As filed with the Securities and Exchange Commission on August 31, 1999.
Pre-Effective Amendment #1
Registration No. 333-80975
811-5271
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
--------
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
MIDLAND NATIONAL LIFE SEPARATE ACCOUNT A
(with respect to Variable Survivorship policies)
________________________________________
(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
Approximate date of proposed public offering: As soon as practicable after the
effectiveness of the Registration
Statement.
An indefinite amount of securities is being registered pursuant to Rule
24f-2 under the Investment Company Act of 1940.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), shall determine.
S6CVVLSL.txt
<PAGE>
VARIABLE SURVIVORSHIP LIFE
Issued By:
Midland National Life (An Iowa Corporation)
7755 Office Plaza Drive North, Suite 105 West Des Moines, IA 50266
(605) 335-5700
Variable Survivorship Life is a last survivor variable life insurance
policy issued by Midland National Life Insurance Company. Variable
Survivorship Life:
* provides insurance coverage with flexibility in death benefits and
premiums;
* pays a death benefit if both of the two insureds die 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 five
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 Growth and Income (hereinafter referred to as Lord
Abbett VC Growth and Income)
24. Lord Abbett Mid-Cap Value (hereinafter referred to as Lord Abbett
VC Mid-Cap Value)
25. Lord Abbett International (hereinafter referred to as Lord Abbett
VC International)
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: _________ 1999.
Table of Contents
PART 1: SUMMARY 4
FEATURES OF VARIABLE SURVIVORSHIP LIFE 4
Death Benefit Options 4
Contract Changes 4
Flexible Premium Payments 4
Additional Benefits 4
INVESTMENT CHOICES 5
YOUR CASH VALUE 5
Transfers 6
Policy Loans 6
Withdrawing Money 6
Surrendering Your Contract 6
DEDUCTIONS AND CHARGES 6
Deductions From Your Premiums 6
Deductions From Your Cash Value 6
Surrender Charges 7
Portfolio Expenses 7
ADDITIONAL INFORMATION ABOUT THE
CONTRACTS 8
Your Right To Examine This Contract 8
Your Contract Can Lapse 8
Tax Effects of Variable Survivorship Life 8
Illustrations 9
PART 2: DETAILED INFORMATION ABOUT
VARIABLE SURVIVORSHIP LIFE 9
INSURANCE FEATURES 9
How the Contracts Differ From Whole Life Insurance 9
Application for Insurance 9
Death Benefit 9
Maturity Benefit 11
Changes In Variable Survivorship Life 12
Changing The Face Amount of Insurance 12
Changing Your Death Benefit Option 12
When Contract Changes Go Into Effect 13
Flexible Premium Payments 13
Allocation of Premiums 14
Additional Benefits 14
Policy Split Option 15
Extended Maturity Option 15
SEPARATE ACCOUNT INVESTMENT CHOICES 15
Our Separate Account And Its Investment Divisions 15
The Funds 15
Investment Policies Of The Portfolios 16
USING YOUR CASH VALUE 18
The Cash Value 18
Amounts In Our Separate Account 18
How We Determine The Accumulation Unit Value 18
Cash Value Transactions 19
Transfers Of Cash Value 19
Dollar Cost Averaging 19
Contract Loans 20
Withdrawing Money From Your Cash Value 21
Surrendering Your Contract 22
THE GENERAL ACCOUNT 22
DEDUCTIONS AND CHARGES 22
Deductions From Your Premiums 22
Deductions From Your Cash Value 23
Charges Against The Separate Account 24
Transaction Charges 24
How Cash Value Charges Are Allocated 24
Surrender Charges 25
Charges In The Funds 25
ADDITIONAL INFORMATION ABOUT THE
CONTRACTS 26
Your Right To Examine The Contract 27
Your Contract Can Lapse 27
You May Reinstate Your Contract 27
Contract Periods And Anniversaries 27
Maturity Date 28
We Own The Assets Of Our Separate Account 28
Changing the Separate Account 28
Limits On Our Right To Challenge The Contract 29
Your Payment Options 29
Your Beneficiary 30
Assigning Your Contract 30
When We Pay Proceeds From This Contract 30
TAX EFFECTS 31
Tax Status of the Policy 31
Tax Treatment of Policy Benefits - In General 31
Tax Treatment of Distributions - Modified Endowment
Contracts 32
Tax Treatment of Distributions - Contracts That Are
Not Modified Endowment Contracts 32
Investment in the Contract 33
Loans 33
Multiple Policies 33
Tax Treatment of Policy Split Option 33
Other Policy Owner Tax Matters 33
Possible Tax Law Changes 33
Possible Charge for Midland's Taxes 34
Other Tax Considerations 34
PART 3: ADDITIONAL INFORMATION 34
MIDLAND NATIONAL LIFE INSURANCE
COMPANY 34
YOUR VOTING RIGHTS AS AN OWNER 34
OUR REPORTS TO CONTRACT OWNERS 35
DIVIDENDS 35
MIDLAND'S SALES AND OTHER AGREEMENTS 35
REGULATION 36
YEAR 2000 36
DISCOUNT FOR MIDLAND EMPLOYEES 36
LEGAL MATTERS 37
FINANCIAL 37
ADDITIONAL INFORMATION 37
MANAGEMENT OF MIDLAND 38
ILLUSTRATIONS 40
DEFINITIONS 48
PERFORMANCE 50
FINANCIAL STATEMENTS 51
APPENDIX A 52
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 two
persons who are covered by the contract as the "Insured" or "Insured
Person(s)," because the owner may not be one of the insureds.
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 SURVIVORSHIP LIFE
Death Benefit Options
Variable Survivorship Life is life insurance on two insureds. If the
contract is in force when the second of the two insureds dies, we will
pay a death benefit. No benefit is paid when the first insured dies.
You 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.
You also choose between two corridor percentages that might, in some
circumstances, result in an even larger death benefit. See "Death
Benefit" on page 9.
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 $200,000
Contract Changes
You may make limited changes to 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
Joint Equal Age. (See Appendix A for how the Joint Equal Age is
determined.)
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 first 5
years (the Minimum Premium Period) by paying premiums equal to the
accumulated minimum premium amounts. See "Flexible Premium Payments" on
page 13.
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)
* extending the maturity date
* a death benefit guarantee to maturity
* additional survivor life insurance protection during the first four
years
* a benefit to waive the cost of monthly deductions upon one insured's
death
* additional survivor life insurance protection until the maturity date
* insurance protection for one of the insureds
We deduct any costs of additional benefits from your cash value
monthly. See "Additional Benefits" on page 14.
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) Money Market
Portfolio
2. Fidelity's Variable Insurance Products Fund (VIP) High Income
Portfolio
3. Fidelity's Variable Insurance Products Fund (VIP) Equity-Income
Portfolio
4. Fidelity's Variable Insurance Products Fund (VIP) Growth Portfolio
5. Fidelity's Variable Insurance Products Fund (VIP) Overseas Portfolio
6. Fidelity's Variable Insurance Products Fund II (VIP II) Asset
Manager Portfolio
7. Fidelity's Variable Insurance Products Fund II (VIP II) Investment
Grade Bond Portfolio
8. Fidelity's Variable Insurance Products Fund II (VIP II) Contrafund
Portfolio
9. Fidelity's Variable Insurance Products Fund II (VIP II) Asset
Manager: Growth Portfolio
10. Fidelity's Variable Insurance Products Fund II (VIP II) Index 500
Portfolio
11. Fidelity's Variable Insurance Products Fund III (VIP III) Growth &
Income Portfolio
12. Fidelity's Variable Insurance Products Fund III (VIP III) Balanced
Portfolio
13. Fidelity's Variable Insurance Products Fund 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 Growth and Income
24. Lord Abbett VC Mid-Cap Value
25. Lord Abbett VC International
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 15.
YOUR CASH VALUE
Your cash value begins with your first premium payment. From your
premium we deduct a sales charge, a premium tax, a federal tax and any
service charges per premium expenses . The balance of the premium is
your beginning cash value.
Your cash value reflects:
* the amount and frequency of premium payments,
* monthly 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 18.
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 transfers. We
reserve the right to charge a $25 fee after the 12th transfer in a
contract year. There are other limitations on transfers to and from the
General Account. See "Transfers Of Cash Value" on page 19.
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 20. 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 31.
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 50% of the net cash surrender value. The Net Cash
Surrender Value 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
21. Withdrawals and surrenders may have negative tax effects. See "TAX
EFFECTS" on page 31.
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 22.
DEDUCTIONS AND CHARGES
Deductions From Your Premiums
We deduct a 2.25% sales charge from each premium payment. This charge
partially reimburses us for the selling and distributing costs of this
contract. We also charge a 2.25% premium tax on each premium payment
and 1.50% for Federal taxes. We may decrease or increase these charges
depending on our taxes, and we may vary the premium tax by state. If
you elect to pay premiums by Civil Service Allotment, we also deduct a
46 service 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:
* a policy charge of $10.00 (currently, we plan to make this deduction
for only the first 10 contract years), reduce this charge to $5.00
after the 10th contract year).
* an expense charge that is based upon the insured person's issue age,
sex, risk class, and the amount of insurance under your contract
* a cost of insurance charge. The amount of this charge is based on
the insured persons' issue age, sex, risk class, the contract duration,
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 twelve transfers a year between investment divisions. (We
currently waive this charge).
See "Deductions From Your Cash Value" on page 23.
We also deduct a daily charge at an annual rate of 0.50% of the assets
in every investment division. This rate will decrease to 0.25% after
the 10th contract year. This charge is for certain mortality and
expense risks.
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
surrender charge period (this period is the earlier of 15 years or the
attained Joint Equal Age of 95). If you keep this contract in force
for the surrender charge period, then you will not incur a surrender
charge.
The surrender charge is on a fixed schedule per thousand dollars of
face amount and decreases to $0.00 after the surrender charge period.
The initial surrender charge is based on the Joint Equal Age at the
time of issue and the face amount. This summary of the surrender
charge assumes no changes in face amount. See "Surrender Charges" on
page 25. The surrender charge varies by the equal age (Appendix A
describes how the equal age of a policy is determined) of the policy as
determined at the time of issue. The per $1,000 surrender charge is
highest in the first year of your policy and gradually decreases to
$0.00 after the end of the surrender charge period (earlier of 15 years
or the attained equal age of 95). The surrender charge at the time of
surrender is determined by multiplying the surrender charge listed in
your policy form, for the appropriate policy year, times the
appropriate face amount of insurance and dividing by 1,000. If you
change your face amount of insurance after your policy is issued, the
face amount used in the surrender charge calculation is the highest
face amount which exists during the life of your contract. See
"Surrender Charges" on page 25 for samples of the per $1,000 charge for
various equal ages.
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,
1998 are shown in the table below (except as otherwise noted).
Total
Expenses
(after expense
Portfolio reimbursement)
VIP Money Market .30%
VIP High Income .70%
VIP Equity-Income(1) .58%
VIP Growth(1) .68%
VIP Overseas(1) .91%
VIP II Asset Manager(1) .64%
VIP II Investment Grade Bond .57%
VIP II Contrafund(1) .70%
VIP II Asset Manager: Growth(1) .73%
VIP II Index 500(1) .35%
VIP III Growth & Income(1) .61%
VIP III Balanced(1) .59%
VIP III Growth Opportunities(1) .71%
American Century VP Capital
Appreciation 1.00%
American Century VP Value 1.00%
American Century VP Balanced 0.97% 1.00%
American Century VP International 1.47%
American Century VP Income
& Growth .70%
MFS VIT Emerging Growth(3) .85%
MFS VIT Research(3) .86%
MFS VIT Growth with Income(3) .88%
MFS VIT New Discovery(2) (3) 1.17%
Lord Abbett VC Growth and Income .51%
Lord Abbett VC Mid-Cap Value (4) (5) 1.10%
Lord Abbett VC International (4) (5) 1.35%
(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%
VIP Overseas 0.89%
VIP II Asset Manager 0.63%
VIP II Index 500 0.28%
VIP II Contrafund 0.66%
VIP II Asset Manager: Growth 0.72%
VIP III Balanced 0.58%
VIP III Growth Opportunities 0.70%
VIP III Growth & Income 0.60%
(2) MFS has agreed to bear expenses for this portfolio, such that the
portfolio's other expenses shall not exceed 0.25%. Without this
limitation, the other expenses and total expenses would be 4.32% and
5.22% for the MFS VIT New Discovery.
(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.
(4) The expense figures shown for these portfolios are based on
estimated expenses for 1999 since the portfolios were not in existence
during 1998.
(5) Lord, Abbett & Co. has entered into an expense reimbursement
agreement with Lord Abbett VC Mid-Cap Value and Lord Abbett VC
International under which Lord, Abbett & Co. will reimburse each
portfolio if and to the extent such portfolios' Other Expenses
(excluding management fees) exceed or would otherwise exceed .35%
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 27.
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 Survivorship Life
It is reasonable to conclude that a contract should qualify as a life
insurance contract for federal income tax purposes, although there is
some uncertainty due to lack of pertinent authority and 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 the taxpayer attaining 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 31.
Illustrations
This prospectus includes sample projections illustrations of
hypothetical death benefits and cash surrender values, beginning on
page 40. These are only hypothetical figures and are not indications
of either past or anticipated future investment performance. These
hypothetical value projections illustrations 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
SURVIVORSHIP LIFE
INSURANCE FEATURES
This prospectus describes our Variable Survivorship Life 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 Survivorship Life (VSL) 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. VSL differs from traditional whole life
insurance because you may choose the amount and frequency of premium
payments, within limits.
In addition, VSL has two types of death benefit options. You may
switch back and forth between these options. Variable Survivorship
Life also allows you to change the face amount without purchasing a new
insurance policy. However, evidence of insurability may be required.
Finally, VSL is called 'last survivor' or 'survivorship' because no
death benefit is paid until the last, 'surviving' insured dies. No
death benefit is paid and no adjustment will be made when just one
insured dies.
Application for Insurance
To apply for a contract you must submit a completed application on both
insureds. 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 individual issue age is 85 and the minimum individual issue age
is 20. The maximum Joint Equal Age is 85 and the minimum Joint Equal
Age is 20. The Joint Equal Age of the policy is a single age which is
derived from the two individual ages, substandard ratings, risk classes
and sexes of the two insureds on the policy. We will determine the
Joint Equal Age for each policy as shown in Appendix A.
Death Benefit
Death Benefit Options: We pay the death benefit to the beneficiary
after the last surviving insured 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 death benefit under option 1
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.
Death Benefit Corridor Percentages. You also choose between two death
benefit corridor percentage tables. These percentages are applied to
the cash value at the death of the second insured, and if that result
is greater than that described above, then it will be the death benefit
amount.
The percentage is 250% up to age 40, and then the percentages generally
decline as the insured person gets older. This alternative minimum
death benefit will be the cash value on the day the last surviving
insured dies multiplied by the corridor percentage for the younger
insured's age. For this purpose, age is the attained age (age last
birthday) at the beginning of the contract year of the younger insured.
(If the younger insured dies first, then the younger insured's nominal
age is used; that is the age the younger insured would have attained if
he or she were still alive at the survivor's death.)
You can choose either a standard corridor percentage table or an
enhanced corridor percentage table (both tables are available under
either death benefit option 1 or option 2). The tables are the same
for ages 0 through 85. The difference is that the enhanced corridor
percentage table provides a higher multiple of your cash values for
attained ages 86 through 95 94 . As a result, your beneficiaries may
receive a larger death benefit if the last survivor dies when the
younger insured's attained age (or nominal attained age) is between 86
and 95 94. However, when the death benefit is larger, we deduct higher
cost of insurance charges from your cash value (because the charge is
based on the difference between the cash value and the death benefit
amount). This results in a lower cash value, which would eventually
result in a lower death benefit than under the standard corridor
percentage table. However, this is not guaranteed to occur and you
should run a hypothetical illustration for your particular face amount
and anticipated premium contribution levels to see how the death
benefits and cash values compare between the enhanced and standard
corridor tables. Your actual death benefits will depend on your actual
cash value and the younger insured's attained age (or nominal age) at
the time of the death of the last survivor.
Once your contract is issued, you can never change the corridor
percentage table that you selected.
The standard and the enhanced corridor percentage tables are shown
below:
Standard Death Benefit
Corridor Percentage Table
The Death The Death
Benefit Will Benefit Will
Be At Least Be At Least
If The Equal To If The Equal To
Younger This Percent Younger This Percent
Insured's of The Insured'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.
Enhanced Death Benefit
Corridor Percentage Table
The Death The Death
Benefit Will Benefit Will
Be At Least Be At Least
If The Equal To If The Equal To
Younger This Percent Younger This Percent
Insured's of The Insured's of The
Age Is Cash Value Age Is Cash Value
0-40 250% 65 120%
41 243% 66 119%
42 236% 67 118%
43 229% 68 117%
44 222% 69 116%
45 215% 70 115%
46 209% 71 113%
47 203% 72 111%
48 197% 73 109%
49 191% 74 107%
50 185% 75-85 105%
51 178% 86 109%
52 171% 87 113%
53 164% 88 118%
54 157% 89 122%
55 150% 90 126%
56 146% 91 121%
57 142% 92 115%
58 138% 93 110%
59 134% 94 105%
60 130% 95 100%
61 128% 96 100%
62 126% 97 100%
63 124% 98 100%
64 122% 99 100%
The following example will clarify how these factors work. Assume the
younger insured person is 55 years old and the face amount is $100,000
$200,000 . The "corridor percentage" at that age is 150%. Under Option
1, the death benefit will generally be $100,000 $200,000 . However, when
the cash value is greater than $66,666.67 $133,333.33 , the corridor
percentage applies and the death benefit will be greater than $100,000
$200,000 (since 150% of $66,666.67 $133,333.33 equals $100,000
$200,000) . In this case, at age 55, we multiply the cash value by a
factor of 150%. So if the cash value were $70,000 $140,000 , then the
death benefit would be $105,000 $210,000 .
Under Option 2, the death benefit is the face amount plus the cash
value. In this example, if the younger insured is 55 years-old, the
face amount is $100,000 $200,000 , and the cash value is $200,000
$400,000 , then the death benefit would be $300,000 $600,000 . 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 $400,000 , the death benefit would increase by $1.50 (at that
age).
Under any 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 is $200,000.
Notice and Proof of Death. We require satisfactory proof of both
insured's death before we pay the death benefit. That can be a
certified copy of a death certificate, a written statement by the
attending physician, a certified copy of a decree of a court of
competent jurisdiction as to the finding of death, or any other proof
satisfactory to us.
You should notify us of the first insured's death as soon as possible
after it occurs. You should submit proof of death at that time,
because it will probably be easier to obtain proof of death shortly
after it occurs instead of possibly years later. This will help avoid
delay in making payment after the survivor's death, and it may affect
an additional benefit provided by rider.
Maturity Benefit
If at least one insured person is still living on the maturity date, we
will pay you the cash value minus any outstanding loans. The contract
will then end. The maturity date is the contract anniversary after the
younger insured person's 100th birthday. If Yyour policy contains the
an Extended Maturity Rider option and, you may extend the maturity
date. See "Additional Benefits" "Extended Maturity Option" on page 14.
15
Changes In Variable Survivorship Life
Variable Survivorship Life 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 executive 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 $50,000.
* To increase the face amount, you must provide satisfactory evidence
of insurability for both insureds. If either 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 and a minimum
premium 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 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 the face amount of insurance may have tax consequences. You
should consult a tax advisor before changing the face amount of
insurance.
Changing Your Death Benefit Option
You may change your death benefit option by sending a written request
to our executive office. (However, as noted above, you cannot change
your corridor percentage table.) We require satisfactory evidence of
insurability (for both insureds) to change the death benefit option.
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.
Changing the death benefit option may have tax consequences. You
should consult a tax advisor before changing the death benefit option.
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 following 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
executive 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 31.
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
premiums 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. Planned periodic premiums may be monthly if paid by pre-
authorized check. Premiums may be bi-weekly if paid by Civil Service
Allotment. The planned premiums may not be enough to keep your contract
in force.
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 ages, sexes and rating classes of the insured persons,
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
executive 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 by pre-authorized check. Amounts made by pre-authorized check can
be as low as $30.
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.
The minimum premium increases when the face amount increases.
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 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 the record date (which is the date we issue the
contract) will not be allocated or invested until the record date).
The net premium is the premium minus a sales charge, a state premium
tax charge, a federal tax charge and any expense charges a service
charge (deducted only if you are on a Civil Service Allotment Premium
Mode) 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
executive office with new instructions. Allocation percentages may be
any whole number from 0 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
22. 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 designated insured person becomes
totally disabled on or after his/her 20th birthday and the disability
continues for at least 6 months. If a disability starts before the
contract anniversary following the designated insured person's 60th
birthday, then we will waive monthly deductions for as long as the
disability continues. The designated insured is the person named in
the Disability Waiver Benefit application as the person on whom
coverage should apply.
(2) Extended Maturity Option: With this benefit, we will extend the
maturity date indefinitely, or as long as allowed by the IRS. If at
least one of the insureds is living on the maturity date and this
contract is still in force, this benefit will transfer all the cash
value to the General Account and will cease all cash value deductions.
This will allow the policy to remain in force until the last survivor
dies or the policy is surrendered.
(3) (1) Death Benefit Guarantee to Maturity: With this benefit, the
policy is guaranteed to remain in force until the maturity date if a
sufficient premium is paid. The premium required to provide this
guarantee is substantially higher than the minimum premium.
(4) Death Waiver Benefit: This benefit will waive all future monthly
charges from the cash value if the selected insured dies before the
other insured. The selected insured is the individual named in the
policy application for the Death Waiver Benefit.
(5) (2) Additional Four Year Survivor Insurance: This benefit
provides an additional death benefit if both insureds die during the
first 4 years the contract is in force.
(6) Additional Survivor Insurance: This benefit provides an
additional death benefit if the survivor dies while this benefit is in
force.
(7) (3) Single Life Insurance: With this benefit, an additional death
benefit will be paid upon the death of the selected insured. The
selected insured is the individual named in the policy application for
the Single Life Insurance coverage.
Policy Split Option
This feature allows the contract to be split into two individual
contracts if both insureds submit satisfactory evidence of
insurability. There is no charge for this option. The death benefit
for each individual policy may be for any amount as long as the total
death benefit does not exceed the death benefit under the Variable
Survivorship Life. The surrender charge for the existing Variable
Survivorship Life Policy is waived at the time the policy split option
is exercised. Any cash value and loan value will be split in the same
proportion as the death benefit. The individual contracts issued
during the exercise of the policy split option will be two new non-
variable individual policies with each one subject to that particular
policy's expense and surrender charge amounts and time periods. All of
the contract provisions of the two new non-variable individual
policies, including the surrender charge period, will begin anew just
as if you had purchased a new contract.
Extended Maturity Option
This option allows the maturity date to be extended indefinitely, or as
long as allowed by the IRS. If at least one insured is alive on the
maturity date and this contract is still in force, this option may be
elected. In order to elect this option, all of the Cash Value must be
transferred to either the General Account or the Money Market
Investment Division and the death benefit option must be elected as
Option 1. Once your policy is extended beyond the Maturity Date, there
will be no further monthly deductions and we will only allow transfers
to the General Account or the Money Market Investment Division.
Furthermore, we will not allow any of the following to occur:
* Increase in the Specified Amount of Insurance
* Changes in the Death Benefit Options
* Contract Loans
* Premium Payments
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 (at any one time) of the twenty-three twenty-
five investment divisions of our Separate Account.
The Funds
Each of the 23 25 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) 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 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.
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.
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.
VIP Overseas
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.
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.
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.
VIP II
Asset Manager: Growth
Seeks to maximize total return by allocating its assets among stocks,
bonds, short-term instruments, and other investments.
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.
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.
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.
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.
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 incidental 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 Growth and Income
Seeks long-term growth of capital and income without excessive
fluctuation in market value.
Lord Abbett VC Mid-Cap Value
Seeks capital appreciation through investments, primarily in equity
securities which are believed to be undervalued in the marketplace.
Lord Abbett VC International
Seeks long-term capital appreciation, by investing primarily in equity
securities of non-U.S. issuers.
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) Services Company manages the
MFS Variable Insurance Trusts. Lord Abbett & Co. 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), when we make monthly
deductions and charges, and when we 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 .0013733%, which is an
effective annual rate of 0.50%. We will reduce this charge to 0.25%
after the 10th contract year. (See "Mortality and Expense Risks" on
page 24.)
* 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 executive office. Currently, you may make an
unlimited number of transfers of cash value in each contract year. But
we reserve the right to assess a $25 charge after the 12th 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. Transfers are
effected at unit values determined at the close of business 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
These limits do not apply to transfers made in a Dollar Cost Averaging
program 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.
Transfers made through a DCA Program that extends over a time period of
12 or more months are not included in counting the number of transfers
of Cash Value.
We reserve the right to end the DCA program by sending you one month's
notice.
Contract Loans
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.
We pay you interest on this loaned amount, currently at an annual rate
of 4% 3.5%. (We charge you interest on the loaned amount at a higher
rate, see below.)
A loan taken from, or secured by, a contract may have federal income
tax consequences. See "TAX EFFECTS" on page 31.
You may request a loan by contacting our executive 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).
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.
Contract Loan Interest. Interest Currently Interest on a contract loan
accrues daily at an annual interest rate of 6% 4.25%. We guarantee that
this rate will not exceed 8%,
After the 10th contract year, we guarantee that the annual rate of
interest charged on the contract loan will equal 4% 3.5% (which is
equal to the interest rate paid on the loaned portion of the cash
value) 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).
(the earnings of the policy is equal to the cash value minus total
premiums paid).
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. If your policy lapses with a
loan outstanding, there may be adverse tax conseqeuences.
Withdrawing Money From Your Cash Value
You may request a partial withdrawal of your net cash surrender value
by writing to our executive office. You will not incur a surrender
charge. Partial withdrawals are subject to certain conditions. They
must:
* be at least $200,
* total no more than 50% of the net cash surrender value in any
contract year,
* 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. A withdrawal may have adverse tax
consequences.
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 executive 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
at least one of the insured persons is living. You do this by sending
both a written request and the contract to our executive office. The
net cash surrender value equals the cash surrender value minus any loan
outstanding (including loan interest). During the surrender charge
period (earlier of 15 years or the attained Joint Equal Age of 95), the
cash surrender value is the cash value minus the surrender charge.
After the surrender charge period, 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 executive office. All
of your insurance coverage will end on that date. A surrender may have
adverse tax consequences.
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 3.5%. We may, at our sole
discretion, credit interest in excess of 3.5%. You assume the risk
that interest credited may not exceed 3.5%. 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" on page 19.
DEDUCTIONS AND CHARGES
Deductions From Your Premiums
We deduct a sales charge, a premium tax charge, and a federal tax
charges from each premium. These three charges total 6% of each
premium. In addition, in some cases we also deduct a service charge.
The rest of each premium (called the net premium) is placed in your
cash value.
Sales Charge. We deduct a 2.25% sales charge from each premium
payment. This charge partially reimburses us for the selling and
distributing costs of this contract. These include commissions and the
costs of preparing sales literature and printing prospectuses. (We
also deduct a surrender charge if you surrender your contract for its
net cash surrender value or let your contract lapse during the
surrender charge period. See "Surrender Charges" on page 25.)
Since the charge is a percentage of your premium, the amount of the
charge will vary with the amount of the premium.
Premium Tax Charge. Some states and other jurisdictions (cities,
counties, municipalities) tax premium payments and some levy other
charges. We deduct 2.25% of each premium for those tax charges. These
tax rates currently range from 0.75% to 4%. We expect to pay an
average of 2.25% in premium tax because of certain retaliatory
provisions in the premium tax regulations. If we pay less, we may
change the premium tax 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.
Federal Tax Charge. A charge equal to 1.50% is deducted from each
premium to pay applicable Federal taxes. 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 reserve the right to change this charge to reflect any changes in
the law. 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.
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. Policy Charge: This charge is $10.00 per month (currently we plan
to reduce this charge to $5.00 after the 10th contract year make this
deduction for the first 10 years only , but we reserve the right to
deduct it keep it at $10 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. Expense Charge. The expense charge is based on the amount of
insurance on your contract and is only deducted during the first 10
contract years. This charge varies based on the Joint Equal Age of the
policy at the time of issue. This monthly charge ranges from $.065 for
each $1,000 of insurance to $.782 for each $1,000 of insurance. This
charge is used to recover certain sales expenses and distribution
expenses. In addition, we expect to profit from this charge.
3. Charges for Additional Benefits: Monthly deductions are made for
the cost of any additional benefits (riders). We may change these
charges, but your contract contains tables showing the guaranteed
maximum rates for all of these insurance costs.
4. 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, issue age, duration,
and rating class of each insured person at the time of the charge. We
place an insured person who is a standard risk in the following rate
classes: preferred non-smoker, non-smoker, and smoker. An 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.
If Variable Survivorship Life 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.
The non-smoker cost of insurance rates are lower than the smoker cost
of insurance rates. 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.
The preferred non-smoker cost of insurance rates are lower than the
non-smoker cost of insurance rates. To qualify for the preferred non-
smoker class, an insured person must be age 20 or over and meet
certain underwriting requirements.
Changes in Monthly Charges. Any changes in the cost of insurance,
charges for additional benefits or expense charges will be by class of
insured and will be based on changes in future expectations of
investment earnings, mortality, the length of time contracts will
remain in effect, expenses and taxes.
Charges Against The Separate Account
Fees and charges allocated to the investment divisions reduce the
amount in your cash value.
Mortality and Expense Risk Charge. 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 0.50% of the value of the assets in the Separate Account
attributable to Variable Survivorship Life. We will reduce this charge
to 0.25% after the 10th contract year. 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 surrender charge, our General
Account funds, which may include amounts derived from this mortality
and expense risk charge, will be used to cover sales expenses.
Tax Reserve. We reserve the right to charge for taxes or tax reserves,
which may reduce the investment performance of the investment
divisions. Currently, no such charge is made.
Transaction Charges
In addition to the deductions described above, we charge fees for
certain contract transactions that you make:
* 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 Contract Year.
* Transfers. Currently, we do not charge when You make transfers of
Cash Value among investment divisions. We reserve the right to assess
a $25 charge after the twelfth transfer in a Contract Year.
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 10 to 100) which add up to 100. You may change
your deduction allocation percentages by writing to our executive
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) is 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
The surrender charge is the difference between the amount in your cash
value and your contract's cash surrender value during the surrender
charge period (the first 15 contract years or until the attained Joint
Equal Age is 95, whichever occurs first). It is a contingent, deferred
charge 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 surrender
charge period. 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 following table provides some examples of the first year surrender
charge per $1,000 of the face amount. This charge gradually decreases
and is completely eliminated after the surrender charge period.
Table of First Year Surrender Charges
Per Thousand of Face Amount
for Two Standard Non-Smokers
Male Age 35, Female Age 35 $ 5.20
Male Age 45, Female Age 45 $ 7.70
Male Age 55, Female Age 55 $ 14.60
Male Age 65, Female Age 65 $ 28.00
Male Age 75, Female Age 75 $ 39.00
The following table provides some examples of the first year surrender
charge. The first year surrender charge rate varies by the Equal Age
(explained in Appendix A) determined for each policy. The maximum
charge for your policy per $1,000 of face amount is the first year
charge. The first year charge, on a per $1,000 of face amount basis,
gradually decreases over the surrender charge period (the earlier of 15
years or the attained Equal Age of 95). The maximum first year
surrender charge for all policies, per $1,000 of face amount, occurs at
the Equal Age of 85 and is shown in the following table. Your contract
will specify the actual surrender charge rate, per $1,000 of face
amount, for all durations in the surrender charge period. The table
below is only provided to give you an idea of the level of the first
year surrender charge rates for a few sample Issue Ages (IA) and Equal
Ages (EA).
First Year Surrender Charges
Per $1,000 of Face Amount
Both Insureds Standard Non-Smoker
Male, IA 35/Female IA 35; EA 33 $ 5.20
Male, IA 47/Female IA 47; EA 45 $ 8.80
Male, IA 55/Female IA 55; EA 53 $14.60
Male, IA 67/Female IA 67; EA 65 $30.20
Male, IA 75/Female IA 75; EA 73 $39.00
Male, IA 85/Male IA 85; EA 85 $52.00
If there has been a change in face amount during the life of the
contract, then the surrender charge is applied against the highest face
amount in force during the life of the contract. Your contract will
specify your actual surrender charge rates.
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.
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 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 Lord Abbett Portfolio has an annual management fee that is based on
the monthly average of the net assets in the portfolio. See the Lord
Abbett Portfolio prospectus for details.
The expenses for all 23 25 portfolios for the year ending December 31,
1998, (except as otherwise noted) are shown in the table below.
Management Other Total
Portfolio Fee Expenses Expenses
(After Expense
Reimbursement)
VIP Money Market .20% .10% .30%
VIP High Income .58% .12% .70%
VIP Equity-Income(1) .49% .09% .58%
VIP Growth(1) .59% .09% .68%
VIP Overseas(1) .74% .17% .91%
VIP II Asset Manager(1) .54% .10% .64%
VIP II Investment
Grade Bond .43% .14% .57%
VIP II Contrafund(1) .59% .11% .70%
VIP II Asset
Manager: Growth(1) .59% .14% .73%
VIP II Index 500(1) .24% .11% .35%
VIP III Growth &
Income(1) .49% .12% .61%
VIP III Balanced(1) .44% .15% .59%
VIP III Growth
Opportunities(1) .59% .12% .71%
American Century VP
Capital Appreciation 1.00% .00% 1.00%
American Century VP
Value 1.00% .00% 1.00%
American Century VP
Balanced .97% .00% .97%
American Century VP
International 1.47% .00% 1.47%
American Century VP
Income & Growth .70% .00% .70
MFS VIT Emerging
Growth(3) .75% .10% .85%
MFS VIT Research(3) .75% .11% .86%
MFS VIT Growth
With Income(3) .75% .13% .88%
MFS VIT New
Discovery(2) (3) .90% .27% 1.17%
Lord Abbett VC
Growth and Income .50% .01% .51%
Lord Abbett VC
Mid-Cap Value(4) (5) .75% .35% 1.10%
Lord Abbett VC
International(4) (5) 1.00% .35% 1.35%
(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%
VIP Overseas 0.89%
VIP II Asset Manager 0.63%
VIP II Index 500 0.28%
VIP II Contrafund 0.66%
VIP II Asset Manager: Growth 0.72%
VIP III Balanced 0.58%
VIP III Growth Opportunities 0.70%
VIP III Growth & Income 0.60%
(2) MFS has agreed to bear expenses for this portfolio (subject to
reimbursement by these portfolios) such that the 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 New Discovery 4.32% 5.22%
(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.
(4) The expense figures shown for these portfolios are based on
estimated expenses for 1999 since the portfolios were not in existence
during 1998.
(5) Lord, Abbett & Co. has entered into an expense reimbursement
agreement with Lord Abbett VC Mid-Cap Value and Lord Abbett VC
International under which Lord, Abbett & Co. will reimburse each
portfolio if and to the extent such portfolios' Other Expenses
(excluding management fees) exceed or would otherwise exceed .35%
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 within a
specific time period. You cancel the contract by sending it to our
executive 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 Survivorship Life 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 last surviving insured 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 satisfactory evidence of insurability for both insured
persons,
* 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. 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 29.
Maturity Date
The maturity date is the first contract anniversary after the younger
insured person's 100th birthday unless your contract contains the
Extended Maturity Rider. The contract ends on that date if at least one
of the insured persons is still alive and the maturity benefit is paid.
If at least one of the insured persons survives to the maturity date
and your contract contains the Extended Maturity Rider, 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.
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
chargeable 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 Survivorship Life 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 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 at least
one of the insured persons 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
at least one of the insured persons' 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 at least one of the insured
persons' lifetime.
* We can challenge at any time (and require proof of continuing
disability) an additional benefit that provides benefits to an insured
person in the event that an insured person becomes totally disabled.
If the last of the surviving insured persons 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 an 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
correct age and sex.
If either 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 either 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 either insured person's lifetime by
writing to our executive office. If no beneficiary is living when the
last surviving insured person dies, then we will pay the death benefit
to you. If the owner is not surviving, we will pay the death benefit
to the owner's estate.
Assigning Your Contract
You may assign your rights in this contract. You must send a copy of
the assignment to our executive 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 executive office. Death benefits are determined as of the date of
the last surviving 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
Tax Status of the Policy
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life
insurance contracts under Federeal tax law, a contract must satisfy
certain requirements which are set forth in the Internal Revenue Code.
Guidance as to how these requirements are to be applied is limited,
particularly as to contracts that insure more than one individual.
Nevertheless, we believe that it is reasonable to conclude that a
contract will satisfy the applicable requirements, although there is
some uncertainty, particularly if the contract owner pays the full
amount of premiums permitted under the contract.
If it is subsequently determined that a contract does not satisfy the
applicable requirements, Midland may take appropriate steps to bring
the contract into compliance with such requirements and we resere the
right to restrict contract transactions in order to do so.
In certain circumstances, owners of variable life insurance contracts
have been considered for Federal income tax purposes to be the owners
of the assets of the separate account supporting their contracts due to
their ability to exercise investment control over those assets. Where
this is the case, the contract owners have been currently taxed on
income and gains attributable to the variable account assets. There is
little guidance in this area, and some features of the contract, such
as the flexibility of the contract owner to allocate payments and cash
values, have not been explicitly addressed in published rulings. While
Midland believes that the contract does not give the contract owner
investment control over Separate Account assets, Midland reserves the
right to modify the contract as necessary to prevent the contract owner
from being treated as the owner of the Variable Account assets
supporting the contract.
In addition, the Code requires that the investments of the Separate
Account be "adequately diversified" in order for the contract to be
treated as a life insurance contract for Federal income tax purposes.
It is intended that the Separate Account, through the portfolios, will
satisfy these diversification requirements.
The following discussion assumes that the contract will qualify as a
life insurance contract for Federal income tax purposes.
Tax Treatment of Policy Benefits - In General
We believe that the death benefit payable to the beneficiary under a
contract on the death of the second insured to die should be excludible
from the gross income of the beneficiary. Federal, state and local
transfer, and other tax consequences of ownership or receipt of
contract proceeds depend on the circumstances of each contract owner or
beneficiary. A tax advisor should be consulted on these consequences.
Generally, the contract owner will not be deemed to be in constructive
receipt of the contract's cash value until there is a distribution.
When distributions from a contract occur, or when loans are taken out
from or secured by a contract, the tax consequences depend on whether
the contract is classified as a "Modified Endowment contract."
Tax Treatment of Distributions - Modified Endowment Contracts
Under the Internal Revenue Code, certain life insurance contracts are
classified as "Modified Endowment contracts," with less favorable tax
treatment than other life insurance contracts. Due to the flexibility
of the contracts as to premiums and benefits, the individual
circumstances of each contract will determine whether it is classified
as a Modified Endowment contract. The rules are too complex to be
summarized here, but generally depend on the amount of premiumd paid
during the first seven contract years. Certain changes in a contract
after it is issued (including a reduction in benefits at any time after
issuance) could also cause it to be classified as a Modified Endowment
contract. A current or prospective contract owner should consult with
a competent tax advisor to determine whether a contract transaction
will cause the contract to be classified as a Modified Endowment
contract.
Contracts classified as Modified Endowment contracts are subject to the
following tax rules:
(1) All distributions other than death benefits, including
distributions upon surrender and withdrawals, from a Modified Endowment
contract will be treated first as distributions of gain taxable as
ordinary income and as tax-free recovery of the contract owner's
investment in the contract only after all gain has been distributed.
(2) Loans taken from or secured by a contract classified as a Modified
Endowment contract (e.g., collateral assignments) are treated as
distributions and taxed accordingly.
(3) A 10 percent additional income tax is imposed on the amount subject
to tax except where the distribution or loan is made when the contract
owner has attained age 59 1/2 or is disabled, or where the distribution
is part of a series of substantially equal periodic payments for the
life (or life expectancy) of the contract owner or the joint lives (or
joint life expectancies) of the contract owner and the contract owner's
beneficiary or designated beneficiary.
If a contract becomes a Modified Endowment contract, distributions that
occur during the contract year will be taxed as distributions from a
Modified Endowment contract. In addition, distributions from a
contract within two years before it becomes a Modified Endowment
contract will be taxed in this manner. This means that a distribution
from a contract that is not a Modified Endowment contract at the time
when the distribution is made could later become taxable as a
distribution from a Modified Endowment contract.
Tax Treatment of Distributions - Contracts That Are Not Modified
Endowment Contracts
Distributions other than death benefits from a contract that is not
classified as a Modified Endowment contract are generally treated first
as a recovery of the contract owner's investment in the contract and
only after the recovery of all investment in the contract as taxable
income. However, certain distributions which must be made in order to
enable the contract to continue to qualify as a life insurance contract
for Federal income tax purposes if contract benefits are reduced during
the first 15 contract years may be treated in whole or in part as
ordinary income subject to tax.
Loans from or secured by a contract that is not a Modified Endowment
contract are generally not treated as distributions. However, the tax
consequences associated with contract loans that are outstanding after
the first 10 contract years, to the extent such loans do not exceed
earnings, are less clear and a tax advisor should be consulted about
such loans.
Finally, neither distributions from nor loans from or secured by a
contract that is not a Modified Endowment contract are subject to the
10 percent additional income tax.
Investment in the Contract
Your investment in the contract is generally your aggregate premiums.
When a distribution is taken from the contract, your investment in the
contract is reduced by the amount of the distribution that is tax-free.
Loans
In general, interest on a contract loan will not be deductible. Before
taking out a contract loan, you should consult a tax advisor as to the
tax consequences.
Multiple Policies
All Modified Endowment contracts that are issued by Midland (or its
affiliates) to the same contract owner during any calendar year are
treated as one Modified Endowment contract for purposes of determining
the amount includible in the contract owner's income when a taxable
distribution occurs.
Tax Treatment of Policy Split Option
The policy split option allows the contract to be split into two non-
variable individual contracts if both insureds submit evidence of
insurability. It is not clear whether exercising the policy split
rider option will be treated as a taxable transaction or whether the
individual contracts that result would be classified as Modified
Endowment contracts. A competent tax advisor should be consulted
before exercising the policy split option.
Other Policy Owner Tax Matters
Federal and state estate, inheritance, transfer, and other tax
consequences depend on the individual circumstances of each contract
owner or beneficiary.
The transfer of the contract or designation of a beneficiary may have
federal, state, and/or local transfer and inheritance tax consequences,
including the imposition of gift, estate, and generation-skipping
transfer taxes. For example, the transfer of the contract to, or the
designation as a beneficiary of, or the payment of proceeds to, a
person who is assigned to a generation which is two or more generations
below the generation assignment of the contract owner may have
generation-skipping transfer tax consequences under federal tax law.
The individual situation of each contract owner or beneficiary will
determine the extent, if any, to which federal, state, and local
transfer and inheritance taxes may be imposed and how ownership or
receipt of contract proceeds will be treated for purposes of federal,
state and local estate, inheritance, generation-skipping and other
taxes.
Businesses can use the contract in various arrangements, including
nonqualified deferred compensation or salary continuance plans, split
dollar insurance plans, executive bonus plans, tax exempt and nonexempt
welfare benefit plans, retiree medical benefit plans and others. The
tax consequences of such plans may vary depending on the particular
facts and circumstances. If you are purchasing the contract for any
arrangement the value of which depends in part on its tax consequences,
you should consult a qualified tax advisor. In recent years, moreover,
Congress has adopted new rules relating to life insurance owned by
businesses. Any business contemplating the purchase of a new contract
or a change in an existing contract should consult a tax advisor.
Possible Tax Law Changes
Although the likelihood of legislative changes is uncertain, there is
always the possibility that the tax treatment of the contract could
change by legislation or otherwise. Consult a tax advisor with respect
to legislative developments and their effect on the contract.
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 were
redomesticated to Iowa in 1999. We are licensed to do business in 49
states, the District of Columbia, and Puerto Rico. Our officers and
directors are listed beginning on page 38.
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 regular annual
meetings.
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 68% of premiums paid. For subsequent years, the commission
allowance may equal an amount up to 2.5% 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 Iowa 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 2001 . We are in the process of
updating and testing hardware and software running on personal computer
(PC) platforms. Y2K issues have been handled primarily by our internal
staff.
and expect to have any Y2K issues resolved by June 30, 1999. We expect
to have all of Y2K issues resolved by December 31, 1999.
Y2K issues have been handled primarily by our internal staff.
We are currently in the process of developing a Y2K Contingency Plan
and will which involve representatives from our IT and non-IT business
units in the planning process. The Y2K Contingency Plan may should
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 whom 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.
DISCOUNT FOR MIDLAND EMPLOYEES
Midland employees may receive a discount of up to 25% of first year
premiums. Midland will pay the discount as the employee contributes
the premium.
Additional Premium Payments contributed solely by Midland National Life
will be paid into the employee's policy during the first year. 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
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 LLP, independent auditors, for the periods
indicated in their report which appears in this prospectus and in the
registration statement. The address for PricewaterhouseCoopers 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.
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
Michael M. Masterson
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193-0001
Chairman of the Board, President and Chief Executive Officer
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; 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
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
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
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
Stephen P. Horvat, Jr. Midland National Life
Senior Vice President
Senior Vice President (January 1997 to present), Midland National Life
Insurance Company; Shareholder (June 1996 to December 1997), Sorling
Law Firm; Sernior 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
Vice President, Secretary, and General Counsel
Vice President, Secretary and General Counsel (since 1978), Midland
National Life Insurance Company
Gary W. Helder
Midland National Life
Vice President- Policy Administration
Vice President-Policy Administration (since 1991), Midland National
Life Insurance Company
Robert W. Buchanan
Midland National Life
Vice President- Marketing Services
Vice President-Marketing Services (March 1996 to present), Second Vice
President-Sales Development (prior thereto), Midland National Life
Insurance Company
Thomas M. Meyer
Midland National Life
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; 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.
Illustrations
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 two insureds 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 the following pages illustrate the following examples:
* Death Benefit Option 1 Standard Corridor Percentage Table, Face
Amount $1,000,000, Annual Premium $15,000, male preferred non-smoker
issue age 55 and a female preferred non-smoker issue age 55 (both
current and guaranteed charges).
* Death Benefit Option 2 Standard Corridor Percentage Table, Face
Amount $1,000,000, Annual Premium $30,000, male preferred non-smoker
issue age 55 and a female preferred non-smoker issue age 55 (both
current and guaranteed charges).
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 until the
end of the surrender charge period (earlier of the end of 15 policy
years or the attained Joint Equal Age of 95) due to the surrender
charge. For contract years after the expiration of the surrender charge
period, 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 Commissioner's 1980
Standard Ordinary Mortality Table. The fifth and eighth columns
illustrate the death benefit of a contract over the designated period.
The illustrations of death benefits reflect the same assumptions as the
cash value and cash surrender values. The illustrations shown are those
for Death Benefit Options 1 and 2 using The Standard Corridor Table.
The death benefits and cash values vary values also vary between
tables, depending upon whether Option 1 or Option 2 death benefits are
illustrated and depending on whether the standard or if the enhanced
corridor table has been selected. A personalized illustration will be
provided upon request. Please contact your Agent or Midland at the
Executive Office if you would like to request one.
The amounts shown for the death benefit, cash values, and cash
surrender values reflect the fact that the net hyopthetical investment
return of the divisions of our Separate Account is lower than the
hyopthetical 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
2.25% sales charge deduction from each premium, the 2.25% state premium
tax deduction and the 1.5% federal tax charge from each premium, the
$10.00 per month policy charge (for the first ten years on a current
basis) (on a current basis this is $10/month in years 1-10 and $5/month
thereafter) the expense charge, 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% 0.80% 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,
1998). The actual fees and expenses associated with the contract may be
more or less than .76% 0.80% and will depend on how allocations are
made to each investment division. The MFS VIT New Discovery, The Lord
Abbett VC Mid-Cap Value and The Lord Abbett VC International portfolios
contains an expense reimbursement arrangement whereby the portfolios
expenses have a limit. Without this arrangement, expenses would be
higher and the average of 0.80% would be higher. This would result in
lower values than what are shown in the illustrations. Midland cannot
predict whether such arrangements will continue. See footnotes (2) and
(5) on pages 25 and 26 for further information on the limits on other
expenses. 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 .50% (.25% after year 10 on both a current and
guaranteed basis) of the average net assets of the divisions of
Separate Account A. After deductions of these amounts, the illustrated
gross investment rates of 0%, 6%, and 12% correspond to approximate net
annual rates of -1.26% -1.30% , 4.74% 4.70%, and 10.74%,
10.70% respectively (-1.01%, 4.99%, 10.99%
- -1.05%, 4.95%, and 10.95% after year 10).
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 - VSL
DEATH BENEFIT OPTION 1 STANDARD CORRIDOR TABLE FACE AMOUNT: $1,000,000
MALE PREFERRED NON-SMOKER ISSUE AGE 55 FEMALE PREFERRED NON-SMOKER
ISSUE AGE 55
ASSUMED ANNUAL PREMIUM(1): $15,000 HYPOTHETICAL GROSS AMOUNT ANNUAL
RATE OF PREMIUM RETURN: 0%
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED CASH CASH
OF AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFIT(2) VALUE(2) VALUE(2) BENEFIT(2)
1 15,750 11,889 0 1,000,000 11,840 0 1,000,000
2 32,288 23,615 9,015 1,000,000 23,409 8,809 1,000,000
3 49,652 35,178 21,308 1,000,000 34,687 20,817 1,000,000
4 67,884 46,576 33,436 1,000,000 45,653 32,513 1,000,000
5 87,029 57,803 45,393 1,000,000 56,279 43,869 1,000,000
6 107,130 68,867 57,187 1,000,000 66,531 54,851 1,000,000
7 128,237 79,778 68,828 1,000,000 76,362 65,412 1,000,000
8 150,398 90,522 80,302 1,000,000 85,711 75,491 1,000,000
9 173,668 101,099 91,609 1,000,000 94,497 85,007 1,000,000
10 198,102 111,507 102,747 1,000,000 102,633 93,873 1,000,000
11 223,757 124,028 115,998 1,000,000 112,218 104,188 1,000,000
12 250,695 136,367 129,067 1,000,000 120,957 113,657 1,000,000
13 278,979 148,502 141,932 1,000,000 128,746 122,176 1,000,000
14 308,678 160,417 154,577 1,000,000 135,463 129,623 1,000,000
15 339,862 172,066 169,146 1,000,000 140,947 138,027 1,000,000
16 372,605 183,408 183,408 1,000,000 144,982 144,982 1,000,000
17 406,986 194,436 194,436 1,000,000 147,272 147,272 1,000,000
18 443,085 205,109 205,109 1,000,000 147,427 147,427 1,000,000
19 480,989 215,379 215,379 1,000,000 144,971 144,971 1,000,000
20 520,789 225,190 225,190 1,000,000 139,367 139,367 1,000,000
21 562,578 234,466 234,466 1,000,000 130,023 130,023 1,000,000
22 606,457 243,102 243,102 1,000,000 116,282 116,282 1,000,000
23 652,530 250,969 250,969 1,000,000 97,395 97,395 1,000,000
24 700,906 257,927 257,927 1,000,000 72,439 72,439 1,000,000
25 751,702 263,810 263,810 1,000,000 40,176 40,176 1,000,000
30 1,046,412 267,369 267,369 1,000,000 0 0 0
35 1,422,545 179,430 179,430 1,000,000 0 0 0
40 1,902,596 0 0 0 0 0 0
45 2,515,277 0 0 0 0 0 0
1. ASSUMES A $15,000 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 CASH VALUE , 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 - VSL
DEATH BENEFIT OPTION 1 STANDARD CORRIDOR TABLE FACE AMOUNT: $1,000,000
MALE PREFERRED NON-SMOKER ISSUE AGE 55 FEMALE PREFERRED NON-SMOKER
ISSUE AGE 55
ASSUMED ANNUAL PREMIUM(1): $15,000 HYPOTHETICAL GROSS AMOUNT ANNUAL
RATE OF PREMIUM RETURN: 6%
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED CASH CASH
OF AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFIT(2) VALUE(2) VALUE(2) BENEFIT(2)
1 15,750 12,669 0 1,000,000 12,618 0 1,000,000
2 32,288 25,925 11,325 1,000,000 25,709 11,109 1,000,000
3 49,652 39,792 25,922 1,000,000 39,271 25,401 1,000,000
4 67,884 54,297 41,157 1,000,000 53,302 40,162 1,000,000
5 87,029 69,460 57,050 1,000,000 67,791 55,381 1,000,000
6 107,130 85,320 73,640 1,000,000 82,725 71,045 1,000,000
7 128,237 101,914 90,964 1,000,000 98,075 87,125 1,000,000
8 150,398 119,265 109,045 1,000,000 113,799 103,57 1,000,000
9 173,668 137,405 127,915 1,000,000 129,835 120,34 1,000,000
10 198,102 156,368 147,608 1,000,000 146,113 137,353 1,000,000
11 223,757 178,650 170,620 1,000,000 164,924 156,894 1,000,000
12 250,695 201,988 194,688 1,000,000 183,985 176,685 1,000,000
13 278,979 226,414 219,844 1,000,000 203,225 196,655 1,000,000
14 308,678 251,970 246,130 1,000,000 222,563 216,723 1,000,000
15 339,862 278,671 275,751 1,000,000 241,886 238,966 1,000,000
16 372,605 306,540 306,540 1,000,000 261,036 261,036 1,000,000
17 406,986 335,640 335,640 1,000,000 279,796 279,796 1,000,000
18 443,085 366,005 366,005 1,000,000 297,881 297,881 1,000,000
19 480,989 397,672 397,672 1,000,000 314,948 314,948 1,000,000
20 520,789 430,684 430,684 1,000,000 330,628 330,628 1,000,000
21 562,578 465,074 465,074 1,000,000 344,529 344,529 1,000,000
22 606,457 500,876 500,876 1,000,000 356,244 356,244 1,000,000
23 652,530 538,124 538,124 1,000,000 365,324 365,324 1,000,000
24 700,906 576,871 576,871 1,000,000 371,225 371,225 1,000,000
25 751,702 617,192 617,192 1,000,000 373,220 373,220 1,000,000
30 1,046,412 846,968 846,968 1,000,000 274,015 274,015 1,000,000
35 1,422,545 1,145,865 1,145,865 1,203,158 0 0 0
40 1,902,596 1,523,885 1,523,885 1,539,124 0 0 0
45 2,515,277 2,021,627 2,021,627 2,021,627 0 0 0
1. ASSUMES A $15,000 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 CASH VALUE , 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 - VSL
DEATH BENEFIT OPTION 1 STANDARD CORRIDOR TABLE FACE AMOUNT: $1,000,000
MALE PREFERRED NON-SMOKER ISSUE AGE 55 FEMALE PREFERRED NON-SMOKER
ISSUE AGE 55
ASSUMED ANNUAL PREMIUM(1): $15,000 HYPOTHETICAL GROSS AMOUNT ANNUAL
RATE OF PREMIUM RETURN: 12%
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED CASH CASH
OF AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFIT(2) VALUE(2) VALUE(2)BENEFIT(2)
1 15,750 13,450 0 1,000,000 13,398 0 1,000,000
2 32,288 28,330 13,730 1,000,000 28,105 13,505 1,000,000
3 49,652 44,791 30,921 1,000,000 44,239 30,369 1,000,000
4 67,884 62,999 49,859 1,000,000 61,927 48,787 1,000,000
5 87,029 83,131 70,721 1,000,000 81,306 68,896 1,000,000
6 107,130 105,401 93,721 1,000,000 102,522 90,842 1,000,000
7 128,237 130,044 119,094 1,000,000 125,730 114,780 1,000,000
8 150,398 157,302 147,082 1,000,000 151,088 140,868 1,000,000
9 173,668 187,452 177,962 1,000,000 178,761 169,271 1,000,000
10 198,102 220,801 212,041 1,000,000 208,933 200,173 1,000,000
11 223,757 260,376 252,346 1,000,000 244,403 236,373 1,000,000
12 250,695 304,247 296,947 1,000,000 283,207 275,907 1,000,000
13 278,979 352,871 346,301 1,000,000 325,694 319,124 1,000,000
14 308,678 406,764 400,924 1,000,000 372,270 366,430 1,000,000
15 339,862 466,483 463,563 1,000,000 423,396 420,476 1,000,000
16 372,605 532,661 532,661 1,000,000 479,606 479,606 1,000,000
17 406,986 606,037 606,037 1,000,000 541,524 541,524 1,000,000
18 443,085 687,425 687,425 1,000,000 609,912 609,912 1,000,000
19 480,989 777,750 777,750 1,000,000 685,745 685,745 1,000,000
20 520,789 878,067 878,067 1,000,000 770,312 770,312 1,000,000
21 562,578 989,575 989,575 1,039,054 865,324 865,324 1,000,000
22 606,457 1,113,306 1,113,306 1,168,972 972,995 972,995 1,021,645
23 652,530 1,250,501 1,250,501 1,313,026 1,093,096 1,093,096 1,147,751
24 700,906 1,402,601 1,402,601 1,472,730 1,225,736 1,225,736 1,287,023
25 751,702 1,571,193 1,571,193 1,649,753 1,372,119 1,372,119 1,440,725
30 1,046,412 2,728,778 2,728,778 2,865,216 2,357,887 2,357,887 2,475,781
35 1,422,545 4,640,562 4,640,562 4,872,590 3,915,320 3,915,320 4,111,085
40 1,902,596 7,813,035 7,813,035 7,891,166 6,456,848 6,456,848 6,521,416
45 2,515,277 13,232,729 13,232,729 13,232,729 10,952,221 10,952,221 10,952,221
1. ASSUMES A $15,000 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 CASH VALUE , 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 - VSL
DEATH BENEFIT OPTION 2 STANDARD CORRIDOR TABLE FACE AMOUNT: $1,000,000
MALE PREFERRED NON-SMOKER ISSUE AGE 55 FEMALE PREFERRED NON-SMOKER
ISSUE AGE 55
ASSUMED ANNUAL PREMIUM(1): $30,000 HYPOTHETICAL GROSS AMOUNT ANNUAL
RATE OF PREMIUM RETURN: 0%
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED CASH CASH
OF AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFIT(2) VALUE(2) VALUE(2) BENEFIT(2)
1 31,500 25,806 11,206 1,025,806 25,756 11,156 1,025,756
2 64,575 51,267 36,667 1,051,267 51,056 36,456 1,051,056
3 99,304 76,386 62,516 1,076,386 75,881 62,011 1,075,881
4 135,769 101,164 88,024 1,101,164 100,204 87,064 1,100,204
5 174,057 125,594 113,184 1,125,594 123,997 111,587 1,123,997
6 214,260 149,688 138,008 1,149,688 147,218 135,538 1,147,218
7 256,473 173,457 162,507 1,173,457 169,815 158,865 1,169,815
8 300,797 196,889 186,669 1,196,889 191,716 181,496 1,191,716
9 347,337 219,984 210,494 1,219,984 212,826 203,336 1,212,826
10 396,204 242,742 233,982 1,242,742 233,042 224,282 1,233,042
11 447,514 267,809 259,779 1,267,809 254,799 246,769 1,254,799
12 501,389 292,550 285,250 1,292,550 275,440 268,140 1,275,440
13 557,959 316,939 310,369 1,316,939 294,832 288,262 1,294,832
14 617,357 340,957 335,117 1,340,957 312,822 306,982 1,312,822
15 679,725 364,546 361,626 1,364,546 329,216 326,296 1,329,216
16 745,211 387,649 387,649 1,387,649 343,754 343,754 1,343,754
17 813,972 410,257 410,257 1,410,257 356,090 356,090 1,356,090
18 886,170 432,307 432,307 1,432,307 365,779 365,779 1,365,779
19 961,979 453,736 453,736 1,453,736 372,300 372,300 1,372,300
20 1,041,578 474,460 474,460 1,474,460 375,100 375,100 1,375,100
21 1,125,156 494,371 494,371 1,494,371 373,617 373,617 1,373,617
22 1,212,914 513,318 513,318 1,513,318 367,306 367,306 1,367,306
23 1,305,060 531,115 531,115 1,531,115 355,631 355,631 1,355,631
24 1,401,813 547,558 547,558 1,547,558 338,013 338,013 1,338,013
25 1,503,404 562,410 562,410 1,562,410 313,743 313,743 1,313,743
30 2,092,824 599,356 599,356 1,599,356 55,334 55,334 1,055,334
35 2,845,090 518,571 518,571 1,518,571 0 0 0
40 3,805,193 239,676 239,676 1,239,676 0 0 0
45 5,030,555 0 0 0 0 0 0
1. ASSUMES A $30,000 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 CASH VALUE , 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 - VSL
DEATH BENEFIT OPTION 2 STANDARD CORRIDOR TABLE FACE AMOUNT: $1,000,000
MALE PREFERRED NON-SMOKER ISSUE AGE 55 FEMALE PREFERRED NON-SMOKER
ISSUE AGE 55
ASSUMED ANNUAL PREMIUM(1): $30,000 HYPOTHETICAL GROSS AMOUNT ANNUAL
RATE OF PREMIUM RETURN: 6%
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED CASH CASH
OF AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFIT(2) VALUE(2) VALUE(2) BENEFIT(2)
1 31,500 27,432 12,832 1,027,432 27,380 12,780 1,027,380
2 64,575 56,144 41,544 1,056,144 55,923 41,323 1,055,923
3 99,304 86,193 72,323 1,086,193 85,655 71,785 1,085,655
4 135,769 117,640 104,500 1,117,640 116,601 103,461 1,116,601
5 174,057 150,538 138,128 1,150,538 148,779 136,369 1,148,779
6 214,260 184,964 173,284 1,184,964 182,199 170,519 1,182,199
7 256,473 220,995 210,045 1,220,995 216,857 205,907 1,216,857
8 300,797 258,691 248,471 1,258,691 252,728 242,508 1,252,728
9 347,337 298,125 288,635 1,298,125 289,763 280,273 1,289,763
10 396,204 339,374 330,614 1,339,374 327,899 319,139 1,327,899
11 447,514 385,471 377,441 1,385,471 369,906 361,876 1,369,906
12 501,389 433,786 426,486 1,433,786 413,075 405,775 1,413,075
13 557,959 484,397 477,827 1,484,397 457,315 450,745 1,457,315
14 617,357 537,394 531,554 1,537,394 502,510 496,670 1,502,510
15 679,725 592,832 589,912 1,592,832 548,487 545,567 1,548,487
16 745,211 650,769 650,769 1,650,769 595,001 595,001 1,595,001
17 813,972 711,312 711,312 1,711,312 641,702 641,702 1,641,702
18 886,170 774,522 774,522 1,774,522 688,116 688,116 1,688,116
19 961,979 840,458 840,458 1,840,458 733,662 733,662 1,733,662
20 1,041,578 909,162 909,162 1,909,162 777,691 777,691 1,777,691
21 1,125,156 980,652 980,652 1,980,652 819,507 819,507 1,819,507
22 1,212,914 1,054,902 1,054,902 2,054,902 858,393 858,393 1,858,393
23 1,305,060 1,131,846 1,131,846 2,131,846 893,595 893,595 1,893,595
24 1,401,813 1,211,393 1,211,393 2,211,393 924,279 924,279 1,924,279
25 1,503,404 1,293,413 1,293,413 2,293,413 949,421 949,421 1,949,421
30 2,092,824 1,729,773 1,729,773 2,729,773 938,535 938,535 1,938,535
35 2,845,090 2,153,159 2,153,159 3,153,159 533,636 533,636 1,533,636
40 3,805,193 2,458,514 2,458,514 3,458,514 0 0 0
45 5,030,555 2,292,579 2,292,579 3,292,579 0 0 0
1. ASSUMES A $30,000 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 CASH VALUE , 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 - VSL
DEATH BENEFIT OPTION 2 STANDARD CORRIDOR TABLE FACE AMOUNT: $1,000,000
MALE PREFERRED NON-SMOKER ISSUE AGE 55 FEMALE PREFERRED NON-SMOKER
ISSUE AGE 55
ASSUMED ANNUAL PREMIUM(1): $30,000 HYPOTHETICAL GROSS AMOUNT ANNUAL
RATE OF PREMIUM RETURN: 12%
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED CASH CASH
OF AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFIT(2) VALUE(2) VALUE(2) BENEFIT(2)
1 31,500 29,059 14,459 1,029,059 29,006 14,406 1,029,006
2 64,575 61,218 46,618 1,061,218 60,987 46,387 1,060,987
3 99,304 96,805 82,935 1,096,805 96,233 82,363 1,096,233
4 135,769 136,184 123,044 1,136,184 135,061 121,921 1,135,061
5 174,057 179,751 167,341 1,179,751 177,815 165,405 1,177,815
6 214,260 227,959 216,279 1,227,959 224,864 213,184 1,224,864
7 256,473 281,313 270,363 1,281,313 276,605 265,655 1,276,605
8 300,797 340,346 330,126 1,340,346 333,454 323,234 1,333,454
9 347,337 405,661 396,171 1,405,661 395,847 386,357 1,395,847
10 396,204 477,925 469,165 1,477,925 464,256 455,496 1,464,256
11 447,514 561,238 553,208 1,561,238 542,442 534,412 1,542,442
12 501,389 653,609 646,309 1,653,609 628,244 620,944 1,628,244
13 557,959 755,995 749,425 1,755,995 722,342 715,772 1,722,342
14 617,357 869,470 863,630 1,869,470 825,470 819,630 1,825,470
15 679,725 995,183 992,263 1,995,183 938,391 935,471 1,938,391
16 745,211 1,134,408 1,134,408 2,134,408 1,061,884 1,061,884 2,061,884
17 813,972 1,288,608 1,288,608 2,288,608 1,196,720 1,196,720 2,196,720
18 886,170 1,459,354 1,459,354 2,459,354 1,343,640 1,343,640 2,343,640
19 961,979 1,648,380 1,648,380 2,648,380 1,503,384 1,503,384 2,503,384
20 1,041,578 1,857,595 1,857,595 2,857,595 1,676,732 1,676,732 2,676,732
21 1,125,156 2,089,084 2,089,084 3,089,084 1,864,534 1,864,534 2,864,534
22 1,212,914 2,345,118 2,345,118 3,345,118 2,067,745 2,067,745 3,067,745
23 1,305,060 2,628,176 2,628,176 3,628,176 2,287,426 2,287,426 3,287,426
24 1,401,813 2,940,985 2,940,985 3,940,985 2,524,707 2,524,707 3,524,707
25 1,503,404 3,286,538 3,286,538 4,286,538 2,780,692 2,780,692 3,780,692
30 2,092,824 5,628,850 5,628,850 6,628,850 4,373,840 4,373,840 5,373,840
35 2,845,090 9,416,141 9,416,141 10,416,141 6,601,753 6,601,753 7,601,753
40 3,805,193 15,513,916 15,513,916 16,513,916 9,724,000 9,724,000 10,724,000
45 5,030,555 25,123,225 25,123,225 26,123,225 12,764,211 12,764,211 13,764,211
1. ASSUMES A $30,000 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 CASH VALUE , 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.
Beneficiary means the person or persons to whom the contract's death
benefit is paid when the Last Surviving 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, December 23,
1999 and December 31, 1999 . These days along with the days
the New YorkStock Exchange is not open for trading will not be counted
as Business Days.
Contract Fund Cash Value 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 Cash Value 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
Last Surviving Insured Person dies.
Evidence of Insurability means evidence, satisfactory to us, that the
insured person is insurable and meets our underwriting standards.
Executive Office means where you write to us to pay premiums or take
other action, such as transfers between investment divisions, changes
in Face Amount, or other such action regarding your contract. The
address is:
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
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.
In Force means the Insured Persons' lives remain 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: This is 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 the 6% deduction for the sales
charge, Federal taxes and state premium taxes, and less any per premium
expense charge.
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.
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 (the sales charge, 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.
Appendix A
Joint Equal Age Calculation
A Joint An Equal Age ( JEA EA ) calculation changes many possible
combinations of ages, risk classes, substandard ratings and sexes of
two lives into a single JEA EA which is used for setting various
charges and the minimum premium. Midland National Life's VSL product
uses the Joint Equal Age calculation shown below.
The surrender charges, the expense charge and the minimum premium are
based on the JEA EA of the policy at the time of issue. The steps to
calculating the JEA EA are as follows:
1. Smoker Adjustment. Adjust the age of any insured who is
classified as a Smoker as follows:
Male Female Unisex
+5 +3 +4
Note: The individual age cannot exceed 85 nor be less than 20
before adjustments.
The preferred class does not allow for individual ages which
exceed 80.
2. Female Adjustment. Reduce the age of all females by 5 years.
Reduce the age of all unisex by 1 year.
3. Table Rating Adjustment. Increase the age of any rated insureds
according to the following table.
Table Rating 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Unins
Age Increase 0 2 4 6 7 8 9 10 11 12 13 14 15 16 17 18 19 30
4. Cap Adjusted Age at 110. If the adjusted age for any individual
exceeds age 110, we will reduce the adjusted age to age 110.
5. Age Difference Adjustment. The ages need to be adjusted for the
difference in ages. After making the above adjustments, subtract the
younger age from the older age. Using the table below, find the Age
Difference Adjustment and add this to the younger Adjusted Age.
Age Age
Difference Adjustment Difference Adjustment
0 0 45-47 13
1-2 1 48-50 14
3-4 2 51-53 15
5-6 3 54-56 16
7-9 4 57-60 17
10-12 5 61-64 18
13-15 6 65-69 19
16-18 7 70-75 20
19-23 8 76-82 21
24-28 9 83-91 22
29-34 10 92-100 23
35-39 11
40-44 12
The Maximum JEA EA allowed is 85 and the minimum is 20.
JEA EA which do not fall into these limits do not qualify for issue.
Example 1: Assume the policy has a 55 year old Male Smoker who is
standard and a 63 year old Female Non-Smoker with a table 6 rating.
Male Female
Initial Age 55 63
Step 1 Adjustment +5 -
Step 2 Adjustment - -5
Step 3 Adjustment - +9
Total Step 1, 2 and 3 60 67
Step 4 Adjustment N/A
Step 5 Adjustment +4
Joint Equal Age is 64.
6730VLSL.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
5,385,315 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.
11. Event (Unaudited) Subsequent to the Date of the Independent
Auditor's Report:
Effective July 1, 1999, the Company changed its state of domicile
from South Dakota to Iowa. The change will have no impact on the
Company's business operations. The change was approved by both
states.
The Company is currently negotiating for the purchase of an insurance
Company and a block of insurance business which represent approximately
$800 million of individual annuity contracts. On August 24, 1999, the
Company signed a stock purchase agreement to purchase substantially all
of the stock of the insurance company.
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 53 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 5
(b) Sutherland Asbill & Brennan L L P 5
(c) PricewaterhouseCoopers L L P 5
(d) Timothy A. Reuer 5
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. 3
(2) Not applicable.
(3) (a) Principal Underwriting Agreement. 1
(b) Selling Agreement. 1
(c) Commission schedule. 5
(4) Not applicable.
(5) Form of Contract. 5
1 Filed previously in Pre-Effective Amendment No. 1 for Form S-6 File
No. 333-14061 on January 31, 1997.
2 Filed previously in Pre-Effective Amendment No. 2 for Form S-6 File
No. 333-14061 on April 23, 1997.
3 Filed previously in Post Effective Amendment No. 1 for Form S-6 File
No. 333-14061 on April 28, 1998.
4 Filed previously in Post Effective Amendment No. 3 for Form S-6 File
No. 333-14061 on April 29, 1999.
5 Filed herein.
- --------------
<PAGE>
(6) (a) Articles of Incorporation of Midland National Life. 3
(b) By-Laws of Midland National Life. 3
(7) Not applicable.
(8) (a) Participation Agreements for Fidelity Distributors
Corporation/Variable Insurance Products Fund,
and Variable Products Fund II. 2
(b) Amendments to Participation Agreements for Fidelity
Distributors Corporation/Variable Insurance Products Fund,
and Variable Products Fund II. 2
(c) Participation Agreement for Fidelity Distributors
Corporation/Variable Insurance Products Fund III. 3
(d) Participation Agreement for American Century Investment
Services, Inc. 2
(e) Participation Agreement for Lord Abbett Series Funds, Inc. 4
(f) Amendments to Participation Agreement for Lord Abbett
Series Funds, Inc. 5
(g) Participation Agreement for Massachusetts Financial Variable
Insurance Trusts. 4
(9) Not applicable.
(10) Application Form. 5
(11) Memorandum describing Midland National Life's issuance, transfer
and redemption procedures for the Contract. 5
2. See Exhibit 1(5).
---
3. Opinion and Consent of Jack L. Briggs. 5
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 Timothy A. Reuer. 5
7. Consent of Sutherland Asbill & Brennan L L P 5
8. Consent of PricewaterhouseCoopers L L P 5
1 Filed previously in Pre-Effective Amendment No. 1 for Form S-6 File
No. 333-14061 on January 31, 1997.
2 Filed previously in Pre-Effective Amendment No. 2 for Form S-6 File
No. 333-14061 on April 23, 1997.
3 Filed previously in Post Effective Amendment No. 1 for Form S-6 File
No. 333-14061 on April 28, 1998.
4 Filed previously in Post Effective Amendment No. 3 for Form S-6 File
No. 333-14061 on April 29, 1999.
5 Filed herein.
CONVLSL.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, all in Sioux Falls, South Dakota, on the 27th day of August,
1999.
Midland National Life Separate Account A
(Seal) By: Midland National Life Insurance Company
By:_/s/ Michael M. Masterson__
President
Pursuant to the requirements of the Securities Act of 1933, Midland
National Life Insurance Company 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, all in Sioux
Falls, South Dakota on the 27th day of August, 1999.
(Seal) By: Midland National Life Insurance Company
By:__/s/ Michael M. Masterson ____
President
Signature Title Date
--------- ----- ----
/s/_ Michael M. Masterson Director, Chairman of the August 27, 1999
Michael M. Masterson Board, Chief Executive
Officer and President
_/s/ John J. Craig II Director, Executive Vice August 27, 1999
John J. Craig II President
_/s/ Steven C. Palmitier Director, Senior Vice August 27, 1999
Steven C. Palmitier President and Chief
Marketing Officer
_/s/ Stephen P. Horvat, Jr. Director, Senior Vice August 27, 1999
Stephen P. Horvat, Jr. President - Legal
_/s/ Thomas M. Meyer Vice President and August 27, 1999
Thomas M. Meyer Chief Financial
Officer
_____________________ Director and Vice President August 27, 1999
Robert W. Korba
VLSLSIG1.TXT
<PAGE>
Registration No. 333-80975
PRE-EFFECTIVE AMENDMENT NO.1
________________________________________________________________________________
- --------------------------------------------------------------------------------
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
____________________________________
________________________________________________________________________________
- --------------------------------------------------------------------------------
VLSLEXH.txt
<PAGE>
EXHIBIT INDEX
Exhibit
_________
1 (3) (c) Commission Schedule
1 (5) Form of Contract
1 (8) (f) Amendment to Participation Agreement - Lord Abbett
1 (10) Application Form
1 (11) Memo describing issuance, transfer and redemption
procedures for the Contract.
3 Opinion and Consent of Jack Briggs
6 Opinion and Consent of Timothy Reuer
7 Consent of Sutherland Asbill and Brennan L L P
8 Consent of PricewaterhouseCoopers L L P
<PAGE>
INDXVLSL.txt
1st YEAR COMMISSION
% of % of
1st Year 1st Year Renewal Renewal Service
Premium Premium Commission Bonus Fees
(up to (over (Yrs. 2-10) (Yrs. 2-10) (Yrs. 11+)
Target Target % of % of % of
Product Name Premium) Premium) Premium Premium Premium
Last Survivor Life:
Age at Issue:
25-70 67 2.5 2.5 2 1.5
71-75 60 1.0 1.0 2 1.5
Joint MNL's VSUL
Equal Age Target Premium
20 2.65
21 2.73
22 2.81
23 2.89
24 2.98
25 3.07
26 3.16
27 3.25
28 3.35
29 3.45
30 3.55
31 3.66
32 3.77
33 3.88
34 4.04
35 4.21
36 4.38
37 4.56
38 4.75
39 4.95
40 5.15
41 5.37
42 5.59
43 5.82
44 6.20
45 6.60
46 7.03
47 7.49
48 7.98
49 8.50
50 9.05
51 9.64
52 10.27
53 10.94
54 11.94
55 13.03
56 14.21
57 15.45
58 16.70
59 17.96
60 19.23
61 20.51
62 21.79
63 23.08
64 24.38
65 25.69
66 27.01
67 28.34
68 29.68
69 31.03
70 32.38
71 33.73
72 35.08
73 36.43
74 37.77
75 39.08
76 40.36
77 41.60
78 42.79
79 43.92
80 44.98
81 46.00
82 47.00
83 48.00
84 49.00
85 50.00
VLSLCOMSCHD.txt
<PAGE>
MIDLAND NATIONAL LIFE INSURANCE COMPANY
A Stock Company
Principal Office: 7755 Office Plaza Drive, West Des Moines, Iowa 50266
In this Contract, the terms "We", "Our", and "Us" are
used to refer to Midland National Life Insurance Company; the
terms "You" and "Your" refer to the Owner or Owners of this Contract.
We agree to pay the Proceeds of this Contract to the Beneficiary
if We receive due proof of both Insureds' death prior to the Maturity
Date and while this Contract is in force. If at least one Insured
is living on the Maturity Date, We will pay the Net Cash Surrender
Value to You. Other rights and benefits will be provided according
to the terms of this Contract.
This Contract is a legal contract between You and Midland
National Life Insurance Company. READ YOUR CONTRACT CAREFULLY. A
guide to its contents is on Page 2. A summary is on Page 3.
If there is a question about it, or if there is a claim, contact
Your Midland Agent or Our Executive Office.
Right To Examine Contract
You may examine this Contract and if for any reason You are not
satisfied with it, You may return it to Us by delivering or mailing it
to the Agent through whom it was purchased or to Our Administrative
Office. This must be done by the later of the 10th day after You
receive it or the 45th day after Part 1 of the application was signed.
We will then deem this Contract void from the start and refund the
Contract Fund plus the sum of all charges deducted from Your premiums,
the Contract Fund and the Investment Divisions.
Signed for the Company at its Principal Office on the Contract Date.
LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
Proceeds Payable Upon Survivor's Death Prior to the Maturity Date.
Adjustable Death Benefit. Contract Values will Reflect the Investment
Experience of Our Separate Account and Interest Earned in the General
Account. Flexible Premiums Payable Prior to the Survivor's Death, or
Prior to the Maturity Date. Non-Participating.
2. Table of Surrender Charges
The factors shown below are used to calculate the Surrender Charge as
described in the Surrender Charge section of the Contract Values provision.
Contract Surrender
Year Charge
Factor
1 $ 5.20
2 5.20
3 4.94
4 4.68
5 4.42
6 4.16
7 3.90
8 3.64
9 3.38
10 3.12
11 2.86
12 2.60
13 2.34
14 2.08
15 1.04
After 15 0.00
3. Table of Guaranteed Monthly Risk Rates
The rates shown below are used to calculate the Risk Charge as described in
the Risk Charge section of the Contract Values provision.
Contract Guaranteed Contract Guaranteed
Year Risk Rate Year Risk Rate
1 0.000218 34 0.718141
2 0.000704 35 0.841389
3 0.001290 36 0.987922
4 0.001994 37 1.165251
5 0.002835 38 1.382146
6 0.003881 39 1.644712
7 0.005117 40 1.955245
8 0.006579 41 2.314048
9 0.008297 42 2.719877
10 0.010301 43 3.172450
11 0.012687 44 3.675995
12 0.015476 45 4.242810
13 0.018746 46 4.890227
14 0.022562 47 5.635498
15 0.027066 48 6.495043
16 0.032431 49 7.469612
17 0.038838 50 8.549219
18 0.046595 51 9.718637
19 0.055937 52 10.965037
20 0.066909 53 12.276815
21 0.079897 54 13.647641
22 0.094917 55 15.084452
23 0.111974 56 16.596277
24 0.131620 57 18.211937
25 0.154798 58 19.985889
26 0.182371 59 22.047174
27 0.215613 60 24.687958
28 0.256529 61 28.478876
29 0.306836 62 34.519571
30 0.367052 63 44.775873
31 0.437834 64 61.995404
32 0.519446 65 83.333333
33 0.612308 66+ 0
4. Policy Specifications
Premium Load. The Premium Load will be equal to:
a. Sales Load of 2.25 percent; plus
b. Premium tax of 2.25 percent; plus
c. Federal Tax of 1.5 percent.
Policy Load. The annual Policy Load will not be more than:
a. $120; plus
b. An annual Expense Amount.
The annual Expense Amount is equal to:
a. $0.84 multiplied by
b. The number of thousands of Specified Amount then
in effect.
The Expense Amount is only present during the first ten
Contract Years.
General Account Interest Rate. The interest rate credited
to the General Account will not be less than 3.5 percent.
Maximum Loan Interest Rate. The maximum interest rate that We
will charge on Contract Loans is an effective rate of 8 percent
per year from the date of the loan.
Mortality and Expense Charge. The Mortality and Expense Charge is
a daily charge equivalent to an effective annual rate of 0.50
percent for Contract Years one through ten. We will charge
0.25 after the tenth Contract Year.
Policy Specifications continued
Standard Death Benefit
Corridor Percentage Table
Youngest Insured's Youngest Insured's
Attained Age Percentage Attained Age Percentage
0-40 250% 60 130%
41 243% 61 128%
42 236% 62 126%
43 229% 63 124%
44 222% 64 122%
45 215% 65 120%
46 209% 66 119%
47 203% 67 118%
48 197% 68 117%
49 191% 69 116%
50 185% 70 115%
51 178% 71 113%
52 171% 72 111%
53 164% 73 109%
54 157% 74 107%
55 150% 75-90 105%
56 146% 91 104%
57 142% 92 103%
58 138% 93 102%
59 134% 94 101%
95+ 100%
Contract Summary
We offer this summary to help You understand this Contract.
This summary does not go into detail. We do not intend that it
change any of the provisions of this Contract. You should read the
actual provisions for full information and any limits which may
apply. The "Contract Provisions" section on the inside of the
front cover shows where the provisions may be found.
This is a Contract of life insurance. We will pay a death
benefit (Proceeds) if both Insureds die while this Contract is in
force. This money often is not taken in one sum. For all or part
of it, another form of payment may be available. If the Survivor
dies and the choice of payment has not been made, the person who
is entitled to receive the money may be able to make the choice
of payment.
Premium payments for this Contract are flexible. We allow an
extra 61 days (Grace Period) beyond the first Monthly Anniversary on
which the Net Cash Surrender Value is insufficient to cover the
Monthly Deduction for payment of enough premium to keep the Contract
in force. If the Additional Required Premium is not paid by the end
of the Grace Period, all coverage under this Contract ends.
This Contract has guaranteed Cost of Insurance Rates. Rates more
favorable than these may be declared by Us. Your Contract Fund will
change in proportion to the investment experience of the Investment
Divisions You have chosen.
There are other rights available to You.
Unless We amend it to say otherwise, this Contract
gives You these rights among others:
a. You may request a change in the Death Benefit;
b. You may assign the Contract;
c. You may change the Owner or Beneficiary; or
d. You may borrow or withdraw part or all of the Net Cash Surrender
Value.
This Contract, as issued, may or may not have extra benefits. If it
does, We add them by Rider.
Definitions
Some of the main words and phrases used in this Contract are defined
here. Many other words and phrases are explained in the Contract
provisions themselves.
Executive Office - Our Executive Office is:
One Midland Plaza, Sioux Falls, South Dakota, 57193.
Principal Office - Our Principal Office is:
7755 Office Plaza Drive, West Des Moines, Iowa 50266.
Insureds - the persons whose lives are insured by
this basic Contract (not including Riders). The Insureds are specified
on the Contract Information page. They need not be the Owner.
Suppose We issue a Contract on the life of Your father and mother. You
applied for it and named no one else as Owner. Your parents are the
Insureds and You are the Owner.
Survivor - the Insured who is living after the
death of the other Insured. The first death of the two Insureds must
occur while this Contract is in force. If both Insureds die simultaneously
or in circumstances where it is not clear which Insured died first, the
older of the two Insureds will be deemed to be the Survivor.
Attained Age - the Issue Age, as shown on Page
1, plus the number of completed Contract Years since the Contract Date.
Owner - the person who has control of the rights and values
provided in this Contract. Often an Insured is the Owner, but not
always. There may also be more than one Owner. The Owner or Owners
are specified on the Contract Information page. "You" or "Your" is used
to refer to the Owner or Owners in this Contract.
Beneficiary - as specified in the application unless changed
as provided in this contract.
Policy - this basic document plus any amendments, but
excluding the application or any Riders.
Contract - this Policy, plus any endorsements, and Riders.
"Contract" also includes the application, and any future supplemental
applications for changes in Specified Amount.
Record Date - the date the Contract is recorded on Our
books as an in force Contract.
Rider(s) - the form(s) attached to this Contract
which describe any additional benefits provided by Rider.
Anniversary or Contract Anniversary - the same month
and day as the Contract Date, in each later year.
If the Contract Date is June 3, 2000, the first Anniversary is
June 3, 2001; the second Anniversary is June 3, 2002, and so on.
Contract Year - a year which begins on an Anniversary.
If the Contract Date is June 3, 2000, the first Contract Year
starts on June 3, 2000, and ends on June 2, 2001, the second
Contract Year starts on June 3, 2001, and ends on June 2, 2002,
and so on.
Monthly Anniversary - the day of each month that has the
same numerical date as the Contract Date.
Contract Month - a month which begins on a Monthly
Anniversary.
If the Contract Date is June 3, 2000, the first Contract Month
starts on June 3, 2000, and ends on July 2, 2000; the second
Contract Month starts on July 3, 2000, and ends on August 2, 2000,
and so on.
Business Day - a day when We and the New York Stock Exchange
are open for business.
Valuation Period - A Valuation Period is the interval of
time beginning at the close of the New York Stock Exchange on each
Business Day and ending at the close of the New York Stock Exchange on
the next Business Day.
Premiums
Payment of Premiums. You may pay any amount over $50
subject to the Maximum Premium Limit. In addition, the premium You
pay must exceed the Minimum Premium.
The first premium is due on the Contract Date. You may pay premiums
after the first at any time. We will send premium notices to You annually,
semi-annually, or quarterly. You may also pay premiums using a monthly
automatic payment plan. You may ask Us to change the amount or frequency
of the payments as long as the amount is more than $50 but less than the
Maximum Premium Limit. Premiums must be paid to Us at Our Executive
Office.
Maximum Premium Limit. Federal law limits the premiums
that can be paid if this Contract is to qualify as life insurance for
tax purposes. We will not accept a premium which would cause this
limitation to be violated. If We accept a premium in error, We will
refund it as soon as the error is discovered. We will accept any premium
which is necessary to keep this Contract in force.
Additional Information regarding Maximum Premiums and their affect
on the qualification of this Contract as life insurance for tax purposes
will be provided upon request.
Minimum Premium Period.
The Minimum Premium Period is the time from the Contract Date to the
fifth Anniversary. Regardless of the amount of Net Cash Surrender Value,
this Contract is guaranteed to remain in force during the Minimum Premium
Period if the sum of the premiums paid, less any Contract Debt and any
withdrawals, is equal to or greater than the Minimum Premium Requirement.
Minimum Premium Requirement.
The Minimum Premium Requirement is:
a. The Minimum Premium shown on Page 1, times
b. The number of Contract Months completed plus one.
Continuation of Insurance. Even if You stop paying premiums, this
Contract will continue as long as:
a. The Net Cash Surrender Value is sufficient to make Monthly
Deductions, or
b. The Contract is within the Minimum Premium Period and the sum of the
premiums paid less any Contract Debt and any withdrawals is equal to
or greater than the Minimum Premium Requirement.
Grace Period. Before this Contract will terminate for insufficient
payment of premium, a Grace Period of 61 days will be given for the payment
of additional premiums. The Grace Period will begin on any Monthly
Anniversary where this Contract does not meet the conditions in a. or b.
of the Continuation of Insurance section. If the Grace Period expires
without payment of the Additional Required Premium, this contract will
terminate at the end of the Grace Period without value.
At least 30 days before this Contract ends without value, We will mail
to Your last known address a notice showing the Additional Required Premium.
We will send a copy of the notice to the last known address of any assignee
of record. That premium will be due on the date the Grace Period began.
Additional Required Premium. If this Contract is within the
Minimum Premium Period, the Additional Required Premium to keep this
Contract in force will be the lesser of:
a. The Minimum Premium Requirement at the beginning of the Grace Period,
plus any Contract Debt and withdrawals, less the sum of the premiums
paid; and
b. The premium needed to increase the Net Cash Surrender Value to an
amount that allows the Monthly Deduction to be made.
If the Contract is beyond the Minimum Premium Period, the Additional
Required Premium will be the premium needed to increase the Net Cash
Surrender Value to an amount that allows the Monthly Deduction to be made.
Reinstatement. If the Grace Period expires without payment of the
Additional Required Premium, this Contract may be reinstated within five years
after its expiration. Reinstatement is subject to these conditions:
a. Receipt by Us of Your application for reinstatement;
b. Receipt by Us of satisfactory evidence of both Insureds'
insurability;
c. Payment of a premium that is enough to keep the Contract
in force for two months following reinstatement;
d. Payment or restoration of any Contract Debt; and
e. Deduction from the Contract Fund of all overdue Monthly
Deductions.
If this Contract is reinstated during the Minimum Premium Period,
We will reinstate the Minimum Premium Guarantee Period, but in no event
will it extend beyond the fifth Anniversary. To reinstate the Minimum
Premium Period, the total premium paid less any Contract Debt or
withdrawals must exceed the Total Minimum Premium Requirement.
If this Contract is reinstated after the Minimum Premium Period, no
Minimum Premium Period will apply.
Reinstatement is effective on the first Monthly Anniversary
on or following Our approval of the reinstatement. The Surrender
Charge is not affected by Reinstatement.
Proceeds
We will pay the Proceeds when We receive proof of both Insureds'
death while this Contract is in force. Proof of death of the first
of the two insureds to die should be sent to Us within 90 days of
death.
Proceeds Defined. The Proceeds is the sum of:
a. The amount of the Death Benefit; and
b. Any benefit provided by Rider(s) at the death
of the Survivor; less:
c. Any Contract Debt; and
d. Any past due Monthly Deductions.
Death Benefit Defined. Under Death Benefit
Option 1, the Death Benefit is the greater of:
a. The Specified Amount; or
b. The Contract Fund multiplied by the Corridor Percentage
found in the Policy Specifications.
Under Death Benefit Option 2, the Death Benefit is the
greater of:
a. The Specified Amount plus the Contract Fund; or
b. The Contract Fund multiplied by the Corridor Percentage
found in the Policy Specifications.
You elect the Death Benefit Option in the application. If no
option is elected, Death Benefit Option 1 is the automatic option.
Corridor Percentage. The Corridor Percentage
is found in the Policy Specifications. As shown in this table, the
percentages change on each Contract Anniversary and vary with the attained
age of the youngest insured. These percentages are used in the calculation
of the death benefit as described in the Death Benefit Section. You
elect either the Standard or Enhanced Corridor Percentage in the
application. If no table is elected, the Standard table is automatically
assigned. Once the Corridor Percentage Table is established at issue, it
may not be changed.
Beneficiary
Designation. The Beneficiary named in the application
for this Contract will receive the Proceeds upon the death of the
Survivor unless You have changed this designation.
Change. You may change any Beneficiary designation while at
least one Insured is alive, unless the previous designation provides
otherwise. Such change will take effect only after We receive Your written
request in a form approved by Us. Any previous Beneficiary's interest will
end then even if the Survivor is not living when We receive the request. We
reserve the right to require that this Contract accompany such request.
Class of Beneficiary. The priority of a Beneficiary
may be shown by using numbered classes. The class of first priority
is called Class 1, the class of second priority is called Class 2,
and so on. The following statements apply to Beneficiaries unless
otherwise stated:
a. One will have the right to be paid only if he or she survives the
Survivor and only if no one in a prior class survives the Survivor;
b. One who has the right to be paid will be the only one paid
if no one else in the same class survives the Survivor;
c. Two or more in the same class who have the right to be
paid will be paid in equal shares, unless otherwise requested; and
d. If none survives the Survivor, the Owner or Owners will be paid.
If the Owner or Owners do not survive the Survivor, We will pay the
estate of the Owner or Owners.
Suppose the Class 1 Beneficiary is Jane and the Class 2
Beneficiaries are Paul and John. We owe Jane the Proceeds if she
is living at the Survivor's death. We owe Paul and John the
Proceeds if they are living then but Jane is not. But if only one
of them is living, We owe him the Proceeds. If none of them is
living, We owe the Owner or Owners.
Right to Change Death Benefit
Changes in Specified Amount. You may change the Specified
Amount while both Insureds are living. You must send Us a written
request for the change. You may not make changes more often than twice
a year. If We approve the change, We will send You an amended Contract
Information page. The amended Contract Information page will show the
change and the effective date of the change. Any change in Specified
Amount is subject to the following conditions:
a. If the Specified Amount is to be decreased:
1.The Specified Amount cannot be decreased to less than
$200,000;
2. The Specified Amount cannot be decreased to an amount that
would cause the Maximum Premium Limits to be violated;
3. All decreases in Specified Amount will decrease previous
increases in reverse order before decreasing the initial
Specified Amount; and
4. The Minimum Premium shown on Page 1 will not decrease.
b. If the Specified Amount is to be increased:
1. The Specified Amount can not be increased by less than $50,000;
2. The increase must be applied for on a supplemental application;
3. We will need satisfactory evidence of both Insureds'
insurability; and
4. The portion of the Specified Amount representing the increase may
be assigned a Premium Class different from the Premium Class assigned
to the original Specified Amount or to any other increases; and
5. The Minimum Premium shown on Page 1 will increase.
Changes in Death Benefit Option. You may make limited
changes to the Death Benefit Option while both Insureds are living.
You must send Us a written request for the change. The change will be
effective on the date shown on the amended Contract Information page.
We will require satisfactory evidence of both Insureds' insurability to
make this change. We will not allow a change if it would cause the
Maximum Premium Limits to be violated. The following describes the
changes We allow and how these changes affect Your Contract.
a. If the change is from Option 1 to Option 2, the Specified Amount
will be reduced to equal the current Specified Amount minus the
current Contract Fund. This change will not be allowed if it would
result in the Specified Amount being less than $200,000.
b. If the change is from Option 2 to Option 1, the Specified Amount
will be increased to equal the current Specified Amount plus the
current Contract Fund.
Changes in Corridor Percentage Table. You may not change
Corridor Percentage Tables.
Your Investment Options
The Separate Account
The Separate Account. The Separate Account is Our Separate
Account A, established under the Insurance Laws of the State of Iowa,
and is a unit investment trust registered with the SEC under the
Investment Company Act of 1940. It is also subject to the laws of
Iowa. We own the assets of the account; We keep them separate from the
assets of Our General Account. We established the account to support
variable life insurance contracts.
Initial Allocation. If any premium is received on or
prior to the Record Date, the Invested Premium will be allocated to
the General Account regardless of the allocation percentages You have
indicated. The day following the Record Date, the value in the General
Account will be reallocated among the Investment Divisions and the
General Account as specified by You in the application.
Allocations. The Separate Account has several Investment
Divisions. We list them on the application and in the Prospectus.
You determine, using percentages, how Invested Premiums will be allocated
to Our General Account or among the Investment Divisions. You may
choose to allocate nothing to Our General Account or to a particular
Investment Division. But any allocation You make must be at least 10
percent; You may not choose a fractional percent.
Example: You may choose a percentage of 0, or 100, or 10, 11, 12,
and so on, up to 90. But You may not choose a percentage of 1 through
9, or 91 through 99, or any percent that is not a whole number. The
total for all percentages must be 100 percent.
We reserve the right to limit the number of Investment Divisions in
which you have funds invested.
The allocation of Invested Premiums that took effect the day
following the Record Date is shown in the application. You may change
the allocation for future Invested Premiums at any time if the
Contract is in force. To do so, You must notify Us in writing in
a form that meets Our needs. The change will take effect on the date We
receive Your notice at Our Executive Office.
A premium might be paid when the Contract Fund amount is less than
zero. In that case, when We receive that premium, We first use as much
of the Invested Premium as We need to eliminate the deficit in the
Contract Fund. We will then allocate any remainder of the Invested
Premium in accordance with Your most recent request.
Deductions are made from the unloaned portion of the General
Account and the Investment Divisions of Our Separate Account for
cost of insurance, Policy Load and other fees. You determine,
using percentages, how these charges will be deducted from the
Investment Options. Similar to premium allocation, You may choose
a percentage of 0, or 100, or 10, 11, 12, and so on, up to 90. The
total for all allocations must be 100 percent. You may change these
allocations at any time if the Contract is not in default. Notification
must be in writing and sent to Our Executive Office. The change will take
effect on the date We receive Your notice.
Transfers. You may request in writing to transfer monies
from one Investment Division to another or between the Investment
Divisions and the General Account. The minimum amount You may
transfer is $200. This minimum need not come from any one Investment
Division or be transferred to any one Investment Division. The minimum
applies to the net amounts being transferred in Your request. You
may make up to twelve transfers in each year without charge. For each
additional transfer there is a charge of $25. This charge will be
deducted from the Investment Divisions from which the transfer is
being made in equal proportion to the number of such Investment
Divisions on the day of the transfer. The amount remaining in the
Investment Division after deducting the transfer and any transfer charge
must be greater than or equal to zero.
The maximum amount that can be transferred from the General
Account to the Separate Account in any Contract Year is the larger of:
a. 25 percent of the unloaned amount in the General Account at the
beginning of the Contract Year; or
b. $1,000.
The Funds. The word Funds, where We use it in this Contract
without qualification, means the Funds We identify in the application.
The Funds are registered with the SEC under the Investment Company Act
of 1940 as open-end diversified management investment companies. The
Funds have several portfolios; there is a portfolio that corresponds to
each of the Investment Divisions of Our Separate Account.
Account Investments. We use the assets of Our Separate
Account to buy shares in the Funds. Each Investment Division is
invested in a corresponding specific portfolio. Income and realized
and unrealized gains and losses from Our shares in each portfolio
are credited to, or charged against, the Investment Division.
This is without regard to income, gains, or losses in Our other
investment accounts.
We will always keep assets in the Separate Account with a total
value at least equal to the Contract Fund under Contracts like this
one. To the extent those assets do not exceed this amount, We use
them only to support those Contracts; We do not use those assets to
support any other business We conduct. We may use any excess over this
amount in any way We choose.
Change in Investment Policy. A portfolio of the Funds might
make a material change in its investment policy. In that case, We
will send You a notice of the change. Within 60 days after You receive
the notice, or within 60 days after the effective date of the change,
if later, You may exchange monies You have allocated to another
Investment Division of Our Separate Account.
Change of Fund. A portfolio might, in Our judgement, become
unsuitable for investment by an Investment Division. This might happen
because of a change in investment contract, or a change in the laws or
regulations, or because the shares are no longer available for investment,
or for some other reason. If that occurs, We have the right to
substitute another portfolio of the Funds, or to invest in a Fund other
than the ones We show on the application. But We would first seek
approval from the SEC and, where required, the insurance regulator
where this Contract is delivered.
Contract Values
The Value of Your Contract Fund. The amount in
Your Contract Fund at any time is equal to the sum of the amounts You
then have in Our General Account and in the Investment Divisions of Our
Separate Account under this Policy.
The Contract Fund on the Contract Date is any Invested Premium
received on or before the Contract Date minus the Monthly Deduction
due on the Contract Date, plus any interest credited since We received
Your premium.
Your Value in Our General Account. The amount You
have in Our General Account at any time is equal to the accumulation at
interest of:
a. The Contract Fund in the General Account from the end of the
previous Contract Month; plus
b. Invested Premiums allocated to, or transfers made to the
General Account during the current Contract Month; minus
c. Any Monthly Deduction allocated to the General Account at the
beginning of the current Contract Month; minus
d. Any partial withdrawals, transfers, or transfer charges taken
from the General Account during the current Contract Month; minus
e. Any amount charged against the General Account for Federal or
State Income Taxes.
We will credit the amount in Our General Account with interest
We determine based on Our future expectations. The rates may be
different for unloaned and loaned amounts. Such interest rates are
as shown in Policy Specifications on page 5. Any interest in excess
of that shown in Policy Specifications will be at the SOLE DISCRETION
of Our Board of Directors and will also be stated as an effective
annual rate.
Your Value in Our Separate Account. The Separate Account
portion of the Contract Fund at any time is equal to the sum of the
values of all Accumulation Units assigned to the Policy.
The number of Accumulation Units in any Investment Division is
equal to:
a. The number of Accumulation Units in the Investment Division at
the end of the previous Contract Month; plus
b. The number of Accumulation Units from Invested Premiums allocated
to, or transfers made to the Investment Division during the current
Contract Month; minus
c. The number of Accumulation Units from any Monthly Deduction allocated
to the Investment Division at the beginning of the current Contract
Month; minus
d. The number of Accumulation Units from any partial withdrawals,
transfers or transfer charges taken from the Investment Division
during the current Contract Month, minus
e. The number of Accumulation Units from any amount charged against the
Investment Division for Federal or State income taxes.
Accumulation Units. We will credit amounts to or deduct
amounts from the Investment Divisions in the form of Accumulation Units.
The number of Accumulation Units to be credited to or deducted from
any Investment Division will be determined by dividing the amount to
be credited to or deducted from that Investment Division by the
Accumulation Unit Value of the Investment Division. Accumulation Units
will be credited or deducted using the Unit Value for the Business Day
during which the transaction occurs. If any credit or deduction is
scheduled to occur on a date that is not a Business Day, such credit
or deduction will be deemed to occur on the next following Business Day
unless otherwise specified.
Accumulation Unit Value.
The Accumulation Unit Value of each Investment Division was set
at the end of the first Valuation Period of the Investment Division.
The Accumulation Unit Value for each subsequent Valuation Period is then
determined at the end of the Valuation Period and is the Net Investment
Factor for that period multiplied by the Accumulation Unit Value for the
immediately preceding Valuation Period. The Accumulation Unit Value for a
Valuation Period applies to each day in the period. The Accumulation
Unit Value may increase or decrease from one Valuation Period to the next.
Net Investment Factor.
The Net Investment Factor is an index used to measure the investment
performance of an Investment Division from one Valuation Period to the
next. The Net Investment Factor can be greater or less than one;
therefore, the value of an Investment Division unit may increase or
decrease.
The Net Investment Factor for each Investment Division for a
Valuation Period is determined by adding (a) and (b), subtracting (c)
and then dividing the result by (a) where:
a. is the value of the assets at the end of the preceding Valuation
Period;
b. is the investment income and capital gains, realized or
unrealized, credited during the current Valuation Period;
c. is the sum of:
1. the capital losses, realized or unrealized, charged during
the current Valuation Period plus any amount charged or set
aside for taxes during the current Valuation Period; plus
2. the Mortality and Expense Charge.
Charges Against The Investment Division. In determining
the values for the Accumulation Units, We deduct the Mortality and
Expense Charge from the assets of each Investment Division. This charge
is for mortality and expense risks that We assume.
The earnings of the Separate Account are taxed as part of Our
operations. At the present time, We do not expect to incur taxes on
earnings of any Investment Division to the extent the earnings are
credited under the Contract. If We incur additional taxes due to the
operation of the Separate Account, We may make charges for such taxes
against the Investment Divisions.
Monthly Deduction. The Monthly Deduction for a Contract
Month is equal to:
a. The Policy Load as shown on Page 5 divided by 12; plus
b. The Risk Charge for that Contract Month; plus
c. The Rider Charge for that Contract Month. The Rider Charge is
the cost of additional benefits provided by Rider(s).
Risk Charge. The Risk Charge is determined on each Monthly
Anniversary. It is equal to a. multiplied by the difference between
b. and c., divided by $1,000.
a. The Risk Rate;
b. The Insureds' Death Benefit;
c. The Contract Fund after deducting the Policy Load and the Rider Charge.
Invested Premium. This is the portion of each premium
paid that We will add to the Contract Fund. It is equal to the
premium paid, minus a deduction for the Premium Load.
Premium Load. A Premium Load will be charged each time a
premium is paid to cover state premium tax, federal tax and a sales
load. The Premium Load amount is found in Policy Specifications on
Page 5.
We reserve the right to change the Premium Tax and Federal Tax if
the actual tax We incur is changed. We reserve the right to vary the
Premium Tax by state.
Risk Rates. Risk Rates are based on the sex of the Insureds,
Issue Age of the Insureds shown on Page 1, Contract Year and Premium Class.
If We change Risk Rates, the change will apply uniformly to all pairs of
Insureds of the same sex, age, Premium Class and Contract Year. The
Risk Rates in a Premium Class other than Special or Modified will never
be more than those shown in the Table of Guaranteed Monthly Risk Rates
on page 4.
Cash Surrender Value. The Cash Surrender Value
is the Contract Fund less a Surrender Charge.
Net Cash Surrender Value. Net Cash Surrender
Value is the Cash Surrender Value less any Contract Debt.
Surrender Charge. The Surrender Charge varies by contract
duration and is based on sex of the Insureds, Issue Age of the Insureds
shown on Page 1 and Premium Class. The Surrender Charge for the initial
Specified Amount is equal to:
a. The Surrender Charge Factor found in the Table of
Surrender Charges on page 3; multiplied by
b. The number of thousands of initial Specified Amount.
A Specified Amount decrease, will not reduce the Surrender Charge.
If the Specified Amount increases, the Surrender Charge will increase.
The Surrender Charge for the Specified Amount increase will equal the
Surrender Charge for a new Contract with the Specified Amount equal to
the increase in Specified Amount.
Withdrawal of Cash Surrender Value. You may request
in writing a withdrawal of part or all of the Cash Surrender Value
on any Monthly Anniversary before the Maturity Date while the
Survivor is living.
If the total Cash Surrender Value is withdrawn, the amount payable
will be:
a. The Cash Surrender Value on the date of withdrawal; minus
b. Any Contract Debt.
A partial withdrawal of up to 50 percent of the Net Cash Surrender
Value, will be allowed in any one Contract Year. Withdrawals in excess
of this amount will not be allowed. The withdrawal must be at least
$200. The amount payable upon a partial withdrawal will be:
a. The amount of withdrawal requested; minus
b. A Withdrawal Charge.
When a partial withdrawal is made, the amount of the withdrawal
will be deducted from the Contract Fund. The Specified Amount
will be reduced by the amount of the withdrawal unless:
a. Death Benefit Option 2 is in effect; or
b. The Contract Fund after withdrawal times the Percentage found in
the appropriate Percentage Table for the next Contract Year exceeds the
Specified Amount prior to withdrawal.
A partial withdrawal will not be allowed if it would result in the
Specified Amount being less than $200,000 or if it would cause the
Maximum Premium Limits to be violated.
For any withdrawal from the General Account, We reserve the right
to defer payment for up to six months after We receive Your request.
We will not defer payment if a partial withdrawal is to be used to pay
premiums on Contracts with Us. If the withdrawal is requested within
30 days of a Contract Anniversary, the amount payable on withdrawal
will not be less than what would have been payable on that Contract
Anniversary, less any Contract Loans or partial withdrawals made on
or after that date.
Withdrawal Charge. There is no Withdrawal Charge for the
first withdrawal made in a Contract Year. There is a Withdrawal Charge
of $25 for each subsequent withdrawal made in that Contract Year.
Annual Report of Contract Status
We will send You an annual report, at no charge, which gives a summary
of this Contract's status as of the end of each Contract Year. This report
will give information regarding the Death Benefit, Cash Surrender Value,
premium payments, Monthly Deductions, and investment performance.
In addition to the annual report, We will prepare at Your request a
projection of the results of this Contract for future years. We will not
charge more than $25 for the preparation of this report.
Contract Loans
Loan Requirements. After this Contract has a Loan Value
You may borrow all or part of the Loan Value if these conditions are met:
a. At least one Insured is living;
b. You send Us a written request in a form approved by Us; and
c. You assign this Contract to Us as sole security for a
loan.
When You make a loan, You may tell Us how much of the loan is
to be allocated to Your unloaned value in Our General Account and
Your value in each Investment Division.
If You do not otherwise notify Us in writing, We will determine
the allocation by Your instructions for other deductions. If this
is not possible, We will use a pro rata method.
The loaned portion of Your Contract Fund will be kept as a part
of Our General Account where it will earn the General Account Interest Rate.
We reserve the right to require this Contract accompany
the written request.
Loan Value. The Loan Value is the amount of loan available
on any date. The Loan Value equals 92 percent of the Cash Surrender
Value, minus the Contract Debt.
Contract Debt. Contract Debt at any time means the total
loan on the Contract on that date plus the interest that has accrued
but has not been paid as of that date.
Suppose a Contract has a Loan Value of $3,000 on a particular
date. Several months ago You borrowed $500. By now $10 of interest
has accrued but has not been paid. The Contract Debt is now $510,
made up of the $500 loan and the $10 accrued interest.
Loan and Repayment. We have the right to postpone making
a Contract Loan for up to six months from the date We receive the
request. However, We will not postpone a Contract Loan if it will
be used to pay premiums on other Contracts issued by Us. All or part
of any Contract Debt may be paid back at any time while this
Contract is in force and at least one Insured is living.
The Survivor may die before the Contract Debt is repaid. If
this occurs, any Contract Debt is due Us and We will make an
adjustment so that the Proceeds will not include that amount.
Contract Loan Interest Rate. The maximum interest rate is
shown in Policy Specifications. However, a lower rate may be
charged. If the interest rate is lowered, it can be increased again
later. Any increases or decreases will occur no more than once a year.
Any increase in the interest rate will be limited to a maximum of one
percent per year. You will be given notice of any such increase at least
30 days before such effective date and given notice as to any loans
made during the 40 days before the effective date of the increase.
Interest on Contract Loans. We will charge interest on
any Contract Loan at the Contract Loan Interest Rate. Interest is
due at the end of each Contract Year. If interest is not paid when
due, it will be added to the loan and bear interest at the same rate.
After the tenth Contract Year, the interest rate that We charge
on Contract Loans will be the General Account Interest Rate for any
portion of the Contract Loan that does not exceed the Contract Fund,
minus premiums paid.
Excess Contract Debt. It is possible that the Contract
Debt may grow to be equal to or more than the Cash Surrender Value.
If this should happen, Your Contract will enter the Grace Period.
Maturity Date
The Maturity Date of this Contract will be set at age 100 of the youngest
Insured.
If the youngest Insured survives to age 100 and You ask Us to continue
this Contract, We will extend the Maturity Date if in doing so this
Contract still qualifies as Life Insurance according to the Internal
Revenue Service and Your State.
By extending the Maturity Date, this Contract may not qualify as life
insurance and may be subject to tax consequences.
A tax advisor should be consulted prior to electing to
extend the Maturity Date.
To continue this Contract beyond Attained Age 100 of the youngest
Insured, We will require that:
a. all of the Contract Fund be transferred to the General Account or
the Money Market, and
b. the Death Benefit Option must be Option 1.
Once this Contract is extended beyond Attained Age 100 of the youngest
Insured:
a. We will not allow any increases to the Specified Amount.
b. We will not allow any changes in the Death Benefit Option.
c. We will not allow any Contract Loans.
d. We will only allow transfers to the General Account and the Money
Market.
e. We will not accept any premium payments.
f. All Monthly Deductions will be eliminated.
General Provisions
The Contract. This Contract is issued in consideration of
the application, any supplemental applications, and payment of the initial
premium. The Policy, the application and any supplemental applications for
changes in Specified Amount and any Rider(s) attached to this Policy form
the entire Contract.
We assume that all statements in the application were made to the
best knowledge and belief of the persons who made them; in the absence
of fraud, they are deemed to be representations and not warranties.
We relied on those statements when We issued the Contract. We will
not use any statement to void the Contract or deny a claim unless that
statement is made in the application or a supplemental application and
a copy of such application is attached.
Incontestability. If either Insured dies within the first
two Contract Years, We have the right to deny payment of the Proceeds based
on the information provided to Us in the application. We will not contest
this Contract after it has been in force during both Insureds' lifetime
for two years from the Contract Date except for any provisions granting
disability benefits or accidental death benefits.
Any change in Specified Amount or any reinstatement effective
after the Contract Date will be incontestable after such change
or any reinstatement has been in effect during both Insureds'
lifetime for two years following the effective date of such change,
or such reinstatement.
Termination of Contract. All benefits provided by this
Contract will cease if:
a. You request that this Contract be terminated; or
b. The Survivor dies. If Riders are attached to this Contract,
Rider forms may provide for continuation of Rider benefits; or
c. This Contract matures; or
d. The Grace Period expires without payment of the Additional Required
Premium; or
e. You withdraw all the Cash Surrender Value; or
f. The Contract Debt exceeds the Cash Surrender Value.
Contract Modifications. Only Our President,
Vice-President, Secretary or Assistant Secretary can agree to
modify this Contract, and then only in writing.
Right to Request this Contract for Change. If You request a
change that would cause the information given on Contract Information
page, the application or any supplemental applications to be incorrect,
We reserve the right to require that this Contract be returned to Us so
that the appropriate change(s) can be made.
Right to Exchange this Contract. During the first two
Contract Years, You may request to exchange this Contract for a
Last Survivor Flexible Premium Adjustable Life Insurance contract
that was available at the time this Contract was issued. The new
contract will have the same Contract Date and Issue Age as this
contract. On the date of exchange, the new contract will also have
the same Specified Amount, Death Benefit Option, and Contract Fund.
Policy Split. You may be able to have this Contract
split into two individual plans of insurance available at the time
of the request provided the attained age falls within the issue age
limits of the individual plans. In this situation, both Insureds must
provide satisfactory evidence of insurability. The specified amount of
each Insured under the individual plans of insurance can be any amount as
long as the total specified amount of the individual policies does not
exceed the Specified Amount of this Contract. The Contract Fund and
Contract Loan amounts will be split in the same proportion as the
Specified Amount.
Ownership and Control. Unless inconsistent with
the terms of any Beneficiary designation or any assignment or change in
ownership:
a. The Owner or Owners of this Contract is shown on the Contract
Information page; and
b. While the Survivor is living, You alone are entitled to:
1. Any Contract benefits or value; and
2. The exercise of any right and privilege granted in the Contract
or by Us.
There may be more than one Owner, in which case, they will own this
Contract as joint tenants with right of survivorship unless otherwise
stated.
Contingent Owner. The Owner, if other than one of the Insureds,
may name or change the Contingent Owner while at least one of the Insureds
is alive. Upon the death of the Owner, the Contingent Owner will become
the Owner. If no Contingent Owner has been named or is living, ownership
will pass to the Owner's estate.
Assignment. We will not be bound by any Assignment of
this Contract unless We receive the Assignment, or a copy of it, at Our
Executive Office. We are not obliged to see that an Assignment is valid or
sufficient.
Suicide Exclusion. If either Insured commits suicide,
while sane or insane, within two years of the Contract Date, Our total
liability will be limited to the premium paid prior to death, less any
Contract Debt and partial withdrawals.
If either Insured commits suicide, while sane or insane, within
two years of the effective date of any increase in Specified Amount,
Our total liability with respect to such increase will be limited to
the Risk Charge made for such increase.
Misstatement of Age or Sex. If the Contract is
in error with regard to either Insured's age or sex, the Death Benefit
will be the amount provided based on the most recent Risk Charge at the
correct age or sex.
Non-participation. Nonparticipation is defined as follows:
a. Risk Rates, Policy Loads, and interest rates are determined
and redetermined only prospectively.
b. You are not entitled to participate in company profits.
c. We will not recoup losses by means of premium or factor changes.
Payment Options
Payee.
A Payee is person who has the right to receive the Proceeds under this
Contract.
Option Date. The Option Date is the date of death of the
Survivor or the date of any other ending of this Contract.
Payment of Proceeds.
Payment. The Proceeds may be paid in one sum or all or
part of this sum may be applied to any Payment Option. If no Payment
Option is chosen, We will pay interest on the Proceeds from the
Option Date to the date of payment. The interest rate will be
that being paid on Payment Option 4 on the Option Date.
Claims of Creditors. To the extent allowed by Law, the
Proceeds will not be subject to any claims of a Payee's creditors.
Payment Options Available.
Election of Payment Options.
By Owner: While the Survivor is living, You may choose,
or change the choice of, any Payment Option, unless the previous
choice provides otherwise.
By Payee: If the Proceeds are payable in one sum, the Payee may
choose any Payment Option.
Conditions. Any choice must be in writing in a form
approved by Us. Our consent is needed for a Payment Option to be
used for any Payee under any of these conditions
a. The Payee is not a natural person;
b. The Payee will be paid as assignee;
c. The amount to be applied for the Payee is less than
$10,000;
d. Each payment to the Payee would be less than $50.
Payment Option 1. -- Payment for a Specified Period.
We will make equal monthly payments which will start on the
Option Date and will run for one to 30 years, as shown. The
guaranteed minimum monthly payments will be based on 2.75 percent.
The payments may be increased by additional interest.
Payment Option 2. -- Payment of Life Income. We will
make equal monthly payments which will start on the Option Date
and will run as long as the Payee lives.
The amount of the payment will depend on the age and sex of
the Payee on the Option Date.
We must have proof of the Payee's date of birth. Either of
the following terms may be chosen:
a. Life Income, Guaranteed Period. -- The payments will run
for the life of the Payee with guaranteed payments for
five, ten, or twenty years, as chosen;
b. Life Income Only. -- The payments will run only during
the lifetime of the Payee.
We reserve the right to require proof that the Payee is alive
when each payment is due.
Payment
Option 3. -- Payment of a Specified Amount. We will make equal
payments every one, three, six, or twelve months, as chosen. The
payments will start on the Option Date and will run until the Proceeds
applied, together with interest at the rate of at least 2.75 percent
a year on the unpaid balance, are fully paid. The final payment will
be any balance equal to or less than one payment. The payments may be
increased by additional interest.
Payment Option 4. -- Proceeds Left at Interest. The
Proceeds may be left with Us for any length of time agreed upon.
Interest will be at the rate of at least 2.75 percent a year or the
minimum as required by the state the Survivor resides in. The interest
may be left with Us to accumulate, or it may be paid every one, three,
six, or twelve months, as chosen. If the interest is to be paid, the
first payment will be at the end of the first interest period.
Payment Option 5. -- Annuity. We will make payments
like those of any life annuity We then regularly issue which is
bought by a single sum. (This does not include contracts which are
used to qualify for special Federal Income Tax treatment as a
retirement plan.) Each payment will be 103 percent of the amount We would
pay if the Proceeds were used to buy such an annuity on the Option
Date. The first payment will be at the end of the first installment period.
We must have proof of the Payee's date of birth.
Other Payment Options Available. We may agree to pay
the Proceeds in any other manner.
Payment Contracts.
Issue. When a Payment Option is chosen, We will issue
a Payment Contract in exchange for this Contract. The effective date of
the Payment Contract will be the Option Date.
Assignment. Payment Contracts may not be assigned.
Withdrawal of Proceeds. The Payee has the right to
withdraw the Proceeds under a Payment Option if so provided in the
Payment Contract. We may postpone payment of any amount to be withdrawn
for not more than six months from the date We receive the written request
for withdrawal at Our Executive Office.
Changing Options. A Payee under Option 1, 3, or 4 may
change to another option on using the sum which the Payee could
withdraw on the date the new option is to start. In some cases,
the Payee will need Our consent to change an option. We describe
these cases under Conditions.
Death of Payee. If any payments remain to be paid
under a Payment Option at the death of the Payee, payment will be
made according to the terms of the Payment Contract.
LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
Proceeds Payable Upon Survivor's Death Prior to the Maturity Date.
Adjustable Death Benefit. Contract Values will Reflect the Investment
Experience of Our Separate Account and Interest Earned in the General
Account. Flexible Premiums Payable Prior to the Survivor's Death, or
Prior to the Maturity Date. Non-Participating.
L114A1
<PAGE>
Term Life Insurance Rider For Individual Insured
Individual Insured.
The Individual Insured is any person insured by this Rider. Page 1 of
this Contract lists each Individual Insured covered by this Rider.
Benefit Amount.
The Benefit Amount is the amount of term life insurance provided on the
life of an Individual Insured by this Rider. The Benefit Amount can vary
from one Individual Insured to another. Page 1 of this Contract lists
the Benefit Amount of this Rider for each Individual Insured.
Effective Date.
The Effective Date is the Contract Date unless otherwise shown on Page 1.
Benefit.
This Rider provides term life insurance on the life of each Individual
Insured. Upon the death of an Individual Insured, We will pay the
Benefit Amount of this Rider for that Individual Insured if We receive
due proof that the death occurred while this Contract and Rider were
in effect. We will pay the Benefit Amount according to the Beneficiary
designation shown in the application for this Rider, or any later change
in that designation.
Cost of This Rider.
The total monthly cost of this Rider is the sum of the monthly Rider
cost for each Individual Insured. This cost is determined on each
Monthly Anniversary, and the Monthly Deduction for this Contract is
increased by the total monthly cost for this Rider. The monthly Rider
cost for each Individual Insured is equal to:
1. the Rider Rate as described in the following section; multiplied by
2. the Benefit Amount of this Rider for the Individual Insured, divided
by 1,000.
Rider Rate.
Rider Rates are based on the Attained Age, sex and Premium Class of
each Individual Insured. Rider Rates for an Individual Insured in a
Premium Class other than Special or Modified will never be more than
those shown in the Table of Guaranteed Monthly Rider Rates. We may
declare Rider Rates that differ from those shown in the Table of Guaranteed
Monthly Rider Rates. Changes in the declared Rider Rates will be by sex,
Attained Age and Premium Class and based upon changes in future expectations
for investment earnings, mortality, taxes, persistency and expenses.
Conversion.
An Individual Insured may submit an application to convert
the coverage under this Rider to a new contract, without evidence of
insurability, at any time prior to the Individual Insured's age 70.
This Policy and Rider must be in effect at the time of conversion.
You must send Us a written request for conversion. We may require
that this Contract be returned to Us at the time of conversion. The
new contract will be subject to the following conditions:
1. The new contract can be any Permanent Life Insurance Contract We
then have available for conversion. At least one such contract
will be available;
2. The premium will be at the rate in use by Us, on the date of
conversion and at the Attained Age of the Insured, for the new
contract chosen;
3. The Amount of Insurance of the new contract may not be greater
than the Benefit Amount of this Rider for the Individual Insured
at the time of conversion;
4. The first premium must be paid for the new contract at the time of
conversion;
5. The Benefit Amount of this Rider for the Individual Insured making
the conversion will be reduced by the amount of the new contract;
6. For the Amount of Insurance You are entitled to convert, the
Suicide and Incontestable periods of the new contract will be
measured from the Effective Date of this Rider.
Termination of Coverage Under This Rider.
The date of termination of coverage under this Rider is determined for
each Individual Insured separately. Coverage under this Rider will
terminate on the earliest of the following dates, as these dates apply
to each Individual Insured:
1. The Anniversary next following the Individual Additional Insured's
100th birthday;
2. The Monthly Anniversary next following Our receipt of Your request
that coverage under this Rider be terminated for the Individual
Additional Insured; or
3. The date that this Contract terminates.
Applicability of Contract Provisions to this Rider.
This Rider is subject to all of the provisions of this Contract except
where specifically excluded. In particular, the provisions regarding
the Insured's coverage under this Contract are equally applicable to
the Individual Additional Insured's coverage under this Rider, unless
stated otherwise.
General Provisions.
1. This Rider is a part of this Contract;
2. This Rider is issued in consideration of the application and
payment of the first month's cost of this Rider; and
3. This Rider does not pay dividends.
TR89A1
<PAGE>
Estate Preservation Rider
Benefit. This is a term rider providing life insurance
coverage during the first four Contract Years. The Benefit Amount is
payable at the death of the Survivor if We receive due proof that
both Insureds died while this Contract and Rider were in effect. The
Benefit Amount is paid according to the Beneficiary designation for
this Policy, or any later change in that designation.
Benefit Amount. The Benefit Amount is the amount of death
benefit provided by this Rider. The Benefit Amount is shown on Page 1
of the Policy.
Effective Date. The Effective Date is the Contract Date
shown on Page 1.
Cost of this Rider. The Monthly Deduction for this
Contract is increased by the cost of this Rider. The cost of this Rider
is shown on Page 1. We may declare Rider Rates which differ from that
shown on Page 1. However, the monthly cost of this Rider will never be
more than:
1. The Guaranteed Monthly Rider Rates shown in the following table;
multiplied by
2. The Benefit Amount of this Rider, divided by 1,000.
Changes in the declared rates will be by Equal Age and based upon
changes in future expectations for investment earnings, mortality, taxes,
persistency and expenses. We will notify you of any changes in the declared
rates.
Termination. This Rider will terminate on the earliest of:
1. The fourth Contract Anniversary;
2. The date the Contract terminates; or
3. The Monthly Anniversary next following Our receipt of Your
request that coverage under this Rider be terminated.
General Provisions.
1. This Rider is part of this Contract;
2. This Rider is issued in consideration of the application and
payment of the first month's cost of this Rider; and
3. This Rider does not pay dividends.
TR90A1
<PAGE>
Guaranteed Death Benefit to Maturity Rider
Benefit.
Regardless of the amount of the Net Cash Surrender Value, this Contract
will not enter the Grace Period and terminate as long as the Conditions
of this Rider are met. This Rider insures that the Death Benefit will be
payable under this Policy as long as this Rider remains in force.
Effective Date.
The Effective Date is the Contract Date shown on Page 1.
Rider Minimum Premium.
The current monthly Rider Minimum Premium is shown on Page 1. It is subject
to change upon increases or decreases in Specified Amount, changes in Death
Benefit Option, changes in Premium Class, and any addition or deletion of
riders.
Conditions of this Rider.
To keep this Rider in force, the total premiums paid less any withdrawals
or Contract Debt must, on each Anniversary, at least be equal to the
Rider Minimum Premium Requirement.
Rider Minimum Premium Requirement.
The Rider Minimum Premium Requirement is the sum of the Monthly Rider Minimum
Premiums since the Contract Date to the most recent Monthly Anniversary.
Cost of this Rider.
The Monthly Deduction for this Contract is increased by the cost of this
Rider. The monthly cost of this Rider is shown on Page 1 as Benefit Cost.
Rider Grace Period.
If on any Anniversary the Rider Minimum Premium Requirement is not met,
We will allow a Rider Grace Period of 30 days in order to pay the required
premium. At the beginning of the Rider Grace Period, We will send You a
notice of the premium required. If the premium is not received by Us at Our
Home Office within 30 days of You receiving this notice, this Rider will
terminate.
Termination.
This Rider will terminate on the earliest of:
1. The date the Rider Grace Period expires without payment of the
required premium;
2. the date the Contract terminates; or
3. the Monthly Anniversary next following Our receipt of Your request
that coverage under this rider be terminated.
General Provisions.
1. This Rider is part of this Contract;
2. this Rider is issued in consideration of the application and
payment of the first month's cost of this Rider; and
3. this Rider does not pay dividends.
TR91A1
VLSLFRM.txt
<PAGE>
FIRST AMENDMENT TO THE
FUND PARTICIPATION AGREEMENT
BY AND BETWEEN
Lord Abbett Series Fund, Inc.,
Lord, Abbett & Co.
AND
Midland National Life Insurance Company
THIS AMENDMENT No. 1 (this "Amendment") is dated as of the day of August,
1999 by and between Lord Abbett Series Fund, Inc. (the "Fund"), Lord, Abbett
& Co. (the "Adviser"), and Midland National Life Insurance Company (the
"Company").
WITNESSETH:
WHEREAS, the Fund, the Adviser and the Company entered into a Fund
Participation Agreement dated June 11, 1998 (the "Agreement") with regard
to variable life insurance and/or variable annuity contracts (the "Variable
Contracts") which sets forth the terms and conditions under which the
Company may purchase shares of the Growth and Income Portfolio of the Fund
at net asset value for the purpose of funding the Variable Contracts;
WHEREAS, the Fund has created additional portfolios of the Fund (the "New
Portfolios") which the Company desires to purchase at net asset value for
the purpose of funding the Variable Contracts on the same terms and
conditions as are set forth in the Agreement;
WHEREAS, the Fund and the Adviser desire to offer the New Portfolios to the
Company at net asset value for the purpose of funding the Variable Contracts
on the same terms and conditions as are set forth in the Agreement; and
WHEREAS, the Fund, the Adviser and the Company desire to amend said
Agreement in the manner hereinafter set forth;
NOW THEREFORE, pursuant to Section 10.9 of the Agreement, the Fund, the
Adviser and the Company hereby amend the Agreement as follows:
1. By adding to Appendix A the following Portfolios:
Lord Abbett Series Fund, Inc. Mid-Cap Value Portfolio
Lord Abbett Series Fund, Inc. International Portfolio
2. By adding to Appendix B the following Portfolios:
Separate Account A Mid-Cap Value Portfolio
Separate Account C Mid-Cap Value Portfolio
Separate Account A International Portfolio
Separate Account C International Portfolio
3. The Agreement, as amended, shall remain in full force and effect.
4. This Amendment may be executed simultaneously in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
5. This Amendment and the Agreement as amended by this Amendment shall be
construed and the provisions hereof interpreted under and in accordance with
the laws of the State of Indiana. It shall also be subject to the
provisions of the federal securities laws and the rules and regulations
thereunder and to any orders of the Securities and Exchange Commission
granting exemptive relief therefrom and the conditions of such orders.
IN WITNESS WHEREOF, the Fund, the Adviser and the Company have caused this
Amendment to be executed by their duly authorized officers effective as of
the day and year first above written.
LORD ABBETT SERIES FUND, INC
MIDLAND NATIONAL LIFE INSURANCE COMPANY
By:______________________________ By:_/s/Michael_M._Masterson_______
Name:____________________________ Name:__Michael_M._Masterson______
Title:___________________________ Title:_Chairman,_CEO_&_President_
Date:____________________________ Date:_August_26,_1999____________
LORD, ABBETT & CO.
By:______________________________
Name:____________________________
Title:___________________________
Date:____________________________
LAPARAMND1.txt
<PAGE>
MIDLAND NATIONAL LIFE
Survivorship
Life Application
PART1
1. FIRST PROPOSED INSURED
SINGLE
MARRIED
BIRTH DATE
MO. DAY YEAR
STATE OF BIRTH
AGE
SEX
SOCIAL SECURITY NUMBER AND DRIVERS LICENSE NUMBER
STATE
HEIGHT (FT. IN.)
WEIGHT (LBS.)
LAST NAME
FIRST
M.I.
SECOND PROPOSED INSURED
SINGLE
MARRIED
BIRTH DATE
MO. DAY YEAR
STATE OF BIRTH
AGE
SEX
SOCIAL SECURITY NUMBER AND DRIVERS LICENSE NUMBER
STATE
HEIGHT (FT. IN.)
WEIGHT (LBS.)
LAST NAME
FIRST
M.I.
STATE
2. RESIDENCE ADDRESS (Street, City, State, Zip)
TELEPHONE NUMBER(S)
First ( )
Second ( )
3. How long at this address? If less than 2 years, provide previous
address in "Special Requests," Section #14.
First:
Years Months
Second:
Years Months
CONTACT THE INSUREDS AT:
RESIDENCE
BUSINESS
Time (CST) A.M. P.M.
SEND MAIL TO:
RESIDENCE
BUSINESS
4. EMPLOYER(S) (Company Name, Street, City, State, Zip)
FIRST PROPOSED INSURED
SECOND PROPOSED INSURED
BUSINESS TELEPHONE NUMBER
First ( )
Second ( )
5. OCCUPATION OF FIRST (Describe and give exact duties)
OCCUPATION OF SECOND (Describe and give exact duties)
6. Has First Proposed Insured or Second Proposed Insured ever used tobacco in
any form?
First Proposed
Yes
No
Second Proposed
Yes
No
If YES, complete below...
Type of Tobacco:
First
Cigarettes
Other
Second
Cigarettes
Other
Date Last Used:
Current or within 1 year
Over 1 year ago but less than 3 years ago
Over 3 years ago
7. AMOUNT
PLAN OF BASIC POLICY
First:
Preferred
Nonsmoker
Smoker
Second:
Preferred
Nonsmoker
Smoker
Option I
Option II
Enhanced Corridor Percentage
Yes
No
ANNUAL INCOME
First
Second
Net Worth
First
Second
8. RIDERS
INDIVIDUAL LIFE RIDER
First Amount $
Second Amount $
Guaranteed Death Benefit to Maturity Rider
Estate Preservation Rider
Other
9a. PREMIUM FREQUENCY:
Annual
Semi-Annual
Quarterly
Monthly
PREMIUM MODE:
Auto Withdrawal
Direct Billing
List Billing
Military Government Allotment
Civil Service Allotment
Amount of Mode Premium
(Receipt valid only if amount paid with application is entered here.)
Amount Paid with Application
9b. FOR AUTO WITHDRAWAL ONLY:
DRAW DAY Month Day
(1ST-28TH)
ACCOUNT TYPE
Checking (enclose voided check)
Savings (must complete 9c)
AUTHORIZED SIGNATURE(S) OF ACCOUNT HOLDER(S)
9c. ROUTING/TRANSIT NUMBER
ACCOUNT NUMBER
FINANCIAL INSTITUTION NAME AND ADDRESS
10a. WILL THE INSURANCE BEING APPLIED FOR REPLACE OR CHANGE ANY EXISTING LIFE
INSURANCE OR ANNUITY CONTRACT?
YES
NO
10b. IS THERE ANY INSURANCE IN FORCE OR APPLICATION PENDING ON THE LIFE/LIVES
OF ANY PROPOSED INSURED(S)?
YES
NO (If yes, please complete 10c.)
10c. Proposed Insured Name
Company
Amount
Status
Pending
Issued
Yr.
Pending
Issued
Yr.
Type
I
L
B
I
L
B
Proposed Insured Name
Company
Amount
Status
Pending
Issued
Yr.
Pending
Issued
Yr.
Type
I
L
B
I
L
B
I = Individual
L = Last-to-Die
B = Business
11. OWNER IF OTHER THAN PROPSOED INSUREDS (Include relationship to proposed
insureds)
NAME
ADDRESS
Soc. Sec. No. or Fed. Tax I.D. No.
12. PRIMARY BENEFICIARY - (Class 1) (Include relationship to proposed insureds)
13. CONTINGENT BENEFICIARY - (Class 2) (Include relationship to proposed
insureds)
14. SPECIAL REQUESTS OR DETAILS
PRINCIPAL REVIEW
Midland National Life Insurance Company . One Midland Plaza . Sioux Falls, SD
57193-0001 . Phone: (605) 335-5700 . Fax: (605) 335-7583 . Internet:
www.MNLife.com
Detach and Deliver this Section to the Proposed insureds.
Premium checks must be payable to Midland National Life Insurance Company. Do
not make checks payable to the Agent or leave the Payee blank.
RECIEPT
Check
List Billing Authorization or Government Allotment
Received from the sum of $
for application made this date to MIDLAND NATIONAL LIFE INSURANCE COMPANY. If
after investigation and the completion of all required medical examinations and
studies, the Company shall be satisfied that on the date of the application or
medical examination, whichever is later, each person proposed for insurance was
insurable and entitled under the Company's rules and standards to insurance on
the plan and for the amount and at the rate of premium applied for, the
insurance protection applied for shall by reason of such payment take effect
from the date of application or such medical examination or the date
specifically requested in the application, whichever is later, if the sum paid
is equal to or greater than 1/12th of the annual premium required for the
policy applied for. Unless every condition specified in this receipt is
fulfilled exactly, no insurance shall be considered in effect unless and
until the application has been approved and accepted by the Company and the
policy delivered to and accepted by the Owner, and the full first premium
has been paid while each person proposed for insurance is alive and while
the state of health and other conditions affecting insurability are as
stated in this application or examination, if required. This receipt will
be void if any acknowledged authorization is cancelled before payment or if
any check or draft is not honored when presented. This receipt will be void
if altered or modified in any respect. No agent of the Company and no
broker is authorized to alter or waive any of such conditions. Failure of
the Company to issue a policy within 90 days from the date of this receipt
shall automatically be deemed a declination without further notice.
EVEN IF EVERY CONDITION SPECIFIED IN THIS RECEIPT IS FULFILLED EXACTLY, THE
COMPANY'S MAXIMUM LIABILITY PRIOR TO THE ACTUAL ISSUANCE AND DELIVERY OF THE
POLICY SHALL NOT EXCEED $250,000.
Agent Signature
Date
Detach and Deliver this section to proposed insured.
MIDLAND NATIONAL LIFE INSURANCE COMPANY, Sioux Falls, South Dakota 57193-0001
Fair Credit Reporting Act Notification
As part of our underwriting procedure, an investigative consumer report may be
made which will provide applicable information concerning residence
verification, employment, occupation, general health, habits, reputation,
personal characteristics and mode of living, except as may be related directly
or indirectly to your sexual orientation. Such information for the
investigative consumer report may be obtained through personal interviews with
your friends, neighbors, and associates. Upon written request, a complete and
accurate disclosure of the nature and scope of the investigative consumer
report will be provided.
Medical Information Bureau Notification
Information regarding your insurability will be treated as confidential.
Midland National Life Insurance Company, or its reinsurers, may, however,
make a brief report thereon to the Medical Information Bureau, a non-profit
membership organization of life insurance companies, which operates an
information exchange on behalf of its members. If you apply to another Bureau
member company for life or health insurance coverage, or a claim for
benefits is submitted to such a company, the Bureau, upon request, will
supply such company with the information in its file. Upon receipt of a
request from you, the Bureau will arrange disclosure of any information it
may have in your file. If you question the accuracy of information in the
Bureau's file, you may contact the Bureau and seek a correction in
accordance with the procedures set forth in the federal
Fair Credit Reporting Act. The address of the Bureau's information office is
Post Office Box 105, Essex Station, Boston, Massachusetts 02112, telephone
number (617) 426-3660. Midland National Life Insurance Company, or its
reinsurers, may also release information in its file to other life insurance
companies to whom you may apply for life or health insurance, or to whom a
claim for benefits may be submitted.
Page 2 - Application to MIDLAND NATIONAL LIFE INSURANCE COMPANY
Details of questions answered "yes" in Section 15 through 18. Include question
number, full names and addresses of physicians and names of individuals to whom
history pertains.
Question 15 to be completed on both non-medical and examined applications.
Yes
No
15. Has any person proposed for insurance in Section 1 on reverse side
(a) Received treatment for drug or alcohol use or used marijuana; narcotic,
hallucinogenic or habit forming drugs not prescribed by a physician or is any
such person currently using marijuana or such drugs?
(b) Had any motor vehicle moving violations or accidents or been arrested for
driving under the influence of alcohol or drugs within the last five years?
(c) Been arrested for any reason other than moving traffic violations?
(d) Flown other than as a fare-paying passenger within the last tow years, or
contemplate such flying in the future? (If yes, complete Aviation
Questionnaire.)
(e) Any past, present or expected activity in racing, skin or sky diving, or
any other hazardous sport or hobby? (If yes, complete Hazardous Activities
Questionnaire.)
(f) Ever had an application for insurance or reinstatement of insurance
declined, postponed, rated up or modified? Why?
(g) Traveled or resided outside the U.S. or intends to travel or reside
outside the U.S.?
16. Has any person proposed for insurance in Section 1 on reverse side
ever had or been treated for
(a) Chest pain, heart murmur, high blood pressure, or any other disease of the
heart, blood, or blood vessels?
(b) Peptic ulcer, indigestion, or any other disease of the stomach,
intestines, gall bladder or liver?
(c) Emphysema, bronchitis, asthma, pleurisy, or any other disease of the chest
or lungs?
(d) Kidney stone, diabetes; albumin, pus, blood or sugar in urine; venereal
disease, or any other disease of the kidneys, bladder or reproductive organs?
(e) An immune deficiency disorder, AIDS, ARC (AIDS related complex) or been
told test results indicate exposure to the AIDS virus?
(f) Severe headaches, fainting spells, epilepsy, paralysis, nervousness,
mental disorder, or any other disease of the brain or nervous system?
(g) Any impairment of sight or hearing?
(h) Cancer, tumor or any other illness or injury not mentioned above?
17. Other than indicated above, has any person proposed for insurance in
Section 1 on reverse side
(a) Ever applied for or received a pension or disability benefit?
(b) Been hospitalized in the past 5 years?
(c) Consulted a physician during the past 5 years?
(d) Had a change of weight in the past year?
(e) Had an immediate family member with a history of cancer, diabetes, mental,
nervous, heart or circulatory disorder?
18. Is any person proposed for insurance in Section 1 on reverse side now
under observation or taking treatment or been advised to have any tests,
hospitalization or surgery which has not been completed?
19. Are medical records under any other name (maiden name, etc.)?
Yes
No
If yes, please indicate full name.
Name and Address of Primary Physicians (if not specified above, date last
consulted)
FIRST
SECOND
Telephone Number of Primary Physicians
( )
( )
IT IS DECLARED that the statements and answers in this application or given to
the examiner in Part II, should examination be required, are complete and true
to the best knowledge and belief of the undersigned. IT IS AGREED: (1) that
any waiver or modification of this application will not be effective unless in
writing and signed by the President, a Vice President, the Secretary or an
Assistant Secretary; (2) that no insurance shall be in effect under this
application (except as may be provided in the receipt bearing the same date as
this application) unless and until the application has been approved and
accepted by the Company at its Home Office and the policy delivered to and
accepted by the Owner and the full first premium has been paid while each
person proposed for insurance is alive and while the state of health and other
conditions affecting insurability are as stated in this application and
examination, if required. (If a List Billing Authorization or Government
Allotment is indicated in Section 9a and has actually been signed and delivered
for the correct amount, this shall be considered the same as payment of the
full first premium); (3) that the acceptance of any policy issued on this
application shall constitute a ratification of any correction or amendment
made by the Company, except that when issued in Maryland, no change in amount,
classification, plan of insurance, or benefits shall be effective unless agreed
to in writing by the applicant.
I also acknowledge receipt of Fair Credit Reporting Act and Medical Information
Bureau Notifications.
AUTHORIZATION: I hereby authorize any licensed physician, medical
practitioner, hospital, clinic or other medical or medically related
facility, insurance company, the Medical Information Bureau or other
organization, institution or
person, that has any records or knowledge of me or my child for whom insurance
application is made, or my health or my child's health, to give to Midland
National Life Insurance Company, or its reinsurers, any such information. A
reproduction of this authorization shall be as valid as the original.
Make all checks payable to Midland National Life Insurance Company.
FIRST PROPOSED FOR INSURANCE (Signature)
X
SIGNED AT (City, State)
DATE
SECOND PROPOSED FOR INSURANCE (Signature)
X
OWNER (Signature)
X
To the best of my knowledge, this application is is not involved in
replacement of life insurance or annuities, as defined in applicable Insurance
Department Regulations, except as stated in Section 10a.
SOLICITING AGENT (Signature)
PRINT AGENT'S LAST NAME
CODE NO.
TELEPHONE NUMBER
( )
OTHER AGENT (Please Print)
% CREDIT
CODE NO.
GENERAL AGENT (Please Print)
CODE NO.
8000
VLSLAPP.txt
<PAGE>
MIDLAND NATIONAL LIFE
SUPPLEMENT TO APPLICATION FOR SURVIVORSHIP LIFE INSURANCE
ALLOCATION QUESTIONS
Initial Allocation Percentages
(Whole Numbers Only - Smallest Non-Zero Number Must Be At Least Ten)
Deduction percentages will be the same as Premium percentages unless indicated
otherwise below.
Fund Name Premiums Deductions
General Account % %
VIP Money Market % %
VIP High Income % %
VIP Equity-Income % %
VIP Growth % %
VIP Overseas % %
VIP II Asset Manager % %
VIP II Investment Grade Bond % %
VIP II Index 500 % %
VIP II Contrafund % %
VIP II Asset Manager: Growth % %
VIP III Growth & Income % %
VIP III Balanced % %
VIP III Growth Opportunities % %
ACVP Capital Appreciation % %
ACVP Value % %
ACVP Balanced % %
ACVP International % %
ACVP Income & Growth % %
MFS VIT Emerging Growth Series % %
MFS VIT Research Series % %
MFS VIT Growth With Income Series % %
MFS VIT New Discovery Series % %
LA VC Growth and Income % %
LA VC Mid-Cap Value % %
LA VC International % %
% %
Total of all Funds 100% 100%
THE DEATH BENEFIT MAY BE VARIABLE OR FIXED UNDER SPECIFIED
CONDITIONS.
CASH VALUES MAY INCREASE OR DECREASE IN ACCORDANCE WITH THE
EXPERIENCE OF THE SEPARATE ACCOUNT.
PROSPECTUS VERIFICATION
Yes No
Have you received a prospectus for the Variable Survivorship Life Insurance
Contract AND a prospectus for the Variable Insurance Products Fund AND a
prospectus for the American Century Portfolios AND a prospectus for the MFS
Variable Insurance Trust AND a prospectus for the Lord Abbett Series Fund?
Do you believe that this product will meet your insurance needs and financial
objectives?
FIRST INSURED (Signature
X
SECOND INSURED (Signature)
X
SIGNED AT (City, State)
DATE
OWNER (Signature)
WITNESS (Signature)
VLSLAPP.txt
<PAGE>
DESCRIPTION OF MIDLAND'S PURCHASE,
REDEMPTION, TRANSFER, AND EXCHANGE
PROCEDURES FOR CONTRACTS
This document sets forth the administrative procedures that
will be followed by Midland National Life Insurance Company
(Midland) in connection with the issuance of its Variable Survivorship
Universal Life Insurance Contract (Contract or Contracts), the
transfer of assets held thereunder, and the redemption or exchange
by contract owners of their interests in the Contracts.
1. "Public Offering Price:" Purchase and Related
Transactions
Set out below is a summary of the principal contract provisions
and administrative procedures which might be deemed to
constitute, either directly or indirectly, a "purchase" transaction.
The summary shows that, because of the insurance nature of the
Contracts, the procedures involved necessarily differ in certain
significant respects from the purchase procedures for mutual funds
and contractual plans.
(a) Premium Schedules and Underwriting Standards
Premiums for the Contracts will not be the same for all contract
owners. The full first premium is due on the contract date and
cannot be less than the minimum premium for the first contract
year. The cost of insurance charge deducted as part of the monthly
deduction, is based on the insureds' attained age, sex, risk
classification and specified amount of the Contract.
On premiums other than the first, Midland does not require the
payment of any specified amount. Contract owners may determine
a periodic plan, a plan under which a level premium may be paid at
fixed intervals for a specified period of time. Payment of
premiums in accordance with this plan is not, however, mandatory
and failure to do so will not of itself cause the Contract to lapse.
Instead, so long as there is no outstanding contract debt (contract
loans plus accrued interest) contract owners may make premium
payments in any amount and at any frequency, subject only to the
minimum amount requirements, and the maximum premium
limitations. If at any time a premium is paid which would result
in total premiums exceeding the current maximum premium
limitation set forth in the Contract, Midland will accept only that
portion of the premium which will make the total premiums equal
that amount. Any portion of the premium in excess of the
maximum premium limitation will be returned to the contract
owner and no further premiums will be accepted until allowed by
the current maximum set forth in the Contract.
The Contract will remain in force so long as the net cash
surrender value is sufficient to pay the monthly deduction. Thus,
the amount of a premium, if any, that must be paid to keep the
Contract in force may depend on the net cash surrender value of
the Contract, which in turn depends on the investment experience
of Midland National Life Separate Account A ("Separate
Account") and the cost of insurance charge. The cost of insurance
rate utilized in computing the cost of insurance charge will not be
the same for each contract owner. The chief reason is that the
principle of pooling and distribution of mortality risks is based on
the assumption that the cost of insuring each insured is
commensurate with their mortality risk which is actuarially
determined based upon factors such as attained age, sex and risk
classification. Accordingly, while not all insureds will be subject
to the same cost of insurance rate, there will be a single "rate" for
all insureds in a given actuarial category.
The Contracts will be offered and sold pursuant to established
underwriting standards and in accordance with state insurance
laws. State insurance laws prohibit unfair discrimination but
recognize that premiums must be based upon factors such as age,
sex, health, and occupation.
(b) Application and Initial Premium Processing
Upon receipt of a completed application, Midland will follow
certain insurance underwriting (i.e., evaluation of risks) procedures
designed to determine whether the proposed insureds is insurable.
This process may involved such verification procedures as medical
examinations or tests and may require that further information be
provided by the applicants before a determination can be made. A
Contract will not be issued until this underwriting procedure has
been completed.
Insurance coverage under the Contract will begin on the
contract date. Midland will allocate premiums received prior to the
Record Date to the General Account where they will earn interest
at a fixed rate. The day following the Record Date, the value in the
General Account will be allocated according to the instructions
specified in the application.
The contract date is also the date used to determine contract
years and contract months. The contract date is assigned each
contract when the contract is issued. The contract date will
normally be the date the Contract is issued; however, the contract
date may be any other date mutually agreeable to Midland and the
contract owner. If the contract date would otherwise fall on the
29th, 30th, or 31st day of the month, the Contract date will be the
28th.
Payments of any amount unless otherwise specified will be
treated first as payment of any outstanding contract debt. The
portion of a payment in excess of any outstanding contract debt
will be treated as premium payment.
(c) Reinstatement
If the contract terminates and is reinstated, a premium must be
paid sufficient to:
1. Pay all overdue monthly deductions; plus,
2. Increase the Contract Fund to a level where the Contract
Fund less any Contract Debt equals the surrender charges;
plus,
3. Cover the next two months' deductions.
If the contract is reinstated, the surrender charge will be as
though the contract had been in effect continuously from its
original contract date.
(d) Repayment of Contract Debt
A contract loan will be subject to a maximum interest rate set
forth in the Contract. Contract debt (contract loans plus accrued
interest) may be repaid in whole or in part at any time. While there
is outstanding contract debt, any payment will be treated as the
repayment of that debt. The portion of any payment in excess of
outstanding contract debt will be treated as a premium payment.
Upon the repayment, the Contract Fund in the general account
securing contract debt will be transferred to Separate Account.
Midland will allocate the repayment of contract debt at the end of
the valuation period during which the repayment is received.
(e) Correction of Misstatement of Age or Sex
If the insureds' age or sex was misstated in an application, life
insurance proceeds and benefits will be adjusted. The adjusted life
insurance proceeds will be (a) the contract fund plus (b) the life
insurance proceeds reduced by the contract fund and multiplied by
the ratio of (1) the monthly cost of insurance actually applied, to
(2) the monthly cost of insurance that should have been applied at
the true age or sex. All amounts are those in effect, with respect to
the insureds in the contract month of the death of the Survivor.
2. "Redemption Procedures:" Surrender and Related
Transactions
This section outlines those procedures which might be deemed
to constitute redemptions under the Contract. These procedures
differ in certain significant respects from redemption procedures
for mutual funds and contractual plans.
(a) Surrender for Cash Values
As long as the Contract is in effect, the contract owner may
partially or totally surrender the contract by sending a written
request to Midland. Upon complete surrender, the contract owner
will receive the net cash surrender value (contract fund reduced by
any outstanding contract debt and less any applicable surrender
charges) of the Contract computed as of the end of the business day
on which the surrender request is received by Midland at its Home
Office. Contract Fund will be determined on a daily basis thereby
enabling Midland to pay a cash surrender value based on the next
computed value after a request is received. Surrenders will
generally be paid within seven days of a written request. Under
Midland's current procedures, if the Contract is being totally
surrendered, the Contract itself must be returned to Midland along
with the request.
The amount paid upon a partial withdrawal cannot be less than
$200, nor greater than 50 percent of the net cash surrender value.
If Option 1 is in effect, the specified amount will be reduced by the
amount paid upon partial withdrawal. A request for a partial
withdrawal will not be implemented if it would result in a specified
amount less than the minimum specified amount applicable at
issue. The amount of the partial withdrawal will be deducted from
the Contract Fund on the end of the business day during which the
request is received. Any applicable charge will be deducted from
the contract fund upon a partial withdrawal of the Contract.
Payment upon complete surrender of the Contract may be made
in a lump sum or in accordance with one of the optional payment
plans described in the Contract. The optional payment plans are
subject to the restrictions and limitations set forth in the Contract.
There is a Surrender Charge until the earlier of joint equal age
95 or 15 years.
(b) Benefit Claim
As long as the contract remains in force, Midland will normally
pay life insurance proceeds to the primary or contingent
beneficiary in accordance with the designated benefit option within
seven days after receipt of due proof of death of the Survivor.
Payment of life insurance proceeds may, however, be postponed
under certain circumstances. The amount of life insurance
proceeds payable under this contract will be determined as of the
end of the business day during which the Survivor dies. The
life insurance proceeds will be reduced by any outstanding contract
debt and any due and unpaid charges and increased by any optional
insurance benefits added by rider.
As long as there is no outstanding contract debt or any due and
unpaid charges, life insurance proceeds are guaranteed not to be
less than the current specified amount of the Contract. The life
insurance proceeds may, however, exceed the current specified
amount. The amount by which life insurance proceeds exceed the
specified amount depends upon the benefit option in effect and the
Contract Fund. Under Option 2, the life insurance proceeds
payable under the contract equals the specified amount plus the
Contract Fund. Under Option 1, life insurance proceeds will only
vary whenever Contract Fund multiplied by the corridor percentage
exceeds the specified amount of the Contract.
If the Contract is still in force on the maturity date, the contract
owner will receive maturity benefits equal to the contract fund
reduced by any outstanding contract debt. These benefits will only
be paid if the Last Survivor is living on the Contract's maturity
date. If the Contract is still in force on the maturity date, the
contract owner may decide to continue the contract. In order to
continue the Contract, the Contract must still qualify as Life
Insurance according to the Internal Revenue Service and the state
in which the contract owner resides. The maturity date is the date
designated as such in the Contract or as subsequently changed.
(c) Contract Loans
The contract owner may borrow money from Midland using
the Contract as the only security for the loan. Loans have priority
over the claims of any assignee or any other person. The
maximum amount that may be borrowed under the Contract at any
time is 92 percent of the net cash surrender value. Contract debt
equals the total of all contract loans and any accrued interest on the
loans. The maximum loan amount will be determined on the end
of the business day which the loan request is received. The loan
and any accrued interest may be repaid in whole or in part at any
time prior to the maturity date so long as the Last Survivor is
living. Interest accrues daily and is due and payable at the end of
each Contract year. Any interest not paid when due becomes part
of the contract loan and will bear interest.
When a contract loan is made, a portion of the Contract Fund
sufficient to secure the loan is transferred out of Separate Account
and into Midland's general account. Any loan interest that is due
and unpaid will also be so transferred. Contract Fund in the
general account will accrue interest daily at an annual rate of 3.5
percent. This interest will be credited on each monthly anniversary
day and transferred to Separate Account. After the tenth contract
year, the interest rate that We charge on Contract Loans will be the
General Account Interest Rate for any portion of the Contract Loan
that does not exceed the Contract Fund, minus premiums paid.
If contract debt exceeds cash surrender value on a monthly
anniversary day, Midland will notify the contract owner and any
assignee of record. A payment at least equal to the excess contract
debt must be made to Midland within 61 days from the date the
notice was sent, otherwise the Contract will lapse and terminate
without value. The Contract, however, may later be reinstated.
(d) Contract Lapsation
The Net Cash Surrender Value may be less than the Monthly
Deduction on a monthly anniversary. Midland will consider the
Contract to default if such an event takes place.
A Grace Period of 61 days will be allowed for the payment of
additional premiums so the Contract will not default. At least 30
days before this Contract ends without value, Midland will mail to
the contract owner's last known address a notice of the amount of
premium needed. Midland will send a copy of the notice to the last
known address of any assignee of record. That premium will be
due on the Monthly Anniversary on which the contract deficiency
first occurred. If that premium is not paid within the Grace Period,
this Contract will end without value.
(e) Exchange of Contract
During the first 24 months, the owner of a Variable Survivorship
Life Insurance Contract may convert this contract to a
Last Survivor Flexible Premium Adjustable Life contract
supported by Midland's General Account. The contract owner may
elect the same death benefit or the same net amount at risk as the
existing contract at the time of conversion. Premiums will be
based on the same issue age and risk classification of the insureds
as the existing contract. The Contract Fund of the new contract
will be set equal to that of the existing contract at the date of
exchange.
See Repayment of Contract Debt, infra p. 4
The minimum amount requirement for unscheduled premiums is currently
$50.00. For planned periodic premiums, the minimum amount is $50 unless
premiums are paid monthly by pre-authorized check in which case the minimum
amount is $50. Midland, in its sole discretion, may accept premium payments
of a lesser amount.
The maximum premium limitation will be set forth in the Contract. This
limitation is imposed to conform the Contract to certain restrictions on
premiums contained in the Internal Revenue Code.
Payment may be postponed whenever: (i) the New York Stock Exchange is
closed other than customary weekend and holiday closings, or trading on the
New York Stock Exchange is restricted by the Commission; (ii) the Commission
by order permits postponement for the protection of contract owners; or (iii)
an
emergency exists, as determined by the Commission, as a result of which
disposal of securities is not reasonably practicable or it is not reasonably
practicable to determine the value of the net assets of Separate Account.
Payments under the Contract which are derived from any amount paid to
Midland by check or draft may be postponed until such time as Midland is
satisfied that the check or draft has cleared the bank upon which it is drawn.
See note 4, supra.
VLSLTRANS.txt
<PAGE>
August 23, 1999
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
Gentlemen:
With reference to the Registration Statement on Form S-6 as amended, filed
by Midland National Life Insurance Company and Midland National Life
Separate Account A with the Securities and Exchange Commission covering
last survivor flexible premium variable life insurance contracts, I have
examined such documents and such law as I considered necessary and
appropriate, and on the basis of such examination, it is my opinion that:
1. Midland National Life Insurance Company is duly organized and validly
existing under the laws of the State of South Dakota and has been duly
authorized to issue individual last survivor flexible premium variable
life insurance policies by the Insurance Department of the State of South
Dakota.
2. Midland National Life Separate Account A is a duly authorized and
existing separate account established pursuant to the provisions of
Chapter 58-28 of the Insurance Code of South Dakota.
3. The last survivor flexible premium variable life insurance contracts,
when issued as contemplated by said Form S-6 Registration Statement, will
constitute legal, validly issued and binding obligations of Midland National
Life Insurance Company.
I hereby consent to the filing of this opinion as an exhibit to said S-6
Registration Statement and the use of my name under the caption "Legal
Matters" in the Prospectus contained in the Registration Statement.
Sincerely,
/s/_Jack_L._Briggs____
Jack L. Briggs
Vice President, Secretary and General Counsel
VLSLJLB.txt
<PAGE>
August 18, 1999
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
RE: Variable Survivorship Life
Form S-6, File No. 333-80975
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus filed as part of the Pre-Effective Amendment
No. 1 to the Registration Statement on Form S-6 filed by Midland National
Life Insurance Company Separate Account A for certain variable survivorship
life insurance contracts (File No. 333-80975). 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
SABVLSL.txt
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-6
(File No. 333-80975) of our reports dated March 10, 1999 and March 26,
1999 relating to the financial statements of Midland National Life
Insurance Company and Midland National Life Insurance Company Separate
Account A, respectively, which appear in such Registration Statement.
We also consent to the references to us under the headings "Financial"
in such Registration Statement.
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
August 30, 1999
VLSLPWC.txt
<PAGE>
August 25, 1999
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
Gentlemen:
This opinion is furnished in connection with the filing of Pre-
Effective Amendment No. 1 to Registration Statement No. 333-80975 on
Form S-6 ("Registration Statement") which covers premiums expected to
be received under the flexible premium Variable Survivorship Life
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, cash value and
accumulated premiums in 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 with two insureds aged 55 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.
Sincerely,
_/s/_Timothy_A._Reuer___
Timothy A. Reuer, FSA, MAAA
Actuary, Product Development
TARVLSL.TXT
