As filed with the Securities and Exchange Commission on April 22, 1999.
File No. 33-73738
File No. 811-8260
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 9 |X|
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
Amendment No. 10 |X|
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
(Exact Name of Registrant)
CUNA MUTUAL LIFE INSURANCE COMPANY
(Name of Depositor)
2000 Heritage Way
Waverly, Iowa 50677
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number: (319) 352-4090
Barbara L. Secor, Esquire
2000 Heritage Way
Waverly, Iowa 50677
(Name and Address of Agent for Service of Process)
It is proposed that this filing will become effective (check appropriate box)
|_| immediately upon filing pursuant to paragraph (b) of Rule 485
|X| on May 1, 1999 pursuant to paragraph (b) of Rule 485
|_| 60 days after filing pursuant to paragraph (a)(i) of Rule 485
|_| on pursuant to paragraph (a)(i) of Rule 485
|_| 75 days after filing pursuant to paragraph (a)(ii)
|_| on pursuant to paragraph (a)(ii) of Rule 485
The index to attached exhibits is found following the signature pages.
================================================================================
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY PROSPECTUS
2000 Heritage Way, Waverly, Iowa 50677-9202
(319) 352-4090 (800) 798-5500 May 1, 1999
This Prospectus describes the individual flexible premium deferred variable
annuity contract ("Contract") being offered by CUNA Mutual Life Insurance
Company ("Company"). Please read it carefully and keep it for future reference.
The Company may sell the Contract to individuals, or to or in connection with
retirement plans, including plans that qualify for special federal tax treatment
under the Internal Revenue Code of 1986, as amended ("Code").
The Owner ("you") may allocate purchase payments and Contract Values to either:
(1) one or more of the Subaccounts of the CUNA Mutual Life Variable Annuity
Account ("Variable Account"), or (2) to the Guaranteed Interest Option, or (3)
to both. The investment performance of the mutual fund portfolios underlying the
Subaccounts you select will affect the Contract value to the Annuity Date,
except for amounts you invest in the Guaranteed Interest Option and will affect
the size of variable annuity payments after the annuity date. You bear the
entire investment risk on any amounts you allocate to the Variable Account.
Each Subaccount of the Variable Account invests solely in a corresponding
portfolio of one of the following Funds:
Ultra Series Fund
Money Market Fund Growth and Income Stock Fund
Bond Fund Capital Appreciation Stock Fund
Balanced Fund Mid-Cap Stock Fund
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock Portfolio
MFS(R) Variable Insurance TrustSM ("MFS Variable Insurance Trust")
MFS(R) Global Governments SeriesSM ("MFS Global Governments Series")
MFS(R) Emerging Growth Series SM ("MFS Emerging Growth Series")
Oppenheimer Variable Account Funds
Oppenheimer High Income Fund/VA
Templeton Variable Products Series Fund
Templeton Developing Markets Fund: Class 2
Inside this Prospectus, you will find basic information about the Contract and
the Variable Account that you should know before investing. The Statement of
Additional Information ("SAI") contains additional information about the
Contract and the Variable Account. You will find its table of contents on the
last page of this Prospectus. The SAI has been filed with the Securities and
Exchange Commission (SEC) and is incorporated by reference. You may obtain a
copy of the SAI dated May 1, 1999, free of charge by contacting the Company at
the address or telephone number shown above. Additionally, the SEC maintains a
website at http://www.sec.gov that contains the SAI material incorporated by
reference and other information.
This Prospectus must be accompanied by a current prospectus for the Ultra Series
Fund, T. Rowe Price International Series, Inc., MFS Variable Insurance Trust,
Oppenheimer Variable Account Funds, and Templeton Variable Products Series Fund.
Investment in a variable annuity contract is subject to risks, including the
possible loss of principal. Unlike credit union and bank accounts, Contract
Value invested in the Variable Account is not insured. Variable Contract Value
is not deposited in or guaranteed by any credit union or bank and is not
guaranteed by any government agency.
The Securities and Exchange Commission has not approved or disapproved of these
securities or passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
DEFINITIONS....................................................................1
EXPENSE TABLES.................................................................3
CONDENSED FINANCIAL INFORMATION................................................5
SUMMARY........................................................................8
The Contract................................................................8
Charges and Deductions......................................................9
Annuity Provisions..........................................................9
Federal Tax Status..........................................................9
CUNA MUTUAL LIFE INSURANCE COMPANY, THE CUNA MUTUAL LIFE VARIABLE ANNUITY
ACCOUNT, AND THE UNDERLYING FUNDS...........................................10
CUNA Mutual Life Insurance Company.........................................10
CUNA Mutual Life Variable Annuity Account..................................10
The Underlying Funds.......................................................11
The Ultra Series Fund......................................................11
Money Market Fund........................................................11
Bond Fund................................................................11
Balanced Fund............................................................11
Growth and Income Stock Fund.............................................12
Capital Appreciation Stock Fund..........................................12
Mid-Cap Stock Fund.......................................................12
T. Rowe Price International Series, Inc./T. Rowe Price International
Stock Portfolio..........................................................12
MFS Variable Insurance Trust...............................................12
MFS Global Governments Series............................................12
MFS Emerging Growth Series...............................................12
Oppenheimer Variable Account Funds / Oppenheimer High Income Fund/VA.......12
Templeton Variable Products Series Fund / Templeton Developing
Markets Fund: Class 2....................................................12
Availability of the Funds..................................................13
Resolving Material Conflicts...............................................13
Addition, Deletion or Substitution of Investments..........................13
DESCRIPTION OF THE CONTRACT...................................................14
Issuance of a Contract.....................................................14
Purchase Payments..........................................................14
Right to Examine...........................................................15
Allocation of Purchase Payments............................................16
Variable Contract Value....................................................16
Transfer Privileges........................................................17
Surrenders and Partial Withdrawals.........................................19
Contract Loans.............................................................20
Death Benefit Before the Annuity Date......................................21
Death Benefit After the Annuity Date.......................................22
Annuity Payments on the Annuity Date.......................................22
Payments...................................................................23
Modification...............................................................23
Reports to Owners..........................................................23
Inquiries..................................................................23
THE GUARANTEED INTEREST OPTION................................................24
Category 1.................................................................24
Guaranteed Interest Option Value.........................................24
Guarantee Periods........................................................25
Net Purchase Payment Preservation Program................................25
Interest Adjustment......................................................25
Category 2.................................................................26
Guaranteed Interest Option Value.........................................27
Guarantee Periods........................................................27
Net Purchase Payment Preservation Program................................28
Category 3.................................................................28
CHARGES AND DEDUCTIONS........................................................28
Surrender Charge (Contingent Deferred Sales Charge)........................28
Annual Contract Fee........................................................29
Asset-Based Administration Charge..........................................29
Transfer Processing Fee....................................................29
Lost Contract Request......................................................30
Mortality and Expense Risk Charge..........................................30
Fund Expenses..............................................................30
Premium Taxes..............................................................30
Other Taxes................................................................31
ANNUITY PAYMENT OPTIONS.......................................................31
Election of Annuity Payment Options........................................31
Fixed Annuity Payments.....................................................31
Variable Annuity Payments..................................................31
Description of Annuity Payment Options.....................................32
YIELDS AND TOTAL RETURNS......................................................33
FEDERAL TAX MATTERS...........................................................34
Introduction...............................................................34
Tax Status of the Contract.................................................34
Taxation of Annuities......................................................35
Transfers, Assignments or Exchanges of a Contract..........................37
Withholding................................................................37
Multiple Contracts.........................................................37
Taxation of Qualified Plans................................................37
Possible Charge for the Company's Taxes....................................39
Other Tax Consequences.....................................................39
DISTRIBUTION OF THE CONTRACTS.................................................39
LEGAL PROCEEDINGS.............................................................40
PREPARING FOR YEAR 2000.......................................................40
VOTING RIGHTS.................................................................40
COMPANY HOLIDAYS..............................................................41
FINANCIAL STATEMENTS..........................................................41
<PAGE>
DEFINITIONS
Accumulation Unit A unit of measure used to calculate Variable Contract Value.
Adjusted Contract The Contract Value less applicable premium tax not yet
Value deducted, less a pro-rated portion of the annual Contract
fee, plus or minus any applicable interest adjustment, and
(for annuity option 1) less any applicable surrender charges
as of the Annuity Date.
Annuitant The person or persons whose life (or lives) determines the
annuity payment benefits payable under the Contract and
whose death determines the death benefit. The maximum number
of joint Annuitants is two and provisions referring to the
death of an Annuitant mean the death of the last surviving
Annuitant.
Annuity Date The date when the Adjusted Contract Value will be applied
under an annuity payment option, if the Annuitant is still
living.
Annuity Unit A unit of measure used to calculate variable annuity
payments.
Beneficiary The person to whom the proceeds payable on the death of an
Annuitant will be paid.
Contract The same date in each Contract Year as the Contract Date.
Anniversary
Contract Date The date set forth on the specifications page of the
Contract which is used to determine Contract Years and
Contract Anniversaries.
Contract Year A twelve-month period beginning on the Contract Date or
on a Contract Anniversary.
Contract Value The total amount invested under the Contract. It is the sum
of the Variable Contract Value, the Guaranteed Interest
Option Value and the balance of the Loan Account.
DCA One Year A Dollar Cost Averaging One Year Guarantee Period described
Guarantee in the Section entitled THE GUARANTEED INTEREST OPTION.
Period
Due Proof Proof of death satisfactory to the Company. Such proof may
of Death consist of the following if acceptable to the Company:
(a) a certified copy of the death record;
(b) a certified copy of a court decree reciting a
finding of death;
(c) any other proof satisfactory to the Company.
General Account The assets of the Company other than those allocated to the
Variable Account or any other separate account of the
Company.
Guarantee Amount Any portion of Guaranteed Interest Option Value allocated to
a particular Guarantee Period with a particular expiration
date (including interest thereon) less any withdrawals
therefrom.
Guarantee Period A choice under the Guaranteed Interest Option of a specific
number of years for which the Company agrees to credit a
particular effective annual interest rate.
Guaranteed Interest An allocation option under the Contract funded by the
Option Company's General Account. It is neither part of nor
dependent upon the investment performance of the Variable
Account.
Guaranteed Interest The value of the Contract in the Guaranteed Interest Option.
Option Value
Home Office The Company's principal office at 2000 Heritage Way,
Waverly, Iowa 50677.
Loan Account For any Contract, a portion of the Company's General Account
to which Contract Value is transferred to provide collateral
for any loan taken under the Contract.
Loan Amount Except on a Contract Anniversary, the Contract Value in the
Loan Account plus any interest charges accrued on such
Contract Value up to that time. On a Contract Anniversary,
the Loan Amount equals the balance of the Loan Account.
Net Purchase A purchase payment less any premium taxes deducted from
Payment purchase payments.
Non-Qualified A contract that is not a "Qualified Contract."
Contract
Owner The person(s) ("you") who own(s) the Contract and who is
(are) entitled to exercise all rights and privileges
provided in the Contract.
Payee The Annuitant(s) during the annuity period.
Qualified A contract that is issued in connection with retirement
Contract plans that qualify for special federal income tax treatment
under Section(s) 401, 403(b), 408, 408A or 457 of the Code.
Series An investment portfolio (sometimes called a "Fund") of Ultra
Series Fund, T. Rowe Price International Series, Inc., MFS
Variable Insurance Trust, Oppenheimer Variable Account
Funds, Templeton Variable Products Series Fund, or any other
open-end management investment company or unit investment
trust in which a Subaccount invests.
Subaccount A subdivision of the Variable Account, the assets of which
are invested in a corresponding underlying Fund.
Surrender Value The Contract Value plus the value of any paid-up annuity
additions plus or minus any applicable interest adjustment,
less any applicable surrender charges, premium taxes not
previously deducted, and the annual Contract fee and Loan
Amount.
Valuation Day For each Subaccount, each day on which the New York Stock
Exchange is open for business except for the holidays listed
in the Prospectus under "Company Holidays" and any day that
a Subaccount's corresponding Fund does not value its shares.
Valuation The period that starts at 3:00 p.m. Central Time on one
Period Valuation Day and ends at 3:00 p.m. on the next succeeding
Valuation Day.
Variable Account CUNA Mutual Life Variable Annuity Account.
Variable Contract The value of the Contract in the Variable Account.
Value
Written Notice A Written Notice or request in a form satisfactory to the
Company which is signed by the Owner and received at the
Home Office.
<PAGE>
EXPENSE TABLES
The following expense information assumes that the entire Contract Value is
Variable Contract Value.
Owner Transaction Expenses
Sales Charge Imposed on Purchase Payments None
Maximum Surrender Charge (contingent deferred sales charge)
as a percentage of purchase payments 7%
Transfer Processing Fee None*
Annual Contract Fee $30**
Variable Account Annual Expenses
(as a percentage of net assets)
Mortality and Expense Risk Charge 1.25%
Other Variable Account Expenses 0.15%
Total Variable Account Expenses 1.40%
Annual Fund Expenses
(as percentage of average net assets)
<TABLE>
Total Annual
Portfolio Name Management Fees Other Expenses 12b-1 Fees Fund Expenses
<S> <C> <C> <C>
Money Market Fund 0.45% 0.01% None 0.46%
Bond Fund 0.55% 0.01% None 0.56%
Balanced Fund 0.70% 0.01% None 0.71%
Growth and Income Stock Fund 0.60% 0.01% None 0.61%
Capital Appreciation Stock Fund 0.80% 0.01% None 0.81%
Mid-Cap Stock Fund 1.00% 0.01% None 1.01%
T. Rowe Price International Stock Portfolio(4) 1.05% 0.0% None 1.05%
MFS Global Governments Series 0.75% 0.26%(1)(2) None 1.00%
(After expense limitation)
MFS Emerging Growth Series 0.75% 0.10% (1) None 0.85%
(After expense limitation)
Oppenheimer High Income Fund/VA 0.75% 0.06% None 0.81%
Templeton Developing Markets Fund: Class 2(3) 1.25% 0.41% 0.25% 1.91%
</TABLE>
* The Company reserves the right to charge a $10 transfer fee on each
transfer after the first 12 transfers in any Contract Year. (See SUMMARY,
Charges and Deductions.)
** The Company does not deduct the annual Contract fee if the Contract Value
is $25,000 or more. (See SUMMARY, Annual Contract Fee.)
(1) These Series have an expense offset arrangement which reduces the Series'
custodian fee based upon the amount of cash maintained by the Series with
its custodian and dividend disbursing agent, and may enter into other such
arrangements and directed brokerage arrangements (which would also have the
effect of reducing the Series' expenses). Any such fee reductions are not
reflected under "Other Expenses".
(2) The annual expenses listed for the MFS Global Governments Series are net of
certain reimbursements by its investment adviser. The investment adviser
has agreed to bear, subject to reimbursement, until December 31, 2004,
expenses of the Global Governments Series such that the Series' aggregate
operating expenses do not exceed 1.00%, on an annualized basis, of its
average daily net assets. See "Information Concerning Shares of The Series
- Expenses" in the prospectus of the MFS Global Governments Series. For the
1998 fiscal year, absent this expense arrangement, the "Other Expenses" and
the "Total Annual Fund Expenses" shown above would be .36% and 1.11%,
respectively.
(3) Class 2 of the Fund has a distribution plan or "Rule 12b-1 Plan" which is
described in the Fund's prospectus.
(4) Management fees include operating expenses.
Premium taxes may be applicable, depending on the laws of various jurisdictions.
Each underlying Fund's management provided us with the expense information for
these underlying Funds. We have not independently verified this information.
The tables are intended to assist you in understanding the costs and expenses
that you will bear directly or indirectly. The tables reflect the expenses for
the Variable Account and for each of the underlying Funds available as
investment options for the fiscal year ended December 31, 1998. Expenses of the
funds are not fixed or specified under the terms of the Contract, and actual
expenses may vary. For a more complete description of the various costs and
expenses see "Charges and Deductions" and the prospectuses for the Ultra Series
Fund, the T. Rowe Price International Series, Inc., the MFS Variable Insurance
Trust, the Oppenheimer Variable Account Funds, and the Templeton Variable
Products Series Fund which accompany this Prospectus.
An Owner would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
1. If the Contract is surrendered (or annuitized under annuity option 1) at
the end of the applicable time period:
Subaccount 1 Year 3 Years 5 Years 10 Years
Money Market 83 106 131 225
Bond 84 109 136 236
Balanced 85 113 144 251
Growth and Income Stock 84 110 139 241
Capital Appreciation Stock 86 116 149 262
Mid-Cap Stock Fund 88 122 159 282
T. Rowe Price International Stock 89 123 161 286
MFS Global Governments 88 122 159 281
MFS Emerging Growth 88 122 159 281
Oppenheimer High Income 86 116 149 262
Templeton Developing Markets 97 149 203 367
2. If the Contract is not surrendered or is annuitized (for annuity options 2
- 4) at the end of the applicable time period:
Subaccount 1 Year 3 Years 5 Years 10 Years
Money Market 20 61 104 225
Bond 21 64 109 236
Balanced 22 68 117 251
Growth and Income Stock 21 65 112 241
Capital Appreciation Stock 23 71 122 262
Mid-Cap Stock Fund 25 77 132 282
T. Rowe Price International Stock 26 78 134 286
MFS Global Governments 25 77 132 281
MFS Emerging Growth 25 77 132 281
Oppenheimer High Income 23 71 122 262
Templeton Developing Markets 34 104 176 367
The examples provided above assume that no transfer charges, premium taxes, or
interest adjustment have been assessed. The examples also assume that the annual
Contract fee is $30 and that the average Contract Value is $42,510, which
translates the Contract fee into an assumed 0.0007057% charge for the purposes
of the examples based on a $1,000 investment.
The examples should not be considered a representation of past or future
expenses. The assumed 5% annual rate of return is hypothetical and should not be
considered a representation of past or future annual returns, which may be
greater or less than this assumed rate. Also, actual expenses may be greater or
less than those shown.
<PAGE>
CONDENSED FINANCIAL INFORMATION
The following information is a part of the financial statements of the Variable
Account. The financial statements are included in the Statement of Additional
Information. The table below gives per unit information about the financial
history of each Subaccount for the fiscal years ended December 31, 1994, 1995,
1996, 1997 and 1998.
<TABLE>
Money Market Subaccount
1998 1997 1996 1995 1994*
<S> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period $11.31 $10.91 $10.55 $10.16 $10.00
End of period 11.72 11.31 10.91 10.55 10.16
Percentage increase in unit value during period 3.63% 3.67% 3.41% 3.8% 1.6%
Number of units outstanding at end of period 2,280,739 1,551,829 1,492,704 637,911 257,622
Bond Subaccount
1998 1997 1996 1995 1994*
Net asset value:
Beginning of period $12.21 $11.52 $11.36 $9.89 $10.00
End of period 12.79 12.21 11.52 11.36 9.89
Percentage increase in unit value during period 4.75% 5.99% 1.41% 14.9% (1.1%)
Number of units outstanding at end of period 4,554,265 2,755,770 1,686,539 556,749 127,666
Balanced Subaccount
1998 1997 1996 1995 1994*
Net asset value:
Beginning of period $15.02 $13.03 $11.92 $9.89 $10.00
End of period 16.80 15.02 13.03 11.92 9.89
Percentage increase in unit value during period 11.85% 15.27% 9.31% 20.5% (1.1%)
Number of units outstanding at end of period 17,694,943 12,307,622 7,783,833 2,698,049 664,679
Growth and Income Stock Subaccount
1998 1997 1996 1995 1994*
Net asset value:
Beginning of period $19.91 $15.36 $12.76 $9.82 $10.00
End of period 23.17 19.91 15.36 12.76 9.82
Percentage increase in unit value during period 16.37% 29.62% 20.38% 29.90% (1.8%)
Number of units outstanding at end of period 18,555,957 14,176,543 8,541,383 2,807,876 593,599
Capital Appreciation Stock Subaccount
1998 1997 1996 1995 1994*
Net asset value:
Beginning of period $20.05 $15.45 $12.90 $10.00 $10.00
End of period 23.91 20.05 15.45 12.90 11.60
Percentage increase in unit value during period 19.25% 29.77% 19.77% 29.00% 16.00%
Number of units outstanding at end of period 8,586,442 6,732,473 4,495,720 2,024,589 775,631
T. Rowe Price International Stock Subaccount
1998 1997 1996 1995 1994*
Net asset value:
Beginning of period $12.61 $12.40 $10.96 $9.99 $10.00
End of period 14.41 12.61 12.40 10.96 9.99
Percentage increase in unit value during period 14.27% 1.69% 13.14% 9.71% (0.1%)
Number of units outstanding at end of period 4,955,996 4,373,475 2,683,277 1,090,681 326,923
Global Governments Subaccount
1998 1997 1996 1995 1994
Net asset value:
Beginning of period $11.29 $11.58 $11.29 $10.01 $10.00
End of period 12.02 11.29 11.58 11.29 10.01
Percentage increase in unit value during period 6.47% (2.50)% 2.57% 12.8% 0.1%
Number of units outstanding at end of period 1,101,162 1,232,126 1,033,483 505,990 186,155
Emerging Growth Subaccount
1998 1997 1996**
Net asset value:
Beginning of period $12.12 $10.08 $10.00
End of period 16.04 12.12 10.08
Percentage increase in unit value during period 32.34% 20.24% 0.80%
Number of units outstanding at end of period 5,094,236 3,752,045 1,650,627
Oppenheimer High Income Subaccount
1998 1997***
Net asset value:
Beginning of period $10.99 $10.00
End of period 10.87 10.99
Percentage increase in unit value during period (1.09%) 9.9%
Number of units outstanding at end of period 3,561,305 1,234,868
Templeton Developing Markets Subaccount
1998 1997***
Net asset value:
Beginning of period $6.64 $10.00
End of period 5.17 6.64
Percentage increase in unit value during period (22.14%) (33.60)%
Number of units outstanding at end of period 868,801 458,727
</TABLE>
* This column reflects per unit information from June 1, 1994 (the
commencement of operations) through December 31, 1994.
** 1996 data is for the eight-month period beginning May 1, 1996, and ending
December 31, 1996.
*** 1997 data is for the eight-month period beginning May 1, 1997, and ending
December 31, 1997.
<PAGE>
SUMMARY
The following summarizes information which is described in more detail later in
the prospectus.
The Contract
Issuance of a Contract. The Company issues Contracts to individuals or in
connection with retirement plans that may or may not qualify for special federal
tax treatment under the Code. (See DESCRIPTION OF THE CONTRACT, Issuance of a
Contract.) Neither you nor the Annuitant may be older than age 85 (age 78 in
Pennsylvania) on the Contract Date.
"Right to Examine" Period. You have the right to return the Contract within 10
days after you receive it. If you return the Contract, it will become void. The
Company will refund to you the Contract Value as of the date the Contract is
received at our Home office plus any premium taxes deducted. You are subject to
market risk during the "right to examine" period. You may get back more or less
than aggregate purchase payments you have made during this period. If required,
the Company will instead return the purchase payment(s) to you. (See DESCRIPTION
OF THE CONTRACT, Right to Examine.)
Purchase Payments. The minimum amount required to purchase a Contract depends
upon several factors. Generally, you must make payments totaling $5,000 within
the first 12 months of the Contract. Certain Qualified Contracts, Section 1035
contracts, and Contracts sold to employees have lower minimum purchase amounts.
Unless you pay the minimum purchase amount in full at the time of application,
an automatic purchase payment plan must be established resulting in the minimum
purchase amount being paid before the end of the first 12 months of the
Contract. The minimum purchase payment is $100, unless the payment is made
through an automatic purchase payment plan, in which case the minimum is $25.
(See DESCRIPTION OF THE CONTRACT, Purchase Payments.)
Allocation of Purchase Payments. You may allocate purchase payments to one or
more of the Subaccounts of the Variable Account or to the Guaranteed Interest
Option or to both. An allocation to a Subaccount must be in whole percentages
and be at least 5% of the purchase payment. An allocation to the Guaranteed
Interest Option must be at least $1,000 (lesser amounts received will be
allocated to the Money Market Subaccount). Each Subaccount invests solely in a
corresponding underlying Fund. The investment performance of the Fund(s) will
affect the Subaccount in which you invest your money and your Contract Value.
The Company will credit interest to amounts in the Guaranteed Interest Option at
a guaranteed minimum rate of 3% per year, or a higher current interest rate
declared by the Company. (See DESCRIPTION OF THE CONTRACT, Allocation of
Purchase Payments.)
Transfers. On or before the Annuity Date, you may transfer all or part of the
Contract Value between Subaccount(s) or the Guaranteed Interest Option, subject
to certain restrictions.
Transfers to the Guaranteed Interest Option must be at least $1,000 (lesser
amounts received will be allocated to the Money Market Subaccount). Transfers
are not allowed to the DCA One Year Guarantee Period. Except for the DCA One
Year Guarantee Period, you may only transfer amount(s) out of the Guaranteed
Interest Option during the 30 days prior to the expiration of a Guarantee
Period. You may transfer amount(s) from the DCA One Year Guarantee Period
throughout its Guarantee Period. No fee is charged for transfers, but the
Company reserves the right to charge $10 for each transfer over 12 during a
Contract Year. (See DESCRIPTION OF THE CONTRACT, Transfer Privilege.)
Partial Withdrawal. By Written Notice to the Company on or before the Annuity
Date, you may withdraw part of your Contract's Surrender Value, subject to
certain imitations. (See DESCRIPTION OF THE CONTRACT, Surrender and Partial
Withdrawals.)
Surrender. By Written Notice to the Company, you may surrender the Contract and
receive its Surrender Value. (See DESCRIPTION OF THE CONTRACT, Surrender and
Partial Withdrawals.)
Charges and Deductions
The Contract contains the following charges and deductions:
Surrender Charge (Contingent Deferred Sales Charge). There are no sales charges
deducted at the time purchase payments are made. However, a surrender charge is
deducted when you surrender or partially withdraw purchase payment(s) within
seven years of their being paid.
The surrender charge is 7% of the amount of the
payment withdrawn or surrendered within one year of having been paid. The
surrender charge decreases by 1% for each full year that has passed since the
payment was made. There is no surrender charge for withdrawing or surrendering
Contract Value in excess of the total purchase payments received or on purchase
payments that are more than seven years old. (See CHARGES AND DEDUCTIONS,
Surrender Charge (Contingent Deferred Sales Charge).)
Subject to certain restrictions, for the first partial withdrawal (or surrender)
in each Contract Year, 10% of total purchase payments subject to a surrender
charge may be surrendered or withdrawn without a surrender charge. (See CHARGES
AND DEDUCTIONS, Surrender Charge.) The surrender charge also may be waived in
certain circumstances as provided in the Contracts.
Annual Contract Fee. The Contract has an annual Contract fee of $30. (This fee
is waived if the Contract Value is $25,000 or more.) Before the Annuity Date,
the Company deducts this fee from the Contract Value on each Contract
Anniversary (or upon surrender of the Contract). After the Annuity Date, the
Company deducts this fee from variable annuity payments made to you. A pro-rated
portion of the fee is deducted upon annuitization of a Contract. (See CHARGES
AND DEDUCTIONS, Annual Contract Fee.)
Mortality and Expense Risk Charge. The Company deducts a daily mortality and
expense risk charge to compensate it for assuming certain mortality and expense
risks. The charge is deducted from the Variable Account at a rate of 0.003425%
per day which is an annual rate of 1.25% (approximately 0.85% for mortality risk
and 0.40% for expense risk). (See CHARGES AND DEDUCTIONS, Mortality and Expense
Risk Charge.)
Asset-Based Administration Charge. The Company deducts a daily administration
charge to compensate it for certain expenses the Company incurs in administering
the Contract. The charge is deducted from the Variable Account at an annual rate
of 0.15%. (See CHARGES AND DEDUCTIONS, Asset-Based Administration Charge.)
Premium Taxes. The Company pays any state or local premium taxes applicable to a
Contract: (a) from purchase payments as they are received, (b) from Contract
Value upon surrender or partial withdrawal, (c) upon application of adjusted
Contract Value to an annuity payment option, or (d) upon payment of a death
benefit. The Company reserves the right to deduct premium taxes at the time it
pays such taxes. (See CHARGES AND DEDUCTIONS, Premium Taxes.)
Annuity Provisions
You select the Annuity Date. For Non-Qualified Contracts, the Annuity Date must
be on or prior to the later of (1) the Contract Anniversary following the
Annuitant's 85th birthday or (2) 10 years after the Contract Date. For Qualified
Contracts, the Annuity Date must be on or before: (1) the Annuitant reaching age
70 1/2 or (2) any other date meeting the requirements of the Code. You may
change the Annuity Date as described in DESCRIPTION OF THE CONTRACT, Annuity
Payments on the Annuity Date.
On the Annuity Date, the Adjusted Contract Value will be applied to an annuity
payment option, unless you choose to receive the Surrender Value in a lump sum.
(See ANNUITY PAYMENT OPTIONS.)
Federal Tax Status
Generally, any distribution from your Contract may result in taxable income. In
certain circumstances, a 10% penalty tax may apply. For a further discussion of
the federal income status of variable annuity contracts, see Federal Tax
Matters.
CUNA MUTUAL LIFE INSURANCE COMPANY,
THE CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT, AND
THE UNDERLYING FUNDS
CUNA Mutual Life Insurance Company (the Company), is the insurer. CUNA Mutual
Life Variable Annuity Account (the Variable Account), is a separate account of
the Company. Five registered investment companies of the series type serve as
underlying investment options for the Variable Account.
CUNA Mutual Life Insurance Company
CUNA Mutual Life Insurance Company is a mutual life insurance company organized
under the laws of Iowa in 1879 and incorporated on June 21, 1882. The Home
Office of the Company is located at 2000 Heritage Way, Waverly, Iowa 50677-9202.
The Company organized as a fraternal benefit society with the name "Mutual Aid
Society of the Evangelical Lutheran Synod of Iowa and Other States," changed its
name to "Lutheran Mutual Aid Society" in 1911, and reorganized as a mutual life
insurance company called "Lutheran Mutual Life Insurance Company" on January 1,
1938. On December 28, 1984, the Company changed its name to "Century Life of
America" and on December 31, 1996 the Company changed its name to "CUNA Mutual
Life Insurance Company."
On July 1, 1990, the Company entered into a permanent affiliation with CUNA
Mutual Insurance Society ("CUNA Mutual"), 5910 Mineral Point Road, Madison WI
53705-4456. The terms of an Agreement of Permanent Affiliation provide for
extensive financial sharing between the Company and CUNA Mutual of individual
life insurance business through reinsurance arrangements, the joint development
of business plans and distribution systems for individual insurance and other
financial service products within the credit union system, and the sharing of
certain resources and facilities. At the current time, all of the directors of
the Company are also directors of CUNA Mutual and many of the senior executive
officers of the Company hold similar positions with CUNA Mutual. The
affiliation, however, is not a merger or consolidation. Both companies remain
separate corporate entities and their respective Owners retain their voting
rights. The Company and CUNA Mutual along with their subsidiaries are referred
to herein as the "CUNA Mutual Group".
As of December 31, 1998, the Company had more than $4 billion in assets and more
than $11 billion of life insurance in force. Effective June 1998, and through
the date of this Prospectus, A.M. Best rated the Company A (Excellent).
Effective March 1998, and through the date of this Prospectus, Duff & Phelps
rated the Company AA. These are the most recent ratings available as of the date
of this Prospectus. Periodically, the rating agencies review the ratings of the
Company. To obtain the most current ratings, contact the Company at the address
or telephone number shown on the first page of this Prospectus.
The objective of Best's rating system is to evaluate the factors affecting
overall performance of an insurance company and then provide an opinion of a
company's financial strength and ability to meet its contractual obligations
relative to other companies in the industry. The evaluation includes both
quantitative and qualitative analysis of a company's financial and operating
performance.
Duff & Phelps Credit Rating Co. rates insurance companies on their claims paying
abilities. It bases these ratings on its assessment of the economic fundamentals
of the company's principal lines of business, the company's competitive
position, the company's management capability, the relationship of the company
to its affiliates and the company's asset and liability management practices.
The Company and CUNA Mutual are members of the Insurance Marketplace Standards
Association (IMSA). IMSA is a newly formed independent industry organization
dedicated to the practice of high ethical standards in the sale of
individually-sold life insurance and annuity products. IMSA members have adopted
policies and procedures that demonstrate a commitment to honesty, fairness and
integrity in all customer contacts involving sales and service of individual
life insurance and annuity products.
The Company owns a one-half interest in CIMCO Inc. (the Investment Adviser to
the Ultra Series Fund). CUNA Mutual owns CUNA Mutual Investment Corporation,
5910 Mineral Point Road, Madison, Wisconsin, 53705. CUNA Mutual Investment
Corporation owns CUNA Brokerage Services, Inc. (the principal underwriter for
the Variable Account) and owns a one-half interest in CIMCO Inc. (the Investment
Adviser to the Ultra Series Fund).
CUNA Mutual Life Variable Annuity Account
The Variable Account was established by the Company as a separate account on
December 14, 1993. The Variable Account will receive and invest Net Purchase
Payments made under the Contracts. In addition, the Variable Account may receive
and invest purchase payments for other variable annuity contracts issued in the
future by the Company.
Although the assets in the Variable Account are the property of the Company, the
assets in the Variable Account attributable to the Contracts are not chargeable
with liabilities arising out of any other business which the Company may
conduct. The assets of the Variable Account are available to cover the general
liabilities of the Company only to the extent that the Variable Account's assets
exceed its liabilities arising under the Contracts and any other contracts
supported by the Variable Account. The Company has the right to transfer to the
General Account any assets of the Variable Account which are in excess of
reserves and other Contract liabilities. All obligations arising under the
Contracts are general corporate obligations of the Company.
The Variable Account is divided into Subaccounts. In the future, the number of
Subaccounts may change. Each Subaccount invests exclusively in shares of a
single corresponding Fund. The income, gains and losses, realized or unrealized,
from the assets allocated to each Subaccount are credited to or charged against
that Subaccount without regard to income, gains or losses of any other
Subaccount, Separate Account or the Company itself.
The Variable Account has been registered with the SEC as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act") and meets the
definition of a separate account under the federal securities laws. Registration
with the SEC does not involve supervision of the management or investment
practices or policies of the Variable Account or of the Company by the SEC. The
Variable Account is also subject to the laws of the State of Iowa which regulate
the operations of insurance companies domiciled in Iowa.
The Underlying Funds
The Variable Account invests in the Ultra Series Fund (Class Z shares), the T.
Rowe Price International Series, Inc., the MFS Variable Insurance Trust, the
Oppenheimer Variable Account Funds, and the Templeton Variable Products Series
Fund. Each is a management investment company of the series type with one or
more investment portfolios or Funds. Each is registered with the SEC as an
open-end, management investment company.
The investment objectives and policies of each Fund are summarized below. There
is no assurance that any Fund will achieve its stated objectives. More detailed
information, including a description of risks and expenses, may be found in the
Fund prospectuses which must accompany or precede this Prospectus. The
prospectuses should be read carefully and retained for future reference.
The Ultra Series Fund
The Ultra Series Fund is a series fund with two classes of shares within each of
seven investment portfolios. Class C shares are offered to unaffiliated
insurance company separate accounts and unaffiliated qualified retirement plans.
Class Z shares are offered to CUNA Mutual Group affiliates separate accounts and
qualified retirement plans. Currently, the Ultra Series Fund offers six Funds as
investment options under the Policies.
Money Market Fund. This Fund seeks high current income from money market
instruments consistent with preservation of capital and liquidity. An investment
in the Money Market Fund is neither insured nor guaranteed by the U.S.
Government. There can be no assurance that the Money Market Fund will be able to
maintain a stable net asset value of $1.00 per share.
Bond Fund. This Fund seeks a high level of current income, consistent with the
prudent limitation of investment risk, through investment in a diversified
portfolio of fixed-income securities with maturities of up to 30 years. It
principally invests in securities of intermediate term maturities.
Balanced Fund. This Fund seeks a high total return through the combination of
income and capital growth. It pursues this objective by investing in the types
of common stocks owned by the Capital Appreciation Stock Fund and the Growth and
Income Stock Fund, the type of bonds owned by the Bond Fund, and the type of
money market instruments owned by the Money Market Fund.
Growth and Income Stock Fund. This Fund seeks long-term growth of capital with
income as a secondary consideration. It pursues this objective by investing in
common stocks of companies with financial and market strengths and long-term
records of performance.
Capital Appreciation Stock Fund. This Fund seeks a high level of long-term
growth of capital. It pursues this objective by investing in common stocks,
including those of smaller companies and of companies undergoing significant
change.
Mid-Cap Stock Fund. This Fund seeks long-term capital appreciation by investing
in mid-size and small companies. It pursues this objective by purchasing the
common stock of generally smaller, less-developed issuers with valuations,
fundamentals and/or prospects that are attractive to the investment adviser.
CIMCO Inc. ("CIMCO") serves as investment adviser to the Ultra Series Fund and
manages its assets in accordance with general policies and guidelines
established by the trustees of the Ultra Series Fund.
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock Portfolio. This Fund seeks long-term growth of
capital through investments primarily in common stocks of established, non-U.S.
companies.
Rowe Price-Fleming International, Inc. ("RPFI") serves as the investment adviser
to the T. Rowe Price International Stock Portfolio and manages its assets in
accordance with general policies and guidelines established by the board of
directors of the T. Rowe Price International Series, Inc. RPFI was founded in
1979 as a joint venture between T. Rowe Price Associates, Inc. and Robert
Fleming Holdings Limited.
MFS Variable Insurance Trust
MFS Global Governments Series. The fund's investment objective is to provide
income and capital appreciation. The fund's objective may be modified without
shareholder approval.
MFS Emerging Growth Series. This Fund seeks long-term growth of capital through
investments primarily in equity common stock of emerging growth companies.
Massachusetts Financial Services Company ("MFS") serves as the investment
adviser to the MFS Global Governments Series and MFS Emerging Growth Series and
manages its assets in accordance with general policies and guidelines
established by the board of trustees of the MFS Variable Insurance Trust. MFS is
a subsidiary of Sun Life Assurance Company of Canada (U.S.) which, in turn, is a
wholly owned subsidiary of Sun Life Assurance Company of Canada.
Oppenheimer Variable Account Funds
Oppenheimer High Income Fund/VA. This Fund seeks a high level of current income
from investments in high yield fixed-income securities. Oppenheimer High Income
Fund/VA's investments include unrated securities or high risk securities in the
lower rating categories, commonly known as "junk bonds," which are subject to a
greater risk of loss of principal and nonpayment of interest than higher-rated
securities.
Oppenheimer Funds, Inc. serves as the investment adviser to the Oppenheimer High
Income Fund/VA and manages its assets in accordance with general policies and
guidelines established by the board of trustees of the Oppenheimer Variable
Account Funds. The Manager is owned by Oppenheimer Acquisition Corp., a holding
company that is owned in part by senior officers of the Manager and controlled
by Massachusetts Mutual Life Insurance Company.
Templeton Variable Products Series Fund
The Templeton Variable Products Series Fund is only available as an underlying
investment of the Variable Account in which this Contract invests.
Templeton Developing Markets Fund: Class 2. This Fund seeks long-term capital
appreciation by investing primarily in emerging market equity securities.
Class 2 of the Templeton Developing Markets Fund pays 0.25% of the average daily
net assets of the Fund annually under a distribution plan adopted pursuant to
Rule 12b-1 under the 1940 Act. Amounts paid under the 12b-1 Plan to the Company
may be used for furnishing certain contract owner services or distribution
activities.
Templeton Asset Management Ltd. serves as the investment adviser to the
Templeton Developing Markets Fund: Class 2 and manages its assets and makes its
investments decisions. Templeton Asset Management Ltd. is a Singapore
corporation wholly owned by Franklin Resources, Inc., a publicly owned U.S.
company. Franklin Resources' principal shareholders are Charles B. Johnson and
Rupert H. Johnson Jr.
Availability of the Funds
The Variable Account purchases shares of the T. Rowe Price International Stock
Portfolio, the MFS Global Governments Series and the MFS Emerging Growth Series,
the Oppenheimer High Income Fund/VA, and the Templeton Developing Markets Fund:
Class 2 in accordance with four participation agreements. The termination
provisions of these agreements vary. A summary of the termination provisions of
these agreements may be found in the Statement of Additional Information.
If a participation agreement terminates, the Variable Account may not be able to
purchase additional shares of the Fund(s) covered by that agreement. Likewise,
in certain circumstances, it is possible that shares of a Fund may not be
available to the Variable Account even if the participation agreement relating
to that Fund has not been terminated. In either event, Owners will no longer be
able to allocate purchase payments or transfer Contract Value to the Subaccount
investing in that Fund.
Resolving Material Conflicts
Shares of the Funds, other than Ultra Series Fund, are sold to separate accounts
of insurance companies that are not affiliated with the Company or each other, a
practice known as "shared funding." They are also sold to separate accounts to
serve as the underlying investment for both variable annuity contracts and
variable life insurance contracts, a practice known as "mixed funding." As a
result, there is a possibility that a material conflict may arise between the
interests of Owners, whose Contract Values are allocated to the Variable
Account, and of owners of other contracts whose contract values are allocated to
one or more other separate accounts investing in any one of the Funds. Shares of
some of the Funds may also be sold directly to certain qualified pension and
retirement plans qualifying under Section 401 of the Code. As a result, there is
a possibility that a material conflict may arise between the interests of Owners
or owners of other contracts (including contracts issued by other companies),
and such retirement plans or participants in such retirement plans. In the event
of any such material conflicts, the Company will consider what action may be
appropriate, including removing the Fund from the Variable Account or replacing
the Fund with another Fund. There are certain risks associated with mixed and
shared funding and with sale of shares to qualified pension and retirement
plans, as disclosed in the Fund's prospectus.
As with other Funds, Ultra Series Fund sells shares in "mixed funding"
arrangements. In addition, it sells shares directly to qualified pension and
retirement plans sponsored by CUNA Mutual Group. In the future, it is possible
that Ultra Series Fund may sell shares in "shared funding" arrangements. As with
other funds, in the event of material conflicts, the Company will consider what
action may be appropriate, including removing an Ultra Series Fund Portfolio
from the Variable Account or replacing it with another Portfolio or Fund.
Certain risks associated with mixed funding and with the sale of shares to CUNA
Mutual Group plans are disclosed in the Ultra Series Fund Statement of
Additional Information.
Addition, Deletion or Substitution of Investments
The Company reserves the right, subject to applicable law, to make additions to,
deletions from, or substitutions for the shares of a Fund that are held in the
Variable Account or that the Variable Account may purchase. If the shares of a
Fund are no longer available for investment or if, in the Company's judgment,
further investment in any Fund should become inappropriate, the Company may
redeem the shares, if any, of that Fund and substitute shares of another Fund.
The Company will not substitute any shares attributable to a Contract's interest
in a Subaccount without notice and prior approval of the SEC and state insurance
authorities, to the extent required by the 1940 Act or other applicable law.
The Company also reserves the right to establish additional Subaccounts of the
Variable Account, each of which would invest in shares of a new corresponding
Fund having a specified investment objective. The Company may, in its sole
discretion, establish new Subaccounts or eliminate or combine one or more
Subaccounts if marketing needs, tax considerations or investment conditions
warrant. Any new Subaccounts may be made available to existing Owners on a basis
to be determined by the Company. Subject to obtaining any approvals or consents
required by applicable law, the assets of one or more Subaccounts may be
transferred to any other Subaccount if, in the sole discretion of the Company,
marketing, tax, or investment conditions warrant.
In the event of any such substitution or change, the Company (by appropriate
endorsement, if necessary) may change the Contract to reflect the substitution
or change.
If the Company considers it to be in the best interest of Owners and Annuitants,
and subject to any approvals that may be required under applicable law, the
Variable Account may be operated as a management investment company under the
1940 Act, it may be deregistered under the 1940 Act if registration is no longer
required, it may be combined with other Company separate accounts, or its assets
may be transferred to another separate account of the Company. In addition, the
Company may, when permitted by law, restrict or eliminate any voting rights of
Owners or other persons who have such rights under the Contracts.
These mutual fund portfolios are not available for purchase directly by the
general public, and are not the same as other mutual fund portfolios with very
similar or nearly identical names that are sold directly to the public. However,
the investment objectives and policies of certain portfolios available under the
policy may be very similar to the investment objectives and policies of other
portfolios that are managed by the same investment adviser or manager.
Nevertheless, the investment performance and results of the portfolios available
under the policy may be lower, or higher, than the investment results of such
other (publicly available) portfolios. There can be no assurance, and no
representation is made, that the investment results of any of the portfolios
available under the policy will be comparable to the investment results of any
other mutual fund portfolio, even in the other portfolio has the same investment
adviser or manager and the same investment objectives and policies, and a very
similar name.
DESCRIPTION OF THE CONTRACT
Issuance of a Contract
In order to purchase a Contract, application must be made to the Company through
a licensed representative of the Company, who is also a registered
representative of CUNA Brokerage Services, Inc. ("CUNA Brokerage") or a
broker-dealer having a selling agreement with CUNA Brokerage or a broker-dealer
having a selling agreement with such broker-dealer. Contracts may be sold to or
in connection with retirement plans that do not qualify for special tax
treatment as well as retirement plans that qualify for special tax treatment
under the Code. Neither the Owner nor the Annuitant may be older than age 85
(age 78 in Pennsylvania) on the Contract Date.
Purchase Payments
The minimum amount required to purchase a Contract depends upon several factors.
The minimum purchase amount the Company must receive during the first 12 months
of the Contract is:
o $5,000 for a Contract other than those specified below.
o $2,000 for Contracts that qualify for special federal income
tax treatment under Sections 401, 408, 408A, or 457 of the
Code. This category includes qualified pension plans,
individual retirement accounts, and certain deferred
compensation plans.
o $300 for Contracts that qualify for special federal income tax
treatment under Section 403(b) of the Code. This category
includes tax-sheltered annuities.
o The value of a Contract exchanged pursuant to Section 1035 of
the Code, if the Company had approved the transaction prior to
the exchange.
o $600 for a Contract sold to employees of the Company and its
subsidiaries, to employees of CUNA Mutual and its
subsidiaries, and to registered representatives and other
persons associated with CUNA Brokerage. This category includes
both individual retirement accounts and non-individual
retirement accounts.
Unless the minimum purchase amount specified above already has been paid in full
at the time of application, an automatic purchase payment plan must be
established to schedule regular payments during the first 12 months of the
Contract. Under the Company's automatic purchase payment plan, the Owner can
select a monthly payment schedule pursuant to which purchase payments will be
automatically deducted from a credit union account, bank account or other
source.
The regular payment schedule established under the automatic purchase plan must
total at least the amount shown above as a minimum purchase amount. For example,
if $5,000 is the required minimum purchase amount, a $2,000 payment at the time
of application and an automatic payment plan amount of $272.73 a month for the
next 11 months would be sufficient. Similarly, if $2,000 is the required minimum
purchase amount, an initial purchase payment of $166.74 and an automatic payment
plan amount of $166.66 for each of the next 11 months would be sufficient. (Tax
law does not permit the Company to accept more than $2,000.00 for an individual
retirement account, except in the case of a rollover or transfer.)
The minimum size for an initial purchase payment and subsequent purchase payment
is $100, unless the payment is made through an automatic purchase payment plan
in which case the minimum size is $25. Purchase payments may be made at any time
during the Annuitant's lifetime and before the Annuity Date. Additional purchase
payments after the initial purchase payment are not required.
The Company reserves the right not to accept (1) purchase payments received
after the Contract Anniversary following the Annuitant's 85th birthday (78th
birthday in Pennsylvania), (2) purchase payments of less than $100, and (3)
purchase payments in excess of $1 million. Also, the Company reserves the right
to change the size of minimum payments and, with respect to Contracts not yet
issued, the size of the minimum purchase amounts.
The Company reserves the right, if allowed by state law, to terminate a Contract
and pay the Contract Value to the Owner if: (1) no purchase payments have been
received during the prior 24 months, and (2) aggregate purchase payments up to
the time of termination total less than $2,000, and (3) Contract Value is less
than $2,000. Since the charges imposed on such a Contract will be significant,
only those with the financial capability to keep an annuity in place for a
substantial period should purchase an annuity.
Right to Examine
The Contract provides for an initial "right to examine" period. The Owner has
the right to return the Contract within 10 days of receiving it. In some states,
this period may be longer than 10 days.
In all states except Georgia, Idaho, Michigan, Nevada, North Carolina, Oklahoma,
South Carolina, Utah, and Washington: The Owner is subject to market risk during
the Right to Examine period. When the Company receives the returned Contract or
when the sales representative who sold the Contract receives the returned
Contract before the end of the Right to Examine period, the Company will cancel
the Contract and refund to the Owner an amount equal to the Contract Value as of
the date the returned Contract is received in the Home Office plus any premium
taxes deducted for all plan types except IRAs. This amount may be more or less
than the aggregate amount of purchase payments made up to that time. For IRAs,
aggregate purchase payments are returned.
In the states of Georgia, Idaho, Michigan, Nevada, North Carolina, Oklahoma,
South Carolina, Utah, and Washington: When the Company receives the returned
Contract or when the sales representative who sold the contract receives the
returned Contract before the end of the Right to Examine period, the Company
will cancel the Contract and refund to the Owner an amount equal to aggregate
purchase payments made. In these states, the initial purchase payments will be
allocated to the money market subaccount for 20 days following the Contract
Date.
In some states, the refund amount may differ from the description above if the
contract is a replacement for an existing contract.
Allocation of Purchase Payments
At the time of application, the Owner selects how the initial Net Purchase
Payment is to be allocated among the Subaccounts and the Guaranteed Interest
Option. An allocation to a Subaccount must be for at least 5% of a purchase
payment and be in whole percentages. An allocation to the Guaranteed Interest
Option must be for at least $1,000.
If the application for a Contract is properly completed and is accompanied by
all the information necessary to process it, including payment of the initial
purchase payment, the initial Net Purchase Payment will be allocated, as
designated by the Owner, to one or more of the Subaccounts or to the Guaranteed
Interest Option within two Valuation Days of receipt of such purchase payment by
the Company at its Home Office. If the application is not properly completed,
the Company reserves the right to retain the purchase payment for up to five
Valuation Days while it attempts to complete the application. If the application
is not complete at the end of the 5-day period, the Company will inform the
applicant of the reason for the delay and the initial purchase payment will be
returned immediately, unless the applicant specifically consents to the Company
retaining the purchase payment until the application is complete. Once the
application is complete, the initial Net Purchase Payment will be allocated as
designated by the Owner within two Valuation Days.
Notwithstanding the foregoing, in jurisdictions where the Company must refund
aggregate purchase payments in the event the Owner exercises the right to
examine, any portion of the initial Net Purchase Payment to be allocated to a
Subaccount will be allocated to the Money Market Subaccount for a 20-day period
following the Contract Date. At the end of that period, the amount in the Money
Market Subaccount will be allocated to the Subaccounts as designated by the
Owner based on the proportion that the allocation percentage for each such
Subaccount bears to the sum of the allocation percentages.
Any subsequent Net Purchase Payments will be allocated as of the end of the
Valuation Period in which the subsequent Net Purchase Payment is received by the
Company and will be allocated in accordance with the allocation schedule in
effect at the time the purchase payment is received. However, Owners may direct
individual payments to a specific Subaccount or to the Guaranteed Interest
Option (or any combination thereof) without changing the existing allocation
schedule. The allocation schedule may be changed by the Owner at any time by
Written Notice. Changing the purchase payment allocation schedule will not
change the allocation of existing Contract Value among the Subaccounts or the
Guaranteed Interest Option.
The Contract Values allocated to a Subaccount will vary with that Subaccount's
investment experience, and the Owner bears the entire investment risk. Owners
should periodically review their purchase payment allocation schedule in light
of market conditions and their overall financial objectives.
Variable Contract Value
The Variable Contract Value will reflect the investment experience of the
selected Subaccounts, any Net Purchase Payments paid, any surrenders or partial
withdrawals, any transfers, and any charges assessed in connection with the
Contract. There is no guaranteed minimum Variable Contract Value, and, because a
Contract's Variable Contract Value on any future date depends upon a number of
variables, it cannot be predetermined.
Calculation of Variable Contract Value. The Variable Contract Value is
determined at the end of each Valuation Period. The value will be the total of
the values attributable to the Contract in each of the Subaccounts. The
Subaccounts are valued by multiplying that Subaccount's unit value for the
relevant Valuation Period by the number of Accumulation Units of that Subaccount
allocated to the Contract.
Determination of Number of Accumulation Units. Any amounts allocated or
transferred to the Subaccounts will be converted into Subaccount Accumulation
Units. The number of Accumulation Units to be credited to a Contract is
determined by dividing the dollar amount being allocated or transferred to a
Subaccount by the Accumulation Unit value for that Subaccount at the end of the
Valuation Period during which the amount was allocated or transferred. The
number of Accumulation Units in any Subaccount will be increased at the end of
the Valuation Period by any Net Purchase Payments allocated to the Subaccount
during the current Valuation Period and by any amounts transferred to the
Subaccount from another Subaccount or from the Guaranteed Interest Option during
the current Valuation Period.
Any amounts transferred, surrendered or deducted from a Subaccount will be
processed by canceling or liquidating Accumulation Units. The number of
Accumulation Units to be canceled is determined by dividing the dollar amount
being removed from a Subaccount by the Accumulation Unit value for that
Subaccount at the end of the Valuation Period during which the amount was
removed. The number of Accumulation Units in any Subaccount will be decreased at
the end of the Valuation Period by: (a) any amounts transferred (including any
applicable transfer fee) from that Subaccount to another Subaccount or to the
Guaranteed Interest Option, (b) any amounts withdrawn or surrendered during that
Valuation Period, (c) any surrender charge, annual Contract fee or premium tax
assessed upon a partial withdrawal or surrender, and (d) the annual Contract
fee, if assessed during that Valuation Period.
Determination of Accumulation Unit Value. The Accumulation Unit value for each
Subaccount's first Valuation Period was set at $10. The Accumulation Unit value
for a Subaccount is calculated for each subsequent Valuation Period by
subtracting (2) from (1) and dividing the result by (3), where:
(1) Is the result of:
(a) the net assets of the Subaccount (i.e., the aggregate
value of underlying Fund shares or units held by the
Subaccount) as of the end of the Valuation Period;
(b) plus or minus the net charge or credit with respect
to any taxes paid or any amount set aside as a
provision for taxes during the Valuation Period that
the Company determines to be attributable to the
operations of the Subaccount.
(2) The cumulative unpaid daily charge for mortality and expense
risks and for administration multiplied by the number of days
in the Valuation Period.
(3) The number of Accumulation Units outstanding as of the end of
the Valuation Period.
Transfer Privileges
General. Before the Annuity Date and subject to the restrictions described
below, the Owner may transfer all or part of the amount in a Subaccount or the
Guaranteed Interest Option to another Subaccount or the Guaranteed Interest
Option.
Transfers to the Guaranteed Interest Option must be at least $1,000 (lesser
amounts received will be allocated to the Money Market Subaccount). Transfers
are not allowed to the DCA One Year Guarantee Period. Except for the DCA One
Year Guarantee Period, transfers out of the Guaranteed Interest Option are only
permitted during the 30-day period prior to the expiration of a Guarantee
Period. Transfers from the DCA One Year Guarantee Period may be made throughout
its Guarantee Period. Transfers will be made as of the Valuation Day on which
Written Notice requesting such transfer is received by the Company if received
before 3:00 p.m. Central Time. Transfers will be made as of the Valuation Day
next following the day on which Written Notice requesting such transfer is
received if received after 3:00 p.m. Central Time. Subject to these
restrictions, there currently is no limit on the number of transfers that can be
made among or between Subaccounts or to or from the Guaranteed Interest Option.
Transfers may be made by written request or by telephone. The Company will only
honor telephone transfer requests if it has a currently valid telephone transfer
authorization form on file signed by the Owner(s). A telephone transfer
authorization form received by the Company at the Home Office is valid until it
is rescinded or revoked in writing by the Owner(s) or until a subsequently dated
form signed by the Owner(s) is received at the Home Office. If a currently valid
telephone transfer authorization form is on file, the Company may act upon the
instructions of any one Owner. The Company is not responsible for inability to
receive an Owner's instructions because of busy telephone lines or
malfunctioning telephone equipment.
The Company will send a written confirmation of all transfers made pursuant to
telephone instructions. The Company may also require a form of personal
identification prior to acting on instructions received by telephone and tape
record instructions received by telephone. If the Company follows these
procedures, it will not be liable for any losses to Owners due to unauthorized
or fraudulent instructions.
The Company reserves the right to modify, restrict, suspend or eliminate the
transfer privileges (including the telephone transfer facility) at any time, for
any class of Contracts, for any reason. In particular, the Company reserves the
right to not honor transfers requested by a third party holding a power of
attorney from an Owner where that third party requests simultaneous transfers on
behalf of the Owners of two or more Contracts.
Transfer Fee. No charge is made for transfers, however, the Company reserves the
right to charge $10 for each transfer after the 12th during a Contract Year.
(See CHARGES AND DEDUCTIONS.)
Dollar-Cost Averaging. If elected at the time of the application or at any other
time by written request, an Owner may systematically or automatically transfer
(on a monthly, quarterly, semi-annual or annual basis) specified dollar amounts
from the Money Market Subaccount or the DCA One Year Guarantee Period to other
Subaccounts. This is known as the dollar-cost averaging method of investment.
The fixed dollar amount will purchase more Accumulation Units of a Subaccount
when their value is lower and fewer units when their value is higher. Over time,
the cost per unit averages out to be less than if all purchases had been made at
the highest value and greater than if all purchases had been made at the lowest
value. The dollar-cost averaging method of investment reduces the risk of making
purchases only when the price of Accumulation Units is high. It does not assure
a profit or protect against a loss in declining markets.
The minimum transfer amount for dollar-cost averaging is the equivalent of $100
per month. If less than $100 remains in the Money Market or DCA One Year
Guarantee Period, the entire amount will be transferred. The amount transferred
to a Subaccount must be at least 5% of the amount transferred and must be stated
in whole percentages. An amount transferred to the Guaranteed Interest Option
must be at least $1,000 (lesser amounts received will be transferred to the
Money Market Subaccount).
Once elected, dollar-cost averaging remains in effect until the earliest of: (1)
the Variable Contract Value in the Money Market Subaccount or the value in the
DCA One Year Guarantee Period is depleted to zero; (2) the Owner cancels the
election (by Written Notice or by telephone if the Company has the Owner's
telephone authorization form on file); or (3) for three successive months, the
Variable Contract Value in the Money Market Subaccount or the value in the DCA
One Year Guarantee Period has been insufficient to implement the dollar-cost
averaging instructions the Owner has given to the Company. The Company will
notify the Owner when dollar-cost averaging is no longer in effect. There is no
additional charge for using dollar-cost averaging. The Company reserves the
right to discontinue offering dollar-cost averaging at any time and for any
reason.
Other Types of Automatic Transfers. If elected at the time of the application or
at any other time by written request, an Owner may systematically or
automatically transfer (on a monthly, quarterly, semi-annual or annual basis)
Variable Contract Value from one Subaccount to another. Amounts may also be
automatically transferred from the DCA One Year Guarantee Period to one or more
Subaccounts. Such automatic transfers may be requested on the following basis:
(1) as a specified dollar amount, (2) as a specified number of Accumulation
Units, (3) as a specified percent of Variable Contract Value in a particular
Subaccount, or (4) in an amount equal to the excess of a specified amount of
Variable Contract Value in a particular Subaccount.
The minimum automatic transfer amount is the equivalent of $100 per month. If
less than $100 remains in the Subaccount or DCA One Year Guarantee Period from
which transfers are being made, the entire amount will be transferred. The
amount transferred to a Subaccount must be at least 5% of the amount transferred
and must be stated in whole percentages. An amount transferred to the Guaranteed
Interest Option must be at least $1,000. Once elected, automatic transfers
remain in effect until the earliest of: (1) the Variable Contract Value in the
Subaccount or DCA One Year Guarantee Period from which transfers are being made
is depleted to zero; (2) the Owner cancels the election (by Written Notice or by
telephone if the Company has the Owner's telephone authorization form on file);
or (3) for three successive months, the Variable Contract Value in the
Subaccount from which transfers are being made has been insufficient to
implement the automatic transfer instructions the Owner has given to the
Company. The Company will notify the Owner when automatic transfer instructions
are no longer in effect. There is no additional charge for using automatic
transfers. The Company reserves the right to discontinue offering automatic
transfer at any time and for any reason.
Automatic Personal Portfolio Rebalancing Service. If elected at the time of the
application or requested at any other time by Written Notice, an Owner may
instruct the Company to automatically transfer (on a monthly, quarterly,
semi-annual or annual basis) Variable Contract Value between and among specified
Subaccounts in order to achieve a particular percentage allocation of Variable
Contract Value among such Subaccounts. Such percentage allocations must be in
whole percentages and be at least 5% per allocation. Owners may start and stop
automatic Variable Contract Value rebalancing at any time and may specify any
percentage allocation of Contract Value between or among as many Subaccounts as
are available at the time the rebalancing is elected. (If an Owner elects
automatic Variable Contract Value rebalancing without specifying such percentage
allocation(s), the Company will allocate Variable Contract Value in accordance
with the Owner's currently effective purchase payment allocation schedule.)
There is no additional charge for using Variable Contract Value rebalancing.
Surrenders and Partial Withdrawals
Surrender. At any time before the Annuity Date, the Owner may surrender the
Contract for its Surrender Value. The Surrender Value will be determined as of
the Valuation Period on the date Written Notice requesting surrender and the
Contract are received at the Company's Home Office. The Surrender Value will be
paid in a lump sum unless the Owner requests payment under an annuity payment
option. A surrender may have adverse federal income tax consequences, including
a penalty tax. (See FEDERAL TAX MATTERS, Taxation of Annuities.)
Partial Withdrawals. At any time before the Annuity Date, an Owner may make
withdrawals of the Surrender Value in any Contract Year. There is no minimum
amount which may be withdrawn but the maximum amount is that which would leave
the remaining Surrender Value equal to $2,000. A partial withdrawal request that
would reduce the Surrender Value to less than $2,000 is treated as a request for
a full surrender of the Contract. The Company will withdraw the amount requested
from the Contract Value as of the Valuation Day Written Notice requesting the
partial withdrawal is received. Any applicable interest adjustment will be
deducted from the remaining Contract Value. (See THE GUARANTEED INTEREST OPTION,
Interest Adjustment.) Any applicable surrender charge also will be deducted from
the remaining Contract Value. (See CHARGES AND DEDUCTIONS, Surrender Charge.)
The Owner may specify the amount of the partial withdrawal to be made from
Subaccounts or Guarantee Amounts. If the Owner does not so specify, or if the
amount in the designated Subaccounts or Guarantee Amount is inadequate to comply
with the request, the partial withdrawal will be made from each Subaccount and
each Guarantee Amount based on the proportion that the value in such Subaccount
or Guarantee Amount bears to the total Contract Value immediately prior to the
partial withdrawal.
A partial withdrawal may have adverse federal income tax consequences, including
a penalty tax. (See FEDERAL TAX MATTERS, Taxation of Annuities.)
Surrender and Partial Withdrawal Restrictions. The Owner's right to make
surrenders and partial withdrawals is subject to any restrictions imposed by
applicable law or employee benefit plan.
Restrictions on Distributions from Certain Types of Contracts. There are certain
restrictions on surrenders of and partial withdrawals from Contracts used as
funding vehicles for Code Section 403(b) retirement programs. Section 403(b)(11)
of the Code restricts the distribution under Section 403(b) annuity contracts
of: (i) elective contributions made in years beginning after December 31, 1988;
(ii) earnings on those contributions; and (iii) earnings in such years on
amounts held as of the last year beginning before January 1, 1989. Distributions
of those amounts may only occur upon the death of the employee, attainment of
age 59 1/2, separation from service, disability, or financial hardship. In
addition, income attributable to elective contributions may not be distributed
in the case of hardship.
Other restrictions with respect to the election, commencement, or distribution
of benefits may apply under Qualified Contracts or under the terms of the plans
in respect of which Qualified Contracts are issued.
Systematic Withdrawals. If elected at the time of the application or requested
at any other time by Written Notice, an Owner may elect to receive periodic
partial withdrawals under the Company's systematic withdrawal plan. Under the
systematic withdrawal plan, the Company will make partial withdrawals (on a
monthly, quarterly, semi-annual or annual basis) from designated Subaccounts as
specified by the Owner. Such withdrawals must be at least $100 each and may only
be made from Variable Contract Value. Generally, owners must be at least age 59
1/2 to participate in the systematic withdrawal plan unless they elect to
receive substantially equal periodic payments.
The withdrawals may be requested on the following basis: (1) as a specified
dollar amount, (2) as a specified whole number of Accumulation Units, (3) as a
specified whole percent of Variable Contract Value in a particular Subaccount,
(4) in an amount equal to the excess of a specified amount of Variable Contract
Value in a particular Subaccount, and (5) in an amount equal to an Owner's
required minimum distribution under the Code.
Participation in the systematic withdrawal plan will terminate on the earliest
of the following events: (1) the Variable Contract Value in a Subaccount from
which partial withdrawals are being made becomes zero, (2) a termination date
specified by the Owner is reached, (3) the Owner requests that his or her
participation in the plan cease, or (4) a surrender charge would be applicable
to amounts being withdrawn (i.e., partial withdrawals under the systematic
withdrawal plan may not include amounts subject to the surrender charge). With
regard to (4), an Owner may, by Written Notice, request that systematic
withdrawals continue even though a surrender charge is deducted in connection
with such withdrawals. Also with regard to (4), if necessary to meet the
required minimum distribution under the Code or if necessary to make
substantially equal payments as required under the Code, the Company will
continue systematic withdrawals even though a surrender charge is deducted.
There are federal income tax consequences to partial withdrawals through the
systematic withdrawal plan and Owners should consult with their tax adviser
before electing to participate in the plan. The Company reserves the right to
discontinue offering the systematic withdrawal plan at any time.
Contract Loans
Owners of Contracts issued in connection with retirement programs meeting the
requirements of Section 403(b) of the Code (other than those programs subject to
Title 1 of the Employee Retirement Income Security Act of 1974) may borrow from
the Company using their Contracts as collateral. Loans such as these are subject
to the provisions of any applicable retirement program and to the Code. Owners
should, therefore, consult their tax and retirement plan advisers before taking
a Contract loan.
At any time, Owners may borrow the lesser of (1) the maximum loan amount
permitted under the Code, or (2) 90% of the Surrender Value of their Contract.
Loans in excess of the maximum amount permitted under the Code may be treated as
a taxable distribution rather than a loan. The Company will only make Contract
loans after approving a written application by the Owner. The written consent of
all assignees and irrevocable beneficiaries must be obtained before a loan will
be given.
When a loan is made, the Company transfers an amount equal to the amount
borrowed from the Variable Contract Value or Guaranteed Interest Option Value to
the Loan Account. The Loan Account is part of the Company's General Account and
Contract Value in the Loan Account does not participate in the investment
experience of any Subaccount or Guarantee Account. The Owner must indicate in
the loan application from which Subaccounts or Guarantee Amounts, and in what
amounts, Contract Value is to be transferred to the Loan Account. In the absence
of any such instructions from the Owner, the transfer(s) are made pro-rata from
all Subaccounts having Variable Contract Value and from all Guarantee Amounts.
Loans may be repaid by the Owner at any time before the Annuity Date. Upon the
repayment of any portion of a loan, an amount equal to the repayment will be
transferred from the Loan Account to the Subaccount(s) or Guarantee Accounts
designated by the Owner or according to the Owner's current purchase payment
allocation instructions. Loan repayments may not be allocated to the DCA One
Year Guarantee Period Account. Amounts transferred from the Guaranteed Interest
Option to the Loan Account may be subject to an interest adjustment, if
applicable.
The Company charges interest on Contract loans at an effective annual rate of
6.5%. The Company pays interest on the Contract Value in the Loan Account at
rates it determines from time to time but never less than an effective annual
rate of 3.0%. This rate may change at the Company's discretion and Owners should
request current interest rate from the Company or Representative or by calling
the Company at (800) 798-5500. Consequently, the net cost of a loan is the
difference between 6.5% and the rate being paid from time to time on the
Contract Value in the Loan Account. Interest on Contract loans accrues on a
daily basis from the date of the loan and is due and payable at the end of each
Contract Year. If the Owner does not pay the interest due at that time, an
amount equal to such interest less interest earned on the Contract Value in the
Loan Account is transferred from his or her Variable Contract Value or
Guaranteed Interest Option Value (as described above for the loan itself) to the
Loan Account. This transfer will therefore increase the loan amount.
If at any time, the loan amount causes the Surrender Value to be equal to or
less than zero, the Contract will be in default. In this event, the Company will
send a Written Notice of default to the Owner stating the amount of loan
repayment needed to reinstate the Contract and the Owner will have 60 days, from
the day the notice is mailed, to pay the stated amount. If the Company does not
receive the required loan repayment within 60 days, it will terminate the
Contract without value. Principal and interest must be repaid in substantially
level payments made no less frequently than quarterly over a five-year period
(or, if the loan is used to acquire the Owner's principal residence, a 10, 15 or
20-year period but not beyond the year the Owner attains age 70 1/2). The Owner
is allowed a 60-day grace period from the end of quarter installment due date.
If the amount due by the end of the quarter is not received within the grace
period, a deemed distribution of the entire amount of the outstanding principal,
interest due, and any applicable charges under this Contract, including any
withdrawal charge, will be made. This deemed distribution may be subject to
income and penalty tax under the Code and may adversely affect the treatment of
the Contract under Code Section 403(b).
Any loan amount outstanding upon the death of the Owner or Annuitant is deducted
from any death benefit paid. In addition, a Contract loan, whether or not
repaid, will have a permanent effect on the Contract Value because the
investment experience of the Variable Account and the interest rates applicable
to Guarantee Accounts do not apply to the portion of Contract Value transferred
to the Loan Account. The longer the loan remains outstanding, the greater this
effect is likely to be.
Death Benefit Before the Annuity Date
Death of an Owner. If any Owner dies prior to the Annuity Date, any surviving
Owner becomes the sole Owner. If there is no surviving Owner, the Annuitant
becomes the new Owner unless the deceased Owner was also the Annuitant. If the
sole deceased Owner was also the Annuitant, then the provisions relating to the
death of an Annuitant (described below) will govern unless the deceased Owner
was one of two joint Annuitants. In the latter event, the surviving Annuitant
becomes the Owner.
The following options are available to a sole surviving Owner or a new Owner:
(1) If the Owner is the spouse of the deceased Owner, he or she may
continue the Contract as the new Owner.
(2) If the Owner is not the spouse of the deceased Owner he or she may
elect, within 60 days of the date the Company receives Due Proof of
Death:
(a) to receive the Surrender Value in a single sum within 5 years of
the deceased Owner's death; or
(b) to apply the Surrender Value within 1 year of the deceased
Owner's death to one of the annuity payment options provided that
payments under the option are payable over the new Owner's life
or over a period not greater than the new Owner's life
expectancy.
If he or she does not elect one of the above options, the Company will pay the
Surrender Value five years from the date of the deceased Owner's death.
Under any of these options, sole surviving Owners or new Owners may exercise all
Ownership rights and privileges from the date of the deceased Owner's death
until the date that the Surrender Value is paid.
Death of the Annuitant. If the Annuitant dies before the Annuity Date, the
Company will pay the death benefit described below to the Beneficiary named by
the Owner in a lump sum. (Owners and Beneficiaries also may name successor
Beneficiaries.) If there is no surviving Beneficiary, the Company will pay the
death benefit to the Owner or the Owner's estate. In lieu of a lump sum payment,
the Beneficiary may elect, within 60 days of the date the Company receives due
proof of the Annuitant's death, to apply the death benefit to an annuity payment
option, provided that the Annuity Date selected by the Beneficiary is at least
two years after the Contract Date. The Company is currently waiving this two
year requirement for Annuity Payment Options 3 and 4. (See ANNUITY PAYMENT
OPTIONS, Description of Annuity Payment Options.)
If the Annuitant who is also an Owner dies, the provisions described immediately
above apply except that the Beneficiary may only apply the death benefit payment
to an annuity payment option if:
(1) payments under the option begin within 1 year of the Annuitant's
death; and
(2) payments under the option are payable over the Beneficiary's life or
over a period not greater than the Beneficiary's life expectancy.
Death Benefit. If the Annuitant is age 75 or younger on the Contract Date, the
death benefit is an amount equal to the greater of:
(1) aggregate Net Purchase Payments made under the Contract less partial
withdrawals as of the date the Company receives Due Proof of Death of
the deceased;
(2) Contract Value as of the date the Company receives Due Proof of Death
of the deceased's death; or
(3) the death benefit floor amount as of the date of the deceased's death
plus any Net Purchase Payments made and less any partial withdrawals
made since the most recent death benefit floor computation anniversary
prior to death.
less any applicable premium taxes not previously deducted and any outstanding
loan amount on the date the death benefit is paid. For Contracts issued after
the Annuitant's 76th birthday, the death benefit is always equal to the Contract
Value as of the date the Company receives due proof of the Annuitant's death
less any outstanding loan amount and any applicable premium taxes not previously
deducted.
The death benefit floor amount is the Contract Value on the most recent death
benefit floor computation anniversary. In states other than Texas, death benefit
floor computation anniversaries are the 7th Contract Anniversary and each
subsequent 7th Contract Anniversary (for example, the 14th Contract Anniversary,
the 21st Contract Anniversary, etc.) (In Texas, the death benefit floor
computation anniversaries are the 6th Contract Anniversary and each subsequent
6th Contract Anniversary.)
Death Benefit After the Annuity Date
If an Owner dies after the Annuity Date, any surviving Owner becomes the sole
Owner. If there is no surviving Owner, the Payee receiving annuity payments
becomes the new Owner. Such Owners will have the rights of Owners during the
annuity period, including the right to name successor Payees if the deceased
Owner had not previously done so. The death of an Annuitant after the Annuity
Date will have the effect stated in the annuity payment option pursuant to which
annuity payments are being made.
Annuity Payments on the Annuity Date
The Owner selects the Annuity Date. For Non-Qualified Contracts, the Annuity
Date may not be after the later of the Contract Anniversary following the
Annuitant's 85th birthday or 10 years after the Contract Date. For Qualified
Contracts, the Annuity Date must be no later than the Annuitant's age 70 1/2 or
any other date meeting the requirements of the Code.
The Owner may change the Annuity Date subject to the following limitations: (1)
the Owner's Written Notice must be received at the Home Office at least 30 days
before the current Annuity Date, and (2) the requested Annuity Date must be a
date that is at least 30 days after receipt of the Written Notice, and (3) the
requested Annuity Date must be at least two years after the Contract Date (the
Company is currently waiving this limitation for Annuity Payment Options 3 and
4.) (See ANNUITY PAYMENT OPTIONS, Description of Annuity Payment Options.)
On the Annuity Date, the adjusted Contract Value will be applied under the life
income annuity payment option with ten years guaranteed, unless the Owner elects
to have the proceeds paid under another payment option or to receive the
Surrender Value in a lump sum. (See ANNUITY PAYMENT OPTIONS.) In certain states,
the Surrender Value will be applied to the annuity payment option rather than
the adjusted Contract Value. Unless the Owner instructs the Company otherwise,
amounts in the Guaranteed Interest Option will be used to provide a
fixed-annuity payment option and amounts in the Variable Account will be used to
provide a variable annuity payment option.
The adjusted Contract Value is the Contract Value:
(1) plus or minus any applicable interest adjustment;
(2) minus any applicable surrender charge if annuity payment option 1 is
selected;
(3) minus the pro-rated portion of the annual Contract fee (unless the
Annuity Date falls on the Contract Anniversary);
(4) minus any applicable loan amount; and
(5) minus any applicable premium taxes not yet deducted.
Payments
Any surrender, partial withdrawal, Contract loan or death benefit usually will
be paid within seven days of receipt of a Written Notice, any information or
documentation reasonably necessary to process the request, and (in the case of a
death benefit) receipt and filing of Due Proof of Death. However, payments may
be postponed if:
(1) the New York Stock Exchange is closed, other than customary weekend
and holiday closings, or trading on the exchange is restricted as
determined by the SEC; or
(2) the SEC permits the postponement for the protection of Owners; or
(3) the SEC determines that an emergency exists that would make the
disposal of securities held in the Variable Account or the
determination of the value of the Variable Account's net assets not
reasonably practicable.
If a recent check or draft has been submitted, the Company has the right to
delay payment until it has assured itself that the check or draft has been
honored.
The Company has the right to defer payment of any surrender, partial withdrawal
or transfer from the Guaranteed Interest Option for up to six months from the
date of receipt of Written Notice for such a surrender or transfer. If payment
is not made within 30 days after receipt of documentation necessary to complete
the transaction, or such shorter period required by a particular jurisdiction,
interest will be added to the amount paid from the date of receipt of
documentation at 3% or such higher rate required for a particular jurisdiction.
Modification
Upon notice to the Owner, the Company may modify the Contract:
(1) to permit the Contract or the Variable Account to comply with any
applicable law or regulation issued by a government agency; or
(2) to assure continued qualification of the Contract under the Code or
other federal or state laws relating to retirement annuities or
variable annuity contracts; or
(3) to reflect a change in the operation of the Variable Account; or
(4) to provide for the addition or substitution of investment options.
In the event of most such modifications, the Company will make appropriate
endorsement to the Contract.
Reports to Owners
At least annually, the Company will mail to each Owner, at such Owner's last
known address of record, a report setting forth the Contract Value (including
the Contract Value in each Subaccount and each Guarantee Amount) of the
Contract, purchase payments paid and charges deducted since the last report,
partial withdrawals made since the last report and any further information
required by any applicable law or regulation.
Inquiries
Inquiries regarding a Contract may be made by writing to the Company at its Home
Office.
THE GUARANTEED INTEREST OPTION
The guaranteed interest option varies according to the state in which the
Contract is issued. Solely for the sake of convenient reference, states have
been divided into three categories. In category one, the Company offers
guarantee periods varying in duration from one year to 10 years and the Company
may impose an interest adjustment on guarantee amounts withdrawn prior to the
expiration of a guarantee period.
In Category 2, the Company offers a guarantee period of one year and no interest
adjustment is imposed if guarantee amounts are withdrawn before the expiration
of that year.
In Category 3, the Company does not intend to offer a guaranteed interest
option.
To determine the guaranteed interest option available in your state, find the
name of your state in the lists of states below. Then read about the guaranteed
interest option available in that state.
Category 1
The Company, in Category 1 states, offers guarantee periods varying in duration
from one year to ten years and the Company may impose an interest adjustment on
guarantee amounts withdrawn prior to the expiration of a guarantee period.
Category 1 states are: Alabama, Alaska, Arizona, Arkansas, California, Colorado,
Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho,
Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Massachusetts,
Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New
Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Rhode
Island, South Carolina, South Dakota, Tennessee, Vermont, Virginia, West
Virginia, and Wyoming.
In Category 1 states, an Owner may allocate some or all of the Net Purchase
Payments and transfer some or all of the Contract Value to the Guaranteed
Interest Option for selected periods of time from one to ten years. The Company
also intends to offer a special one year Guarantee Period that allows transfers
to other Subaccounts throughout the Guarantee Period (the "DCA One Year
Guarantee Period"). Purchase Payments may be allocated to this DCA One Year
Guarantee Period, but transfers are not allowed into it. The DCA One Year
Guarantee Period has not yet been approved in all states and the Guaranteed
Interest Options may not be available in all states. Contact the Company for
information on availability in your state.
The Guaranteed Interest Option is part of the Company's General Account and pays
interest at declared rates, set at the sole discretion of the Company. The rates
are guaranteed for a selected period of time from one to ten years. The
principal, after deductions, is also guaranteed. The Company's General Account
supports its insurance and annuity obligations. Since the Guaranteed Interest
Option is part of the General Account, the Company assumes the risk of
investment gain or loss on this amount. All assets in the General Account are
subject to the Company's general liabilities from business operations.
The Guaranteed Interest Option has not been, and is not required to be,
registered with the SEC under the Securities Act of 1933, and neither the
Guaranteed Interest Option nor the Company's General Account has been registered
as an investment company under the 1933 Act. Therefore, neither the Company's
General Account, nor the Guaranteed Interest Option, are generally subject to
regulation under the 1933 Act or the 1940 Act. The disclosures relating to the
Guaranteed Interest Option which are included in this Prospectus are for the
Owner's information. However, such disclosures may be subject to certain
generally applicable provisions of federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
Guaranteed Interest Option Value
The portion of the Contract Value allocated to the Guaranteed Interest Option is
the Guaranteed Interest Option value which is credited with interest, as
described below. The Guaranteed Interest Option value reflects interest credited
to Contract Value in Guarantee Periods, Net Purchase Payments allocated to or
Contract Value transferred to Guarantee Periods, transfers of Contract Value out
of Guarantee Periods, surrenders and partial withdrawals from Guarantee Periods
(including related interest adjustments) and charges assessed in connection with
the Contract. The Guaranteed Interest Option value is the sum of Guarantee
Amounts under the Contract. The Guaranteed Interest Option value is guaranteed
to accumulate at a minimum effective annual interest rate of 3%.
Guarantee Periods
From time to time the Company will offer to credit Guaranteed Interest Option
value with interest at specific guaranteed rates for specific periods of time.
These periods of time are known as Guarantee Periods. The Company may offer one
or more Guarantee Periods of one to ten years' duration at any time, but will
always offer a Guarantee Period of one year. The Company will publish an
effective annual interest rate applicable to each Guarantee Period being offered
at that time. Net Purchase Payments allocated or Contract Value transferred to a
Guarantee Period are guaranteed to earn that rate of interest for each year of
the period (provided that such payments and Contract Value are not withdrawn
during the Guarantee Period or surrendered). The interest rates available at any
time will vary with the number of years in the Guarantee Period but will always
be equal to or greater than an effective annual rate of 3%.
Guarantee Periods begin as of the date Net Purchase Payments or transfers of
Contract Value are made to them and end when the number of years in the
Guarantee Period have elapsed. Transfers of Contract Value to the DCA One Year
Guarantee Period are not permitted. The last day of the Guarantee Period is the
expiration date for the Guarantee Period. Owners may not select Guarantee
Periods with expiration dates later than the Contract's current Annuity Date.
During the 30-day period prior to the expiration of a Guarantee Period, the
Owner may transfer the Guarantee Amount related to that Guarantee Period to any
new Guarantee Period or Subaccount available at that time. Such transfers may be
made at any time from the DCA One Year Guarantee Period. At the expiration of
the DCA One Year Guarantee Period, any amount remaining in the account will be
transferred to the Money Market Subaccount if other instructions are not
received from the Owner. If, at the expiration of a Guarantee Period, less than
one year remains until the Annuity Date, the Company will credit interest to the
Guarantee Amount at the guaranteed rate then applicable to a one year Guarantee
Period. For Guarantee Periods other than the DCA One Year Guarantee Period, the
Company will notify Owners of the available Guarantee Periods and Subaccounts 30
days prior to the expiration of a Guarantee Period.
If an Owner does not respond to the notice with instructions as to how to
reinvest the Guarantee Amount, then on the expiration date the Company will
invest the Guarantee Amount in another Guarantee Period of the same duration as
the expiring period. If no Guarantee Period of equal duration is available at
that time, the Company will reinvest the Guarantee Amount in the next shortest
Guarantee Period available. If either of such default Guarantee Periods would
extend beyond the Annuity Date of the Contract, the Company will reinvest the
Guarantee Amount in the Guarantee Period of the longest duration that expires
before the Annuity Date.
The Company intends to credit Guarantee Amounts with interest at current rates
in excess of the minimum guaranteed rate but is not obligated to do so. The
Company has no specific formula for determining current interest rates. These
current interest rates may be influenced by, but do not necessarily correspond
to, prevailing general market interest rates. Guaranteed Interest Option Value
will not share in the investment performance of the Company's General Account or
any portion thereof. Any interest credited on Guarantee Amounts in excess of the
minimum guaranteed effective rate of 3% per year will be determined in the sole
discretion of the Company. The Owner therefore assumes the risk that interest
credited may not exceed the minimum guaranteed rate.
Net Purchase Payment Preservation Program
An Owner may elect to allocate the initial Net Purchase Payment between the
Guaranteed Interest Option and the Variable Account so that at the end of the
Guaranteed Period the portion of the initial Net Purchase Payment allocated to
the Guarantee Interest Option will equal the initial Net Purchase Payment. This
would permit the Owner to allocate the remaining portion of the initial Net
Purchase Payment to one or more Subaccounts and still be certain of having a
Contract Value at the end of the Guarantee Period at least equal to the initial
Net Purchase Payment. Upon request, the Company will calculate the portion of
any Net Purchase Payment that must be allocated to a particular Guarantee Period
to achieve this result.
Interest Adjustment
The Company will impose an interest adjustment on Guarantee Amounts withdrawn or
surrendered or applied to an annuity payment option from a Guarantee Period
(other than the DCA One Year Guarantee Period) before expiration of the period
except when such a withdrawal, surrender or annuitization occurs during the last
30 days of the period. The interest adjustment is calculated by multiplying the
amount surrendered, withdrawn or annuitized by the following factor:
0.70 x (I - J) x n/12
Where:
I = the guaranteed interest rate then being offered for a new Guarantee
Period equal in duration and type to the period from which the
Guarantee Amount is being withdrawn, surrendered or annuitized. If a
Guarantee Period of such duration is not being offered, "I" equals the
linear interpolation of the guaranteed rates for periods then
available. If the Guarantee Periods needed to perform the
interpolation are not being offered, "I" equals the interest rate
being paid on the Treasury Constant Maturity Series published by the
Federal Reserve Board for Treasury securities with remaining
maturities equal to the duration of the appropriate Guarantee Period
plus the interest adjustment reference factor shown on the Contract
data page. If no published rates are available for maturities equal to
the duration of the appropriate Guarantee Period, linear interpolation
of other published rates will be used.
J = the guaranteed interest rate then being credited to the Guarantee
Amount being withdrawn, surrendered or annuitized.
n = the number of complete months remaining until the expiration of the
Guarantee Period.
At a time when I exceeds J, the interest adjustment will reduce the portion of
any Guarantee Amount available for withdrawal, surrender or annuitization. At a
time when J exceeds I, the interest adjustment will increase the portion of any
Guarantee Amount available for withdrawal, surrender or annuitization. Moreover,
the interest adjustment will only operate to increase or reduce credited
interest in an amount equal to the excess of 3% per year on a Guarantee Amount
at the beginning of any Guarantee Period.
The interest adjustment is calculated separately for each Guarantee Amount and
is applied before any surrender charge. Owners must instruct the Company as to
which Guarantee Periods should be withdrawn or surrendered. Within any Guarantee
Period, Guarantee Amounts are withdrawn or surrendered on a first-in-first-out
basis. The adjustment does not apply to the calculation of a death benefit or to
amounts deducted from Guaranteed Interest Option value by the Company as fees or
charges. In addition, the sum of the surrender charge and interest adjustment
for a Guarantee Amount withdrawn or surrendered will not exceed 10% of the
Guarantee Amount withdrawn or surrendered.
Any applicable interest adjustment(s) will be deducted from or added to the
remaining Guarantee Amount(s), if any, or from all remaining Guarantee Amounts
on a pro-rata basis. If, at the time a partial withdrawal is requested from a
Guarantee Amount, the Guaranteed Interest Option value would be insufficient to
permit the deduction of the interest adjustment from any remaining Guarantee
Amounts, then the Company will not permit the partial withdrawal.
The imposition of an interest adjustment may have significant federal income tax
consequences. (See FEDERAL TAX MATTERS, Taxation of Annuities.)
Category 2
The Company, in Category 2 states, offers guarantee periods of one year and no
interest adjustment is imposed. Category 2 states include: Pennsylvania, Texas,
Utah and Wisconsin. Category 2 states may also include Maryland and New Jersey.
Maryland and New Jersey offers will be limited to the DCA One Year Guarantee
Period only. Contact the Company for information on availability in Maryland and
New Jersey.
In Category 2 states an Owner may allocate some or all of the Net Purchase
Payments and transfer some or all of the Contract Value to the Guaranteed
Interest Option for one year periods. The Company also intends to offer a
special one year Guarantee Period that allows transfers to other Subaccounts
throughout the Guarantee Period (the "DCA One Year Guarantee Period"). Purchase
Payments may be allocated to this DCA One Year Guarantee Period, but transfers
are not allowed into it. Purchase payment allocations are limited to the first
three contract years in Maryland and New Jersey. Contracts sold in Maryland and
New Jersey prior to availability of the DCA One Year Guarantee Period do not
contain the Guaranteed Interest Option.
The Guaranteed Interest Option is part of the Company's General Account and pays
interest at declared rates, set at the sole discretion of the Company, that are
guaranteed for one year. The principal, after deductions, is also guaranteed.
The Company's General Account supports its insurance and annuity obligations.
Since the Guaranteed Interest Option is part of the General Account, the Company
assumes the risk of investment gain or loss on this amount. All assets in the
General Account are subject to the Company's general liabilities from business
operations.
The Guaranteed Interest Option has not been, and is not required to be,
registered with the SEC under the Securities Act of 1933, and neither the
Guaranteed Interest Option nor the Company's General Account has been registered
as an investment company under the 1940 Act. Therefore, neither the Company's
General Account, nor the Guaranteed Interest Option, are generally subject to
regulation under the 1933 Act or the 1940 Act. The disclosures relating to the
Guaranteed Interest Option which are included in this Prospectus are for the
Owner's information. However, such disclosures may be subject to certain
generally applicable provisions of federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
Guaranteed Interest Option Value
The Guaranteed Interest Option value is the portion of the Contract Value
allocated to the Guaranteed Interest Option. The Guaranteed Interest Option
value reflects Net Purchase Payments allocated to and Contract Value transferred
to 1) Guarantee Periods, 2) interest credited to Contract Value in Guarantee
Periods, 3) transfers of Contract Value out of Guarantee Periods, 4) surrenders
and partial withdrawals from Guarantee Periods, and 5) charges assessed in
connection with the Contract. Guarantee Amounts are withdrawn or surrendered on
a first-in-first-out basis. The Guaranteed Interest Option value is the sum of
Guarantee Amounts under the Contract. The Guaranteed Interest Option value is
guaranteed to accumulate at a minimum effective annual interest rate of 3%.
Guarantee Periods
From time to time the Company will offer to credit Guaranteed Interest Option
value with interest at a specific rate guaranteed for the following one year
period. The one year period is known as a Guarantee Period. The Company will
publish the effective annual interest rate applicable to each Guarantee Period.
Net Purchase Payments allocated and Contract Value transferred to a Guarantee
Period are guaranteed to earn that rate of interest during the period (provided
that such payments and Contract Value are not withdrawn from the Guarantee
Period or surrendered). The interest rate will always be equal to or greater
than an effective annual rate of 3%.
A Guarantee Period begins as of the date Net Purchase Payments or transfers of
Contract Value are made to the Guarantee Account and ends when 365 days have
passed. Transfers of Contract Value to the DCA One Year Guarantee Period are not
permitted. The last day of the 365 day period is the expiration date for the
Guarantee Period. During the 30-day period prior to the expiration date, the
Owner may transfer the Guarantee Amount related to that Guarantee Period to a
new one year Guarantee Period or to any Subaccount available at that time. Such
transfers may be made at any time from the DCA One Year Guarantee Period. At the
expiration of a DCA One Year Guarantee Period, any amount remaining will be
transferred to the Money Market Subaccount. For Guarantee Periods other than the
DCA One Year Guarantee Period, the Company will notify Owners of the interest
rates applicable to the upcoming Guarantee Period thirty days prior to the
expiration of a Guarantee Period. If an Owner does not respond to the notice
with instructions as to how to reinvest the Guarantee Amount, then on the
expiration date the Company will invest the Guarantee Amount in another one year
Guarantee Period at the guaranteed rate then offered. If less than one year
remains until the Annuity Date, the Company will credit interest to the
Guarantee Amount at the guaranteed rate then applicable to a one year Guarantee
Period.
The Company intends to credit Guarantee Amounts with interest at current rates
in excess of the minimum guaranteed rate but is not obligated to do so. The
Company has no specific formula for determining current interest rates. Current
interest rates may be influenced by, but do not necessarily correspond to,
prevailing general market interest rates. Guaranteed Interest Option Value will
not share in the investment performance of the Company's General Account. Any
interest credited on Guarantee Amounts in excess of the minimum guaranteed
effective rate of 3% per year will be determined in the sole discretion of the
Company. The Owner assumes the risk that interest credited may not exceed the
minimum guaranteed rate.
The Company will not impose an interest adjustment on Guarantee Amounts
withdrawn or surrendered or applied to an annuity payment option from the
Guaranteed Interest Option.
Net Purchase Payment Preservation Program
An Owner may elect to allocate the initial Net Purchase Payment between the one
year Guaranteed Period and the Variable Account so that at the end of the
Guarantee Period, the portion of the initial Net Purchase Payment allocated to
the Guarantee Amount will equal the initial Net Purchase Payment. This permits
the Owner to allocate the remaining portion of the initial Net Purchase Payment
to one or more Subaccounts and still be certain of having a Contract Value at
the end of the Guarantee Period at least equal to the initial Net Purchase
Payment. Upon request, the Company will calculate the portion of any initial Net
Purchase Payment that must be allocated to a one year Guarantee Period to
achieve this result. The program is not available in Maryland and New Jersey.
Category 3
The Company does not intend to offer a guaranteed interest option in Category 3
states. Category 3 states are: Oregon and Washington. Category 3 also includes
Maryland and New Jersey Contracts sold prior to the availability of the DCA One
Year Guarantee Period.
CHARGES AND DEDUCTIONS
Surrender Charge (Contingent Deferred Sales Charge)
General. No charge for sales expenses is deducted from purchase payments at the
time purchase payments are paid. However, within certain time limits described
below, a surrender charge (contingent deferred sales charge) is deducted from
the Contract Value if a partial withdrawal or surrender is made before the
Annuity Date. Also, a surrender charge is deducted from amounts applied to
annuity payment option 1. (See DESCRIPTION OF THE CONTRACT, Annuity Payments on
the Annuity Date.)
Charge for Partial Withdrawal or Surrender. A charge is imposed on the partial
withdrawal or surrender of purchase payments within seven years of their having
been received by the Company. The surrender charge is the percentage of each
such purchase payment specified in the table below and is separately calculated
and applied to each purchase payment at any time when that purchase payment is
withdrawn or surrendered. No surrender charge applies to Contract Value in
excess of aggregate purchase payments. The surrender charge is calculated using
the assumption that all Contract Value in excess of aggregate purchase payments
is surrendered before any purchase payments and that purchase payments are
surrendered on a first-in-first-out basis.
Number of Full Years Between
Date of Purchase Payment and Charge as Percentage
Date of Surrender of Purchase Payment
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 + 0%
Any applicable surrender charge is deducted pro-rata from the remaining Variable
Contract Value in the Subaccounts from which the withdrawal is made or the
remaining Guaranteed Interest Option value from the Guarantee Amounts from which
the withdrawal is made. If such remaining Variable Contract Value or Guaranteed
Interest Option value is insufficient for this purpose, the surrender charge is
deducted pro-rata from all Subaccounts and Guarantee Amounts under the Contract.
Amounts Not Subject to Surrender Charge. In each Contract Year, up to 10% of an
amount equal to the aggregate purchase payments still subject to a surrender
charge (computed at the time of the withdrawal or surrender) may be withdrawn or
surrendered during that year without a surrender charge. Any amounts surrendered
or withdrawn in excess of this 10% will be assessed a surrender charge. This
right is not cumulative from Contract Year to Contract Year.
Waiver of Surrender Charge. In most states, the Contract provides that, upon
Written Notice from the Owner before the Annuity Date, the surrender charge will
be waived on any partial withdrawal or surrender if the Annuitant is confined to
a nursing home or hospital (as described in the Contract) or becomes terminally
ill (as described in the Contract). This waiver is not available in some states,
and, therefore, is not described in Contracts issued in those states. As of May
1, 1999, those states include Kansas, New Jersey, Pennsylvania, and Texas.
The Company also offers an Executive Benefits Plan Endorsement in conjunction
with certain deferred compensation plans. The executive benefits plan
endorsement waives the surrender charges (deferred charges) on the contract
(policy) to which it is attached subject to the following conditions:
1. the contract (policy) is surrendered and the proceeds are used to fund
a new policy provided through CUNA Mutual Life Insurance Company or an
affiliate;
2. the contract (policy) is owned by a business or trust;
3. the new contract (policy) is owned by the same entity;
4. the annuitant (insured) under the contract (policy) is a selected
manager or a highly compensated employee (as those terms are defined
by Title 1 of the Employee Retirement Income Security Act, as
amended);
5. the annuitant (insured) under the new contract is also a selected
manager or highly compensated employee;
6. we receive an application for the new contract (and have evidence of
insurability satisfactory to us).
There is no charge for this benefit. However, if you exercise this benefit
during the first to contract (policy) years, we reserve the right to charge a
fee to offset expenses incurred. This fee will not exceed $150. The Executive
Benefits Plan Endorsement may not be available in all states.
Annual Contract Fee
On each Contract Anniversary prior to the Annuity Date, the Company deducts from
the Variable Contract Value an annual Contract fee of $30 to reimburse it for
administrative expenses relating to the Contract. The fee is deducted from each
Subaccount and from the Guaranteed Interest Option based on the proportion that
the value of the Subaccount and the Guaranteed Interest Option bear to the total
Contract Value. (In Texas and South Carolina, the fee is deducted from each
Subaccount based on the proportion that the value of the Subaccount bears to the
total Variable Contract Value.) The annual Contract fee also is deducted upon
surrender of a Contract on a date other than a Contract Anniversary. A pro-rated
portion of the fee is deducted upon annuitization. After the Annuity Date, the
annual Contract fee is deducted from variable annuity payments. The Company does
not deduct the annual Contract fee on Contracts with a Contract Value of $25,000
or more on the Contract Anniversary. The Contract fee will not be charged after
the Annuity Date when a Contract with a Contract Value of $25,000 or more has
been annuitized.
Asset-Based Administration Charge
The Company deducts a daily administration charge to compensate it for certain
expenses it incurs in administration of the Contract. The charge is deducted
from the assets of the Variable Account at an annual rate of 0.15%.
Transfer Processing Fee
Currently no fee is charged for transfers. However, the Company reserves the
right to charge $10 for the 13th transfer and each subsequent transfer during a
Contract Year. For the purpose of assessing such a transfer fee, each written
request would be considered to be one transfer, regardless of the number of
Subaccounts or Guarantee Amounts affected by the transfer. The transfer fee
would be deducted from the Subaccount or Guarantee Amount from which the
transfer is made. If a transfer is made from more than one Subaccount or
Guarantee Amount at the same time, the transfer fee would be deducted pro-rata
from the remaining Variable Contract Value in such Subaccount(s) or from the
remaining Guarantee Amount.
Lost Contract Request
You can obtain a certification of your contract at no charge. There will be a
$30 charge for a duplicate contract.
Mortality and Expense Risk Charge
To compensate the Company for assuming mortality and expense risks, the Company
deducts a daily mortality and expense risk charge from the assets of the
Variable Account. The charge is at a daily rate of 0.003425%. On an annual
basis, this equates to 1.25% (approximately 0.85% for mortality risk and 0.40%
for expense risk).
The mortality risk the Company assumes is that Annuitants may live for a longer
period of time than estimated when the guarantees in the Contract were
established. Because of these guarantees, each Payee is assured that longevity
will not have an adverse effect on the annuity payments received. The mortality
risk that the Company assumes also includes a guarantee to pay a death benefit
if the Annuitant dies before the Annuity Date. The expense risk that the Company
assumes is the risk that the administrative fees and transfer fees (if imposed)
may be insufficient to cover actual future expenses.
The Company may use any profits from this charge to finance other expenses,
including distribution expenses related to the Contracts.
Fund Expenses
Because the Variable Account purchases shares or units of the various Funds, the
net assets of the Variable Account will reflect the investment management fees
and other operating expenses incurred by such Funds. (See EXPENSE TABLES and the
accompanying current prospectuses for Ultra Series Fund, T. Rowe Price
International Series, Inc., MFS Variable Insurance Trust, Oppenheimer Variable
Account Funds, and Templeton Variable Products Series Fund.)
Premium Taxes
Various states and other governmental entities levy a premium tax on annuity
contracts issued by insurance companies. Premium tax rates are subject to change
from time to time by legislative and other governmental action. In addition,
other government units within a state may levy such taxes. The timing of tax
levies varies from one taxing authority to another. If premium taxes are
applicable to a Contract, the jurisdiction may require payment (a) from purchase
payments as they are received, (b) from Contract Value upon withdrawal or
surrender, (c) from adjusted Contract Value upon application to an annuity
payment option, or (d) upon payment of a death benefit. The Company will forward
payment to the taxing jurisdiction when required by law. Although the Company
reserves the right to deduct premium taxes at the time such taxes are paid to
the taxing authority, currently the Company does not deduct premium tax from the
Owner's Contract Value until the Contract is annuitized. (In Pennsylvania,
premium tax is also deducted when the Contract is terminated by surrender or
death.)
The Company, upon request, will provide current premium tax rates. To obtain
this information, contact the Company at the address and telephone number shown
on the first page of this prospectus. As of January 1, 1999, the Contracts
offered by this Prospectus were subject to tax in the states shown below:
State Non-Qualified Qualified
California 2.35% 0.50%
Kentucky 2.00% 2.00%
Maine 2.00% 0.00%
Nevada 3.50% 0.00%
South Dakota 1.25% 0.00%
West Virginia 1.00% 1.00%
Wyoming 1.00% 0.00%
Other Taxes
Currently, no charge is made against the Variable Account for any federal, state
or local taxes (other than premium taxes) that the Company incurs or that may be
attributable to the Variable Account or the Contracts. The Company may, however,
make such a charge in the future from Surrender Value, death benefits or annuity
payments, as appropriate. Such taxes may include taxes (levied by any government
entity) which the Company determines to have resulted from: (1) the
establishment or maintenance of the Variable Account, (2) receipt by the Company
of purchase payments, (3) issuance of the Contracts, or (4) the payment of
annuity payments.
ANNUITY PAYMENT OPTIONS
Election of Annuity Payment Options
On the Annuity Date, the adjusted Contract Value will be applied under an
annuity payment option, unless the Owner elects to receive the Surrender Value
in a single sum. (See DESCRIPTION OF THE CONTRACT, Annuity Payments on the
Annuity Date.) If an election of an annuity payment option is not on file at the
Company's Home Office on the Annuity Date, the proceeds will be paid as a life
income annuity with payments for ten years guaranteed. An annuity payment option
may be elected, revoked, or changed by the Owner at any time before the Annuity
Date while the Annuitant is living. The election of an option and any revocation
or change must be made by Written Notice signed by the Owner and/or Beneficiary,
as appropriate. The Owner may elect to apply any portion of the adjusted
Contract Value to provide either variable annuity payments or fixed annuity
payments or a combination of both.
Before to the Annuity Date, the Owner can apply the entire Surrender Value under
an annuity payment option, or a Beneficiary can apply the death benefit under an
annuity payment option. The annuity payment options available are described
below.
The Company reserves the right to refuse the election of an annuity payment
option other than paying the adjusted Contract Value in a lump sum if the total
amount applied to an annuity payment option would be less than $2,500, or each
annuity payment would be less than $25.00.
Fixed Annuity Payments
Fixed annuity payments are periodic payments from the Company to the designated
Payee, the amount of which is fixed and guaranteed by the Company. The amount of
each payment depends only on the form and duration of the annuity payment option
chosen, the age of the Annuitant, the sex of the Annuitant (if applicable), the
amount applied to purchase the annuity payments and the applicable annuity
purchase rates in the Contract. The annuity purchase rates in the Contract are
based on a minimum guaranteed interest rate of 3.5%. The Company may, in its
sole discretion, make annuity payments in an amount based on a higher interest
rate.
Variable Annuity Payments
The dollar amount of the first variable annuity payment is determined in the
same manner as that of a fixed annuity payment. Therefore, for any particular
amount applied to a particular annuity payment option, the dollar amount of the
first variable annuity payment and the first fixed annuity payment (assuming
such fixed payment is based on the minimum guaranteed 3.5% interest rate) would
be the same. Variable annuity payments after the first payment are similar to
fixed annuity payments except that the amount of each payment varies to reflect
the net investment performance of the Subaccount(s) selected by the Owner or
Payee.
The net investment performance of a Subaccount is translated into a variation in
the amount of variable annuity payments through the use of Annuity Units. The
amount of the first variable annuity payment associated with each Subaccount is
applied to purchase Annuity Units at the Annuity Unit value for the Subaccount
on the Annuity Date. The number of Annuity Units of each Subaccount attributable
to a Contract then remains fixed unless an exchange of Annuity Units is made as
described below. Each Subaccount has a separate Annuity Unit value that changes
with each Valuation Period in substantially the same manner as do Accumulation
Units of the Subaccount.
The dollar value of each variable annuity payment after the first is equal to
the sum of the amounts determined by multiplying the number of Annuity Units
under a Contract of a particular Subaccount by the Annuity Unit value for the
Subaccount for the Valuation Period which ends immediately preceding the date of
each such payment. If the net investment return of the Subaccount for a payment
period is equal to the pro-rated portion of the 3.5% annual assumed investment
rate, the variable annuity payment attributable to that Subaccount for that
period will equal the payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of 3.5% for a payment period, the
payment for that period will be greater than the payment for the prior period
and to the extent that such return for a period falls short of an annualized
rate of 3.5%, the payment for that period will be less than the payment for the
prior period.
After the Annuity Date, a Payee may change the selected Subaccount(s) by Written
Notice up to four times per Contract Year. Such a change will be made by
exchanging Annuity Units of one Subaccount for another on an equivalent dollar
value basis. See the Statement of Additional Information for examples of Annuity
Unit value calculations and variable annuity payment calculations.
Description of Annuity Payment Options
Option 1 - Interest Income. (Fixed Annuity Payments Only) The proceeds are left
with the Company to earn interest at a compound annual rate to be determined by
the Company but not less than 3.5%. Interest will be paid every month or every
12 months as the Owner or Payee selects. Under this option, the Payee may
withdraw part or all of the proceeds at any time. This option may not be
available in all states.
Option 2 - Income For a Fixed Term. (Fixed Annuity Payments Only) The proceeds
are paid out in equal monthly installments for a fixed number of years between 5
and 30. In the event of the Payee's death, a successor Payee may receive the
payments or may elect to receive the present value of the remaining payments
(computed as described in the Contract) in a lump sum. If there is no successor
Payee or if the successor Payee dies, the present value of the remaining
payments will be paid to the estate of the last surviving Payee.
Option 3A - Life Income With Specified Number of Years Guaranteed. The proceeds
are paid in monthly installments during the Payee's lifetime with the guarantee
that payments will be made for a period of ten years or twenty years. In the
event of the Payee's death before the expiration of the specified number of
years, a successor Payee may receive the remaining payments or may elect to
receive the present value of the remaining payments (computed as described in
the Contract) in a lump sum. If there is no successor Payee or if the successor
Payee dies, the present value of the remaining payments will be paid to the
estate of the last surviving Payee.
Option 3B - Life Income With Special Specified Number of Years Guaranteed.
(Fixed Annuity Payments Only) The same as Option 3A except that the specified
number of years selected is at least that which is necessary for the total of
all guaranteed payments to equal the amount of proceed applied under this
option.
Option 3C - Life Income. The same as Option 3A except that payments are not
guaranteed for a specific number of years but only for the lifetime of the
Payee. Under this option, a Payee could receive only one payment if the
Annuitant dies after the first payment, two payments if the Annuitant dies after
the second payment, etc.
Option 4 - Joint and Survivor Life Income - 10 Year Guaranteed Period Certain.
The proceeds are paid out in monthly installments for as long as either of two
joint Payees (Annuitants) remain alive. If after the second Payee dies, payments
have been made for fewer than 10 years, payments will be made to any successor
Payee who was not a joint Annuitant or such successor Payee may elect to receive
the present value of the remaining payments (computed as described in the
Contract) in a lump sum. If there is no such successor Payee or if the successor
Payee dies, the present value of the remaining payments will be paid to the
estate of the last surviving Payee.
The amount of each payment will be determined from the tables in the Contract
that apply to the particular option using the Payee's age (and if applicable,
sex). Age will be determined from the last birthday at the due date of the first
payment.
Alternate Payment Option. In lieu of one of the above options, the adjusted
Contract Value or death benefit, as applicable, may be applied to any other
payment option made available by the Company or requested and agreed to by the
Company.
YIELDS AND TOTAL RETURNS
From time to time, the Company may advertise or include in sales literature
yields, effective yields and total returns for the Subaccounts. These figures
are based on historical earnings and do not indicate or project future
performance. The Company also may, from time to time, advertise or include in
sales literature Subaccount performance relative to certain performance rankings
and indices compiled by independent organizations. More detailed information as
to the calculation of performance appears in the Statement of Additional
Information.
Effective yields and total returns for the Subaccounts are based on the
investment performance of the corresponding Fund. The performance of a Fund in
part reflects its expenses. See the prospectuses for the Funds.
The yield of the Money Market Subaccount refers to the annualized income
generated by an investment in the Subaccount over a specified seven-day period.
The yield is calculated by assuming that the income generated for that seven-day
period is generated each seven-day period over a 52-week period and is shown as
a percentage of the investment. The effective yield is calculated similarly but,
when annualized, the income earned by an investment in the Subaccount is assumed
to be reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
The yield of a Subaccount (except the Money Market Subaccount) refers to the
annualized income generated by an investment in the Subaccount over a specified
30-day or one-month period. The yield is calculated by assuming that the income
generated by the investment during that 30-day or one-month period is generated
each month over a 12-month period and is shown as a percentage of the
investment.
The total return of a Subaccount refers to return quotations assuming an
investment under a Contract has been held in the Subaccount for various periods
of time. For periods prior to the date the Variable Account commenced
operations, non-standard performance information will be calculated based on the
performance of the various Funds and the assumption that the Subaccounts were in
existence for the same periods as those indicated for the Funds, with the level
of Contract charges that were in effect at the inception of the Subaccounts for
the Contracts. When a Subaccount has been in operation for one, five, and ten
years, respectively, the total standard returns for these periods will be
provided.
The average annual total return quotations represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Contract to the redemption value of that investment as of the last day
of each of the periods for which total return quotations are provided. Average
annual total return information shows the average annual percentage change in
the value of an investment in the Subaccount from the beginning date of the
measuring period to the end of that period. This standardized version of average
annual total return reflects all historical investment results, less all charges
and deductions applied against the Subaccount (including any surrender charge
that would apply if an Owner terminated the Contract at the end of each period
indicated, but excluding any deductions for premium taxes).
In addition to the standard version described above, total return performance
information computed on two different non-standard bases may be used in
advertisements or sales literature. Average annual total return information may
be presented, computed on the same basis as described above, except deductions
will not include the surrender charge. In addition, the Company may from time to
time disclose cumulative total returns for Contracts funded by Subaccounts.
From time to time, yields, standard average annual total returns, and
non-standard total returns for the Funds may be disclosed, including such
disclosures for periods prior to the date the Variable Account commenced
operations.
Non-standard performance data will only be disclosed if the standard performance
data for the required periods is also disclosed. For additional information
regarding the calculation of other performance data, please refer to the
Statement of Additional Information.
In advertising and sales literature, the performance of each Subaccount may be
compared with the performance of other variable annuity issuers in general or to
the performance of particular types of variable annuities investing in mutual
funds, or investment portfolios of mutual funds with investment objectives
similar to the Subaccount. Lipper Analytical Services, Inc. ("Lipper"), Variable
Annuity Research Data Service ("VARDS") and Morningstar, Inc. ("Morningstar")
are independent services which monitor and rank the performance of variable
annuity issuers in each of the major categories of investment objectives on an
industry-wide basis.
Lipper's and Morningstar's rankings include variable life insurance issuers as
well as variable annuity issuers. VARDS's rankings compare only variable annuity
issuers. The performance analyses prepared by Lipper, VARDS and Morningstar each
rank such issuers on the basis of total return, assuming reinvestment of
distributions, but do not take sales charges, redemption fees, or certain
expense deductions at the separate account level into consideration. In
addition, VARDS prepares risk rankings, which consider the effects of market
risk on total return performance. This type of ranking provides data as to which
Funds provide the highest total return within various categories of funds
defined by the degree of risk inherent in their investment objectives.
Advertising and sales literature may also compare the performance of each
Subaccount to the Standard & Poor's Index of 500 Common Stocks, a widely used
measure of stock performance. This unmanaged index assumes the reinvestment of
dividends but does not reflect any "deduction" for transaction costs or expenses
of operating and managing an investment portfolio. The Lehman Bond Indexes
represent unmanaged groups of securities of various issuers and terms to
maturity which are representative of bond market performance. The Consumer Price
Index is a statistical measure of changes in the prices of goods and services
over time published by the U.S. Bureau of Labor Statistics. Lipper Performance
Summary Averages represent the average annual total return of all the funds
(within a specified investment category) that are covered by the Lipper
Analytical Services Variable Insurance Products Performance Analysis Service.
Other independent ranking services and indices may also be used for performance
comparisons.
The Company may also report other information including the effect of
tax-deferred compounding on a Subaccount's investment returns, or returns in
general, which may be illustrated by tables, graphs, or charts. All income and
capital gains derived from Subaccount investments are reinvested on a
tax-deferred basis which can lead to substantial long-term accumulation of
assets, provided that the Subaccount investment experience is positive.
FEDERAL TAX MATTERS
The Following Discussion is General and
Is Not Intended as Tax Advice
Introduction
This discussion is not intended to address the tax consequences resulting from
all of the situations in which a person may be entitled to or may receive a
distribution under the Contract. Any person concerned about specific tax
implications should consult a competent tax adviser before making a transaction.
This discussion is based upon the Company's understanding of the present federal
income tax laws, as they are currently interpreted by the Internal Revenue
Service ("IRS"). No representation is made as to the likelihood of the
continuation of the present federal income tax laws or of the current
interpretation by the IRS. Moreover, no attempt has been made to consider any
applicable state or other tax laws.
The Contract may be purchased on a non-qualified basis or purchased and used in
connection with plans qualifying for favorable tax treatment. The Qualified
Contract is designed for use by individuals whose purchase payments are
comprised solely of proceeds from and/or contributions under retirement plans
which are intended to qualify as plans entitled to special income tax treatment
under Sections 401(a), 403(b), 408, 408A or 457 of the Code. The ultimate effect
of federal income taxes on the amounts held under a Contract, or annuity
payments, and on the economic benefit to the Owner, the Annuitant, or the
Beneficiary depends on the type of retirement plan, on the tax and employment
status of the individual concerned, and on the Company's tax status. In
addition, certain requirements must be satisfied in purchasing a Qualified
Contract with proceeds from a tax-qualified plan and receiving distributions
from a Qualified Contract in order to continue receiving favorable tax
treatment. Therefore, purchasers of Qualified Contracts should seek competent
legal and tax advice regarding the suitability of a Contract for their
situation, the applicable requirements, and the tax treatment of the rights and
benefits of a Contract. The following discussion assumes that Qualified
Contracts are purchased with proceeds from and/or contributions under retirement
plans that qualify for the intended special federal income tax treatment.
Tax Status of the Contract
Diversification Requirements. Section 817(h) of the Code provides that separate
account investment underlying a contract must be "adequately diversified" in
accordance with Treasury regulations in order for the contract to qualify as an
annuity contract under Section 72 of the Code. The Variable Account, through
each underlying Fund, intends to comply with the diversification requirements
prescribed in regulations under Section 817(h) of the Code, which affect how the
assets in the various Subaccounts may be invested. Although the Company does not
have direct control over the Funds in which the Variable Account invests, we
believe that each Fund in which the Variable Account owns shares will meet the
diversification requirements, and therefore, the Contract will be treated as an
annuity contract under the Code.
Owner Control. In certain circumstances, owners of variable annuity contracts
may be considered the owners, for federal income tax purposes, of the assets of
the separate account used to support their contracts. In those circumstances,
income and gains from the separate account assets would be includable in the
variable annuity contract owner's gross income. The IRS has stated in published
rulings that a variable contract owner will be considered the owner of separate
account assets if the contract owner possesses incidents of ownership in those
assets, such as the ability to exercise investment control over the assets. The
Treasury Department has also announced, in connection with the issuance of
regulations concerning investment diversification, that those regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor (i.e., the
contract owner), rather than the insurance company, to be treated as the owner
of the assets in the account." This announcement also states that guidance would
be issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular subaccounts without being treated as
owners of the underlying assets."
The ownership rights under the Contracts are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contractowners were not owners of separate account assets. For
example, the Owner of a Contract has the choice of one or more Subaccounts in
which to allocate Net Purchase Payments and Contract Values, and may be able to
transfer among Subaccounts more frequently than in such rulings. These
differences could result in an Owner being treated as the Owner of the assets of
the Variable Account. In addition, the Company does not know what standards will
be set forth, if any, in the regulations or rulings which the Treasury
Department has stated it expects to issue. The Company therefore reserves the
right to modify the Contract as necessary to attempt to prevent the contract
owner from being considered the Owner of the assets of the Variable Account.
Required Distributions. In order to be treated as an annuity contract for
federal income tax purposes, Section 72(s) of the Code requires any
Non-Qualified Contract to provide that: (a) if any owner dies on or after the
annuity date but prior to the time the entire interest in the contract has been
distributed, the remaining portion of such interest will be distributed at least
as rapidly as under the method of distribution being used as of the date of that
owner's death; and (b) if any owner dies prior to the annuity date, the entire
interest in the contract will be distributed within five years after the date of
the owner's death. These requirements will be considered satisfied as to any
portion of the owner's interest which is payable to or for the benefit of a
"designated beneficiary" and which is distributed over the life of such
annuitant or over a period not extending beyond the life expectancy of that
annuitant, provided that such distributions begin within one year of that
owner's death. The owner's "designated beneficiary" is the person designated by
such owner as an annuitant and to whom ownership of the contract passes by
reason of death and must be a natural person. However, if the owner's
"designated annuitant" is the surviving spouse of the owner, the contract may be
continued with the surviving spouse as the new owner.
The Non-Qualified Contracts contain provisions which are intended to comply with
the requirements of Section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. The Company intends to
review such provisions and modify them if necessary to assure that they comply
with the requirements of Code Section 72(s) when clarified by regulation or
otherwise.
Other rules may apply to Qualified Contracts.
Taxation of Annuities
The following discussion assumes that the Contracts will qualify as annuity
contracts for federal income tax purposes.
In General. Section 72 of the Code governs taxation of annuities in general. The
Company believes that an Owner who is a natural person is not taxed on increases
in the value of a Contract until distribution occurs by withdrawing all or part
of the Contract Value (e.g., partial withdrawals and surrenders) or as annuity
payments under the payment option elected. For this purpose, the assignment,
pledge, or agreement to assign or pledge any portion of the Contract Value (and
in the case of a Qualified Contract, any portion of an interest in the qualified
plan) generally will be treated as a distribution. The taxable portion of a
distribution (in the form of a single sum payment or payment option) is taxable
as ordinary income.
Any annuity contract owner who is not a natural person generally must include in
income any increase in the excess of the Contract Value over the "investment in
the contract" during the taxable year. There are some exceptions to this rule,
and a prospective Owner that is not a natural person may wish to discuss these
with a competent tax adviser.
The following discussion generally applies to Contracts owned by natural
persons.
Partial Withdrawals. In the case of a partial withdrawal from a Qualified
Contract, under Section 72(e) of the Code, a ratable portion of the amount
received is taxable, generally based on the ratio of the "investment in the
contract" to the participant's total accrued benefit or balance under the
retirement plan. The "investment in the contract" generally equals the portion,
if any, of any purchase payments paid by or on behalf of the individual under a
Contract which were not excluded from the individual's gross income. For
Contracts issued in connection with qualified plans, the "investment in the
contract" can be zero. Special tax rules may be available for certain
distributions from Qualified Contracts.
In the case of a partial withdrawal (including systematic withdrawals) from a
Non-Qualified Contract, under Section 72(e), any amounts received are generally
first treated as taxable income to the extent that the Contract Value
immediately before the partial withdrawal exceeds the "investment in the
contract" at that time. Any additional amount withdrawn is not taxable. With
respect to a Non-Qualified Contract, partial withdrawals are generally treated
as taxable income to the extent that the Contract Value immediately before the
withdrawal exceeds the "investment in the contract" at that time. The Contract
Value immediately before a partial withdrawal may have to be increased by any
positive interest adjustment which results from such a withdrawal. There is,
however, no definitive guidance on the proper tax treatment of interest
adjustments, and the Owner should contact a competent tax adviser with respect
to the potential tax consequences of an interest adjustment. Surrenders are
treated as taxable income to the extent that the amount received exceeds the
investment in the contract.
In the case of a full surrender under a Qualified or Non-Qualified Contract, the
amount received generally will be taxable only to the extent it exceeds the
"investment in the contract."
Section 1035 of the Code generally provides that no gain or loss shall be
recognized on the exchange of one annuity contract for another. Special rules
and procedures apply to Section 1035 transactions. Prospective Owners wishing to
take advantage of Section 1035 should consult their tax adviser.
Annuity Payments. Tax consequences may vary depending on the payment option
elected under an annuity contract. Generally, under Code Section 72(b), (prior
to recovery of the investment in the Contract) taxable income does not include
that part of any amount received as an annuity under an annuity contract that
bears the same ratio to such amount as the investment in the contract bears to
the expected return at the annuity starting date. For variable annuity payments,
the taxable portion is generally determined by an equation 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" by the total number of
expected periodic payments. However, the entire distribution will be taxable
once the recipient has recovered the dollar amount of his or her "investment in
the contract." For fixed annuity payments, in general, there is no tax on the
portion of each payment which represents the same ratio that the "investment in
the contract" bears to the total expected value of the annuity payments for the
term of the payments; however, the remainder of each annuity payment is taxable
until the recovery of the investment in the contract, and thereafter the full
amount of each annuity payment is taxable. If death occurs before full recovery
of the investment in the contract, the unrecovered amount may be deducted on the
Annuitant's final tax return.
Taxation of Death Benefit Proceeds. Amounts may be distributed from a Contract
because of the death of the Owner or Annuitant. Generally, such amounts are
includable in the income of the recipient as follows: (i) if distributed in a
lump sum, they are taxed in the same manner as a full surrender of the contract
or (ii) if distributed under a payment option, they are taxed in the same way as
annuity payments.
Penalty Tax on Certain Withdrawals. In the case of a distribution pursuant to a
Non-Qualified Contract, there may be imposed a federal penalty tax equal to 10%
of the amount treated as taxable income. In general, however, there is no
penalty on distributions:
(1) made on or after the taxpayer reaches age 59 1/2;
(2) made on or after the death of the holder (or if the holder is not an
individual, the death of the primary Annuitant);
(3) attributable to the taxpayer's becoming disabled;
(4) as part of a series of substantially equal periodic payments not less
frequently than annually for the life (or life expectancy) of the
taxpayer or the joint lives (or joint life expectancies) of the
taxpayer and the designated Beneficiary;
(5) made under certain annuities issued in connection with structured
settlement agreements; and
(6) made under an annuity contract that is purchased with a single
purchase payment when the Annuity Date is no later than a year from
purchase of the annuity and substantially equal periodic payments are
made not less frequently than annually during the annuity payment
period.
Other tax penalties may apply to certain distributions under a Qualified
Contract.
Possible Changes in Taxation. Although the likelihood of legislative change is
uncertain, there is always the possibility that the tax treatment of the
Contracts could change by legislation or other means. For instance, the
President's 1999 Budget Proposal recommended legislation that, if enacted, would
adversely modify the federal taxation of the Contracts. It is also possible that
any change could be retroactive (that is, effective prior to the date of the
change). A tax adviser should be consulted with respect to legislative
developments and their effect on the Contract.
Transfers, Assignments or Exchanges of a Contract
A transfer of ownership of a Contract, the designation of an Annuitant, Payee or
other Beneficiary who is not also the Owner, the selection of certain Annuity
Dates or the exchange of a Contract may result in certain tax consequences to
the Owner that are not discussed herein. An Owner contemplating any such actions
should contact a competent tax adviser with respect to the potential tax
effects.
Withholding
Distributions from Contracts generally are subject to withholding for the
Owner's federal income tax liability. The withholding rate varies according to
the type of distribution and the Owner's tax status. The Owner will be provided
the opportunity to elect to not have tax withheld from distributions.
"Eligible rollover distributions" from section 401(a) plans and section 403(b)
tax-sheltered annuities are subject to a mandatory federal income tax
withholding of 20%. An eligible rollover distribution is the taxable portion of
any distribution from such a plan, except certain distributions such as
distributions required by the Code or distributions in a specified annuity form.
The 20% withholding does not apply, however, if the Owner chooses a "direct
rollover" from the plan to another tax-qualified plan or IRA.
Multiple Contracts
All non-qualified deferred annuity Contracts that are issued by the Company (or
its affiliates) to the same Owner during any calendar year are treated as one
annuity Contract for purposes of determining the amount includable in gross
income under Section 72(e). In addition, the Treasury Department has specific
authority to issue regulations that prevent the avoidance of Section 72(e)
through the serial purchase of annuity contracts or otherwise. There may also be
other situations in which the Treasury may conclude that it would be appropriate
to aggregate two or more annuity Contracts purchased by the same Owner.
Accordingly, a contract owner should consult a competent tax adviser before
purchasing more than one annuity Contract.
Taxation of Qualified Plans
The Contracts are designed for use with several types of qualified plans. The
tax rules applicable to participants in these qualified plans vary according to
the type of plan and the terms and conditions of the plan itself. Special
favorable tax treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions in excess
of specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; and in other specified circumstances. Therefore, no
attempt is made to provide more than general information about the use of the
Contracts with the various types of qualified retirement plans. Contractowners,
the Annuitants, and Beneficiaries are cautioned that the rights of any person to
any benefits under these qualified retirement plans may be subject to the terms
and conditions of the plans themselves, regardless of the terms and conditions
of the Contract, but the Company shall not be bound by the terms and conditions
of such plans to the extent such terms contradict the Contract, unless the
Company consents. Some retirement plans are subject to distribution and other
requirements that are not incorporated into the Company's Contract
administration procedures. Brief descriptions follow of the various types of
qualified retirement plans in connection with a Contract. The Company will amend
the Contract as necessary to conform it to the requirements of such plans.
For qualified plans under Section 401(a), 403(a), 403(b), and 457, the Code
requires that distributions generally must commence no later than the later of
April 1 of the calendar year following the calendar year in which the Owner (or
plan participant) (i) reaches age 70 1/2 or (ii) retires, and must be made in a
specified form or manner. If the plan participant is a "5 percent owner" (as
defined in the Code), distributions generally must begin no later than April 1
of the calendar year following the calendar year in which the Owner (or plan
participant) reaches age 70 1/2. For IRAs described in Section 408,
distributions generally must commence no later tan the later of April 1 of the
calendar year following the calendar year in which the Owner (or plan
participant) reaches age 70 1/2.
Corporate Pension and Profit Sharing Plans and H.R. 10 Plans. Section 401(a) of
the Code permits corporate employers to establish various types of retirement
plans for employees, and permits self-employed individuals to establish these
plans for themselves and their employees. These retirement plans may permit the
purchase of the Contracts to accumulate retirement savings under the plans.
Adverse tax or other legal consequences to the plan, to the participant or to
both may result if this Contract is assigned or transferred to any individual as
a means to provide benefit payments, unless the plan complies with all legal
requirements applicable to such benefits prior to transfer of the Contract.
Employers intending to use the Contract with such plans should seek competent
advice.
The Contract includes a Death Benefit that in some cases may exceed the greater
of the purchase payments or the Contract Value. The Death Benefit could be
characterized as an incidental benefit, the amount of which is limited in any
pension or profit-sharing plan. Because the Death Benefit may exceed this
limitation, employers using the Contract in connection with such plans should
consult their tax adviser.
Individual Retirement Annuities. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
"Individual Retirement Annuity" or "IRA." IRA contributions are limited each
year to the lesser of $2,000 or 100% of the Owner's adjusted gross income and
may be deductible in whole or in part depending on the individual's income.
Distributions from certain other types of qualified plans, however, may be
"rolled over" on a tax-deferred basis into an IRA without regard to this limit.
Earnings in an IRA are not taxed while held in the IRA. All amounts in the IRA
(other than nondeductible contributions) are taxed when distributed from the
IRA. Distributions prior to age 59 1/2 (unless certain exceptions apply) are
also subject to a 10% penalty tax. Sales of the Contract for use with IRAs may
be subject to special requirements of the Internal Revenue Service. The Internal
Revenue Service has not reviewed the Contract for qualification as an IRA, and
has not addressed in a ruling of general applicability whether a death benefit
provision such as the provision in the Contract comports with IRA qualifications
requirements.
Roth IRAs. Effective January 1, 1998, Section 408A of the Code permits certain
eligible individuals to contribute to a Roth IRA. Contributions to a Roth IRA,
which are subject to certain limitations, are not deductible and must be made in
cash or as a rollover or transfer from another Roth IRA or other IRA. A rollover
from or conversion of an IRA to a Roth IRA may be subject to tax and other
special rules may apply. You should consult a tax adviser before combining any
converted amounts with any other Roth IRA contributions, including any other
conversion amounts from other tax years. Distributions from a Roth IRA generally
are not taxed, except that, once aggregate distributions exceed contributions to
the Roth IRA, income tax and a 10% penalty tax may apply to distributions made
(1) before age 59 1/2 (subject to certain exceptions) or (2) during the five
taxable years starting with the year in which the first contribution is made to
the Roth IRA.
Simplified Employee Pension (SEP) IRAs. Employers may establish Simplified
Employee Pension (SEP) IRAs under Code section 408(k) to provide IRA
contributions on behalf of their employees. In addition to all of the general
Code rules governing IRAs, such plans are subject to certain Code requirements
regarding participation and amounts of contributions.
Tax Sheltered Annuities. Section 403(b) of the Code allows employees of certain
Section 501(c)(3) organizations and public schools to exclude from their gross
income the purchase payments paid, within certain limits, on a Contract that
will provide an annuity for the employee's retirement. These purchase payments
may be subject to FICA (Social Security) taxes. Owners of certain Section 403(b)
annuities may receive Contract loans. Contract loans that satisfy certain
requirements with respect to loan amount and repayment are not treated as
taxable distributions. If these requirements are not satisfied, or if the
Contract terminates while a loan is outstanding, the loan balance will be
treated as a taxable distribution and may be subject to penalty tax, and the
treatment of the Contract under Section 403(b) may be adversely affected. Owners
should seek competent advice before requesting a Contract loan. The Contract
includes a Death Benefit that in some cases may exceed the greater of the
Purchase Payments or the Contract Value. The Death Benefit could be
characterized as an incidental benefit, the amount of which is limited in any
tax-sheltered annuity under section 403(b). Because the Death Benefit may exceed
this limitation, employers using the Contract in connection with such plans
should consult their tax adviser.
Certain Deferred Compensation Plans. Code Section 457 provides for certain
deferred compensation plans. These plans may be offered with respect to service
for state governments, local governments, political subdivisions, agencies,
instrumentalities and certain affiliates of such entities, and tax-exempt
organizations. These plans are subject to various restrictions on contributions
and distributions. The plans may permit participants to specify the form of
investment for their deferred compensation account. In general, all investments
are owned by the sponsoring employer and are subject to the claims of the
general creditors of the employer. Depending on the terms of the particular
plan, the employer may be entitled to draw on deferred amounts for purposes
unrelated to its Section 457 plan obligations. In general, all amounts
distributed under a Section 457 plan are taxable and are subject to federal
income tax withholding as wages.
Possible Charge for the Company's Taxes
At the present time, the Company makes no charge to the Subaccounts for any
Federal, state, or local taxes that the Company incurs which may be attributable
to such Subaccounts or the Contracts. The Company, however, reserves the right
in the future to make a charge for any such tax or other economic burden
resulting from the application of the tax laws that it determines to be properly
attributable to the Subaccounts or to the Contracts.
Other Tax Consequences
As noted above, the foregoing comments about the Federal tax consequences under
these Contracts are not exhaustive, and special rules are provided with respect
to other tax situations not discussed in this Prospectus. Further, the Federal
income tax consequences discussed herein reflect the Company's understanding of
current law and the law may change. Federal estate and state and local estate,
inheritance and other tax consequences of ownership or receipt of distributions
under a Contract depend on the individual circumstances of each Owner or
recipient of the distribution. A competent tax adviser should be consulted for
further information.
DISTRIBUTION OF THE CONTRACTS
The Contracts will be offered to the public on a continuous basis. The Company
does not anticipate discontinuing the offering of the Contracts, but reserves
the right to discontinue the offering. Applications for Contracts are solicited
by agents who are licensed by applicable state insurance authorities to sell the
Company's variable annuity Contracts and who are also registered representatives
of CUNA Brokerage or broker-dealers having selling agreements with CUNA
Brokerage or broker-dealers having selling agreements with such broker-dealers.
CUNA Brokerage is an indirect wholly-owned subsidiary of CUNA Mutual and 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.
CUNA Brokerage acts as the principal underwriter, as defined in the Act, of the
Contracts for the Variable Account pursuant to an underwriting agreement between
the Company and CUNA Brokerage. CUNA Brokerage is not obligated to sell any
specific number of Contracts. CUNA Brokerage maintains an Office of Supervisory
Jurisdiction at the same address as the Company. CUNA Brokerage's principal
business address is the same as that of CUNA Mutual.
The Company may pay sales commissions to broker-dealers up to an amount equal to
6% of the purchase payments paid under a Contract. These broker-dealers are
expected to compensate sales representatives in varying amounts from these
commissions. The Company also may pay other distribution expenses such as
agents' insurance and pension benefits, agency expense allowances, and overhead
attributable to distribution. In addition, the Company may from time to time pay
or allow additional promotional incentives in the form of cash or other
compensation. These distribution expenses do not result in any additional
charges under the Contracts that are not described under CHARGES AND DEDUCTIONS.
LEGAL PROCEEDINGS
The Company and its subsidiaries, like other life insurance companies, are
involved in lawsuits, including class action lawsuits. In some class action and
other lawsuits involving insurers, substantial damages have been sought and/or
material settlement payments have been made. Although the outcome of any
litigation cannot be predicted with certainty, the Company believes that at the
present time there are not pending or threatened lawsuits that are reasonably
likely to have a material adverse impact on the Separate Account or the Company.
PREPARING FOR YEAR 2000
Like all financial service providers, the Company and its affiliates utilize
systems that may be affected by Year 2000 transition issues, and they rely on
service providers, including administrators and investment managers, that also
may be affected. The Company and its affiliates have developed, and are in the
process of implementing, a Year 2000 readiness plan, and are confirming that its
service providers are also so engaged. The resources that are being devoted to
this effort are substantial. It is difficult to predict with precision whether
the amount of resources ultimately devoted, or the outcome of these efforts will
have a negative impact on the Company or its affiliates. However, as of the date
of this prospectus, it is not anticipated that Owners will experience negative
effects on their investment, or on their services provided in connection
therewith, as a result of Year 2000 readiness implementation. As of the date of
this prospectus, the Company and its affiliates believe that all of their
critical systems are Year 2000 ready, but there can be no assurance that the
Company was successful, or that interaction with other service providers will
not impair the Company's or its affiliates' services at that time. The Company
will be testing the remainder of its systems throughout 1999, and will have
continuity plans in place designed to minimize the impact of any unforeseen
failures.
VOTING RIGHTS
In accordance with its view of current applicable law, the Company will vote
Fund shares held in the Variable Account at regular and special shareholder
meetings of the Funds in accordance with instructions received from persons
having voting interests in the corresponding Subaccounts. If, however, the 1940
Act or any regulation thereunder should be amended, or if the present
interpretation thereof should change, or the Company otherwise determines that
it is allowed to vote the shares in its own right, it may elect to do so.
The number of votes that an Owner or Annuitant has the right to instruct will be
calculated separately for each Subaccount of the Variable Account, and may
include fractional votes. Prior to the Annuity Date, an Owner holds a voting
interest in each Subaccount to which the Contract Value is allocated. After the
Annuity Date, the Annuitant has a voting interest in each Subaccount from which
variable annuity payments are made.
For each Owner, the number of votes attributable to a Subaccount will be
determined by dividing the Contract Value attributable to that Owner's Contract
in that Subaccount by the net asset value per share of the Fund in which that
Subaccount invests. For each Annuitant, the number of votes attributable to a
Subaccount will be determined by dividing the liability for future variable
annuity payments to be paid from that Subaccount by the net asset value per
share of the Fund in which that Subaccount invests. This liability for future
payments is calculated on the basis of the mortality assumptions, the 3.5%
assumed investment rate used in determining the number of Annuity Units of that
Subaccount credited to the Annuitant's Contract and the Annuity Unit value of
that Subaccount on the date that the number of votes is determined. As variable
annuity payments are made to the Annuitant, the liability for future payments
decreases as does the number of votes.
The number of votes available to an Owner or Annuitant will be determined as of
the date coincident with the date established by the Fund for determining
shareholders eligible to vote at the relevant meeting of the Fund's
shareholders. Voting instructions will be solicited by written communication
prior to such meeting in accordance with procedures established for the Fund.
Each Owner or Annuitant having a voting interest in a Subaccount will receive
proxy materials and reports relating to any meeting of shareholders of the Fund
in which that Subaccount invests.
Fund shares for which no timely instructions are received and shares held by the
Company in a Subaccount for which no Owner or Annuitant has a beneficial
interest will be voted in proportion to the voting instructions which are
received with respect to all Contracts participating in that Subaccount. Voting
instructions to abstain on any item to be voted upon will be applied to reduce
the total number of votes eligible to be cast on a matter.
COMPANY HOLIDAYS
The Company is closed on the following holidays: (1) Thanksgiving Day, (2)
Christmas Day, (3) New Year's Day, and (4) Independence Day.
The Company is closed on the day itself if those days fall Monday through
Friday, the day immediately preceding if those days fall on a Saturday, and the
day immediately following if those days fall on a Sunday.
FINANCIAL STATEMENTS
The audited financial statements of the Variable Annuity Account as of December
31, 1998, including a statement of assets and liabilities, a statement of
operations for the year then ended, a statement of changes in net assets for the
years ended December 31, 1998, and 1997, and accompanying notes, are included in
the Statement of Additional Information.
The statutory basis statements of admitted assets, liabilities, and surplus for
the Company as of December 31, 1998, and 1997, and the related statutory basis
statements of operations, changes in unassigned surplus, and cash flows for the
years ended December 31, 1998, 1997, and 1996, as well as the Independent
Auditors' Report are contained in the Statement of Additional Information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
ADDITIONAL CONTRACT PROVISIONS.................................................1
The Contract..........................................................1
Incontestability......................................................1
Misstatement of Age or Sex............................................1
Participation.........................................................1
PRINCIPAL UNDERWRITER..........................................................1
CALCULATION OF YIELDS AND TOTAL RETURNS........................................1
Money Market Subaccount Yields........................................1
Other Subaccount Yields...............................................3
Average Annual Total Returns..........................................4
Other Total Returns...................................................6
Effect of the Annual Contract Fee on Performance Data.................7
VARIABLE ANNUITY PAYMENTS......................................................7
Assumed Investment Rate...............................................7
Amount of Variable Annuity Payments...................................8
Annuity Unit Value....................................................8
TERMINATION OF PARTICIPATION AGREEMENTS........................................9
T. Rowe Price International Series, Inc...............................9
MFS Variable Insurance Trust.........................................10
Oppenheimer Variable Account Funds...................................10
Templeton Variable Products Series Fund..............................10
LEGAL MATTERS.................................................................10
EXPERTS.......................................................................11
OTHER INFORMATION.............................................................11
FINANCIAL STATEMENTS..........................................................11
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT.....................................12
CUNA MUTUAL LIFE INSURANCE COMPANY............................................24
You may obtain a copy of the Statement of Additional Information free of charge
by writing to or calling us at the address or telephone number shown at the
beginning of this Prospectus.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
CUNA Mutual Life Insurance Company
2000 Heritage Way
Waverly, Iowa 50677
(800) 798-5500
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Individual Flexible Premium Deferred Variable Annuity Contract
This Statement of Additional Information contains additional information to that
already provided in the Prospectus for the individual flexible premium deferred
variable annuity contract (the "Contract") offered by CUNA Mutual Life Insurance
Company (the "Company").
This Statement of Additional Information is not a Prospectus, and it should be
read only in conjunction with Prospectuses for the following:
1. Contract;
2. Ultra Series Fund;
3. T. Rowe Price International Series, Inc.;
4. MFS(R) Variable Insurance TrustSM ("MFS Variable Insurance
Trust");
5. Oppenheimer Variable Account Funds; and
6. Templeton Variable Products Series Fund.
The Prospectus for the Contract is dated the same as this Statement of
Additional Information. You may obtain a copy of the Prospectuses by writing or
calling us at our address or phone number shown above.
May 1, 1999
<PAGE>
TABLE OF CONTENTS
ADDITIONAL CONTRACT PROVISIONS................................................1
The Contract.........................................................1
Incontestability.....................................................1
Misstatement of Age or Sex...........................................1
Participation........................................................1
PRINCIPAL UNDERWRITER.........................................................1
CALCULATION OF YIELDS AND TOTAL RETURNS.......................................1
Money Market Subaccount Yields.......................................1
Other Subaccount Yields..............................................3
Average Annual Total Returns.........................................4
Other Total Returns..................................................6
Effect of the Annual Contract Fee on Performance Data................7
VARIABLE ANNUITY PAYMENTS.....................................................7
Assumed Investment Rate..............................................7
Amount of Variable Annuity Payments..................................8
Annuity Unit Value...................................................8
TERMINATION OF PARTICIPATION AGREEMENTS.......................................9
T. Rowe Price International Series, Inc..............................9
MFS Variable Insurance Trust........................................10
Oppenheimer Variable Account Funds..................................10
Templeton Variable Products Series Fund.............................10
LEGAL MATTERS................................................................10
EXPERTS......................................................................11
OTHER INFORMATION............................................................11
FINANCIAL STATEMENTS.........................................................11
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT....................................12
CUNA MUTUAL LIFE INSURANCE COMPANY...........................................24
<PAGE>
ADDITIONAL CONTRACT PROVISIONS
The Contract
The application, endorsements and all other attached papers are part of the
Contract. The statements made in the application are representations and not
warranties. The Company will not use any statement in defense of a claim or to
void the Contract unless it is contained in the application.
Incontestability
The Company will not contest the Contract.
Misstatement of Age or Sex
If the age or sex (if applicable) of the Annuitant has been misstated, the
amount which will be paid is that which the proceeds would have purchased at the
correct age and sex (if applicable).
Participation
The Contract may participate in the Company's divisible surpluses but no
dividends are expected to be paid. Any dividends paid after the Annuity Date
would be paid with each annuity payment.
PRINCIPAL UNDERWRITER
CUNA Brokerage Services, Inc., ("CUNA Brokerage"), an affiliate of CUNA Mutual,
is the principal underwriter of the variable annuity contracts described herein.
The offering of the contract is continuous. CUNA Mutual does not anticipate
discontinuing the offering of the Contract, but does reserve the right to do so.
CUNA Brokerage received and retained $22,006,124 in 1998, $18,675,904 in 1997,
$15,144,129 in 1996, and $5,709,829 in 1995, as commissions for serving as
principal underwriter of the variable annuity contracts.
CALCULATION OF YIELDS AND TOTAL RETURNS
From time to time, the Company may disclose yields, total returns, and other
performance data pertaining to the Contracts for a Subaccount. Such performance
data will be computed, or accompanied by performance data computed, in
accordance with the standards defined by the SEC.
Money Market Subaccount Yields
From time to time, advertisements and sales literature may quote the current
annualized yield of the Money Market Subaccount for a seven-day period in a
manner which does not take into consideration any realized or unrealized gains
or losses, or income other than investment income, on shares of the Ultra Series
Fund's Money Market Fund or on that Fund's portfolio securities.
This current annualized yield is computed by determining the net change
(exclusive of realized gains and losses on the sale of securities and unrealized
appreciation and depreciation), and exclusive of income other than investment
income at the end of the seven-day period in the value of a hypothetical account
under a Contract having a balance of 1 unit of the Money Market Subaccount at
the beginning of the period. Then dividing such net change in account value by
the value of the hypothetical account at the beginning of the period to
determine the base period return, and annualizing this quotient on a 365-day
basis.
The net change in account value reflects: 1) net income from the Fund
attributable to the hypothetical account; and 2) charges and deductions imposed
under the Contract which are attributable to the hypothetical account.
The charges and deductions include the per unit charges for the hypothetical
account for: 1) the annual Contract fee; 2) the mortality and expense risk
charge; and (3) the asset-based administration charge.
For purposes of calculating current yields for a Contract, an average per unit
Contract fee is used based on the $30 annual Contract fee deducted at the end of
each Contract Year. Current Yield is calculated according to the following
formula:
Current Yield = ((NCS - ES)/UV) X (365/7)
Where:
NCS = the net change in the value of the Money Market Fund (exclusive
of realized gains or losses on the sale of securities and
unrealized appreciation and depreciation), and exclusive of
income other than investment income for the seven-day period
attributable to a hypothetical account having a balance of 1
Subaccount unit.
ES = per unit expenses attributable to the hypothetical account for
the seven-day period.
UV = the unit value for the first day of the seven-day period.
Effective yield = (1 + ((NCS-ES)/UV)) 365/7 - 1
Where:
NCS = the net change in the value of the Money Market Fund (exclusive
of realized gains or losses on the sale of securities and
unrealized appreciation and depreciation) for the seven-day
period attributable to a hypothetical account having a balance of
1 Subaccount unit.
ES = per unit expenses attributable to the hypothetical account for
the seven-day period.
UV = the unit value for the first day of the seven-day period.
Because of the charges and deductions imposed under the Contract, the yield for
the Money Market Subaccount is lower than the yield for the Money Market Fund.
The current and effective yields on amounts held in the Money Market Subaccount
normally fluctuate on a daily basis. Therefore, the disclosed yield for any
given past period is not an indication or representation of future yields or
rates of return. The Money Market Subaccount's actual yield is affected by
changes in interest rates on money market securities, average portfolio maturity
of the Money Market Fund, the types and quality of portfolio securities held by
the Money Market Fund and the Money Market Fund's operating expenses. Yields on
amounts held in the Money Market Subaccount may also be presented for periods
other than a seven-day period.
Yield calculations do not take into account the surrender charge under the
Contract equal to 1% to 7% of certain purchase payments during the seven years
subsequent to each payment being made. A surrender charge will not be imposed
upon surrender or partial withdrawal in any Contract Year on an amount equal to
10% of the aggregate purchase payments subject to the surrender charge as of the
time of the first withdrawal or surrender in that Contract Year.
Other Subaccount Yields
From time to time, sales literature or advertisements may quote the current
annualized yield of one or more of the Subaccounts (except the Money Market
Subaccount) for a Contract for 30-day or one-month periods. The annualized yield
of a Subaccount refers to income generated by the Subaccount during a 30-day or
one-month period and is assumed to be generated each period over a 12-month
period.
The yield is computed by:
1) dividing the net investment income of the Fund attributable to the
Subaccount units less Subaccount expenses for the period; by
2) the maximum offering price per unit on the last day of the period
times the daily average number of units outstanding for the period; by
3) compounding that yield for a six-month period; and by
4) multiplying that result by 2.
Expenses attributable to the Subaccount include the annual contract fee, the
asset-based administration charge and the mortality and expense risk charge. The
yield calculation assumes a contract fee of $30 per year per Contract deducted
at the end of each Contract Year. For purposes of calculating the 30-day or
one-month yield, an average contract fee based on the average Contract Value in
the Variable Account is used to determine the amount of the charge attributable
to the Subaccount for the 30-day or one-month period.
The 30-day or one-month yield is calculated according to the following formula:
Yield = 2 X (((NI - ES)/(U X UV) + 1)6 - 1)
Where:
NI = net income of the portfolio for the 30-day or one-month period
attributable to the Subaccount's units.
ES = expenses of the Subaccount for the 30-day or one-month period.
U = the average number of units outstanding.
UV = the unit value at the close (highest) of the last day in the 30-day
or one-month period.
Because of the charges and deductions imposed under the Contracts, the yield for
the Subaccount is lower than the yield for the corresponding Fund.
The yield on the amounts held in the Subaccounts normally fluctuates over time.
Therefore, the disclosed yield for any given past period is not an indication or
representation of future yields or rates of return. A Subaccount's actual yield
is affected by the types and quality of portfolio securities held by the
corresponding Fund and that Fund's operating expenses.
Yield calculations do not take into account the surrender charge under the
Contract equal to 1% to 7% of certain purchase payments during the seven years
subsequent to each payment being made. A surrender charge will not be imposed
upon surrender or partial withdrawal in any Contract Year on an amount equal to
10% of the aggregate purchase payments subject to the surrender charge as of the
time of the first withdrawal or surrender in that Contract Year.
Average Annual Total Returns
From time to time, sales literature or advertisements may also quote average
annual total returns for one or more of the Subaccounts for various periods of
time.
When a Subaccount or Fund has been in operation for 1, 5, and 10 years,
respectively, the average annual total return for these periods will be
provided. Average annual total returns for other periods of time may, from time
to time, also be disclosed.
Standard average annual total returns represent the average annual compounded
rates of return that would equate an initial investment of $1,000 under a
Contract to the redemption value of that investment as of the last day of each
of the periods. The ending date for each period for which total return
quotations are provided will be for the most recent calendar quarter-end
practicable, considering the type of the communication and the media through
which it is communicated.
Standard average annual total returns are calculated using Subaccount unit
values which the Company calculates on each Valuation Day based on the
performance of the Subaccount's underlying Fund, the deductions for the
mortality and expense risk charge, the deductions for the asset-based
administration charge and the annual Contract fee. The calculation assumes that
the Contract fee is $30 per year per Contract deducted at the end of each
Contract year. For purposes of calculating average annual total return, an
average per-dollar per-day Contract fee attributable to the hypothetical account
for the period is used. The calculation also assumes surrender of the Contract
at the end of the period for the return quotation. Total returns will therefore
reflect a deduction of the surrender charge for any period less than eight
years. The total return is calculated according to the following formula:
TR = ((ERV/P)1/N) - 1
Where:
TR = the average annual total return net of Subaccount recurring charges.
ERV = the ending redeemable value (net of any applicable surrender charge)
of the hypothetical account at the end of the period.
P = a hypothetical initial payment of $1,000.
N = the number of years in the period.
Such average annual total return information for the Subaccounts is as follows:
Period Since Inception
Subaccount 6/1/94 to 12/31/98 12/31/97 to 12/31/98
Money Market 2.87% -2.80%
Bond 4.89% -1.68%
Balanced 11.45% 5.42%
Growth and Income Stock 19.66% 9.93%
Capital Appreciation Stock 20.49% 12.81%
T. Rowe Price International Stock 7.71% 7.84%
Global Governments 3.45% .04%
Emerging Growth 17.96%* 25.88%
Developing Markets -37.05%** -28.53%
High Income 1.84%** -7.51%
* For the period May 1, 1996 through December 31, 1998.
** For the period May 1, 1997 through December 31, 1998.
***Effective May 1, 1999 MFS has changed the name of the MFS World Government
Series to the MFS Global Government Series.
From time to time, sales literature or advertisements may quote average annual
total returns for periods prior to the date the Variable Account or any
Subaccount commenced operations. The Money Market, Bond, Balanced, and Growth &
Income Stock Funds commenced operations in January, 1985. The Capital
Appreciation Stock Fund commenced operations in January, 1994. The T. Rowe Price
International Stock Portfolio of the T. Rowe Price International Series, Inc.
commenced operations in March, 1994. The MFS(R) Global Governments SeriesSM
("MFS Global Governments Series") and MFS(R) Emerging Growth SeriesSM ("MFS
Emerging Growth Series") of the MFS Variable Insurance Trust commenced
operations in June, 1994, and July, 1995, respectively. The Oppenheimer High
Income Fund/VA ("Oppenheimer High Income Fund/VA") commenced operations in 1986.
The Templeton Developing Markets Fund commenced operations on March 4, 1996, and
began issuing Class 2 shares ("Templeton Developing Markets Fund: Class 2") on
May 1, 1997.
Performance information for the Subaccounts for periods prior to the inception
of the Variable Account is calculated according to the formula shown on the
previous page, based on the performance of the Funds and the assumption that the
corresponding Subaccounts were in existence for the same periods as those
indicated for the Funds, with the level of Contract charges that were in effect
at the inception of the Subaccounts.
Such average annual total return information for the Subaccounts is as follows:
For the For the For the For the period
1-year 5-year 10-Year from date
period period period of inception
ended ended ended of fund to
Subaccount 12/31/98 12/31/98 12/31/98 12/31/98
Money Market -2.8% 2.75% 3.58% 4.04%
Bond -1.68% 3.70% 6.15% 6.83%
Balanced 5.42% 10.24% 10.16% 10.31%
Growth and Income Stock 9.93% 18.27% 15.08% 14.13%
Capital Appreciation Stock 12.81% 19.56% N/A 19.56%
High Income -7.51% 6.51% 11.01% 10.55%
Other Total Returns
From time to time, sales literature or advertisements may also quote average
annual total returns that do not reflect the surrender charge. These are
calculated in exactly the same way as average annual total returns described
above, except that the ending redeemable value of the hypothetical account for
the period is replaced with an ending value for the period that does not take
into account any charges on amounts surrendered or withdrawn.
Such average annual total return information for the Subaccounts is as follows:
Period Since Inception
Subaccount 6/1/94 to 12/31/98 12/31/97 to 12/31/98
Money Market 3.40% 3.50%
Bond 5.39% 4.62%
Balanced 11.84% 11.72%
Growth and Income Stock 19.96% 16.23%
Capital Appreciation Stock 20.79% 19.11%
T. Rowe Price International Stock 8.16% 14.14%
Global Governments 3.97% 6.34%
Emerging Growth 19.23%* 32.18%
Developing Markets -32.74%** -22.23%
High Income 5.00%** -1.21%
* For the period 5/1/96 through 12/31/98.
** For the period 5/1/97 through 12/31/98.
The chart below corresponds to the chart on the previous page showing returns
for periods prior to the date the Variable Account commenced operations, except
that the chart below does not reflect the surrender charge.
Such average annual total return information for the Subaccounts is as follows:
For the For the For the For the period
1-year 5-year 10-Year from date
period period period of inception
ended ended ended of fund to
Subaccount 12/31/98 12/31/98 12/31/98 12/31/98
Money Market 3.50% 3.23% 3.58% 4.04%
Bond 4.62% 4.16% 6.15% 6.83%
Balanced 11.72% 10.60% 10.16% 10.31%
Growth and Income Stock 16.23% 18.54% 15.08% 14.13%
Capital Appreciation Stock 19.11% 19.83% N/A 19.83%
High Income -1.21% 6.93% 11.01% 10.55%
The Company may disclose cumulative total returns in conjunction with the
standard formats described above. The cumulative total returns will be
calculated using the following formula:
CTR = (ERV/P) - 1
Where:
CTR = The cumulative total return net of Subaccount recurring charges for
the period.
ERV = The ending redeemable value of the hypothetical investment at the
end of the period.
P = A hypothetical single payment of $1,000.
Effect of the Annual Contract Fee on Performance Data
The Contract provides for a $30 annual Contract fee to be deducted annually at
the end of each Contract Year, from the Subaccounts based on the proportion of
the Variable Contract Value invested in each such Subaccount. For purposes of
reflecting the Contract fee in yield and total return quotations, the annual
charge is converted into a per-dollar per-day charge based on the average
Variable Contract Value in the Variable Account of all Contracts on the last day
of the period for which quotations are provided. The per-dollar per-day average
charge will then be adjusted to reflect the basis upon which the particular
quotation is calculated.
VARIABLE ANNUITY PAYMENTS
Assumed Investment Rate
The discussion concerning the amount of variable annuity payments which follows
this section is based on an assumed investment rate of 3.5% per year. The
assumed investment rate is used merely in order to determine the first monthly
payment per thousand dollars of applied value. This rate does not bear any
relationship to the actual net investment experience of the Variable Account or
of any Subaccount.
Amount of Variable Annuity Payments
The amount of the first variable annuity payment to a Payee will depend on the
amount (i.e., the adjusted Contract Value, the Surrender Value, the death
benefit) applied to effect the variable annuity payment as of the Annuity Date,
the annuity payment option selected, and the age and sex (if, applicable) of the
Annuitant. The Contracts contain tables indicating the dollar amount of the
first annuity payment under each annuity payment option for each $1,000 applied
at various ages. These tables are based upon the 1983 Table A (promulgated by
the Society of Actuaries) and an assumed investment rate of 3.5% per year.
The portion of the first monthly variable annuity payment derived from a
Subaccount is divided by the Annuity Unit value for that Subaccount (calculated
as of the date of the first monthly payment). The number of such units will
remain fixed during the annuity period, assuming the Payee makes no exchanges of
Annuity Units for Annuity Units of another Subaccount.
In any subsequent month, for any Contract, the dollar amount of the variable
annuity payment derived from each Subaccount is determined by multiplying the
number of Annuity Units of that Subaccount attributable to that Contract by the
value of such Annuity Unit at the end of the Valuation Period immediately
preceding the date of such payment.
The Annuity Unit value will increase or decrease from one payment to the next in
proportion to the net investment return of the Subaccount or Subaccounts
supporting the variable annuity payments, less an adjustment to neutralize the
3.5% assumed investment rate referred to above. Therefore, the dollar amount of
annuity payments after the first will vary with the amount by which the net
investment return of the appropriate Subaccounts is greater or less than 3.5%
per year. For example, for a Contract using only one Subaccount to generate
variable annuity payments, if that Subaccount has a cumulative net investment
return of 5% over a one year period, the first annuity payment in the next year
will be approximately 1 1/2% greater than the payment on the same date in the
preceding year. If such net investment return is 1% over a one year period, the
first annuity payment in the next year will be approximately 2 1/2 percentage
points less than the payment on the same date in the preceding year. (See also
"Variable Annuity Payments" in the Prospectus.)
Annuity Unit Value
The value of an Annuity Unit is calculated at the same time that the value of an
Accumulation Unit is calculated and is based on the same values for Fund shares
and other assets and liabilities. (See "Variable Contract Value" in the
Prospectus.) The Annuity Unit value for each Subaccount's first Valuation Period
was set at $100. The Annuity Unit value for a Subaccount is calculated for each
subsequent Valuation Period by dividing (1) by (2), then multiplying this
quotient by (3) and then multiplying the result by (4), where:
(1) is the Accumulation Unit value for the current Valuation Period;
(2) is the Accumulation Unit value for the immediately preceding Valuation
Period;
(3) is the Annuity Unit value for the immediately preceding Valuation
Period; and
(4) is a special factor designed to compensate for the assumed investment
rate of 3.5% built into the table used to compute the first variable
annuity payment.
The following illustrations show, by use of hypothetical examples, the method of
determining the Annuity Unit value and the amount of several variable annuity
payments based on one Subaccount.
<TABLE>
<S> <C>
Illustration of Calculation of Annuity Unit Value
1. Accumulation Unit value for current Valuation Period 12.56
2. Accumulation Unit value for immediately preceding Valuation Period 12.55
3. Annuity Unit value for immediately preceding Valuation Period 103.41
4. Factor to compensate for the assumed investment rate of 3.5% 0.99990575
5. Annuity Unit value of current Valuation Period ((1)/(2))x(3)x(4) 103.48
Illustration of Variable Annuity Payments
1. Number of Accumulation Units at Annuity Date 1,000.00
2. Accumulation Unit value $18.00
3. Adjusted Contract Value (1)x(2) $18,000.00
4. First monthly annuity payment per $1,000 of adjusted Contract Value $5.63
5. First monthly annuity payment (3)x(4),1,000 $101.34
6. Annuity Unit value $98.00
7. Number of Annuity Units (5),(6) 1.034
8. Assume Annuity Unit value for second month equal to $99.70
9. Second monthly annuity payment (7)x(8) $103.09
10. Assume Annuity Unit value for third month equal to $95.30
11. Third monthly annuity payment (7)x(10) $98.54
</TABLE>
TERMINATION OF PARTICIPATION AGREEMENTS
The participation agreements pursuant to which the Funds sell their shares to
the Variable Account contain varying provisions regarding termination. The
following summarizes those provisions:
T. Rowe Price International Series, Inc.
The agreement between the Company and T. Rowe Price International Series, Inc.
(and its principal underwriter) provides for termination as it applies to any
Fund covered by the agreement: (1) by any party upon six months prior written
notice to the other parties or in the event that (subject to certain conditions)
formal proceedings are initiated against any other party by the SEC or another
regulator or in the event that any other party suffers a material adverse change
in its business, operations, financial condition or prospects or suffers
material adverse publicity, (2) by the Company upon Written Notice to the other
parties if shares of the Fund are not reasonably available to meet the
requirements of the Contracts or are not registered, issued or sold in
conformity with applicable laws or such laws preclude the use of such shares as
investment media for the Contracts, (3) by the Company upon Written Notice to
the other parties in the event that the Fund fails to meet certain Code
requirements described in the agreement, (4) by T. Rowe Price International
Series, Inc. or its principal underwriter upon 45 days written notice to the
Company, and (5) by T. Rowe Price International Series, Inc. or its principal
underwriter upon written notice to the Company in the event that the Contracts
fail to meet certain Code requirements described in the agreement.
MFS Variable Insurance Trust
The agreement between the Company and MFS Variable Insurance Trust (and its
investment adviser) provides for termination as it applies to any Fund covered
by the agreement: (1) by any party upon six months prior written notice to the
other parties, or in the event that (subject to certain conditions) formal
proceedings are initiated against any other party by the SEC or another
regulator, or (subject to certain conditions) in the event that the Company
should substitute shares of another Fund for the Fund, (2) by any party upon
written notice to the other parties in the event that any other party suffers a
material adverse change in its business, operations, financial condition or
prospects or suffers material adverse publicity, or in the event that another
party materially breaches any provision of the agreement, (3) by the Company
upon prompt written notice to the other parties if shares of the Fund are not
reasonably available to meet the requirements of the Contracts or are not
appropriate funding vehicles for the Contracts, and (4) upon assignment of the
agreement by any party unless the other parties agree in writing to the
assignment.
Oppenheimer Variable Account Funds
The agreement between the Company and Oppenheimer Variable Account Funds (and
its investment adviser) provides for termination as it applies to any Fund
covered by the agreement: (1) by any party upon six months prior written notice
to the other parties, or in the event that (subject to certain conditions)
formal proceedings are initiated against any other party, (2) by the Company
upon prompt written notice to the other parties if shares of the Fund are not
reasonably available to meet the requirements of the Contracts or are not
appropriate funding vehicles for the Contracts, and (3) by Oppenheimer Variable
Account Funds upon six months written notice if it determines an irreconcilable
material conflict cannot be remedied.
Templeton Variable Products Series Fund
Generally, the agreement between the Company and Templeton Variable Products
Series Fund (and its principal underwriter) provides for termination as it
applies to any Fund covered by the agreement: (1) by any party in its entirety
or with respect to one, some or all portfolios or any reason by sixty (60) days
advance written notice delivered to the other parties, (2) by any party upon
written notice to the other parties in the event that any other party suffers a
material adverse change in its business, operations, financial condition or
prospects or suffers material adverse publicity, or in the event that another
party materially breaches any provision of the agreement, (3) by Templeton
Variable Products Series Fund or its principal underwriter upon 45 days written
notice to the Company, and (4) upon assignment of the agreement by any party
unless the other parties agree in writing to the assignment.
This is a summary only; other provisions and conditions may apply.
LEGAL MATTERS
All matters relating to Iowa law pertaining to the Contracts, including the
validity of the Contracts and the Company's authority to issue the Contracts,
have been passed upon by Barbara L. Secor, Esquire, Assistant Vice President and
Associate General Counsel of the Company.
EXPERTS
The financial statements of the Variable Annuity Account as of December 31,
1998, including a statement of assets and liabilities, a statement of operations
for the year then ended, a statement of changes in net assets for the years
ended December 31, 1998, and 1997, and accompanying notes, which are included in
this Statement of Additional Information and in the registration statement, have
been audited by KPMG Peat Marwick LLP, independent auditors, as set forth in
their report herein, and are included herein in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
The statutory basis statements of admitted assets, liabilities and surplus of
the Company as of December 31, 1998, and 1997, and the related statements of
operations, changes in unassigned surplus, and cash flows for the years ended
December 31, 1998, 1997, and 1996, which are included in this Statement of
Additional Information and in the registration statement, have been audited by
KPMG Peat Marwick LLP, independent auditors, as set forth in their report
herein, and are included herein in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The report of KPMG Peat Marwick LLP covering the December 31, 1998, financial
statements contains an explanatory paragraph that states that the Company
prepared the financial statements using accounting practices prescribed or
permitted by the Iowa Department of Commerce, Insurance Division, which
practices differ from generally accepted accounting principles.
OTHER INFORMATION
A registration statement has been filed with the SEC under the Securities Act of
1933, as amended, with respect to the Contracts discussed in this Statement of
Additional Information. Not all 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 SEC.
FINANCIAL STATEMENTS
The audited financial statements of the Variable Account as of December 31,
1998, including a statement of assets and liabilities, a statement of operations
for the year then ended, a statement of changes in net assets for the years
ended December 31, 1998, and 1997, and accompanying notes, are included in this
Statement of Additional Information.
The Company's statutory basis statements of admitted assets, liabilities and
surplus as of December 31, 1998, and 1997, and the related statutory basis
statements of operations, changes in unassigned surplus, and cash flows for the
years ended December 31, 1998, 1997, and 1996, as well as the Independent
Auditor's Reports, which are included in this Statement of Additional
Information, should be considered only as bearing on the Company's ability to
meet its obligations under the Contracts. They should not be considered as
bearing on the investment performance of the assets held in the Variable
Account.
<PAGE>
<TABLE>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statements of Assets and Liabilities
December 31, 1998
Capital
Appreciation Growth and Money
Stock Income Stock Balanced Bond Market
Assets: Subaccount Subaccount Subaccount Subaccount Subaccount
Investments in Ultra Series Fund:
(note 2)
<S> <C> <C> <C> <C> <C>
Capital Appreciation Stock Fund,
9,258,593 shares at net asset
value of $22.19 per share
(cost $146,304,839) $205,418,385 $ -- $ -- $ -- $ --
Growth and Income Stock Fund,
14,073,353 shares at net asset
value of $30.56 per share
(cost $331,744,234) -- 430,068,433 -- -- --
Balanced Fund,
15,873,410 shares at net asset
value of $18.74 per share
(cost $257,278,953) -- -- 297,390,115 -- --
Bond Fund,
5,511,208 shares at net asset
value of $10.57 per share
(cost $58,128,183) -- -- -- 58,249,050 --
Money Market Fund,
26,751,190 shares at net asset
value of $1.00 per share
(cost $26,751,190) -- -- -- -- 26,751,190
---------- ---------- ---------- ---------- ----------
Total assets 205,418,385 430,068,433 297,390,115 58,249,050 26,751,190
---------- ---------- ---------- ---------- ----------
Liabilities:
Accrued adverse mortality and
expense charges 68,432 145,737 100,443 19,780 8,861
Other accrued expenses 8,212 17,489 12,053 2,374 1,063
---------- ---------- ---------- ---------- ----------
Total liabilities 76,644 163,226 112,496 22,154 9,924
---------- ---------- ---------- ---------- ----------
Net assets $205,341,741 $429,905,207 $297,277,619 $58,226,896 $26,741,266
========== ========== ========== ========== ==========
Contract owners' equity:
Contracts in accumulation period 205,299,594 429,644,902 297,167,271 58,226,896 26,731,870
Contracts in annuity payment period
(note 2) 42,147 260,305 110,348 -- 9,396
---------- ---------- ---------- ---------- ----------
Total contract owners' equity 205,341,741 429,905,207 297,277,619 58,226,896 26,741,266
========== ========== ========== ========== ==========
Total units outstanding
(note 5 and note 6) 8,586,442 18,555,957 17,694,943 4,554,265 2,280,739
========== ========== ========== ========== ==========
Net asset value per unit $23.91 $23.17 $16.80 $12.79 $11.72
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statements of Assets and Liabilities
December 31, 1998
International World Emerging High Developing
Stock Governments Growth Income Markets
Assets: Subaccount Subaccount Subaccount Subaccount Subaccount
<S> <C> <C> <C> <C> <C>
Investments in T. Rowe Price
International Fund, Inc.:
International Stock Portfolio,
4,920,487 shares at net asset
value of $14.52 per share
(cost $60,938,563) $71,445,469 $ -- $ -- $ -- $ --
Investments in MFS(R) Variable
Insurance TrustSM:
World Governments Series,
1,216,850 shares at net asset
value of $10.88 per share
(cost $12,522,965) -- 13,239,325 -- -- --
Investments in MFS(R) Variable
Insurance TrustSM:
Emerging Growth Series,
3,806,507 shares at net asset
value of $21.47 per share
(cost $57,686,856) -- -- 81,725,702 -- --
Investments in Oppenheimer
Variable Account Funds:
High Income Series,
3,513,794 shares at net asset
value of $11.02 per share
(cost $39,801,809) -- -- -- 38,722,007 --
Investments in Templeton
Variable Products Series Fund:
Developing Markets Series,
878,001 shares at net asset value
of $5.12 per share
(cost $6,309,181) -- -- -- -- 4,495,366
---------- ---------- ---------- ---------- ---------
Total assets 71,445,469 13,239,325 81,725,702 38,722,007 4,495,366
---------- ---------- ---------- ---------- ---------
Liabilities
Accrued adverse mortality and
expense charges 24,302 4,502 27,542 13,135 1,530
Other accrued expenses 2,916 540 3,305 1,576 184
---------- ---------- ---------- ---------- ---------
Total liabilities 27,218 5,042 30,847 14,711 1,714
---------- ---------- ---------- ---------- ---------
Net assets $71,418,251 $13,234,283 $81,694,855 $38,707,296 $4,493,652
========== ========== ========== ========== =========
Contract owners' equity:
Contracts in accumulation period 71,389,663 13,232,093 81,655,398 38,690,570 4,493,652
Contracts in annuity payment period
(note 2) 28,588 2,190 39,457 16,726 --
---------- ---------- ---------- ---------- ----------
Total contract owners' equity 71,418,251 13,234,283 81,694,855 38,707,296 4,493,652
========== ========== ========== ========== ==========
Total units outstanding
(note 5 and note 6) 4,955,996 1,101,162 5,094,236 3,561,305 868,801
========== ========== ========== ========== =========
Net asset value per unit $14.41 $12.02 $16.04 $10.87 $5.17
========== ========== ========== ========== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statements of Operations
December 31, 1998
Capital
Appreciation Growth and Money
Stock Income Stock Balanced Bond Market
Investment income (loss): Subaccount Subaccount Subaccount Subaccount Subaccount
<S> <C> <C> <C> <C> <C>
Dividend income $ 534,022 $4,267,631 $7,830,324 $2,871,080 $977,926
Adverse mortality and expense
charges (note 3) (2,103,928) (4,461,725) (2,977,460) (550,939) (244,695)
Administrative charges (252,471) (535,407) (357,295) (66,113) (29,363)
---------- ---------- ---------- --------- ---------
Net investment income (loss) (1,822,377) (729,501) 4,495,569 2,254,028 703,868
---------- ---------- ---------- --------- ---------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Capital gain distributions 4,782,640 15,760,094 11,953 39,826 --
Proceeds from sale of securities 2,472,043 4,446,207 2,611,234 835,255 29,235,141
Cost of securities sold (1,848,605) (3,459,730) (2,321,801) (817,103) (29,235,141)
---------- ---------- ---------- --------- ---------
Net realized gain (loss) on
security transactions 5,406,078 16,746,571 301,386 57,978 --
Net change in unrealized
appreciation or depreciation on
investments 26,215,883 36,859,343 22,339,305 (318,903) --
---------- ---------- ---------- --------- ---------
Net gain (loss) on investments 31,621,961 53,605,914 22,640,691 (260,925) --
---------- ---------- ---------- --------- ---------
Net increase (decrease) in net
assets resulting from operations $29,799,584 $52,876,413 $27,136,260 $1,993,103 $703,868
========== ========== ========== ========= =========
International World Emerging High Developing
Stock Governments Growth Income Markets
Investment income (loss): Subaccount Subaccount Subaccount Subaccount Subaccount
Dividend income $1,115,930 $166,263 $494,173 $895,494 $80,388
Adverse mortality and expense
charges (note 3) (802,274) (166,662) (763,113) (332,919) (46,606)
Administrative charges (96,273) (19,999) (91,574) (39,950) (5,593)
--------- -------- ---------- -------- --------
Net investment income (loss) 217,383 (20,398) (360,514) 522,625 28,189
--------- -------- ---------- -------- --------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) on security
transactions:
Capital gain distributions -- -- -- -- --
Proceeds from sale of securities 1,939,904 2,644,181 1,117,896 518,681 426,874
Cost of securities sold (1,760,537) (2,618,073) (916,201) (551,048) (681,083)
--------- -------- ---------- -------- --------
Net realized gain (loss) on
security transactions 179,367 26,108 201,695 (32,367) (254,209)
Net change in unrealized
appreciation or depreciation on
investments 7,712,376 812,043 17,967,979 (1,183,574) (665,933)
--------- -------- ---------- -------- --------
Net gain (loss) on investments 7,891,743 838,151 18,169,674 (1,215,941) (920,142)
--------- -------- ---------- -------- --------
Net increase (decrease) in net
assets resulting from operations $8,109,126 $817,753 $17,809,160 ($693,316) ($891,953)
========= ======== ========== ======== ========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statements of Changes in Net Assets
Years Ended December 31, 1998 and 1997
CAPITAL APPRECIATION STOCK SUBACCOUNT GROWTH AND INCOME STOCK SUBACCOUNT
Operations: 1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net investment income (loss) ($1,822,377) ($811,200) ($729,501) $15,195
Net realized gain (loss) on
security transactions 5,406,078 1,882,280 16,746,571 4,861,709
Net change in unrealized appreciation
or depreciation on investments 26,215,883 24,598,979 36,859,343 46,546,353
----------- ----------- ----------- -----------
Change in net assets from operations 29,799,584 25,670,059 52,876,413 51,423,257
----------- ----------- ----------- -----------
Capital unit transactions (note 5):
Proceeds from sales of units 144,718,325 107,669,256 259,442,954 197,965,607
Cost of units repurchased (104,156,130) (67,800,969) (164,894,635) (98,094,296)
Actuarial adjustments for mortality
experience on annuities in
payment period 934 -- 21,919 --
Annuity benefit payments (865) (168) (15,863) (7,512)
----------- ----------- ----------- -----------
Change in net assets from capital
unit transactions 40,562,264 39,868,119 94,554,375 99,863,799
----------- ----------- ----------- -----------
Increase (decrease) in net assets 70,361,848 65,538,178 147,430,788 151,287,056
Net assets:
Beginning of period 134,979,893 69,441,715 282,474,419 131,187,363
----------- ----------- ----------- -----------
End of period $205,341,741 $134,979,893 $429,905,207 $282,474,419
=========== =========== =========== ===========
BALANCED SUBACCOUNT BOND SUBACCOUNT
Operations: 1998 1997 1998 1997
Net investment income (loss) $4,495,569 $3,624,989 $2,254,028 $1,087,785
Net realized gain (loss) on
security transactions 301,386 2,410,519 57,978 19,072
Net change in unrealized appreciation
or depreciation on investments 22,339,305 14,073,060 (318,903) 524,467
----------- ----------- ---------- ----------
Change in net assets from operations 27,136,260 20,108,568 1,993,103 1,631,324
----------- ----------- ---------- ----------
Capital unit transactions (note 5):
Proceeds from sale of units 201,714,553 134,826,300 54,431,468 31,709,344
Cost of units repurchased (116,470,212) (71,445,220) (31,471,803) (19,493,816)
Actuarial adjustments for mortality
experience on annuities in
payment period 4,797 -- -- --
Annuity benefit payments (5,344) (1,535) -- --
----------- ----------- ---------- ----------
Change in net assets from capital
unit transactions 85,243,794 63,379,545 22,959,665 12,215,528
----------- ----------- ---------- ----------
Increase (decrease) in net assets 112,380,054 83,488,113 24,952,768 13,846,852
Net assets:
Beginning of period 184,897,565 101,409,452 33,274,128 19,427,276
----------- ----------- ---------- ----------
End of period $297,277,619 $184,897,565 $58,226,896 $33,274,128
=========== =========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statements of Changes in Net Assets
Years Ended December 31, 1998 and 1997
MONEY MARKET SUBACCOUNT INTERNATIONAL STOCK SUBACCOUNT
<S> <C> <C> <C> <C>
Operations: 1998 1997 1998 1997
Net investment income (loss) $703,868 $749,001 $217,383 $575,230
Net realized gain (loss) on
security transactions -- -- 179,367 38,683
Net change in unrealized appreciation
or depreciation on investments -- -- 7,712,376 (469,465)
---------- ---------- ---------- ----------
Change in net assets from operations 703,868 749,001 8,109,126 144,448
---------- ---------- ---------- ----------
Capital unit transactions (note 5):
Proceeds from sales of units 94,301,939 92,196,341 69,558,237 64,648,440
Cost of units repurchased (85,815,933) (91,675,721) (61,390,267) (42,924,106)
Actuarial adjustments for mortality
experience on annuities in
payment period -- -- 362 --
Annuity benefit payments (376) -- (481) --
---------- ---------- ---------- ----------
Change in net assets from capital
unit transactions 8,485,630 520,620 8,167,851 21,724,334
---------- ---------- ---------- ----------
Increase (decrease) in net assets 9,189,498 1,269,621 16,276,977 21,868,782
Net assets:
Beginning of period 17,551,768 16,282,147 55,141,274 33,272,492
---------- ---------- ---------- ----------
End of period $26,741,266 $17,551,768 $71,418,251 $55,141,274
========== ========== ========== ==========
WORLD GOVERNMENTS SUBACCOUNT EMERGING GROWTH SUBACCOUNT
Operations: 1998 1997 1998 1997
Net investment income (loss) ($20,398) $124,518 ($360,514) $(441,903)
Net realized gain (loss) on
security transactions 26,108 (14,843) 201,695 22,348
Net change in unrealized appreciation
or depreciation on investments 812,043 (395,717) 17,967,979 5,960,197
---------- ---------- ---------- ----------
Change in net assets from operations 817,753 (286,042) 17,809,160 5,540,642
---------- ---------- ---------- ----------
Capital unit transactions (note 5):
Proceeds from sale of units 12,632,836 15,607,791 66,116,408 50,764,584
Cost of units repurchased (14,130,975) (13,378,076) (47,709,272) (27,459,730)
Actuarial adjustments for mortality
experience on annuities in
payment period 160 -- 1,367 --
Annuity benefit payments (31) -- (854) (187)
---------- ---------- ---------- ----------
Change in net assets from capital
unit transactions (1,498,010) 2,229,715 18,407,649 23,304,667
---------- ---------- ---------- ----------
Increase (decrease) in net assets (680,257) 1,943,673 36,216,809 28,845,309
Net assets:
Beginning of period 13,914,540 11,970,867 45,478,046 16,632,737
---------- ---------- ---------- ----------
End of period $13,234,283 $13,914,540 $81,694,855 $45,478,046
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Statements of Changes in Net Assets
Years Ended December 31, 1998 and 1997
HIGH INCOME SUBACCOUNT DEVELOPING MARKETS SUBACCOUNT
<S> <C> <C> <C> <C>
Operations: 1998 1997* 1998 1997*
Net investment income (loss) $522,625 $342,331 $28,189 $(18,284)
Net realized gain (loss) on
security transactions (32,367) 52 (254,209) (20,944)
Net change in unrealized appreciation
or depreciation on investments (1,183,574) 103,771 (665,933) (1,147,882)
---------- --------- --------- ---------
Change in net assets from operations (693,316) 446,154 (891,953) (1,187,110)
---------- --------- --------- ---------
Capital unit transactions (note 5):
Proceeds from sales of units 40,076,476 14,947,080 4,921,625 4,966,376
Cost of units repurchased (14,247,012) (1,822,151) (2,583,701) (731,585)
Actuarial adjustments for mortality
experience on annuities in
payment period 596 -- -- --
Annuity benefit payments (532) -- -- --
---------- --------- --------- ---------
Change in net assets from capital
unit transactions 25,829,528 13,124,929 2,337,924 4,234,791
---------- --------- --------- ---------
Increase (decrease) in net assets 25,136,213 13,571,083 1,445,971 3,047,681
Net assets:
Beginning of period 13,571,083 -- 3,047,681 --
---------- --------- --------- ---------
End of period $38,707,296 $13,571,083 $4,493,652 $3,047,681
========== ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
*The data is for the period beginning May 1, 1997 (date of initial activity).
<PAGE>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Notes to Financial Statements
(1) Organization
The CUNA Mutual Life Variable Annuity Account (the Variable Account) is a
unit investment trust registered under the Investment Company Act of 1940
with the Securities and Exchange Commission (SEC). The Variable Account was
established as a separate investment account within CUNA Mutual Life
Insurance Company (the Company) to receive and invest net premiums paid
under variable annuity contracts (Contracts).
Although the assets in the Variable Account are the property of the
Company, the assets in the Variable Account attributable to the Contracts
are not chargeable with liabilities arising out of any other business which
the Company may conduct. The assets of the Variable Account are available
to cover the general liabilities of the Company only to the extent that the
Variable Account's assets exceed its liabilities arising under the
Contracts. The Company has the right to transfer to the general account any
assets of the Variable Account which are in excess of reserves and other
contract liabilities. All obligations arising under the Contracts are
general corporate obligations of the Company.
(2) Significant Accounting Policies
Investments
The Variable Account currently is divided into ten subaccounts but may, in
the future, include additional subaccounts. Each subaccount invests
exclusively in shares of a single underlying fund. (The term fund is used
to mean an investment portfolio sometimes called a fund, i.e., Ultra Series
Fund (Class Z shares), T. Rowe Price International Fund, Inc., MFS(R)
Variable Insurance TrustSM,* Oppenheimer Variable Account Funds, Templeton
Variable Products Series Fund, or any other open-end management investment
company or unit investment trust in which a subaccount invests.) The
income, gains and losses, realized or unrealized, from the assets allocated
to each subaccount are credited to or charged against that subaccount
without regard to income, gains or losses from any other subaccount.
The Variable Account invests in shares of Ultra Series Fund, T. Rowe Price
International Fund, Inc., MFS(R) Variable Insurance TrustSM,* Oppenheimer
Variable Account Funds, and Templeton Variable Products Series Fund. Each
is a management investment company of the series type with one or more
funds. Each is registered with the SEC as an open-end, management
investment company. Such registration does not involve supervision of the
management or investment practices or policies of the companies or their
funds by the SEC.
The Ultra Series Fund currently has five funds available as investment
options under the Contracts, The T. Rowe Price International Series, Inc.
has one fund available as an investment option under the Contracts, the MFS
Variable Insurance Trust has two funds available as investment options
under the Contracts, the Oppenheimer Variable Account Funds has one fund
available as an investment option under the Contracts and the Templeton
Variable Products Series Fund has one fund available as an investment
option under the Contracts. The Ultra Series Fund, MFS Variable Insurance
Trust, Oppenheimer Variable Account Funds and Templeton Variable Products
Series Fund also have other funds that are not available under the
Contracts. All five investment companies may, in the future, create
additional funds or classes that may or may not be available as investment
options under the Contracts. Each fund has its own investment objective and
the income, gains and losses for each fund are determined separately for
that fund or class.
CIMCO Inc. (CIMCO) serves as the Investment Adviser to the Ultra Series
Fund and manages its assets in accordance with general policies and
guidelines established by the board of trustees of the Ultra Series Fund.
The Company owns one half of CIMCO's outstanding stock and one half is
owned indirectly by CUNA Mutual Insurance Society.
Rowe Price-Fleming International, Inc. (RPFI) serves as the Investment
Adviser to the International Stock Portfolio and manages its assets in
accordance with general policies and guidelines established by the board of
directors of T. Rowe Price International Fund, Inc. RPFI was founded in
1979 as a joint venture between T. Rowe Price Associates, Inc. and Robert
Fleming Holdings Limited.
Massachusetts Financial Services Company (MFS) serves as the Investment
Adviser to the MFS World Governments Series and Emerging Growth Series and
manages its assets in accordance with general policies and guidelines
established by the board of trustees of MFS(R) Variable Insurance TrustSM.
MFS is a subsidiary of Sun Life Assurance Company of Canada (U.S.) which,
in turn, is a subsidiary of Sun Life Assurance Company of Canada.
OppenheimerFunds, Inc. (the Manager) serves as the investment adviser to
the Oppenheimer High Income Fund and manages its assets in accordance with
general policies and guideline established by the board of trustees of the
Oppenheimer Variable Account Funds. The Manager is owned by Oppenheimer
Acquisition Corp., a holding company that is owned in part by senior
officers of the Manager and controlled by Massachusetts Mutual Life
Insurance Company.
<PAGE>
Templeton Asset Management Ltd. serves as the investment adviser to the
Templeton Developing Markets Fund: Class 2 and manages its assets and makes
its investments decisions. Templeton Asset Management Ltd. is a Singapore
corporation wholly owned by Franklin Resources, Inc., a publicly owned
company. Resources' principal shareholders are Charles B. Johnson and
Rupert H. Johnson, Jr.
The assets of each fund are held separate from the assets of the other
funds, and each fund is offered at a price equal to its respective net
asset value per share, without sales charge. Dividends and capital gain
distributions from each fund are reinvested in that fund. Investments in
shares of the funds are stated at market value which is the net asset value
per share as determined by the funds. Realized gains and losses from
security transactions are reported on an average cost basis. Dividend
income is recorded on the ex-dividend date.
Federal Income Taxes
Currently, no charge is made against the Variable Account for any federal,
state or local taxes (other than premium taxes) that the Company incurs or
that may be attributable to the Variable Account or the Contracts. The
Company may, however, make such a charge in the future from surrender
value, death benefits or annuity payments, as appropriate. Such taxes may
include taxes (levied by any government entity) which the Company
determines to have resulted from: (1) the establishment or maintenance of
the Variable Account, (2) receipt by the Company of purchase payments, (3)
issuance of the Contracts, or (4) the payment of annuity payments.
Annuity Reserves
Annuity reserves are computed for contracts in the payout stage according
to the 1983a Individual Annuitant Mortality Table. The assumed investment
return is 3.5% unless the annuitant elects otherwise, in which case the
rate may vary from 3.5% to 7%, as regulated by the laws of the respective
states. The mortality risk is fully borne by the Company and may result in
additional amounts being transferred into the variable annuity account by
the Company to cover greater longevity of annuitants than expected.
Conversely, if reserves exceed amounts required, transfers may be made to
the insurance company.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increase and decrease in
net assets from operations during the period. Actual results could differ
from those estimates.
(3) Fees and Charges
Organization Costs
The Company absorbed all organization expenses of the Variable Account.
Contract Charges
Surrender Charge (Contingent Deferred Sales Charge). No charge for sales
expenses is deducted from purchase payments at the time purchase payments
are paid. However, a surrender charge is deducted upon surrender or partial
withdrawal of purchase payments within 7 years of their being paid and, in
certain circumstances, upon payment of a death benefit or the election of
certain annuity payment options.
For purchase payments withdrawn or surrendered within one year of having
been paid, the charge is 7% of the amount of the payment withdrawn or
surrendered. For each purchase payment, the surrender charge decreases by
1% for each full year that has elapsed since the payment was made. No
surrender charge is assessed upon the withdrawal or surrender of the
contract value in excess of aggregate purchase payments or on purchase
payments made more than 7 years prior to the withdrawal or surrender.
Subject to certain restrictions for the first partial withdrawal (or
surrender) in each contract year, an amount equal to 10% of aggregate
purchase payments subject to a surrender charge (as of the time of
withdrawal or surrender) may be surrendered without a surrender charge. The
surrender charge also may be waived in certain circumstances as provided in
the Contracts.
Annual Contract Fee. On each contract anniversary (or upon surrender of the
Contract) prior to the annuity date, the Company deducts an annual contract
fee of $30 from the variable contract value. After the annuity date, the
Company deducts this fee from variable annuity payments. A pro-rated
portion of the fee is deducted upon annuitization of a Contract except on a
contract anniversary.
Transfer Fee. No charge is made for transfers, however, the Company
reserves the right to charge $10 for the 13th and each subsequent transfer
during a Contract year.
<PAGE>
Premium Taxes. If state or other premium taxes are applicable to a
Contract, they will be deducted either: (a) from purchase payments as they
are received, (b) from contract value upon surrender or partial withdrawal,
(c) upon application of adjusted contract value to an annuity payment
option, or (d) upon payment of a death benefit. The Company, however,
reserves the right to deduct premium taxes at the time it pays such taxes.
Variable Account Charges
Mortality and Expense Risk Charge. The Company deducts a daily mortality
and expense risk charge to compensate it for assuming certain mortality and
expense risks. The charge is deducted from the assets of the Variable
Account at an annual rate of 1.25% (approximately 0.85% for mortality risk
and 0.40% for expense risks).
Asset-Based Administration Charge. The Company deducts a daily
administration charge to compensate it for certain expenses it incurs in
administration of the Contract. The charge is deducted from the assets of
the Variable Account at an annual rate of 0.15%.
(4) Investment Transactions
The cost of shares purchased, including reinvestment of dividend
distributions, during the year ended December 31, 1998, was as follows:
Capital Appreciation Stock Fund............................ $46,045,816
Growth and Income Stock Fund............................... 114,141,120
Balanced Fund.............................................. 92,439,912
Bond Fund.................................................. 26,104,564
Money Market Fund.......................................... 38,431,318
International Stock Portfolio.............................. 10,341,816
World Governments Series................................... 1,128,138
Emerging Growth............................................ 19,187,355
High Income Fund........................................... 26,882,971
Developing Markets Fund.................................... 2,794,122
-----------
$377,497,132
===========
(5) Accumulation Unit Activity from Contract Transactions
Transactions in accumulation units of each subaccount of the Variable
Account for the years ended December 31, 1998 and 1997, were as follows:
<TABLE>
<CAPTION>
Capital
Appreciation Growth and Money
Stock Income Stock Balanced Bond Market
Subaccount Subaccount Subaccount Subaccount Subaccount
Units for contracts in accumulation period:
<S> <C> <C> <C> <C> <C>
Units outstanding at December 31, 1996 4,495,720 8,541,383 7,783,833 1,686,539 1,492,704
Units sold 6,013,456 11,114,621 9,579,893 2,687,144 8,313,505
Units repurchased (3,776,703) (5,479,461) (5,056,104) (1,647,913) (8,254,380)
--------- --------- --------- --------- ---------
Units outstanding at December 31, 1997 6,732,473 14,176,543 12,307,622 2,725,770 1,551,829
Units sold 6,677,476 12,089,141 12,798,228 4,340,906 8,182,107
Units repurchased (4,825,290) (7,720,616) (7,416,771) (2,512,411) (7,453,252)
--------- --------- --------- --------- ---------
Units outstanding at December 31, 1998 8,584,659 18,545,068 17,689,079 4,554,265 2,280,684
========= ========= ========= ========= =========
Units for annuitized contracts:
Units outstanding at December 31, 1996 -- -- -- -- --
Units sold 257 9,730 3,497 -- --
Units repurchased (9) (391) (103) -- --
Units outstanding at December 31, 1997 248 9,339 3,394 -- --
--------- --------- --------- --------- ---------
Units sold 1,575 2,286 2,810 -- 88
Units repurchased (40) (736) (340) -- (33)
--------- --------- --------- --------- ---------
Units outstanding at December 31, 1998 1,783 10,889 5,864 -- 55
--------- --------- --------- --------- ---------
Total units outstanding December 31, 1998 8,586,442 18,555,957 17,694,943 4,554,265 2,280,739
========= ========= ========= ========= =========
<PAGE>
International World Emerging High Developing
Stock Governments Growth Income Markets
Subaccount Subaccount Subaccount Subaccount* Subaccount*
Accumulation units outstanding at
December 31, 1996 2,683,277 1,033,483 1,650,627 -- --
Accumulation units sold 5,006,978 1,384,847 4,521,335 1,403,639 547,590
Accumulation units repurchased (3,316,780) (1,186,204) (2,419,917) (168,771) (88,863)
--------- --------- --------- --------- -------
Accumulation units outstanding at
December 31, 1997 4,373,475 1,232,126 3,752,045 1,234,868 458,727
Accumulation units sold 5,085,363 1,096,047 4,843,927 3,628,184 896,126
Accumulation units repurchased (4,503,868) (1,227,198) (3,503,276) (1,303,313) (486,052)
--------- --------- --------- --------- -------
Accumulation units outstanding at
December 31, 1998 4,954,970 1,100,975 5,092,696 3,559,739 868,801
========= ========= ========= ========= =======
Units for annuitized contracts:
Units outstanding at December 31, 1996 -- -- -- -- --
Units sold -- -- 1,507 -- --
Units repurchased -- -- (16) -- --
--------- --------- --------- --------- ---------
Units outstanding at December 31, 1997 -- -- 1,491 -- --
--------- --------- --------- --------- ---------
Units sold 1,061 190 110 1,614 --
Units repurchased (35) (3) (61) (48) --
--------- --------- --------- --------- ---------
Units outstanding at December 31, 1998 1,026 187 1,540 1,566 --
--------- --------- --------- --------- ---------
Total units outstanding December 31, 1998 4,955,996 1,101,162 5,094,236 3,561,305 868,801
========= ========= ========= ========= =========
</TABLE>
*The data is for period beginning May 1, 1997 (date of initial activity).
(6) Condensed Financial Information
The table below gives per unit information about the financial history of
each subaccount for each period.
<TABLE>
<CAPTION>
Capital Appreciation Growth and Income Balanced Bond
Stock Subaccount Stock Subaccount Subaccount Subaccount
Accumulation unit value: 1998 1997 1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of period $20.05 $15.45 $19.91 $15.36 $15.02 $13.03 $12.21 $11.52
End of period 23.91 20.05 23.17 19.91 16.80 15.02 12.79 12.21
Percentage increase in
unit value during period 19.25% 29.77% 16.37% 29.62% 11.85% 15.27% 4.75% 5.99%
Number of units outstanding
at end of period 8,586,442 6,732,473 18,555,957 14,176,543 17,694,943 12,307,622 4,554,265 2,725,770
Money Market International World Governments Emerging Growth
Subaccount Stock Subaccount Subaccount Subaccount
Accumulation unit value: 1998 1997 1998 1997 1998 1997 1998 1997
Beginning of period $11.31 $10.91 $12.61 $12.40 $11.29 $11.58 $12.12 $10.08
End of period 11.72 11.31 14.41 12.61 12.02 11.29 16.04 12.12
Percentage increase in
unit value during period 3.63% 3.67% 14.27% 1.69% 6.47% (2.50%) 32.34% 20.24%
Number of units outstanding
at end of period 2,280,739 1,551,829 4,955,996 4,373,475 1,101,162 1,232,126 5,094,236 3,752,045
<PAGE>
High Income Developing Markets
Subaccount Stock Subaccount
Accumulation unit value: 1998 1997* 1998 1997*
Beginning of period $10.99 $10.00 $6.64 $10.00
End of period 10.87 10.99 5.17 6.64
Percentage increase in
unit value during period (1.09%) 9.9% (22.14%) (33.6%)
Number of units outstanding
at end of period 3,561,305 1,234,868 868,801 458,727
</TABLE>
For the Money Market Subaccount, the "seven-day average yield" for the
seven days ended December 31, 1998, was 3.2% and the "effective yield" for
that period was 3.4%.
*1997 data is for the eight-month period ended December 31, 1997.
<PAGE>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Independent Auditors' Report
The Board of Directors
CUNA Mutual Life Insurance Company and Contract Owners of CUNA Mutual Life
Variable Annuity Account:
We have audited the statements of assets and liabilities of the Capital
Appreciation Stock Subaccount, Growth and Income Stock Subaccount, Balanced
Subaccount, Bond Subaccount, Money Market Subaccount, International Stock
Subaccount, World Governments Subaccount, Emerging Growth Subaccount, High
Income Subaccount, and the Developing Markets Subaccount of the CUNA Mutual Life
Variable Annuity Account as of December 31, 1998; the related statements of
operations for the year then ended; changes in net assets and the condensed
financial information for each of the years in the two-year (one year and eight
months for the High Income Subaccount and the Developing Markets Subaccount)
period then ended. These financial statements and condensed financial
information are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements and
condensed financial information 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 and condensed
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Investments owned at December 31, 1998, were verified
by audit of the statements of assets and liabilities of the underlying funds of
Ultra Series Fund and confirmation with MFS Variable Insurance Trust, T. Rowe
Price, OppenheimerFunds, Inc., and Templeton Asset Management Ltd. 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 and condensed financial information
referred to above present fairly, in all material respects, the financial
position of the Capital Appreciation Stock Subaccount, Growth and Income Stock
Subaccount, Balanced Subaccount, Bond Subaccount, Money Market Subaccount,
International Stock Subaccount, World Governments Subaccount, Emerging Growth
Subaccount, High Income Subaccount, and the Developing Markets Subaccount of the
CUNA Mutual Life Variable Annuity Account as of December 31, 1998, the results
of their operations for the year then ended; changes in their net assets and the
condensed financial information for each of the years in the two-year (one year
and eight months for the High Income Subaccount and the Developing Markets
Subaccount) period then ended in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Des Moines, Iowa
February 5, 1999
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Financial Statements and Supplementary Information
December 31, 1998 and 1997
(With Independent Auditors' Report)
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Statutory Statements of Admitted Assets, Liabilities and Surplus
December 31, 1998 and 1997
(in thousands)
<TABLE>
<CAPTION>
Admitted Assets 1998 1997
--------------- ---- ----
Investments:
<S> <C> <C>
Fixed maturities $ 1,517,147 $ 1,570,735
Equity securities:
Preferred stock 71 102
Common stock 77,036 57,292
Mortgage loans on real estate 306,037 362,958
Investment real estate 62,345 64,771
Policy loans 101,569 101,061
Other invested assets 16,799 11,459
Receivable for securities 19,886 14,394
Cash and short-term investments 74,740 27,260
--------- ---------
Total investments 2,175,630 2,210,032
Premiums receivable 15,147 12,534
Accrued investment income 28,005 30,540
Electronic data processing equipment 2,230 2,822
Due from affiliates and related parties 8,121 12,093
Federal income tax recoverable -- 2,158
Other assets 2,295 2,936
Separate accounts 1,830,012 1,198,978
--------- ---------
Total admitted assets $ 4,061,440 $ 3,472,093
========= =========
Liabilities and Surplus
Liabilities:
Policy reserves:
Life insurance and annuity contracts $ 1,672,272 $ 1,749,927
Accident and health insurance 12,611 11,795
Supplementary contracts without life contingencies 76,131 72,664
Policyholders' dividend accumulations 156,151 153,931
Policy and contract claims 9,915 7,232
Other policyholders' funds:
Dividends payable to policyholders 24,450 23,780
Premiums and other deposit funds 4,194 4,693
Interest maintenance reserve 5,694 3,531
Amounts held for others 18,923 20,500
Commissions, expenses, taxes, licenses and fees accrued 14,594 13,133
Asset valuation reserve 48,395 41,756
Loss contingency reserve for investments 5,800 6,050
Federal income taxes due and accrued 5,025 --
Note payable 1,300 1,300
Other liabilities 15,639 6,823
Separate accounts 1,784,589 1,164,297
--------- ---------
Total liabilities 3,855,683 3,281,412
--------- ---------
Surplus:
Unassigned surplus 205,757 190,681
--------- ---------
Total surplus 205,757 190,681
--------- ---------
Total liabilities and surplus $ 4,061,440 $ 3,472,093
========= =========
</TABLE>
See accompanying notes to statutory financial statements.
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Statutory Statements of Operations
Years Ended December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
Income:
Premiums and other considerations:
<S> <C> <C> <C>
Life and annuity contracts $ 466,203 $ 414,724 $ 346,584
Accident and health 18,292 14,886 12,007
Supplementary contracts and dividend accumulations 43,547 44,194 46,303
Other deposit funds 159,786 114,825 51,322
Net investment income 148,998 168,192 174,573
Reinsurance commissions 7,871 9,601 9,962
Separate accounts income and fees 15,858 9,885 4,883
Other income 5,794 5,862 3,761
------- ------- -------
Total income 866,349 782,169 649,395
------- ------- -------
Benefits and expenses:
Death benefits 41,908 37,430 33,592
Annuity benefits 82,074 49,095 39,086
Surrender benefits 189,343 176,291 143,867
Payments on supplementary contracts without life
contingencies and dividend accumulations 47,431 44,747 48,896
Other benefits to policyholders and beneficiaries 18,244 17,509 12,703
Decrease in policy reserves - life and annuity
contracts and accident and health insurance (76,839) (78,148) (54,954)
Increase in liabilities for supplementary contracts without life
contingencies and policyholders' dividend accumulations 5,687 6,954 8,328
Decrease in group annuity reserves (225) (2) (233)
Increase in benefit funds 870 3,975 4,075
Commissions 43,396 37,017 37,529
General insurance expenses, including cost of
collection in excess of loading on due and deferred
premiums and other expenses 60,126 60,722 51,004
Insurance taxes, licenses, and fees 5,909 6,939 6,199
Net transfers to separate accounts 408,384 369,788 272,028
------- ------- -------
Total benefits and expenses 826,308 732,317 602,120
------- ------- -------
Income before dividends to policyholders, federal
income taxes, and net realized capital (losses) gains 40,041 49,852 47,275
Dividends to policyholders 24,441 23,670 23,286
------- ------- -------
Income before federal income taxes and net
realized capital (losses) gains 15,600 26,182 23,989
Federal income taxes 4,436 12,208 7,713
------- ------- -------
Income before net realized capital (losses) gains 11,164 13,974 16,276
Net realized capital (losses) gains, less federal income taxes
and transfers to the interest maintenance reserve (317) 3,885 171
------- ------- -------
Net income $ 10,847 $ 17,859 $ 16,447
======= ======= =======
</TABLE>
See accompanying notes to statutory financial statements.
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Statutory Statements of Changes in Unassigned Surplus
Years Ended December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 190,681 $ 163,304 $ 154,028
------- ------- -------
Increase (decrease) in unassigned surplus:
Net income 10,847 17,859 16,447
Change in net unrealized gains (losses) 10,070 6,752 (7,135)
Change in asset valuation reserve (6,639) 257 (9,811)
Change in nonadmitted assets 543 285 2,695
Change in surplus of separate accounts (64) 209 (2,071)
Change in separate account seed money 64 (189) 2,232
Subsidiary surplus distribution -- -- 13,858
Change in loss contingency for investments 250 2,200 (6,954)
Other miscellaneous changes 5 4 15
------- ------- -------
Net increase in unassigned surplus 15,076 27,377 9,276
------- ------- -------
Balance at end of year $ 205,757 $ 190,681 $ 163,304
======= ======= =======
</TABLE>
See accompanying notes to statutory financial statements.
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Statutory Statements of Cash Flows
Years Ended December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
Cash from operations Premiums and other considerations:
<S> <C> <C> <C>
Life and annuity contracts $ 463,537 $ 412,840 $345,095
Accident and health 17,903 14,754 11,911
Supplementary contracts and dividend accumulations 43,546 44,194 46,303
Other deposit funds 159,786 114,826 51,322
Investment income received 160,304 177,984 176,394
Reinsurance commissions 7,871 8,425 13,210
Separate accounts income and fees 15,858 9,885 1,129
Other income 4,786 4,931 57,268
------- ------- -------
Total provided from operations 873,591 787,839 702,632
------- ------- -------
Life and accident and health claims paid 46,128 42,004 38,809
Surrender benefits paid 189,343 176,291 143,867
Other benefits to policyholders paid 140,575 105,505 95,785
Commissions, other expenses and taxes paid,
excluding federal income taxes 107,589 105,834 89,017
Dividends to policyholders paid 23,756 23,161 22,542
Federal income taxes (181) 14,558 15,804
Net transfers to separate accounts 419,156 383,942 281,652
Interest paid on defined benefit plans 1,338 3,507 4,104
Other -- 189 684
------- ------- -------
Total used in operations 927,704 854,991 692,264
------- ------- -------
Net cash (used in) from operations (54,113) (67,152) 10,368
------- ------- -------
Cash from investments
Proceeds from investments sold, matured or repaid:
Fixed maturities 296,732 285,135 226,919
Equity securities 17,412 17,223 29,960
Mortgage loans on real estate 77,980 47,892 52,773
Other invested assets 562 969 831
Investment real estate 3,950 17,701 700
------- ------- -------
Total investment proceeds 396,636 368,920 311,183
------- ------- -------
Cost of investments acquired:
Fixed maturities 243,804 200,692 237,191
Equity securities 24,923 29,724 26,235
Mortgage loans on real estate 17,956 4,704 31,025
Investment real estate 5,222 10,929 10,060
Other invested assets 10,461 -- --
Other cash used 109 4,098 2,148
------- ------- -------
Total investments acquired 302,475 250,147 306,659
Increase (decrease) in policy loans and premium notes 500 (475) 664
------- ------- -------
Net cash from investments 93,661 119,248 3,860
------- ------- -------
Cash from financing and miscellaneous sources
Transfer of defined benefit pension plan assets -- (42,247) --
Other cash provided (applied), net 7,932 (15,879) 3,762
------- ------- -------
Net cash from (used in) financing and
miscellaneous sources 7,932 (58,126) 3,762
------- ------- -------
Reconciliation of cash and short-term investments:
Net change in cash and short-term investments 47,480 (6,030) 17,990
Cash and short-term investments at beginning of year 27,260 33,290 15,300
------- ------- -------
Cash and short-term investments at end of year $ 74,740 $ 27,260 $ 33,290
======= ======= =======
See accompanying notes to statutory financial statements.
</TABLE>
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
December 31, 1998, 1997 and 1996
(1) Summary of Significant Accounting Policies
Company Operations
CUNA Mutual Life Insurance Company (the Company) offers a full range of
ordinary life and health insurance products through face-to-face and direct
response distribution systems. The Company's operations are conducted in 49
states and the District of Columbia. The Company is subject to regulation by
the Insurance Departments of states in which it is licensed and undergoes
periodic examinations by those departments.
Basis of Presentation
The accompanying statutory financial statements have been prepared in
conformity with accounting practices prescribed or permitted by the Iowa
Department of Commerce, Insurance Division. Prescribed statutory accounting
practices are promulgated by the National Association of Insurance
Commissioners (NAIC), as well as through state laws, regulations, and
general administration rules. Permitted statutory accounting practices
encompass all accounting procedures other than those prescribed. The Company
is currently applying only prescribed accounting practices. Statutory
accounting practices vary in some respects from generally accepted
accounting principles. The more significant of these differences are as
follows:
o The costs related to acquiring business are charged to income in the
year incurred and, thus, are not amortized over the periods benefited,
whereas the premium income is recorded into earnings on a pro rata
basis over the premium-paying periods covered by the policies;
o Adjustments reflecting the revaluation of investments at statement date
and equity in earnings of subsidiary companies are carried to the
statements of changes in unassigned surplus as "net unrealized gains or
losses," without providing for income taxes, or income tax reductions,
with respect to net unrealized gains or losses;
o Majority owned subsidiaries are not consolidated and are carried at
their underlying book value using the equity method of accounting;
o Policy reserves are based on statutory mortality and interest
requirements, without consideration for withdrawals, which may differ
from reserves based on reasonably conservative estimates of mortality,
interest and withdrawals;
o Derivative investment contract hedging fixed income securities are
carried on the statutory financial statements at the amortized cost, if
any, versus at the estimated fair value of the contract;
o Deferred federal income taxes are not provided for unrealized gains or
losses and the temporary differences between the statutory and tax
basis of assets and liabilities;
o "Nonadmitted assets" (principally, the airplane, prepaid insurance and
expenses, furniture, equipment and certain receivables) are excluded
from the balance sheets through a direct charge to surplus;
o The asset valuation reserve is recorded as a liability by a direct
charge to surplus;
o The interest maintenance reserve defers recognition of interest-related
gains and losses from the disposal of investment securities and
amortizes them into income over the remaining lives of those
securities;
o Reserves established for potential bond and mortgage loan defaults or
real estate impairments are recorded as liabilities by direct charges
to surplus;
o Pension expense reflects the amount funded during the year and
disclosures related to the pension plan are in accordance with ERISA
requirements;
o Assets and liabilities are recorded net of ceded reinsurance balances;
and
o Deposits, surrenders and benefits on universal life and annuity
contracts are recorded in the statements of operations.
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(1) Summary of Significant Accounting Policies, continued
Basis of Presentation, Continued
A reconciliation of net income and surplus between amounts presented herein
and amounts stated in conformity with GAAP as of December 31 are as follows
(in thousands):
Net Income 1997 1996
Statutory net income $17,859 $16,447
Adjustments:
Federal income taxes 1,555 (9,500)
Deferred policy acquisition costs 18,593 15,566
Insurance reserves (9,651) (2,181)
Investments (414) 8,590
Pension benefits 1,175 (1,457)
Other (1,877) (2,365)
------ ------
GAAP net income $27,240 $25,100
====== ======
Surplus 1997 1996
------- ---- ----
Statutory surplus $190,681 $163,304
Adjustments:
Federal income taxes 7,436 6,576
Deferred policy acquisition costs 142,710 130,655
Insurance reserves (71,352) (61,701)
Investments 37,409 33,231
Employee benefits (20,072) (21,744)
Dividends payable to policyholders 11,890 11,635
Other 5,211 2,955
------- -------
GAAP Surplus $303,913 $264,911
======= =======
The effects of these variances on net income and surplus at December 31,
1998, although not reasonably determinable as of this date, are presumed to
be material.
Valuation of Investments
Investments are valued as prescribed by the National Association of
Insurance Commissioners (NAIC). Fixed maturities and short-term investments
are generally carried at amortized cost, preferred equity securities at
cost, common equity securities of unaffiliated companies at fair value, and
mortgage loans at the amount of outstanding principal adjusted for
unamortized premiums and discounts. Fixed maturities that the NAIC has
determined are impaired in value are carried at the lower of amortized cost
or estimated fair value. Real estate acquired in satisfaction of debt is
valued at the lower of the carrying value of the outstanding mortgage loans
or fair value of the acquired real estate at time of foreclosure. The
adjusted basis is subsequently depreciated. Investments in limited
partnerships are included in other invested assets, and investments in
subsidiaries are carried at the Company's share of the underlying net equity
of the investment. Home office real estate is carried at depreciated cost.
Policy loans are stated at their aggregate unpaid balances.
Realized gains and losses on the sale of investments are reported in income
based upon the first-in, first-out method. The net unrealized gains and
losses attributable to the adjustment from book value to carrying value for
all investments are reflected in surplus.
Provision for Depreciation
The provision for depreciation of real estate is computed on a straight-line
basis using estimated useful lives of the assets ranging from five to fifty
years.
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(1) Summary of Significant Accounting Policies, continued
Policy Reserves
During 1988, the Company began using the 1980 Commissioners' Standard
Ordinary (C.S.O.) Mortality Table. Prior to the adoption of the 1980 C.S.O.
table, reserves were recorded using the 1958 C.S.O. table. The 1958 C.S.O.
table is used with interest rate assumptions ranging from 2.5 percent to 5.0
percent. The 1980 C.S.O. table is used with interest rate assumptions
ranging from 3.5 percent to 5.5 percent. With respect to older policies, the
mortality table and interest assumptions vary from the American Experience
table with 2.5 to 4 percent interest to the 1941 C.S.O. table with 2.5
percent interest. Approximately 24 percent of the life reserves are
calculated on a net level reserve basis and 76 percent on a modified reserve
basis. The effect of the use of a modified reserve basis is to partially
offset the effect of immediately expensing acquisition costs by providing a
policy reserve increase in the first policy year which is less than the
reserve increase in renewal years. Fixed deferred annuity reserves are
calculated using continuous Commissioners' Annuity Reserve Valuation Method
(CARVM) with interest assumptions ranging from 2.5 percent to 7.5 percent.
Provision for Participating Policy Dividends
The provision for participating policy dividends is based on the board of
directors' determination and declaration of an equitable current dividend
plus a provision for such dividend expected to be paid in the following
year, rather than being provided for ratably over the premium-paying period
in accordance with dividend scales contemplated at the time the policies
were issued. Participating business comprised 99.9 percent of ordinary life
insurance in force and premiums received during 1998.
Statutory Valuation Reserves
The asset valuation reserve (AVR) provides a reserve for fluctuations in the
values of invested assets, primarily common stocks. Changes in the AVR are
charged or credited directly to surplus.
An interest maintenance reserve (IMR) is maintained as prescribed by the
NAIC for the purpose of stabilizing the surplus of the Company against gains
and losses on sales of fixed income investments that are primarily
attributable to changing interest rates. The interest-related gains and
losses are deferred and amortized into income over the remaining lives of
the securities.
Electronic Data Processing Equipment
Electronic data processing equipment is carried at cost less accumulated
depreciation of $6,744,419 and $6,023,003 at December 31, 1998 and 1997,
respectively. The equipment is being depreciated using the straight-line
method over a five-year period.
Pension Costs
Pension costs relating to the Company's pension plans are computed on the
basis of accepted actuarial methods. The annual contributions are computed
according to the aggregate funding method, which produces an annual normal
cost at each valuation date. Such annual normal cost provides for spreading
the excess of the present value of future benefits over the value of the
assets of the plan as a level percentage of payroll over the remaining
period of service of active employees on the valuation date based upon the
actuarial assumptions adopted. Gains and losses which arise on each
valuation date as the result of differences between the actual experience
and that expected by the actuarial assumptions are spread over the remaining
period of service of active employees. The Company's policy is to fund
pension costs accrued.
Risks and Uncertainties
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheets and revenues and expenses
for the period. Actual results could differ significantly from those
estimates. The following elements of the financial statements are most
affected by the use of estimates and assumptions:
o Investment valuations
o Insurance reserves
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(1) Summary of Significant Accounting Policies, continued
Risks and Uncertainties, continued
The Company is subject to the risk that interest rates will change and cause
a decrease in the value of its investments. To the extent that fluctuations
in interest rates cause the duration of assets and liabilities to differ,
the Company may have to sell assets prior to their maturity and realize
losses. Interest rate exposure for the investment portfolio is managed
through asset/liability management techniques that attempt to match the
duration of the assets with the estimated duration of the liabilities. The
Company had derivative financial instruments at December 31, 1998 and 1997,
which are discussed in note 2.
The Company is subject to the risk that issuers of securities or mortgage
loans owned by the Company will default or other parties, including
reinsurers who owe the Company money, will not pay. The Company minimizes
this risk by adhering to a conservative investment strategy and by
maintaining strong reinsurance and credit and collection policies.
The Company is subject to the risk that the legal or regulatory environment
in which the Company operates will change and create additional costs and
expenses not anticipated by the Company in pricing its products. In other
words, regulatory initiatives designed to reduce insurer profits or new
legal theories may create costs for the insurer beyond those recorded in the
financial statements. The Company mitigates this risk by operating in a
geographically diverse area, thus reducing its exposure to any single
jurisdiction; closely monitoring the regulatory environment to anticipate
changes; and by using underwriting practices that identify and minimize the
potential adverse impact of this risk.
Disclosures about Fair Value of Financial Instruments
Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures
About Fair Value of Financial Instruments," requires disclosure of fair
value information about existing on and off balance sheet financial
instruments. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation
techniques. These techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows.
Although fair value estimates are calculated using assumptions that
management believes are appropriate, changes in assumptions could cause
these estimates to vary materially. In that regard, the derived fair value
estimates cannot be substantiated by comparison to independent markets and,
in many cases, could not be realized in the immediate settlement of the
instruments. Certain financial instruments and all non-financial instruments
are excluded from disclosure requirements. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the
Company. In addition, the tax ramifications of the related unrealized gains
and losses can have a significant effect on fair value estimates and have
not been considered in the estimates.
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash, short-term investments, accrued investment income and policy loans:
The carrying amounts reported for these instruments approximate their
fair values because of the short-term nature of these instruments.
Fixed maturities and equity securities: Fair values for fixed maturities
are based on quoted market prices where available. For fixed maturities
not actively traded, fair values are estimated using values obtained from
independent pricing services or, in the case of private placements, are
estimated by discounting expected future cash flows using a current
market rate applicable to the yield, credit quality and maturity of the
investments. The fair values for unaffiliated equity securities are based
on quoted market prices. The carrying values and fair value for these
instruments is disclosed in note 2.
Derivative financial instruments: The carrying values and fair value for
these instruments is disclosed in note 2.
Mortgage loans on real estate: The fair values for mortgage loans are
estimated using discounted cash flow analysis, at interest rates
currently being offered for similar loans to borrowers with similar
credit ratings. Loans with similar characteristics are aggregated for
purposes of the calculations. Fair values for mortgages in default are
reported at the estimated fair value of the underlying collateral. The
carrying and fair values for these instruments are disclosed in note 2.
Other invested assets: The fair value of joint ventures and partnership
interests in common stock approximate their carrying values or are
estimated using discounted cash flow analysis. The estimated fair value
for other invested assets for 1998 and 1997 was $16,596,994 and
$10,163,876, respectively.
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(1) Summary of Significant Accounting Policies, continued
Disclosures about Fair Value of Financial Instruments, continued
Separate account assets and liabilities: The fair value of assets held in
separate accounts is based on quoted market prices. The fair value of
liabilities related to separate accounts is the amount payable on demand.
The carrying amounts reported in these accounts approximate their fair
values.
Investment contracts: The fair values of the Company's liabilities under
investment type insurance contracts are estimated using the cash
surrender value of the contracts. The carrying value and estimated fair
value of these liabilities were $1,100,993,513 and $1,096,826,483 for
1998 and $1,242,817,910 and $1,233,846,222 for 1997, respectively.
Derivative Financial Instruments
The Company enters into derivatives, primarily interest rate swaps and caps
and stock index futures to reduce interest rate exposure for long-term
assets, to exchange fixed rates for floating interest rates and to increase
or decrease exposure to selected segments of the bond and stock markets.
Hedges of fixed maturity securities are stated at amortized cost, if any,
and hedges of equity securities are stated at market value. See note 2 for
additional information related to these agreements.
Net interest receivable or payable on those contracts that hedge risks
associated with interest rate fluctuations are recognized in the period
incurred as an adjustment to investment income. Realized capital gains and
losses on equity swaps are recognized in the period incurred as an
adjustment to net realized capital gains and losses. Unrealized capital
gains and losses on equity swaps are charged or credited to surplus.
Interest rate cap agreements entitle the Company to receive from the
counter-parties the amounts, if any, by which the selected market interest
rates exceed the strike rates stated in the agreements. The amount paid to
purchase the interest rate caps is included in other invested assets and
amortized over the term of the agreements as an adjustment to investment
income.
Separate Accounts
Separate account assets are funds of separate account contractholders and
the Company, segregated into accounts with specific investment objectives.
The assets are generally carried at fair value. An offsetting liability is
maintained to the extent of contractholders' interests in the assets.
Appreciation or depreciation of the Company's interest in the separate
accounts, including undistributed net investment income, is reflected in
policyholders' surplus. Contractholders' interests in net investment income
and realized and unrealized capital gains and losses on separate account
assets are not reflected in operations.
Statutory Accounting Practices
The NAIC has developed a codification of Statements of Statutory Accounting
Principles (SSAP's) which, pending approval of the Iowa Department of
Commerce, Insurance Division, will take effect January 1, 2001. The effect
of adopting the SSAP's will be reported as an adjustment to unassigned
surplus on the effective date. Although generally consistent with current
accounting practices, there are differences that could have a material
impact on the Company; the ultimate impact on unassigned surplus has not
been determined.
Reclassifications
Certain amounts previously reported in prior years' financial statements
have been reclassified to conform to the current year presentation.
(2) Investments
Fixed Maturities
The carrying value, gross unrealized gains and losses and the estimated fair
value of investments in fixed maturities as of December 31, 1998 and 1997
are as follows (in thousands):
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(2) Investments, continued
<TABLE>
<CAPTION>
Fixed Maturities, continued
Gross Gross
Carrying unrealized unrealized Estimated
Description value gains losses fair value
1998:
<S> <C> <C> <C> <C>
United States treasury
and government securities $ 56,037 $ 2,539 $ -- $ 58,576
States and political
subdivisions securities 38 -- -- 38
Foreign government securities 16,433 1,487 -- 17,920
Corporate securities 885,831 52,988 1,629 937,190
Mortgage-backed securities 524,821 9,794 3,703 530,912
Other debt securities 33,987 1,963 -- 35,950
-------- ------ ----- --------
$1,517,147 $68,771 $5,332 $1,580,586
======== ====== ===== ========
1997:
United States treasury
and government securities $ 62,478 $ 1,532 $ 38 $ 63,972
States and political
subdivisions securities 47 -- -- 47
Foreign government securities 16,428 1,154 -- 17,582
Corporate securities 989,245 49,050 2,648 1,035,647
Mortgage-backed securities 464,286 11,203 349 475,140
Other fixed maturities 38,251 1,640 -- 39,891
-------- ------ ----- --------
$1,570,735 $64,579 $3,035 $1,632,279
======== ====== ===== ========
</TABLE>
A provision of $408,937and $361,018 at December 31, 1998 and 1997,
respectively, has been provided for fixed maturities that have been
determined by the NAIC to have an impairment in value. In addition to the
asset valuation reserve provision, a loss contingency reserve of $1,700,000
has been established at December 31, 1998 and 1997, for projected fixed
maturity losses.
The carrying value and estimated fair value of investments in fixed
maturities as of December 31, 1998 are shown below by contractual maturity
(in thousands). Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
Carrying Estimated
value fair value
Due in 1 year or less $ 307,807 $ 326,471
Due after 1 year through 5 years 392,658 417,246
Due after 5 years through 10 years 270,020 282,911
Due after 10 years 21,841 23,045
-------- --------
992,326 1,049,673
Mortgage-backed securities 524,821 530,913
-------- --------
$1,517,147 $1,580,586
======== ========
The average duration until maturity for the above fixed maturities,
excluding mortgage-backed securities, is 3.51 years.
Proceeds from sales of fixed maturities were $66,334,584, $43,061,083 and
$86,235,854 during 1998, 1997 and 1996, respectively. Gross gains of
$1,734,636, $589,958 and $807,839 and gross losses of $1,885,632, $137,218
and $3,080,341 were realized on those sales in 1998, 1997 and 1996,
respectively. Net realized capital gains (losses), less applicable income
taxes of $3,207,823, $1,852,451 and $974,141 were transferred to the IMR in
1998, 1997 and 1996, respectively.
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(2) Investments, continued
Equity Securities
The cost, gross unrealized gains and losses, and estimated fair value on
unaffiliated equity securities are as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross Estimated
unrealized unrealized fair
Cost gains losses value
---- ----- ------ -----
<S> <C> <C> <C> <C>
December 31, 1998
Common stock $55,551 20,297 (2,090) 73,758
Preferred stock 71 -- (4) 67
December 31, 1997
Common stock $44,298 14,010 (2,323) 55,985
Preferred stock 102 4 -- 106
</TABLE>
Mortgage Loans on Real Estate
The Company's mortgage portfolio consists mainly of commercial mortgage
loans. The Company limits its concentrations of credit risk by diversifying
its mortgage loan portfolio so that loans made in any one state are not
greater than 20 percent (14 percent in Illinois) of the aggregate mortgage
loan portfolio balance and loans of no more than 2 percent of the aggregate
mortgage loan portfolio balance are made to any one borrower. In addition to
the asset valuation reserve provision, a loss contingency reserve of
$2,000,000 has been provided for mortgage loans on real estate as of
December 31, 1998 and 1997.
The carrying value and estimated fair value of mortgage loans as of December
31, 1998 and 1997 are as follows (in thousands):
Carrying Estimated
value fair value
1998 $306,037 $328,591
1997 362,958 385,689
Assets Designated
The carrying values of assets designated for regulatory authorities as of
December 31 are as follows (in thousands):
1998 1997
---- ----
Fixed maturities and
short-term investments $1,527,512 $1,565,951
Mortgage loans on real estate 306,037 362,958
Policy loans 101,569 101,061
-------- --------
$1,935,118 $2,029,970
======== ========
Net Investment Income
Components of net investment income as of December 31 are as follows (in
thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Fixed maturities $114,421 $123,395 $124,778
Equity securities 1,198 458 1,744
Mortgage loans on real estate 29,057 34,372 37,968
Investment real estate 9,244 10,158 11,456
Policy loans 6,664 6,571 6,513
Other invested assets (2,244) 4,711 4,390
Short-term investments 2,175 2,689 2,222
Derivative financial instruments (1,835) (1,445) (360)
Other 2,911 11 79
------- ------- -------
Gross investment income 161,591 180,920 188,790
Less investment expenses 12,593 12,728 14,217
------- ------- -------
Net investment income $148,998 $168,192 $174,573
======= ======= =======
</TABLE>
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(2) Investments, continued
Realized Gains and Losses
Net realized investment gains and losses as of December 31 are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Fixed maturities $(1,645) $1,843 $(3,194)
Equity securities 3,832 2,853 6,466
Mortgage loans on real estate 2,965 1,030 (433)
Investment real estate 413 3,056 428
Derivative financial instruments (108) -- (3,068)
Short-term investments and other
invested assets -- 12 --
---- ---- ----
5,457 8,794 199
Less:
Capital gains tax 2,566 3,057 (946)
Transfer to interest maintenance reserve 3,208 1,852 974
---- ---- ----
Net realized investment gains $ (317) $3,885 $ 171
==== ==== ====
</TABLE>
Investment Expenses
The Company incurs expense in managing its investment portfolio and
producing investment income. These expenses, which include salaries,
brokerage fees, securities custodial fees, real estate expenses and the
like, are deducted from investment income to determine the net investment
income reported in the financial statements.
Derivative Financial Instruments
As of December 31, 1998, the Company had an interest rate swap
agreement with a major financial institution, having a notional amount of
$100 million. Under the agreement, the Company receives interest payments at
a floating rate based on an interest rate index, which was 4.22 percent as
of December 31, 1998, and pays interest on the same notional amount at a
fixed rate, which was 6.96 percent. Amounts exchanged as a part of the
interest rate differential are accounted for as adjustments to investment
income. This interest rate swap agreement is scheduled to terminate in the
year 2000. As of December 31, 1998, the fair value of the interest swap
agreement was ($3,420,000). This negative fair value represents the
estimated amount the Company would have to pay at December 31, 1998, to
cancel the contract or transfer it to another party.
As of December 31, 1998, the Company had three interest rate cap agreements
with two major financial institutions, having a total notional amount of
$500 million. The Company paid $2,280,000 for these agreements which
terminate in 1999. The agreements entitle the Company to receive from the
counter-parties the amounts, if any, by which the selected market interest
rates exceed the strike rates stated in the agreements. The amount paid to
purchase the interest rate caps is included in other invested assets and
amortized over the term of the agreements. The fair value, which was -0- as
of December 31, 1998, represents the estimated amount the Company would
receive if it transferred the agreements to another party. As of December
31, 1998, the carrying value of the caps was $514,860.
In October 1998, the Company entered into a one-year total return swap
agreement. The purpose is to increase exposure to the high yield bond
market, consistent with the Company's strategic asset allocation. The
Company pays interest on a notional amount of $25 million based on the
one-month LIBOR interest rate and receives the total return of a high yield
bond index on the same notional amount. Net settlements are made quarterly.
The position is further hedged by ownership of a $25 million one-year bond
that pays a floating rate that is also based upon LIBOR. The net effect is
the equivalent of a $25 million investment in high yield fixed maturities
without incurring the specific credit risks and transaction costs of
purchasing individual securities. As of December 31, 1998, the Company has
recognized $510,808 of income relating to this derivative investment and its
fair value was $575,000.
During 1998, the Company sold S&P Stock Index futures with a face amount of
approximately $3.9 million. The purpose of the sales was to reduce exposure
to the domestic equity market, consistent with the Company's strategic asset
allocation. The futures positions were closed out prior to the end of the
year with a loss of $108,448 after certain equity investments were sold and
the futures were no longer necessary.
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(2) Investments, continued
Derivative Financial Instruments, continued
The Company is exposed to credit losses in the event of nonperformance by
the counter-parties to its swap and cap agreements. The Company anticipates,
however, that the counter-parties will be able to fully satisfy their
obligations under the contracts. The Company monitors the credit standing of
the counter-parties. The futures contracts are traded in an exchange and
have no counter-party risk.
(3) Investment Real Estate
A summary of investment real estate held as of December 31 is as follows (in
thousands):
1998 1997
Cost:
Investment real estate $83,537 $84,297
Home office 16,064 15,615
------ ------
99,601 99,912
Less accumulated depreciation 37,256 35,141
------ ------
$62,345 $64,771
====== ======
Investment real estate and the home office buildings are being depreciated
using the straight-line basis over the useful lives of these assets. In
addition to the asset valuation reserve provision, a loss contingency
reserve of $2,100,000 and $2,350,000 at December 31, 1998 and 1997,
respectively, has been provided for investment real estate.
(4) Note Payable
As of December 31, 1998, the Company has an outstanding liability for
borrowed money in the original amount of $1,300,000 as a result of a
non-recourse interest-free loan and grant made by the Community
Redevelopment Agency of the City of Los Angeles, California. The loan is
secured by real estate property with an appraisal value that exceeds the
loan principal balance. The loan will be amortized on a straight-line basis
over 240 months beginning in September, 2001. The loan agreement includes a
grant provision forgiving 15 percent of the original balance in September,
2001 upon the fulfillment of conditions specified in the loan agreement. It
is the Company's opinion that these conditions have been fully satisfied.
(5) Affiliation and Transactions with Affiliates and Related Parties
The Company has entered into an agreement of permanent affiliation with CUNA
Mutual Insurance Society (CMIS), a mutual multi-line insurer domiciled in
Wisconsin. The agreement is not a merger or consolidation, in that both
companies remain separate corporate entities, and both continue to be
separately owned and ultimately controlled by their respective policyholder
groups, who retain their voting rights without change. The agreement terms
include a provision for reinsurance of each company's individual life and
health business, joint development of business plans and distribution
systems for the sale of individual insurance and financial service products
within the credit union market, and a provision for the sharing of certain
resources and facilities. Expenses relating to shared resources and
facilities are allocated between the companies and their subsidiaries under
a jointly developed cost-sharing agreement. Expenses are allocated based on
specific identification or, if indeterminable, generally on the basis of
usage or benefit derived. These transactions give rise to intercompany
account balances, which are settled at least annually. Subsequent to each
year-end, the expense allocation process is subject to review by each
company. Based on these reviews, allocated expenses to each company may be
adjusted, if determined necessary. The Company's allocated expenses were
increased by $154,672, $975,672 and $736,162, during 1998, 1997 and 1996,
respectively.
On July 1, 1998, the Company formed a non-insurance subsidiary, CMIA
Wisconsin, Inc.. This subsidiary employs representatives who sell property
and casualty insurance coverage on behalf of the CUNA Mutual Group. CMIA
Wisconsin, Inc., is reimbursed for the costs associated with providing these
employment services by CUNA Mutual Insurance Agency, Inc., a non-insurance
affiliate, under terms of a service agreement between the two entities.
Equity security investments on December 31, 1998, include the Company's
wholly owned subsidiaries, Red Fox Motor Hotel Corporation and CMIA
Wisconsin, Inc. and the 50 percent ownership of CIMCO Inc. (CIMCO), a
non-insurance affiliate. The carrying value of the subsidiary investments on
the Company's books amounted to $3,278,009 and $1,306,903 at December 31,
1998 and 1997, respectively. Included in net investment income for 1996 was
dividend income of $1,328,364 from Century Life Insurance Company (a former
wholly owned subsidiary).
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(5) Affiliation and Transactions with Affiliates and Related Parties, continued
The Company allocates expenses to its subsidiaries. These expenses, such as
salaries, rents, depreciation, and other operating expenses, represent the
subsidiaries' share of expenses and are allocated based on specific
identification or, if indeterminable, generally on the basis of usage or
benefit derived. These transactions give rise to intercompany account
balances, which are settled monthly.
The Company has a note receivable from CUNA Mutual Investment Corporation
(CMIC) with a stated maturity date of January 15, 2011. The effective yield
on the date of the agreement was 10.62 percent. The yield varies over the
life of the note, as both the yield and the payment stream are determined
based on the pay-down activity of an underlying notional pool of Federal
National Mortgage Association mortgages. The structure of this arrangement
provides a hedge against the Company's fixed maturity holdings, as the
return varies inversely with the return on the fixed maturity portfolio. The
carrying value of the note was $5.1 million and $7.2 million at 1998 and
1997, respectively, and is included in other invested assets.
The Company is party to an agreement with CIMCO for investment advisory
services. CIMCO, 50 percent of which is owned by the Company and 50 percent
owned by CMIC, provides an investment program, which complies with policies,
directives and guidelines established by the Company. For these services,
the Company paid fees to CIMCO totaling $2,172,000, $2,115,000 and
$2,581,800, for 1998, 1997 and 1996, respectively.
CUNA Mutual created its own proprietary mutual funds entitled MEMBERS Mutual
Funds, which became available to the public in 1998. The carrying value of
the Company's investments in the funds was $20,332,202 and $11,000,078 at
1998 and 1997, respectively.
(6) Separate Accounts
The Company has three separate account components. The first component is
used for the investment of premiums on flexible premium variable universal
life insurance policies and has nine subaccounts, which invest exclusively
in shares of a single corresponding fund. The funds consist of the
following: Capital Appreciation Stock, Growth and Income Stock, Balanced
(combination of common stock and bond), Bond, Money Market, Treasury 2000,
International Stock, World Governments, and Emerging Growth. The second
component is used for the investment of group annuity premium deposits and
has 10 subaccounts, which invest in all but the Treasury 2000 fund, plus
High Income and Developing Markets subaccounts. The third component is used
for the investment of premiums received on variable annuity contracts and
has 10 subaccounts, which invest in all but the Treasury 2000 fund, plus
High Income and Developing Markets subaccounts.
(7) Annuity Reserves and Deposit Liabilities
The withdrawal characteristics of the Company's annuity contracts and
deposit funds as of December 31 are as follows (in thousands):
1998 1997
---- ----
Subject to discretionary withdrawal:
With market value adjustments $ 724,535 $ 581,114
At book value, less surrender charge 298,044 431,984
At market value 1,181,132 749,944
At book value, no charge or adjustment 714,170 710,936
-------- --------
2,917,881 2,473,978
Not subject to discretionary withdrawal 41,091 39,800
-------- --------
2,958,972 2,513,778
Reinsurance ceded 395,706 437,765
-------- --------
$2,563,266 $2,076,013
======== ========
(8) Reinsurance
In the ordinary course of doing business, the Company enters into
reinsurance agreements for the purpose of limiting its exposure to loss on
any one single insured or to diversify its risk and limit its overall
financial exposure. The Company would be liable in the event that a
reinsurer is unable to meet the obligations assumed under the reinsurance
agreements.
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(8) Reinsurance, continued
The effects of reinsurance on premium income and on benefit expenses
incurred are as follows (in thousands):
1998 1997 1996
---- ---- ----
Premium income:
Direct $458,408 $423,146 $371,031
Assumed 48,355 39,644 30,942
Ceded 22,268 33,180 43,382
------- ------- ------
Premium income, net of reinsurance $484,495 $429,610 $358,591
======= ======= ======
Benefit expenses:
Direct $136,727 $100,413 $84,171
Assumed 13,875 11,266 8,421
Ceded 13,667 12,501 11,328
------- ------ -----
Benefit expenses, net of reinsurance $136,935 $ 99,178 $81,264
======= ====== =====
All assumed business in the above table is assumed from affiliates and the
amounts ceded includes $18,369,127, $30,117,985 and $40,853,178 premiums as
of December 31, 1998, 1997 and 1996, respectively, and $12,278,628,
$11,140,828 and $10,214,240 benefits ceded as of December 31, 1998, 1997 and
1996, respectively, to affiliated companies. Policy reserves and claim
liabilities are net of reinsurance balances of $464,939,512, $501,275,170
and $534,173,135 at December 31, 1998, 1997 and 1996, respectively.
(9) Federal Income Taxes
The Company files a consolidated life/nonlife federal income tax return with
its subsidiaries, Red Fox Motor Hotel Corporation, PLAN AMERICA Program,
Inc., and CMIA of Wisconsin, Inc. The Company's policy is to collect from or
refund to its subsidiaries the amount of taxes applicable to its operations
had it filed a separate return. Net federal income taxes payable or
recoverable reflect balances payable to or due from subsidiaries and the
Internal Revenue Service (IRS) as follows (in thousands):
1998 1997
---- ----
Due from subsidiaries $ -- $ --
Due (to)/from IRS (5,025) 2,158
------ ------
$ (5,025) $ 2,158
------ -----
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(9) Federal Income Taxes, continued
The actual federal income tax expense differs from "expected" tax expense
computed by applying the statutory federal income tax rate of 35 percent to
the earnings before federal income taxes and net realized capital gains
(losses) for the following reasons (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Computed "expected" tax expense $5,460 35.0% $ 9,164 35.0% $8,396 35.0%
Nontaxable investment income (2,587) (16.58) (1,419) (5.4) (4,159) (17.3)
Mutual life insurance company
differential earnings tax 3,450 22.12 4,200 16.0 2,599 10.8
Deferred acquisition costs 681 4.37 1,465 5.6 614 2.6
Book and tax reserve change (1,569) (10.06) (670) (2.6) 1,400 5.8
Prior year over/under accrual (72) (0.46) (200) (.8) (1,500) (6.3)
General & administrative expenses (543) (3.48)
Other, net (619) (3.97) 857 3.3 363 1.6
Accrued policyholder dividends 235 1.51 (1,189) (4.5) -- --
----- ---- ------ ---- ----- ----
Total federal income tax expense $4,436 28.45% $12,208 46.6% $7,713 32.2%
===== ==== ====== ==== ===== ====
</TABLE>
The Company's consolidated federal income tax return has been examined by
the IRS through the year ending December 31, 1994. The Company is currently
under examination for the years ending December 31, 1995 and December 31,
1996. The Company does not expect the examination to result in a material
adjustment.
Income tax expense (benefit) on net realized capital gains (losses) amounted
to $2,565,792, $3,056,961, and ($946,308) for 1998, 1997, and 1996,
respectively. Of these amounts $1,727,293, $997,476, and $524,540, were
transferred to the IMR in 1998, 1997, and 1996, respectively. Net income
taxes paid were $11,000,000, $12,500,000, and $16,000,000 in 1998, 1997, and
1996, respectively.
(10) Benefit Plans
Defined Benefit Pension Plans
The Company has two noncontributory defined benefit pension plans that cover
substantially all employees and agents who meet eligibility requirements.
Until December 12, 1997, the pension plans were funded through a Deposit
Administration contract issued by the Company. On December 12, 1997, the
Company transferred the plan assets from the Deposit Administration contract
to State Street Bank and Trust Company as trustee. The amount transferred
was $43,871,243 for the defined benefit pension plans. Plan assets are now
invested primarily in the Ultra Series Funds, a family of mutual funds,
which serves as the investment vehicle for the Company's variable insurance,
annuity and pension products. The total pension expense for 1998, 1997 and
1996 was $2,614,251, $2,673,924 and $673,542, respectively.
The actuarial present value of accumulated plan benefits and plan net assets
available for benefits for the Company's pension plans as of January 1, 1998
and 1997 are as follows (in thousands):
1998 1997
---- ----
Actuarial present value of accumulated plan benefits
Vested $35,556 $ 32,101
Nonvested 741 1,008
------ ------
$36,297 $ 33,109
====== ======
Net assets available for benefits $54,074 $ 46,944
====== ======
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(10) Defined Benefit Pension Plans, continued
The discount rate used in determining the actuarial present value of
accumulated plan benefits on the two plans was 7 percent for 1998 and 1997.
Defined Contribution Pension Plans
The Company has two defined contribution plans (401[k] and thrift) which
cover all regular full-time employees and agents who meet certain
eligibility requirements. Under the plans, the Company contributes an amount
equal to 50 percent of the employees' contributions, up to a maximum of 3
percent of the employees' salaries. The Company contributions were
approximately $1,212,000, $997,500 and $1,141,000 for the years ended
December 31, 1998, 1997 and 1996, respectively.
Nonqualified Pension Plans
In addition to the defined benefit pension plans mentioned above, the
Company has also established three deferred compensation plans and two
supplemental benefit plans. The deferred compensation plans are the CUNA
Mutual Life Insurance Company Deferred Compensation Plan for Agents and
Managers, which had a liability of $759,110 and $651,858 as of December 31,
1998 and 1997, respectively; the CUNA Mutual Life Insurance Company Deferred
Compensation Plan for Home Office Employees, which had a liability of
$328,758 and $347,617 as of December 31, 1998 and 1997, respectively; and
the CUNA Mutual Life Insurance Company Special Deferred Compensation Plan
for Managers, which had a liability of $510,264 and $449,457 as of December
31, 1998 and 1997, respectively.
The supplemental retirement plans include the CUNA Mutual Life Insurance
Company Supplemental Retirement Plan for Agents and Managers, which replaces
the loss of benefits under the regular pension plan which occurs when
deferred compensation is removed from an agent's or manager's earnings base
in order to calculate pension benefits. The balance of the liability for
this plan is $309,590 and $367,199 as of December 31, 1998 and 1997,
respectively. The other plan is the CUNA Mutual Life Insurance Company
Supplemental Retirement Plan for Home Office Employees, which replaces the
loss of benefits under the regular pension plan which occurs when deferred
compensation is removed from a home office employee's earnings base in order
to calculate pension benefits. The balance of the liability for this plan is
$21,662 and $45,052 as of December 31, 1998 and 1997, respectively.
Post-retirement Benefit Plans
The Company provides certain medical and life insurance benefits for
retirees and their beneficiaries and covered dependents. The Company's
medical benefit plan provides subsidized coverage after retirement for
eligible full-time employees and agents, their spouses, and dependents, up
to age 65. Starting at age 65, retirees pay the full cost of their coverage.
Additionally, the Company provides group term life insurance for its
retirees, the face amount of which is based on the individual's salary at
retirement. The cost of post-retirement benefits other than pensions is
recognized by the Company during the employee's active working careers. The
Company adopted this accounting policy as of January 1, 1992, and is
amortizing the related initial impact over twenty years.
The following information is presented on a combined plan basis and sets
forth the accumulated post-retirement benefit obligation, the liability for
such obligations included in the accompanying Company financial statements,
and the post-retirement benefit expense at December 31, 1998 and 1997 (in
thousands):
1998 1997
---- ----
Accumulated post-retirement benefit obligation:
Active plan participants $ 2,746 $ 2,716
Inactive plan participants 5,870 5,224
----- -----
8,616 7,940
Transition obligation (1,599) (1,731)
Unrecognized loss (1,704) (2,061)
Unrecognized prior service cost (32) (44)
----- -----
Accrued post-retirement benefit cost $ 5,281 $ 4,104
===== =====
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
(9) Benefit Plans, continued
Post-retirement Benefit Plans, continued
Net periodic post-retirement benefit expense for 1998 and 1997, including
the following components (in thousands):
1998 1997
---- ----
Service cost $ 563 $ 889
Interest cost on projected benefit obligation 617 489
Amortization
Prior service cost 12 12
Transition obligation 133 133
Unrecognized loss 252 553
----- -----
Net periodic post-retirement benefit expense $ 1,577 $ 2,076
===== =====
The weighted average discount rate used in determining the post-retirement
benefit obligation at December 31, 1998 and 1997, was 7.5 percent; the
initial health care cost trend rate was 9.0 percent, trending down to an
ultimate rate of 5.0 percent; and the weighted average rate of compensation
increase was 5.0 percent. The health care cost trend rate assumption has a
significant effect on the amounts reported. To illustrate, increasing the
assumed health care cost trend rates by one percentage point in each year
would increase the post-retirement benefit obligation as of December 31,
1998, by $2,322,112 and the estimated eligibility cost and interest cost
components of net periodic post-retirement benefit cost for 1998 by
$373,296.
(11) Commitments and Contingencies
The Company participates in a securities lending program. All securities
loaned are fully collateralized with cash, U.S. government securities, or
irrevocable bank letters of credit. At December 31, 1998, the par value of
securities loaned by the Company totaled $9,935,000.
The Company had no outstanding loan commitments at December 31, 1998.
The Company is a defendant in various legal actions arising out of the
conduct of its business. In the opinion of management and in-house legal
counsel, the ultimate liability, if any, resulting from all such pending
actions will not materially affect the financial position or results of
operations of the Company.
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Schedule I - Summary of Investments -
Other than Investments in Related Parties
December 31, 1998
<TABLE>
<CAPTION>
Amount at which
shown in the
Statutory Statement
of Admitted Assets,
Cost Value Liabilities and Surplus
Fixed maturities:
Bonds:
<S> <C> <C> <C>
United States government and government
agencies and authorities $ 53,036,590 58,575,230 56,036,590
States, municipalities and political subdivisions 38,258 38,000 38,258
Foreign governments 16,432,837 17,920,005 16,432,837
Corporate securities 886,239,900 937,190,444 885,830,963
Foreign corporate securities 33,986,628 35,949,852 33,986,628
Mortgage-backed securities 524,821,267 230,912,759 524,821,267
------------ ------------ ------------
Total fixed maturities 1,517,555,480 1,580,586,290 1,517,146,543
============ ============ ============
Equity securities:
Common stocks:
Public utilities 2,066,808 2,001,150 2,001,150
Banks, trust and insurance companies 3,792,264 5,762,058 5,762,055
Industrial, miscellaneous and all other 49,691,636 65,995,304 65,995,304
Non-redeemable preferred stocks 71,222 71,222 71,222
------------ ------------ ------------
Total equity securities 55,621,930 73,829,734 73,829,731
------------ ============ ------------
Mortgage loans on real estate 306,036,561 306,036,561
Investment real estate 14,195,998 14,195,998
Real estate acquired in satisfaction of debt 48,149,533 48,149,533
Policy loans 101,568,838 101,568,838
Other long-term investments 16,799,356 16,799,356
Investment receivable 19,886,019 19,886,019
Short-term investments 74,481,372 74,481,372
------------ ------------
Total investments $2,154,295,087 2,172,093,951
============ ============
</TABLE>
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Schedule III - Supplementary Insurance Information
Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Future
policy Other
benefits, policy
Deferred losses, claims
policy claims and
acquisition and loss Unearned benefits Premium
Segment costs expenses premiums payable revenue
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1998:
Life insurance $ -- 1,764,656,059 -- 9,850,063 687,827,795
========= ============ ======== ========= ===========
Year ended December 31, 1997:
Life insurance $ -- 1,838,556,204 -- 7,181,708 588,628,879
========= ============ ======== ========= ===========
Year ended December 31, 1996:
Life insurance $ -- 1,911,927,116 -- 5,816,767 456,216,468
========= ============ ======== ========= ===========
Benefits Amortization
claims of deferred
Net losses and policy Other
investment settlement acquisition operating Premium
income expenses costs expenses written
Year ended December 31, 1998:
Life insurance $148,998,386 307,608,912 -- 110,315,105 --
=========== =========== ======== ========== ========
Year ended December 31, 1997:
Life insurance $168,191,667 253,871,140 -- 108,657,518 --
=========== =========== ======== ========== ========
Year ended December 31, 1996:
Life insurance $174,573,265 268,333,774 -- 61,758,217 --
=========== =========== ======== ========== ========
</TABLE>
<PAGE>
CUNA MUTUAL LIFE INSURANCE COMPANY
Schedule IV - Reinsurance
Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Assumed Percentage
Ceded to other from other of amount
Gross amount companies companies Net amount assumed to net
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1998:
Life insurance in force $ 11,220,070,381 2,032,638,000 2,805,647,619 11,993,080,000 23.4%
============== ============ ============ ============= ======
Premiums
Life insurance $ 456,220,390 21,482,248 31,465,273 466,203,415
Accident and health insurance 2,187,481 785,275 16,889,420 18,291,626
-------------- ------------ ------------ -------------
Total premiums $ 458,407,871 22,267,523 48,354,693 484,495,041 10.0%
============== ============ ============ ============= ======
Year ended December 31, 1997:
Life insurance in force $ 11,011,821,402 1,730,140,000 2,358,526,598 11,640,208,000 20.3%
============== ============ ============ ============= ======
Premiums
Life insurance $ 421,255,332 32,540,795 26,009,624 414,724,161
Accident and health insurance 1,891,033 639,302 13,633,904 14,885,635
-------------- ------------ ------------ -------------
Total premiums $ 423,146,365 33,180,097 39,643,528 429,609,796 9.2%
============== ============ ============ ============= ======
Year ended December 31, 1996:
Life insurance in force $ 11,034,287,601 1,593,020,119 1,950,126,518 11,391,394,000 17.1%
============== ============ ============ ============= ======
Premiums
Life insurance $ 369,320,913 42,927,795 20,190,933 346,584,051
Accident and health insurance 1,709,891 454,396 10,751,785 12,007,280
-------------- ------------ ------------ -------------
Total premiums $ 371,030,804 43,382,191 30,942,718 358,591,331 8.6%
============== ============ ============ ============= ======
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
CUNA Mutual Life Insurance Company:
We have audited the accompanying statutory statements of admitted assets,
liabilities, and surplus of CUNA Mutual Life Insurance Company as of December
31, 1998 and 1997, and the related statutory statements of operations, changes
in unassigned surplus, and cash flows for each of the years in the three-year
period ended December 31, 1998. In connection with our audits of the financial
statements, we also have audited the financial statement schedules I, III, and
IV. These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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.
As described more fully in note 1 to the financial statements, the Company
prepared these financial statements using accounting practices prescribed or
permitted by the Iowa Department of Commerce, Insurance Division, which
practices differ from generally accepted accounting principles. The effects of
the variances between the statutory basis of accounting and generally accepted
accounting principles on the 1997 and 1996 financial statements are also
described in note 1. The effects of such variances on the 1998 financial
statements, although not reasonably determinable as of this date, are presumed
to be material.
In our opinion, because of the effects of the matters discussed in the third
paragraph of this report, the financial statements referred to above do not
present fairly, in conformity with generally accepted accounting principles, the
financial position of CUNA Mutual Life Insurance Company as of December 31, 1998
and 1997, or the results of its operations or its cash flows for each of the
years in the three-year period ended December 31, 1998.
Also, in our opinion, the financial statements referred to above present fairly,
in all material respects, the admitted assets, liabilities and surplus of CUNA
Mutual Life Insurance Company as of December 31, 1998 and 1997, and the results
of its operations and its cash flows for each of the years in the three-year
period ended December 31, 1998, on the basis of accounting described in note 1.
Also, in our opinion, the related financial statement schedules, when considered
in relation to the basic financial statements, taken as a whole, present fairly,
in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Des Moines, Iowa
March 19, 1999
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
All required financial statements are included in Part B.
(b) Exhibits
1. Certified resolution of the board of directors of Century Life
of America (the "Company") establishing Century Variable
Annuity Account (the "Account"). Incorporated herein by
reference to post-effective amendment number 5 to this Form
N-4 registration statement (File No. 33-73738) filed with the
Commission on April 19, 1996.
2. Not Applicable.
3. (a) Distribution Agreement Between CUNA Mutual Life Insurance
Company and CUNA Brokerage Services, Inc. for Variable Annuity
Contracts dated January 1, 1997. Incorporated herein by
reference to post-effective amendment number 6 to this Form
N-4 registration statement (File No. 33-73738) filed with the
Commission on April 18, 1997.
(b) Servicing Agreement related to the Distribution Agreement
between CUNA Mutual Life Insurance Company and CUNA Brokerage
Services, Inc. for Variable Annuity Contracts dated January 1,
1997. Incorporated herein by reference to post-effective
amendment number 6 to this Form N-4 registration statement
(File No. 33-73738) filed with the Commission on April 18,
1997.
4. (a) Variable Annuity Contract. Incorporated herein by reference to
post-effective amendment number 6 to this Form N-4
registration statement (File No. 33-73738) filed with the
Commission on April 18, 1997.
(b) State Variations to Contract Form No. 2800.
(c) TSA Endorsement. Incorporated herein by reference to
post-effective amendment number 7 to this Form N-4
registration statement (File No. 33-73738) filed with the
Commission on April 17, 1998.
(d) IRA Endorsement. Incorporated herein by reference to
post-effective amendment number 6 to this Form N-4
registration statement (File No. 33-73738) filed with the
Commission on April 18, 1997.
(e) Roth IRA Endorsement.
(f) Executive Benefit Plan Endorsement. Incorporated herein by
reference to post-effective amendment number 8 to this Form
N-4 registration statement (File No. 33-73738) filed with the
Commission on February 24, 1999.
5. (a) Variable Annuity Application. Incorporated herein by reference
to post-effective amendment number 8 to this Form N-4
registration statement (File No. 33-73738) filed with the
Commission on February 24, 1999.
(b) State Variations to Application Form No. 1676.
(c) State Variations to Application Form No. 99-VAAPP.
6. (a) Certificate of Existence of the Company. Incorporated herein
by reference to post-effective amendment number 5 to this Form
N-4 registration statement (File No. 33-73738) filed with the
Commission on April 19, 1996.
(b) Articles of Incorporation of the Company. Incorporated herein
by reference to post-effective amendment number 6 to this Form
N-4 registration statement (File No. 33-73738) filed with the
Commission on April 18, 1997.
(c) Bylaws of the Company. Incorporated herein by reference to
post-effective amendment number 6 to this Form N-4
registration statement (File No. 33-73738) filed with the
Commission on April 18, 1997.
7. Not Applicable.
8. (a) Letter Agreement between Rowe Price-Fleming International,
Inc. and the Company dated April 1, 1997. Incorporated herein
by reference to post-effective amendment number 8 to this Form
N-4 registration statement (File No. 33-73738) filed with the
Commission on February 24, 1999.
(b) Participation Agreement between MFS Variable Insurance Trust
and the Company dated November 21, 1997. Incorporated herein
by reference to post-effective amendment number 8 to this Form
N-4 registration statement (File No. 33-73738) filed with the
Commission on February 24, 1999.
(c) Participation Agreement between Oppenheimer Variable Account
Funds, OppenheimerFunds, Inc. and the Company, dated February
20, 1997. Incorporated herein by reference to post-effective
amendment number 8 to this Form N-4 registration statement
(File No. 33-73738) filed with the Commission on February 24,
1999.
(d) Participation Agreement between Templeton Variable Products
Series Fund, Franklin Templeton Distributors, Inc. and the
Company dated March 31, 1997. Incorporated herein by reference
to post-effective amendment number 8 to this Form N-4
registration statement (File No. 33-73738) filed with the
Commission on February 24, 1999.
9. Opinion of Counsel from Barbara L. Secor, Esquire.
Incorporated herein by reference to post-effec tive amendment
number 7 to tis Form N-4 registration Statement (File No.
33-73738) filed with the Commission on April 17, 1998.
10. KPMG Peat Marwick LLP Consent.
11. Not applicable.
12. Not applicable.
13. Schedules of Performance Data Computation. Incorporated herein
by reference to post-effective amendment number 8 to this Form
N-4 registration statement (File No. 33-73738) filed with the
Commission on February 24, 1999.
14. Financial Data Schedule electronic submission (Exhibit 27).
Power of Attorney. Incorporated herein by reference to post-effective
amendment number 8 to this Form N-4 registration statement (File No.
33-73738) filed with the Commission on February 24, 1999.
<PAGE>
Item 25. Directors and Officers of the Company
Name Position/Office
Directors
James C. Barbre** Director
Robert W. Bream** Director
Wilfred F. Broxterman** Director
James L. Bryan** Director & Secretary
Loretta M. Burd** Director
Ralph B. Canterbury** Director
Joseph N. Cugini** Director & Treasurer
Rudolf J. Hanley** Director
Jerald R. Hinrichs** Director
Michael B. Kitchen** Director
Robert T. Lynch** Director
Brian L. McDonnell** Director
C. Alan Peppers** Director
Omer K. Reed** Director
Richard C. Robertson** Director
Rosemarie M. Shultz** Director
Neil A. Springer** Director & Vice Chairman
Farouk D.G. Wang** Director
Larry T. Wilson** Director & Chairman of the Board
Executive Officers
Wayne A. Benson** CUNA Mutual Life Insurance Company*
Chief Officer - Sales
Michael S. Daubs** CUNA Mutual Life Insurance Company*
Chief Officer - Investments
John A. Gibson** CUNA Mutual Life Insurance Company*
Chief Officer - Marketing
James M. Greaney** CUNA Mutual Life Insurance Company*
Chief Officer - Corporate Services
Richard J. Keintz** CUNA Mutual Life Insurance Company*
Chief Officer - Finance and Information Services
Michael B. Kitchen** CUNA Mutual Life Insurance Company*
President and Chief Executive Officer
Reid A. Koenig*** CUNA Mutual Life Insurance Company*
Chief Officer - Operations
Daniel E. Meylink, Sr.** CUNA Mutual Life Insurance Company*
Chief Officer - Member Services
Kevin G. Shea** CUNA Mutual Life Insurance Company*
Chief Officer - Lending Services
John M. Waggoner** CUNA Mutual Life Insurance Company*
Chief Officer - Legal
* CUNA Mutual Life Insurance Company entered into a permanent affiliation
with the CUNA Mutual Insurance Society on July 1, 1990. Those persons
marked with an "*" hold identical titles with CUNA Mutual Insurance
Society. The most recent position has been given for those persons who
have held more than one position with CUNA Mutual Life Insurance
Company or CUNA Mutual Insurance Society during the last five year
period.
** Principal place of business is 5910 Mineral Point Road, Madison,
Wisconsin 53705.
*** Principal place of business is 2000 Heritage Way, Waverly, Iowa 50677.
<PAGE>
Item 26. Persons Controlled by or Under Common Control With the Depositor or
Registrant. The registrant is a segregated asset account of the Company and is
therefore owned and controlled by the Company. The Company is a mutual life
insurance company and therefore is controlled by its contractowners.
Nonetheless, various companies and other entities are controlled by the Company
and may be considered to be under common control with the registrant or the
Company. Such other companies and entities, together with the identity of their
controlling persons (where applicable), are set forth on the following
organization charts.
In addition, as described in the prospectus under the caption "CUNA Mutual Life
Insurance Company," by virtue of an Agreement of Permanent Affiliation with CUNA
Mutual Insurance Society ("CUNA Mutual"), the Company and the registrant could
be considered to be affiliated persons of CUNA Mutual. Likewise, CUNA Mutual and
its affiliates, together with the identity of their controlling persons (where
applicable), are set forth on the following organization charts.
See organization charts on following page.
<PAGE>
CUNA Mutual Insurance Society
ORGANIZATIONAL CHART AS OF DECEMBER 31, 1998
CUNA Mutual Insurance Society
Business: Life, Health & Disability Insurance
May 20, 1935*
State of domicile: Wisconsin
CUNA Mutual Insurance Society, either directly or indirectly is the controlling
company of the following wholly-owned subsidiaries:
1. CUNA Mutual Investment Corporation
Business: Holding Company
September 15, 1972*
State of domicile: Wisconsin
CUNA Mutual Investment Corporation is the owner of the following subsidiaries:
a. CUMIS Insurance Society, Inc.
Business: Corporate Property/Casualty Insurance
May 23, 1960*
State of domicile: Wisconsin
CUMIS Insurance Society, Inc. is the 100% owner of the
following subsidiary:
(1) Credit Union Mutual Insurance Society New
Zealand Ltd.
Business: Fidelity Bond Coverage
November l, 1990*
State of domicile: Wisconsin
b. CUNA Brokerage Services, Inc.
Business: Brokerage
July 19, 1985*
State of domicile: Wisconsin
c. CUNA Mutual General Agency of Texas, Inc.
Business: Managing General Agent
August 14, 1991*
State of domicile: Texas
d. MEMBERS Life Insurance Company
Business: Credit Disability/Life/Health
February 27, 1976*
State of domicile: Wisconsin
Formerly CUMIS Life & CUDIS
e. International Commons, Inc.
Business: Special Events
January 13, 1981*
State of domicile: Wisconsin
f. CUNA Mortgage Corporation
Business: Mortgage Servicing
November 20, 1978*
State of domicile: Wisconsin
(1) CU Mortgage Corporation Inc.
Business: Mortgage Servicing
May 28, 1987*
State of domicile: California
g. Investors Equity Insurance Company, Inc.
Business: Private Mortgage Insurance
April 14, 1994*
State of Domicile: California
h. CUNA Mutual Insurance Agency, Inc.
Business: Leasing/Brokerage
March 1, 1974*
State of domicile: Wisconsin
Formerly CMCI Corporation
i. Stewart Associates Incorporated
Business: Credit Insurance
March 6, 1998
State of domicile: Wisconsin
CUNA Mutual Insurance Agency, Inc. is the 100% owner of the following
subsidiaries:
(1) CM Field Services, Inc.
Business: Serves Agency Field Staff
January 26,1994*
State of domicile: Wisconsin
(2) CUNA Mutual Insurance Agency of Alabama, Inc.
Business: Property & Casualty Agency
May 27, 1993*
State of domicile: Alabama
(3) CUNA Mutual Insurance Agency of New Mexico, Inc.
Business: Brokerage of Corporate & Personal Lines
June 10, 1993*
State of domicile: New Mexico
(4) CUNA Mutual Insurance Agency of Hawaii, Inc.
Business: Property & Casualty Agency
June 10, 1993*
State of domicile: Hawaii
(5) CUNA Mutual Casualty Insurance Agency of Mississippi, Inc.
Business: Property & Casualty Agency
June 24, 1993 *
State of domicile: Mississippi
(6) CUNA Mutual Insurance Agency of Kentucky, Inc.
Business: Brokerage of Corporate & Personal Lines
October 5, 1994*
State of domicile: Kentucky
(7) CUNA Mutual Insurance Agency of Massachusetts, Inc.
Business: Brokerage of Corporate & Personal Lines
January 27, 1995*
State of domicile: Massachusetts
2. C.U.I.B.S. Pty. Ltd.
Business: Brokerage
February 18,1981*
Country of domicile: Australia
3. CUNA Caribbean Insurance Society Limited
Business: Life and Health
July 4, 1985*
Country of domicile: Trinidad and Tobago
* Dates shown are dates of acquisition, control or organization.
CUNA Mutual Insurance Society, either directly or through a wholly-owned
subsidiary, has a partial ownership interest in the following:
1. C. U. Family Insurance Services, Inc./Colorado
50% ownership by CUNA Mutual Insurance Agency, Inc.
50% ownership by Colleague Services Corporation
September 1, 1981
2. C. U. Insurance Services, Inc./Oregon
50% ownership by CUNA Mutual Insurance Agency, Inc.
50% ownership by Oregon Credit Union League
December 27, 1989
3. CUFIS of New York, Inc.
50% ownership by CUNA Mutual Insurance Agency, Inc. 50% ownership by
CUC Services, Inc.
March 28, 1991
4. The CUMIS Group Limited
63.449% ownership by CUNA Mutual Insurance Society (as of 12-31 -96)
5. CIMCO Inc. (CIMCO)
50% ownership by CUNA Mutual Investment Corporation 50% ownership by
CUNA Mutual Life Insurance Company January 1, 1992
6. GWARANT, Ltd.
50% ownership by CUNA Mutual Insurance Society 50% ownership by
Foundation for Polish Credit Unions February 18, 1994
7. CUNA Mutual Insurance Agency of Ohio, Inc.
1% of value owned by Michael Corcoran (CUNA Mutual Employee) subject to
a voting trust agreement, Michael B. Kitchen as Voting Trustee.
99% of value-owned by CUNA Mutual Insurance Agency, Inc. Due to Ohio
regulations, CUNA Mutual Insurance Agency, Inc. holds no voting stock
in this corporation.
June 14, 1993
8. SECURITY Management Company, Ltd. (Hungary)
90% ownership by CUNA Mutual Insurance Society
10% ownership by: Federation of Savings Cooperatives
Savings Cooperative of Szoreg
Savings Cooperative of Szekkutas
(collectively called Hungarian Associates)
September 5, 1992
9. CMG Mortgage Insurance Company
50% ownership by CUNA Mutual Investment Corporation 50% ownership by
PMI Mortgage Insurance Co.
April 14, 1994
10. Cooperators Life Assurance Society Limited (Jamaica) CUNA Mutual
Insurance Society owns 122,500 shares Jamaica Co-op Credit Union League
owns 127,500 shares (NOTE: Awaiting authority to write business) May
10, 1990
11. CU Interchange Group, Inc.
Owned by CUNA Mutual Investment Corporation, CUNA Service Group and
various state league organizations December 15, 1993 - CUNA Mutual
Investment Corporation purchased 100 shares stock
12. CUNA Service Group, Inc.
April 22, 1974 - CUNA Mutual Insurance Society purchased 200.71 shares
13. Credit Union Service Corporation
Owned by CUNA Mutual Investment Corporation, Credit Union National
Association, Inc. and 18 state league organizations March 29, 1996 -
CUNA Mutual Investment Corporation purchased 1,300,000 shares of stock
Partnerships
1. LeaSo Partners, a California partnership
CUNA Mutual Insurance Society - 50% Partner
California Credit Union League - 50% Partner
December 29, 1981
2. CM CUSO Limited Partnership, a Washington Partnership
CUMIS Insurance Society, Inc. - General Partner
Credit Unions in Washington - Limited Partners
June 14, 1993
Limited Liability Companies
1. "Sofia LTD." (Ukraine)
99.96% CUNA Mutual Insurance Society
.04% CUMIS Insurance Society, Inc.
March 6, 1996
2. 'FORTRESS' (Ukraine)
80% "Sofia LTD."
19% The Ukrainian National Association of Savings and Credit Unions
1% Service Center by UNASCU
September 25, 1996
Affiliated (Nonstock)
1. MEMBERS Prime Club, Inc.
August 8, 1978
2. CUNA Mutual Group Foundation, Inc.
July 5, 1967
3. CUNA Mutual Life Insurance Company
July 1, 1990
<PAGE>
CUNA Mutual Life Insurance Company
ORGANIZATIONAL CHART AS OF DECEMBER 31, 1998
CUNA Mutual Life Insurance Company
An Iowa mutual life insurance company
Fiscal Year End: December 31
CUNA Mutual Life Insurance Company is the controlling company for the following
subsidiaries:
1. Red Fox Motor Hotel Corporation
An Iowa Business Act Corporation.
100% ownership by CUNA Mutual Life Insurance Company
2. CIMCO Inc.
An Iowa Business Act Corporation
50% ownership by CUNA Mutual Life Insurance Company
50% ownership by CUNA Mutual Investment Corporation
CIMCO Inc. is the investment adviser of:
Ultra Series Fund
MEMBERS Mutual Funds
3. Plan America Program, Inc.
A Maine Business Act Corporation
100% ownership by CUNA Mutual Life Insurance Company
4. CMIA Wisconsin Inc.
A Wisconsin Business Act Corporation
100% ownership by CUNA Mutual Life Insurance Company
<PAGE>
Item 27. Number of Contractowners
As of January 31, 1999, there were 12,247 non-qualified contracts outstanding
and 17,039 qualified contracts outstanding.
<PAGE>
Item 28. Indemnification.
Section 10 of the Bylaws of the Company and Article VIII, Section 4 of
the Company's charter together provide for indemnification of officers
and directors of the Company against claims and liabilities that such
officers and/or directors become subject to by reason of having served
as an officer or director of the Company or any subsidiary or affiliate
of the Company. Such indemnification covers liability for all actions
alleged to have been taken, omitted, or neglected by such officers or
directors in the line of duty as an officer or director, except
liability arising out of an officer's or a director's willful
misconduct.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
<PAGE>
Item 29. Principal Underwriter
(a) CUNA Brokerage is the registrant's principal underwriter and
for certain variable life insurance contracts issued by CUNA
Mutual Life Variable Account. CUNA Brokerage is also principal
underwriter for the Ultra Series Fund, an underlying Fund for
the Company's variable products. CUNA Brokerage is the
distributor of MEMBERS Mutual Funds, a group of open-end
investment companies.
(b) Officers and Directors of CUNA Brokerage.
Name and Principal Positions and Offices
Business Address With the Underwriter
Wayne A. Benson* Director & President
Donna C. Blankenheim* Assistant Secretary
Timothy L. Carlson** Assistant Treasurer
Jan C. Doyle* Assistant Secretary
John C. Fritsche Assistant Vice President
Members Investment Services, Inc
4455 LBJ Freeway
Suite 1108
Dallas, TX 75244
Lawrence R. Halverson* Director
John W. Henry* Director & Vice President
Michael G. Joneson* Director, Treasurer & Secretary
Brian C. Lasko** Managing Principal
Campbell D. McHugh* Compliance Officer
Barbara L. Secor** Assistant Secretary
Jason E. Smith* Assistant Secretary
Sandra K. Steffeney Vice President
CUNA Mutual Group - NWMD
P.O. Box 3919
Federal Way, WA 98063
Joanne M. Toay* Assistant Compliance Officer
Michael A. Ullsperger* Assistant Treasurer
Scott Vignovich** Assistant Vice President
John M. Waggoner* Chief Officer - Legal
John W. Wiley* Associate Compliance Officer
*The principal business address of these persons is: 5910 Mineral Point Road,
Madison, Wisconsin 53705.
**The principal business address of these persons is: 2000 Heritage Way,
Waverly, Iowa 50677.
(c) CUNA Brokerage Services is the only principal underwriter. The
Distribution Agreement between the Company and CUNA Brokerage
Services and the Related Servicing Agreement between the
Company and CUNA Brokerage Services specify the services
provided by each party. Those contracts have been filed as
exhibits under Item 24(b)(3). The Company pays a dealer
concession of approximately six percent, as more fully
described in Schedule A of the Servicing Agreement. The total
dealer's concession for the year ended December 31, 1998, was
$22,006,124. The contracts provide that the Company performs
certain functions on behalf of the distributor. For example,
the Company sends confirmation statements to Owners and the
Company maintains payroll records for the registered
representatives. Some of the dealer concession is used to
reimburse the Company for the services it performs on behalf
of the distributor.
<PAGE>
Item 30. Location Books and Records
All of the accounts, books, records or other documents required to be
kept by Section 31(a) of the Investment Company Act of 1940 and rules
thereunder, are maintained by the Company at 2000 Heritage Way, Waverly, Iowa
50677 or at CIMCO Inc. or CUNA Mutual Group, both at 5910 Mineral Point Road,
Madison, Wisconsin 53705.
<PAGE>
Item 31. Management Services
All management contracts are discussed in Part A or Part B of this registration
statement.
<PAGE>
Item 32. Undertakings and Representations
(a) The registrant undertakes that it will 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 as long as purchase payments under the Contracts offered
herein are being accepted.
(b) The registrant undertakes that it will 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 and send to the
Company for a statement of additional information.
(c) The registrant undertakes to deliver any statement of
additional information and any financial statements required
to be made available under this Form N-4 promptly upon written
or oral request to the Company at the address or phone number
listed in the Prospectus.
(d) The Company represents that in connection with its offering of
the Contracts as funding vehicles for retirement plans meeting
the requirements of Section 403(b) of the Internal Revenue
Code of 1986, it is relying on a no-action letter dated
November 28, 1988, to the American Council of Life Insurance
(Ref. No. IP-6-88) regarding Sections 22(e), 27(c)(1), and
27(d) of the Investment Company Act of 1940, and that
paragraphs numbered (1) through (4) of that letter will be
complied with.
(e) The Company represents that the fees and charges deducted
under the Contracts, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by CUNA Mutual Life Insurance
Company.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, CUNA
Mutual Life Variable Annuity Account, certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, all in the City of Madison, and State of Wisconsin, on the 19th day
of April, 1999.
CUNA Mutual Life Variable Annuity Account
(Registrant)
By: /s/ Michael B. Kitchen
Michael B. Kitchen
President
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the depositor, CUNA
Mutual Life Insurance Company, certifies that it meets all of the requirements
for effectiveness of this Registration Statement pursuant to rule 485(b) under
the Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized, all in the
City of Madison, and State of Wisconsin, on the 19th day of April, 1999.
CUNA Mutual Life Insurance Company
(Depositor)
By: /s/ Michael B. Kitchen
Michael B. Kitchen
President
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
and on the dates indicated.
<TABLE>
SIGNATURE AND TITLE DATE SIGNATURE AND TITLE DATE
<S> <C> <C> <C>
/s/James C. Barbre * /s/Robert T. Lynch *
James C. Barbre, Director Robert T. Lynch, Director
/s/Robert W. Bream * /s/Brian L. McDonnell *
Robert W. Bream, Director Brian L. McDonnell, Director
/s/Wilfred F. Broxterman * /s/C. Alan Peppers *
Wilfred F. Broxterman, Director C. Alan Peppers, Director
/s/James L. Bryan * /s/Omer K. Reed *
James L. Bryan, Director Omer K. Reed, Director
/s/Loretta M. Burd * /s/Richard C. Robertson *
Loretta M. Burd, Director Richard C. Robertson, Director
/s/Ralph B. Canterbury * /s/Rosemarie M. Shultz *
Ralph B. Canterbury, Director Rosemarie M. Shultz, Director
/s/Joseph N. Cugini * /s/Neil A. Springer *
Joseph N. Cugini, Director Neil A. Springer, Director
/s/Rudolf J. Hanley * /s/ Kevin S. Thompson 4/19/99
Rudolf J. Hanley, Director Kevin S. Thompson,
Attorney-In-Fact
/s/Jerald R. Hinrichs * /s/Farouk D. G. Wang *
Jerald R. Hinrichs, Director Farouk D. G. Wang, Director
/s/ Michael B. Kitchen 4/19/99 /s/Larry T. Wilson *
Michael B. Kitchen, Director Larry T. Wilson, Director
</TABLE>
*Pursuant to Powers of Attorney filed herewith
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following person in the capacity indicated on
the date indicated.
SIGNATURE AND TITLE DATE
/s/ Michael G. Joneson April 19, 1999
Michael G. Joneson
Vice President - Accounting & Financial Systems
/s/ Richard J. Keintz April 19, 1999
Richard J. Keintz
Chief Officer - Finance & Information Service
/s/ Michael B. Kitchen April 19, 1999
Michael B. Kitchen
President and Chief Executive Officer
<PAGE>
EXHIBIT INDEX
4. (b) State Variations to Contract Form No. 2800.
(e) Roth IRA Endorsement.
5. (b) State Variations to Application Form No. 1676.
(c) State Variations to Application Form No. 99-VAAPP.
10. KPMG Peat Marwick LLP Consent.
Financial Data Schedule
<PAGE>
Exhibit 4(b)
Flexible Premium Deferred Variable and Fixed Annuity Contract
State Variations
Contract Form No. 2800 attached as Exhibit 4 is a copy of the Contract language
used in the following states:
Alabama Minnesota
Alaska Mississippi
Arkansas Missouri
Colorado Nebraska
Connecticut Nevada
Delaware New Hampshire
Georgia New Mexico
Hawaii Ohio
Illinois Rhode Island
Indiana South Dakota
Iowa Tennessee
Kentucky Vermont
Louisiana Wyoming
Maine
The following state contract forms vary from the Form No. 2800 as indicated
below:
Arizona -- Contract No. 2800 AZ adds language to Form No. 2800 stating, "Upon
written request, we will provide you with information regarding the
benefits and provisions of the Contract."
California -- Contract No. 2800 CA changes Form 2800 language to allow for a
10-day free look, except for ages 60 and above allowing for a 30-day
free look.
District of Columbia -- Contract No. 2800 DC changes Form 2800 language in
Sections 6.2 and 7.2 to include the word "partial" when describing
withdrawals.
Florida -- Contract No. 2800 FL changes Form 2800 language on the cover page to
add "If you have a question, complaint or need information concerning
your contract, call 1-800-798-5500." Surrender Charge description added
to Data Page. Revises Section 1.7 without change in meaning. Adds table
of values per $1,000 allocated to a Guarantee Period to Section 6.2.
Idaho -- Contract No. 2800 ID changes Form 2800 language to allow for a
20-day free look and the return of purchase payments during the Right
to Examine Period. First paragraph in Section 4.3 changed to explain
20-day free look provision. Changes Section 7.6 interest rate paid for
deferral of payment of partial withdrawal and surrenders as defined in
Idaho Code.
Kansas -- Contract No. 2800 KS deletes nursing homes/terminal illness
paragraph from Section 7.4 of Form 2800.
Maryland -- Contract No. 2800 MD 0897 adds "Limited Participation as described
herein." Deletes sentence saying, "we will refund any purchase payments
received by us required by state law" from the Right to Examine
provision. Deletes all the fixed accounts except the DCA 1 Year fixed
account of the Guaranteed Interest Option. DCA allocation period is
limited to 3 years. Section 7.5 regarding interest adjustment has been
deleted, as well as all references throughout the contract.
Massachusetts -- Contract Nos. 2800 SMA and UMA allowing for separate forms for
sex distinct and unisex. Also added Table of values to Section 6.2 in
Form 2800. Tables were changed on data page and misstatement of age and
sex language was revised from Form 2800.
Michigan -- Contract Nos. 2800 U and 2800 S allowing for separate forms for sex
distinct and unisex. Tables were changed on data page and misstatement
of age and sex language was revised from Form 2800.
Montana -- Contract No. 2800 MT 0294 is unisex only. Revises misstatement of
age and sex, tables etc. and adds Section 1.2 "Does the Contract
Conform with Montana Statutes?" to Form 2800.
North Carolina -- Contract No. 2800 NC deletes settlement options 1 & 2 from
Form 2800.
North Dakota -- Contract No. 2800 ND revises Form 2800 to allow for 20-day
free look (on the cover page). Tables were changed on data page and
misstatement of age and sex language was revised from Form 2800.
New Jersey - Contract No. 2800NJ 1097 revises Form 2800 to delete the
phrase "which will never be less than the amount required by state law"
from the second paragraph of the cover page. Add a third paragraph to
the cover that states "Monthly annuity payments, surrender value, and
death benefit amounts are equal to or greater than those required by
state law. Partial withdrawals will result in cancellation of
accumulation units. Contract loans will be deducted prior to
determining such benefit amounts." Change paragraph 4 to read "The
dollar amount of any annuity payments and other values provided by this
contract will increase or decrease based on the investment performance
of the subaccounts selected. The variable provisions are described in
section 5". Add statements to the data page: 1.) "Our expense and
mortality experience will not adversely affect the dollar amount of the
variable benefits or other contractual payments or values under this
contract." and 2.) "A fee is paid to these investment advisors."
Section 4.1, delete "We may accept purchase payments beyond the
contract anniversary following the annuitant's 85th birthday." Section
4.2, delete wording indicating we reserve the right to terminate the
contract & pay the contract value if no purchase payments have been
received for two years, purchase payments are less than $2,000 and the
contract value is less than $2,000. Deletes all fixed accounts of the
guarantee period except for the DCA 1 year guarantee period. DCA
allocation period is limited to 3 years. No interest adjustment;
therefore section 7.5 and all references throughout the contract have
been deleted.
Oklahoma -- Contract No. 2800 OK revises Form 2800 to allow the return of
purchase payments during the Right to Examine Period and that interest
will be paid on refunds made more than thirty days from the date of
cancellation. Also revises Section 4.3 "How Net Purchase Payments Will
be Allocated" to describe the Right to Examine Period provision.
Oregon -- Contract No. 2800 OR revises Form 2800 to delete "Fixed" from the
title on the cover page. There are no Fixed Accounts, therefore,
deletes Section 7.5 regarding Fixed Accounts. Deletes Section 6
regarding Guaranteed Interest Option and deletes all references to
Guaranteed Interest Option throughout the contract Form 2800.
Pennsylvania -- Contract No. 2800 PA changes Form 2800 to allow for issue ages
0-78; revised Free-Look. Revised Section 1.3 related to misstatement of
age and sex adding "to be equal to the amount the contract value would
have purchased based on correct age/sex." Revised Section 4.3 regarding
how the initial purchase payment will be allocated. Section 5.2(i)
added: "If such change required endorsement of your contract, we will
notify you and the endorsement may then be either accepted or
rejected." Only one fixed account guarantee period with no interest
adjustment. Therefore, all language referring to the interest
adjustment is deleted, including Section 7.5.
South Carolina -- Contract No. 2800 SC 0397 changes Form 2800 in the Right to
Examine Period by returning purchase payments. Deletes "in the absence
of fraud" from Section 1.2 regarding "When will the contract become
incontestable. "Contract fee deducted from subaccounts only, not fixed
accounts. Revised free-look language to allow the return of purchase
payments and Section 4.3 to describe the return of purchase payments
during the Right to Examine Period.
Texas -- Contract No. 2800 TX revises Form 2800 to allow for a 6 year stepped
up death benefit in Section 8.3. Contract fee deducted from subaccounts
only, not fixed in Section 1.4. One fixed account and the DCA 1 year
account/guarantee period, with no interest adjustment. Therefore, all
language regarding interest adjustment deleted including Section 7.5.
Section 11.2 "What Annuity Payment Options are Available?" adds Option
3(d) "The rates for such period of years will be calculated on an
actuarially equivalent basis to those shown in Section 13.2.
Utah -- Contract No. 2800 UT revises Form 2800 free-look language to allow
the return of purchase payments and Section 4.3 How Will the Net
Purchase Payments be Allocated" to describe the return of purchase
payments during the Right to Examine Period. One fixed account and the
DCA 1 Year account/guarantee period with no interest adjustment.
Therefore, all language regarding interest adjustment deleted,
including Section 7.5.
Virginia -- Contract No. 2800 VA revises Form 2800 to change interest adjustment
to "market value adjustment" throughout contract.
Washington -- Contract No. 2800 WA deletes "Fixed" from the title on the cover
page of the Form 2800. There are no Fixed Accounts, therefore, deletes
Section 7.5 regarding Fixed Accounts, and Section 6, Guaranteed
Interest Option. All references to Guaranteed interest Option removed
throughout the contract.
West Virginia -- Contract No. 2800 WV limits postponement of payment of
partial withdrawals and surrenders to 30 days in Section 7.6 of Form
2800. Please note there is a separate notice that prints with the
contract to change the right to examine period from 10 to 30 days.
Wisconsin-- Contract No. 2800 WI changes Form 2800 to allow one fixed account
and the DCA 1 Year account/guarantee period with no interest
adjustment. Therefore, all language regarding interest adjustment
deleted, including Section 7.5.
<PAGE>
Exhibit 4(e)
CUNA MUTUAL LIFE INSURANCE COMPANY
A Mutual Insurance Company
2000 Heritage Way
Waverly, Iowa 50677
Phone: 800/798-6600
FLEXIBLE PREMIUM
DEFERRED VARIABLE AND FIXED ANNUITY
ROTH IRA ENDORSEMENT
Contract No. ________________ Endorsement Effective Date _________________
Owner ______________________ City & State _______________________________
The contract is intended to be qualified as a Roth Individual Retirement Annuity
under Section 408A of the Internal Revenue Code (Code). The terms and conditions
listed below will then form a part of the owner's contract effective as of the
date listed above. In any conflict between the terms of this Section and all or
any of the other Sections of the contract, this Section will govern. In order to
maintain qualified status as a Roth IRA, the following terms and conditions are
required to be met.
- ------------------------------------------------------------------------------
ROTH INDIVIDUAL RETIREMENT ANNUITY
- ------------------------------------------------------------------------------
EXCLUSIVITY, NONFORFEITABLE, NONTRANSFERABLE, AND NONASSIGNABLE
This contract is for the exclusive benefit of the owner or his or her
beneficiaries. The interest of the owner is nonforfeitable. The owner must be
the annuitant. A co-owner may not be designated. This contract is not
transferable except to the Company on surrender or settlement. It may not be
pledged as security for any purpose.
PURCHASE PAYMENTS
A. Maximum Payment. The maximum payment under this contract for any tax year
will be no more tan the lesser of:
1. $2,000 for owners with compensation below the phase-out range
explained below as an aggregate amount of the purchase payments for
this contract and .contributions to all other individual retirement
arrangements that the owner has or may create. If the owner makes
regular contributions to both Roth and traditional IRAs for a taxable
year, the maximum purchase payment that can be paid to all the
individual's Roth IRAs for that taxable year is reduced by the regular
contributions made to the owner's traditional IRAs for the taxable
year; or
2. 100 percent of compensation. Compensation means wages, salaries,
professional fees, or other amounts derived from or received for
personal service actually rendered (including, but not limited to,
commissions paid sales personnel, compensation for services on the
basis of a percentage of profits, commissions on insurance premiums,
tips, and bonuses) and includes earned income, as defined in Code
Section 401(c)(2) (reduced by the deduction the self-employed
individual takes for contributions made to a self-employed retirement
plan). For purposes of this definition, Section 401(c)(2) shall be
applied as if the term trade or business for purposes of Section 1402
included service described in subsection (c)(6). Compensation does not
include amounts derived from or received as earnings or profits from
property (including, but not limited to, interest and dividends) or
amounts not includible in gross income. Compensation also does not
include any amount received as a pension or annuity or as deferred
compensation. The term "compensation" shall include any amount
includible in the individual's gross income under Code Section 71 with
respect to divorce or separation instrument described in subparagraph
(A) of Code Section 71(b)(2). In the case of a married individual
filing a joint return, the greater compensation of his or her spouse
is treated as his or her own compensation but only to the extent that
such spouse's compensation is no being used for purposes of the spouse
making a contribution to a Roth IRA or a nondeductible contribution to
a traditional IRA.
The above maximum purchase payment limitations do not apply to rollover
contributions as permitted by Code Section 408A from other Roth IRAs or
transferred contributions as permitted by Code Section 408(d)(3) from
traditional IRAs.
This Roth IRA will not accept a direct rollover contribution from a plan
meeting the requirements of Code Section 401(a) or 403(b).
No contributions will be accepted under a SIMPLE IRA Plan established by
any employer pursuant to Code Section 408(p). Also, no transfer or rollover
of funds attributable to contributions made by a particular employer under
its SIMPLE IRA Plan will be accepted from that plan prior to the expiration
of the two-year period beginning on the date the individual first
participated in that employer's SIMPLE IRA Plan.
B. Purchase Payment/Contribution Limits
1. The maximum purchase payment amount is further limited for
individuals with compensation above $95,000 or for married
couples with compensation above $150,000 as follows:
TAX FILING STATUS PHASE-OUT RANGE NO CONTRIBUTION
Single or Head of $95,000 to $110,000 $110,000 or more
Household modified adjusted modified adjusted
gross income gross income
Joint Return or $150,000 to $160,000 $160,000 or more
Qualifying Widow(er) modified adjusted modified adjusted
gross income gross income
Married - Separate $0 to $10,000 $10,000 or more
Return modified adjusted modified adjusted
gross income gross income
2. A rollover from a traditional IRA cannot be made to this IRA if,
for the year the amount is distributed from the traditional IRA:
a. the owner is married and files a separate return;
b. the owner is married and together the owner and the owner's
spouse have modified adjusted gross income in excess of
$100,000. Modified adjusted gross income does not include
any amount included in adjusted gross income as a result of
a rollover from a traditional IRA (a "conversion"); or
c. the owner is not married and has modified adjusted gross
income in excess of $100,000.
3. A regular contribution to a traditional IRA may be
recharacterized pursuant to the rules in Section 1.408A-5 of the
proposed regulations as a regular contribution to this IRA,
subject to the above limits.
C. Refund of Excess Contributions. If the purchase payment received is in
excess of the maximum payment: (1) the excess amount may be subject to an
excise tax for the year of the excess and for each year thereafter until
corrected; or (2) the owner may receive a refund of the excess amount plus
any investment gain resulting from allocation to the subaccount(s). Any
investment loss resulting from the allocation of the excess amount to the
subaccount(s) will be deducted proportionately from the remaining
subaccount value(s) and guarantee amount(s).
The owner must make his request in writing on or before the date prescribed
by law (including extension of time) for filing the income tax return for
that taxable year. If the Company is made aware that premium received is in
excess of the maximum premium and the owner does not exercise one of these
options within the period allowed, the excess contributions will be
refunded.
D. Refund of Purchase Payments. Any refund of purchase payments (other than
those attributable to excess contribution) will be applied toward the
payment of future premiums or the purchase of additional benefits and must
be applied before the close of the calendar year following the year of the
refund.
E. Payment. Payment under this contract must be in cash.
F. Minimum Purchase Payment Amount. The minimum total first-year purchase
amount required to purchase a contract is $2,000. The minimum purchase
payment size is $100, unless the payment is made through an Automatic
Purchase Payment Plan, in which case the minimum is $25.
G. Additional Purchase Payments. Additional purchase payments after the
initial purchase payment are not required.
PROCEEDS
A. Premature Distributions. Any distribution will be reported to the IRS as a
premature distribution, and earnings may be subject to an excise tax in
addition to income tax unless the Company is notified of one of the
following circumstances:
1. the distribution is a part of a series of substantially equal periodic
payments made no less frequently than annually over the life
expectancy of the owner or joint life expectancies of the owner and
the named beneficiary(ies);
2. the owner is over age 59%;
3. the distribution occurs following the disability (within the meaning
of 572(m)(7) of the Code) of the owner;
4. the distribution to the beneficiary(ies) occurs following the death of
the owner; or
5. the distribution occurs: (a) to pay health insurance premiums if the
owner receives state or federal unemployment compensation for at least
twelve (12) consecutive weeks; (b) to pay medical bills in excess of
7%% of the owner' s adjusted gross income; (c) to pay up to
$10,000/1ifetime for qualified first-time home purchase; or (d) to pay
qualified secondary education costs.
B. Payments to Owner. Payment shall be made to the owner under this contract
as follows:
1. as a lump sum; or
2. in equal or substantially equal payments.
Ordinary federal income tax will be due on any nonqualified distribution of
earnings. A nonqualified distribution is a distribution that occurs: (1)
within five years of the year of the original contribution to the original
Roth IRA; or (2) after five years if the distribution is not due to one of
the following: (a) owner' s death; (b) disability of the owner; (c) owner'
s attainment of age 59%; or (d) for the qualified expenses of a first-time
home purchase.
All distributions made hereunder shall be made in accordance with the
requirement of 5401(a)(9) of the Code except the requirements of
5401(a)(S)(A) and (G) of the Code, and the regulations thereunder. No
amount is required to be distributed prior to the death of the owner for
whose benefit the contract was originally established.
Any applicable charges outlined in the contract will apply to the amount
withdrawn to the extent allowed by federal regulation.
C. Payments to Beneficiary(ies). Payments to a beneficiary(ies) after the
death of the owner are provided by this contract. If the owner dies, the
owner' s entire remaining interest will be distributed as follows:
1. If the owner dies on or after distributions have begun, the entire
remaining interest will be distributed at least as rapidly as under
the method of distribution being used prior to the owner' s death. A
beneficiary(ies) may increase the frequency or amount of payments if
the payments are for a period certain. Payments must be made at
intervals of no longer than one year.
2. If the owner dies, the entire remaining interest must be distributed
as elected by the owner or, if the owner has not so elected, as
elected by the beneficiary by December 31st of the year containing the
fifth anniversary of the owner' s death; except to the extent that an
election is made to receive distributions in accordance with a. or b.
below:
a. In payments over the life or over a period certain not greater
than the life expectancy of the designated beneficiary(ies)
started by December 31st of the year following the year of the
owner' s death.
b. If the designated beneficiary is the individual' s surviving
spouse, the date distributions are required to begin in a. above
shall not be earlier than the later of December 31 of the
calendar year immediately following the calendar year in which
the owner died or December 31 of the calendar year in which the
owner would have attained age 70%.
c. If the designated beneficiary is the individual' s surviving
spouse, the spouse may elect to treat the contract as his or her
own Roth IRA. This election will occur automatically if the
surviving spouse makes a regular contribution to this Roth IRA,
makes a rollover to or from this Roth IRA, or fails to take a
distribution as required by subsection a. or subsection b. of
this paragraph.
d. Payments required under (a) and (b) above must be made at
intervals of no longer than 1 year and must be either
nonincreasing or increasing as provided in Q&A F-3 of section
1.401(a)(9)-1 of the proposed regulations.
3. Life expectancy and joint and last survivor expectancy are computed by
use of the return multiples contained in Tables V of 51.72-g of the
Income Tax Regulations. Unless otherwise elected by the owner' s
surviving spouse before distribution has commenced, the life
expectancy of the spouse beneficiary shall be recalculated annually
for the purposes of distribution. An election not recalculated shall
be irrevocable and shall apply to all subsequent years. The life
expectancy of a non-spouse beneficiary(ies) may not be recalculated.
Instead, life expectancy will be calculated using the attained age of
such beneficiary during the calendar year in which the distributions
are required to begin and payments for subsequent years shall be
calculated based on such life expectancy reduced by one for each
calendar year which has elapsed since the calendar year life
expectancy was first calculated.
GENERAL PROVISIONS
A. Endorsements. The contract, including this Endorsement, will be amended
from time to time as required by changes in the Code, IRS Regulation, or
published revenue rulings. The owner will be promptly furnished with a copy
of any endorsements to the contract which are made in order to maintain
compliance with changes in the Code. Upon receipt of the endorsement, the
owner has thirty (30) days in which to contact the Company in order to
reject the endorsement. If the thirty (30) days elapse without contact by
the owner, the endorsement is deemed accepted by the owner. Rejection of
the endorsement by the owner will be deemed a request to surrender this
contract as this contract is established with the intent to remain in
compliance with federal regulation.
B. Reporting. The Company is required to report payments from this contract to
the IRS and, in some cases, to withhold certain amounts from taxable
distributions. The Company will furnish an annual calendar year report
summarizing total contributions and distributions under this contract in
that year as may be required by the IRS.
C. Disclosure. The Company furnishes a disclosure statement describing Roth
IRAs when the contract is delivered or endorsed.
D. Enabling Agreement. The owner, by signing the application requesting that
the contract be issued as a Roth Individual Retirement Annuity, agrees to
the terms of this section and requests that this Endorsement be attached to
the contract. The matters which the owner agrees to and accepts
responsibility for in the contract (including the Application and this
Endorsement) will not be the responsibility of CUNA Mutual Life Insurance
Company (the Company). The Company will not be liable for any direct or
indirect damage or loss including (without limitation) taxes suffered or
incurred by the owner or the beneficiary(ies) as a result of those matters.
Unless such damage or loss is caused by willful or negligent act or
omission of the Company in violation of the contract or applicable law, the
Company will not be liable for any direct or indirect damage or loss. This
includes (without limitation) taxes suffered or incurred by the owner when
the Company:
1. acts in accordance with or reliance upon any information furnished by
the owner or the beneficiary(ies);
2. is required to act without the benefit of information which the owner
is required to provide under the provisions of the contract or by law;
or
3. administers any other matters arising under or relating to the
contract.
CUNA Mutual Life Insurance Company
A Mutual Insurance Company
/s/ Michael B. Kitchen
President
Form 99-VAROTH (12/98)
<PAGE>
Exhibit 5(b)
Flexible Premium Deferred Variable and Fixed Annuity Application
State Variations
Application Form No. 1676 attached as Exhibit 5 is a copy of the Application
language used in the following states:
Alabama Mississippi
California Missouri
Connecticut Nebraska
Delaware New Mexico
Hawaii North Dakota
Illinois Rhode Island
Indiana South Dakota
Iowa Tennessee
Kansas Vermont
Louisiana West Virginia
Maine Wyoming
Massachusetts
The following application forms vary from the Form No. 1676 as indicated below:
Application Form No. 1676AR Section 13 added fraud statement as item g.) "Any
person who knowingly presents a false or fraudulent claim for payment of a loss
or benefit or knowingly presents false information in an application for
insurance is guilty of a crime and may be subject to fines and confinement in
prison. Form 1676 AR language is used in the following states:
Arkansas
Application Form No. 1676 AZ Section 13 added, "Upon written request, we will
provide the owner with information regarding benefits and provisions of the
contract. If you decide not to keep your contract, return it within 10 days
after you receive it for a refund of purchase payments, adjusted for any
investment gain or loss if allocated to the Subaccount(s) of the Variable
Account. You may return it to Century Life of America, 2000 Heritage Way,
Waverly, Iowa 50677, or to the agent who sold it to you." Form 1676 AZ language
is used in the following states:
Arizona
Application Form No. 1676CO adds a Section 14 to include the following fraud
statement in bold: Any person who, with intent to defraud or knowing that s/he
is facilitating a fraud against an insurer, submits an application or files a
claim containing a false or deceptive statement may be guilty of insurance
fraud. Form 1676 CO language is used in the following states:
Colorado
Application Form No. 1676 FL2 adds agent license no. line next to the witness or
agent line. It also adds the following fraud statement to Section 13 as item
g.): Any person who knowingly and with intent to injure, defraud or deceive any
insurer files a statement of claim or an application containing any false,
incomplete or misleading information is guilty of a felony of the third degree.
Form 1676 FL2 language is used in the following states:
Florida
Application Form No. 1676(B) adds to Section 8 "the portion of the initial
Purchase Payment allocated to the subaccount(s) of the variable account will be
allocated to the Money Market subaccount for the first 20 days of your contract.
After 20 days, it will be allocated as shown above." Form 1676(B) language is
used in the following states:
Georgia
Idaho
Michigan
Nevada
North Carolina
South Carolina
Application Form No. 1676 KY adds to Section 13 "(g) - fraud statement". Also
changed signature lines to include: signed at: (city & state), on (date). Form
1676 KY language is used in the following states:
Kentucky
Application Form No. 1676(F) deletes from Section 8 the allocation percentage to
the guarantee periods. Section 9, Preservation Plus Program is deleted in its
entirety. Section 12, Agreement Section deleted (f), "I understand that amounts
withdrawn from the guaranteed interest option may be adjusted upward or downward
based on an interest adjustment formula. Form 1676(F) language is used in the
following states:
Oregon
Application Form No. 1676 MD 0897 deletes from Section 8 all guarantee periods
except the DCA 1 year guarantee period. Section 9, Preservation Plus Program is
deleted in its entirety. All remaining sections are renumbered. Item f.) of the
Agreement section (renumbered to Section 12) is deleted - "I understand that
amounts withdrawn from the guarantee interest option may be adjusted upward or
downward based on an interest adjustment formula." Application Form No. 1676 MD
0897 is used in the following states:
Maryland
Application Form No. 1676 MN deletes subsection (c) from Section 13 related to
taxpayer identification. Application Form No. 1676 MN language is used in the
following states:
Minnesota
Application Form No. 1676 MT0294 adds a date in the form number. Application
Form No. 1676 MT0294 language is used in the following states:
Montana
Application Form No. 1676(D) includes only one year guarantee period percentage
allocation in Section 8. Section 13, Agreement (f) is deleted - "I understand
that amounts withdrawn from the guarantee interest option may be adjusted upward
or downward based on an interest adjustment formula." Application Form No.
1676(D) language is used in the following states:
Wisconsin
Application Form No. 1676 NJ 1097 deletes all guarantee periods except the DCA 1
year guarantee period in Section 8. Section 9, Preservation Plus Program is
deleted in its entirety. All remaining sections are renumbered. Item f.) of the
Agreement Section (renumbered to Section 12. is deleted - "I understand that
amounts withdrawn from the guarantee interest option may be adjusted upward or
downward based on an interest adjustment formula." New item f.) has been added
which is a fraud statement: "Any person who includes any false or misleading
information on an application for an insurance policy is subject to criminal and
civil penalties. Application Form No. 1676 NJ 1097 language is used in the
following states:
New Jersey
Application Form No. 1676(C) adds (g) fraud clause to Section 13, Agreement.
Application 1676(C) language is used in the following states:
Ohio
Application Form No. 1676 OK adds to Section 8 "The portion of the initial
Purchase Payment allocated to the Money Market Subaccount(s) of the Variable
Account will be allocated to the Money market Subaccount for the first 20 days
of your contract. After 20 days, it will be allocated as shown above. Question
13 adds fraud statement. Application Form No. 1676 OK language is used in the
following states:
Oklahoma
Application Form No. 1676(E) adds to Section 8 "The portion of the Initial
Purchase Payment allocated to Subaccount(s) of the Variable Account will be
allocated to the Money Market Subaccount for the first 20 days of your contract.
After 20 days, it will be allocated as shown above. Also, only 1 year guarantee
period % allocation. Section 13, Agreement, (f) is deleted "I understand that
amounts withdrawn from the guaranteed interest option may be adjusted upward or
downward based on an interest adjustment formula." Application Form No. 1676(E)
language is used in the following states:
Utah
Application Form No. 1676 PA deletes all Guarantee Periods except the DCA 1 Year
Guarantee Period in Section 8. In the Agreement Section, Section 13, delete item
f.): "I understand that amounts withdrawn from the guarantee interest option may
be adjusted upward or downward based on an interest adjustment formula." Add new
item f.) which is a fraud statement that reads: "Any person who knowingly and
with intent to defraud any insurance company or other person files an
application for insurance or statement of claim containing any materially false
information or conceals for the purpose of misleading, information concerning
any fact material thereto commits a fraudulent insurance act, which is a crime
and subjects such person to criminal and civil penalties. Application Form No.
1676 PA language is used in the following states:
Pennsylvania
Application Form No. 1676TX2 includes only the one year and the DCA 1 year
guarantee period percentage allocation in Section 8. Section 13, Agreement (f)
is deleted - "I understand that amounts withdrawn from the guarantee interest
option may be adjusted upward or downward based on an interest adjustment
formula." Application Form No. 1676 TX2 is used in the following states:
Texas
Application Form No. 1676 VA changes Section 13, Agreement (f) "interest
adjustment" to "market Value". Application Form No. 1676 VA language is used in
the following states:
Virginia
Application Form No. 1676(G) adds to Section 8 "The portion of the initial
Purchase Payment allocated to the subaccount(s) of the Variable Account will be
allocated to the Money Market Subaccount for the first 20 days of your contract.
After 20 days, it will be allocated as shown above. Also in Section 8, delete
Guarantee Interest Option and all guarantee periods and the allocation
percentage to the guarantee periods. Delete Section 9, Preservation Plus
Program, in its entirety. Renumber remaining Sections. Delete item f.) in the
Agreement section (renumbered to Section 12) which states: I understand that
amounts withdrawn from the guarantee interest option may be adjusted upward or
downward based on an interest adjustment formula." Application Form No. 1676(G)
language is used in the following states:
Washington
<PAGE>
Exhibit 5(c)
Flexible Premium Deferred Variable and Fixed Annuity Application
State Variations
Application Form No. 99-VAAPP attached as Exhibit 5 is a copy of the Application
language used in the following states:
Alaska Louisiana
Alabama Mississippi
Arkansas Missouri
California New Hampshire
Colorado New Mexico
Delaware Ohio
Illinois South Dakota
Indiana Tennessee
Iowa West Virginia
Kansas Wyoming
Kentucky
The following application forms vary from the Form No. 99-VAAPP as indicated
below:
Application Form No. 99-VAAPP-AZ Section 14 added, "Upon written request, we
will provide the owner with information regarding benefits and provisions of the
contract. If you decide not to keep your contract, return it within 10 days
after you receive it for a refund of purchase payments, adjusted for any
investment gain or loss if allocated to the Subaccount(s) of the Variable
Account. You may return it to CUNA Mutual Life Insurance Company, 2000 Heritage
Way, Waverly, Iowa 50677, or to the agent who sold it to you." Form 99-VAAPP-AZ
language is used in the following states:
Arizona
Application Form No. 99-VAAPP-FL changes Section 14(c) to "Any person who
knowingly and with intent to injure, defraud or deceive any insurer files a
statement of claim or an application containing any false, incomplete or
misleading information is guilty of a felony of the third degree."; adds
"printed name of agent", "agent license no" and "date" line under "Signature of
Annuitant(s)" line. Form 99-VAAPP-FL language is used in the following states:
Florida
Application Form No. 99-VAAP-B adds to Section 8 "The portion of the initial
Purchase Payment allocated to the Subaccount(s) of the Variable Account will be
allocated to the Money Market Subaccount for the first 20 days of your contract.
After 20 days, it will be allocated as shown above." Form 99-VAAPP-B language is
used in the following states:
Georgia
Idaho
Michigan
North Carolina
Nevada
Oklahoma
Application Form No. 99-VAAPP-D deletes item 14(c) the fraud notice. Form
99-VAAPP-D is used in the following states:
Massachusetts
Nebraska
Application Form No. 99-VAAPP-MN deletes subsection (g) from Section 14 related
to taxpayer identification. Application Form No. 99-VAAPP-MN language is used in
the following states:
Minnesota
Application Form No. 99-VAAPP-OR deletes from Section 8 the allocation
percentage to the Guarantee Periods of the Guaranteed Interest Option. Section
9, Preservation Plus Program is deleted in its entirety. Section 14, Agreement
Section deleted (c) the fraud notice, and (f), "I understand that amounts
withdrawn from the guaranteed interest option may be adjusted upward or downward
based on an interest adjustment formula. Form 99-VAAPP-OR language is used in
the following states:
Oregon
Application Form No. 99-VAAPP-PA includes only DCA one year and one year
guarantee period percentage allocation in Section 8. Section 14, Agreement item
(b) has been inserted, "In states where written consent is required, my
agreement in writing is required for entries made by the company in Section 6 as
to age at issue, plan of insurance, amount of insurance, or benefits applied
for.", the fraud statement is revised to, "Any person who knowingly and with
intent to defraud any insurance company or other person files an application for
insuracne or statement of claim containing any materially false information or
conceals for the purpose of misleading, informaiton concerning any fact material
thereto commits a fraudulent insurance act which is a crime and subjects such
person to criminal and civil penalties.", and (f) is deleted - "I understand
that amounts withdrawn from the guarantee interest option may be adjusted upward
or downward based on an interest adjustment formula." Application Form No.
99-VAAPP-PA language is used in the following states:
Pennsylvania
Application Form No. 99-VAAPP-C includes only the DCA one year and one year
guarantee period percentage allocation in Section 8. Section 13, Agreement, the
fraud statement is deleted and (f) is deleted - "I understand that amounts
withdrawn from the guarantee interest option may be adjusted upward or downward
based on an interest adjustment formula." Application Form No. 99-VAAPP-C
language is used in the following states:
Texas
Wisconsin
Application Form No. 99-VAAPP-UT adds to Section 8 "The portion of the Initial
Purchase Payment allocated to Subaccount(s) of the Variable Account will be
allocated to the Money Market Subaccount for the first 20 days of your contract.
After 20 days, it will be allocated as shown above." Also, only DCA 1 year and 1
year guarantee period % allocation. Section 14, Agreement, (f) is deleted "I
understand that amounts withdrawn from the guaranteed interest option may be
adjusted upward or downward based on an interest adjustment formula."
Application Form No. 99-VAAPP-UT language is used in the following states:
Utah
Application Form No. 99-VAAPP-VA Section 14, Agreement deletes fraud warning and
changes (f) "interest adjustment" to "Market ValueAdjustment". Application Form
No. 99-VAAPP-VA language is used in the following states:
Virginia
Application Form No. 99-VAAPP-WA adds to Section 8 "The portion of the initial
Purchase Payment allocated to the subaccount(s) of the Variable Account will be
allocated to the Money Market Subaccount for the first 20 days of your contract.
After 20 days, it will be allocated as shown above" and deletes all of the
Guaranteed Periods. Section 9 Preservation Plus Program deleted entirely.
Section 14 (f) deleted "I understand that amounts withdrawn from the guaranteed
interest option may be adjusted upward or downward based on an interest
adjustment formula." Application Form No. 99-VAAPP-WA language is used in the
following states:
Washington
<PAGE>
Exhibit 10
KPMG Peat Marwick LLP
2500 Ruan Center
P.O. Box 772
Des Moines, IA 50303
The Board of Directors of CUNA Mutual Life Insurance Company
And Contract Owners of CUNA Mutual Life Variable Annuity Account:
We consent to the use of our reports included herein and to the reference to our
Firm under the heading "Experts" in the Statement of Additional Information of
the CUNA Mutual Life Variable Annuity Account.
Our report dated March 19, 1999, contains an explanatory paragraph that states
that the Company prepared the financial statements using accounting practices
prescribed or permitted by the Iowa Department of Commerce, Insurance Division,
which practices differ from generally accepted accounting principles.
KPMG Peat Marwick LLP
Des Moines, Iowa
April 19, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 997,466,773
<INVESTMENTS-AT-VALUE> 1,227,505,042
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,227,505,042
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 463,976
<TOTAL-LIABILITIES> 463,976
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 67,253,845
<SHARES-COMMON-PRIOR> 48,545,478
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,227,041,066
<DIVIDEND-INCOME> 19,233,232
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 13,944,359
<NET-INVESTMENT-INCOME> 5,288,873
<REALIZED-GAINS-CURRENT> 22,632,606
<APPREC-INCREASE-CURRENT> 109,738,519
<NET-CHANGE-FROM-OPS> 137,659,998
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 59,647,239
<NUMBER-OF-SHARES-REDEEMED> 40,953,343
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 18,693,896
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
