[LOGO]
Conseco(R)
Conseco Variable Insurance Company
Formerly
Great American Reserve Insurance Company
Annual Report to
Contract Owners
December 31, 1998
Great American Reserve Variable Annuity Account E
<PAGE>
Annual Report to Contract Owners
Table of Contents
December 31, 1998
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Great American Reserve Variable Annuity Account E Page
Statement of Assets and Liabilities as of December 31, 1998 ................ 2
Statements of Operations for the Years Ended December 31,
1998 and 1997 ............................................................ 4
Statements of Changes in Net Assets for the Years Ended
December 31, 1998 and 1997 ............................................... 4
Notes to Financial Statements .............................................. 5
Report of Independent Accountants .......................................... 7
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GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT E
Statement of Assets and Liabilities
December 31, 1998
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SHARES COST VALUE
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Assets:
Investments in portfolio shares, at net asset value (Note 2):
The Alger American Fund:
Growth Portfolio................................................................ 94,197.9 $ 4,307,257 $ 5,013,213
Leveraged AllCap Portfolio...................................................... 144,045.4 3,706,701 5,027,186
MidCap Growth Portfolio......................................................... 85,673.7 2,160,402 2,473,401
Small Capitalization Portfolio.................................................. 134,702.2 5,731,138 5,922,856
American Century Variable Portfolios, Inc.:
International Fund.............................................................. 185,819.9 1,372,236 1,415,948
Value Fund...................................................................... 507,034.7 3,461,317 3,412,344
Income and Growth Fund.......................................................... 34,226.9 205,328 232,059
Berger Institutional Products Trust:
100 Fund........................................................................ 150,018.5 1,835,260 1,933,738
Growth and Income Fund.......................................................... 393,863.3 5,792,302 6,549,946
Small Company Growth Fund....................................................... 86,150.9 1,092,217 1,057,933
BIAM International Fund......................................................... 205,876.7 2,065,215 2,307,878
Conseco Series Trust:
Asset Allocation Portfolio...................................................... 1,670,205.7 23,112,722 22,828,352
Common Stock Portfolio.......................................................... 1,429,174.4 30,509,525 30,849,762
Corporate Bond Portfolio........................................................ 590,377.5 5,990,334 5,930,358
Government Securities Portfolio................................................. 167,645.2 2,030,678 2,036,226
Money Market Portfolio.......................................................... 7,044,817.8 7,044,818 7,044,818
Dreyfus Stock Index Fund.......................................................... 985,198.5 26,149,533 32,038,656
The Dreyfus Socially Responsible Growth Fund, Inc................................. 209,628.6 5,749,997 6,515,256
Dreyfus Variable Investment Fund:
Disciplined Stock Portfolio..................................................... 12,824.9 256,054 294,331
International Value Portfolio................................................... 3,337.7 48,421 44,892
Federated Insurance Series:
High Income Bond Fund II........................................................ 621,059.8 6,746,156 6,781,973
International Equity Fund II.................................................... 116,501.8 1,860,309 1,792,962
Utility Fund II................................................................. 222,058.9 3,101,469 3,390,839
Invesco Variable Investment Funds, Inc.:
High Yield Portfolio............................................................ 12,555.4 154,071 142,128
Industrial Income Portfolio..................................................... 7,837.5 141,445 145,855
Janus Aspen Series:
Aggressive Growth Portfolio..................................................... 180,096.3 3,633,774 4,968,857
Growth Portfolio................................................................ 496,319.9 9,670,117 11,683,369
Worldwide Growth Portfolio...................................................... 950,521.0 23,257,295 27,650,656
Lazard Retirement Series, Inc.:
Equity Portfolio................................................................ 107,745.9 1,105,896 1,190,592
Small Cap Portfolio............................................................. 15,664.9 144,345 149,130
Lord Abbett Series Fund, Inc.
Growth and Income Portfolio..................................................... 15,243.8 307,640 314,769
Mitchell Hutchins Series Trust:
Growth and Income Portfolio..................................................... 13,261.5 183,877 196,402
Neuberger & Berman Advisers Management Trust:
Limited Maturity Bond Portfolio................................................. 83,729.8 1,140,552 1,157,146
Partners Portfolio.............................................................. 429,199.7 8,430,818 8,124,750
Strong Variable Insurance Funds, Inc.:
Growth Fund II.................................................................. 56,314.8 773,582 902,163
Strong Opportunity Fund II, Inc................................................... 80,253.0 1,730,447 1,743,095
Van Eck Worldwide Insurance Trust:
Worldwide Hard Assets Fund (formerly Gold and Natural Resources Fund) (Note 1).. 133,894.7 1,795,112 1,231,831
Worldwide Bond Fund............................................................. 266,219.5 2,901,273 3,269,176
Worldwide Emerging Markets Fund................................................. 156,317.1 1,512,723 1,112,978
Worldwide Real Estate Fund...................................................... 3,700.7 35,650 35,305
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Total assets............................................................................................... 218,913,129
Liabilities:
Amounts due to Conseco Variable Insurance Company................................................................ 258,497
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Net assets (Note 6)........................................................................................ $218,654,632
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</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT E
Statement of Assets and Liabilities - Continued
December 31, 1998
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UNITS UNIT VALUE REPORTED VALUE
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Net assets attributable to:
Contract owners' deferred annuity reserves:
The Alger American Fund:
Growth Portfolio................................................................ 2,650,327.7 $ 1.889410 $ 5,007,557
Leveraged AllCap Portfolio...................................................... 1,757,689.1 2.856798 5,021,363
MidCap Growth Portfolio......................................................... 1,718,378.4 1.437775 2,470,641
Small Capitalization Portfolio.................................................. 3,775,576.6 1.566862 5,915,809
American Century Variable Portfolios, Inc.:
International Fund.............................................................. 1,104,956.1 1.279955 1,414,294
Value Fund...................................................................... 2,689,736.3 1.267116 3,408,208
Income and Growth Fund.......................................................... 214,243.0 1.081920 231,794
Berger Institutional Products Trust:
100 Fund........................................................................ 1,458,644.8 1.324112 1,931,410
Growth and Income Fund.......................................................... 3,900,875.4 1.677071 6,542,045
Small Company Growth Fund....................................................... 892,904.9 1.183412 1,056,675
BIAM International Fund......................................................... 2,075,530.7 1.110669 2,305,228
Conseco Series Trust:
Asset Allocation Portfolio...................................................... 10,615,722.9 2.147855 22,801,038
Common Stock Portfolio.......................................................... 11,148,307.8 2.763812 30,811,824
Corporate Bond Portfolio........................................................ 4,326,193.1 1.369208 5,923,457
Government Securities Portfolio................................................. 1,543,010.8 1.318099 2,033,841
Money Market Portfolio.......................................................... 5,969,565.3 1.178748 7,036,615
Dreyfus Stock Index Fund.......................................................... 13,802,783.1 2.318443 32,000,971
The Dreyfus Socially Responsible Growth Fund, Inc................................. 2,868,834.2 2.268331 6,507,465
Dreyfus Variable Investment Fund:
Disciplined Stock Portfolio..................................................... 273,971.4 1.071933 293,679
International Value Portfolio................................................... 47,624.5 0.941707 44,848
Federated Insurance Series:
High Income Bond Fund II........................................................ 4,956,911.2 1.366573 6,773,980
International Equity Fund II.................................................... 1,216,875.7 1.471681 1,790,852
Utility Fund II................................................................. 1,955,544.4 1.731943 3,386,891
Invesco Variable Investment Funds, Inc.:
High Yield Portfolio............................................................ 149,344.3 0.950601 141,967
Industrial Income Portfolio..................................................... 141,539.9 1.029287 145,685
Janus Aspen Series:
Aggressive Growth Portfolio..................................................... 2,503,350.5 1.982620 4,963,194
Growth Portfolio................................................................ 5,285,447.5 2.207852 11,669,487
Worldwide Growth Portfolio...................................................... 11,703,337.6 2.359887 27,618,549
Lazard Retirement Series, Inc.:
Equity Portfolio................................................................ 1,126,898.4 1.055270 1,189,182
Small Cap Portfolio............................................................. 174,150.7 0.855373 148,964
Lord Abbett Series Fund, Inc.:
Growth and Income Portfolio..................................................... 312,997.0 1.004593 314,434
Mitchell Hutchins Series Trust:
Growth and Income Portfolio..................................................... 197,924.6 0.989814 195,909
Neuberger & Berman Advisers Management Trust:
Limited Maturity Bond Portfolio................................................. 1,076,377.0 1.073805 1,155,819
Partners Portfolio.............................................................. 6,369,007.3 1.274108 8,114,802
Strong Variable Insurance Funds, Inc.:
Growth Fund II.................................................................. 559,106.3 1.611675 901,098
Strong Opportunity Fund II, Inc................................................... 1,264,364.4 1.377011 1,741,043
Van Eck Worldwide Insurance Trust:
Worldwide Hard Assets Fund (formerly Gold and Natural Resources Fund) (Note 1).. 1,485,879.8 0.828049 1,230,382
Worldwide Bond Fund............................................................. 2,826,107.0 1.155392 3,265,261
Worldwide Emerging Markets Fund................................................. 1,728,987.9 0.642969 1,111,686
Worldwide Hard Assets Fund (Note 1)............................................. 1,015.7 1.397707 1,420
Worldwide Real Estate Fund...................................................... 41,417.3 0.851446 35,265
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Net assets................................................................................................. $218,654,632
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</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT E
Statements of Operations
For the Years Ended December 31, 1998 and 1997
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<CAPTION>
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1998 1997
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Investment income:
Dividends from investments in portfolio shares.................................................... $ 8,749,779 $ 7,456,439
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Expenses:
Mortality and expense risk fees................................................................... 2,119,799 848,167
Administrative fees............................................................................... 254,376 101,780
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Total expenses.................................................................................. 2,374,175 949,947
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Net investment income......................................................................... 6,375,604 6,506,492
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Net realized gains (losses) and unrealized appreciation (depreciation) on investments:
Net realized gains on sales of investments in portfolio shares.................................... 2,964,511 284,803
Net change in unrealized appreciation of investments in portfolio shares.......................... 14,847,690 1,446,801
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Net gain on investments in portfolio shares..................................................... 17,812,201 1,731,604
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Net increase in net assets from operations.................................................... $ 24,187,805 $ 8,238,096
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</TABLE>
Statements of Changes in Net Assets
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
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1998 1997
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Changes from operations:
Net investment income............................................................................. $ 6,375,604 $ 6,506,492
Net realized gains on sales of investments in portfolio shares.................................... 2,964,511 284,803
Net change in unrealized appreciation of investments in portfolio shares.......................... 14,847,690 1,446,801
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Net increase in net assets from operations...................................................... 24,187,805 8,238,096
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Changes from contract owners' transactions:
Net contract purchase payments.................................................................... 85,403,562 75,117,717
Contract redemptions.............................................................................. (6,164,480) (2,305,982)
Net transfers from fixed account.................................................................. 63,987 146,732
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Net increase in net assets from contract owners' transactions................................... 79,303,069 72,958,467
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Net increase in net assets.................................................................... 103,490,874 81,196,563
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Net assets, beginning of year........................................................................ 115,163,758 33,967,195
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Net assets, end of year (Note 6).............................................................. $218,654,632 $115,163,758
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</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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GREAT AMERICAN RESERVE VARIABLE ANNUITY ACCOUNT E
Notes to Financial Statements
December 31, 1998
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(1) General
Conseco Variable Insurance Company (formerly Great American Reserve
Insurance Company prior to its name change in October 1998) Variable Annuity
Account E ("Account E") is registered under the Investment Company Act of 1940,
as amended, as a unit investment trust. It is anticipated that on May 1, 1999, a
filing will be made with the Securities and Exchange Commission to change the
name of Great American Reserve Variable Account E to Conseco Variable Account E.
Account E was established on November 12, 1993, and commenced operations on July
25, 1994, as a segregated investment account for individual and group variable
annuity contracts which are registered under the Securities Act of 1933. The
operations of Account E are included in the operations of Conseco Variable
Insurance Company (the "Company") pursuant to the provisions of the Texas
Insurance Code. The Company is an indirect wholly owned subsidiary of Conseco,
Inc., a publicly-held specialized financial services holding company listed on
the New York Stock Exchange.
Prior to June 1, 1995, Account E invested solely in shares of the
portfolios of the Conseco Series Trust. Currently, the following investment
options are available (effective date in parenthesis):
THE ALGER AMERICAN FUND
Growth Portfolio (June 1, 1996)
Leveraged AllCap Portfolio (June 1, 1995)
MidCap Growth Portfolio (June 1, 1996)
Small Capitalization Portfolio (June 1, 1995)
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
Income and Growth Fund (May 1, 1998)
International Fund (May 1, 1997)
Value Fund (May 1, 1997)
BERGER INSTITUTIONAL PRODUCTS TRUST
100 Fund (June 1, 1996)
Growth and Income Fund (June 1, 1996)
Small Company Growth Fund (June 1, 1996)
BIAM International Fund (May 1, 1997)
CONSECO SERIES TRUST
Asset Allocation Portfolio
Common Stock Portfolio
Corporate Bond Portfolio
Government Securities Portfolio
Money Market Portfolio
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. (JUNE 1, 1995)
DREYFUS STOCK INDEX FUND (JUNE 1, 1995)
DREYFUS VARIABLE INVESTMENT FUND (MAY 1, 1998)
International Value Portfolio
Disciplined Stock Portfolio
FEDERATED INSURANCE SERIES (JUNE 1, 1995)
High Income Bond Fund II
International Equity Fund II
Utility Fund II
INVESCO VARIABLE INVESTMENT FUNDS, INC. (MAY 1, 1998)
High Yield Portfolio
Industrial Income Portfolio
JANUS ASPEN SERIES (JUNE 1, 1995)
Aggressive Growth Portfolio
Growth Portfolio
Worldwide Growth Portfolio
LAZARD RETIREMENT SERIES, INC. (MAY 1, 1998)
Equity Portfolio
Small Cap Portfolio
LORD ABBETT SERIES FUND, INC. (MAY 1, 1998)
Growth and Income Portfolio
MITCHELL HUTCHINS SERIES TRUST (MAY 1, 1998)
Growth and Income Portfolio
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
(MAY 1, 1997)
Limited Maturity Bond Portfolio
Partners Portfolio
STRONG VARIABLE INSURANCE FUNDS, INC.
Growth Fund II (May 1, 1997)
STRONG OPPORTUNITY FUND II, Inc. (MAY 1, 1997)
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Hard Assets Fund (formerly Gold and Natural
Resources Fund) (June 1, 1995)
Worldwide Bond Fund (June 1, 1995)
Worldwide Emerging Markets Fund (June 1, 1996)
Worldwide Real Estate Fund (May 1, 1998)
Van Eck Worldwide Insurance Trust terminated the Worldwide Hard Assets Fund
on May 1, 1997, and the Gold and Natural Resources Fund was renamed the
Worldwide Hard Assets Fund. The remaining units in the terminated fund relate to
a contract owner who has not transferred out.
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 increases and decreases in net assets from
operations during the reporting period. Actual results could differ from those
estimates.
(2) Summary of Significant Accounting Policies
INVESTMENT VALUATION, TRANSACTIONS AND INCOME
Investments in portfolio shares are valued using the net asset value of the
respective portfolios at the end of each New York Stock Exchange business day.
Investment share transactions are accounted for on a trade date basis (the date
the order to purchase or redeem shares is executed) and dividend income is
recorded on the ex-dividend date. The cost of investments in portfolio shares
sold is determined on a first-in first-out basis. Account E does not hold any
investments which are restricted as to resale.
Net investment income and net realized gains (losses) and unrealized
appreciation (depreciation) on investments are allocated to the contracts on
each valuation date based on each contract's pro rata share of the assets of
Account E as of the beginning of the valuation date.
FEDERAL INCOME TAXES
No provision for federal income taxes has been made in the accompanying
financial statements because the operations of Account E are included in the
total operations of the Company, which is treated as a life insurance company
for federal income tax purposes under the Internal Revenue Code. Net investment
income and realized gains (losses) are retained in Account E and are not taxable
until received by the contract owner or beneficiary in the form of annuity
payments or other distributions.
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(2) Summary of Significant Accounting Policies (Continued)
ANNUITY RESERVES
Deferred annuity contract reserves are comprised of net contract purchase
payments less redemptions and benefits. These reserves are adjusted daily for
the net investment income and net realized gains (losses) and unrealized
appreciation (depreciation) on investments.
(3) Purchases and Sales of Investments in Portfolio Shares
The aggregate cost of purchases of investments in portfolio shares were
$137,408,045 and $90,025,395 for the years ended December 31, 1998 and 1997,
respectively. The aggregate proceeds from sales of investments in portfolio
shares were $51,611,210 and $10,491,816 for the years ended December 31, 1998
and 1997, respectively.
(4) Deductions and Expenses
Although periodic retirement payments to contract owners vary according to
the investment performance of the portfolios, such payments are not affected by
mortality or expense experience because the Company assumes the mortality and
expense risks under the contracts.
The mortality risk assumed by the Company results from the life annuity
payment option in the contracts in which the Company agrees to make annuity
payments regardless of how long a particular annuitant or other payee lives. The
annuity payments are determined in accordance with annuity purchase rate
provisions established at the time the contracts are issued. Based on the
actuarial determination of expected mortality, the Company is required to fund
any deficiency in the annuity payment reserves from its general account assets.
The expense risk assumed by the Company is the risk that the deductions for
sales and administrative expenses may prove insufficient to cover the actual
sales and administrative expenses. The Company deducts daily from Account E a
fee, which is equal on an annual basis to 1.25 percent of the daily value of the
total investments of Account E, for assuming the mortality and expense risks.
These fees were $2,119,799 and $848,167 for the years ended December 31, 1998
and 1997, respectively.
Pursuant to an agreement between Account E and the Company (which may be
terminated by the Company at any time), the Company provides sales and
administrative services to Account E, as well as a minimum death benefit prior
to retirement for the contracts. The Company may deduct a percentage of amounts
surrendered to cover sales expenses. The percentage varies up to 9.00 percent
based upon the number of years the contract has been held. In addition, the
Company deducts units from individual contracts annually and upon full surrender
to cover an administrative fee of $30 unless the value of the contract is
$25,000 or greater. This fee is recorded as a redemption in the accompanying
Statement of Changes of Net Assets. Sales and administrative charges were
$489,585 and $120,852 for the years ended December 31, 1998 and 1997,
respectively. The Company also deducts daily from Account E a fee, which is
equal on an annual basis to 0.15 percent of the daily value of the total
investments of Account E, for administrative expenses. These expenses were
$254,376 and $101,780 for the years ended December 31, 1998 and 1997,
respectively.
(5) Other Transactions With Affiliates
Conseco Equity Sales, Inc., an affiliate of the Company, is the principal
underwriter and performs all variable annuity sales functions on behalf of the
Company through various retail broker/dealers including Conseco Financial
Services, Inc., an affiliate of the Company.
(6) Net Assets
Net assets consisted of the following at December 31, 1998:
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Proceeds from the sales of units since organization,
less cost of units redeemed ................................ $182,802,095
Undistributed net investment income ........................... 14,775,680
Undistributed net realized gains on sales of investments ...... 3,411,734
Net unrealized appreciation of investments .................... 17,665,123
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Net assets ............................................... $218,654,632
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REPORT OF INDEPENDENT ACCOUNTANTS
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To The Board of Directors of Conseco Variable
Insurance Company and Contract Owners of
Great American Reserve Variable Annuity
Account E
In our opinion, the accompanying statement of assets and liabilities and
the related statements of operations and of changes in net assets present
fairly, in all material respects, the financial position of the Great American
Reserve Variable Annuity Account E (the "Account") at December 31, 1998, and the
results of its operations and the changes in its net assets for each of the two
years in the period then ended, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Account's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of portfolio shares owned at December 31, 1998 by correspondence
with the custodians, provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Indianapolis, Indiana
February 10, 1999>>
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Great American Reserve
Variable Annuity Account E
Sponsor
Conseco Variable Insurance Company - Carmel, Indiana.
Distributor
Conseco Equity Sales, Inc. - Carmel, Indiana.
Independent Public Accountants
PricewaterhouseCoopers LLP - Indianapolis, Indiana.
9
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[LOGO]
Conseco(R)
Conseco Variable Insurance Company is a
subsidiary of Conseco, Inc., a financial services
organization headquartered in Carmel, Indiana.
Conseco is dedicated to providing its customers
with solutions for both wealth protection and
wealth creation. Through its subsidiaries,
Conseco is one of the nation's leading providers
of supplemental health insurance, retirement
annuities, universal life insurance, and consumer
and commercial finance products and services.
Conseco Variable Insurance Company
11815 North Pennsylvania Street
Carmel, Indiana 46032
(C) 1999, Conseco Variable Insurance Company
05-7998 (2/99) 03862
