Securities and Exchange Commission
450 5 Street, N.W.
Washington, DC 20549
RE: Midland National Life Separate Account A
File Number 33-76318
Commissioners:
Enclosed for filing is a complete copy, including exhibits, of
Post-Effective Amendment Number 4 to the above referenced Form
S-6 Registration Statement.
This amendment is being filed pursuant to paragraph (b) of Rule 485,
and pursuant to subparagraph (b)(4) of that Rule, we certify the
amendment does not contain disclosure which would render it ineligible
to become effective pursuant to said paragraph (b).
If you have any comments or questions about this filing, please contact
Fred Bellamy of Sutherland, Asbill and Brennan at 202-383-0126.
Sincerely,
Paul M. Phalen, CLU, FLMI
Assistant Vice-President
Product Implementation
VUL2CVR.TXT
<PAGE>
Registration No. 33-76318
POST-EFFECTIVE AMENDMENT NO. 4
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 L L P
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
It is proposed that this filing will become effective (check appropriate line):
___ immediately upon filing pursuant to paragraph (b)
_X_ on May 01, 1999 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a) (i)
___ on _________________ pursuant to paragraph (a) (i) of Rule 485
If appropriate, check the following line:
___ the Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
----------------------------------------------------------------------
S6CVRVL2.TXT
<PAGE>
VARIABLE UNIVERSAL LIFE 2
(Variable Universal Life 2)
Issued By:
Midland National Life Insurance Company
One Midland Plaza Sioux Falls, SD 57193 (605) 335-5700
Variable Universal Life 2 is an individual variable life
insurance policy issued by Midland National Life Insurance
Company. Variable Universal Life 2:
provides insurance coverage with flexibility in death
benefits and premiums;
pays a death benefit if the insured person dies while the
contract is still in force;
can provide substantial cash value build-up on a tax-
deferred basis. However, there is no guaranteed cash
value for amounts you allocate to the Investment
Divisions. You bear the risk of poor investment
performance for those amounts.
lets you borrow against your contract, withdraw part of
the net cash surrender value, or completely surrender
your contract. Loans and withdrawals affect the cash
value, and may affect the death benefit.
After the first premium, you may decide how much your
premiums will be and how often you wish to pay 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, then loans and withdrawals may have
negative tax consequences.
You have a limited right to examine your contract and
return it to us for a refund.
You may allocate your cash value to our General Account or
up to ten investment divisions. Each division invests in a
specified mutual fund portfolio. You can choose among the
following twenty-three investment divisions:
1. VIP Money Market Portfolio
2. VIP High Income Portfolio
3. VIP Equity-Income Portfolio
4. VIP Growth Portfolio
5. VIP Overseas Portfolio
6. VIP II Asset Manager Portfolio
7. VIP II Investment Grade Bond Portfolio
8. VIP II Contrafund Portfolio
9. VIP II Asset Manager: Growth Portfolio
10. VIP II Index 500 Portfolio
11. VIP III Growth & Income Portfolio
12. VIP III Balanced Portfolio
13. VIP III Growth Opportunities Portfolio
14. American Century VP Capital Appreciation Portfolio
15. American Century VP Value Portfolio
16. American Century VP Balanced Portfolio
17. American Century VP International Portfolio
18. American Century VP Income & Growth
19. MFS VIT Emerging Growth
20. MFS VIT Research
21. MFS VIT Growth with Income
22. MFS VIT New Discovery
23. Lord, Abbett VC C Growth and Income
Your cash value in the investment divisions will increase
or decrease based on investment performance. You bear this
risk. The U.S. Government does not insure or guarantee any
of these investments. Separate prospectuses describe the
investment objectives, policies and risks of the
portfolios.
The Securities and Exchange Commission has not approved or
disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
Prospectus: May 1, 1999.
Table of Contents
PART 1: SUMMARY 3
FEATURES OF VARIABLE UNIVERSAL LIFE 2 3
Death Benefit Options 3
Contract Changes 3
Flexible Premium Payments 3
Additional Benefits 3
INVESTMENT CHOICES 4
YOUR CASH VALUE 4
Transfers 4
Policy Loans 5
Withdrawing Money 5
Surrendering Your Contract 5
DEDUCTIONS AND CHARGES 5
Deductions From Your Premiums 5
Deductions From Your Cash Value 5
Surrender Charges 5
Portfolio Expenses 6
ADDITIONAL INFORMATION ABOUT THE CONTRACTS 7
Your Right To Examine This Contract 7
Your Contract Can Lapse 7
Tax Effects of Variable Universal Life 2 7
Illustrations 7
PART 2: DETAILED INFORMATION ABOUT VARIABLE UNIVERSAL LIFE
2 8
INSURANCE FEATURES 8
How the Contracts Differ From Whole Life Insurance 8
Application for Insurance 8
Death Benefit 8
Maturity Benefit 9
Changes In Variable Universal Life 2 9
Changing The Face Amount of Insurance 10
Changing Your Death Benefit Option 10
When Contract Changes Go Into Effect 10
Flexible Premium Payments 11
Allocation of Premiums 12
Additional Benefits 12
SEPARATE ACCOUNT INVESTMENT CHOICES 13
Our Separate Account And Its Investment Divisions 13
The Funds 13
Investment Policies Of The Portfolios 13
USING YOUR CASH VALUE 17
The Cash Value 17
Amounts In Our Separate Account 17
How We Determine The Accumulation Unit Value 18
Cash Value Transactions 18
Transfers Of Cash Value 18
Dollar Cost Averaging 19
Contract Loans 19
Withdrawing Money From Your Cash Value 20
Surrendering Your Contract 21
THE GENERAL ACCOUNT 21
DEDUCTIONS AND CHARGES 22
Deductions From Your Premiums 22
Charges Against The Separate Account 22
Deductions From Your Cash Value 22
Transaction Charges 23
How Cash Value Charges Are Allocated 24
Surrender Charges 24
Charges In The Funds 25
ADDITIONAL INFORMATION ABOUT THE CONTRACTS 26
Your Right To Examine The Contract 26
Your Contract Can Lapse 27
You May Reinstate Your Contract 27
Contract Periods And Anniversaries 27
Maturity Date 27
We Own The Assets Of Our Separate Account 27
Changing the Separate Account 28
Limits On Our Right To Challenge The Contract 28
Your Payment Options 29
Your Beneficiary 30
Assigning Your Contract 30
When We Pay Proceeds From This Contract 30
TAX EFFECTS 30
Contract Proceeds 30
Possible Charge for Midland's Taxes 33
Other Tax Considerations 33
PART 3: ADDITIONAL INFORMATION 33
MIDLAND NATIONAL LIFE INSURANCE COMPANY 33
YOUR VOTING RIGHTS AS AN OWNER 33
OUR REPORTS TO CONTRACT OWNERS 34
DIVIDENDS 34
MIDLAND'S SALES AND OTHER AGREEMENTS 34
REGULATION 35
YEAR 2000 35
DISCOUNT FOR MIDLAND EMPLOYEES 36
LEGAL MATTERS 36
FINANCIAL AND ACTUARIAL 36
ADDITIONAL INFORMATION 36
MANAGEMENT OF MIDLAND 37
ILLUSTRATIONS 40
DEFINITIONS 48
PERFORMANCE 50
FINANCIAL STATEMENTS 51
This prospectus generally describes only the variable
portion of the Contract, except where the General Account
is specifically mentioned.
Buying this contract might not be a good way of replacing
your existing insurance or adding more insurance if you
already own a flexible premium variable life insurance
contract.
You should read this prospectus carefully and keep it for
future reference. You should also have and read the current
prospectuses for the funds.
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" or "Insured Person", because the insured person
and the owner may not be the same.
There is a list of definitions at the end of this
prospectus, explaining many words and phrases used here and
in the actual insurance policy.
The detailed information appearing later in this prospectus
further explains the following summary. This summary must
be read along 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 2
Death Benefit Options
Variable Universal Life 2 is life insurance on the insured
person. If the contract is in force we will pay a death
benefit when the insured person dies. You can choose
between two death benefit options:
Option 1: death benefit equals the face amount
("Specified Amount") of the insurance contract. This is
sometimes called a "level" death benefit.
Option 2: death benefit equals the face amount plus the
cash value. This is sometimes called a "variable" death
benefit.
The death benefit may be even greater in some
circumstances. See "Death Benefit" on page 8.
We deduct any outstanding loans and unpaid charges before
paying any benefits. The beneficiary can take the death
benefit in a lump sum or under a variety of payment plans.
Whether your contract lapses or remains in force can depend
on the amount of your cash value (less any outstanding
loans and surrender charges). The cash value, in turn,
depends on the investment performance of the investment
divisions you select. (The cash value also depends on the
premiums you pay and the charges we deduct.) However,
during the Minimum Premium Period, you can keep your policy
in force by paying a certain level of premiums.
The minimum face amount is generally $50,000. However, for
insured persons, age 0 to 14 at issue, the minimum face
amount is $25,000.
Contract Changes
You may change the death benefit option you have chosen.
You may also increase or decrease the face amount of your
contract, within limits.
Flexible Premium Payments
You may pay premiums whenever and in whatever amount you
want, within certain limits. We require an initial minimum
premium based on the contract's face amount and the insured
person's age and sex.
You choose a planned periodic premium. But payment of the
planned premiums does not ensure that your contract will
remain in force. Additional premiums may be required to
keep your policy from lapsing. You need not pay premiums
according to the planned schedule. However, you can ensure
that your contract stays in force during the Minimum
Premium Period by paying premiums equal to the accumulated
minimum premium amounts. See "Flexible Premium Payments" on
page 11.
Additional Benefits
You may choose to include additional benefits in the
contract by rider. These benefits may include:
a disability waiver benefit (to waive the cost of monthly
deductions)
a monthly disability benefit
an accidental death benefit
life insurance for children
family life insurance coverage
life insurance for additional insured persons
an accelerated death benefit in the event of a terminal
illness.
We deduct any costs of additional benefits from your cash
value monthly. See "Additional Benefits" on page 12.
INVESTMENT CHOICES
You may allocate your cash value to up to ten of the
following investment divisions:
1. Fidelity's Variable Insurance Products Fund (VIP)VIP
Money Market Portfolio
2. Fidelity's Variable Insurance Products Fund (VIP)VIP
High Income Portfolio
3. Fidelity's Variable Insurance Products Fund (VIP)VIP
Equity-Income Portfolio
4. Fidelity's Variable Insurance Products Fund (VIP)VIP
Growth Portfolio
5. Fidelity's Variable Insurance Products Fund (VIP)VIP
Overseas Portfolio
6. Fidelity's Variable Insurance Products Fund II (VIP II)
VIP II Asset Manager Portfolio
7. Fidelity's Variable Insurance Products Fund II (VIP II)
VIP II Investment Grade Bond Portfolio
8. Fidelity's Variable Insurance Products Fund II (VIP II)
VIP II Contrafund Portfolio
9. Fidelity's Variable Insurance Products Fund II (VIP II)
VIP II Asset Manager: Growth Portfolio
10. Fidelity's Variable Insurance Products Fund II (VIP II)
VIP II Index 500 Portfolio
11. Fidelity's Variable Insurance Products Fund III (VIP
III) VIP III Growth & Income Portfolio
12. Fidelity's Variable Insurance Products Fund III (VIP
III) VIP III Balanced Portfolio
13. Fidelity's Variable Insurance Products Fund III (VIP
III) VIP III Growth Opportunities Portfolio
14. American Century VP Capital Appreciation Portfolio
15. American Century VP Value Portfolio
16. American Century VP Balanced Portfolio
17. American Century VP International Portfolio
18. American Century VP Income & Growth
19. MFS VIT Emerging Growth
20. MFS VIT Research
21. MFS VIT Growth with Income
22. MFS VIT New Discovery
23. Lord, Abbett VC C Growth and Income
You bear the complete investment risk for all amounts
allocated to any of these investment divisions. You may
also allocate your cash value to our General Account, where
we guarantee the safety of principal and a minimum interest
rate.
For more information, see "The Funds" on page 13.
YOUR CASH VALUE
Your cash value begins with your first premium payment.
From your premium we deduct a premium tax and any per
premium expenses. The balance of the premium is your
beginning cash value.
Your cash value reflects:
the amount and frequency of premium payments,
deductions for the cost of insurance and expenses,
the investment performance of your chosen investment
divisions,
interest earned on amounts allocated to the General
Account,
loans, and
partial withdrawals.
there is no guaranteed cash value for amounts allocated to
the investment divisions.
See "The Cash Value" on page 17.
Transfers
You may transfer your cash value between the General
Account and the various investment divisions. Transfers
take effect when we receive your request. We require a
minimum amount for each transfer, usually $200. Currently,
we allow an unlimited number of transferswill charge a $25
fee after the 15th transfer in a contract year. We reserve
the right to charge a $25 fee after the 12thfourth transfer
in a contract year. There are other limitations on
transfers to and from the General Account. See "Transfers
Of Cash Value" on page 18.
Policy Loans
You may borrow up to 92% of your cash surrender value (the
cash value less the surrender charge). Your contract will
be the sole security for the loan. Your contract states a
minimum loan amount, usually $200. Contract loan interest
accrues daily at an annually adjusted rate. See "Contract
Loans" on page 19. Contract loan interest is not tax
deductible on contracts owned by an individual. There may
be federal tax consequences for taking a policy loan. See
"TAX EFFECTS" on page 30.
Withdrawing Money
You may make a partial withdrawal from your cash value. The
current minimum withdrawal amount is $200. The maximum
partial withdrawal you can make is 20% of the net cash
surrender value. The Net Cash Surrender ValueThat is the
cash surrender value (your cash value minus any surrender
charge) minus any outstanding loan and loan interest due.
Withdrawals are subject to other requirements. If you make
more than one withdrawal in a contract year, then we deduct
a service charge (no more than $25). See "Withdrawing Money
From Your Cash Value" on page 20. Withdrawals and
surrenders may have negative tax effects. See "TAX EFFECTS"
on page 30.
Surrendering Your Contract
You can surrender your contract for cash and then we will
pay you the net cash surrender value. A surrender charge
may be deducted, and taxes and a tax penalty may apply. See
"Surrendering Your Contract" on page 21.
DEDUCTIONS AND CHARGES
Deductions From Your Premiums
We charge a 2.5% premium tax on each premium payment. We
may decrease or increase this charge depending on our
expenses, and we may vary this charge by state. If you
elect to pay premiums by Civil Service Allotment, we also
deduct a $.46 charge from each premium payment. See
"Deductions From Your Premiums" on page 22.
Deductions From Your Cash Value
Certain amounts are deducted from your cash value each
month.
These are:
an expense charge of $5.00 (currently, we plan to make
this deduction for only the first 15 contract years),
a cost of insurance charge. The amount of this charge is
based on the insured person's attained age, sex, risk
class, and the amount of insurance under your contract;
and
charges for additional benefits.
In addition, we deduct fees when you make:
a partial withdrawal of net cash surrender value more
than once in a contract year or
more than fifteen transfers a year between investment
divisions. (We reserve the right to charge after the
fourth transfer.)
See "Deductions From Your Cash Value" on page 22.
We also deduct a daily charge at an annual rate of 1.10% of
the assets in every investment division. This charge is
for certain mortality and expense risks, as well as an
administrative charge.
Surrender Charges
We deduct a surrender charge only if you surrender your
contract for its net cash surrender value or let your
contract lapse during the first 15 contract years. If you
keep this contract in force for 15 years, then you will not
incur a surrender charge.
The surrender charge has two parts: a deferred sales charge
and a deferred issue charge. The deferred sales charge
partially reimburses us for our costs in selling and
distributing this contract. The deferred issue charge
reimburses us for underwriting and our other costs in
issuing the contract.
The maximum deferred sales charge is:
30% of any premium payment in the first 2 contract years
up to one guideline annual premium (this varies for each
contract); and
9% of all other premium payments.
After ten years, this charge begins to decline. There is
no surrender charge after 15 years. The amount of the
deferred sales charge depends on:
1) the amount of your premium payments,
2) when you pay your premiums and
3) when you surrender your contract or allow it to lapse.
The deferred issue charge is on a fixed schedule per
thousand dollars of face amount. It starts at $3.00 per
$1,000 of face amount for the first 10 contract years and
decreases to $0.00 after the 15th contract year. This
summary of the deferred sales charge and the deferred issue
charge assumes no changes in face amount. See "Surrender
Charges" on page 24.
Portfolio Expenses
Each investment division invests exclusively in a
corresponding mutual fund portfolio. Each portfolio pays
an investment advisory fee, and may also incur other
operating expenses. The total expenses for each portfolio
(as a percentage of assets) for the year ending December
31, 1997 are shown in the table below (except as otherwise
noted).
Total
Portfolio Expenses
VIP Money Market .30%.31%
VIP High Income .70%.71%
VIP Equity-Income(1) .58%
VIP Growth(1) .68%.69%
VIP Overseas(1) .91%.92%
VIP II Asset Manager(1) .64%.65%
VIP II Investment Grade Bond .57%.58%
VIP II Contrafund(1) .70%.71%
VIP II Asset Manager: Growth(1) .73%.77%
VIP II Index 500(1)(2) .35%.28%
VIP III Growth & Income(1) .61%.70%
VIP III Balanced(1) .59%.61%
VIP III Growth Opportunities(1) .71%.74%
American Century VP Capital Appreciation 1.00%
American Century VP Value 1.00%
American Century VP Balanced 1.00%
American Century VP International 1.47%1.50%
American Century VP Income & Growth(4) .70%
MFS VIT Emerging Growth(3) .85%.87%
MFS VIT Research(3) .86%.88%
MFS VIT Growth with Income(3) .88%1.00%
MFS VIT New Discovery(2)(3) (4) 1.17%1.15%
Lord, Abbett VC C Growth and Income .51%.52%
(1) This portfolio used a portion of its paid brokerage
commissions to reduce its expenses. Certain portfolios
used credits gained as a result of uninvested cash balances
to reduce custodian and transfer agent expenses. Including
these reductions, total operating expenses would have been
as follows:
VIP Equity-Income 0.57%
VIP Growth 0.66%0.67%
VIP Overseas 0.89%0.90%
VIP II Asset Manager 0.63%0.64%
VIP II Index 500 0.28%
VIP II Contrafund 0.66%0.78%
VIP II Asset Manager: Growth 0.72%0.76%
VIP III Balanced 0.58%0.60%
VIP III Growth Opportunities 0.70%0.73%
VIP III Growth & Income 0.60%
(2) The Fund's investment advisor voluntarily reduced the
portfolio's expenses. Absent reimbursement, the total
expenses for the VIP II Index 500 would have been 0.40%.
(2)(3) MFS has agreed to bear expenses for thisthese
portfolios, such that theeach such portfolio's other
expenses shall not exceed 0.25%. Without this limitation,
the other expenses and total expenses would be
0.35% and 1.10% for the MFS VIT Growth with Income, and
4.32%0.47% and 5.22%1.37% for the MFS VIT New Discovery.
(4) The annual expenses shown for these portfolios are based
on estimated expenses for 1998.
(3) Each of the MFS Series has an expense offset
arrangement, which reduces the series' custodian fee based
upon the amount of cash maintained by the series with its
custodian and dividend disbursing agent. Each series may
enter into other such arrangements and directed brokerage
arrangements, which would also have the effect of reducing
the series' expenses. The expenses shown above do not take
into account these expense reductions, and are therefore
higher than the actual expenses of the series.
See "Charges In The Funds" on page 25.
ADDITIONAL INFORMATION ABOUT THE CONTRACTS
Your Right To Examine This Contract
You have a right to examine and cancel the contract. Your
cancellation request must be postmarked by the latest of
the following 3 dates:
10 days after you receive your contract,
10 days after we mail you a notice of this right, or
45 days after you sign the contract application.
If you cancel your contract during this period, then we
will return your cash value plus all of the charges we have
deducted from premiums or from the investment divisions or
the cash value. Expenses of the portfolios are not
returned.
See "Your Right To Examine The Contract" on page 26.
Your Contract Can Lapse
Your contract remains in force if the net cash surrender
value can pay the monthly charges. In addition, during the
Minimum Premium Period, your contract will remain in force
as long as you meet the applicable minimum premium
requirements. However, the contract can lapse after the
Minimum Premium Period no matter how much you pay in
premiums, if the net cash surrender value is insufficient
to pay the monthly charges (subject to the grace period).
See "Your Contract Can Lapse" on page 27.
Tax Effects of Variable Universal Life 2
We believe that a contract issued on the basis of a
standard rate class should quality as a life insurance
contract for federal income tax purposes. It is unclear
whether a contract issued on a substandard basis would
qualify as a life insurance contract, particularly if you
pay the full amount of premiums permitted under the
contract. If a contract does not satisfy Section 7702 of
the Internal Revenue code (defining life insurance for tax
purposes), we will take appropriate and reasonable steps to
try to get the contract to comply with Section 7702.
If a contract qualifies as a life insurance contract for
federal income tax purposes, then the death benefit payment
is not subject to federal income tax. In addition, under
current federal tax law, you do not have to pay income tax
on any increases in your cash value as long as they remain
in your contract.
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 distributions of taxable income and then as a
return of your investment in the contract. In addition,
prior to age 59 1/2, 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 your investment in the contract and then as a
distribution of taxable income. Moreover, loans will not be
treated as distributions. Finally, distributions and loans
from a contract that is not a Modified Endowment contract
are not subject to the 10% penalty tax. See "TAX EFFECTS"
on page 30.
Illustrations
This prospectus includes sample projections of hypothetical
death benefits and cash surrender values, beginning on page
40.in Appendix B. These are only hypothetical figures and
are not indications of either past or anticipated future
investment performance. These hypothetical value
projections may be helpful in understanding the long-term
effects of different levels of investment performance,
charges and deductions. They may help in comparing this
contract to other life insurance contracts. They indicate
that if the contract is surrendered in the early contract
years, the net cash surrender value may be low compared to
never purchasing the policy and investing the money used as
premiums at 5% per year. This demonstrates that this
contract should not be purchased as a short-term
investment.
PART 2: DETAILED INFORMATION
ABOUT VARIABLE UNIVERSAL LIFE 2
INSURANCE FEATURES
This prospectus describes our Variable Universal Life 2
contract. There may be contractual variances because of
requirements of the state where your contract is issued.
How the Contracts Differ From Whole Life Insurance
Variable Universal Life 2 (VUL-2) provides insurance
coverage with flexibility in death benefits and premium
payments. It enables you to respond to changes in your
life and to take advantage of favorable financial
conditions. VUL-2 differs from traditional whole life
insurance because you may choose the amount and frequency
of premium payments, within limits.
In addition, VUL-2 has two types death benefit options.
You may switch back and forth between these options.
Variable Universal Life 2 also allows you to change the
face amount without purchasing a new insurance policy.
However, evidence of insurability may be required.
Application for Insurance
To apply for a contract you must submit a completed
application. We decide whether 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, then we will return the sum of
premiums paid plus interest credited. The maximum issue
age is 80.
Death Benefit
We pay the death benefit to the beneficiary when the
insured person dies (outstanding indebtedness will be
deducted from the proceeds). As the owner, you may choose
between two death benefit options:
Option 1 provides a benefit that equals the face amount
of the contract. This "level" death benefit is for
owners who prefer insurance coverage that does not vary
in amount and has lower insurance charges. Except as
described below, the option 1 death benefit is level or
fixed at the face amount.
Option 2 provides a benefit that equals the face amount
of the contract plus the cash value on the day the
insured person dies. This "variable" death benefit is
for owners who prefer to have investment performance
reflected in the amount of their insurance coverage.
Under Option 2, the value of the death benefit fluctuates
with your cash value.
Under both options, Federal tax law may require a greater
benefit. This benefit is a percentage multiple of your
cash value. The percentage declines as the insured person
gets older (this is referred to as the "corridor"
percentage). The death benefit will be your cash value on
the day the insured person dies multiplied by the
percentage for his or her age. For this purpose, age is
the attained age (last birthday) at the beginning of the
contract year of the insured person's death.
The percentages are shown below:
Table of Death Benefits
Based on Cash 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 Cash Value Age Is Cash Value
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 federal income 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 face amount is $100,000. The "corridor percentage" at
that age is 150%. Under Option 1, the death benefit will
generally be $100,000. However, when the cash value is
greater than $66,666.67, the corridor percentage applies
and the death benefit will be greater than $100,000 (since
150% of $66,666.67 equals $100,000). In this case, at age
55, we multiply the cash value by a factor of 150%. So if
the cash value were $70,000, then the death benefit would
be $105,000.
Under Option 2, the death benefit is the face amount plus
the cash value. In this example, if a 55 year-old had a
face amount of $100,000 and a cash value of $200,000, then
the death benefit would be $300,000. This figure results
from either: (a) adding the face amount to the cash value
or (b) multiplying the cash value by the corridor
percentage. For all cash values higher than this level,
the corridor percentage would apply. Therefore, for every
$1.00 added to the cash value above $200,000, the death
benefit would increase by $1.50 (at that age).
Under either option, the length of time your contract
remains in force depends on the net cash surrender value of
your contract and whether you meet the Minimum Premium
Period requirements. Your coverage lasts as long as your
net cash surrender value can cover the monthly deductions
from your cash value. In addition, during the Minimum
Premium Period, your contract remains in force if the sum
of your premium payments (minus any loans or withdrawals)
is greater than the sum of the monthly minimum premiums for
all of the contract months since the contract was issued.
The investment performances of the investment divisions and
the interest earned in the General Account affect your cash
value. Therefore, the returns from these investment
options can affect the length of time your contract remains
in force.
The minimum initial face amount generally is $50,000.
However, for issue ages 0 to 14, the minimum is $25,000.
Maturity Benefit
If the insured person is still living on the maturity date,
we will pay the beneficiary the cash value minus any
outstanding loans. The contract will then end. The
maturity date is the contract anniversary after the insured
person's 100th birthday. In certain circumstances, you may
extend the maturity date. See "Maturity Date" on page 27.
Changes In Variable Universal Life 2
Variable Universal Life 2 gives you the flexibility to
choose from a variety of strategies that enable you to
increase or decrease your insurance protection.
A reduction in face amount lessens the emphasis on a
contract's insurance coverage by reducing both the death
benefit and the amount of pure insurance provided. The
amount of pure insurance is the difference between the cash
value and the death benefit. This is the amount of risk we
take. A reduced amount at risk results in lower cost of
insurance deductions from your cash value.
A partial withdrawal reduces the cash value and may reduce
the death benefit, while providing you with a cash payment,
but generally does not reduce the amount at risk. Choosing
not to make premium payments may have the effect of
reducing the cash value. Under death benefit option 1,
reducing the cash value increases the amount at risk
(thereby increasing the cost of insurance deductions) while
leaving the death benefit unchanged; under death benefit
option 2, it decreases the death benefit while leaving the
amount at risk unchanged.
Increases in the face amount have the exact opposite effect
of decreases.
Changing The Face Amount of Insurance
You may change the face amount of your contract by sending
a written request to our home office. You can only change
the face amount twice each contract year. All changes are
subject to our approval and to the following conditions.
For increases:
Increases in the face amount must be at least $25,000.
To increase the face amount, you must provide
satisfactory evidence of insurability. If the insured
person has become a more expensive risk, then we charge
higher cost of insurance fees for the additional amounts
of insurance (we may change this procedure in the
future).
Monthly cost of insurance deductions from your cash value
will increase. There will also be a surrender charge
increase. These begin on the date the face amount
increase takes effect.
The right to examine this contract does not apply to face
amount increases. (It only applies when you first buy
the contract.)
For decreases:
You cannot reduce the face amount below the minimum we
require to issue this contract at the time of the
reduction. Monthly cost of insurance deductions from
your cash value will decrease.
The federal tax law may limit a decrease in the face
amount. If that limit applies, then your new death
benefit will be your cash value multiplied by the
corridor percentage the federal tax law specifies for the
insured's age at the time of the change.
If you request a face amount decrease after you have
already increased the face amount at substandard (i.e.,
higher) risk charges, and the original face amount was at
standard risk charges, then we will first decrease the
face amount that is at substandard higher risk charges.
We may change this procedure.
Changing Your Death Benefit Option
You may change your death benefit option by sending a
written request to our home office. We require
satisfactory evidence of insurability to make this change.
If you change from option 1 to option 2, the face amount
decreases by your cash value on the date of the change.
This keeps the death benefit and amount at risk the same as
before the change. We may not allow a change in death
benefit option if it would reduce the face 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, then the face
amount increases by the amount of your cash value on the
date of the change. These increases and decreases in face
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. This is the amount on which the cost of
insurance charges are based.
When Contract Changes Go Into Effect
Any changes in the face amount or the death benefit option
will go into effect on the monthly anniversary of the date
we approved your request. After your request is approved,
you will receive a written notice 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. We will notify you if we do not
approve a change you request. For example, we might not
approve a change that would disqualify your contract as
life insurance for income tax purposes.
Contract changes may have negative tax consequences. See
"TAX EFFECTS" on page 30.
Flexible Premium Payments
You may choose the amount and frequency of premium
payments, within the limits described below.
Even though your premiums are flexible, your contract
information page will show a "planned" periodic premium.
You determine the planned premium when you apply and can
change them at any time. You will specify the frequency to
be on a quarterly, semi-annual or annual basis. The
planned premiums may not be enough to keep your contract in
force. Planned periodic premiums may be monthly if paid by
pre-authorized check. Premiums may be bi-weekly if paid by
Civil Service Allotment.
The insurance goes into effect when we receive your initial
minimum premium payment (and approve your application). We
determine the initial minimum premium based on:
1) the age, sex, and premium class of the insured person,
2) the initial face amount of the contract, and
3) any additional benefits selected.
All premium payments should be payable to "Midland". After
your first premium payment, all additional premiums should
be sent directly to our home office.
We will send you premium reminders based on your planned
premium schedule. You may make the planned payment, skip
the planned payment, or change the frequency or the amount
of the payment. Generally, you may pay premiums at any
time. Amounts must be at least $50, unless made through a
$30 monthly automatic payment plan.
Payment of the planned premiums does not guarantee that
your contract will stay in force. Additional premium
payments may be necessary. The planned premiums increase
when the face amount of insurance increases.
If you send us a premium payment that would cause your
contract to cease to qualify as life insurance under
Federal tax law, we will notify you and return that portion
of the premium that would cause the disqualification.
Premium Provisions During The Minimum Premium Period.
During the Minimum Premium Period, you can keep your
contract in force by meeting a minimum premium requirement.
The Minimum Premium Period lasts until the 5th contract
anniversary. A monthly minimum premium is shown on your
contract information page. (This is not the same as the
planned premiums.) The minimum premium requirement will be
satisfied if the sum of premiums you have paid, less your
loans or withdrawals, is more than the sum of the monthly
minimum premiums required to that date.
During the Minimum Premium Period, your contract will lapse
if:
the net cash surrender value cannot cover the monthly
deductions from your cash value; and
the total premiums you have paid, less your loans or
withdrawals, are less than the total monthly minimum
premiums required to that date.
This contract lapse can occur even if you pay all of the
planned premiums.
Premium Provisions After The Minimum Premium Period. After
the Minimum Premium Period, your contract will lapse if the
net cash surrender value cannot cover the monthly
deductions from your cash value. Paying your planned
premiums may not be sufficient to maintain your contract
because of investment performance, charges and deductions,
contract changes or other factors. Therefore, additional
premiums may be necessary to keep your contract in force.
Allocation of Premiums
Each net premium will be allocated to the investment
divisions or to our General Account on the day we receive
it (except that any premium received before we issue the
contract will not be allocated or invested until we issue
the contract). The net premium is the premium minus a
premium tax and any expense charges. Each premium is put
into your cash value according to your instructions. Your
contract application may provide directions to allocate net
premiums to our General Account or the investment
divisions. You may not allocate your cash value to more
than 10 investment divisions at any one point in time.
Your allocation instructions will apply to all of your
premiums unless you write to our home office with new
instructions. Allocation percentages may be any whole
number from 010 to 100. The sum of the allocation
percentages must equal 100. Of course, you may choose not
to allocate a premium to any particular investment
division. See "THE GENERAL ACCOUNT" on page 21. Any
premium received before the record date will be held and
earn interest in the General Account until the day after
the record date. When this period ends your instructions
will dictate how we allocate it.
Additional Benefits
You may include additional benefits in your contract.
Certain benefits result in an additional monthly deduction
from your cash value. You may cancel these benefits at any
time. The following briefly summarizes the additional
benefits that are currently available:
(1) Disability Waiver Benefit: With this benefit, we
waive monthly charges from the cash value if the insured
person becomes totally disabled on or after his/her 15th
birthday and the disability continues for at least 6
months. If a disability starts before the contract
anniversary following the insured person's 60th birthday,
then we will waive monthly deductions for as long as the
disability continues.
(2) Monthly Disability Benefit: With this benefit, we pay
a set amount into your cash value each month (the amount is
on your contract information page). The benefit is payable
when the insured person becomes totally disabled on or
after their 15th birthday and the disability continues for
at least 6 months. The disability must start before the
contract anniversary following the insured person's 60th
birthday. The benefit will continue until the insured
person reaches age 65. If the amount of benefit paid into
the cash value is more than the amount allowed under the
income tax code, the monthly benefit will be paid to the
insured person.
(3) Accidental Death Benefit: We will pay an additional
benefit if the insured person dies from a physical injury
that results from an accident, provided the insured person
dies before the contract anniversary that is within a half
year of his or her 70th birthday.
(4) Children's Insurance Rider: This benefit provides
term life insurance on the lives of the insured person's
children. This includes natural children, stepchildren and
legally adopted children, between the ages of 15 days and
21 years. They are covered until the insured person
reaches age 65 or the child reaches age 25.
(5) Family Insurance Rider: This benefit provides term
life insurance on the insured person's children as does the
Children's Insurance. It also provides decreasing term life
insurance on the insured's spouse.
(6) 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.
(7) Guaranteed Insurability Rider: This benefit provides
for additional amounts of insurance without further
evidence of insurability.
(8) Living Needs Rider: This benefit provides an
accelerated death benefit as payment of an "Advanced Sum,"
in the event the insured person is expected to die within
12 months.
You can choose the death benefit amount 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, there is 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 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 face amount
c. any cash values
d. any outstanding loan
When we reduce the cash value, we allocate the reduction
based on the proportion that your unloaned amounts in the
General Account and your amounts in the investment
divisions bear to the total unloaned portion of your cash
value.
Pursuant to the Health Insurance Portability and
Accountability Act of 1996, we believe that for federal
income tax purposes an advanced sum payment made under the
living needs rider should be fully excludable from the
gross income of the beneficiary, as long as the beneficiary
is the insured person under the contract. However, you
should consult a qualified tax advisor about the
consequences of adding this rider to a contract or
requesting an advanced sum payment under this rider.
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. It is a unit investment trust registered with the
Securities and Exchange Commission (SEC) under the
Investment Company Act of 1940 but this registration does
not involve any SEC supervision of its management or
investment policies. The Separate Account meets the
definition of a "Separate Account" under the federal
securities laws. The Separate Account has a number of
investment divisions, each of which invests in the shares
of a corresponding portfolio of the Funds. You may allocate
part or all of your net premiums to ten of the twenty-three
investment divisions of our Separate Account.
The Funds
Each of the 23 portfolios available under the contract is a
"series" of one of the following investment companies:
1. Fidelity's Variable Insurance Products Fund,
2. Fidelity's Variable Insurance Products Fund II,
3. Fidelity's Variable Insurance Products Fund III,
4. American Century Variable Portfolios, Inc.,
5. MFS(r) Massachusetts Financial's Variable Insurance Trusts,
and
6. Lord, Abbett's Series Fund, Inc.
The Funds' shares are bought and sold by our Separate
Account at net asset value. More detailed information about
the Funds and their investment objectives, policies, risks,
expenses and other aspects of their operations, appear in
their prospectuses, which accompany this prospectus.
Midland may from time to time receive revenue from the
Funds and/or from their managers. The amounts of the
revenue, if any, may be based on the amount of Midland's
investments in the Funds.
Investment Policies Of The Portfolios
Each portfolio tries to achieve a specified investment
objective by following certain investment policies. A
portfolio's objectives and policies affect its returns and
risks. Each investment division's performance depends on
the experience of the corresponding portfolio. The
objectives of the portfolios are as follows:
Portfolio
Objective
VIP Money Market
Seeks as
high a
level of
current
income
as is
consistent with
preservation of
capital
and
liquidity by
investing in
U.S.
dollar-
denominated
money
market
securities. Seeks
to earn
a high
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.)
VIP High Income
Seeks a
high
level of
current
income
by
investing
primarily in
income-producing debt
securities while
also
considering
growth
of
capital.
Policy
owners
should
understand that
the
fund's
unit
price
may be
volatile
due to
the
nature
of the
high
yield
bond
marketplace. Seeks high
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.
VIP Equity-Income
Seeks
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. Seeks
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.
VIP Growth
Seeks
capital
appreciation by
investing in
common stocks.
The
adviser
invests
the
fund's
assets
in
companies the
adviser
believes
have
above-average
growth
potential. Seeks
capital
appreciation by
investing in
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.
VIP Overseas
Seeks
long-term
growth
of
capital,
primarily
through
investments in
foreign
securities. Seeks
long-term
growth
of
capital,
primarily
through
investments in
foreign
securities.
VIP II 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
instruments. Seeks high
total
return
with
reduced
risk
over the
long-term by
allocating its
assets
among
domestic
and
foreign
stocks,
bonds
and
short-term
money
market
instruments.
VIP II Investment Grade Bond
Seeks a
high a
level of
current
income
as is
consistent with
the
preservation of
capital
by
investing in
U.S.
dollar-denominated
investment-grade
bonds. 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.
VIP II Contrafund
Seeks to
achieve
capital
appreciation
over the
long
term by
investing in
common
stocks
and
securities of
companies whose
value
the
manager
believes
is not
fully
recognized by
the
public. Seeks to
achieve
capital
appreciation
over the
long
term by
investing in
securities of
companies whose
value
the
manager
believes
is not
recognized fully
by the
public.
VIP II Asset Manager: Growth
Seeks to
maximize
total
return
by
allocating its
assets
among
stocks,
bonds,
short-term
instruments, and
other
investments. 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.
VIP II 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. 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.
VIP III Growth & Income
Seeks
high
total
return,
combining
current
income
and
capital
appreciation.
Invests mainly
in
stocks
that pay
current
dividends and
show
potential for
capital
appreciation. earnings
potential.
VIP III Balanced
Seeks
both
income
and
growth
of
capital.
When
FMR's
outlook
is
neutral,
it will
invest
approximately
60% of
the
fund's
assets
in
equity
securities and
will
always
invest
at least
25% of
the
fund's
assets
in
fixed-income
senior
securities. Seeks
to
balance
the
growth
potential of
stocks
with the
possible
income
cushion
of
bonds.
Invests in broad
selection of
stocks,
bonds
and
convertible
securities.
VIP III Growth Opportunities
Seeks
capital
growth
by
investing
primarily in
common
stocks.
Although
the fund
invests
primarily in
common
stocks,
it has
the
ability
to
purchase
other
securities,
including bonds,
which
may be
lower-
quality
debt
securities. Seeks
long-
term
growth
of
capital.
Invests
primarily in
common
stocks
and
securities
convertible into
common
stocks,
but it
has the
ability
to
purchase
other
securities such
as
preferred stocks
and
bonds
that may
produce
capital
growth.
American Century VP Capital Appreciation
Seeks
capital
growth
by
investing
primarily in
common
stocks
that
management
considers to
have
better-than-average
prospects for
appreciation.
American Century VP Value
Seeks
long-term
capital
growth
with
income
as a
secondary
objective.
Invests primarily in
equity
securities of
well-established
companies that
management
believes
to be
under-valued.
American Century VP Balanced
Seeks
capital
growth
and
current
income.
Invests
approximately 60
percent
of its
assets
in
common
stocks
that
management
considers to
have
better
than
average
potential for
appreciation and
the rest
in fixed
income
securities.
American Century VP International
Seeks
capital
growth
by
investing
primarily in
securities of
foreign
companies that
management
believes
to have
potential for
appreciation.
American Century VP
Income & Growth Seeks
dividend
growth,
current
income
and
capital
appreciation.
The
Portfolio will
seek to
achieve
its
investment
objective by
investing in
common
stocks.
MFS VIT Emerging Growth
Seeks to
provide
long-term
growth
of
capital.
Dividend
and
interest
income
from
portfolio
securities, if
any, is
incident
al to
the
Series'
investment
objective of
long-term
growth
capital.
MFS VIT Research
Seeks to
provide
long-term
growth
of
capital
and
future
income.
MFS VIT Growth
with
Income
Seeks to
provide
reasonable
current
income
and
long-term
growth
of
capital
and
income.
MFS VIT New Discovery
Seeks
capital
appreciation.
Lord,Abbett VC C Growth and Income
Seeks
long-term
growth
of
capital
and
income
without
excessive
fluctuation in
market
value.
Fidelity Management & Research Company manages the VIP, VIP
II and VIP III portfolios. American Century Investment
Management, Inc. manages the American Century VP
Portfolios. MFS(r) Massachusetts Financial Services Company
manages the MFS Variable Insurance Trusts. Lord, Abbett &
Co.Company manages the Lord, Abbett Series Fund, Inc.
The Fund portfolios available under these contracts are not
available for purchase directly by the general public, and
are not the same as the mutual funds with very similar or
nearly identical names that are sold directly to the
public. However, the investment objectives and policies of
the portfolios are very similar to the investment
objectives and policies of other (publicly available)
mutual fund portfolios that have very similar or nearly
identical names and that are or may be managed by the same
investment advisor or manager. Nevertheless, the investment
performance and results of any of the Funds' portfolios
that are available under the contracts may be lower, or
higher, than the investment results of such other (publicly
available) portfolios. There can be no assurance, and no
representation is made, that the investment results of any
of the available portfolios will be comparable to the
investment results of any other portfolio or mutual fund,
even if the other portfolio or mutual fund has the same
investment advisor or manager and the same investment
objectives and policies and a very similar or nearly
identical name.
USING YOUR CASH VALUE
The Cash Value
Your cash value is the sum of your amounts in the various
investment divisions and in the General Account (including
any amount in our General Account securing a contract
loan). Your cash value reflects various charges. See
"DEDUCTIONS AND CHARGES" on page 22. Monthly deductions are
made on the first day of each contract month. Transaction
and surrender charges are made on the effective date of the
transaction. Charges against our Separate Account are
reflected daily.
We guarantee amounts allocated to the General Account.
There is no guaranteed minimum cash value for amounts
allocated to the investment divisions of our Separate
Account. You bear that investment risk. An investment
division's performance will cause your cash value to go up
or down.
Amounts In Our Separate Account
Amounts allocated or transferred to the investment
divisions are used to purchase accumulation units.
Accumulation units of an investment division are purchased
when you allocate premiums, repay loans or transfer amounts
to that division. Accumulation units are redeemed when you
make withdrawals or transfer amounts from an investment
division (including transfers for loans), we make monthly
deductions and charges, and to pay the death benefit. The
number of accumulation units purchased or redeemed in an
investment division is calculated by dividing the dollar
amount of the transaction by the division's accumulation
unit value at the end of that day. The value you have in
an investment division is the accumulation unit value times
the number of accumulation units credited to you. The
number of accumulation units credited to you will not vary
because of changes in accumulation unit values.
How We Determine The Accumulation Unit Value
We determine accumulation unit values for the investment
divisions at the end of each business day. Accumulation
unit values fluctuate with the investment performance of
the corresponding portfolios of the Funds. They reflect
investment income, the portfolio's realized and unrealized
capital gains and losses, the Funds' expenses, and our
deductions and charges. The accumulation unit value for
each investment division is 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 previous 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:
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
transactions for that day, such as premium payments or
surrenders). We use the share value reported to us by the
Fund.
We add any dividends or capital gains distributions paid
by the portfolio on that day.
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).
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 .0030304%, which is an effective annual rate of
1.10%. (See "Mortality and Expense Risks" on page 20 and
"Administrative Charges" on page 21.)
We may subtract any daily charge for taxes or amounts set
aside as tax reserves.
Cash Value Transactions
The transactions described below may have different effects
on your cash value, death benefit, face amount or cost of
insurance changes. You should consider the net effects
before making any cash value transactions. Certain
transactions have fees. Remember that upon completion of
these transactions, you may not have your cash value
allocated to more than 10 investment divisions.
Transfers Of Cash Value
You may transfer amounts among the investment divisions and
between the General Account and any investment divisions.
To make a transfer of cash value, write to our home office.
Currently, you may make an unlimited number of transfers of
cash value in each contract year.we will charge a $25 fee
after the 15th transfer in a contract year. We reserve the
right to charge a $25 fee after the 12thfourth transfer in
a contract year. If we charge you for making a transfer,
then we will allocate the charge as described under
"Deductions and Charges - How Cash Value Charges Are
Allocated" on page 24. Although a single transfer request
may include multiple transfers, it will be considered a
single transfer for fee purposes.
Transfer requests received before 3:00 p.m. (Central
Standard Time) will take affect on the same day if that day
is a business day. Otherwise, the transfer request will
take affect on the business day following the day we
receive your request. The unit values are determined on
the day the transfer takes affect. The minimum transfer
amount is $200. The minimum amount does not have to come
from or be transferred to just one investment division.
The only requirement is that the total amount transferred
that day equals the transfer minimum.
The total 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. $25,000.$1,000.
These limits do not apply to transfers made in Dollar Cost
Averaging that occurs over a time period of 12 or more
months.
Dollar Cost Averaging
The Dollar Cost Averaging (DCA) program enables you to make
monthly transfers of a predetermined dollar amount from the
DCA source account (any investment division or the General
Account) into one or more of the investment divisions. By
allocating monthly, as opposed to allocating the total
amount at one time, you may reduce the impact of market
fluctuations. This plan of investing does not insure a
profit or protect against a loss in declining markets. The
minimum monthly amount to be transferred using DCA is $200.
You can elect the DCA program at any time. You must
complete the proper request form, and there must be a
sufficient amount in the DCA source account. The minimum
amount required in the DCA source account for DCA to begin
is the sum of $2,400 and the minimum premium. You can get
a sufficient amount by paying a premium with the DCA
request form, allocating premiums, or transferring amounts
to the DCA source account. The DCA election will specify:
a. The DCA source account from which DCA transfers will be
made,
b. That any money received with the form is to be placed
into the DCA source account,
c. The total monthly amount to be transferred to the other
investment divisions, and
d. How that monthly amount is to be allocated among the
investment divisions.
The DCA request form must be received with any premium
payments you intend to apply to DCA.
Once DCA is elected, additional premiums can be deposited
into the DCA source account by sending them in with a DCA
request form. All amounts in the DCA source account will
be available for transfer under the DCA program.
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.
You may change the DCA allocation percentages or DCA
transfer amounts twice during a contract year.
If it is requested when the contract is issued, then DCA
will start at the beginning of the 2nd contract month. If
it is requested after issue, then DCA will start at the
beginning of the 1st contract month which occurs at least
30 days after the request is received.
DCA will last until the value in the DCA source account
falls below the allowable limit or until we receive your
written termination request. DCA automatically terminates
on the maturity date.
We reserve the right to end the DCA program by sending you
one month's notice.
Contract Loans
If your contract has a TSA Life 403(b) Endorsement,
contract loans are not available and this section is not
applicable to your contract.
Whenever 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, then the outstanding loan and loan
interest will be added to the additional loan amount and
the original loan will be canceled. Thus, you will only
have one outstanding loan.
We pay you interest on this loaned amount, currently at an
annual rate of 6%. After the 10th contract year, we
guarantee that the annual rate of interest paid on the
loaned portion of the cash value will equal 8% (which is
equal to the interest rate charged on the contract loan)
for the portion of the loan that is from earnings (that is,
the portion that does not exceed the cash value minus total
premiums paid).
A loan taken from, or secured by, a contract may have
federal income tax consequences. See "TAX EFFECTS" on page
30.
You may request a loan by contacting our home office. You
should tell us how much of the loan you want taken from
your unloaned amount in the General Account or from the
Separate Account investment divisions. If you do not tell
us how to allocate your loan, the loan will be allocated
according to your deduction allocation percentages as
described under "How Cash Value Charges Are Allocated" on
page 24. If the loan cannot be allocated this way, then we
will allocate it in proportion to the unloaned amounts of
your cash value in the General Account and each investment
division. We will redeem units from each investment
division equal in value to the amount of the loan allocated
to that investment division (and transfer these amounts to
the General Account).
Contract Loan Interest. Interest on a contract loan
accrues daily at an annual interest rate of 8%.
Interest is due on each contract anniversary. If you do
not pay the interest when it is due, then it will be added
to your outstanding loan and allocated based on the
deduction allocation percentages for your cash value. This
means we make an additional loan to pay the interest and
will transfer amounts from the General Account or the
investment divisions to make the loan. If we cannot
allocate the interest based on these percentages, then we
will allocate it as described above for allocating your
loan.
Repaying The Loan. You may repay all or part of a contract
loan 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 serve as premium payments, then 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 Cash Value. A loan
against your contract will have a permanent effect on your
cash value and benefits, even if the loan is repaid. When
you borrow on your contract, we transfer your loan amount
into our General Account where it earns a declared rate of
interest. You cannot invest that loan amount in any
Separate Account investment divisions. You may earn more
or less on the loan amount, depending on the performance of
the investment divisions and whether they are better or
worse than the rates declared for the unloaned portion of
the General Account.
Your Contract May Lapse. Your loan may affect the amount
of time that your contract remains in force. For example,
your contract may lapse because the loaned amount cannot be
used to cover the monthly deductions that are taken from
your cash value. If these deductions are more than the net
cash surrender value of your contract, then the contract's
lapse provisions 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, especially if you borrow the
maximum.
Withdrawing Money From Your Cash Value
You may request a partial withdrawal of your net cash
surrender value by writing to our home office. You will
not incur a deferred sales charge or deferred issue charge.
Partial withdrawals are subject to certain conditions.
They must:
be at least $200,
total no more than 20% of the net cash surrender value in
any contract year,
allow the death benefit to remain above the minimum for
which we would issue the contract at that time,
allow the contract to still 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, then
we will make the withdrawal as described in "Deductions and
Charges - How Cash Value Charges Are Allocated" on page 24.
Withdrawal Charges. When you make a partial withdrawal
more than once in a contract year, a charge of $25 (or 2%
of the amount withdrawn, whichever is less), will be
deducted from your cash value. If you do not give us
instructions for deducting the charge, then it will be
deducted as described under "Deductions and Charges - How
Cash Value Charges Are Allocated" on page 24.
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 in your cash value, the cash surrender
value and generally the death benefit on a dollar-for-
dollar basis. If the death benefit is based on the
corridor percentage multiple, then the death benefit
reduction could be greater. If you have death benefit
option 1, then we will also reduce the face amount of your
contract so that there will be no change in the net amount
at risk. We will send you a new contract information page
to reflect this change. Both the withdrawal and any
reductions will be effective as of the date we receive your
request at our home office.
A contract loan might be better than a partial withdrawal
if you need temporary cash.
Surrendering Your Contract
You may surrender your contract for its net cash surrender
value while the insured person is living. You do this by
sending both a written request and the contract to our home
office. The net cash surrender value equals the cash
surrender value minus any loan outstanding (including loan
interest). During the first 15 contract years, the cash
surrender value is the cash value minus the surrender
charge. After 15 years, the cash surrender value equals
the cash value. We will compute the net cash surrender
value as of the date we receive your request and contract
at our home office. All of your insurance coverage will
end on that date.
THE GENERAL ACCOUNT
You may allocate all or some of your cash value to the
General Account. The General Account pays interest at a
declared rate. We guarantee the principal after
deductions. 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.
You may accumulate amounts in the General Account by:
allocating net premium and loan payments,
transferring amounts from the investment divisions,
securing any contract loans, or
earning interest on amounts you already have in the
General Account.
This amount is reduced by transfers, withdrawals and
allocated deductions.
We pay interest on all your amounts in the General Account.
The annual interest rates will never be less than 4.0%. We
may, at our sole discretion, credit interest in excess of
4.0%. You assume the risk that interest credited may not
exceed 4.0%. We may pay different rates on unloaned and
loaned amounts in the General Account. Interest compounds
daily at an effective annual rate that equals the annual
rate we declared.
You may request a transfer between the General Account and
one or more of the investment divisions, within limits.
See "Transfers of Cash Value".
DEDUCTIONS AND CHARGES
Deductions From Your Premiums
We deduct a premium tax charge, and in some cases a service
charge from each premium. The rest of each premium (called
the net premium) is placed in your cash value.
Premium Tax Charge. Some states and other jurisdictions
(cities, counties, municipalities) tax premium payments and
some levy other charges. We deduct 2.5% of each premium
for those tax charges. These tax rates currently range
from 0.75% to 4%. We expect to pay at least 2.5% of most
premiums in premium tax because of certain retaliatory
provisions in the premium tax regulations. If we pay less,
then we may reduce the charge for that premium.
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 vary with the
amount of the premium.
We may increase this charge if our premium tax expenses
increase. We reserve the right to vary this charge by
state. If we make such a change, then we will notify you.
Service Charge. If you have chosen the Civil Service
Allotment Mode, then we deduct $.46 from each premium
payment. The $.46 covers the extra expenses we incur in
processing bi-weekly premium payments.
Charges Against The Separate Account
Fees and charges allocated to the investment divisions
reduce the amount in your cash value.
Mortality and Expense Risks. We charge for assuming
mortality and expense risks. We guarantee that monthly
administrative and insurance deductions from your cash
value will never be greater than the maximum amounts shown
in your contract. The mortality risk we assume is that
insured people will live for shorter periods than we
estimated. When this happens, we have to pay a greater
amount of death benefits than we expected. The expense
risk we assume is that the cost of issuing and
administering contracts will be greater than we expected.
We 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-2.
The investment divisions' accumulation unit values reflect
this charge. See "Using Your Cash Value - How We Determine
The Accumulation Unit Value" on page 18. If the money we
collect from this charge is not needed, then we profit. We
expect to make money 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.
Administrative Charges. We charge to cover our record-
keeping and other administrative expenses. This charge
includes expenses for purchasing, selling and transferring
shares from the Funds. The effective annual rate of this
charge is 0.20% of the value of the assets in the separate
account, attributable to the Variable Universal Life 2. The
investment divisions' accumulation unit values reflect this
charge. This charge will reimburse us for expenses. We do
not expect to make any money from this charge.
Tax Reserve. We reserve the right to charge for taxes or
tax reserves, which may reduce the investment performance
of the investment divisions. Currently, no such charge is
made.
Deductions From Your Cash Value
At the beginning of each contract month (including the
contract date), the following three deductions are taken
from your cash value:
1. Expense Charge: This charge is $5.00 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 covers
the continuing costs of maintaining your contract, such
as premium billing and collections, claim processing,
contract transactions, record keeping, communications
with owners and other expense and overhead items.
2. Charges for Additional Benefits: Monthly deductions are
made for the cost of any additional benefits. 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. If the
current death benefit for the month is increased due to
the requirements of Federal tax law, then your amount at
risk for the month will also increase. For this
purpose, your cash value amount 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.
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 place the insured person that is a standard
risk in the non-smoker and smoker rate classes. 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, but they will never
be more than the guaranteed maximum rates set forth in your
contract. The maximum charges are based on 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, nonsmoker, standard
risk at various ages. (In Montana, there are no
distinctions based on sex.)
If Variable Universal Life 2 is purchased in connection
with an employment-related insurance or benefit plan,
employers and employee organizations should consider, in
consultation with counsel, the impact of Title VII of the
Civil Rights Act of 1964. In 1983, the United States
Supreme Court held 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 $.07
15 .11 .11
25 .13 .11
35 .14 .13
45 .29 .26
55 .69 .54
65 1.87 1.24
For a male non-smoker, age 35, with a $100,000 face amount
option 1 contract and an initial premium of $1,000, the
cost of insurance for the first month will be $12.87. This
example assumes the expense charge ($5.00 per month) and
current cost of insurance rate ($.13 per $1,000).
The non-smokerWe offer lower cost of insurance rates are
lower than the smoker 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 habits. The reduced
cost of insurance rates depends on such variables as the
attained age and sex of the insured.
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 of investment earnings,
mortality, the length of time contracts will remain in
effect, expenses and taxes.
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 Cash Values among investment
divisions.Currently, we will charge a $25 fee after the
15th transfer in a contract year. We reserve the right to
charge a $25 fee after the twelfthfourth transfer in a
Ccontract Yyear.
How Cash Value Charges Are Allocated
Generally, deductions from your cash value for monthly or
partial withdrawal charges are made from the investment
divisions and the unloaned portion of the General Account.
They are made in accordance with your specified deduction
allocation percentages unless you instruct us otherwise.
Your deduction allocation percentages may be any whole
numbers (from 010 to 100) which add up to 100. 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 of (a)
to (b) where (a) is your unloaned amounts in the General
Account and your amounts in the investment divisions and
(b) isto the total unloaned amount of your cash value.
Deductions for transfer charges are made equally between
the investment divisions from which the transfer was made.
For example, if the transfer is made from two investment
divisions, then the transfer charge assessed to each of the
investment divisions will be $12.50.
Surrender Charges
We incur various sales and promotional expenses in selling
Variable Universal Life 2. These include commissions, the
cost of preparing sales literature, promotional activities
and other distribution expenses. We also incur expenses
for underwriting, printing contract forms and prospectuses,
and entering information in our records.
The surrender charge is the difference between the amount
in your cash value and your contract's cash surrender value
for the first 15 contract years. It 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 expenses in that year. We anticipate
that the sales charge and surrender charge will not fully
cover our sales expenses. If sales expenses are not covered
by the sales and surrender charges, we will cover them with
other funds. The net cash surrender value, the amount we
pay you if you surrender your contract for cash, equals the
cash surrender value minus any outstanding loan and loan
interest.
The surrender charge includes deferred sales charges and
deferred issue charges. The deferred sales charge is the
sum of two pieces:
(1) 30% of any premium payment in the first 2 contract years
up to one guideline annual premium.
(2) 9% of all other premium payments.
The sum of the above pieces is also limited by the
Guideline Annual Premium, times 9%, times the lesser of 20
years or the expected future lifetime at issue as
determined by the 1980 CSO Mortality Table. Your contract
information page specifies the guideline annual premium.
It varies for each contract.
During the first 10 contract years, the maximum deferred
sales charge may be imposed. Beginning in the 11th year
the maximum deferred sales charge will be multiplied by a
percentage:
Contract Year Percentage Multiple
11 83.33%
12 66.67%
13 50.00%
14 33.33%
15 16.67%
16 and up 0.00%
If there is an increase in face amount, there will also be
an increase in the Guideline Annual Premium. All additions
to the deferred sales charge, due to this increase, will be
9% of premiums. The maximum limit will also increase by
the additional Guideline Annual Premium, times 9%, times
the lesser of 20 years or the expected future lifetime
(determined at the time of the increase using the 1980 CSO
Mortality Table). The total in the deferred sales charge
prior to the increase in face amount will not be affected.
If there is a decrease in the face 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 per
$1,000 of the face amount. After the 15th contract year,
there is no deferred issue charge.
Table of Deferred Issue Charges
Per Thousand of Face Amount
Contract
Year Charge
1-10 $3.00
11 $2.50
12 $2.00
13 $1.50
14 $1.00
15 $0.50
16+ $0.00
If there has been a change in face amount during the life
of the contract, then the deferred issue charge is applied
against the highest face amount in force during the life of
the contract.
Accordingly, the maximum surrender charge is 30% of premium
paid, plus $3.00 per thousand of Face Amount. However, as
explained above, in most cases, the surrender charge will
be less than the maximum.
Charges In The Funds
The Funds charge for managing investments and providing
services. Each portfolio's charges vary.
The VIP, the VIP II, and the VIP III Portfolios have an
annual management fee. That fee is the sum of an
individual fund fee rate and a group fee rate based on the
monthly average net assets of Fidelity Management &
Research Company's mutual funds. In addition, each of
these portfolios' total operating expenses includes fees
for management and shareholder services and other expenses
(custodial, legal, accounting, and other miscellaneous
fees). See the VIP, VIP II and VIP III prospectuses for
additional information on how these charges are determined
and on the minimum and maximum charges allowed. All
expenses for the year ending December 31, 19981997 , are
shown in the table below.
The American Century Variable Portfolios have annual
management fees that are based on the monthly average of
the net assets in each of the portfolios. See the American
Century Variable Portfolios prospectus for details. The
expenses for the year ending December 31, 19981997 , (except
as otherwise noted) are shown in the table below.
The MFS Portfolios have annual management fees that are
based on the monthly average of the net assets in each of
the portfolios. See the MFS Portfolios prospectus for
details. The expenses for the year ending December 31,
19981997 , (except as otherwise noted) are shown in the
table below.
The Lord, Abbett Portfolio s has anhave annual management
Fee s that isare based on the monthly average of the net
assets in each of the portfolios. See the Lord, Abbett
Portfolios prospectus for details. The expenses for the
year ending December 31, 19981997 , (except as otherwise
noted) are shown in the table below.
Management
Fee Other
Portfolio Expenses Expenses Total
VIP Money Market .20.21% .10% .30.31%
VIP High Income .58.59% .12% .70.71%
VIP Equity-Income(1) .49.50% .09.08% .58%
VIP Growth(1) .59.60% .09% .68.69%
VIP Overseas(1) .74.75% .17% .91.92%
VIP II Asset Manager(1) .54.55% .10% .64.65%
VIP II Investment
Grade Bond .43.44% .14% .57.58%
VIP II Contrafund(1) .59.60% .11% .70.71%
VIP II Asset
Manager: Growth(1) .59.60% .14.17% .73.77%
VIP II Index 500(1)(2) .24% .11.04% .35.28%
VIP III Growth &
Income(1) .49% .12.21% .61.70%
VIP III Balanced(1) .44.45% .15.16% .59.61%
VIP III Growth
Opportunities(1) .59.60% .12.14% .71.74%
American Century VP
Capital Appreciation 1.00% .00% 1.00%
American Century VP
Value 1.00% .00% 1.00%
American Century VP
Balanced 1.00% .00% 1.00%
American Century VP
International 1.471.50% .00% 1.471.50%
American Century VP
Income & Growth(4) .70% .00% .70
MFS VIT Emerging
Growth(3) .75% .10.12% .85.87%
MFS VIT Research(3) .75% .11.13% .86.88%
MFS VIT Growth
With Income(3) .75% .13.25% .881.00%
MFS VIT New
Discovery(2) (3) (4) .90% .27.25% 1.171.15%
Lord, Abbett VC C
Growth and Income .50% .01.02% .51.52%
(1) The portfolio used a portion of its paid brokerage
commissions to reduce its expenses. Certain portfolios
used credits gained as a result of uninvested cash balances
to reduce custodian and transfer agent expenses. Including
these reductions, total operating expenses would have been
as follows:
VIP Equity-Income 0.57%
VIP Growth 0.66%0.67%
VIP Overseas 0.89%0.90%
VIP II Asset Manager 0.63%0.64%
VIP II Index 500 0.28%
VIP II Contrafund 0.66%0.78%
VIP II Asset Manager: Growth 0.72%0.76%
VIP III Balanced 0.58%0.60%
VIP III Growth Opportunities 0.70%0.73%
VIP III Growth & Income 0.60%
(2) The Fund's investment advisor voluntarily reduced the
portfolio's expenses. Absent such reimbursement, the
management fee, other expenses, and total expenses for the
VIP II Index 500 would have been 0.27%, 0.13% and 0.40%
respectively.
(2)(3) MFS has agreed to bear expenses for this these
portfolios (subject to reimbursement by these portfolios)
such that theeach such portfolio's other expenses shall not
exceed 0.25%. Without this limitation, the other expenses
and total expenses would be:
Other Total
Expenses Expenses
MFS VIT Growth with Income 0.35% 1.10%
MFS VIT New Discovery 4.320.47% 5.221.37%
(4) The expenses are based on estimated expenses for 1998.
(3) Each of the MFS Series has an expense offset
arrangement, which reduces the series' custodian fee based
upon the amount of cash maintained by the series with its
custodian and dividend disbursing agent. Each series may
enter into other such arrangements and directed brokerage
arrangements, which would also have the effect of reducing
the series' expenses. The expenses shown above do not take
into account these expense reductions, and are therefore
higher than the actual expenses of the series.
ADDITIONAL INFORMATION ABOUT THE CONTRACTS
Your Right To Examine The Contract
You have a right to examine the contract. If for any
reason you are not satisfied with it, then you may cancel
the contract. You cancel the contract by sending it to our
home office along with a written cancellation request.
Your cancellation request must be postmarked by 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, then we will return all of the
charges deducted from your paid premiums and cash value,
plus the cash value.
Insurance coverage ends when you send your request.
Your Contract Can Lapse
Your Variable Universal Life 2 insurance coverage continues
as long as the net cash surrender value of your contract is
enough to pay the monthly deductions that are taken out of
your cash value. During the Minimum Premium Period,
coverage continues if your paid premiums exceed the
schedule of required minimum premiums. If neither of these
conditions is true at the beginning of any contract month,
we will send written notification to you and any assignees
on our records that a 61-day grace period has begun. This
will tell you the amount of premium payment that is needed
to satisfy the minimum requirement for two months.
If we receive payment of this amount before the end of the
grace period, then we will use that amount to pay the
overdue deductions. We will put any remaining balance in
your cash value and allocate it in the same manner as your
previous premium payments.
If we do not receive payment within 61 days, then your
contract will lapse without value. We will withdraw any
amount left in your cash value. We will apply this amount
to the deductions owed to us, including any applicable
surrender charge. We will inform you and any assignee 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 did not surrender the contract for its net
cash surrender value. To reinstate the contract, you must:
complete an application for reinstatement,
provide evidence that the insured person is still
insurable,
pay enough premium to cover all overdue monthly
deductions, including the premium tax on those
deductions,
increase the cash value so that the cash value minus any
contract debt equals the surrender charges,
cover the next two months' deductions, and
pay or restore any contract debt.
The contract date of the reinstated contract will be the
beginning of the contract month that coincides with or
follows the date that 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 And Anniversaries
We measure contract years, contract months, and contract
anniversaries from the contract date shown on your contract
information page. Each contract month begins on the same
day in each calendar month. The calendar days of 29, 30,
and 31 are not used. Our right to challenge a contract and
the suicide exclusion are measured from the contract date.
See "Limits On Our Right To Challenge The Contract" on page
28.
Maturity Date
The maturity date is the first 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 as long as this contract still qualifies as
life insurance according to the Internal Revenue Service
and your state. If the maturity date is extended, the
contract may not qualify as life insurance and there may be
tax consequences. A tax advisor should be consulted before
you elect to extend the maturity date. In order to
continue the contract beyond the original maturity date, we
require that the death benefit not exceed the cash value on
the original maturity date.
We Own The Assets Of Our Separate Account
We own the assets of our Separate Account and use them to
support your contract and other variable life contracts.
We may 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. The assets in the Separate Account
generally are not changeable with liabilities arising out
of any other business we conduct. Under certain unlikely
circumstances, one investment division of the Separate
Account may be liable for claims relating to the operations
of another division.
Changing the Separate Account
We have the right to modify how we operate our Separate
Account. 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;
withdraw assets relating to Variable Universal Life 2
from one investment division and put them into another;
eliminate the shares of a portfolio and substitute shares
of another portfolio of the Funds or another open-end
investment company. This may happen if the shares of the
portfolio are no longer available for investment or, if
in our judgment, further investment in the portfolio is
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 interested
parties employees of Midland);
disregard instructions from contract owners regarding a
change in the investment objectives of the portfolio or
the approval or disapproval of an investment advisory
contract. (We would do so only if required by state
insurance regulatory authorities or otherwise pursuant to
insurance law or regulation); and
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. In choosing these investments, we will rely
on our own or outside counsel for advice. In addition,
we may disapprove of any change in investment advisors or
in investment policies unless a law or regulation
provides differently.
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. There are 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 during the time that we may
challenge the validity of the contract, then 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, then the death benefit and any additional
benefits will be changed. They 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, then the death benefit will be limited to the
total of all paid premiums minus the amount of any
outstanding contract loan and loan interest minus any
partial withdrawals of net cash surrender value. If the
insured person commits suicide within two years after the
effective date of your requested face amount increase, then
we will pay the face 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
You may choose for contract benefits and other payments
(such as the net cash surrender value or death benefit) to
be paid immediately in one lump sum or in another form of
payment. Payments under these options are not affected by
the investment performance of any investment division.
Instead, interest accrues pursuant to the option chosen.
If you do not arrange for a specific form of payment before
the insured person dies, then the beneficiary will have
this choice. However, if you do make an arrangement with
us for how the money will be paid, then the beneficiary
cannot change your choice. Payment options will also be
subject to our rules at the time of selection. Our consent
is required when an optional payment is selected and the
payee is either an assignee or not a natural person (i.e.,
a corporation). Currently, these alternate payment options
are only available if the proceeds applied are more than
$1,000 and periodic payments are at least $20.
You have the following payment options:
1. Deposit Option: The money will stay on deposit with
us for a period that 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
specified time, up to 30 years.
b. Fixed Amount: We will pay the sum in installments in
an amount that we agree upon. We will continue to 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 from 1 of 4 ways
to receive the income. We will guarantee payments for:
(1) at least 5 years (called "5 Years Certain");
(2) at least 10 years (called "10 Years
Certain");
(3) at least 20 years (called "20 Years
Certain"); or
(4) payment for life. With a life only payment
option, payments will only be made as long as the
payee is alive. Therefore, if the payee dies after
the first payment, only one payment will be made.
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 and installation
options at 2.75% a year, but we may allow a higher rate of
interest.
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 a fiduciary or
not a natural person. Also, the details of all
arrangements will be subject to our rules at the time the
arrangements take effect. These include:
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 choose 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 in your contract application.
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,
then we will pay the death benefit, in equal shares, to the
insured person's surviving children. If there are no
surviving children, then we will pay the death benefit to
the insured person's estate.
Assigning Your Contract
You may assign your rights in this contract. You must send
a copy of the assignment to our home office. We are not
responsible for the validity of the assignment or for any
payment we make or any action we take before we receive
notice of the assignment. An absolute assignment is a
change of ownership. There may be tax consequences.
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
receiving the required form(s) at our home office. Death
benefits are determined as of the date of the insured
person's death and will not be affected by subsequent
changes in the accumulation unit values of the investment
divisions. We pay interest from the date of death to the
date of payment.
We may delay payment for one or more of the following
reasons:
(1) We contest the contract.
(2) We cannot determine the amount of the payment because
the New York Stock Exchange is closed, the SEC has
restricted trading in securities, or the SEC has
declared that an emergency exists.
(3) The SEC, by order, permits us to delay payment to
protect our contract owners.
We may also delay any payment until your premium checks
have cleared your bank. We may defer payment of any loan
amount, withdrawal, or surrender from the General Account
for up to six months after we receive your request.
TAX EFFECTS
Contract Proceeds
The Internal Revenue Code of 1986 ("Code"), Section 7702,
defines life insurance for tax purposes. The Code places
limits on certain contract charges used in determining the
maximum amount of premiums that may be paid under Section
7702. There is limited guidance as to how to apply Section
7702.
Midland believes that a standard rate class contract should
meet the Section 7702 definition of a life insurance
contract (although there is some uncertainty). For a
contract issued on a substandard basis (i.e., a rate class
involving higher than standard mortality risk), there may
be more uncertainty whether it meets the Section 7702
definition of a life insurance contract. It is not clear
whether 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, then Midland may take appropriate and reasonable
steps to cause the contract to comply with Section 7702.
These may include 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 a contract's face amount changes, then the applicable
premium limitation may also change. During the first 15
contract years, there are certain events that may create
taxable ordinary income for you if at the time of the event
there has been a gain in the contract. These events
include:
A decrease in the face amount;
A partial withdrawal;
A change from death benefit 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 may result 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 death benefits) from certain Variable Life
insurance contracts as follows:
1. If premiums are paid more rapidly than the rate
defined by a 7-Pay Test, then 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), 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 a taxable
distribution of gain from the contract (to the extent
that gain exists), and then as non-taxable recovery of
basis.
5. The Code imposes an extra "penalty" tax of 10% on
any distribution from a Modified Endowment Contract
includable in income, unless such distributions are made
(a) after you attain age 59 1/2, (b) on account of you
becoming disabled, or (c) as substantially equal annuity
payments over your life or life expectancy.
A contract that is not a Modified Endowment contract may be
classified as a Modified Endowment contract if it is
"materially changed" and fails to meet the 7-Pay Test. 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 contractual changes, a competent tax advisor
should be consulted.
Any life insurance contracts which are treated as Modified
Endowment contracts and are issued by Midland 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.
For contracts not classified as Modified Endowment
contracts, distributions generally will be treated first as
a return of your investment in the contract, and then taxed
as ordinary income to the extent that they exceed your
investment in the contract (which generally is the total
premiums paid plus any contract debt).
The Code (Section 817(h)) also authorizes the Secretary of
the Treasury to set standards, by regulation or otherwise,
for the investments of Variable Life insurance Separate
Accounts to be "adequately diversified" in order for the
contracts to be treated as life insurance contracts for
federal tax purposes. We believe Separate Account A,
through its investments in the Funds, will be adequately
diversified, although we do not control the Funds.
Owners of Variable Life insurance contracts may be
considered, for Federal income tax purposes, the owners of
the assets of the Separate Account used to support their
contracts. In those circumstances, income and gains from
the Separate Account assets are included 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 policy owner), rather
than the insurance company, to be treated as the owner of
the assets in the account." This announcement also stated
that regulations or rulings would issue guidance on the
"extent to which policyholders may direct their investments
to particular sub-accounts 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 2 are
similar to, but different 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. Midland does
not know what standards will be set forth 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 2 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.
Surrenders, withdrawals, and contract changes may have tax
consequences. These include a change of owners, an
assignment of the contract, a change from one death benefit
option to another, and other changes reducing future death
benefits. Upon complete surrender or when maturity
benefits are paid, if the amount received plus the contract
debt is more than the total premiums paid that are not
treated as previously withdrawn by you, then the excess
generally will be treated as ordinary income.
Federal, state and 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, or
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 which the value depends in part on its tax
consequences, then you should be sure to consult a
qualified tax advisor regarding the tax attributes of the
particular arrangement.
In recent years, Congress has adopted new rules relating to
corporate owned life insurance. Any business contemplating
the purchase of a new life insurance contract or a change
in an existing contract should consult a tax advisor.
Although the likelihood of legislative changes is
uncertain, there is always the possibility that the tax
treatment of the policy could change by legislation or
other means. For instance, the President's 1999 Budget
Proposal has recommended legislation that would negatively
modify the federal taxation of the contracts described in
this prospectus. It is possible that any change could be
retroactive (that is, effective prior to the date of the
change). A tax advisor could be consulted with respect to
actual and prospective changes in taxation.
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
reserves the right to make a charge for any such tax or
other economic burden resulting from the application of the
tax laws.
If such a charge is made, it would be set aside as a
provision for taxes which we would keep in the effected
division rather than in our General Account.
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 advisor.
This discussion is based on our understanding of the
Internal Revenue Service's current interpretation of the
present federal income tax laws. 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 complete
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
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 officers and directors are
listed in beginning on page 40.Appendix A.
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.
YOUR VOTING RIGHTS AS AN OWNER
We invest the assets of our Separate Account divisions in
shares of the Funds' portfolios. Midland is the legal
owner of the shares and has the right to vote on certain
matters. Among other things, we may vote:
to elect the Funds' Board of Directors,
to ratify the selection of independent auditors for the
Funds, and
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 at shareholder
meetings according to your instructions.
The Funds will determine how often shareholder meetings are
held. As we receive notice of these meetings, we will ask
for 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 contract
owners, then we will vote those shares 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 alone are entitled to vote in the same
proportions that contract owners 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 contract owner voting, then
we may do so.
You may participate in voting only on matters concerning
the Fund portfolios in which your cash value has been
invested. We determine your voting shares in each division
by dividing the amount of your cash value allocated to that
division by the net asset value of one share of the
corresponding Fund portfolio. This is determined as of the
record date set by the Funds' Board for the shareholders
meeting. 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 Funds' advisor or the investment policies of
its portfolios. We will advise you if we do.
Other insurance companies own shares in the Funds to
support their Variable insurance products. We do not
foresee any disadvantage to this. Nevertheless, the Funds'
Board of Directors will monitor events to identify
conflicts that may arise and determine appropriate action.
If we disagree with any Fund action, then we will see that
appropriate action is taken to protect our contract owners.
OUR REPORTS TO CONTRACT OWNERS
Shortly after the end of the third, sixth, ninth, and
twelfth contract months, we will send you reports that
show:
the current death benefit for your contract,
your cash value,
information about investment divisions,
the cash surrender value of your contract,
the amount of your outstanding contract loans,
the amount of any interest that you owe on the loan, and
information about the current loan interest rate.
The annual report will show any transactions involving your
cash value that occurred during the year. Transactions
include your premium allocations, our deductions, and your
transfers or withdrawals.
We will send you semi-annual reports with financial
information on the Funds, including a list of the
investments held by each portfolio.
Our report also contains 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.
DIVIDENDS
We do not pay any dividends on the contract described in
this prospectus.
MIDLAND'S SALES AND OTHER AGREEMENTS
The contract will be sold by individuals who, in addition
to being licensed as life insurance agents for Midland
National Life, are registered representatives of Walnut
Street Securities (WSS) or broker-dealers who have entered
into written sales agreements with WSS. WSS, the principal
underwriter of the contracts, 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. The address for Walnut Street Securities is
670 Mason Ridge Center Drive, Suite 301, St. Louis,
Missouri 63141.
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. After the 15th contract year, we pay
no commission. Certain persistency and production bonuses
may be paid.
We may sell our contracts through broker-dealers registered
with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 that 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. 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 those states. 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 are
complying with the applicable laws and regulations.
We are also subject to various federal securities laws and
regulations.
YEAR 2000
The Year 2000 issue (Y2K) relates to the ability of
computer systems to properly recognize a four-digit year
code. Many computer systems only allowed for a two-digit
year code and thus years such as 1998 were simply
recognized as 98. Using a two-digit year code for the years
2000 and beyond could result in errors and miscalculations.
Midland National Life relies extensively on computer
systems in its daily operations. Several years ago, we
began implementing a Plan to modify all of our computer
systems to properly recognize the year 2000. Our Y2K Plan
focused on assuring compliance in the following areas:
Information Technology ("IT") and non-information ("non-
IT") hardware, operating systems, software applications and
custom applications. We are in the process of the
remediation and testing of other systems, including
telephone, heating and cooling, mechanical and other
equipment having embedded, date sensitive technology for
Year 2000 compliance, In addition, we are reviewing the
Year 2000 compliance status of our mission critical
customers, vendors and service providers.
We have upgraded our mainframe computer hardware, systems
software and applications software to address Y2K issues
and we expect to complete compliance testing by June 30,
1999. Most of our systems run on the IBM mainframe computer
platform, where future dated systems testing has been
performed through December 31, 2000. We are in the process
of updating and testing hardware and software running on
personal computer (PC) platforms and expect to have any Y2K
issues resolved by June 30, 1999.
Y2K issues have been handled primarily by our internal
staff. We spent approximately $800,000 on the Year 2000
project through the end of 1998 and estimate additional
expenditures of $250,000 for the balance of the project.
Due to our early start in addressing Y2K issues, the number
of other IT projects delayed due to Y2K has been very
limited.
We are currently in the process of developing a Y2K
Contingency Plan and will involve representatives from our
IT and non-IT business units in the planning process. The
Y2K Contingency Plan may include potential Y2K issues
generated within our own Company and potential Y2K issues
generated by third parties that have a mission critical
business relationship with us.
While we cannot guarantee that our computer systems nor
those of the parties with which we conduct business will
properly function once the year 2000 is reached, Midland
National Life is committed to maintaining reliable computer
systems which properly recognize the year 2000.
Midland National Life is in the process of updating
administrative systems to accommodate all Year 2000 issues.
Midland does not anticipate any material financial impact
in processing and completing the changes required to comply
with Year 2000 issues.
DISCOUNT FOR MIDLAND EMPLOYEES
Midland employees may receive a discount of up to 25%45% of
first year premiums. Midland will pay off the discount as
the employee pays the qualifying premium. All other
contract provisions will apply.
LEGAL MATTERS
The law firm of Sutherland Asbill & Brennan LLP,
Washington, DC, has provided advice regarding certain
matters relating to federal securities laws.
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 PricewaterhouseCoopers LLPCoopers &
Lybrand LLP, independent auditors, for the periods
indicated in their report which appears in this prospectus
and in the registration statement. The address for
PricewaterhouseCoopers LLPCoopers & Lybrand LLP is IBM Park
Building, Suite 1300, 650 Third Avenue South, Minneapolis,
Minnesota 55402-4333. The financial statements have been
included in reliance upon reports 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 Chief 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, then 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
and
Business
Address
Principal
Occupation
Principal Occupation
During Past Five Years
John C. Watson
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Chairman
of the
Board
Chairman of the Board
(October 1992 to
present), Chairman of the
Board and Chief Executive
Officer (October 1992 to
March 1997), Midland
National Insurance
Company; President and
Director (1992 to
present) Consolidated
Investment Services,
Inc.; Chairman of the
Board, President, and
Chief Executive Officer
(December 1996 to
present), Sammons
Financial Holdings, Inc.;
Chairman of the Board and
Chief Executive Officer
(December 1996 to
present), North American
Company for Life and
Health Insurance;
President and Director
(1996 to present), Briggs
ITD Corporation; Director
(1996 to present),
NACOLAH Holding
Corporation; Director
(1996 to present), North
American Company for Life
and Health of New York;
Director (1996 to
present), NACOLAH Life
Insurance Company;
Director (1996 to
present), Institutional
Founders Life Insurance
Company; Chairman of the
Board (1995-present),
Midland Advisors Company;
President and Director
(1992 to present), CH
Holdings, Inc.; Director,
(1992 to present),
Sammons Enterprises Inc.;
Chairman of the Board and
Chief Executive Officer
(October 1992 to January
1997), Investors Life
Insurance Company of
Nebraska; President and
Chief Operating Officer
(1990 to October 1992),
Franklin Life Insurance
Company
Michael M. Masterson
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193-0001
Chairman
of the
Board,
President and
Chief
Executive
OfficerChief
Executive
Officer
and
President
Chairman of the Board
(March 1999 to present),
Chief Executive Officer
and President (March 1997
to present) President and
Chief Operating Officer
(March 1996 to February
1997), Executive Vice
President-Marketing
(March 1995 to February
1996), Midland National
Life Insurance Company;
President and Chief
Operating Officer (March
1996 to December 1996),
Executive Vice President-
Marketing (March 1995 to
February 1996),Investors
Life Insurance Company of
Nebraska; Vice President
- - Individual Sales (prior
thereto), Northwestern
National Life
John J. Craig, II
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193-0001
Executive Vice
President
Executive Vice President
(January 1998 to
present), Midland
National Life Insurance
Company; Senior Vice
President and Chief
Financial Officer
(October 1993 to 1998),
Midland National Life
Insurance Company;
Treasurer (January 1996
to present), Briggs ITD
Corp.; Treasurer (March
1996 to present), Sammons
Financial Holdings, Inc.;
Treasurer (November 1993
to present), CH Holdings;
Treasurer (November 1993
to present), Consolidated
Investment Services,
Inc.; Treasurer (November
1993 to present),
Richmond Holding Company,
L.L.C.; Partner (prior
thereto), Ernst and Young
Russell A. Evenson
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193-0001
Senior Vice President and
Chief
Actuary
Senior Vice President and
Chief Actuary (March 1996
to present), Senior Vice
President and Actuary
(prior thereto), Midland
National Life Insurance
Company; Senior Vice
President and Chief
Actuary (March 1996 to
December 1996), Senior
Vice President and
Actuary (prior thereto),
Investors Life Insurance
Company of Nebraska; Vice
President and Chief
Actuary (1990 to 1993),
Professional Insurance
Corporation
John J. Craig, II
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Executive Vice
President
Executive Vice President
(January 1998 to
present), Midland
National Life Insurance
Company; Senior Vice
President and Chief
Financial Officer
(October 1993 to 1998),
Midland National Life
Insurance Company;
Treasurer (January 1996
to present), Briggs ITD
Corp.; Treasurer (March
1996 to present), Sammons
Financial Holdings, Inc.;
Treasurer (November 1993
to present), CH Holdings;
Treasurer (November 1993
to present), Consolidated
Investment Services,
Inc.; Treasurer (November
1993 to present),
Richmond Holding Company,
L.L.C.; Senior Vice
President and Chief
Financial Officer
(October 1993 to December
1996), Investors Life
Insurance Company of
Nebraska; Partner (prior
thereto), Ernst and Young
Steven C. Palmitier
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193-0001
Senior Vice President and
Chief
Marketing
Officer
Senior Vice President and
Chief Marketing Officer
(March 1997 to present),
Senior Vice President-
Sales (August 1996 to
February 1997), Midland
National Life Insurance
Company; Senior Vice
President-Sales (prior
thereto), Penn Mutual
Life Insurance
Robert W. Korba
Sammons Enterprises, Inc.
300 Crescent CT
Dallas, TX 75201
Board of
Directors
Member,
Vice
President
President and Director
(since 1988), Sammons
Enterprises, Inc.; Vice
President (August 1998 to
present), Midland
National Life Insurance
Company
James N. Whitson
Sammons Enterprises, Inc.
300 Crescent CT
Dallas, TX 75201
Board of Directors Member
Executive Vice President
(since 1989), Sammons
Enterprises, Inc.
Executive Officers (other than Directors)
Unless otherwise indicated, the addresses for the following are
One Midland Plaza, Sioux Falls, SD 57193-0001
Name and Business
Address
Principal
Occupation
Principal Occupation
During Past Five Years
E John Fromelt
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Senior
Vice
President, Chief
Investment
Officer
Senior Vice President,
Chief Investment Officer
(since 1990), Midland
National Life Insurance
Company; President (since
August 1995), Midland
Advisors Company; Chief
Investment Officer (1996
to present), North
American Company for Life
and Health; Chief
Investment Officer (1990-
1996), Investors Life
Insurance Company of
Nebraska
Stephen P. Horvat, Jr.
Midland National Life
Insurance Company
Senior Vice
President
Senior Vice President
(January 1997 to
present), Midland
National Life Insurance
Company; Shareholder
(June 1996 to December
1997), Sorling Law Firm;
Senior Vice President,
General Counsel &
Secretary (prior
thereto), Franklin Life
Insurance Company
Gary J.Gaspar
North American
Company for
Life & Health
Insurance
222 South
Riverside
Plaza Chicago, IL 60606-5929
Senior
Vice
President &
Chief
Information
Officer
Senior Vice President &
Chief Information Officer
(August 1998 to present),
Midland National Life
Insurance Company; Senior
Vice President
Information Systems
Officer (1985 to
present); North American
Company for Life & Health
Insurance
Jack L. Briggs
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Vice
President,
Secretary, and
General
Counsel
Vice President, Secretary
and General Counsel
(since 1978), Midland
National Life Insurance
Company; Vice President,
Secretary, and General
Counsel (1978 to 1996),
Investors Life Insurance
Company of Nebraska
Gary W. Helder
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Vice
President-
Policy
Administration
Vice President-Policy
Administration (since
1991), Midland National
Life Insurance Company;
Vice President-Policy
Administration (1991-
1996), Investors Life
Insurance Company of
Nebraska
Robert W. Buchanan
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Vice
President-
Marketing
Services
Vice President-Marketing
Services (March 1996 to
present), Second Vice
President-Sales
Development (prior
thereto), Midland
National Life Insurance
Company; Second Vice
President-Sales
Development (1983 to
1996), Investors Life
Insurance Company of
Nebraska
Thomas M. Meyer
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Vice
President and
Chief
Financial
Officer
Vice President and Chief
Financial Officer
(January 1998 to
present), Second Vice
President and Controller
(1995 to 1998), Midland
National Life Insurance
Company
Julia B. Roper
North American Company
For Life & Health
Insurance
222 South Riverside Plaza
Chicago , IL 60606- 5929
Vice
President &
Chief Compliance
Officer Vice President & Chief
Compliance Officer
(August 1998 to present),
Midland National Life
Insurance Company; Vice
President & Chief
Compliance Officer
(September 1997 to
present), North American
Company for Life & Health
Insurance; Assistant Vice
President (prior
thereto), CNA Insurance
Companies
Joseph B. Moran
Parkway Mortgage
1700 Galloping Hill Road
Kenilworth, NJ 07033
Vice
President -
Parkway
Mortgage
Division
Vice President - Parkway
Mortgage Division
(January 1999 to
present), Midland
National Life Insurance
Company; President (prior
thereto), Parkway
Mortgage, Inc.
James T. Fehon
Parkway Mortgage
1700 Galloping Hill Road
Kenilworth, NJ 07033
Vice
President -
Parkway
Mortgage
Division
Vice President - Parkway
Mortgage Division
(January 1999 to
present), Midland
National Life Insurance
Company; Executive Vice
President (prior
thereto), Parkway
Mortgage, Inc.
Illustration
Following are a series of tables that illustrate how the
cash values, cash surrender values, and death benefits of a
contract change with the investment performance of the
Funds. The tables show how the cash values, 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 31 through 33
illustrate a contract issued to a male, age 25, under a
standard rate non-smoker underwriting risk classification.
The tables on pages 34 through 36 illustrate a contract
issued to a male, age 40, under a standard rate non-smoker
underwriting risk classification. The cash values, 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 cash value exceeds the cash surrender
value during the first fifteen contract years due to the
surrender charge. For contract years sixteen and after, the
cash value 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 cash values and the fourth and
seventh columns illustrate the cash surrender values of the
contract over the designated period. The cash values 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 cash
values 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 Commissioners 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 cash
value 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, cash values, 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 2.5% premium
tax deduction from each premium and the $5.00 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
.76%.79% of the aggregate average daily net assets of the
Portfolios of the Funds (the average rate of the Portfolios
for the period ending December 31, 19981997 ). The actual
fees and expenses associated with the contract may be more
or less than .76%.79% 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 1.10% 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 -
1.86%, 4.14%, and 10.14%,-1.89%, 4.11%, and 10.11%,
respectively.
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 cash
values, 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 face 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.
MIDLAND NATIONAL LIFE INSURANCE COMPANY - VUL2
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
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) BENEFIT(2)
1 788 528 32 100,000 505 8 100,000
2 1,614 1,047 484 100,000 1,012 449 100,000
3 2,483 1,558 926 100,000 1,512 880 100,000
4 3,394 2,059 1,360 100,000 2,002 1,303 100,000
5 4,351 2,552 1,785 100,000 2,484 1,718 100,000
6 5,357 3,024 2,190 100,000 2,958 2,124 100,000
7 6,412 3,489 2,587 100,000 3,424 2,522 100,000
8 7,520 3,945 2,976 100,000 3,870 2,901 100,000
9 8,683 4,394 3,357 100,000 4,308 3,272 100,000
10 9,905 4,835 3,731 100,000 4,728 3,624 100,000
11 11,188 5,257 4,281 100,000 5,141 4,165 100,000
12 12,535 5,672 4,846 100,000 5,535 4,709 100,000
13 13,949 6,069 5,415 100,000 5,912 5,259 100,000
14 15,434 6,447 5,990 100,000 6,271 5,813 100,000
15 16,993 6,809 6,575 100,000 6,613 6,379 100,000
16 18,630 7,213 7,213 100,000 6,928 6,928 100,000
17 20,349 7,599 7,599 100,000 7,226 7,226 100,000
18 22,154 7,957 7,957 100,000 7,498 7,498 100,000
19 24,049 8,287 8,287 100,000 7,743 7,743 100,000
20 26,039 8,590 8,590 100,000 7,963 7,963 100,000
21 28,129 8,867 8,867 100,000 8,157 8,157 100,000
22 30,323 9,118 9,118 100,000 8,327 8,327 100,000
23 32,627 9,344 9,344 100,000 8,461 8,461 100,000
24 35,045 9,545 9,545 100,000 8,572 8,572 100,000
25 37,585 9,721 9,721 100,000 8,649 8,649 100,000
30 52,321 10,114 10,114 100,000 8,324 8,324 100,000
35 71,127 9,289 9,289 100,000 6,286 6,286 100,000
40 95,130 6,687 6,687 100,000 1,277 1,277 100,000
1. 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.
2. 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.
MIDLAND NATIONAL LIFE INSURANCE COMPANY - VUL2
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
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) BENEFIT(2)
1 788 566 70 100,000 542 45 100,000
2 1,614 1,156 592 100,000 1,119 555 100,000
3 2,483 1,772 1,140 100,000 1,720 1,089 100,000
4 3,394 2,413 1,715 100,000 2,348 1,649 100,000
5 4,351 3,083 2,316 100,000 3,003 2,236 100,000
6 5,357 3,769 2,935 100,000 3,685 2,851 100,000
7 6,412 4,484 3,583 100,000 4,397 3,496 100,000
8 7,520 5,230 4,261 100,000 5,128 4,159 100,000
9 8,683 6,009 4,972 100,000 5,890 4,854 100,000
10 9,905 6,820 5,716 100,000 6,674 5,570 100,000
11 11,188 7,655 6,679 100,000 7,491 6,515 100,000
12 12,535 8,526 7,700 100,000 8,332 7,506 100,000
13 13,949 9,423 8,770 100,000 9,199 8,546 100,000
14 15,434 10,348 9,890 100,000 10,092 9,634 100,000
15 16,993 11,302 11,068 100,000 11,013 10,779 100,000
16 18,630 12,349 12,349 100,000 11,953 11,953 100,000
17 20,349 13,430 13,430 100,000 12,923 12,923 100,000
18 22,154 14,537 14,537 100,000 13,914 13,914 100,000
19 24,049 15,672 15,672 100,000 14,929 14,929 100,000
20 26,039 16,836 16,836 100,000 15,968 15,968 100,000
21 28,129 18,032 18,032 100,000 17,033 17,033 100,000
22 30,323 19,262 19,262 100,000 18,126 18,126 100,000
23 32,627 20,527 20,527 100,000 19,238 19,238 100,000
24 35,045 21,830 21,830 100,000 20,382 20,382 100,000
25 37,585 23,173 23,173 100,000 21,549 21,549 100,000
30 52,321 30,464 30,464 100,000 27,616 27,616 100,000
35 71,127 38,634 38,634 100,000 33,793 33,793 100,000
40 95,130 47,735 47,735 100,000 39,444 39,444 100,000
1. 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.
2. 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.
MIDLAND NATIONAL LIFE INSURANCE COMPANY - VUL2
DEATH BENEFIT OPTION 1 ASSUMED HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 25 ANNUAL RATE OF RETURN: 12%
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $ 750
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) BENEFIT(2)
1 788 604 107 100,000 579 82 100,000
2 1,614 1,270 706 100,000 1,229 666 100,000
3 2,483 2,004 1,373 100,000 1,947 1,316 100,000
4 3,394 2,814 2,115 100,000 2,739 2,040 100,000
5 4,351 3,707 2,941 100,000 3,612 2,846 100,000
6 5,357 4,680 3,846 100,000 4,576 3,742 100,000
7 6,412 5,754 4,852 100,000 5,638 4,737 100,000
8 7,520 6,937 5,968 100,000 6,798 5,829 100,000
9 8,683 8,243 7,207 100,000 8,078 7,041 100,000
10 9,905 9,683 8,579 100,000 9,478 8,374 100,000
11 11,188 11,260 10,284 100,000 11,023 10,046 100,000
12 12,535 13,000 12,174 100,000 12,716 11,890 100,000
13 13,949 14,909 14,255 100,000 14,573 13,920 100,000
14 15,434 17,003 16,545 100,000 16,611 16,153 100,000
15 16,993 19,304 19,070 100,000 18,851 18,617 100,000
16 18,630 21,897 21,897 100,000 21,303 21,303 100,000
17 20,349 24,748 24,748 100,000 24,000 24,000 100,000
18 22,154 27,877 27,877 100,000 26,960 26,960 100,000
19 24,049 31,314 31,314 100,000 30,210 30,210 100,000
20 26,039 35,092 35,092 100,000 33,784 33,784 100,000
21 28,129 39,249 39,249 100,000 37,716 37,716 100,000
22 30,323 43,827 43,827 100,000 42,047 42,047 100,000
23 32,627 48,873 48,873 100,000 46,814 46,814 100,000
24 35,045 54,430 54,430 107,226 52,072 52,072 102,581
25 37,585 60,529 60,529 115,611 57,847 57,847 110,488
30 52,321 101,245 101,245 158,955 96,222 96,222 151,069
35 71,127 166,343 166,343 222,899 157,226 157,226 210,683
40 95,130 270,392 270,392 329,878 253,962 253,962 309,834
1. 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.
2. 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.
MIDLAND NATIONAL LIFE INSURANCE COMPANY - VUL2
DEATH BENEFIT OPTION 1 ASSUMED HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 0%
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $1500
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) BENEFIT(2)
1 1,575 1,176 479 100,000 1,141 443 100,000
2 3,229 2,322 1,489 100,000 2,252 1,419 100,000
3 4,965 3,425 2,457 100,000 3,322 2,355 100,000
4 6,788 4,488 3,385 100,000 4,353 3,250 100,000
5 8,703 5,512 4,274 100,000 5,345 4,107 100,000
6 10,713 6,497 5,124 100,000 6,299 4,926 100,000
7 12,824 7,445 5,937 100,000 7,217 5,709 100,000
8 15,040 8,356 6,713 100,000 8,088 6,445 100,000
9 17,367 9,232 7,454 100,000 8,925 7,147 100,000
10 19,810 10,074 8,161 100,000 9,718 7,805 100,000
11 22,376 10,883 9,176 100,000 10,457 8,751 100,000
12 25,069 11,648 10,193 100,000 11,145 9,689 100,000
13 27,898 12,372 11,213 100,000 11,781 10,622 100,000
14 30,868 13,044 12,227 100,000 12,347 11,529 100,000
15 33,986 13,667 13,241 100,000 12,854 12,429 100,000
16 37,261 14,301 14,301 100,000 13,284 13,284 100,000
17 40,699 14,876 14,876 100,000 13,638 13,638 100,000
18 44,309 15,385 15,385 100,000 13,917 13,917 100,000
19 48,099 15,828 15,828 100,000 14,101 14,101 100,000
20 52,079 16,197 16,197 100,000 14,193 14,193 100,000
21 56,258 16,493 16,493 100,000 14,183 14,183 100,000
22 60,646 16,718 16,718 100,000 14,050 14,050 100,000
23 65,253 16,872 16,872 100,000 13,775 13,775 100,000
24 70,091 16,956 16,956 100,000 13,347 13,347 100,000
25 75,170 16,951 16,951 100,000 12,744 12,744 100,000
30 104,641 15,366 15,366 100,000 6,345 6,345 100,000
35 142,254 10,447 10,447 100,000 0 0 0
40 190,260 0 0 0 0 0 0
1. 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.
2. 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.
MIDLAND NATIONAL LIFE INSURANCE COMPANY - VUL2
DEATH BENEFIT OPTION 1 ASSUMED HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 6%
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $1500
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) BENEFIT(2)
1 1,575 1,256 558 100,000 1,219 522 100,000
2 3,229 2,554 1,721 100,000 2,480 1,648 100,000
3 4,965 3,886 2,918 100,000 3,773 2,805 100,000
4 6,788 5,253 4,150 100,000 5,100 3,997 100,000
5 8,703 6,657 5,419 100,000 6,463 5,225 100,000
6 10,713 8,101 6,728 100,000 7,864 6,491 100,000
7 12,824 9,587 8,079 100,000 9,306 7,798 100,000
8 15,040 11,118 9,475 100,000 10,781 9,138 100,000
9 17,367 12,697 10,919 100,000 12,301 10,523 100,000
10 19,810 14,326 12,413 100,000 13,859 11,946 100,000
11 22,376 16,009 14,302 100,000 15,448 13,741 100,000
12 25,069 17,738 16,283 100,000 17,070 15,615 100,000
13 27,898 19,518 18,360 100,000 18,728 17,570 100,000
14 30,868 21,343 20,525 100,000 20,407 19,590 100,000
15 33,986 23,215 22,790 100,000 22,120 21,694 100,000
16 37,261 25,201 25,201 100,000 23,851 23,851 100,000
17 40,699 27,238 27,238 100,000 25,604 25,604 100,000
18 44,309 29,322 29,322 100,000 27,384 27,384 100,000
19 48,099 31,458 31,458 100,000 29,176 29,176 100,000
20 52,079 33,644 33,644 100,000 30,987 30,987 100,000
21 56,258 35,885 35,885 100,000 32,813 32,813 100,000
22 60,646 38,190 38,190 100,000 34,643 34,643 100,000
23 65,253 40,565 40,565 100,000 36,466 36,466 100,000
24 70,091 43,019 43,019 100,000 38,281 38,281 100,000
25 75,170 45,545 45,545 100,000 40,079 40,079 100,000
30 104,641 59,509 59,509 100,000 48,667 48,667 100,000
35 142,254 76,756 76,756 100,000 55,555 55,555 100,000
40 190,260 99,773 99,773 104,762 57,914 57,914 100,000
1. 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.
2. 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.
MIDLAND NATIONAL LIFE INSURANCE COMPANY - VUL2
DEATH BENEFIT OPTION 1 ASSUMED HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 12%
$100,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $1500
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) BENEFIT(2)
1 1,575 1,335 637 100,000 1,298 600 100,000
2 3,229 2,797 1,964 100,000 2,718 1,885 100,000
3 4,965 4,386 3,418 100,000 4,263 3,295 100,000
4 6,788 6,116 5,013 100,000 5,944 4,841 100,000
5 8,703 8,003 6,765 100,000 7,779 6,541 100,000
6 10,713 10,065 8,692 100,000 9,782 8,410 100,000
7 12,824 12,321 10,813 100,000 11,975 10,467 100,000
8 15,040 14,792 13,149 100,000 14,366 12,723 100,000
9 17,367 17,502 15,724 100,000 16,988 15,211 100,000
10 19,810 20,478 18,565 100,000 19,859 17,946 100,000
11 22,376 23,750 22,044 100,000 22,996 21,289 100,000
12 25,069 27,341 25,886 100,000 26,430 24,975 100,000
13 27,898 31,288 30,129 100,000 30,199 29,040 100,000
14 30,868 35,624 34,806 100,000 34,324 33,506 100,000
15 33,986 40,394 39,969 100,000 38,858 38,432 100,000
16 37,261 45,715 45,715 100,000 43,837 43,837 100,000
17 40,699 51,581 51,581 100,000 49,320 49,320 100,000
18 44,309 58,053 58,053 100,000 55,372 55,372 100,000
19 48,099 65,209 65,209 100,000 62,058 62,058 100,000
20 52,079 73,130 73,130 100,000 69,464 69,464 100,000
21 56,258 81,898 81,898 106,467 77,688 77,688 100,994
22 60,646 91,530 91,530 117,159 86,754 86,754 111,045
23 65,253 102,107 102,107 128,654 96,685 96,685 121,823
24 70,091 113,724 113,724 141,017 107,565 107,565 133,381
25 75,170 126,482 126,482 154,308 119,486 119,486 145,773
30 104,641 211,574 211,574 245,426 198,271 198,271 229,994
35 142,254 348,078 348,078 372,444 322,914 322,914 345,518
40 190,260 568,609 568,609 597,039 522,676 522,676 548,809
1. 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.
2. 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.
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. The holidays which we
are closed but the New York Stock Exchange is open are the
day after Thanksgiving, the day before and Christmas Eve
Day, and New Year's Eve Day. These days along with the days
the New York Stock Exchange is not open for trading will
not be counted as Business Days.
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.
Cash Value is the value of your contract fund.
Contract Anniversary: The same month and day of the
Contract Date in each year following the Contract Date.
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.
Evidence of Insurability means evidence, satisfactory to
us, that the insured person is insurable and meets our
underwriting standards.
Funds mean the investment companies, more commonly called
mutual funds, available for investment by Separate Account
A on the Contract Date or as later changed by us.
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.
Investment Division means a division of Separate Account A
which invests exclusively in the shares of a specified
Portfolio of the Fund.
Minimum Premium Period: The period of time beginning on the
Contract Date and ending five years from the Contract Date.
Modified Endowment Contract is a contract where premiums
are paid more rapidly than the rate defined by a 7-Pay
Test.
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 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.
Surrender Charges means a charge made only upon surrender
of the contract. It includes a charge for sales related
expenses and issue related expenses.
Performance
Performance information for the investment divisions may
appear in reports and advertising to current and
prospective owners. We base the performance information on
the investment experience of the investment division and
the Funds. The information does not indicate or represent
future performance.
Total return quotations reflect changes in Funds' share
prices, 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 (premium tax charge, and any per
premium expense charge), the monthly deduction from the
cash value (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.
Average annual total returns tend to smooth out variations
in an investment division's returns and are not the same as
actual year-by-year results.
Midland may advertise performance figures for the
investment divisions based on the performance of a
portfolio before the Separate Account commenced operations.
Midland may provide individual hypothetical illustrations
of cash value, cash surrender value, and death benefits
based on the Funds' historical investment returns. These
illustrations will reflect the deduction 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 cash value and the
surrender charge. The illustrations do not indicate what
contract benefits will be in the future.
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.
5860ED.txt
<PAGE>
C O N T E N T S
Page(s)
Report of Independent Accountants 1
Statement of Assets 2-3
Statements of Operations and
Changes in Net Assets 4-9
Notes to Financial Statements 10-15
Report of Independent Accountants
The Board of Directors and Stockholder
Midland National Life Insurance Company:
In our opinion, the accompanying statement of assets and the
related statements of operations and changes in net assets present
fairly, in all material respects, the financial position of
Midland National Life Separate Account A (comprising,
respectively, the portfolios of the Variable Insurance Products
Fund, the Variable Insurance Products Fund II, the Variable
Insurance Products Fund III, the American Century Variable
Portfolios, Inc., the Massachusetts Financial Services, and the
Lord, Abbett & Company) as of December 31, 1998, and the related
statements of operations and changes in net assets for each of the
three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles. These financial
statements are the responsibility of Midland National Life
Insurance Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
March 26, 1999
Midland National Life Insurance Company
Separate Account A
Statement of Assets
as of December 31, 1998
<TABLE>
<S> <C> <C>
Value
Per
ASSETS Shares Share
Investments at net asset value:
Variable Insurance Products Fund:
Money Market Portfolio (cost $2,731,098) 2,731,098 $ 1.00 $2,731,098
High Income Portfolio (cost $3,396,027) 274,412 11.53 3,163,974
Equity-Income Portfolio (cost $13,877,294) 618,850 25.42 15,731,177
Growth Portfolio (cost $21,656,697) 635,255 44.87 28,503,893
Overseas Portfolio (cost $4,629,466) 244,142 20.05 4,895,040
Variable Insurance Products Fund II:
Asset Manager Portfolio (cost $6,523,158) 401,292 18.16 7,287,457
Investment Grade Bond Portfolio (cost $1,078,462) 88,153 12.96 1,142,457
Index 500 Portfolio (cost $10,269,373) 86,530 141.25 12,222,424
Contrafund Portfolio (cost $9,020,995) 451,333 24.44 11,030,567
Asset Manager Growth Portfolio (cost $2,475,691) 161,856 17.03 2,756,403
Variable Insurance Products Fund III:
Balanced Portfolio (cost $618,952) 41,559 16.11 669,509
Growth & Income Portfolio (cost $1,612,836) 112,272 16.15 1,813,193
Growth Opportunities Portfolio (cost $3,135,150) 155,276 22.88 3,552,709
American Century Variable Portfolios, Inc.:
Balanced Portfolio (cost $310,679) 39,542 8.34 329,779
Capital Appreciation Portfolio (cost $208,500) 24,118 9.02 217,542
International Portfolio (cost $1,121,676) 154,502 7.62 1,177,307
Value Portfolio (cost $757,203) 115,688 6.73 778,580
Income & Growth Portfolio (cost $31,396) 4,797 6.78 32,520
Massachusetts Financial Services:
Emerging Growth Portfolio (cost $49,389) 2,632 21.47 56,516
Growth & Income Portfolio (cost $10,771) 565 20.11 11,356
New Discovery Portfolio (cost $1,833) 193 10.22 1,975
Research Portfolio (cost $204,426) 12,885 19.05 245,451
Lord, Abbett & Company:
Growth & Income Portfolio (cost $64,942) 3,086 20.64 63,724
Total investments (cost $83,786,014) $98,414,651
Net assets $98,414,651
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statement of Assets, Continued
as of December 31, 1998
<S> <C> <C>
Value
Per
NET ASSETS Units Unit
Net assets represented by:
Variable Insurance Products Fund:
Money Market Portfolio 208,987 $13.07 $2,731,098
High Income Portfolio 164,127 19.28 3,163,974
Equity-Income Portfolio 623,207 25.24 15,731,177
Growth Portfolio 752,627 37.87 28,503,893
Overseas Portfolio 244,770 20.00 4,895,040
Variable Insurance Products Fund II:
Asset Manager Portfolio 292,241 24.94 7,287,457
Investment Grade Bond Portfolio 73,197 15.61 1,142,457
Index 500 Portfolio 630,981 19.37 12,222,424
Contrafund Portfolio 596,283 18.50 11,030,567
Asset Manager Growth Portfolio 170,821 16.14 2,756,403
Variable Insurance Products Fund III:
Balanced Portfolio 51,474 13.01 669,509
Growth & Income Portfolio 118,401 15.31 1,813,193
Growth Opportunities Portfolio 243,892 14.57 3,552,709
American Century Variable Portfolios, Inc.:
Balanced Portfolio 25,768 12.80 329,779
Capital Appreciation Portfolio 20,937 10.39 217,542
International Portfolio 95,377 12.34 1,177,307
Value Portfolio 63,538 12.25 778,580
Income & Growth Portfolio 2,723 11.94 32,520
Massachusetts Financial Services:
Emerging Growth Portfolio 4,492 12.58 56,516
Growth & Income Portfolio 982 11.56 11,356
New Discovery Portfolio 153 12.91 1,975
Research Portfolio 20,875 11.76 245,451
Lord, Abbett & Company:
Growth & Income Portfolio 5,930 10.75 63,724
Net assets $98,414,651
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets
for the years ended December 31, 1998, 1997 and 1996
<S> <C> <C>
Combined
1998 1997 1996
Investment income:
Dividend income $980,408 $676,790 $353,783
Capital gains distributions 4,404,907 1,587,492 907,775
385,315 2,264,282 1,261,558
Expenses:
Administrative expense 112,287 84,730 52,416
Mortality and expense risk 660,451 427,879 237,175
Net investment income 4,612,577 1,751,673 971,967
Realized and unrealized gains (losses) on investments:
Net realized gains on investments 2,782,785 2,741,725 1,387,105
Net unrealized appreciation (depreciation) on
investments 7,854,876 3,254,492 735,339
Net realized and unrealized gains (losses) on
investments 10,637,661 5,996,217 2,122,444
Net increase (decrease) in net assets resulting
from operations $15,250,238 $7,747,890 $3,094,411
Net assets at beginning of year $54,189,603 $32,499,879 $19,649,521
Net increase (decrease) in net assets resulting from
operations 15,250,238 7,747,890 3,094,411
Capital shares transactions
Net premiums 40,629,334 21,376,417 14,348,315
Transfers of policy loans (1,812,692) (1,016,654) (633,495)
Transfers of cost of insurance (6,444,223) (4,261,689) (2,927,460)
Transfers of surrenders (3,055,075) (2,042,224) (998,919)
Transfers of death benefits (144,047) (38,948) (13,892)
Transfers of other terminations (198,487) (75,068) (18,602)
Interfund transfers
Net increase in net assets from capital share
Transactions 28,974,810 13,941,834 9,755,947
Total increase in net assets 44,225,048 21,689,724 12,850,358
Net assets at end of year $98,414,651 $54,189,603 $32,499,879
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Variable Insurance Products Fund
Money Market Portfolio High Income Portfolio
1998 1997 1996 1998 1997 1996
$123,409 $94,654 $58,559 $178,129 $104,881 $65,229
113,186 12,963 12,762
123,409 94,654 58,559 291,315 117,844 77,991
2,905 3,462 2,241 4,792 3,598 2,332
20,969 16,588 10,139 26,040 18,244 10,553
99,535 74,604 46,179 260,483 96,002 65,106
44,450 42,799 49,881
(460,189) 137,622 19,282
(415,739) 180,421 69,163
$99,535 $74,604 $46,179 $(155,256) $276,423 $134,269
$1,393,023 $1,672,741 $589,269 $2,830,980 $1,421,414 $815,627
99,535 74,604 46,179 (155,256) 276,423 134,269
1,970,072 1,828,298 857,355 1,477,592 876,690 841,221
(96,356) 18,183 (9,004) (94,338) (37,241) (41,674)
(148,349) (119,358) (94,185) (251,359) (207,138) (159,359)
(450,390) (914,181) (187,306) (287,811) (78,445) (54,152)
(130) (336) (1,051)
(519) (1,028) (224) (2,422) (1,570) (447)
(35,918) (1,166,106) 470,657 (353,076) 581,898 (114,071)
1,238,540 (354,322) 1,037,293 488,250 1,133,143 471,518
1,338,075 (279,718) 1,083,472 332,994 1,409,566 605,787
$2,731,098 $1,393,023 $1,672,741 $3,163,974 $2,830,980 $1,421,414
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets, Continued
for the years ended December 31, 1998, 1997 and 1996
<S> <C> <C> <C>
Variable Insurance Products Fund
Equity-Income Portfolio
1998 1997 1996
Investment income:
Dividend income $145,189 $107,918 $6,019
Capital gains distributions 516,702 542,585 172,545
661,891 650,503 178,564
Expenses:
Administrative expense 20,642 16,434 9,932
Mortality and expense risk 114,253 80,523 44,942
Net investment income 526,996 553,546 123,690
Realized and unrealized gains (losses) on investments:
Net realized gains on investments 464,171 465,017 344,216
Net unrealized appreciation (depreciation) on
investments 297,365 820,036 112,077
Net realized and unrealized gains on
investments 761,536 1,285,053 456,293
Net increase in net assets resulting
from operations $1,288,532 $1,838,599 $579,983
Net assets at beginning of year $10,118,500 $6,148,229 $3,721,811
Net increase in net assets resulting from
operations $1,288,532 $1,838,599 $579,983
Capital shares transactions:
Net premiums 6,101,737 3,188,435 2,820,841
Transfers of policy loans (286,720) (198,994) (114,290)
Transfers of cost of insurance (1,071,429) (757,555) (533,174)
Transfers of surrenders (380,774) (171,987) (93,138)
Transfers of death benefits (42,005) (16,504) (131)
Transfers of other terminations (43,973) (17,833) (4,334)
Interfund transfers 47,309 106,110 (229,339)
Net increase in net assets from capital share
transactions 4,324,145 2,131,672 1,846,435
Total increase in net assets 5,612,677 3,970,271 2,426,418
Net assets at end of year $15,731,177 $10,118,500 $6,148,229
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Variable Insurance Products Fund
Growth Portfolio Overseas Portfolio
1998 1997 1996 1998 1997 1996
$90,127 $80,524 $22,193 $74,765 $47,188 $20,685
2,357,538 360,439 560,363 220,360 187,323 22,754
2,447,665 440,963 582,556 295,125 234,511 43,439
38,417 28,874 19,895 7,786 6,468 4,298
197,513 152,938 90,025 39,797 17,378 19,450
2,211,735 259,151 472,636 247,542 210,665 19,691
998,269 1,336,185 700,698 101,507 154,287 58,004
4,140,818 1,180,231 469 78,405 (83,491) 155,462
5,139,087 2,516,416 701,167 179,912 70,796 213,466
$7,350,822 $2,775,567 $1,173,803 $427,454 $281,461 $233,157
$17,132,404 $11,699,876 $7,817,338 $3,708,222 $2,587,815 $1,723,792
7,350,822 2,775,567 1,173,803 427,454 281,461 233,157
7,318,889 5,149,531 4,390,266 1,583,685 1,410,695 1,053,155
(590,467) (446,688) (252,514) (97,787) (91,175) (59,815)
(1,601,618) (1,357,432) (1,059,362) (366,371) (324,642) (263,297)
(817,281) (354,778) (309,025) (255,013) (94,010) (73,670)
(23,796) (14,755) (10,342) (4,169) (3,223) (83)
(57,078) (34,808) (6,455) (3,207) (2,361) (1,405)
(207,982) (284,109) (43,833) (97,774) (56,338) (24,019)
4,020,667 2,656,961 2,708,735 759,364 838,946 630,866
11,371,489 5,432,528 3,882,538 1,186,818 1,120,407 864,023
$28,503,893 $17,132,404 $11,699,876 $4,895,040 $3,708,222 $2,587,815
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets, Continued
for the years ended December 31, 1998, 1997 and 1996
<S> <C> <C>
Variable Insurance Products Fund II
Asset Manager Portfolio
1998 1997 1996
Investment income:
Dividend income $187,684 $158,180 $133,666
Capital gains distributions 563,053 396,791 110,216
750,737 554,971 243,882
Expenses:
Administrative expense 12,260 10,361 8,072
Mortality and expense risk 58,657 54,683 36,522
Net investment income 679,820 489,927 199,288
Realized and unrealized gains (losses) on investments:
Net realized gains on investments 155,701 198,545 122,556
Net unrealized appreciation (depreciation) on
investments 18,174 208,315 176,177
Net realized and unrealized gains (losses) on
investments 173,875 406,860 298,733
Net increase in net assets resulting
from operations $853,695 $896,787 $498,021
Net assets at beginning of year $5,864,777 $4,483,785 $3,633,749
Net increase in net assets resulting from
operations 853,695 896,787 498,021
Capital shares transactions:
Net premiums 1,504,185 1,304,321 1,212,022
Transfers of policy loans (174,116) (100,858) (67,771)
Transfers of cost of insurance (449,699) (423,781) (401,099)
Transfers of surrenders (249,884) (123,302) (222,263)
Transfers of death benefits (12,156) (158) (2,280)
Transfers of other terminations (15,437) (3,731) (5,303)
Interfund transfers (33,908) (168,286) (161,291)
Net increase in net assets from capital share
transactions 568,985 484,205 352,015
Total increase in net assets 1,422,680 1,380,992 850,036
Net assets at end of year $7,287,457 $5,864,777 $4,483,785
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Variable Insurance Products Fund II
Investment Grade Bond Portfolio Index 500 Portfolio
1998 1997 1996 1998 1997 1996
$39,734 $46,902 $35,859 $58,842 $17,532 $4,429
4,714 136,288 35,574 11,389
44,448 46,902 35,859 195,130 53,106 15,818
1,721 1,572 1,469 9,557 5,431 1,561
8,643 8,015 6,648 71,255 33,893 7,065
34,084 37,315 27,742 114,318 13,782 7,192
15,445 12,052 4,931 478,120 213,675 64,340
20,815 9,013 (17,545) 1,380,373 455,684 83,067
36,260 21,065 (12,614) 1,858,493 669,359 147,407
$70,344 $58,380 $15,128 $1,972,811 $683,141 $154,599
$823,750 $757,993 $710,276 $4,566,701 $1,340,570 $292,473
70,344 58,380 15,128 1,972,811 683,141 154,599
397,712 233,307 241,760 6,643,119 2,611,727 1,028,697
(10,939) 2,346 (39,038) (200,663) (39,650) (17,532)
(88,089) (83,015) (80,239) (886,807) (393,476) (141,911)
(53,582) (105,722) (31,289) (183,244) (54,915) (11,092)
(3,204) (618) (1,056) (16,201) (1,332)
(927) (505) (540) (17,516) (4,272) (87)
7,392 (38,416) (57,009) 344,224 424,908 35,423
248,363 7,377 32,589 5,682,912 2,542,990 893,498
318,707 65,757 47,717 7,655,723 3,226,131 1,048,097
$1,142,457 $823,750 $757,993 $12,222,424 $4,566,701 $1,340,570
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets, Continued
for the years ended December 31, 1998, 1997 and 1996
<S> <C> <C> <C>
Variable Insurance Products Fund II
Contrafund Portfolio
1998 1997 1996
Investment income:
Dividend income $37,587 $17,687 $
Capital gains distributions 276,533 46,743 3,899
314,120 64,430 3,899
Expenses:
Administrative expense 10,181 6,563 2,164
Mortality and expense risk 68,560 33,820 9,790
Net investment income (loss) 235,379 24,047 (8,055)
Realized and unrealized gains on investments:
Net realized gains on investments 405,977 248,167 36,440
Net unrealized appreciation on
investments 1,432,988 385,213 190,170
Net realized and unrealized gains on
investments 1,838,965 633,380 226,610
Net increase in net assets resulting
from operations $2,074,344 $657,427 $218,555
Net assets at beginning of year $5,101,986 $1,919,525 $291,610
Net increase in net assets resulting from
operations 2,074,344 657,427 218,555
Capital shares transactions:
Net premiums 5,148,927 2,852,974 1,487,812
Transfers of policy loans (203,142) (93,023) (19,479)
Transfers of cost of insurance (746,910) (414,073) (154,413)
Transfers of surrenders (248,949) (103,126) (16,096)
Transfers of death benefits (24,534) (1,177)
Transfers of other terminations (34,555) (8,960) 193
Interfund transfers (36,600) 292,419 111,343
Net increase in net assets from capital share
transactions 3,854,237 2,525,034 1,409,360
Total increase in net assets 5,928,581 3,182,461 1,627,915
Net assets at end of year $11,030,567 $5,101,986 $1,919,525
</TABLE>
<TABLE>
<S> <C> <C> <C>
Variable Insurance Products II Variable Insurance Products Fund III
Growth & Income
Asset Manager Growth Portfolio Balanced Portfolio Portfolio
1998 1997 1996 1998 1997 1998 1997
$28,628 $ $7,144 $3,696 $ $ $1,324
133,880 772 13,847 5,647 1,443 4,302
162,508 772 20,991 9,343 1,443 5,626
2,638 1,700 452 62 25 218 26
17,363 9,040 2,041 3,005 320 6,973 370
142,507 (9,968) 18,498 6,276 (345) (5,748) 5,230
30,155 65,245 6,039 6,509 191 37,985 473
148,003 117,585 16,180 48,417 2,140 199,570 786
178,158 182,830 22,219 54,926 2,331 237,555 1,259
$320,665 $172,862 $40,717 $61,202 $1,986 $231,807 $6,489
$1,304,663 $467,931 $53,576 $121,777 $ $214,268 $
320,665 172,862 40,717 61,202 1,986 231,807 6,489
1,392,497 787,790 415,186 539,114 102,622 1,372,004 182,863
(10,349) (29,528) (12,378) (5,099) (9,957) (71)
(221,079) (122,121) (40,421) (45,367) (3,050) (110,453) (8,429)
(21,053) (39,420) (888) (11,935) (4) (4,601) (307)
(91)
(5,348) (433)
(3,502) 67,149 12,139 9,817 20,223 120,558 33,723
1,131,075 663,870 373,638 486,530 119,791 1,367,118 207,779
1,451,740 836,732 414,355 547,732 121,777 1,598,925 214,268
$2,756,403 $1,304,663 $467,931 $669,509 $121,777 $1,813,193 $214,268
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets, Continued
for the years ended December 31, 1998, 1997 and 1996
<S> <C> <C>
Products Fund III
Growth Opportunities
Portfolio
1998 1997
Investment income:
Dividend income $8,299 $
Capital gains distributions 28,848 37,147
Expenses:
Administrative expense 639 143
Mortality and expense risk 15,685 1,194
Net investment income (loss) 20,823 (1,337)
Realized and unrealized gains (losses) on investments:
Net realized gains (losses) on investments 50,809 4,463
Net unrealized appreciation (depreciation) on investments 394,294 23,265
Net realized and unrealized gains (losses) on investments445,103 27,728
Net increase (decrease) in net assets
resulting from operations $465,926 $26,391
Net assets at beginning of year $544,175 $
Net increase (decrease) in net assets
resulting from operations 465,926 26,391
Capital shares transactions:
Net premiums 2,646,226 424,520
Transfers of policy loans (9,991)
Transfers of cost of insurance (234,192) (19,831)
Transfers of surrenders (27,363) (536)
Transfers of death benefits
Transfers of other terminations (6,801)
Interfund transfers 174,729 113,631
Net increase in net assets from capital
share transactions 2,542,608 517,784
Total increase in net assets 3,008,534 544,175
Net assets at end of year $3,552,709 $544,175
</TABLE>
<TABLE>
American Century Variable Portfolios, Inc.
Capital Appreciation
<S> <C> <C> <C> <C> <C>
Balanced Portfolio Portfolio International Portfolio
1998 1997 1998 1997 1998 1997
$1,086 $ $ $ $1,827 $ 6,735
4,895 18,759
7,821 4,895 20,586
20 5 41 10 239 38
1,392 126 1,207 141 5,145 392
6,409 (131) 3,647 (151) 15,202 (430)
(1,944) 387 (14,210) (425) 18,863 (34)
18,540 559 14,374 (5,332) 54,979 652
16,596 946 164 (5,757) 73,842 618
$23,005 $815 $3,811 $(5,908) $89,044 $188
$52,097 $ $73,008 $ $199,713 $
23,005 815 3,811 (5,908) 89,044 188
288,299 57,959 183,887 71,171 1,002,411 176,976
(5,411) (241) (5,436) 45
(24,458) (6,022) (29,375) (4,961) (82,794) (8,337)
(5,978) (110) (13,744) (126) (12,709) (1,208)
(5,006) (5,265)
7,231 (545) 196 12,832 (7,657) 32,049
254,677 51,282 140,723 78,916 888,550 199,525
277,682 52,097 144,534 73,008 977,594 199,713
$329,779 $52,097 $217,542 $73,008 $1,177,307 $199,713
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets, Continued
for the years ended December 31, 1998, 1997 and 1996
<S> <C> <C> <C>
American Century Variable
Portfolios, Inc.
Income &
Growth
Value Portfolio Portfolio
1998 1997 1998
Investment income:
Dividend income $1,367 $ $39
Capital gains distributions 16,326
17,693 39
Expenses:
Administrative expense 111 20
Mortality and expense risk 3,549 214 10
Net investment income (loss) 14,033 (234) 29
Realized and unrealized gains (losses) on investments:
Net realized gains (losses) on investments (10,206) 698 38
Net unrealized appreciation (depreciation) on
investments 19,163 2,214 1,125
Net realized and unrealized gains (losses) on
investments 8,957 2,912 1,163
Net increase (decrease) in net assets resulting
from operations $22,990 $2,678 $1,192
Net assets at beginning of year $139,559 $ $
Net increase (decrease) in net assets resulting from
operations 22,990 2,678 1,192
Capital shares transactions:
Net premiums 699,611 116,538 30,706
Transfers of policy loans (11,530)
Transfers of cost of insurance (82,653) (8,468) (128)
Transfers of surrenders (24,446) (47)
Transfers of death benefits (17,555)
Transfers of other terminations
Interfund transfers 52,604 28,858 750
Net increase in net assets from capital share
transactions 616,031 136,881 31,328
Total increase in net assets 639,021 139,559 32,520
Net assets at end of year $778,580 $139,559 $32,520
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Lord, Abbett
Massachusetts Financial Services & Company
Emerging Growth & New Growth &
Growth Income Discovery Research Income
Portfolio Portfolio Portfolio Portfolio Portfolio
1998 1998 1998 1998 1998
$ $ $ $ $
4 54
46 5 1 349 34
(50) (5) (1) (403) (34)
146 8 15 909 68
7,127 585 142 41,025 (1,217)
7,273 593 157 41,934 (1,149)
$7,223 $588 $156 $41,531 $(1,183)
$ $ $ $ $
7,223 588 156 41,531 (1,183)
47,502 10,680 1,842 204,167 64,470
(150)
(315) (120) (23) (2,238) (397)
(918) (5,394) (6)
3,024 208 7,535 840
49,293 10,768 1,819 203,920 64,907
56,516 11,356 1,975 245,451 63,724
$56,516 $11,356 $1,975 $245,451 $63,724
</TABLE>
1. Organization and Significant Accounting Policies:
Organization:
Midland National Life Separate Account A ("Separate Account"),
a unit investment trust, was established as a segregated
investment account of Midland National Life Insurance Company
(the "Company") in accordance with the provisions of the South
Dakota Insurance laws. The assets and liabilities of the
Separate Account are clearly identified and distinguished from
the other assets and liabilities of the Company. The Separate
Account is used to fund variable universal life insurance
policies of the Company.
The Separate Account invests in specified portfolios of
Variable Insurance Products Fund ("VIPF"), Variable Insurance
Products Fund II ("VIPF II"), Variable Insurance Products
Fund III ("VIPF III"), American Century Variable Portfolios,
Inc. ("ACVP"), Massachusetts Financial Services ("MFS"), and
Lord, Abbett & Company ("LAC") (collectively "the Funds"), each
diversified open-end management companies registered under the
Investment Company Act of 1940, as directed by participants.
The VIPF III Balanced, Growth & Income and Growth Opportunities
portfolios and the ACVP Balanced, Capital Appreciation,
International and Value portfolios were introduced in 1997.
The ACVP Income & Growth portfolio, the MFS Emerging Growth,
Growth & Income, New Discovery and Research portfolios as well
as the LAC's Growth & Income portfolio were each introduced in
1998. All other portfolios have been in existence for more
than three years. Investments in shares of the Funds are
valued at the net asset values of the respective portfolios of
the Funds corresponding to the investment portfolios of the
Separate Account. Fair value of investments is also the net
asset value. Walnut Street Securities serves as the
underwriter of the Separate Account. Investment transactions
are recorded on the trade date. Dividends are automatically
reinvested in shares of the Funds. The first-in, first-out
(FIFO) method is used to determine realized gains and losses on
investments.
Federal Income Taxes:
The operations of the Separate Account are included in the
federal income tax return of the Company. Under the provisions
of the policies, the Company has the right to charge the
Separate Account for federal income tax attributable to the
Separate Account. No charge is currently being made against
the Separate Account for such tax since, under current law, the
Company pays no tax on investment income and capital gains
reflected in variable life insurance policy reserves. However,
the Company retains the right to charge for any federal income
tax incurred which is attributable to the Separate Account if
the law is changed. Charges for state and local taxes, if any,
attributable to the Separate Account may also be made
1. Organization and Significant Accounting Policies,
continued:
Estimates:
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 reporting
period. Actual results could differ from those estimates.
Merger:
Effective January 2, 1997, Investors Life Insurance Company of
Nebraska ("Investors Life") was merged into the Company.
Related to this merger all of the assets and liabilities of
Investors Life were transferred to Midland including the assets
of Investors Life's Separate Account B, which were merged into
Midland's Separate Account A. The merger of the Separate
Account B assets into Midland's Separate Account A was possible
as the variable universal life insurance contracts were
identical in all material respects to the contracts issued by
Separate Account A. This merger of separate account assets was
structured so that there was no change in the rights and
benefits of persons owning contracts with either separate
accounts and no change in the net asset values held by the
respective participants of either of the separate accounts.
2. Expense Charges:
The Company is compensated for certain expenses as described
below. The rates for each applicable charge is described in
the Separate Account's prospectus.
? A contract administration fee is charged to cover the
Company's recordkeeping and other administrative expenses
incurred to operate the Separate Account.
? A mortality and expense risk fee is charged in return for the
Company's assumption of risks associated with adverse
mortality experience or excess administrative expenses in
connection with policies issued.
? The Company assumes the responsibility for providing the
insurance benefits included in the policy. The cost of
insurance is determined each month based upon the applicable
insurance rate and the current death benefit. The cost of
insurance can vary from month to month since the
determination of both the insurance rate and the current
death benefit depends upon a number of variables as described
in the Separate Account's prospectus
2. Expense Charges, continued:
? A transfer charge is imposed on each transfer between
portfolios of the Separate Account in excess of a stipulated
number of transfers in any one contract year.
? A surrender charge may be imposed in the event of a contract
surrender or lapse within a stipulated number of years.
<TABLE>
3. Purchases and Sales of Investment Securities:
The aggregate cost of purchases and proceeds from sales of investments for the years ended
December 31, 1998, 1997, and 1996 were as follows:
<S> <C> <C> <C> <C>
1998 1997 1996
Portfolio Purchases Sales Purchases Sales Purchases Sales
Variable Insurance
Products Fund:
Money Market $3,703,516 $2,365,443 $2,398,056 $2,679,342 $2,034,275 $949,787
High Income 2,203,912 1,455,179 1,762,564 534,720 1,130,421 593,263
Equity-Income 8,012,948 3,161,806 4,606,039 1,926,533 3,626,635 1,654,290
Growth 11,455,665 5,223,262 6,694,330 3,789,244 5,850,056 2,665,240
Overseas 2,210,743 1,203,837 1,975,804 928,568 1,305,663 654,357
Variable Insurance
Products
Fund II:
Asset Manager 2,586,539 1,337,735 2,167,982 1,198,071 1,858,024 1,305,947
Investment Grade
Bond 643,163 360,716 351,091 307,112 340,129 279,245
Index 500 8,451,405 2,654,171 3,510,441 954,879 1,327,248 425,671
Contrafund 6,631,801 2,542,183 3,786,750 1,239,389 1,876,198 473,421
Asset Manager
Growth 1,849,012 575,429 1,025,893 372,417 522,652 130,138
Variable Insurance
Products
Fund III:
Balanced 732,611 239,805 151,867 32,420
Growth & Income 1,662,264 300,895 229,692 16,682
Growth Oppor-
tunities 3,263,185 699,754 583,991 67,546
American Century
Variable
Portfolios, Inc.:
Balanced 335,438 74,354 69,085 17,933
Capital Apprecia-
tion 242,481 98,110 93,376 14,612
International 1,186,094 282,341 224,848 25,753
911,411 281,349 153,593 16,945
Income & Growth 32,015 657
Massachusetts
Financial
Services:
Emerging Growth 50,012 769
Growth & Income 10,927 164
New Discovery 1,904 86
Research 216,124 12,607
Lord, Abbett &
Company:
Growth & Income 65,826 952
$56,458,996 $22,871,604 $29,785,402 $14,122,166 $19,871,301 $9,131,859
</TABLE>
<TABLE>
4. Summary of Changes from Unit Transactions:
Transactions in units for the years ended December 31, 1998, 1997, and 1996 were
as follows:
<S> <C> <C> <C> <C>
1998 1997 1996
Portfolio Purchases Sales Purchases Sales Purchases Sales
Variable Insurance Products
Fund:
Money Market 295,836 184,053 160,457 175,104 132,191 61,393
High Income 121,025 66,129 71,855 20,908 45,898 25,239
Equity-Income 455,774 132,401 155,294 58,396 122,028 57,300
Growth 444,888 159,955 216,574 102,996 167,406 80,887
Overseas 122,745 60,018 89,759 39,237 67,962 33,856
Variable Insurance Products
Fund II:
Asset Manager 102,475 54,816 77,125 50,498 84,315 66,066
Investment Grade Bond 44,592 23,051 20,534 19,490 20,996 18,784
Index 500 555,532 157,217 204,615 48,013 81,534 25,464
Contrafund 438,316 156,194 254,844 75,480 145,795 35,584
Asset Manager Growth 126,892 38,975 71,882 23,310 39,936 10,263
Variable Insurance Products
Fund III
Balanced 60,349 19,734 13,593 2,733
Growth & Income 121,924 21,402 19,277 1,397
Growth Opportunities 251,295 52,957 51,166 5,612
American Century Variable
Portfolios, Inc.:
Balanced 27,213 6,100 6,244 1,589
Capital Appreciation 23,494 9,333 8,033 1,258
International 98,873 22,399 21,308 2,405
Value 74,591 22,784 13,166 1,434
Income & Growth 2,779 57
Massachusetts Financial Services:
Emerging Growth 4,556 63
Growth & Income 997 14
New Discovery 160 7
Research 22,120 1,245
Lord, Abbett & Company:
Growth & Income 6,014 84
</TABLE>
<TABLE>
5. Net Assets:
Net assets at December 31, 1998, consisted of the following:
<S> <C> <C> <C>
Accumulated
Net Investment Net
Capital Income an Unrealized
Share Net Realized Appreciation
Portfolio Transactions Gains of Investments Total
Variable Insurance Products Fund:
Money Market 2,474,045 257,053 2,731,098
High Income 2,735,943 660,085 (232,054) 3,163,974
Equity-Income 10,780,276 3,097,017 1,853,884 15,731,177
Growth 14,653,801 7,002,895 6,847,197 28,503,893
Overseas 3,720,814 908,652 265,574 4,895,040
Variable Insurance Products Fund II:
Asset Manager 4,514,398 2,008,761 764,298 7,287,457
Investment Grade Bond 903,437 175,025 63,995 1,142,457
Index 500 9,368,052 901,318 1,953,054 12,222,424
Contrafund 8,072,838 948,155 2,009,574 11,030,567
Asset Manager Growth 2,220,929 254,762 280,712 2,756,403
Variable Insurance Products Fund III:
Balanced 606,322 12,631 50,556 669,509
Growth & Income 1,574,898 37,940 200,355 1,813,193
Growth Opportunities 3,060,390 74,758 417,561 3,552,709
American Century Variable
Portfolios, Inc.:
Balanced 305,960 4,721 19,098 329,779
Capital Appreciation 219,638 (11,139) 9,043 217,542
International 1,088,075 33,601 55,631 1,177,307
Value 752,913 4,291 21,376 778,580
Income & Growth 31,328 67 1,125 32,520
Massachusetts Financial Services:
Emerging Growth 49,293 96 7,127 56,516
Growth & Income 10,768 3 585 11,356
New Discovery 1,819 14 142 1,975
Research 203,920 506 41,025 245,451
Lord, Abbett & Company:
Growth & Income 64,907 34 (1,217) 63,724
67,414,764 16,371,246 14,628,641 98,414,651
</TABLE>
The accompanying notes are an integral part of the
financial statements.
2 The accompanying notes are an integral part of the
financial statements.
3 The accompanying notes are an integral part of the
financial statements.
4 The accompanying notes are an integral part of the
financial statements.
5 The accompanying notes are an integral part of the
financial statements.
6 The accompanying notes are an integral part of the
financial statements.
7 The accompanying notes are an integral part of the
financial statements.
8 The accompanying notes are an integral part of the
financial statements.
9 Midland National Life Insurance Company
Separate Account A
Notes to Financial Statements
18
Midland National Life Insurance Company
Separate Account A
Notes to Financial Statements, Continued
NEWSPA98
<PAGE>
C O N T E N T S
Page(s)
Report of Independent Accountants 1
Balance Sheets 2
Statements of Income 3
Statements of Stockholder's Equity 4
Statements of Cash Flows 5-6
Notes to Financial Statements 7-23
Report of Independent Accountants
The Board of Directors and Stockholder
Midland National Life Insurance Company:
In our opinion, the accompanying balance sheets and the related
statements of income, stockholder's equity, and cash flows present
fairly, in all material respects, the financial position of Midland
National Life Insurance Company as of December 31, 1998 and 1997, and
the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. These financial statements
are the responsibility of Midland National Life Insurance Company's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for the opinion expressed above.
March 10, 1999
Midland National Life Insurance Company
Balance Sheets
as of December 31, 1998 and 1997
(Amounts in thousands, except share and per share amounts)
ASSETS 1998 1997
Investments:
Fixed maturities $2,281,730 $2,420,977
Equity securities 327,309 145,156
Policy loans 213,267 202,129
Short-term investments 280,943 636,280
Other invested assets 37,076 29,329
Total investments 3,140,325 3,433,871
Cash 754 2,384
Accrued investment income 38,555 37,980
Deferred policy acquisition costs 417,164 416,767
Present value of future profits of
acquired businesses 31,162 40,397
Other receivables and other assets 14,407 28,045
Separate accounts assets 249,145 139,072
Total assets $3,891,512 $4,098,516
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Policyholder account balances $2,307,893 $2,401,302
Policy benefit reserves 419,615 419,131
Policy claims and benefits payable 30,393 33,839
Federal income taxes 20,566 36,088
Other liabilities 100,867 90,102
Security lending liability 50,500 308,125
Separate account liabilities 249,145 139,072
Total liabilities 3,178,979 3,427,659
Commitments and contingencies
Stockholder's equity:
Common stock, $1 par value, 2,549,439 shares
authorized, 2,548,878 shares outstanding 2,549 2,549
Additional paid-in capital 33,707 33,707
Accumulated other comprehensive income 26,826 30,838
Retained earnings 649,629 603,763
Less treasury stock (561 shares), at cost (178)
Total stockholder's equity 712,533 670,857
Total liabilities and stockholder's equity $3,891,512 $4,098,516
Midland National Life Insurance Company
Statements of Income
for the years ended December 31, 1998, 1997, and 1996
(Amounts in thousands)
1998 1997 1996
Revenues:
Premiums $94,495 $98,668 $101,423
Interest sensitive life and
investment product charges 159,115 157,423 150,839
Net investment income 224,939 188,650 173,583
Net realized investment (losses)
gains (6,489) 3,561 6,839
Net unrealized gains (losses) on
trading securities 2,847 (641) 6,200
Other income 3,157 2,565 4,362
Total revenue 478,064 450,226 443,246
Benefits and expenses:
Benefits incurred 137,313 146,227 151,208
Interest credited to policyholder
account balances 133,529 111,333 103,618
Total benefits 270,842 257,560 254,826
Operating expenses (net of
commissions and other expenses
deferred) 47,549 44,130 43,243
Amortization of deferred policy
acquisition costs and present
value of future profits of
acquired businesses 66,189 56,954 53,316
Total benefits and expenses 384,580 358,644 351,385
Income before income taxes 93,484 91,582 91,861
Income tax expense 32,618 33,053 31,821
Net income $60,866 $58,529 $60,040
<TABLE>
Midland National Life Insurance Company
Statements of Stockholder's Equity
for the years ended December 31, 1998, 1997, and 1996
(Amounts in thousands)
<S> <C> <C> <C> <C>
Accumulated
Additional Other Less Total
Common Paid-in Comprehensive Comprehensive Retained Treasury Stockholder's
Stock Capital Income Income Earnings Stock Equity
Balance at January 1, 1996 $2,549 $33,707 $31,027 $510,194 $577,477
Comprehensive income:
Net income $60,040 60,040 60,040
Other comprehensive income:
Net unrealized loss on available-for-sale
investments (12,202) (12,202) (12,202)
Total comprehensive income $47,838
Balance at December 31, 1996 2,549 33,707 18,825 570,234 625,315
Comprehensive income:
Net income 58,529 58,529 58,529
Other comprehensive income:
Net appreciation on available-for-sale investments 12,013 12,013 12,013
Total comprehensive income $70,542
Dividends paid on common stock (25,000) (25,000)
Balance at December 31, 1997 2,549 33,707 30,838 603,763 670,857
Comprehensive income:
Net income 60,866 60,866 60,866
Other comprehensive income:
Net unrealized loss on available-for-sale
investments (4,012) (4,012) (4,012)
Total comprehensive income $56,854
Dividends paid on common stock (15,000) (15,000)
Repurchase of minority interest shares (178) (178)
Balance at December 31, 1998 $2,549 $33,707 $26,826 $649,629 $(178) $712,533
</TABLE>
<TABLE>
Midland National Life Insurance Company
Statements of Cash Flows
for the years ended December 31, 1998, 1997, and 1996
(Amounts in thousands)
<S> <C> <C> <C>
1998 1997 1996
Cash flows from operating activities:
Net income $60,866 $58,529 $60,040
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of deferred policy acquisition costs
and present value of future profits of acquired
business 66,189 56,954 53,316
Net amortization of premiums and discounts on
investments 4,325 2,699 5,532
Policy acquisition costs deferred (54,611) (50,363) (65,285)
Net realized investment (gains) losses 6,489 (3,561) (6,839)
Net unrealized (gains) losses on
trading securities (2,847) 641 (6,200)
Net proceeds from (cost of) trading
securities (37,769) 99,850 5,788
Deferred income taxes (10,849) (5,421) 12,177
Net interest credited and product charges on
charges on universal life and
investment policies (25,586) (46,090) (47,221)
Changes in other assets and liabilities:
Net receivables and payables 22,190 (13,946) 32,863
Policy benefits 8,397 15,826 26,185
Other 1,173 122 (277)
Net cash provided by operating
activities 37,967 115,240 70,079
Cash flows from investing activities:
Proceeds from investments sold, matured or repaid:
Fixed maturities 1,405,391 1,217,086 1,422,426
Equity securities 304,589 137,510 129,827
Other invested assets 2,601 941 2,055
Cost of investments acquired:
Fixed maturities 1,281,839) (1,791,522)(1,569,779)
Equity securities (451,181) (144,862) (145,096)
Other invested assets (10,346) (11,702) (14,245)
Net change in policy loans (11,138) (9,995) (11,295)
Net change in short-term investments 355,337 93,875 (18,748)
Net change in security lending (257,625) 308,125
Payment for purchase of insurance business, net of
cash acquired (1,026) 23,939
Net cash provided by (used in)
investing activities 54,763 (176,605) (204,855)
</TABLE>
<TABLE>
Midland National Life Insurance Company
Statements of Cash Flows, Continued
for the years ended December 31, 1998, 1997, and 1996
(Amounts in thousands)
<S> <C> <C> <C>
1998 1997 1996
Cash flows from financing activities:
Receipts from universal life
and investment products 317,398 280,164 285,569
Benefits paid on universal life
and investment products (396,580) (194,993) (156,514)
Dividends paid on common stock (15,000) (25,000)
Repurchase of minority interest shares (178)
Net cash provided by (used in)
financing activities (94,360) 60,171 129,055
Increase (decrease) in cash (1,630) (1,194) (5,721)
Cash at beginning of year 2,384 3,578 9,299
Cash at end of year 754 2,384 3,578
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $119 $143 $166
Income taxes, paid to parent 45,980 42,749 16,772
Noncash operating, investing and financing
Policy loans, receivables and other assets
received in assumption reinsurance
agreements 70 38,044
</TABLE>
1. Summary of Significant Accounting Policies:
Organization:
Midland National Life Insurance Company ("Midland" or the
"Company") is a wholly-owned subsidiary of Sammons Enterprises,
Inc. ("SEI"). Midland operates predominantly in the individual
life and annuity business of the life insurance industry. The
Company is licensed to operate in 49 states and the District of
Columbia.
Basis of Presentation:
Effective May 31, 1996, Midland sold its wholly-owned subsidiary,
North American Management, Inc. ("NAM"), to an unrelated party
for a net consideration which approximated the net equity of NAM
at May 31, 1996. The operations of the subsidiary, which were
included through May 31, 1996, were not material to the financial
statements.
On January 2, 1997, Investors Life Insurance Company of Nebraska
was merged into Midland. Since this wholly-owned subsidiary was
previously consolidated with Midland, this merger had no impact
on the financial statements of Midland.
In preparing the financial statements, management is required to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities as of the date of the balance sheet and revenues and
expenses for the period. Actual results could differ
significantly from those estimates. The following are the more
significant elements of the financial statements affected by the
use of estimates and assumptions:
- Investment values.
- Deferred policy acquisition costs.
- Present value of future profits of acquired business.
- Policy benefit reserves and claims reserves.
- - Fair value of financial instruments.
- -
The Company is subject to the risk that interest rates will
change and cause a decrease in the value of its investments. To
the extent that fluctuations in interest rates cause the duration
of assets and liabilities to differ, the Company may have to sell
assets prior to their maturity and realize a loss.
1. Summary of Significant Accounting Policies, continued:
Investments:
The Company is required to classify its fixed maturity
investments (bonds and redeemable preferred stocks) and equity
securities (common and nonredeemable preferred stocks) into three
categories: securities that the Company has the positive intent
and the ability to hold to maturity are classified as "held to
maturity"; securities that are held for current resale are
classified as "trading securities"; and securities not classified
as held to maturity or as trading securities are classified as
"available for sale". Investments classified as trading or
available-for-sale are required to be reported at fair value in
the balance sheet. The Company has no securities classified as
held-to-maturity.
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 statements 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 as other comprehensive income
in stockholder's equity, net of related adjustments to deferred
policy acquisition costs, deferred income taxes and the
accumulated unrealized holding gains (losses) on securities sold
which are released into income as realized investment gains.
Cash flows from available-for-sale security transactions are
included in investing activities in the statements of cash flows.
For CMO's and mortgage-backed securities, the Company recognizes
income using a constant effective yield based on anticipated
prepayments and the estimated economic life of the securities.
When actual prepayments differ significantly from anticipated
prepayments, the effective yield is recalculated to reflect
actual payments to date and anticipated future payments. The net
investment in the security is adjusted to the amount that would
have existed had the new effective yield been applied since the
acquisition of the security. This adjustment is included in net
investment income.
Policy loans and other invested assets are carried at unpaid
principal balances. Short-term investments are carried at
amortized cost, which approximates fair value.
Investment income is recorded when earned. Realized gains and
losses are determined on the basis of specific identification of
the investments.
1. Summary of Significant Accounting Policies, continued:
Investments, continued:
When a decline in value of an investment is determined to be
other than temporary, the specific investment is carried at
estimated realizable value and its original book value is reduced
to reflect this impairment. Such reductions in book value are
recognized as realized investment losses in the period in which
they were written down.
Recognition of Traditional Life, Health, and Annuity Premium
Revenue and Policy Benefits:
Traditional life insurance products include those products with
fixed and guaranteed premiums and benefits. Life insurance
premiums, which comprise the majority of premium revenues, are
recognized as premium income when due. Benefits and expenses are
associated with earned premiums so as to result in recognition of
profits over the life of the contracts. This association is
accomplished by means of the provision for policy benefit
reserves and the amortization of deferred policy acquisition
costs.
Liabilities for future policy benefits for traditional policies
generally are computed by the net level premium method based on
estimated future investment yield, mortality, morbidity, and
withdrawals which were appropriate at the time the policies were
issued or acquired. Interest rate assumptions range from 6.5% to
11%.
Recognition of Revenue and Policy Benefits for Interest Sensitive
Life Insurance Products and Investment Contracts (Interest
Sensitive Policies):
Interest sensitive policies are issued on a periodic and single
premium basis. Amounts collected are credited to policyholder
account balances. Revenues from interest sensitive policies
consist of charges assessed against policyholder account balances
for the cost of insurance, policy administration, and surrender
charges. Revenues also include investment income related to the
investments which support the policyholder account balances.
Policy benefits and claims that are charged to expense include
benefits incurred in the period in excess of related policyholder
account balances. Benefits also include interest credited to the
account balances.
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 and credited interest less withdrawals and
charges for mortality, administrative, and policy expenses.
Interest crediting rates ranged primarily from 3% to 6.5% in
1998, 3.75% to 6.75% in 1997 and 3% to 7% in 1996. For certain
contracts these crediting rates extend for periods in excess of
one year.
1. Summary of Significant Accounting Pollicies, continued:
Deferred Policy Acquisition Costs:
Policy acquisition costs which vary with, and are primarily
related to the production of new business, have been deferred to
the extent that such costs are deemed recoverable from future
profits. Such costs include commissions, policy issuance,
underwriting, and certain variable agency expenses.
Deferred costs related to traditional life insurance are
amortized over the estimated premium paying period of the related
policies in proportion to the ratio of annual premium revenues to
total anticipated premium revenues.
Deferred costs related to interest sensitive policies are being
amortized over the lives of the policies (up to 25 years) in
relation to the present value of actual and estimated gross
profits subject to regular evaluation and retroactive revision to
reflect actual emerging experience.
Policy acquisition costs deferred and amortized for years ended
December 31 are as follows:
1998 1997 1996
Deferred policy acquisition costs,
beginning of year 416,767 427,218 410,051
Commissions deferred 44,072 40,660 55,005
Underwriting and acquisition expenses
deferred 10,539 9,703 10,280
Change in offset to unrealized gains
and losses 3,766 (8,710) 92
Amortization (57,980) (52,104) (48,210)
Deferred policy acquisition costs,
end of year 417,164 416,767 427,218
To the extent that unrealized gains and losses on available-for-
sale securities would result in an adjustment to the amortization
pattern of deferred policy acquisition costs or present value of
future profits of acquired business had those gains or losses
actually been realized, the adjustments are recorded directly to
stockholder's equity through other comprehensive income as an
offset to the unrealized gains or losses.
Present Value of Future Profits of Acquired Business:
The present value of future profits of acquired business ("PVFP")
represents the portion of the purchase price of a block of
business which is allocated to the future profits attributable to
the insurance in force at the dates of acquisition. The PVFP is
amortized in relationship to the actual and expected emergence of
such future profits. The composition of the PVFP for the years
ended December 31 is summarized below:
1. Summary of Significant Accounting Policies, continued:
Present Value of Future Profits of Acquired Business, continued:
1998 1997 1996
Balance at beginning of year 40,397 21,308 26,414
Value of in-force acquired 23,939
Adjustment to purchase price (1,026)
Amortization (8,209) (4,850) (5,106)
Balance at end of year 31,162 40,397 21,308
Based on current conditions and assumptions as to future events,
the Company expects to amortize approximately 18 percent of the
December 31, 1998 balance of PVFP in 1999, 15 percent in 2000, 12
percent in 2001, 10 percent in 2002, and 9 percent in 2003. The
interest rates used to determine the amortization of the PVFP
purchased ranged from 5.5 percent to 6.5 percent.
Policy Claims and Benefits Payable:
The liability for policy claims and benefits payable includes
provisions for reported claims and estimates for claims incurred
but not reported, based on the terms of the related policies and
contracts and on prior experience. Claim liabilities are
necessarily based on estimates and are subject to future changes
in claim severity and frequency. Estimates are periodically
reviewed and adjustments to such liabilities are reflected in
current operations.
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 return basis.
The Company makes payment to, or receives payment 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.
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.
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 financial statements.
1. Summary of Significant Accounting Policies, continued:
Comprehensive Income:
During 1998, the Company adopted Statement of Financial
Accounting Standard No. 130, "Reporting Comprehensive Income."
The standard requires the reporting of comprehensive income in
addition to net income from operations. Comprehensive income is
a more inclusive financial reporting methodology that includes
disclosure of certain financial information that historically has
not been recognized in the calculation of net income.
Comprehensive income for the Company includes net income and
unrealized gains and losses (other comprehensive income) on
available-for-sale securities. The adoption of this statement
does not impact the overall financial position or stockholder's
equity of the Company.
Security Lending:
The Company periodically enters into agreements to sell and
repurchase securities. Securities out on loan are required to be
100% collateralized. Short-term investments of $50,500 and the
related liability representing the collateral received is
reflected on the balance sheets as of December 31, 1998.
Treasury Stock:
During the fourth quarter of 1998, the Company purchased its
remaining outstanding minority shares from the lone minority
shareholder for $178. The shares are retained as treasury stock
as a reduction to stockholder's equity.
2. Fair Value of Financial Instruments:
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash, Short-Term Investments, Policy Loans and Other Invested
Assets:
The carrying amounts reported in the balance sheets for these
instruments approximate their fair values.
Investment Securities:
Fair value for fixed maturity securities (including redeemable
preferred stocks) are based on quoted market prices, where
available. For fixed maturities not actively traded, fair values
are estimated using values obtained from independent pricing
services. In some cases, such as private placements and certain
mortgage-backed securities, fair values 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 value of equity securities are based on
quoted market prices.
2. Fair Value of Financial Instruments, continued:
Investment-Type Insurance Contracts:
Fair values for the Company's liabilities under investment-type
insurance contracts are estimated using two methods. For those
contracts without a defined maturity, the fair value is estimated
as the amount payable on demand (cash surrender value). For
those contracts with known maturities, fair value is estimated
using discounted cash flow calculations using interest rates
currently being offered for similar contracts with maturities
consistent with the contracts being valued.
These fair value estimates are significantly affected by the
assumptions used, including the discount rate and estimates of
future cash flows. Although fair value estimates are calculated
using assumptions that management believes are appropriate,
changes in assumptions could cause these estimates to vary
materially. In that regard, the derived fair value estimates
cannot be substantiated by comparison to independent markets and,
in some cases, could not be realized in the immediate settlement
of the instruments. Certain financial liabilities (including non
investment-type insurance contracts) and all nonfinancial
instruments are excluded from the disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
The carrying value and estimated fair value of the Company's
financial instruments are as follows:
December 31, 1998 December 31, 1997
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
Financial assets:
Fixed maturities,
available-for-sale $2,281,730 $2,281,730 $2,420,977 $2,420,977
Equity securities,
available-for-sale 221,325 221,325 78,950 78,950
Equity securities,
trading 105,984 105,984 66,206 66,206
Policy loans 213,267 213,267 202,129 202,129
Short-term investments 280,943 280,943 636,280 636,280
Other investments 37,076 37,076 29,329 29,329
Financial liabilities:
Investment-type insurance
Contracts 866,000 850,000 1,011,000 989,000
3. Investments and Investment Income:
Fixed Maturities and Equity Security Investments:
The amortized cost and estimated fair value of fixed maturities
and equity securities classified as available for sale are as
follows:
December 31, 1998
Gross Gross
Unrealized Unrealized Estimated
Amortized Holding Holding Fair
Cost Gains Losses Value
Fixed maturities:
U.S. Treasury and other U.S.
Government corporations
and agencies $208,581 $14,285 $378 $222,488
Corporate securities 1,052,442 30,366 15,546 1,067,262
Mortgage-backed securities 955,785 22,225 1,093 976,917
Other debt securities 14,861 225 23 15,063
Total fixed maturities 2,231,669 67,101 17,040 2,281,730
Equity securities 209,952 15,403 4,030 221,325
Total available for sale $2,441,621 $82,504 $21,070 $2,503,055
December 31, 1997
Gross Gross
Unrealized Unrealized Estimated
Amortized Holding Holding Fair
Cost Gains Losses Value
Fixed maturities:
U.S. Treasury and other U.S. Government corporations
and agencies $625,958 $9,232 $266 $634,924
Obligations of U.S. states and political
subdivisions 3,201 147 3,348
Corporate securities 660,172 30,234 577 689,829
Mortgage-backed securities 1,055,140 22,159 109 1,077,190
Other debt securities 14,861 826 1 15,686
Total fixed maturities 2,359,332 62,598 953 2,420,977
Equity securities 69,221 10,433 704 78,950
Total available for sale $2,428,553 $73,031 $1,657 $2,499,927
The cost of the equity securities classified as trading
securities are $103,798 and $66,867, respectively at December 31,
1998 and December 31, 1997.
3. Investments and Investment Income, continued:
Fixed Maturities and Investment Security Investments, continued:
The unrealized appreciation on the available-for-sale securities
in 1998 and 1997 is reduced by deferred policy acquisition costs
and deferred income taxes and is reflected as accumulated other
comprehensive income in the statements of stockholder's equity:
1998 1997
Gross unrealized appreciation $61,434 $71,374
Deferred policy acquisition costs (20,164) (23,930)
Deferred income taxes (14,444) (16,606)
Accumulated other comprehensive income $26,826 $30,838
The other comprehensive income in 1998 and 1997 is comprised of
the change in unrealized gains (losses) on available-for-sale
fixed maturities and equity security investments arising during
the period less the realized gains (losses) included in income,
deferred policy acquisition costs and deferred income taxes as
follows:
1998 1997 1996
Unrealized holding gains (losses) arising in the
current period:
Fixed maturities $(11,399) $27,096 $(12,860)
Equity securities (5,025) 3,571 759
Less reclassification adjustment for (gains)
losses released into income 6,484 (3,476) (6,851)
Less DAC impact 3,766 (8,710) 92
Less deferred income tax effect 2,162 (6,468) 6,658
Net other comprehensive income $(4,012) $12,013 $(12,202)
The amortized cost and estimated fair value of available-for-sale
fixed maturities at December 31, 1998, by contractual maturity,
are as follows. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
3. Investments and Investment Income, continued:
Fixed Maturities and Investment Security Investments, continued:
Estimated
Amortized Cost Fair Value
Due in one year or less $66,556 $67,164
Due after one year through five years 94,231 96,047
Due after five years through ten years 297,052 313,506
Due after ten years 818,045 828,096
Securities not due at a single
maturity date (primarily mortgage-
backed securities) 955,785 976,917
Total fixed maturities $2,231,669 $2,281,730
Investment Income and Investment Gains (Losses):
Major categories of investment income are summarized as follows:
1998 1997 1996
Gross investment income:
Fixed maturities $173,475 $148,640 $126,733
Equity securities 22,563 13,831 22,202
Policy loans 15,331 11,891 10,327
Short-term investments 24,308 20,594 16,946
Other invested assets 2,730 824 553
Total gross investment income 238,407 195,780 176,761
Investment expenses 13,468 7,130 3,178
Net investment income $224,939 $188,650 $173,583
The major categories of investment gains and losses reflected in
the income statement are summarized as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
1998 1997 1996
Unrealized - Unrealized - Unrealized -
Trading Trading Trading
Realized Securities Realized Securities Realized Securities
Fixed maturities $185 $2,934 $195 $8,047 $(438)
Equity securities (6,669) 2,847 542 (836) (1,196) 6,638
Other (5) 85 (12)
Net investment gains
(losses) $(6,489) $2,847 $3,561 $(641) $6,839 $6,200
</TABLE>
3. Investments and Investment Income, continued:
Investment Income and Investment Gains (Losses), continued:
Proceeds from the sale of available-for-sale securities and the
gross realized gains and losses on these sales (excluding
maturities, calls and prepayments) during 1998, 1997, and 1996
were as follows:
<TABLE>
<S> <C> <C> <C> <C>
1998 1997 1996
Fixed Fixed Fixed
Maturities Equity Maturities Equity Maturities Equity
Proceeds from sales $744,300 $304,589 $801,246 $136,085 $1,020,090 $106,354
Gross realized gains 7,527 442 3,757 1,977 10,418 787
Gross realized losses 7,313 6,303 3,213 887 5,030 1,954
</TABLE>
Other:
At December 31, 1998, and 1997, securities amounting to
approximately $14,993 and $14,366, respectively, were on deposit
with regulatory authorities as required by law.
At December 31, 1998, and 1997, the Company entered into
repurchase agreements with brokerage firms totaling $50,500 and
$308,125, respectively.
The Company generally strives to maintain a diversified invested
assets portfolio. Other than investments in U.S. Government or
U.S. Government Agency or Authority, the Company had no
investments in one entity which exceeded 10% of stockholder's
equity at December 31, 1998, except for the following investment
with the following carrying value:
Residential Funding $75,527
4. Income Taxes:
The significant components of the provision for Federal income
taxes are as follows:
1998 1997 1996
Current $43,467 $38,474 $19,644
Deferred (10,849) (5,421) 12,177
Total federal income tax expense $32,618 $33,053 $31,821
4. Income Taxes, continued:
Income tax expense differs from the amounts computed by applying
the U.S. Federal income tax rate of 35% to income before income
taxes as follows:
1998 1997 1996
At statutory federal income tax rate $32,720 $32,054 $32,151
Dividends received deductions (191) (514) (1,391)
Other, net 89 1,513 1,061
Total federal income tax expense $32,618 $33,053 $31,821
The federal income tax liability as of December 31 is comprised
of the following:
1998 1997
Net deferred income tax liability $21,470 $34,480
Income taxes currently (receivable) due (904) 1,608
Federal income tax liability $20,566 $36,088
The tax effects of temporary differences that give rise to
significant portions of the deferred income tax assets and
deferred income tax liabilities at December 31 are as follows:
1998 1997
Deferred tax liabilities:
Present value of future profits of acquired business $10,907 $14,139
Deferred policy acquisition costs 99,192 100,989
Investments 22,154 27,245
Other 906
Total deferred income tax liabilities 132,253 143,279
Deferred tax assets:
Policy liabilities and reserves 108,973 108,799
Other 1,810
Total gross deferred income tax assets 110,783 108,799
Net deferred income tax liability $21,470 $34,480
Prior to 1984, certain special deductions were allowed life
insurance companies for federal income tax purposes. These
special deductions 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 balance in the
policyholders' surplus account at December 31, 1998.
5. Reinsurance:
The Company is involved in both the cession and assumption of
reinsurance with other companies. Reinsurance premiums and
claims ceded and assumed for the years ended December 31 are as
follows:
1998 1997 1996
Ceded Assumed Ceded Assumed Ceded Assumed
Premiums $20,280 $6,106 $17,081 $7,971 $13,759 $7,116
Claims 11,495 5,954 8,683 4,472 12,170 6,068
The Company generally reinsures the excess of each individual
risk over $500 on ordinary life policies in order to spread its
risk of loss. Certain other individual health contracts are
reinsured on a policy-by-policy basis. The Company remains
contingently liable for certain of the liabilities ceded in the
event the reinsurers are unable to meet their obligations under
the reinsurance agreement.
Effective in 1996, the Company assumed certain policy risks from
its affiliate, North American Company for Life and Health
Insurance, and its subsidiaries. The company fulfilled its
obligation on this assumption contract and was released of this
risk effective December 31, 1998. The Company has reflected risk
and profit charges of $729 and $1,119 in other income in 1997 and
1996, respectively, under the terms of the reinsurance contract.
Effective October 31, 1997, Midland acquired, via assumption
reinsurance, a block of life and annuity business. Under the
assumption agreement, the Company assumed approximately $574,310
of life and annuity reserves which is reflected in the
liabilities for future policy benefits and received $550,371 of
assets which was net of $23,939 of PVFP. The PVFP asset is being
amortized principally over periods up to 25 years in relation to
the present value of expected gross profits. The assets acquired
included approximately $511,877 in cash and short term
instruments, $38,044 in policy loans and $450 of other assets.
In accordance with the agreement, the final purchase price was
determined in 1998 which reduced the PVFP asset to $22,913 and
the life and annuity reserves assumed to $573,284.
6. Statutory Financial Data and Dividend Restrictions:
The Company is domiciled in South Dakota and its statutory-basis
financial statements are prepared in accordance with accounting
practices prescribed or permitted by the insurance department of
the domiciliary state. "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" statutory accounting practices encompass all
accounting practices that are not prescribed. Such practices
differ from state to state and company to company.
6. Statutory Financial Data and Dividend Restrictions, continued:
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 the Company during any 12-month period, without prior approval
of the insurance commissioner, is limited according to statutory
regulations and is a function of statutory equity and statutory
net income (generally, the greater of statutory-basis net gain
from operations or 10% of prior year-end statutory-basis
surplus). The company paid a stockholder dividend of $15,000 and
$25,000 in 1998 and 1997, respectively. The maximum amount of
dividends payable in 1999 without prior approval of regulatory
authorities is approximately $60,000.
The statutory net income of the Company for the years ended
December 31, 1998 and 1997 is approximately $75,000 and $65,000,
respectively, and capital and surplus at December 31, 1998 and
1997 is approximately $384,000 and $323,000, respectively, in
accordance with statutory accounting principles.
7. Employee Benefits:
The Company participates in qualified pensions and other
postretirement benefit plans sponsored by SEI. The Company also
provides certain post-retirement health care and life insurance
benefits for eligible active and retired employees through a
defined benefit plan. The following table summarizes the benefit
obligations, the fair value of plan assets and the funded status
over the two-year period ended December 31, 1998. The amounts
reflect an allocation of the Company's portion of the SEI plan:
Pension Benefits Other Benefits
1998 1997 1998 1997
Benefit obligation at
December 31 $6,420 $4,678 $1,718 $2,203
Fair value of plan assets at
December 31 3,642 3,176
Funded status at December 31 $(2,778) $(1,502) $(1,718) $(2,203)
Accrued benefit liability
recognized in financial
statements $616 $92 $1,650 $1,751
7. Employee Benefits, continued:
The Company's post-retirement benefit plan is not funded;
therefore, it has no plan assets.
The amounts of contributions made to and benefits paid from the
plan are as follows:
Pension Benefits Other Benefits
1998 1997 1998 1997
Employer contributions $ $ $227 $172
Employee contributions 56 56
Benefit payments 197 444 283 228
The following table provides the net periodic benefit cost for
the years ended 1998, 1997 and 1996:
Pension Benefits Other Benefits
1998 1997 1996 1998 1997 1996
Net periodic benefit costs $524 $360 $263 $126 $179 $164
The assumptions used in the measurement of the Company's benefit
obligations are shown in the following table:
Pension Benefits Other Benefits
1998 1997 1998 1997
Weighted-average assumptions
as of December 31:
Discount rate 7.00% 7.25% 7.00% 7.25%
Expected return on plan
assets 8.75% 8.75% N/A N/A
Rate of compensation
increase 4.25% 4.25% N/A N/A
For measurement purposes, a 6.5% annual rate of increase in the
per capita cost of covered health care benefits was assumed for
1998. The rate was assumed to decrease gradually each year to a
rate of 4.5% for 2006 and remain at that level thereafter.
The Company also 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 expense for 1998, 1997, and
1996 was $1,725, $1,920, and $1,700, respectively. All
contributions to the ESOP are held in trust.
8. Commitments and Contingencies:
Lease Commitments:
Midland'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 of Industrial Revenue Bonds for face
value. The bonds are collateralized by $2,571 of Midland's
investments in government bonds. The lease includes a purchase
option under which Midland may repurchase the building upon
repayment of all bonds issued. The lease terms provide for 10
annual payments equivalent to principal of $425 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 as
part of other assets and the lease obligation as part of other
liabilities.
The Company also leases certain equipment. Rental expense on
operating leases amounted to $1,511, $1,208 and $1,048 for the
years ended December 31, 1998, 1997, and 1996, respectively. The
minimum future rentals on capital and operating leases at
December 31, 1998, are as follows:
Year Ending December 31 Capital Operating Total
1999 $513 $1,823 $2,336
2000 489 1,827 2,316
2001 466 1,448 1,914
2002 442 191 633
2003 191 191
Thereafter 705 705
Total 1,910 $6,185 $8,095
Less amount representing interest 210
Present value of amounts due
under capital leases $1,700
Other Contingencies:
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.
9. Other Related Party Transactions:
The Company pays fees to SEI under management contracts. The
Company was charged $1,552, $1,530 and $1,458 in 1998, 1997, and
1996, respectively, related to these contracts.
The Company pays investment management fees to an affiliate
(Midland Advisors Company). Net fees related to these services
were $1,855, $1,425 and $1,339 in 1998, 1997 and 1996,
respectively.
The Company provided certain insurance and non-insurance services
to North American Company for Life and Health Insurance ("North
American"), beginning in 1997. The Company was reimbursed $1,465
and $488 in 1998 and 1997, respectively, for the costs incurred
to render such services.
The Company sold certain securities to North American at the
current market value of $15,856, incurring a realized loss of
$2,736 in 1998. In addition the Company acquired securities
totaling $22,679 from North American
10. Subsequent Event:
Effective January 4, 1999, the Company received a contribution
from SEI totaling $64,000. These funds were then applied to
purchase substantially all of the assets of Parkway Mortgage Inc.
("Parkway"), a mortgage broker. In addition, the Company agreed
to assume responsibility for the warehouse line-of-credit to fund
loan originations.
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
Midland National Life Insurance Company
Notes to Financial Statements
(Amounts in thousands)
Midland National Life Insurance Company
Notes to Financial Statements, Continued
(Amounts in thousands)
NEWMGP98
<PAGE>
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.TXT
<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.
S6FORM.TXT
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
----------------------------------
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
The prospectus consisting of 50 pages.
The undertaking to file reports.
Representations pursuant to Section 26(e) of the Investment
Company Act.
The signatures.
Written consents of the following persons:
(a) Jack L. Briggs 1
(b) Sutherland Asbill & Brennan L L P 4
(c) Russell A. Evenson, FSA. 4
(d) PricewaterhouseCoopers L L P 4
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. 1
(2) Not applicable.
(3) (a) Principal Underwriting Agreement.
(b) Selling Agreement. 1
(c) Commission schedule. 2
--------------------
(4) Not applicable.
(5) Form of Contract. 1
- -----------------------
1 Incorporated by reference to the like-numbered exhibit in
Post-Effective Amendment No. 1 to Form S-6, File No. 333-14061
for Midland National Life Separate Account A, on April 28, 1998.
2 Filed previously in Pre-Effective Amendment No. 1 on October 26, 1994.
3 Filed previously in Post Effective Amendment No. 3 on April 29, 1997.
4 Filed herewith.
5 Incorporated by reference to the like-numbered exhibit in
Post-Effective Amendment No. 3 to Form S-6, File No. 333-14061
for Midland National Life Separate Account A, on April 1999.
<PAGE>
(6) (a) Articles of Incorporation of Midland National Life. 1
(b) By-Laws of Midland National Life. 1
(7) Not applicable.
(8) (a) Participation Agreements for Fidelity Distributors
Corporation/Variable Insurance Products Fund, and
Variable Products Fund II. 1
(8) (b) Participation Agreement for Fidelity Distributors
Corporation/Variable Insurance Products Fund III. 3
(8) (c) Participation Agreement for American Century Investment
Services, Inc. 3
(8) (d) Participation Agreement for Massachusetts Financial Variable
Insurance Trusts. 5
(8) (e) Participation Agreement for Lord Abbett Series Funds, Inc. 5
(9) Not applicable.
(10) Application Form. 1
(11) Memorandum describing Midland National Life's insurance, transfer
and redemption procedures for the Contract. 2
2. See Exhibit 1(5).
---
3. Opinion and Consent of Jack L. Briggs. 2
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. 4
7. Consent of Sutherland Asbill & Brennan L L P 4
8. Consent of PricewaterhouseCoopers L L P 4
27. Financial Data Schedule
1 Incorporated by reference to the like-numbered exhibit in
Post-Effective Amendment No. 1 to Form S-6, File No. 333-14061
for Midland National Life Separate Account A, on April 28, 1998.
2 Filed previously in Pre-Effective Amendment No. 1 on October 26, 1994.
3 Filed in Post Effective Amendment No. 3, on April 29, 1997.
4 Filed herewith.
5 Incorporated by reference to the like-numbered exhibit in
Post-Effective Amendment No. 3 to Form S-6, File No. 333-14061
for Midland National Life Separate Account A, on April 1999.
CONVUL2.txt
<PAGE>
SIGNATURES
__________
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Midland National Life Separate Account A, has duly
caused this Registration Statement to be signed on its behalf
by the undersigned thereunto duly authorized, and its seal to be
hereunto affixed and attested, all in Sioux Falls, South Dakota,
on the 5th day of April, 1999.
Midland National Life Separate Account A
(Seal) By: Midland National Life Insurance Company
By:_______________________________________
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following Directors
of Midland National Life Insurance Company in the capacities and on the
dates indicated.
Signature Title Date
------- ----- ----
__/s/ Michael M. Masterson Director, Chairman of the April 5, 1999
Michael M. Masterson Board, Chief Executive
Officer and President
__/s/ John J. Craig____ Director, Executive Vice April 5, 1999
John J. Craig II President
__/s/ Russell A. Evenson Director, Senior Vice April 5, 1999
Russell A. Evenson President and Chief
Actuary
_/s/ Steven C. Palmitier Director, Senior Vice April 5, 1999
Steven C. Palmitier President and Chief
Marketing Officer
__/s/ Thomas M. Meyer__ Vice President and April 5, 1999
Thomas M. Meyer Chief Financial
Officer
_________________________ Director and Vice President April 5, 1999
Robert W. Korba
SECVUL2
<PAGE>
SIGNATURE
__________
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Midland National Life Separate Account A, certifies
that it meets all of the requirements for effectiveness of this
registration statement pursuant to Rule 485(b) under the Securities
Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized,
and its seal to be hereunto affixed and attested, all in Sioux Falls,
South Dakota, on the 5th day of April, 1999.
Midland National Life Separate Account A
(Seal) By: Midland National Life Insurance Company
By:_/s/ John J. Craig II________________
John J. Craig II
Executive Vice President
SECSIG1
<PAGE>
Registration No. 33-76318
POST EFFECTIVE AMENDMENT NO.4
________________________________________________________________________________
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________
EXHIBITS
TO
FORM S-6
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FOR
MIDLAND NATIONAL LIFE SEPARATE ACCOUNT A
AND
MIDLAND NATIONAL LIFE INSURANCE COMPANY
____________________________________
________________________________________________________________________________
- --------------------------------------------------------------------------------
EXHVUL2.TXT
<PAGE>
EXHIBIT INDEX
Exhibit
_________
6. Opinion and Consent of Russell A. Evenson, Senior
Vice President and Actuary of Midland National Life
7. Consent of Sutherland Asbill & Brennan, L L P
8. Consent of PricewaterhouseCoopers, L L P
INDVUL2.TXT
<PAGE>
April 5, 1999
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
Gentlemen:
This opinion is furnished in connection with the filing of Post-
Effective Amendment No. 4 to Registration Statement No. 33-76318 on
Form S-6 ("Registration Statement") which covers premiums expected to
be received under the flexible premium Variable Universal Life 2
Insurance 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,
__/s/ Russell A. Evenson____
Russell A. Evenson, FSA, CLU, ChFC
Senior Vice President and Actuary
RAEVUL2.TXT
<PAGE>
April 26, 1999
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
RE: Variable Universal Life II
Form S-6, File No. 33-76318
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus filed as part of the Post-Effective Amendment
No. 4 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. 33-76318). 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: __/s/Frederick_R._Bellamy__
Frederick R. Bellamy
<PAGE>
CONSENT OF IDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post effective Amendment No. 4 to this
Registration Statement of Midland National Life Separate Account A on
Form S-6 (File No. 33-76318) of our reports dated March 26, 1999 and
March 17, 1999, on our audits of the financial statements of Midland
National Life Separate Account A, and the financial statements of Midland
National Life Insurance Company, respectively. We also consent to the
reference of our firm under the caption "Financial and Actuarial".
PRICEWATERHOUSECOOPERS L L P
MINNEAPOLIS, MINNESOTA
April 23, 1999
CNSNTVL2.TXT
<PAGE>
