Securities and Exchange Commission
450 5 Street, N.W.
Washington, DC 20549
RE: Midland National Life Separate Account A
File Number 333-14081
Commissioners:
Enclosed for filing is a complete copy, including exhibits, of
Post-Effective Amendment Number 2 to the above referenced Form
S-6 Registration Statement.
This amendment is being filed pursuant to paragraph (b) of Rule 485,
and pursuant to subparagraph (b)(4) of that Rule, we certify the
amendment does not contain disclosure which would render it ineligible
to become effective pursuant to said paragraph (b).
If you have any comments or questions about this filing, please contact
Fred Bellamy of Sutherland, Asbill and Brennan at 202-383-0126.
Sincerely,
Paul M. Phalen, CLU, FLMI
Assistant Vice-President
Product Implementation
VEULCVR.TXT
<PAGE>
Registration No. 333-14081
POST-EFFECTIVE AMENDMENT NO. 2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
--------
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
MIDLAND NATIONAL LIFE SEPARATE ACCOUNT A
________________________________________
(Exact Name of Trust)
MIDLAND NATIONAL LIFE INSURANCE COMPANY
(Name of Depositor)
One Midland Plaza
Sioux Falls, SD 57193
(Address of Principal Executive Office)
_________________________
Jack L. Briggs, Vice President, Secretary and General Counsel
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
(Name and Address of Agent for Service of Process)
Copy to:
Frederick R. Bellamy
Sutherland Asbill & Brennan L L P
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
It is proposed that this filing will become effective (check appropriate line):
___ immediately upon filing pursuant to paragraph (b)
_X_ on May 01, 1999 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a) (i)
___ on _________________ pursuant to paragraph (a) (i) of Rule 485
If appropriate, check the following line:
___ the Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
----------------------------------------------------------------------
S6CVRVEL.TXT
<PAGE>
VARIABLE EXECUTIVE UNIVERSAL LIFE
(Variable Executive Universal Life)
Issued By:
Midland National Life Insurance Company
One Midland Plaza Sioux Falls, SD 57193 (605) 335-5700
Variable Executive Universal Life is an individual variable
life insurance policy issued by Midland National Life Insurance
Company. Variable Executive Universal Life:
provides insurance coverage with flexibility in death
benefits and premiums;
pays a death benefit if the insured person dies while the
contract is still in force;
can provide substantial cash value build-up on a tax-deferred
basis. However, there is no guaranteed cash value for
amounts you allocate to the Investment Divisions. You bear
the risk of poor investment performance for those amounts.
lets you borrow against your contract, withdraw part of the
net cash surrender value, or completely surrender your
contract. Loans and withdrawals affect the cash value, and
may affect the death benefit.
After the first premium, you may decide how much your premiums
will be and how often you wish to pay them, within limits. You
may also increase or decrease the amount of insurance
protection, within limits.
Depending on the amount of premiums paid, this may or may not
be a Modified Endowment contract. If it is a Modified Endowment
contract, then loans and withdrawals may have negative tax
consequences.
You have a limited right to examine your contract and return it
to us for a refund.
You may allocate your cash value to our General Account or up
to ten investment divisions. Each division invests in a
specified mutual fund portfolio. You can choose among the
following twenty-three investment divisions:
1. VIP Money Market Portfolio
2. VIP High Income Portfolio
3. VIP Equity-Income Portfolio
4. VIP Growth Portfolio
5. VIP Overseas Portfolio
6. VIP II Asset Manager Portfolio
7. VIP II Investment Grade Bond Portfolio
8. VIP II Contrafund Portfolio
9. VIP II Asset Manager: Growth Portfolio
10. VIP II Index 500 Portfolio
11. VIP III Growth & Income Portfolio
12. VIP III Balanced Portfolio
13. VIP III Growth Opportunities Portfolio
14. American Century VP Capital Appreciation Portfolio
15. American Century VP Value Portfolio
16. American Century VP Balanced Portfolio
17. American Century VP International Portfolio
18. American Century VP Income & Growth
19. MFS VIT Emerging Growth
20. MFS VIT Research
21. MFS VIT Growth with Income
22. MFS VIT New Discovery
23. Lord, Abbett VC C Growth and Income
Your cash value in the investment divisions will increase or
decrease based on investment performance. You bear this risk.
The U.S. Government does not insure or guarantee any of these
investments. Separate prospectuses describe the investment
objectives, policies and risks of the portfolios.
The Securities and Exchange Commission has not approved or
disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
Prospectus: May 1, 1999.
Table of Contents
PART 1: SUMMARY 3
FEATURES OF VARIABLE EXECUTIVE UNIVERSAL LIFE 3
Death Benefit Options 3
Contract Changes 3
Flexible Premium Payments 3
Additional Benefits 3
INVESTMENT CHOICES 4
YOUR CASH VALUE 4
Transfers 4
Policy Loans 5
Withdrawing Money 5
Surrendering Your Contract 5
DEDUCTIONS AND CHARGES 5
Deductions From Your Premiums 5
Deductions From Your Cash Value 5
Surrender Charges 5
Portfolio Expenses 6
ADDITIONAL INFORMATION ABOUT THE CONTRACTS 7
Your Right To Examine This Contract 7
Your Contract Can Lapse 7
Tax Effects of Variable Executive Universal Life 7
Illustrations 7
PART 2: DETAILED INFORMATION ABOUT VARIABLE EXECUTIVE UNIVERSAL
LIFE 8
INSURANCE FEATURES 8
How the Contracts Differ From Whole Life Insurance 8
Application for Insurance 8
Death Benefit 8
Maturity Benefit 9
Changes In Variable Executive Universal Life 9
Changing The Face Amount of Insurance 10
Changing Your Death Benefit Option 10
When Contract Changes Go Into Effect 10
Flexible Premium Payments 11
Allocation of Premiums 12
Additional Benefits 12
Automatic Benefit Increase Provision 13
SEPARATE ACCOUNT INVESTMENT CHOICES 14
Our Separate Account And Its Investment Divisions 14
The Funds 14
Investment Policies Of The Portfolios 14
USING YOUR CASH VALUE 18
The Cash Value 18
Amounts In Our Separate Account 18
How We Determine The Accumulation Unit Value 18
Cash Value Transactions 19
Transfers Of Cash Value 19
Dollar Cost Averaging 19
Contract Loans 20
Withdrawing Money From Your Cash Value 21
Surrendering Your Contract 21
THE GENERAL ACCOUNT 22
DEDUCTIONS AND CHARGES 22
Deductions From Your Premiums 22
Charges Against The Separate Account 23
Deductions From Your Cash Value 23
Transaction Charges 24
How Cash Value Charges Are Allocated 24
Surrender Charges 25
Charges In The Funds 26
ADDITIONAL INFORMATION ABOUT THE CONTRACTS 27
Your Right To Examine The Contract 27
Your Contract Can Lapse 27
You May Reinstate Your Contract 28
Contract Periods And Anniversaries 28
Maturity Date 28
We Own The Assets Of Our Separate Account 28
Changing the Separate Account 28
Limits On Our Right To Challenge The Contract 29
Your Payment Options 29
Your Beneficiary 30
Assigning Your Contract 31
When We Pay Proceeds From This Contract 31
TAX EFFECTS 31
Contract Proceeds 31
Possible Charge for Midland's Taxes 33
Other Tax Considerations 34
PART 3: ADDITIONAL INFORMATION 34
MIDLAND NATIONAL LIFE INSURANCE COMPANY 34
YOUR VOTING RIGHTS AS AN OWNER 34
OUR REPORTS TO CONTRACT OWNERS 35
DIVIDENDS 35
MIDLAND'S SALES AND OTHER AGREEMENTS 35
REGULATION 35
YEAR 2000 36
DISCOUNT FOR MIDLAND EMPLOYEES 36
LEGAL MATTERS 36
FINANCIAL AND ACTUARIAL 36
ADDITIONAL INFORMATION 37
MANAGEMENT OF MIDLAND 38
ILLUSTRATIONS 41
DEFINITIONS 49
PERFORMANCE 51
FINANCIAL STATEMENTS 52
This prospectus generally describes only the variable portion
of the Contract, except where the General Account is
specifically mentioned.
Buying this contract might not be a good way of replacing your
existing insurance or adding more insurance if you already own
a flexible premium variable life insurance contract.
You should read this prospectus carefully and keep it for
future reference. You should also have and read the current
prospectuses for the funds.
PART 1: SUMMARY
In this prospectus "We", "Our", and "Us" mean Midland National
Life Insurance Company.
"You" and "Your" mean the owner of the contract. We refer to
the person who is covered by the contract as the "Insured" or
"Insured Person", because the insured person and the owner may
not be the same.
There is a list of definitions at the end of this prospectus,
explaining many words and phrases used here and in the actual
insurance policy.
The detailed information appearing later in this prospectus
further explains the following summary. This summary must be
read along with that detailed information. Unless otherwise
indicated, the description of the contract in this prospectus
assumes that the contract is in force and that there is no
outstanding contract loan.
FEATURES OF VARIABLE EXECUTIVE UNIVERSAL LIFE
Death Benefit Options
Variable Executive Universal Life is life insurance on the
insured person. If the contract is in force we will pay a
death benefit when the insured person dies. You can choose
between two death benefit options:
Option 1: death benefit equals the face amount ("Specified
Amount") of the insurance contract. This is sometimes called
a "level" death benefit.
Option 2: death benefit equals the face amount plus the cash
value. This is sometimes called a "variable" death benefit.
The death benefit may be even greater in some circumstances.
See "Death Benefit" on page 8.
We deduct any outstanding loans and unpaid charges before
paying any benefits. The beneficiary can take the death
benefit in a lump sum or under a variety of payment plans.
Whether your contract lapses or remains in force can depend on
the amount of your cash value (less any outstanding loans and
surrender charges). The cash value, in turn, depends on the
investment performance of the investment divisions you select.
(The cash value also depends on the premiums you pay and the
charges we deduct.) However, during the Minimum Premium
Period, you can keep your policy in force by paying a certain
level of premiums.
The minimum face amount is $150,000
Contract Changes
You may change the death benefit option you have chosen. You
may also increase or decrease the face amount of your contract,
within limits.
Flexible Premium Payments
You may pay premiums whenever and in whatever amount you want,
within certain limits. We require an initial minimum premium
based on the contract's face amount and the insured person's
age and sex.
You choose a planned periodic premium. But payment of the
planned premiums does not ensure that your contract will remain
in force. Additional premiums may be required to keep your
policy from lapsing. You need not pay premiums according to
the planned schedule. However, you can ensure that your
contract stays in force during the Minimum Premium Period by
paying premiums equal to the accumulated minimum premium
amounts. See "Flexible Premium Payments" on page 11.
Additional Benefits
You may choose to include additional benefits in the contract
by rider. These benefits may include:
a disability waiver benefit (to waive the cost of monthly
deductions)
a monthly disability benefit
an accidental death benefit
life insurance for children
family life insurance coverage
life insurance for additional insured persons
an accelerated death benefit in the event of a terminal
illness.
We deduct any costs of additional benefits from your cash value
monthly. See "Additional Benefits" on page 12.
INVESTMENT CHOICES
You may allocate your cash value to up to ten of the following
investment divisions:
1. Fidelity's Variable Insurance Products Fund (VIP)VIP Money
Market Portfolio
2. Fidelity's Variable Insurance Products Fund (VIP)VIP High
Income Portfolio
3. Fidelity's Variable Insurance Products Fund (VIP)VIP Equity-
Income Portfolio
4. Fidelity's Variable Insurance Products Fund (VIP)VIP Growth
Portfolio
5. Fidelity's Variable Insurance Products Fund (VIP)VIP
Overseas Portfolio
6. Fidelity's Variable Insurance Products Fund II (VIP II) VIP
II Asset Manager Portfolio
7. Fidelity's Variable Insurance Products Fund II (VIP II) VIP
II Investment Grade Bond Portfolio
8. Fidelity's Variable Insurance Products Fund II (VIP II) VIP
II Contrafund Portfolio
9. Fidelity's Variable Insurance Products Fund II (VIP II) VIP
II Asset Manager: Growth Portfolio
10. Fidelity's Variable Insurance Products Fund II (VIP II) VIP
II Index 500 Portfolio
11. Fidelity's Variable Insurance Products Fund III (VIP III)
VIP III Growth & Income Portfolio
12. Fidelity's Variable Insurance Products Fund III (VIP III)
VIP III Balanced Portfolio
13. Fidelity's Variable Insurance Products Fund III (VIP III)
VIP III Growth Opportunities Portfolio
14. American Century VP Capital Appreciation Portfolio
15. American Century VP Value Portfolio
16. American Century VP Balanced Portfolio
17. American Century VP International Portfolio
18. American Century VP Income & Growth
19. MFS VIT Emerging Growth
20. MFS VIT Research
21. MFS VIT Growth with Income
22. MFS VIT New Discovery
23. Lord, Abbett VC C Growth and Income
You bear the complete investment risk for all amounts allocated
to any of these investment divisions. You may also allocate
your cash value to our General Account, where we guarantee the
safety of principal and a minimum interest rate.
For more information, see "The Funds" on page 14.
YOUR CASH VALUE
Your cash value begins with your first premium payment. From
your premium we deduct a sales charge, a premium tax and any
per premium expenses. The balance of the premium is your
beginning cash value.
Your cash value reflects:
the amount and frequency of premium payments,
deductions for the cost of insurance and expenses,
the investment performance of your chosen investment
divisions,
interest earned on amounts allocated to the General Account,
loans, and
partial withdrawals.
There is no guaranteed cash value for amounts allocated to the
investment divisions.
See "The Cash Value" on page 18.
Transfers
You may transfer your cash value between the General Account
and the various investment divisions. Transfers take effect
when we receive your request. We require a minimum amount for
each transfer, usually $200. Currently, we allow an unlimited
number of transfers. We reserve the right to charge a $25 fee
after the 12th transfer in a contract year. There are other
limitations on transfers to and from the General Account. See
"Transfers Of Cash Value" on page 19.
Policy Loans
You may borrow up to 92% of your cash surrender value (the cash
value less the surrender charge). Your contract will be the
sole security for the loan. Your contract states a minimum
loan amount, usually $200. Contract loan interest accrues
daily at an annually adjusted rate. See "Contract Loans" on
page 20. Contract loan interest is not tax deductible on
contracts owned by an individual. There may be federal tax
consequences for taking a policy loan. See "TAX EFFECTS" on
page 31.
Withdrawing Money
You may make a partial withdrawal from your cash value. The
current minimum withdrawal amount is $200. The maximum partial
withdrawal you can make is 50% of the net cash surrender value.
The Net Cash Surrender ValueThat is the cash surrender value
(your cash value minus any surrender charge) minus any
outstanding loan and loan interest due. Withdrawals are
subject to other requirements. If you make more than one
withdrawal in a contract year, then we deduct a service charge
(no more than $25). See "Withdrawing Money From Your Cash
Value" on page 21. Withdrawals and surrenders may have negative
tax effects. See "TAX EFFECTS" on page 31.
Surrendering Your Contract
You can surrender your contract for cash and then we will pay
you the net cash surrender value. A surrender charge may be
deducted, and taxes and a tax penalty may apply. See
"Surrendering Your Contract" on page 21.
DEDUCTIONS AND CHARGES
Deductions From Your Premiums
We deduct a 2.50% sales charge from each premium payment. This
charge partially reimburses us for the selling and distributing
costs of this contract. We also charge a 2.5% premium tax on
each premium payment. We may decrease or increase this charge
depending on our expenses, and we may vary this charge by
state. If you elect to pay premiums by Civil Service Allotment,
we also deduct a $.46 charge from each premium payment. See
"Deductions From Your Premiums" on page 22.
Deductions From Your Cash Value
Certain amounts are deducted from your cash value each month.
These are:
an expense charge of $6.00 (currently, we plan to make this
deduction for only the first 15 contract years),
a cost of insurance charge. The amount of this charge is
based on the insured person's attained age, sex, risk class,
and the amount of insurance under your contract; and
charges for additional benefits.
In addition, we deduct fees when you make:
a partial withdrawal of net cash surrender value more than
once in a contract year or
more than twelve transfers a year between investment
divisions. (We currently waive this charge).
See "Deductions From Your Cash Value" on page 23.
We also deduct a daily charge at an annual rate of 0.90% of the
assets in every investment division. We currently intend to
reduce this charge to 0.50% after the 10th contract year. (This
is not guaranteed.) 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 first 12 contract years. If you keep this
contract in force for 12 years, then you will not incur a
surrender charge.
The surrender charge has two parts: a deferred sales charge and
a deferred issue charge. The deferred sales charge partially
reimburses us for our costs in selling and distributing this
contract. The deferred issue charge reimburses us for
underwriting and our other costs in issuing the contract.
The maximum deferred sales charge is:
27.5% of any premium payment in the first 2 contract years up
to one guideline annual premium (this varies for each
contract); and
6.5% of all other premium payments.
After seven years, this charge begins to decline. There is no
surrender charge after 12 years. The amount of the deferred
sales charge depends on:
1) the amount of your premium payments,
2) when you pay your premiums and
3) when you surrender your contract or allow it to lapse.
The deferred issue charge is on a fixed schedule per thousand
dollars of face amount. It starts at $3.00 per $1,000 of face
amount for the first 7 contract years and decreases to $0.00
after the 12th contract year. This summary of the deferred
sales charge and the deferred issue charge assumes no changes
in face amount. See "Surrender Charges" on page 25.
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, 19981997 are shown in the
table below (except as otherwise noted).
Total
Portfolio Expenses
VIP Money Market .30%.31%
VIP High Income .70%.71%
VIP Equity-Income(1) .58%
VIP Growth(1) .68%.69%
VIP Overseas(1) .91%.92%
VIP II Asset Manager(1) .64%.65%
VIP II Investment Grade Bond .57%.58%
VIP II Contrafund(1) .70%.71%
VIP II Asset Manager: Growth(1) .73%.77%
VIP II Index 500(1)(2) .35%.28%
VIP III Growth & Income(1) .61%.70%
VIP III Balanced(1) .59%.61%
VIP III Growth Opportunities(1) .71%.74%
American Century VP Capital Appreciation 1.00%
American Century VP Value 1.00%
American Century VP Balanced 1.00%
American Century VP International 1.47%1.50%
American Century VP Income & Growth(4) .70%
MFS VIT Emerging Growth(3) .85%.87%
MFS VIT Research(3) .86%.88%
MFS VIT Growth with Income(3) .88%1.00%
MFS VIT New Discovery(2) (3) (4) 1.17%1.15%
Lord, Abbett VC C Growth and Income .51%.52%
(1) This portfolio used a portion of its paid brokerage
commissions to reduce its expenses. Certain portfolios used
credits gained as a result of uninvested cash balances to
reduce custodian and transfer agent expenses. Including these
reductions, total operating expenses would have been as
follows:
VIP Equity-Income 0.57%
VIP Growth 0.66%0.67%
VIP Overseas 0.89%0.90%
VIP II Asset Manager 0.63%0.64%
VIP II Index 500 0.28%
VIP II Contrafund 0.66%0.78%
VIP II Asset Manager: Growth 0.72%0.76%
VIP III Balanced 0.58%0.60%
VIP III Growth Opportunities 0.70%0.73%
VIP III Growth & Income 0.60%
(2) The Fund's investment advisor voluntarily reduced the
portfolio's expenses. Absent reimbursement, the total expenses
for the VIP II Index 500 would have been 0.40%.
(2)(3) MFS has agreed to bear expenses for thisthese portfolios,
such that theeach such portfolio's other expenses shall not
exceed 0.25%. Without this limitation, the other expenses and
total expenses would be
0.35% and 1.10% for the MFS VIT Growth with Income, and
4.32%0.47% and 5.22%1.37% for the MFS VIT New Discovery.
(4) The annual expenses shown for these portfolios are based on
estimated expenses for 1998.
(3) Each of the MFS Series has an expense offset arrangement,
which reduces the series' custodian fee based upon the amount
of cash maintained by the series with its custodian and
dividend disbursing agent. Each series may enter into other
such arrangements and directed brokerage arrangements, which
would also havae 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 26.
ADDITIONAL INFORMATION ABOUT THE CONTRACTS
Your Right To Examine This Contract
You have a right to examine and cancel the contract. Your
cancellation request must be postmarked by the latest of the
following 3 dates:
10 days after you receive your contract,
10 days after we mail you a notice of this right, or
45 days after you sign the contract application.
If you cancel your contract during this period, then we will
return your cash value plus all of the charges we have deducted
from premiums or from the investment divisions or the cash
value. Expenses of the portfolios are not returned.
See "Your Right To Examine The Contract" on page 27.
Your Contract Can Lapse
Your contract remains in force if the net cash surrender value
can pay the monthly charges. In addition, during the Minimum
Premium Period, your contract will remain in force as long as
you meet the applicable minimum premium requirements. However,
the contract can lapse after the Minimum Premium Period no
matter how much you pay in premiums, if the net cash surrender
value is insufficient to pay the monthly charges (subject to
the grace period). See "Your Contract Can Lapse" on page 27.
Tax Effects of Variable Executive Universal Life
We believe that a contract issued on the basis of a standard
rate class should quality as a life insurance contract for
federal income tax purposes. It is unclear whether a contract
issued on a substandard basis would qualify as a life insurance
contract, particularly if you pay the full amount of premiums
permitted under the contract. If a contract does not satisfy
Section 7702 of the Internal Revenue code (defining life
insurance for tax purposes), we will take appropriate and
reasonable steps to try to get the contract to comply with
Section 7702.
If a contract qualifies as a life insurance contract for
federal income tax purposes, then the death benefit payment is
not subject to federal income tax. In addition, under current
federal tax law, you do not have to pay income tax on any
increases in your cash value as long as they remain in your
contract.
A contract may be treated as a "Modified Endowment contract"
depending upon the amount of premiums paid in relation to the
death benefit. If the contract is a Modified Endowment
contract, then all pre-death distributions, including contract
loans, will be treated first as distributions of taxable income
and then as a return of your investment in the contract. In
addition, prior to age 59 1/2, such distributions generally
will be subject to a 10% penalty tax.
If the contract is not a Modified Endowment contract,
distributions generally will be treated first as a return of
your investment in the contract and then as a distribution of
taxable income. Moreover, loans will not be treated as
distributions. Finally, distributions and loans from a contract
that is not a Modified Endowment contract are not subject to
the 10% penalty tax. See "TAX EFFECTS" on page 31.
Illustrations
This prospectus includes sample projections of hypothetical
death benefits and cash surrender values, beginning on page
42.in Appendix B. These are only hypothetical figures and are
not indications of either past or anticipated future investment
performance. These hypothetical value projections may be
helpful in understanding the long-term effects of different
levels of investment performance, charges and deductions. They
may help in comparing this contract to other life insurance
contracts. They indicate that if the contract is surrendered in
the early contract years, the net cash surrender value may be
low compared to never purchasing the policy and investing the
money used as premiums at 5% per year. This demonstrates that
this contract should not be purchased as a short-term
investment.
PART 2: DETAILED INFORMATION
ABOUT VARIABLE
EXECUTIVE UNIVERSAL LIFE
INSURANCE FEATURES
This prospectus describes our Variable Executive Universal 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 Executive Universal Life (VEUL) 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. VEUL
differs from traditional whole life insurance because you may
choose the amount and frequency of premium payments, within
limits.
In addition, VEUL has two types death benefit options. You may
switch back and forth between these options. Variable
Executive Universal Life also allows you to change the face
amount without purchasing a new insurance policy. However,
evidence of insurability may be required.
Application for Insurance
To apply for a contract you must submit a completed
application. We decide whether to issue a contract based on
the information in the application and our standards for
issuing insurance and classifying risks. If we decide not to
issue a contract, then we will return the sum of premiums paid
plus interest credited. The maximum issue age is 80.
Death Benefit
We pay the death benefit to the beneficiary when the insured
person dies (outstanding indebtedness will be deducted from the
proceeds). As the owner, you may choose between two death
benefit options:
Option 1 provides a benefit that equals the face amount of
the contract. This "level" death benefit is for owners who
prefer insurance coverage that does not vary in amount and
has lower insurance charges. Except as described below, the
option 1 death benefit is level or fixed at the face amount.
Option 2 provides a benefit that equals the face amount of
the contract plus the cash value on the day the insured
person dies. This "variable" death benefit is for owners who
prefer to have investment performance reflected in the amount
of their insurance coverage. Under Option 2, the value of
the death benefit fluctuates with your cash value.
Under both options, Federal tax law may require a greater
benefit. This benefit is a percentage multiple of your cash
value. The percentage declines as the insured person gets
older (this is referred to as the "corridor" percentage).
ThisThe death benefit will be your cash value on the day the
insured person dies multiplied by the percentage for his or her
age. For this purpose, age is the attained age (last birthday)
at the beginning of the contract year of the insured person's
death.
The percentages are shown below:
Table of Death Benefits
Based on Cash Value
The Death The Death
Benefit Will Benefit Will
Be At Least Be At Least
If The Equal To If The Equal To
Insured This Percent Insured This Percent
Person's of The Person's of The
Age Is Cash Value Age Is Cash Value
0-40 250% 60 130%
41 243% 61 128%
42 236% 62 126%
43 229% 63 124%
44 222% 64 122%
45 215% 65 120%
46 209% 66 119%
47 203% 67 118%
48 197% 68 117%
49 191% 69 116%
50 185% 70 115%
51 178% 71 113%
52 171% 72 111%
53 164% 73 109%
54 157% 74 107%
55 150% 75-90 105%
56 146% 91 104%
57 142% 92 103%
58 138% 93 102%
59 134% 94 101%
95-99 100%
These percentages are based on federal income tax law which
require a minimum death benefit, in relation to cash value, for
your contract to qualify as life insurance.
For example, assume the insured person is 55 years old and the
face amount is $100,000. The "corridor percentage" at that age
is 150%. Under Option 1, the death benefit will generally be
$100,000. However, when the cash value is greater than
$66,666.67, the corridor percentage applies and the death
benefit will be greater than $100,000 (since 150% of $66,666.67
equals $100,000). In this case, at age 55, we multiply the
cash value by a factor of 150%. So if the cash value were
$70,000, then the death benefit would be $105,000.
Under Option 2, the death benefit is the face amount plus the
cash value. In this example, if a 55 year-old had a face
amount of $100,000 and a cash value of $200,000, then the death
benefit would be $300,000. This figure results from either:
(a) adding the face amount to the cash value or (b) multiplying
the cash value by the corridor percentage. For all cash values
higher than this level, the corridor percentage would apply.
Therefore, for every $1.00 added to the cash value above
$200,000, the death benefit would increase by $1.50 (at that
age).
Under either option, the length of time your contract remains
in force depends on the net cash surrender value of your
contract and whether you meet the Minimum Premium Period
requirements. Your coverage lasts as long as your net cash
surrender value can cover the monthly deductions from your cash
value. In addition, during the Minimum Premium Period, your
contract remains in force if the sum of your premium payments
(minus any loans or withdrawals) is greater than the sum of the
monthly minimum premiums for all of the contract months since
the contract was issued.
The investment performances of the investment divisions and the
interest earned in the General Account affect your cash value.
Therefore, the returns from these investment options can affect
the length of time your contract remains in force.
The minimum initial face amount is $150,000.
Maturity Benefit
If the insured person is still living on the maturity date, we
will pay the beneficiary the cash value minus any outstanding
loans. The contract will then end. The maturity date is the
contract anniversary after the insured person's 100th birthday.
In certain circumstances, you may extend the maturity date. See
"Maturity Date" on page 28.
Changes In Variable Executive Universal Life
Variable Executive Universal 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 home office. You can only change the
face amount twice each contract year. All changes are subject
to our approval and to the following conditions.
For increases:
Increases in the face amount must be at least $25,000.
To increase the face amount, you must provide satisfactory
evidence of insurability. If the insured person has become a
more expensive risk, then we charge higher cost of insurance
fees for the additional amounts of insurance (we may change
this procedure in the future).
Monthly cost of insurance deductions from your cash value
will increase. There will also be a surrender charge
increase. These begin on the date the face amount increase
takes effect.
The right to examine this contract does not apply to face
amount increases. (It only applies when you first buy the
contract.)
For decreases:
You cannot reduce the face amount below the minimum we
require to issue this contract at the time of the reduction.
Monthly cost of insurance deductions from your cash value
will decrease.
The federal tax law may limit a decrease in the face amount.
If that limit applies, then your new death benefit will be
your cash value multiplied by the corridor percentage the
federal tax law specifies for the insured's age at the time
of the change.
If you request a face amount decrease after you have already
increased the face amount at substandard (i.e., higher) risk
charges, and the original face amount was at standard risk
charges, then we will first decrease the face amount that is
at substandard higher risk charges. We may change this
procedure.
Changing Your Death Benefit Option
You may change your death benefit option by sending a written
request to our home office. We require satisfactory evidence
of insurability to make this change.
If you change from option 1 to option 2, the face amount
decreases by your cash value on the date of the change. This
keeps the death benefit and amount at risk the same as before
the change. We may not allow a change in death benefit option
if it would reduce the face amount below the minimum we require
to issue this contract at the time of the reduction.
If you change from option 2 to option 1, then the face amount
increases by the amount of your cash value on the date of the
change. These increases and decreases in face amount are made
so that the amount of the death benefit remains the same on the
date of the change. When the death benefit remains the same,
there is no change in the net amount at risk. This is the
amount on which the cost of insurance charges are based.
When Contract Changes Go Into Effect
Any changes in the face amount or the death benefit option will
go into effect on the monthly anniversary of the date we
approved your request. After your request is approved, you
will receive a written notice showing each change. You should
attach this notice to your contract. We may also ask you to
return your contract to us at our home office so that we can
make a change. We will notify you if we do not approve a
change you request. For example, we might not approve a change
that would disqualify your contract as life insurance for
income tax purposes.
Contract changes may have negative tax consequences. See "TAX
EFFECTS" on page 31.
Flexible Premium Payments
You may choose the amount and frequency of premium payments,
within the limits described below.
Even though your premiums are flexible, your contract
information page will show a "planned" periodic premium. You
determine the planned premium when you apply and can change
them at any time. You will specify the frequency to be on a
quarterly, semi-annual or annual basis. The planned premiums
may not be enough to keep your contract in force. Planned
periodic premiums may be monthly if paid by pre-authorized
check. Premiums may be bi-weekly if paid by Civil Service
Allotment. The planned premiums may not be enough to keep your
contract in force.
The insurance goes into effect when we receive your initial
minimum premium payment (and approve your application). We
determine the initial minimum premium based on:
1) the age, sex, and premium class of the insured person,
2) the initial face amount of the contract, and
3) any additional benefits selected.
All premium payments should be payable to "Midland". After your
first premium payment, all additional premiums should be sent
directly to our home office.
We will send you premium reminders based on your planned
premium schedule. You may make the planned payment, skip the
planned payment, or change the frequency or the amount of the
payment. Generally, you may pay premiums at any time. Amounts
must be at least $50, unless made through a $30 monthly
automatic payment plan.
Payment of the planned premiums does not guarantee that your
contract will stay in force. Additional premium payments may
be necessary. The planned premiums increase when the face
amount of insurance increases. This includes increases
resulting from the Automatic Benefit Increase provision. (See
"Automatic Benefit Increase Provision" on page 13 for details
on how and when the increases are applied.)
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 total premiums you have paid, less your loans or
withdrawals, are less than the total monthly minimum premiums
required to that date.
This contract lapse can occur even if you pay all of the
planned premiums.
Premium Provisions After The Minimum Premium Period. After the
Minimum Premium Period, your contract will lapse if the net
cash surrender value cannot cover the monthly deductions from
your cash value. Paying your planned premiums may not be
sufficient to maintain your contract because of investment
performance, charges and deductions, contract changes or other
factors. Therefore, additional premiums may be necessary to
keep your contract in force.
Allocation of Premiums
Each net premium will be allocated to the investment divisions
or to our General Account on the day we receive it (except that
any premium received before we issue the contract will not be
allocated or invested until we issue the contract). The net
premium is the premium minus a sales charge, a premium tax and
any expense charges. Each premium is put into your cash value
according to your instructions. Your contract application may
provide directions to allocate net premiums to our General
Account or the investment divisions. You may not allocate your
cash value to more than 10 investment divisions at any one
point in time. Your allocation instructions will apply to all
of your premiums unless you write to our home office with new
instructions. Allocation percentages may be any whole number
from 010 to 100. The sum of the allocation percentages must
equal 100. Of course, you may choose not to allocate a premium
to any particular investment division. See "THE GENERAL
ACCOUNT" on page 22. Any premium received before the record
date will be held and earn interest in the General Account
until the day after the record date. When this period ends
your instructions will dictate how we allocate it.
Additional Benefits
You may include additional benefits in your contract. Certain
benefits result in an additional monthly deduction from your
cash value. You may cancel these benefits at any time. The
following briefly summarizes the additional benefits that are
currently available:
(1) Disability Waiver Benefit: With this benefit, we waive
monthly charges from the cash value if the insured person
becomes totally disabled on or after his/her 15th birthday and
the disability continues for at least 6 months. If a
disability starts before the contract anniversary following the
insured person's 60th birthday, then we will waive monthly
deductions for as long as the disability continues.
(2) Monthly Disability Benefit: With this benefit, we pay a
set amount into your cash value each month (the amount is on
your contract information page). The benefit is payable when
the insured person becomes totally disabled on or after their
15th birthday and the disability continues for at least 6
months. The disability must start before the contract
anniversary following the insured person's 60th birthday. The
benefit will continue until the insured person reaches age 65.
If the amount of benefit paid into the cash value is more than
the amount allowed under the income tax code, the monthly
benefit will be paid to the insured person.
(3) Accidental Death Benefit: We will pay an additional
benefit if the insured person dies from a physical injury that
results from an accident, provided the insured person dies
before the contract anniversary that is within a half year of
his or her 70th birthday.
(4) Children's Insurance Rider: This benefit provides term
life insurance on the lives of the insured person's children.
This includes natural children, stepchildren and legally
adopted children, between the ages of 15 days and 21 years.
They are covered until the insured person reaches age 65 or the
child reaches age 25.
(5) Family Insurance Rider: This benefit provides term life
insurance on the insured person's children as does the
Children's Insurance. It also provides decreasing term life
insurance on the insured's spouse.
(6) Additional Insured Rider: You may provide term insurance
for another person, such as the insured person's spouse, under
your contract. A separate charge will be deducted for each
additional insured.
(7) Guaranteed Insurability Rider: This benefit provides for
additional amounts of insurance without further evidence of
insurability.
(8) Living Needs Rider: This benefit provides an accelerated
death benefit as payment of an "Advanced Sum," in the event the
insured person is expected to die within 12 months.
You can choose the death benefit amount to accelerate at the
time of the claim. The maximum advanced sum is 50% of the
eligible death benefit (which is the death benefit of the
contract plus the sum of any additional death benefits on the
life of the insured person provided by any eligible riders).
Currently, there is a maximum of $250,000 and a minimum of
$5,000.
There is no charge for this benefit prior to the time of a
payment. The amount of the advanced sum is reduced by expected
future interest and may be reduced by a charge for
administrative expenses.
On the day we pay the accelerated benefit, we will reduce the
following in proportion to the reduction in the eligible death
benefit:
a. the death benefit of the contract and of each eligible rider
b. the face amount
c. any cash values
d. any outstanding loan
When we reduce the cash value, we allocate the reduction based
on the proportion that your unloaned amounts in the General
Account and your amounts in the investment divisions bear to
the total unloaned portion of your cash value.
Pursuant to the Health Insurance Portability and Accountability
Act of 1996, we believe that for federal income tax purposes an
advanced sum payment made under the living needs rider should
be fully excludable from the gross income of the beneficiary,
as long as the beneficiary is the insured person under the
contract. However, you should consult a qualified tax advisor
about the consequences of adding this rider to a contract or
requesting an advanced sum payment under this rider.
Automatic Benefit Increase Provision
The Automatic Benefit Increase (ABI) provision is a contract
rider that allows for face amount increases to keep pace with
inflation. All standard issues of regularly underwritten
policies issued after May 1, 1998, include the ABI provision,
except where the issue age of the primary insured is older than
55. In addition, the ABI provision is not included where the
billing mode is military government allotment, civil service
allotment or list bill.
The ABI can automatically increase your face amount every two
years, based on increases in the Consumer Price Index. The
increases will occur on the 2nd contract anniversary and every
two years thereafter, unless you reject an increase. The
increases continue until the rider terminates. We send you a
notice about the increase amounts at least 30 days before the
increase date. You have the right to reject any increase in
face amount by sending us a notice before it takes effect. If
you reject an increase, then the ABI provision terminates. (See
your ABI rider for exact details.)
We calculate each face amount increase under the ABI provision
as follows:
(a) The eligible face amount, multiplied by
(b) The Consumer Price Index 5 months before the increase
date, divided by
(c) The Consumer Price Index 29 months before the increase
date,
minus the eligible face amount from part (a). The eligible
face amount is the sum of the portions of the face amount of
insurance that are in the non-smoker, ordinary or preferred
premium class.
The maximum increase is the lesser of $50,000 or 20% of the
eligible face amount. The ABI provision automatically
terminates once the total of the increases is more than twice
the initial face amount. The Consumer Price Index is the U.S.
Consumer Price Index for all urban consumers as published by
the U.S. Department of Labor. (See your policy form for more
details on this index.)
The ABI provision does not require separate monthly charges,
but it does affect the amount of your monthly cost of insurance
charge by increasing your face amount. (See "Deductions From
Your Cash Value" on page 23.)
ABI increases also increase the planned and minimum premiums.
(See Your ABI Rider and Your Base Contract Policy Form for
exact details.)
SEPARATE ACCOUNT INVESTMENT CHOICES
Our Separate Account And Its Investment Divisions
The "Separate Account" is our Separate Account A, established
under the insurance laws of the State of South Dakota. It is a
unit investment trust registered with the Securities and
Exchange Commission (SEC) under the Investment Company Act of
1940 but this registration does not involve any SEC supervision
of its management or investment policies. The Separate Account
meets the definition of a "Separate Account" under the federal
securities laws. The Separate Account has a number of
investment divisions, each of which invests in the shares of a
corresponding portfolio of the Funds. You may allocate part or
all of your net premiums to ten of the twenty-three investment
divisions of our Separate Account.
The Funds
Each of the 23 portfolios available under the contract is a
"series" of one of the following investment companies:
1. Fidelity's Variable Insurance Products Fund,
2. Fidelity's Variable Insurance Products Fund II,
3. Fidelity's Variable Insurance Products Fund III,
4. American Century Variable Portfolios, Inc.,
5. MFS(r)Massachusetts Financial's Variable Insurance Trusts, and
6. Lord, Abbett's Series Fund, Inc.
The Funds' shares are bought and sold by our Separate Account
at net asset value. More detailed information about the Funds
and their investment objectives, policies, risks, expenses and
other aspects of their operations, appear in their
prospectuses, which accompany this prospectus.
Midland may from time to time receive revenue from the Funds
and/or from their managers. The amounts of the revenue, if
any, may be based on the amount of Midland's investments in the
Funds.
Investment Policies Of The Portfolios
Each portfolio tries to achieve a specified investment
objective by following certain investment policies. A
portfolio's objectives and policies affect its returns and
risks. Each investment division's performance depends on the
experience of the corresponding portfolio. The objectives of
the portfolios are as follows:
Portfolio
Objective
VIP Money Market
Seeks as
high a level
of current
income as is
consistent
with
preservation
of capital
and
liquidity by
investing in
U.S. dollar-
denominated
money market
securities. Seeks to earn
a high level
of current
income as is
consistent
with
preserving
capital and
providing
liquidity by
investing in
high quality
money market
instruments.
(An
investment
in the Money
Market or
any other
Portfolio is
neither
insured nor
guaranteed
by the U.S.
Government,
and there is
no assurance
that the
Money Market
Portfolio
will be able
to maintain
a constant
net asset
value.)
VIP High Income
Seeks a high
level of
current
income by
investing
primarily in
income-
producing
debt
securities
while also
considering
growth of
capital.
Policy
owners
should
understand
that the
fund's unit
price may be
volatile due
to the
nature of
the high
yield bond
marketplace.
Seeks high
current
income by
investing
primarily in
high-
yielding,
lower-rated,
fixed-income
securities,
while also
considering
growth of
capital. For
a description
of the
special
risks
involved in
investing in
these securities,
see the
prospectus
for the
Funds.
VIP Equity-Income
Seeks
reasonable
income by
investing
primarily in
income-
producing
equity
securities.
In choosing
these
securities,
the Manager
will
consider the
potential
for capital
appreciation. The
Portfolio's
goal is to
achieve a
yield which
exceeds the
composite
yield on the
securities
comprising
the Standard
& Poor's
Composite
Index of 500
Stocks. Seeks
reasonable
income by
investing
primarily in
income-
producing
equity
securities.
In choosing
these
securities,
the Manager
will
consider the
potential
for capital
appreciation. The
Portfolio's
goal is to
achieve a
yield which
exceeds the
composite
yield on the
securities
comprising
the Standard
& Poor's
Composite
Index of 500
Stocks.
VIP Growth
Seeks
capital
appreciation
by investing
in common
stocks. The
adviser
invests the
fund's
assets in
companies
the adviser
believes
have above-
average
growth
potential. Seeks capital
appreciation
by investing
in common
stocks,
although the
Portfolio's
investments
are not
restricted
to any one
type of
security.
Capital
appreciation
also may be
found in
other types
of
securities,
including
bonds and
preferred
stocks.
VIP Overseas
Seeks long-
term growth
of capital,
primarily
through
investments
in foreign
securities. Seeks
long-term growth
of capital,
primarily
through
investments
in foreign
securities.
VIP II Asset Manager
Seeks high
total return
with reduced
risk over
the long
term by
allocating
its assets
among
domestic and
foreign
stocks,
bonds and
short-term
instruments.
Seeks high
total return
with reduced
risk over
the long-
term by
allocating
its assets
among
domestic and
foreign
stocks,
bonds and
short-term
money market
instruments.
VIP II Investment Grade Bond
Seeks a high
a level of
current
income as is
consistent
with the
preservation
of capital
by investing
in U.S.
dollar-
denominated
investment-
grade
bonds. Seeks
as high a
level of
current
income as is
consistent
with the
preservation
of capital
by investing
in a broad
range of
investment
grade fixed
income
securities.
VIP II Contrafund
Seeks to
achieve
capital
appreciation
over the
long term by
investing in
common
stocks and
securities
of companies
whose value
the manager
believes is
not fully
recognized
by the
public. Seeks
to achieve
capital
appreciation
over the
long term by
investing in
securities
of companies
whose value
the manager
believes is
not
recognized
fully by the
public.
VIP II Asset Manager: Growth
Seeks to
maximize
total return
by allocating
its assets
among stocks,
bonds, short-term
instruments,
and other
investments.
Seeks to
maximize
total return
over the
long term
through
investments
in stocks,
bonds, and
short-term
instruments.
This portfolio
has a
heavier
emphasis on
stocks than
the Asset
Manager
Portfolio.
VIP II Index 500
Seeks to
provide
investment
results that
correspond
to the total
return of
common stocks
publicly
traded in
the United
States by
duplicating
the composition
and total
return of
the Standard
& Poor's
Composite
Index of 500
Stocks. Seeks
to provide
investment
results that
correspond
to the total
return of
common
stocks
publicly
traded in
the United
States by
duplicating
the composition
and total
return of
the Standard
& Poor's
Composite
Index of 500
Stocks. This
is designed
as a long- term
investment
option.
VIP III Growth & Income
Seeks high
total
return,
combining
current
income and
capital
appreciation. Invests
mainly in
stocks that
pay current
dividends
and show
potential
for capital
appreciation
earnings
potential.
VIP III Balanced
Seeks both
income and
growth of
capital.
When FMR's
outlook is
neutral, it
will invest
approximately
60% of the
fund's
assets in
equity
securities
and will
always
invest at
least 25% of
the fund's
assets in
fixed-income
senior
securities. Seeks to
balance the
growth
potential of
stocks with
the possible
income
cushion of
bonds.
Invests in
broad
selection of
stocks,
bonds and
convertible
securities.
VIP III Growth Opportunities
Seeks
capital
growth by
investing
primarily in
common
stocks.
Although the
fund invests
primarily in
common
stocks, it
has the
ability to
purchase
other
securities,
including
bonds, which
may be
lower-
quality debt
securities. Seeks long-
term growth
of capital.
Invests
primarily in
common
stocks and
securities
convertible
into common
stocks, but
it has the
ability to
purchase
other
securities
such as
preferred
stocks and
bonds that
may produce
capital
growth.
American Century VP Capital Appreciation
Seeks
capital
growth by
investing
primarily in
common
stocks that
management
considers to
have better-
than-average
prospects
for
appreciation.
American Century VP Value
Seeks long-
term capital
growth with
income as a
secondary
objective.
Invests
primarily in
equity
securities
of well-
established
companies
that
management
believes to
be under-
valued.
American Century VP Balanced
Seeks
capital
growth and
current
income.
Invests
approximately 60 percent
of its
assets in
common
stocks that
management
considers to
have better
than average
potential
for
appreciation
and the rest
in fixed
income
securities.
American Century VP International
Seeks
capital
growth by
investing
primarily in
securities
of foreign
companies
that
management
believes to
have
potential
for
appreciation.
American Century VP Income & Growth
Seeks
dividend
growth,
current
income and
capital
appreciation. The
Portfolio
will seek to
achieve its
investment
objective by
investing in
common
stocks.
MFS VIT Emerging Growth
Seeks to
provide
long-term
growth of
capital.
Dividend and
interest
income from
portfolio
securities,
if any, is
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 C Growth and Income
Seeks long-
term growth
of capital
and income
without
excessive
fluctuation
in market
value.
Fidelity Management & Research Company manages the VIP, VIP II
and VIP III portfolios. American Century Investment
Management, Inc. manages the American Century VP Portfolios.
MFS(r) Massachusetts Financial Services Company manages the MFS
Variable Insurance Trusts. Lord, Abbett & Co.Company manages
the Lord, Abbett Series Fund, Inc.
The Fund portfolios available under these contracts are not
available for purchase directly by the general public, and are
not the same as the mutual funds with very similar or nearly
identical names that are sold directly to the public. However,
the investment objectives and policies of the portfolios are
very similar to the investment objectives and policies of other
(publicly available) mutual fund portfolios that have very
similar or nearly identical names and that are or may be
managed by the same investment advisor or manager.
Nevertheless, the investment performance and results of any of
the Funds' portfolios that are available under the contracts
may be lower, or higher, than the investment results of such
other (publicly available) portfolios. There can be no
assurance, and no representation is made, that the investment
results of any of the available portfolios will be comparable
to the investment results of any other portfolio or mutual
fund, even if the other portfolio or mutual fund has the same
investment advisor or manager and the same investment
objectives and policies and a very similar or nearly identical
name.
USING YOUR CASH VALUE
The Cash Value
Your cash value is the sum of your amounts in the various
investment divisions and in the General Account (including any
amount in our General Account securing a contract loan). Your
cash value reflects various charges. See "DEDUCTIONS AND
CHARGES" on page 22. Monthly deductions are made on the first
day of each contract month. Transaction and surrender charges
are made on the effective date of the transaction. Charges
against our Separate Account are reflected daily.
We gaurantee amounts allocated to the General Account. There
is no guaranteed minimum cash value for amounts allocated to
the investment divisions of our Separate Account. You bear
that investment risk. An investment division's performance
will cause your cash value to go up or down.
Amounts In Our Separate Account
Amounts allocated or transferred to the investment divisions
are used to purchase accumulation units. Accumulation units of
an investment division are purchased when you allocate
premiums, repay loans or transfer amounts to that division.
Accumulation units are redeemed when you make withdrawals or
transfer amounts from an investment division (including
transfers for loans), we make monthly deductions and charges,
and to pay the death benefit. The number of accumulation units
purchased or redeemed in an investment division is calculated
by dividing the dollar amount of the transaction by the
division's accumulation unit value at the end of that day. The
value you have in an investment division is the accumulation
unit value times the number of accumulation units credited to
you. The number of accumulation units credited to you will not
vary because of changes in accumulation unit values.
How We Determine The Accumulation Unit Value
We determine accumulation unit values for the investment
divisions at the end of each business day. Accumulation unit
values fluctuate with the investment performance of the
corresponding portfolios of the Funds. They reflect investment
income, the portfolio's realized and unrealized capital gains
and losses, the Funds' expenses, and our deductions and
charges. The accumulation unit value for each investment
division is set at $10.00 on the first day there are contract
transactions in our Separate Account associated with these
contracts. After that, the accumulation unit value for any
business day is equal to the accumulation unit value for the
previous business day multiplied by the net investment factor
for that division on that business day.
We determine the net investment factor for each investment
division every business day as follows:
We take the value of the shares belonging to the division in
the corresponding Fund portfolio at the close of business
that day (before giving effect to any contract transactions
for that day, such as premium payments or surrenders). We use
the share value reported to us by the Fund.
We add any dividends or capital gains distributions paid by
the portfolio on that day.
We divide this amount by the value of the amounts in the
investment division at the close of business on the preceding
business day (after giving effect to any contract
transactions on that day).
We subtract a daily asset charge for each calendar day
between business days (for example, a Monday calculation may
include charges for Saturday and Sunday). The daily charge is
.0024547%, which is an effective annual rate of 0.90%. We
currently intend to reduce this charge to 0.50% after the
10th contract year. (This is not guaranteed.) (See
"Mortality and Expense Risks" on page 21.)
We may subtract any daily charge for taxes or amounts set
aside as tax reserves.
Cash Value Transactions
The transactions described below may have different effects on
your cash value, death benefit, face amount or cost of
insurance changes. You should consider the net effects before
making any cash value transactions. Certain transactions have
fees. Remember that upon completion of these transactions, you
may not have your cash value allocated to more than 10
investment divisions.
Transfers Of Cash Value
You may transfer amounts among the investment divisions and
between the General Account and any investment divisions. To
make a transfer of cash value, write to our home office.
Currently, you may make an unlimited number of transfers of
cash value in each contract year. But we reserve the right to
assess a $25 charge after the 12th transfer in a contract year.
If we charge you for making a transfer, then we will allocate
the charge as described under "Deductions and Charges - How
Cash Value Charges Are Allocated" on page 24. Although a
single transfer request may include multiple transfers, it will
be considered a single transfer for fee purposes.
Transfer requests received before 3:00 p.m. (Central Standard
Time) will take affect on the same day if that day is a
business day. Otherwise, the transfer request will take affect
on the business day following the day we receive your request.
The unit values are determined on the day the transfer takes
affect. The minimum transfer amount is $200. The minimum
amount does not have to come from or be transferred to just one
investment division. The only requirement is that the total
amount transferred that day equals the transfer minimum.
The total amount that can be transferred from the General
Account to the Separate Account, in any contract year, cannot
exceed the larger of:
1. 25% of the unloaned amount in the General Account at the
beginning of the contract year, or
2. $25,000$1,000.
These limits do not apply to transfers made in a Dollar Cost
Averaging program that occurs over a time period of 12 or more
months.
Dollar Cost Averaging
The Dollar Cost Averaging (DCA) program enables you to make
monthly transfers of a predetermined dollar amount from the DCA
source account (any investment division or the General Account)
into one or more of the investment divisions. By allocating
monthly, as opposed to allocating the total amount at one time,
you may reduce the impact of market fluctuations. This plan of
investing does not insure a profit or protect against a loss in
declining markets. The minimum monthly amount to be
transferred using DCA is $200.
You can elect the DCA program at any time. You must complete
the proper request form, and there must be a sufficient amount
in the DCA source account. The minimum amount required in the
DCA source account for DCA to begin is the sum of $2,400 and
the minimum premium. You can get a sufficient amount by paying
a premium with the DCA request form, allocating premiums, or
transferring amounts to the DCA source account. The DCA
election will specify:
a. The DCA source account from which DCA transfers will be
made,
b. That any money received with the form is to be placed into
the DCA source account,
c. The total monthly amount to be transferred to the other
investment divisions, and
d. How that monthly amount is to be allocated among the
investment divisions.
The DCA request form must be received with any premium payments
you intend to apply to DCA.
Once DCA is elected, additional premiums can be deposited into
the DCA source account by sending them in with a DCA request
form. All amounts in the DCA source account will be available
for transfer under the DCA program.
Any premium payments received while the DCA program is in
effect will be allocated using the allocation percentages from
the DCA request form, unless you specify otherwise. You may
change the DCA allocation percentages or DCA transfer amounts
twice during a contract year.
If it is requested when the contract is issued, then DCA will
start at the beginning of the 2nd contract month. If it is
requested after issue, then DCA will start at the beginning of
the 1st contract month which occurs at least 30 days after the
request is received.
DCA will last until the value in the DCA source account falls
below the allowable limit or until we receive your written
termination request. DCA automatically terminates on the
maturity date.
We reserve the right to end the DCA program by sending you one
month's notice.
Contract Loans
If your contract has a TSA Life 403(b) Endorsement, contract
loans are not available and this section is not applicable to
your contract.
Whenever your contract has a net cash surrender value, you may
borrow up to 92% of the cash surrender value using only your
contract as security for the loan. If you request an
additional loan, then the outstanding loan and loan interest
will be added to the additional loan amount and the original
loan will be canceled. Thus, you will only have one
outstanding loan.
We pay you interest on this loaned amount, currently at an
annual rate of 6%. After the 10th contract year, we guarantee
that the annual rate of interest paid on the loaned portion of
the cash value will equal 8% (which is equal to the interest
rate charged on the contract loan) for the portion of the loan
that is from earnings (that is, the portion that does not
exceed the cash value minus total premiums paid).
A loan taken from, or secured by, a contract may have federal
income tax consequences. See "TAX EFFECTS" on page 31.
You may request a loan by contacting our home office. You
should tell us how much of the loan you want taken from your
unloaned amount in the General Account or from the Separate
Account investment divisions. If you do not tell us how to
allocate your loan, the loan will be allocated according to
your deduction allocation percentages as described under "How
Cash Value Charges Are Allocated" on page 24. If the loan
cannot be allocated this way, then we will allocate it in
proportion to the unloaned amounts of your cash value in the
General Account and each investment division. We will redeem
units from each investment division equal in value to the
amount of the loan allocated to that investment division (and
transfer these amounts to the General Account).
Contract Loan Interest. Interest on a contract loan accrues
daily at an annual interest rate of 8%.
Interest is due on each contract anniversary. If you do not
pay the interest when it is due, then it will be added to your
outstanding loan and allocated based on the deduction
allocation percentages for your cash value. This means we make
an additional loan to pay the interest and will transfer
amounts from the General Account or the investment divisions to
make the loan. If we cannot allocate the interest based on
these percentages, then we will allocate it as described above
for allocating your loan.
Repaying The Loan. You may repay all or part of a contract
loan while your contract is in force. While you have a
contract loan, we assume that any money you send us is meant to
repay the loan. If you wish to have any of these payments
serve as premium payments, then you must tell us in writing.
You may choose how you want us to allocate your repayments. If
you do not give us instructions, we will allocate your
repayments based on your premium allocation percentages.
The Effects Of A Contract Loan On Your Cash Value. A loan
against your contract will have a permanent effect on your cash
value and benefits, even if the loan is repaid. When you
borrow on your contract, we transfer your loan amount into our
General Account where it earns a declared rate of interest.
You cannot invest that loan amount in any Separate Account
investment divisions. You may earn more or less on the loan
amount, depending on the performance of the investment
divisions and whether they are better or worse than the rates
declared for the unloaned portion of the General Account.
Your Contract May Lapse. Your loan may affect the amount of
time that your contract remains in force. For example, your
contract may lapse because the loaned amount cannot be used to
cover the monthly deductions that are taken from your cash
value. If these deductions are more than the net cash
surrender value of your contract, then the contract's lapse
provisions may apply. Since the contract permits loans up to
92% of the cash surrender value, loan repayments or additional
premium payments may be required to keep the contract in force,
especially if you borrow the maximum.
Withdrawing Money From Your Cash Value
You may request a partial withdrawal of your net cash surrender
value by writing to our home office. You will not incur a
deferred sales charge or deferred issue charge. Partial
withdrawals are subject to certain conditions. They must:
be at least $200,
total no more than 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.
Withdrawal Charges. When you make a partial withdrawal more
than once in a contract year, a charge of $25 (or 2% of the
amount withdrawn, whichever is less), will be deducted from
your cash value. If you do not give us instructions for
deducting the charge, then it will be deducted as described
under "Deductions and Charges - How Cash Value Charges Are
Allocated" on page 24.
In general, we do not permit you to make a withdrawal on monies
for which your premium check has not cleared your bank.
The Effects Of A Partial Withdrawal. A partial withdrawal
reduces the amount in your cash value, the cash surrender value
and generally the death benefit on a dollar-for-dollar basis.
If the death benefit is based on the corridor percentage
multiple, then the death benefit reduction could be greater.
If you have death benefit option 1, then we will also reduce
the face amount of your contract so that there will be no
change in the net amount at risk. We will send you a new
contract information page to reflect this change. Both the
withdrawal and any reductions will be effective as of the date
we receive your request at our home office.
A contract loan might be better than a partial withdrawal if
you need temporary cash.
Surrendering Your Contract
You may surrender your contract for its net cash surrender
value while the insured person is living. You do this by
sending both a written request and the contract to our home
office. The net cash surrender value equals the cash surrender
value minus any loan outstanding (including loan interest).
During the first 12 contract years, the cash surrender value is
the cash value minus the surrender charge. After 12 years, the
cash surrender value equals the cash value. We will compute
the net cash surrender value as of the date we receive your
request and contract at our home office. All of your insurance
coverage will end on that date.
THE GENERAL ACCOUNT
You may allocate all or some of your cash value to the General
Account. The General Account pays interest at a declared rate.
We guarantee the principal after deductions. The General
Account supports our insurance and annuity obligations.
Because of applicable exemptive and exclusionary provisions,
interests in the General Account have not been registered under
the Securities Act of 1933, and the General Account has not
been registered as an investment company under the Investment
Company Act of 1940. Accordingly, neither the General Account
nor any interests therein are generally subject to regulation
under the 1933 Act or the 1940 Act. We have been advised that
the staff of the SEC has not made a review of the disclosures
which are included in this prospectus for your information and
which relate to the General Account.
You may accumulate amounts in the General Account by:
allocating net premium and loan payments,
transferring amounts from the investment divisions,
securing any contract loans, or
earning interest on amounts you already have in the General
Account.
This amount is reduced by transfers, withdrawals and allocated
deductions.
We pay interest on all your amounts in the General Account. The
annual interest rates will never be less than 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".
DEDUCTIONS AND CHARGES
Deductions From Your Premiums
We deduct a sales charge, a premium tax charge, and in some
cases a service charge from each premium. The rest of each
premium (called the net premium) is placed in your cash value.
Sales Charge. We deduct a 2.5% 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 deferred sales charge
if you surrender your contract for its net cash surrender value
or let your contract lapse in the first 12 years. See
"Surrender Charges" on page 25.)
Premium Tax Charge. Some states and other jurisdictions
(cities, counties, municipalities) tax premium payments and
some levy other charges. We deduct 2.5% of each premium for
those tax charges. These tax rates currently range from 0.75%
to 4%. We expect to pay at least 2.5% of most premiums in
premium tax because of certain retaliatory provisions in the
premium tax regulations. If we pay less, then we may reduce
the charge for that premium.
This is a tax to Midland so you cannot deduct it on your income
tax return. Since the charge is a percentage of your premium,
the amount of the charge will vary with the amount of the
premium.
We may increase this charge if our premium tax expenses
increase. We reserve the right to vary this charge by state.
If we make such a change, then we will notify you.
Service Charge. If you have chosen the Civil Service Allotment
Mode, then we deduct $.46 from each premium payment. The $.46
covers the extra expenses we incur in processing bi-weekly
premium payments.
Charges Against The Separate Account
Fees and charges allocated to the investment divisions reduce
the amount in your cash value.
Mortality and Expense Risks. We charge for assuming mortality
and expense risks. We guarantee that monthly administrative
and insurance deductions from your cash value will never be
greater than the maximum amounts shown in your contract. The
mortality risk we assume is that insured people will live for
shorter periods than we estimated. When this happens, we have
to pay a greater amount of death benefits than we expected.
The expense risk we assume is that the cost of issuing and
administering contracts will be greater than we expected. We
charge for mortality and expense risks at an effective annual
rate of 0.90% of the value of the assets in the Separate
Account attributable to Variable Executive Universal Life. We
currently intend to reduce this charge to 0.50% after the 10th
contract year (this is not guaranteed). The investment
divisions' accumulation unit values reflect this charge. See
"Using Your Cash Value - How We Determine The Accumulation Unit
Value" on page 18. If the money we collect from this charge is
not needed, then we profit. We expect to make money from this
charge. To the extent sales expenses are not covered by the
sales charge and the deferred sales charge, our General Account
funds, which may include amounts derived from this mortality
and expense risk charge, will be used to cover sales expenses.
Tax Reserve. We reserve the right to charge for taxes or tax
reserves, which may reduce the investment performance of the
investment divisions. Currently, no such charge is made.
Deductions From Your Cash Value
At the beginning of each contract month (including the contract
date), the following three deductions are taken from your cash
value:
1. Expense Charge: This charge is $6.00 per month (currently
we plan to make this deduction for the first 15 years only,
but we reserve the right to deduct it throughout the life of
the contract). This charge covers the continuing costs of
maintaining your contract, such as premium billing and
collections, claim processing, contract transactions, record
keeping, communications with owners and other expense and
overhead items.
2. Charges for Additional Benefits: Monthly deductions are
made for the cost of any additional benefits. We may change
these charges, but your contract contains tables showing the
guaranteed maximum rates for all of these insurance costs.
3. Cost of Insurance Charge: The cost of insurance is our
current monthly cost of insurance rate times the amount at
risk at the beginning of the contract month. If the current
death benefit for the month is increased due to the
requirements of Federal tax law, then your amount at risk
for the month will also increase. For this purpose, your
cash value amount is determined before deduction of the cost
of insurance charge, but after all of the other deductions
due on that date. The amount of the cost of insurance
charge will vary from month to month with changes in the
amount at risk.
The cost of insurance rate is based on the sex, attained age,
and rating class of the insured person at the time of the
charge. We place the insured person that is a standard risk in
the following rate classes: preferred non-smoker, non-smoker,
and smoker. The insured person may also be placed in a rate
class involving a higher mortality risk, known as a substandard
class. We may change the cost of insurance rates, but they
will never be more than the guaranteed maximum rates set forth
in your contract. The maximum charges are based on the charges
specified in the Commissioner's 1980 Standard Ordinary
Mortality Table. The table below shows the current and
guaranteed maximum monthly cost of insurance rates per $1,000
of amount at risk for a male, preferred, nonsmoker, standard
risk at various ages. (In Montana, there are no distinctions
based on sex.)
If Variable Executive Universal 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.
Illustrative Table of Monthly Cost of Insurance Rates
(Rounded) per $1,000 of Amount at Risk
Male Guaranteed Current
Attained Maximum (Preferred Non-Smoker)
Age Rate Rate
5 $.07 $.05
15 .11 .10
25 .13 .07
35 .14 .08
45 .29 .17
55 .69 .36
65 1.87 .74
For a male preferred non-smoker, age 35, with a $100,000 face
amount option 1 contract and an initial premium of $1,000, the
cost of insurance for the first month will be $7.92. This
example assumes the expense charge ($6.00 per month) and
current cost of insurance rate ($.08 per $1,000).
The non-smoker cost of insurance rates are lower than the
smoker cost of insurance rates.We offer lower cost of insurance
rates at most ages for insured people who qualify as non-
smokers. To qualify, an insured must be a standard risk and
must meet additional requirements that relate to smoking
habits. The reduced cost of insurance rates depends on such
variables as the attained age and sex of the insured.
The preferred non-smoker cost of insurance rates are lower than
the non-smoker cost of insurance rates. To qualify for the
preferred non-smoker class, the insured person must be age 20
or over and meet certain underwriting requirements.
Changes in Monthly Charges. Any changes in the cost of
insurance, charges for additional benefits or expense charges
will be by class of insured and will be based on changes in
future expectations of investment earnings, mortality, the
length of time contracts will remain in effect, expenses and
taxes.
Automatic Benefit Increase Charges. There is no separate
charge for the Automatic Benefit Increase (ABI) provision.
However, as the automatic increases are applied (see page 13
for exact details) the face amount of insurance will increase.
The face amount increase will cause an increase in the amount
at risk and the monthly cost of insurance charge.
Transaction Charges
In addition to the deductions described above, we charge fees
for certain contract transactions:
Partial Withdrawal of Net Cash Surrender Value. You may make
one partial withdrawal during each Contract Year without a
charge. There is an administrative charge of $25 or 2
percent of the amount withdrawn, whichever is less, each time
You make a partial withdrawal if more than one withdrawal is
made during a contract year.
Transfers. Currently, we do not charge when You make
transfers of CashContract Fund Vvalue 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 home office. Changes
will be effective as of the date we receive them.
If we cannot make a deduction in accordance with these
percentages, we will make it based on the proportion of (a) to
(b) where (a) is your unloaned amounts in the General Account
and your amounts in the investment divisions and (b)isto the
total unloaned amount of your cash value.
Deductions for transfer charges are made equally between the
investment divisions from which the transfer was made. For
example, if the transfer is made from two investment divisions,
then the transfer charge assessed to each of the investment
divisions will be $12.50.
Surrender Charges
We incur various sales and promotional expenses in selling
Variable Executive Universal Life. These include commissions,
the cost of preparing sales literature, promotional activities
and other distribution expenses. We also incur expenses for
underwriting, printing contract forms and prospectuses, and
entering information in our records.
The surrender charge is the difference between the amount in
your cash value and your contract's cash surrender value for
the first 12 contract years. It is a contingent, deferred
issue charge and sales load designed to partially recover our
expenses in distributing and issuing contracts which are
terminated by surrender in their early years (the sales charge
is also designed to partially reimburse us for these expenses).
It is a contingent load because you pay it only if you
surrender your contract (or let it lapse) during the first 12
contract years. It is a deferred load because we do not deduct
it from your premiums. The amount of the load in a contract
year is not necessarily related to our actual sales expenses in
that year. We anticipate that the sales charge and surrender
charge will not fully cover our sales expenses. If sales
expenses are not covered by the sales and surrender charges, we
will cover them with other funds. The net cash surrender
value, the amount we pay you if you surrender your contract for
cash, equals the cash surrender value minus any outstanding
loan and loan interest.
The surrender charge includes deferred sales charges and
deferred issue charges. The deferred sales charge is the sum
of two pieces:
(1) 27.5% of any premium payment in the first 2 contract years
up to one guideline annual premium.
(2) 6.5% of all other premium payments.
The sum of the above pieces is also limited by the Guideline
Annual Premium, times 6.5%, times the lesser of 20 years or the
expected future lifetime at issue as determined by the 1980 CSO
Mortality Table. Your contract information page specifies the
guideline annual premium. It varies for each contract.
During the first 7 contract years, the maximum deferred sales
charge may be imposed. Beginning in the 8th year the maximum
deferred sales charge will be multiplied by a percentage:
Contract Year Percentage Multiple
8 83.33%
9 66.67%
10 50.00%
11 33.33%
12 16.67%
13 and up 0.00%
If there is an increase in face amount, there will also be an
increase in the Guideline Annual Premium. All additions to the
occurred sales charge, due to this increase, will be 6.5% of
premiums. The maximum limit will also increase by the
additional Guideline Annual Premium, times 6.5%, times the
lesser of 20 years or the expected future lifetime (determined
at the time of the increase using the 1980 CSO Mortality
Table). The total in the deferred sales charge prior to the
increase in face amount will not be affected.
If there is a decrease in the face amount, there will also be a
decrease in Guideline Annual Premium. Future additions to the
Deferred Sales Charge will follow the same rules as at issue
with the new Guideline Annual Premium. Prior totals in the
Deferred Sales Charge will not be affected.
You will not incur any Deferred Sales Charge, regardless of the
amount and timing of premiums, if You keep this contract in
force for thirteen years.
The following table shows the deferred issue charge per $1,000
of the face amount. After the 12th contract year, there is no
deferred issue charge.
Table of Deferred Issue Charges
Per Thousand of Face Amount
Contract
Year Charge
1-7 $3.00
8 $2.50
9 $2.00
10 $1.50
11 $1.00
12 $0.50
13+ $0.00
If there has been a change in face amount during the life of
the contract, then the deferred issue charge is applied against
the highest face amount in force during the life of the
contract.
Accordingly, the maximum surrender charge is 27.50% of premium
paid, plus $3.00 per thousand of Face Amount. However, as
explained above, in most cases, the surrender charge will be
less than the maximum.
Charges In The Funds
The Funds charge for managing investments and providing
services. Each portfolio's charges vary.
The VIP, the VIP II, and the VIP III Portfolios have an annual
management fee. That fee is the sum of an individual fund fee
rate and a group fee rate based on the monthly average net
assets of Fidelity Management & Research Company's mutual
funds. In addition, each of these portfolios' total operating
expenses includes fees for management and shareholder services
and other expenses (custodial, legal, accounting, and other
miscellaneous fees). See the VIP, VIP II and VIP III
prospectuses for additional information on how these charges
are determined and on the minimum and maximum charges allowed.
All expenses for the year ending December 31, 19981997 , are
shown in the table below.
The American Century Variable Portfolios have annual management
fees that are based on the monthly average of the net assets in
each of the portfolios. See the American Century Variable
Portfolios prospectus for details. The expenses for the year
ending December 31, 19981997 , (except as otherwise noted) are
shown in the table below.
The MFS Portfolios have annual management fees that are based
on the monthly average of the net assets in each of the
portfolios. See the MFS Portfolios prospectus for details. The
expenses for the year ending December 31, 19981997 , (except as
otherwise noted) are shown in the table below.
The Lord, Abbett Portfolio s has anhave annual management fees
that isare based on the monthly average of the net assets in
each of the portfolios. See the Lord, Abbett Portfolios
prospectus for details. The expenses for the year ending
December 31, 19981997 , (except as otherwise noted) are shown in
the table below.
Management Other Total
Portfolio Fee Expenses
Expenses
VIP Money Market .20.21% .10% .30.31%
VIP High Income .58.59% .12% .70.71%
VIP Equity-Income(1) .49.50% .09.08% .58%
VIP Growth(1) .59.60% .09% .68.69%
VIP Overseas(1) .74.75% .17% .91.92%
VIP II Asset Manager(1) .54.55% .10% .64.65%
VIP II Investment
Grade Bond .43.44% .14% .57.58%
VIP II Contrafund(1) .59.60% .11% .70.71%
VIP II Asset
Manager: Growth(1) .59.60% .14.17% .73.77%
VIP II Index 500(1)(2) .24% .11.04% .35.28%
VIP III Growth &
Income(1) .49% .12.21% .61.70%
VIP III Balanced(1) .44.45% .15.16% .59.61%
VIP III Growth
Opportunities(1) .59.60% .12.14% .71.74%
American Century VP
Capital Appreciation 1.00% .00% 1.00%
American Century VP
Value 1.00% .00% 1.00%
American Century VP
Balanced 1.00% .00% 1.00%
American Century VP
International 1.471.50% .00% 1.471.50%
American Century VP
Income & Growth(4) .70% .00% .70
MFS VIT Emerging
Growth(3) .75% .10.12% .85.87%
MFS VIT Research(3) .75% .11.13% .86.88%
MFS VIT Growth
With Income(3) .75% .13.25% .881.00%
MFS VIT New
Discovery(2) (3) (4) .90% .27.25% 1.171.15%
Lord, Abbett VC C
Growth and Income .50% .01.02% .51.52%
(1) The portfolio used a portion of its paid brokerage
commissions to reduce its expenses. Certain portfolios used
credits gained as a result of uninvested cash balances to
reduce custodian and transfer agent expenses. Including these
reductions, total operating expenses would have been as
follows:
VIP Equity-Income 0.57%
VIP Growth 0.66%0.67%
VIP Overseas 0.89%0.90%
VIP II Asset Manager 0.63%0.64%
VIP II Index 500 0.28%
VIP II Contrafund 0.66%0.78%
VIP II Asset Manager: Growth 0.72%0.76%
VIP III Balanced 0.58%0.60%
VIP III Growth Opportunities 0.70%0.73%
VIP III Growth & Income 0.60%
(2) The Fund's investment advisor voluntarily reduced the
portfolio's expenses. Absent such reimbursement, the
management fee, other expenses, and total expenses for the VIP
II Index 500 would have been 0.27%, 0.13% and 0.40%
respectively.
(2)(3) MFS has agreed to bear expenses for thisthese portfolios
(subject to reimbursement by these portfolios) such that
theeach such portfolio's other expenses shall not exceed 0.25%.
Without this limitation, the other expenses and total expenses
would be:
Other Total
Expenses Expenses
MFS VIT Growth with Income 0.35% 1.10%
MFS VIT New Discovery 4.320.47% 5.221.37%
(4) The expenses are based on estimated expenses for 1998.
(3) Each of the MFS Series has an expense offset arrangement,
which reduces the series' custodian fee based upon the amount
of cash maintained by the series with its custodian and
dividend disbursing agent. Each series may enter into other
such arrangements and directed brokerage arrangements, which
would also have the effect of reducing the series' expenses.
The expenses shown above do not take into account these expense
reductions, and are therefore higher than the actual expenses
of the series.
ADDITIONAL INFORMATION ABOUT THE CONTRACTS
Your Right To Examine The Contract
You have a right to examine the contract. If for any reason
you are not satisfied with it, then you may cancel the
contract. You cancel the contract by sending it to our home
office along with a written cancellation request. Your
cancellation request must be postmarked by the latest of the
following three dates:
10 days after you receive your contract,
10 days after we mail you a written notice telling you about
your rights to cancel (Notice of Withdrawal Right), or
45 days after you sign Part 1 of the contract application.
If you cancel your contract, then we will return all of the
charges deducted from your paid premiums and cash value, plus
the cash value.
Insurance coverage ends when you send your request.
Your Contract Can Lapse
Your Variable Executive Universal 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 insured person dies during the grace period, we will pay
the insurance benefits to the beneficiary, minus any loan, loan
interest, and overdue deductions.
You May Reinstate Your Contract
You may reinstate the contract within five years after it
lapses if you did not surrender the contract for its net cash
surrender value. To reinstate the contract, you must:
complete an application for reinstatement,
provide evidence that the insured person is still insurable,
pay enough premium to cover all overdue monthly deductions,
including the premium tax on those deductions,
increase the cash value so that the cash value minus any
contract debt equals the surrender charges,
cover the next two months' deductions, and
pay or restore any contract debt.
The contract date of the reinstated contract will be the
beginning of the contract month that coincides with or follows
the date that we approve your reinstatement application. Upon
reinstatement, there will be no further surrender charges
applied against the contract. Previous loans will not be
reinstated.
Contract Periods And Anniversaries
We measure contract years, contract months, and contract
anniversaries from the contract date shown on your contract
information page. Each contract month begins on the same day
in each calendar month. The calendar days of 29, 30, and 31
are not used. Our right to challenge a contract and the
suicide exclusion are measured from the contract date. See
"Limits On Our Right To Challenge The Contract" on page 29.
Maturity Date
The maturity date is the first contract anniversary after the
insured person's 100th birthday. The contract ends on that date
if the insured person is still alive and the maturity benefit
is paid.
If the insured person survives to the maturity date and you
would like to continue the contract, we will extend the
maturity date as long as this contract still qualifies as life
insurance according to the Internal Revenue Service and your
state. If the maturity date is extended, the contract may not
qualify as life insurance and there may be tax consequences. A
tax advisor should be consulted before you elect to extend the
maturity date. In order to continue the contract beyond the
original maturity date, we require that the death benefit not
exceed the cash value on the original maturity date.
We Own The Assets Of Our Separate Account
We own the assets of our Separate Account and use them to
support your contract and other variable life contracts. We
may permit charges owed to us to stay in the Separate Account.
Thus, we may also participate proportionately in the Separate
Account. These accumulated amounts belong to us and we may
transfer them from the Separate Account to our General Account.
The assets in the Separate Account generally are not changeable
with liabilities arising out of any other business we conduct.
Under certain unlikely circumstances, one investment division
of the Separate Account may be liable for claims relating to
the operations of another division.
Changing the Separate Account
We have the right to modify how we operate our Separate
Account. We have the right to:
add investment divisions to, or remove investment divisions
from, our Separate Account;
combine two or more divisions within our Separate Account;
withdraw assets relating to Variable Executive Universal 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 employees of Midland);
disregard instructions from contract owners regarding a
change in the investment objectives of the portfolio or the
approval or disapproval of an investment advisory contract.
(We would do so only if required by state insurance
regulatory authorities or otherwise pursuant to insurance law
or regulation); and
operate our Separate Account or one or more of the investment
divisions in any other form the law allows, including a form
that allows us to make direct investments. In choosing these
investments, we will rely on our own or outside counsel for
advice. In addition, we may disapprove of any change in
investment advisors or in investment policies unless a law or
regulation provides differently.
Limits On Our Right To Challenge The Contract
We can challenge the validity of your insurance contract (based
on material misstatements in the application) if it appears
that the insured person is not actually covered by the contract
under our rules. There are limits on how and when we can
challenge the contract:
We cannot challenge the contract after it has been in effect,
during the insured person's lifetime, for two years from the
date the contract was issued or reinstated. (Some states may
require us to measure this in some other way.)
We cannot challenge any contract change that requires
evidence of insurability (such as an increase in face amount)
after the change has been in effect for two years during the
insured person's lifetime.
We can challenge at any time (and require proof of continuing
disability) an additional benefit that provides benefits to
the insured person in the event that the insured person
becomes totally disabled.
If the insured person dies during the time that we may
challenge the validity of the contract, then we may delay
payment until we decide whether to challenge the contract.
If the insured person's age or sex is misstated on any
application, then the death benefit and any additional benefits
will be changed. They will be those which would be purchased
by the most recent deduction for the cost of insurance and the
cost of any additional benefits at the insured person's correct
age and sex.
If the insured person commits suicide within two years after
the date on which the contract was issued or reinstated, then
the death benefit will be limited to the total of all paid
premiums minus the amount of any outstanding contract loan and
loan interest minus any partial withdrawals of net cash
surrender value. If the insured person commits suicide within
two years after the effective date of your requested face
amount increase, then we will pay the face amount which was in
effect before the increase, plus the monthly cost of insurance
deductions for the increase (Some states require us to measure
this time by some other date).
Your Payment Options
You may choose for contract benefits and other payments (such
as the net cash surrender value or death benefit) to be paid
immediately in one lump sum or in another form of payment.
Payments under these options are not affected by the investment
performance of any investment division. Instead, interest
accrues pursuant to the option chosen. If you do not arrange
for a specific form of payment before the insured person dies,
then the beneficiary will have this choice. However, if you do
make an arrangement with us for how the money will be paid,
then the beneficiary cannot change your choice. Payment
options will also be subject to our rules at the time of
selection. Our consent is required when an optional payment is
selected and the payee is either an assignee or not a natural
person (i.e., a corporation). Currently, these alternate
payment options are only available if the proceeds applied are
more than $1,000 and periodic payments are at least $20.
You have the following payment options:
1. Deposit Option: The money will stay on deposit with us
for a period that we agree upon. You will receive interest on
the money at a declared interest rate.
2. Installment Options: There are two ways that we pay
installments:
a. Fixed Period: We will pay the amount applied in equal
installments plus applicable interest, for a specified
time, up to 30 years.
b. Fixed Amount: We will pay the sum in installments in an
amount that we agree upon. We will continue to pay the
installments until we pay the original amount, together
with any interest you have earned.
3. Monthly Life Income Option: We will pay the money as
monthly income for life. You may choose from 1 of 4 ways to
receive the income. We will guarantee payments for:
(1) at least 5 years (called "5 Years Certain");
(2) at least 10 years (called "10 Years Certain");
(3) at least 20 years (called "20 Years Certain"); or
(4) payment for life. With a life only payment
option, payments will only be made as long as the payee
is alive. Therefore, if the payee dies after the first
payment, only one payment will be made.
4. Other: You may ask us to apply the money under any
option that we make available at the time the benefit is
paid.
We guarantee interest under the deposit and installation
options at 2.75% a year, but we may allow a higher rate of
interest.
The beneficiary, or any other person who is entitled to receive
payment, may name a successor to receive any amount that we
would otherwise pay to that person's estate if that person
died. The person who is entitled to receive payment may change
the successor at any time.
We must approve any arrangements that involve more than one of
the payment options, or a payee who is a fiduciary or not a
natural person. Also, the details of all arrangements will be
subject to our rules at the time the arrangements take effect.
These include:
rules on the minimum amount we will pay under an option,
minimum amounts for installment payments,
withdrawal or commutation rights (your rights to receive
payments over time, for which we may offer you a lump sum
payment),
the naming of people who are entitled to receive payment and
their successors, and
the ways of proving age and survival.
You will choose a payment option (or any later changes) and
your choice will take effect in the same way as it would if you
were changing a beneficiary. (See "Your Beneficiary" below).
Any amounts that we pay under the payment options will not be
subject to the claims of creditors or to legal process, to the
extent that the law provides.
Your Beneficiary
You name your beneficiary in your contract application. The
beneficiary is entitled to the insurance benefits of the
contract. You may change the beneficiary during the insured
person's lifetime by writing to our home office. If no
beneficiary is living when the insured person dies, then we
will pay the death benefit, in equal shares, to the insured
person's surviving children. If there are no surviving
children, then we will pay the death benefit to the insured
person's estate.
Assigning Your Contract
You may assign your rights in this contract. You must send a
copy of the assignment to our home office. We are not
responsible for the validity of the assignment or for any
payment we make or any action we take before we receive notice
of the assignment. An absolute assignment is a change of
ownership. There may be tax consequences.
When We Pay Proceeds From This Contract
We will generally pay any death benefits, net cash surrender
value, or loan proceeds within seven days after receiving the
required form(s) at our home office. Death benefits are
determined as of the date of the insured person's death and
will not be affected by subsequent changes in the accumulation
unit values of the investment divisions. We pay interest from
the date of death to the date of payment.
We may delay payment for one or more of the following reasons:
(1) We contest the contract.
(2) We cannot determine the amount of the payment because the
New York Stock Exchange is closed, the SEC has restricted
trading in securities, or the SEC has declared that an
emergency exists.
(3) The SEC, by order, permits us to delay payment to protect
our contract owners.
We may also delay any payment until your premium checks have
cleared your bank. We may defer payment of any loan amount,
withdrawal, or surrender from the General Account for up to six
months after we receive your request.
TAX EFFECTS
Contract Proceeds
The Internal Revenue Code of 1986 ("Code"), Section 7702,
defines life insurance for tax purposes. The Code places limits
on certain contract charges used in determining the maximum
amount of premiums that may be paid under Section 7702. There
is limited guidance as to how to apply Section 7702.
Midland believes that a standard rate class contract should
meet the Section 7702 definition of a life insurance contract
(although there is some uncertainty). For a contract issued on
a substandard basis (i.e., a rate class involving higher than
standard mortality risk), there may be more uncertainty whether
it meets the Section 7702 definition of a life insurance
contract. It is not clear whether such a contract would
satisfy Section 7702, particularly if the contract owner pays
the full amount of premiums permitted under the contract.
If it is subsequently determined that only a lower amount of
premiums may be paid for a contract to satisfy Section 7702,
then Midland may take appropriate and reasonable steps to cause
the contract to comply with Section 7702. These may include
refunding any premiums paid which exceed that lower amount
(together with interest or such other earnings on any such
premiums as is required by law).
If a contract's face amount changes, then the applicable
premium limitation may also change. During the first 15
contract years, there are certain events that may create
taxable ordinary income for you if at the time of the event
there has been a gain in the contract. These events include:
A decrease in the face amount;
A partial withdrawal;
A change from death benefit option 2 to option 1; or,
Any change that otherwise reduces benefits under the contract
and that results in a cash distribution in order for the
contract to continue to comply with Section 7702 relating to
premium and cash value limitations.
Such income inclusion may result with respect to cash
distributions made in anticipation of reductions in benefits
under the contract.
Code Section 7702A affects the taxation of distributions (other
than death benefits) from certain Variable Life insurance
contracts as follows:
1. If premiums are paid more rapidly than the rate defined
by a 7-Pay Test, then the contract will be treated as a
"Modified Endowment contract."
2. Any contract received in exchange for a contract
classified as a Modified Endowment contract will be treated
as a Modified Endowment contract regardless of whether the
contract received in the exchange meets the 7-Pay Test.
3. Loans (including unpaid loan interest), surrenders and
withdrawals from a Modified Endowment contract will be
considered distributions.
4. Distributions (including loans) from a Modified
Endowment contract will be taxed first as a taxable
distribution of gain from the contract (to the extent that
gain exists), and then as non-taxable recovery of basis.
5. The Code imposes an extra "penalty" tax of 10% on any
distribution from a Modified Endowment Contract includable in
income, unless such distributions are made (a) after you
attain age 59 1/2, (b) on account of you becoming disabled,
or (c) as substantially equal annuity payments over your life
or life expectancy.
A contract that is not a Modified Endowment contract may be
classified as a Modified Endowment contract if it is
"materially changed" and fails to meet the 7-Pay Test. Any
distributions from such a contract will be taxed as explained
above.
Material changes include a requested increase in death benefit
or a change from option 1 to option 2. Before making any
contractual changes, a competent tax advisor should be
consulted.
Any life insurance contracts which are treated as Modified
Endowment contracts and are issued by Midland or any of its
affiliates:
with the same person designated as the owner;
on or after June 21, 1988; and
within any single calendar year
will be aggregated and treated as one contract for purposes of
determining any tax on distributions.
Even if a contract is not a Modified Endowment contract, loans
at very low or no net cost may be treated as distributions for
federal income tax purposes.
For contracts not classified as Modified Endowment contracts,
distributions generally will be treated first as a return of
your investment in the contract, and then taxed as ordinary
income to the extent that they exceed your investment in the
contract (which generally is the total premiums paid plus any
contract debt).
The Code (Section 817(h)) also authorizes the Secretary of the
Treasury to set standards, by regulation or otherwise, for the
investments of Variable Life insurance Separate Accounts to be
"adequately diversified" in order for the contracts to be
treated as life insurance contracts for federal tax purposes.
We believe Separate Account A, through its investments in the
Funds, will be adequately diversified, although we do not
control the Funds.
Owners of Variable Life insurance contracts may be considered,
for Federal income tax purposes, the owners of the assets of
the Separate Account used to support their contracts. In those
circumstances, income and gains from the Separate Account
assets are included in the Variable contract owner's gross
income. The IRS has stated in published rulings that a
Variable contract owner will be considered the owner of
Separate Account assets if the contract owner possesses
incidents of ownership in those assets, such as the ability to
exercise investment control over the assets. The Treasury
Department also announced, in connection with the issuance of
regulations concerning diversification, that those regulations
"do not provide guidance concerning the circumstances in which
investor control of the investments of a segregated asset
account may cause the investor (i.e., the policy owner), rather
than the insurance company, to be treated as the owner of the
assets in the account." This announcement also stated that
regulations or rulings would issue guidance on the "extent to
which policyholders may direct their investments to particular
sub-accounts without being treated as owners of the underlying
assets." As of the date of this prospectus, no such guidance
has been issued.
The ownership rights under Variable Executive Universal Life
are similar to, but different from those described by the IRS
in rulings in which it was determined that contract owners were
not owners of Separate Account assets. For example, the owner
has additional flexibility in allocating premium payments and
contract values. These differences could result in an owner
being treated as the owner of a pro rata portion of the assets
of Separate Account A. Midland does not know what standards
will be set forth in the regulations or rulings which the
Treasury Department has stated it expects to issue. Midland
therefore reserves the right to modify the contract as
necessary to attempt to prevent an owner from being considered
the owner of a pro rata share of the assets of Separate Account
A or to otherwise qualify Variable Executive Universal Life for
favorable tax treatment.
Assuming a contract is a life insurance contract for federal
income tax purposes, the contract should receive the same
federal income tax treatment as fixed benefit life insurance.
As a result, the life insurance proceeds payable under either
benefit option should be excludable from the gross income of
the beneficiary under Section 101 of the Code, and you should
not be deemed to be in constructive receipt of the cash values
under a contract until actual distribution.
Surrenders, withdrawals, and contract changes may have tax
consequences. These include a change of owners, an assignment
of the contract, a change from one death benefit option to
another, and other changes reducing future death benefits.
Upon complete surrender or when maturity benefits are paid, if
the amount received plus the contract debt is more than the
total premiums paid that are not treated as previously
withdrawn by you, then the excess generally will be treated as
ordinary income.
Federal, state and local estate, inheritance and other tax
consequences of ownership or receipt of contract proceeds
depend on the circumstances of each contract owner or
beneficiary.
A contract may be used in various arrangements, including:
nonqualified deferred compensation or salary continuance
plans,
split dollar insurance plans,
executive bonus plans, or
retiree medical benefit plans,
and others.
The tax consequences of such plans may vary depending on the
particular facts and circumstances of each individual
arrangement. Therefore, if you are contemplating the use of a
contract in which the value depends in part on its tax
consequences, then you should be sure to consult a qualified
tax advisor regarding the tax attributes of the particular
arrangement.
In recent years, Congress has adopted new rules relating to
corporate owned life insurance. Any business contemplating the
purchase of a new life insurance contract or a change in an
existing contract should consult a tax advisor.
Although the likelihood of legislative changes is uncertain,
there is always the possibility that the tax treatment of the
policy could change by legislation or other means. For
instance, the President's 1999 Budget Proposal has recommended
legislation that would negatively modify the federal taxation
of the contracts described in this prospectus. It is possible
that any change could be retroactive (that is, effective prior
to the date of the change). A tax advisor could be consulted
with respect to actual and prospective changes in taxation.
Possible Charge for Midland's Taxes
At the present time, Midland makes no charge to the Separate
Account for any federal, state, or local taxes (other than
premium taxes) that it incurs which may be attributable to such
account or to the contracts. Midland reserves the right to
make a charge for any such tax or other economic burden
resulting from the application of the tax laws.
If such a charge is made, it would be set aside as a provision
for taxes which we would keep in the effected division rather
than in our General Account.
Other Tax Considerations
The foregoing discussion is general and is not intended as tax
advice. If you are concerned about these tax implications, you
should consult a competent tax advisor. This discussion is
based on our understanding of the Internal Revenue Service's
current interpretation of the present federal income tax laws.
No representation is made as to the likelihood of continuation
of these current laws and interpretations, and we do not make
any guarantee as to the tax status of the contract. It should
be further understood that the foregoing discussion is not
complete and that special rules not described in this
prospectus may be applicable in certain situations. Moreover,
no attempt has been made to consider any applicable state or
other tax laws.
PART 3: ADDITIONAL INFORMATION
MIDLAND NATIONAL LIFE INSURANCE COMPANY
We are Midland National Life Insurance Company, a stock life
insurance company. Midland was organized, in 1906, in South
Dakota, as a mutual life insurance company at that time named
"The Dakota Mutual Life Insurance Company". We were
reincorporated as a stock life insurance company in 1909. Our
name "Midland" was adopted in 1925. We are licensed to do
business in 49 states, the District of Columbia, and Puerto
Rico. Our officers and directors are listed beginning on page
37.in Appendix A.
Midland is a subsidiary of Sammons Enterprises, Inc., Dallas,
Texas. Sammons has controlling or substantial stock interests
in a large number of other companies engaged in the areas of
insurance, corporate services, and industrial distribution.
YOUR VOTING RIGHTS AS AN OWNER
We invest the assets of our Separate Account divisions in
shares of the Funds' portfolios. Midland is the legal owner of
the shares and has the right to vote on certain matters. Among
other things, we may vote:
to elect the Funds' Board of Directors,
to ratify the selection of independent auditors for the
Funds, and
on any other matters described in the Funds' current
prospectuses or requiring a vote by shareholders under the
Investment Company Act of 1940.
Even though we own the shares, we give you the opportunity to
tell us how to vote the number of shares that are allocated to
your contract. We will vote at shareholder meetings according
to your instructions.
The Funds will determine how often shareholder meetings are
held. As we receive notice of these meetings, we will ask for
your voting instructions. The Funds are not required to hold a
meeting in any given year.
If we do not receive instructions in time from all contract
owners, then we will vote those shares in the same proportion
as we vote shares for which we have received instructions in
that portfolio. We will also vote any Fund shares that we
alone are entitled to vote in the same proportions that
contract owners vote. If the federal securities laws or
regulations or interpretations of them change so that we are
permitted to vote shares of the Fund in our own right or to
restrict contract owner voting, then we may do so.
You may participate in voting only on matters concerning the
Fund portfolios in which your cash value has been invested. We
determine your voting shares in each division by dividing the
amount of your cash value allocated to that division by the net
asset value of one share of the corresponding Fund portfolio.
This is determined as of the record date set by the Funds'
Board for the shareholders meeting. We count fractional
shares.
If you have a voting interest, we will send you proxy material
and a form for giving us voting instructions. In certain
cases, we may disregard instructions relating to changes in the
Funds' advisor or the investment policies of its portfolios.
We will advise you if we do.
Other insurance companies own shares in the Funds to support
their Variable insurance products. We do not foresee any
disadvantage to this. Nevertheless, the Funds' Board of
Directors will monitor events to identify conflicts that may
arise and determine appropriate action. If we disagree with
any Fund action, then we will see that appropriate action is
taken to protect our contract owners.
OUR REPORTS TO CONTRACT OWNERS
Shortly after the end of the third, sixth, ninth, and twelfth
contract months, we will send you reports that show:
the current death benefit for your contract,
your cash value,
information about investment divisions,
the cash surrender value of your contract,
the amount of your outstanding contract loans,
the amount of any interest that you owe on the loan, and
information about the current loan interest rate.
The annual report will show any transactions involving your
cash value that occurred during the year. Transactions include
your premium allocations, our deductions, and your transfers or
withdrawals.
We will send you semi-annual reports with financial information
on the Funds, including a list of the investments held by each
portfolio.
Our report also contains information that is required by the
insurance supervisory official in the jurisdiction in which
this insurance contract is delivered.
Notices will be sent to you for transfers of amounts between
investment divisions and certain other contract transactions.
DIVIDENDS
We do not pay any dividends on the contract described in this
prospectus.
MIDLAND'S SALES AND OTHER AGREEMENTS
The contract will be sold by individuals who, in addition to
being licensed as life insurance agents for Midland National
Life, are registered representatives of Walnut Street
Securities (WSS) or broker-dealers who have entered into
written sales agreements with WSS. WSS, the principal
underwriter of the contracts, is registered with the SEC as a
broker-dealer under the Securities Exchange Act of 1934 and is
a member of the National Association of Securities Dealers,
Inc. The address for Walnut Street Securities is 670 Mason
Ridge Center Drive, Suite 301, St. Louis, Missouri 63141.
During the first contract year, we will pay agents a commission
of up to 50% 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 South Dakota Insurance
Department. We are subject to the insurance laws and
regulations in every jurisdiction where we sell contracts. This
contract has been filed with and approved by insurance
officials in those states. The provisions of this contract may
vary somewhat from jurisdiction to jurisdiction.
We submit annual reports on our operations and finances to
insurance officials in all the jurisdictions where we sell
contracts. The officials are responsible for reviewing our
reports to be sure that we are financially sound and are
complying with the applicable laws and regulations.
We are also subject to various federal securities laws and
regulations.
YEAR 2000
The Year 2000 issue (Y2K) relates to the ability of computer
systems to properly recognize a four-digit year code. Many
computer systems only allowed for a two-digit year code and
thus years such as 1998 were simply recognized as 98. Using a
two-digit year code for the years 2000 and beyond could result
in errors and miscalculations.
Midland National Life relies extensively on computer systems in
its daily operations. Several years ago, we began implementing
a Plan to modify all of our computer systems to properly
recognize the year 2000. Our Y2K Plan focused on assuring
compliance in the following areas: Information Technology
("IT") and non-information ("non-IT") hardware, operating
systems, software applications and custom applications. We are
in the process of the remediation and testing of other systems,
including telephone, heating and cooling, mechanical and other
equipment having embedded, date sensitive technology for Year
2000 compliance, In addition, we are reviewing the Year 2000
compliance status of our mission critical customers, vendors
and service providers.
We have upgraded our mainframe computer hardware, systems
software and applications software to address Y2K issues and we
expect to complete compliance testing by June 30, 1999. Most of
our systems run on the IBM mainframe computer platform, where
future dated systems testing has been performed through
December 31, 2000. We are in the process of updating and
testing hardware and software running on personal computer (PC)
platforms and expect to have any Y2K issues resolved by June
30, 1999.
Y2K issues have been handled primarily by our internal staff.
We spent approximately $800,000 on the Year 2000 project
through the end of 1998 and estimate additional expenditures of
$250,000 for the balance of the project. Due to our early start
in addressing Y2K issues, the number of other IT projects
delayed due to Y2K has been very limited.
We are currently in the process of developing a Y2K Contingency
Plan and will involve representatives from our IT and non-IT
business units in the planning process. The Y2K Contingency
Plan may include potential Y2K issues generated within our own
Company and potential Y2K issues generated by third parties
that have a mission critical business relationship with us.
While we cannot guarantee that our computer systems nor those
of the parties with which we conduct business will properly
function once the year 2000 is reached, Midland National Life
is committed to maintaining reliable computer systems which
properly recognize the year 2000.
Midland National Life is in the process of updating
administrative systems to accommodate all Year 2000 issues.
Midland does not anticipate any material financial impact in
processing and completing the changes required to comply with
Year 2000 issues.
DISCOUNT FOR MIDLAND EMPLOYEES
Midland employees may receive a discount of up to 25%45% of
first year premiums. Midland will pay off the discount as the
employee pays the qualifying premium. All other contract
provisions will apply.
LEGAL MATTERS
The law firm of Sutherland Asbill & Brennan LLP, Washington,
DC, has provided advice regarding certain matters relating to
federal securities laws.
We are not involved in any material legal proceedings.
FINANCIAL AND ACTUARIAL
The financial statements of Midland National Life Separate
Account A and Midland National Life Insurance Company, included
in this prospectus and the registration statement, have been
audited by PricewaterhouseCoopers LLPCoopers & Lybrand LLP,
independent auditors, for the periods indicated in their report
which appears in this prospectus and in the registration
statement. The address for PricewaterhouseCoopers LLPCoopers &
Lybrand LLP is IBM Park Building, Suite 1300, 650 Third Avenue
South, Minneapolis, Minnesota 55402-4333. The financial
statements have been included in reliance upon reports given
upon the authority of the firm as experts in accounting and
auditing.
Actuarial matters in this prospectus have been examined by
Russell A. Evenson, F.S.A., M.A.A.A., who is Senior Vice
President and Corporate Actuary of Midland. His opinion on
actuarial matters is filed as an exhibit to the Registration
Statement we filed with the Securities and Exchange Commission.
ADDITIONAL INFORMATION
We have filed a Registration Statement relating to the Separate
Account and the Variable Life insurance contract described in
this prospectus with the Securities and Exchange Commission.
The Registration Statement, which is required by the Securities
Act of 1933, includes additional information that is not
required in this prospectus under the rules and regulations of
the SEC. If you would like the additional information, then
you may obtain it from the SEC's main office in Washington, DC.
You will have to pay a fee for the material.
Management of Midland
Here is a list of our directors and officers.
Directors
Name and
Business
Address
Principal
Occupation
Principal Occupation During
Past Five Years
John C. Watson
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Chairman of the Board
Chairman of the Board
(October 1992 to present),
Chairman of the Board and
Chief Executive Officer
(October 1992 to March 1997),
Midland National Insurance
Company; President and
Director (1992 to present)
Consolidated Investment
Services, Inc.; Chairman of
the Board, President, and
Chief Executive Officer
(December 1996 to present),
Sammons Financial Holdings,
Inc.; Chairman of the Board
and Chief Executive Officer
(December 1996 to present),
North American Company for
Life and Health Insurance;
President and Director (1996
to present), Briggs ITD
Corporation; Director (1996
to present), NACOLAH Holding
Corporation; Director (1996
to present), North American
Company for Life and Health
of New York; Director (1996
to present), NACOLAH Life
Insurance Company; Director
(1996 to present),
Institutional Founders Life
Insurance Company; Chairman
of the Board (1995-present),
Midland Advisors Company;
President and Director (1992
to present), CH Holdings,
Inc.; Director, (1992 to
present), Sammons Enterprises
Inc.; Chairman of the Board
and Chief Executive Officer
(October 1992 to January
1997), Investors Life
Insurance Company of
Nebraska; President and Chief
Operating Officer (1990 to
October 1992), Franklin Life
Insurance Company
Michael M. Masterson
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193-0001
Chairman of the Board,
President
and Chief
Executive
OfficerChief
Executive
Officer and
President
Chairman of the Board (March
1999 to present), Chief
Executive Officer and
President (March 1997 to
present) President and Chief
Operating Officer (March 1996
to February 1997), Executive
Vice President-Marketing
(March 1995 to February
1996), Midland National Life
Insurance Company; President
and Chief Operating Officer
(March 1996 to December
1996), Executive Vice
President-Marketing (March
1995 to February 1996),
Investors Life Insurance
Company of Nebraska; Vice
President - Individual Sales
(prior thereto), Northwestern
National Life
John J. Craig, II
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193- 0001
Executive
Vice
President
Executive Vice President
(January 1998 to present),
Midland National Life
Insurance Company; Senior
Vice President and Chief
Financial Officer (October
1993 to 1998), Midland
National Life Insurance
Company; Treasurer (January
1996 to present), Briggs ITD
Corp.; Treasurer (March 1996
to present), Sammons
Financial Holdings, Inc.;
Treasurer (November 1993 to
present), CH Holdings;
Treasurer (November 1993 to
present), Consolidated
Investment Services, Inc.;
Treasurer (November 1993 to
present), Richmond Holding
Company, L.L.C.; Partner
(prior thereto), Ernst and
Young
Russell A. Evenson
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193- 0001
Senior Vice
President
and
Corporate
Actuary
Senior Vice President and
Chief Actuary (March 1996 to
present), Senior Vice
President and Actuary (prior
thereto), Midland National
Life Insurance Company;
Senior Vice President and
Chief Actuary (March 1996 to
December 1996), Senior Vice
President and Actuary (prior
thereto), Investors Life
Insurance Company of
Nebraska; Vice President and
Chief Actuary (1990 to 1993),
Professional Insurance
Corporation
John J. Craig, II
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Executive
Vice
President
Executive Vice President
(January 1998 to present),
Midland National Life
Insurance Company; Senior
Vice President and Chief
Financial Officer (October
1993 to 1998), Midland
National Life Insurance
Company; Treasurer (January
1996 to present), Briggs ITD
Corp.; Treasurer (March 1996
to present), Sammons
Financial Holdings, Inc.;
Treasurer (November 1993 to
present), CH Holdings;
Treasurer (November 1993 to
present), Consolidated
Investment Services, Inc.;
Treasurer (November 1993 to
present), Richmond Holding
Company, L.L.C.; Senior Vice
President and Chief Financial
Officer (October 1993 to
December 1996), Investors
Life Insurance Company of
Nebraska; Partner (prior
thereto), Ernst and Young
Steven C. Palmitier
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193- 0001
Senior Vice
President
and Chief
Marketing
Officer
Senior Vice President and
Chief Marketing Officer
(March 1997 to present),
Senior Vice President-Sales
(August 1996 to February
1997), Midland National Life
Insurance Company; Senior
Vice President-Sales (prior
thereto), Penn Mutual Life
Insurance
Robert W. Korba
Sammons Enterprises, Inc.
300 Crescent CT
Dallas, TX 75201
Board of
Directors
Member, Vice
President
President and Director (since
1988), Sammons Enterprises,
Inc., Vice President (August
1998 to present), Midland
National Life Insurance
Company
James N. Whitson
Sammons Enterprises , Inc.
300 Crescent CT
Dallas, TX 75201
Board of
Directors
Member
Executive Vice President
(since 1989), Sammons
Enterprises, Inc.
Executive Officers (other than Directors)
Unless otherwise indicated, the addresses for the following are One
Midland Plaza, Sioux Falls, SD 57193-0001
Name and
Business
Address
Principal
Occupation
Principal Occupation During
Past Five Years
E John Fromelt
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Senior Vice
President,
Chief
Investment
Officer
Senior Vice President, Chief
Investment Officer (since
1990), Midland National Life
Insurance Company; President
(since August 1995), Midland
Advisors Company; Chief
Investment Officer (1996 to
present), North American
Company for Life and Health;
Chief Investment Officer
(1990-1996), Investors Life
Insurance Company of Nebraska
Stephen P. Horvat, Jr.
Midland National Life Insurance Company
Senior Vice
President
Senior Vice President
(January 1997 to present),
Midland National Life
Insurance Company;
Shareholder (June 1996 to
December 1997), Sorling Law
Firm; Senior Vice President,
General Counsel & Secretary
(prior thereto), Franklin
Life Insurance Company
Gary J. Gaspar
North American Company for Life & Health Insurance
222 South Riverside Plaza
Chicago, IL 60606-5929
Senior Vice
President &
Chief
Information
Officer
Senior Vice President & Chief
Information Officer (August
1998 to present), Midland
National Life Insurance
Company; Senior Vice
President Information Systems
Officer (1985 to present);
North American Company for
Life & Health Insurance
Jack L. Briggs
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Vice
President,
Secretary,
and General
Counsel
Vice President, Secretary and
General Counsel (since 1978),
Midland National Life
Insurance Company; Vice
President, Secretary, and
General Counsel (1978 to
1996), Investors Life
Insurance Company of Nebrska
Gary W. Helder
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Vice President-Policy
Administration
Vice President-Policy
Administration (since 1991),
Midland National Life
Insurance Company; Vice
President-Policy
Administration (1991-1996),
Investors Life Insurance
Company of Nebraska
Robert W. Buchanan
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Vice President-Marketing
Services
Vice President-Marketing
Services (March 1996 to
present), Second Vice
President-Sales Development
(prior thereto), Midland
National Life Insurance
Company; Second Vice
President-Sales Development
(1983 to 1996), Investors
Life Insurance Company of
Nebraska
Thomas M. Meyer
Midland National Life
One Midland Plaza
Sioux Falls, SD 57193
Vice
President
and Chief
Financial
Officer
Vice President and Chief
Financial Officer (January
1998 to present), Second Vice
President and Controller
(1995 to 1998), Midland
National Life Insurance
Company
Julia B. Roper
North American Company for Life & Health Insurance
222 South Riverside Plaza
Chicago, IL 60606-5929
Vice
President &
Chief
Compliance
Officer
Vice President & Chief
Compliance Officer (August
1998 to present), Midland
National Life Insurance; Vice
President & Chief Compliance
Officer (September 1997 to
present), North American
Company for Life & Health
Insurance; Assistant Vice
President (prior thereto),
CNA Insurance Companies
Joseph B. Moran
Parkway Mortgage
1700 Galloping Hill Road
Kenilworth, NJ 07033
Vice President -Parkway
Mortgage Division
Vice President - Parkway
Mortgage Division (January
1999 to present), Midland
National Life Insurance
Company; President (prior
thereto), Parkway Mortgage,
Inc.
James T. Fehon
Parkway Mortgage
1700 Galloping Hill Road
Kenilworth, NJ 07033
Vice President - Parkway Mortgage Division
Vice President - Parkway
Mortgage Division (January
1999 to present), Midland
National Life Insurance
Company; Executive Vice
President (prior thereto),
Parkway Mortgage, Inc.
Illustration
Following are a series of tables that illustrate how the cash
values, cash surrender values, and death benefits of a contract
change with the investment performance of the Funds. The tables
show how the cash values, cash surrender values, and death
benefits of a contract issued to an insured of a given age and
given premium would vary over time if the return on the assets
held in each Portfolio of the Funds were a constant gross,
after tax annual rate of 0%, 6%, or 12%. The tables on pages 31
through 33 illustrate a contract issued to a male, age 25,
under a standard rate preferred non-smoker underwriting risk
classification. The tables on pages 34 through 36 illustrate a
contract issued to a male, age 40, under a standard rate
preferred non-smoker underwriting risk classification. The cash
values, cash surrender values, and death benefits would be
different from those shown if the returns averaged 0%, 6%, and
12% over a period of years, but fluctuated above and below
those averages for individual contract years.
The amount of the cash value exceeds the cash surrender value
during the first twelve contract years due to the surrender
charge. For contract years thirteen and after, the cash value
and cash surrender value are equal, since the surrender charge
has reduced to zero.
The second column shows the accumulation value of the premiums
paid at the stated interest rate. The third and sixth columns
illustrate the cash values and the fourth and seventh columns
illustrate the cash surrender values of the contract over the
designated period. The cash values shown in the third column
and the cash values shown in the fourth column assume the
monthly charge for cost of insurance is based upon the current
cost of insurance rates. The cash values shown in the sixth
column and the cash surrender values shown in the seventh
column assume the monthly charge for cost of insurance is based
upon the cost of insurance rates that we guarantee. The maximum
cost of insurance rates allowable under the contract are based
on the 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 death benefit values also vary
between tables, depending upon whether Option 1 or Option 2
death benefits are illustrated.
The amounts shown for the death benefit, cash values, and cash
surrender values reflect the fact that the net investment
return of the divisions of our Separate Account is lower than
the gross, after-tax return on the assets in the Funds, as a
result of expenses paid by the Funds and charges levied against
the divisions of our Separate Account. The illustrations also
reflect the 2.5% sales charge deduction from each premium, the
2.5% premium tax deduction from each premium and the $6.00 per
month expense charge (for the first fifteen years on a current
basis) as well as current and guaranteed cost of insurance
charges.
The contract values shown assume daily investment advisory fees
and operating expenses equivalent to an annual rate of .76%.75%
of the aggregate average daily net assets of the Portfolios of
the Funds (the average rate of the Portfolios for the period
ending December 31, 19981997 ). The actual fees and expenses
associated with the contract may be more or less than .76%.75%
and will depend on how allocations are made to each investment
division. The contract values also take into account a daily
charge to each division of Separate Account A for assuming
mortality and expense risks and administrative charges which is
equivalent to a charge at an annual rate of .90% (.50% after
year 10 on a current basis) of the average net assets of the
divisions of Separate Account A. After deductions of these
amounts, the illustrated gross investment rates of 0%, 6%, and
12% correspond to approximate net annual rates of -1.66%,
4.34%, and 10.34%,-1.65%, 4.35%, and 10.35%, respectively (-
1.26%, 4.74%, 10.74%-1.25%, 4.75%, 10.75% after year 10 on a
current basis).
The hypothetical values shown in the tables do not reflect any
charges for federal income taxes against Separate Account A
since Midland is not currently making such charges. However,
if, in the future, such charges are made, the gross annual
investment rate of return would have to exceed the stated
investment rates by a sufficient amount to cover the tax
charges in order to produce the cash values, cash surrender
values, and death benefits illustrated.
The tables illustrate the contract values that would result
based on hypothetical investment rates of return if premiums
are paid in full at the beginning of each year and if no
contract loans have been made. The values would vary from those
shown if the assumed annual premium payments were paid in
installments during a year. The values would also vary if the
contract owner varied the amount or frequency of premium
payments. The tables also assume that the contract owner has
not requested an increase or decrease in face amount, that no
withdrawals have been made and no withdrawal charges imposed,
that no contract loans have been taken, and that no transfers
have been made and no transfer charges imposed.
MIDLAND NATIONAL LIFE INSURANCE COMPANY - VEUL
DEATH BENEFIT OPTION 1 ASSUMED HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 25 ANNUAL RATE OF RETURN: 0%
$200,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $1,500
PREMIUMS ASSUMING CURRENT COSTS ASSUMING
GUARANTEED COSTS
END ACCUMULATED
OF AT 5% INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER
DEATH
YEAR PER YEAR FUND(2) VALUE(2) BENEFIT(2) FUND(2) VALUE(2)
BENEFIT(2)
1 1,575 1,165 191 200,000 1,023 49 200,000
2 3,229 2,287 1,216 200,000 2,054 983 200,000
3 4,965 3,392 2,224 200,000 3,069 1,900 200,000
4 6,788 4,480 3,214 200,000 4,069 2,803 200,000
5 8,703 5,551 4,188 200,000 5,053 3,690 200,000
6 10,713 6,605 5,144 200,000 6,023 4,562 200,000
7 12,824 7,643 6,084 200,000 6,978 5,419 200,000
8 15,040 8,664 7,284 200,000 7,895 6,515 200,000
9 17,367 9,669 8,500 200,000 8,799 7,630 200,000
10 19,810 10,659 9,733 200,000 9,667 8,741 200,000
11 22,376 11,681 11,031 200,000 10,521 9,872 200,000
12 25,069 12,691 12,350 200,000 11,341 11,000 200,000
13 27,898 13,667 13,667 200,000 12,125 12,125 200,000
14 30,868 14,632 14,632 200,000 12,877 12,877 200,000
15 33,986 15,563 15,563 200,000 13,595 13,595 200,000
16 37,261 16,534 16,534 200,000 14,258 14,258 200,000
17 40,699 17,472 17,472 200,000 14,890 14,890 200,000
18 44,309 18,378 18,378 200,000 15,470 15,470 200,000
19 48,099 19,252 19,252 200,000 15,997 15,997 200,000
20 52,079 20,096 20,096 200,000 16,474 16,474 200,000
21 56,258 20,887 20,887 200,000 16,901 16,901 200,000
22 60,646 21,649 21,649 200,000 17,279 17,279 200,000
23 65,253 22,382 22,382 200,000 17,587 17,587 200,000
24 70,091 23,087 23,087 200,000 17,848 17,848 200,000
25 75,170 23,742 23,742 200,000 18,041 18,041 200,000
30 104,641 26,204 26,204 200,000 17,588 17,588 200,000
35 142,254 27,383 27,383 200,000 13,698 13,698 200,000
40 190,260 26,854 26,854 200,000 3,837 3,837 200,000
1. ASSUMES A $1,500 PREMIUM IS PAID AT THE BEGINNING OF EACH
CONTRACT YEAR. VALUES WOULD BE DIFFERENT IF PREMIUMS ARE
PAID WITH A DIFFERENT FREQUENCY OR IN DIFFERENT AMOUNTS.
2. ASSUMES THAT NO CONTRACT LOANS OR WITHDRAWALS HAVE BEEN
MADE. ZERO VALUES INDICATE LAPSE IN THE ABSENCE OF AN
ADDITIONAL PREMIUM PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT RATES OF
RETURN FOR THE FUND SERIES. THE CONTRACT FUND, SURRENDER VALUE
AND DEATH BENEFIT FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED OVER A
PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR THE INDIVIDUAL CONTRACT YEARS. NO REPRESENTATION CAN BE
MADE BY MIDLAND, THE SEPARATE ACCOUNT, OR THE FUND THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
MIDLAND NATIONAL LIFE INSURANCE COMPANY - VEUL
DEATH BENEFIT OPTION 1 ASSUMED HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 25 ANNUAL RATE OF RETURN: 6%
$200,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $1,500
PREMIUMS ASSUMING CURRENT COSTS ASSUMING
GUARANTEED COSTS
END ACCUMULATED
OF AT 5% INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER
DEATH
YEAR PER YEAR FUND(2) VALUE(2) BENEFIT(2) FUND(2) VALUE(2)
BENEFIT(2)
1 1,575 1,242 269 200,000 1,096 122 200,000
2 3,229 2,516 1,445 200,000 2,265 1,195 200,000
3 4,965 3,845 2,677 200,000 3,488 2,319 200,000
4 6,788 5,234 3,968 200,000 4,764 3,498 200,000
5 8,703 6,684 5,321 200,000 6,099 4,735 200,000
6 10,713 8,199 6,738 200,000 7,493 6,032 200,000
7 12,824 9,781 8,223 200,000 8,950 7,391 200,000
8 15,040 11,433 10,053 200,000 10,449 9,069 200,000
9 17,367 13,159 11,990 200,000 12,015 10,846 200,000
10 19,810 14,961 14,036 200,000 13,629 12,704 200,000
11 22,376 16,909 16,259 200,000 15,316 14,666 200,000
12 25,069 18,950 18,609 200,000 17,056 16,715 200,000
13 27,898 21,069 21,069 200,000 18,854 18,854 200,000
14 30,868 23,290 23,290 200,000 20,710 20,710 200,000
15 33,986 25,597 25,597 200,000 22,629 22,629 200,000
16 37,261 28,070 28,070 200,000 24,593 24,593 200,000
17 40,699 30,642 30,642 200,000 26,626 26,626 200,000
18 44,309 33,319 33,319 200,000 28,710 28,710 200,000
19 48,099 36,107 36,107 200,000 30,848 30,848 200,000
20 52,079 39,012 39,012 200,000 33,045 33,045 200,000
21 56,258 42,022 42,022 200,000 35,305 35,305 200,000
22 60,646 45,161 45,161 200,000 37,630 37,630 200,000
23 65,253 48,437 48,437 200,000 40,006 40,006 200,000
24 70,091 51,859 51,859 200,000 42,456 42,456 200,000
25 75,170 55,415 55,415 200,000 44,967 44,967 200,000
30 104,641 75,452 75,452 200,000 58,217 58,217 200,000
35 142,254 100,260 100,260 200,000 72,213 72,213 200,000
40 190,260 131,378 131,378 200,000 86,004 86,004 200,000
1. ASSUMES A $1,500 PREMIUM IS PAID AT THE BEGINNING OF EACH
CONTRACT YEAR. VALUES WOULD BE DIFFERENT IF PREMIUMS ARE
PAID WITH A DIFFERENT FREQUENCY OR IN DIFFERENT AMOUNTS.
2. ASSUMES THAT NO CONTRACT LOANS OR WITHDRAWALS HAVE BEEN
MADE. ZERO VALUES INDICATE LAPSE IN THE ABSENCE OF AN
ADDITIONAL PREMIUM PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT RATES OF
RETURN FOR THE FUND SERIES. THE CONTRACT FUND, SURRENDER VALUE
AND DEATH BENEFIT FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED OVER A
PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR THE INDIVIDUAL CONTRACT YEARS. NO REPRESENTATION CAN BE
MADE BY MIDLAND, THE SEPARATE ACCOUNT, OR THE FUND THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
MIDLAND NATIONAL LIFE INSURANCE COMPANY - VEUL
DEATH BENEFIT OPTION 1 ASSUMED HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 25 ANNUAL RATE OF RETURN: 12%
$200,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $1,500
PREMIUMS ASSUMING CURRENT COSTS ASSUMING
GUARANTEED COSTS
END ACCUMULATED
OF AT 5% INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER
DEATH
YEAR PER YEAR FUND(2) VALUE(2) BENEFIT(2) FUND(2) VALUE(2)
BENEFIT(2)
1 1,575 1,320 347 200,000 1,169 196 200,000
2 3,229 2,753 1,682 200,000 2,487 1,416 200,000
3 4,965 4,336 3,168 200,000 3,942 2,774 200,000
4 6,788 6,084 4,818 200,000 5,550 4,285 200,000
5 8,703 8,015 6,652 200,000 7,328 5,964 200,000
6 10,713 10,147 8,687 200,000 9,292 7,831 200,000
7 12,824 12,503 10,944 200,000 11,462 9,903 200,000
8 15,040 15,104 13,724 200,000 13,836 12,456 200,000
9 17,367 17,977 16,808 200,000 16,460 15,291 200,000
10 19,810 21,150 20,224 200,000 19,336 18,411 200,000
11 22,376 24,744 24,095 200,000 22,515 21,866 200,000
12 25,069 28,728 28,387 200,000 26,007 25,666 200,000
13 27,898 33,123 33,123 200,000 29,845 29,845 200,000
14 30,868 37,995 37,995 200,000 34,067 34,067 200,000
15 33,986 43,376 43,376 200,000 38,714 38,714 200,000
16 37,261 49,399 49,399 200,000 43,813 43,813 200,000
17 40,699 56,059 56,059 200,000 49,433 49,433 200,000
18 44,309 63,427 63,427 200,000 55,613 55,613 200,000
19 48,099 71,583 71,583 200,000 62,414 62,414 200,000
20 52,079 80,614 80,614 200,000 69,908 69,908 200,000
21 56,258 90,603 90,603 200,000 78,172 78,172 200,000
22 60,646 101,675 101,675 212,501 87,292 87,292 200,000
23 65,253 113,951 113,951 231,321 97,351 97,351 200,000
24 70,091 127,567 127,567 251,306 108,472 108,472 213,690
25 75,170 142,664 142,664 272,488 120,763 120,763 230,658
30 104,641 247,140 247,140 388,010 205,086 205,086 321,984
35 142,254 425,290 425,290 569,888 349,107 349,107 467,803
40 190,260 733,944 733,944 895,412 608,061 608,061 741,835
1. ASSUMES A $1,500 PREMIUM IS PAID AT THE BEGINNING OF EACH
CONTRACT YEAR. VALUES WOULD BE DIFFERENT IF PREMIUMS ARE
PAID WITH A DIFFERENT FREQUENCY OR IN DIFFERENT AMOUNTS.
2. ASSUMES THAT NO CONTRACT LOANS OR WITHDRAWALS HAVE BEEN
MADE. ZERO VALUES INDICATE LAPSE IN THE ABSENCE OF AN
ADDITIONAL PREMIUM PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT RATES OF
RETURN FOR THE FUND SERIES. THE CONTRACT FUND, SURRENDER VALUE
AND DEATH BENEFIT FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED OVER A
PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR THE INDIVIDUAL CONTRACT YEARS. NO REPRESENTATION CAN BE
MADE BY MIDLAND, THE SEPARATE ACCOUNT, OR THE FUND THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
MIDLAND NATIONAL LIFE INSURANCE COMPANY - VEUL
DEATH BENEFIT OPTION 1 ASSUMED HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 0%
$200,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $3,000
PREMIUMS ASSUMING CURRENT COSTS ASSUMING
GUARANTEED COSTS
END ACCUMULATED
OF AT 5% INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER
DEATH
YEAR PER YEAR FUND(2) VALUE(2) BENEFIT(2) FUND(2) VALUE(2)
BENEFIT(2)
1 3,150 2,473 1,116 200,000 2,262 904 200,000
2 6,458 4,885 3,333 200,000 4,468 2,916 200,000
3 9,930 7,238 5,491 200,000 6,597 4,850 200,000
4 13,577 9,533 7,590 200,000 8,652 6,709 200,000
5 17,406 11,771 9,633 200,000 10,633 8,495 200,000
6 21,426 13,931 11,599 200,000 12,543 10,210 200,000
7 25,647 16,038 13,511 200,000 14,384 11,856 200,000
8 30,080 18,093 15,825 200,000 16,135 13,867 200,000
9 34,734 20,097 18,153 200,000 17,821 15,877 200,000
10 39,620 22,031 20,475 200,000 19,423 17,866 200,000
11 44,751 23,994 22,891 200,000 20,919 19,817 200,000
12 50,139 25,896 25,312 200,000 22,315 21,731 200,000
13 55,796 27,719 27,719 200,000 23,611 23,611 200,000
14 61,736 29,464 29,464 200,000 24,769 24,769 200,000
15 67,972 31,154 31,154 200,000 25,812 25,812 200,000
16 74,521 32,861 32,861 200,000 26,701 26,701 200,000
17 81,397 34,514 34,514 200,000 27,440 27,440 200,000
18 88,617 36,115 36,115 200,000 28,031 28,031 200,000
19 96,198 37,646 37,646 200,000 28,434 28,434 200,000
20 104,158 39,108 39,108 200,000 28,652 28,652 200,000
21 112,516 40,502 40,502 200,000 28,667 28,667 200,000
22 121,291 41,831 41,831 200,000 28,437 28,437 200,000
23 130,506 43,076 43,076 200,000 27,922 27,922 200,000
24 140,181 44,222 44,222 200,000 27,100 27,100 200,000
25 150,340 45,251 45,251 200,000 25,927 25,927 200,000
30 209,282 48,152 48,152 200,000 13,266 13,266 200,000
35 284,509 45,659 45,659 200,000 0 0 0
40 380,519 35,749 35,749 200,000 0 0 0
1. ASSUMES A $3,000 PREMIUM IS PAID AT THE BEGINNING OF EACH
CONTRACT YEAR. VALUES WOULD BE DIFFERENT IF PREMIUMS ARE
PAID WITH A DIFFERENT FREQUENCY OR IN DIFFERENT AMOUNTS.
2. ASSUMES THAT NO CONTRACT LOANS OR WITHDRAWALS HAVE BEEN
MADE. ZERO VALUES INDICATE LAPSE IN THE ABSENCE OF AN
ADDITIONAL PREMIUM PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT RATES OF
RETURN FOR THE FUND SERIES. THE CONTRACT FUND, 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 - VEUL
DEATH BENEFIT OPTION 1 ASSUMED HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 6%
$200,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $3,000
PREMIUMS ASSUMING CURRENT COSTS ASSUMING
GUARANTEED COSTS
END ACCUMULATED
OF AT 5% INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER
DEATH
YEAR PER YEAR FUND(2) VALUE(2) BENEFIT(2) FUND(2) VALUE(2)
BENEFIT(2)
1 3,150 2,634 1,276 200,000 2,415 1,058 200,000
2 6,458 5,361 3,809 200,000 4,918 3,365 200,000
3 9,930 8,188 6,440 200,000 7,488 5,740 200,000
4 13,577 11,118 9,176 200,000 10,130 8,188 200,000
5 17,406 14,158 12,021 200,000 12,849 10,712 200,000
6 21,426 17,291 14,959 200,000 15,651 13,318 200,000
7 25,647 20,544 18,017 200,000 18,539 16,012 200,000
8 30,080 23,924 21,656 200,000 21,498 19,229 200,000
9 34,734 27,438 25,493 200,000 24,555 22,610 200,000
10 39,620 31,071 29,515 200,000 27,695 26,138 200,000
11 44,751 34,966 33,864 200,000 30,903 29,800 200,000
12 50,139 39,017 38,434 200,000 34,185 33,602 200,000
13 55,796 43,216 43,216 200,000 37,550 37,550 200,000
14 61,736 47,572 47,572 200,000 40,964 40,964 200,000
15 67,972 52,116 52,116 200,000 44,455 44,455 200,000
16 74,521 56,932 56,932 200,000 47,993 47,993 200,000
17 81,397 61,965 61,965 200,000 51,587 51,587 200,000
18 88,617 67,227 67,227 200,000 55,246 55,246 200,000
19 96,198 72,717 72,717 200,000 58,945 58,945 200,000
20 104,158 78,452 78,452 200,000 62,694 62,694 200,000
21 112,516 84,449 84,449 200,000 66,488 66,488 200,000
22 121,291 90,725 90,725 200,000 70,306 70,306 200,000
23 130,506 97,289 97,289 200,000 74,131 74,131 200,000
24 140,181 104,149 104,149 200,000 77,960 77,960 200,000
25 150,340 111,320 111,320 200,000 81,779 81,779 200,000
30 209,282 152,657 152,657 200,000 100,523 100,523 200,000
35 284,509 206,871 206,871 221,352 117,232 117,232 200,000
40 380,519 284,055 284,055 298,257 128,416 128,416 200,000
1. ASSUMES A $3,000 PREMIUM IS PAID AT THE BEGINNING OF EACH
CONTRACT YEAR. VALUES WOULD BE DIFFERENT IF PREMIUMS ARE
PAID WITH A DIFFERENT FREQUENCY OR IN DIFFERENT AMOUNTS.
2. ASSUMES THAT NO CONTRACT LOANS OR WITHDRAWALS HAVE BEEN
MADE. ZERO VALUES INDICATE LAPSE IN THE ABSENCE OF AN
ADDITIONAL PREMIUM PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT RATES OF
RETURN FOR THE FUND SERIES. THE CONTRACT FUND, 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 - VEUL
DEATH BENEFIT OPTION 1 ASSUMED HYPOTHETICAL GROSS
MALE PREFERRED NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 12%
$200,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $3,000
PREMIUMS ASSUMING CURRENT COSTS ASSUMING
GUARANTEED COSTS
END ACCUMULATED
OF AT 5% INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER
DEATH
YEAR PER YEAR FUND(2) VALUE(2) BENEFIT(2) FUND(2) VALUE(2)
BENEFIT(2)
1 3,150 2,794 1,437 200,000 2,569 1,212 200,000
2 6,458 5,857 4,304 200,000 5,386 3,834 200,000
3 9,930 9,216 7,469 200,000 8,453 6,706 200,000
4 13,577 12,905 10,963 200,000 11,800 9,857 200,000
5 17,406 16,960 14,822 200,000 15,456 13,319 200,000
6 21,426 21,396 19,063 200,000 19,458 17,125 200,000
7 25,647 26,278 23,751 200,000 23,843 21,316 200,000
8 30,080 31,656 29,387 200,000 28,635 26,366 200,000
9 34,734 37,582 35,637 200,000 33,901 31,956 200,000
10 39,620 44,097 42,540 200,000 39,676 38,119 200,000
11 44,751 51,453 50,350 200,000 45,998 44,895 200,000
12 50,139 59,586 59,002 200,000 52,934 52,350 200,000
13 55,796 68,569 68,569 200,000 60,558 60,558 200,000
14 61,736 78,504 78,504 200,000 68,920 68,920 200,000
15 67,972 89,519 89,519 200,000 78,131 78,131 200,000
16 74,521 101,817 101,817 200,000 88,266 88,266 200,000
17 81,397 115,472 115,472 200,000 99,449 99,449 200,000
18 88,617 130,643 130,643 200,000 111,819 111,819 200,000
19 96,198 147,501 147,501 203,551 125,511 125,511 200,000
20 104,158 166,249 166,249 222,774 140,711 140,711 200,000
21 112,516 187,118 187,118 243,254 157,623 157,623 204,910
22 121,291 210,364 210,364 269,266 176,484 176,484 225,900
23 130,506 236,280 236,280 297,712 197,583 197,583 248,954
24 140,181 265,204 265,204 328,853 221,266 221,266 274,370
25 150,340 297,532 297,532 362,989 247,955 247,955 302,505
30 209,282 529,209 529,209 613,882 448,526 448,526 520,290
35 284,509 961,045 961,045 1,028,318 880,475 880,475 942,108
40 380,519 1,817,890 1,817,890 1,908,785 2,026,622 2,026,622 2,127,953
1. ASSUMES A $3,000 PREMIUM IS PAID AT THE BEGINNING OF EACH
CONTRACT YEAR. VALUES WOULD BE DIFFERENT IF PREMIUMS ARE
PAID WITH A DIFFERENT FREQUENCY OR IN DIFFERENT AMOUNTS.
2. ASSUMES THAT NO CONTRACT LOANS OR WITHDRAWALS HAVE BEEN
MADE. ZERO VALUES INDICATE LAPSE IN THE ABSENCE OF AN
ADDITIONAL PREMIUM PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE
ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT RATES OF
RETURN FOR THE FUND SERIES. THE CONTRACT FUND, SURRENDER VALUE
AND DEATH BENEFIT FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED OVER A
PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR THE INDIVIDUAL CONTRACT YEARS. NO REPRESENTATION CAN BE
MADE BY MIDLAND, THE SEPARATE ACCOUNT, OR THE FUND THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
Definitions
Accumulation Unit means the units credited to each investment
division in the Separate Account.
Age means the age of the Insured Person on his/her birthday
which immediately precedes the Contract Date.
Attained Age means the age of the Insured Person on his/her
birthday preceding a Contract Anniversary date.
Beneficiary means the person or persons to whom the contract's
death benefit is paid when the Insured Person dies.
Business Day means any day we are open and the New York Stock
Exchange is open for trading. The holidays which we are closed
but the New York Stock Exchange is open are the day after
Thanksgiving, and the day before Christmas Eve Day, and New
Year's Eve Day. These days along with the days the New York
Stock Exchange is not open for trading will not be counted as
Business Days.
Contract Fund means the total amount of monies in our Separate
Account A attributable to your in force contract. It also
includes monies in our General Account for your contract.
Cash Surrender Value means the Contract Fund on the date of
surrender, less any Surrender Charges.
Cash Value is the value of your contract fund.
Contract Anniversary: The same month and day of the Contract
Date in each year following the Contract Date.
Contract Date means the date from which Contract Anniversaries
and Contract Years are determined.
Contract Month means a month that starts on a Monthly
Anniversary and ends on the following Monthly Anniversary.
Contract Year means a year that starts on the Contract Date or
on each anniversary thereafter.
Death Benefit means the amount payable under your contract when
the Insured Person dies.
Evidence of Insurability means evidence, satisfactory to us,
that the insured person is insurable and meets our underwriting
standards.
Funds mean the investment companies, more commonly called
mutual funds, available for investment by Separate Account A on
the Contract Date or as later changed by us.
Home Office means where you write to us to pay premiums or take
other action, such as transfers between investment divisions,
changes in Specified Amount, or other such action regarding
your contract. The address is:
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
In Force means the Insured Person's life remains insured under
the terms of the contract.
Investment Division means a division of Separate Account A
which invests exclusively in the shares of a specified
Portfolio of the Fund.
Minimum Premium Period: 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 any deduction for
premium taxes, less any deduction for the sales charge and less
any per premium expenses.
Record Date means the date the contract is recorded on Our
books as an In Force contract.
Separate Account means Our Separate Account A which receives
and invests your net premiums under the contract.
Surrender Charges means a charge made only upon surrender of
the contract. It includes a charge for sales related expenses
and issue related expenses.
Performance
Performance information for the investment divisions may appear
in reports and advertising to current and prospective owners.
We base the performance information on the investment
experience of the investment division and the Funds. The
information does not indicate or represent future performance.
Total return quotations reflect changes in Funds' share prices,
the automatic reinvestment by the Separate Account of all
distributions and the deduction of the mortality and expense
risk charge. The quotations will not reflect deductions from
premiums (the sales charge, premium tax charge, and any per
premium expense charge), the monthly deduction from the cash
value (the expense charge, the cost of insurance charge, and
any charges for additional benefits), the surrender charge, or
other transaction charges. Therefore, these returns do not show
how actual investment performance will affect contract
benefits.
A cumulative total return reflects performance over a stated
period of time. An average annual total return reflects the
hypothetical annually compounded return that would have
produced the same cumulative total return if the performance
had been constant over the entire period. Average annual total
returns tend to smooth out variations in an investment
division's returns and are not the same as actual year-by-year
results.
Midland may advertise performance figures for the investment
divisions based on the performance of a portfolio before the
Separate Account commenced operations.
Midland may provide individual hypothetical illustrations of
cash value, cash surrender value, and death benefits based on
the Funds' historical investment returns. These illustrations
will reflect the deduction of expenses in the Funds and the
deduction of contract charges, including the mortality and
expense risk charge, the deductions from premiums, the monthly
deduction from the cash value and the surrender charge. The
illustrations do not indicate what contract benefits will be in
the future.
Financial Statements
The financial statements of Midland National Life Insurance
Company included in this prospectus should be distinguished
from the financial statements of the Midland National Life
Separate Account A and should be considered only as bearing
upon the ability of Midland to meet its obligations under the
Contracts. They should not be considered as bearing upon the
investment performance of the assets held in the Separate
Account.
6244ED.txt
<PAGE>
C O N T E N T S
Page(s)
Report of Independent Accountants 1
Statement of Assets 2-3
Statements of Operations and
Changes in Net Assets 4-9
Notes to Financial Statements 10-15
Report of Independent Accountants
The Board of Directors and Stockholder
Midland National Life Insurance Company:
In our opinion, the accompanying statement of assets and the
related statements of operations and changes in net assets present
fairly, in all material respects, the financial position of
Midland National Life Separate Account A (comprising,
respectively, the portfolios of the Variable Insurance Products
Fund, the Variable Insurance Products Fund II, the Variable
Insurance Products Fund III, the American Century Variable
Portfolios, Inc., the Massachusetts Financial Services, and the
Lord, Abbett & Company) as of December 31, 1998, and the related
statements of operations and changes in net assets for each of the
three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles. These financial
statements are the responsibility of Midland National Life
Insurance Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
March 26, 1999
Midland National Life Insurance Company
Separate Account A
Statement of Assets
as of December 31, 1998
<TABLE>
<S> <C> <C>
Value
Per
ASSETS Shares Share
Investments at net asset value:
Variable Insurance Products Fund:
Money Market Portfolio (cost $2,731,098) 2,731,098 $ 1.00 $2,731,098
High Income Portfolio (cost $3,396,027) 274,412 11.53 3,163,974
Equity-Income Portfolio (cost $13,877,294) 618,850 25.42 15,731,177
Growth Portfolio (cost $21,656,697) 635,255 44.87 28,503,893
Overseas Portfolio (cost $4,629,466) 244,142 20.05 4,895,040
Variable Insurance Products Fund II:
Asset Manager Portfolio (cost $6,523,158) 401,292 18.16 7,287,457
Investment Grade Bond Portfolio (cost $1,078,462) 88,153 12.96 1,142,457
Index 500 Portfolio (cost $10,269,373) 86,530 141.25 12,222,424
Contrafund Portfolio (cost $9,020,995) 451,333 24.44 11,030,567
Asset Manager Growth Portfolio (cost $2,475,691) 161,856 17.03 2,756,403
Variable Insurance Products Fund III:
Balanced Portfolio (cost $618,952) 41,559 16.11 669,509
Growth & Income Portfolio (cost $1,612,836) 112,272 16.15 1,813,193
Growth Opportunities Portfolio (cost $3,135,150) 155,276 22.88 3,552,709
American Century Variable Portfolios, Inc.:
Balanced Portfolio (cost $310,679) 39,542 8.34 329,779
Capital Appreciation Portfolio (cost $208,500) 24,118 9.02 217,542
International Portfolio (cost $1,121,676) 154,502 7.62 1,177,307
Value Portfolio (cost $757,203) 115,688 6.73 778,580
Income & Growth Portfolio (cost $31,396) 4,797 6.78 32,520
Massachusetts Financial Services:
Emerging Growth Portfolio (cost $49,389) 2,632 21.47 56,516
Growth & Income Portfolio (cost $10,771) 565 20.11 11,356
New Discovery Portfolio (cost $1,833) 193 10.22 1,975
Research Portfolio (cost $204,426) 12,885 19.05 245,451
Lord, Abbett & Company:
Growth & Income Portfolio (cost $64,942) 3,086 20.64 63,724
Total investments (cost $83,786,014) $98,414,651
Net assets $98,414,651
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statement of Assets, Continued
as of December 31, 1998
<S> <C> <C>
Value
Per
NET ASSETS Units Unit
Net assets represented by:
Variable Insurance Products Fund:
Money Market Portfolio 208,987 $13.07 $2,731,098
High Income Portfolio 164,127 19.28 3,163,974
Equity-Income Portfolio 623,207 25.24 15,731,177
Growth Portfolio 752,627 37.87 28,503,893
Overseas Portfolio 244,770 20.00 4,895,040
Variable Insurance Products Fund II:
Asset Manager Portfolio 292,241 24.94 7,287,457
Investment Grade Bond Portfolio 73,197 15.61 1,142,457
Index 500 Portfolio 630,981 19.37 12,222,424
Contrafund Portfolio 596,283 18.50 11,030,567
Asset Manager Growth Portfolio 170,821 16.14 2,756,403
Variable Insurance Products Fund III:
Balanced Portfolio 51,474 13.01 669,509
Growth & Income Portfolio 118,401 15.31 1,813,193
Growth Opportunities Portfolio 243,892 14.57 3,552,709
American Century Variable Portfolios, Inc.:
Balanced Portfolio 25,768 12.80 329,779
Capital Appreciation Portfolio 20,937 10.39 217,542
International Portfolio 95,377 12.34 1,177,307
Value Portfolio 63,538 12.25 778,580
Income & Growth Portfolio 2,723 11.94 32,520
Massachusetts Financial Services:
Emerging Growth Portfolio 4,492 12.58 56,516
Growth & Income Portfolio 982 11.56 11,356
New Discovery Portfolio 153 12.91 1,975
Research Portfolio 20,875 11.76 245,451
Lord, Abbett & Company:
Growth & Income Portfolio 5,930 10.75 63,724
Net assets $98,414,651
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets
for the years ended December 31, 1998, 1997 and 1996
<S> <C> <C>
Combined
1998 1997 1996
Investment income:
Dividend income $980,408 $676,790 $353,783
Capital gains distributions 4,404,907 1,587,492 907,775
385,315 2,264,282 1,261,558
Expenses:
Administrative expense 112,287 84,730 52,416
Mortality and expense risk 660,451 427,879 237,175
Net investment income 4,612,577 1,751,673 971,967
Realized and unrealized gains (losses) on investments:
Net realized gains on investments 2,782,785 2,741,725 1,387,105
Net unrealized appreciation (depreciation) on
investments 7,854,876 3,254,492 735,339
Net realized and unrealized gains (losses) on
investments 10,637,661 5,996,217 2,122,444
Net increase (decrease) in net assets resulting
from operations $15,250,238 $7,747,890 $3,094,411
Net assets at beginning of year $54,189,603 $32,499,879 $19,649,521
Net increase (decrease) in net assets resulting from
operations 15,250,238 7,747,890 3,094,411
Capital shares transactions
Net premiums 40,629,334 21,376,417 14,348,315
Transfers of policy loans (1,812,692) (1,016,654) (633,495)
Transfers of cost of insurance (6,444,223) (4,261,689) (2,927,460)
Transfers of surrenders (3,055,075) (2,042,224) (998,919)
Transfers of death benefits (144,047) (38,948) (13,892)
Transfers of other terminations (198,487) (75,068) (18,602)
Interfund transfers
Net increase in net assets from capital share
Transactions 28,974,810 13,941,834 9,755,947
Total increase in net assets 44,225,048 21,689,724 12,850,358
Net assets at end of year $98,414,651 $54,189,603 $32,499,879
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Variable Insurance Products Fund
Money Market Portfolio High Income Portfolio
1998 1997 1996 1998 1997 1996
$123,409 $94,654 $58,559 $178,129 $104,881 $65,229
113,186 12,963 12,762
123,409 94,654 58,559 291,315 117,844 77,991
2,905 3,462 2,241 4,792 3,598 2,332
20,969 16,588 10,139 26,040 18,244 10,553
99,535 74,604 46,179 260,483 96,002 65,106
44,450 42,799 49,881
(460,189) 137,622 19,282
(415,739) 180,421 69,163
$99,535 $74,604 $46,179 $(155,256) $276,423 $134,269
$1,393,023 $1,672,741 $589,269 $2,830,980 $1,421,414 $815,627
99,535 74,604 46,179 (155,256) 276,423 134,269
1,970,072 1,828,298 857,355 1,477,592 876,690 841,221
(96,356) 18,183 (9,004) (94,338) (37,241) (41,674)
(148,349) (119,358) (94,185) (251,359) (207,138) (159,359)
(450,390) (914,181) (187,306) (287,811) (78,445) (54,152)
(130) (336) (1,051)
(519) (1,028) (224) (2,422) (1,570) (447)
(35,918) (1,166,106) 470,657 (353,076) 581,898 (114,071)
1,238,540 (354,322) 1,037,293 488,250 1,133,143 471,518
1,338,075 (279,718) 1,083,472 332,994 1,409,566 605,787
$2,731,098 $1,393,023 $1,672,741 $3,163,974 $2,830,980 $1,421,414
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets, Continued
for the years ended December 31, 1998, 1997 and 1996
<S> <C> <C> <C>
Variable Insurance Products Fund
Equity-Income Portfolio
1998 1997 1996
Investment income:
Dividend income $145,189 $107,918 $6,019
Capital gains distributions 516,702 542,585 172,545
661,891 650,503 178,564
Expenses:
Administrative expense 20,642 16,434 9,932
Mortality and expense risk 114,253 80,523 44,942
Net investment income 526,996 553,546 123,690
Realized and unrealized gains (losses) on investments:
Net realized gains on investments 464,171 465,017 344,216
Net unrealized appreciation (depreciation) on
investments 297,365 820,036 112,077
Net realized and unrealized gains on
investments 761,536 1,285,053 456,293
Net increase in net assets resulting
from operations $1,288,532 $1,838,599 $579,983
Net assets at beginning of year $10,118,500 $6,148,229 $3,721,811
Net increase in net assets resulting from
operations $1,288,532 $1,838,599 $579,983
Capital shares transactions:
Net premiums 6,101,737 3,188,435 2,820,841
Transfers of policy loans (286,720) (198,994) (114,290)
Transfers of cost of insurance (1,071,429) (757,555) (533,174)
Transfers of surrenders (380,774) (171,987) (93,138)
Transfers of death benefits (42,005) (16,504) (131)
Transfers of other terminations (43,973) (17,833) (4,334)
Interfund transfers 47,309 106,110 (229,339)
Net increase in net assets from capital share
transactions 4,324,145 2,131,672 1,846,435
Total increase in net assets 5,612,677 3,970,271 2,426,418
Net assets at end of year $15,731,177 $10,118,500 $6,148,229
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Variable Insurance Products Fund
Growth Portfolio Overseas Portfolio
1998 1997 1996 1998 1997 1996
$90,127 $80,524 $22,193 $74,765 $47,188 $20,685
2,357,538 360,439 560,363 220,360 187,323 22,754
2,447,665 440,963 582,556 295,125 234,511 43,439
38,417 28,874 19,895 7,786 6,468 4,298
197,513 152,938 90,025 39,797 17,378 19,450
2,211,735 259,151 472,636 247,542 210,665 19,691
998,269 1,336,185 700,698 101,507 154,287 58,004
4,140,818 1,180,231 469 78,405 (83,491) 155,462
5,139,087 2,516,416 701,167 179,912 70,796 213,466
$7,350,822 $2,775,567 $1,173,803 $427,454 $281,461 $233,157
$17,132,404 $11,699,876 $7,817,338 $3,708,222 $2,587,815 $1,723,792
7,350,822 2,775,567 1,173,803 427,454 281,461 233,157
7,318,889 5,149,531 4,390,266 1,583,685 1,410,695 1,053,155
(590,467) (446,688) (252,514) (97,787) (91,175) (59,815)
(1,601,618) (1,357,432) (1,059,362) (366,371) (324,642) (263,297)
(817,281) (354,778) (309,025) (255,013) (94,010) (73,670)
(23,796) (14,755) (10,342) (4,169) (3,223) (83)
(57,078) (34,808) (6,455) (3,207) (2,361) (1,405)
(207,982) (284,109) (43,833) (97,774) (56,338) (24,019)
4,020,667 2,656,961 2,708,735 759,364 838,946 630,866
11,371,489 5,432,528 3,882,538 1,186,818 1,120,407 864,023
$28,503,893 $17,132,404 $11,699,876 $4,895,040 $3,708,222 $2,587,815
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets, Continued
for the years ended December 31, 1998, 1997 and 1996
<S> <C> <C>
Variable Insurance Products Fund II
Asset Manager Portfolio
1998 1997 1996
Investment income:
Dividend income $187,684 $158,180 $133,666
Capital gains distributions 563,053 396,791 110,216
750,737 554,971 243,882
Expenses:
Administrative expense 12,260 10,361 8,072
Mortality and expense risk 58,657 54,683 36,522
Net investment income 679,820 489,927 199,288
Realized and unrealized gains (losses) on investments:
Net realized gains on investments 155,701 198,545 122,556
Net unrealized appreciation (depreciation) on
investments 18,174 208,315 176,177
Net realized and unrealized gains (losses) on
investments 173,875 406,860 298,733
Net increase in net assets resulting
from operations $853,695 $896,787 $498,021
Net assets at beginning of year $5,864,777 $4,483,785 $3,633,749
Net increase in net assets resulting from
operations 853,695 896,787 498,021
Capital shares transactions:
Net premiums 1,504,185 1,304,321 1,212,022
Transfers of policy loans (174,116) (100,858) (67,771)
Transfers of cost of insurance (449,699) (423,781) (401,099)
Transfers of surrenders (249,884) (123,302) (222,263)
Transfers of death benefits (12,156) (158) (2,280)
Transfers of other terminations (15,437) (3,731) (5,303)
Interfund transfers (33,908) (168,286) (161,291)
Net increase in net assets from capital share
transactions 568,985 484,205 352,015
Total increase in net assets 1,422,680 1,380,992 850,036
Net assets at end of year $7,287,457 $5,864,777 $4,483,785
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Variable Insurance Products Fund II
Investment Grade Bond Portfolio Index 500 Portfolio
1998 1997 1996 1998 1997 1996
$39,734 $46,902 $35,859 $58,842 $17,532 $4,429
4,714 136,288 35,574 11,389
44,448 46,902 35,859 195,130 53,106 15,818
1,721 1,572 1,469 9,557 5,431 1,561
8,643 8,015 6,648 71,255 33,893 7,065
34,084 37,315 27,742 114,318 13,782 7,192
15,445 12,052 4,931 478,120 213,675 64,340
20,815 9,013 (17,545) 1,380,373 455,684 83,067
36,260 21,065 (12,614) 1,858,493 669,359 147,407
$70,344 $58,380 $15,128 $1,972,811 $683,141 $154,599
$823,750 $757,993 $710,276 $4,566,701 $1,340,570 $292,473
70,344 58,380 15,128 1,972,811 683,141 154,599
397,712 233,307 241,760 6,643,119 2,611,727 1,028,697
(10,939) 2,346 (39,038) (200,663) (39,650) (17,532)
(88,089) (83,015) (80,239) (886,807) (393,476) (141,911)
(53,582) (105,722) (31,289) (183,244) (54,915) (11,092)
(3,204) (618) (1,056) (16,201) (1,332)
(927) (505) (540) (17,516) (4,272) (87)
7,392 (38,416) (57,009) 344,224 424,908 35,423
248,363 7,377 32,589 5,682,912 2,542,990 893,498
318,707 65,757 47,717 7,655,723 3,226,131 1,048,097
$1,142,457 $823,750 $757,993 $12,222,424 $4,566,701 $1,340,570
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets, Continued
for the years ended December 31, 1998, 1997 and 1996
<S> <C> <C> <C>
Variable Insurance Products Fund II
Contrafund Portfolio
1998 1997 1996
Investment income:
Dividend income $37,587 $17,687 $
Capital gains distributions 276,533 46,743 3,899
314,120 64,430 3,899
Expenses:
Administrative expense 10,181 6,563 2,164
Mortality and expense risk 68,560 33,820 9,790
Net investment income (loss) 235,379 24,047 (8,055)
Realized and unrealized gains on investments:
Net realized gains on investments 405,977 248,167 36,440
Net unrealized appreciation on
investments 1,432,988 385,213 190,170
Net realized and unrealized gains on
investments 1,838,965 633,380 226,610
Net increase in net assets resulting
from operations $2,074,344 $657,427 $218,555
Net assets at beginning of year $5,101,986 $1,919,525 $291,610
Net increase in net assets resulting from
operations 2,074,344 657,427 218,555
Capital shares transactions:
Net premiums 5,148,927 2,852,974 1,487,812
Transfers of policy loans (203,142) (93,023) (19,479)
Transfers of cost of insurance (746,910) (414,073) (154,413)
Transfers of surrenders (248,949) (103,126) (16,096)
Transfers of death benefits (24,534) (1,177)
Transfers of other terminations (34,555) (8,960) 193
Interfund transfers (36,600) 292,419 111,343
Net increase in net assets from capital share
transactions 3,854,237 2,525,034 1,409,360
Total increase in net assets 5,928,581 3,182,461 1,627,915
Net assets at end of year $11,030,567 $5,101,986 $1,919,525
</TABLE>
<TABLE>
<S> <C> <C> <C>
Variable Insurance Products II Variable Insurance Products Fund III
Growth & Income
Asset Manager Growth Portfolio Balanced Portfolio Portfolio
1998 1997 1996 1998 1997 1998 1997
$28,628 $ $7,144 $3,696 $ $ $1,324
133,880 772 13,847 5,647 1,443 4,302
162,508 772 20,991 9,343 1,443 5,626
2,638 1,700 452 62 25 218 26
17,363 9,040 2,041 3,005 320 6,973 370
142,507 (9,968) 18,498 6,276 (345) (5,748) 5,230
30,155 65,245 6,039 6,509 191 37,985 473
148,003 117,585 16,180 48,417 2,140 199,570 786
178,158 182,830 22,219 54,926 2,331 237,555 1,259
$320,665 $172,862 $40,717 $61,202 $1,986 $231,807 $6,489
$1,304,663 $467,931 $53,576 $121,777 $ $214,268 $
320,665 172,862 40,717 61,202 1,986 231,807 6,489
1,392,497 787,790 415,186 539,114 102,622 1,372,004 182,863
(10,349) (29,528) (12,378) (5,099) (9,957) (71)
(221,079) (122,121) (40,421) (45,367) (3,050) (110,453) (8,429)
(21,053) (39,420) (888) (11,935) (4) (4,601) (307)
(91)
(5,348) (433)
(3,502) 67,149 12,139 9,817 20,223 120,558 33,723
1,131,075 663,870 373,638 486,530 119,791 1,367,118 207,779
1,451,740 836,732 414,355 547,732 121,777 1,598,925 214,268
$2,756,403 $1,304,663 $467,931 $669,509 $121,777 $1,813,193 $214,268
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets, Continued
for the years ended December 31, 1998, 1997 and 1996
<S> <C> <C>
Products Fund III
Growth Opportunities
Portfolio
1998 1997
Investment income:
Dividend income $8,299 $
Capital gains distributions 28,848 37,147
Expenses:
Administrative expense 639 143
Mortality and expense risk 15,685 1,194
Net investment income (loss) 20,823 (1,337)
Realized and unrealized gains (losses) on investments:
Net realized gains (losses) on investments 50,809 4,463
Net unrealized appreciation (depreciation) on investments 394,294 23,265
Net realized and unrealized gains (losses) on investments445,103 27,728
Net increase (decrease) in net assets
resulting from operations $465,926 $26,391
Net assets at beginning of year $544,175 $
Net increase (decrease) in net assets
resulting from operations 465,926 26,391
Capital shares transactions:
Net premiums 2,646,226 424,520
Transfers of policy loans (9,991)
Transfers of cost of insurance (234,192) (19,831)
Transfers of surrenders (27,363) (536)
Transfers of death benefits
Transfers of other terminations (6,801)
Interfund transfers 174,729 113,631
Net increase in net assets from capital
share transactions 2,542,608 517,784
Total increase in net assets 3,008,534 544,175
Net assets at end of year $3,552,709 $544,175
</TABLE>
<TABLE>
American Century Variable Portfolios, Inc.
Capital Appreciation
<S> <C> <C> <C> <C> <C>
Balanced Portfolio Portfolio International Portfolio
1998 1997 1998 1997 1998 1997
$1,086 $ $ $ $1,827 $ 6,735
4,895 18,759
7,821 4,895 20,586
20 5 41 10 239 38
1,392 126 1,207 141 5,145 392
6,409 (131) 3,647 (151) 15,202 (430)
(1,944) 387 (14,210) (425) 18,863 (34)
18,540 559 14,374 (5,332) 54,979 652
16,596 946 164 (5,757) 73,842 618
$23,005 $815 $3,811 $(5,908) $89,044 $188
$52,097 $ $73,008 $ $199,713 $
23,005 815 3,811 (5,908) 89,044 188
288,299 57,959 183,887 71,171 1,002,411 176,976
(5,411) (241) (5,436) 45
(24,458) (6,022) (29,375) (4,961) (82,794) (8,337)
(5,978) (110) (13,744) (126) (12,709) (1,208)
(5,006) (5,265)
7,231 (545) 196 12,832 (7,657) 32,049
254,677 51,282 140,723 78,916 888,550 199,525
277,682 52,097 144,534 73,008 977,594 199,713
$329,779 $52,097 $217,542 $73,008 $1,177,307 $199,713
</TABLE>
<TABLE>
Midland National Life Insurance Company
Separate Account A
Statements of Operations and Changes in Net Assets, Continued
for the years ended December 31, 1998, 1997 and 1996
<S> <C> <C> <C>
American Century Variable
Portfolios, Inc.
Income &
Growth
Value Portfolio Portfolio
1998 1997 1998
Investment income:
Dividend income $1,367 $ $39
Capital gains distributions 16,326
17,693 39
Expenses:
Administrative expense 111 20
Mortality and expense risk 3,549 214 10
Net investment income (loss) 14,033 (234) 29
Realized and unrealized gains (losses) on investments:
Net realized gains (losses) on investments (10,206) 698 38
Net unrealized appreciation (depreciation) on
investments 19,163 2,214 1,125
Net realized and unrealized gains (losses) on
investments 8,957 2,912 1,163
Net increase (decrease) in net assets resulting
from operations $22,990 $2,678 $1,192
Net assets at beginning of year $139,559 $ $
Net increase (decrease) in net assets resulting from
operations 22,990 2,678 1,192
Capital shares transactions:
Net premiums 699,611 116,538 30,706
Transfers of policy loans (11,530)
Transfers of cost of insurance (82,653) (8,468) (128)
Transfers of surrenders (24,446) (47)
Transfers of death benefits (17,555)
Transfers of other terminations
Interfund transfers 52,604 28,858 750
Net increase in net assets from capital share
transactions 616,031 136,881 31,328
Total increase in net assets 639,021 139,559 32,520
Net assets at end of year $778,580 $139,559 $32,520
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Lord, Abbett
Massachusetts Financial Services & Company
Emerging Growth & New Growth &
Growth Income Discovery Research Income
Portfolio Portfolio Portfolio Portfolio Portfolio
1998 1998 1998 1998 1998
$ $ $ $ $
4 54
46 5 1 349 34
(50) (5) (1) (403) (34)
146 8 15 909 68
7,127 585 142 41,025 (1,217)
7,273 593 157 41,934 (1,149)
$7,223 $588 $156 $41,531 $(1,183)
$ $ $ $ $
7,223 588 156 41,531 (1,183)
47,502 10,680 1,842 204,167 64,470
(150)
(315) (120) (23) (2,238) (397)
(918) (5,394) (6)
3,024 208 7,535 840
49,293 10,768 1,819 203,920 64,907
56,516 11,356 1,975 245,451 63,724
$56,516 $11,356 $1,975 $245,451 $63,724
</TABLE>
1. Organization and Significant Accounting Policies:
Organization:
Midland National Life Separate Account A ("Separate Account"),
a unit investment trust, was established as a segregated
investment account of Midland National Life Insurance Company
(the "Company") in accordance with the provisions of the South
Dakota Insurance laws. The assets and liabilities of the
Separate Account are clearly identified and distinguished from
the other assets and liabilities of the Company. The Separate
Account is used to fund variable universal life insurance
policies of the Company.
The Separate Account invests in specified portfolios of
Variable Insurance Products Fund ("VIPF"), Variable Insurance
Products Fund II ("VIPF II"), Variable Insurance Products
Fund III ("VIPF III"), American Century Variable Portfolios,
Inc. ("ACVP"), Massachusetts Financial Services ("MFS"), and
Lord, Abbett & Company ("LAC") (collectively "the Funds"), each
diversified open-end management companies registered under the
Investment Company Act of 1940, as directed by participants.
The VIPF III Balanced, Growth & Income and Growth Opportunities
portfolios and the ACVP Balanced, Capital Appreciation,
International and Value portfolios were introduced in 1997.
The ACVP Income & Growth portfolio, the MFS Emerging Growth,
Growth & Income, New Discovery and Research portfolios as well
as the LAC's Growth & Income portfolio were each introduced in
1998. All other portfolios have been in existence for more
than three years. Investments in shares of the Funds are
valued at the net asset values of the respective portfolios of
the Funds corresponding to the investment portfolios of the
Separate Account. Fair value of investments is also the net
asset value. Walnut Street Securities serves as the
underwriter of the Separate Account. Investment transactions
are recorded on the trade date. Dividends are automatically
reinvested in shares of the Funds. The first-in, first-out
(FIFO) method is used to determine realized gains and losses on
investments.
Federal Income Taxes:
The operations of the Separate Account are included in the
federal income tax return of the Company. Under the provisions
of the policies, the Company has the right to charge the
Separate Account for federal income tax attributable to the
Separate Account. No charge is currently being made against
the Separate Account for such tax since, under current law, the
Company pays no tax on investment income and capital gains
reflected in variable life insurance policy reserves. However,
the Company retains the right to charge for any federal income
tax incurred which is attributable to the Separate Account if
the law is changed. Charges for state and local taxes, if any,
attributable to the Separate Account may also be made
1. Organization and Significant Accounting Policies,
continued:
Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Merger:
Effective January 2, 1997, Investors Life Insurance Company of
Nebraska ("Investors Life") was merged into the Company.
Related to this merger all of the assets and liabilities of
Investors Life were transferred to Midland including the assets
of Investors Life's Separate Account B, which were merged into
Midland's Separate Account A. The merger of the Separate
Account B assets into Midland's Separate Account A was possible
as the variable universal life insurance contracts were
identical in all material respects to the contracts issued by
Separate Account A. This merger of separate account assets was
structured so that there was no change in the rights and
benefits of persons owning contracts with either separate
accounts and no change in the net asset values held by the
respective participants of either of the separate accounts.
2. Expense Charges:
The Company is compensated for certain expenses as described
below. The rates for each applicable charge is described in
the Separate Account's prospectus.
A contract administration fee is charged to cover the
Company's recordkeeping and other administrative expenses
incurred to operate the Separate Account.
A mortality and expense risk fee is charged in return for the
Company's assumption of risks associated with adverse
mortality experience or excess administrative expenses in
connection with policies issued.
The Company assumes the responsibility for providing the
insurance benefits included in the policy. The cost of
insurance is determined each month based upon the applicable
insurance rate and the current death benefit. The cost of
insurance can vary from month to month since the
determination of both the insurance rate and the current
death benefit depends upon a number of variables as described
in the Separate Account's prospectus
2. Expense Charges, continued:
A transfer charge is imposed on each transfer between
portfolios of the Separate Account in excess of a stipulated
number of transfers in any one contract year.
A surrender charge may be imposed in the event of a contract
surrender or lapse within a stipulated number of years.
<TABLE>
3. Purchases and Sales of Investment Securities:
The aggregate cost of purchases and proceeds from sales of investments for the years ended
December 31, 1998, 1997, and 1996 were as follows:
<S> <C> <C> <C> <C>
1998 1997 1996
Portfolio Purchases Sales Purchases Sales Purchases Sales
Variable Insurance
Products Fund:
Money Market $3,703,516 $2,365,443 $2,398,056 $2,679,342 $2,034,275 $949,787
High Income 2,203,912 1,455,179 1,762,564 534,720 1,130,421 593,263
Equity-Income 8,012,948 3,161,806 4,606,039 1,926,533 3,626,635 1,654,290
Growth 11,455,665 5,223,262 6,694,330 3,789,244 5,850,056 2,665,240
Overseas 2,210,743 1,203,837 1,975,804 928,568 1,305,663 654,357
Variable Insurance
Products
Fund II:
Asset Manager 2,586,539 1,337,735 2,167,982 1,198,071 1,858,024 1,305,947
Investment Grade
Bond 643,163 360,716 351,091 307,112 340,129 279,245
Index 500 8,451,405 2,654,171 3,510,441 954,879 1,327,248 425,671
Contrafund 6,631,801 2,542,183 3,786,750 1,239,389 1,876,198 473,421
Asset Manager
Growth 1,849,012 575,429 1,025,893 372,417 522,652 130,138
Variable Insurance
Products
Fund III:
Balanced 732,611 239,805 151,867 32,420
Growth & Income 1,662,264 300,895 229,692 16,682
Growth Oppor-
tunities 3,263,185 699,754 583,991 67,546
American Century
Variable
Portfolios, Inc.:
Balanced 335,438 74,354 69,085 17,933
Capital Apprecia-
tion 242,481 98,110 93,376 14,612
International 1,186,094 282,341 224,848 25,753
911,411 281,349 153,593 16,945
Income & Growth 32,015 657
Massachusetts
Financial
Services:
Emerging Growth 50,012 769
Growth & Income 10,927 164
New Discovery 1,904 86
Research 216,124 12,607
Lord, Abbett &
Company:
Growth & Income 65,826 952
$56,458,996 $22,871,604 $29,785,402 $14,122,166 $19,871,301 $9,131,859
</TABLE>
<TABLE>
4. Summary of Changes from Unit Transactions:
Transactions in units for the years ended December 31, 1998, 1997, and 1996 were
as follows:
<S> <C> <C> <C> <C>
1998 1997 1996
Portfolio Purchases Sales Purchases Sales Purchases Sales
Variable Insurance Products
Fund:
Money Market 295,836 184,053 160,457 175,104 132,191 61,393
High Income 121,025 66,129 71,855 20,908 45,898 25,239
Equity-Income 455,774 132,401 155,294 58,396 122,028 57,300
Growth 444,888 159,955 216,574 102,996 167,406 80,887
Overseas 122,745 60,018 89,759 39,237 67,962 33,856
Variable Insurance Products
Fund II:
Asset Manager 102,475 54,816 77,125 50,498 84,315 66,066
Investment Grade Bond 44,592 23,051 20,534 19,490 20,996 18,784
Index 500 555,532 157,217 204,615 48,013 81,534 25,464
Contrafund 438,316 156,194 254,844 75,480 145,795 35,584
Asset Manager Growth 126,892 38,975 71,882 23,310 39,936 10,263
Variable Insurance Products
Fund III
Balanced 60,349 19,734 13,593 2,733
Growth & Income 121,924 21,402 19,277 1,397
Growth Opportunities 251,295 52,957 51,166 5,612
American Century Variable
Portfolios, Inc.:
Balanced 27,213 6,100 6,244 1,589
Capital Appreciation 23,494 9,333 8,033 1,258
International 98,873 22,399 21,308 2,405
Value 74,591 22,784 13,166 1,434
Income & Growth 2,779 57
Massachusetts Financial Services:
Emerging Growth 4,556 63
Growth & Income 997 14
New Discovery 160 7
Research 22,120 1,245
Lord, Abbett & Company:
Growth & Income 6,014 84
</TABLE>
<TABLE>
5. Net Assets:
Net assets at December 31, 1998, consisted of the following:
<S> <C> <C> <C>
Accumulated
Net Investment Net
Capital Income an Unrealized
Share Net Realized Appreciation
Portfolio Transactions Gains of Investments Total
Variable Insurance Products Fund:
Money Market 2,474,045 257,053 2,731,098
High Income 2,735,943 660,085 (232,054) 3,163,974
Equity-Income 10,780,276 3,097,017 1,853,884 15,731,177
Growth 14,653,801 7,002,895 6,847,197 28,503,893
Overseas 3,720,814 908,652 265,574 4,895,040
Variable Insurance Products Fund II:
Asset Manager 4,514,398 2,008,761 764,298 7,287,457
Investment Grade Bond 903,437 175,025 63,995 1,142,457
Index 500 9,368,052 901,318 1,953,054 12,222,424
Contrafund 8,072,838 948,155 2,009,574 11,030,567
Asset Manager Growth 2,220,929 254,762 280,712 2,756,403
Variable Insurance Products Fund III:
Balanced 606,322 12,631 50,556 669,509
Growth & Income 1,574,898 37,940 200,355 1,813,193
Growth Opportunities 3,060,390 74,758 417,561 3,552,709
American Century Variable
Portfolios, Inc.:
Balanced 305,960 4,721 19,098 329,779
Capital Appreciation 219,638 (11,139) 9,043 217,542
International 1,088,075 33,601 55,631 1,177,307
Value 752,913 4,291 21,376 778,580
Income & Growth 31,328 67 1,125 32,520
Massachusetts Financial Services:
Emerging Growth 49,293 96 7,127 56,516
Growth & Income 10,768 3 585 11,356
New Discovery 1,819 14 142 1,975
Research 203,920 506 41,025 245,451
Lord, Abbett & Company:
Growth & Income 64,907 34 (1,217) 63,724
67,414,764 16,371,246 14,628,641 98,414,651
</TABLE>
The accompanying notes are an integral part of the
financial statements.
2 The accompanying notes are an integral part of the
financial statements.
3 The accompanying notes are an integral part of the
financial statements.
4 The accompanying notes are an integral part of the
financial statements.
5 The accompanying notes are an integral part of the
financial statements.
6 The accompanying notes are an integral part of the
financial statements.
7 The accompanying notes are an integral part of the
financial statements.
8 The accompanying notes are an integral part of the
financial statements.
9 Midland National Life Insurance Company
Separate Account A
Notes to Financial Statements
18
Midland National Life Insurance Company
Separate Account A
Notes to Financial Statements, Continued
NEWSPA98
<PAGE>
C O N T E N T S
Page(s)
Report of Independent Accountants 1
Balance Sheets 2
Statements of Income 3
Statements of Stockholder's Equity 4
Statements of Cash Flows 5-6
Notes to Financial Statements 7-23
Report of Independent Accountants
The Board of Directors and Stockholder
Midland National Life Insurance Company:
In our opinion, the accompanying balance sheets and the related
statements of income, stockholder's equity, and cash flows present
fairly, in all material respects, the financial position of Midland
National Life Insurance Company as of December 31, 1998 and 1997, and
the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. These financial statements
are the responsibility of Midland National Life Insurance Company's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for the opinion expressed above.
March 10, 1999
Midland National Life Insurance Company
Balance Sheets
as of December 31, 1998 and 1997
(Amounts in thousands, except share and per share amounts)
ASSETS 1998 1997
Investments:
Fixed maturities $2,281,730 $2,420,977
Equity securities 327,309 145,156
Policy loans 213,267 202,129
Short-term investments 280,943 636,280
Other invested assets 37,076 29,329
Total investments 3,140,325 3,433,871
Cash 754 2,384
Accrued investment income 38,555 37,980
Deferred policy acquisition costs 417,164 416,767
Present value of future profits of
acquired businesses 31,162 40,397
Other receivables and other assets 14,407 28,045
Separate accounts assets 249,145 139,072
Total assets $3,891,512 $4,098,516
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Policyholder account balances $2,307,893 $2,401,302
Policy benefit reserves 419,615 419,131
Policy claims and benefits payable 30,393 33,839
Federal income taxes 20,566 36,088
Other liabilities 100,867 90,102
Security lending liability 50,500 308,125
Separate account liabilities 249,145 139,072
Total liabilities 3,178,979 3,427,659
Commitments and contingencies
Stockholder's equity:
Common stock, $1 par value, 2,549,439 shares
authorized, 2,548,878 shares outstanding 2,549 2,549
Additional paid-in capital 33,707 33,707
Accumulated other comprehensive income 26,826 30,838
Retained earnings 649,629 603,763
Less treasury stock (561 shares), at cost (178)
Total stockholder's equity 712,533 670,857
Total liabilities and stockholder's equity $3,891,512 $4,098,516
Midland National Life Insurance Company
Statements of Income
for the years ended December 31, 1998, 1997, and 1996
(Amounts in thousands)
1998 1997 1996
Revenues:
Premiums $94,495 $98,668 $101,423
Interest sensitive life and
investment product charges 159,115 157,423 150,839
Net investment income 224,939 188,650 173,583
Net realized investment (losses)
gains (6,489) 3,561 6,839
Net unrealized gains (losses) on
trading securities 2,847 (641) 6,200
Other income 3,157 2,565 4,362
Total revenue 478,064 450,226 443,246
Benefits and expenses:
Benefits incurred 137,313 146,227 151,208
Interest credited to policyholder
account balances 133,529 111,333 103,618
Total benefits 270,842 257,560 254,826
Operating expenses (net of
commissions and other expenses
deferred) 47,549 44,130 43,243
Amortization of deferred policy
acquisition costs and present
value of future profits of
acquired businesses 66,189 56,954 53,316
Total benefits and expenses 384,580 358,644 351,385
Income before income taxes 93,484 91,582 91,861
Income tax expense 32,618 33,053 31,821
Net income $60,866 $58,529 $60,040
<TABLE>
Midland National Life Insurance Company
Statements of Stockholder's Equity
for the years ended December 31, 1998, 1997, and 1996
(Amounts in thousands)
<S> <C> <C> <C> <C>
Accumulated
Additional Other Less Total
Common Paid-in Comprehensive Comprehensive Retained Treasury Stockholder's
Stock Capital Income Income Earnings Stock Equity
Balance at January 1, 1996 $2,549 $33,707 $31,027 $510,194 $577,477
Comprehensive income:
Net income $60,040 60,040 60,040
Other comprehensive income:
Net unrealized loss on available-for-sale
investments (12,202) (12,202) (12,202)
Total comprehensive income $47,838
Balance at December 31, 1996 2,549 33,707 18,825 570,234 625,315
Comprehensive income:
Net income 58,529 58,529 58,529
Other comprehensive income:
Net appreciation on available-for-sale investments 12,013 12,013 12,013
Total comprehensive income $70,542
Dividends paid on common stock (25,000) (25,000)
Balance at December 31, 1997 2,549 33,707 30,838 603,763 670,857
Comprehensive income:
Net income 60,866 60,866 60,866
Other comprehensive income:
Net unrealized loss on available-for-sale
investments (4,012) (4,012) (4,012)
Total comprehensive income $56,854
Dividends paid on common stock (15,000) (15,000)
Repurchase of minority interest shares (178) (178)
Balance at December 31, 1998 $2,549 $33,707 $26,826 $649,629 $(178) $712,533
</TABLE>
<TABLE>
Midland National Life Insurance Company
Statements of Cash Flows
for the years ended December 31, 1998, 1997, and 1996
(Amounts in thousands)
<S> <C> <C> <C>
1998 1997 1996
Cash flows from operating activities:
Net income $60,866 $58,529 $60,040
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of deferred policy acquisition costs
and present value of future profits of acquired
business 66,189 56,954 53,316
Net amortization of premiums and discounts on
investments 4,325 2,699 5,532
Policy acquisition costs deferred (54,611) (50,363) (65,285)
Net realized investment (gains) losses 6,489 (3,561) (6,839)
Net unrealized (gains) losses on
trading securities (2,847) 641 (6,200)
Net proceeds from (cost of) trading
securities (37,769) 99,850 5,788
Deferred income taxes (10,849) (5,421) 12,177
Net interest credited and product charges on
charges on universal life and
investment policies (25,586) (46,090) (47,221)
Changes in other assets and liabilities:
Net receivables and payables 22,190 (13,946) 32,863
Policy benefits 8,397 15,826 26,185
Other 1,173 122 (277)
Net cash provided by operating
activities 37,967 115,240 70,079
Cash flows from investing activities:
Proceeds from investments sold, matured or repaid:
Fixed maturities 1,405,391 1,217,086 1,422,426
Equity securities 304,589 137,510 129,827
Other invested assets 2,601 941 2,055
Cost of investments acquired:
Fixed maturities 1,281,839) (1,791,522)(1,569,779)
Equity securities (451,181) (144,862) (145,096)
Other invested assets (10,346) (11,702) (14,245)
Net change in policy loans (11,138) (9,995) (11,295)
Net change in short-term investments 355,337 93,875 (18,748)
Net change in security lending (257,625) 308,125
Payment for purchase of insurance business, net of
cash acquired (1,026) 23,939
Net cash provided by (used in)
investing activities 54,763 (176,605) (204,855)
</TABLE>
<TABLE>
Midland National Life Insurance Company
Statements of Cash Flows, Continued
for the years ended December 31, 1998, 1997, and 1996
(Amounts in thousands)
<S> <C> <C> <C>
1998 1997 1996
Cash flows from financing activities:
Receipts from universal life
and investment products 317,398 280,164 285,569
Benefits paid on universal life
and investment products (396,580) (194,993) (156,514)
Dividends paid on common stock (15,000) (25,000)
Repurchase of minority interest shares (178)
Net cash provided by (used in)
financing activities (94,360) 60,171 129,055
Increase (decrease) in cash (1,630) (1,194) (5,721)
Cash at beginning of year 2,384 3,578 9,299
Cash at end of year 754 2,384 3,578
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $119 $143 $166
Income taxes, paid to parent 45,980 42,749 16,772
Noncash operating, investing and financing
Policy loans, receivables and other assets
received in assumption reinsurance
agreements 70 38,044
</TABLE>
1. Summary of Significant Accounting Policies:
Organization:
Midland National Life Insurance Company ("Midland" or the
"Company") is a wholly-owned subsidiary of Sammons Enterprises,
Inc. ("SEI"). Midland operates predominantly in the individual
life and annuity business of the life insurance industry. The
Company is licensed to operate in 49 states and the District of
Columbia.
Basis of Presentation:
Effective May 31, 1996, Midland sold its wholly-owned subsidiary,
North American Management, Inc. ("NAM"), to an unrelated party
for a net consideration which approximated the net equity of NAM
at May 31, 1996. The operations of the subsidiary, which were
included through May 31, 1996, were not material to the financial
statements.
On January 2, 1997, Investors Life Insurance Company of Nebraska
was merged into Midland. Since this wholly-owned subsidiary was
previously consolidated with Midland, this merger had no impact
on the financial statements of Midland.
In preparing the financial statements, management is required to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities as of the date of the balance sheet and revenues and
expenses for the period. Actual results could differ
significantly from those estimates. The following are the more
significant elements of the financial statements affected by the
use of estimates and assumptions:
- Investment values.
- Deferred policy acquisition costs.
- Present value of future profits of acquired business.
- Policy benefit reserves and claims reserves.
- - Fair value of financial instruments.
- -
The Company is subject to the risk that interest rates will
change and cause a decrease in the value of its investments. To
the extent that fluctuations in interest rates cause the duration
of assets and liabilities to differ, the Company may have to sell
assets prior to their maturity and realize a loss.
1. Summary of Significant Accounting Policies, continued:
Investments:
The Company is required to classify its fixed maturity
investments (bonds and redeemable preferred stocks) and equity
securities (common and nonredeemable preferred stocks) into three
categories: securities that the Company has the positive intent
and the ability to hold to maturity are classified as "held to
maturity"; securities that are held for current resale are
classified as "trading securities"; and securities not classified
as held to maturity or as trading securities are classified as
"available for sale". Investments classified as trading or
available-for-sale are required to be reported at fair value in
the balance sheet. The Company has no securities classified as
held-to-maturity.
Trading securities are held for resale in anticipation of short-
term market movements. The Company's trading securities are
stated at market value. Gains and losses on these securities,
both realized and unrealized, are included in the determination
of net income. Net cost of or proceeds from trading securities
are included in operating activities in the statements of cash
flows.
Available-for-sale securities are classified as such if not
considered trading securities or if there is not the positive
intent and ability to hold the securities to maturity. Such
securities are carried at market value with the unrealized
holding gains and losses included as other comprehensive income
in stockholder's equity, net of related adjustments to deferred
policy acquisition costs, deferred income taxes and the
accumulated unrealized holding gains (losses) on securities sold
which are released into income as realized investment gains.
Cash flows from available-for-sale security transactions are
included in investing activities in the statements of cash flows.
For CMO's and mortgage-backed securities, the Company recognizes
income using a constant effective yield based on anticipated
prepayments and the estimated economic life of the securities.
When actual prepayments differ significantly from anticipated
prepayments, the effective yield is recalculated to reflect
actual payments to date and anticipated future payments. The net
investment in the security is adjusted to the amount that would
have existed had the new effective yield been applied since the
acquisition of the security. This adjustment is included in net
investment income.
Policy loans and other invested assets are carried at unpaid
principal balances. Short-term investments are carried at
amortized cost, which approximates fair value.
Investment income is recorded when earned. Realized gains and
losses are determined on the basis of specific identification of
the investments.
1. Summary of Significant Accounting Policies, continued:
Investments, continued:
When a decline in value of an investment is determined to be
other than temporary, the specific investment is carried at
estimated realizable value and its original book value is reduced
to reflect this impairment. Such reductions in book value are
recognized as realized investment losses in the period in which
they were written down.
Recognition of Traditional Life, Health, and Annuity Premium
Revenue and Policy Benefits:
Traditional life insurance products include those products with
fixed and guaranteed premiums and benefits. Life insurance
premiums, which comprise the majority of premium revenues, are
recognized as premium income when due. Benefits and expenses are
associated with earned premiums so as to result in recognition of
profits over the life of the contracts. This association is
accomplished by means of the provision for policy benefit
reserves and the amortization of deferred policy acquisition
costs.
Liabilities for future policy benefits for traditional policies
generally are computed by the net level premium method based on
estimated future investment yield, mortality, morbidity, and
withdrawals which were appropriate at the time the policies were
issued or acquired. Interest rate assumptions range from 6.5% to
11%.
Recognition of Revenue and Policy Benefits for Interest Sensitive
Life Insurance Products and Investment Contracts (Interest
Sensitive Policies):
Interest sensitive policies are issued on a periodic and single
premium basis. Amounts collected are credited to policyholder
account balances. Revenues from interest sensitive policies
consist of charges assessed against policyholder account balances
for the cost of insurance, policy administration, and surrender
charges. Revenues also include investment income related to the
investments which support the policyholder account balances.
Policy benefits and claims that are charged to expense include
benefits incurred in the period in excess of related policyholder
account balances. Benefits also include interest credited to the
account balances.
Policy reserves for universal life and other interest-sensitive
life insurance and investment contracts are determined using the
retrospective deposit method. Policy reserves consist of the
policyholder deposits and credited interest less withdrawals and
charges for mortality, administrative, and policy expenses.
Interest crediting rates ranged primarily from 3% to 6.5% in
1998, 3.75% to 6.75% in 1997 and 3% to 7% in 1996. For certain
contracts these crediting rates extend for periods in excess of
one year.
1. Summary of Significant Accounting Pollicies, continued:
Deferred Policy Acquisition Costs:
Policy acquisition costs which vary with, and are primarily
related to the production of new business, have been deferred to
the extent that such costs are deemed recoverable from future
profits. Such costs include commissions, policy issuance,
underwriting, and certain variable agency expenses.
Deferred costs related to traditional life insurance are
amortized over the estimated premium paying period of the related
policies in proportion to the ratio of annual premium revenues to
total anticipated premium revenues.
Deferred costs related to interest sensitive policies are being
amortized over the lives of the policies (up to 25 years) in
relation to the present value of actual and estimated gross
profits subject to regular evaluation and retroactive revision to
reflect actual emerging experience.
Policy acquisition costs deferred and amortized for years ended
December 31 are as follows:
1998 1997 1996
Deferred policy acquisition costs,
beginning of year 416,767 427,218 410,051
Commissions deferred 44,072 40,660 55,005
Underwriting and acquisition expenses
deferred 10,539 9,703 10,280
Change in offset to unrealized gains
and losses 3,766 (8,710) 92
Amortization (57,980) (52,104) (48,210)
Deferred policy acquisition costs,
end of year 417,164 416,767 427,218
To the extent that unrealized gains and losses on available-for-
sale securities would result in an adjustment to the amortization
pattern of deferred policy acquisition costs or present value of
future profits of acquired business had those gains or losses
actually been realized, the adjustments are recorded directly to
stockholder's equity through other comprehensive income as an
offset to the unrealized gains or losses.
Present Value of Future Profits of Acquired Business:
The present value of future profits of acquired business ("PVFP")
represents the portion of the purchase price of a block of
business which is allocated to the future profits attributable to
the insurance in force at the dates of acquisition. The PVFP is
amortized in relationship to the actual and expected emergence of
such future profits. The composition of the PVFP for the years
ended December 31 is summarized below:
1. Summary of Significant Accounting Policies, continued:
Present Value of Future Profits of Acquired Business, continued:
1998 1997 1996
Balance at beginning of year 40,397 21,308 26,414
Value of in-force acquired 23,939
Adjustment to purchase price (1,026)
Amortization (8,209) (4,850) (5,106)
Balance at end of year 31,162 40,397 21,308
Based on current conditions and assumptions as to future events,
the Company expects to amortize approximately 18 percent of the
December 31, 1998 balance of PVFP in 1999, 15 percent in 2000, 12
percent in 2001, 10 percent in 2002, and 9 percent in 2003. The
interest rates used to determine the amortization of the PVFP
purchased ranged from 5.5 percent to 6.5 percent.
Policy Claims and Benefits Payable:
The liability for policy claims and benefits payable includes
provisions for reported claims and estimates for claims incurred
but not reported, based on the terms of the related policies and
contracts and on prior experience. Claim liabilities are
necessarily based on estimates and are subject to future changes
in claim severity and frequency. Estimates are periodically
reviewed and adjustments to such liabilities are reflected in
current operations.
Federal Income Taxes:
The Company is a member of SEI's consolidated United States
federal income tax group. The policy for intercompany allocation
of federal income taxes provides that the Company compute the
provision for federal income taxes on a separate return basis.
The Company makes payment to, or receives payment from, SEI in
the amount they would have paid to, or received from, the
Internal Revenue Service had they not been members of the
consolidated tax group. The separate Company provisions and
payments are computed using the tax elections made by the Parent.
Deferred tax liabilities and assets are recognized based upon the
difference between the financial statement and tax bases of
assets and liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse.
Separate Account:
Separate account assets and liabilities represent funds held for
the exclusive benefit of variable universal life and annuity
contractholders. Fees are received for administrative expenses
and for assuming certain mortality, distribution and expense
risks. Operations of the separate accounts are not included in
these financial statements.
1. Summary of Significant Accounting Policies, continued:
Comprehensive Income:
During 1998, the Company adopted Statement of Financial
Accounting Standard No. 130, "Reporting Comprehensive Income."
The standard requires the reporting of comprehensive income in
addition to net income from operations. Comprehensive income is
a more inclusive financial reporting methodology that includes
disclosure of certain financial information that historically has
not been recognized in the calculation of net income.
Comprehensive income for the Company includes net income and
unrealized gains and losses (other comprehensive income) on
available-for-sale securities. The adoption of this statement
does not impact the overall financial position or stockholder's
equity of the Company.
Security Lending:
The Company periodically enters into agreements to sell and
repurchase securities. Securities out on loan are required to be
100% collateralized. Short-term investments of $50,500 and the
related liability representing the collateral received is
reflected on the balance sheets as of December 31, 1998.
Treasury Stock:
During the fourth quarter of 1998, the Company purchased its
remaining outstanding minority shares from the lone minority
shareholder for $178. The shares are retained as treasury stock
as a reduction to stockholder's equity.
2. Fair Value of Financial Instruments:
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash, Short-Term Investments, Policy Loans and Other Invested
Assets:
The carrying amounts reported in the balance sheets for these
instruments approximate their fair values.
Investment Securities:
Fair value for fixed maturity securities (including redeemable
preferred stocks) are based on quoted market prices, where
available. For fixed maturities not actively traded, fair values
are estimated using values obtained from independent pricing
services. In some cases, such as private placements and certain
mortgage-backed securities, fair values are estimated by
discounting expected future cash flows using a current market
rate applicable to the yield, credit quality and maturity of the
investments. The fair value of equity securities are based on
quoted market prices.
2. Fair Value of Financial Instruments, continued:
Investment-Type Insurance Contracts:
Fair values for the Company's liabilities under investment-type
insurance contracts are estimated using two methods. For those
contracts without a defined maturity, the fair value is estimated
as the amount payable on demand (cash surrender value). For
those contracts with known maturities, fair value is estimated
using discounted cash flow calculations using interest rates
currently being offered for similar contracts with maturities
consistent with the contracts being valued.
These fair value estimates are significantly affected by the
assumptions used, including the discount rate and estimates of
future cash flows. Although fair value estimates are calculated
using assumptions that management believes are appropriate,
changes in assumptions could cause these estimates to vary
materially. In that regard, the derived fair value estimates
cannot be substantiated by comparison to independent markets and,
in some cases, could not be realized in the immediate settlement
of the instruments. Certain financial liabilities (including non
investment-type insurance contracts) and all nonfinancial
instruments are excluded from the disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
The carrying value and estimated fair value of the Company's
financial instruments are as follows:
December 31, 1998 December 31, 1997
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
Financial assets:
Fixed maturities,
available-for-sale $2,281,730 $2,281,730 $2,420,977 $2,420,977
Equity securities,
available-for-sale 221,325 221,325 78,950 78,950
Equity securities,
trading 105,984 105,984 66,206 66,206
Policy loans 213,267 213,267 202,129 202,129
Short-term investments 280,943 280,943 636,280 636,280
Other investments 37,076 37,076 29,329 29,329
Financial liabilities:
Investment-type insurance
Contracts 866,000 850,000 1,011,000 989,000
3. Investments and Investment Income:
Fixed Maturities and Equity Security Investments:
The amortized cost and estimated fair value of fixed maturities
and equity securities classified as available for sale are as
follows:
December 31, 1998
Gross Gross
Unrealized Unrealized Estimated
Amortized Holding Holding Fair
Cost Gains Losses Value
Fixed maturities:
U.S. Treasury and other U.S.
Government corporations
and agencies $208,581 $14,285 $378 $222,488
Corporate securities 1,052,442 30,366 15,546 1,067,262
Mortgage-backed securities 955,785 22,225 1,093 976,917
Other debt securities 14,861 225 23 15,063
Total fixed maturities 2,231,669 67,101 17,040 2,281,730
Equity securities 209,952 15,403 4,030 221,325
Total available for sale $2,441,621 $82,504 $21,070 $2,503,055
December 31, 1997
Gross Gross
Unrealized Unrealized Estimated
Amortized Holding Holding Fair
Cost Gains Losses Value
Fixed maturities:
U.S. Treasury and other U.S. Government corporations
and agencies $625,958 $9,232 $266 $634,924
Obligations of U.S. states and political
subdivisions 3,201 147 3,348
Corporate securities 660,172 30,234 577 689,829
Mortgage-backed securities 1,055,140 22,159 109 1,077,190
Other debt securities 14,861 826 1 15,686
Total fixed maturities 2,359,332 62,598 953 2,420,977
Equity securities 69,221 10,433 704 78,950
Total available for sale $2,428,553 $73,031 $1,657 $2,499,927
The cost of the equity securities classified as trading
securities are $103,798 and $66,867, respectively at December 31,
1998 and December 31, 1997.
3. Investments and Investment Income, continued:
Fixed Maturities and Investment Security Investments, continued:
The unrealized appreciation on the available-for-sale securities
in 1998 and 1997 is reduced by deferred policy acquisition costs
and deferred income taxes and is reflected as accumulated other
comprehensive income in the statements of stockholder's equity:
1998 1997
Gross unrealized appreciation $61,434 $71,374
Deferred policy acquisition costs (20,164) (23,930)
Deferred income taxes (14,444) (16,606)
Accumulated other comprehensive income $26,826 $30,838
The other comprehensive income in 1998 and 1997 is comprised of
the change in unrealized gains (losses) on available-for-sale
fixed maturities and equity security investments arising during
the period less the realized gains (losses) included in income,
deferred policy acquisition costs and deferred income taxes as
follows:
1998 1997 1996
Unrealized holding gains (losses) arising in the
current period:
Fixed maturities $(11,399) $27,096 $(12,860)
Equity securities (5,025) 3,571 759
Less reclassification adjustment for (gains)
losses released into income 6,484 (3,476) (6,851)
Less DAC impact 3,766 (8,710) 92
Less deferred income tax effect 2,162 (6,468) 6,658
Net other comprehensive income $(4,012) $12,013 $(12,202)
The amortized cost and estimated fair value of available-for-sale
fixed maturities at December 31, 1998, by contractual maturity,
are as follows. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
3. Investments and Investment Income, continued:
Fixed Maturities and Investment Security Investments, continued:
Estimated
Amortized Cost Fair Value
Due in one year or less $66,556 $67,164
Due after one year through five years 94,231 96,047
Due after five years through ten years 297,052 313,506
Due after ten years 818,045 828,096
Securities not due at a single
maturity date (primarily mortgage-
backed securities) 955,785 976,917
Total fixed maturities $2,231,669 $2,281,730
Investment Income and Investment Gains (Losses):
Major categories of investment income are summarized as follows:
1998 1997 1996
Gross investment income:
Fixed maturities $173,475 $148,640 $126,733
Equity securities 22,563 13,831 22,202
Policy loans 15,331 11,891 10,327
Short-term investments 24,308 20,594 16,946
Other invested assets 2,730 824 553
Total gross investment income 238,407 195,780 176,761
Investment expenses 13,468 7,130 3,178
Net investment income $224,939 $188,650 $173,583
The major categories of investment gains and losses reflected in
the income statement are summarized as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
1998 1997 1996
Unrealized - Unrealized - Unrealized -
Trading Trading Trading
Realized Securities Realized Securities Realized Securities
Fixed maturities $185 $2,934 $195 $8,047 $(438)
Equity securities (6,669) 2,847 542 (836) (1,196) 6,638
Other (5) 85 (12)
Net investment gains
(losses) $(6,489) $2,847 $3,561 $(641) $6,839 $6,200
</TABLE>
3. Investments and Investment Income, continued:
Investment Income and Investment Gains (Losses), continued:
Proceeds from the sale of available-for-sale securities and the
gross realized gains and losses on these sales (excluding
maturities, calls and prepayments) during 1998, 1997, and 1996
were as follows:
<TABLE>
<S> <C> <C> <C> <C>
1998 1997 1996
Fixed Fixed Fixed
Maturities Equity Maturities Equity Maturities Equity
Proceeds from sales $744,300 $304,589 $801,246 $136,085 $1,020,090 $106,354
Gross realized gains 7,527 442 3,757 1,977 10,418 787
Gross realized losses 7,313 6,303 3,213 887 5,030 1,954
</TABLE>
Other:
At December 31, 1998, and 1997, securities amounting to
approximately $14,993 and $14,366, respectively, were on deposit
with regulatory authorities as required by law.
At December 31, 1998, and 1997, the Company entered into
repurchase agreements with brokerage firms totaling $50,500 and
$308,125, respectively.
The Company generally strives to maintain a diversified invested
assets portfolio. Other than investments in U.S. Government or
U.S. Government Agency or Authority, the Company had no
investments in one entity which exceeded 10% of stockholder's
equity at December 31, 1998, except for the following investment
with the following carrying value:
Residential Funding $75,527
4. Income Taxes:
The significant components of the provision for Federal income
taxes are as follows:
1998 1997 1996
Current $43,467 $38,474 $19,644
Deferred (10,849) (5,421) 12,177
Total federal income tax expense $32,618 $33,053 $31,821
4. Income Taxes, continued:
Income tax expense differs from the amounts computed by applying
the U.S. Federal income tax rate of 35% to income before income
taxes as follows:
1998 1997 1996
At statutory federal income tax rate $32,720 $32,054 $32,151
Dividends received deductions (191) (514) (1,391)
Other, net 89 1,513 1,061
Total federal income tax expense $32,618 $33,053 $31,821
The federal income tax liability as of December 31 is comprised
of the following:
1998 1997
Net deferred income tax liability $21,470 $34,480
Income taxes currently (receivable) due (904) 1,608
Federal income tax liability $20,566 $36,088
The tax effects of temporary differences that give rise to
significant portions of the deferred income tax assets and
deferred income tax liabilities at December 31 are as follows:
1998 1997
Deferred tax liabilities:
Present value of future profits of acquired business $10,907 $14,139
Deferred policy acquisition costs 99,192 100,989
Investments 22,154 27,245
Other 906
Total deferred income tax liabilities 132,253 143,279
Deferred tax assets:
Policy liabilities and reserves 108,973 108,799
Other 1,810
Total gross deferred income tax assets 110,783 108,799
Net deferred income tax liability $21,470 $34,480
Prior to 1984, certain special deductions were allowed life
insurance companies for federal income tax purposes. These
special deductions were accumulated in a memorandum tax account
designated as "Policyholders' Surplus." Such amounts will
usually become subject to tax at the then current rates only if
the accumulated balance exceeds certain maximum limitations or
certain cash distributions are deemed to be paid out of this
account. It is management's opinion that such events are not
likely to occur. Accordingly, no provision for income tax has
been made on the approximately $66,000 balance in the
policyholders' surplus account at December 31, 1998.
5. Reinsurance:
The Company is involved in both the cession and assumption of
reinsurance with other companies. Reinsurance premiums and
claims ceded and assumed for the years ended December 31 are as
follows:
1998 1997 1996
Ceded Assumed Ceded Assumed Ceded Assumed
Premiums $20,280 $6,106 $17,081 $7,971 $13,759 $7,116
Claims 11,495 5,954 8,683 4,472 12,170 6,068
The Company generally reinsures the excess of each individual
risk over $500 on ordinary life policies in order to spread its
risk of loss. Certain other individual health contracts are
reinsured on a policy-by-policy basis. The Company remains
contingently liable for certain of the liabilities ceded in the
event the reinsurers are unable to meet their obligations under
the reinsurance agreement.
Effective in 1996, the Company assumed certain policy risks from
its affiliate, North American Company for Life and Health
Insurance, and its subsidiaries. The company fulfilled its
obligation on this assumption contract and was released of this
risk effective December 31, 1998. The Company has reflected risk
and profit charges of $729 and $1,119 in other income in 1997 and
1996, respectively, under the terms of the reinsurance contract.
Effective October 31, 1997, Midland acquired, via assumption
reinsurance, a block of life and annuity business. Under the
assumption agreement, the Company assumed approximately $574,310
of life and annuity reserves which is reflected in the
liabilities for future policy benefits and received $550,371 of
assets which was net of $23,939 of PVFP. The PVFP asset is being
amortized principally over periods up to 25 years in relation to
the present value of expected gross profits. The assets acquired
included approximately $511,877 in cash and short term
instruments, $38,044 in policy loans and $450 of other assets.
In accordance with the agreement, the final purchase price was
determined in 1998 which reduced the PVFP asset to $22,913 and
the life and annuity reserves assumed to $573,284.
6. Statutory Financial Data and Dividend Restrictions:
The Company is domiciled in South Dakota and its statutory-basis
financial statements are prepared in accordance with accounting
practices prescribed or permitted by the insurance department of
the domiciliary state. "Prescribed" statutory accounting
practices include state laws, regulations, and general
administrative rules, as well as a variety of publications of the
National Association of Insurance Commissioners (NAIC).
"Permitted" statutory accounting practices encompass all
accounting practices that are not prescribed. Such practices
differ from state to state and company to company.
6. Statutory Financial Data and Dividend Restrictions, continued:
Generally, the net assets of the Company available for
distribution to its shareholders are limited to the amounts by
which the net assets, as determined in accordance with statutory
accounting practices, exceed minimum regulatory statutory capital
requirements. All payments of dividends or other distributions
to stockholders are subject to approval by regulatory
authorities. The maximum amount of dividends which can be paid
by the Company during any 12-month period, without prior approval
of the insurance commissioner, is limited according to statutory
regulations and is a function of statutory equity and statutory
net income (generally, the greater of statutory-basis net gain
from operations or 10% of prior year-end statutory-basis
surplus). The company paid a stockholder dividend of $15,000 and
$25,000 in 1998 and 1997, respectively. The maximum amount of
dividends payable in 1999 without prior approval of regulatory
authorities is approximately $60,000.
The statutory net income of the Company for the years ended
December 31, 1998 and 1997 is approximately $75,000 and $65,000,
respectively, and capital and surplus at December 31, 1998 and
1997 is approximately $384,000 and $323,000, respectively, in
accordance with statutory accounting principles.
7. Employee Benefits:
The Company participates in qualified pensions and other
postretirement benefit plans sponsored by SEI. The Company also
provides certain post-retirement health care and life insurance
benefits for eligible active and retired employees through a
defined benefit plan. The following table summarizes the benefit
obligations, the fair value of plan assets and the funded status
over the two-year period ended December 31, 1998. The amounts
reflect an allocation of the Company's portion of the SEI plan:
Pension Benefits Other Benefits
1998 1997 1998 1997
Benefit obligation at
December 31 $6,420 $4,678 $1,718 $2,203
Fair value of plan assets at
December 31 3,642 3,176
Funded status at December 31 $(2,778) $(1,502) $(1,718) $(2,203)
Accrued benefit liability
recognized in financial
statements $616 $92 $1,650 $1,751
7. Employee Benefits, continued:
The Company's post-retirement benefit plan is not funded;
therefore, it has no plan assets.
The amounts of contributions made to and benefits paid from the
plan are as follows:
Pension Benefits Other Benefits
1998 1997 1998 1997
Employer contributions $ $ $227 $172
Employee contributions 56 56
Benefit payments 197 444 283 228
The following table provides the net periodic benefit cost for
the years ended 1998, 1997 and 1996:
Pension Benefits Other Benefits
1998 1997 1996 1998 1997 1996
Net periodic benefit costs $524 $360 $263 $126 $179 $164
The assumptions used in the measurement of the Company's benefit
obligations are shown in the following table:
Pension Benefits Other Benefits
1998 1997 1998 1997
Weighted-average assumptions
as of December 31:
Discount rate 7.00% 7.25% 7.00% 7.25%
Expected return on plan
assets 8.75% 8.75% N/A N/A
Rate of compensation
increase 4.25% 4.25% N/A N/A
For measurement purposes, a 6.5% annual rate of increase in the
per capita cost of covered health care benefits was assumed for
1998. The rate was assumed to decrease gradually each year to a
rate of 4.5% for 2006 and remain at that level thereafter.
The Company also participates in a noncontributory Employee Stock
Ownership Plan (ESOP) which is qualified as a stock bonus plan.
All employees are eligible to participate in this plan upon
satisfying eligibility requirements. The ESOP is sponsored by
SEI. Each year the Company makes a contribution to the ESOP as
determined by the Board of SEI. The expense for 1998, 1997, and
1996 was $1,725, $1,920, and $1,700, respectively. All
contributions to the ESOP are held in trust.
8. Commitments and Contingencies:
Lease Commitments:
Midland's home office building has been conveyed to the City of
Sioux Falls, South Dakota, and leased back in a transaction in
which the City issued $4,250 of Industrial Revenue Bonds for face
value. The bonds are collateralized by $2,571 of Midland's
investments in government bonds. The lease includes a purchase
option under which Midland may repurchase the building upon
repayment of all bonds issued. The lease terms provide for 10
annual payments equivalent to principal of $425 beginning in 1993
and semiannual payments through 2002 in amounts equivalent to
interest at 5.5% on the outstanding revenue bond principal. The
building and land costs have been capitalized and are carried as
part of other assets and the lease obligation as part of other
liabilities.
The Company also leases certain equipment. Rental expense on
operating leases amounted to $1,511, $1,208 and $1,048 for the
years ended December 31, 1998, 1997, and 1996, respectively. The
minimum future rentals on capital and operating leases at
December 31, 1998, are as follows:
Year Ending December 31 Capital Operating Total
1999 $513 $1,823 $2,336
2000 489 1,827 2,316
2001 466 1,448 1,914
2002 442 191 633
2003 191 191
Thereafter 705 705
Total 1,910 $6,185 $8,095
Less amount representing interest 210
Present value of amounts due
under capital leases $1,700
Other Contingencies:
The Company is a defendant in various lawsuits related to the
normal conduct of its insurance business. Litigation is subject
to many uncertainties and the outcome of individual litigated
matters is not predictable with assurance; however, in the
opinion of management, the ultimate resolution of such litigation
will not materially impact the Company's financial position.
9. Other Related Party Transactions:
The Company pays fees to SEI under management contracts. The
Company was charged $1,552, $1,530 and $1,458 in 1998, 1997, and
1996, respectively, related to these contracts.
The Company pays investment management fees to an affiliate
(Midland Advisors Company). Net fees related to these services
were $1,855, $1,425 and $1,339 in 1998, 1997 and 1996,
respectively.
The Company provided certain insurance and non-insurance services
to North American Company for Life and Health Insurance ("North
American"), beginning in 1997. The Company was reimbursed $1,465
and $488 in 1998 and 1997, respectively, for the costs incurred
to render such services.
The Company sold certain securities to North American at the
current market value of $15,856, incurring a realized loss of
$2,736 in 1998. In addition the Company acquired securities
totaling $22,679 from North American
10. Subsequent Event:
Effective January 4, 1999, the Company received a contribution
from SEI totaling $64,000. These funds were then applied to
purchase substantially all of the assets of Parkway Mortgage Inc.
("Parkway"), a mortgage broker. In addition, the Company agreed
to assume responsibility for the warehouse line-of-credit to fund
loan originations.
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
Midland National Life Insurance Company
Notes to Financial Statements
(Amounts in thousands)
Midland National Life Insurance Company
Notes to Financial Statements, Continued
(Amounts in thousands)
NEWMGP98
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securi-
ties Exchange Act of 1934, the undersigned registrant hereby undertakes
to file with the Securities and Exchange Commission such supplementary
and periodic information, documents, and reports as may be prescribed by
any rule or regulation of the Commission heretofore, or hereafter duly
adopted pursuant to authority conferred in that section.
RULE 484 UNDERTAKING
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling per-
sons of the registrant pursuant to the foregoing provisions, or other-
wise, the registrant has been advised that in the opinion of the Securi-
ties and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such indemnifi-
cation by it is against public policy as expressed in the Act and will
be governed by the final jurisdiction of such issue.
UNDRTAKE.TXT
<PAGE>
REPRESENTATIONS PURSUANT TO SECTION 26 (e) OF THE INVESTMENT COMPANY ACT
Midland National Life Insurance Company hereby represents that the
fees and charges deducted under the Contract, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected
to be incurred, and the risks assumed by Midland National Life Insurance
Company.
S6FORM.TXT
<PAGE> CONTENTS OF REGISTRATION STATEMENT
----------------------------------
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
The prospectus consisting of 51 pages.
The undertaking to file reports.
Representations pursuant to Section 26(e) of the Investment
Company Act.
The signatures.
Written consents of the following persons:
(a) Jack L. Briggs 1
(b) Sutherland Asbill & Brennan, L L P 4
(c) Russell A. Evenson, FSA. 4
(d) PricewaterhouseCoopers L L P 4
The following exhibits:
1. The following exhibits correspond to those required by paragraph A of
the instructions as to the exhibits in Form N-8B-2:
(1) Resolution of the Board of Directors of Midland National Life
establishing the Separate Account A. 3
(2) Not applicable.
(3) (a) Principal Underwriting Agreement. 1
(b) Selling Agreement. 1
(c) Commission schedule. 1
--------------------
(4) Not applicable.
(5) Form of Contract. 1
- -----------------------
1 Filed previously in Pre-Effective Amendment No. 1 on January 31, 1997.
2 Filed previously in Pre-Effective Amendment No. 2 on April 23, 1997.
3 Filed previously in Post Effective Amendment No. 1 for Registration
No. 333-14061.
4 Filed herewith.
5 Incorporated by reference to the like-numbered exhibit filed in
Post Effective Amendment No. 3 Midland National Life Separate
Account A (File No. 333-14061).
<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
(8) (b) Amendments to Participation Agreements for Fidelity
Distributors Corporation/Variable Insurance Products Fund,
and Variable Products Fund II. 2
(8) (c) Participation Agreement for Fidelity Distributors
Corporation/Variable Insurance Products Fund III. 3
(8) (d) Participation Agreement for American Century Investment
Services, Inc. 2
(8) (e) Participation Agreement for Massachusetts Financial Variable
Insurance Trusts. 5
(8) (f) Participation Agreement for Lord Abbett Series Funds, Inc. 5
(9) Not applicable.
(10) Application Form. 1
(11) Memorandum describing Midland National Life's insurance, transfer
and redemption procedures for the Contract. 1
2. See Exhibit 1(5).
---
3. Opinion and Consent of Jack L. Briggs. 1
4. No financial statements are omitted from the Prospectus pursuant to
Instruction 1(b) or (c) or Part I.
5. Not applicable.
6. Opinion and Consent of Russell A. Evenson, Senior Vice President and Actuary
of Midland National Life. 4
7. Consent of Sutherland Asbill & Brennan L L P 4
8. Consent of PricewaterhouseCoopers L L P 4
- -----------------------
1 Filed previously in Pre-Effective Amendment No. 1 on January 31, 1997.
2 Filed previously in Pre-Effective Amendment No. 2 on April 23, 1997.
3 Filed previously in Post Effective Amendment No. 1 for Registration
No. 333-14061.
4 Filed herewith.
5 Incorporated by reference to the like-numbered exhibit filed in
Post Effective Amendment No. 3 Midland National Life Separate
Account A (File No. 333-14061).
CONVEUL.TXT
<PAGE>
SIGNATURES
__________
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Midland National Life Separate Account A, has duly
caused this Registration Statement to be signed on its behalf
by the undersigned thereunto duly authorized, and its seal to be
hereunto affixed and attested, all in Sioux Falls, South Dakota,
on the 5th day of April, 1999.
Midland National Life Separate Account A
(Seal) By: Midland National Life Insurance Company
By:_____________________________________
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following Directors
of Midland National Life Insurance Company in the capacities and on the
dates indicated.
Signature Title Date
--------- ----- ----
_/s/ Michael M. Masterson Director, Chairman of the April 5, 1999
Michael M. Masterson Board, Chief Executive
Officer and President
_/s/ John J. Craig II___ Director, Executive Vice April 5, 1999
John J. Craig II President
_/s/ Russell A. Evenson Director, Senior Vice April 5, 1999
Russell A. Evenson President and Chief
Actuary
_/s/ Steven C. Palmitier Director, Senior Vice April 5, 1999
Steven C. Palmitier President and Chief
Marketing Officer
_/s/ Thomas M. Meyer___ Vice President and April 5, 1999
Thomas M. Meyer Chief Financial
Officer
_________________________ Director and Vice President April 5, 1999
Robert W. Korba
SECVEUL
<PAGE>
SIGNATURE
__________
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Midland National Life Separate Account A, certifies
that it meets all of the requirements for effectiveness of this
registration statement pursuant to Rule 485(b) under the Securities
Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized,
and its seal to be hereunto affixed and attested, all in Sioux Falls,
South Dakota, on the 5th day of April, 1999.
Midland National Life Separate Account A
(Seal) By: Midland National Life Insurance Company
By:/s/ John J. Craig II___________________
John J. Craig II
Executive Vice President
SECSIG1
<PAGE>
Registration No. 333-14081
POST 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
____________________________________
________________________________________________________________________________
- --------------------------------------------------------------------------------
EXHVEUL.TXT
<PAGE>
EXHIBIT INDEX
Exhibit
_________
6. Opinion and Consent of Russell A. Evenson, Senior
Vice President and Actuary of Midland National Life
7. Consent of Sutherland Asbill & Brennan, L L P
8. Consent of PricewaterhouseCoopers, L L P
INDVEUL.TXT
<PAGE>
April 5, 1999
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
Gentlemen:
This opinion is furnished in connection with the filing of Post-
Effective Amendment No. 2 to Registration Statement No. 333-14081 on
Form S-6 ("Registration Statement") which covers premiums expected to
be received under the flexible premium Variable Executive Universal Life
Insurance policy ("Policy") to be offered by Midland National Life
Insurance Company. The Prospectus included in the Registration Statement
describes policies which will be offered by Midland in each State where
they have been approved by appropriate State insurance authorities. The
policy form was prepared under my direction, and I am familiar with the
Registration Statement and Exhibits thereto. In my opinion:
The illustrations of death benefits, contract fund and
accumulated premiums in Appendix A of the Prospectus included in
the Registration Statement (the "Prospectus"), based on the
assumptions stated in the illustrations, are consistent with the
provisions of the Contract. The rate structure of the Contracts
has not been designed so as to make the relationship between
premiums and benefits, as shown in the illustrations, appear to
be correspondingly more favorable to prospective purchasers of
Contracts aged 25 or 40 in the underwriting classes illustrated
than to prospective purchasers of Contracts at other ages or
underwriting classes.
I hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to use of my name under the heading "Experts"
in the Prospectus.
Sincerely,
_// Russell A. Evenson______
Russell A. Evenson, FSA, CLU, ChFC
Senior Vice President and Actuary
RAEVEUL.TXT
<PAGE>
April 26, 1999
Midland National Life Insurance Company
One Midland Plaza
Sioux Falls, SD 57193
RE: Variable Executive Universal Life
Form S-6, File No. 333-14081
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus filed as part of the Post-Effective Amendment
No. 2 to the Registration Statement on Form S-6 filed by Midland National
Life Insurance Company Separate Account A for certain variable life
insurance contracts (File No. 333-14081). In giving this consent, we
do not admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN L L P
by: __/s/Frederick_R._Bellamy__
Frederick R. Bellamy
<PAGE>
CONSENT OF IDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post effective Amendment No. 2 to this
Registration Statement of Midland National Life Separate Account A on
Form S-6 (File No. 333-14081) of our reports dated March 26, 1999 and
March 17, 1999, on our audits of the financial statements of Midland
National Life Separate Account A, and the financial statements of Midland
National Life Insurance Company, respectively. We also consent to the
reference of our firm under the caption "Financial and Actuarial".
PRICEWATERHOUSECOOPERS L L P
MINNEAPOLIS, MINNESOTA
April 23, 1999
CNSNTVEL.TXT
<PAGE>
