As filed with the Securities and Exchange Commission on October 15, 1999.
Pre-Effective Amendment #2
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 five investment divisions:
- - VIP Money Market Portfolio
- - VIP High Income Portfolio
- - VIP Equity-Income Portfolio
- - VIP Growth Portfolio
- - VIP Overseas Portfolio
- - VIP II Asset Manager Portfolio
- - VIP II Investment Grade Bond Portfolio
- - VIP II Contrafund Portfolio
- - VIP II Asset Manager: Growth Portfolio
- - VIP II Index 500 Portfolio
- - VIP III Growth & Income Portfolio
- - VIP III Balanced Portfolio
- - VIP III Growth Opportunities Portfolio
- - American Century VP Capital Appreciation Portfolio
- - American Century VP Value Portfolio
- - American Century VP Balanced Portfolio
- - American Century VP International Portfolio
- - American Century VP Income & Growth
- - MFS VIT Emerging Growth
- - MFS VIT Research
- - MFS VIT Growth with Income
- - MFS VIT New Discovery
- - Lord Abbett Growth and Income (hereinafter referred to as
Lord Abbett VC Growth and Income)
- - Lord Abbett Mid-Cap Value (hereinafter referred to as Lord
Abbett VC Mid-Cap Value)
- - 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 5
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 6
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 14
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 15
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 18
Transfers Of Cash Value 19
Dollar Cost Averaging 19
Contract Loans 20
Withdrawing Money From Your Cash Value 21
Surrendering Your Contract 21
THE GENERAL ACCOUNT 21
DEDUCTIONS AND CHARGES 22
Deductions From Your Premiums 22
Deductions From Your Cash Value 22
Charges Against The Separate Account 23
Transaction Charges 24
How Cash Value Charges Are Allocated 24
Surrender Charges 24
Charges In The Funds 25
ADDITIONAL INFORMATION ABOUT THE CONTRACTS 26
Your Right To Examine The Contract 26
Your Contract Can Lapse 26
You May Reinstate Your Contract 27
Contract Periods And Anniversaries 27
Maturity Date 27
We Own The Assets Of Our Separate Account 27
Changing the Separate Account 27
Limits On Our Right To Challenge The Contract 28
Your Payment Options 28
Your Beneficiary 29
Assigning Your Contract 30
When We Pay Proceeds From This Contract 30
TAX EFFECTS 30
Tax Status of the Policy 30
Tax Treatment of Policy Benefits - In General 31
Tax Treatment of Distributions - Modified Endowment Contracts 31
Tax Treatment of Distributions - Contracts That Are Not Modified
Endowment Contracts 31
Investment in the Contract 32
Loans 32
Multiple Policies 32
Tax Treatment of Policy Split Option 32
Other Policy Owner Tax Matters 32
Possible Tax Law Changes 33
Possible Charge for Midland's Taxes 33
Other Tax Considerations 33
PART 3: ADDITIONAL INFORMATION 33
MIDLAND NATIONAL LIFE INSURANCE COMPANY 33
YOUR VOTING RIGHTS AS AN OWNER 33
OUR REPORTS TO CONTRACT OWNERS 34
DIVIDENDS 34
MIDLAND'S SALES AND OTHER AGREEMENTS 34
REGULATION 35
YEAR 2000 35
DISCOUNT FOR MIDLAND EMPLOYEES 36
LEGAL MATTERS 36
FINANCIAL 36
ADDITIONAL INFORMATION 36
MANAGEMENT OF MIDLAND 37
ILLUSTRATIONS 39
DEFINITIONS 47
PERFORMANCE 49
FINANCIAL STATEMENTS 50
APPENDIX A 51
This prospectus generally describes only the variable portion of
the Contract, except where the General Account is specifically
mentioned.
Buying this contract might not be a good way of replacing your
existing insurance or adding more insurance if you already own a
flexible premium variable life insurance contract.
You should read this prospectus carefully and keep it for
future reference. You should also have and read the current
prospectuses for the funds
PART 1: SUMMARY
In this prospectus "We", "Our", and "Us" mean Midland
National Life Insurance Company.
"You" and "Your" mean the owner of the contract. We refer to
the 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 Equal Age. (See Appendix A for how the
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 death benefit guarantee to maturity
- - additional survivor life insurance protection during the
first four years
- - 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. 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 30.
Withdrawing Money
You may make a partial withdrawal from your cash value. The
current minimum withdrawal amount is $200. The maximum
partial withdrawal you can make is 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 30.
Surrendering Your Contract
You can surrender your contract for cash and then we will pay
you the net cash surrender value. A surrender charge may be
deducted, and taxes and a tax penalty may apply. See
"Surrendering Your Contract" on page 21.
DEDUCTIONS AND CHARGES
Deductions From Your Premiums
We 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 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 22.
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 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 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 amount of the surrender charge in the
first year is, for example $5.20 per $1,000 for equal age 33
but it is $49.00 per $1,000 for equal age 85. The maximum
first year surrender charge for all policies, per $1,000 of
face amount, occurs at equal age 85. 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%
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 re
duce 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 26.
Your Contract Can Lapse
Your contract remains in force if the net cash surrender
value can pay the monthly charges. In addition, during the
Minimum Premium Period, your contract will remain in force as
long as you meet the applicable minimum premium requirements.
However, the contract can lapse after the Minimum Premium
Period no matter how much you pay in premiums, if the net
cash surrender value is insufficient to pay the monthly
charges (subject to the grace period). See "Your Contract Can
Lapse" on page 26.
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 30.
Illustrations
This prospectus includes sample 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 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 Equal Age is 85 and the minimum Equal
Age is 20. The 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 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 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 94. 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 $200,000. The "corridor percentage" at that
age is 150%. Under Option 1, the death benefit will
generally be $200,000. However, when the cash value is
greater than $133,333.33, the corridor percentage applies and
the death benefit will be greater than $200,000 (since 150%
of $133,333.33 equals $200,000). In this case, at age 55, we
multiply the cash value by a factor of 150%. So if the cash
value were $140,000, then the death benefit would be
$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 $200,000, and the cash value is
$400,000, then the death benefit would be $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 $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. Your policy contains an Extended
Maturity option and, you may extend the maturity date. See
"Extended Maturity Option" on page 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 30.
Flexible Premium Payments
You may choose the amount and frequency of premium payments,
within the limits described below.
Even though your premiums are flexible, your contract
information page will show a "planned" periodic premium. You
determine the planned 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:
- - the ages, sexes and rating classes of the insured persons,
- - the initial face amount of the contract, and
- - 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 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 21.
Any premium received before the record date will be held and
earn interest in the General Account until the day after the
record date. When this period ends your instructions will
dictate how we allocate it.
Additional Benefits
You may include additional benefits in your contract.
Certain benefits result in an additional monthly deduction
from your cash value. You may cancel these benefits at any
time. The following briefly summarizes the additional
benefits that are currently available:
(1) 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.
(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.
(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-five investment divisions of our Separate
Account.
The Funds
Each of the 25 portfolios available under the contract is a
"series" of one of the following investment companies:
- - Fidelity's Variable Insurance Products Fund,
- - Fidelity's Variable Insurance Products Fund II,
- - Fidelity's Variable Insurance Products Fund III,
- - American Century Variable Portfolios, Inc.,
- - MFS(r) Variable Insurance Trusts, and
- - 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
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 Seeks long-term
Income 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. 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:
- - 25% of the unloaned amount in the General Account at the
beginning of the contract year, or
- - $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:
- - The DCA source account from which DCA transfers will be
made,
- - That any money received with the form is to be placed into
the DCA source account,
- - The total monthly amount to be transferred to the other
investment divisions, and
- - 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 which only extends for
fewer than 12 months will be 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 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 30.
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. Currently Interest on a contract loan
accrues daily at an annual interest rate of 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 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 (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 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 24.)
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, but we reserve the right to 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 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. 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 $28.00
Male, IA 75/Female IA 75; EA 73 $39.00
Male, IA 85/Male IA 85; EA 85 $49.00
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 25 portfolios for the year ending
December 31, 1998, (except as otherwise noted) are shown in
the table below.
Total
Expenses
(After
Expense
Management Other Reimburse-
Portfolio Fee Expenses ment)
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 28.
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.
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:
- - We contest the contract.
- - 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.
- - 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 reserve 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
premiums 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:
- - 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.
- - 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.
- - 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 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.
Most of our systems run on the IBM mainframe computer
platform, where future dated systems testing has been
performed through December 31, 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.
We expect to have all of Y2K issues resolved by December 31,
1999.
We are currently in the process of developing a Y2K
Contingency Plan which involve representatives from our IT
and non-IT business units in the planning process. The Y2K
Contingency Plan 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 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.
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
Name and
Business Address
Principal Occupation
Principal Occupation During Past Five Years
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.
Illustration
Following are a series of tables that illustrate how the cash
values, cash surrender values, and death benefits of a
contract change with the investment performance of the Funds.
The tables show how the cash values, cash surrender values,
and death benefits of a contract issued to 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 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
hypothetical investment return of the divisions of our
Separate Account is lower than the hypothetical 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 (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
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 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 contain 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 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 assumed gross
investment rates of 0%, 6%, and 12% correspond to approximate
net annual rates of -1.30% , 4.70%, and 10.70% respectively
(-1.05%, 4.95%, and 10.95% after year 10). The approximate
net annual rates do not include cost of insurance charges,
surrender charges, policy charges, premium tax charges, sales
charges, premium tax charges, expense charges nor any charges
for additional benefits.
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 ANNUAL RATE OF 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
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 ANNUAL RATE OF 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 1,000,000 113,799 103,579 1,000,000
9 173,668 137,405 127,915 1,000,000 129,835 120,345 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
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 ANNUAL RATE OF 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
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 ANNUAL RATE OF 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
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 ANNUAL RATE OF 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
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 ANNUAL RATE OF 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
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 York Stock Exchange is
not open for trading will not be counted as Business Days.
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 Cash Value on the date of
surrender, less any Surrender Charges.
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 deductions from the cash value (the
policy charge 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
Equal Age Calculation
An Equal Age (EA) calculation changes many possible
combinations of ages, risk classes, substandard ratings and
sexes of two lives into a single 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 EA of the policy at the time of
issue. The steps to calculating the 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 EA allowed is 85 and the minimum is 20. EAs
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
Equal Age is 64.
6730-VSL.txt (10-12-99)
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>
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets (Unaudited)
for the six-month period ended June 30, 1999
<TABLE>
Variable Insurance Products Fund
<S> <C> <C> <C> <C> <C> <C>
Money High Equity
Market Income Income Growth Overseas
BALANCE SHEET Combined Portfolio Portfolio Portfolio Portfolio Portfolio
ASSETS
Common stocks 128,144,629 3,646,392 3,613,609 19,419,761 35,109,353 5,415,162
Total invested assets 128,144,629 3,646,392 3,613,609 19,419,761 35,109,353 5,415,162
Total assets 128,144,629 3,646,392 3,613,609 19,419,761 35,109,353 5,415,162
LIABILITIES
Cash with application
Charges for mortality & expense
Total liabilities
CAPITAL & SURPLUS
Unassigned surplus 98,414,649 2,731,098 3,163,974 15,731,177 28,503,893 4,895,040
Increase in net assets 29,729,980 915,294 449,635 3,688,584 6,605,460 520,122
Total surplus 128,144,629 3,646,392 3,613,609 19,419,761 35,109,353 5,415,162
Total liabilities & surplus 128,144,629 3,646,392 3,613,609 19,419,761 35,109,353 5,415,162
Variable Insurance Products Fund
Money High Equity
Market Income Income Growth Overseas
Combined Portfolio Portfolio Portfolio Portfolio Portfolio
Transfers of premium 26,847,132 2,031,891 546,314 3,158,899 4,463,747 701,581
Investment income 6,457,967 75,162 309,035 776,529 3,292,881 197,626
Realized/unrealized capital gains/losses 5,393,180 (51,415) 1,371,749 956,781 204,660
Total increase 38,698,279 2,107,053 803,934 5,307,177 8,713,409 1,103,868
Transfers of death benefits (52,585) (62) (3,675) (11,801) (5,703)
Transfers of surrender benefits (2,249,393) (268,065) (47,506) (293,890) (848,300) (97,846)
Transfers of other terminations (146,963) 553 (2,378) (33,013) (49,446) (7,303)
Transfers of policy loans (1,495,617) (67,331) (37,911) (228,809) (411,199) (89,453)
Transfers of maintenance fees (4,542,284) (77,015) (143,635) (719,184) (925,921) (171,611)
Charges for mortality & expense (481,457) (779,839) (122,869) (340,022) 138,718 (211,830)
Total deductions (8,968,299) (1,191,759) (354,299) (1,618,593) (2,107,949) (583,746)
Total increase in net assets 29,729,980 915,294 449,635 3,688,584 6,605,460 520,122
Net assets at beginning of year 98,414,649 2,731,098 3,163,974 15,731,177 28,503,893 4,895,040
Net assets at end of year 128,144,629 3,646,392 3,613,609 19,419,761 35,109,353 5,415,162
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets
for the six-month period ended June 30, 1999
<S> <C> <C> <C> <C> <C>
Variable Insurance Products Fund II
Investment Asset
Asset Grade Index Contra Manager
Manager Bond 500 fund Growth
BALANCE SHEET Portfolio Portfolio Portfolio Portfolio Portfolio
ASSETS
Common stocks 7,814,337 1,269,648 18,119,872 14,775,214 3,602,227
Total invested assets 7,814,337 1,269,648 18,119,872 14,775,214 3,602,227
Receivable/payable to general account
Total assets 7,814,337 1,269,648 18,119,872 14,775,214 3,602,227
LIABILITIES
Cash with application
Charges for mortality & expense
Total liabilities
CAPITAL & SURPLUS
Unassigned surplus 7,287,457 1,142,457 12,222,422 11,030,567 2,756,403
Increase in net assets 526,880 127,191 5,897,450 3,744,648 845,824
Total surplus 7,814,337 1,269,648 18,119,872 14,775,214 3,602,227
Total liabilities & surplus 7,814,337 1,269,648 18,119,872 14,775,214 3,602,227
Variable Insurance Products Fund II
Investment Asset
Asset Grade Index Contra Manager
Manager Bond 500 fund Growth
Portfolio Portfolio Portfolio Portfolio Portfolio
Transfers of premium 710,661 289,407 4,792,037 3,334,171 783,777
Investment income 549,726 59,290 215,339 467,267 184,734
Realized/unrealized capital gains/losses (160,011) (79,672) 1,550,773 902,024 53,743
Total increase 1,100,376 269,025 6,558,149 4,703,462 1,022,254
Transfers of death benefits (71) (7,631) (10,227) (384)
Transfers of surrender benefits (169,142) (29,154) (183,093) (225,122) (41,175)
Transfers of other terminations (9,123) (448) (19,398) (13,456) (6,456)
Transfers of policy loans (91,365) (27,719) (207,113) (197,471) (29,718)
Transfers of maintenance fees (208,509) (55,168) (740,079) (577,297) (113,989)
Charges for mortality & expense (95,285) (29,344) 496,614 64,758 15,292
Total deductions (573,495) (141,833) (660,700) (958,814) (176,430)
Total increase in net assets 526,880 127,191 5,897,450 3,744,648 845,824
Net assets at beginning of year 7,287,457 1,142,457 12,222,422 11,030,566 2,756,403
Net assets at end of year 7,814,337 1,269,648 18,119,872 14,775,214 3,602,227
</TABLE>
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets
for the six-month period ended June 30, 1999
Variable Insurance Products Fund III
Growth & Growth
Balanced Income Opportunities
BALANCE SHEET Portfolio Portfolio Portfolio
ASSETS
Common stocks 1,038,180 3,233,931 5,452,613
Total invested assets 1,038,180 3,233,931 5,452,613
Receivable/payable to general account
Total assets 1,038,180 3,233,931 5,452,613
LIABILITIES
Cash with application
Charges for mortality & expense
Total liabilities
CAPITAL & SURPLUS
Unassigned surplus 669,509 1,813,193 3,552,709
Increase in net assets 368,672 1,420,738 1,899,904
Total surplus 1,038,180 3,233,931 5,452,613
Total liabilities & surplus 1,038,180 3,233,931 5,452,613
Variable Insurance Products Fund III
Growth & Growth
Balanced Income Opportunities
Portfolio Portfolio Portfolio
Transfers of premium 369,064 1,399,737 1,931,772
Investment income 37,379 36,547 111,236
Realized/unrealized capital gains/losses 5,709 156,560 204,740
Total increase 412,152 1,592,844 2,247,747
Transfers of death benefits (12,371)
Transfers of surrender benefits (147) (18,591) (15,146)
Transfers of other terminations (944) (1,089)
Transfers of policy loans (3,115) (40,397) (31,273)
Transfers of maintenance fees (44,874) (186,703) (281,487)
Charges for mortality & expense 4,657 74,530 (6,476)
Total deductions (43,480) (172,106) (347,843)
Total increase in net assets 368,672 1,420,738 1,899,904
Net assets at beginning of year 669,508 1,813,193 3,552,709
Net assets at end of year 1,038,180 3,233,931 5,452,613
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets
for the six-month period ended June 30, 1999
<TABLE>
American Century Variable Portfolios, Inc.
<S> <C> <C> <C> <C>
Capital Income
Balanced Appreciation International Value & Growth
BALANCE SHEET Portfolio Portfolio Portfolio Portfolio Portfolio
ASSETS
Common stocks 413,219 422,586 1,826,641 1,113,316 270,771
Total invested assets 413,219 422,586 1,826,641 1,113,316 270,771
Receivable/payable to general account
Total assets 413,219 422,586 1,826,641 1,113,316 270,771
LIABILITIES
Cash with application
Charges for mortality & expense
Total liabilities
CAPITAL & SURPLUS
Unassigned surplus 329,779 217,542 1,177,307 778,580 32,521
Increase in net assets 83,440 205,044 649,334 334,736 238,250
Total surplus 413,219 422,586 1,826,641 1,113,316 270,771
Total liabilities & surplus 413,219 422,586 1,826,641 1,113,316 270,771
UNAUDITED UNAUDITED
American Century Variable Portfolios, Inc.
CapitalIncome
Balanced Appreciation International Value & Growth
Portfolio Portfolio Portfolio Portfolio Portfolio
Transfers of premium 89,522 141,764 659,923 291,181 213,420
Investment income 54,382 89,519 18
Realized/unrealized capital gains/losses (38,779) 53,697 106,901 33,567 15,273
Total increase 105,124 195,461 766,824 414,267 228,711
Transfers of death benefits (659)
Transfers of surrender benefits (1,575) (190) (7,657) (2,385)
Transfers of other terminations (222) (341)
Transfers of policy loans (1,090) (2,457) (13,642) (4,702) 12
Transfers of maintenance fees (23,682) (25,646) (114,966) (70,518) (11,405)
Charges for mortality & expense 4,662 37,875 19,655 (1,586) 20,932
Total deductions (21,684) 9,583 (117,490) (79,531) 9,539
Total increase in net assets 83,440 205,044 649,334 334,736 238,250
Net assets at beginning of year 329,779 217,542 1,177,307 778,580 32,521
Net assets at end of year 413,219 422,586 1,826,641 1,113,316 270,772
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets
for the six-month period ended June 30, 1999
<S> <C> <C> <C> <C>
Massachusetts Financial Services Lord, Abbett & Company
Emerging Growth & NewGrowth &
Growth Income Discovery Research Income
BALANCE SHEET Portfolio Portfolio Portfolio Portfolio Portfolio
ASSETS
Common stocks 555,921 132,694 75,557 553,979 269,644
Total invested assets 555,921 132,694 75,557 553,979 269,644
Receivable/payable to general account
Total assets 555,921 132,694 75,557 553,979 269,644
LIABILITIES
Cash with application
Charges for mortality & expense
Total liabilities
CAPITAL & SURPLUS
Unassigned surplus 56,516 11,356 1,975 245,451 63,725
Increase in net assets 499,406 121,338 73,582 308,527 205,919
Total surplus 555,921 132,694 75,557 553,979 269,644
Total liabilities & surplus 555,921 132,694 75,557 553,979 269,644
Massachusetts Financial Services Lord, Abbett & Company
Emerging Growth & New Growth &
Growth Income Discovery Research Income
Portfolio Portfolio Portfolio Portfolio Portfolio
Transfers of premium 390,974 110,839 50,239 222,784 163,429
Investment income 1,297
Realized/unrealized capital gains/losses 36,981 4,169 9,915 33,125 22,691
Total increase 427,955 115,007 60,153 255,909 187,417
Transfers of death benefits
Transfers of surrender benefits (409)
Transfers of other terminations (1,950) (1,950)
Transfers of policy loans (6,067) (966) (620) (1,045) (2,168)
Transfers of maintenance fees (19,852) (3,044) (1,909) (15,293) (10,498)
Charges for mortality & expense 99,728 10,341 15,958 68,957 33,117
Total deductions 71,451 6,331 13,429 52,618 18,502
Total increase in net assets 499,406 121,338 73,582 308,527 205,919
Net assets at beginning of year 56,516 11,356 1,975 245,451 63,725
Net assets at end of year 555,921 132,694 75,557 553,978 269,644
</TABLE>
Stub0699a.txt
<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>
Midland National Life Insurance Company
Balance Sheet (Unaudited)
as of June 30, 1999
UNAUDITED
(Amounts in thousands, except share and per share amounts)
ASSETS
Investments:
Fixed maturities $ 2,210,708
Equity securities 365,203
Policy loans 216,124
Short-term investments 147,731
Other invested assets 120,815
Total investments 3,060,581
Cash 10,247
Accrued investment income 41,064
Deferred policy acquisition costs 454,515
Present value of future profits of acquired businesses 27,544
Other receivables and other assets 103,538
Separate account assets 322,085
Total assets $ 4,019,574
LIABILITIES AND STOCKHOLDERS EQUITY
Liabilities:
Policyholder account balances $2,278,601
Policy benefit reserves 421,368
Policy claims and benefits payable 45,532
Federal income taxes (10,966)
Other liabilities 198,525
Separate account liabilities 322,085
Total liabilities 3,255,146
Commitments and contingencies
Stockholders equity:
Common stock $1 par value, 2,549,439 shares authorized,
2,548,878 outstanding 2,549
Additional paid-in capital 101,227
Accumulated other comprehensive income (14,062)
Retained earnings (net of $178 treasury stock) 674,714
Total stockholders equity 764,429
Total liabilities and stockholders equity $4,019,574
Midland National Life Insurance Company
Statement of Income (Unaudited)
for the six-month period ended June 30, 1999
(Amounts in thousands)
Revenues:
Premiums $ 46,597
Interest sensitive life and investment product charges 79,937
Net investment income 107,480
Net realized investment gains 2,934
Net unrealized gains (losses) on trading securities (11,265)
Other income 2,174
Total Revenue 227,857
Benefits and expenses:
Benefits incurred 72,327
Interest credited to policyholder account balances 64,321
Total benefits 136,649
Operating expenses (net of commissions and other
expenses deferred) 22,917
Amortization of deferred policy acquisition costs and
present value of future profits of acquired business 29,197
Total benefits and expenses 188,763
Income before income taxes 39,094
Income tax expense 13,830
Net income $ 25,264
Midland National Life Insurance Company
Statement of Stockholders Equity (Anaudited)
for the six-month period ended June 30, 1999
(Amounts in thousands) Accumulated
Additional Other Total
Common Paid-In Comprehensive Retained Stockholders
Stock Capital Income Earnings Equity
Balance at January 1, 1999 $2,549 $33,707 $26,826 $649,451 $712,533
Comprehensive income:
Net Income 25,264 25,264
Net unrealized depreciation of available for
sale investments (40,888) (40,888)
Total comprehensive income (15,624)
Capital contribution 67,520 67,520
Balance at June 30, 1999 $2,549 $101,227 $(14,062) $674,715 $764,429
Midland National Life Insurance Company
Statement of Cash Flows (Unaudited)
for the six-month period ended June 30, 1999
(Amounts in thousands)
Cash flows from operating activities:
Net income $ 25,264
Adjustments to reconcile net income to net cash
(used in) operating activities:
Net interest credited and product charges on
universal life and investment products (15,615)
Increase in liability for future policy benefits 9,823
Depreciation expense 273
Net amortization of premiums and
Discounts on investments 304
Amortization of deferred acquisition costs and
present value of future profits of
acquired business 29,197
Policy acquisition costs deferred (30,915)
Deferred income taxes (6,815)
Increase in policy and contract claims 3,857
Net realized investment (gains) (2,934)
Net receivables and payables (25,325)
Increase in other policyowner funds 215
Net (cost of)from trading securities (48,274)
Net unrealized losses on trading securities 11,265
Other, net 26,989
Net cash (used in) operating activities (22,691)
Cash flows from investing activities:
Proceeds from investments:
Fixed maturities (671,947)
Equity securities (141,512)
Mortgage loans (81,889)
Increase in policy loans, net (2,857)
Other invested assets (1,850)
Cost of investments acquired:
Fixed maturities 641,878
Equity securities 150,054
Short-term investments, net 132,588
Net change in security lending (50,500)
Net cash used in investing activities (26,035)
Cash flows from financing activities:
Receipts from interest sensitive life insurance
and annuity contracts 171,203
Benefits of interest sensitive life insurance
and annuity contracts (181,883)
Capital contribution 67,520
Net cash provided by financing activities 56,840
Increase in cash 8,114
Cash at beginning of year 1,379
Cash at end of year $ 10,247
Stub0699.txt
<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 6
(c) PricewaterhouseCoopers L L P 6
(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 previously in Pre-Effective Amendment No. 1 for Form S-6 File
No. 333-80975.
6 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 6
8. Consent of PricewaterhouseCoopers L L P 6
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 previously in Pre-Effective Amendment No. 1 for Form S-6 File
No. 333-80975.
6 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 12th day of October,
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 12th day of October, 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 October 12, 1999
Michael M. Masterson Board, Chief Executive
Officer and President
_/s/ John J. Craig II Director, Executive Vice October 12, 1999
John J. Craig II President
_/s/ Steven C. Palmitier Director, Senior Vice October 12, 1999
Steven C. Palmitier President and Chief
Marketing Officer
_/s/ Stephen P. Horvat, Jr. Director, Senior Vice October 12, 1999
Stephen P. Horvat, Jr. President - Legal
_/s/ Thomas M. Meyer Vice President and October 12, 1999
Thomas M. Meyer Chief Financial
Officer
_____________________ Director and Vice President October 12, 1999
Robert W. Korba
VLSLSIG2.TXT
<PAGE>
Registration No. 333-80975
PRE-EFFECTIVE AMENDMENT NO.2
________________________________________________________________________________
- --------------------------------------------------------------------------------
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
_________
7 Consent of Sutherland Asbill and Brennan L L P
8 Consent of PricewaterhouseCoopers L L P
INDXVLSL.txt
<PAGE>
October 13, 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. 2 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
October 15, 1999
VLSLPWC.txt
<PAGE>
