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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1996
REGISTRATION NO. 33-79502
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. [_]
[X]
POST-EFFECTIVE AMENDMENT NO. 3
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X]
AMENDMENT NO. 12
PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT V
(FORMERLY NATIONAL HOME LIFE ASSURANCE COMPANY SEPARATE ACCOUNT V)
(EXACT NAME OF REGISTRANT)
PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
(FORMERLY NATIONAL HOME LIFE ASSURANCE COMPANY)
(NAME OF DEPOSITOR)
20 MOORES ROAD
FRAZER, PENNSYLVANIA 19355
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICE)
DEPOSITOR'S TELEPHONE NUMBER: (800) 523-7900
KIMBERLY A. SCOULLER, ESQUIRE
PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
400 WEST MARKET STREET
P.O. BOX 32830
LOUISVILLE, KENTUCKY 40232
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES TO:
MICHAEL BERENSON, ESQUIRE
MARGARET E. HANKARD, ESQUIRE
JORDEN BURT BERENSON & JOHNSON LLP
1025 THOMAS JEFFERSON STREET, N.W.
SUITE 400 EAST
WASHINGTON, D.C. 20007-0805
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of this Registration Statement.
It is proposed that this filing will become effective (check appropriate box):
[X] Immediately upon filing pursuant to paragraph (b) of Rule 485.
[_] On pursuant to paragraph (b)(1)(v) of Rule 485.
[_] 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
[_] On pursuant to paragraph (a)(1) of Rule 485.
[_] 75 days after filing pursuant to paragraph (a)(2) of Rule 485.
[_] On pursuant to paragraph (a)(2) of Rule 485.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
hereby declares that the Issuer has registered an indefinite amount of
securities under the Securities Act of 1933. The Registrant filed its Rule 24f-
2 Notice for the fiscal year ended December 31, 1995, on February 27, 1996.
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PURSUANT TO RULE 481
SHOWING LOCATION IN PART A (PROSPECTUS) AND PART B
(STATEMENT OF ADDITIONAL INFORMATION) OF REGISTRATION
STATEMENT OF INFORMATION REQUIRED BY FORM N-4
PART A
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ITEM OF FORM N-4 PROSPECTUS CAPTION
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1. Cover Page................. Cover Page
2. Definitions................ GLOSSARY
3. Synopsis................... HIGHLIGHTS; FEE TABLE; Performance Measures
4. Condensed Financial Condensed Financial Information
Information................
5. General Description of
Registrant, Depositor, and Providian Life and Health Insurance Company;
Portfolio Companies........ Providian Life and Health Insurance Company
Separate Account V; The Portfolios; Voting
Rights
6. Deductions................. Charges and Deductions; Federal Tax
Considerations; Fee Table
7. General Description of
Variable CONTRACT FEATURES; Distribution-at-Death Rules;
Annuity Contracts.......... Voting Rights; Allocation of Purchase Payments;
Exchanges Among the Portfolios; Additions,
Deletions, or Substitutions of Investments
8. Annuity Period............. Annuity Payment Options
9. Death Benefit.............. Death of Annuitant Prior to Annuity Date
10. Purchases and Contract Contract Purchase and Purchase Payments;
Value...................... Accumulated Value
11. Redemptions................ Full and Partial Withdrawals; Annuity Payment
Options; Right to Cancel Period
12. Taxes...................... FEDERAL TAX CONSIDERATIONS
13. Legal Proceedings.......... Part B: Legal Proceedings
14. Table of Contents of the
Statement Table of Contents of the Providian Marquee
of Additional Information.. Statement of Additional Information
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PART B
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<CAPTION>
ITEM OF STATEMENT OF ADDITIONAL
FORM N-4 INFORMATION CAPTION
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15. Cover Page................ Cover Page
16. Table of Contents......... Table of Contents
17. General Information and THE COMPANY
History...................
18. Services.................. Part A: Auditors; Part B: SAFEKEEPING OF ACCOUNT
ASSETS; DISTRIBUTION OF THE CONTRACTS
19. Purchase of Securities DISTRIBUTION OF THE CONTRACTS; Exchanges
Being Offered.............
20. Underwriters.............. DISTRIBUTION OF THE CONTRACTS
21. Calculation of Performance PERFORMANCE INFORMATION
Data......................
22. Annuity Payments.......... Computations of Annuity Income Payments
23. Financial Statements...... FINANCIAL STATEMENTS
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PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY SEPARATE ACCOUNT V
PROSPECTUS
FOR THE
PROVIDIAN MARQUEE VARIABLE ANNUITY
OFFERED BY
PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
(A MISSOURI STOCK COMPANY)
ADMINISTRATIVE OFFICES
P.O. BOX 32700
LOUISVILLE, KENTUCKY 40232
The Providian Marquee variable annuity contract (the "Contract"), offered
through Providian Life and Health Insurance Company (the "Company", "us", "we"
or "our"), provides a vehicle for investing on a tax-deferred basis in 12
investment company Portfolios and our General Account. The Contract is an
individual variable annuity contract and is intended for retirement savings or
other long-term investment purposes.
The minimum initial Purchase Payment for Non-Qualified Contracts is $5,000.
The minimum initial Purchase Payment for Qualified Contracts is $2,000 (or $50
monthly by payroll deduction). The Contract is a flexible-premium deferred
variable annuity that provides for a Right to Cancel Period of 10 days (30
days or more in some instances) plus a 5 day grace period to allow for mail
delivery during which you may cancel your investment in the Contract.
Your Purchase Payments for the Contract may be allocated among 12 Subaccounts
of Providian Life and Health Insurance Company's Separate Account V and three
fixed options available under the Company's General Account. Assets of each
Subaccount are invested in one of the following Portfolios (which are
contained within six open-end, diversified investment companies):
. Fidelity Money Market Portfolio
. T. Rowe Price Equity Income
Portfolio
. Fidelity Equity-Income Portfolio
. Fidelity Growth Portfolio . T. Rowe Price New America Growth
Portfolio
. Fidelity Asset Manager Portfolio
. Dreyfus Growth and Income . T. Rowe Price International Stock
Portfolio Portfolio
. Dreyfus Quality Bond Portfolio
. OpCap Advisors Managed Portfolio
. OpCap Advisors Small Cap
Portfolio
. OpCap Advisors U.S. Government
Income Portfolio
Depending upon the state of issue and provisions of your Contract, your
initial Net Purchase Payment(s) will, when your Contract is issued, either be
(i) invested in the Fidelity Money Market Portfolio during your Right to
Cancel Period and/or invested immediately in your chosen Guaranteed Index Rate
Options or (ii) invested immediately in your chosen Portfolios and fixed
options (other than the Five-Year Guaranteed Equity Option).
The Contract's Accumulated Value varies with the investment performance of the
Portfolios you select. You bear all investment risk associated with the
Portfolios. Investment results for your Contract are not guaranteed except to
the extent a portion of the Accumulated Value is allocated to the General
Account.
Contracts are offered with two charge structures: A Units and B Units. The
Contract offers a number of ways of withdrawing monies at a future date,
including a lump sum payment and several Annuity Payment Options. Full or
partial withdrawals of the Contract's Surrender Value may be made at any time,
although in many instances withdrawals made prior to age 59 1/2 are subject to
a 10% penalty tax (and a portion may be subject to ordinary income taxes) and,
in the case of B Unit Contracts, may be subject to a surrender charge of up to
6%. If you elect an Annuity Payment Option, Annuity Payments may be received
on a fixed and/or variable basis. You also have significant flexibility in
choosing the Annuity Date on which Annuity Payments begin.
This Prospectus sets forth the information you should know before investing in
the Contract. It must be accompanied by a current Prospectus for each Fund.
Please read the Prospectuses carefully and retain them for future reference. A
Statement of Additional Information for the Contract Prospectus, which has the
same date as this Prospectus, has also been filed with the Securities and
Exchange Commission, is incorporated herein by reference and is available free
by calling our Administrative Offices at 1-800-866-6007. The Table of Contents
of the Statement of Additional Information is included at the end of this
Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The Contract is not available in all States.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESMAN, OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON.
The date of this Prospectus is April 30, 1996.
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TABLE OF CONTENTS
Page
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GLOSSARY.................................................................... 2
HIGHLIGHTS.................................................................. 5
FEE TABLE................................................................... 7
Condensed Financial Information............................................. 10
Financial Statements........................................................ 11
Performance Measures........................................................ 11
Additional Performance Measures............................................. 11
Yield and Effective Yield................................................... 11
The Company and the Separate Account........................................ 12
Variable Insurance Products Fund and Variable Insurance Products Fund II.... 13
Dreyfus Variable Investment Fund............................................ 13
T. Rowe Price Equity Series, Inc............................................ 13
T. Rowe Price International Series, Inc..................................... 13
OCC Accumulation Trust...................................................... 13
The Portfolios.............................................................. 13
CONTRACT FEATURES........................................................... 15
Right to Cancel Period.................................................... 15
Contract Purchase and Purchase Payments................................... 16
Purchasing by Wire........................................................ 16
Allocation of Purchase Payments........................................... 16
Charges and Deductions.................................................... 16
Accumulated Value......................................................... 19
Exchanges Among the Portfolios............................................ 19
Full and Partial Withdrawals.............................................. 19
Systematic Withdrawal Option.............................................. 20
Dollar Cost Averaging Option.............................................. 20
IRS-Required Distributions................................................ 21
Minimum Balance Requirement............................................... 21
Designation of an Annuitant's Beneficiary................................. 21
Death of Annuitant Prior to Annuity Date.................................. 21
Annuity Date.............................................................. 21
Lump Sum Payment Option................................................... 21
Annuity Payment Options................................................... 21
Deferment of Payment...................................................... 24
FEDERAL TAX CONSIDERATIONS.................................................. 24
GENERAL INFORMATION......................................................... 28
APPENDIX A
The General Account....................................................... A-1
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GLOSSARY
Accumulation Unit - A measure of your ownership interest in the Contract prior
to the Annuity Date.
Accumulation Unit Value - The value of each Accumulation Unit which is
calculated each Valuation Period.
Accumulated Value - The value of all amounts accumulated under the Contract
prior to the Annuity Date.
Adjusted Death Benefit - The sum of all Net Purchase Payments made during the
first six Contract Years, less any partial withdrawals taken. During each
subsequent six-year period, the Adjusted Death Benefit will be the Death
Benefit on the last day of the previous six-year period plus any Net Purchase
Payments made, less any partial withdrawals taken during the current six-year
period. After the Annuitant attains age 75, the Adjusted Death Benefit will
remain equal to the Death Benefit on the last day of the six-year period before
age 75 occurs plus any Net Purchase Payments subsequently made, less any
partial withdrawals subsequently taken.
Annual Contract Fee - The $30 annual fee charged by the Company to cover the
cost of administering each Contract. The Annual Contract Fee will be deducted
on each Contract Anniversary and upon surrender, on a pro rata basis, from each
Subaccount.
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Annuitant - The person whose life is used to determine the duration of any
Annuity Payments and upon whose death, prior to the Annuity Date, benefits
under the Contract are paid.
Annuitant's Beneficiary - The person(s) to whom any benefits are due upon the
Annuitant's death prior to the Annuity Date.
Annuity Date - The date on which Annuity Payments begin. The Annuity Date is
always the first day of the month you specify.
Annuity Payment - One of a series of payments made under an Annuity Payment
Option.
Annuity Payment Option - One of several ways in which withdrawals from the
Contract may be made. Under a Fixed Annuity Option (see "Annuity Payment
Options," page 21), the dollar amount of each Annuity Payment does not change
over time. Under a Variable Annuity Option (see "Annuity Payment Options," page
21), the dollar amount of each Annuity Payment may change over time, depending
upon the investment experience of the Portfolio or Portfolios you choose.
Annuity Payments are based on the Contract's Accumulated Value as of 10
Business Days prior to the Annuity Date.
Annuity Unit - Unit of measure used to calculate Variable Annuity Payments (see
"Annuity Payment Options," page 21).
Annuity Unit Value - The value of each Annuity Unit which is calculated each
Valuation Period.
Business Day - A day when the New York Stock Exchange is open for trading.
Company ("we", "us", "our") - Providian Life and Health Insurance Company, a
Missouri stock company.
Contract Anniversary - Any anniversary of the Contract Date.
Contract Date - The date of issue of this Contract.
Contract Owner ("you", "your") - The person or persons designated as the
Contract Owner in the Contract. The term shall also include any person named as
Joint Owner. A Joint Owner shares ownership in all respects with the Contract
Owner. Prior to the Annuity Date, the Contract Owner has the right to assign
ownership, designate beneficiaries, make permitted withdrawals and Exchanges
among Subaccounts and Guaranteed Index Rate Options.
Contract Year - A period of 12 months starting with the Contract Date or any
Contract Anniversary.
Death Benefit - The greater of the Contract's Accumulated Value on the date the
Company receives due Proof of Death of the Annuitant or the Adjusted Death
Benefit. If any portion of the Contract's Accumulated Value on the date we
receive proof of the Annuitant's death is derived from the Five-Year Guaranteed
Index Rate Option, that portion of the Accumulated Value will be adjusted by a
positive Market Value Adjustment Factor (see "Five-Year Guaranteed Index Rate
Option," at Appendix A), if applicable.
Exchange - One Exchange will be deemed to occur with each voluntary transfer
from any Subaccount or General Account Guaranteed Option.
Funds - Each of (i) Variable Insurance Products Fund, (ii) Variable Insurance
Products Fund II, (iii) Dreyfus Variable Investment Fund, (iv) T. Rowe Price
Equity Series, Inc., (v) T. Rowe Price International Series, Inc. and (vi) OCC
Accumulation Trust. The Separate Account invests in the Portfolios contained
within the Funds. (See "The General Account," at Appendix A.)
General Account - The account which contains all of our assets other than those
held in our separate accounts. (See "The General Account," at Appendix A.)
General Account Guaranteed Option - Any of the following three General Account
options offered by your Contract and to which you may allocate your Net
Purchase Payments: the One-Year Guaranteed Index Rate Option, the Five-Year
Guaranteed Index Rate Option and the Five-Year Guaranteed Equity Option. The
General Account Guaranteed Options are available for sale in most, but not all,
states. (See "The General Account," at Appendix A.)
Guaranteed Index Rate Options - The One-Year Guaranteed Index Rate Option and
the Five-Year Guaranteed Index Rate Option.
Market Value Adjustment Factor - The formula applied to the Accumulated Value
in order to determine the net amount of any transfer or surrender under the
Five-Year Guaranteed Index Rate Option. (See "Five-Year Guaranteed Index Rate
Option," at Appendix A.)
Net Purchase Payment - Any Purchase Payment less the applicable sales load and
Premium Tax, if any.
Non-Qualified Contract - Any Contract other than those described under the
Qualified Contract reference in this Glossary.
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Owner's Designated Beneficiary - The person to whom ownership of this Contract
passes upon the Contract Owner's death, unless the Contract Owner was also the
Annuitant - in which case the Annuitant's Beneficiary is entitled to the Death
Benefit. (Note: this transfer of ownership to the Owner's Designated
Beneficiary will generally not be subject to probate, but will be subject to
estate and inheritance taxes. Consult with your tax and estate adviser to be
sure which rules will apply to you.)
Payee - The Contract Owner, Annuitant, Annuitant's Beneficiary, or any other
person, estate, or legal entity to whom benefits are to be paid.
Portfolio - A separate investment portfolio of the Funds. The Funds currently
offer 12 portfolios in the Providian Marquee variable annuity: the Money Market
Portfolio ("Fidelity Money Market"), the Equity-Income Portfolio ("Fidelity
Equity-Income") and the Growth Portfolio ("Fidelity Growth") of Variable
Insurance Products Fund; the Asset Manager Portfolio ("Fidelity Asset Manager")
of Variable Insurance Products Fund II; the Dreyfus Growth and Income Portfolio
("Dreyfus Growth and Income") and the Dreyfus Quality Bond Portfolio ("Dreyfus
Quality Bond") of Dreyfus Variable Investment Fund; the T. Rowe Price Equity
Income Portfolio ("T. Rowe Price Equity Income") and the T. Rowe Price New
America Growth Portfolio ("T. Rowe Price New America Growth") of T. Rowe Price
Equity Series, Inc.; the T. Rowe Price International Stock Portfolio ("T. Rowe
Price International Stock") of T. Rowe Price International Series, Inc.; and
the OpCap Advisors Managed Portfolio ("OpCap Advisors Managed"), the OpCap
Advisors Small Cap Portfolio ("OpCap Advisors Small Cap") and the OpCap
Advisors U.S. Government Income Portfolio ("OpCap Advisors U.S. Government
Income") of OCC Accumulation Trust (each, a "Portfolio" and collectively, the
"Portfolios"). In this Prospectus, Portfolio will also be used to refer to the
Subaccount that invests in the corresponding Portfolio.
Premium Tax - A regulatory tax that may be assessed by certain states on the
Purchase Payments you make to this Contract. The amount which we must pay as
Premium Tax will be deducted from each Purchase Payment or from your
Accumulated Value as it is incurred by us.
Proof of Death - (a) A certified death certificate; (b) a certified decree of a
court of competent jurisdiction as to the finding of death; (c) a written
statement by a medical doctor who attended the deceased; or (d) any other proof
of death satisfactory to the Company.
Purchase Payment - Any premium payment. The minimum initial Purchase Payment is
$5,000 for Non-Qualified Contracts and $2,000 for Qualified Contracts (or $50
monthly by payroll deduction for Qualified Contracts); each additional Purchase
Payment must be at least $500 for Non-Qualified Contracts or $50 for Qualified
Contracts. Purchase Payments may be made at any time prior to the Annuity Date
as long as the Annuitant is living.
Qualified Contract - An annuity contract as defined under Sections 403(b) and
408(b) of the Internal Revenue Code of 1986, as amended (the "Code").
Right to Cancel Period - The period during which the Contract can be canceled
and treated as void from the Contract Date.
Separate Account - That portion of Providian Life and Health Insurance Company
Separate Account V dedicated to the Contract. The Separate Account consists of
assets that are segregated by Providian Life and Health Insurance Company and,
for Contract Owners, invested in the Portfolios. The Separate Account is
independent of the general assets of the Company.
Subaccount - That portion of the Separate Account that invests in shares of the
Funds' Portfolios. Each Subaccount will only invest in a single Portfolio. The
investment performance of each Subaccount is linked directly to the investment
performance of one of the 12 Portfolios.
Surrender Value - The Accumulated Value, adjusted to reflect any applicable
Market Value Adjustment (see "Five-Year Guaranteed Index Rate Option," at
Appendix A) for amounts allocated to the Five-Year Guaranteed Index Rate
Option, less any early withdrawal charges for amounts allocated to the One-Year
Guaranteed Index Rate Option, less any amount allocated to the Five-Year
Guaranteed Equity Option, less any applicable contingent deferred sales load
(i.e., surrender charge) and any Premium Taxes incurred but not yet deducted.
Valuation Period - The relative performance of your Contract is measured by the
Accumulation Unit Value. This value is calculated each Valuation Period. A
Valuation Period is defined as the period of time between the close of business
on one Business Day and the close of business on the following Business Day.
4
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HIGHLIGHTS
YOU CAN FIND DEFINITIONS OF IMPORTANT TERMS IN THE GLOSSARY (PAGE 2).
THE PROVIDIAN MARQUEE VARIABLE ANNUITY
The Contract provides a vehicle for investing on a tax-deferred basis in 12
investment company Portfolios offered by the Funds and three General Account
Guaranteed Options offered by the Company. Monies may be subsequently withdrawn
from the Contract either as a lump sum or as annuity income as permitted under
the Contract. Accumulated Values and Annuity Payments depend on the investment
experience of the selected Portfolios and/or the guarantees of the General
Account Guaranteed Options. The investment performance of the Portfolios is not
guaranteed. Thus, you bear all investment risk for monies invested under the
Contract except to the extent of the portion of your Accumulated Value
allocated to the General Account. The General Account Guaranteed Options are
available for sale in most, but not all, states.
WHO SHOULD INVEST
The Contract is designed for investors seeking long term, tax-deferred
accumulation of funds, generally for retirement but also for other long-term
investment purposes. The tax-deferred feature of the Contract is most
attractive to investors in high federal and state marginal income tax brackets.
The Contract is offered as both a Qualified Contract and a Non-Qualified
Contract. Both Qualified and Non-Qualified Contracts offer tax-deferral on
increases in the Contract's value prior to withdrawal or distribution -
however, Purchase Payments made by Contract Owners of Qualified Contracts may
be excludible or deductible from gross income in the year such payments are
made, subject to certain statutory restrictions and limitations. (See "Federal
Tax Considerations," page 24)...................................... Page 24
INVESTMENT CHOICES
Your investment in the Contract may be allocated among 12 Subaccounts of the
Separate Account and/or the General Account Guaranteed Options. The Subaccounts
in turn invest exclusively in the following 12 Portfolios offered by the Funds:
Fidelity Money Market, Fidelity Equity-Income, Fidelity Growth, Fidelity Asset
Manager, Dreyfus Growth and Income, Dreyfus Quality Bond, T. Rowe Price Equity
Income, T. Rowe Price New America Growth, T. Rowe Price International Stock,
OpCap Advisors Managed, OpCap Advisors Small Cap and OpCap Advisors U.S.
Government Income. The assets of each Portfolio are separate, and each
Portfolio has distinct investment objectives and policies as described in the
corresponding Fund or Portfolio Prospectus. The General Account Guaranteed
Options are available for sale in most, but not all, states........ Page 13
CONTRACT OWNER
The Contract Owner is the person designated as the owner of the Contract in the
Contract. The Contract Owner may designate any person as a Joint Owner. A Joint
Owner shares ownership in all respects with the Contract Owner. Prior to the
Annuity Date, the Contract Owner has the right to assign ownership, designate
beneficiaries, and make permitted withdrawals and Exchanges among the
Subaccounts and General Account Guaranteed Options.
ANNUITANT
The Annuitant is a person whose life is used to determine the duration of any
Annuity Payments and upon whose death, prior to the Annuity Date, benefits
under the Contract are paid. The Annuitant may not be older than age 75.
ANNUITANT'S BENEFICIARY
The Contract Owner may designate any person to receive benefits under the
Contract which are payable upon the death of the Annuitant prior to the Annuity
Date.
HOW TO INVEST
To invest in the Contract, please consult your agent who will provide the
necessary information to us in a customer order form. You will need to select
an Annuitant. The Annuitant may not be older than age 75. The minimum initial
Purchase Payment is $5,000 for Non-Qualified Contracts, and $2,000 (or $50
monthly by payroll deduction) for Qualified Contracts; subsequent Purchase
Payments must be at least $500 for Non-Qualified Contracts or $50 for Qualified
Contracts. Additional Purchase Payments after the first Contract Year for B
Unit Contracts are limited to $10,000 annually. The distinction between A Unit
Contracts and B Unit Contracts is more fully discussed on page 16. You may make
subsequent Purchase Payments at any time before the Contract's Annuity Date, as
long as the Annuitant specified in the Contract is living.......... Page 16
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ALLOCATION OF PURCHASE PAYMENTS
If the state of issue of your Contract is CA, GA, ID, LA, MI, MO, NE, NH, NC,
OK, OR, SC, UT, VA or WV, then your initial Net Purchase Payment(s) will, when
your Contract is issued, be invested in Fidelity Money Market until the
expiration of the Right to Cancel Period of 10 to 30 days or more in some
instances as specified in your Contract when issued (plus a 5 day grace period
to allow for mail delivery) and then invested according to your initial
allocation instructions (except that any accrued interest will remain in
Fidelity Money Market if it is selected as an initial allocation option),
provided that you may elect to have the portion of your initial Net Purchase
Payment(s) allocated to the Guaranteed Index Rate Options invested immediately
upon our receipt thereof in order to lock in the rates then applicable to such
options.
If the state of issue of your Contract is any other state, your initial Net
Purchase Payment(s) will, unless you indicate otherwise, be invested in your
Portfolios and Guaranteed Index Rate Options immediately upon our receipt
thereof, IN WHICH CASE YOU WILL BEAR FULL INVESTMENT RISK FOR ANY AMOUNTS
ALLOCATED TO THE PORTFOLIOS DURING THE RIGHT TO CANCEL PERIOD. (Please note
that immediate investment is not available with respect to any amounts
allocated to THE FIVE-YEAR GUARANTEED EQUITY OPTION WHICH IS ILLIQUID FOR FIVE
YEARS.) You must fill out and send us the appropriate form or comply with other
designated Company procedures if you would like to change how subsequent Net
Purchase Payments are allocated.................................... Page 16
RIGHT TO CANCEL PERIOD
The Contract provides for a Right to Cancel Period of 10 days (30 or more days
in some instances as specified in your Contract) plus a 5 day period to allow
for mail delivery, during which you may cancel your investment in the Contract.
To cancel your investment, please return your Contract to us or to the agent
from whom you purchased the Contract. When we receive the Contract, (1) if the
state of issue of your Contract is CA, GA, ID, LA, MI, MO, NE, NH, NC, OK, OR,
SC, UT, VA or WV, then for any amount of your initial Purchase Payment(s)
invested in Fidelity Money Market, we will return the Accumulated Value of the
amount of your Purchase Payment(s) so invested, or if greater, the amount of
your Purchase Payment(s) so invested, (2) for any amount of your initial
Purchase Payment(s) invested in the Portfolios immediately following receipt by
us, we will return the Accumulated Value of your Purchase Payment(s) so
invested plus any loads, fees and/or Premium Taxes that may have been
subtracted from such amount, and (3) for any amount of your initial Purchase
Payment(s) invested in the Guaranteed Index Rate Options immediately following
receipt by us, we will refund the amount of your Purchase Payment(s) so
invested........................................................... Page 15
EXCHANGES
You may make unlimited Exchanges among the Portfolios or into the General
Account Guaranteed Options, provided you maintain a minimum balance of $1,000
in each Subaccount or General Account Guaranteed Option to which you have
allocated a portion of your Accumulated Value. No fee is currently imposed for
such Exchanges; however, we reserve the right to charge a $15 fee for Exchanges
in excess of 12 per Contract Year. Exchanges must not reduce the value of any
Subaccount or General Account Guaranteed Option below $1,000, or that remaining
amount will be transferred to your other Subaccounts or General Account
Guaranteed Options on a pro rata basis. The Five-Year Guaranteed Equity Option
is illiquid for the entire five-year guarantee period, and transfers from the
Guaranteed Index Rate Options may be subject to additional limitations and
charges. (See also "Charges and Deductions," page 16, and "The General
Account," at Appendix A)........................................... Page 19
DEATH BENEFIT
If the Annuitant specified in your Contract dies prior to the Annuity Date,
your named Annuitant's Beneficiary will receive the Death Benefit under the
Contract. The Death Benefit is the greater of your Accumulated Value (plus any
positive Market Value Adjustment applicable under the Five-Year Guaranteed
Index Rate Option) or the Adjusted Death Benefit on the date we receive due
proof of the Annuitant's death. During the first six Contract Years, the
Adjusted Death Benefit will be the sum of all Net Purchase Payments made, less
any partial withdrawals taken. During each subsequent six- year period, the
Adjusted Death Benefit will be the Death Benefit on the last day of the
previous six-year period plus any Net Purchase Payments made, less any partial
withdrawals taken during the current six-year period. After the Annuitant
attains age 75, the Adjusted Death Benefit will remain equal to the Death
Benefit on the last day of the six-year period before age 75 occurs plus any
Net Purchase Payments subsequently made, less any partial withdrawals
subsequently taken. The Annuitant's Beneficiary may elect to receive these
proceeds as a lump sum or as Annuity Payments. If the Annuitant dies on or
after the Annuity Date, any unpaid payments certain will be paid, generally to
the Annuitant's Beneficiary, in accordance with the Contract........Page 21
6
<PAGE>
ANNUITY PAYMENT OPTIONS
In addition to the full and partial withdrawal privileges, you may also choose
to create an income stream by requesting an annuity income from us. As the
Contract Owner, you may elect one of several Annuity Payment Options. By
electing an Annuity Payment Option, you are asking us to systematically
liquidate your annuity. We provide you with a variety of options as it relates
to those payments. At your discretion, payments may be either fixed or variable
or both. Fixed payouts are guaranteed for a designated period or for life
(either single or joint). Variable payments will vary depending on the
performance of the underlying Portfolio or Portfolios selected......Page 21
CONTRACT AND POLICYHOLDER INFORMATION
If you have questions about your Contract, please telephone our Administrative
Offices at 1-800-866-6007 between the hours of 8:00 A.M. to 5:00 P.M. Eastern
time. Please have the Contract number and the Contract Owner's name ready when
you call. As Contract Owner you will receive periodic statements confirming any
financial transactions that take place, as well as quarterly statements and an
annual statement.
CHARGES AND DEDUCTIONS UNDER THE CONTRACT
You have a choice of charge structures under the Providian Marquee: A Units and
B Units. A Units have a front-end sales load and an annual mortality and
expense risk charge of .65%. B Units have an annual mortality and expense risk
charge of 1.25%. B Units have no front-end sales load and up to 10% of the
Accumulated Value can be withdrawn once per year without a surrender charge.
However, additional withdrawals from B Unit Contracts are subject to a
surrender charge of up to 6% during the first six Contract Years.
Both Contracts also include administrative charges and policy fees which pay
for administering the Contracts, and management, advisory and other fees, which
reflect the costs of the Funds......................................Page 16
FULL AND PARTIAL WITHDRAWALS
You may withdraw all or part of the Surrender Value of the Contract before the
earlier of the Annuity Date or the Annuitant's death. Withdrawals made prior to
age 59 1/2 may be subject to a 10% penalty tax (and a portion may be subject to
ordinary income taxes)..............................................Page 19
FEE TABLE
The following table illustrates all expenses (except for Premium Taxes that may
be assessed by your state) that you would incur as an owner of either A Unit
Contracts or B Unit Contracts (see page 16). The purpose of this table is to
assist you in understanding the various costs and expenses that you would bear
directly or indirectly as a purchaser of the Contract. The fee table reflects
all expenses for both the Separate Account and the Funds. For a complete
discussion of Contract costs and expenses, including charges applicable to the
General Account Guaranteed Options, see "Charges and Deductions," page 16.
<TABLE>
<CAPTION>
A UNIT B UNIT
CONTRACTS CONTRACTS
CONTRACTOWNER TRANSACTION EXPENSES --------- ---------
<S> <C> <C>
Sales Load Imposed on Purchases (under $100,000)....... 5.75%* None
Contingent Deferred Sales Load (surrender charge)...... None 6%**
Exchange Fees.......................................... None None
ANNUAL CONTRACT FEE.................................... $30 $30
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of
assets in the Separate Account)
Mortality and Expense Risk Charge...................... .65% 1.25%
Administrative Charge.................................. .15% .15%
---- ----
Total Annual Separate Account Expenses................. .80%*** 1.40%***
</TABLE>
*A Unit purchases of $100,000 or more will carry a reduced sales load, see
"Charges and Deductions," page 16.
**Up to 10% of the Accumulated Value as of the last Contract Anniversary (10%
of the initial Net Purchase Payment during the first Contract Year) can be
withdrawn once per year without a surrender charge. Additional withdrawals
in the first Contract Year are subject to a 6% charge. The charge decreases
1% per year until after the sixth Contract Year there is no surrender
charge. The total surrender charges assessed will not exceed 8.5% of the
Purchase Payments under the Contract.
***Separate Account Annual Expenses are not charged against the General Account
Guaranteed Options.
7
<PAGE>
PORTFOLIO ANNUAL EXPENSES
Except as indicated, the figures below are based on expenses for fiscal year
1995 (as a percentage of each Portfolio's average net assets after fee waiver
and/or expense reimbursement limitation, if applicable).
<TABLE>
<CAPTION>
MANAGEMENT
AND ADVISORY OTHER TOTAL PORTFOLIO
EXPENSES EXPENSES ANNUAL EXPENSES
------------ -------- ---------------
<S> <C> <C> <C>
Fidelity Money Market... 0.24% 0.09% 0.33%
Fidelity Equity-Income.. 0.51% 0.10% 0.61%
Fidelity Growth......... 0.61% 0.09% 0.70%
Fidelity Asset Manager*. 0.71% 0.08% 0.79%
Dreyfus Growth and
Income**............... 0.72% 0.20% 0.92%
Dreyfus Quality Bond**.. 0.61% 0.20% 0.81%
T. Rowe Price Equity
Income................. 0.85% 0.00% 0.85%
T. Rowe Price New
America Growth......... 0.85% 0.00% 0.85%
T. Rowe Price
International Stock.... 1.05% 0.00% 1.05%
OpCap Advisors
Managed***............. 0.80% 0.14% 0.94%
OpCap Advisors Small
Cap***................. 0.80% 0.20% 1.00%
OpCap Advisors U.S.
Government Income***... 0.60% 0.40% 1.00%
</TABLE>
*The expenses for the Fidelity Asset Manager Portfolio were reduced by use of a
portion of the brokerage commissions paid by the Fund. Without this
reduction, the Total Portfolio Annual Expenses would have been 0.81%. There
is no guarantee that any fee waivers and/or expense reimbursements will
continue in the future.
**From time to time, the Dreyfus Growth and Income and Quality Bond Portfolios'
investment adviser in its sole discretion may waive all or part of its fees
and/or voluntarily assume certain of the Portfolios' expenses. For a more
complete description of the Portfolios' fees and expenses, see the Dreyfus
Variable Investment Fund's Prospectus. During 1995, certain fees were waived
and/or expenses were assumed, in each case on a voluntary basis. Without
such waivers or reimbursements, the Management and Advisory Expenses, Other
Expenses and Total Portfolio Annual Expenses that would have been incurred
for the fiscal year ended December 31, 1995, would have been: 0.75%, 0.20%
and 0.95%, respectively, for the Dreyfus Growth and Income Portfolio; and
0.65%, 0.20% and 0.85%, respectively, for the Dreyfus Quality Bond
Portfolio. There is no guarantee that any fee waivers or expense
reimbursements will continue in the future. See the Dreyfus Variable
Investment Fund's Prospectus for a discussion of fee waiver and/or expense
reimbursements.
***The annual expenses of the OCC Accumulation Trust Portfolios as of December
31, 1995 have been restated to reflect new management fee and expense
limitation arrangements in effect as of May 1, 1996. Effective May 1, 1996,
the expenses of the Portfolios of the OCC Accumulation Trust are
contractually limited by OpCap Advisors so that their respective annualized
operating expenses do not exceed 1.25% of their respective average daily net
assets. Furthermore, through April 30, 1997, the annualized operating
expenses of the Portfolios will be voluntarily limited by OpCap Advisors so
that annualized operating expenses of these Portfolios do not exceed 1.00%
of their respective average daily net assets. Without such voluntary expense
limitations, and taking into account the revised contractual provisions
effective May 1, 1996 concerning management fees and expense limitations,
the Management Fees, Other Expenses and Total Portfolio Annual Expenses
incurred for the fiscal year ended December 31, 1995 would have been: 0.80%,
0.14% and 0.94%, respectively, for the OpCap Advisors Managed Portfolio;
0.80%, 0.39% and 1.19%, respectively, for the OpCap Advisors Small Cap
Portfolio; and 0.60%, 0.65% and 1.25%, respectively, for the OpCap Advisors
U.S. Government Income Portfolio.
The following example illustrates the expenses that you would incur on a $1,000
Purchase Payment over various periods, assuming (1) a 5% annual rate of return
and (2) redemption at the end of each period.
A UNITS
<TABLE>
<CAPTION>
10
1 YEAR 3 YEARS 5 YEARS YEARS
------ ------- ------- -------
<S> <C> <C> <C> <C>
Fidelity Money Market...................... $69.02 $ 93.31 $119.34 $193.00
Fidelity Equity-Income..................... $71.69 $101.49 $133.29 $222.50
Fidelity Growth............................ $72.55 $104.11 $137.73 $231.79
Fidelity Asset Manager..................... $73.40 $106.72 $142.15 $240.99
Dreyfus Growth and Income.................. $74.64 $110.47 $148.50 $254.11
Dreyfus Quality Bond....................... $73.59 $107.30 $143.13 $243.02
T. Rowe Price Equity Income................ $73.97 $108.45 $145.09 $247.07
T. Rowe Price New America Growth........... $73.97 $108.45 $145.09 $247.07
T. Rowe Price International Stock.......... $75.87 $114.21 $154.80 $267.04
OpCap Advisors Managed..................... $74.83 $111.05 $149.47 $256.11
OpCap Advisors Small Cap................... $75.40 $112.78 $152.39 $262.09
OpCap Advisors U.S. Government Income...... $75.40 $112.78 $152.39 $262.09
</TABLE>
8
<PAGE>
B UNITS
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Fidelity Money Market..................... $74.11 $ 96.00 $117.93 $244.67
Fidelity Equity-Income.................... $76.75 $104.17 $131.97 $273.07
Fidelity Growth........................... $77.60 $106.78 $136.43 $282.00
Fidelity Asset Manager.................... $78.44 $109.39 $140.88 $290.85
Dreyfus Growth and Income................. $79.66 $113.14 $147.26 $303.47
Dreyfus Quality Bond...................... $78.63 $109.97 $141.86 $292.80
T. Rowe Price Equity Income............... $79.01 $111.12 $143.83 $296.70
T. Rowe Price New America Growth.......... $79.01 $111.12 $143.83 $296.70
T. Rowe Price International Stock......... $80.88 $116.87 $153.59 $315.90
OpCap Advisors Managed.................... $79.85 $113.71 $148.24 $305.39
OpCap Advisors Small Cap.................. $80.41 $115.44 $151.16 $311.14
OpCap Advisors U.S. Government Income..... $80.41 $115.44 $151.16 $311.14
</TABLE>
The following example illustrates the expenses that you would incur on a $1,000
Purchase Payment over various periods, assuming (1) a 5% annual rate of return
and (2) you do not surrender your Contract or you annuitize at the end of each
period.
A UNITS
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Fidelity Money Market..................... $69.02 $ 93.31 $119.34 $193.00
Fidelity Equity-Income.................... $71.69 $101.49 $133.29 $222.50
Fidelity Growth........................... $72.55 $104.11 $137.73 $231.79
Fidelity Asset Manager.................... $73.40 $106.72 $142.15 $240.99
Dreyfus Growth and Income................. $74.64 $110.47 $148.50 $254.11
Dreyfus Quality Bond...................... $73.59 $107.30 $143.13 $243.02
T. Rowe Price Equity Income............... $73.97 $108.45 $145.09 $247.07
T. Rowe Price New America Growth.......... $73.97 $108.45 $145.09 $247.07
T. Rowe Price International Stock......... $75.87 $114.21 $154.80 $267.04
OpCap Advisors Managed.................... $74.83 $111.05 $149.47 $256.11
OpCap Advisors Small Cap.................. $75.40 $112.78 $152.39 $262.09
OpCap Advisors U.S. Government Income..... $75.40 $112.78 $152.39 $262.09
</TABLE>
B UNITS
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Fidelity Money Market..................... $18.25 $56.46 $ 97.07 $210.19
Fidelity Equity-Income.................... $21.07 $65.01 $111.48 $239.76
Fidelity Growth........................... $21.97 $67.74 $116.07 $249.08
Fidelity Asset Manager.................... $22.87 $70.47 $120.64 $258.31
Dreyfus Growth and Income................. $24.18 $74.39 $127.20 $271.48
Dreyfus Quality Bond...................... $23.08 $71.07 $121.65 $260.35
T. Rowe Price Equity Income............... $23.48 $72.28 $123.67 $264.41
T. Rowe Price New America Growth.......... $23.48 $72.28 $123.67 $264.41
T. Rowe Price International Stock......... $25.48 $78.30 $133.71 $284.47
OpCap Advisors Managed.................... $24.38 $74.99 $128.20 $273.50
OpCap Advisors Small Cap.................. $24.98 $76.80 $131.21 $279.50
OpCap Advisors U.S. Government Income..... $24.98 $76.80 $131.21 $279.50
</TABLE>
9
<PAGE>
The Annual Contract Fee is reflected in these examples as a percentage equal to
the total amount of fees collected during a calendar year divided by the total
average net assets of the Portfolios during the same calendar year. The fee is
assumed to remain the same in each year of the above periods. (With respect to
partial year periods, if any, in the examples, the Annual Contract Fee is pro-
rated to reflect only the applicable portion of the partial year period.) The
Annual Contract Fee will be deducted on each Contract Anniversary and upon
surrender, on a pro rata basis, from each Subaccount. In some states, the
Company will deduct Premium Taxes as incurred by the Company.
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be higher or lower than those
shown, subject to the guarantees in the Contract.
CONDENSED FINANCIAL INFORMATION
(FOR THE PERIOD JANUARY 1, 1995 THROUGH DECEMBER 31, 1995)
A UNITS
<TABLE>
<CAPTION>
FIDELITY FIDELITY DREYFUS DREYFUS
MONEY FIDELITY ASSET FIDELITY GROWTH AND QUALITY
MARKET EQUITY-INCOME MANAGER GROWTH INCOME BOND
-------- ------------- -------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Accumulation unit value
as of:
Start Date*........... 10.000 10.000 10.000 10.000 10.000 10.000
12/31/94.............. 10.152 9.838 9.741 10.670 9.669 10.171
12/31/95.............. 10.664 13.185 11.302 14.329 15.534 12.150
Number of units
outstanding as of:
12/31/94.............. 20,725 200 1,006 2,452 1,095 100
12/31/95.............. 224,406 35,785 8,531 11,298 13,983 1,525
<CAPTION>
OPCAP
TRP TRP TRP NEW OPCAP OPCAP ADVISORS
EQUITY INTERNATIONAL AMERICA ADVISORS ADVISORS U.S. GOV'T.
INCOME STOCK GROWTH MANAGED SMALL CAP. INCOME**
-------- ------------- -------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Accumulation unit value
as of:
Start Date*........... 10.000 10.000 10.000 10.000 10.000 10.000
12/31/94.............. 10.000 9.672 9.825 9.849 10.232 9.996
12/31/95.............. 13.369 10.668 14.727 14.221 11.696 10.595
Number of units
outstanding as of:
12/31/94.............. 587 2,715 206 794 1,749 0
12/31/95.............. 16,794 9,886 4,670 15,926 4,223 1,849
</TABLE>
* Date of commencement of operations for Fidelity Money Market was 7/20/94;
for T. Rowe Price International, Fidelity Growth and Fidelity Asset Manager
was 8/1/94; for Dreyfus Growth and Income was 9/26/94; for Fidelity Equity-
Income, T. Rowe Price Equity Income, T. Rowe Price New America Growth, OpCap
Advisors Managed and OpCap Advisors Small Cap was 11/17/94; and for Dreyfus
Quality Bond and OpCap Advisors U.S. Government Income was 11/18/94.
** The OpCap Advisors U.S. Government Income Portfolio had activity in 1994 but
no Accumulation Units were outstanding at 12/31/94.
B UNITS
<TABLE>
<CAPTION>
DREYFUS
FIDELITY FIDELITY GROWTH DREYFUS
MONEY FIDELITY ASSET FIDELITY AND QUALITY
MARKET EQUITY-INCOME MANAGER GROWTH INCOME BOND
--------- ------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Accumulation unit value
as of:
Start Date***......... 10.041 10.000 10.000 10.000 10.000 10.000
12/31/94.............. 10.144 9.677 9.604 10.159 9.472 9.910
12/31/95.............. 10.592 12.892 11.076 13.562 14.977 11.769
Number of units
outstanding as of:
12/31/94.............. 81,408 14,705 45,464 21,033 9,468 7,987
12/31/95.............. 1,284,076 487,004 298,894 522,172 302,521 167,901
<CAPTION>
OPCAP
OPCAP ADVISORS
TRP TRP TRP NEW OPCAP ADVISORS U.S.
EQUITY INTERNATIONAL AMERICA ADVISORS SMALL GOV'T.
INCOME STOCK GROWTH MANAGED CAP. INCOME
--------- ------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Accumulation unit value
as of:
Start Date***......... 10.000 10.000 10.000 10.000 10.000 10.000
12/31/94.............. 9.797 9.518 10.000 9.699 10.166 0
12/31/95.............. 13.020 10.435 14.899 13.921 11.551 11.007
Number of units
outstanding as of:
12/31/94.............. 3,274 23,019 1,503 19,221 11,734 N/A
12/31/95.............. 162,561 460,990 235,983 426,184 349,767 52,450
</TABLE>
*** Date of commencement of operations for Fidelity Money Market was 8/2/94,
for Fidelity Equity-Income, Fidelity Growth, Dreyfus Quality Bond and T. Rowe
Price International was 8/17/94; for Dreyfus Growth and Income was 8/31/94;
for T. Rowe Price Equity Income was 9/1/94; for Fidelity Asset Manager was
9/14/94; for OpCap Advisors Managed was 11/3/94; for OpCap Advisors Small Cap
was 11/4/94; for T. Rowe Price New America Growth was 12/30/94; and for OpCap
U.S. Government Income was 11/18/94. The OpCap Advisors U.S. Government
Income Portfolio had activity in 1994 but no Accumulation Units were
outstanding at 12/31/94.
10
<PAGE>
FINANCIAL STATEMENTS
Certain audited statutory-basis financial statements of the Company and the
financial statements of the Separate Account (as well as the Independent
Auditors' Reports thereon) are contained in the Statement of Additional
Information.
PERFORMANCE MEASURES
Performance for the Subaccounts of the Separate Account, including the yield
and effective yield of the Fidelity Money Market Subaccount, the yield of the
other Subaccounts, and the total return of all Subaccounts may appear in
reports and promotional literature to current or prospective Contract Owners.
Please refer to the discussion below and to the Statement of Additional
Information for a more detailed description of the method used to calculate a
Portfolio's yield and total return, and a list of the indexes and other
benchmarks used in evaluating a Portfolio's performance.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
When advertising performance of the Subaccounts, the Company will show the
Standardized Average Annual Total Return for a Subaccount which, as prescribed
by the rules of the Securities and Exchange Commission (the "SEC"), is the
effective annual compounded rate of return that would have produced the cash
redemption value over the stated period had the performance remained constant
throughout. The Standardized Average Annual Total Return assumes a single
$1,000 payment made at the beginning of the period and full redemption at the
end of the period. It reflects the deduction of all applicable sales loads
(including the contingent deferred sales load), the Annual Contract Fee and all
other Portfolio, Separate Account and Contract level charges except Premium
Taxes, if any.
ADDITIONAL PERFORMANCE MEASURES
NON-STANDARDIZED ACTUAL TOTAL RETURN AND NON-STANDARDIZED ACTUAL AVERAGE ANNUAL
TOTAL RETURN
The Company may show actual Total Return (i.e., the percentage change in the
value of an Accumulation Unit) for one or more Subaccounts with respect to one
or more periods, including Total Return Year-to-Date ("YTD") with respect to
certain periods. The Company may also show actual Average Annual Total Return
(i.e., the average annual change in Accumulation Unit Values) with respect to
one or more periods. For one year, the actual Total Return and the actual
Average Annual Total Return are effective annual rates of return and are equal.
For periods greater than one year, the actual Average Annual Total Return is
the effective annual compounded rate of return for the periods stated. Because
the value of an Accumulation Unit reflects the Separate Account and Portfolio
expenses (see "Fee Table"), the actual Total Return and actual Average Annual
Total Return also reflect these expenses. These percentages do not reflect the
Annual Contract Fee, any sales loads or Premium Taxes (if any) which, if
included, would reduce the percentages reported.
NON-STANDARDIZED HYPOTHETICAL TOTAL RETURN AND NON-STANDARDIZED HYPOTHETICAL
AVERAGE ANNUAL TOTAL RETURN
The Company may show Non-Standardized Hypothetical Total Return and Non-
Standardized Hypothetical Average Annual Total Return, calculated on the basis
of the historical performance of the Portfolios, and may assume the Contract
was in existence prior to its inception date (which it was not). After the
Contract's inception date, the calculations will reflect actual Accumulation
Unit Values. These returns are based on specified premium patterns which
produce the resulting Accumulated Values. They reflect a deduction for the
Separate Account expenses and Portfolio expenses. These returns do not include
the Annual Contract Fee, any sales loads or Premium Taxes (if any) which, if
included, would reduce the percentages reported.
The Non-Standardized Annual Total Return for a Subaccount is the effective
annual rate of return that would have produced the ending Accumulated Value of
the stated one-year period.
The Non-Standardized Average Annual Total Return for a Subaccount is the
effective annual compounded rate of return that would have produced the ending
Accumulated Value over the stated period had the performance remained constant
throughout.
YIELD AND EFFECTIVE YIELD
The Company may also show yield and effective yield figures for the Subaccount
investing in shares of the Fidelity Money Market Portfolio. "Yield" refers to
the income generated by an investment in Fidelity Money Market over a seven-day
period, which is then "annualized." That is, the amount of income generated by
the investment during that week is assumed to be generated each week over a 52-
week period and is shown as a percentage of the investment. The
11
<PAGE>
"effective yield" is calculated similarly but, when annualized, the income
earned by an investment in Fidelity Money Market is assumed to be reinvested.
Therefore the effective yield will be slightly higher than the yield because of
the compounding effect of this assumed reinvestment. These figures do not
reflect the Annual Contract Fee, any sales loads or Premium Taxes (if any)
which, if included, would reduce the yields reported.
From time to time a Portfolio of a Fund may advertise its yield and total
return investment performance. For each Subaccount other than Fidelity Money
Market for which the Company advertises yield, the Company shall furnish a
yield quotation referring to the Portfolio computed in the following manner:
the net investment income per Accumulation Unit earned during a recent one
month period is divided by the Accumulation Unit Value on the last day of the
period.
Please refer to the Statement of Additional Information for a description of
the method used to calculate a Portfolio's yield and total return, and a list
of the indexes and other benchmarks used in evaluating a Portfolio's
performance.
The performance measures discussed above reflect results of the Portfolios and
are not intended to indicate or predict future performance. For more detailed
information, see the Statement of Additional Information.
Performance information for the Subaccounts may be contrasted with other
comparable variable annuity separate accounts or other investment products
surveyed by Lipper Analytical Services, a nationally recognized independent
reporting service which ranks mutual funds and other investment companies by
overall performance, investment objectives and assets. Performance may also be
tracked by other ratings services, companies, publications or persons who rank
separate accounts or other investment products on overall performance or other
criteria. Performance figures will be calculated in accordance with
standardized methods established by each reporting service.
THE COMPANY AND THE SEPARATE ACCOUNT
PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
The Company is a stock life insurance company incorporated under the laws of
Missouri on August 6, 1920. The Company is principally engaged in offering life
insurance, annuity contracts, and accident and health insurance and is admitted
to do business in 49 states, the District of Columbia and Puerto Rico. The
Company is owned, directly and indirectly, by Providian Corporation, a
publicly-held diversified consumer financial services company whose shares are
traded on the New York Stock Exchange with assets of $26.8 billion as of
December 31, 1995.
PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY SEPARATE ACCOUNT V
The Separate Account was established by the Company as a separate account under
the laws of the State of Missouri on February 14, 1992, pursuant to a
resolution of the Company's Board of Directors. The Separate Account is a unit
investment trust registered with the SEC under the Investment Company Act of
1940 (the "1940 Act"). Such registration does not signify that the SEC
supervises the management or the investment practices or policies of the
Separate Account. The Separate Account meets the definition of a "separate
account" under the federal securities laws.
The assets of the Separate Account are owned by the Company and the obligations
under the Contract are obligations of the Company. These assets are held
separately from the other assets of the Company and are not chargeable with
liabilities incurred in any other business operation of the Company (except to
the extent that assets in the Separate Account exceed the reserves and other
liabilities of the Separate Account). Income, gains and losses incurred on the
assets in the Separate Account, whether or not realized, are credited to or
charged against the Separate Account without regard to other income, gains or
losses of the Company. Therefore, the investment performance of the Separate
Account is entirely independent of the investment performance of the General
Account assets or any other separate account maintained by the Company.
The Separate Account has dedicated 12 Subaccounts to the Contract, each of
which invests solely in a corresponding Portfolio of the Funds. Additional
Subaccounts may be established at the discretion of the Company. The Separate
Account also includes other subaccounts which are not available under the
Contract.
12
<PAGE>
VARIABLE INSURANCE PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND II
Variable Insurance Products Fund and Variable Insurance Products Fund II (each,
a "Fidelity Fund" and collectively, the "Fidelity Funds") are diversified,
open-end management investment companies organized by Fidelity Management &
Research Company ("FMR") and registered under the 1940 Act. Each Fidelity Fund
consists of several investment portfolios, including the Money Market, Equity-
Income, Growth and Asset Manager Portfolios available as part of the Providian
Marquee. FMR serves as the Fidelity Funds' investment adviser.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund is a diversified, open-end management
investment company organized under the 1940 Act. The Dreyfus Variable
Investment Fund consists of eleven separate investment portfolios, including
the Growth and Income and Quality Bond Portfolios, which are the only
portfolios available as part of the Providian Marquee. The Dreyfus Corporation
serves as this Fund's investment adviser.
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Series Inc. is a Maryland corporation organized in 1994
and is registered with the Securities and Exchange Commission under the 1940
Act as a diversified, open-end management investment company, commonly known as
a "mutual fund." Currently, the fund consists of the Equity-Income and New
America Growth Portfolios, each of which represents a separate class of shares
having different objectives and investment policies, and both of which are
available as part of the Providian Marquee. T. Rowe Price Associates, Inc. is
responsible for the selection and management of this Fund's portfolio
investments and serves as the Fund's investment adviser.
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Series, Inc. is a Maryland corporation organized in
1994 and is registered with the Securities and Exchange Commission under the
1940 Act as a diversified, open-end management investment company, commonly
known as a "mutual fund." The corporation is a series fund and has the
authority to issue other series in addition to the International Stock
Portfolio currently available as part of the Providian Marquee. Rowe Price-
Fleming International, Inc. is responsible for selection and management of this
Fund's portfolio investments and serves as the Fund's investment adviser.
OCC ACCUMULATION TRUST
OCC Accumulation Trust is a Massachusetts business trust and is registered with
the Securities and Exchange Commission under the 1940 Act as a diversified,
open-end management investment company. The Fund receives investment advice
with respect to each of its portfolios from OpCap Advisors, a subsidiary of
Oppenheimer Capital, a registered investment adviser. The Fund currently
consists of seven series, including the OpCap Advisors Managed, OpCap Advisors
Small Cap and OpCap Advisors Government Income Portfolios available as part of
the Providian Marquee. The OCC Accumulation Trust was formerly known as the
Quest For Value Accumulation Trust.
THE PORTFOLIOS (SEE ACCOMPANYING PROSPECTUSES)
FOR MORE INFORMATION CONCERNING THE RISKS ASSOCIATED WITH EACH PORTFOLIO'S
INVESTMENTS, PLEASE REFER TO THE APPLICABLE UNDERLYING FUND PROSPECTUS.
FIDELITY MONEY MARKET PORTFOLIO ("FIDELITY MONEY MARKET")
Fidelity Money Market seeks to obtain as high a level of current income as is
consistent with preserving capital and providing liquidity. It invests only in
high-quality U.S. dollar denominated money market instruments of domestic and
foreign issuers.
FIDELITY EQUITY-INCOME PORTFOLIO ("FIDELITY EQUITY-INCOME")
Fidelity Equity-Income seeks reasonable income by investing primarily in
income-producing equity securities. In choosing these securities the Portfolio
will also 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.
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<PAGE>
FIDELITY GROWTH PORTFOLIO ("FIDELITY GROWTH")
Fidelity Growth seeks to achieve capital appreciation normally through the
purchase of common stocks (although the Portfolio's investments are not
restricted to any one type of security). Capital appreciation may also be found
in other types of securities, including bonds and preferred stocks.
FIDELITY ASSET MANAGER PORTFOLIO ("FIDELITY ASSET MANAGER")
Fidelity Asset Manager seeks high total return with reduced risk over the long-
term by allocating its assets among domestic and foreign stocks, bonds and
short-term fixed income instruments.
DREYFUS GROWTH AND INCOME PORTFOLIO ("DREYFUS GROWTH AND INCOME")
Dreyfus Growth and Income is a non-diversified Portfolio, the goal of which is
long-term capital growth, current income and growth of income, consistent with
reasonable investment risk. The Portfolio invests in equity and debt securities
and money market instruments of domestic and foreign issuers.
DREYFUS QUALITY BOND PORTFOLIO ("DREYFUS QUALITY BOND")
Dreyfus Quality Bond is a diversified Portfolio, the goal of which is to
provide the maximum amount of current income to the extent consistent with the
preservation of capital and the maintenance of liquidity. The Dreyfus Quality
Bond Portfolio invests in debt obligations of corporations, the U.S. Government
and its agencies and instrumentalities, and major U.S. banking institutions.
T. ROWE PRICE EQUITY INCOME PORTFOLIO ("T. ROWE PRICE EQUITY INCOME")
T. Rowe Price Equity Income seeks to provide substantial dividend income as
well as long-term capital appreciation by investing primarily in dividend-
paying common stocks of established companies. In pursuing its objective, the
Portfolio emphasizes companies with favorable prospects for both increasing
dividend income and capital appreciation.
T. ROWE PRICE NEW AMERICA GROWTH PORTFOLIO ("T. ROWE PRICE NEW AMERICA GROWTH")
T. Rowe Price New America Growth seeks long-term growth of capital through
investments primarily in the common stocks of U.S. growth companies which
operate in service industries. In pursuing its objective, this Portfolio
invests primarily in companies deriving a majority of their revenues or
operating earnings from service-related activities and in companies whose
prospects are closely tied to service industries. This Portfolio may also
invest up to 25% of its assets in non-service related growth companies in
pursuit of capital appreciation whose earnings are believed to hold the
prospect of superior growth.
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO ("T. ROWE PRICE INTERNATIONAL
STOCK")
T. Rowe Price International Stock seeks long-term growth of capital, through
investments primarily in common stocks of established, non-U.S. companies.
OPCAP ADVISORS OCC ACCUMULATION TRUST MANAGED PORTFOLIO ("OPCAP ADVISORS
MANAGED")
OpCap Advisors Managed seeks to achieve growth of capital over time through
investment in a portfolio consisting of common stocks, bonds and cash
equivalents, the percentages of which will vary over time based on the
investment manager's assessments of the relative outlook for such investments.
OPCAP ADVISORS OCC ACCUMULATION TRUST SMALL CAP PORTFOLIO ("OPCAP ADVISORS
SMALL CAP")
OpCap Advisors Small Cap seeks capital appreciation through investments in a
diversified portfolio consisting primarily of equity securities of companies
with market capitalizations under $1 billion.
OPCAP ADVISORS OCC ACCUMULATION TRUST U.S. GOVERNMENT INCOME PORTFOLIO ("OPCAP
ADVISORS U.S. GOVERNMENT INCOME")
The investment objective of OpCap Advisors U.S. Government Income is to seek a
high level of current income together with the protection of capital. This
Portfolio seeks to achieve its investment objective by investing exclusively in
debt obligations, including mortgage-backed securities, issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
14
<PAGE>
OTHER PORTFOLIO INFORMATION
There is no assurance that a Portfolio will achieve its stated investment
objective.
Additional information concerning the investment objectives and policies of the
Portfolios and the investment advisory services, total expenses and charges can
be found in the current prospectuses for the corresponding Funds. THE FUNDS' OR
PORTFOLIOS' PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
CONCERNING THE ALLOCATION OF NET PURCHASE PAYMENTS TO A PORTFOLIO.
The Portfolios may be made available to registered separate accounts offering
variable annuity and variable life products of the Company as well as other
insurance companies or to a person or plan, including a pension or retirement
plan receiving favorable tax treatment under the Code, that qualifies to
purchase shares of the Funds under Section 817(h) of the Code. Although we
believe it is unlikely, a material conflict could arise between the interests
of the Separate Account and one or more of the other participating separate
accounts and other qualified persons or plans. In the event of a material
conflict, the affected insurance companies agree to take any necessary steps,
including removing their separate accounts from the Funds if required by law,
to resolve the matter.
CONTRACT FEATURES
The rights and benefits under the Contract are applicable to both A Units and B
Units as described below and in the Contract. The Company reserves the right to
make any modification to conform the Contract to, or give the Contract Owner
the benefit of, any federal or state statute or any rule or regulation of the
United States Treasury Department.
RIGHT TO CANCEL PERIOD
A Right to Cancel Period exists for a minimum of 10 days after you receive the
Contract (30 or more days in some instances as set forth in your Contract) plus
a 5 day grace period to allow for mail delivery. The Contract permits you to
cancel the Contract during the Right to Cancel Period by returning the Contract
to our Administrative Offices, P.O. Box 32700, Louisville, Kentucky 40232, or
to the agent from whom you purchased the Contract. Upon cancellation, the
Contract is treated as void from the Contract Date and when we receive the
Contract, (1) if the state of issue of your Contract is CA, GA, ID, LA, MI, MO,
NE, NH, NC, OK, OR, SC, UT, VA or WV, then for any amount of your initial
Purchase Payment(s) invested in Fidelity Money Market, we will return the
Accumulated Value of the amount of your Purchase Payment(s) so invested, or if
greater, the amount of your Purchase Payment(s) so invested, (2) for any amount
of your initial Purchase Payment(s) invested in the Portfolios immediately
following receipt by us, we will return the Accumulated Value of your Purchase
Payment(s) so invested plus any loads, fees and/or Premium Taxes that may have
been subtracted from such amount, and (3) for any amount of your initial
Purchase Payment(s) invested in the Guaranteed Index Rate Options immediately
following receipt by us, we will refund the amount of your Purchase Payment(s)
so invested.
CONTRACT PURCHASE AND PURCHASE PAYMENTS
If you wish to purchase a Contract, you should consult your agent who will
provide the necessary information to us in a customer order form and forward
your initial Purchase Payment to such address as the Company may from time to
time designate. If you wish to make personal delivery by hand or courier to the
Company of your initial Purchase Payment (rather than through the mail), you
must do so at our Administrative Offices, 400 West Market Street, Louisville,
KY 40202. Your initial Purchase Payment for a Non-Qualified Contract must be
equal to or greater than the $5,000 minimum investment requirement. The initial
Purchase Payment for a Qualified Contract must be equal to or greater than
$2,000 (or you may establish a payment schedule of $50 a month by payroll
deduction).
The Contract will be issued and the initial Purchase Payment less any sales
load or Premium Taxes will be credited within two Business Days after receipt
of the customer order form and the initial Purchase Payment in good order. The
Company reserves the right to reject any customer order form or initial
Purchase Payment. Following issuance the Contract will be mailed to you along
with a Contract acknowledgement form, which you should complete, sign and
return in accordance with its instructions. Please note that until the Company
receives the acknowledgement form signed by the Owner and any Joint Owner, the
Owner and any Joint Owner must obtain a signature guarantee on their written,
signed request in order to exercise any rights under the Contract.
If the initial Purchase Payment cannot be credited because the customer order
form is incomplete, we will contact you, explain the reason for the delay and
will refund the initial Purchase Payment within five Business Days, unless you
instruct us to retain the initial Purchase Payment and credit it as soon as the
necessary requirements are fulfilled.
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<PAGE>
Additional Purchase Payments may be made at any time prior to the Annuity Date,
as long as the Annuitant is living. Any additional Purchase Payments must be
for at least $500 for Non-Qualified Contracts or $50 for Qualified Contracts
and, for B Unit Contracts, are limited to $10,000 annually after the first
Contract Anniversary. If additional Purchase Payments are received prior to the
close of the New York Stock Exchange (generally 4:00 P.M. Eastern time) they
will be credited to the Accumulated Value at the close of business that same
day. Additional Purchase Payments received after the close of the New York
Stock Exchange are processed the next Business Day.
Total Purchase Payments may not exceed $1,000,000 without our prior approval.
PURCHASING BY WIRE
For wiring instructions please contact our Administrative Offices at 1-800-866-
6007.
ALLOCATION OF PURCHASE PAYMENTS
You instruct your agent how your Net Purchase Payments will be allocated. You
may allocate each Net Purchase Payment to one or more of the Portfolios or
General Account Guaranteed Options as long as such portions are whole number
percentages provided that each allocation to a General Account Guaranteed
Option is at least $1,000 and that no Portfolio or General Account Guaranteed
Option may contain a balance less than $1,000. You may choose not to allocate
any monies to a particular Portfolio. You may change allocation instructions
for future Net Purchase Payments by sending us the appropriate Company form or
by complying with other designated Company procedures. The General Account
Guaranteed Options are available for sale in most, but not all, states.
If the state of issue of your Contract is CA, GA, ID, LA, MI, MO, NE, NH, NC,
OK, OR, SC, UT, VA or WV, then your initial Net Purchase Payment(s) will, when
your Contract is issued, be invested in Fidelity Money Market until the
expiration of the Right to Cancel Period of 10 to 30 days (plus a five day
grace period to allow for mail delivery) or more in some instances as specified
in your Contract after the issuance of your Contract and then invested
according to your initial allocation instructions (except that any accrued
interest will remain in Fidelity Money Market if it is selected as an initial
allocation option), provided that you may elect to have the portion of your
initial Net Purchase Payment(s) allocated to the Guaranteed Index Rate Options
invested immediately upon our receipt thereof in order to lock in the rates
then applicable to such options.
If the state of issue of your Contract is any other state, your initial Net
Purchase Payment(s) will, unless you indicate otherwise, be invested in your
Portfolios and Guaranteed Index Rate Options immediately upon our receipt
thereof, IN WHICH CASE YOU WILL BEAR FULL INVESTMENT RISK FOR ANY AMOUNTS
ALLOCATED TO THE PORTFOLIOS DURING THE RIGHT TO CANCEL PERIOD. (Please note
that immediate investment is not available with respect to any amounts
allocated to THE FIVE-YEAR GUARANTEED EQUITY OPTION WHICH IS ILLIQUID FOR FIVE
YEARS.)
CHARGES AND DEDUCTIONS
You may choose between two charge structures: A Units or B Units. There are no
withdrawal or surrender charges for A Units (although certain charges or
restrictions may apply to your Contract's General Account Guaranteed Options).
For A Units, the following percentages of each Purchase Payment are deducted as
a sales load:
<TABLE>
<CAPTION>
AGGREGATED PURCHASE PAYMENTS SALES LOAD
---------------------------- ----------
<S> <C>
$0-$99,999.................................. 5.75%
$100,000-$249,999........................... 4.75%
$250,000-$499,999........................... 3.75%
$500,000-$999,999........................... 2.75%
$1 Million +................................ 1.75%
</TABLE>
These Purchase Payment breakpoints will be applied on an aggregated basis, so
that all prior Purchase Payments will be added to the amount of any additional
Purchase Payment before the breakpoint calculation is made. (Example: An
$80,000 Purchase Payment is initially received. An additional Purchase Payment
of $40,000 is made the following year, bringing the aggregate amount of
Purchase Payments to $120,000. A sales load of 4.75% will apply to the entire
$40,000 Purchase Payment.) Growth in your Accumulated Value is not added into
this calculation, and partial withdrawals are not subtracted from this
calculation.
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<PAGE>
For B Units, no sales load is deducted from Purchase Payments and up to 10% of
the Accumulated Value as of the Contract Date, or, if more recent, the last
Contract Anniversary, can be withdrawn once per year without a surrender
charge, subject to the charges and restrictions of the General Account
Guaranteed Options. Additional withdrawals are subject to a surrender charge
according to the following schedule:
<TABLE>
<CAPTION>
SURRENDER
CONTRACT YEAR CHARGE
------------- ---------
<S> <C>
1............................................ 6%
2............................................ 5%
3............................................ 4%
4............................................ 3%
5............................................ 2%
6............................................ 1%
7............................................ 0%
</TABLE>
The total surrender charges assessed will not exceed 8.5% of the Purchase
Payments under the Contract. There will be no surrender charge assessed on the
death of the Annuitant or after the sixth Contract Year.
MORTALITY AND EXPENSE RISK CHARGE
We impose a charge as compensation for bearing certain mortality and expense
risks under the Contracts. The annual charge is assessed daily based on the net
asset value of the Separate Account. The annual mortality and expense risk
charge is .65% of the net asset value of the Separate Account attributable to A
Unit Contracts, and 1.25% of the net asset value of the Separate Account
attributable to B Unit Contracts.
We guarantee that this annual charge will never increase. If this charge is
insufficient to cover actual costs and assumed risks, the loss will fall on us.
Conversely, if the charge proves more than sufficient, any excess will be added
to the Company surplus and will be used for any lawful purpose, including any
shortfall on the costs of distributing the Contracts.
The mortality risk borne by us under the Contracts, where one of the life
Annuity Payment Options is selected, is to make monthly Annuity Payments
(determined in accordance with the annuity tables and other provisions
contained in the Contract) regardless of how long all Annuitants may live. We
also assume mortality risk as a result of our guarantee of a Death Benefit in
the event the Annuitant dies prior to the Annuity Date.
The expense risk borne by us under the Contracts is the risk that the charges
for administrative expenses which are guaranteed for the life of the Contract
may be insufficient to cover the actual costs of issuing and administering the
Contract.
ADMINISTRATIVE CHARGE AND ANNUAL CONTRACT FEE
An administrative charge equal to .15% annually of the net asset value of the
Separate Account is assessed daily along with the Annual Contract Fee of $30.
The Annual Contract Fee is deducted proportionately from the Subaccounts. For
any Contract with amounts allocated to the Subaccounts, the $30 fee is assessed
per Contract, not per Portfolio chosen. The Annual Contract Fee will be
deducted on each Contract Anniversary and upon surrender, on a pro rata basis,
from each Subaccount. These deductions represent reimbursement for the costs
expected to be incurred over the life of the Contract for issuing and
maintaining each Contract and the Separate Account.
EXCHANGES
Each Contract Year you may make an unlimited number of free Exchanges between
Portfolios and/or General Account Guaranteed Options, provided that after an
Exchange no Portfolio or General Account Guaranteed Option may contain a
balance less than $1,000. We reserve the right to charge a $15 fee in the
future for Exchanges in excess of 12 per Contract Year.
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<PAGE>
EXCEPTIONS TO CHARGES AND TO TRANSACTION OR BALANCE REQUIREMENTS
The sales load, contingent deferred sales load or other administrative charges
or fees may be reduced for sales of Contracts to a trustee, employer or similar
entity representing a group where the Company determines that such sales result
in savings of sales and/or administrative expenses. In addition, directors,
officers and bona fide full-time employees (and their spouses and minor
children) of the Company, its ultimate parent company, Providian Corporation
and certain of their affiliates and certain sales representatives for the
Contract are permitted to purchase Contracts with substantial reduction of the
sales load, contingent deferred sales load or other administrative charges or
fees or with a waiver or modification of certain minimum or maximum purchase
and transaction amounts or balance requirements. Contracts so purchased are for
investment purposes only and may not be resold except to the Company.
In no event will reduction or elimination of the sales load, contingent
deferred sales loads or other fees or charges or waiver or modification of
transaction or balance requirements be permitted where such reduction,
elimination, waiver or modification will be unfairly discriminatory to any
person. Additional information about reductions in charges is contained in the
Statement of Additional Information.
TAXES
We will, where such taxes are imposed on the Company by state law, deduct
Premium Taxes that currently range up to 3.5%. These taxes will be deducted
from the Accumulated Value or Purchase Payments in accordance with applicable
law.
At the time of the filing of this Prospectus, the following state assesses a
Premium Tax on all initial and additional Purchase Payments on Non-Qualified
Contracts:
<TABLE>
<CAPTION>
QUALIFIED NON-QUALIFIED
--------- -------------
<S> <C> <C>
South Dakota.................. 0% 1.25%
</TABLE>
In addition, a number of states currently impose Premium Taxes at the time an
Annuity Payment Option (other than a Lump Sum Payment Option) is selected. At
the time of the filing of this Prospectus, the following states assess a
Premium Tax against the Accumulated Value if the Contract Owner chooses an
Annuity Payment Option instead of receiving a lump sum distribution:
<TABLE>
<CAPTION>
QUALIFIED NON-QUALIFIED
--------- -------------
<S> <C> <C>
Alabama....................... 1.00% 1.00%
California.................... .50% 2.35%
District of Columbia.......... 2.25% 2.25%
Kansas........................ 0% 2.00%
Kentucky...................... 2.00% 2.00%
Maine......................... 0% 2.00%
Nevada........................ 0% 3.50%
West Virginia................. 1.00% 1.00%
Wyoming....................... 0% 1.00%
</TABLE>
Under present laws, the Company will incur state or local taxes (in addition to
the Premium Taxes described above) in several states. At present, the Company
does not charge the Contract Owner for these taxes. If there is a change in
state or local tax laws, charges for such taxes may be made. The Company does
not expect to incur any federal income tax liability attributable to investment
income or capital gains retained as part of the reserves under the Contracts.
(See "Federal Tax Considerations," page 24.) Based upon these expectations, no
charge is currently being made to the Separate Account for federal income taxes
that may be attributable to the Separate Account.
The Company will periodically review the question of a charge to the Separate
Account for federal income taxes related to the Separate Account. Such a charge
may be made in future years for any federal income taxes incurred by the
Company. This might become necessary if the tax treatment of the Company is
ultimately determined to be other than what the Company currently believes it
to be, if there are changes made in the federal income tax treatment of
annuities at the corporate level, or if there is a change in the Company's tax
status. In the event that the Company should incur federal income taxes
attributable to investment income or capital gains retained as part of the
reserves under the Contracts, the Accumulated Value of the Contract would be
correspondingly adjusted by any provision or charge for such taxes.
18
<PAGE>
PORTFOLIO EXPENSES
The value of the assets in the Separate Account reflect the fees and expenses
paid by the Portfolios. A complete description of these expenses is found in
the "Fee Table" section of this Prospectus and in each Fund's Prospectus and
Statement of Additional Information.
ACCUMULATED VALUE
At the commencement of the Contract, the Accumulated Value equals the initial
Net Purchase Payment. Thereafter, the Accumulated Value equals the Accumulated
Value from the previous Business Day increased by: (i) any additional Net
Purchase Payments received by the Company and (ii) any increase in the
Accumulated Value due to investment results of the selected Portfolio(s) and
the interest credited to the General Account Guaranteed Options during the
Valuation Period; and reduced by: (i) any decrease in the Accumulated Value due
to investment results of the selected Portfolio(s), (ii) a daily charge to
cover the mortality and expense risks assumed by the Company, (iii) any charge
to cover the cost of administering the Contract, (iv) any partial withdrawals,
(v) any Market Value Adjustment or other deduction due to early Exchanges from
the Guaranteed Index Rate Options and, if exercised by the Company, (vi) any
charges for any Exchanges made after the first twelve in any Contract Year.
EXCHANGES AMONG THE PORTFOLIOS
Should your investment goals change, you may exchange Accumulated Value among
the Portfolios of the Funds and, as permitted, the General Account Guaranteed
Options. Requests for Exchanges, received by mail or by telephone, prior to the
close of the New York Stock Exchange (generally 4:00 P.M. Eastern time) are
processed at the close of business that same day. Requests received after the
close of the New York Stock Exchange are processed the next Business Day. If
you experience difficulty in making a telephone Exchange your Exchange request
may be made by regular or express mail. It will be processed on the date
received.
To take advantage of the privilege of initiating transactions by telephone, you
must first elect the privilege by completing the appropriate section of the
Contract acknowledgement form, which you will receive with your Contract. You
may also complete a separate telephone authorization form at a later date. To
take advantage of the privilege of authorizing a third party to initiate
transactions by telephone, you must first complete a third party authorization
form or the appropriate section of the Contract acknowledgement form.
The Company will undertake reasonable procedures to confirm that instructions
communicated by telephone are genuine. Prior to the acceptance of any request,
the caller will be asked by a customer service representative for his or her
Contract number and social security number. In addition, telephone
communications from a third party authorized to transact in an account will
undergo reasonable procedures to confirm that instructions are genuine. The
third party caller will be asked for his or her name, company affiliation (if
appropriate), the Contract number to which he or she is referring, and the
social security number of the Contract Owner. All calls will be recorded, and
this information will be verified with the Contract Owner's records prior to
processing a transaction. Furthermore, all transactions performed by a customer
service representative will be verified with the Contract Owner through a
written confirmation statement. Neither the Company nor the Funds shall be
liable for any loss, cost or expense for action on telephone instructions that
are believed to be genuine in accordance with these procedures.
For information concerning Exchanges to and from the General Account Guaranteed
Options, see "The General Account," at Appendix A.
FULL AND PARTIAL WITHDRAWALS
At any time before the Annuity Date and while the Annuitant is living, you may
make a partial or full withdrawal of the Contract to receive all or part of the
Surrender Value by sending a written request to our Administrative Offices.
Full or partial withdrawals may only be made before the Annuity Date and all
partial withdrawal requests must be for at least $500. The amount available for
full or partial withdrawal is the Surrender Value at the end of the Valuation
Period during which the written request for withdrawal is received. The
Surrender Value is an amount equal to the Accumulated Value, adjusted to
reflect any applicable Market Value Adjustment for amounts allocated to the
Five-Year Guaranteed Index Rate Option, less any early withdrawal charges for
amounts allocated to the One-Year Guaranteed Index Rate Option,
19
<PAGE>
less any amount allocated to the Five-Year Guaranteed Equity Option, less any
applicable contingent deferred sales load (i.e., surrender charge), less any
Premium Taxes incurred but not yet deducted. The withdrawal amount may be paid
in a lump sum to you, or if elected, all or any part may be paid out under an
Annuity Payment Option. (See "Annuity Payment Options," page 21).
You can make a withdrawal by sending the appropriate Company form to our
Administrative Offices. You may not make any full or partial withdrawals from
the Five-Year Guaranteed Equity Option before the end of the five-year
guarantee period. Your proceeds will normally be processed and mailed to you
within two Business Days after the receipt of the request but in no event will
it be later than seven calendar days, subject to postponement in certain
circumstances. (See "Deferment of Payment," page 24).
Payments under the Contract of any amounts derived from premiums paid by check
may be delayed until such time as the check has cleared your bank. If, at the
time the Contract Owner requests a full or partial withdrawal, he has not
provided the Company with a written election not to have federal income taxes
withheld, the Company must by law withhold such taxes from the taxable portion
of any full or partial withdrawal and remit that amount to the federal
government. Moreover, the Code provides that a 10% penalty tax may be imposed
on certain early withdrawals. (See "Federal Tax Considerations," page 24).
Since the Contract Owner assumes the investment risk with respect to amounts
allocated to the Separate Account, the total amount paid upon withdrawal of the
Contract (taking into account any prior withdrawals) may be more or less than
the total Net Purchase Payments made.
SYSTEMATIC WITHDRAWAL OPTION
You may choose to have a specified dollar amount provided to you on a regular
basis from the portion of your Contract's Accumulated Value that is allocated
to the Portfolios. By electing the Systematic Withdrawal Option, withdrawals
may be made on a monthly, quarterly, semiannual or annual basis. The minimum
amount for each withdrawal is $250.
This option may be elected by completing the Systematic Withdrawal Request
Form. This form must be received by us at least 30 days prior to the date
systematic withdrawals will begin. Each withdrawal will be processed on the day
and at the frequency indicated on the Systematic Withdrawal Request Form. The
start date for the systematic withdrawals must be between the first and twenty-
eighth day of the month. You may discontinue the Systematic Withdrawal Option
at any time by notifying us in writing at least 30 days prior to your next
scheduled withdrawal date.
A surrender charge will apply to B Unit Contracts when withdrawals in any of
the first six Contract Years exceed 10% of that year's beginning Accumulated
Value. (See "Charges and Deductions," page 16.) Each systematic withdrawal is
subject to federal income taxes on the taxable portion, and may be subject to a
10% federal penalty tax if you are under age 59 1/2. You may elect to have
federal income taxes withheld from each withdrawal at a 10% rate on the
Systematic Withdrawal Request Form. For a discussion of the tax consequences of
withdrawals, see "Federal Tax Considerations" on page 24 of the Prospectus. You
may wish to consult a tax adviser regarding any tax consequences that might
result prior to electing the Systematic Withdrawal Option.
We reserve the right to discontinue offering the Systematic Withdrawal Option
upon 30 days written notice. We also reserve the right to charge a fee for such
service.
DOLLAR COST AVERAGING OPTION
If you have at least $5,000 of Accumulated Value in Fidelity Money Market, you
may choose to have a specified dollar amount transferred from this Portfolio to
other Portfolios in the Separate Account or to the General Account Guaranteed
Options on a monthly basis. The main objective of Dollar Cost Averaging is to
shield your investment from short term price fluctuations. Since the same
dollar amount is transferred to other Portfolios each month, more units are
purchased in a Portfolio if the value per unit is low and less units are
purchased if the value per unit is high. Therefore, a lower average cost per
unit may be achieved over the long term. This plan of investing allows
investors to take advantage of market fluctuations but does not assure a profit
or protect against a loss in declining markets.
This Dollar Cost Averaging Option may be elected on the customer order form or
at a later date. The minimum amount that may be transferred each month into any
Portfolio or General Account Guaranteed Option is $250. The maximum amount
which may be transferred is equal to the Accumulated Value in Fidelity Money
Market when elected, divided by 12.
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<PAGE>
The transfer date will be the same calendar day each month as the Contract
Date. The dollar amount will be allocated to the Portfolios in the proportions
you specify on the appropriate Company form, or, if none are specified, in
accordance with your original investment allocation. If, on any transfer date,
the Accumulated Value is equal to or less than the amount you have elected to
have transferred, the entire amount will be transferred and the option will
end. You may change the transfer amount once each Contract Year, or cancel this
option by sending the appropriate Company form to our Administrative Offices
which must be received at least seven days before the next transfer date.
IRS-REQUIRED DISTRIBUTIONS
Prior to the Annuity Date, if you or, if applicable, a Joint Owner dies before
the entire interest in the Contract is distributed, the value of the Contract
must be distributed to the Owner's Designated Beneficiary (unless the Contract
Owner was also the Annuitant--in which case the Annuitant's Beneficiary is
entitled to the Death Benefit) as described in this section so that the
Contract qualifies as an annuity under the Code. If the death occurs on or
after the Annuity Date, the remaining portions of such interest will be
distributed at least as rapidly as under the method of distribution being used
as of the date of death. If the death occurs before the Annuity Date, the
entire interest in the Contract will be distributed within five years after
date of death or be paid under an Annuity Payment Option under which payments
will begin within one year of the Contract Owner's death and will be made for
the life of the Owner's Designated Beneficiary or for a period not extending
beyond the life expectancy of that beneficiary. The Owner's Designated
Beneficiary is the person to whom ownership of the Contract passes by reason of
death.
If any portion of the Contract Owner's interest is payable to (or for the
benefit of) the surviving spouse of the Contract Owner, the Contract may be
continued with the surviving spouse as the new Contract Owner.
MINIMUM BALANCE REQUIREMENT
We will transfer the balance in any Portfolio that falls below $1,000, due to a
partial withdrawal or Exchange, to the remaining Portfolios held under that
Contract on a pro rata basis. In the event that the entire value of the
Contract falls below $1,000, you may be notified that the Accumulated Value of
your account is below the Contract's minimum requirement. You would then be
allowed 60 days to make an additional investment before the account is
liquidated. Proceeds would be promptly paid to the Contract Owner. The full
proceeds would be taxable as a withdrawal. We will not exercise this right with
respect to Qualified Contracts.
DESIGNATION OF AN ANNUITANT'S BENEFICIARY
The Contract Owner may select one or more Annuitant's Beneficiaries and name
them in the customer order form. Thereafter, while the Annuitant is living, the
Contract Owner may change the Annuitant's Beneficiary by sending us the
appropriate Company form. Such change will take effect on the date such form is
signed by the Contract Owner but will not affect any payment made or other
action taken before the Company acknowledges such form. You may also make the
designation of Annuitant's Beneficiary irrevocable by sending us the
appropriate Company form and obtaining approval from the Company. Changes in
the Annuitant's Beneficiary may then be made only with the consent of the
designated irrevocable Annuitant's Beneficiary.
If the Annuitant dies prior to the Annuity Date, the following will apply
unless the Contract Owner has made other provisions.
(a) If there is more than one Annuitant's Beneficiary, each will share in
the Death Benefits equally;
(b) If one or two or more Annuitant's Beneficiaries have already died, that
share of the Death Benefit will be paid equally to the survivor(s);
(c) If no Annuitant's Beneficiary is living, the proceeds will be paid to
the Contract Owner;
(d) If an Annuitant's Beneficiary dies at the same time as the Annuitant,
the proceeds will be paid as though the Annuitant's Beneficiary had
died first. If an Annuitant's Beneficiary dies within 15 days after the
Annuitant's death and before the Company receives due proof of the
Annuitant's death, proceeds will be paid as though the Annuitant's
Beneficiary had died first.
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If an Annuitant's Beneficiary who is receiving Annuity Payments dies, any
remaining payments certain will be paid to that Annuitant's Beneficiary's named
beneficiary(ies) when due. If no Annuitant's Beneficiary survives the
Annuitant, the right to any amount payable will pass to the Contract Owner. If
the Contract Owner is the Annuitant, this right will pass to his or her estate.
If a Life Annuity with Period Certain option was elected, and if the Annuitant
dies on or after the Annuity Date, any unpaid payments certain will be paid to
the Annuitant's Beneficiary or your designated Payee.
DEATH OF ANNUITANT PRIOR TO ANNUITY DATE
If the Annuitant dies prior to the Annuity Date, an amount will be paid as
proceeds to the Annuitant's Beneficiary. The Death Benefit is calculated and is
payable upon receipt of due Proof of Death of the Annuitant as well as proof
that the Annuitant died prior to the Annuity Date. Upon receipt of this proof,
the Death Benefit will be paid within seven days, or as soon thereafter as the
Company has sufficient information about the Annuitant's Beneficiary to make
the payment. The Annuitant's Beneficiary may receive the amount payable in a
lump sum cash benefit or under one of the Annuity Payment Options.
The Death Benefit is the greater of:
(1) The Accumulated Value on the date we receive due Proof of Death; or
(2) The Adjusted Death Benefit.
During the first six Contract Years, the Adjusted Death Benefit will be the sum
of all Net Purchase Payments made, less any partial withdrawals taken. During
each subsequent six-year period, the Adjusted Death Benefit will be the Death
Benefit on the last day of the previous six-year period plus any Net Purchase
Payments made, less any partial withdrawals taken during the current six-year
period. After the Annuitant attains age 75, the Adjusted Death Benefit will
remain equal to the Death Benefit on the last day of the six year period before
age 75 occurs plus any Net Purchase Payments subsequently made, less any
partial withdrawals subsequently taken.
ANNUITY DATE
You may specify an Annuity Date, which can be no later than the first day of
the month after the Annuitant's 85th birthday, without the Company's prior
approval. The Annuity Date is the date that Annuity Payments are scheduled to
commence under the Contract unless the Contract has been surrendered or an
amount has been paid as proceeds to the designated Annuitant's Beneficiary
prior to that date.
You may advance or defer the Annuity Date. However, the Annuity Date may not be
advanced to a date prior to 30 days after the date of receipt of a written
request or, without the Company's prior approval, deferred to a date beyond the
first day of the month after the Annuitant's 85th birthday. The Annuity Date
may only be changed by written request during the Annuitant's lifetime and must
be made at least 30 days before the then-scheduled Annuity Date. The Annuity
Date and Annuity Payment Options available for Qualified Contracts may also be
controlled by endorsements, the plan or applicable law.
LUMP SUM PAYMENT OPTION
You may surrender the Contract at any time while the Annuitant is living and
before the Annuity Date. The Surrender Value is equal to the Accumulated Value,
adjusted for any Market Value Adjustment or other deductions applicable to
amounts allocated to a General Account Guaranteed Option, less any amount
allocated to the Five-Year Guaranteed Equity Option, less any applicable
deferred sales load (i.e., surrender charge) and any Premium Taxes incurred but
not yet deducted.
ANNUITY PAYMENT OPTIONS
All Annuity Payment Options (except for the Designated Period Annuity Option)
are offered as "Variable Annuity Options." This means that Annuity Payments,
after the initial payment, will reflect the investment experience of the
Portfolio or Portfolios you have chosen. All Annuity Payment Options are also
offered as "Fixed Annuity Options." This means that the amount of each payment
will be set on the Annuity Date and will not change. The following Annuity
Payment Options are available under the Contract:
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Life Annuity--Monthly Annuity Payments are paid for the life of an Annuitant,
ceasing with the last Annuity Payment due prior to the Annuitant's death.
Joint and Last Survivor Annuity--Monthly Annuity Payments are paid for the life
of two Annuitants and thereafter for the life of the survivor, ceasing with the
last Annuity Payment due prior to the survivor's death.
Life Annuity with Period Certain--Monthly Annuity Payments are paid for the
life of an Annuitant, with a Period Certain of not less than 120, 180, or 240
months, as elected.
Installment or Unit Refund Life Annuity--Available as either a Fixed
(Installment Refund) or Variable (Unit Refund) Annuity Option. Monthly Annuity
Payments are paid for the life of an Annuitant, with a Period Certain
determined by dividing the Accumulated Value by the first Annuity Payment.
Designated Period Annuity--Only available as a Fixed Annuity Option. Monthly
Annuity Payments are paid for a Period Certain as elected, which may be from 10
to 30 years.
Before the Annuity Date and while the Annuitant is living, you may change the
Annuity Payment Option by written request. The request for change must be made
at least 30 days prior to the Annuity Date and is subject to the approval of
the Company. If an Annuity Payment Option is chosen that depends on the
continuation of the life of the Annuitant, proof of birth date may be required
before Annuity Payments begin. For Annuity Payment Options involving life
income, the actual age of the Annuitant will affect the amount of each payment.
Since payments to older Annuitants are expected to be fewer in number, the
amount of each Annuity Payment will generally be greater.
All or part of the Accumulated Value may be placed under one or more Annuity
Payment Options. If Annuity Payments are to be paid under more than one option,
the Company must be told what part of the Accumulated Value is to be paid under
each option.
If at the time of any Annuity Payment you have not provided the Company with a
written election not to have federal income taxes withheld, the Company must by
law withhold such taxes from the taxable portions of such Annuity Payment and
remit that amount to the federal government.
In the event that an Annuity Payment Option is not selected, the Company will
make monthly Annuity Payments that will go on for as long as the Annuitant
lives (120 payments guaranteed) in accordance with the Life Annuity with Period
Certain Option and the annuity benefit sections of the Contract. That portion
of the Accumulated Value that has been held in a Portfolio prior to the Annuity
Date will be applied under a Variable Annuity Option based on the performance
of that Portfolio. Subject to approval by the Company, you may select any other
Annuity Payment Option then being offered by the Company. All Fixed Annuity
Payments and the initial Variable Annuity Payment are guaranteed to be not less
than as provided by the Annuity Tables and the Annuity Payment Option elected
by the Contract Owner. The minimum payment, however, is $100. If the
Accumulated Value is less than $5,000, or less than $2,000 for Texas Contract
Owners, the Company has the right to pay that amount in a lump sum. From time
to time, the Company may require proof that the Annuitant or Contract Owner is
living. Annuity Payment Options are not available to: (1) an assignee; or (2)
any other than a natural person, except with the consent of the Company.
We may, at the time of election of an Annuity Payment Option, offer more
favorable rates in lieu of the guaranteed rates specified in the Annuity Tables
found in the Contract.
The value of Variable Annuity Payments will reflect the investment experience
of the chosen Portfolio. Only one Variable Annuity Option may be chosen from
among those made available by the Company for each Portfolio. The Annuity
Tables, which are contained in the Contract and are used to calculate the value
of the initial Variable Annuity Payment, are based on an assumed interest rate
of 4%. If the actual net investment experience exactly equals the assumed
interest rate, then the Variable Annuity Payments will remain the same (equal
to the first Annuity Payment). However, if actual investment experience exceeds
the assumed interest rate, the Variable Annuity Payments will increase;
conversely, they will decrease if the actual experience is lower. The method of
computation of Variable Annuity Payments is described in more detail in the
Statement of Additional Information.
The value of all payments, both fixed and variable, will be greater for shorter
guaranteed periods than for longer guaranteed periods, and greater for life
annuities than for joint and survivor annuities, because they are expected to
be made for a shorter period.
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After the Annuity Date, you may change the Portfolio funding the Variable
Annuity Payments on the appropriate Company form or by calling our
Administrative Offices at 1-800-866-6007.
DEFERMENT OF PAYMENT
Payment of any cash withdrawal or lump sum Death Benefit due from the Separate
Account will occur within seven days from the date the election becomes
effective except that the Company may be permitted to defer such payment if:
(1) the New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the New York Stock Exchange is otherwise restricted; or
(2) an emergency exists as defined by the SEC, or the SEC requires that trading
be restricted; or (3) the SEC permits a delay for the protection of Contract
Owners.
As to amounts allocated to the General Account, we may, at any time, defer
payment of the Surrender Value for up to six months after we receive a request
for it. We will allow interest of at least 4% annually on any Surrender Value
payment derived from the General Account that we defer 30 days or more.
FEDERAL TAX CONSIDERATIONS
INTRODUCTION
The ultimate effect of federal income taxes on the amounts paid for the
Contract, on the investment return on assets held under a Contract, on Annuity
Payments, and on the economic benefits to the Contract Owner, Annuitant or
Annuitant's Beneficiary, depends on the terms of the Contract, the Company's
tax status and upon the tax status of the individuals concerned. The following
discussion is general in nature and is not intended as tax advice. You should
consult a tax adviser regarding the tax consequences of purchasing a Contract.
No attempt is made to consider any applicable state or other tax laws.
Moreover, the discussion is based upon the Company's understanding of the
federal income tax laws as they are currently interpreted. No representation is
made regarding the likelihood of continuation of the federal income tax laws,
the Treasury regulations or the current interpretations by the Internal Revenue
Service. We reserve the right to make uniform changes in the Contract to the
extent necessary to continue to qualify the Contract as an annuity. For a
discussion of federal income taxes as they relate to the Funds, please see the
accompanying Prospectuses for the Funds.
TAXATION OF ANNUITIES IN GENERAL
Section 72 of the Code governs taxation of annuities. In general, a Contract
Owner is not taxed on increases in value under a Contract until some form of
withdrawal or distribution is made under it. However, under certain
circumstances, the increase in value may be subject to current federal income
tax. (See "Contracts Owned by Non-Natural Persons," page 26 and
"Diversification Standards," page 26).
Section 72 provides that the proceeds of a full or partial withdrawal from a
Contract prior to the Annuity Date will be treated as taxable income to the
extent the amounts held under the Contract exceed the "investment in the
Contract," as that term is defined in the Code. The "investment in the
Contract" can generally be described as the cost of the Contract, and generally
constitutes all Purchase Payments paid for the Contract less any amounts
received under the Contract that are excluded from the individual's gross
income. The taxable portion is taxed at ordinary income tax rates. For purposes
of this rule, a pledge or assignment of a Contract is treated as a payment
received on account of a partial withdrawal of a Contract.
Upon receipt of a full or partial withdrawal or an Annuity Payment under the
Contract, you will be taxed if the value of the Contract exceeds the investment
in the Contract. Ordinarily, the taxable portion of such payments will be taxed
at ordinary income tax rates.
For Fixed Annuity Payments, in general, the taxable portion of each payment is
determined by using a formula known as the "exclusion ratio," which establishes
the ratio that the investment in the Contract bears to the total expected
amount of Annuity Payments for the term of the Contract. That ratio is then
applied to each payment to determine the non-taxable portion of the payment.
The remaining portion of each payment is taxed at ordinary income tax rates.
For Variable Annuity Payments, in general, the taxable portion is determined by
a formula that establishes a specific dollar amount of each payment that is not
taxed. The dollar amount is determined by dividing the investment in the
Contract
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by the total number of expected periodic payments. The remaining portion of
each payment is taxed at ordinary income tax rates. Once the excludible portion
of Annuity Payments to date equals the investment in the Contract, the balance
of the Annuity Payments will be fully taxable.
Withholding of federal income taxes on all distributions may be required unless
the recipient elects not to have any amounts withheld and properly notifies the
Company of that election.
With respect to amounts withdrawn or distributed before the taxpayer reaches
age 59 1/2, a penalty tax is imposed equal to 10% of the taxable portion of
amounts withdrawn or distributed. However, the penalty tax will not apply to
withdrawals (i) made on or after the death of the Contract Owner or, where the
Contract Owner is not an individual, the death of the Annuitant, who is defined
as the individual the events in whose life are of primary importance in
affecting the timing and payment under the Contracts; (ii) attributable to the
taxpayer's becoming disabled within the meaning of Code Section 72(m)(7); (iii)
that are part of a series of substantially equal periodic payments made at
least annually for the life (or life expectancy) of the taxpayer, or joint
lives (or joint life expectancies) of the taxpayer and his or her beneficiary;
(iv) from a qualified plan (note, however, other penalties may apply); (v)
under a qualified funding asset (as defined in Code Section 130(d)); (vi) under
an immediate annuity contract as defined in Section 72(u)(4); or (vii) that are
purchased by an employer on termination of certain types of qualified plans and
that are held by the employer until the employee separates from service. Other
tax penalties may apply to certain distributions as well as to certain
contributions and other transactions under Qualified Contracts.
If the penalty tax does not apply to a withdrawal as a result of the
application of item (iii) above, and the series of payments are subsequently
modified (other than by reason of death or disability), the tax for the year in
which the modification occurs will be increased by an amount (as determined
under Treasury Regulations) equal to the tax that would have been imposed but
for item (iii) above, plus interest for the deferral period. The foregoing rule
applies if the modification takes place (a) before the close of the period that
is five years from the date of the first payment and after the taxpayer attains
age 59 1/2, or (b) before the taxpayer reaches age 59 1/2.
THE COMPANY'S TAX STATUS
The Company is taxed as a life insurance company under Part I of Subchapter L
of the Code. Since the Separate Account is not a separate entity from the
Company and its operations form a part of the Company, it will not be taxed
separately as a "regulated investment company" under Subchapter M of the Code.
Investment income and realized capital gains on the assets of the Separate
Account are reinvested and taken into account in determining the Accumulated
Value. Under existing federal income tax law, the Separate Account's investment
income, including realized net capital gains, is not taxed to the Company. The
Company reserves the right to make a deduction for taxes should they be imposed
with respect to such items in the future.
DISTRIBUTION-AT-DEATH RULES
In order to be treated as an annuity contract, a Contract must generally
provide the following two distribution rules: (a) if any Contract Owner dies on
or after the Annuity Date and before the entire interest in the Contract has
been distributed, the remaining portion of such interest must be distributed at
least as quickly as the method in effect on the Contract Owner's death; and (b)
if any Contract Owner dies before the Annuity Date, the entire interest must
generally be distributed within five years after the date of death. To the
extent such interest is payable to the Owner's Designated Beneficiary, however,
such interests may be annuitized over the life of that Owner's Designated
Beneficiary or over a period not extending beyond the life expectancy of that
Owner's Designated Beneficiary, so long as distributions commence within one
year after the Contract Owner's death. If the Owner's Designated Beneficiary is
the spouse of the Contract Owner, the Contract (together with the deferral on
tax on the accrued and future income thereunder) may be continued unchanged in
the name of the spouse as Contract Owner. The term Owner's Designated
Beneficiary means the natural person named by the Contract Owner as a
beneficiary and to whom ownership of the Contract passes by reason of the
Contract Owner's death (unless the Contract Owner was also the Annuitant--in
which case the Annuitant's Beneficiary is entitled to the Death Benefit).
If the Contract Owner is not an individual, the "primary Annuitant" (as defined
under the Code) is considered the Contract Owner. The primary Annuitant is the
individual who is of primary importance in affecting the timing or the
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amount of payout under a Contract. In addition, when the Contract Owner is not
an individual, a change in the primary Annuitant is treated as the death of the
Contract Owner. Finally, in the case of joint Contract Owners, the distribution
will be required at the death of the first of the Contract Owners.
TRANSFERS OF ANNUITY CONTRACTS
Any transfer of a Non-Qualified Contract prior to the Annuity Date for less
than full and adequate consideration will generally trigger tax on the gain in
the Contract to the Contract Owner at the time of such transfer. The investment
in the Contract of the transferee will be increased by any amount included in
the Contract Owner's income. This provision, however, does not apply to those
transfers between spouses or incident to a divorce which are governed by Code
Section 1041(a).
CONTRACTS OWNED BY NON-NATURAL PERSONS
Where the Contract is held by a non-natural person (for example, a
corporation), the Contract is generally not treated as an annuity contract for
federal income tax purposes, and the income on that Contract (generally the
increase in the net Accumulated Value less the payments) is includible in
taxable income each year. The rule does not apply where the non-natural person
is only a nominal owner such as a trust or other entity acting as an agent for
a natural person. If an employer is the nominal owner of a Contract, and the
beneficial owners are employees, then the Contract is not treated as being held
by a non-natural person. The rule also does not apply where the Contract is
acquired by the estate of a decedent, where the Contract is a qualified funding
asset for structured settlements, where the Contract is purchased on behalf of
an employee upon termination of a qualified plan, and in the case of an
immediate annuity.
ASSIGNMENTS
A transfer of ownership of a Contract, a collateral assignment or the
designation of an Annuitant or other beneficiary who is not also the Contract
Owner may result in tax consequences to the Contract Owner, Annuitant or
beneficiary that are not discussed herein. A Contract Owner contemplating such
a transfer or assignment of a Contract should contact a tax adviser with
respect to the potential tax effects of such a transaction.
MULTIPLE CONTRACTS RULE
All non-qualified annuity contracts issued by the same company (or affiliate)
to the same Contract Owner during any calendar year are to be aggregated and
treated as one contract for purposes of determining the amount includible in
the taxpayer's gross income. Thus, any amount received under any Contract prior
to the Contract's Annuity Date, such as a partial withdrawal, will be taxable
(and possibly subject to the 10% federal penalty tax) to the extent of the
combined income in all such contracts. The Treasury Department has specific
authority to issue regulations that prevent the avoidance of Code Section 72(e)
through the serial purchase of annuity contracts or otherwise. In addition,
there may be other situations in which the Treasury Department may conclude
that it would be appropriate to aggregate two or more Contracts purchased by
the same Contract Owner. Accordingly, a Contract Owner should consult a tax
adviser before purchasing more than one Contract or other annuity contracts.
DIVERSIFICATION STANDARDS
To comply with certain diversification regulations (the "Regulations") under
Code Section 817(h), after a start up period, the Separate Account will be
required to diversify its investments. The Regulations generally require that
on the last day of each quarter of a calendar year, no more than 55% of the
value of the Separate Account is represented by any one investment, no more
than 70% is represented by any two investments, no more than 80% is represented
by any three investments, and no more than 90% is represented by any four
investments. A "look-through" rule applies that suggests that each Subaccount
of the Separate Account will be tested for compliance with the percentage
limitations by looking through to the assets of the Portfolios in which each
such division invests. All securities of the same issuer are treated as a
single investment. Each government agency or instrumentality will be treated as
a separate issuer for purposes of those limitations.
In connection with the issuance of temporary diversification regulations in
1986, the Treasury Department announced that such regulations did not provide
guidance concerning the extent to which Contract Owners may direct their
investments to particular divisions of a separate account. It is possible that
regulations or revenue rulings may be issued
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in this area at some time in the future. It is not clear, at this time, what
these regulations or rulings would provide. It is possible that when the
regulations or ruling are issued, the Contracts may need to be modified in
order to remain in compliance. For these reasons, the Company reserves the
right to modify the Contracts, as necessary, to prevent the Contract Owner from
being considered the owner of assets of the Separate Account.
We intend to comply with the Regulations to assure that the Contracts continue
to be treated as annuity contracts for federal income tax purposes.
403(B) CONTRACTS
Contracts will be offered in connection with retirement plans adopted by public
school systems and certain tax-exempt organizations (Code Section 501(c)(3)
organizations) for their employees under Section 403(b) of the Code; except, as
discussed below and subject to any conditions in an employer's plan, a Contract
used in connection with a Section 403(b) Plan offers the same benefits and is
subject to the same charges described in this Prospectus.
The Code imposes a maximum limit on annual Purchase Payments which may be
excluded from your gross income. Such limit must be calculated in accordance
with Sections 403(b), 415 and 402(g) of the Code. In addition, Purchase
Payments will be excluded from your gross income only if the 403(b) Plan meets
certain Code non-discrimination requirements.
Under your 403(b) Contract, you may borrow against your Contract's Surrender
Value after the first Contract Year. No additional loans will be extended until
prior loan balances are paid in full. The loan amount must be at least $1,000
with a minimum vested Accumulated Value of $2,000. The loan amount may not
exceed the lesser of (a) or (b), where (a) is 50% of the Contract's vested
Accumulated Value on the date on which the loan is made, and (b) is $50,000
reduced by the highest outstanding balance of any loan within the preceding 12
months ending on the day before the current loan is made. If you are married,
your spouse must consent in writing to a loan request. This consent must be
given within the 90-day period before the loan is to be made.
On the first Business Day of each calendar month, the Company will determine a
loan interest rate. The loan interest rate for the calendar month in which the
loan is effective will apply for one year from the loan effective date.
Annually on the anniversary of the loan effective date, the rate will be
adjusted to equal the loan interest rate determined for the month in which the
loan anniversary occurs.
Principal and interest on loans must be amortized in quarterly installments
over a five year term except for certain loans for the purchase of a principal
residence. If the loan interest rate is adjusted, future payments will be
adjusted so that the outstanding loan balance is amortized in equal quarterly
installments over the remaining term. A $40 processing fee is charged for each
loan. The remainder of each repayment will be credited to the individual
account.
If a loan payment is not made when due, interest will continue to accrue. The
defaulted payment plus accrued interest will be deducted from any future
distributions under the Contract and paid to us. Any loan payment which is not
made when due, plus interest, will be treated as a distribution, as permitted
by law. The loan payment may be taxable to the borrower, and may be subject to
the early withdrawal tax penalty. When a loan is made, the number of
Accumulation Units equal to the loan amount will be withdrawn from the
individual account and placed in the Collateral Fixed Account. Accumulation
Units taken from the individual account to provide a loan do not participate in
the investment experience of the related Portfolios or the guarantees of the
General Account Guaranteed Options. The loan amount will be withdrawn on a pro
rata basis first from the Portfolios to which Accumulated Value has been
allocated, and if that amount is insufficient, collateral will then be
transferred from the General Account Guaranteed Options--except the Five-Year
Guaranteed Equity Option. As with any withdrawal, Market Value Adjustments or
other deductions applicable to amounts allocated to General Account Guaranteed
Options may be applied and no amounts may be withdrawn from the Five-Year
Guaranteed Equity Option. Until the loan is repaid in full, that portion of the
Collateral Fixed Account shall be credited with interest at a rate of 2% less
than the loan interest rate applicable to the loan--however, the interest rate
credited will never be less than the General Account Guaranteed Option's
guaranteed rate of 3%.
A bill in the amount of the quarterly principal and interest will be mailed
directly to you in advance of the payment due date. The initial quarterly
repayment will be due three months from the loan date. The loan date will be
the date that the Company receives the loan request form in good order. Payment
is due within 30 calendar days after the due date. Subsequent quarterly
installments are based on the first due date.
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When repayment of principal is made, Accumulation Units will be reallocated on
a current value basis among the same investment Portfolios and/or General
Account Guaranteed Options and in the same proportion as when the loan was
initially made. If a repayment in excess of a billed amount is received, the
excess will be applied towards the principal portion of the outstanding loan.
Payments received which are less than the billed amount will not be accepted
and will be returned to you.
If a partial surrender is taken from your individual account due to nonpayment
of a billed quarterly installment, the date of the surrender will be the first
business day following the 30 calendar day period in which the repayment was
due.
Prepayment of the entire loan is allowed. At the time of prepayment, the
Company will bill you for any accrued interest. The Company will consider the
loan paid when the loan balance and accrued interest are paid.
If the individual account is surrendered with an outstanding loan balance, the
outstanding loan balance and accrued interest will be deducted from the
Surrender Value. If the individual account is surrendered, with an outstanding
loan balance, due to the Contract Owner's death or the election of an Annuity
Payment Option, the outstanding loan balance and accrued interest will be
deducted.
The Company may require that any outstanding loan be paid if the individual
account value falls below an amount equal to 25% of total loans outstanding.
The Code requires the aggregation of all loans made to an individual employee
under a single employer-sponsored 403(b) Plan. However, since the Company has
no information concerning the outstanding loans that you may have with other
companies, it will only use the information available under Contracts issued by
the Company.
The Code imposes restrictions on full or partial surrenders from 403(b)
individual accounts attributable to Purchase Payments under a salary reduction
agreement and to any earnings on the entire 403(b) individual account credited
on and after January 1, 1989. Surrenders of these amounts are allowed only if
the Contract Owner (a) has died, (b) has become disabled, as defined in the
Code, (c) has attained age 59 1/2, or (d) has separated from service.
Surrenders are also allowed if the Contract Owner can show "hardship," as
defined by the Internal Revenue Service, but the surrender is limited to the
lesser of Purchase Payments made on or after January 1, 1989 or the amount
necessary to relieve the hardship. Even if a surrender is permitted under these
provisions, a 10% federal tax penalty may be assessed on the withdrawn amount
if it does not otherwise meet the exceptions to the penalty tax provisions.
(See "Taxation of Annuities in General," page 24).
Under the Code, you may request a full or partial surrender of an amount equal
to the individual account cash value as of December 31, 1988 (the
"grandfathered" amount), subject to the terms of the 403(b) Plan. Although the
Code surrender restrictions do not apply to this amount, a 10% federal penalty
tax may be assessed on the withdrawn amount if it does not otherwise meet the
exceptions to the penalty tax provisions (See "Taxation of Annuities in
General," page 24).
The Company believes that the Code surrender restrictions do not apply to tax-
free transfers pursuant to Revenue Ruling 90-24. The Company further believes
that the surrender restrictions will not apply to any "grandfathered" amount
transferred pursuant to Revenue Ruling 90-24 into another 403(b) Contract.
GENERAL INFORMATION
ADDITIONS, DELETIONS, OR SUBSTITUTIONS OF INVESTMENTS
The Company retains the right, subject to any applicable law, to make certain
changes. The Company reserves the right to eliminate the shares of any of the
Portfolios and to substitute shares of another Portfolio of the Funds, or of
another registered, open-end management investment company, if the shares of
the Portfolios are no longer available for investment, or, if in the Company's
judgment, investment in any Portfolio would be inappropriate in view of the
purposes of the Separate Account. To the extent required by the 1940 Act,
substitutions of shares attributable to a Contract Owner's interest in a
Portfolio will not be made until SEC approval has been obtained and the
Contract Owner has been notified of the change.
28
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New Portfolios may be established at the discretion of the Company. Any new
Portfolios will be made available to existing Contract Owners on a basis to be
determined by the Company. The Company may also eliminate one or more
Portfolios if marketing, tax, investment or other conditions so warrant.
In the event of any such substitution or change, the Company may, by
appropriate endorsement, make such changes in the Contracts as may be necessary
or appropriate to reflect such substitution or change. Furthermore, if deemed
to be in the best interests of persons having voting rights under the
Contracts, the Separate Account may be operated as a management company under
the 1940 Act or any other form permitted by law, may be deregistered under the
1940 Act in the event such registration is no longer required, or may be
combined with one or more other separate accounts.
VOTING RIGHTS
The Funds do not hold regular meetings of shareholders. The Directors/Trustees
of each Fund may call special meetings of shareholders as may be required by
the 1940 Act or other applicable law. To the extent required by law, the
Portfolio shares held in the Separate Account will be voted by the Company at
shareholder meetings of each Fund in accordance with instructions received from
persons having voting interests in the corresponding Portfolio. Fund shares as
to which no timely instructions are received or shares held by the Company as
to which Contract Owners have no beneficial interest will be voted in
proportion to the voting instructions that are received with respect to all
Contracts participating in that Portfolio. Voting instructions to abstain on
any item to be voted upon will be applied on a pro rata basis to reduce the
votes eligible to be cast.
The number of votes that are available to a Contract Owner will be calculated
separately for each Portfolio. That number will be determined by applying his
or her percentage interest, if any, in a particular Portfolio to the total
number of votes attributable to the Portfolio.
Prior to the Annuity Date, a Contract Owner holds a voting interest in each
Portfolio to which the Accumulated Value is allocated. The number of votes
which are available to a Contract Owner will be determined by dividing the
Accumulated Value attributable to a Portfolio by the net asset value per share
of the applicable Portfolio. After the Annuity Date, the person receiving
Annuity Payments has the voting interest. The number of votes after the Annuity
Date will be determined by dividing the reserve for such Contract allocated to
the Portfolio by the net asset value per share of the corresponding Portfolio.
After the Annuity Date, the votes attributable to a Contract decrease as the
reserves allocated to the Portfolio decrease. In determining the number of
votes, fractional shares will be recognized.
The number of votes of the Portfolio that are available will be determined as
of the date coincident with the date established by that Portfolio for
determining shareholders eligible to vote at the meeting of the corresponding
Fund. Voting instructions will be solicited by written communication prior to
such meeting in accordance with procedures established by such Fund.
AUDITORS
Ernst & Young LLP serves as independent auditors for the Separate Account and
the Company and will audit their financial statements annually.
LEGAL MATTERS
Jorden Burt Berenson & Johnson LLP of Washington, D.C., has provided legal
advice relating to the federal securities laws applicable to the issue and sale
of the Contracts. All matters of Missouri law pertaining to the validity of the
Contract and the Company's right to issue such Contracts have been passed upon
by Kimberly A. Scouller, Esquire, on behalf of the Company.
29
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TABLE OF CONTENTS FOR THE PROVIDIAN MARQUEE VARIABLE ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
PAGE
THE CONTRACT..............................................................2
Computation of Variable Annuity Income Payments.......................2
Exchanges.............................................................3
Exceptions to Charges and to Transaction or Balance Requirements......3
GENERAL MATTERS...........................................................3
Non-Participating.....................................................3
Misstatement of Age or Sex............................................3
Assignment............................................................4
Annuity Data..........................................................4
Annual Statement......................................................4
Incontestability......................................................4
Ownership.............................................................4
PERFORMANCE INFORMATION...................................................4
Money Market Subaccount Yields........................................5
30-Day Yield for Non-Money Market Subaccounts.........................5
Standardized Average Annual Total Return for Market Subaccounts.......5
ADDITIONAL PERFORMANCE MEASURES...........................................7
Non-Standardized Actual Total Return and Non-Standardized Actual Average
Annual Total Return...................................................7
Non-Standardized Total Return Year-to-Date...........................10
Non-Standardized One Year Return.....................................11
Non-Standardized Hypothetical Total Return and Non-Standardized
Hypothetical Average Annual Total Return............................12
Individualized Computer Generated Illustrations......................32
PERFORMANCE COMPARISONS..................................................32
SAFEKEEPING OF ACCOUNT ASSETS............................................34
THE COMPANY..............................................................34
STATE REGULATION.........................................................34
RECORDS AND REPORTS......................................................35
DISTRIBUTION OF THE CONTRACTS............................................35
LEGAL PROCEEDINGS........................................................35
OTHER INFORMATION........................................................35
FINANCIAL STATEMENTS.....................................................35
Audited Financial Statements.........................................35
<PAGE>
APPENDIX A
THE GENERAL ACCOUNT
Because of applicable exemptive and exclusionary provisions, interests in the
General Account have not been registered under the Securities Act of 1933
("1933 Act"), nor under the 1940 Act. Thus, neither our General Account, nor
any interest therein are generally subject to regulation under the provisions
of the 1933 Act or the 1940 Act. Accordingly, the Company has been advised that
the staff of the SEC has not reviewed the disclosure in this Appendix relating
to the General Account. These disclosures regarding the General Account may,
however, be subject to certain generally applicable provisions of the federal
securities laws relating to the accuracy and completeness of statements made in
prospectuses.
Note: The General Account Guaranteed Options, or certain of them, are currently
available for sale in most, but not all, states. Please check with your sales
representative for details of the availability of these features before
purchasing.
The General Account contains all of the assets of the Company other than those
in the separate accounts we establish. The Company has sole discretion to
invest the assets of the General Account, subject to applicable law. Allocation
of any amounts to the General Account does not entitle you to share directly in
the investment experience of these assets.
There are three fixed options under the General Account: the One-Year
Guaranteed Index Rate Option, the Five-Year Guaranteed Index Rate Option, and
the Five-Year Guaranteed Equity Option, each described below:
One-Year Guaranteed Index Rate Option
-------------------------------------
You may allocate your Accumulated Value to this option at any time. The
Accumulated Value you allocate under this option earns interest equal to 90% (A
Units) or 80% (B Units) of the one-year constant maturity Treasury rate at the
time your allocation is made with a guarantee that the Accumulated Value in
this General Account Guaranteed Option will not be less than the amounts
allocated, plus 3%.
You may allocate any or all of your Accumulated Value from this General Account
Guaranteed Option to any of the Subaccounts or other General Account Guaranteed
Options at any time before the end of the one-year guarantee period. However,
for any amounts so transferred we will deduct an amount equal to the interest
the transferred value earned over the previous 90 days at the applicable one-
year rate. For full and partial withdrawals of amounts allocated to this
General Account Guaranteed Option prior to the end of the one-year guarantee
period, we will deduct an amount equal to the interest earned on the amount
withdrawn during the previous 90 days at the applicable one-year rate plus we
will deduct any applicable surrender charge.
At the end of the one-year guarantee period, you may, without loss of interest,
elect to transfer all or part of your Accumulated Value under this option to
any of the Subaccounts or transfer to another General Account Guaranteed Option
or renew your participation in this option. Notice of such an election must be
provided to the Company no later than 15 days after the end of the one-year
guarantee period (and each subsequent one-year guarantee period). If no such
election is made, your Accumulated Value will automatically be renewed under
this option for the next one-year guarantee period.
Five-Year Guaranteed Index Rate Option
--------------------------------------
You may allocate your Accumulated Value to this option at any time. The
Accumulated Value you allocate under this option earns interest equal to 100%
(A Units) or 90% (B Units) of the five-year constant maturity Treasury rate at
the time your allocation is made with a guarantee that the Accumulated Value in
this General Account Guaranteed Option will not be less than the amount
initially allocated, plus 3%, compounded annually.
You may allocate any or all of your Accumulated Value from this General Account
Guaranteed Option to any of the Subaccounts or other General Account Guaranteed
Options at any time before the end of the five-year guarantee period. However,
for any amounts so transferred we will apply a Market Value Adjustment (as
described below) against such amounts. For full and partial withdrawals of
amounts allocated to this General Account Guaranteed Option prior to the end of
the five-year guarantee period, we will apply a Market Value Adjustment (as
described below) against such amounts withdrawn plus we will deduct any
applicable surrender charge.
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The Market Value Adjustment ("MVA") Factor for the Five-Year Guaranteed Index
Rate Option will be as follows:
N (B - E)
--- X -------
12 1 + E
where N=the number of months left in the five-year guarantee period at the time
of the transfer or surrender (including any partial months which will
count as full months for purposes of this calculation);
B=the applicable five-year constant maturity Treasury rate at the
beginning of the five-year guarantee period; and
E=the applicable five-year constant maturity Treasury rate at the time of
the transfer or surrender.
The MVA is applied to the Accumulated Value in order to determine the net
amount of the transfer or surrender under this option prior to the deduction of
any applicable surrender charge. Generally, if the five-year constant maturity
Treasury rate at the beginning of the five-year guarantee period is lower than
the five-year constant maturity Treasury rate prevailing at the time of the
transfer or surrender, then the application of the MVA will result in a lower
payment upon transfer or surrender. Similarly, if the five-year constant
maturity Treasury rate at the beginning of the five-year guarantee period is
higher than the prevailing five-year constant maturity Treasury rate at the
time of transfer or surrender, then the application of the MVA will result in a
higher payment upon transfer or surrender.
The following is an example of how your Accumulated Value under the Five-Year
Guaranteed Index Rate Option is affected by a positive Market Value Adjustment:
Assume an initial allocation of $100,000 when the five-year constant maturity
Treasury rate is 8%. At the end of 12 months, your Accumulated Value is
$108,000. Assume also you surrender at the end of one year with 48 months of
the guarantee period remaining and the five-year constant maturity Treasury
rate is 7%.
Accumulated Value = $108,000
MVA Factor = 48 .08 - .07 = 4 X .00935 = .0374
-- X ---------
12 1 + .07
Adjustment = $108,000 X .0374 = $4,039
= $108,000 + $4,039 = $112,039 = Net amount of transfer or
surrender (before application of a surrender charge)
The following is an example of how your Accumulated Value under the Five-Year
Guaranteed Index Rate Option is affected by a negative Market Value Adjustment:
Assume an initial allocation of $100,000 when the five-year constant maturity
Treasury rate is 8%. At the end of 12 months, your Accumulated Value is
$108,000. Assume also you surrender at the end of one year with 48 months
remaining in the guarantee period and the five-year constant maturity Treasury
rate is 9%.
Accumulated Value = $108,000
MVA Factor = 48 X .08 - .09 = 4 X -.00917 = -.0367
-- X --------
12 1 + .09
Adjustment = $108,000 X -.0367 = -$3,964
= $108,000 - $3,964 = $104,036 = Net amount of transfer or
surrender (before application of a surrender charge)
Notwithstanding application of a negative Market Value Adjustment under the
Five-Year Guaranteed Index Rate Option, any Net Purchase Payments allocated to
this General Account Guaranteed Option will earn interest of at least 3%,
compounded annually.
At the end of the five-year guarantee period, you may, without loss of
interest, elect to transfer any or all of your Accumulated Value under this
option to any of the Subaccounts or transfer to another General Account
Guaranteed Option or renew your participation in this option. Such election
must be provided to the Company before the end of the five-year guarantee
period (and each subsequent five-year guarantee period). If no election is
made, your Accumulated Value will automatically be renewed under this option
for the next five-year guarantee period.
A-2
<PAGE>
Five-Year Guaranteed Equity Option
You may allocate your Accumulated Value to this option as of the first business
day of each month. For B Unit Contracts, such allocation may occur only after
the sixth Contract Year. During the five-year guarantee period applicable to
Accumulated Value allocated to this option, we will credit interest at a
guaranteed annual effective rate of 3%, compounded annually. At the end of the
five-year guarantee period we will credit additional interest in an amount
equal to the amount by which (a) exceeds (b), where: (a) equals the percentage
change in the S&P 500(R) Composite Stock Price Index ("S&P 500(R) Index") from
the date Accumulated Value is allocated to the end of the five-year guarantee
period, multiplied by the amount allocated; and (b) equals the total amount of
interest credited during the five-year guarantee period. ("S&P 500(R)" is a
trademark of The McGraw-Hill Companies, Inc. and has been licensed for use by
Providian Corporation.)
THIS OPTION IS ILLIQUID FOR THE ENTIRE FIVE-YEAR GUARANTEE PERIOD AND,
ACCORDINGLY, DOES NOT PERMIT ANY EXCHANGES OR REALLOCATIONS OF ACCUMULATED
VALUE TO THE SUBACCOUNTS OR OTHER GENERAL ACCOUNT GUARANTEED OPTIONS OR FULL OR
PARTIAL WITHDRAWALS DURING SUCH FIVE-YEAR PERIOD. However, during such
guarantee period, the Accumulated Value allocated under this option may be
annuitized under any of the Annuity Payment Options.
At the end of the five-year guarantee period, you may, without loss of
earnings, elect to transfer all or part of your Accumulated Value under this
option to any of the Subaccounts, transfer into another General Account
Guaranteed Option or renew your participation in this option. Such election
must be received by the Company no later than 30 days prior to the end of the
five-year guarantee period. If no election is received, your Accumulated Value
will automatically be transferred to Fidelity Money Market. This option may not
be available at all times.
DISCLAIMER REGARDING STANDARD & POOR'S(R) 500 INDEX
The Five-Year Guaranteed Equity Option (the "GEO") is not sponsored,
endorsed, sold or promoted by Standard & Poor's Corporation ("S&P"). S&P makes
no representation or warranty, express or implied, to investors in the GEO or
any member of the public regarding the advisability of investing in securities
generally or in the GEO particularly or the ability of the S&P 500(R) Index to
track general stock market performance. S&P's only relationship to Providian
Life and Health Insurance Company is the licensing of certain trademarks and
trade names of S&P and of the S&P 500(R) Index which is determined, composed
and calculated by S&P without regard to Providian Life and Health Insurance
Company or the GEO. S&P has no obligation to take the needs of Providian Life
and Health Insurance Company or the investors in the GEO into consideration in
determining, composing or calculating the S&P 500(R) Index. S&P is not
responsible for and has not participated in the determination of the timing of,
prices at, or quantities of the GEO to be issued or in the determination or
calculation of the equation by which the GEO is to be converted into cash. S&P
has no obligation or liability in connection with the administration, marketing
or trading of the GEO.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500(R)
INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED,
AS TO RESULTS TO BE OBTAINED BY PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY,
INVESTORS IN THE GEO, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P
500(R) INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS
LICENSED BY PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY OR FOR ANY OTHER USE.
S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE S&P 500(R) INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING
ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
A-3
<PAGE>
PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT V
STATEMENT OF ADDITIONAL INFORMATION
FOR THE
PROVIDIAN MARQUEE VARIABLE ANNUITY
Offered by
Providian Life and Health Insurance Company
(A Missouri Stock Company)
Administrative Offices
P.O. Box 32700
Louisville, Kentucky 40232
----------
This Statement of Additional Information expands upon subjects discussed in the
current Prospectus for the Providian Marquee variable annuity contract (the
"Contract") offered by Providian Life and Health Insurance Company (the
"Company"). You may obtain a copy of the Prospectus dated April 30, 1996, by
calling 1-800-866-6007 or by writing to our Administrative Offices, P.O. Box
32700, Louisville, Kentucky 40232. Terms used in the current Prospectus for the
Contract are incorporated in this Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACT.
April 30, 1996
TABLE OF CONTENTS PAGE
- ----------------- ----
THE CONTRACT................................................................ 2
Computation of Variable Annuity Income Payments............................ 2
Exchanges.................................................................. 3
Exceptions to Charges and to Transaction or Balance Requirements........... 3
GENERAL MATTERS............................................................. 3
Non-Participating.......................................................... 3
Misstatement of Age or Sex................................................. 3
Assignment................................................................. 4
Annuity Data............................................................... 4
Annual Statement........................................................... 4
Incontestability........................................................... 4
Ownership.................................................................. 4
PERFORMANCE INFORMATION..................................................... 4
Money Market Subaccount Yields............................................. 5
30-Day Yield for Non-Money Market Subaccounts.............................. 5
Standardized Average Annual Total Return for Subaccounts................... 5
ADDITIONAL PERFORMANCE MEASURES............................................. 7
Non-Standardized Actual Total Return and Non-Standardized Actual Average
Annual Total Return....................................................... 7
Non-Standardized Total Return Year-to-Date................................. 10
Non-Standardized One Year Return........................................... 11
Non-Standardized Hypothetical Total Return and Non-Standardized
Hypothetical Average Annual Total Return.................................. 12
Individualized Computer Generated Illustrations............................ 32
PERFORMANCE COMPARISONS..................................................... 32
SAFEKEEPING OF ACCOUNT ASSETS............................................... 34
THE COMPANY................................................................. 34
STATE REGULATION............................................................ 34
RECORDS AND REPORTS......................................................... 35
DISTRIBUTION OF THE CONTRACTS............................................... 35
LEGAL PROCEEDINGS........................................................... 35
OTHER INFORMATION........................................................... 35
FINANCIAL STATEMENTS........................................................ 35
<PAGE>
THE CONTRACT
In order to supplement the description in the Prospectus and Appendix A thereto,
the following provides additional information about the Contract which may be of
interest to Contract Owners.
COMPUTATION OF VARIABLE ANNUITY INCOME PAYMENTS
The amounts shown in the Annuity Tables contained in your Contract represent the
guaranteed minimum for each Annuity Payment under a Fixed Payment Option.
Variable annuity income payments are computed as follows. First, the
Accumulated Value (or the portion of the Accumulated Value used to provide
variable payments) is applied under the Annuity Tables contained in your
Contract corresponding to the Annuity Payment Option elected by the Contract
Owner and based on an assumed interest rate of 4%. This will produce a dollar
amount which is the first monthly payment. The Company may, at the time annuity
income payments are computed, offer more favorable rates in lieu of the
guaranteed rates specified in the Annuity Tables.
The amount of each Annuity Payment after the first is determined by means of
Annuity Units. The number of Annuity Units is determined by dividing the first
Annuity Payment by the Annuity Unit Value for the selected Subaccount ten
Business Days prior to the Annuity Date. The number of Annuity Units for the
Subaccount then remains fixed, unless an Exchange of Annuity Units (as set forth
below) is made. After the first Annuity Payment, the dollar amount of each
subsequent Annuity Payment is equal to the number of Annuity Units multiplied by
the Annuity Unit Value for the Subaccount ten Business Days before the due date
of the Annuity Payment.
The Annuity Unit Value for each Subaccount was initially established at $10.00
on the date money was first deposited in that Subaccount. The Annuity Unit
Value for any subsequent Business Day is equal to (a) times (b) times (c), where
(a) = the Annuity Unit Value for the immediately preceding Business Day;
(b) = the Net Investment Factor for the day;
(c) = the investment result adjustment factor (.99989255 per day), which
recognizes an assumed interest rate of 4% per year used in
determining the Annuity Payment amounts.
The Net Investment Factor is a factor applied to a Subaccount that reflects
daily changes in the value of the Subaccount due to:
(a) = any increase or decrease in the value of the Subaccount due to
investment results;
(b) = a daily charge for the mortality and expense risks assumed by the
Company corresponding to an annual rate according to the following
schedule:
A Unit Contracts .65%
B Unit Contracts 1.25%
(c) = a daily charge for the cost of administering the Contract
corresponding to an annual charge of .15% of the value of the
Subaccount, plus the Annual Contract Fee.
The Annuity Tables contained in the Contract are based on the 1983 Table "A"
Mortality Table projected for mortality improvement to the year 2000 using
Projection Scale G and an interest rate of 4% a year; except that in
2
<PAGE>
Massachusetts and Montana, the Annuity Tables contained in the Contract are
based on a 60% female/40% male blending of the above for all annuitants of
either gender.
EXCHANGES
After the Annuity Date you may, by making a written request, exchange the
current value of an existing Subaccount to Annuity Units of any other
Subaccount(s) then available. The written request for an Exchange must be
received by us, however, at least 10 Business Days prior to the first payment
date on which the Exchange is to take effect. An Exchange shall result in the
same dollar amount as that of the Annuity Payment on the date of Exchange (the
Exchange Date). Each year you may make an unlimited number of free Exchanges
between Subaccounts. We reserve the right to charge a $15 fee in the future for
Exchanges in excess of twelve per Contract Year.
Exchanges will be made using the Annuity Unit Value for the Subaccounts on the
date the written request for Exchange is received. On the Exchange Date, the
Company will establish a value for the current Subaccounts by multiplying the
Annuity Unit Value by the number of Annuity Units in the existing Subaccounts
and compute the number of Annuity Units for the new Subaccounts by dividing the
Annuity Unit Value of the new Subaccounts into the value previously calculated
for the existing Subaccounts.
EXCEPTIONS TO CHARGES AND TRANSACTION OR BALANCE REQUIREMENTS
In addition to the Purchase Payment breakpoints discussed in the Prospectus, the
Company may impose reduced sales loads, administrative charges or other
deductions from Purchase Payments in certain situations where the Company
expects to realize significant economies of scale or other economic benefits
with respect to the sales of Contracts. This is possible because sales costs do
not increase in proportion to the dollar amount of the Contracts sold. For
example, the per-dollar transaction cost for a sale of a Contract equal to
$5,000 is generally much higher than the per-dollar cost for a sale of Contract
equal to $1,000,000. As a result, the applicable sales charge declines as a
percentage of the dollar amount of Contracts sold as the dollar amount
increases.
The Company may also impose reduced sales loads and reduced administrative
charges and fees on sales to directors, officers and bona fide full-time
employees (and their spouses and minor children) of the Company, its ultimate
parent company, Providian Corporation, and certain of their affiliates and
certain sales representatives for the Contract. The Company may also grant
waivers or modifications of certain minimum or maximum purchase and transaction
amounts or balance requirements in these circumstances.
Notwithstanding the above, any variations in the sales loads, administrative
charges or other deductions from Purchase Payments or in the minimum or maximum
transaction or balance requirements shall reflect differences in costs or
services and shall not be unfairly discriminatory against any person.
GENERAL MATTERS
NON-PARTICIPATING
The Contracts are non-participating. No dividends are payable and the Contracts
will not share in the profits or surplus earnings of the Company.
MISSTATEMENT OF AGE OR SEX
The Company may require proof of age and sex before making Annuity Payments. If
the Annuitant's stated age, sex or both in the Contract are incorrect, the
Company will change the annuity benefits payable to those benefits which the
Purchase Payments would have purchased for the correct age and sex. In the case
of correction of the
3
<PAGE>
stated age and/or sex after payments have commenced, the Company will (1) in the
case of underpayment, pay the full amount due with the next payment; (2) in the
case of overpayment, deduct the amount due from one or more future payments.
ASSIGNMENT
Any Non-Qualified Contract may be assigned by you prior to the Annuity Date and
during the Annuitant's lifetime. The Company is not responsible for the validity
of any assignment. No assignment will be recognized until the Company receives
the appropriate Company form notifying the Company of such assignment. The
interest of any beneficiary which the assignor has the right to change shall be
subordinate to the interest of an assignee. Any amount paid to the assignee
shall be paid in one sum notwithstanding any settlement agreement in effect at
the time assignment was executed. The Company shall not be liable as to any
payment or other settlement made by the Company before receipt of the
appropriate Company form.
ANNUITY DATA
The Company will not be liable for obligations which depend on receiving
information from a Payee until such information is received in a form
satisfactory to the Company.
ANNUAL STATEMENT
Once each Contract Year, the Company will send you an annual statement of the
current Accumulated Value allocated to each Subaccount and/or the General
Account Guaranteed Options; and any Purchase Payments, charges, Exchanges or
withdrawals during the year. This report will also give you any other
information required by law or regulation. You may ask for an annual statement
like this at any time. We will also send you quarterly statements. However, we
reserve the right to discontinue quarterly statements at any time.
INCONTESTABILITY
This Contract is incontestable from the Contract Date, subject to the
"Misstatement of Age or Sex" provision.
OWNERSHIP
The Contract Owner on the Contract Date is the Annuitant, unless otherwise
specified in the application. The Contract Owner may specify a new Contract
Owner by sending us the appropriate Company form at any time thereafter. The
term Contract Owner also includes any person named as a Joint Owner. A Joint
Owner shares ownership in all respects with the Contract Owner. During the
Annuitant's lifetime, all rights and privileges under this Contract may be
exercised solely by the Contract Owner. Upon the death of the Contract Owner,
ownership is retained by the surviving Joint Owner or passes to the Owner's
Designated Beneficiary, if one has been designated by the Contract Owner. If no
Owner's Designated Beneficiary has been selected or if no Owner's Designated
Beneficiary is living, then the Owner's Designated Beneficiary is the Contract
Owner's estate. From time to time the Company may require proof that the
Contract Owner is still living.
PERFORMANCE INFORMATION
Performance information for the Subaccounts including the yield and effective
yield of the Fidelity Money Market Subaccount, the yield of the remaining
Subaccounts, and the total return of all Subaccounts, may appear in reports or
promotional literature to current or prospective Contract Owners.
Where applicable in calculating performance information, the Annual Contract Fee
is reflected as a percentage equal to the total amount of fees collected during
a calendar year divided by the total average net assets of the Portfolios during
the same calendar year. The fee is assumed to remain the same in each year of
the applicable period. (With respect to partial year periods, if any, in the
examples, the Annual Contract Fee is pro-rated to reflect only the applicable
portion of the partial year period.)
Where applicable, the following inception dates are used in the calculation of
performance figures. For A Unit operations: 7/20/94 for the Fidelity Money
Market Portfolio; 8/1/94 for the T. Rowe Price International, Fidelity Growth
and Fidelity Asset Manager Portfolios; 9/26/94 for the Dreyfus Growth and Income
Portfolio; 11/17/94 for the Fidelity Equity-Income, T. Rowe Price Equity Income,
T. Rowe Price New America Growth, OpCap Advisors Managed and OpCap Advisors
Small Cap Portfolios; and 11/18/94 for the Dreyfus Quality Bond and OpCap
Advisors U.S. Government Income Portfolios; For B Unit operations: 8/2/94 for
the Fidelity Money Market Portfolio; 8/17/94 for the Fidelity Equity-Income,
Fidelity Growth, Dreyfus Quality Bond and T. Rowe Price International
Portfolios; 8/31/94 for the Dreyfus Growth and Income Portfolio; 9/1/94 for the
T. Rowe Price Equity Income Portfolio; 9/14/94 for the Fidelity Asset Manager
Portfolio; 11/3/94 for the OpCap Advisors Managed Portfolio; 11/4/94 for the
OpCap Small Cap Portfolio; 12/30/94 for the T. Rowe Price New America Growth
Portfolio; and 11/18/94 for the OpCap Advisors U.S. Government Income Portfolio.
4
<PAGE>
MONEY MARKET SUBACCOUNT YIELDS
Current yield for the Fidelity Money Market Subaccount will be based on the
change in the value of a hypothetical investment (exclusive of capital changes)
over a particular 7-day period, less a pro-rata share of Subaccount expenses
accrued over that period (the "base period"), and stated as a percentage of the
investment at the start of the base period (the "base period return"). The base
period return is then annualized by multiplying by 365/7, with the resulting
yield figure carried to at least the nearest hundredth of one percent.
Calculation of "effective yield" begins with the same "base period return" used
in the calculation of yield, which is then annualized to reflect weekly
compounding pursuant to the following formula:
Effective Yield = [((Base Period Return)+1)/365/7/] - 1
30-DAY YIELD FOR NON-MONEY MARKET SUBACCOUNTS
Quotations of yield for the remaining Subaccounts will be based on all
investment income per Unit earned during a particular 30-day period, less
expenses accrued during the period ("net investment income"), and will be
computed by dividing net investment income by the value of a Unit on the last
day of the period, according to the following formula:
a - b
YIELD = 2[(----- + 1)/6/ - 1]
cd
Where:
[a] equals the net investment income earned during the period by the
Portfolio attributable to shares owned by a Subaccount
[b] equals the expenses accrued for the period (net of reimbursement)
[c] equals the average daily number of Units outstanding during the
period
[d] equals the maximum offering price per Accumulation Unit on the
last day of the period
Yield on a Subaccount is earned from the increase in net asset value of shares
of the Portfolio in which the Subaccount invests and from dividends declared and
paid by the Portfolio, which are automatically reinvested in shares of the
Portfolio.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR SUBACCOUNTS
When advertising performance of the Subaccounts, the Company will show the
"Standardized Average Annual Total Return," calculated as prescribed by the
rules of the SEC, for each Subaccount. The Standardized Average Annual Total
Return is the effective annual compounded rate of return that would have
produced the cash redemption value over the stated period had the performance
remained constant throughout. The calculation assumes a single $1,000 payment
made at the beginning of the period and full redemption at the end of the
period. It reflects the deduction of all applicable sales loads (including the
contingent deferred sales load), the Annual Contract Fee and all other
Portfolio, Separate Account and Contract level charges except Premium Taxes, if
any.
Quotations of average annual total return for any Subaccount will be expressed
in terms of the average annual compounded rate of return of a hypothetical
investment in a Contract over a period of one, five and ten years (or, if less,
up to the life of the Subaccount), calculated pursuant to the formula:
5
<PAGE>
P(1 + T)/n/ = ERV
Where:
(1) [P] equals a hypothetical initial Purchase Payment of $1,000
(2) [T] equals an average annual total return
(3) [n] equals the number of years
(4) [ERV] equals the ending redeemable value of a hypothetical $1,000
Purchase Payment made at the beginning of the period (or fractional
portion thereof)
The following tables show the Standardized Average Annual Total Return for the
Subaccounts for the period beginning at the inception of each Subaccount and
ending on December 31, 1995.
A UNIT PERFORMANCE FOR PERIOD ENDING DECEMBER 31, 1995
Subaccount 1 Year Since Inception
---------- ------ ---------------
Fidelity Money Market Portfolio -1.08% 0.28%
Fidelity Equity-Income Portfolio 26.24% 21.32%
Fidelity Growth Portfolio 26.49% 23.57%
Fidelity Asset Manager Portfolio 9.29% 4.49%
Dreyfus Growth and Income Portfolio 51.30% 35.17%
Dreyfus Quality Bond Portfolio 12.52% 12.82%
TRP Equity Income Portfolio 26.24% 22.84%
TRP New America Growth Portfolio 25.93% 34.01%
TRP International Stock Portfolio 3.89% 0.31%
OpCap Advisors Managed Portfolio 36.03% 29.81%
OpCap Advisors Small Cap Portfolio 7.68% 9.02%
OpCap Advisors Government Income Portfolio N/A (0.19)%
6
<PAGE>
B UNIT PERFORMANCE FOR PERIOD ENDING DECEMBER 31, 1995
<TABLE>
<CAPTION>
Subaccount 1 Year Since Inception
---------- ------ ----------------
<S> <C> <C>
Fidelity Money Market Portfolio -0.90% 0.45%
Fidelity Equity-Income Portfolio 26.47% 16.29%
Fidelity Growth Portfolio 26.73% 20.67%
Fidelity Asset Manager Portfolio 9.49% 4.36%
Dreyfus Growth and Income Portfolio 51.58% 30.70%
Dreyfus Quality Bond Portfolio 12.73% 8.82%
TRP Equity Income Portfolio 26.17% 17.71%
TRP New America Growth Portfolio N/A% 40.87%
TRP International Stock Portfolio 4.08% -0.32%
OpCap Advisors Managed Portfolio 36.29% 27.79%
OpCap Advisors Small Cap Portfolio 7.88% 8.79%
OpCap Advisors Government Income N/A% 4.06%
Portfolio
</TABLE>
ADDITIONAL PERFORMANCE MEASURES
NON-STANDARDIZED ACTUAL TOTAL RETURN AND NON-STANDARDIZED ACTUAL AVERAGE ANNUAL
TOTAL RETURN
The Company may show Non-Standardized Actual Total Return (i.e., the percentage
change in the value of an Accumulation Unit) for one or more Subaccounts with
respect to one or more periods. The Company may also show Non-Standardized
Actual Average Annual Total Return (i.e., the average annual change in
Accumulation Unit Value) with respect to one or more periods. For one year, the
Non-Standardized Actual Total Return and the Non-Standardized Actual Average
Annual Total Return are effective annual rates of return and are equal. For
periods greater than one year, the Non-Standardized Actual Average Annual Total
Return is the effective annual compounded rate of return for the periods stated.
Because the value of an Accumulation Unit reflects the Separate Account and
Portfolio expenses (See Fee Table in the Prospectus), the Non-Standardized
Actual Total Return and Non-Standardized Actual Average Annual Total Return also
reflect these expenses. However, these percentages do not reflect the Annual
Contract Fee, any sales loads or Premium Taxes (if any), which if included would
reduce the percentages reported by the Company.
7
<PAGE>
NON-STANDARDIZED ACTUAL TOTAL RETURN FOR PERIOD ENDING 12/31/95
<TABLE>
<CAPTION>
A UNITS One Year Since Inception
------- -------- ---------------
<S> <C> <C>
Fidelity Money Market Portfolio 5.04% 6.64%
Fidelity Equity-Income Portfolio 34.02% 31.85%
Fidelity Growth Portfolio 34.29% 43.29%
Fidelity Asset Manager Portfolio 16.03% 13.02%
Dreyfus Growth and Income Portfolio 60.67% 55.34%
Dreyfus Quality Bond Portfolio 19.46% 21.50%
TRP Equity Income Portfolio 34.02% 33.69%
TRP New America Growth Portfolio 49.89% 47.27%
TRP International Stock Portfolio 10.29% 6.68%
OpCap Advisors Managed Portfolio 44.40% 42.21%
OpCap Advisors Small Cap Portfolio 14.31% 16.96%
OpCap Advisors Government Income 5.99% 5.95%
Portfolio
B UNITS One Year Since Inception
------- -------- ---------------
Fidelity Money Market Portfolio 4.42% 5.49%
Fidelity Equity-Income Portfolio 33.22% 28.92%
Fidelity Growth Portfolio 33.49% 35.62%
Fidelity Asset Manager Portfolio 15.33% 10.76%
Dreyfus Growth and Income Portfolio 59.65% 49.77%
Dreyfus Quality Bond Portfolio 18.75% 17.69%
TRP Equity Income 32.89% 30.20%
TRP New America Growth Portfolio 48.99% 48.99%
TRP International Stock Portfolio 9.64% 4.35%
OpCap Advisors Managed Portfolio 43.53% 39.21%
OpCap Advisors Small Cap Portfolio 13.63% 15.51%
OpCap Advisors Government Income Portfolio 10.07% 10.07%
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
NON-STANDARDIZED ACTUAL AVERAGE ANNUAL TOTAL RETURNS FOR PERIOD ENDING 12/31/95
A UNITS One Year Since Inception
------- -------- ---------------
<S> <C> <C>
Fidelity Money Market Portfolio 5.04% 4.54%
Fidelity Equity-Income Portfolio 34.02% 27.98%
Fidelity Growth Portfolio 34.29% 28.91%
Fidelity Asset Manager Portfolio 16.03% 9.02%
Dreyfus Growth and Income Portfolio 60.67% 41.73%
Dreyfus Quality Bond Portfolio 19.46% 19.04%
TRP Equity Income Portfolio 33.69% 29.58%
TRP New America Growth Portfolio 49.89% 41.38%
TRP International Stock Portfolio 10.29% 4.67%
OpCap Advisors Managed Portfolio 44.40% 36.92%
OpCap Advisors Small Cap Portfolio 14.31% 15.01%
OpCap Advisors Government Income Portfolio 5.99% 5.95%
B UNITS One Year Since Inception
------- -------- ---------------
Fidelity Money Market Portfolio 4.42% 3.85%
Fidelity Equity-Income Portfolio 33.22% 20.33%
Fidelity Growth Portfolio 33.49% 24.85%
Fidelity Asset Manager Portfolio 15.33% 8.21%
Dreyfus Growth and Income Portfolio 59.65% 35.35%
Dreyfus Quality Bond Portfolio 18.75% 12.60%
TRP Equity Income Portfolio 32.89% 21.92%
TRP New America Growth Portfolio 48.99% 48.99%
TRP International Stock Portfolio 9.64% 3.15%
OpCap Advisors Managed Portfolio 43.53% 33.04%
OpCap Advisors Small Cap Portfolio 13.63% 13.28%
OpCap Advisors Government Income Portfolio 10.07% 10.07%
</TABLE>
9
<PAGE>
NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE
The Company may show Non-Standardized Total Return Year-to-Date as of a
particular date, or simply Total Return YTD, for one or more Subaccounts with
respect to one or more non-standardized base periods commencing at the beginning
of a calendar year. Total Return YTD figures reflect the percentage change in
actual Accumulation Unit Values during the relevant period. These percentages
reflect a deduction for the Separate Account and Portfolio expenses, but do not
include the Annual Contract Fee, any sales loads or Premium Taxes (if any),
which if included would reduce the percentages reported by the Company.
<TABLE>
<CAPTION>
Total Return
A UNIT as of 12/31/95
------ --------------
<S> <C>
Fidelity Money Market Portfolio 5.04%
Fidelity Equity-Income Portfolio 34.02%
Fidelity Growth Portfolio 34.29%
Fidelity Asset Manager Portfolio 16.03%
Dreyfus Growth and Income Portfolio 60.67%
Dreyfus Quality Bond Portfolio 19.46%
TRP Equity Income Portfolio 33.69%
TRP New America Growth Portfolio 49.89%
TRP International Stock Portfolio 10.29%
OpCap Advisors Managed Portfolio 44.40%
OpCap Advisors Small Cap Portfolio 14.31%
OpCap Advisors Government Income Portfolio 5.99%
Total Return
B UNIT as of 12/31/95
------ --------------
Fidelity Money Market Portfolio 4.42%
Fidelity Equity-Income Portfolio 33.22%
Fidelity Growth Portfolio 33.49%
Fidelity Asset Manager Portfolio 15.33%
Dreyfus Growth and Income Portfolio 59.65%
Dreyfus Quality Bond Portfolio 18.75%
TRP Equity Income Portfolio 32.89%
TRP New America Growth Portfolio 48.99%
TRP International Stock Portfolio 9.64%
OpCap Advisors Managed Portfolio 43.53%
OpCap Advisors Small Cap Portfolio 13.63%
OpCap Advisors Government Income Portfolio 10.07%
</TABLE>
10
<PAGE>
NON-STANDARDIZED ONE YEAR RETURN
The Company may show Non-Standardized One Year Return, for one or more
Subaccounts with respect to one or more non-standardized base periods commencing
at the beginning of a calendar year (or date of inception, if during the
relevant year) and ending at the end of such calendar year. One Year Return
figures reflect the percentage change in actual Accumulation Unit Values during
the relevant period. These percentages reflect a deduction for the Separate
Account and Portfolio expenses, but do not include the Annual Contract Fee, any
sales loads or Premium Taxes (if any), which if included would reduce the
percentages reported by the Company.
NON-STANDARDIZED
ONE YEAR RETURN
<TABLE>
<CAPTION>
A UNITS 1995 1994 1993 1992 1991
------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Fidelity Money Market Portfolio 5.04% 3.42% 2.40% 3.07% 5.24%
Fidelity Equity-Income Portfolio 34.02% 6.21% 17.34% 15.95% 30.39%
Fidelity Growth Portfolio 34.29% -0.82% 18.42% 8.45% 44.35%
Fidelity Asset Manager Portfolio 16.03% -6.84% 20.26% 10.82% 21.58%
Dreyfus Growth and Income Portfolio 60.67% N/A N/A N/A N/A
Dreyfus Quality Bond Portfolio 19.46% -5.35% 14.41% 11.91% 13.21%
TRP Equity Income Portfolio 33.69% N/A N/A N/A N/A
TRP New America Growth Portfolio 49.89% N/A N/A N/A N/A
TRP International Stock Portfolio 10.29% N/A N/A N/A N/A
OpCap Advisors Managed Portfolio 44.40% N/A N/A N/A N/A
OpCap Advisors Small Cap Portfolio 14.31% N/A N/A N/A N/A
OpCap Advisors U.S. Government Income Portfolio 5.99% N/A N/A N/A N/A
B UNITS 1995 1994 1993 1992 1991
------- ------ ------ ------ ------ ------
Fidelity Money Market Portfolio 4.42% 2.79% 1.78% 2.45% 4.60%
Fidelity Equity-Income Portfolio 33.22% 5.57% 16.63% 15.25% 29.60%
Fidelity Growth Portfolio 33.49% -1.42% 17.70% 7.79% 43.47%
Fidelity Asset Manager Portfolio 15.33% -7.40% 19.53% 10.15% 20.84%
Dreyfus Growth and Income Portfolio 59.65% N/A N/A N/A N/A
Dreyfus Quality Bond Portfolio 18.75% -5.93% 13.72% 10.52% 12.52%
TRP Equity Income Portfolio 32.89% N/A N/A N/A N/A
TRP New America Growth Portfolio 48.99% N/A N/A N/A N/A
TRP International Stock Portfolio 9.64% N/A N/A N/A N/A
OpCap Advisors Managed Portfolio 43.53% N/A N/A N/A N/A
OpCap Advisors Small Cap Portfolio 13.63% N/A N/A N/A N/A
OpCap Advisors U.S. Government Income Portfolio 10.07% N/A N/A N/A N/A
</TABLE>
11
<PAGE>
NON-STANDARDIZED HYPOTHETICAL TOTAL RETURN AND NON-STANDARDIZED HYPOTHETICAL
AVERAGE ANNUAL TOTAL RETURN*
The Company may show Non-Standardized Hypothetical Total Return and Non-
Standardized Hypothetical Average Annual Total Return, calculated on the basis
of the historical performance of the Portfolios (calculated beginning from the
end of the year of inception for each Portfolio) and may assume the Contract was
in existence prior to its inception date (which it was not). After the
Contract's inception date, actual Accumulation Unit Values are used for the
calculations. These returns are based on specified premium patterns which
produce the resulting Accumulated Values. However, they reflect a deduction
for the Separate Account expenses and Portfolio expenses. They do not include
the Annual Contract Fee, any sales loads or Premium Taxes (if any), which if
included would reduce the percentages reported.
The Non-Standardized Annual Total Return for a Subaccount is the effective
annual rate of return that would have produced the ending Accumulated Value of
the stated one-year period.
The Non-Standardized Average Annual Total Return for a Subaccount is the
effective annual compounded rate of return that would have produced the ending
Accumulated Value over the stated period had the performance remained constant
throughout.
<TABLE>
<CAPTION>
HYPOTHETICAL TOTAL RETURNS FOR PERIODS ENDING 12/31/95
(BASED ON SINGLE INITIAL PURCHASE)
Since Inception
A UNITS 1 Year 3 Year 5 Year Year-End
------- ------ ------ ------ ---------------
<S> <C> <C> <C> <C>
Fidelity Money Market Portfolio 5.02% 11.22% 20.64% 130.00%
Fidelity Equity-Income Portfolio 34.01% 67.02% 152.52% 194.63%
Fidelity Growth Portfolio 34.28% 57.07% 146.86% 232.63%
Fidelity Asset Manager Portfolio 16.02% 29.99% 75.13% 86.26%
Dreyfus Growth and Income Portfolio 60.59 N/A N/A 57.36%
Dreyfus Quality Bond Portfolio 19.46% 29.35% 62.83% 66.16%
TRP Equity Income Portfolio 33.68% N/A N/A 42.20%
TRP New America Growth Portfolio 49.87% N/A N/A 50.24%
TRP International Stock Portfolio 10.29% N/A N/A 11.55%
OpCap Advisors Managed Portfolio 44.40% 60.99% 174.50% 176.45%
OpCap Advisors Small Cap Portfolio 14.31% 33.11% 135.76% 154.21%
OpCap Advisors Government Income Portfolio N/A N/A N/A 12.48%
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Since Inception
B UNITS 1 Year 3 Year 5 Year Year-End
------- ------ ------ ------ ---------------
<S> <C> <C> <C> <C>
Fidelity Money Market Portfolio 4.39% 9.22% 17.04% 111.59%
Fidelity Equity-Income Portfolio 33.20% 64.01% 144.98% 178.59%
Fidelity Growth Portfolio 33.46% 54.96% 139.48% 214.52%
Fidelity Asset Manager Portfolio 15.32% 27.69% 69.90% 79.26%
Dreyfus Growth and Income Portfolio 59.62% N/A N/A 55.79%
Dreyfus Quality Bond Portfolio 18.73% 27.02% 57.96% 60.88%
TRP Equity Income Portfolio 32.87% N/A N/A 40.70%
TRP New America Growth Portfolio 48.96% N/A N/A 48.65%
TRP International Stock Portfolio 9.62% N/A N/A 10.37%
OpCap Advisors Managed Portfolio 43.52% 58.08% 166.30% 164.28%
OpCap Advisors Small Cap Portfolio 13.62% 30.71% 128.72% 143.02%
OpCap Advisors Government Income Portfolio 10.07% N/A N/A 11.73%
HYPOTHETICAL AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/95
(BASED ON SINGLE INITIAL PURCHASE)
Since Inception
A UNITS 1 Year 3 Year 5 Year Year-End
------- ------- ------ ------ ---------------
Fidelity Money Market Portfolio 5.02% 3.61% 3.82% 6.24%
Fidelity Equity-Income Portfolio 34.01% 18.65% 20.35% 12.42%
Fidelity Growth Portfolio 34.28% 16.40% 19.81% 13.91%
Fidelity Asset Manager Portfolio 16.02% 9.14% 11.86% 10.35%
Dreyfus Growth and Income Portfolio 60.59% N/A N/A 31.40%
Dreyfus Quality Bond Portfolio 19.46% 3.96% 10.24% 9.99%
TRP Equity Income Portfolio 33.68% N/A N/A 22.31%
TRP New America Growth Portfolio 49.87% N/A N/A 26.22%
TRP International Stock Portfolio 10.29% N/A N/A 6.45%
OpCap Advisors Managed Portfolio 44.40% 17.20% 22.38% 14.70%
OpCap Advisors Small Cap Portfolio 14.31% 10.00% 18.71% 13.41%
OpCap Advisors Government Income Portfolio N/A N/A N/A 11.15%
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Since Inception
B UNITS 1 Year 3 Year 5 Year Year-End
------- ------- ------- ------- ---------------
<S> <C> <C> <C> <C>
Fidelity Money Market Portfolio 4.39% 2.98% 3.20% 5.60%
Fidelity Equity-Income Portfolio 33.20% 17.93% 19.63% 11.74%
Fidelity Growth Portfolio 33.46% 15.69% 19.08% 13.22%
Fidelity Asset Manager Portfolio 15.32% 8.48% 11.18% 9.68%
Dreyfus Growth and Income Portfolio 59.62% N/A N/A 30.61%
Dreyfus Quality Bond Portfolio 18.73% 8.30% 9.57% 9.33%
TRP Equity Income Portfolio 32.87% N/A N/A 21.57%
TRP New America Growth Portfolio 48.96% N/A N/A 25.46%
TRP International Stock Portfolio 9.62% N/A N/A 5.81%
OpCap Advisors Managed Portfolio 43.52% 16.49% 21.64% 14.00%
OpCap Advisors Small Cap Portfolio 13.62% 9.34% 17.99% 12.72%
OpCap Advisors Government Income Portfolio 10.07% N/A N/A 10.48%
</TABLE>
Note: Advertisements and other sales literature for the Portfolios may quote
total returns which are calculated on non-standardized base periods. These
total returns also represent the historic change in the value of an investment
in the Portfolios based on monthly reinvestment of dividends over a specific
period of time.
* On September 16, 1994, an investment company then called Quest for Value
Accumulation Trust (the "Old Trust") was effectively divided into two investment
funds, the Old Trust and the Quest for Value Accumulation Trust (now known as
the OCC Accumulation Trust) that is included in the Contract (the
"New Trust"), at which time the New Trust commenced operations. The total net
assets for each of the OpCap Advisors Small Cap and OpCap Advisors Managed
Portfolios immediately after the transaction were $139,812,573 and $682,601,380,
respectively, with respect to the Old Trust and, with respect to the New Trust
were $8,129,274 and $51,345,102, for the OpCap Advisors Small Cap and OpCap
Advisors Managed Growth Portfolios, respectively. For the period prior to
September 16, 1994, the performance figures above for each of the OpCap Advisors
Small Cap and OpCap Advisors Managed Portfolios reflect the performance of the
corresponding Portfolios of the Old Trust.
Remainder of Page Intentionally Left Blank
14
<PAGE>
<TABLE>
<CAPTION>
FIDELITY EQUITY INCOME PORTFOLIO A-UNITS FIDELITY EQUITY INCOME PORTFOLIO A-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1986 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1986
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ------------------ ----------------------- ----------------
One Average One Average A
Year Annual Year Annual UNITS
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------- ------- -------- ---------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/86 $ 2,000 N/A N/A N/A 12/31/86 $50,000 N/A N/A N/A 0.00%
12/31/87 $ 4,000 $ 1,962 -1.92% -1.92% 12/31/87 $50,000 $ 49,040 -1.92% -1.92% -1.92%
12/31/88 $ 6,000 $ 4,822 21.73% 13.13% 12/31/88 $50,000 $ 59,695 21.73% 9.27% 21.73%
12/31/89 $ 8,000 $ 7,941 16.40% 14.69% 12/31/89 $50,000 $ 69,486 16.40% 11.59% 16.40%
12/31/90 $10,000 $ 8,354 -15.97% 1.74% 12/31/90 $50,000 $ 58,390 -15.97% 3.95% -15.97%
12/31/91 $12,000 $13,500 30.39% 10.18% 12/31/91 $50,000 $ 76,134 30.39% 8.77% 30.39%
12/31/92 $14,000 $17,973 15.95% 11.67% 12/31/92 $50,000 $ 88,282 15.95% 9.94% 15.95%
12/31/93 $16,000 $23,437 17.34% 12.92% 12/31/93 $50,000 $103,593 17.34% 10.97% 17.34%
12/31/94 $18,000 $27,018 6.21% 11.57% 12/31/94 $50,000 $110,030 6.21% 10.36% 6.21%
12/31/95 $20,000 $38,890 34.02% 15.14% 12/31/95 $50,000 $147,462 34.02% 12.77% 34.02%
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
FIDELITY GROWTH PORTFOLIO A-UNITS FIDELITY GROWTH PORTFOLIO A-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1986 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1986
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ------------------ ----------------------- -----------------
One Average One Average A
Year Annual Year Annual UNITS
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------- ------- -------- --------- ---------- ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/86 $ 2,000 N/A N/A N/A 12/31/86 $50,000 N/A N/A N/A 0.00%
12/31/87 $ 4,000 $ 2,057 2.83% 2.83% 12/31/87 $50,000 $ 51,415 2.83% 2.83% 2.83%
12/31/88 $ 6,000 $ 4,651 14.66% 10.49% 12/31/88 $50,000 $ 58,950 14.66% 8.58% 14.66%
12/31/89 $ 8,000 $ 8,677 30.46% 19.62% 12/31/89 $50,000 $ 76,906 30.46% 15.43% 30.46%
12/31/90 $10,000 $ 9,349 -12.44% 6.33% 12/31/90 $50,000 $ 67,341 -12.44% 7.73% -12.44%
12/31/91 $12,000 $16,382 44.35% 16.93% 12/31/91 $50,000 $ 97,205 44.35% 14.22% 44.35%
12/31/92 $14,000 $19,934 8.45% 14.71% 12/31/92 $50,000 $105,414 8.45% 13.24% 8.45%
12/31/93 $16,000 $25,974 18.42% 15.51% 12/31/93 $50,000 $124,826 18.42% 13.96% 18.42%
12/31/94 $18,000 $27,744 -0.82% 12.15% 12/31/94 $50,000 $123,803 -0.82% 12.00% -0.82%
12/31/95 $20,000 $34,944 34.29% 15.66% 12/31/95 $50,000 $166,255 34.29% 14.28% 34.29%
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
FIDELITY EQUITY INCOME PORTFOLIO B-UNITS FIDELITY EQUITY INCOME PORTFOLIO B-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1986 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1986
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ------------------ ----------------------- -----------------
One Average One Average B
Year Annual Year Annual UNITS
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------- ------- -------- --------- ---------- ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/86 $ 2,000 N/A N/A N/A 12/31/86 $50,000 N/A N/A N/A 0.00%
12/31/87 $ 4,000 $ 1,950 -2.51% -2.51% 12/31/87 $50,000 $ 48,743 -2.51% -2.51% -2.51%
12/31/88 $ 6,000 $ 4,779 20.99% 12.46% 12/31/88 $50,000 $ 58,975 20.99% 8.60% 20.99%
12/31/89 $ 8,000 $ 7,843 15.70% 14.00% 12/31/89 $50,000 $ 68,233 15.70% 10.92% 15.70%
12/31/90 $10,000 $ 8,221 -16.48% 1.09% 12/31/90 $50,000 $ 56,991 -16.48% 3.33% -16.48%
12/31/91 $12,000 $13,247 29.60% 9.52% 12/31/91 $50,000 $ 73,860 29.60% 8.12% 29.60%
12/31/92 $14,000 $17,572 15.25% 11.01% 12/31/92 $50,000 $ 85,126 15.25% 9.27% 15.25%
12/31/93 $16,000 $22,828 16.63% 12.25% 12/31/93 $50,000 $ 99,286 16.63% 10.30% 16.63%
12/31/94 $18,000 $26,211 5.57% 10.90% 12/31/94 $50,000 $104,817 5.57% 9.69% 5.57%
12/31/95 $20,000 $37,583 33.22% 14.48% 12/31/95 $50,000 $139,637 33.22% 12.09% 33.22%
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
FIDELITY GROWTH PORTFOLIO B-UNITS FIDELITY GROWTH PORTFOLIO B-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1986 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1986
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ------------------- ----------------------- ----------------
One Average One Average B
Year Annual Year Annual UNITS
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------- -------- -------- ---------- ---------- ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/86 $ 2,000 N/A N/A N/A 12/31/86 $50,000 N/A N/A N/A 0.00%
12/31/87 $ 4,000 $ 2,044 2.21% 2.21% 12/31/87 $50,000 $ 51,104 2.21% 2.21% 2.21%
12/31/88 $ 6,000 $ 4,609 13.96% 9.83% 12/31/88 $50,000 $ 58,240 13.96% 7.93% 13.96%
12/31/89 $ 8,000 $ 8,570 29.67% 18.92% 12/31/89 $50,000 $ 75,519 29.67% 14.73% 29.67%
12/31/90 $10,000 $ 9,199 -12.97% 5.67% 12/31/90 $50,000 $ 65,727 -12.97% 7.08% -12.97%
12/31/91 $12,000 $16,068 43.47% 16.25% 12/31/91 $50,000 $ 94,300 43.47% 13.53% 43.47%
12/31/92 $14,000 $19,475 7.79% 14.02% 12/31/92 $50,000 $101,646 7.79% 12.55% 7.79%
12/31/93 $16,000 $25,276 17.70% 14.82% 12/31/93 $50,000 $119,636 17.70% 13.27% 17.70%
12/31/94 $18,000 $26,889 -1.42% 11.46% 12/31/94 $50,000 $117,937 -1.42% 11.32% -1.42%
12/31/95 $20,000 $38,563 33.49% 14.98% 12/31/95 $50,000 $157,433 33.49% 13.59% 33.49%
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
FIDELITY ASSET MANAGER PORTFOLIO A-UNITS FIDELITY ASSET MANAGER PORTFOLIO A-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1989 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1989
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ----------------- ----------------------- -----------------
One Average One Average A
Year Annual Year Annual UNITS
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------ ------ -------- ---------- ---------- ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/89 $ 2,000 N/A N/A N/A 12/31/89 $50,000 N/A N/A N/A 0.00%
12/31/90 $ 4,000 $ 2,117 5.87% 5.87% 12/31/90 $50,000 $52,933 5.87% 5.87% 5.87%
12/31/91 $ 6,000 $ 5,006 21.58% 15.92% 12/31/91 $50,000 $64,356 21.58% 13.45% 21.58%
12/31/92 $ 8,000 $ 7,764 10.82% 13.45% 12/31/92 $50,000 $71,317 10.82% 12.57% 10.82%
12/31/93 $10,000 $11,742 20.26% 15.95% 12/31/93 $50,000 $85,766 20.26% 14.44% 20.26%
12/31/94 $12,000 $12,802 -6.84% 8.35% 12/31/94 $50,000 $79,898 -6.84% 9.83% -6.84%
12/31/95 $14,000 $17,174 16.03% 10.34% 12/31/95 $50,000 $92,703 16.03% 10.84% 16.03%
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
FIDELITY MONEY MARKET PORTFOLIO A-UNITS FIDELITY MONEY MARKET PORTFOLIO A-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1983 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1983
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ---------------- ------------------------ ----------------
One Average One Average A
Year Annual Year Annual UNITS
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------ ------- -------- ---------- ----------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/83 $ 2,000 N/A N/A N/A 12/31/83 $50,000 N/A N/A N/A 0.00%
12/31/84 $ 4,000 $ 2,191 9.55% 9.55% 12/31/84 $50,000 $54,773 9.55% 9.55% 9.55%
12/31/85 $ 6,000 $ 4,495 7.25% 8.03% 12/31/85 $50,000 $58,742 7.25% 8.39% 7.25%
12/31/86 $ 8,000 $ 6,874 5.85% 6.96% 12/31/86 $50,000 $62,176 5.85% 7.54% 5.85%
12/31/87 $10,000 $ 9,370 5.59% 6.42% 12/31/87 $50,000 $65,651 5.59% 7.05% 5.59%
12/31/88 $12,000 $12,113 6.53% 6.46% 12/31/88 $50,000 $69,938 6.53% 6.94% 6.53%
12/31/89 $14,000 $15,277 8.25% 6.94% 12/31/89 $50,000 $75,706 8.25% 7.16% 8.25%
12/31/90 $16,000 $18,516 7.18% 7.00% 12/31/90 $50,000 $81,138 7.18% 7.16% 7.18%
12/31/91 $18,000 $21,592 5.24% 6.63% 12/31/91 $50,000 $85,391 5.24% 6.92% 5.24%
12/31/92 $20,000 $24,316 3.07% 5.96% 12/31/92 $50,000 $88,012 3.07% 6.48% 3.07%
12/31/93 $22,000 $26,948 2.40% 5.36% 12/31/93 $50,000 $90,128 2.40% 6.07% 2.40%
12/31/94 $24,000 $29,937 3.42% 5.06% 12/31/94 $50,000 $93,206 3.42% 5.83% 3.42%
12/31/95 $26,000 $33,548 5.04% 5.05% 12/31/95 $50,000 $97,907 5.04% 5.76% 5.04%
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
FIDELITY ASSET MANAGER PORTFOLIO B-UNITS FIDELITY ASSET MANAGER PORTFOLIO B-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1989 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1989
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ----------------- ----------------------- -----------------
One Average One Average
Year Annual Year Annual B UNITS
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payments Value Return Return Date Payments Value Return Return Return
---- -------- ----- ------ ------ ---- -------- ----- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/89 $ 2,000 N/A N/A N/A 12/31/89 $50,000 N/A N/A N/A 0.00%
12/31/90 $ 4,000 $ 2,105 5.23% 5.23% 12/31/90 $50,000 $52,613 5.23% 5.23% 5.23%
12/31/91 $ 6,000 $ 4,960 20.84% 15.23% 12/31/91 $50,000 $63,580 20.84% 12.76% 20.84%
12/31/92 $ 8,000 $ 7,666 10.15% 12.76% 12/31/92 $50,000 $70,031 10.15% 11.89% 10.15%
12/31/93 $10,000 $11,554 19.53% 15.26% 12/31/93 $50,000 $83,709 19.53% 13.75% 19.53%
12/31/94 $12,000 $12,551 -7.40% 7.67% 12/31/94 $50,000 $77,511 -7.40% 9.16% -7.40%
12/31/95 $14,000 $16,782 15.33% 9.67% 12/31/95 $50,000 $89,396 15.33% 10.17% 15.33%
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
FIDELITY MONEY MARKET PORTFOLIO B-UNITS FIDELITY MONEY MARKET PORTFOLIO B-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1983 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1983
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average B
Year Annual Year Annual UNITS
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------ ------- -------- ---------- ---------- ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/83 $ 2,000 N/A N/A N/A 12/31/83 $50,000 N/A N/A N/A N/A
12/31/84 $ 4,000 $ 2,178 8.88% 8.88% 12/31/84 $50,000 $54,442 8.88% 8.88% 8.88%
12/31/85 $ 6,000 $ 4,453 6.60% 7.37% 12/31/85 $50,000 $58,033 6.60% 7.73% 6.60%
12/31/86 $ 8,000 $ 6,789 5.21% 6.31% 12/31/86 $50,000 $61,055 5.21% 6.88% 5.21%
12/31/87 $10,000 $ 9,224 4.95% 5.78% 12/31/87 $50,000 $64,077 4.95% 6.40% 4.95%
12/31/88 $12,000 $11,885 5.89% 5.81% 12/31/88 $50,000 $67,849 5.89% 6.30% 5.89%
12/31/89 $14,000 $14,939 7.59% 6.29% 12/31/89 $50,000 $73,000 7.59% 6.51% 7.59%
12/31/90 $16,000 $18,045 6.53% 6.35% 12/31/90 $50,000 $77,765 6.53% 6.51% 6.53%
12/31/91 $18,000 $20,968 4.60% 5.98% 12/31/91 $50,000 $81,346 4.60% 6.27% 4.60%
12/31/92 $20,000 $23,530 2.45% 5.32% 12/31/92 $50,000 $83,335 2.45% 5.84% 2.45%
12/31/93 $22,000 $25,985 1.79% 4.71% 12/31/93 $50,000 $84,822 1.78% 5.43% 1.78%
12/31/94 $24,000 $28,766 2.79% 4.41% 12/31/94 $50,000 $87,189 2.79% 5.19% 2.79%
12/31/95 $26,000 $32,125 4.42% 4.41% 12/31/95 $50,000 $91,039 4.42% 5.12% 4.42%
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
DREYFUS GROWTH AND INCOME PORTFOLIO A-UNITS DREYFUS GROWTH AND INCOME PORTFOLIO A-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1994 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1994
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ----------------- ----------------------- -----------------
One Average One Average
Year Annual Year Annual A and B
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------ ------- -------- ---------- ---------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A N/A
12/31/95 $4,000 $3,213 60.67% 60.67% 12/31/95 $80,334 60.67% 60.67% 60.67% 60.67%
</TABLE>
<TABLE>
<CAPTION>
DREYFUS GROWTH AND INCOME PORTFOLIO B-UNITS DREYFUS GROWTH AND INCOME PORTFOLIO B-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1994 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1994
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ----------------- ----------------------- -----------------
One Average One Average
Year Annual Year Annual A and B
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------ ------- -------- ---------- ---------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A N/A
12/31/95 $4,000 $3,193 59.65% 59.65% 12/31/95 $50,000 $79,825 59.65% 59.65% 59.65%
</TABLE>
<TABLE>
<CAPTION>
DREYFUS QUALITY BOND PORTFOLIO A-UNITS DREYFUS QUALITY BOND PORTFOLIO A-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1989 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1989
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ----------------- ----------------------- -----------------
One Average One Average A
Year Annual Year Annual UNIT
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------ ------- -------- ---------- ---------- ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/89 $ 2,000 N/A N/A N/A 12/31/89 $50,000 N/A N/A N/A 0.00%
12/31/90 $ 4,000 $ 2,032 1.58% 1.58% 12/31/90 $50,000 $50,790 1.58% 1.58% 1.58%
12/31/91 $ 6,000 $ 4,564 13.21% 9.12% 12/31/91 $50,000 $57,498 13.21% 7.24% 13.21%
12/31/92 $ 8,000 $ 7,299 11.19% 10.12% 12/31/92 $50,000 $63,934 11.19% 8.54% 11.19%
12/31/93 $10,000 $10,639 14.41% 11.73% 12/31/93 $50,000 $73,145 14.41% 9.98% 14.41%
12/31/94 $12,000 $11,962 -5.35% 6.03% 12/31/94 $50,000 $69,230 -5.35% 6.72% -5.35%
12/31/95 $14,000 $16,680 19.46% 9.49% 12/31/95 $50,000 $82,705 19.46% 8.75% 19.46%
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
DREYFUS QUALITY BOND PORTFOLIO B-UNITS DREYFUS QUALITY BOND PORTFOLIO B-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1989 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1989
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ----------------- ----------------------- -----------------
One Average One Average B UNIT
Year Annual Year Annual Fund
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------ ------- -------- ---------- ----------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/89 $ 2,000 N/A N/A N/A 12/31/89 $50,000 N/A N/A N/A 0.00%
12/31/90 $ 4,000 $ 2,019 0.97% 0.97% 12/31/90 $50,000 $50,483 0.97% 0.97% 0.97%
12/31/91 $ 6,000 $ 4,523 12.52% 8.47% 12/31/91 $50,000 $56,805 12.52% 6.59% 12.52%
12/31/92 $ 8,000 $ 7,209 10.52% 9.46% 12/31/92 $50,000 $62,781 10.52% 7.88% 10.52%
12/31/93 $10,000 $10,472 13.72% 11.07% 12/31/93 $50,000 $71,392 13.72% 9.31% 13.72%
12/31/94 $12,000 $11,733 -5.93% 5.38% 12/31/94 $50,000 $67,161 -5.93% 6.08% -5.93%
12/31/95 $14,000 $16,308 18.75% 8.83% 12/31/95 $50,000 $79,755 18.75% 8.09% 18.75%
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE EQUITY INCOME PORTFOLIO A-UNITS T. ROWE PRICE EQUITY INCOME PORTFOLIO A-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1994 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1994
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ----------------- ----------------------- -----------------
One Average One Average A and B
Year Annual Year Annual Fund
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------ ------- -------- ---------- ----------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A N/A
12/31/95 $4,000 $2,678 33.69% 33.69% 12/31/95 $50,000 $66,846 33.69% 33.69% 33.69%
</TABLE>
<TABLE>
<CAPTION>
T. ROWE PRICE EQUITY INCOME PORTFOLIO B-UNITS T. ROWE PRICE EQUITY INCOME PORTFOLIO B-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1994 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1994
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ----------------- ----------------------- -----------------
One Average One Average A and B
Year Annual Year Annual Fund
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------ ------- -------- ---------- ----------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A N/A
12/31/95 $4,000 $2,658 32.89% 32.89% 12/31/95 $50,000 $66,446 32.89% 32.89% 32.89%
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE INTERNATIONAL PORTOLIO A-UNITS T. ROWE PRICE INTERNATIONAL PORTFOLIO A-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1994 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1994
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ----------------- ----------------------- -----------------
One Average One Average A and B
Year Annual Year Annual Fund
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------ ------- -------- ---------- ----------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A N/A
12/31/95 $4,000 $2,206 10.29% 10.29% 12/31/95 $50,000 $55,147 10.29% 10.29% 10.29%
</TABLE>
<TABLE>
<CAPTION>
T. ROWE PRICE INTERNATIONAL PORTOLIO B-UNITS T. ROWE PRICE INTERNATIONAL PORTFOLIO B-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1994 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1994
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ----------------- ----------------------- -----------------
One Average One Average A and B
Year Annual Year Annual Fund
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------ ------- -------- ---------- ----------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A N/A
12/31/95 $4,000 $2,193 9.64% 9.64% 12/31/95 $50,000 $54,818 9.64% 9.64% 9.64%
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE NEW AMERICAN GROWTH FUND PORTFOLIO A-UNITS T. ROWE PRICE NEW AMERICAN GROWTH FUND PORTFOLIO A-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1994 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1994
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ----------------- ----------------------- -----------------
One Average One Average A and B
Year Annual Year Annual Fund
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------ ------- -------- ---------- ----------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A N/A
12/31/95 $4,000 $2,998 49.89% 49.89% 12/31/95 $50,000 $74,943 49.89% 49.89% 49.89%
</TABLE>
<TABLE>
<CAPTION>
T. ROWE PRICE NEW AMERICAN GROWTH FUND PORTFOLIO B-UNITS T. ROWE PRICE NEW AMERICAN GROWTH FUND PORTFOLIO B-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1994 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1994
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ----------------- ----------------------- -----------------
One Average One Average A and B
Year Annual Year Annual Fund
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------ ------- -------- ---------- ----------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A N/A
12/31/95 $4,000 $2,980 48.99% 48.99% 12/31/95 $50,000 $74,495 48.99% 48.99% 48.99%
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
OPCAP ADVISORS MANAGED PORTFOLIO A-UNITS OPCAP ADVISORS MANAGED PORTFOLIO A-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1988 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1988
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ----------------- ----------------------- -----------------
One Average One Average A UNIT
Year Annual Year Annual Fund
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------ ------- -------- ---------- ----------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/88 $ 2,000 N/A N/A N/A 12/31/88 $50,000 N/A N/A N/A 0.00%
12/31/89 $ 4,000 $ 2,519 25.95% 25.95% 12/31/89 $50,000 $62,975 25.95% 25.95% 25.95%
12/31/90 $ 6,000 $ 3,259 -27.88% -12.90% 12/31/90 $50,000 $45,418 -27.88% -4.69% -27.88%
12/31/91 $ 8,000 $ 7,903 50.27% 14.42% 12/31/91 $50,000 $68,249 50.27% 10.93% 50.27%
12/31/92 $10,000 $ 7,985 -19.37% -0.08% 12/31/92 $50,000 $55,029 -19.37% 2.42% -19.37%
12/31/93 $12,000 $ 9,216 -7.70% -2.71% 12/31/93 $50,000 $50,792 -7.70% 0.31% -7.70%
12/31/94 $14,000 $10,342 -7.79% -4.23% 12/31/94 $50,000 $46,835 -7.79% -1.08% -7.79%
12/31/95 $16,000 $17,822 44.40% 6.04% 12/31/95 $50,000 $67,628 44.40% 4.41% 44.40%
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
OPCAP ADVISORS MANAGED PORTFOLIO B-UNITS OPCAP ADVISORS MANAGED PORTFOLIO B-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1988 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1988
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ----------------- ----------------------- -----------------
One Average One Average B UNIT
Year Annual Year Annual Fund
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------ ------- -------- ---------- ----------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/88 $ 2,000 N/A N/A N/A 12/31/88 $50,000 N/A N/A N/A 0.00%
12/31/89 $ 4,000 $ 2,504 25.19% 25.19% 12/31/89 $50,000 $62,595 25.19% 25.19% 25.19%
12/31/90 $ 6,000 $ 3,229 -28.32% -13.46% 12/31/90 $50,000 $44,868 -28.32% -5.27% -28.32%
12/31/91 $ 8,000 $ 7,809 49.36% 13.77% 12/31/91 $50,000 $67,015 49.36% 10.26% 49.36%
12/31/92 $10,000 $ 7,861 -19.86% -0.70% 12/31/92 $50,000 $53,706 -19.86% 1.80% -19.86%
12/31/93 $12,000 $ 9,046 -8.26% -3.32% 12/31/93 $50,000 $49,270 -8.26% -0.29% -8.26%
12/31/94 $14,000 $10,124 -8.35% -4.84% 12/31/94 $50,000 $45,156 -8.35% -1.68% -8.35%
12/31/95 $16,000 $17,402 43.53% -0.25% 12/31/95 $50,000 $64,814 43.53% 3.78% 43.53%
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
OPCAP ADVISORS SMALL CAPITAL PORTFOLIO A-UNITS OPCAP ADVISORS SMALL CAPITAL PORTFOLIO A-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1988 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1988
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ----------------- ----------------------- -----------------
One Average One Average A UNIT
Year Annual Year Annual Fund
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------ ------- -------- ---------- ----------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/88 $ 2,000 N/A N/A N/A 12/31/88 $50,000 N/A N/A N/A 0.00%
12/31/89 $ 4,000 $ 2,304 15.22% 15.22% 12/31/89 $50,000 $57,608 15.22% 15.22% 15.22%
12/31/90 $ 6,000 $ 3,256 -24.36% -12.97% 12/31/90 $50,000 $43,572 -24.36% -6.65% -24.36%
12/31/91 $ 8,000 $ 8,558 62.83% 18.84% 12/31/91 $50,000 $70,950 62.83% 12.37% 62.83%
12/31/92 $10,000 $ 8,591 -18.63% 2.87% 12/31/92 $50,000 $57,729 -18.63% 3.66% -18.63%
12/31/93 $12,000 $10,334 -2.42% 1.10% 12/31/93 $50,000 $56,333 -2.42% 2.41% -2.42%
12/31/94 $14,000 $10,135 -17.83% -4.81% 12/31/94 $50,000 $46,288 -17.83% -1.28% -17.83%
12/31/95 $16,000 $13,872 14.31% -0.23% 12/31/95 $50,000 $52,919 14.31% 0.81% 14.31%
</TABLE>
<TABLE>
<CAPTION>
OPCAP ADVISORS US GOVERNMENT INCOME PORTFOLIO A-UNITS OPCAP ADVISORS US GOVERNMENT INCOME PORTFOLIO A-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1994 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1994
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ----------------- ----------------------- -----------------
One Average One Average A and B
Year Annual Year Annual Fund
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------ ------- -------- ---------- ----------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A N/A
12/31/95 $4,000 $2,120 5.99% 5.99% 12/31/95 $50,000 $52,996 5.99% 5.99% 5.99%
</TABLE>
<TABLE>
<CAPTION>
OPCAP ADVISORS US GOVERNMENT INCOME PORTFOLIO B-UNITS OPCAP ADVISORS US GOVERNMENT INCOME PORTFOLIO B-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1994 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1994
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ----------------- ----------------------- -----------------
One Average One Average A and B
Year Annual Year Annual Fund
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------ ------- -------- ---------- ----------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A N/A
12/31/95 $4,000 $2,201 10.07% 10.07% 12/31/95 $50,000 $55,035 10.07% 10.07% 10.07%
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
OPCAP ADVISORS SMALL CAPITAL PORTFOLIO B-UNITS OPCAP ADVISORS SMALL CAPITAL PORTFOLIO B-UNITS
$2000 PURCHASE PAYMENT MADE DECEMBER 31, 1988 $50,000 SINGLE PURCHASE PAYMENT MADE DECEMBER 31, 1988
AND YEARLY DECEMBER 31ST THEREAFTER
Values prior to current Values prior to current
years purchase payment Non-Standardized years purchase payment Non-Standardized
----------------------- ----------------- ----------------------- ----------------
One Average One Average B
Year Annual Year Annual UNIT
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payments Value Return Return Date Payments Value Return Return Return
- -------- ---------- ----------- ------- ------- -------- ---------- ----------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/88 $ 2,000 N/A N/A N/A 12/31/88 $50,000 N/A N/A N/A 0.00%
12/31/89 $ 4,000 $ 2,290 14.52% 14.52% 12/31/89 $50,000 $57,259 14.52% 14.52% 14.52%
12/31/90 $ 6,000 $ 3,225 -24.82% -13.52% 12/31/90 $50,000 $43,047 -24.82% -7.21% -24.82%
12/31/91 $ 8,000 $ 8,457 61.85% 18.17% 12/31/91 $50,000 $69,670 61.85% 11.69% 61.85%
12/31/92 $10,000 $ 8,457 -19.13% 2.24% 12/31/92 $50,000 $56,345 -19.13% 3.03% -19.13%
12/31/93 $12,000 $10,143 -3.01% 0.47% 12/31/93 $50,000 $54,650 -3.01% 1.79% -3.01%
12/31/94 $14,000 $ 9,917 -18.33% -5.42% 12/31/94 $50,000 $44,634 -18.33% -1.87% -18.33%
12/31/95 $16,000 $13,541 13.63% -0.42% 12/31/95 $50,000 $50,715 13.63% 0.20% 13.63%
</TABLE>
31
<PAGE>
INDIVIDUALIZED COMPUTER GENERATED ILLUSTRATIONS
The Company may from time to time use computer-based software available through
Morningstar, CDA/Wiesenberger and/or other firms to provide registered
representatives and existing and/or potential owners of Contracts with
individualized hypothetical performance illustrations for some or all of the
Portfolios. Such illustrations may include, without limitation, graphs, bar
charts and other types of formats presenting the following information: (i) the
historical results of a hypothetical investment in a single Portfolio; (ii) the
historical fluctuation of the value of a single Portfolio (actual and
hypothetical); (iii) the historical results of a hypothetical investment in more
than one Portfolio; (iv) the historical performance of two or more market
indices in relation to one another and/or one or more Portfolios; (v) the
historical performance of two or more market indices in comparison to a single
Portfolio or a group of Portfolios; (vi) a market risk/reward scatter chart
showing the historical risk/reward relationship of one or more mutual funds or
Portfolios to one or more indices and a broad category of similar anonymous
variable annuity subaccounts; and (vii) Portfolio data sheets showing various
information about one or more Portfolios (such as information concerning total
return for various periods, fees and expenses, standard deviation, alpha and
beta, investment objective, inception date and net assets).
PERFORMANCE COMPARISONS
Performance information for any Subaccount reflects only the performance of a
hypothetical Contract under which Accumulation Value is allocated to a
Subaccount during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the Portfolio in which
the Subaccount invests, and the market conditions during the given period, and
should not be considered as a representation of what may be achieved in the
future.
Reports and marketing materials may, from time to time, include information
concerning the rating of Providian Life and Health Insurance Company as
determined by one or more of the ratings services listed below, or other
recognized rating services. Reports and promotional literature may also contain
other information including (i) the ranking of any Subaccount derived from
rankings of variable annuity separate accounts or other investment products
tracked by Lipper Analytical Services or by other rating services, companies,
publications, or other person who rank separate accounts or other investment
products on overall performance or other criteria, and (ii) the effect of tax-
deferred compounding on a Subaccount's investment returns, or returns in
general, which may be illustrated by graphs, charts, or otherwise, and which may
include a comparison, at various points in time, of the return from an
investment in a Contract (or returns in general) on a tax-deferred basis
(assuming one or more tax rates) with the return on a taxable basis.
Each Subaccount's performance depends on, among other things, the performance of
the underlying Portfolio which, in turn, depends upon such variables as:
. quality of underlying investments;
. average maturity of underlying investments;
. type of instruments in which the Portfolio is invested;
. changes in interest rates and market value of underlying investments;
. changes in Portfolio expenses; and
. the relative amount of the Portfolio's cash flow.
From time to time, we may advertise the performance of the Subaccounts and the
underlying Portfolios as compared to similar funds or portfolios using certain
indexes, reporting services and financial publications, and we may advertise
rankings or ratings issued by certain services and/or other institutions. These
may include, but are not limited to, the following:
32
<PAGE>
. DOW JONES INDUSTRIAL AVERAGE ("DJIA"), an unmanaged index representing
share prices of major industrial corporations, public utilities, and
transportation companies. Produced by the Dow Jones & Company, it is cited
as a principal indicator of market conditions.
. STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a
composite index of common stocks in industrial, transportation, and
financial and public utility companies, which can be used to compare to
the total returns of funds whose portfolios are invested primarily in
common stocks. In addition, the Standard & Poor's index assumes
reinvestments of all dividends paid by stocks listed on its index. Taxes
due on any of these distributions are not included, nor are brokerage or
other fees calculated into the Standard & Poor's figures.
. LIPPER ANALYTICAL SERVICES, INC., a reporting service that ranks funds
in various fund categories by making comparative calculations using total
return. Total return assumes the reinvestment of all income dividends and
capital gains distributions, if any. From time to time, we may quote the
Portfolios' Lipper rankings in various fund categories in advertising and
sales literature.
. BANK RATE MONITOR NATIONAL INDEX, Miami Beach, Florida, a financial
reporting service which publishes weekly average rates of 50 leading bank
and thrift institution money market deposit accounts. The rates published
in the index are an average of the personal account rates offered on the
Wednesday prior to the date of publication by ten of the largest banks and
thrifts in each of the five largest Standard Metropolitan Statistical
Areas. Account minimums range upward from $2,500 in each institution, and
compounding methods vary. If more than one rate is offered, the lowest
rate is used. Rates are subject to change at any time specified by the
institution.
. SHEARSON LEHMAN GOVERNMENT/CORPORATE (TOTAL) INDEX, an index comprised of
approximately 5,000 issues which include: non-convertible bonds publicly
issued by the U.S. government or its agencies; corporate bonds guaranteed
by the U.S. government and quasi-federal corporations; and publicly
issued, fixed-rate, non-convertible domestic bonds of companies in
industry, public utilities and finance. The average maturity of these
bonds approximates nine years. Tracked by Shearson Lehman, Inc., the index
calculates total returns for one month, three month, twelve month, and ten
year periods and year-to-date.
. SHEARSON LEHMAN GOVERNMENT/CORPORATE (LONG-TERM) INDEX, an index composed
of the same types of issues as defined above. However, the average
maturity of the bonds included in this index approximates 22 years.
. SHEARSON LEHMAN GOVERNMENT INDEX, an unmanaged index comprised of all
publicly issued, non-convertible domestic debt of the U.S. government, or
any agency thereof, or any quasi-federal corporation and of corporate debt
guaranteed by the U.S. government. Only notes and bonds with a minimum
outstanding principal of $1 million and a minimum maturity of one year are
included.
. MORNINGSTAR, INC., an independent rating service that publishes the bi-
weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
. MONEY, a monthly magazine that regularly ranks money market funds in
various categories based on the latest available seven-day compound
(effective) yield. From time to time, the Fund will quote its Money
ranking in advertising and sales literature.
33
<PAGE>
. STANDARD & POOR'S UTILITY INDEX, an unmanaged index of common stocks from
forty different utilities. This index indicates daily changes in the price
of the stocks. The index also provides figures for changes in price from
the beginning of the year to date, and for a twelve month period.
. DOW JONES UTILITY INDEX, an unmanaged index comprised of fifteen utility
stocks that tracks changes in price daily and over a six month period. The
index also provides the highs and lows for each of the past five years.
. THE CONSUMER PRICE INDEX, a measure for determining inflation.
Investors may use such indexes (or reporting services) in addition to the Funds'
Prospectuses to obtain a more complete view of each Portfolio's performance
before investing. Of course, when comparing each Portfolio's performance to any
index, conditions such as composition of the index and prevailing market
conditions should be considered in assessing the significance of such companies.
Unmanaged indexes may assume the reinvestment of dividends but generally do not
reflect deductions for administrative and management costs and expenses.
When comparing funds using reporting services, or total return and yield, or
effective yield, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price.
SAFEKEEPING OF ACCOUNT ASSETS
Title to assets of the Separate Account is held by the Company. The Assets are
kept physically segregated and held separate and apart from the Company's
General Account assets. The General Account contains all of the assets of the
Company. Records are maintained of all purchases and redemptions of eligible
Portfolio shares held by each of the Subaccounts and the General Account.
THE COMPANY
Effective July 1, 1995, the name of the Company was changed from National Home
Life Assurance Company to Providian Life and Health Insurance Company. Providian
Corporation owns a 4% interest in the Company and 61%, 15% and 20% interests,
respectively, are held by Commonwealth Life Insurance Company, Peoples Security
Life Insurance Company and Capital Liberty, L.P. Commonwealth Life Insurance
Company and Peoples Security Life Insurance Company are each wholly-owned by
Providian Corporation. A 5% interest in Capital Liberty, L.P. is owned by
Providian Corporation, which is the general partner, and 76% and 19% interests,
respectively, are held by two limited partners, Commonwealth Life Insurance
Company and Peoples Security Life Insurance Company.
STATE REGULATION
The Company is a stock life insurance company organized under the laws of
Missouri, and is subject to regulation by the Missouri State Department of
Insurance. An annual statement is filed with the Missouri Commissioner of
Insurance on or before March 1st of each year covering the operations and
reporting on the financial condition of the Company as of December 31st of the
preceding calendar year. Periodically, the Missouri Commissioner of Insurance
examines the financial condition of the Company, including the liabilities and
reserves of the Separate Account.
34
<PAGE>
In addition, the Company is subject to the insurance laws and regulations of
all the states where it is licensed to operate. The availability of certain
contract rights and provisions depends on state approval and/or filing and
review processes. Where required by state law or regulation, the Contracts will
be modified accordingly.
RECORDS AND REPORTS
All records and accounts relating to the Separate Account will be maintained
by the Company or by its Administrator. As presently required by the Investment
Company Act of 1940 and regulations promulgated thereunder, the Company will
mail to all Contract Owners at their last known address of record, at least
semi-annually, reports containing such information as may be required under
that Act or by any other applicable law or regulation.
DISTRIBUTION OF THE CONTRACTS
Providian Securities Corporation ("PSC"), the principal underwriter of the
Contracts, is ultimately a wholly owned subsidiary of Providian Corporation. PSC
is registered with the SEC under the Securities Exchange Act of 1934 as a
broker-dealer and is a member of the National Association of Securities Dealers,
Inc. Commissions not to exceed (i) 4.75% of Purchase Payments for A Units plus
an annual trail or maintenance fee of .20% of the Contract's Accumulation Value;
and (ii) 6.75% of Purchase Payments for B Units may be paid to entities which
sell the Contracts. In addition, expense reimbursement allowances may be paid.
Additional payments may be made for other services not directly related to the
sale of the Contracts.
The Contracts are offered to the public through brokers licensed under the
federal securities laws and state insurance laws that have generally entered
into agreements with PSC. The offering of the Contracts is continuous and PSC
does not anticipate discontinuing the offering of the Contracts. However, PSC
does reserve the right to discontinue the offering of the Contracts.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate Account are subject. The Company is not
involved in any litigation that is of material importance in relation to its
total assets or that relates to the Separate Account.
OTHER INFORMATION
A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
Contracts discussed in this Statement of Additional Information. Not all of the
information set forth in the Registration Statement, amendments and exhibits
thereto has been included in this Statement of Additional Information.
Statements contained in this Statement of Additional Information concerning the
content of the Contracts and other legal instruments are intended to be
summaries. For a complete statement of the terms of these documents, reference
should be made to the instruments filed with the Securities and Exchange
Commission.
FINANCIAL STATEMENTS
The audited financial statements of the Separate Account for the periods ended
December 31, 1995 and 1994, including the Report of Independent Auditors
thereon, is included in this Statement of Additional Information. The audited
statutory-basis financial statements of the Company for the periods ended
December 31, 1995 and 1994, respectively, including the Reports of Independent
Auditors thereon, which are also included in this Statement of Additional
Information, should be distinguished from the financial statements of the
Separate Account and should be
35
<PAGE>
considered only as bearing on the ability of the Company to meet its
obligations under the Contracts. They should not be considered as bearing on the
investment performance of the assets held in the Separate Account.
36
<PAGE>
Financial Statements
Providian Life and Health Insurance Company
Separate Account V - Marquee
Periods ended December 31, 1995 and 1994
with Report of Independent Auditors
<PAGE>
Providian Life and Health Insurance Company
Separate Account V - Marquee
Financial Statements
Periods ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Report of Independent Auditors........................................ 1
Audited Financial Statements
Statements of Assets and Liabilities.................................. 2
Statements of Operations.............................................. 4
Statements of Changes in Net Assets................................... 6
Notes to Financial Statements......................................... 8
</TABLE>
<PAGE>
Report of Independent Auditors
Contract Holders
Providian Life and Health Insurance Company Separate Account V - Marquee
We have audited the accompanying statement of assets and liabilities of
Providian Life and Health Insurance Company Separate Account V - Marquee
(comprising the Fidelity Money Market, Fidelity Equity-Income, Fidelity Growth,
Fidelity Asset Manager, Dreyfus Growth and Income, Dreyfus Quality Bond, TRP
Equity-Income, TRP New America Growth, TRP International Stock, Quest for Value
Managed, Quest for Value Small Cap and Quest for Value U.S. Government Income
Subaccounts) as of December 31, 1995 and 1994, and the related statements of
operations and changes in net assets for the periods then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995 and 1994, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
subaccounts constituting the Providian Life and Health Insurance Company
Separate Account V - Marquee at December 31, 1995 and 1994, and the results of
their operations and changes in their net assets for the periods then ended in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Louisville, Kentucky
April 23, 1996
1
<PAGE>
Providian Life and Health Insurance Company
Separate Account V - Marquee
Statements of Assets and Liabilities
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
--------------------------
<S> <C> <C>
ASSETS
Investments in Marquee Variable Insurance Product Fund:
Fidelity Money Market Portfolio (cost: $14,815,892 and
$1,031,487 in 1995 and 1994, respectively) $ 14,815,892 $ 1,031,487
Fidelity Equity-Income Portfolio (cost: $6,124,508 and $146,988
in 1995 and 1994, respectively) 6,750,129 144,300
Fidelity Growth Portfolio (cost: $6,848,013 and $234,598 in 1995
and 1994, respectively) 7,243,352 239,755
Fidelity Asset Manager Portfolio (cost: $3,142,963 and $456,719
in 1995 and 1994, respectively) 3,407,093 446,447
Dreyfus Growth and Income Portfolio (cost: $4,384,201 and
$104,546 in 1995 and 1994, respectively) 4,747,966 100,260
Dreyfus Quality Bond Portfolio (cost: $1,923,611 and $81,049 in
1995 and 1994, respectively) 1,994,517 80,119
TRP Equity-Income Portfolio (cost: $2,092,667 and $38,400 in
1995 and 1994, respectively) 2,341,024 37,878
TRP New America Growth Portfolio (cost: $3,113,677 and
$17,026 in 1995 and 1994, respectively) 3,584,701 17,053
TRP International Stock Portfolio (cost: $4,663,184 and $251,513
in 1995 and 1994, respectively) 4,916,098 245,381
Quest for Value Managed Portfolio (cost: $5,553,120 and
$199,039 in 1995 and 1994, respectively) 6,159,414 194,241
Quest for Value Small Cap Portfolio (cost: $3,765,654 and
$134,231 in 1995 and 1994, respectively) 4,089,628 137,212
Quest for Value U.S. Government Income Portfolio (cost:
$580,642) 596,654 -
--------------------------
60,646,468 2,674,133
Amounts due from Fund Manager 364 -
Amounts due from Providian Life and Health Insurance Company 1,178,388 4,851
--------------------------
NET ASSETS $ 61,825,220 $ 2,678,984
==========================
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
--------------------------
<S> <C> <C>
NET ASSETS ATTRIBUTABLE TO VARIABLE ANNUITY CONTRACT OWNERS
Fidelity Money Market Subaccount $ 15,994,397 $ 1,036,236
Fidelity Equity-Income Subaccount 6,750,129 144,268
Fidelity Growth Subaccount 7,243,352 239,838
Fidelity Asset Manager Subaccount 3,407,093 446,431
Dreyfus Growth and Income Subaccount 4,747,966 100,262
Dreyfus Quality Bond Subaccount 1,994,518 80,167
TRP Equity-Income Subaccount 2,341,015 37,946
TRP New America Growth Subaccount 3,584,702 17,053
TRP International Stock Subaccount 4,916,099 245,363
Quest for Value Managed Subaccount 6,159,415 194,242
Quest for Value Small Cap Subaccount 4,089,627 137,178
Quest for Value U.S. Government Income Subaccount 596,907 -
--------------------------
NET ASSETS ATTRIBUTABLE TO VARIABLE ANNUITY CONTRACT OWNERS $ 61,825,220 $ 2,678,984
==========================
</TABLE>
See accompanying notes.
3
<PAGE>
Providian Life and Health Insurance Company
Separate Account V - Marquee
Statement of Operations
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Dreyfus
Fidelity Fidelity Fidelity Growth Dreyfus TRP
Money Equity- Fidelity Asset and Quality Equity-
Market Income Growth Manager Income Bond Income
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends $ 404,358 $ 78,798 $ 1,669 $ 9,571 $205,036 $ 75,801 $ 45,553
Expenses:
Mortality and expense risk and
administrative charges 95,611 34,560 37,138 23,004 21,626 12,429 13,076
----------------------------------------------------------------------------------
Net investment income (expense) 308,747 44,238 (35,469) (13,433) 183,410 63,372 32,477
Realized and unrealized gain on investments:
Net realized gain from investment
transactions:
Proceeds from sales 4,521,173 153,426 105,950 96,046 114,754 61,684 92,430
Cost of investments sold 4,521,173 143,586 94,750 94,250 69,966 59,442 86,989
----------------------------------------------------------------------------------
- 9,840 11,200 1,796 44,788 2,242 5,441
Net unrealized appreciation (depreciation)
of investments:
At end of year - 625,621 395,339 264,130 363,765 70,906 248,357
At beginning of year - (2,688) 5,157 (10,272) (4,286) (930) (522)
----------------------------------------------------------------------------------
- 628,309 390,182 274,402 368,051 71,836 248,879
Net gain on investments - 638,149 401,382 276,198 412,839 74,078 254,320
----------------------------------------------------------------------------------
Net increase in net assets resulting from
operations $ 308,747 $682,387 $365,913 $262,765 $596,249 $137,450 $286,797
==================================================================================
</TABLE>
<TABLE>
<CAPTION>
Quest for
TRP Value U.S.
TRP New Inter- Quest for Quest for Govern-
America national Value Value ment
Growth Stock Managed Small Cap Income Total
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends $ 58 $ 1,347 $ 2,528 $ 1,406 $19,576 $ 845,701
Expenses:
Mortality and expense risk and
administrative charges 17,886 27,096 32,943 24,974 4,269 344,612
-------------------------------------------------------------------------------
Net investment income (expense) (17,828) (25,749) (30,415) (23,568) 15,307 501,089
Realized and unrealized gain on investments:
Net realized gain from investment
transactions:
Proceeds from sales 69,646 102,266 154,722 119,434 18,903 5,610,434
Cost of investments sold 62,303 99,101 141,982 112,852 17,230 5,503,624
-------------------------------------------------------------------------------
7,343 3,165 12,740 6,582 1,673 106,810
Net unrealized appreciation (depreciation)
of investments:
At end of year 471,024 252,914 606,294 323,974 16,012 3,638,336
At beginning of year 27 (6,132) (4,798) 2,981 - (21,463)
-------------------------------------------------------------------------------
470,997 259,046 611,092 320,993 16,012 3,659,799
Net gain on investments 478,340 262,211 623,832 327,575 17,685 3,766,609
-------------------------------------------------------------------------------
Net increase in net assets resulting from
operations $460,512 $236,462 $593,417 $304,007 $32,992 $4,267,698
===============================================================================
</TABLE>
See accompanying notes.
4
<PAGE>
Providian Life and Health Insurance Company
Separate Account V - Marquee
Statement of Operations
Period Ended December 31, 1994
<TABLE>
<CAPTION>
Dreyfus
Fidelity Fidelity Fidelity Growth Dreyfus TRP
Money Equity- Fidelity Asset and Quality Equity-
Market Income Growth Manager Income Bond Income
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends $12,761 $ 847 $ - $ 4 $ 1,875 $ 1,681 $ 439
Expenses:
Mortality and expense risk and
administrative charges 2,749 401 698 750 227 153 38
-----------------------------------------------------------------------------------
Net investment income (expense) 10,012 446 (698) (746) 1,648 1,528 401
Realized and unrealized gain (loss) on
investments:
Net realized gain (loss) from investment
transactions:
Proceeds from sales 88,291 367 4,781 5,230 229 951 106
Cost of investments sold 88,291 334 4,703 5,171 214 1,035 83
-----------------------------------------------------------------------------------
- 33 78 59 15 (84) 23
Net unrealized appreciation (depreciation)
of investments:
At end of year - (2,688) 5,157 (10,272) (4,286) (930) (522)
-----------------------------------------------------------------------------------
Net gain (loss) on investments - (2,655) 5,235 (10,213) (4,271) (1,014) (499)
-----------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $10,012 $(2,209) $4,537 $(10,959) $(2,623) $ 514 $ (98)
===================================================================================
</TABLE>
<TABLE>
<CAPTION>
TRP
TRP New Inter- Quest for Quest for
America national Value Value
Growth Stock Managed Small Cap Total
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income:
Dividends $ - $ - $ - $ - $ 17,607
Expenses:
Mortality and expense risk and
administrative charges 2 742 315 189 6,264
----------------------------------------------------------------
Net investment income (expense) (2) (742) (315) (189) 11,343
Realized and unrealized gain (loss) on investments:
Net realized gain (loss) from investment
transactions:
Proceeds from sales 1 723 316 155 101,150
Cost of investments sold 1 118 403 155 100,508
----------------------------------------------------------------
- 605 (87) - 642
Net unrealized appreciation (depreciation)
of investments:
At end of year 27 (6,132) (4,798) 2,981 (21,463)
----------------------------------------------------------------
Net gain (loss) on investments 27 (5,527) (4,885) 2,981 (20,821)
----------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations $25 $(6,269) $(5,200) $2,792 $ (9,478)
================================================================
</TABLE>
See accompanying notes.
5
<PAGE>
Providian Life and Health Insurance Company
Separate Account V - Marquee
Statement of Changes in Net Assets
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Dreyfus
Fidelity Fidelity Fidelity Growth Dreyfus TRP
Money Equity- Fidelity Asset and Quality Equity-
Market Income Growth Manager Income Bond Income
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1995 $ 1,036,236 $ 144,268 $ 239,838 $ 446,431 $ 100,262 $ 80,167 $ 37,946
Increase in net assets resulting
from operations:
Net investment income (expense) 308,747 44,238 (35,469) (13,433) 183,410 63,372 32,477
Net realized gain on investments - 9,840 11,200 1,796 44,788 2,242 5,441
Net unrealized appreciation of
investments - 628,309 390,182 274,402 368,051 71,836 248,879
-----------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 308,747 682,387 365,913 262,765 596,249 137,450 286,797
Changes from variable annuity
contract transactions:
Transfers of net premiums 18,888,487 5,486,495 5,880,391 2,565,916 3,554,661 1,633,697 1,892,262
Transfers for terminations (165,072) (51,335) (37,746) (36,496) (25,138) (49,255) (43,652)
Transfers for annuity benefits (155,185) - - - - - -
Net transfers within Separate
Account V -
Marquee and transfers to and
from the general account (3,918,816) 488,314 794,956 168,477 521,932 192,459 167,662
-----------------------------------------------------------------------------------------------
Net increase in net assets
derived from variable annuity
contract transactions 14,649,414 5,923,474 6,637,601 2,697,897 4,051,455 1,776,901 2,016,272
-----------------------------------------------------------------------------------------------
Net increase in net assets 14,958,161 6,605,861 7,003,514 2,960,662 4,647,704 1,914,351 2,303,069
-----------------------------------------------------------------------------------------------
Balances at December 31, 1995 $15,994,397 $6,750,129 $7,243,352 $3,407,093 $4,747,966 $1,994,518 $2,341,015
===============================================================================================
</TABLE>
<TABLE>
<CAPTION>
Quest for
TRP Value U.S.
TRP New Inter- Quest for Quest for Govern-
America national Value Value ment
Growth Stock Managed Small Cap Income Total
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1995 $ 17,053 $ 245,363 $ 194,242 $ 137,178 $ - $ 2,678,984
Increase in net assets resulting
from operations:
Net investment income (expense) (17,828) (25,749) (30,415) (23,568) 15,307 501,089
Net realized gain on investments 7,343 3,165 12,740 6,582 1,673 106,810
Net unrealized appreciation of
investments 470,997 259,046 611,092 320,993 16,012 3,659,799
-------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 460,512 236,462 593,417 304,007 32,992 4,267,698
Changes from variable annuity
contract transactions:
Transfers of net premiums 2,761,711 3,967,021 4,882,464 3,344,233 546,060 55,403,398
Transfers for terminations (9,628) (28,568) (47,228) (13,087) (10,897) (518,102)
Transfers for annuity benefits - - - - - (155,185)
Net transfers within Separate
Account V -
Marquee and transfers to and
from the general account 355,054 495,821 536,520 317,296 28,752 148,427
-------------------------------------------------------------------------------
Net increase in net assets
derived from variable annuity
contract transactions 3,107,137 4,434,274 5,371,756 3,648,442 563,915 54,878,538
-------------------------------------------------------------------------------
Net increase in net assets 3,567,649 4,670,736 5,965,173 3,952,449 596,907 59,146,236
-------------------------------------------------------------------------------
Balances at December 31, 1995 $3,584,702 $4,916,099 $6,159,415 $4,089,627 $596,907 $61,825,220
===============================================================================
</TABLE>
See accompanying notes.
6
<PAGE>
Providian Life and Health Insurance Company
Separate Account V - Marquee
Statement of Changes in Net Assets
Period Ended December 31, 1994
<TABLE>
<CAPTION>
Dreyfus
Fidelity Fidelity Fidelity Growth Dreyfus TRP
Money Equity- Fidelity Asset and Quality Equity-
Market Income Growth Manager Income Bond Income
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1994 $ - $ - $ - $ - $ - $ - $ -
Increase (decrease) in net assets
resulting from operations:
Net investment income (expense) 10,012 446 (698) (746) 1,648 1,528 401
Net realized gain (loss) on
investments - 33 78 59 15 (84) 23
Net unrealized appreciation
(depreciation) of investments - (2,688) 5,157 (10,272) (4,286) (930) (522)
--------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 10,012 (2,209) 4,537 (10,959) (2,623) 514 (98)
Changes from variable annuity
contract transactions:
Transfers of net premiums 1,111,750 138,550 227,051 418,639 101,135 79,403 33,284
Transfers for terminations (1,748) - - (2,496) - (750) -
Net transfers within Separate
Account V - Marquee (83,778) 7,927 8,250 41,247 1,750 1,000 4,760
--------------------------------------------------------------------------------------------
Net increase in net assets derived
from variable annuity contract
transactions 1,026,224 146,477 235,301 457,390 102,885 79,653 38,044
--------------------------------------------------------------------------------------------
Net increase in net assets 1,036,236 144,268 239,838 446,431 100,262 80,167 37,946
--------------------------------------------------------------------------------------------
Balances at December 31, 1994 $1,036,236 $144,268 $239,838 $446,431 $100,262 $80,167 $37,946
============================================================================================
</TABLE>
<TABLE>
<CAPTION>
TRP
TRP New Inter- Quest for Quest for
America national Value Value
Growth Stock Managed Small Cap Total
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1994 $ - $ - $ - $ - $ -
Increase (decrease) in net assets
resulting from operations:
Net investment income (expense) (2) (742) (315) (189) 11,343
Net realized gain (loss) on
investments - 605 (87) - 642
Net unrealized appreciation
(depreciation) of investments 27 (6,132) (4,798) 2,981 (21,463)
-----------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 25 (6,269) (5,200) 2,792 (9,478)
Changes fromvariable annuity
contract transactions:
Transfers of net premiums 15,028 244,955 193,775 129,886 2,693,456
Transfers for terminations - - - - (4,994)
Net transfers within Separate
Account V - Marquee 2,000 6,677 5,667 4,500 -
-----------------------------------------------------------------
Net increase in net assets derived
from variable annuity contract
transactions 17,028 251,632 199,442 134,386 2,688,462
-----------------------------------------------------------------
Net increase in net assets 17,053 245,363 194,242 137,178 2,678,984
-----------------------------------------------------------------
Balances at December 31, 1994 $17,053 $245,363 $194,242 $137,178 $2,678,984
=================================================================
</TABLE>
See accompanying notes.
7
<PAGE>
Providian Life and Health Insurance Company
Separate Account V - Marquee
Notes to Financial Statements
December 31, 1995
1. ACCOUNTING POLICIES
ORGANIZATION OF THE ACCOUNT
Providian Life and Health Insurance Company Separate Account V - Marquee (the
"Separate Account") is a separate account of Providian Life and Health Insurance
Company ("PLH"), formerly National Home Life Assurance Company, a wholly-owned
subsidiary of Providian Corporation, and is registered as a unit investment
trust under the Investment Company Act of 1940, as amended. The Separate Account
was established for the purpose of funding variable annuity contracts issued by
PLH.
The Separate Account offers a choice of two charge structures: "A" units and "B"
units. "A" units have a front-end sales load of up to 5.75% of aggregate premium
contributions and no surrender charges. For "B" units, no sales load is deducted
from premium contributions and up to 10% of the accumulated value can be
withdrawn once per year without a surrender charge. Additional withdrawals are
subject to surrender charges of up to 6% during the first six contract years and
the total surrender charges assessed will not exceed 8.5% of the premium
contributions under the contract. No surrender charges are assessed on the death
of the annuitant or after the sixth contract year.
The Separate Account has 12 subaccounts, 11 of which had activity during 1994.
In certain states of issue, the contract owner's initial premium is
automatically allocated to the Fidelity Money Market Subaccount until the end of
the free look period (typically 10 days or, in certain instances, 30 days or
more). Subsequent to the free look period, the contract owner may allocate all
or a portion of the initial premium and additional premiums, if any, to one or
more subaccounts of the Separate Account or to PLH's General Account, which
consists of all assets owned by PLH other than those in the Separate Account or
other separate accounts. In all other states of issue, a contract owner may
allocate the initial premium to one or more subaccounts of the Separate Account
or to PLH's General Account.
The Separate Account had no activity until the first contract application was
processed in July 1994.
8
<PAGE>
Providian Life and Health Insurance Company
Separate Account V - Marquee
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS
Each subaccount invests exclusively in shares of the corresponding portfolios of
the Variable Insurance Products Fund and the Variable Insurance Products Fund II
(both advised by Fidelity Management and Research Company), Dreyfus Variable
Investment Fund (advised by Dreyfus Corporation), T. Rowe Price Equity Series,
Inc. (advised by T. Rowe Price Associates, Inc.), T. Rowe Price International
Series, Inc. (advised by Rowe Price-Fleming International, Inc.) and The Quest
for Value Accumulation Trust (advised by Quest for Value Advisors) (each, a
"Fund" and collectively, the "Funds"). Effective May 1, 1996, the Quest for
Value Accumulation Trust and the Quest for Value Advisors will be renamed OCC
Accumulation Trust and OpCap Advisors, respectively. The investment objectives
of the Funds' portfolios are as follows:
Fidelity Money Market Portfolio seeks to obtain as high a level of current
income as is consistent with preserving capital and providing liquidity. It
invests only in high-quality U.S. dollar denominated money market instruments
of domestic and foreign issuers.
Fidelity Equity-Income Portfolio seeks reasonable income by investing
primarily in income-producing equity securities. In choosing these securities
the portfolio will also 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 500 Composite Stock Price
Index.
Fidelity Growth Portfolio seeks to achieve capital appreciation normally
through the purchase of common stocks (although the portfolio's investments
are not restricted to any one type of security). Capital appreciation may
also be found in other types of securities, including bonds and preferred
stocks.
Fidelity Asset Manager Portfolio seeks high total return with reduced risk
over the long-term by allocating its assets among domestic and foreign
stocks, bonds and short-term fixed income instruments.
Dreyfus Growth and Income Portfolio is a non-diversified portfolio, the goal
of which is long-term capital growth, current income and growth of income,
9
<PAGE>
Providian Life and Health Insurance Company
Separate Account V - Marquee
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
consistent with reasonable investment risk. The portfolio invests in equity
and debt securities and money market instruments of domestic and foreign
issuers.
Dreyfus Quality Bond Portfolio is a diversified portfolio, the goal of which
is to provide the maximum of current income to the extent consistent with the
preservation of capital and the maintenance of liquidity. The portfolio
invests in debt obligations of corporations, the U.S. Government and its
agencies and instrumentalities, and major U.S. banking institutions.
T. Rowe Price Equity-Income Portfolio seeks to provide substantial dividend
income and also capital appreciation by investing primarily in dividend-
paying common stocks of established companies. In pursuing its objective, the
portfolio emphasizes companies with favorable prospects for increasing both
dividend income and capital appreciation.
T. Rowe Price New America Growth Portfolio seeks long-term growth of capital
through investments primarily in the common stocks of U.S. growth companies
which operate in service industries. In pursuing its objective, this
portfolio invests primarily in companies deriving a majority of their
revenues or operating earnings from service-related activities and in
companies whose prospects are closely tied to service industries. The
portfolio may also invest up to 25% of its assets in non-service related
growth companies in pursuit of capital appreciation whose earnings are
believed to hold the prospect of superior growth.
T. Rowe Price International Stock Portfolio seeks long-term growth of
capital, through investments primarily in common stocks of established,
non-U.S. companies.
Quest for Value Managed Portfolio seeks to achieve growth of capital over
time through investment in a portfolio consisting of common stocks, bonds and
cash equivalents, the percentages of which will vary over time based on the
investment manager's assessments of the relative outlook for such
investments. Effective May 1, 1996, the portfolio will be renamed OpCap
Advisors Managed Portfolio.
10
<PAGE>
Providian Life and Health Insurance Company
Separate Account V - Marquee
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
Quest for Value Small Cap Portfolio seeks capital appreciation through
investments in a diversified portfolio consisting primarily of equity
securities of companies with market capitalization under $1 billion.
Effective May 1, 1996, the portfolio will be renamed OpCap Advisors Small
Cap Portfolio.
Quest for Value U.S. Government Income Portfolio seeks a high level of
current income together with the protection of capital. The portfolio seeks
to achieve its investment objective by investing exclusively in debt
obligations, including mortgage-backed securities, issued or guaranteed by
the U.S. Government, its agencies or instrumentalities. Effective May 1,
1996, the portfolio will be renamed OpCap Advisors U.S. Government Income
Portfolio.
There is no assurance that a portfolio will achieve its stated investment
objective.
The Separate Account purchases shares of the Funds at net asset value in
connection with premium payments allocated to the subaccounts in accordance with
contract owners' directions and redeems shares of the Funds to process transfers
and to meet policy contract obligations. Gains and losses resulting from the
redemption of shares are computed on the basis of average cost. Investment
transactions are recorded on the trade dates.
All dividends and capital gains earned on the portfolios are reinvested in the
portfolios and are reflected in the unit values of the subaccounts of the
Separate Account.
Investments in the Fund portfolios are valued at market which is calculated
daily on each day the New York Stock Exchange is open for trading. Income and
both realized and unrealized gains or losses from assets of each subaccount will
be credited to or charged against that subaccount without regard to income,
gains or losses from any other subaccount of the Separate Account or arising out
of any other business PLH may conduct.
The contract's accumulated value varies with the investment performance of the
corresponding portfolios. Investment results are not guaranteed by the Separate
Account or PLH, except to the extent of amounts allocated to PLH's General
Account. PLH has sole discretion to invest the assets of the General Account,
subject to applicable law. Allocation of any amounts to the General Account does
not entitle the
11
<PAGE>
Providian Life and Health Insurance Company
Separate Account V - Marquee
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
contract owner to share directly in the investment experience of these assets.
There are three fixed options under the General Account.
Although the assets in the Separate Account are the property of PLH, the assets
in the Separate Account attributable to the contracts cannot be used to
discharge the liabilities arising out of any other business which PLH may
conduct. The assets of the Separate Account are available to cover the general
liabilities of PLH only to the extent that the Separate Account's assets exceed
its liabilities under the contracts.
12
<PAGE>
Providian Life and Health Insurance Company
Separate Account V - Marquee
Notes to Financial Statements (continued)
2. INVESTMENTS
The following is a summary of shares and amounts outstanding as of December 31,
1995 and 1994:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
- ------------------------------------------------------------------------------------------------------------------------
PORTFOLIO SHARES NET ASSET VALUE FAIR VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity Money Market Portfolio 14,815,891.820 $ 1.00 $ 14,815,892
Fidelity Equity-Income Portfolio 350,292.135 19.27 6,750,129
Fidelity Growth Portfolio 248,059.999 29.20 7,243,352
Fidelity Asset Manager Portfolio 215,775.362 15.79 3,407,093
Dreyfus Growth and Income Portfolio 259,027.086 18.33 4,747,966
Dreyfus Quality Bond Portfolio 168,883.763 11.81 1,994,517
TRP Equity-Income Portfolio 177,216.067 13.21 2,341,024
TRP New America Growth Portfolio 253,371.063 15.23 3,584,701
TRP International Stock Portfolio 436,598.440 11.26 4,916,098
Quest for Value Managed Portfolio 204,360.132 30.14 6,159,414
Quest for Value Small Cap Portfolio 205,405.712 19.91 4,089,628
Quest for Value U.S. Government Income Portfolio 56,182.119 10.62 596,654
--------------
$ 60,646,468
==============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
- ------------------------------------------------------------------------------------------------------------------------
PORTFOLIO SHARES NET ASSET VALUE FAIR VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity Money Market Portfolio 1,031,487.450 $ 1.00 $ 1,031,487
Fidelity Equity-Income Portfolio 9,400.664 15.35 144,300
Fidelity Growth Portfolio 11,053.734 21.69 239,755
Fidelity Asset Manager Portfolio 32,374.656 13.79 446,447
Dreyfus Growth and Income Portfolio 6,414.617 15.63 100,260
Dreyfus Quality Bond Portfolio 7,608.626 10.53 80,119
TRP Equity-Income Portfolio 3,635.123 10.42 37,878
TRP New America Growth Portfolio 1,688.379 10.10 17,053
TRP International Stock Portfolio 24,104.224 10.18 245,381
Quest for Value Managed Portfolio 9,325.051 20.83 194,241
Quest for Value Small Cap Portfolio 7,894.841 17.38 137,212
Quest for Value U.S. Government Income Portfolio - - -
--------------
$ 2,674,133
==============
</TABLE>
13
<PAGE>
Providian Life and Health Insurance Company
Separate Account V - Marquee
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
The aggregate cost of shares purchased during the periods ended December 31,
1995 and 1994, for each of the respective portfolios is as follows:
<TABLE>
<CAPTION>
1995 1994
---------------------------
<S> <C> <C>
Fidelity Money Market Portfolio $18,305,559 $1,119,778
Fidelity Equity-Income Portfolio 6,121,106 147,322
Fidelity Growth Portfolio 6,708,165 239,301
Fidelity Asset Manager Portfolio 2,780,495 461,890
Dreyfus Growth and Income Portfolio 4,349,622 104,760
Dreyfus Quality Bond Portfolio 1,902,004 82,084
TRP Equity-Income Portfolio 2,141,257 38,483
TRP New America Growth Portfolio 3,158,954 17,027
TRP International Stock Portfolio 4,510,772 251,631
Quest for Value Managed Portfolio 5,496,064 199,442
Quest for Value Small Cap Portfolio 3,744,275 134,386
Quest for Value U.S. Government Income Portfolio 597,873 -
------------------------
$59,816,146 $2,796,104
========================
</TABLE>
All dividends and capital gains earned on the portfolios are reinvested in the
portfolios and are reflected in the unit values of the subaccounts of the
Separate Account.
3. FEDERAL INCOME TAXES
Operations of the Separate Account are included in the federal income tax return
of PLH, which is taxed as a life insurance company under the Internal Revenue
Code. The Separate Account will not be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code. Under current federal income
tax law, no federal income taxes are payable with respect to the Separate
Account.
4. ADVISORY AND SERVICE FEES
The Funds and their advisers furnish corporate management, administrative,
marketing and distribution services. Additionally, the Funds' advisers furnish
investment advisory services to the Fund portfolios under the terms of advisory
contracts. The net asset value of the portfolios is net of the advisory and
service fees.
14
<PAGE>
Providian Life and Health Insurance Company
Separate Account V - Marquee
Notes to Financial Statements (continued)
5. EXPENSES
An annual charge is deducted from the unit values of the subaccounts of the
Separate Account and is assessed for PLH's assumption of certain mortality and
expense risks incurred in connection with the contract. The charge is assessed
daily based on the net asset value of the Separate Account attributable to the
"A" unit contracts and the "B" unit contracts. For the periods ended December
31, 1995 and 1994, the effective annual rate for this charge was .65% for the
"A" unit contracts and 1.25% for the "B" unit contracts.
An administrative charge equal to .15% annually is deducted from the unit values
of the subaccounts of the Separate Account. This charge is assessed daily by
PLH, along with an annual policy fee of $30 per contract. The annual policy fee
is deducted proportionately from the subaccount's accumulated value. These
deductions represent reimbursement for the costs expected to be incurred over
the life of the contract for issuing and maintaining each contract and the
Separate Account.
6. CONTRACT OWNER TRANSACTIONS
Transactions with contract owners for the periods ended December 31, 1995 and
1994 for each of the respective subaccounts were as follows:
<TABLE>
<CAPTION>
1995 1994
----------------------------- -------------------------
A UNITS B UNITS A UNITS B UNITS
----------------------------- -------------------------
<S> <C> <C> <C> <C>
FIDELITY MONEY MARKET
SUBACCOUNT
Outstanding at beginning of period 20,724.868 81,408.482 - -
Issuance of units 204,414.809 1,624,300.077 21,635.935 88,960.833
Redemption of units (733.580) (421,633.036) (911.067) (7,552.351)
---------------------------------------------------------
Outstanding at end of period 224,406.097 1,284,075.523 20,724.868 81,408.482
============================= =========================
Unit Value $ 10.663945 $ 10.592323 $ 10.151940 $ 10.144373
============================= =========================
Amount at end of period $ 2,393,054 $ 13,601,343 $ 210,398 $ 825,838
============================= =========================
</TABLE>
15
<PAGE>
Providian Life and Health Insurance Company
Separate Account V - Marquee
Notes to Financial Statements (continued)
6. CONTRACT OWNER TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
1995 1994
----------------------------- -------------------------
A UNITS B UNITS A UNITS B UNITS
----------------------------- -------------------------
<S> <C> <C> <C> <C>
FIDELITY EQUITY-INCOME
SUBACCOUNT
Outstanding at beginning of period 200.000 14,704.932 - -
Issuance of units 36,344.927 481,523.451 200.000 14,704.932
Redemption of units (760.210) (9,224.068) - -
----------------------------- -------------------------
Outstanding at end of period 35,784.717 487,004.315 200.000 14,704.932
============================= =========================
Unit Value $ 13.184522 $ 12.891724 $ 9.837701 $ 9.677001
============================= =========================
Amount at end of period $ 471,804 $ 6,278,325 $ 1,968 $ 142,300
============================= =========================
FIDELITY GROWTH SUBACCOUNT
Outstanding at beginning of period 2,451.561 21,032.707 - -
Issuance of units 8,850.807 506,240.250 2,823.161 21,032.707
Redemption of units (4.140) (5,101.121) (371.600) -
----------------------------- -------------------------
Outstanding at end of period 11,298.228 522,171.836 2,451.561 21,032.707
============================= =========================
Unit Value $ 14.329427 $ 13.561541 $ 10.670488 $ 10.159355
============================= =========================
Amount at end of period $ 161,897 $ 7,081,455 $ 26,159 $ 213,679
============================= =========================
FIDELITY ASSET MANAGER
SUBACCOUNT
Outstanding at beginning of period 1,006.404 45,464.030 - -
Issuance of units 7,526.016 260,704.225 1,206.173 45,717.740
Redemption of units (1.661) (7,274.746) (199.769) (253.710)
----------------------------- -------------------------
Outstanding at end of period 8,530.759 298,893.509 1,006.404 45,464.030
============================= =========================
Unit Value $ 11.301946 $ 11.076449 $ 9.740791 $ 9.603813
============================= =========================
Amount at end of period $ 96,414 $ 3,310,679 $ 9,803 $ 436,628
============================= =========================
</TABLE>
16
<PAGE>
Providian Life and Health Insurance Company
Separate Account V - Marquee
Notes to Financial Statements (continued)
6. CONTRACT OWNER TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
1995 1994
---------------------------- ------------------------
A UNITS B UNITS A UNITS B UNITS
---------------------------- ------------------------
<S> <C> <C> <C> <C>
DREYFUS GROWTH AND INCOME
SUBACCOUNT
Outstanding at beginning of period 1,094.647 9,467.679 - -
Issuance of units 12,900.517 299,814.239 1,094.647 9,467.679
Redemption of units (12.347) (6,760.455) - -
---------------------------- ------------------------
Outstanding at end of period 13,982.817 302,521.463 1,094.647 9,467.679
============================ ========================
Unit Value $ 15.534453 $ 14.976627 $ 9.668670 $ 9.472000
============================ ========================
Amount at end of period $ 217,215 $ 4,530,751 $ 10,584 $ 89,678
============================ ========================
DREYFUS QUALITY BOND
SUBACCOUNT
Outstanding at beginning of period 100.000 7,986.548 - -
Issuance of units 2,172.769 163,552.014 100.000 8,062.283
Redemption of units (748.008) (3,637.099) - (75.735)
---------------------------- ------------------------
Outstanding at end of period 1,524.761 167,901.463 100.000 7,986.548
============================ ========================
Unit Value $ 12.150454 $ 11.768752 $ 10.170760 $ 9.910439
============================ ========================
Amount at end of period $ 18,527 $ 1,975,991 $ 1,017 $ 79,150
============================ ========================
TRP EQUITY-INCOME SUBACCOUNT
Outstanding at beginning of period 586.554 3,274.398 - -
Issuance of units 17,576.728 164,608.670 586.554 3,274.398
Redemption of units (1,369.015) (5,322.127) - -
---------------------------- ------------------------
Outstanding at end of period 16,794.267 162,560.941 586.554 3,274.398
============================ ========================
Unit Value $ 13.369106 $ 13.019680 $ 10.000001 $ 9.797124
============================ ========================
Amount at end of period $ 224,524 $ 2,116,491 $ 5,866 $ 32,080
============================ ========================
</TABLE>
17
<PAGE>
Providian Life and Health Insurance Company
Separate Account V - Marquee
Notes to Financial Statements (continued)
6. CONTRACT OWNER TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
1995 1994
---------------------------- -----------------------
A UNITS B UNITS A UNITS B UNITS
---------------------------- -----------------------
<S> <C> <C> <C> <C>
TRP NEW AMERICA GROWTH
SUBACCOUNT
Outstanding at beginning of period 206.097 1,502.759 - -
Issuance of units 4,463.972 238,353.955 206.097 1,502.759
Redemption of units (.444) (3,873.404) - -
---------------------------- -----------------------
Outstanding at end of period 4,669.625 235,983.310 206.097 1,502.759
============================ =======================
Unit Value $ 14.726569 $ 14.899078 $ 9.825205 $ 10.000000
============================ =======================
Amount at end of period $ 68,768 $ 3,515,934 $ 2,025 $ 15,028
============================ =======================
TRP INTERNATIONAL STOCK
SUBACCOUNT
Outstanding at beginning of period 2,714.613 23,019.405 - -
Issuance of units 7,175.337 445,452.255 2,714.613 23,019.405
Redemption of units (3.503) (7,481.728) - -
---------------------------- -----------------------
Outstanding at end of period 9,886.447 460,989.932 2,714.613 23,019.405
============================ =======================
Unit Value $ 10.668133 $ 10.435431 $ 9.672412 $ 9.518300
============================ =======================
Amount at end of period $ 105,470 $ 4,810,629 $ 26,257 $ 219,106
============================ =======================
QUEST FOR VALUE MANAGED
SUBACCOUNT
Outstanding at beginning of period 794.327 19,220.893 - -
Issuance of units 15,143.201 416,039.077 794.327 19,220.893
Redemption of units (11.138) (9,076.112) - -
---------------------------- -----------------------
Outstanding at end of period 15,926.390 426,183.858 794.327 19,220.893
============================ =======================
Unit Value $ 14.221162 $ 13.921040 $ 9.848733 $ 9.698766
============================ =======================
Amount at end of period $ 226,492 $ 5,932,923 $ 7,823 $ 186,419
============================ =======================
</TABLE>
18
<PAGE>
Providian Life and Health Insurance Company
Separate Account V - Marquee
Notes to Financial Statements (continued)
6. CONTRACT OWNER TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
1995 1994
---------------------------- -----------------------
A UNITS B UNITS A UNITS B UNITS
---------------------------- -----------------------
<S> <C> <C> <C> <C>
QUEST FOR VALUE SMALL CAP
SUBACCOUNT
Outstanding at beginning of period 1,749.077 11,733.736 - -
Issuance of units 2,769.547 346,254.931 1,749.077 11,733.736
Redemption of units (295.419) (8,222.006) - -
---------------------------- ------------------------
Outstanding at end of period 4,223.205 349,766.661 1,749.077 11,733.736
============================ ========================
Unit Value $ 11.696394 $ 11.551219 $ 10.231964 $ 10.165710
============================ ========================
Amount at end of period $ 49,396 $ 4,040,231 $ 17,896 $ 119,282
============================ ========================
QUEST FOR VALUE U.S.
GOVERNMENT INCOME
SUBACCOUNT
Outstanding at beginning of period - - - -
Issuance of units 2,551.276 53,120.187 - -
Redemption of units (701.906) (670.066) - -
---------------------------- ------------------------
Outstanding at end of period 1,849.370 52,450.121 - -
============================ ========================
Unit Value $ 10.594749 $ 11.006903 $ - $ -
============================ ========================
Amount at end of period $ 19,594 $ 577,313 $ - $ -
============================ ========================
</TABLE>
19
<PAGE>
Providian Life and Health Insurance Company
Separate Account V - Marquee
Notes to Financial Statements (continued)
7. NET ASSETS
Net assets at December 31, 1995 are summarized in the following tables:
<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY
MONEY EQUITY- FIDELITY ASSET
MARKET INCOME GROWTH MANAGER
---------------------------------------------------
<S> <C> <C> <C> <C>
Contract owner transactions $15,675,638 $6,069,951 $6,872,902 $3,155,287
Accumulated net investment income
(expense) 318,759 44,684 (36,167) (14,179)
Accumulated net realized gain on
investments - 9,873 11,278 1,855
Net unrealized appreciation on
investments - 625,621 395,339 264,130
---------------------------------------------------
$15,994,397 $6,750,129 $7,243,352 $3,407,093
===================================================
TRP
DREYFUS DREYFUS TRP NEW
GROWTH AND QUALITY EQUITY- AMERICA
INCOME BOND INCOME GROWTH
---------------------------------------------------
Contract owner transactions $ 4,154,340 $1,856,554 $2,054,316 $3,124,165
Accumulated net investment income
(expense) 185,058 64,900 32,878 (17,830)
Accumulated net realized gain on
investments 44,803 2,158 5,464 7,343
Net unrealized appreciation on
investments 363,765 70,906 248,357 471,024
---------------------------------------------------
$ 4,747,966 $1,994,518 $2,341,015 $3,584,702
===================================================
</TABLE>
20
<PAGE>
Providian Life and Health Insurance Company
Separate Account V - Marquee
Notes to Financial Statements (continued)
7. NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
TRP
INTER- QUEST FOR QUEST FOR QUEST FOR
NATIONAL VALUE VALUE VALUE
STOCK MANAGED SMALL CAP U.S. TOTAL
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Contract owner transactions $4,685,906 $5,571,198 $3,782,828 $563,915 $57,567,000
Accumulated net investment income
(expense) (26,491) (30,730) (23,757) 15,307 512,432
Accumulated net realized gain on
investments 3,770 12,653 6,582 1,673 107,452
Net unrealized appreciation on
investments 252,914 606,294 323,974 16,012 3,638,336
-------------------------------------------------------------------
$4,916,099 $6,159,415 $4,089,627 $596,907 $61,825,220
===================================================================
</TABLE>
21
<PAGE>
Statutory-Basis Financial Statements
Providian Life and Health Insurance Company
Years ended December 31, 1995 and 1994
with Report of Independent Auditors
<PAGE>
Providian Life and Health Insurance Company
Statutory-Basis Financial Statements
Years ended December 31, 1995 and 1994
Contents
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Auditors.................................. 1
Audited Financial Statements
Balance Sheets (Statutory-Basis)................................ 3
Statements of Operations (Statutory-Basis)...................... 4
Statements of Changes in Capital and Surplus (Statutory-Basis).. 5
Statements of Cash Flows (Statutory-Basis)...................... 6
Notes to Financial Statements................................... 7
</TABLE>
<PAGE>
Report of Independent Auditors
Board of Directors
Providian Life and Health Insurance Company
We have audited the accompanying statutory-basis balance sheets of Providian
Life and Health Insurance Company (formerly National Home Life Assurance
Company) as of December 31, 1995 and 1994, and the related statutory-basis
statements of operations, changes in capital and surplus, and cash flows for
each of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits of the accompanying statutory-basis financial statements
in accordance with generally accepted auditing standards; however, as discussed
in the following paragraph, we were not engaged to determine or audit the
effects of the variances between statutory accounting practices and generally
accepted accounting principles. Generally accepted auditing standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion on the accompanying statutory-
basis financial statements.
The Company presents its financial statements in conformity with accounting
practices prescribed or permitted by the Missouri Department of Insurance. When
statutory-basis financial statements are presented for purposes other than for
filing with a regulatory agency, generally accepted auditing standards require
that the auditors' report on such statements indicate whether they are presented
in conformity with generally accepted accounting principles. The accounting
practices used by the Company vary from generally accepted accounting principles
as explained in Note 1, and the Company has not determined the effects of those
variances. Accordingly, we were not engaged to audit, and we did not audit, the
effects of those variances. Since the accompanying financial statements do not
purport to be a presentation in conformity with generally accepted accounting
principles, we are not in a position to express, and we do not express, an
opinion on the financial statements referred to above as to fair presentation of
financial
1
<PAGE>
position, results of operations, or cash flows in conformity with generally
accepted accounting principles.
In our opinion, the statutory-basis financial statements referred to above
present fairly, in all material respects, the financial position of Providian
Life and Health Insurance Company at December 31, 1995 and 1994, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with accounting practices prescribed or
permitted by the Missouri Department of Insurance.
/s/ Ernst & Young LLP
Louisville, Kentucky
April 23, 1996
2
<PAGE>
Providian Life and Health Insurance Company
Balance Sheets (Statutory-Basis)
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
------------------------
ADMITTED ASSETS (In Thousands)
<S> <C> <C>
Cash and invested assets:
Bonds $ 4,410,245 $4,307,195
Preferred stocks 27,719 72,508
Common stocks 408,298 297,906
Mortgage loans 2,756,891 2,013,375
Real estate 25,065 27,152
Policy loans 158,774 151,132
Cash and short-term investments 205,266 113,531
Other invested assets 125,052 127,620
------------------------
Total cash and invested assets 8,117,310 7,110,419
Deferred and uncollected premiums 45,849 43,340
Accrued investment income 99,001 93,066
Other receivables 50,942 154,174
Federal income taxes recoverable from parent 3,725 17,459
Other admitted assets 4,581 4,054
Separate account assets 1,741,564 1,114,835
------------------------
Total admitted assets $10,062,972 $8,537,347
========================
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Aggregate policy reserves $ 5,608,366 $4,908,607
Policy and contract claims 37,947 35,302
Policyholder contract deposits 1,519,204 1,494,308
Other policy or contract liabilities 318,911 300,304
Amounts due to affiliates 18,882 18,665
Asset valuation reserve 89,486 47,482
Interest maintenance reserve - 15,868
Accrued expenses and other liabilities 152,118 71,764
Separate account liabilities 1,741,564 1,114,835
------------------------
Total liabilities 9,486,478 8,007,135
Capital and surplus:
Common stock, $11 par value, 1,145,000 and 230,000 shares
authorized, issued and outstanding in 1995 and 1994,
respectively 12,595 2,530
Preferred stock, $11 par value, 2,290,000 shares
authorized, issued and outstanding in 1995 25,190 -
Paid-in surplus 2,583 41,838
Unassigned surplus 536,126 485,844
------------------------
Total capital and surplus 576,494 530,212
------------------------
Total liabilities and capital and surplus $10,062,972 $8,537,347
========================
</TABLE>
See accompanying notes.
3
<PAGE>
Providian Life and Health Insurance Company
Statements of Operations (Statutory--Basis)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
------------------------------------
(In Thousands)
<S> <C> <C> <C>
Revenues:
Premiums earned:
Life and annuity $ 264,020 $ 181,143 $ 258,471
Accident and health 159,550 162,742 173,168
Annuity fund deposits 803,537 1,223,232 1,073,837
Net investment income 570,009 472,691 451,417
Commissions and expense allowances
on reinsurance ceded 7,164 16,186 17,230
Amortization of interest maintenance reserve 4,798 7,476 3,006
Other income 455 10 103
------------------------------------
1,809,533 2,063,480 1,977,232
Benefits and expenses:
Accident and health, life and other benefits 1,323,996 986,601 1,033,991
(Decrease) increase in aggregate policy reserves (142,665) 613,678 328,584
Commissions and expense allowances
on reinsurance assumed 66,988 54,690 61,658
General insurance and other expenses 140,495 120,830 139,103
Reinsurance recapture fee 66,672 - -
Net transfers to separate accounts 316,222 162,973 314,382
------------------------------------
1,771,708 1,938,772 1,877,718
Net gain from operations before federal
income taxes 37,825 124,708 99,514
Federal income tax expense 18,222 50,351 46,866
------------------------------------
Net gain from operations 19,603 74,357 52,648
Net realized capital losses, net of income taxes
(1995--($14,998); 1994--($7,311); 1993--
$25,997) and excluding gains (losses)
transferred to the interest maintenance reserve
(1995--($21,644); 1994--($6,786); 1993--
$28,652) (609) (15,867) (2,547)
------------------------------------
Net income $ 18,994 $ 58,490 $ 50,101
=====================================
</TABLE>
See accompanying notes.
4
<PAGE>
Providian Life and Health Insurance Company
Statements of Changes in Capital and Surplus (Statutory--Basis)
<TABLE>
<CAPTION>
COMMON PREFERRED PAID-IN UNASSIGNED
STOCK STOCK SURPLUS SURPLUS
--------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Balances, January 1, 1993 $ 2,530 $ - $ 41,838 $359,543
Net income - - - 50,101
Change in net unrealized gains
on investments - - - 838
Decrease in nonadmitted assets - - - 1,643
Change in reserves due to
change in valuation basis - - - 6,582
Increase in asset valuation
reserve - - - (6,330)
Prior year federal income tax
adjustment - - - (3,448)
--------------------------------------------
Balances, December 31, 1993 2,530 - 41,838 408,929
Net income - - - 58,490
Change in net unrealized gains
on investments - - - 24,538
Increase in nonadmitted assets - - - (3,283)
Increase in asset valuation
reserve - - - (2,830)
--------------------------------------------
Balances, December 31, 1994 2,530 - 41,838 485,844
Purchase and retirement of
common stock (11) - (3,989) -
Stock split/dividend 10,076 25,190 (35,266) -
Net income - - - 18,994
Change in net unrealized gains
on investments - - - 96,430
Change in reserves due to
change in valuation basis - - - (802)
Prior year federal income tax
adjustment - - - (5,092)
Increase in nonadmitted assets - - - (17,244)
Increase in asset valuation
reserve - - - (42,004)
--------------------------------------------
Balances, December 31, 1995 $12,595 $25,190 $ 2,583 $536,126
============================================
</TABLE>
See accompanying notes.
5
<PAGE>
Providian Life and Health Insurance Company
Statements of Cash Flows (Statutory--Basis)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
-------------------------------------
<S> <C> <C> <C>
(In Thousands)
Cash and short-term investments provided
Operations:
Premiums and annuity fund deposits $1,224,560 $1,574,914 $1,499,353
Net investment income received 564,587 481,560 440,139
Allowances and reserve adjustments received on
reinsurance ceded 7,195 16,168 17,337
Other income received 455 - -
-------------------------------------
1,796,797 2,072,642 1,956,829
Benefits paid 1,320,679 991,357 1,044,195
General insurance and other expenses 197,177 171,197 196,101
Federal income taxes (recovered) paid (10,510) 64,311 28,719
Net increase in policy loans and premium notes 7,283 4,298 11,752
Paid reinsurance reserves and other items 1,305 39 997
Net transfer to separate accounts 327,365 147,516 308,635
-------------------------------------
1,843,299 1,378,718 1,590,399
-------------------------------------
Total cash (applied) provided by operations (46,502) 693,924 366,430
Investments sold, matured or repaid 3,662,934 2,096,056 7,767,911
Other cash provided:
Increase in amounts due to affiliates - 4,402 -
Net increase in broker receivables/payables 114,177 - -
Accounts receivable - other invested assets 83,606 - -
Cash received in reinsurance recapture transaction 30,095 - -
Net cash and short-term investments received from
reinsurance assumed 303,376 - -
Other items 7,764 15,530 50,655
-------------------------------------
Total other cash provided 539,018 19,932 50,655
-------------------------------------
Total cash and short-term investments provided 4,155,450 2,809,912 8,184,996
Cash and short-term investments applied:
Investments acquired 4,029,433 2,533,051 8,244,557
Other cash applied:
Decrease in amounts due to affiliates 15,506 - 23,314
Net decrease in broker receivables/payables - 101,703 -
Accounts receivable - other invested assets - 83,606 -
Redemption of common stock 4,000 - -
Other items 14,776 16,282 38,001
-------------------------------------
Total other cash applied 34,282 201,591 61,315
-------------------------------------
Total cash and short-term investments applied 4,063,715 2,734,642 8,305,872
-------------------------------------
Increase (decrease) in cash and short-term investments 91,735 75,270 (120,876)
Cash and short-term investments:
Beginning of year 113,531 38,261 159,137
-------------------------------------
End of year $ 205,266 $ 113,531 $ 38,261
=====================================
</TABLE>
See accompanying notes.
6
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements
December 31, 1995
1. ORGANIZATION, NATURE OF OPERATIONS AND ACCOUNTING POLICIES
ORGANIZATION
Providian Life and Health Insurance Company (PLH), formerly National Home Life
Assurance Company, is a life and health insurance company domiciled in Missouri.
Prior to the transaction discussed in the following paragraph, PLH was wholly
owned by a limited partnership, Capital Liberty Limited Partnership (CLLP),
consisting of Providian Corporation (PVN) and two of its wholly owned insurance
subsidiaries, Peoples Security Life Insurance Company (PSI) and Commonwealth
Life Insurance Company (CLICO). PLH wholly owns an insurance subsidiary,
Veterans Life Insurance Company (VLIC), which wholly owns an insurance
subsidiary, First Providian Life and Health Insurance Company (FPLH), formerly
National Home Life Assurance Company of New York, and a non-insurance
subsidiary. On December 20, 1995, PLH executed a stock split/dividend whereby
four additional shares of common and ten shares of preferred stock (a total of
916,000 common and 2,290,000 preferred shares) were issued for each existing
share of common stock. CLLP retained the newly issued preferred stock and the
previously held common shares, now representing a 20% interest in PLH, and
distributed the additional common shares to its partners as follows: 174,705
shares (15.2%) to PSI, 698,820 shares (60.7%) to CLICO, and 42,475 shares (4.1%)
to PVN.
NATURE OF OPERATIONS
PLH sells and services life and accident and health insurance products,
primarily utilizing direct response methods, such as television, telephone, mail
and third-party programs to reach low to middle income households nationwide.
PLH also sells and services group and individual accumulation products,
primarily utilizing brokers, fund managers, financial planners, and stock
brokerage firms.
MANAGEMENT'S ESTIMATES
The preparation of financial statements requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Significant estimates are utilized in the calculation of
benefit reserves and the allowance for uncollectible mortgage loans. It is
reasonably possible that these estimates may change in the near term, thereby
possibly having a material effect on the financial statements.
7
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
1. ORGANIZATION, NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION
The accompanying financial statements of PLH have been prepared in accordance
with the accounting practices prescribed or permitted by the Missouri Department
of Insurance. Such practices vary from generally accepted accounting principles
(GAAP). The more significant variances from GAAP are as follows:
INVESTMENTS
Investments in bonds and mandatorily redeemable preferred stocks are reported
at amortized cost or fair value based on their National Association of
Insurance Commissioners (NAIC) rating; for GAAP, such fixed maturity
investments are designated at purchase as held-to-maturity, trading or
available-for-sale. Held-to-maturity fixed investments are reported at
amortized cost, and the remaining fixed maturity investments are reported at
fair value with unrealized holding gains and losses reported in operations
for those designated as trading and as a separate component of shareholders'
equity for those designated as available-for-sale.
Fair values of investments in bonds and stocks are generally based on values
specified by the Securities Valuation Office (SVO) of the NAIC, rather than
on values provided by outside broker confirmations or internally calculated
estimates. However, for certain investments, the NAIC does not provide a
value and PLH uses either admitted asset investment amounts (i.e., statement
values) as allowed by the NAIC, fair values provided by outside broker
confirmations or internally calculated estimates. Investments in real estate
are reported net of related obligations rather than on a gross basis. Real
estate owned and occupied by PLH is included in investments rather than
reported as an operating asset, and investment income and operating expense
include amounts representing rent for PLH's occupancy of such real estate.
Changes between cost and admitted asset investment amounts are credited and
charged directly to unassigned surplus rather than to a separate surplus
account.
Valuation allowances are established for mortgage loans based on the
difference between the unpaid loan balance and the estimated fair value of
the underlying real estate when such loans are determined to be in default as
to scheduled payments. Under GAAP, valuation allowances would be established
when PLH determines it is probable that it will be unable to collect all
amounts due (both principal and interest) according to the contractual terms
of the loan agreement. Such allowances are generally based on the estimated
fair value of the underlying real estate (collateral).
8
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
1. ORGANIZATION, NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
The initial valuation allowance and subsequent changes in the allowance for
mortgage loans are charged or credited directly to unassigned surplus, rather
than being included as a component of earnings as would be required under
GAAP.
Under a formula prescribed by the NAIC, PLH defers the portion of realized
capital gains and losses attributable to changes in the general level of
interest rates on sales of certain liabilities and fixed income investments,
principally bonds and mortgage loans, and amortizes such deferrals into
income on a straight-line basis over the remaining period to maturity based
on groupings of individual liabilities or investments sold. The net
accumulated unamortized balance of such deferrals is reported as an "interest
maintenance reserve" (IMR) in the accompanying balance sheet. Realized gains
and losses are reported in income net of tax and transfers to the IMR. The
"asset valuation reserve" (AVR) is also determined by a NAIC prescribed
formula and is reported as a liability rather than a valuation allowance. The
AVR represents a provision for possible fluctuations in the value of bonds,
equity securities, mortgage loans, real estate and other invested assets.
Changes to the AVR are charged or credited directly to unassigned surplus.
Under GAAP, realized gains and losses are reported in the income statement on
a pretax basis in the period that the asset giving rise to the gain or loss
is sold and direct write-downs are recorded (or valuation allowances are
provided, where appropriate under GAAP) when there has been a decline in
value deemed to be other than temporary, in which case, write-downs (or
provisions) for such declines are charged to income.
SUBSIDIARIES
The accounts and operations of PLH's subsidiaries are not consolidated with
the accounts and operations of PLH as would be required under GAAP.
POLICY ACQUISITION COSTS
Costs of acquiring and renewing business are expensed when incurred. Under
GAAP, acquisition costs related to traditional life insurance, to the extent
recoverable from future policy revenues, are deferred and amortized over the
premium-paying period of the related policies using assumptions consistent
with those used in computing policy benefit reserves. For universal life
insurance and investment-type contracts, to the extent recoverable from
future gross profits, deferred policy acquisition costs are amortized
generally in proportion to the present value of expected gross profits from
surrender charges and investment, mortality and expense margins.
9
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
1. ORGANIZATION, NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
NONADMITTED ASSETS
Certain assets designated as "nonadmitted," principally agents' debit
balances and furniture and equipment, are excluded from the balance sheets
and are charged directly to unassigned surplus.
PREMIUMS
Revenues for universal life policies and investment-type contracts consist of
the entire premium received and benefits represent the death benefits paid
and the change in policy reserves. Under GAAP, premiums received in excess of
policy charges are not recognized as premium revenue and benefits represent
the excess of benefits paid over the policy account value and interest
credited to the account values.
BENEFIT RESERVES
Certain policy reserves are calculated using prescribed interest and
mortality assumptions rather than on expected experience and actual account
balances as is required under GAAP.
INCOME TAXES
Deferred income taxes are not provided for differences between the financial
statement and the tax bases of assets and liabilities.
The effects of the foregoing variances from GAAP on the accompanying statutory-
basis financial statements have not been determined.
Other significant accounting policies followed in preparing the accompanying
statutory-basis financial statements are as follows:
INVESTMENTS
Bonds, preferred stocks, common stocks, mortgage loans, real estate, short-
term investments and derivative financial instruments are stated at values
prescribed by the NAIC, as follows:
Bonds not backed by other loans are stated at amortized cost using the
interest method.
10
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
1. ORGANIZATION, NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
Loan-backed bonds and structured securities are valued at amortized cost
using the interest method. Anticipated prepayments are considered when
determining the amortization of related discounts or premiums. Prepayment
assumptions are obtained from dealer survey values or internal estimates
and are consistent with the current interest rate and economic
environment. The retrospective adjustment method is used to value such
securities.
Short-term investments include investments with maturities of less than
one year at the date of acquisition. Short-term investments and cash are
carried at cost.
Preferred stocks are carried at cost. In addition, certain bonds and
preferred stocks are carried at the lower of cost (or amortized cost) or
the NAIC designated fair value.
Common stocks are carried at the NAIC designated fair value, except that
investments in unconsolidated subsidiaries and affiliates in which PLH
has an interest of 20 percent or more are carried on the equity basis.
Derivative financial instruments, consisting primarily of interest rate
swap agreements, are valued in accordance with NAIC guidelines, which is
on a basis consistent with the asset or liability being hedged.
Mortgage loans in good standing and policy loans are carried at unpaid
principal balances while statutorily delinquent mortgages are carried at
their unpaid principal balance less the related valuation allowance.
Real estate is carried at the lower of cost (less depreciation for
occupied and investment real estate, generally calculated using the
straight-line method) or net realizable value, and is net of related
obligations, if any.
Bond and other loan interest is credited to income as it accrues. Dividends
on common and preferred stocks are credited to income on ex-dividend dates.
For securities, PLH follows the guidelines of the NAIC for each security on
an individual basis in determining the admitted or nonadmitted status of
accrued income amounts. For interest rate exchange agreements, interest is
credited to income as it accrues. For mortgage loans, PLH's policy is to
accrue investment income due for a maximum of three months from the last
payment date. At December 31, 1995 and 1994, the total amount excluded from
accrued investment income for delinquent mortgage loans was approximately
$314,000 and $4,172,000, respectively.
11
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
1. ORGANIZATION, NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
Net income includes realized gains and losses on investments sold, net of tax
and transfers to the IMR. The cost of investments sold is determined on a
first-in, first-out basis.
SEPARATE ACCOUNTS
Separate account assets and liabilities reported in the accompanying
financial statements represent funds that are separately administered,
principally for annuity contracts, and for which the contract holder, rather
than PLH, bears the investment risk. Separate account contract holders have
no claim against the assets of the general account of PLH. Separate account
assets are reported at fair value. The operations of the separate accounts
are not included in the accompanying financial statements. Fees charged on
separate account policyholder deposits are included in net transfers to
separate accounts in the accompanying statements of operations.
POLICY RESERVES
Unearned premiums represent the portion of premiums written which are
applicable to the unexpired terms of accident and health policies in force,
calculated principally by the application of monthly pro rata fractions.
Liabilities for unearned premiums are included in aggregate policy reserves.
PLH waives deduction of deferred fractional premiums upon death of insureds.
PLH's policy is not to return any portion of the final premium beyond the
date of death. Surrender values are not promised in excess of the legally
computed reserves. Additional premiums are charged for policies issued on
substandard lives according to underwriting classification. Mean reserves are
determined by computing the regular mean reserve for the plan at the issued
age and holding in addition one-half of the extra premium charged for the
year.
The tabular interest has been determined from the basic data for the
calculation of policy reserves. The tabular less actual reserve released and
the tabular cost have been determined by formula as described in the NAIC
instructions.
12
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
1. ORGANIZATION, NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
Policy reserves also include single premium and flexible premium annuity
contracts and structured settlement contracts. The single premium and
flexible premium contracts contain surrender charges for the first six to
seven years of the contract. These contract reserves are held at the contract
value that accrues to the policyholder. Structured settlement contracts
contain no surrender charge. Policy reserves on these contracts are
determined based on the expected future cash flows discounted at the
applicable statutorily defined mortality and interest rates. Annual effective
rates credited to these annuity contracts ranged from 4.0 percent to 8.0
percent during 1995.
POLICY AND CONTRACT CLAIMS
Policy and contract claims, principally related to accident and health
policies, include amounts determined on an individual case basis for reported
losses and estimates of incurred but not reported losses developed on the
basis of experience. These estimates are subject to the effects of trends in
claim severity and frequency. Although considerable variability is inherent
in such estimates, management believes that the reserves for claims and claim
expenses are adequate. The methods of making such estimates and establishing
the resulting reserves are continually reviewed and updated, and any
adjustments resulting therefrom are reflected in earnings currently.
POLICYHOLDER CONTRACT DEPOSITS
Policyholder contract deposits is comprised of guaranteed investment
contracts (GICs). The GICs consist of three types. One type is guaranteed as
to principal along with interest guarantees based upon predetermined indices.
The second type guarantees principal and interest, but also includes a
penalty if the contract is surrendered early. The third type guarantees
principal and interest and is non-surrenderable before the fixed maturity
date. Policy reserves on the GICs are determined following the retrospective
deposit method and consist of contract values that accrue to the benefit of
the policyholder. Annual effective rates credited to these GICs ranged from
5.5 percent to 7.8 percent during 1995.
PREMIUMS, BENEFITS AND EXPENSES
For individual and most group life policies, premiums are reported as earned
on the policy/certificate anniversary. For individual and group annuities,
premiums and
13
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
1. ORGANIZATION, NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
annuity fund deposits are recorded as earned when collected. For individual
and group accident and health policies, premiums are recorded as earned on a
pro rata basis over the coverage period for which the premiums were collected
or due. Benefit claims (including an estimated provision for claims incurred
but not reported), policy reserve changes and expenses are charged to income
as incurred.
REINSURANCE
Reinsurance premiums, benefits and expenses are accounted for in a manner
consistent with that used in accounting for original policies issued and the
terms of the reinsurance contracts. Premiums, benefits, expenses and the
reserves for policy and contract liabilities and unearned premiums are
recorded net of reinsured amounts.
GUARANTY FUND ASSESSMENTS
Periodically, PLH is assessed by various state guaranty funds as part of
those funds' activities to collect funds from solvent insurance companies to
cover certain losses to policyholders that resulted from the insolvency or
rehabilitation of other insurance companies. Each state guaranty fund
operates independently of any other state guaranty fund; as such, the methods
by which assessments are levied against PLH vary from state to state. Also,
some states permit guaranty fund assessments to be partially recovered
through reductions in future premium taxes. At December 31, 1995 and 1994,
PLH has established an estimated liability for guaranty fund assessments for
those insolvencies or rehabilitations that have actually occurred prior to
that date. The estimated liability is determined using preliminary
information received from the various state guaranty funds and the National
Organization of Life and Health Insurance Guaranty Associations. Because
there are many uncertainties regarding the ultimate assessments that will be
assessed against PLH, the ultimate assessments for those insolvencies or
rehabilitations that occurred prior to December 31, 1995 may vary from the
estimated liability included in the accompanying financial statements. The
estimated liability for guaranty fund assessments recorded at December 31,
1995 and 1994 was $11,571,000 and $11,139,000, respectively.
14
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
1. ORGANIZATION, NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
PERMITTED STATUTORY ACCOUNTING PRACTICES
PLH's statutory-basis financial statements are prepared in accordance with
accounting practices prescribed or permitted by the Missouri Department of
Insurance. "Prescribed" statutory accounting practices include state laws,
regulations, and general administrative rules, as well as a variety of
publications of the NAIC. "Permitted" statutory accounting practices
encompass all accounting practices that are not prescribed; such practices
may differ from state to state, may differ from company to company within a
state, and may change in the future. The NAIC currently is in the process of
recodifying statutory accounting practices, the result of which is expected
to constitute the only source of "prescribed" statutory accounting practices.
Accordingly, that project, which is expected to be completed in 1997, will
likely change, to some extent, prescribed statutory accounting practices, and
may result in changes to the accounting practices that PLH uses to prepare
its statutory-basis financial statements.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year financial statements
to conform with the current year presentation.
2. INVESTMENTS
The tables below contain amortized cost (carrying value or statement value) and
fair value information on bonds.
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------------------------------------------------
<S> <C> <C> <C> <C>
(In Thousands)
DECEMBER 31, 1995
U.S. government obligations $ 457,122 $ 9,764 $ 5 $ 466,881
States and political 37,957 1,399 280 39,076
subdivisions
Foreign government 71,821 4,024 34 75,811
obligations*
Corporate and other 2,828,447 93,238 11,053 2,910,632
Foreign corporate* 259,804 14,063 2,223 271,644
Mortgage-backed 755,094 - - 755,094
------------------------------------------------------
$4,410,245 $122,488 $13,595 $4,519,138
======================================================
</TABLE>
15
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
DECEMBER 31, 1994
U.S. government obligations $ 280,081 $ 272 $ 16,404 $ 263,949
States and political 60,708 260 4,398 56,570
subdivisions
Foreign government 66,401 120 4,951 61,570
obligations*
Corporate and other 2,754,441 15,388 188,532 2,581,297
Foreign corporate* 259,782 442 20,983 239,241
Mortgage-backed 885,782 3,275 47,803 841,254
----------------------------------------------------
$4,307,195 $19,757 $283,071 $4,043,881
====================================================
</TABLE>
* Substantially all are U.S. dollar denominated.
The amortized cost and fair value of bonds at December 31, 1995, by contractual
maturity, are shown below. Actual maturities may differ from contractual
maturities because certain borrowers may have the right to call or prepay
obligations, sometimes without call or prepayment penalties.
AMORTIZED FAIR
COST VALUE
--------------------------
(In Thousands)
Due in one year or less $ 31,763 $ 31,813
Due after one year through 767,315 772,576
five years
Due after five years through 1,103,712 1,115,424
ten years
Due after ten years 1,752,361 1,844,231
--------------------------
3,655,151 3,764,044
Mortgage-backed securities 755,094 755,094
--------------------------
$4,410,245 $4,519,138
==========================
Proceeds during 1995 and 1994 from sales, maturities and calls of bonds were
$2,842,536,000 and $1,674,690,000, respectively. Gross gains of $60,899,000 and
$28,226,000 and gross losses of $35,199,000 and $37,882,000, in 1995 and 1994,
respectively, were realized on those sales.
16
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
The change in unrealized gains and losses on investments in common stocks and on
investments in subsidiaries is credited or charged directly to unassigned
surplus and does not affect net income. The cost and fair value of those
investments at December 31, 1995 and 1994 are as follows:
GROSS GROSS
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------------------------------------------
(In Thousands)
DECEMBER 31, 1995
Common stocks $ 41,619 $ 662 $796 $ 41,485
Subsidiaries 197,949 168,864 - 366,813
---------------------------------------------
$239,568 $169,526 $796 $408,298
=============================================
GROSS GROSS
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------------------------------------------
(In Thousands)
DECEMBER 31, 1994
Common stocks $ 23,713 $ 313 $775 $ 23,251
Subsidiaries 197,949 76,706 - 274,655
---------------------------------------------
$221,662 $ 77,019 $775 $297,906
=============================================
The cost of preferred stocks of unaffiliated companies was $27,719,000 and
$72,508,000 at December 31, 1995 and 1994, respectively, and the related fair
value was $27,199,000 and $61,502,000 at December 31, 1995 and 1994,
respectively. There was no difference between cost and statement value of
preferred stocks at December 31, 1995 and 1994.
Included in investments are securities having admitted asset values of
$4,494,000 at December 31, 1995 which were on deposit with various state
insurance departments to satisfy regulatory requirements.
The carrying value of mortgage loans is net of an allowance for loan losses of
$771,000 and $9,137,000 at December 31, 1995 and 1994, respectively. The maximum
and minimum lending rates for residential mortgage loans made during 1995 were
11.5 percent and 4.9 percent, respectively, while the maximum and minimum
lending rates for
17
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
commercial mortgage loans made during 1995 were 9.6 percent and 7.1 percent,
respectively. The maximum percentage of any one loan to the value of collateral
at the time of the loan, exclusive of insured, guaranteed or purchase money
mortgages was 80 percent. Hazard insurance is required on all properties covered
by mortgage loans at least equal to the excess of the loan over the maximum loan
which would be permitted by law on the land without buildings. As of December
31, 1995, PLH held $1,746,000 of mortgages with interest more than one year
overdue amounting to $215,000. As of December 31, 1995, there were no taxes,
assessments, or other amounts advanced by PLH on account of mortgage loans which
were not included in mortgage loan totals. During 1995, $715,000 of taxes and
maintenance expenses were paid by PLH on property acquired through foreclosure.
During 1995, PLH did not reduce interest rates on any outstanding mortgages.
3. FINANCIAL INSTRUMENTS
PLH utilizes a variety of financial instruments in its asset/liability
management process and to meet its customers' financing needs. The
asset/liability management process focuses on the management of a variety of
risks, including interest rate, market and credit risks. Effective management of
these risks is an important determinant of profitability. Instruments used in
this process and to meet the customers' financing and investing needs include
derivative financial instruments, primarily interest rate swap agreements and
futures contracts, and commitments to extend credit. All of these instruments
involve (to varying degrees) elements of market and credit risks in excess of
the amounts recognized in the accompanying financial statements at a given point
in time. The contract or notional values of all of these instruments reflect the
extent of involvement in the various types of financial instruments.
PLH's exposure to market risk (including interest rate risk) is the risk of
market volatility and potential disruptions in the market which may result in
certain instruments being less valuable. PLH monitors and controls its exposure
to this risk primarily through the use of cash flow stress testing, total
portfolio analysis of net duration levels, a monthly mark-to-market process and
ongoing monitoring of interest rate movements.
PLH's exposure to credit risk is the risk of loss from a counterparty failing to
perform according to the terms of the contract. This exposure
18
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
3. FINANCIAL INSTRUMENTS (CONTINUED)
includes settlement risk (risk that the counterparty defaults after PLH has
delivered funds or securities under the terms of the contract) which results in
an accounting loss and replacement cost risk (cost to replace the contract at
current market rates should the counterparty default prior to the settlement
date). There is no off-balance sheet exposure to credit risk that would result
in an immediate accounting loss (settlement risk) associated with counterparty
non-performance on interest rate swap agreements and futures. Interest rate swap
agreements are subject to replacement cost risk, which equals the cost to
replace those contracts in a net gain position should a counterparty default.
Default by a counterparty would not result in an immediate accounting loss.
These instruments, as well as futures, are subject to market risk, which is the
possibility that future changes in market prices may make the instruments less
valuable. Credit loss exposure resulting from non-performance by a counterparty
for commitments to extend credit is represented by the contractual amounts of
the instruments.
The credit risk on all financial instruments, whether on- or off-balance sheet,
is controlled through an ongoing credit review, approval and monitoring process.
PLH determines, on an individual counterparty basis, the need for collateral or
other security to support financial instruments with credit risk, and
establishes individual and aggregate counterparty exposure limits. In order to
limit exposure associated with counterparty non-performance on interest rate
swap agreements, PLH enters into master netting agreements with its
counterparties. These master netting agreements provide that, upon default of
either party, contracts in gain positions will be offset with contracts in loss
positions and the net gain or loss will be received or paid, respectively.
Assuming every counterparty defaulted, the cost of replacing those interest rate
contracts in a net gain position, after consideration of the aforementioned
master netting agreements, was $51,709,000 and $698,000 at December 31, 1995 and
1994, respectively.
PLH manages interest rate risk through the use of duration analysis. Duration is
a key portfolio management tool and is measured for both assets and liabilities.
For the simplest forms of assets or liabilities, duration is proportional to
their weighted average life, with weights equal to the discounted present value
of estimated cash flows. This methodology causes near-term cash flows to have a
greater proportional weight than cash flows further in the future. For more
complex assets and liabilities with optional cash flows, for example, callable
bonds, mortgage-backed securities, or traditional insurance liabilities,
additional adjustments are made in estimating an effective duration number. PLH
uses
19
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
3. FINANCIAL INSTRUMENTS (CONTINUED)
derivatives as a less costly and less burdensome alternative to restructuring
the underlying cash instruments to manage interest rate risk based upon the
aggregate net duration level of its aggregate portfolio. Information is provided
below for each significant derivative product type.
Interest rate swap agreements generally involve the exchange of fixed and
floating rate interest payments, without an exchange of the underlying principal
amount. PLH also enters into basis swap agreements where amounts received are
based primarily upon six month or less LIBOR and pays an amount based on either
a short-term Treasury or Prime Rate. The amounts to be paid or received as a
result of these agreements are accrued and recognized in the accompanying
statements of operations through net investment income. Gains or losses realized
on closed or terminated agreements are deferred and amortized as a component of
the IMR.
Futures are contracts which call for the delayed delivery of securities in which
the seller agrees to deliver on a specified future date, a specified instrument
at a specified price. The daily change in fair value of futures contracts is
used to adjust the net duration level of the overall portfolio and is deferred
and amortized as a component of the IMR. The net deferred (loss) gain on these
contracts was $(56,112,000) and $14,707,000 during 1995 and 1994, respectively.
The daily change in fair value for futures used as accounting hedges for
products that provide a return based on the market performance of a designated
index is recognized in the accompanying statement of operations through net
realized investment losses. Margin requirements on futures contracts, equal to
the change in fair value, are usually settled on a daily basis.
20
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
3. FINANCIAL INSTRUMENTS (CONTINUED)
The following table summarizes the activity by notional or contract value in
derivative products for 1995 and 1994:
RECEIVE PAY FIXED/
FIXED/PAY RECEIVE
FLOATING FLOATING BASIS FUTURES
---------------------------------------------
(In Thousands)
Balances, December 31, 1993 $1,395,000 $1,257,000 $56,000 $ 39,000
Additions 1,647,000 - 18,000 4,226,000
Maturities 18,000 - 9,000 -
Terminations 2,325,000 1,257,000 - 3,595,000
---------------------------------------------
Balances, December 31, 1994 699,000 - 65,000 670,000
Additions 623,000 250,000 94,000 1,201,000
Maturities 1,000 - 50,000 -
Terminations - - 44,000 1,821,000
---------------------------------------------
Balances, December 31, 1995 $1,321,000 $ 250,000 $65,000 $ 50,000
=============================================
During 1994, PLH terminated or closed certain interest rate swap agreements
which were accounted for as hedges. The net deferred gains on these agreements
during 1994 were $7,425,000 and are being amortized to investment income over
the expected remaining life of the related investment, generally four to ten
years, as a component of the IMR.
COMMITMENTS
Commitments to extend credit consist of agreements to lend to a customer at some
future time, subject to established contractual conditions. Since it is likely
some commitments may expire or be withdrawn without being fully drawn upon, the
total commitment amounts do not necessarily represent future cash requirements.
PLH evaluates individually each customer's creditworthiness. Collateral may be
obtained, if deemed necessary, based on a credit evaluation of the counterparty.
The collateral may include commercial and/or residential real estate. At
December 31, 1995 and 1994, commitments to extend credit were $85,285,000 and
$359,793,000, respectively.
21
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
3. FINANCIAL INSTRUMENTS (CONTINUED)
CONCENTRATIONS OF CREDIT RISK
PLH limits credit risk by diversifying its investment portfolio among common and
preferred stocks, public bonds, private placement securities, and commercial and
residential mortgage loans. It further diversifies these portfolios between and
within industry sectors, by geography and by property type. Credit risk is also
limited by maintaining stringent underwriting standards and purchasing insurance
protection in certain cases. In addition, PLH establishes credit approval
processes, limits and monitoring procedures on an individual counterparty basis.
As a result, management believes that significant concentrations of credit risk
do not exist.
4. FEDERAL INCOME TAXES
PLH and its subsidiaries (FPLH and VLIC) file a consolidated federal income tax
return. Under a written agreement, PLH and its affiliates allocate the federal
income tax liability among the members of the consolidated return group in the
ratio that each member's separate return tax liability for the year bears to the
sum of the separate return tax liabilities of all members, with current credits
for net operating losses. The final settlement under this agreement is made
after the annual filing of the consolidated U.S. Corporate Income Tax Return.
Income before income taxes differs from taxable income principally due to
differences between the treatment of investments for statutory and tax purposes,
policy acquisition costs, and differences in policy and contract liabilities.
At December 31, 1995, PLH recorded a receivable for federal income taxes of
approximately $3,725,000. The receivable resulted primarily from updated
estimates used in the 1995 and 1994 tax accrual calculations and a tax capital
loss of approximately $28,800,000. The tax capital loss is expected to be
carried back and fully utilized against tax capital gains in the carryback
period.
Included in the statement of changes in capital and surplus are certain
adjustments totaling $5,092,013 at December 31, 1995 relating to the settlement
of the 1991/1992 IRS audit. No adjustments were necessary at December 31, 1994.
At December 31, 1995, accumulated earnings of PLH for federal income tax
purposes included $17,425,000 of "Policyholders' Surplus," a special memorandum
tax account.
22
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
4. FEDERAL INCOME TAXES (CONTINUED)
This memorandum account balance has not been currently taxed, but income taxes
computed at current rates will become payable if this surplus is distributed.
Provisions of the Deficit Reduction Act of 1984 (the "Act") do not permit
further additions to the Policyholders' Surplus account. "Shareholders' Surplus"
is also a special memorandum tax account, and generally represents an
accumulation of taxable income (net of tax thereon) plus the dividends-received
deduction, tax-exempt interest, and certain other special deductions as provided
by the Act. At December 31, 1995, the balance in the Shareholders' Surplus
account amounted to approximately $621,075,000. There is no present intention to
make distributions in excess of Shareholders' Surplus.
5. RELATED PARTY TRANSACTIONS
PLH has entered into an agreement with its affiliates whereby PLH performs
administrative services, management support services, and marketing services for
its affiliates. PLH, as compensation, receives an amount equal to the actual
cost of providing such services. This cost is allocated on a pro rata basis to
each affiliate receiving these services. Amounts received were $68,000,000 in
1995, $44,000,000 in 1994 and $73,300,000 in 1993; such amounts are classified
as reductions of general insurance and other expenses in the accompanying
statements of operations.
On November 1, 1995, PLH executed a Revolving Credit Note with FPLH allowing for
FPLH to borrow from PLH up to $5,000,000. The note is a demand note expiring
November 1, 1996 with interest payable at the prime rate. At December 31, 1995,
there was no outstanding balance. There was no interest earned by PLH during
1995 on this note.
PLH participates in a short-term investment agreement with PVN and other
affiliates which provides for the centralization of short-term investment
operations. PLH retains the right to participate in or withdraw its funds on a
daily basis. PLH had invested $2,400,000 and $21,900,000 in this short-term
agreement as of December 31, 1995 and 1994, respectively.
PLH participates in various benefit plans sponsored by PVN and the related costs
allocated to PLH are not significant.
PLH has 2,290,000 shares of redeemable preferred stock outstanding, all of which
are owned by CLLP. The preferred stock has a par value of $11 per share and a
liquidation value of $240 per share. CLLP is entitled to receive a cumulative
dividend equal to 8 1/2 percent per annum of the liquidation value of the
preferred stock. PLH may redeem all or any portion of the preferred stock at the
liquidation value commencing December 18, 2000.
On December 13, 1995, PLH redeemed 1,000 shares of its common stock held by its
wholly owned subsidiary, VLIC, for $4,000,000.
23
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
5. RELATED PARTY TRANSACTIONS (CONTINUED)
On November 8, 1994, PLH made a surplus contribution of $101,000,000
($50,000,000 in cash and $51,000,000 in securities) to VLIC.
Prior to April 1, 1995, PLH was a party to various reinsurance agreements with
VLIC whereby PLH ceded pro rata portions of certain blocks of its life and
health business on a coinsurance basis. The agreements were amended effective
April 1, 1995 whereby PLH recaptured the business. This recapture resulted in
PLH recording $159,169,000 of liabilities related to the business and
$92,497,000 of assets supporting the block of business. The $66,672,000
difference between the liabilities and assets recorded represents a recapture
fee incurred by PLH to compensate VLIC for the present value of the future cash
flows on the business recaptured by PLH.
The following table summarizes the amounts reflected in the statements of
operations from these reinsurance agreements:
<TABLE>
<CAPTION>
EXPENSE (REVENUE) FOR THE
YEAR ENDED DECEMBER 31
1995 1994 1993
--------------------------------
(In Thousands)
<S> <C> <C> <C>
Premium income ceded $ 15,049 $ 37,573 $ 37,333
Life and accident and
health benefits ceded (10,582) (28,601) (28,874)
Commissions and expense allowances (6,029) (14,794) (15,926)
on reinsurance ceded
Reserve adjustments on
reinsurance ceded - (2,626) (1,963)
Reinsurance recapture fee 66,672 - -
</TABLE>
PLH entered into two indemnity reinsurance agreements with CLICO in 1987 whereby
PLH assumes 100% of the risks reinsured on all structured settlement policies
issued during 1987 by CLICO. The agreements were amended in 1988 whereby PLH
also assumes 100% of the risks reinsured on all structured settlement, pension
buyout, and single premium immediate annuities issued subsequent to 1987 by
CLICO. The agreements were also amended in 1988 to change the agreements from
indemnity reinsurance to coinsurance. The agreements were also amended in 1992
whereby CLICO recaptured structured settlements issued in 1991 and in the first
five months of
24
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
5. RELATED PARTY TRANSACTIONS (CONTINUED)
1992. The following table summarizes the amounts reflected in the statements of
operations from these agreements:
<TABLE>
<CAPTION>
EXPENSE (REVENUE) FOR THE
YEAR ENDED DECEMBER 31
1995 1994 1993
---------------------------------
(In Thousands)
<S> <C> <C> <C>
Premium income assumed $(66,091) $(23,719) $(76,519)
Annuity benefits assumed 61,307 55,802 52,493
Commissions and expense allowance
on reinsurance assumed 5,291 3,784 6,393
Change in policy reserves assumed 71,056 29,618 81,199
</TABLE>
PLH entered into a reinsurance agreement with CLICO in 1988 on a coinsurance
basis whereby PLH assumes 100% of the risks on all credit life and disability
policies issued prior to January 1, 1989 by CLICO. The agreements were amended
in 1990 whereby PLH also assumes 100% of the risks on all credit life and
disability policies issued between January 1, 1989 and March 31, 1990,
inclusive. The following table summarizes the amounts reflected in the
statements of operations from this agreement:
<TABLE>
<CAPTION>
EXPENSE (REVENUE) FOR THE
YEAR ENDED DECEMBER 31
1995 1994 1993
---------------------------------
(In Thousands)
<S> <C> <C> <C>
Premium income assumed $ 11 $ 10 $ (117)
Life and accident and health
benefits assumed 176 431 1,277
Commissions and expense allowances (6) (19) (104)
on reinsurance assumed
Change in policy reserves assumed (345) (668) (1,701)
</TABLE>
PLH entered into a reinsurance agreement with CLICO in 1990 on a coinsurance
basis whereby PLH assumes 100% of the risk on certain guaranteed investment
contracts issued by CLICO. The agreement was amended in 1995 to provide CLICO
with profit sharing on the assumed business of up to 20 basis points per year
of the account value.
25
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
5. RELATED PARTY TRANSACTIONS (CONTINUED)
The amount of profit sharing paid to CLICO in 1995 was $1,589,000. In addition,
the agreement was amended to provide CLICO with reimbursement of extraordinary
expenses related to the assumed policies, including guaranty fund assessment
payments. There were no expense reimbursements made to CLICO in 1995. The
following table summarizes amounts reflected in the statements of operations
from this reinsurance agreement:
<TABLE>
<CAPTION>
EXPENSE (REVENUE) FOR THE
YEAR ENDED DECEMBER 31
1995 1994 1993
---------------------------------
(In Thousands)
<S> <C> <C> <C>
Premium income assumed $(289,272) $(698,338) $(207,489)
Life and other benefits assumed 276,351 76,342 234,937
Commissions and expense allowances 350 1,110 1,910
on reinsurance assumed
Change in policyholder contract
deposits assumed 104,113 (658,482) 4,496
</TABLE>
PLH entered into indemnity reinsurance agreements with PSI in 1987 whereby PLH
assumed 100 percent of the risks reinsured on all structured settlement
contracts issued during 1987. The agreements were amended in 1988 whereby PLH
also assumed 100 percent of the risks reinsured on all structured settlement,
pension buyout and single premium immediate annuities issued subsequent to 1987.
The agreements were also amended in 1988 to change the agreements from indemnity
reinsurance to coinsurance. The following table summarizes amounts reflected in
the statements of operations from these reinsurance agreements:
<TABLE>
<CAPTION>
EXPENSE (REVENUE) FOR THE
YEAR ENDED DECEMBER 31
1995 1994 1993
---------------------------------
(In Thousands)
<S> <C> <C> <C>
Premium income assumed $(1,231) $ 291 $ 503
Annuity and other benefits assumed 8,007 7,443 7,563
Commissions and expense allowances
on reinsurance assumed 10 5 21
Change in policyholder contract
deposits assumed 116 (666) 169
</TABLE>
26
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
5. RELATED PARTY TRANSACTIONS (CONTINUED)
Effective June 30, 1995, PLH entered into a coinsurance agreement with PSI
whereby PLH assumed 100 percent of the risk of business reinsured by PSI from
North American Security Life (NASL). This agreement coinsures existing deposits
of NASL's fixed annuities and the fixed account portion of their variable
annuity product business. In addition, this agreement includes prospective
coinsurance of additional annual fixed annuity deposits from the future sales of
NASL's fixed and variable annuities. This agreement also contains a provision
which provides PSI with profit sharing on the assumed business of up to 10 basis
points of account value. There were no profit sharing amounts payable in 1995.
Under the agreement, PLH received cash and invested assets in exchange for its
coinsurance of $724,700,000 of fixed annuity deposits. At December 31, 1995,
there were $728,700,000 of fixed annuity deposits outstanding which were
coinsured by PLH. The following table summarizes amounts reflected in the
statements of operations from this reinsurance agreement:
<TABLE>
<CAPTION>
EXPENSE (REVENUE) FOR THE YEAR
ENDED DECEMBER 31, 1995
------------------------------
(In Thousands)
<S> <C>
Premium income assumed $(72,339)
Annuity benefits assumed 98,519
Commissions and expense allowances
on reinsurance assumed 1,441
Change in policyholder contract deposits assumed (1,715)
</TABLE>
PLH entered into two separate reinsurance agreements with two affiliates,
Academy Life Insurance Company (ALIC) and Pension Life Insurance Company of
America (PLIC), in 1992, both on a coinsurance funds withheld basis. On April 1,
1993, the reinsurance agreements were amended from a coinsurance funds withheld
basis to a coinsurance nonfunds withheld basis. On April 1, 1993, PLH received
funds in the amount of $23,000,000 under the terms of these reinsurance
agreements. The following table summarizes the amounts reflected in the
statements of operations from these reinsurance agreements:
27
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
5. RELATED PARTY TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
EXPENSE (REVENUE) FOR THE
YEAR ENDED DECEMBER 31
1995 1994 1993
---------------------------------
(In Thousands)
<S> <C> <C> <C>
Premium income assumed $(49,325) $(53,051) $(71,128)
Life, accident and health and other
benefit assumed 31,421 33,457 37,926
Commissions and expense allowances
on reinsurance assumed 12,349 12,438 26,966
Change in policy reserves assumed 1,588 4,122 3,269
Other income assumed (1,030) (3,475) (1,019)
</TABLE>
Policy reserves and policy and contract claims exclude liabilities relating to
reinsurance ceded to affiliates of approximately $160,000,000 at December 31,
1994. No such amounts were ceded as of December 31, 1995. While these amounts
have been excluded from liabilities, PLH remains liable in the event the
reinsuring companies are unable to meet their obligations.
6. REINSURANCE
Certain premiums and benefits are assumed from and ceded to other nonaffiliated
insurance companies under various reinsurance agreements. The ceded reinsurance
agreements provide PLH with increased capacity to write larger risks.
PLH's assumed and ceded reinsurance agreements with affiliated and nonaffiliated
insurance companies reduced (increased) certain items in the accompanying
financial statements by the following amounts:
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------------
(In Thousands)
<S> <C> <C> <C>
ASSUMED:
Policy and contract liabilities* $3,153,667 $1,978,629 $1,284,940
Claim reserves* 11,512 9,748 8,306
Advance premiums* 921 787 408
Unearned premium reserves* 8,114 7,226 6,609
</TABLE>
*At year end.
28
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
6. REINSURANCE (CONTINUED)
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------------
(In Thousands)
<S> <C> <C> <C>
CEDED:
Benefits paid or provided $12,679 $ 30,889 $ 30,274
Commissions and expense allowances
on reinsurance ceded (7,164) (16,186) (17,230)
Other income-reserves on
ceded business 1,305 (39) (37)
Policy and contract liabilities* 2,682 164,604 174,624
Claim reserves* 469 1,120 1,441
Advance premiums* 11 55 54
Unearned premium reserves* 19 533 554
</TABLE>
*At year end.
Amounts payable or recoverable for reinsurance on paid or unpaid life and health
claims are not subject to periodic or maximum limits. At December 31, 1995, PLH
reinsurance recoverables are not material and no individual reinsurer owed PLH
an amount equal to or greater than 3% of PLH's surplus.
For all short-duration contracts, the effect of all reinsurance agreements on
accident and health premiums written and earned in 1995, 1994 and 1993 was as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
PREMIUMS PREMIUMS PREMIUMS
WRITTEN EARNED WRITTEN EARNED WRITTEN EARNED
-------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Direct $101,345 $101,452 $111,163 $111,099 $124,725 $125,110
Assumed 62,667 61,773 56,762 55,946 50,951 52,250
Ceded (3,140) (3,675) (4,283) (4,303) (4,184) (4,192)
-------------------------------------------------------------------
Net $160,872 $159,550 $163,642 $162,742 $171,492 $173,168
===================================================================
</TABLE>
29
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
6. REINSURANCE (CONTINUED)
For all long-duration contracts, the effect of reinsurance on life and annuity
premiums earned in 1995, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
PREMIUMS EARNED PREMIUMS EARNED PREMIUMS EARNED
-----------------------------------------------------
<S> <C> <C> <C>
(In Thousands)
Direct $138,553 $134,011 $147,943
Assumed 140,738 84,332 146,994
Ceded (15,271) (37,200) (36,466)
-----------------------------------------------------
Net $264,020 $181,143 $258,471
=====================================================
</TABLE>
PLH remains obligated for amounts ceded in the event that the reinsurers do not
meet their obligations.
7. LIFE AND ANNUITY RESERVES AND DEPOSIT FUND LIABILITIES
The withdrawal provisions of PLH's annuity reserves and deposit fund liabilities
at December 31, 1995 are summarized as follows:
<TABLE>
<CAPTION>
AMOUNT PERCENT
-----------------------
(In Thousands)
<S> <C> <C>
Subject to discretionary withdrawal (with adjustment):
With market value adjustment $1,269,197 16.1%
At book value less surrender charge 567,158 7.2%
At market value 2,416,018 30.6%
-----------------------
4,252,373 53.9%
Subject to discretionary withdrawal (without adjustment)
at book value with minimal or no charge or adjustment 2,064,845 26.2%
Not subject to discretionary withdrawal 1,567,088 19.9%
-----------------------
Total annuity reserves and deposit fund liabilities
before reinsurance 7,884,306 100.0%
==========
Less reinsurance -
------------
Net annuity reserves and deposit fund liabilities $7,884,306*
============
</TABLE>
*Includes $1,710,866,000 of annuities reported in PLH's separate account
liability.
30
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
7. LIFE AND ANNUITY RESERVES AND DEPOSIT FUND LIABILITIES (CONTINUED)
The above amount subject to discretionary withdrawal with market value
adjustment includes approximately $598,000 at December 31, 1995 of floating rate
GIC liabilities with credited rates that vary in response to changes in
stipulated indexes and which self-adjust in response to market changes making
their market value and book value essentially equal.
As of December 31, 1995, PLH has $143,808,000 of insurance in force for which
the gross premiums are less than the net premiums according to the standard of
valuation set by the State of Missouri.
8. SEPARATE ACCOUNTS
Separate accounts held by PLH primarily represent funds held for individual
policyholders. The separate accounts do not have any minimum guarantees and the
investment risks associated with market value changes are borne entirely by the
policyholder. Information regarding the separate accounts of PLH as of and for
the year ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
NONINDEXED
GUARANTEE NON-
MORE THAN 4% GUARANTEED TOTAL
----------------------------------------
(In Thousands)
<S> <C> <C> <C>
Premiums, deposits and other
considerations $ 75,292 $ 338,974 $ 414,266
========================================
Reserves for separate accounts* $258,192 $1,471,721 $1,729,913
========================================
Reserves for separate accounts by
withdrawal characteristics:
Subject to discretionary withdrawal
(with adjustment):
With market value adjustment $258,192 $ - $ 258,192
At market value - 1,471,721 1,471,721
----------------------------------------
Total separate account liabilities $258,192 $1,471,721 $1,729,913
========================================
</TABLE>
*Reserves for separate accounts are exclusive of $11,651,000 which represents
transfers due the general account and other amounts payable as of December 31,
1995.
31
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
8. SEPARATE ACCOUNTS (CONTINUED)
A reconciliation of the amounts transferred to and from PLH's separate accounts
for the year ended December 31, 1995 is presented below:
<TABLE>
<CAPTION>
1995
--------------
(In Thousands)
<S> <C>
Transfers as reported in the Summary of Operations of
PLH's Separate Accounts Annual Statement:
Transfers to separate accounts $ 414,266
Transfers from separate accounts (105,966)
--------------
Net transfers to separate accounts 308,300
Reconciling adjustments:
Fees paid to external fund manager (1,254)
Transfers to modified separate account (6,668)
--------------
(7,922)
--------------
Transfers as reported in the Summary of Operations
of PLH's Life, Accident & Health Annual Statement $ 316,222
==============
</TABLE>
9. PREMIUMS AND ANNUITY CONSIDERATIONS DEFERRED AND UNCOLLECTED
Deferred and uncollected life insurance premiums and annuity considerations as
of December 31, 1995 were as follows:
<TABLE>
<CAPTION>
NET OF
TYPE GROSS LOADING LOADING
- ---------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Ordinary new $ 3,513 $ 2,476 $ 1,037
Ordinary renewal 17,162 4,674 12,488
----------------------------
Total ordinary 20,675 7,150 13,525
----------------------------
Group new business 6,425 3,566 2,859
Group renewal 40,447 10,982 29,465
----------------------------
Total group 46,872 14,548 32,324
----------------------------
Total $ 67,547 $ 21,698 $ 45,849
============================
</TABLE>
32
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
10. STATUTORY RESTRICTIONS ON DIVIDENDS
PLH is subject to limitations, imposed by the State of Missouri, on the payment
of dividends to its parent company. Generally, dividends during any year may not
be paid, without prior regulatory approval, in excess of the greater of (1) 10
percent of PLH's statutory capital and surplus as of the preceding December 31,
or (2) PLH's statutory net income for the preceding year. Subject to
availability of unassigned surplus at the time of such dividend, the maximum
payment which may be made in 1996, without prior approval, is $57,649,000.
11. CONTINGENCIES
In the ordinary course of business, PLH is a defendant in litigation principally
involving insurance policy claims for damages, including compensatory and
punitive damages. In the opinion of management, the outcome of such litigation
will not result in a loss which would be material to PLH's financial position at
December 31, 1995.
12. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used in estimating fair value
disclosures for the following financial instruments:
BONDS, PREFERRED STOCKS AND COMMON STOCKS
The fair values of bonds, preferred stocks and common stocks are generally
based on published quotations of the SVO of the NAIC. However, for certain
investments, the SVO does not provide a value and PLH uses either admitted
asset investment amounts (i.e., statement values) as allowed by the NAIC,
values provided by outside broker confirmations or internally calculated
estimates. The fair values of PLH's bonds, preferred stocks and common
stocks are disclosed in Note 2.
MORTGAGE LOANS
The fair values of commercial and residential mortgage loans are estimated
utilizing discounted cash flow calculations, using current market interest
rates for loans with similar terms to borrowers of similar credit quality.
POLICY LOANS
The carrying values of policy loans reported in the accompanying balance
sheets approximate their fair values.
33
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
12. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
CASH, SHORT-TERM INVESTMENTS AND OTHER INVESTED ASSETS
The carrying values of cash, short-term investments and other invested
assets reported in the accompanying balance sheets approximate their fair
values.
INVESTMENT CONTRACTS
The fair values of floating rate guaranteed investment contracts approximate
their carrying values. The fair values of fixed rate guaranteed investment
contracts and investment-type fixed annuity contracts are estimated using
discounted cash flow calculations, based on current interest rates for
similar contracts. The fair values of variable annuity contracts approximate
their carrying values.
DERIVATIVE FINANCIAL INSTRUMENTS
The fair values for derivative financial instruments are based on pricing
models or formulas using current assumptions.
The carrying values and fair values of PLH's investments in commercial and
residential mortgage loans are summarized as follows:
<TABLE>
<CAPTION>
CARRYING FAIR
VALUE VALUE
------------------------
(In Thousands)
<S> <C> <C>
DECEMBER 31, 1995
Commercial mortgages $1,495,755 $1,527,424
Residential mortgages 1,261,136 1,267,627
------------------------
$2,756,891 $2,795,051
========================
DECEMBER 31, 1994
Commercial mortgages $1,442,685 $1,468,697
Residential mortgages 570,690 545,640
------------------------
$2,013,375 $2,014,337
========================
</TABLE>
The fair values of interest rate swap agreements were $51,540,000 and
$(20,833,000) at December 31, 1995 and 1994, respectively. These instruments are
primarily off-balance sheet and as such, are not recorded in the accompanying
financial statements.
34
<PAGE>
Providian Life and Health Insurance Company
Notes to Financial Statements (continued)
12. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
The carrying values and fair values of PLH's liabilities for investment-type
contracts are summarized as follows:
<TABLE>
<CAPTION>
CARRYING FAIR
VALUE VALUE
------------------------
(In Thousands)
<S> <C> <C>
DECEMBER 31, 1995
Fixed annuity contracts $3,667,197 $3,801,151
Guaranteed investment contracts 1,519,204 1,546,248
Variable annuity contracts 1,471,722* 1,471,722
------------------------
$6,658,123 $6,819,121
========================
DECEMBER 31, 1994
Fixed annuity contracts $3,103,331 $3,098,958
Guaranteed investment contracts 1,494,308 1,473,202
Variable annuity contracts 944,261* 944,261
------------------------
$5,541,900 $5,516,421
========================
</TABLE>
*Included in PLH's separate account liabilities.
The fair values for PLH's insurance contracts other than investment contracts
are not required to be disclosed. However, the fair values of liabilities under
all insurance contracts are taken into consideration in PLH's overall management
of interest rate risk, such that PLH's exposure to changing interest rates is
minimized through the matching of investment maturities with amounts due under
insurance contracts.
35
<PAGE>
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
Part A. None
Part B. All Financial Statements required to be filed are included in
Part B.
Part C. None
(b) Exhibits.
(1) Resolution of the Board of Directors of National Home Life
Assurance Company ("National Home") authorizing establishment
of the Separate Account./1/
(2) Not Applicable.
(3) Distribution Agreement.
(a) Form of Selling Agreement./5/
(4) (a) Form of variable annuity contract (A Unit)./6/
(b) Form of variable annuity contract (B Unit)./6/
(c) 403(b) Rider./5/
(d) Individual Retirement Annuity Rider./5/
(5) Form of Application./7/
(6) (a) Articles of Incorporation of National Home./1/
(b) Amendment to Articles of Incorporation of National
Home./1/
(c) Amended and Restated Articles of Incorporation of National
Home./1/
(d) Amended and Restated Articles of Incorporation of
Providian Life and Health Insurance Company./9/
(7) Not Applicable.
(8) (a) Form of Participation Agreement for the Funds./6/
(b) Marketing Agreement between MKT, Inc. and National Home
Life Assurance Company dated March 1, 1994./7/
- ---------
/1/ Incorporated by reference from the initial Registration Statement of
National Home Life Assurance Company Separate Account V, File No. 33-45862.
/2/ Incorporated by reference from the initial Registration Statement of
National Home Life Assurance Company Separate Account II, File No. 33-7033.
/3/ Incorporated by reference from Post-Effective Amendment No. 3 to the
Registration Statement of National Home Life Assurance Company Separate
Account II, File No. 33-7033.
/4/ Incorporated by reference from Post-Effective Amendment No. 5 to the
Registration Statement of National Home Life Assurance Company Separate
Account II, File No. 33-7033.
/5/ Incorporated by reference from Pre-Effective Amendment No. 1 to the
Registration Statement of National Home Life Assurance Company Separate
Account V, File No. 33-45862.
/6/ Incorporated by reference from the Registration Statement of National Home
Life Assurance Company Separate Account V, File No. 33-72838, filed on
December 10, 1933.
/7/ Incorporated by reference from the Registration Statement of National Home
Life Assurance Company Separate Account V, File No. 33-79502, filed on May
27, 1994.
/8/ Incorporated by reference from Post-Effective Amendment No. 2 to the
Registration Statement of National Home Life Assurance Company Separate
Account V, File No. 33-79502, filed on April 30, 1995.
/9/ Filed herewith.
<PAGE>
(c) Participation Agreement Among T. Rowe Price International
Series, Inc., T. Rowe Price Equity Series, Inc., T. Rowe
Price Investment Services, Inc., and National Home Life
Assurance Company dated as of July 8, 1994./8/
(d) Fund Participation Agreement between Dreyfus Variable
Investment Fund and National Home Life Assurance Company
dated as of October 17, 1994./8/
(e) Participation Agreement Among Variable Insurance Products
Fund II, Fidelity Distributors Corporation and National
Home Life Assurance Company dated as of November 1,
1993./8/
(f) Participation Agreement Among Variable Insurance Products
Fund, Fidelity Distributors and National Home Life
Assurance Company./8/
(9) (a) Opinion and Consent of Counsel./9/
(b) Consent of Counsel./9/
(10) Consent of Independent Auditors./9/
(11) No Financial Statements are omitted from Item 23.
(12) Not Applicable.
(13) Performance Computation./9/
(14) Not Applicable.
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
<S> <C>
Chairman of the Board and CEO Shailesh J. Mehta
President David J. Miller
Chief Operating Officer Stephen J. Leaman
Vice President, Treasurer & CFO Dennis E. Brady
Senior Vice President Robert A. Long
Senior Vice President/Human Resources
and Corporate Communications John H. Rogers
Senior Vice President Martin Renninger
Senior Vice President Paul Yakulis
Vice President, General Counsel
and Secretary David R. Aplington
Vice President G. Douglas Mangum, Jr.
Vice President and Actuary John C. Prestwood, Jr.
Vice President Richard A. Babyak
Vice President Edward A. Biemer
Vice President Charles N. Coatsworth
Vice President & Associate
General Counsel Julie S. Congdon
Vice President Stephen F. Eulie
Vice President Karen H. Fleming
Vice President Anita Gambos
Vice President/Underwriting William J. Kline
Vice President Carolyn M. Kerstein
Vice President Michael F. Lane
Vice President Susan E. Martin
Vice President Douglas S. Menges
Senior Vice President David J. Miller
Vice President Thomas B. Nesspor
Vice President G. Eric O'Brien
Vice President Harold W. Peterson, Jr.
Vice President John R. Pegues
Vice President Frank J. Rosa
Vice President Anita R. Tilley
Vice President Douglas A. Sarcia
Vice President Nancy B. Schuckert
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Vice President Brian Alford
Vice President Joseph D. Strenk
Vice President William W. Strickland
Vice President Aris R. Stuart, III
Vice President William C. Tomilin
Vice President & Controller Jean A. Young
Vice President Rita Biesiot
Assistant Vice President James P. Greaton
Vice President Kevin P. McGlynn
Assistant Vice President Geralyn Barbato
Assistant Vice President Janice Boehmler
Assistant Vice President Joan G. Chandler
Assistant Vice President Mary Ellen Fahringer
Assistant Vice President and
Assistant Treasurer John A. Mazzuca
Assistant Vice President Harvey Waite
Assistant Treasurer Elaine J. Robinson
Assistant Controller Joseph C. Noone
Second Vice President Cindy L. Chanley
Second Vice President Michael K. Mingus
Second Vice President/Investments Terri L. Allen
Second Vice President/Investments Tom Bauer
Second Vice President/Investments Kirk W. Buese
Second Vice President/Investments Curt M. Burns
Second Vice President/Investments William S. Cook
Second Vice President/Investments Deborah A. Dias
Second Vice President/Investments Eric B. Goodman
Second Vice President/Investments James Grant
Second Vice President/Investments Theodore M. Haag
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Second Vice President/Investments Frederick B. Howard
Second Vice President/Investments Diane J. Hulls
Second Vice President/Investments William H. Jenkins
Second Vice President/Investments Caroline A. Johnson
Second Vice President/Investments Fredeick C. Kessell
Second Vice President/Investments Tim Kuussalo
Second Vice President/Investments Mark E. Lamb
Second Vice President/Investments Lisa M. Longino
Second Vice President/Investments Monika Machon
Second Vice President/Investments James D. MacKinnon
Second Vice President/Investments Jack McCabe
Second Vice President/Investments Wayne R. Nelis
Second Vice President/Investments James G. Nickerson
Second Vice President/Investments Douglas H. Owen, Jr.
Second Vice President/Investments Debra K. Pellman
Second Vice President/Investments Robert Saunders
Second Vice President/Investments Michael B. Simpson
Second Vice President/Investments Brad H. Seibel
Second Vice President/Investments Jon L. Skaggs
Second Vice President/Investments James A. Skufca
Second Vice President/Investments Robert A. Smedley
Second Vice President/Investments Bradley L. Stofferahn
Second Vice President/Investments Randall K. Waddell
Second Vice President/Investments Tammy C. Wetterer
Second Vice President/Special Markets Kim A. Bivins
Second Vice President/Special Markets Gregory Lee Chapman
Second Vice President/Special Markets John B. Cobb, III
Second Vice President/Special Markets Gregory M. Curry
Second Vice President/Special Markets Julie Ford
Second Vice President/Special Markets Lauren M. S. Kaltman
Second Vice President/Special Markets Rose Marie Mathison
Second Vice President/Special Markets Paul Farley Olschwanger
Second Vice President/Special Markets Lisa L. Patterson
Second Vice President/Special Markets Rhonda L. Pritchett
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Second Vice President/Special Markets Kris A. Robbins
Second Vice President/Special Markets Prentice J. Siegel
Second Vice President/Special Markets Thomas E. Walsh
Second Vice President/Special Markets Harvey Willis
Second Vice President and Assistant
Secretary Edward P. Rieter
Assistant Secretary L. Jude Clark
Assistant Secretary Colleen S. Lyons
Assistant Secretary Mary Ann Malinyak
Assistant Secretary John F. Reesor
Assistant Secretary Kimberly A. Scouller
Assistant Secretary R. Michael Slaven
Assistant Secretary Carolyn Wetterer
Advertising Compliance Officer Nancy E. Partington
Product Compliance Officer James T. Bradley
</TABLE>
DIRECTORS:
- ---------
David R. Applington
Dennis E. Brady
Stephen J. Leaman
Robert A. Long
Shailesh J. Mehta
David J. Miller
Thomas B. Nesspor
John H. Rogers
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
The Depositor, Providian Life and Health Insurance Company ("Providian Life
and Health"), is directly and indirectly wholly owned by Providian Corporation.
The Registrant is a segregated asset account of Providian Life and Health.
The following chart indicates the persons controlled by or under common
control with Providian Life and Health:
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation Percent of Voting Securities Owned
- ---- ---------------- ----------------------------------
<S> <C> <C>
Providian Corporation Delaware 100% Publicly Owned
Providian Agency Group, Inc. Kentucky 100% Providian Corporation
College Resource Group, Inc. Kentucky 100% Providian Corporation
Knight Insurance Agency, Inc. Massachusetts 100% College Resource Group, Inc.
Knight Tuition Payment Plans, Inc. Massachusetts 100% Knight Insurance Agency, Inc.
Knight Insurance Agency
(New Hampshire), Inc. New Hampshire 100% Knight Insurance Agency, Inc.
Capital General Development Corporation Delaware 100% Providian Corporation
Commonwealth Life Insurance Company Kentucky 100% Capital General Development Corp
Agency Holding I, Inc. Delaware 100% Commonwealth Life Insurance Co.
Agency Investments I, Inc. Delaware 100% Agency Holding I, Inc.
Commonwealth Agency, Inc. Kentucky 100% Commonwealth Life Insurance Co.
Peoples Security Life Insurance Company North Carolina 100% Capital General Development Corp.
Agency Holding II, Inc. Delaware 100% Peoples Security Life Ins. Co.
Agency Investments II, Inc. Delaware 100% Agency Holding II, Inc.
Agency Holding III, Inc. Delaware 100% Peoples Security Life Ins. Co.
Agency Investments III, Inc. Delaware 100% Agency Holding III, Inc.
Ammest Realty Corporation Texas 100% Peoples Security Life Ins. Co.
Providian Assignment Corporation Kentucky 100% Providian Corporation
Providian Capital Management, Inc. Delaware 100% Providian Corporation
Providian Capital Management Real
Estate Services, Inc. Delaware 100% Providian Capital Management, Inc.
Capital Real Estate Development Corporation Delaware 100% Providian Corporation
KB Currency Advisors, Inc. Delaware 33 1/3% Capital Real Estate Development Corp.
33 1/3% Jonathan M. Berg
33 1/3% Andrew J. Krieger
Capital 200 Block Corporation Delaware 100% Providian Corporation
Capital Values Financial Services, Inc. Pennsylvania 100% Providian Corporation
Providian Securities Corporation Pennsylvania 100% Capital Values Financial Services, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation Percent of Voting Securities Owned
- ---- ---------------- ----------------------------------
<S> <C> <C>
Capital Broadway Corporation Kentucky 100% Providian Corporation
Providian Investment Advisors, Inc. Delaware 100% Providian Corporation
Capital Security Life Insurance Company North Carolina 100% Providian Corporation
Security Trust Life Insurance Company Kentucky 100% Capital Security Life Ins. Co.
Independence Automobile Association, Inc. Florida 100% Capital Security Life Ins. Co.
Independence Automobile Club, Inc. Georgia 100% Capital Security Life Ins. Co.
Southlife, Inc. Tennessee 100% Providian Corporation
Providian Bancorp, Inc. Delaware 100% Providian Corporation
First Deposit Service Corporation California 100% Providian Bancorp, Inc.
First Deposit Life Insurance Company Arkansas 100% Providian Bancorp, Inc.
First Deposit National Bank United States 100% Providian Bancorp, Inc.
Winnisquam Community Development
Corporation New Hampshire 96% First Deposit National Bank
4% First New Hampshire Bank
Providian National Bancorp California 100% Providian Bancorp, Inc.
Providian Credit Corporation Delaware 100% Providian Bancorp, Inc.
Commonwealth Premium Finance California 100% Providian National Bancorp
Providian Credit Services, Inc. Utah 100% Providian Bancorp, Inc.
Providian National Bank United States 100% Providian Bancorp, Inc.
National Liberty Corporation Pennsylvania 100% Providian Corporation
National Home Life Corporation Pennsylvania 100% National Liberty Corporation
Compass Rose Development Corporation Pennsylvania 100% National Liberty Corporation
Association Consultants, Inc. Illinois 100% National Liberty Corporation
Valley Forge Associates, Inc. Pennsylvania 100% National Liberty Corporation
Veterans Benefits Plans, Inc. Pennsylvania 100% National Liberty Corporation
Veterans Insurance Services, Inc. Delaware 100% National Liberty Corporation
Financial Planning Services, Inc. Washington, D.C. 100% National Liberty Corporation
Providian Auto and Home Insurance Company Missouri 100% Providian Corporation
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation Percent of Voting Securities Owned
- ---- ---------------- ----------------------------------
<S> <C> <C>
Academy Insurance Group, Inc. Delaware 100% Providian Auto and Home Insurance Company
Academy Life Insurance Company Missouri 100% Academy Insurance Group, Inc.
Pension Life Insurance Company of America New Jersey 100% Academy Insurance Group, Inc.
Academy Services, Inc. Delaware 100% Academy Insurance Group, Inc.
Ammest Development Corporation, Inc. Kansas 100% Academy Insurance Group, Inc.
Ammest Insurance Agency, Inc. California 100% Academy Insurance Group, Inc.
Ammest Massachusetts Insurance Agency, Inc. Massachusetts 100% Academy Insurance Group, Inc.
Ammest Realty, Inc. Pennsylvania 100% Academy Insurance Group, Inc.
AMPAC, Inc. Texas 100% Academy Insurance Group, Inc.
AMPAC Insurance Agency, Inc. Pennsylvania 100% Academy Insurance Group, Inc.
Data/Mark Services, Inc. Delaware 100% Academy Insurance Group, Inc.
Force Financial Group, Inc. Delaware 100% Academy Insurance Group, Inc.
Force Financial Services, Inc. Massachusetts 100% Force Financial Group, Inc.
Military Associates, Inc. Pennsylvania 100% Academy Insurance Group, Inc.
NCOAA Management Company Texas 100% Academy Insurance Group, Inc.
NCOA Motor Club, Inc. Georgia 100% Academy Insurance Group, Inc.
Unicom Administrative Services, Inc. Pennsylvania 100% Academy Insurance Group, Inc.
Unicom Administrative Services GmbH Germany 100% Unicom Administrative Services, Inc.
Providian Property and Casualty Insurance
Company Kentucky 100% Providian Auto and Home Insurance Company
Providian Fire Insurance Company Kentucky 100% Providian Property and Casualty Insurance Company
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation Percent of Voting Securities Owned
- ---- ---------------- ----------------------------------
<S> <C> <C>
Capital Liberty, L.P. (Limited Partnership) Delaware 5% Providian Corporation (General Partnership
Interest)
76% Commonwealth Life Insurance Company
Partnership Interest)
19% Peoples Security Life Insurance Company
Partnership Interest)
Providian Life and Health Insurance Company Missouri 20% Capital Liberty, L.P.
61% Commonwealth Life Insurance Company
15% Peoples Security Life Insurance Company
4% Providian Corp.
Wannalancit Corp. Massachusetts 100% Providian Corporation
Veterans Life Insurance Company Illinois 100% Providian Life and Health Insurance Company
Providian Services, Inc. Pennsylvania 100% Veterans Life Insurance Company
First Providian Life and Health Insurance
Company New York 100% Veterans Life Insurance Company
Benefit Plans, Inc. Delaware 100% Providian Corporation
DurCo Agency, Inc. Virginia 100% Benefit Plans, Inc.
</TABLE>
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
314 A Units, 1,482 B Units as of April 8, 1996.
- --- ----- -
ITEM 28. INDEMNIFICATION
Item 28 is incorporated by reference from the Post-Effective Amendment No. 6 to
the Registration Statement of the National Home Life Assurance Company Separate
Account II, File No. 33-7033.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Providian Securities Corporation, which serves as the principal
underwriter for the variable annuity contracts funded by Separate
Account V, also serves as the principal underwriter for variable life
insurance policies funded by Separate Account I and for Separate
Account II of Providian Life and Health Insurance Company.
<PAGE>
(b) Directors and Officers
<TABLE>
<CAPTION>
Positions and Officers
Name with Underwriter
---- ----------------------
<S> <C>
Jeffrey P. Lammers President, Assistant Secretary and Director
Kimberly A. Scouller Vice President and Chief Compliance Officer
Harvey E. Willis Vice President and Secretary
Michael F. Lane Vice President
Mark Nerderman Vice President
Sarah J. Strange Vice President
Elaine J. Robinson Treasurer
Michael G. Ayers Controller
Robert L. Walker Director
Frederick C. Kessell Director
</TABLE>
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The books, accounts and other documents required by Section 31(a) under the
Investment Company Act and the rules promulgated thereunder will be maintained
in the Administrative Offices of Providian Life and Health Insurance Company in
Louisville, Kentucky.
ITEM 31. MANAGEMENT SERVICES
All management contracts are discussed in Part A or Part B.
ITEM 32. UNDERTAKINGS.
(a) The Registrant hereby undertakes to file a post-effective amendment to
this registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more than
16 months old for so long as payments under the variable annuity contracts may
be accepted;
(b) The Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
prospectus that the applicant can remove to send for a Statement of Additional
Information;
(c) The Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request.
(d) The Registrant hereby undertakes to rely on the no-action letter dated
November 28, 1988 (Ref. No. IP-6-88) with respect to language concerning
withdrawal restrictions applicable to Code Section 403(b) plans. National Home
has complied with conditions 1 through 4 of the no-action letter.
(e) The Registrant hereby represents that no Director has resigned due to a
disagreement with the Registrant or any matter relating to the Separate
Account's operations, policies or practices.
<PAGE>
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Providian Life and Health Insurance Company Separate
Account V, certifies that it meets the requirements of Securities Act Rule
485(b) for effectiveness of this amended Registration Statement and has caused
this amended Registration Statement to be signed on its behalf in the County of
Chester and Commonwealth of Pennsylvania on the 25th day of April, 1996.
PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT V (REGISTRANT)
By: Providian Life and Health Insurance Company
/s/ DAVID J. MILLER
By: ___________________________________________
David J. Miller, President
PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
(DEPOSITOR)
/s/ DAVID J. MILLER
By: ___________________________________________
David J. Miller, President
<PAGE>
As required by the Securities Act of 1933, this amended Registration
Statement has been duly signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ SHAILESH J. MEHTA Director, Chairman of the Board and April 25, 1996
- --------------------------- Chief Executive Officer
Shailesh J. Mehta
/s/ DAVID J. MILLER Director and President April 25, 1996
- ---------------------------
David J. Miller
/s/ DENNIS E. BRADY Director, Vice President, Treasurer and April 25, 1996
- --------------------------- Chief Financial Officer
Dennis E. Brady
/s/ ROBERT A. LONG Director and Senior Vice President April 25, 1996
- ---------------------------
Robert A. Long
/s/ JOHN H. ROGERS Director and Senior Vice President April 25, 1996
- ---------------------------
John H. Rogers
/s/ DAVID R. APLINGTON Director, Vice President, General Counsel April 25, 1996
- --------------------------- and Secretary
David R. Aplington
/s/ JEAN A. YOUNG Vice President and Controller (Chief April 25, 1996
- --------------------------- Accounting Officer)
Jean A. Young
/s/ STEPHEN J. LEAMAN Director and Chief Operating Officer April 25, 1996
- ---------------------------
Stephen J. Leaman
/s/ THOMAS B. NESSPOR Director and Vice President April 25, 1996
- ---------------------------
Thomas B. Nesspor
</TABLE>
<PAGE>
SEPARATE ACCOUNT V
MARQUEE VARIABLE ANNUITY
INDEX TO EXHIBITS
EXHIBIT 6(d) AMENDED AND RESTATED ARTICLES OF
INCORPORATION OF PROVIDIAN LIFE AND HEALTH
INSURANCE COMPANY
EXHIBIT 9(a) OPINION AND CONSENT OF COUNSEL
EXHIBIT 9(b) CONSENT OF COUNSEL
EXHIBIT 10 CONSENT OF INDEPENDENT AUDITORS
EXHIBIT 13 PERFORMANCE COMPUTATION
<PAGE>
EXHIBIT 6(d)
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
PROVIDIAN LIFE AND HEALTH ASSURANCE COMPANY
_________________________________________________________________
Pursuant to the provisions of Section 375.201 RSMo., 1994, Providian Life
and Health Insurance Company, a Missouri stock insurance company (the
"Corporation"), hereby amends and restates its Articles of Incorporation, which
supersede and take the place of heretofore existing Restated Articles of
Incorporation and amendments thereto.
ARTICLE I
The name of the Corporation is Providian Life and Health Insurance Company.
ARTICLE II
The principal office for the transaction of business of the Corporation
shall be located at 237 East High Street, Jefferson City, Missouri. The
registered agent for the Corporation shall be Nicholas M. Monaco, 237 East High
Street, Jefferson City, Missouri.
ARTICLE III
The Corporation is formed for the purpose of making insurance upon the
lives of individuals, and every assurance pertaining thereto or connected
therewith, and to grant, purchase and dispose of annuities and endowments of
every kind and description whatsoever, and to provide an indemnity against
death, and for weekly or other periodic indemnity for disability occasioned by
accident or sickness to the person of the insured; but such accident and health
insurance shall be made a separate department of the business of the life
insurance company undertaking it.
<PAGE>
ARTICLE IV
Authorized Shares
-----------------
The aggregate number of shares of capital stock which the Corporation has
authority to issue is 3,436,000 shares, consisting of:
1. 1,146,000 shares of Common Stock, par value $11.00 per share (the
"Common Stock"); and
2. 2,290,000 shares of Preferred Stock, par value of $11.00 per share
(the "Preferred Stock").
Common Stock
------------
Except as may otherwise be required by applicable law, all shares of the
Common Stock shall be identical in all respects and shall entitle the holders
thereof to the same rights and privileges, subject to the same qualifications,
limitations and restrictions.
1. Voting Rights. Each share of the Common Stock shall be entitled
to one vote per share on all matters to be voted upon by the
shareholders of the Corporation.
2. Dividends. As and when dividends are declared or paid thereon,
whether in cash, property or securities of the Corporation, the
holders of the Common Stock shall be entitled to participate in such
dividends ratably on a per share basis.
3. Liquidation. Subject to the provisions of the Preferred Stock,
the holders of the Common Stock shall be entitled to participate
ratably on a per share basis in all distributions to the holders of
the Common Stock in any liquidation, dissolution or winding up of the
Corporation.
Preferred Stock
---------------
Except as may otherwise be required by applicable law, all shares of the
Preferred Stock shall be identical in all respects and shall entitle the holders
thereof to the same rights and privileges, subject to the same qualifications,
limitations and restrictions.
<PAGE>
1. Voting Rights. The shares of the Preferred Stock shall not have
any voting rights with respect to matters to be voted upon by the
shareholders of the Corporation.
2. Dividends. The holders of the Preferred Stock shall be entitled
to receive a cumulative dividend equal to eight and one-half percent
(8 1/2%) per annum of the Liquidation Value of the Preferred Stock.
Such dividends shall accrue whether or not they have been declared or
whether or not there are any profits, surplus or other funds of the
Corporation legally available for the payment of dividends. In the
event that dividends are not paid on the Preferred Stock, then the
dividends shall accumulate, and such accumulated dividends must be
paid prior to the payment of any dividend declared by the Corporation
on any share of its Common Stock or Preferred Stock authorized and
issued by the Corporation.
3. Liquidation. Upon any liquidation, dissolution or winding up of
the Corporation, the holders of the Preferred Stock will be entitled
to be paid out of the assets of the Corporation available for
distribution, before any distribution or payment is made upon any of
the Corporation's equity securities, an amount in cash equal to
$240.00 per share (the "Liquidation Value"), plus all accrued and
unpaid dividends thereon to and including the date of payment. In the
event that the assets of the Corporation available for distribution to
the holders of shares of the Preferred Stock upon any liquidation,
dissolution or winding up of the Corporation are insufficient to pay
in full all amounts to which such holders are entitled pursuant to
this Paragraph 3, proportionate distributive amounts shall be paid on
account of the shares of the Preferred Stock, ratably, in proportion
to the full distributive amounts to which the holders of all such
shares are respectively entitled upon such liquidation, dissolution or
winding up.
4. Redemption. The Corporation may at any time, commencing five (5)
years after the date on which the Preferred Stock is issued, redeem
all or any portion of the Preferred Stock then outstanding at a price
per share equal to the Liquidation Value thereof (plus all accrued and
unpaid dividends thereon), provided that all such redemptions are made
pro rata among the holders of the Preferred Stock on the basis of the
number of shares of Preferred Stock held by such holder.
Regulatory Approval
-------------------
<PAGE>
So long as the Corporation is subject to registration under Section 382.100
RSMo., no annual or cumulative dividend shall be paid by the Corporation to
shareholders, nor shall any other distribution be made to shareholders with
regard to the Common Stock or the Preferred Stock, without complying with the
requirements of Section 382.210 RSMo. The Corporation shall not purchase or
otherwise acquire any of the Preferred Stock (including any redemption) without
complying with the requirements of Section 375.350 RSMo.
ARTICLE V
The Corporation shall be managed and controlled by a Board of Directors
composed of not less than nine or more than twenty-one, which said Board of
Directors shall elect a Chairman of the Board, President, Vice President,
Secretary and Treasurer of the Corporation. In addition, said Board of Directors
may elect one or more Senior Vice Presidents, one or more Executive Vice
Presidents, additional Vice Presidents, Assistant Secretaries and Assistance
Treasurers and may appoint or employ such agents and employees or the
Corporation as is deemed necessary or advisable for the proper conduct of the
business of the Corporation. The By-laws of the Corporation may provide for such
other powers and duties of the Board of Directors, not inconsistent with the
Constitution and laws of the State of Missouri, as may be deemed advisable and
in the best interest of the Corporation.
The Board of Directors shall be elected annually at an annual meeting of
the shareholders to be held on the first Thursday in May of each and every year
hereafter, and if not so held in any year, through oversight or otherwise, then
at such time as may be fixed by the Board of Directors by resolution. The
Directors elected at any annual meeting of the shareholders shall continue in
office one year and until their successors are duly elected and qualified; and
in the event any vacancy shall occur in the Board of Directors from any cause,
the remaining directors shall elect a director to fill such vacancy, which said
director so elected shall hold office until the next annual meeting of the
shareholders and until his successor shall have been elected and qualified.
ARTICLE VI
The duration of the Corporation is perpetual.
<PAGE>
[LETTERHEAD OF PROVIDIAN CORPORATION]
EXHIBIT 9(a)
April 30, 1996
Providian Life and Health Insurance Company
Administrative Offices
20 Moores Road
Frazer, Pennsylvania 19355
RE: PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT V (MARQUEE)- OPINION AND CONSENT
To Whom It May Concern:
This opinion and consent is furnished in connection with the filing of Post-
Effective Amendment No. 3 (the "Amendment") to the Registration Statement on
Form N-4, File No. 33-79502 (the "Registration Statement") under the Securities
Act of 1933, as amended (the "Act"), of Providian Life and Health Insurance
Company Separate Account V ("Separate Account V"). Separate Account V receives
and invests premiums allocated to it under a flexible premium multi-funded
annuity contract (the "Annuity Contract"). The Annuity Contract is offered in
the manner described in the prospectus contained in the Registration Statement
(the "Prospectus").
In my capacity as legal adviser to Providian Life and Health Insurance Company,
I hereby confirm the establishment of Separate Account V pursuant to a
resolution adopted by the Board of Directors of Providian Life and Health
Insurance Company for a separate account for assets applicable to the Annuity
Contract, pursuant to the provisions of Section 376.309 of the Missouri
Insurance Statutes. In addition, I have made such examination of the law in
addition to consultation with outside counsel and have examined such corporate
records and such other documents as I consider appropriate as a basis for the
opinion hereinafter expressed. On the basis of such examination, it is my
professional opinion that:
1. Providian Life and Health Insurance Company is a corporation duly organized
and validly existing under the laws of the State of Missouri.
2. Separate Account V is an account established and maintained by Providian
Life and Health Insurance Company pursuant to the laws of the State of
Missouri, under which income, capital gains and capital losses incurred on
the assets of Separate Account V are credited to or charged against the
assets of Separate
<PAGE>
Providian Life and Health Insurance Company
Separate Account V
April 30, 1996
Page 2
Account V, without regard to the income, capital gains or capital losses
arising out of any other business which Providian Life and Health Insurance
Company may conduct.
3. Assets allocated to Separate Account V will be owned by Providian Life and
Health Insurance Company. The assets in Separate Account V attributable to
the Annuity Contract generally are not chargeable with liabilities arising
out of any other business which Providian Life and Health Insurance Company
may conduct. The assets of Separate Account V are available to cover the
general liabilities of Providian Life and Health Insurance Company only to
the extent that the assets of Separate Account V exceed the liabilities
arising under the Annuity Contracts.
4. The Annuity Contracts have been duly authorized by Providian Life and
Health Insurance Company and, when sold in jurisdictions authorizing such
sales, in accordance with the Registration Statement, will constitute
validly issued and binding obligations of Providian Life and Health
Insurance Company in accordance with their terms.
5. Owners of the Annuity Contracts as such, will not be subject to any
deductions, charges or assessments imposed by Providian Life and Health
Insurance Company other than those provided in the Annuity Contract.
I hereby consent to the use of this opinion as an exhibit to the Amendment and
to the reference to my name under the heading "Legal Matters" in the Prospectus.
Very truly yours,
/s/ Kimberly A. Scouller
Kimberly A. Scouller
Assistant General Counsel
/maz
<PAGE>
EXHIBIT 9(b)
JORDEN BURT BERENSON & JOHNSON LLP
1025 THOMAS JEFFERSON STREET, N.W.
SUITE 400-EAST
WASHINGTON, D.C. 20007-0805
(202) 965-8100
TELECOPIER (202) 965-8104
April 30, 1996
Providian Life and Health
Insurance Company
20 Moores Road
Frazer, Pennsylvania 19355
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus contained in Post-Effective Amendment No. 3 to the
Registration Statement on Form N-4 (file No.33-79502) filed by Providian Life
and Health Insurance Company and Providian Life and Health Insurance Company
Separate Account V with the Securities and Exchange Commission under the
Securities Act of 1933 and the Investment Company Act of 1940.
Very truly yours,
/s/ Jorden Burt Berenson & Johnson LLP
Jorden Burt Berenson & Johnson LLP
<PAGE>
Exhibit No. (10)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Auditors" and to the
use of our reports dated April 23, 1996, with respect to the financial
statements of Providian Life and Health Insurance Company Separate Account
V--Marquee and the statutory-basis financial statements of Providian Life
and Health Insurance Company in Post-Effective Amendment No. 3 to the
Registration Statement (Form N-4 No. 33-79502) and related Prospectus of
Providian Life and Health Insurance Company Separate Account V--Marquee.
/s/ ERNST & YOUNG LLP
Louisville, Kentucky
April 23, 1996
<PAGE>
EXHIBIT 13
PERFORMANCE CALCULATION
SEPARATE ACCOUNT V
MARQUEE VARIABLE ANNUITY Fund is Fidelity Equity-Income (A Units)
AUV @ 12/31/94 9.837701
AUV @ 12/31/95 13.184522
1 year nonstandard actual total return and actual average annual total
return is:
13.184522 - 1 = .3402036 * 100% rounded to 2 decimal places = 34.02%
---------
9.837701
