurs
on or after such Special Option Date. If any Regular Option
Date(s) has (have) already been voided, We will void the next
Regular Option Date. It is possible that all the Regular Option
Dates will be voided due to the choice of Special Option Dates.
If this is the case, Special Option Dates will continue to be
available. The Special Option can not be elected more than
twenty times.
Additional insurance issued under any option in this rider will
be the same risk classification as this contract. Risk rates for
this additional insurance will be based on the Attained
Age.
Termination of Rider.
This rider shall automatically end on the earlier of these dates:
a. The Contract Date after the Insured's age 40;
b. The date that this Contract terminates.
You may terminate this rider on the Monthly Anniversary next
following Our receipt of Your request that coverage under
this Rider be terminated.
General Provisions.
a. This Rider is part of this Contract.
b. Charges for this Rider are shown on Page 1 of this
Contract, and increase the Monthly Deduction of this Contract.
c. The terms and conditions of this Contract apply to this
Rider unless otherwise provided.
d. The issue date of this rider is the Contract Date unless
otherwise specified on Page 1 of this Contract.
e. This Rider is issued in consideration of the application and
payment of the first month's cost of this Rider.
TRT-74
<PAGE>
Disability Rider
Benefit.
During the Total Disability of the Insured, We will pay into the
Contract Fund of this Contract the Monthly Disability Benefit
shown on Page 1 for each complete month of Total Disability
but not beyond age 65 of the Insured. Disability Benefits will be
paid to the Insured if payment into the Contract Fund violated
Federal Guidelines.
Total Disability.
Total Disability Defined. Total disability means that the
Insured is unable to engage for gain or profit in any occupation for
which the Insured is or could become qualified by reason of
education, training or experience. Being a homemaker or student
is considered engaging for gain or profit in an occupation.
To approve a claim for benefits under this Rider, We require
that:
a. You send Us proof of disability; and
b. The disability has continued for six consecutive months;
and
c. The disability resulted from bodily injury or disease; and
d. The disability began while this Contract and Rider were
in force and after age 15 of the Insured.
If the Insured becomes totally disabled while this Contract is
in the Grace Period, You must pay enough premium so that all
Monthly Deductions then due can be made.
Total disability is presumed if the Insured suffers a total and
permanent loss while this Contract and Rider are in force after
age 15, of:
a. The use of both hands or both feet; or
b. The use of one hand and one foot.
Causes of Disability Not Covered. The Disability Benefit will
not be paid into the Contract Fund if the Total Disability
results from:
a. Intentionally self-inflicted injury; or
b. Insurrection or war, declared or undeclared, or any act
incident to war, whether or not the Insured is in the military
service.
Notice and Proof of Claim
Initial Proof of Total Disability. Written notice
and proof of
claim must be given to Us at Our Home Office.
a. While the Insured is living; and
b. While Total Disability continues; and
c. Not more than one year after the beginning of the disability.
Failure to give notice and proof within one year will not void a
claim if it is shown that the notice and proof were given as soon
as possible. We will pay the Disability Benefit into the Contract
Fund on each Monthly Anniversary after the start of the Total
Disability as if We had received earlier notice of proof. However,
We will not pay the Disability Benefit on more than six Monthly
Anniversaries preceding the date We actually did receive notice
and proof.
Proof of Continuance of Total Disability. Proof of
continuance of total disability will be required at reasonable
intervals. We may require that the Insured be examined at reasonable
intervals. Any such examination will be at Our expense by an examiner
whom We will name. If proof is not furnished on request or the
Insured fails to submit to examination, all benefits under this
Rider will end.
Cost of This Rider.
The cost of this Rider is determined on each Monthly
Anniversary. The Monthly Deduction for this Contract is increased
by the cost of this Rider. The cost of this Rider is shown on
Page 1.
General Provisions.
Effective Date. The Effective Date of this Rider is the
Contract Date of this Policy unless otherwise shown on Page 1.
Termination of Coverage Under this Rider. This Rider will
terminate on the earliest of the following dates:
a. The Anniversary next following the Insured's 65th birthday.
b. The Monthly Anniversary next following Our receipt of Your
request that his Rider be terminated.
c. The date this Contract terminates.
Other General Provisions.
a. This Rider is part of this Contract.
b. This Rider is issued in consideration of the application
and payment of the first month's cost for this Rider.
c. The terms and conditions of this Contract apply to this
Rider unless specifically excluded.
d. When the Insured has recovered from Total Disability,
You should immediately give Us written notice.
e. This Rider does not pay dividends.
WPT-23
<PAGE>
Family Insurance Provision
Term Insurance on Spouse and Insured Children
Definitions
Spouse - the Insured's spouse as named in the application
for this Contract.
Insured Child - a child or stepchild born to or adopted by
the Insured. An Insured Child must be named in the application for
this Rider or be born to or adopted by the Insured
after the date of the application. An Insured Child must be
at least 15 days old but not yet 21 years old when his or her
insurance under this Rider begins.
Effective Date of this Rider. The Contract Date of this
Contract unless otherwise shown on Page 1.
Expiration Date. As shown on Page 1 of this Contract.
Benefits
Term Insurance. This Rider provides the following amounts of
term insurance for each unit of Family Insurance Provision
as shown on Page 1. We will pay these amounts when We
receive proof of the death of the Spouse or an Insured Child
while this Contract and Rider are in force.
a. Insurance on Spouse. We will pay the benefit from the
following table upon death of the Spouse. The benefit decreases
each year as the attained age of the Spouse increases.
b. Insurance on Insured Children. We will pay $1,000
upon the death of an Insured Child. The death must
occur while the Insured Child is at least 15 days old
but not yet 25 years old.
BENEFIT TABLE
Attained Benefit Attained Benefit Attained Benefit
Age Per Unit Age Per Unit Age Per Unit
16 11,760 36 6,960 56 2,160
17 11,520 37 6,720 57 1,920
18 11,280 38 6,480 58 1,680
19 11,040 39 6,240 59 1,440
20 10,800 40 6,000 60 1,200
21 10,560 41 5,760 61 1,080
22 10,320 42 5,520 62 960
23 10,080 43 5,280 63 840
24 9,840 44 5,040 64 720
25 9,600 45 4,800
26 9,360 46 4,560
27 9,120 47 4,320
28 8,880 48 4,080
29 8,640 49 3,840
30 8,400 50 3,600
31 8,160 51 3,360
32 7,920 52 3,120
33 7,680 53 2,880
34 7,440 54 2,640
35 7,200 55 2,400
Paid-Up Insurance Benefits. If the Insured dies, the
term insurance on the Spouse and the Insured Children will
become fully paid-up. Upon the death of the Spouse, the term
insurance on the Insured Children will become fully paid-up.
This paid-up term insurance may be surrendered prior to its
expiration for its Cash Value. The Cash Value will be equal
to the net single premium for the paid-up benefits on the date
of surrender based on the 1980 CSO table at 5%. Within thirty-one
days after a Contract Anniversary, the Cash Value will
not be less than it was on the anniversary.
Payment of Benefits Under This Rider
The beneficiary named in the application will not be used in
paying benefits under this Rider. All benefits will be paid as
follows:
a. to You, if living; if not,
b. to the Insured, if living; if not,
c. to the Spouse, if living; if not,
d. in equal shares to surviving Insured Children, if any;
if not,
e. to the estate of the insured person whose death made
the benefit payable.
Cost of This Rider
The cost of this Rider is determined on each Monthly
Anniversary and the Monthly Deduction for this Contract is increased
by the monthly cost for this Rider. The monthly cost for this
rider if those insured under this Rider are in the Standard
premium class, is equal to the number of units of this Rider
as shown on Page 1, multiplied by $1.72.
Conversion
Upon termination of coverage under this Rider, any person
insured under this Rider may submit an application to convert
his or her coverage to a new contract, without evidence
of insurability. We must receive a written request within
31 days following the termination of coverage under this
Rider. The new contract will be subject to the following
conditions:
a. The new contract can be any plan We then have available
for conversion. At least one plan of insurance will be
available.
b. The premium will be at the rate in use by Us, on the
date of conversion and at the Attained Age of the Insured,
for the new contract chosen.
c. If the Spouse requests conversion, the amount of insurance
of the new Contract must be the amount of term
insurance provided by this Rider on the date this Rider
terminated.
d. If an Insured Child requests conversion, the amount
of insurance on the new contract must be at least $1,000
but not more than five times the amount of term insurance
provided by this Rider on the Insured Child's life.
e. The first premium must be paid for the new contract
at the time of conversion.
f. Riders providing disability or accidental death benefits
will be included in the new contract if evidence of
insurability is furnished.
g. For the amount of Insurance You are entitled to convert,
the Suicide and Incontestable periods for the new Contract
will be measured from the Effective Date of the Rider.
If a person who could convert dies during the 31 day
conversion period without requesting conversion, We will pay $1,000
for each Rider Unit shown on Page 1.
General Provisions
Termination of Coverage Under This Rider. Coverage under this
Rider will terminate on the earliest of the following dates:
a. The Contract Anniversary next following the Insured's
65th birthday.
b. The Monthly Anniversary next following Our receipt
of Your request that this Rider be terminated.
c. The end of the Grace Period of any unpaid premium.
d. Benefits under this Rider for any Insured Child will
end on the child's 25th birthday.
Suicide. If any person insured under this Rider,
while sane or insane, dies by suicide within two years after
the Effective Date of this Rider, We will pay as the proceeds
of this Rider the sum of the premiums paid for this Rider. However,
within 31 days following the date of such suicide, any surviving person
insured under this Rider may convert as described in the Conversion
provision.
Incontestability. After this rider has been in force for a
period of two years from the Effective Date, it will be incontestable
except for nonpayment of premium.
Other General Provisions.
a. This Rider is a part of this Contract.
b. This Rider is issued in consideration of the application
and payment of the first month's cost for this Rider.
c. This Rider is subject to all of the provisions of this Contract
except where specifically excluded.
d. This Rider does not pay dividends.
TR67C1
<PAGE>
Children's Insurance Provision
Definitions
Insured Child - a child or stepchild born to or adopted by
the Insured. An Insured Child must be named in the application
for this Rider or be born to or adopted by the Insured after
the date of the application. An Insured Child must be at least
15 days old but not yet 21 years old when his or her insurance
under this Rider begins.
Effective Date - the Contract Date unless otherwise shown on
Page 1.
Benefits
Term Insurance. This Rider provides $1,000 of term insurance
on each Insured Child for each unit of Children's Insurance
Rider as shown on Page 1. We will pay that amount when we
receive due proof that the death of an Insured Child occurred
while this Contract and Rider were in effect. The death must
occur while the Insured Child is at least 15 days old but not
yet 25 years old.
Paid Up Insurance Benefits. If the Insured dies, the $1,000
term insurance on the Insured Children will become fully paid-up.
This paid-up term insurance may be surrendered prior to
its termination for its cash value. The cash value will be equal
to the net single premium for the paid up benefits on the date
of surrender based on the 1980 CSO table at 3%. Within thirty-one
days after a contract anniversary, the Cash Value will not
be less than it was on that anniversary.
Payment of Benefits Under This Rider
The beneficiary named in the application will not be used in
paying benefits under this Rider. All benefits will be paid as
follows:
a. To You, if living;
b. To the Insured, if You are deceased;
c. To surviving Insured Children in equal shares, if You
and the Insured are deceased;
d. To the Insured Child's estate, if You, the Insured,
and all Insured Children are deceased.
Cost of This Rider
The cost of this Rider is determined on each Monthly
Anniversary and the Monthly Deduction for this Contract is increased
by the monthly cost for this Rider. The monthly cost for this
Rider is equal to the number of units of this Rider as shown
on Page 1, multiplied by $.52.
Conversion
Upon termination of coverage under this Rider, any insured
Child under this Rider may submit an application to convert
his coverage to a new contract without evidence of insurability.
We must receive written request within 31 days following the
termination of coverage under this Rider. The new contract
will be subject to the following conditions:
a. The new contract can be any plan We then have
available for conversion. At least one plan of insurance
will be available.
b. The premium will be at the rate in use by us, on the
date of conversion and at the attained age of the
Insured, for the new contract chosen.
c. The amount of insurance on the new contract must
be at least $1,000 but not more than five times the
amount of term insurance provided by this Rider
on the Insured Child's life.
d. The first premium must be paid for the new contract
at the time of conversion.
e. Riders providing disability or Accidental Death Benefits
will be included in the new contract if evidence of
Insurability is furnished.
f. For the amount of insurance you are entitled to convert,
the Suicide and Incontestable period of the new
Contract will be measured from the Effective Date
of this Rider.
If a person who could convert dies during the 31 day conversion
period without requesting conversion, We will pay $1,000 for
each Rider Unit shown on Page 1.
General Provisions
Termination Of Coverage Under This Rider. Coverage under
this Rider will terminate on the earliest of:
a. The Contract Anniversary next following the Insured's
65th birthday.
b. The Monthly Anniversary next following Our receipt
of Your request that this Rider be terminated.
c. The end of the grace period of any unpaid premium.
Benefits under this Rider for any Insured Child will
end on that child's 25th birthday.
Suicide. If the Insured, while sane or insane, dies by
suicide within two years after the effective date of this Rider, we
will pay as the proceeds of this Rider the sum of the premiums
paid on this Rider. However, within 31 days following the date
of such suicide, any surviving person insured under this Rider
may convert as described in the Conversion provision.
Incontestability. After this Rider has been in force for a
period of two years from the Effective Date, it will be incontestable
except for nonpayment of premium.
Other General Provisions.
a. This Rider is a part of this Contract.
b. This Rider is issued in consideration of the application
and payment of the first month's cost of this Rider.
c. This Rider is subject to all of the provisions of this
Contract except where specifically excluded.
This Rider does not pay dividends.
TRT-68
<PAGE>
TERMINAL ILLNESS OR INJURY ACCELERATED BENEFIT RIDER
NOTICE:
Benefits advanced under this Rider may or may not be taxable.
Whether or not the Owner or the Beneficiary incurs a tax liability when
benefits are advanced depends on how the IRS interprets applicable
portions of the Tax Code. As with all tax matters, the Owner should
consult a personal tax advisor to assess the impact of this benefit.
If Accelerated Benefits are advanced under the terms of this Rider,
death benefits and surrender benefits will be reduced.
THE AGREEMENT
Right to Examine Rider.
This Rider may be returned within 20 days after
its receipt to the agent through whom this Policy was purchased or to Our
Home Office. Upon cancellation, it will be void from the beginning.
Consideration.
This Rider is part of this Contract. Unless changed by
this Rider, all provisions, exclusions, and limitations of this Contract
remain the same and apply to this Rider. There is no charge for this
Rider prior to the time Rider benefits are applied for. It is issued in
consideration of the application.
Renewability.
We will not cancel this Rider. Unless the Owner requests
termination of this Rider, it will remain in force as long as this Policy
remains in force.
DEFINITIONS
Effective Date.
The Effective Date of this Rider will be the Contract
Date of this Policy unless otherwise shown on Page 1.
Eligible Death Benefit.
On any date, the Eligible Death Benefit is the sum of
A plus B where:
A is any death benefit on the life of the
Insured provided by this Policy on such date. A does not
include the death benefit provided by any Rider.
B is the sum of any death benefit on the life of the
Insured provided by any Eligible Riders on such date.
Any increase or decrease in any of these items will automatically be
reflected in the Eligible Death Benefit at the time
the increase or decrease becomes effective.
On any date, the Eligible Death Benefit is zero if this Contract is not
an Eligible Contract on such date.
Eligible Contract. On any date, this Contract is an Eligible
Contract unless on such date
1. this Policy or any Eligible Rider provides on such date a decreasing
death benefit on the Insured, or
2. this Contract has less than five years remaining until its maturity or
expiration date, or
3. any Eligible Rider has less than five years remaining until the
expiration date of such rider.
Eligible Rider. On any date, an Eligible Rider is any life
insurance rider that is attached to this policy and provides a death benefit
on the life of the Insured. An accidental death benefit rider is not an
Eligible Rider.
Advanced Sum.
An Advanced Sum is the amount
used to advance an Accelerated Benefit under this Rider.
Any Advanced Sum will be calculated by Us as of the date it is used
and will be the lesser of:
a. the amount the Owner requests to use; or
b. the Maximum Advanced Sum.
Administrative Expense Charge.
The Administrative Expense Charge, if any, will be determined at the
time any Accelerated Benefit is paid in accordance with the most recent
statement of Administrative Expense Charge - Current Practice disclosed
to
the Owner.
Maximum Advanced Sum: On any date, the Maximum Advanced
Sum is the smaller of A and B where:
A is 50% of the difference of
1. the Eligible Death Benefit less
2. the sum of any Advanced Sums ever used under this Contract less
3. any outstanding Life Debt.
B is the difference of
1. $250,000 less
2. the sum of any Advanced Sums ever used under this Contract and
any other Contracts ever issued by Us on the Insured.
Life Debt. Life Debt is any outstanding Contract Debt not
arising from any annuity rider.
Physician. Physician means an individual who is licensed to
practice medicine and treat illness or injury in the state in which
treatment is received and who is acting within the scope of that license.
Physician does not include:
a. the Insured;
b. the Owner;
c. a person who lives with the Insured or Owner; or
d. a person who is part of the Insured's or Owner's
Immediate Family.
Immediate Family. Immediate Family means a spouse, child,
brother, sister, parent, or grandparent of the Insured or
the Owner, or a child, brother, sister, parent, or grandparent of the
spouse of the Insured or Owner.
Terminal Illness or Injury. Terminal Illness or Injury
means an imminent death expected as a result of a noncorrectable
medical
condition that:
a. with reasonable medical certainty, will result in the death of the
Insured in less than 12 months from the date of the
Physician Statement; and
b. is diagnosed on or after the Effective Date of this Rider while this
Rider is in force.
Physician Statement. A Physician Statement means a statement
acceptable to Us, signed by a Physician, which:
a. gives the Physician's diagnosis of the Insured's
noncorrectable medical condition;
b. is dated the same as the date of diagnosis, with the date of diagnosis
at least 14 days after the onset of the noncorrectable medical
condition; and
c. states that, with reasonable medical certainty, the noncorrectable
medical condition will result in the death of the
Insured in less than 12 months from the date of the Physician Statement,
assuming the exercise of ordinary and reasonable medical care, advice,
and treatment available in the same or similar communities.
BENEFITS
Description of Benefits.
We will advance the Accelerated Benefit if the
Insured has been diagnosed as having a Terminal Illness
or Injury, subject to the provisions of this Rider. We will advance the
Accelerated Benefit as a lump sum.
The Accelerated Benefit is A minus B where :
A is the Advanced Sum less adjustments for:
a. Expected future interest and
b. Expected future premiums.
Each of these adjustments will be made at Our option, using Our methods
and assumptions. Among other things, We will assume a reduced life
expectancy
for the Insured.
B is the Administrative Expense Charge.
The Accelerated Benefit will be at least as large as the net surrender
value (excluding the net surrender value of any annuity rider) times the
Advanced Sum divided by the difference of the Eligible Death Benefit less
any Life Debt.
Considering the Advanced Sum, the Accelerated Benefit will not be less
than the amount required to be a qualified accelerated death benefit
according to Internal Revenue Service regulations.
We will charge an Administrative Expense Charge, as described in the
Administrative Expense Charge definition, for each Accelerated Benefit.
At the beginning of each Contract Year, We will set the rate that will
apply for that Contract Year for use in calculating the above expected
future interest.
The maximum rate at any time will be the greater of A and
B , but not more than allowed in the state of issue of this
Rider where:
A is Moody's Corporate Bond Yield Average - Monthly Average
Corporates, as published by Moody's Investors Service, Inc., or any
successor thereto, for the calendar month ending two months before the
date on which the rate is determined. (If this bond average is no
longer published, A will be a similar average established by law
or regulation issued by the insurance commissioner.)
B is the rate used to compute the cash value under this
Policy during the applicable period plus 1% per year.
If a reduction in the maximum rate, as defined above, would require a
reduction of less than 1/2%, We are not required to reduce the rate. Any
increase in the rate will be for 1/2% or more, subject to the maximum rate.
Conditions for Advance of Accelerated Benefit.
The advance of an Accelerated Benefit is subject to the following
conditions:
a. This Policy must be in force other than as Extended Term Insurance or
Reduced Paid-Up Insurance.
b. The Advanced Sum used to advance the Accelerated Benefit
must not exceed the Maximum Advanced Sum determined at
the time We advance the Accelerated Benefit.
c. We must receive Proof of Loss that is acceptable to Us. Even if We
received Proof of Loss for an Accelerated Benefit advanced earlier, We
reserve the right to request additional Proof of Loss, including
additional information, additional Physician Statements, and additional
Physical Examinations.
d. This Contract must not be legally or equitably assigned except to Us
as security for any Contract Debt.
e. We must receive a consent form from each irrevocable beneficiary, if
any. We also reserve the right to require a consent form from a spouse,
the Insured, other beneficiaries, or any other person
if We feel such person's consent is necessary to protect Our interests.
f. We reserve the right not to advance any Accelerated Benefit if
the Advanced Sum is less than $50,000.
g. No Accelerated Benefit will be advanced
1. after there are fewer than five years remaining until the
a) expiration or Maturity date of this Contract or
b) expiration date of any Eligible Rider, or
2. on any date if this Policy or any Eligible Rider provides on
such date a decreasing death benefit on the Insured.
h. This Rider provides for the advance of a portion of the death
benefit of this Contract. This is not meant to cause involuntary
access to proceeds ultimately payable to the beneficiary. Thus, this
benefit is not available:
1. if either the Owner or the Insured is required
by law to use this benefit to meet the claims of creditors, whether in
bankruptcy or otherwise; or
2. if either the Owner or the Insured is required
by a government agency to use this benefit in order to apply for,
obtain, or otherwise keep a government benefit or entitlement.
3. We reserve the right to require that this Contract be returned
to Us so that We can make appropriate changes.
Limitations. No benefit will be provided by this Rider
if Terminal Illness or Injury results from intentionally self-inflicted
injury.
EFFECT OF RIDER BENEFITS ON POLICY VALUES AND BENEFITS
Changes.
On the day We advance an Accelerated Benefit the Eligible Death
Benefit will be reduced by an amount equal to A divided by B.
A is:
1. The Eligible Death Benefit (just before the advance), times
2. The Advanced Sum.
B is:
1. The Eligible Death Benefit (just before the advance), minus
2. Any Life Debt.
The following changes will be made to this Contract on the day We
advance the Accelerated Benefit.
a. We will reduce the following in proportion to the reduction in
Eligible Death Benefit:
1. The death benefit of this Policy and of each Eligible Rider,
2. any Specified Amount of this Policy,
3. any contract values (including any contract fund), and
4. any Life Debt.
b. If this Contract has a Specified Amount, the highest Specified
Amount ever in effect will be reduced in proportion to the reduction
in the Eligible Death Benefit.
c.
Any Premiums for this Policy and any riders with reduced benefits
will be based on the respective reduced benefits.
Premiums and Monthly Deductions After Claim. If this
Contract requires regularly scheduled premiums, We will continue to bill
for premiums after the advance of the Accelerated Benefit. Any premium
not
paid before the end of its grace period will cause this Contract to lapse
or terminate in accordance with the provisions of this Contract.
If this Contract requires regular monthly deductions from the Contract
Fund or Cash Value, We will continue to make the monthly deductions
after
the advance of any Accelerated Benefit.
CLAIMS
Notice of Claim.
Written Notice of Claim must be given to Us within 30
days after the date the Insured has been diagnosed as
having a Terminal Illness or Injury as defined in this Rider, or as soon as
reasonably possible. Notice of Claim must identify the
Insured and be sent to Us at Our Home Office.
Claim Forms.
We will send claim forms to the Owner when Notice of Claim
is received. If We do not mail the claim form within 15 days, the Owner
will be considered to have complied with the Proof of Loss requirements
by giving Us an acceptable Physician Statement and a written statement
of
the nature and extent of the Terminal Illness or Injury.
Proof of Loss.
Written proof of the Insured's Terminal
Illness or Injury must be received by Us within 90 days after the date the
Insured has been diagnosed as having a Terminal Illness or
Injury before We will advance the Accelerated Benefit. If Proof of Loss
cannot
be furnished within 90 days, the claim will not be affected. In any event,
proof must be received by Us within 1 year of the 90 day period.
This proof
must include a properly completed Claim Form and a Physician
Statement
acceptable to Us. We may request additional medical information from
the
Physician submitting the statement. We will not unreasonably withhold
Our acceptance of Proof of Loss.
The Owner and Insured are responsible for obtaining and
paying for the costs of all information to be provided as Proof of Loss. In
cases where the Owner has provided unacceptable Proof of Loss, as
determined
by Us, any additional medical tests, procedures, or services which would
be useful in helping the Owner provide new evidence of the existence of a
Terminal Illness or Injury will need to be determined and performed at
the discretion of the Owner and Insured, as well as being
paid for by them. These costs will not be paid for by Us.
Physical Examination.
At Our expense, We reserve the right to have a
Physician of Our choosing examine the Insured prior to
advancing an Accelerated Benefit. In the event that the Physician We
choose
provides a different Physician Statement, We reserve the right to rely on
that
Physician Statement for claim purposes.
Time of Payment of Claims.
All benefits described in this Rider will be
available as soon as We receive satisfactory Proof of Loss.
Payment of Claims.
All Rider benefits will be paid to the Owner. But if, prior to
approval and payment of an Accelerated Benefit, We receive notice,
acceptable to Us, of the Insured's death, such
Accelerated Benefit will not be paid.
Legal Actions.
Legal actions may not be brought against Us until after
60 days from the date written Proof of Loss was given to Us.
GENERAL PROVISIONS
Representations and Contestability.
All statements made in the application for this Rider by or on behalf
of the Insured will, in the absence of fraud, be deemed
representations and not warranties. The validity of this Rider with respect
to the Insured will not be contestable after it has been
in force for 2 years during the lifetime of the Insured.
Any increase in coverage effective after the Contract Date or Issue Date
or any reinstatement will not be contestable after such increase or
reinstatement has been in force during the lifetime of the
Insured for 2 years from its effective date. A contest will be
based only on the application for the increase or reinstatement.
Reinstatement.
If this Policy is reinstated, this Rider will also be reinstated.
Incorrect Age or Sex.
If there is an error in the age or sex of the
Insured, the benefit available under this Rider
will be the Accelerated Benefit
that would be available based on the death benefit that
this Contract would have provided for the Insured
at the correct age and sex.
Conformity with State Statutes.
If any provision of this Rider is in
conflict with the laws of the state in which the
Insured resides on the Effective Date of this Rider, the provision is
automatically amended to meet the minimum requirements of such laws.
Termination of Rider.
This Rider terminates:
a. on the day We receive written request of the Owner;
b. upon termination of this Contract; or
c. when this Contract reaches its Maturity Date, if any.
Coverage will terminate at 12:00 midnight on any given termination date.
TR81A1
RIDER FORM
<PAGE>
MNL Life Insurance Application to: PART 1
MIDLAND NATIONAL LIFE INSURANCE COMPANY, Sioux Falls, SD
57193-0001
1.a. PRIMARY PROPOSED INSURED
MARRIED
SINGLE
LAST NAME, FIRST, M.I.
BIRTH DATE
MO. DAY YEAR
STATE OF BIRTH
AGE
SEX
SOCIAL SECURITY #
DRIVERS LICENSE #
HEIGHT (FT.IN.)
WEIGHT (LBS.)
b. SPOUSE PROPOSED
for INSURANCE (or premium payer for juvenile policy)
BIRTH DATE
MO. DAY YEAR
STATE OF BIRTH
AGE
SEX
SOCIAL SECURITY #
DRIVERS LICENSE #
HEIGHT (FT.IN.)
WEIGHT (LBS.)
c. DEPENDENT
CHILDREN PROPOSED for INSURANCE
BIRTH DATE
MO. DAY YEAR
STATE OF BIRTH
AGE
SEX
SOCIAL SECURITY #
DRIVERS LICENSE #
HEIGHT (FT.IN.)
WEIGHT (LBS.)
2. RESIDENCE ADDRESS (Street, City, State, Zip)
TELEPHONE NUMBER ( )
How long at this address?
If less than 2 years, give previous address under "Special Requests"
3. EMPLOYER (Company Name, Street, City, State, Zip)
4. Occupation (Describe and give exact duties)
OCCUPATION OF SPOUSE (If applicable)
BUSINESS TELEPHONE NUMBER
Primary Insured ( )
Spouse ( )
ANNUAL INCOME
Primary Proposed Insured
Spouse
5a. Has Primary Proposed Insured ever used tobacco in any form?
No Yes IF YES, complete below...
Type of Tobacco:
Date Last Used
Cigarettes Other
Current or within 1 year
Over 1 year but less than 3 years
Over 3 years
5b. Has Spouse Proposed Insured ever used tobacco in any form?
No Yes IF YES, complete below...
Type of Tobacco:
Date Last Used
Cigarettes Other
Current or within 1 year
Over 1 year but less than 3 years
Over 3 years
CONTACT THE PROPOSED INSURED AT:
RESIDENCE BUSINESS
Time A.M. P.M.
6. AMOUNT
If Universal Life
Minimum Premium
Target Premium
PLAN OF BASIC POLICY
Preferred
Non-Smoker Smoker
If Universal Life
Option I Option II
Automatic Premium Loan
7. RIDERS
Waiver of Premium
Living Needs Rider
Accidental Death Benefit
Amount
Units
Children's Insurance Rider
Other Rider
Plan Amount
Preferred Non-Smoker Smoker
SEND MAIL TO
RESIDENCE
BUSINESS
8a. PREMIUM FREQUENCY
Annual
Semi-Annual
Quarterly
Monthly
PREMIUM MODE
Check-O-Matic
Direct Billing
List Billing/Franchise
Military Government Allotment
Civil Service Allotment
Amount of Mode Premium
Amount Paid with Application
(Receipt valid only if amount paid with application is entered here)
8b. FOR CHECK-O-MATIC ONLY:
DRAW DATE
(1st-28th) Month Day
ACCOUNT TYPE
Checking (enclose voided check)
Savings (Must complete 8c)
AUTHORIZED SIGNATURE(S) OF ACCOUNT HOLDER(S)
8c. ROUTING/TRANSIT NUMBER
ACCOUNT NUMBER
FINANCIAL INSTITUTION NAME AND ADDRESS
9a. WILL THE INSURANCE BEING APPLIED FOR REPLACE OR
CHANGE ANY EXISTING LIFE INSURANCE OR ANNUITY
CONTRACT? YES NO
9b. IS THERE ANY INSURANCE IN FORCE OR APPLICATION
PENDING ON THE LIFE/LIVES OF ANY PROPOSED INSURED(S)?
YES NO (If yes, please complete 9c)
9c. Proposed Insured Name
Company
Amount
Status
Issued
Pending
ADB
Y N
Proposed Insured Name
Company
Amount
Status
Issued
Pending
ADB
Y N
10. OWNER IF OTHER THAN PROPOSED INSURED (Include
relationship to proposed insured.)
NAME ADDRESS Soc. Sec. No. Or Fed. Tax ID No.
11. PRIMARY BENEFICIARY-(Class 1)(Include relationship to proposed
insured.)
12. CONTINGENT BENEFICIARY-(Class 2)(Include relationship to
proposed insured.)
Beneficiary designations do not apply to others covered under
Family/Children's Provision Riders.
13. SPECIAL REQUESTS OR DETAILS
Premium checks must be payable to Midland National Life Insurance
Company. Do not make checks payable to the Agent or leave the Payee
blank.
Detach and Deliver this section to the proposed insured.
RECEIPT Cash Franchise Authorization or Government Allotment
Received from the sum of $ representing Full Partial
payment of the first premium on account of application made this date to
MIDLAND NATIONAL LIFE INSURANCE COMPANY. If after
investigation and the completion of all required medical examinations and
studies, the Company shall be satisfied that on the date of the application
or medical examination, whichever is later, each person proposed for
insurance was insurable and entitled under the Company's rules and
standards to insurance on the plan and for the amount and at the rate of
premium applied for, the insurance protection applied for shall by reason
of such payment take effect from the date of application or such medical
examination or the date specifically requested in the application,
whichever is later, if the sum paid is equal to or greater than 1/12th of the
annual premium required for the policy applied for. Unless every condition
specified in this receipt is fulfilled exactly, no insurance shall be
considered in effect unless and until the application has been approved
and accepted by the Company and the policy delivered to and accepted
by the Owner, and the full first premium has been paid while each person
proposed for insurance is alive and while the state of health and other
conditions affecting insurability are as stated in this application or
examination, if required. This receipt will be void if any acknowledged
authorization is cancelled before payment or if any check or draft is not
honored when presented. This receipt will be void if altered or modified in
any respect. No agent of the Company and no broker is authorized to
alter or waive any of such conditions. Failure of the Company to issue a
policy within 90 days from the date of this receipt shall automatically be
deemed a declination without further notice.
EVEN IF EVERY CONDITION SPECIFIED IN THIS RECEIPT IF
FULFILLED EXACTLY, THE COMPANY'S MAXIMUM LIABILITY PRIOR
TO THE ACTUAL ISSUANCE AND DELIVERY OF THE POLICY SHALL
NOT EXCEED $250,000.
Date
Agent
Signature
Detach and Deliver this section to proposed insured.
MIDLAND NATIONAL LIFE INSURANCE COMPANY, Sioux Falls, South
Dakota 57193-0001
Fair Credit Reporting Act Notification
As part of our underwriting procedure, an investigative consumer report
may be made which will provide applicable information concerning
residence verification, employment, occupation, general health, habits,
reputation, personal characteristics and mode of living. Such information
for the investigative consumer report will be obtained through personal
interviews with your friends, neighbors, and associates. Upon written
request, a complete and accurate disclosure of the nature and scope of
the investigative consumer report will be provided.
Medical Information Bureau Notification
Information regarding your insurability will be treated as confidential.
Midland National Life Insurance Company, or its reinsurers, may,
however, make a brief report thereon to the Medical Information Bureau,
a non-profit membership organization of life insurance companies, which
operates an information exchange on behalf of its members. If you apply
to another Bureau member company for life or health insurance coverage,
or a claim for benefits is submitted to such a company, the Bureau, upon
request, will supply such company with the information in its file. Upon
receipt of a request from you, the Bureau will arrange disclosure of any
information it may have in your file. If you question the accuracy of
information in the Bureau's file, you may contact the Bureau and seek a
correction in accordance with the procedures set forth in the federal Fair
Credit Reporting Act. The address of the Bureau's information office is
Post Office Box 105, Essex Station, Boston, Massachusetts 02112,
telephone number (617) 426-3660. Midland National Life Insurance
Company, or its reinsurers, may also release information in its file to other
life insurance companies to whom you may apply for life or health
insurance, or to whom a claim for benefits may be submitted.
Question 14 to be completed on both non-medical and examined
applications.
14. Has any person proposed for insurance in Section 1 on reverse side Yes No
(a) Received treatment for drug use or used marijuana; narcotic,
hallucinogenic or habit forming
drugs not prescribed by a physician or is any such person currently using
marijuana or such
drugs?
(b) Had any motor vehicle moving violations or accidents or been arrested
for driving under the
influence of alcohol or drugs within the last five years?
(c) Been arrested for any reason other than moving traffic violations?
(d) Flown other than as a fare-paying passenger within the last two years,
or contemplate such
flying in the future? (If yes, complete Aviation Questionnaire.)
(e) Any past, present or expected activity in racing, skin or sky diving, or
any other hazardous
sport or hobby? (If yes, complete Hazardous Activities Questionnaire.)
(f) Ever had an application for insurance or reinstatement of insurance
declined, postponed, rated
up or modified? Why?
(g) Traveled or resided outside the U.S. or intends to travel or reside
outside the U.S.?
15. Has any person proposed for insurance in Section 1 on reverse side
ever had or been treated for
(a) Chest pain, heart murmur, high blood pressure, or any other disease
of the heart, blood,
or blood vessels?
(b) Peptic ulcer, indigestion, or any other disease of the stomach,
intestines, gall bladder or liver?
(c) Emphysema, bronchitis, asthma, pleurisy, or any other disease of the
chest or lungs?
(d) Kidney stone, diabetes; albumin, pus, blood or sugar in urine; venereal
disease, or any other
disease of the kidneys, bladder or reproductive organs?
(e) An immune deficiency disorder, AIDS, ARC (AIDS related complex) or
been told test results
indicate exposure to the AIDS virus?
(f) Severe headaches, fainting spells, epilepsy, paralysis, nervousness,
mental disorder, or any
other disease of the brain or nervous system?
(g) Any impairment of sight or hearing?
(h) Alcoholism or been treated or counselled for the use of alcohol?
(i) Cancer, tumor or any other illness or injury not mentioned above?
16. Other than indicated above, has any person proposed for insurance in
Section 1 on reverse side
(a) Ever applied for or received a pension or disability benefit?
(b) Been hospitalized in the past 5 years?
(c) Consulted a physician during the past 5 years?
(d) Had a change of weight in the past year?
(e) Had an immediate family member with a history of diabetes, mental,
nervous, heart or
circulatory disorder?
17. Is any person proposed for insurance in Section 1 on reverse side
now under observation or
taking treatment or been advised to have any tests, hospitalization or
surgery which has not
been completed?
IT IS DECLARED that the statements and answers in this application or
given to the examiner in Part II, should examination be required, are
complete and true to the best knowledge and belief of the undersigned. IT
IS AGREED: (1) that any waiver or modification of this application will not
be effective unless in writing and signed by the President, a Vice
President, the Secretary or an Assistant Secretary; (2) that no insurance
shall be in effect under this application (except as may be provided in the
receipt bearing the same date as this application) unless and until the
application has been approved and accepted by the Company at its
Home Office and the policy delivered to and accepted by the Owner and
the full first premium has been paid while each person proposed for
insurance is alive and while the state of health and other conditions
affecting insurability are as stated in this application and examination, if
required. (If a Franchise Authorization or Government Allotment is
indicated in section 8a and has actually been signed and delivered for the
correct amount, this shall be considered the same as payment of the full
first premium); (3) that the acceptance of any policy issued on this
application shall constitute a ratification of any correction or amendment
made by the Company.
I also acknowledge receipt of Fair Credit Reporting Act and Medical
Information Bureau Notifications.
AUTHORIZATION: I hereby authorize any licensed physician, medical
practitioner, hospital, clinic or other medical or medically related facility,
insurance company, the Medical Information Bureau or other
organization, institution or person, that has any records or knowledge of
me or my child for whom insurance application is made, or my health or
my child's health, to give to Midland National Life Insurance Company, or
its reinsurers, any such information. A reproduction of this authorization
shall be as valid as the original.
PROPOSED INSURED if 15 YEARS OR OLDER (Signature)
Make all checks payable to Midland National Life Insurance Company
SIGNED AT (City, State)
DATE
OWNER (Signature)
SPOUSE PROPOSED FOR INSURANCE (Signature)
SOLICITING AGENT (Signature) To the best of my knowledge, this
application is not involved in replacement of life insurance or annuities, as
defined in applicable Insurance Department Regulations, except as stated
in Section 9a.
PRINT AGENT'S LAST NAME
CODE NO.
TELEPHONE NUMBER ( )
OTHER AGENT (Please Print)
% CREDIT
CODE NO.
GENERAL AGENT (Please Print)
CODE NO.
<PAGE>
DESCRIPTION OF MIDLAND'S PURCHASE,
REDEMPTION, TRANSFER, AND EXCHANGE
PROCEDURES FOR CONTRACTS
This document sets forth the administrative procedures that
will be followed by Midland National Life Insurance Company
(Midland) in connection with the issuance of its Flexible Premium
Variable Life Insurance Contract (Contract or Contracts), the
transfer of assets held thereunder, and the redemption or exchange
by contract owners of their interests in the Contracts.
1. "Public Offering Price:" Purchase and Related
Transactions
Set out below is a summary of the principal contract provisions
and administrative procedures which might be deemed to
constitute, either directly or indirectly, a "purchase" transaction.
The summary shows that, because of the insurance nature of the
Contracts, the procedures involved necessarily differ in certain
significant respects from the purchase procedures for mutual funds
and contractual plans.
(a) Premium Schedules and Underwriting Standards
Premiums for the Contracts will not be the same for all contract
owners. The full first premium is due on the contract date and
cannot be less than the minimum premium for the first contract
year. The cost of insurance charge deducted as part of the monthly
deduction, is based on the insured's attained age, sex, risk
classification and specified amount of the Contract.
On premiums other than the first, Midland does not require the
payment of any specified amount. Contract owners may determine
a periodic plan, a plan under which a level premium may be paid at
fixed intervals for a specified period of time. Payment of
premiums in accordance with this plan is not, however, mandatory
and failure to do so will not of itself cause the Contract to lapse.
Instead, so long as there is no outstanding contract debt (contract
loans plus accrued interest) contract owners may make premium
payments in any amount and at any frequency, subject only to the
minimum amount requirements, and the maximum premium
limitations. If at any time a premium is paid which would result
in total premiums exceeding the current maximum premium
limitation set forth in the Contract, Midland will accept only that
portion of the premium which will make the total premiums equal
that amount. Any portion of the premium in excess of the
maximum premium limitation will be returned to the contract
owner and no further premiums will be accepted until allowed by
the current maximum set forth in the Contract.
The Contract will remain in force so long as the net cash
surrender value is sufficient to pay the monthly deduction. Thus,
the amount of a premium, if any, that must be paid to keep the
Contract in force may depend on the net cash surrender value of
the Contract, which in turn depends on the investment experience
of Midland National Life Separate Account A ("Separate
Account") and the cost of insurance charge. The cost of insurance
rate utilized in computing the cost of insurance charge will not be
the same for each contract owner. The chief reason is that the
principle of pooling and distribution of mortality risks is based on
the assumption that the cost of insuring each insured is
commensurate with their mortality risk which is actuarially
determined based upon factors such as attained age, sex and risk
classification. Accordingly, while not all insureds will be subject
to the same cost of insurance rate, there will be a single "rate" for
all insureds in a given actuarial category.
The Contracts will be offered and sold pursuant to established
underwriting standards and in accordance with state insurance
laws. State insurance laws prohibit unfair discrimination but
recognize that premiums must be based upon factors such as age,
sex, health, and occupation.
(b) Application and Initial Premium Processing
Upon receipt of a completed application, Midland will follow
certain insurance underwriting (i.e., evaluation of risks) procedures
designed to determine whether the proposed insured is insurable.
This process may involved such verification procedures as medical
examinations or tests and may require that further information be
provided by the applicant before a determination can be made. A
Contract will not be issued until this underwriting procedure has
been completed.
Insurance coverage under the Contract will begin on the
contract date. Midland will allocate premiums received prior to the
Record Date to the General Account where they will earn interest
at a fixed rate. The day following the Record Date, the value in the
General Account will be allocated according to the instructions
specified in the application.
The contract date is also the date used to determine contract
years and contract months. The contract date is assigned each
contract when the contract is issued. The contract date will
normally be the date the Contract is issued; however, the contract
date may be any other date mutually agreeable to Midland and the
contract owner. If the contract date would otherwise fall on the
29th, 30th, or 31st day of the month, the Contract date will be the
28th.
Payments of any amount unless otherwise specified will be
treated first as payment of any outstanding contract debt. The
portion of a payment in excess of any outstanding contract debt
will be treated as premium payment.
(c) Reinstatement
If the contract terminates and is reinstated, a premium must be
paid sufficient to:
1. Pay all overdue monthly deductions; plus,
2. Increase the Contract Fund to a level where the Contract
Fund less any Contract Debt equals the surrender charges;
plus,
3. Cover the next two months' deductions.
If the contract is reinstated, the surrender charge will be as
though the contract had been in effect continuously from its
original contract date.
(d) Repayment of Contract Debt
A contract loan will be subject to a maximum interest rate set
forth in the Contract. Contract debt (contract loans plus accrued
interest) may be repaid in whole or in part at any time. While there
is outstanding contract debt, any payment will be treated as the
repayment of that debt. The portion of any payment in excess of
outstanding contract debt will be treated as a premium payment.
Upon the repayment, the Contract Fund in the general account
securing contract debt will be transferred to Separate Account.
Midland will allocate the repayment of contract debt at the end of
the valuation period during which the repayment is received.
(e) Correction of Misstatement of Age or Sex
If the insured's age or sex was misstated in an application, life
insurance proceeds and benefits will be adjusted. The adjusted life
insurance proceeds will be (a) the contract fund plus (b) the life
insurance proceeds reduced by the contract fund and multiplied by
the ratio of (1) the monthly cost of insurance actually applied, to
(2) the monthly cost of insurance that should have been applied at
the true age or sex. All amounts are those in effect, with respect to
the insured, in the contract month of the insured's death.
2. "Redemption Procedures:" Surrender and Related
Transactions
This section outlines those procedures which might be deemed
to constitute redemptions under the Contract. These procedures
differ in certain significant respects from redemption procedures
for mutual funds and contractual plans.
(a) Surrender for Cash Values
As long as the Contract is in effect, the contract owner may
partially or totally surrender the contract by sending a written
request to Midland. Upon complete surrender, the contract owner
will receive the net cash surrender value (contract fund reduced by
any outstanding contract debt and less any applicable surrender
charges) of the Contract computed as of the end of the business day
on which the surrender request is received by Midland at its Home
Office. Contract Fund will be determined on a daily basis thereby
enabling Midland to pay a cash surrender value based on the next
computed value after a request is received. Surrenders will
generally be paid within seven days of a written request. Under
Midland's current procedures, if the Contract is being totally
surrendered, the Contract itself must be returned to Midland along
with the request.
The amount paid upon a partial withdrawal cannot be less than
$200, nor greater than 50 percent of the net cash surrender value.
If Option 1 is in effect, the specified amount will be reduced by the
amount paid upon partial withdrawal. A request for a partial
withdrawal will not be implemented if it would result in a specified
amount less than the minimum specified amount applicable at
issue. The amount of the partial withdrawal will be deducted from
the Contract Fund on the end of the business day during which the
request is received. Any applicable charge will be deducted from
the contract fund upon a partial withdrawal of the Contract.
Payment upon complete surrender of the Contract may be made
in a lump sum or in accordance with one of the optional payment
plans described in the Contract. The optional payment plans are
subject to the restrictions and limitations set forth in the Contract.
There is a Deferred Sales Charge and a Deferred Issue Charge
in contract years 1 through 15.
(b) Benefit Claim
As long as the contract remains in force, Midland will normally
pay life insurance proceeds to the primary or contingent beneficiary
in accordance with the designated benefit option within seven days
after receipt of due proof of death of the insured. Payment of life
insurance proceeds may, however, be postponed under certain
circumstances. The amount of life insurance proceeds payable
under this contract will be determined as of the end of the business
day during which the insured dies. The life insurance proceeds
will be reduced by any outstanding contract debt and any due and
unpaid charges and increased by any optional insurance benefits
added by rider.
As long as there is no outstanding contract debt or any due and
unpaid charges, life insurance proceeds are guaranteed not to be
less than the current specified amount of the Contract. The life
insurance proceeds may, however, exceed the current specified
amount. The amount by which life insurance proceeds exceed the
specified amount depends upon the benefit option in effect and the
Contract Fund. Under Option 2, the life insurance proceeds
payable under the contract equals the specified amount plus the
Contract Fund. Under Option 1, life insurance proceeds will only
vary whenever Contract Fund multiplied by the corridor percentage
exceeds the specified amount of the Contract.
If the Contract is still in force on the maturity date, the contract
owner will receive maturity benefits equal to the contract fund
reduced by any outstanding contract debt. These benefits will only
be paid if the insured is living on the Contract's maturity date. If
the Contract is still in force on the maturity date, the contract
owner may decide to continue the contract. In order to continue
the Contract, the Contract must still qualify as Life Insurance
according to the Internal Revenue Service and the state in which
the contract owner resides. The maturity date is the date
designated as such in the Contract or as subsequently changed.
(c) Contract Loans
The contract owner may borrow money from Midland using the
Contract as the only security for the loan. Loans have priority over
the claims of any assignee or any other person. The maximum
amount that may be borrowed under the Contract at any time is 92
percent of the net cash surrender value. Contract debt equals the
total of all contract loans and any accrued interest on the loans.
The maximum loan amount will be determined on the end of the
business day which the loan request is received. The loan and any
accrued interest may be repaid in whole or in part at any time prior
to the maturity date so long as the insured is living. Interest
accrues daily and is due and payable at the end of each Contract
year. Any interest not paid when due becomes part of the contract
loan and will bear interest.
When a contract loan is made, a portion of the Contract Fund
sufficient to secure the loan is transferred out of Separate Account
and into Midland's general account. Any loan interest that is due
and unpaid will also be so transferred. Contract Fund in the
general account will accrue interest daily at an annual rate of 3.5
percent. This interest will be credited on each monthly anniversary
day and transferred to Separate Account. After the tenth contract
year, for the portion of the contract loan that does not exceed the
Contract Fund minus the premiums paid, the rate credited to that
portion of the Contract Fund will equal 8 percent, the rate charged
for contract loans.
If contract debt exceeds cash surrender value on a monthly
anniversary day, Midland will notify the contract owner and any
assignee of record. A payment at least equal to the excess contract
debt must be made to Midland within 61 days from the date the
notice was sent, otherwise the Contract will lapse and terminate
without value. The Contract, however, may later be reinstated.
(d) Contract Lapsation
The Net Cash Surrender Value may be less than the Monthly
Deduction on a monthly anniversary. Midland will consider the
Contract to default if such an event takes place.
A Grace Period of 61 days will be allowed for the payment of
additional premiums so the Contract will not default. At least 30
days before this Contract ends without value, Midland will mail to
the contract owner's last known address a notice of the amount of
premium needed. Midland will send a copy of the notice to the last
known address of any assignee of record. That premium will be
due on the Monthly Anniversary on which the contract deficiency
first occurred. If that premium is not paid within the Grace Period,
this Contract will end without value.
(e) Exchange of Contract
During the first 24 months, the contract owner may convert this
contract to a flexible premium adjustable life insurance contract
supported by Midland's General Account. The contract owner may
elect the same death benefit or the same net amount at risk as the
existing contract at the time of conversion. Premiums will be
based on the same issue age and risk classification of the insured as
the existing contract. The Contract Fund of the new contract will
be set equal to that of the existing contract at the date of exchange.
<PAGE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 199
C O N T E N T S
Page(s)
Report of Independent Accountants 1
Consolidated Financial Statements:
Balance Sheets 2
Statements of Income 3
Statements of Changes in Stockholders' Equity 4
Statements of Cash Flows 5-6
Notes to Consolidated Financial Statements 7-25
Report of Independent Accountants
To the Board of Directors
Midland National Life Insurance Company:
We have audited the accompanying consolidated balance sheets of
Midland National Life Insurance Company, a majority-owned
subsidiary of Sammons Enterprises, Inc., as of December 31, 1995
and 1994, and the related consolidated statements of income,
changes in stockholders' equity, and cash flows for each of the
three years ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits 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. 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Midland National Life Insurance Company as
of December 31, 1995 and 1994, and the consolidated results of
its operations and its cash flows for each of the three years
ended December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 2 to the financial statements, the Company
changed its method of accounting for investments effective
January 1, 1994.
Minneapolis, Minnesota
March 8, 1996
Midland National Life Insurance Company
Consolidated Balance Sheets
as of December 31, 1995 and 1994
(dollars in thousands)
ASSETS 1995 1994
Investments:
Fixed maturities $ 1,689,811 $ 1,517,911
Equity securities 221,712 207,778
Policy loans 142,795 131,878
Short-term investments 224,109 199,146
Other invested assets 6,271 4,409
Total investments 2,284,698 2,061,122
Cash and cash equivalents 9,299 8,911
Deferred policy acquisition costs 410,051 415,594
Present value of future profits of acquired businesses
26,414 31,495
Accrued investment income 34,493 31,074
Other assets 35,476 21,556
Separate account assets 44,273 22,800
Total assets $ 2,844,704 $ 2,592,552
LIABILITIES AND STOCKHOLDERS' EQUITY
Policy liabilities:
Future policy benefits:
Traditional life insurance products 368,069 346,943
Universal life and investment products 1,707,898 1,591,787
Policy and contract claims 30,347 28,693
Policyowner funds 11,718 11,259
Total policy liabilities 2,118,032 1,978,682
Accounts payable and other liabilities 73,903 62,251
Federal income taxes 31,019 5,470
Security lending liability - 33,239
Separate account liabilities 44,273 22,800
Total liabilities 2,267,227 2,102,442
Commitments and contingencies
Stockholders' equity:
Common stock, $1 par value per share, 2,549,439 shares
authorized, issued and outstanding 2,549 2,549
Additional paid-in capital 33,707 33,707
Unrealized appreciation (depreciation) of investments, net
31,027 (10,003)
Retained earnings 510,194 463,857
Total stockholders' equity 577,477 490,110
Total liabilities and
stockholders' equity $2,844,704 $ 2,592,552
Midland National Life Insurance Company
Consolidated Statements of Income
for the years ended December 31, 1995, 1994 and 1993
(dollars in thousands)
1995 1994 1993
Revenue:
Traditional life insurance premiums
100,795 $ 101,146 $ 101,049
Universal life and investment product charges
139,611 113,334 101,252
Accident and health insurance premiums
63 150 20,061
Investment income, net of related expenses
167,020 150,318 137,737
Net realized investment gains (losses)
1,762 (17,764) 17,435
Net unrealized gains (losses) on trading securities
7,057 (13,277) -
Other income 5,754 4,545 4,527
422,062 338,452 382,061
Benefits and expenses:
Policy benefits:
Traditional life insurance
66,543 61,242 57,917
Universal life and investment products
151,762 130,591 120,590
Accident and health 224 13,850 11,666
218,529 205,683 190,173
Increase (decrease) in liability for future policy benefits:
Traditional life insurance 21,464 23,741 18,231
Accident and health (60) (240) 1,791
21,404 23,501 20,022
239,933 229,184 210,195
Amortization of deferred policy acquisition costs and present
value of future profits of acquired businesses
51,576 39,820 43,595
General and administrative expenses
43,726 34,249 47,390
Dividends to policyholders 1,462 1,389 1,430
336,697 304,642 302,610
Income before income taxes 85,365 33,810 79,451
Income taxes 28,703 9,837 24,578
Net income $ 56,662 $ 23,973 $ 54,873
Midland National Life Insurance Company
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1995, 1994 and 1993
(dollars in thousands)
Unrealized
Apreciation
Additional (Depreciation) Total
Common Stock Paid-In of Retained Stockholders
Shares Amount Capital Investments Earnings Equity
Balance, January 1, 1993
2,549,439 $2,549 $33,707 $ 3,323 $410,338 $449,917
Net income - - - - 54,873 54,873
Cash dividends paid to stockholders
- - - - (12,477) (12,477)
Change in unrealized appreciation of
equity securities
- - - 462 - 462
Balance, December 31, 1993
2,549,439 2,549 33,707 3,785 452,734 492,775
Adjustment to beginning balance of
retained earnings for change in
accounting principle
- - - 33,616 - 33,616
Net income
- - - - 23,973 23,973
Cash dividends paid to stockholders
- - - - (12,850) (12,850)
Change in unrealized depreciation of
investments
- - - (47,404) - (47,404)
Balance, December 31, 1994
2,549,439 2,549 33,707 (10,003) 463,857 490,110
Net income
- - - - 56,662 56,662
Cash dividends paid to stockholders
- - - - (10,325) (10,325)
Change in unrealized appreciation of
investments
- - - 41,030 - 41,030
Balance, December 31, 1995
2,549,439 $ 2,549 $33,707 $ 31,027 $ 510,194 $ 577,477
Midland National Life Insurance Company
Consolidated Statements of Cash Flows
for the years ended December 31, 1995, 1994 and 1993
(dollars in thousands)
1995 1994 1993
Cash flows from operating activities:
Net income $ 56,662 $ 23,973 $ 54,873
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation expense 304 301 483
Amortization of deferred
policy acquisition costs and
present value of future profits of acquired business
51,576 39,820 43,595
Net amortization of
premiums and discounts on
investments 4,828 3,577 1,223
Net realized investment
(gains) losses
(1,762) 17,764 (17,435)
Net unrealized (gains)
losses on trading securities
(7,057) 13,277 -
Net (cost of) proceeds
from trading securities
(23,305) 47,585 -
Deferred income taxes (5,721) (6,953) (1,024)
Net interest credited and
mortality and expense charges
on universal life and investment products
(37,272) (26,939) (18,269)
Change in assets and
liabilities net of effects from
purchase of insurance business:
Net receivables and payables
12,346 8,172 1,830
Policy acquisition costs deferred
(63,718) (61,045) (62,935)
Liability for future
policy benefits
21,464 23,741 20,022
Policy and contract
claims
1,577 (2,671) 3,506
Policyowner funds 459 589 275
Other, net 236 (320) (611)
Net cash provided by
operating activities
10,617 80,871 25,533
Cash flows from investing activities:
Proceeds from investments sold, matured or repaid:
Fixed maturities 911,883 736,651 516,239
Equity securities 51,567 12,171 248,878
Real estate - 237 1,040
Wholly-owned
subsidiary - - 23,228
Short-term investments,
net - 90,704 17,998
Other invested assets 421 1,249 893
Cost of investments acquired:
Fixed maturities (994,486) (1,071,431) (673,949)
Equity securities (41,968) (26,229) (309,058)
Increase in policy loans,
net
(9,883) (10,425) (8,915)
Short-term investments,
net (24,963) - -
Other invested assets (2,283) - (549)
Payment for purchase of
insurance business, net of
cash acquired (440) 32,215 -
Change in security
lending (33,239) 33,239 -
Net cash used in
investing activities
(143,391) (201,619) (184,195)
Midland National Life Insurance Company
Consolidated Statements of Cash Flows, Continued
for the years ended December 31, 1995, 1994 and 1993
(dollars in thousands)
1995 1994 1993
Cash flows from financing activities:
Receipts from universal life and investment products
$ 272,511 $ 237,792 $ 238,069
Benefits paid on universal life and investment products
(129,024) (98,775) (69,653)
Cash dividends paid to stockholders by operating
activities: (10,325) (12,850) (12,477)
Net cash provided by
financing activities
133,162 126,167 155,939
Increase (decrease) in cash and cash equivalents
388 5,419 (2,723)
Cash and cash equivalents, beginning of year
8,911 3,492 6,215
Cash and cash equivalents, end of year
9,299 $ 8,911 $ 3,492
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest Net receivables and payables
$ 188 $ 210 $ 234
Income taxes paid to
parent Policy acquisition costs
deferred 25,376 23,573 24,734
Noncash operating, investing and financing activity:
Liability for future policy benefits
Policy loans and
receivables from state guaranty
associations and others received in assumption
reinsurance agreement 9,723 48,546 -
1. Summary of Significant
Accounting Policies:
Organization:
Midland National Life Insurance Company ("Midland") is a
majority-owned subsidiary of Sammons Enterprises, Inc. ("SEI").
Midland operates predominantly in the individual life and
annuity business of the life insurance industry in 49 states.
Basis of Presentation:
The consolidated financial statements include the accounts of
Midland and its wholly-owned subsidiaries (collectively, "the
Company"). All significant intercompany accounts and
transactions have been eliminated.
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 amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates. The
most significant areas which require the use of management's
estimates relate to determinations of the fair values of
financial instruments, deferred policy acquisition costs,
present value of future profits of acquired businesses and
future policy benefits for traditional policies.
Investments:
Effective January 1, 1994, the Company implemented the
provisions of Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS No. 115"). SFAS No. 115 requires the Company
to classify its fixed maturity investments (bonds and redeemable
preferred stocks) and equity securities (common and
nonredeemable preferred stocks) as trading, available-for-sale
or held to maturity at the time of purchase.
Trading securities are held for resale in anticipation of
short-term market movements. The Company's trading securities
are stated at market value. Gains and losses on these
securities, both realized and unrealized, are included in the
determination of net income. Net cost of or proceeds from
trading securities are included in operating activities in the
consolidated statement of cash flows.
Available-for-sale securities are classified as such if not
considered trading securities or if there is not the positive
intent and ability to hold the securities to maturity. Such
securities are carried at market value with the unrealized
holding gains and losses included directly in stockholders'
equity, net of related adjustments to deferred policy
acquisition costs and deferred income taxes. Cash flows from
available-for-sale security transactions are included in
investing activities in the consolidated statement of cash flows
1. Summary of Significant
Accounting Policies, continued:
Investments, continued:
The Company has no securities classified as held-to-maturity.
Prior to 1994, fixed maturity investments were generally stated
at amortized cost and equity securities were stated at quoted
market values. The change in unrealized appreciation and
depreciation of equity securities (net of related deferred
income taxes) was included directly in stockholders' equity.
Policy loans and other invested assets are stated at their
unpaid balances. Short-term investments are stated at cost
which approximates market.
Investment income is recorded when earned. Realized gains and
losses are determined on the basis of specific identification of
the investments.
When a decline in value of an investment is determined to be
other than temporary, the Company's carrying value of the
investment is reduced to its estimated realizable value. Such
reductions in carrying value are recognized as realized losses
in the determination of net income.
The Company also enters into agreements to sell and repurchase
securities. The commitment to repurchase securities sold under
these agreements are reported as liabilities and the investments
acquired with the funds received from the securities sold are
included in short-term investments.
Cash and Cash Equivalents:
The Company considers all demand deposits and interest-bearing
accounts not related to the investment function to be cash
equivalents.
Deferred Policy Acquisition Costs:
Policy acquisition costs, representing commissions, medical
examinations, underwriting, issue and other expenses which vary
with and are primarily related to the production of new business
are deferred. For traditional insurance products, such costs
are amortized over the premium-paying period of the related
policies in proportion to the ratio of the annual premium
revenue to the total anticipated premium revenue. For universal
life and other interest-sensitive life insurance and investment
contracts, such costs are amortized over periods of up to 25
years in relation to the present value of expected gross profits
(including the unrealized gains and losses recognized under SFAS
No. 115), subject to regular evaluation and retroactive revision
to reflect actual emerging experience
1. Summary of Significant
Accounting Policies, continued:
Present Value of Future Profits of Acquired Businesses:
The present value of future profits of acquired businesses (PVP)
is being amortized principally over periods of up to 25 years in
relation to the present value of expected gross profits.
Separate Account:
Separate account assets and liabilities represent funds held for
the exclusive benefit of variable universal life and annuity
contractholders. Fees are received for administrative expenses
and for assuming certain mortality, distribution and expense
risks. Operations of the separate accounts are not included in
these consolidated financial statements.
Policy Benefits:
The liabilities for future policy benefits for traditional life
insurance policies generally are computed by the net level
premium method, based upon estimated future investment yield,
mortality and withdrawals (including a provision for the risk of
adverse deviations from the estimates) which were appropriate at
the time the policies were issued or acquired. Interest
assumptions range from 6.5% to 11%, graded to 5% after 30 years.
Mortality and withdrawal assumptions are based, in general, on
the Company's own experience.
Participating business approximates 1% of the Company's ordinary
life insurance in force. Dividends to be paid on participating
policies are determined annually by the Board of Directors based
upon the Company's published dividend tables.
Policy reserves for universal life and other interest-sensitive
life insurance and investment contracts are determined using the
retrospective deposit method. Policy reserves consist of the
policyholder deposits accumulated at credited interest less
withdrawals and charges for mortality, administrative and policy
initiation expenses. Interest credited to these policies where
the interest rate is not fixed ranged from 3% to 7.5% during
1995 and 3.5% to 7.5% during 1994.
Liabilities for policy and contract claims include provisions
for reported claims and estimates for claims incurred but not
reported. Changes in estimates are reflected in operating
results in the year the change is made. Liabilities for claim
adjustment expenses are based on estimates of allocated and
unallocated expenses.
Federal Income Taxes:
The Company is a member of SEI's consolidated United States
federal income tax group. The policy for intercompany
allocation of federal income taxes provides that the Company
compute the provision for federal income taxes on a separate
consolidated return with its subsidiaries. The Company makes
payment to, or receives payments from, SEI in the amount they
would have paid to or received from the Internal Revenue Service
had they not been members of the consolidated tax group. The
separate Company provisions and payments are computed using the
tax elections made by the Parent.
1. Summary of Significant
Accounting Policies, continued:
Federal Income Taxes, continued:
Deferred tax liabilities and assets are recognized based upon
the difference between the financial statement and tax bases of
assets and liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse.
Recognition of Premium Revenues:
Life insurance premiums, other than premiums on universal life
and other interest-sensitive life insurance and investment
contracts, are recognized as revenue over the premium paying
period. Accident and health insurance premiums are earned pro
rata over the periods to which the premiums relate.
Revenues for universal life and other interest-sensitive life
insurance and investment contracts consist of policy fund
charges for the cost of insurance, policy administration and
surrender charges assessed against policyholder account balances.
Fair Value of Financial Instruments:
The following methods and assumption were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents, short-term investments and other
invested assets: The carrying amounts reported in the balance
sheet for these instruments approximate their fair values.
Investment securities: Fair values for fixed maturity
securities (including redeemable preferred stocks) are based on
quoted market prices, where available. For securities not
actively traded, fair values are estimated using values obtained
from independent pricing services or, in the case of private
placements, are estimated by discounting expected future cash
flows using a current market rate applicable to the yield,
credit quality and maturity of the investments. The fair values
for equity securities are based on quoted market prices.
Policy loans: The Company does not believe an estimate of the
fair value of policy loans can be made without incurring
excessive cost.
Investment-type insurance contracts: Fair values for the
Company's liabilities under investment-type insurance contracts
are estimated based on the cash surrender values of the
underlying contracts.
Insurance contracts: Fair values for the Company's insurance
contracts other than investment-type contracts are not required
to be disclosed.
Security lending liability: The carrying amount approximates
fair value because of the short maturity of these instruments
1. Summary of Significant
Accounting Policies, continued:
Fair Value of Financial Instruments, continued:
The cost, carrying value and estimated fair value of the
Company's financial instruments are as follows (dollars in
thousands):
December 31, 1995 Cost Carrying Value Fair Value
Financial assets:
Fixed maturities:
Available-for-sale
$ 1,622,018 $ 1,680,408 $ 1,680,408
Trading 9,160 9,403 9,403
Equity securities:
Available-for-sale
45,837 50,582 50,582
Trading 177,593 177,130 171,130
Short-term investments
224,109 224,109 224,109
Other invested assets
6,271 6,271 6,271
Financial liabilities:
Investment-type
insurance contracts
* 599,000 583,000
* Cost is not applicable.
December 31, 1994
Financial assets:
Fixed maturities:
Available-for-sale $1,531,777 $ 1,510,564 $ 1,510,564
Trading 7,938 7,347 7,347
Equity securities:
Available-for-sale 57,620 56,391 56,391
Trading 164,074 151,387 151,387
Short-term investments 199,146 199,146 199,146
Other invested assets 4,409 4,409 4,409
Financial liabilities:
Investment-type
insurance contracts * 567,000 551,000
Security lending liability 33,239 33,239 33,239
* Cost is not applicable.
1. Summary of Significant
Accounting Policies, continued:
Dividend Restrictions:
Generally, the net assets of the Company available for
distribution to its shareholders are limited to the amounts by
which the net assets, as determined in accordance with statutory
accounting practices, exceed minimum regulatory statutory
capital requirements. All payments of dividends or other
distributions to stockholders are subject to approval by
regulatory authorities. The maximum amount of dividends which
can be paid by Midland and its subsidiaries during any 12-month
period to stockholders without prior approval of the insurance
commissioner is limited according to statutory regulations and
is a function of statutory equity and statutory net income. The
maximum amount of dividends payable in 1996 without prior
approval of regulatory authorities is approximately $39,000,000.
Combined statutory net income of the Company and its insurance
subsidiaries for the years ended December 31, 1995 and 1994 is
approximately $39,000,000 and $26,000,000, respectively, and
capital and surplus at December 31, 1995 and 1994 is
approximately $284,000,000 and $254,000,000, respectively, in
accordance with statutory accounting principles.
Prescribed Statutory Accounting Policies:
The Company, which is domiciled in South Dakota, prepares its
statutory basis financial statements in accordance with
accounting practices prescribed or permitted by the Division of
Insurance of the State of South Dakota. Prescribed statutory
accounting practices include state laws, regulations and general
administrative rules, as well as a variety of publications of
the National Association of Insurance Commissioners (NAIC).
Permitted practices encompass all accounting practices not so
prescribed. The Company uses prescribed practices or, if
prescribed statutory accounting practices do not address the
accounting for a transaction, the Company uses generally
accepted accounting principles to prepare its statutory basis
financial statements.
Reclassifications:
Certain items in the 1994 and 1993 financial statements have
been reclassified to conform to the 1995 presentation.
2. Change in Accounting
Policy:
In 1994, the Company adopted the provisions of SFAS No. 115 for
investments held as of or acquired after January 1, 1994. The
fundamental change contained in SFAS No. 115 was to require
fixed maturity investments classified as trading or
available-for-sale to be reported at fair value in the balance
sheet. The cumulative effect of adopting SFAS No. 115 for
available-for-sale securities is reflected in stockholders'
equity (as a cumulative effect of a change in accounting
principle). There was no material effect of adopting SFAS No.
115 for trading securities
2. Change in Accounting
Policy, continued:
The following is the effect on stockholders' equity of adopting
SFAS No. 115 as of January 1, 1994:
Cumulative effect (dollars in thousands):
Increase in carrying
value of investments $66,019
Adjustment to deferred
policy acquisition costs (14,207)
Deferred federal income
tax adjustment (18,196)
Net effect on
stockholders' equity $ 33,616
With the recognition of the unrealized gains and losses under
SFAS No. 115, an adjustment is required to the deferred policy
acquisition cost asset associated with universal life and
investment type contracts (as defined in SFAS No. 97). The
adjustment requires the gross profit stream to be revised as if
the unrealized gains or losses on the investments underlying the
universal life and investment type contracts had actually been
realized.
In accordance with the Statement, prior period financial
statements have not been restated to reflect the change in
accounting principle.
3. Sale of Affiliated
Companies and Accident and Health
Business:
Effective September 30, 1993, Midland sold its majority-owned
subsidiary, Professional Insurance Corporation, to an unrelated
party for a net consideration of $23,228,000. The Company
recognized a gain of $5,647,000, which is included in net
realized investment gains. As of the disposal date,
Professional Insurance Corporation had assets with a carrying
value of $55,656,000 and net liabilities with a carrying value
of $38,075,000. The operations of the subsidiary were not
material to the consolidated group
4. Investments and
Investment Income:
Following is a summary of the fixed maturity and equity
investments classified as available-for-sale (dollars in
thousands):
Gross Gross Estimate
Amoritized Unrealized Unrealized Market
December 31, 1995 Cost Gains Losses Value
Fixed maturities:
U.S. treasury and other
U.S. govern-
ment corporations and agencies
$ 663,677 6,449 $ 1,791 $ 668,335
Obligations of U.S.
states and political
subdivisions 3,604 418 - 4,022
Corporate debt
securities 495,345 39,129 196 534,278
Mortgage-backed
securities 449,177 15,882 230 464,829
Other debt securities
10,215 6 1,277 8,944
Total fixed maturities
1,622,018 61,884 3,494 1,680,408
Equity securities 45,837 7,045 2,300 50,582
Total available-for-
sale $ 1,667,855 $ 68,929 $ 5,794 $ 1,730,990
December 31, 1994
Fixed maturities:
U.S. treasury and other
U.S. government corporations
and agencies
$ 348,698 1,010 $ 10,672 $ 339,036
Obligations of U.S.
states and political
subdivisions 5,853 601 6 6,448
Corporate debt
securities 665,165 15,945 15,868 665,242
Mortgage-backed
securities 495,082 6,032 17,924 483,190
Other debt securities
16,979 117 448 16,648
Total fixed
maturities
1,531,777 23,705 44,918 1,510,564
Equity securities
57,620 4,173 5,402 56,391
Total available-for-
sale $ 1,589,397 $ 27,878 $ 50,320 $ 1,566,955
4. Investments and
Investment Income, continued:
The net unrealized appreciation (depreciation) on the
available-for-sale securities have been reduced by deferred
income taxes and deferred policy acquisition costs as of
December 31, 1995 and 1994 as shown below (dollars in thousands):
1995 1994
Gross unrealized appreciation (depreciation)
$ 63,135 $ (22,442)
Deferred income taxes (16,898) 5,427
Deferred policy acquisition costs (15,210) 7,012
Unrealized
appreciation (depreciation) of investments, net
$ 31,027 $ (10,003)
The amortized cost and estimated market value of
available-for-sale debt securities at December 31, 1995, by
contractual maturities, are shown below. Expected maturities
may differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without
call or prepayment penalties (dollars in thousands):
Amortized Cost Estimated Market Value
Due in one year or less 545,635 546,848
Due after one year through five years
345,698 357,115
Due after five years through ten years
109,024 121,291
Due after ten years 172,484 190,325
Mortgage-backed securities 449,177 464,829
Total fixed maturities $ 1,622,018 $1,680,408
Major categories of investment income are summarized below
(dollars in thousands):
1995 1994 1993
Fixed maturities $ 121,003 106,701 106,701
Equity securities 20,885 18,071 18,071
Short-term investments 18,648 7,963 7,963
Policy loans 9,485 7,369 6,438
Other invested assets 490 589 1,158
170,511 154,872 140,331
Less investments expenses 3,491 4,554 2,594
Net investment income $ 167,020 $ 150,318 $ 137,737
4. Investments and
Investment Income, continued:
Realized and unrealized investment gains and losses are
summarized below (dollars in thousands):
Unrealized
December 31, 1995
Realized Trading Available for Sale
Fixed maturities $ 14,303 $ 834 $ 79,603
Equity securities (12,608) 6,223 5,974
Other 67 - -
Less deferred policy acquisition cost effects
- - (22,325)
Less income tax effects - - (22,222)
Net gains on investments $ 1,762 $ 7,057 $41,030
December 31, 1994
Fixed maturities $ (6,115) $ (591) (87,911)
Equity securities (11,669) (12,686) (6,377)
Other 20 - -
Less deferred policy acquisition cost effects
- - 21,219
Less income tax effects - - 25,665
Net losses on investments $ (17,764) $(13,277) $ (47,404)
December 31, 1993
Realized Unrealized
Fixed maturities $ 11,724 $ (9,312)
Equity securities 648 719
Mortgage loans (224) -
Sale of wholly-owned subsidiary 5,647 -
-
Other (360) -
Less income tax effects - 3,018
Gains and losses on investments $ 17,435 $ (5,575)
4. Investments and
Investment Income, continued:
Proceeds from the sale of available-for-sale securities in 1995
and 1994 and the gross gains and losses realized on these sales
are summarized below (dollars in thousands):
1995 Fixed Maturities Equity Combined
Proceeds from sales $ 651,092 $ 51,547 $ 702,639
Gross realized gains 15,205 617 15,822
Gross realized losses 4,241 2,802 7,043
1994
Proceeds from sales $ 489,418 $ 12,171 $ 501,589
Gross realized gains 4,634 254 4,888
Gross realized losses 11,115 1,003 12,118
Proceeds from the sale of fixed maturities investments during
1993 and the gross gains and losses realized on these sales are
summarized below (dollars in thousands):
Proceeds from sales $ 105,31
Gross realized gains 2,182
Gross realized losses 3,153
The Company had U.S. Treasury notes under repurchase agreements
with brokerage firms at December 31, 1994. The carrying value
and market value of the U.S. Treasury notes sold were
$32,250,000 as of December 31, 1994. The interest rates on the
liabilities varied from 5% to 5.25%. The Company had no
investments under repurchase agreements at December 31, 1995
5. Federal Income Taxes:
Significant components of the provisions for federal income
taxes are as follows (dollars in thousands):
1995 1994 1993
Current $ 34,424 $ 16,790 $ 25,602
Deferred:
From operations (5,721) (6,953) (1,751)
From tax rate change - - 727
Total deferred (5,721) (6,953) (1,024)
Total $ 28,703 $ 9,837 $ 24,578
The reconciliation of federal income tax attributable to
continuing operations computed at the U.S. federal statutory tax
rates to income tax expense is as follows (dollars in thousands):
1995 1994 1993
Tax computed on income at statutory rate
29,980 $ 11,755 $ 27,903
Dividends received deduction
(1,718) (1,798) (1,737)
Temporary differences of subsidiary not recognized From
operations - - (2,010)
Tax rate change - - 727
Other From tax rate change
441 (120) (305)
$ 28,703 $ 9,837 $ 24,578
The federal income tax liability as of December 31, 1995 and
1994 are comprised of the following (dollars in thousands):
1995 1994
Net deferred income tax liability $ 27,913 $ 11,412
Income taxes due to (receivable from) parent
3,106 (5,942)
Federal income tax liability $ 31,019 $ 5,470
5. Federal Income Taxes,
continued:
The tax effect of temporary differences giving rise to the
Company's consolidated deferred income tax liability at December
31, 1995 and 1994 are as follows (dollars in thousands):
1995 1994
Deferred tax liabilities:
Deferred policy
acquisition costs $ 112,818 $ 119,379
Unrealized appreciation
on investments 845 -
Unrealized appreciation
on fixed maturities
20,592 -
Accrued dividends 2,590 1,133
Net unamortized
discount on fixed maturities
- 1,954
Unamortized present
value of future profits of acquired
business 9,276 11,061
Other 4,598 4,719
150,719 138,246
Deferred tax assets:
Unrealized depreciation
on equity securities
603 4,887
Unrealized depreciation
on fixed maturities
- 7,665
Write-downs of
investments not currently deductible for tax
- 139
Future policy benefits
and policy claims
115,547 112,235
Other 6,656 1,908
122,806 126,834
Net deferred income
tax liability $ 27,913 $ 11,412
Under provisions of the Life Insurance Company Income Tax Act of
1959, as revised by the 1984 Act, certain special deductions
were allowed life insurance companies for federal income tax
purposes. The special deductions for 1983 and prior years were
accumulated in a memorandum tax account designated as
"Policyholders' Surplus". Such amounts will usually become
subject to tax at the then current rates only if the accumulated
balance exceeds certain maximum limitations or certain cash
distributions are deemed to be paid out of this account. It is
management's opinion that such events are not likely to occur.
Accordingly, no provision for income tax has been made on the
approximately $66,000,000 balance in the policyholders' surplus
account at December 31, 1995
6. Commitments and
Contingencies:
The Company had $62 million of outstanding commitments to
purchase trust certificates secured by government guaranteed
notes.
The Company's home office building has been conveyed to the City
of Sioux Falls, South Dakota and leased back in a transaction in
which the City issued $4,250,000 of Industrial Revenue Bonds for
face value. The bonds are collateralized by $4,714,000 of
Midland's investments in government bonds. The lease includes a
purchase option under which Midland may repurchase the building
for $10 upon repayment of all bonds issued. The lease terms
provide for 10 annual payments equivalent to principal of
$425,000 beginning in 1993 and semiannual payments through 2002
in amounts equivalent to interest at 5.5% on the outstanding
revenue bond principal. The building and land costs have been
capitalized and are carried in the balance sheet as part of
other assets. The liability is included in accounts payable and
other liabilities in the balance sheet.
The Company is a party to various other lease agreements.
Certain of these leases contain purchase options and none
contain restrictions which have a material effect on the
Company's operations.
Future minimum lease payments on the capital lease as of
December 31, 1995 are as follows (dollars in thousands):
1996 $ 583
1997 559
1998 536
1999 513
2000 489
Thereafter 908
Total 3,588
Less amount representing interest 613
Present value of amounts due under capital lease $ 2,975
The Company is a defendant in various lawsuits related to the
normal conduct of its insurance business. Litigation is subject
to many uncertainties and the outcome of individual litigated
matters is not predictable with assurance; however, in the
opinion of management, the ultimate resolution of such
litigation will not materially impact the Company's financial
position
6. Commitments and
Contingencies, continued:
In 1994, the Company settled a lawsuit associated with an
accident and health policy acquired in the 1990 merger of
Reserve Life Insurance Company (former parent company of
Midland). The net impact of this settlement was a charge to the
statement of income of $12,500,000 and was included as part of
accident and health benefits.
The Company is also subject to insurance guaranty laws in the
states in which it writes business. These laws provide for
assessments against insurance companies for the benefit of
policyholders and claimants in the event of insolvency of other
life insurance companies. The Company has accrued for the
estimated present value of future guaranty fund assessments, net
of estimated recoveries through premium tax offsets, for known
insolvencies.
7. Retirement and Benefit
Plans:
Defined Benefit Pension Plan:
The Company has a noncontributory defined benefit pension plan
covering substantially all home office employees of Midland.
The defined benefits are based on years of service and
compensation during an employee's last 10 years of service. The
Company's policy is to fund accrued pension costs currently.
The following table sets forth the plan's funded status and
amounts recognized in the Company's balance sheet at December 31:
1995 1994
Actuarial present value of benefit obligations:
Accumulated benefit
obligation, including vested benefit of
$2,394,578 in 1995 and $1,962,013 in 1994
2,794,919 $ 2,110,178
Projected benefit obligation for service rendered to date
$ (4,091,097) $ (3,453,408)
Plan assets at fair value (funds on deposit with the Company)
3,750,261 3,314,939
Projected benefit
obligation in excess of plan assets
(340,836) (138,469)
Unrecognized net gain from past experience different than from
assumed 56,052 71,468
Deferred investment gain 816,445 345,087
Prepaid pension cost $ 531,661 $278,086
7. Retirement and Benefit
Plans, continued:
Defined Benefit Pension Plan, continued:
Net pension cost incudes the following components:
1995 1994 1993
Service cost-benefits earned during the period
$ 248,258 $ 250,273 $ 193,745
Interest cost on projected benefit obligation
283,271 299,132 245,263
Actual return on plan assets
(220,332) (199,797) (90,823)
Net amortization and deferral
(53,138) (46,808) (232,407)
Net periodic pension cost
$ 258,059 $302,800 $ 115,778
The assumed discount rates used in determining the actuarial
present value of the projected benefit obligation as of December
31, 1995 and 1994 were 7.25% and 8.5%, respectively. The rate
of increase in future compensation levels used in determining
the actuarial present value of projected benefit obligation as
of December 31, 1995 and 1994 was 5.5%. The expected long-term
rate of return on plan assets in 1995 and 1994 was 8.75% and
8.0%, respectively.
Effective January 1, 1996, this plan was merged with a similar
benefit plan of SEI.
Employee Stock Ownership Plan:
The Company participates in a noncontributory Employee Stock
Ownership Plan (ESOP) which is qualified as a stock bonus plan.
All employees are eligible to participate in this plan upon
satisfying eligibility requirements. The ESOP is sponsored by
SEI. Each year the Company makes a contribution to the ESOP as
determined by the Board of SEI. The amounts payable to the ESOP
at December 31, 1995 and 1994 were $1,515,000 and $874,000,
respectively. The expense for 1995, 1994 and 1993 was
$2,096,000, $767,000 and $1,095,000, respectively. All
contributions to the ESOP are held in trust.
Postretirement Benefit Plan:
The Company sponsors a defined benefit health care plan that
provides postretirement medical benefits to full-time employees
whose sum of age and years of service are at least 70. The plan
provides a monthly defined dollar benefit based on years of
service up to a maximum benefit of 90% of the cost of coverage.
7. Retirement and Benefit
Plans, continued:
Postretirement Benefit Plan, continued:
The Company has chosen not to fund any amounts in excess of
currently payable benefits. The following table sets forth the
amounts recognized in the Company's consolidated balance sheet
at December 31, 1995 and 1994:
1995 1994
Accumulated postretirement medical benefit obligation:
Retirees $ 1,235,000 $ 1,127,000
Fully eligible active plan
participants
274,000 247,000
Other active plan
participants 560,000 505,000
Accumulated
unfunded postretirement benefit obligation
$ 2,069,000 $ 1,879,000
Net periodic postretirement benefit costs include the following
components for the years ended December 31, 1995 and 1994:
1995 1994
Service cost $ 16,000 $ 13,000
Interest cost 164,000 144,000
Amortization of loss 10,000 10,000
Net periodic
postretirement benefit cost
190,000 $ 167,000
The weighted-average annual assumed rate of increase in the per
capita cost of health care benefits for employees (i.e., health
care cost trend rate) is 13% graded down 1% per year for seven
years and to 6% for year six and thereafter. The health care
cost trend rate assumption normally has a significant effect on
the amounts reported. However, increasing the assumed health
care trend rates by 1% would decrease the accumulated
postretirement benefit obligation as of December 31, 1995 by
only $38,000 and net periodic postretirement benefit costs for
the year ended December 31, 1995 by only $5,000 due to the plan
provision of a $50,000 post-age 65 lifetime maximum. As medical
costs increase, retirees reach their lifetime maximum sooner.
Since the benefits are fixed, the Company provides these for a
shorter period of time so the cost is less. The
weighted-average discount rate used in determining the
accumulated postretirement benefit obligation was 7.75% at
December 31, 1995 and 1994.
Other:
Funds of the pension plan and other previously terminated plans
totaling $7,928,000 and $7,470,000 were invested in deposit
administration contracts of the Company as of December 31, 1995
and 1994, respectively. The plans deposit the contributions
received in accordance with plan provisions. Interest of
$492,000 in 1995 and $495,000 in 1994 were credited to
participant accounts at a rate declared by the Company for group
annuity contracts.
8. Reinsurance:
The Company presently reinsures the excess of each individual
risk over $500,000 on ordinary life insurance in order to spread
its risk of loss. Certain other individual health contracts are
reinsured on a policy-by-policy basis.
To the extent that reinsurers may not be able to meet the
obligations assumed under the reinsurance contracts, the Company
is contingently liable to pay policy benefits.
Effective November 1, 1994, the Company acquired, via assumption
reinsurance, three blocks of life and annuity business. Under
the agreements, the Company assumed approximately $190,000,000
of life and annuity reserves which is included primarily in the
universal life and investment products policy liabilities.
The Company received $158,000,000 in assets which was net of
$32,000,000 of the present value of future profits (PVP). The
assets acquired in the agreement included approximately
$110,000,000 in cash, $22,000,000 in policy loans and
$26,000,000 of receivables from various state guaranty
associations, of which approximately $22,000,000 of the
receivables remained outstanding at December 31, 1994 (reflected
in the balance sheet in short-term investments) with none
outstanding as of December 31, 1995. The final purchase price
was determined based on final accounting on June 30, 1995. In
the final accounting, life reserves acquired in the agreement
decreased by $871,000 and cash and other assets of $350,000 were
received, resulting in a net decrease to the PVP asset of
$1,221,000. The Company maintained the reinsurance associated
with these blocks whereby the excess of each individual risk
over $100,000 on ordinary life insurance is reinsured.
Effective January 1, 1995, the Company acquired, via assumption
reinsurance, a block of life and annuity business. Under the
agreement, the Company assumed approximately $10,504,000 of life
and annuity reserves which is included primarily in universal
life and investment products policy liabilities. The Company
received $9,723,000 in assets which was net of $781,000 of the
PVP. The assets acquired in the agreement included $1,356,000
in policy loans and due premium and a $8,367,000 receivable from
the ceding company, of which all of the receivable was collected
as of December 31, 1995.
8. Reinsurance, continued:
The following schedule presents a summary of the life insurance
in force and premium income as affected by reinsurance
transactions (dollars in thousands):
Ceded to Assumed
Other From Other
Direct Companies Companies Net
Life insurance in force,
December 31, 1995 $ 56,082,611 $ 3,138,454 $ 5,454,111 $58,398,268
1995 revenues:
Individual life and
annuity $246,786 $ 12,449 $ (45) $ 234,292
Individual accident and
health 746 683 - 63
Group 734 33 5,413 6,114
Total $ 248,266 $ 13,165 $ 5,368 240,469
Life insurance in force,
December 31, 1994 $ 53,863,471 $ 3,440,640 5,207,543 $ 55,630,374
1994 revenues:
Individual life and
annuity $ 215,333 $ 6,617 58 $ 208,774
Individual accident and
health 1,018 868 - 150
Group 584 30 5,152 5,706
Total $ 216,935 $ 7,515 $5,210 214,630
Life insurance in force,
December 31, 1993
$ 47,564,264 $ 1,602,047 $ 5,268,314 $51,230,531
1993 revenues:
Individual life and
annuity $ 201,696 $ 4,971 $ 90 $ 196,815
Individual accident and
health 21,371 1,310 - 20,061
Group 145 25 5,366 5,486
Total $ 223,212 $ 6,306 $ 5,456 222,362
9. Other Related Party
Transactions:
The Company pays fees to SEI under management contracts. The
Company was charged $2,778,000, $70,000 and $2,480,000 in 1995,
1994 and 1993, respectively, related to these contracts.
Included in the fixed maturity investments at December 31, 1994
was a $45,000,000 note receivable from SEI. The note was repaid
by SEI in 1995.
<PAGE>
Midland National Life Insurance Company
Midland National Life Insurance Company
Consolidated GAAP Balance Sheet
as of September 30, 1996
(dollars in thousands)
Unaudited
September 30,
ASSETS 1996
Investments:
Fixed Maturities $1,756,469
Equity Securities 257,027
Policy Loans 150,636
Short-Term Investments 199,263
Other Invested Assets 8,008
Total Investments 2,371,403
Cash and Cash Equivalents 6,181
Deferred Policy Acquisition Costs 430,158
Present Value of Future Profits of Acquired Businesses 22,559
Accrued Investment Income 38,167
Other Assets 34,804
Separate Account Assets 71,700
Total Assets $ 2,974,972
LIABILITIES AND STOCKHOLDERS' EQUITY
Policy Liabilities:
Future Policy Benefits:
Traditional Life Insurance Products 385,168
Universal Life and Investment Products 1,772,396
Policy and Contract Claims 28,192
Policyowner Funds 11,575
Total Policy Liabilities 2,197,331
Accounts Payable and Other Liabilities 75,977
Federal Income Taxes 26,684
Separate Account Liabilities 71,700
Total Liabilities 2,371,692
Commitments and Contingencies
Stockholders' Equity:
Common Stock, $1 Par Value Per Share,
2,549,439 Shares Authorized, Issued and
outstanding 2,549
Additional Paid-In Capital 33,707
Unrealized Appreciation (Depreciation)
of Investments, Net 15,369
Retained Earnings 551,655
Total Stockholders' Equity 603,280
Total Liabilities and Stockholders' Equity $2,974,972
Midland National Life Insurance Company
Consolidated GAAP Statement of Income
for the nine months ended September 30, 1996
(dollars in thousands)
Unaudited
September 30,
1996
Revenue:
Traditional Life Insurance Premiums $ 72,185
Universal Life and Investment Product Charges 112,067
Accident and Health Insurance Premiums 83
Investment Income, Net of Related Expenses 128,270
Net Realized Investment Gains (Losses) 1,261
Net Unrealized Gains (Losses) on Trading Securities 4,462
Other Income 3,256
321,584
Benefits and Expenses:
Policy Benefits:
Traditional Life Insurance 47,742
Universal Life and Investment Products 117,792
Accident and Health 195
165,729
Increase (Decrease) in Liability for Future Policy Benefits:
Traditional Life Insurance 16,290
Accident and Health (40)
16,250
181,979
Amortization of Deferred Policy Acquisition Costs and Present
Value of Future Profits of Acquired Businesses 41,925
General and Administrative Expenses 34,266
Dividends to Policyholders 1,041
259,211
Income Before Income Taxes 62,373
Income Taxes 20,912
Net Income $ 41,461
Midland National Life Insurance Company
Consolidated GAAP Statement of Changes in Stockholders' Equity
for the nine months ended September 30, 1996
(dollars in thousands)
Unaudited
Unrealized
Appreciation
Additional (Depreciation) Total
Common Stock Paid-In of Retained Stockholders'
Shares Amount Capital Investments Earnings Equity
Balance, December 31, 1995
2,549,439 $2,549 $33,707 $31,027 $510,194 $577,477
Net Income 41,461 41,461
Change in Unrealized
Appreciation of Investments (15,658) (15,658)
Balance, September 30, 1996
2,549,439 $2,549 $33,707 $15,369 $551,655 $603,280
<PAGE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
Consolidated GAAP Cash Flows
As of September 30, 1996
(dollars in thousands)
Unaudited September 30,
1996
OPERATING ACTIVITIES:
Net Income $41,461
Adjustments to Reconcile Net Income to Net Cash
Provided by (used in) Operating Activities:
Interest Credited and Mortality Charges on
Universal Life and Investment Products (34,608)
Increase in Liability for Future Policy Benefits 16,250
Depreciation Expense 265
Net Amortization of Investments 4,148
Amortization of DAC and SNL PVP 41,925
Policy Acquisition Costs Capitalized (51,235)
Deferred Income Tax 8,906
Incr (Decr) in Policy and Contract Claims (1,305)
Realized Investment Losses (Gains) (1,261)
Net Changes in Amounts Receivable and Payable (5,272)
Incr (Decr) in Other Policyowner Funds (142)
Net Proceeds From Trading Securities (15,508)
Change in Unrealized From Trading Securities (4,462)
Other, Net (686)
Net Cash Provided (used in) Operating Activities (1,524)
INVESTING ACTIVITIES
Investments Purchases of (1,234,768)
Proceeds From Sale or Maturity of 1,134,067
Net Cash Used in Investing Activities (100,701)
FINANCING ACTIVITIES
Receipts from Int Sens Life & Annuity Contracts 216,622
Benefits of Int Sens Life & Annuity Contracts (117,516)
Net Cash From Financing Activities 99,106
Increase (Decrease) in Cash (3,119)
Cash at Beginning of Year 9,300
Cash at End of Year $6,181
<PAGE>
UNAUDITED MIDLAND NATIONAL LIFE SEPARATE ACCOUNT A
(000'S) AS OF 9/30/96
MONEY HIGH
ASSET INVEST ASSET
MARKET INCOME EQUITY GROWTH OVERSEAS
MANAGER GRADE INDEX MGR/GROW CONTRA TOTAL
BALANCE SHEET
ASSETS
COMMON STOCKS, AT MARKET
1,740 1,274 5,338 10,961 2,332
4,132 727 988 312 1,430 29,234
TOTAL STATUTORY ASSETS 1,740 1,274 5,338 10,961 2,332
4,132 727 988 312 1,430 29,234
LIABILITIES & SURPLUS
AGGREGATE RESERVES 1,738 1,273 5,333 10,951 2,330
4,128 726 987 312 1,429 29,207
CASH WITH APP SUSPENSE 0 0 0 0 0
0 0 0 0 0 0
CHGS FOR M&E DUE & ACCRUED 2 1 5 10 2
4 1 1 0 1 27
TOTAL LIABILITIES 1,740 1,274 5,338 10,961 2,332
4,132 727 988 312 1,430 29,234
UNASSIGNED SURPLUS 0 0 0 0 0
0 0 0 0 0 0
TOTAL LIAB & SURPLUS 1,740 1,274 5,338 10,961 2,332
4,132 727 988 312 1,430 29,234
INCOME STATEMENT
INCOME
TRANSFER OF NET PREMIUM 684 668 2,204 3,360 781
933 202 707 260 1,084 10,883
GROSS INVESTMENT INCOME 36 78 179 583 43
244 36 16 3 4 1,222
CAPITAL G/L REAL/UNREAL 0 40 92 475 99
47 (34) 59 15 94 887
TOTAL INCOME 720 786 2,475 4,418 923
1,224 204 782 278 1,182 12,992
DEDUCTIONS
TRANSFER DEATH BENEFITS 0 0 0 10 0
2 1 0 0 0 13
TRANSFER ANNUITY BENEFITS 0 0 0 0 0
0 0 0
0 0 0 0 0 0
TRANSFER SURRENDER BENEFITS 12 44 56 131 41
56 2 3 0 6 351
TRANS DUE OTHER TERMINATIONS 0 0 1 4 1
5 1 0 0 0 12
TRANSFER POLICY LOANS 7 31 96 171 51
55 37 14 4 1 467
INCREASE IN RESERVES 1,148 457 1,611 3,134 606
495 16 695 258 1,137 9,557
TRANSFER MAINTENANCE FEES 63 114 380 760 191
301 60 92 24 98 2,083
CHARGES FOR M&E GUARANTEES (510) 140 331 208 33
310 87 (22) (8) (60) 509
TOTAL DEDUCTIONS 720 786 2,475 4,418 923
1,224 204 782 278 1,182 12,992
NET GAIN FROM OPERATIONS 0 0 0 0 0
0 0 0 0 0 0
</TABLE>
