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As Of Filer Filing For·On·As Docs:Size Issuer Agent 10/01/14 WRL Series Annuity Account N-4 12:7.1M RR Donnelley/FA → WRL Series Annuity Account ⇒ WRL Freedom VA |
Document/Exhibit Description Pages Size 1: N-4 Registration Statement for a Separate Account HTML 4.66M (Unit Investment Trust) 2: EX-1.B Underwriting Agreement HTML 13K 3: EX-1.C Underwriting Agreement HTML 33K 4: EX-1.D Underwriting Agreement HTML 29K 5: EX-3.B Articles of Incorporation/Organization or By-Laws HTML 11K 8: EX-8.A.1 Opinion re: Tax Matters HTML 16K 9: EX-8.C.2 Opinion re: Tax Matters HTML 22K 10: EX-9 Voting Trust Agreement HTML 10K 11: EX-10 Material Contract HTML 8K 12: EX-13 Annual or Quarterly Report to Security Holders HTML 72K 6: EX-99.6.A Exhibit (6)(A) HTML 45K 7: EX-99.6.B Exhibit (6)(B) HTML 26K
N-4 |
As filed with the Securities and Exchange Commission on October 1, 2014
Registration No. 333-
811- 05672
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 | X |
Pre-Effective Amendment No.
Post-Effective Amendment No.
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 193
WRL SERIES ANNUITY ACCOUNT
(Exact Name of Registrant)
TRANSAMERICA PREMIER LIFE INSURANCE COMPANY
(Name of Depositor)
(Former Depositor, Western Reserve Life Assurance Co. of Ohio)
4333 Edgewood Road NE
(Address of Depositor’s Principal Executive Offices)
Depositor’s Telephone Number: (800) 355-8511
Alison Ryan, Esq.
Transamerica Premier Life Insurance Company
4333 Edgewood Road, N.E.
(Name and Address of Agent for Service)
Title of Securities Being Registered: Units of interest in a separate account under flexible premium individual deferred variable annuity contracts
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this registration statement.
Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
WRL FREEDOM VARIABLE ANNUITY
Issued by
TRANSAMERICA PREMIER LIFE INSURANCE COMPANY
WRL Series Annuity Account
Supplement Dated October 1, 2014
to the
Prospectus dated May 1, 2009, as Supplemented
Service Center: 4333 Edgewood Road NE
Phone: (800) 333-6524
Transamerica Premier Life Insurance Company (“TPLIC” or the “Company”) is amending the prospectus for WRL Freedom Variable Annuity contracts (the “Contracts”) for the purpose of providing information regarding the merger (the “Merger”) of the insurance company on your Contract, Western Reserve Life Assurance Co. of Ohio (“Western Reserve”), with and into TPLIC.
Western Reserve no longer sells the Contracts. Following the Merger, TPLIC will not sell the former Western Reserve Contracts.
Effective on or about October 1, 2014, Western Reserve merged with and into its affiliate TPLIC. Before the Merger, Western Reserve was the insurance company on the Contracts. Upon consummation of the Merger, Western Reserve’s corporate existence ceased by operation of law, and TPLIC assumed legal ownership of all of the assets of Western Reserve, including WRL Series Annuity Account (the “separate account”) funds the Contracts, and the assets of the separate account. As a result of the merger, TPLIC became responsible for all liabilities and obligations of Western Reserve, including those created under the Contracts. The Contracts have thereby become flexible premium individual deferred variable annuity contracts funded by a separate account of TPLIC.
The Merger did not affect the terms of, or the rights and obligations under, your Contract, other than to change the company that provides your Contract benefits from Western Reserve to TPLIC. The Merger also did not result in any adverse tax consequences for any Contract owners, and Contract owners will not be charged additional fees or expenses as a result of the Merger. You will receive a Contract endorsement from TPLIC that reflects the change from Western Reserve to TPLIC. Until we amend all forms we use that are related to the Contracts, we may still reflect Western Reserve in correspondence and disclosure to you.
The following are the available investment options:
SUBACCOUNT | PORTFOLIO | ADVISOR/SUBADVISOR | ||
Access One Trust | ||||
Access VP High Yield FundSM | Access VP High Yield FundSM | ProFund Advisors LLC | ||
ProFunds | ||||
ProFund VP Asia 30 | ProFund VP Asia 30 | ProFund Advisors LLC | ||
ProFund VP Basic Materials | ProFund VP Basic Materials | ProFund Advisors LLC | ||
ProFund VP Bull | ProFund VP Bull | ProFund Advisors LLC | ||
ProFund VP Consumer Services | ProFund VP Consumer Services | ProFund Advisors LLC | ||
ProFund VP Emerging Markets | ProFund VP Emerging Markets | ProFund Advisors LLC | ||
ProFund VP Europe 30 | ProFund VP Europe 30 | ProFund Advisors LLC | ||
ProFund VP Falling U.S. Dollar | ProFund VP Falling U.S. Dollar | ProFund Advisors LLC | ||
ProFund VP Financials | ProFund VP Financials | ProFund Advisors LLC | ||
ProFund VP International | ProFund VP International | ProFund Advisors LLC | ||
ProFund VP Japan | ProFund VP Japan | ProFund Advisors LLC | ||
ProFund VP Mid-Cap | ProFund VP Mid-Cap | ProFund Advisors LLC | ||
ProFund VP Money Market | ProFund VP Money Market | ProFund Advisors LLC | ||
ProFund VP NASDAQ-100 | ProFund VP NASDAQ-100 | ProFund Advisors LLC |
SUBACCOUNT | PORTFOLIO | ADVISOR/SUBADVISOR | ||
ProFund VP Oil & Gas | ProFund VP Oil & Gas | ProFund Advisors LLC | ||
ProFund VP Pharmaceuticals | ProFund VP Pharmaceuticals | ProFund Advisors LLC | ||
ProFund VP Precious Metals | ProFund VP Precious Metals | ProFund Advisors LLC | ||
ProFund VP Short Emerging Markets | ProFund VP Short Emerging Markets | ProFund Advisors LLC | ||
ProFund VP Short International | ProFund VP Short International | ProFund Advisors LLC | ||
ProFund VP Short NASDAQ-100 | ProFund VP Short NASDAQ-100 | ProFund Advisors LLC | ||
ProFund VP Short Small-Cap | ProFund VP Short Small-Cap | ProFund Advisors LLC | ||
ProFund VP Small-Cap | ProFund VP Small-Cap | ProFund Advisors LLC | ||
ProFund VP Small-Cap Value | ProFund VP Small-Cap Value | ProFund Advisors LLC | ||
ProFund VP Telecommunications | ProFund VP Telecommunications | ProFund Advisors LLC | ||
ProFund VP UltraSmall-Cap | ProFund VP UltraSmall-Cap | ProFund Advisors LLC | ||
ProFund VP U.S. Government Plus | ProFund VP U.S. Government Plus | ProFund Advisors LLC | ||
ProFund VP Utilities | ProFund VP Utilities | ProFund Advisors LLC | ||
Transamerica Series Trust - Service Class | ||||
TA Aegon Tactical Vanguard ETF – Conservative | Transamerica Aegon Active Asset Allocation – Conservative VP | Aegon USA Investment Management, LLC | ||
TA Aegon Tactical Vanguard ETF – Growth | Transamerica Aegon Active Asset Allocation – Moderate Growth VP | Aegon USA Investment Management, LLC | ||
TA BlackRock Tactical Allocation | Transamerica BlackRock Tactical Allocation VP | BlackRock Financial Management, Inc. | ||
TA Janus Balanced | Transamerica Janus Balanced VP | Janus Capital Management LLC | ||
TA PIMCO Tactical - Balanced | Transamerica PIMCO Tactical - Balanced VP | Pacific Investment Management Company, LLC | ||
TA PIMCO Tactical - Conservative | Transamerica PIMCO Tactical - Conservative VP | Pacific Investment Management Company, LLC | ||
TA PIMCO Tactical - Growth | Transamerica PIMCO Tactical - Growth VP | Pacific Investment Management Company, LLC | ||
TA Vanguard ETF – Balanced | Transamerica Vanguard ETF Portfolio – Balanced VP | Aegon USA Investment Management, LLC | ||
TA Vanguard ETF – Growth | Transamerica Vanguard ETF Portfolio – Growth VP | Aegon USA Investment Management, LLC | ||
Transamerica Series Trust - Initial Class | ||||
TA Aegon High Yield Bond | Transamerica Aegon High Yield Bond VP | Aegon USA Investment Management, LLC | ||
TA Aegon Money Market | Transamerica Aegon Money Market VP | Aegon USA Investment Management, LLC | ||
TA Aegon U.S. Government Securities | Transamerica Aegon U.S. Government Securities VP | Aegon USA Investment Management, LLC | ||
TA AllianceBernstein Dynamic Allocation |
Transamerica AllianceBernstein Dynamic Allocation VP | AllianceBernstein L.P. | ||
TA Asset Allocation - Conservative | Transamerica Asset Allocation - Conservative VP | Aegon USA Investment Management, LLC | ||
TA Asset Allocation - Growth | Transamerica Asset Allocation - Growth VP | Aegon USA Investment Management, LLC | ||
TA Asset Allocation - Moderate | Transamerica Asset Allocation - Moderate VP | Aegon USA Investment Management, LLC | ||
TA Asset Allocation - Moderate Growth | Transamerica Asset Allocation - Moderate Growth VP | Aegon USA Investment Management, LLC | ||
TA Barrow Hanley Dividend Focused | Transamerica Barrow Hanley Dividend Focused VP | Barrow, Hanley, Mewhinney, & Strauss, LLC | ||
TA Clarion Global Real Estate Securities | Transamerica Clarion Global Real Estate Securities VP | CBRE Clarion Securities LLC | ||
TA International Moderate Growth | Transamerica International Moderate Growth VP | Aegon USA Investment Management, LLC | ||
TA JPMorgan Core Bond | Transamerica JPMorgan Core Bond VP | J.P. Morgan Investment Management Inc. | ||
TA JPMorgan Enhanced Index | Transamerica JPMorgan Enhanced Index VP | J.P. Morgan Investment Management Inc. | ||
TA JPMorgan Tactical Allocation | Transamerica JPMorgan Tactical Allocation VP | J.P. Morgan Investment Management Inc. | ||
TA Jennison Growth | Transamerica Jennison Growth VP | Jennison Associates LLC | ||
TA MFS International Equity | Transamerica MFS International Equity VP | MFS® Investment Management | ||
TA Morgan Stanley Capital Growth | Transamerica Morgan Stanley Capital Growth VP | Morgan Stanley Investment Management Inc. | ||
TA Morgan Stanley Mid-Cap Growth | Transamerica Morgan Stanley Mid-Cap Growth VP | Morgan Stanley Investment Management Inc. | ||
TA Multi-Managed Balanced | Transamerica Multi-Managed Balanced VP |
J.P. Morgan Investment Management Inc. and Aegon USA Investment Management, LLC | ||
TA PIMCO Total Return | Transamerica PIMCO Total Return VP | Pacific Investment Management Company LLC | ||
TA Systematic Small/Mid Cap Value | Transamerica Systematic Small/Mid Cap Value VP | Systematic Financial Management L.P. | ||
TA T. Rowe Price Small Cap | Transamerica T. Rowe Price Small Cap VP | T. Rowe Price Associates, Inc. | ||
TA Torray Concentrated Growth | Transamerica Torray Concentrated Growth VP | Torray LLC | ||
TA WMC US Growth | Transamerica WMC US Growth VP | Wellington Management Company, LLP |
Additional Information:
The following subaccounts are only available to owners who held an investment in the subaccounts on May 1, 2003:
Fidelity® Variable Insurance Products Fund – Service Class 2 | ||||
Fidelity® VIP Contrafund® Portfolio | Fidelity® VIP Contrafund® Portfolio | Fidelity Management & Research Company | ||
Fidelity® VIP Growth Opportunities Portfolio | Fidelity® VIP Growth Opportunities Portfolio | Fidelity Management & Research Company | ||
The following subaccount closed to new investments on December 12, 2005: | ||||
Transamerica Series Trust - Initial Class | ||||
TA JPMorgan Mid Cap Value | Transamerica JPMorgan Mid Cap Value VP | J.P. Morgan Investment Management Inc. | ||
Effective December 12, 2011, the following subaccount was closed to new investments: | ||||
Fidelity® Variable Insurance Products Fund – Service Class 2 | ||||
Fidelity® VIP Equity-Income Portfolio | Fidelity® VIP Equity-Income Portfolio | Fidelity Management & Research Company |
The following hereby replaces the Other Information - Western Reserve Life Assurance Co. Of Ohio section of the prospectus:
Transamerica Premier Life Insurance Company
Transamerica Premier Life Insurance Company (formerly known as Monumental Life Insurance Company) was incorporated under the laws of the State of Maryland on March 5, 1858. It was redomesticated to the State of Iowa on April 1, 2007. It is engaged in the sale of life and health insurance and annuity policies. The Company is a wholly-owned indirect subsidiary of Transamerica Corporation which conducts most of its operations through subsidiary companies engaged in the insurance business or in providing non-insurance financial services. All of the stock of Transamerica Corporation is indirectly owned by Aegon N.V. of The Netherlands, the securities of which are publicly traded. Aegon N.V., a holding company, conducts its business through subsidiary companies engaged primarily in the insurance business. The Company is licensed in the District of Columbia, Guam, Puerto Rico and all states except New York.
On July 31, 2014, Monumental Life Insurance Company changed its name to Transamerica Premier Life Insurance Company.
All obligations arising under the policies, including the promise to make annuity payments, are general corporate obligations of the Company. Accordingly no financial institution, brokerage firm or insurance agency is responsible for the financial obligations of the Company arising under the policies.
The following hereby replaces Other Information - The Separate Account section of the prospectus:
The Separate Account
Western Reserve established a separate account, called the WRL Series Annuity Account, under the laws of the State of Ohio on April 12, 1988. Effective on October 1, 2014, the WRL Series Annuity Account was re-domesticated under the laws of the State of Iowa and reestablished under TPLIC. The separate account is divided into subaccounts, each of which invests exclusively in shares of a mutual fund portfolio. TPLIC may add, close, remove, combine or substitute subaccounts or investments held by the subaccounts, and reserves the right to change the investment objective of any subaccount, subject to applicable law as described in the SAI. In addition, the separate account may be used for other variable annuity contracts issued by TPLIC.
The separate account is registered with the SEC as a unit investment trust under the 1940 Act. However, the SEC does not supervise the management, the investment practices, or the contracts of the separate account or TPLIC.
The assets of the separate account are held in TPLIC’s name on behalf of the separate account and belong to TPLIC. However, the portion of the assets of the separate account equal to the reserves and other contract liabilities with respect to the separate account are not chargeable with liabilities arising out of any other business the Company may conduct. The income, gains and losses, realized and unrealized, from the assets allocated to each subaccount are credited to and charged against that subaccount without regard to the income, gains and losses from any other of our accounts or subaccounts.
Information about the separate account can be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. You may obtain information about the operation of the public reference room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a web site (www.sec.gov) that contains other information regarding the separate account.
The following hereby replaces the Other Information - Legal Proceedings section of the prospectus:
Legal Proceedings
We, like other life insurance companies, are subject to regulatory and legal proceedings, including class action lawsuits, in the ordinary course of our business. Such legal and regulatory matters include proceedings specific to us and other proceedings generally applicable to business practices in the industry in which we operate. In some lawsuits and regulatory proceedings involving insurers, substantial damages have been sought and/or material settlement payments have been made. Although the outcome of any litigation or regulatory proceeding cannot be predicted with certainty, at the present time, we believe that there are no pending or threatened proceedings or lawsuits that are likely to have a material adverse impact on the separate account, on TCI’s ability to perform under its principal underwriting agreement, or on our ability to meet our obligations under the policy.
We are currently being audited on behalf of multiple states’ treasury and controllers’ offices for compliance with laws and regulations concerning the identification, reporting and escheatment of unclaimed benefits or abandoned funds. The audits focus on insurance company processes and procedures for identifying unreported death claims, and their use of the Social Security Master Death File to identify deceased policy and contract holders. In addition, we are the subject of multiple state Insurance Department inquiries and market conduct examinations with a similar focus on the handling of unreported claims and abandoned property. The audits and related examination activity have resulted in or may result in additional payments to beneficiaries, escheatment of funds deemed abandoned, administrative penalties and changes in our procedures for the identification of unreported claims and handling of escheatable property. We do not believe that any regulatory actions or agreements that have resulted from or will result from these examinations has had or will have a material adverse impact on the separate account, on TCI’s ability to perform under its principal underwriting agreement, or on our ability to meet our obligations under the policy. Although it is possible that the outcome of any such examination could have a material adverse impact on results of TPLIC’s operations in any particular reporting period as the proceedings are resolved, TPLIC believes that it has adequately reserved for the unclaimed matters described here.
The following hereby replaces the Other Information - Financial Statements section of the prospectus:
Financial Statements
The financial statements of Western Reserve, TPLIC and the separate account are included in the SAI.
WRL FREEDOM VARIABLE ANNUITY
Issued by
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
WRL SERIES ANNUITY ACCOUNT
Supplement Dated November 4, 2013
to the
Prospectus dated May 1, 2009 as Supplemented
The following hereby amends, and to the extent inconsistent replaces, the corresponding paragraphs in the 9. DEATH BENEFIT section in the prospectus:
We will pay a death benefit to your beneficiary(ies), under certain circumstances, if you are both an owner and annuitant, and you die during the accumulation period (that is before the maturity date). A beneficiary may choose to receive payment of his or her portion of the death benefit proceeds under a life annuity payment option, to continue the Contract in the accumulation period for a specified number of years, or to receive a lump sum payment. Death benefit provisions may vary from state to state. The guarantees of these death benefits are based on our claims paying ability.
If a beneficiary does not choose one of these options, then the default option for nonqualified Contracts is complete distribution of the beneficiary’s interest within 5 years of the owner’s death, and the default option for qualified Contracts is payout over a beneficiary’s life expectancy. Please see Alternate Payment Elections Before the Maturity Date below for details.
We will determine the amount of and pay the death benefit proceeds, if any are payable on a Contract, upon receipt at our Administrative Office of satisfactory proof of the annuitant’s death, directions regarding how to pay the death benefit, and any other documents, forms and information that we need (collectively referred to as “due proof of death”). For Contracts with multiple beneficiaries, we will pay the first beneficiary to provide us with due proof of death their share of the death proceeds. We will not pay any remaining beneficiary their share until we receive due proof of death from that beneficiary. Such beneficiaries continue to bear the investment risk until they submit due proof of death. Please note, we may be required to remit the death benefit proceeds to a state prior to receiving “due proof of death.” See Section 10. Other Information - Abandoned or Unclaimed Property.
Please Note: Such due proof of death must be received in good order to avoid a delay in processing the death benefit claim. Due proof requires selecting a payment option. See Section 10. Other Information - Sending Forms and Transaction Requests in Good Order.
WRL FREEDOM VARIABLE ANNUITY
Issued by
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Supplement Dated May 1, 2013
to the
Prospectus dated May 1, 2009
The following hereby amends and supplements your prospectus:
Abandoned or Unclaimed Property
Every state has unclaimed property laws that generally provide for escheatment to the state of unclaimed property (including proceeds of annuity, life and other insurance policies) under various circumstances. In addition to the state unclaimed property laws, we may be required to escheat property pursuant to regulatory demand, finding, agreement or settlement. To help prevent such escheatment, it is important that you keep your contact and other information on file with us up to date, including the names, contact information and identifying information for owners, insureds, annuitants, beneficiaries and other payees. Such updates should be communicated in a form and manner satisfactory to us.
Legal Proceedings
We, like other life insurance companies, are subject to regulatory and legal proceedings, including class action lawsuits, in the ordinary course of our business. Such legal and regulatory matters include proceedings specific to us and other proceedings generally applicable to business practices in the industry in which we operate. In some lawsuits and regulatory proceedings involving insurers, substantial damages have been sought and/or material settlement payments have been made. Although the outcome of any litigation or regulatory proceeding cannot be predicted with certainty, at the present time, we believe that there are no pending or threatened proceedings or lawsuits that are likely to have a material adverse impact on the separate account, on TCI’s ability to perform under its principal underwriting agreement, or on our ability to meet our obligations under the policy.
We are currently being audited on behalf of multiple states’ treasury and controllers’ offices for compliance with laws and regulations concerning the identification, reporting and escheatment of unclaimed benefits or abandoned funds. The audits focus on insurance company processes and procedures for identifying unreported death claims, and their use of the Social Security Master Death File to identify deceased policy and contract holders. In addition, we are the subject of multiple state Insurance Department inquiries and market conduct examinations with a similar focus on the handling of unreported claims and abandoned property. The audits and related examination activity may result in additional payments to beneficiaries, escheatment of funds deemed abandoned, administrative penalties and changes in our procedures for the identification of unreported claims and handling of escheatable property. We do not believe that any regulatory actions or agreements that result from these examinations will have a material adverse impact on the separate account, on TCI’s ability to perform under its principal underwriting agreement, or on our ability to meet our obligations under the policy.
This Prospectus Supplement must be accompanied or preceded
by the Prospectus for the
WRL Freedom Variable Annuity dated May 1, 2009
WRL FREEDOM VARIABLE ANNUITY
Issued by
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Supplement Dated September 14, 2012
to the
Prospectus dated May 1, 2009
Effective on or about September 17, 2012, the following subaccounts were restructured and renamed:
Current: | New: | |
TA Hanlon Balanced – Service Class subadvised by Hanlon Investment Management, Inc. | TA PIMCO Tactical – Balanced – Service Class subadvised by Pacific Investment Management Company LLC | |
TA Hanlon Growth – Service Class subadvised by Hanlon Investment Management, Inc. | TA PIMCO Tactical – Growth – Service Class subadvised by Pacific Investment Management Company LLC | |
TA Hanlon Growth and Income – Service Class subadvised by Hanlon Investment Management, Inc. | TA PIMCO Tactical – Conservative – Service Class subadvised by Pacific Investment Management Company LLC |
This Prospectus Supplement must be accompanied or preceded
by the Prospectus for the
WRL Freedom Variable Annuity dated May 1, 2009
WRL FREEDOM VARIABLE ANNUITY
Issued by
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Supplement Dated July 26, 2012
to the
Prospectus dated May 1, 2009
The subaccounts listed below are available under the policy, but may not be available for all policies.
SUBACCOUNT | PORTFOLIO | ADVISOR/SUBADVISOR | ||
| ||||
Access One Trust | ||||
Access VP High Yield FundSM |
Access VP High Yield FundSM | ProFund Advisors LLC | ||
Investment Objective: To correspond generally to the total return of the high yield market consistent with maintaining reasonable liquidity. | ||||
| ||||
ProFunds | ||||
ProFund VP Asia 30 | ProFund VP Asia 30 | ProFund Advisors LLC | ||
Investment Objective: Seeks investment results, before fees and expenses, that correspond to the performance of the ProFunds Asia 30 Index. | ||||
ProFund VP Basic Materials | ProFund VP Basic Materials | ProFund Advisors LLC | ||
Investment Objective: Seeks investment results, before fees and expenses, that correspond to the performance of the Dow Jones U.S. Basic MaterialsSM Index. | ||||
ProFund VP Bull | ProFund VP Bull | ProFund Advisors LLC | ||
Investment Objective: Seeks investment results, before fees and expenses, that correspond to the performance of the S&P 500® Index. | ||||
ProFund VP Consumer Services | ProFund VP Consumer Services | ProFund Advisors LLC | ||
Investment Objective: Seeks investment results, before fees and expenses, that correspond to the performance of the Dow Jones U.S. Consumer ServicesSM Index. | ||||
ProFund VP Emerging Markets | ProFund VP Emerging Markets | ProFund Advisors LLC | ||
Investment Objective: Seeks investment results, before fees and expenses, that correspond to the performance of The Bank of New York Mellon Emerging Markets 50 ADR® Index. | ||||
ProFund VP Europe 30 | ProFund VP Europe 30 | ProFund Advisors LLC | ||
Investment Objective: Seeks investment results, before fees and expenses, that correspond to the performance of the ProFunds Europe 30 Index. | ||||
ProFund VP Falling U.S. Dollar | ProFund VP Falling U.S. Dollar | ProFund Advisors LLC | ||
Investment Objective: Seeks daily investment results, before fees and expenses, that correspond to the daily performance of the basket of currencies included in the U.S. Dollar Index®. | ||||
ProFund VP Financials | ProFund VP Financials | ProFund Advisors LLC | ||
Investment Objective: Seeks investment results, before fees and expenses, that correspond to the performance of the Dow Jones U.S. FinancialsSM Index. | ||||
ProFund VP International | ProFund VP International | ProFund Advisors LLC | ||
Investment Objective: Seeks investment results, before fees and expenses, that correspond to the performance of the MSCI EAFE Index. | ||||
ProFund VP Japan | ProFund VP Japan | ProFund Advisors LLC | ||
Investment Objective: Seeks investment results, before fees and expenses, that correspond to the performance of the Nikkei 225 Stock Average. | ||||
ProFund VP Mid-Cap | ProFund VP Mid-Cap | ProFund Advisors LLC | ||
Investment Objective: Seeks investment results, before fees and expenses, that correspond to the performance of the S&P MidCap 400®. | ||||
ProFund VP Money Market(1) | ProFund VP Money Market(1) | ProFund Advisors LLC | ||
Investment Objective: High level of current income consistent with liquidity and preservation of capital. | ||||
ProFund VP NASDAQ-100 | ProFund VP NASDAQ-100 | ProFund Advisors LLC | ||
Investment Objective: Seeks investment results, before fees and expenses, that correspond to the performance of the NASDAQ-100® Index. |
This Prospectus Supplement must be accompanied or preceded
by the Prospectus for the
WRL Freedom Variable Annuity dated May 1, 2009
ProFunds (Continued...) | ||||
ProFund VP Oil & Gas | ProFund VP Oil & Gas | ProFund Advisors LLC | ||
Investment Objective: Seeks investment results, before fees and expenses, that correspond to the performance of the Dow Jones U.S. Oil and GasSM Index. | ||||
ProFund VP Pharmaceuticals | ProFund VP Pharmaceuticals | ProFund Advisors LLC | ||
Investment Objective: Seeks investment results, before fees and expenses, that correspond to the performance of the Dow Jones U.S. PharmaceuticalsSM Index. | ||||
ProFund VP Precious Metals | ProFund VP Precious Metals | ProFund Advisors LLC | ||
Investment Objective: Seeks investment results, before fees and expenses, that correspond to the performance of the Dow Jones Precious MetalsSM Index. | ||||
ProFund VP Short Emerging Markets | ProFund VP Short Emerging Markets | ProFund Advisors LLC | ||
Investment Objective: Seeks daily investment results, before fees and expenses, that correspond to the inverse of the daily performance of The Bank of New York Mellon Emerging Markets 50 ADR® Index. | ||||
ProFund VP Short International | ProFund VP Short International | ProFund Advisors LLC | ||
Investment Objective: Seeks daily investment results, before fees and expenses, that correspond to the inverse of the daily performance of the MSCI EAFE Index. | ||||
ProFund VP Short NASDAQ-100 | ProFund VP Short NASDAQ-100 | ProFund Advisors LLC | ||
Investment Objective: Seeks daily investment results, before fees and expenses, that correspond to the inverse of the daily performance of the NASDAQ- 100® Index. | ||||
ProFund VP Short Small-Cap | ProFund VP Short Small-Cap | ProFund Advisors LLC | ||
Investment Objective: Seeks daily investment results, before fees and expenses, that correspond to the inverse of the daily performance of the Russell 2000® Index. | ||||
ProFund VP Small-Cap | ProFund VP Small-Cap | ProFund Advisors LLC | ||
Investment Objective: Seeks investment results, before fees and expenses, that correspond to the performance of the Russell 2000® Index. | ||||
ProFund VP Small-Cap Value | ProFund VP Small-Cap Value | ProFund Advisors LLC | ||
Investment Objective: Seeks investment results, before fees and expenses, that correspond to the performance of the S&P SmallCap 600 Value Index. | ||||
ProFund VP Telecommunications | ProFund VP Telecommunications | ProFund Advisors LLC | ||
Investment Objective: Seeks investment results, before fees and expenses, that correspond to the performance of the Dow Jones U.S. TelelcommunicationsSM Index. | ||||
ProFund VP UltraSmall-Cap | ProFund VP UltraSmall-Cap | ProFund Advisors LLC | ||
Investment Objective: Seeks daily investment results, before fees and expenses, that correspond to twice (200%) the daily performance of the Russell 2000® Index. | ||||
ProFund VP U.S. Government Plus | ProFund VP U.S. Government Plus | ProFund Advisors LLC | ||
Investment Objective: Seeks daily investment results, before fees and expenses, that correspond to one and one-quarter (1.25x) the daily movement of the most recently issued 30-Year U.S. Treasury Bond. | ||||
ProFund VP Utilities | ProFund VP Utilities | ProFund Advisors LLC | ||
Investment Objective: Seeks investment results, before fees and expenses, that correspond to the performance of the Dow Jones U.S. UtilitiesSM Index. | ||||
| ||||
Transamerica Series Trust - Service Class | ||||
TA AEGON Tactical Vanguard ETF – Conservative | Transamerica AEGON Active Asset Allocation – Conservative VP | AEGON USA Investment Management, LLC | ||
Investment Objective: Current income and preservation of capital. | ||||
TA AEGON Tactical Vanguard ETF – Growth | Transamerica AEGON Active Asset Allocation – Moderate Growth VP | AEGON USA Investment Management, LLC | ||
Investment Objective: Capital appreciation with current income as a secondary objective. | ||||
TA Hanlon Balanced | Transamerica Hanlon Balanced VP | Hanlon Investment Management, Inc. | ||
Investment Objective: Current income and capital appreciation. | ||||
TA Hanlon Growth | Transamerica Hanlon Growth VP | Hanlon Investment Management, Inc. | ||
Investment Objective: Long-term capital appreciation. | ||||
TA Hanlon Growth and Income | Transamerica Hanlon Growth and Income VP | Hanlon Investment Management, Inc. | ||
Investment Objective: Capital appreciation and some current income. | ||||
TA Hanlon Income | Transamerica Hanlon Income VP | Hanlon Investment Management, Inc. | ||
Investment Objective: Conservative stability. | ||||
TA Janus Balanced | Transamerica Janus Balanced VP | Janus Capital Management LLC | ||
Investment Objective: Long-term capital growth, consistent with preservation of capital and balanced by current income. | ||||
TA Vanguard ETF Index – Balanced | Transamerica Index 50 VP | AEGON USA Investment Management, LLC | ||
Investment Objective: To balance capital appreciation and income. | ||||
TA Vanguard ETF Index – Growth | Transamerica Index 75 VP | AEGON USA Investment Management, LLC | ||
Investment Objective: Capital appreciation as a primary objective and income as a secondary objective. | ||||
| ||||
Transamerica Series Trust - Initial Class | ||||
TA AEGON High Yield Bond | Transamerica AEGON High Yield Bond VP | AEGON USA Investment Management, LLC | ||
Investment Objective: Seeks a high level of current income by investing in high-yield debt securities. | ||||
TA AEGON Money Market(1) | Transamerica AEGON Money Market VP(1) | AEGON USA Investment Management, LLC | ||
Investment Objective: Maximum current income from money market securities consistent with liquidity and preservation of principal. |
2
| ||||
Transamerica Series Trust - Initial Class (Continued...) | ||||
TA AEGON U.S. Government Securities | Transamerica AEGON U.S. Government Securities VP | AEGON USA Investment Management, LLC | ||
Investment Objective: Provide as high a level of total return as is consistent with prudent investment strategies. | ||||
TA AllianceBernstein Dynamic Allocation | Transamerica AllianceBernstein Dynamic Allocation VP | AllianceBernstein L.P. | ||
Investment Objective: Capital appreciation and current income. | ||||
TA Asset Allocation - Conservative | Transamerica Asset Allocation - Conservative VP | Transamerica Asset Management, Inc.(2) | ||
Investment Objective: Current income and preservation of capital. | ||||
TA Asset Allocation - Growth | Transamerica Asset Allocation - Growth VP | Transamerica Asset Management, Inc. (2) | ||
Investment Objective: Long-term capital appreciation. | ||||
TA Asset Allocation - Moderate | Transamerica Asset Allocation - Moderate VP | Transamerica Asset Management, Inc. (2) | ||
Investment Objective: Capital appreciation and current income. | ||||
TA Asset Allocation - Moderate Growth | Transamerica Asset Allocation - Moderate Growth VP | Transamerica Asset Management, Inc. (2) | ||
Investment Objective: Capital appreciation with current income as a secondary objective. | ||||
TA BlackRock Large Cap Value | Transamerica BlackRock Large Cap Value VP | BlackRock Investment Management, LLC | ||
Investment Objective: Long-term capital growth. | ||||
TA Clarion Global Real Estate Securities | Transamerica Clarion Global Real Estate Securities VP | CBRE Clarion Securities LLC | ||
Investment Objective: Long-term total return from investments primarily in equity securities of real estate companies. Total return consists of realized and unrealized capital gains and losses plus income. | ||||
TA International Moderate Growth | Transamerica International Moderate Growth VP | Transamerica Asset Management, Inc. (2) | ||
Investment Objective: Capital appreciation with current income as a secondary objective. | ||||
TA JPMorgan Core Bond | Transamerica JPMorgan Core Bond VP | J.P. Morgan Investment Management Inc. | ||
Investment Objective: Total return, consisting of current income and capital appreciation. | ||||
TA JPMorgan Enhanced Index | Transamerica JPMorgan Enhanced Index VP | J.P. Morgan Investment Management Inc. | ||
Investment Objective: To earn a total return modestly in excess of the total return performance of the S&P 500® Index (including the reinvestment of dividends) while maintaining a volatility of return similar to the S&P 500® Index. | ||||
TA JPMorgan Tactical Allocation | Transamerica JPMorgan Tactical Allocation VP | J.P. Morgan Investment Management Inc. | ||
Investment Objective: Current income and preservation of capital. | ||||
TA Jennison Growth | Transamerica Jennison Growth VP | Jennison Associates LLC | ||
Investment Objective: Long-term growth of capital. | ||||
TA MFS International Equity | Transamerica MFS International Equity VP | MFS® Investment Management | ||
Investment Objective: Capital growth. | ||||
TA Morgan Stanley Capital Growth | Transamerica Morgan Stanley Capital Growth VP | Morgan Stanley Investment Management Inc. | ||
Investment Objective: Maximize long-term growth. | ||||
TA Morgan Stanley Mid-Cap Growth | Transamerica Morgan Stanley Mid-Cap Growth VP | Morgan Stanley Investment Management Inc. | ||
Investment Objective: Capital appreciation. | ||||
TA Multi-Managed Balanced | Transamerica Multi-Managed Balanced VP | J.P. Morgan Investment Management Inc. and BlackRock Financial Management, Inc. | ||
Investment Objective: To provide a high total investment return through investments in a broadly diversified portfolio of stocks, bonds and money market instruments. | ||||
TA Multi Managed Large Cap Core | Transamerica Multi Managed Large Cap Core VP | Morgan Stanley Investment Management Inc. and Invesco Advisers, Inc. | ||
Investment Objective: To provide high total return. | ||||
TA PIMCO Total Return | Transamerica PIMCO Total Return VP | Pacific Investment Management Company LLC | ||
Investment Objective: Maximum total return consistent with preservation of capital and prudent investment management. | ||||
TA Systematic Small/Mid Cap Value | Transamerica Systematic Small/Mid Cap Value VP | Systematic Financial Management L.P. | ||
Investment Objective: Maximize total return. | ||||
TA T. Rowe Price Small Cap | Transamerica T. Rowe Price Small Cap VP | T. Rowe Price Associates, Inc. | ||
Investment Objective: Long-term growth of capital by investing primarily in common stocks of small growth companies. | ||||
TA Third Avenue Value | Transamerica Third Avenue Value VP | Third Avenue Management LLC | ||
Investment Objective: Long-term capital appreciation. | ||||
TA WMC Diversified Growth | Transamerica WMC Diversified Growth VP | Wellington Management Company, LLP | ||
Investment Objective: Maximize long-term growth. |
3
(1) | There can be no assurance that the Transamerica AEGON Money Market VP portfolio or the ProFund VP Money Market portfolio will be able to maintain a stable net asset value per share. During extended periods of low interest rates, and partly as a result of policy charges, the yield on the TA AEGON Money Market subaccount or the ProFund VP Money Market subaccount may become extremely low and possibly negative. |
(2) | Effective on or about April 17, 2012, formerly subadvised by Morningstar Associates, LLC. |
Additional Information:
The following subaccounts are only available to owners that held an investment in the subaccounts on May 1, 2003:
SUBACCOUNT | PORTFOLIO | ADVISOR/SUBADVISOR | ||
| ||||
Fidelity® Variable Insurance Products Fund – Service Class 2 | ||||
Fidelity® VIP Contrafund® Portfolio | Fidelity® VIP Contrafund® Portfolio | Fidelity Management & Research Company | ||
Investment Objective: Seeks long-term capital appreciation. | ||||
Fidelity® VIP Growth Opportunities Portfolio | Fidelity® VIP Growth Opportunities Portfolio | Fidelity Management & Research Company | ||
Investment Objective: Seeks to provide capital growth. | ||||
The following subaccount closed to new investments on December 12, 2005: | ||||
| ||||
Transamerica Series Trust - Initial Class | ||||
TA JPMorgan Mid Cap Value | Transamerica JPMorgan Mid Cap Value VP | J.P. Morgan Investment Management Inc. | ||
Investment Objective: Seeks growth from capital appreciation. | ||||
The following subaccount closed to new investments on December 12, 2011: | ||||
| ||||
Fidelity® Variable Insurance Products Fund – Service Class 2 | ||||
Fidelity® VIP Equity-Income Portfolio | Fidelity® VIP Equity-Income Portfolio | Fidelity Management & Research Company | ||
Investment Objective: Seeks reasonable income. The fund will also consider the potential for capital appreciation. The fund’s goal is to achieve a yield which exceeds the composite yield on the securities comprising the S&P 500® Index. |
4
WRL FREEDOM VARIABLE ANNUITY
Issued by
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Supplement Dated December 12, 2011
to the
Prospectus dated May 1, 2009
Effective on or about December 9, 2011 the following subaccounts merged:
Existing Subaccount | Acquiring Subaccount | |
Transamerica Global Conservative VP | Transamerica AEGON Active Asset Allocation – Conservative VP | |
Transamerica Emerging Markets/Pacific Rim VP | Transamerica AEGON Active Asset Allocation – Moderate Growth VP | |
Transamerica Global Growth VP | Transamerica AEGON Active Asset Allocation – Moderate Growth VP |
Effective on or about December 9, 2011 the following subaccount was restructured and renamed:
Old Subaccount Name | New Subaccount Name | |
Transamerica Global Commodities & Hard Assets VP | Transamerica Janus Balanced VP |
Effective on or about December 12, 2011, the following subaccount name changes will occur:
Current Subaccount Name(1) | New Subaccount Name | |
Transamerica AEGON Active Asset Allocation – Conservative VP | TA AEGON Tactical Vanguard ETF – Conservative | |
Transamerica AEGON Active Asset Allocation – Moderate Growth VP | TA AEGON Tactical Vanguard ETF – Growth | |
Transamerica Index 50 VP | TA Vanguard ETF Index – Balanced | |
Transamerica Index 75 VP | TA Vanguard ETF Index – Growth | |
Transamerica Hanlon Balanced VP | TA Hanlon Balanced | |
Transamerica Hanlon Growth VP | TA Hanlon Growth | |
Transamerica Hanlon Growth and Income VP | TA Hanlon Growth and Income | |
Transamerica Hanlon Income VP | TA Hanlon Income | |
Transamerica Janus Balanced VP | TA Janus Balanced | |
Transamerica Asset Allocation – Conservative VP | TA Asset Allocation – Conservative | |
Transamerica Asset Allocation – Growth VP | TA Asset Allocation – Growth | |
Transamerica Asset Allocation – Moderate VP | TA Asset Allocation – Moderate | |
Transamerica Asset Allocation – Moderate Growth VP | TA Asset Allocation – Moderate Growth | |
Transamerica International Moderate Growth VP | TA International Moderate Growth | |
Transamerica AEGON High Yield Bond VP | TA AEGON High Yield Bond | |
Transamerica AEGON Money Market VP | TA AEGON Money Market | |
Transamerica AEGON U.S. Government Securities | TA AEGON U.S. Government Securities | |
Transamerica AllianceBernstein Dynamic Allocation VP | TA AllianceBernstein Dynamic Allocation | |
Transamerica BlackRock Large Cap Value VP | TA BlackRock Large Cap Value | |
Transamerica Clarion Global Real Estate Securities VP | TA Clarion Global Real Estate Securities | |
Transamerica JPMorgan Core Bond VP | TA JPMorgan Core Bond | |
Transamerica JPMorgan Enhanced Index VP | TA JPMorgan Enhanced Index | |
Transamerica JPMorgan Mid Cap Value VP | TA JPMorgan Mid Cap Value | |
Transamerica JPMorgan Tactical Allocation VP | TA JPMorgan Tactical Allocation | |
Transamerica Multi-Managed Balanced VP | TA Multi-Managed Balanced | |
Transamerica Jennison Growth VP | TA Jennison Growth | |
Transamerica MFS International Equity VP | TA MFS International Equity |
This Prospectus Supplement must be accompanied or preceded
by the Prospectus for the
WRL Freedom Variable Annuity dated May 1, 2009
Current Subaccount Name(1) (Continued...) | New Subaccount Name (Continued...) | |
Transamerica Morgan Stanley Capital Growth VP | TA Morgan Stanley Capital Growth | |
Transamerica Morgan Stanley Growth Opportunities VP | TA Morgan Stanley Growth Opportunities | |
Transamerica Morgan Stanley Mid Cap Growth VP | TA Morgan Stanley Mid Cap Growth | |
Transamerica Multi Managed Large Cap Core VP | TA Multi Managed Large Cap Core | |
Transamerica PIMCO Total Return VP | TA PIMCO Total Return | |
Transamerica Systematic Small/Mid Cap Value VP | TA Systematic Small/Mid Cap Value | |
Transamerica T. Rowe Price Small Cap VP | TA T. Rowe Price Small Cap | |
Transamerica Third Avenue Value VP | TA Third Avenue Value | |
Transamerica WMC Diversified Growth VP | TA WMC Diversified Growth | |
Transamerica WMC Diversified Equity VP | TA WMC Diversified Equity |
(1) | Also the name of the underlying fund portfolio the subaccount invests in. The underlying fund portfolio name is not changing. |
Effective on or about December 30, 2011, the following subaccount merger will occur:
Existing Subaccount | Acquiring Subaccount | |
TA Morgan Stanley Growth Opportunities | TA Morgan Stanley Mid Cap Growth | |
TA WMC Diversified Equity | TA WMC Diversified Growth |
Any references in the Prospectus to the subaccounts are hereby changed as noted above.
2
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Supplement Dated August 18, 2010
to the Prospectuses For
WRL FREEDOM ATTAINER® (Dated May 1, 2010)
WRL FREEDOM WEALTH CREATOR® (Dated May 1, 2010)
WRL FREEDOM ACCESS® (Dated May 1, 2008)
WRL FREEDOM ENHANCER® (Dated May 1, 2008)
FLEXIBLE PREMIUM VARIABLE ANNUITY - M (Dated May 1, 2009)
|
WRL FREEDOM CONQUEROR® (Dated May 1, 2010)
WRL FREEDOM PREMIER® (Dated May 1, 2010)
WRL FREEDOM BELLWETHER® (Dated May 1, 2008)
WRL FREEDOM VARIABLE ANNUITY (Dated May 1, 2009) |
The following information supplements, amends and replaces the information in the Prospectus regarding the Transamerica Convertible Securities VP:
Effective on or around August 16, 2010, Transamerica Asset Management terminated its investment sub-advisory agreement with Transamerica Investment Management with respect to Transamerica Convertible Securities VP fund and entered into a new investment sub-advisory agreement with AllianceBernstein L.P. In connection with the change in sub-adviser, the Transamerica Convertible Securities VP fund’s investment objective, principal investment strategies and risks and benchmark index, as well as the name, changed. The new name of the fund is Transamerica AllianceBernstein Dynamic Allocation VP.
WRL FREEDOM VARIABLE ANNUITY
Issued by
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Supplement Dated June 14, 2010
to the
Prospectus dated May 1, 2009
The following herby amends the “Signature Guarantee” section under “7. ACCESS TO YOUR MONEY” in the prospectus:
Signature Guarantees
As a protection against fraud, we require that the following transaction requests include a Medallion signature guarantee:
— | All requests for surrenders (i.e. partial surrenders and full surrenders) over $250,000; |
— | Any non-electronic disbursement request made on or within 15 days of a change to the address of record for contract owner’s account; |
— | Any disbursement request made on or within 15 days of an ownership change; |
— | Any electronic disbursement on or within 15 days of a change to the electronic funds transfer instructions; |
— | Any disbursement request when the Company has been directed to send the proceeds to a different personal address from the address of record for that contract owner’s account. PLEASE NOTE: This requirement will not apply to disbursement requests made in connection with exchanges of one annuity contract for another with the same owner in a “tax free exchange”; |
— | All requests for surrenders (i.e. partial surrenders and full surrenders) when the Company does not have an originating or guaranteed signature on file. |
You can obtain a Medallion signature guarantee from more than 7,000 financial institutions across the United States and Canada that participate in the Medallion signature guarantee program. This includes many:
— | National and state banks |
— | Savings banks and savings and loan association; |
— | Securities brokers and dealers; and |
— | Credit Unions. |
The best source of a Medallion signature guarantee is a bank, savings and loan association, brokerage firm, or credit union with which you do business. Guarantor firms may, but frequently do not, charge a fee for their services.
A notary public cannot provide a Medallion signature guarantee. Notarization will not substitute for a Medallion signature guarantee.
This Prospectus Supplement must be accompanied or preceded
by the Prospectus for the
WRL Freedom Variable Annuity dated May 1, 2009
WRL FREEDOM VARIABLE ANNUITY
Issued by
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Supplement Dated November 19, 2009
to the
Prospectus dated May 1, 2009
MERGER:
At the close of business November 20, 2009 (“merger date”), the Transamerica Capital Guardian Value VP merged into the Transamerica BlackRock Large Cap Value VP with the Transamerica BlackRock Large Cap Value VP being the surviving fund.
If you do not wish to remain allocated to the Transamerica BlackRock Large Cap Value VP, please note that you may transfer your policy value allocated in this subaccount to any of the subaccounts investing in the funds listed in your Prospectus provided your updated investment allocation does not violate any allocation guidelines and restrictions applicable to allocation instructions for premium payments or other purposes (for example, dollar cost averaging or asset rebalancing).
You will not be charged for the transfer we made to the Transamerica BlackRock Large Cap Value VP. In addition, if you reallocate your policy value to another subaccount from the Transamerica BlackRock Large Cap Value VP, you will not be charged for the transfer from that subaccount to another available subaccount if made within 30 days of the merger date. This reallocation also will not count as a transfer for purposes of any free transfers that you receive each contract year.
NEW INVESTMENT CHOICES:
This supplement describes new investment choices generally available to policies on or after November 19, 2009.
TRANSAMERICA SERIES TRUST
Subadvised by Foxhall Capital Management, Inc.
Transamerica Foxhall Global Growth VP – Service Class
Transamerica Foxhall Global Conservative VP – Service Class
Transamerica Foxhall Global Hard Asset VP – Service Class
Transamerica Foxhall Emerging Markets/Pacific Rim VP – Service Class
Subadvised by Hanlon Investment Management, Inc.
Transamerica Hanlon Growth VP – Service Class
Transamerica Hanlon Growth and Income VP – Service Class
Transamerica Hanlon Balanced VP – Service Class
Transamerica Hanlon Managed Income VP – Service Class
UPDATES:
Please note:
The fax number for Western Reserve has changed to 866-671-9215.
This Prospectus Supplement must be accompanied or preceded
by the Prospectus for the
WRL Freedom Variable Annuity dated May 1, 2009
The following hereby amends the corresponding paragraphs in the Dollar Cost Averaging Program, Section 4. Investment Choices, in the prospectus.
You may request dollar cost averaging at any time. A dollar cost averaging program will begin once we have received in our Administrative and Service Office in good order all necessary information and the minimum required amount. There is no charge for this program. However, these transfers do count towards the 12 free transfers allowed during each Contract year.
We reserve the right to discontinue offering dollar cost averaging 30 days after we send notice to you. Dollar cost averaging is not available if you have elected the asset rebalancing program or if you elect to participate in any asset allocation service provided by a third party. Dollar cost averaging will terminate if we receive (at our mailing office or by phone) from you or your authorized registered representative a request to cancel your participation or the value in the account from which we make the transfer is depleted.
The following hereby amends the corresponding paragraph in the Telephone, Fax and Internet Transactions, Section 4. Investment Choices, in the prospectus.
You may make transfers, change the allocation of additional premium payments and request partial surrenders by telephone. Telephone partial surrenders are not allowed in the following situations:
— | For qualified contracts (except traditional IRA, Roth IRA, SEP, SIMPLE); |
— | If the amount you want to withdraw is $50,000 and over; or |
— | If the address of record has been changed within the past 15 days. |
Telephone, fax and Internet orders must be received at our administrative office while the New York Stock Exchange is open for regular trading to receive same-day pricing. Orders received in good order at our office after the close of the New York Stock Exchange will receive the price computed at the end of the next business day.
The following hereby amends the corresponding paragraph in the Partial Withdrawals and Complete Surrenders, Section 7, Access To Your Money, in the prospectus.
We must receive at our Administrative and Service Office in good order a properly completed surrender (partial or full) request by mail or fax. We will accept telephone requests for partial withdrawals as long as the withdrawal proceeds are being sent to the address of record. The maximum withdrawal amount you may request by telephone is under $50,000.
WRL FREEDOM VARIABLE ANNUITY
Issued by
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Supplement Dated September 30, 2009
to the
Prospectus dated May 1, 2009
Effective close of business September 30, 2009, we will not accept any premium payment that is allocated to the fixed account or the dollar cost averaging fixed account in excess of $5,000. We also will not accept any premium payment or transfer which would result in the aggregate policy value in the fixed account and the dollar cost averaging fixed account exceeding $5,000.
This Prospectus Supplement must be accompanied or preceded
by the Prospectus for the
WRL Freedom Variable Annuity dated May 1, 2009
WRL FREEDOM VARIABLE ANNUITY
VARIABLE ANNUITY
Issued Through
WRL SERIES ANNUITY ACCOUNT
By
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
Prospectus
This prospectus gives you important information about the WRL Freedom Variable Annuity, a flexible payment variable deferred annuity contract (“Contract”). Please read this prospectus and the fund prospectuses before you invest and keep them for future reference. This Contract is available to individuals as well as to certain groups and individual retirement plans.
You can put your money into one or more of the following investment choices. Money you put in a subaccount is invested exclusively in a single mutual fund portfolio. Your investments in the portfolios are not guaranteed. You could lose your money. Money you direct into the fixed account earns interest at a rate guaranteed by Western Reserve.
If you would like more information about the WRL Freedom Variable Annuity, you can obtain a free copy of the Statement of Additional Information (“SAI”) dated May 1, 2009. Please call us at 1-800-851-9777 (Monday – Friday, 8:30 a.m. – 7:00 p.m. Eastern Time), write us at: Western Reserve, Attention: Customer Care Group, 4333 Edgewood Road NE, Cedar Rapids, Iowa 52499-0001 or visit our website at www.westernreserve.com. A registration statement, including the SAI, has been filed with the Securities and Exchange Commission (“SEC”) and is incorporated herein by reference. More information about the variable annuity can be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. You may obtain information about the operation of the public reference room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site (www.sec.gov) that contains the prospectus, the SAI, material incorporated by reference and other information. The table of contents of the SAI is included at the end of this prospectus.
Please note that the Contract and the funds:
— | are not bank deposits |
— | are not federally insured |
— | are not endorsed by any bank or government agency |
— | are not guaranteed to achieve their goal involve risks, including possible loss of premium |
The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
WRL00006-5/2009
PORTFOLIOS ASSOCIATED WITH THE SUBACCOUNTS
TRANSAMERICA SERIES TRUST
– INITIAL CLASS
Portfolio Construction Manager: Morningstar Associates, LLC
Transamerica Asset Allocation – Conservative VP
Transamerica Asset Allocation – Growth VP
Transamerica Asset Allocation – Moderate VP
Transamerica Asset Allocation – Moderate Growth VP
Transamerica International Moderate Growth VP
Subadvised by BlackRock Investment Management, LLC
Transamerica BlackRock Large Cap Value VP
Subadvised by Capital Guardian Trust Company
Transamerica Capital Guardian Value VP
Subadvised by ING Clarion Real Estate Securities, L.P.
Transamerica Clarion Global Real Estate Securities VP
Subadvised by Federated Equity Management Company of Pennsylvania
Transamerica Federated Market Opportunity VP
Subadvised by JPMorgan Investment Advisors, Inc.
Transamerica JPMorgan Core Bond VP
Subadvised by J.P. Morgan Investment Management Inc.
Transamerica JPMorgan Enhanced Index VP
Subadvised by ClearBridge Advisors, LLC
Transamerica Legg Mason Partners All Cap VP
Subadvised by MFS® Investment Management
Transamerica MFS High Yield VP
Transamerica MFS International Equity VP
Subadvised by Columbia Management Advisors, LLC
Transamerica Marsico Growth VP
Subadvised by Munder Capital Management
Transamerica Munder Net50 VP
Subadvised by Pacific Investment Management Company LLC
Transamerica PIMCO Total Return VP
Subadvised by T. Rowe Price Associates, Inc.
Transamerica T. Rowe Price Equity Income VP
Transamerica T. Rowe Price Small Cap VP
Subadvised by Templeton Investment Counsel, LLC and Transamerica Investment Management, LLC
Transamerica Templeton Global VP
Subadvised by Third Avenue Management LLC
Transamerica Third Avenue Value VP
Subadvised by Transamerica Investment Management, LLC
Transamerica Balanced VP
Transamerica Convertible Securities VP
Transamerica Equity VP
Transamerica Growth Opportunities VP
Transamerica Money Market VP
Transamerica Science & Technology VP
Transamerica Small/Mid Cap Value VP
Transamerica U.S. Government Securities VP
Transamerica Value Balanced VP
Subadvised by Morgan Stanley Investment Management Inc.
Transamerica Van Kampen Large Cap Core VP
Subadvised by Van Kampen Asset Management
Transamerica Van Kampen Mid-Cap Growth VP
TRANSAMERICA SERIES TRUST
– SERVICE CLASS
Managed by AEGON USA Investment Management, LLC
Transamerica Index 50 VP
Transamerica Index 75 VP
PROFUNDS
Managed by ProFund Advisors LLC
ProFund VP Asia 30
ProFund VP Basic Materials
ProFund VP Bull
ProFund VP Consumer Services
ProFund VP Emerging Markets
ProFund VP Europe 30
ProFund VP Falling U.S. Dollar
ProFund VP Financials
ProFund VP International
ProFund VP Japan
ProFund VP Mid-Cap
ProFund VP Money Market
ProFund VP NASDAQ-100
ProFund VP Oil & Gas
ProFund VP Pharmaceuticals
ProFund VP Precious Metals
ProFund VP Short Emerging Markets
ProFund VP Short International
ProFund VP Short NASDAQ-100
ProFund VP Short Small-Cap
ProFund VP Small-Cap
ProFund VP Small-Cap Value
ProFund VP Telecommunications
ProFund VP UltraSmall-Cap
ProFund VP U.S. Government Plus
ProFund VP Utilities
ACCESS ONE TRUST
Managed by ProFund Advisors LLC
Access VP High Yield FundSM
2
DEFINITIONS OF SPECIAL TERMS | 5 | |||||
SUMMARY | 7 | |||||
ANNUITY CONTRACT FEE TABLE | 14 | |||||
1. | THE ANNUITY CONTRACT | 16 | ||||
2. | ANNUITY PAYMENTS (THE INCOME PHASE) | 16 | ||||
16 | ||||||
17 | ||||||
3. | PURCHASE | 18 | ||||
18 | ||||||
18 | ||||||
18 | ||||||
18 | ||||||
19 | ||||||
19 | ||||||
19 | ||||||
19 | ||||||
19 | ||||||
4. | INVESTMENT CHOICES | 20 | ||||
20 | ||||||
22 | ||||||
23 | ||||||
24 | ||||||
24 | ||||||
25 | ||||||
27 | ||||||
28 | ||||||
28 | ||||||
29 | ||||||
5. | EXPENSES | 30 | ||||
30 | ||||||
30 | ||||||
31 | ||||||
31 | ||||||
31 | ||||||
31 | ||||||
31 | ||||||
31 | ||||||
32 | ||||||
33 | ||||||
6. | TAXES | 34 | ||||
34 | ||||||
35 | ||||||
Partial Withdrawals and Surrenders- Qualified Contracts Generally |
35 | |||||
36 | ||||||
36 | ||||||
37 |
3
37 | ||||||||
37 | ||||||||
37 | ||||||||
38 | ||||||||
38 | ||||||||
Annuity Contracts Purchased by Nonresident Aliens and Foreign Corporations |
38 | |||||||
38 | ||||||||
38 | ||||||||
38 | ||||||||
39 | ||||||||
7. | ACCESS TO YOUR MONEY | 39 | ||||||
39 | ||||||||
40 | ||||||||
40 | ||||||||
40 | ||||||||
41 | ||||||||
41 | ||||||||
8. | PERFORMANCE | 43 | ||||||
9. | 43 | |||||||
44 | ||||||||
45 | ||||||||
45 | ||||||||
46 | ||||||||
10. | OTHER INFORMATION | 46 | ||||||
46 | ||||||||
47 | ||||||||
47 | ||||||||
47 | ||||||||
47 | ||||||||
47 | ||||||||
48 | ||||||||
48 | ||||||||
49 | ||||||||
49 | ||||||||
49 | ||||||||
51 | ||||||||
52 | ||||||||
52 | ||||||||
52 | ||||||||
52 | ||||||||
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION | 52 | |||||||
APPENDIX A | ||||||||
Condensed Financial Information | 54 |
4
accumulation period | The period between the Contract date and the maturity date while the Contract is in force. | |||
accumulation unit value | An accounting unit of measure we use to calculate subaccount values during the accumulation period. | |||
administrative office | Our phone number is 1-800-851-9777. Our hours are Monday – Friday from 8:30 a.m. – 7:00 p.m. Eastern time. | |||
Age | The issue age, which is annuitant’s age on the birthday nearest the Contract date, plus the number of completed Contract years. When we use the term “age” in this prospectus, it has the same meaning as “attained age” in the Contract. | |||
annuitant | The person on whose life any annuity payments will be based. | |||
annuity unit value | An accounting unit of measure we use to calculate annuity payments from the subaccounts after the maturity date. | |||
annuity value | The sum of the separate account value and the fixed account value at the end of any valuation period. | |||
annuitize (annuitization) | When you switch from the accumulation phase to the income phase and we begin to make annuity payments to you (or your designee). | |||
beneficiary(ies) | The person(s) you elect to receive the death benefit proceeds under the Contract. | |||
cash value | The annuity value less any applicable premium taxes, any withdrawal charge, any loans and unpaid accrued interest, the annual Contract charge, and any rider charges. | |||
Code | The Internal Revenue Code of 1986, as amended. | |||
contingent annuitant | The person named by the owner to become the new annuitant upon the death of the current annuitant during the accumulation period, if the owner is still alive. | |||
Contract anniversary | The same day in each succeeding year as the Contract date. If there is no day in a calendar year which coincides with the Contract date, the Contract anniversary will be the first day of the next month. | |||
Contract date | Generally, the later of the date on which the initial purchase payment is received, or the date that the properly completed application is received, at Western Reserve’s administrative office. We measure Monthiversaries, Contract years, Contract months, and Contract anniversaries from the Contract date. | |||
death report day | The valuation date on which we have received both: (a) proof of the earlier of: (1) the death of any owner, or (2) the death of the annuitant, if no contingent annuitant is named, and (b) a beneficiary’s election regarding payment. If the spouse of the deceased owner elects to continue the Contract (if sole beneficiary), there are two death report days (one relating to the death of the first to die and the second relating to the death of the spouse who continues the Contract). If there is no spousal continuation of the Contract, then there is only one death report day for the Contract. If there are multiple beneficiaries, the death report day is the earliest date on which we receive both proof of death and any beneficiary’s completed election form. | |||
fixed account | An investment option to which you can direct your money under the Contract, other than the separate account. It provides a guarantee of principal and a guaranteed minimum interest rate. The assets supporting the fixed account are held in the general account. | |||
fixed account value | During the accumulation period, your Contract’s value in the fixed account. | |||
Funds | Investment companies which are registered with the U.S. Securities and Exchange Commission. The Contract allows you to invest in the portfolios of the funds through our subaccounts. We reserve the right to add portfolios of other registered investment companies as investment choices under the Contract in the future. | |||
in force | Condition under which the Contract is active and an owner is entitled to exercise all rights under the Contract. | |||
Mailing address | 4333 Edgewood Road NE, Cedar Rapids, Iowa 52499-0001. All premium payments, loan repayments, correspondence and notices should be sent to this address. | |||
maturity date | The date on which the accumulation period ends and annuity payments begin. The latest maturity date is the annuitant’s 90th birthday. | |||
Monthiversary | The same day in the month as the Contract date. When there is no date in a calendar month that coincides with the Contract date, the Monthiversary is the first day of the next month. | |||
NYSE | New York Stock Exchange. | |||
nonqualified Contracts | Contracts issued other than in connection with retirement plans. |
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owner (you, your) |
The person(s) entitled to exercise all rights and privileges under the Contract. The annuitant is an owner unless the application states otherwise, or unless a change of ownership is made at a later time. If two owners are named, the Contract is owned jointly and the consent of each owner is required to exercise ownership rights under the Contract. Please note: A joint owner receives no benefits under this Contract. A joint owner (even if the joint owner is the spouse of the owner) is not entitled to receive the death benefit under this Contract; a joint owner may not continue the Contract on the death of an owner. | |
portfolio | A separate investment portfolio of a fund. | |
purchase payments/premium | Amounts paid by an owner or on an owner’s behalf to Western Reserve as consideration for the benefits provided by the Contract. When we use the term “purchase payment” or “premium” in this prospectus, it has the same meaning as “net payment” in the Contract, which means the purchase payment less any applicable premium taxes. | |
qualified Contracts | Contracts issued in connection with retirement plans that qualify for special federal income tax treatment under the Code. | |
separate account | WRL Series Annuity Account, a unit investment trust consisting of subaccounts. Each subaccount of the separate account invests solely in shares of a corresponding portfolio of a fund. | |
separate account value | During the accumulation period, your Contract’s value in the separate account, which equals the sum of the values in each subaccount. | |
subaccount | A subdivision of the separate account that invests exclusively in the shares of a specified portfolio and supports the Contracts. Subaccounts corresponding to each portfolio hold assets under the Contract during the accumulation period. | |
surrender | The termination of a Contract at the option of an owner. | |
valuation date/ business day |
Each day on which the NYSE is open for trading, except when a subaccount’s corresponding portfolio does not value its shares. Western Reserve is open for business on each day that the NYSE is open. When we use the term “business day,” it has the same meaning as valuation date. | |
valuation period | The period of time over which we determine the change in the value of the subaccounts in order to price accumulation units and annuity units. Each valuation period begins at the close of normal trading on the NYSE (currently 4:00 p.m. Eastern Time on each valuation date) and ends at the close of normal trading of the NYSE on the next valuation date. | |
Western Reserve (we, us, our) |
Western Reserve Life Assurance Co. of Ohio. |
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The sections in this summary correspond to sections in this prospectus, which discuss the topics in more detail. Please read the entire prospectus carefully.
1. | The Annuity Contract |
The WRL Freedom Variable Annuity is a flexible payment variable deferred annuity contract (the “Contract”) offered by Western Reserve. It is a contract between you, as the owner, and Western Reserve, a life insurance company. The Contract provides a way for you to invest on a tax-deferred basis in the subaccounts of the separate account and the fixed account. We intend the Contract to be used to accumulate money for retirement or other long-term investment purposes.
The Contract allows you to direct your money into one or more of the subaccounts. Any restriction we impose on allocations of purchase payments or transfers of annuity value will not affect the allocations you made before we put the restriction in place. Each subaccount invests exclusively in a single portfolio of a fund. The money you invest in the subaccounts will fluctuate daily based on the portfolio’s investment results. The value of your investment in the subaccounts is not guaranteed and may increase or decrease. You bear the investment risk for amounts you invest in the subaccounts.
You can also direct money to the fixed account. Amounts in the fixed account earn interest annually at a fixed rate that is guaranteed by us never to be less than 4%, and may be more. We guarantee the interest, as well as principal, on money placed in the fixed account.
You can transfer money between any of the investment choices during the accumulation period, subject to certain limits on transfers from the fixed account.
The Guaranteed Minimum Income Benefit Rider is no longer available for new sales, but if you have previously elected the Guaranteed Minimum Income Benefit Rider you can still upgrade.
The Additional Earnings Rider is no longer available for new sales.
The Contract, like all deferred annuity contracts, has two phases: the “accumulation period” and the “income phase.” During the accumulation period, earnings accumulate on a tax-deferred basis and are taxed as ordinary income when you take them out of the Contract. The income phase starts on the maturity date when you begin receiving regular payments from your Contract. The money you can accumulate during the accumulation period, as well as the annuity payment option you choose, will largely determine the amount of any income payments you receive during the income phase.
2. | Annuity Payments (The Income Phase) |
The Contract allows you to receive income after the maturity date under one of several fixed annuity payment options. You can choose to receive payments monthly, quarterly, semi-annually, or annually. Generally, you cannot annuitize before your Contract’s fifth anniversary.
3. | Purchase |
You can buy this Contract with $5,000 ($1,000 for traditional or Roth IRAs and $100 for other qualified Contracts) or more under most circumstances. You can add as little as $100 at any time during the accumulation period. We allow purchase payments up to a total of $1,000,000 per Contract year without prior approval. There is no limit on the total purchase payments you may make during the accumulation period.
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4. | Investment Choices |
You can invest your money in any of the fund portfolios by directing it to the corresponding subaccount. The portfolios are described in the fund prospectuses that you received with this prospectus. The portfolios now available to you under the Contract are:
Transamerica Asset Allocation - Conservative VP - Initial Class
Transamerica Asset Allocation - Growth VP - Initial Class
Transamerica Asset Allocation - Moderate VP - Initial Class
Transamerica Asset Allocation - Moderate Growth VP - Initial Class
Transamerica International Moderate Growth VP - Initial Class
Transamerica BlackRock Large Cap Value VP - Initial Class
Transamerica Capital Guardian Value VP - Initial Class
Transamerica Clarion Global Real Estate Securities VP - Initial Class
Transamerica Federated Market Opportunity VP - Initial Class
Transamerica JPMorgan Core Bond VP - Initial Class
Transamerica JPMorgan Enhanced Index VP - Initial Class
Transamerica Legg Mason Partners All Cap VP - Initial Class
Transamerica MFS High Yield VP - Initial Class
Transamerica MFS International Equity VP - Initial Class
Transamerica Marsico Growth VP - Initial Class
Transamerica Munder Net50 VP - Initial Class
Transamerica PIMCO Total Return VP - Initial Class
Transamerica T. Rowe Price Equity Income VP - Initial Class
Transamerica T. Rowe Price Small Cap VP - Initial Class
Transamerica Templeton Global VP - Initial Class
Transamerica Third Avenue Value VP - Initial Class
Transamerica Balanced VP - Initial Class
Transamerica Convertible Securities VP - Initial Class
Transamerica Equity VP - Initial Class
Transamerica Growth Opportunities VP - Initial Class
Transamerica Money Market VP - Initial Class
Transamerica Science & Technology VP - Initial Class
Transamerica Small/Mid Cap Value VP - Initial Class
Transamerica U.S. Government Securities VP - Initial Class
Transamerica Value Balanced VP - Initial Class
Transamerica Van Kampen Large Cap Core VP - Initial Class
Transamerica Van Kampen Mid-Cap Growth VP - Initial Class
Transamerica Index 50 VP - Service Class
Transamerica Index 75 VP - Service Class
ProFund VP Asia 30(1)
ProFund VP Basic Materials(1)
ProFund VP Bull(1)
ProFund VP Consumer Services(1)
ProFund VP Emerging Markets(1)
ProFund VP Europe 30(1)
ProFund VP Falling U.S. Dollar(1)
ProFund VP Financials(1)
ProFund VP International(1)
ProFund VP Japan(1)
ProFund VP Mid-Cap(1)
ProFund VP Money Market(1)
ProFund VP NASDAQ-100(1)
ProFund VP Oil & Gas(1)
ProFund VP Pharmaceuticals(1)
ProFund VP Precious Metals(1)
ProFund VP Short Emerging Markets(1)
ProFund VP Short International(1)
ProFund VP Short NASDAQ-100(1)
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ProFund VP Short Small-Cap(1)
ProFund VP Small-Cap(1)
ProFund VP Small-Cap Value(1)
ProFund VP Telecommunications(1)
ProFund VP UltraSmall-Cap(1)
ProFund VP U.S. Government Plus(1)
ProFund VP Utilities(1)
Access VP High Yield FundSM(1)
(1) | The ProFunds and Access portfolios permit frequent transfers and investors in these portfolios may bear the additional costs and investment risks of frequent transfers. |
Please contact our administrative office at 1-800-851-9777 (Monday – Friday 8:30 a.m. – 7:00 p.m. Eastern Time) or visit our website (www.westernreserve.com) to obtain an additional copy of the fund prospectuses containing more complete information concerning the funds and portfolios.
Depending upon market conditions, you can make or lose money in any of these subaccounts. We reserve the right to offer other investment choices in the future.
You can also allocate your purchase payments to the fixed account.
Transfers. You have the flexibility to transfer assets within your Contract. During the accumulation period you may transfer amounts among the subaccounts and between the subaccounts and the fixed account. Certain restrictions and charges apply.
5. | Expenses |
We do not take any deductions for sales charges from purchase payments at the time you buy the Contract. You generally invest the full amount of each purchase payment in one or more of the investment choices.
During the accumulation period and the income phase, we deduct a daily mortality and expense risk charge of 1.25% each year from the money you have invested in the subaccounts.
During the accumulation period, we deduct an annual Contract charge of $30 from the annuity value on each Contract anniversary and at the time of surrender.
We impose a $10 charge per transfer if you make more than 12 transfers among the subaccounts per Contract year. There is no charge for transfers from the fixed account. We do not currently charge for Internet transfers, although we reserve the right to do so in the future.
If you take a Contract loan, we will impose a $30 loan processing fee. Only certain types of qualified Contracts can take Contract loans. This fee is not applicable in all states.
We may deduct state premium taxes, which currently range from 0% to 3.50%, when you make your purchase payment(s), if you surrender the Contract or partially withdraw its value, if we pay out death benefit proceeds, or if you begin to receive regular annuity payments. We only charge you premium taxes in those states that require us to pay premium taxes.
If you make a partial withdrawal or surrender your Contract completely, we will deduct a withdrawal charge for purchase payments withdrawn within five years after we receive a purchase payment. This charge is 5% of the amount that must be withdrawn if the partial withdrawal occurs within five years of our receipt of the purchase payment.
When we calculate withdrawal charges, we treat partial withdrawals as coming first from the oldest purchase payment, then the next oldest and so forth. For the first partial withdrawal you make in any Contract year, we will waive that portion of the withdrawal charge that is based on the first 10% of your Contract’s annuity value at the
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time of the partial withdrawal. Amounts of the first partial withdrawal in excess of the first 10% of your Contract’s annuity value and all subsequent partial withdrawals you make during the Contract year will be subject to a withdrawal charge. We will deduct the full withdrawal charge if you surrender your Contract completely. The 10% “waiver’’ does not apply to a complete surrender. We waive this charge under certain circumstances. See Section 5. Expenses – Withdrawal Charge for how we calculate withdrawal charges and waivers.
The value of the assets in each subaccount will reflect the fees and expenses paid by the underlying fund portfolios. The lowest and highest fund expenses for the previous calendar year are found in the “Annuity Contract Fee Table” section of this prospectus. See the prospectuses for the underlying fund portfolios for more information.
See Section 10. Other Information - Distribution of the Contracts for information concerning compensation we pay our agents for the sale of the Contracts.
6. | Taxes |
The Contract’s earnings are generally not taxed until you take them out. For federal tax purposes, if you take money out of a nonqualified contract during the accumulation period, earnings come out first and are taxed as ordinary income. The annuity payments you receive during the income phase may be considered partly a return of your original investment so that part of each payment may not be taxable as income until the “investment in the contract” has been fully recovered. Different tax consequences may apply for a qualified Contract. If you are younger than 59 1⁄2 when you take money out of a Contract, you may be charged a 10% federal penalty tax on the amount you must report as taxable income.
Death benefits are taxable and generally are included in the income of the recipient as follows: if received under an annuity payment option, death benefits are taxed in the same manner as annuity payouts; if not received under an annuity option (for instance, if paid out in a lump sum), death benefits are taxed in the same manner as a partial withdrawal or complete surrender.
7. | Access to Your Money |
You can take some or all of your money out anytime during the accumulation period. However, you may not take a partial withdrawal if it reduces the cash value below $10,000. No partial withdrawals may be made from the fixed account without prior consent from us. Access to amounts held in qualified Contracts may be restricted or prohibited by law or regulation or the terms of the plan. Other restrictions and withdrawal charges may apply. You may also have to pay federal income tax and a penalty tax on any money you take out.
Partial withdrawals may reduce the death benefit by more than the amount withdrawn.
8. | Performance |
The value of your Contract will vary up or down depending upon the investment performance of the subaccounts you choose and will be reduced by Contract fees and charges. Past performance does not guarantee future results.
9. | Death Benefit |
On the earlier of the death of any owner, or the death of the annuitant (if no contingent annuitant is named), we will pay a death benefit to the beneficiary, provided death occurs during the accumulation period. If an owner dies before the maturity date, and the owner’s sole beneficiary is the surviving spouse, then the surviving spouse may elect to continue the Contract. If such surviving spouse elects continuation, we will adjust the annuity value as of the death report day to equal the death benefit proceeds on the death report day and revise the way we calculate the death benefit so that it is based on the age of the surviving spouse. Death benefit provisions may vary by state. Only one death benefit will be payable under the Contract. When we receive due proof of death, the Contract will terminate.
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If you name different persons as owner and annuitant, you can affect whether the death benefit is payable, what the amount of the death benefit will be, and who will receive it. Use care when naming owners, annuitants, contingent annuitants and beneficiaries, and consult your agent if you have questions. Please note: A joint owner (even if the joint owner is the spouse of the owner) is not entitled to receive the death benefit under this Contract; a joint owner may not continue the Contract on the death of an owner.
Payments upon death are subject to certain distribution requirements under the Code. See the SAI for more details.
On the earlier of the death of any owner, or the death of the annuitant (if no contingent annuitant is named), before the maturity date and before the fifth Contract anniversary, and if a death benefit is payable, the death benefit proceeds will be the greater of:
— | the annuity value of your Contract on the death report day; or |
— | the total purchase payments you make to the Contract, less partial withdrawals and partial annuitization amounts withdrawn from the Contract. |
On the death of any owner who is not the annuitant before the maturity date and on or after the fifth Contract anniversary, and if a death benefit is payable, the death benefit proceeds will be the greater of:
— | the annuity value of your Contract on the death report day; |
— | the total purchase payments you make to the Contract, less partial withdrawals and partial annuitization amounts withdrawn from the Contract; or |
— | the annuity value as of the fifth Contract anniversary, less partial withdrawals and partial annuitization amounts withdrawn from the Contract after the fifth Contract year. |
On the death of the annuitant, who is not the owner (if no contingent annuitant is named) or the owner who is the annuitant, before the maturity date and on or after the fifth Contract anniversary, and if a death benefit is payable, the death benefit proceeds will be the greatest of:
— | the death benefits described above; or |
— | the highest annuity value as of any Contract anniversary occurring between (a) the later of May 1, 2000 and the fifth Contract anniversary and (b) the earlier of: |
— | the annuitant’s date of death; or |
— | the Contract anniversary nearest the annuitant’s 80th birthday. This benefit terminates at age 80. |
The highest annuity value will be increased by purchase payments made and decreased by adjusted partial withdrawals (including any partial annuitizations) taken since the Contract anniversary with the highest annuity value.
The death benefit payable, if any, on or after the maturity date depends on the annuity payment option selected. See Section 2. The Annuity Payments (The Income Phase) - Annuity Payment Options Under the Contract for a description of the annuity payment options. Please note that not all payment options provide for the payment of a death benefit.
10. | Other Information |
Right to Cancel Period. You may return your Contract for a refund within 10 days after you receive it, or whatever longer time may be required by state law. In most states, the amount of the refund will be the total purchase payments we have received, plus (or minus) any gains (or losses) in the amounts you invested in the subaccounts. You will keep any gains, and bear any losses, on amounts that you invested in the subaccounts. If state law requires, we will refund your original purchase payment(s). We determine the value of the refund as of the date we receive your written notice of cancellation and the returned Contract at our administrative office in good order. We will pay the refund within 7 days after we receive your original signature written notice of cancellation and the returned Contract. A faxed version or a copy of the written notice of cancellation will not be sufficient for us to pay a refund. The Contract will then be deemed void. In some states you may have more than 10 days and/or receive a different refund amount.
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Who Should Purchase the Contract? We have designed this Contract for people seeking long-term tax deferred accumulation of assets, generally for retirement. This includes persons who have maximized their use of other retirement savings methods, such as 401(k) plans. The tax-deferred feature is most attractive to people in high federal and state tax brackets. You should not buy this Contract if you are looking for a short-term investment or if you cannot take the risk of getting back less money than you put in. If you are purchasing the Contract through a tax-favored arrangement, including traditional IRAs and Roth IRAs, you should consider carefully the costs and benefits of the Contract (including annuity income benefits) before purchasing the Contract, because the tax-favored arrangement itself provides tax-sheltered growth.
Additional Features. This Contract has additional features that might interest you. These include the following:
— | Reduced Minimum Initial Purchase Payment (for nonqualified Contracts): You may make a minimum initial purchase payment of $1,000, rather than $5,000, if you indicate on your application that you anticipate making minimum monthly payments of at least $100 by electronic funds transfer. |
— | Systematic Partial Withdrawals: You can arrange to have money automatically sent to you while your Contract is in the accumulation period. You may take systematic partial withdrawals monthly, quarterly, semi-annually or annually without paying withdrawal charges. Amounts you receive may be included in your gross income and, in certain circumstances, may be subject to penalty taxes. |
— | Partial Annuitization: After your first Contract anniversary, you may partially annuitize your Contract without surrendering it completely, subject to certain restrictions. Amounts you receive may be included in your gross income and, in certain circumstances, may be subject to penalty taxes. |
— | Dollar Cost Averaging: You can arrange to have a certain amount of money automatically transferred monthly from one or any combination of the fixed account, the Transamerica Money Market VP subaccount or Transamerica JPMorgan Core Bond VP subaccount into your choice of subaccounts. Dollar cost averaging does not guarantee a profit and does not protect against a loss if market prices decline. |
— | Asset Rebalancing: We will, upon your request, automatically transfer amounts periodically among the subaccounts on a regular basis to maintain a desired allocation of the annuity value among the various subaccounts. |
— | Telephone, Fax and Internet Transactions: You may make transfers, partial withdrawals, and/or change the allocation of additional purchase payments by telephone or fax. You may also make transfers and change premium payment allocations involving the subaccounts through our website – www.westernreserve.com. Internet transactions are not available for transfers and changes in premium payment allocation involving the fixed account. Transfer orders made in writing, by telephone, by facsimile, or via the Internet must be received before the close of our business day, which is the same as when the NYSE closes, usually 4:00 p.m. Eastern Time. Transfer orders received at our administrative office in good order before the NYSE closes are priced using the subaccount accumulation unit value determined at the close of that regular business session of the NYSE (usually 4:00 p.m. Eastern Time). If we receive a transfer order at our administrative office after the NYSE closes for normal trading, we will process the order using the subaccount accumulation unit value determined at the close of the next regular business session of the NYSE. |
— | Nursing Care Facility Waiver: If you are confined to a nursing care facility, you may take partial withdrawals or surrender your Contract completely without paying the withdrawal charge, under certain circumstances. |
— | Contract Loans (for certain qualified Contracts): If you own a qualified Contract, you may be eligible to take out Contract loans during the accumulation period, subject to certain restrictions. Penalties may apply if you fail to comply with required restrictions. See Section 7. Access to Your Money - Contract Loans for Certain Qualified Contracts for details. |
— | Guaranteed Minimum Death Benefit Features: |
— | Additional Benefits with Spousal Continuation If an owner dies before the maturity date, and if the owner’s sole beneficiary is the deceased owner’s surviving spouse, then the surviving spouse may elect to keep the Contract in force as sole owner and annuitant. If such surviving spouse elects continuation, we will adjust the annuity value as of the death report day to equal the death benefit proceeds on the death report day, and we also will revise the way we calculate the death benefit so that it is based on the age of such surviving spouse. |
— | Additional Death Benefit on Beneficiary’s Death: If an owner dies before the maturity date, and if the deceased owner’s spouse who is named as the sole beneficiary does not elect to continue the Contract, then each beneficiary can elect to keep the Contract in the accumulation period (with some restrictions) and to receive his or her portion of the death benefit proceeds over a period not to exceed that beneficiary’s life |
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expectancy (the “distribution period”). We will revise the way we calculate the death benefit so that it is based on the age of such beneficiary. We will pay a death benefit if the beneficiary dies during the distribution period and permit such beneficiary to name a new beneficiary. The Contract will terminate at the end of the distribution period. |
— | Multiple Beneficiaries: If an owner who is an annuitant dies before the maturity date, and the deceased owner has named multiple beneficiaries, each beneficiary may choose individually how he or she wants to receive his/her portion of the death benefit proceeds. |
These features are not available in all states, may vary by state and may not be suitable for certain qualified Contracts or in your particular situation. Subject to compliance with applicable law, we may at any time discontinue offering any optional rider or feature described in this prospectus.
Certain states place restrictions on access to the fixed account, on the death benefit calculation and on other features of the Contract. Consult your agent and the Contract for details.
Scheduled Financial Transaction Processing. We process scheduled financial transactions based on the accumulation unit values determined at the end of the business day on which we schedule the transaction. Examples of scheduled financial transactions include systematic partial withdrawals, dollar cost averaging and asset rebalancing.
A business day is any day the NYSE is open. Our business day closes when the NYSE closes, usually 4:00 p.m. Eastern Time. We observe the same holidays as the NYSE. If a day on which a scheduled financial transaction would ordinarily occur falls on a day the NYSE is closed, we will process the transaction the next day that the NYSE is open.
Other Contracts. We offer other variable annuity contracts which also invest in the same portfolios of the funds. These contracts may have different charges that could affect subaccount performance and may offer different benefits more suitable to your needs. To obtain more information about these contracts, contact your agent, or call us at 1-800-851-9777 (Monday - Friday 8:30 a.m. - 7:00 p.m. Eastern Time).
State Variations. Policies issued in your state may provide different features and benefits from, and impose different costs than, those described in this prospectus because of state law variations. These differences include, among other things, free look rights and issue age limitations. Please note that this prospectus describes the material rights and obligations of a contract owner, and the maximum fees and charges for all contract features and benefits are set forth in the fee table of this prospectus.
Financial Information. We have included in Appendix A a financial history of the accumulation unit values for the subaccounts available through this Contract.
11. | Inquiries |
If you need additional information or want to make a transaction, please contact us at:
Western Reserve Life Assurance Co. of Ohio
Administrative Office
1-800-851-9777
(Monday – Friday 8:30 a.m. – 7:00 p.m. Eastern Time)
You may check your Contract at www.westernreserve.com. We cannot guarantee that you will be able to access this site.
Or write to us at our mailing address:
Western Reserve Life Assurance Co. of Ohio
Attention: Customer Care Group
4333 Edgewood Road NE
Please send all premium payments, loan repayments, correspondence and notices to the mailing address.
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The following tables describe the fees and expenses that you will pay when buying, owning, and surrendering the Contract. The first table describes the fees and charges that you will pay at the time that you buy the Contract, take a loan from the Contract, partially withdraw or completely surrender the Contract, or transfer annuity value between the subaccounts and/or the fixed account. State premium taxes may also apply.
Owner Transaction Expenses
Sales Load on Purchase Payments | None | |
Maximum Withdrawal Charge (as a % of purchase payments)(2)(3)(4) | 5% | |
Transfer Charge(5) | $10 after 12 per year | |
Loan Processing Fee(6) | $30 per loan | |
Special Service Fee | $0 - $25 |
The next table describes the fees and expenses that you will pay periodically during the time that you own the Contract, not including portfolio fees and expenses. This table also includes the charges you would pay if you added optional riders to your Contract.
Annual Contract Charge(4) | $30 per Contract year | |
Separate Account Annual Expenses (as a % of average separate account value during the accumulation period(7) | ||
Mortality and Expense Risk Charge Administrative Charge Total Separate Account Annual Expenses |
1.25% None 1.25% |
The next table shows the lowest and highest total operating expenses charged by the portfolios for the fiscal year ended December 31, 2008. Expenses of the portfolios may be higher or lower in the future. More detail concerning each portfolio’s fees and expenses is contained in the prospectus for each portfolio.
Total Annual Portfolio Operating Expenses(8)(9) | Lowest | Highest | ||
Expenses that are deducted from portfolio assets, including management fees, distribution and/or service 12b-1 fees, and other expenses. | 0.42% | 2.49% |
The following Example is intended to help you compare the cost of investing in the Contract with the cost of investing in other variable annuity contracts. The Example shows the maximum costs of investing in the Contract, including Contract owner transaction expenses, the annual Contract charge, separate account charges, and highest Annual Portfolio Operating Expenses.
The Example assumes that you invest $10,000 in the Contract for the time periods indicated. The Example also assumes that your investment has a 5% return each year.
Example(10) | 1 Year | 3 Years | 5 Years | 10 Years | ||||
If you surrender the Contract at the end of the applicable time period. | $879 | $1652 | $2444 | $4011 | ||||
If you annuitize* or remain invested in the Contract at the end of the applicable time period. | $379 | $1152 | $1944 | $4011 |
* | You cannot annuitize your Contract before your Contract’s fifth anniversary. |
Please remember that the Example is an illustration and does not represent past or future expenses. Your actual expenses may be higher or lower than those shown. Similarly, your rate of return may be more or less than the 5% assumed in the Example.
For information concerning compensation paid for the sale of the Contracts, see “Distribution of the Contracts.”
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(1) | The Fee Table applies only to the accumulation period. During the income phase, the fees may be different than those described in the fee table. See Section 5, Expenses. |
(2) | We will deduct from any payment for a partial or complete surrender the charge for any extraordinary expenses we incur for expediting delivery of the payment of your partial or complete surrender – such as for wire transfers or overnight mail expenses. We charge $25 for a wire transfer and $20 ($30 for a Saturday delivery) for an overnight delivery. |
(3) | The withdrawal charge is based on the number of years since each purchase payment was made during the first five years following each purchase payment, dropping to 0% in the sixth year after the purchase payment was made. To calculate withdrawal charges, the first purchase payment made is considered to come out first. This charge is waived under certain circumstances. |
(4) | We may reduce or waive the withdrawal charge and the annual Contract charge for Contracts sold to groups of employees with the same employer, including our directors, officers and full-time employees, or other groups where sales to the group reduce our administrative expenses. |
(5) | There are no charges for transfers from the fixed account, however, they will be counted toward the 12 free transfers allowed per Contract year. We do not currently charge for Internet transfers, although we reserve the right to do so in the future. |
(6) | Loans are available only for certain qualified Contracts. The loan processing fee is not applicable in all states. |
(7) | This charge is assessed on assets in each subaccount. It does not apply to the fixed account. This charge applies during the accumulation period and the income phase. |
(8) | The portfolio expenses used to prepare this table were provided to Western Reserve by the fund(s) their investment advisors or managers. Western Reserve cannot independently verify the accuracy or completeness of such information. The expenses shown are those incurred for the year ended December 31, 2008. Current or future expenses may be greater or less than those shown. |
(9) | The table showing the range of expenses for the portfolios takes into account the expenses of several asset allocation portfolios that are “fund of funds.” A “fund of funds” portfolio typically allocates its assets, within predetermined percentage ranges, among certain other portfolios of the TST fund. Each “fund of funds” has its own set of operating expenses, as does each of the portfolios in which it invests. In determining the range of portfolio expenses, Western Reserve took into account the information received from the TST fund on the combined actual expenses for each of the “fund of funds” and for the portfolios in which it invests, assuming a constant allocation by each “fund of funds” of its assets among the portfolios identical to its actual allocation at December 31, 2008. |
(10) | The Example does not reflect transfer fees or premium taxes (which may range up to 3.5%, depending on the jurisdiction). The annual Contract charge of $30 is reflected as an annual charge of 0.06% that is determined by dividing the total Contract charges collected during 2008 by total average net assets attributable to the Contract during 2008. Different fees and expenses not reflected in the Example may be assessed after you annuitize under a variable annuity payout option. |
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1. | THE ANNUITY CONTRACT |
This prospectus describes the WRL Freedom Variable Annuity Contract offered by Western Reserve.
An annuity is a contract between you, an owner, and an insurance company (in this case Western Reserve), where the insurance company promises to pay the annuitant an income in the form of annuity payments. These payments begin after the maturity date. (See Section 2 below). Until the maturity date, your annuity is in the accumulation period and the earnings generally are tax deferred. Tax deferral means you generally are not taxed on your annuity until you take money out of your annuity. After the maturity date, your annuity switches to the income phase.
The Contract is a flexible payment variable deferred annuity. You can use the Contract to accumulate funds for retirement or other long-term financial planning purposes.
It is a “flexible payment” Contract because after you purchase it, you can generally make additional investments of $100 or more at any time, until the maturity date. But you are not required to make any additional investments.
The Contract is a “variable” annuity because the value of your Contract during the accumulation period can go up or down based on the performance of your investment choices.
The Contract also contains a fixed account. The fixed account offers an interest rate that is guaranteed by Western Reserve to equal at least 4% per year. There may be different interest rates for each payment or transfer you direct to the fixed account which are equal to or greater than the guaranteed rate. The interest rates we set will be credited for periods of at least one year measured from each payment or transfer date.
2. | ANNUITY PAYMENTS (THE INCOME PHASE) |
You choose the date when annuity payments start under the Contract. This is the maturity date. You can change this date by giving us 30 days written notice. The maturity date cannot be earlier than the end of the fifth Contract year. The maturity date cannot be later than the annuitant’s 90th birthday. The maturity date may be earlier for qualified Contracts.
Election of Annuity Payment Option. Before the maturity date, if the annuitant is alive, you may choose an annuity payment option or change your option. If you do not choose an annuity option by the maturity date, we will make payments under Option B (see below) as a Life Income with 120 guaranteed payments. You cannot change the annuity payment option after the maturity date.
Unless you specify otherwise, the annuitant named on the application will receive the annuity payments. As of the maturity date and so long as we agree, you may elect a different annuitant or add a joint annuitant who will be a joint payee under a joint and survivor life income payment option. If you do not choose an annuitant, we will consider you to be the annuitant.
Supplemental Contract. Once you annuitize, the Contract will end and we will issue a supplemental Contract to describe the terms of the option you selected. The supplemental Contract will name who will receive the annuity payments and describe when the annuity payments will be made.
Annuity Payment Options Under the Contract
The Contract provides several fixed annuity payment options that are described below. You may choose any annuity payment option available under your Contract. You can choose to receive payments monthly, quarterly, semi-annually, or annually.
We will use your “annuity proceeds” to provide these payments. The “annuity proceeds” is your annuity value on the maturity date, less any premium tax that may apply. If your annuity payment would be less than $20, then we will pay you the annuity proceeds in one lump sum.
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If you choose annuity payment Option A, B or C, the dollar amount of each annuity payment will be fixed on the maturity date and guaranteed by us. The payment amount will generally depend on the following:
— | the amount of the annuity proceeds on the maturity date; |
— | the interest rate we credit on those amounts; and |
— | the specific payment option you choose. |
Payment Option A -- Fixed Installments. We will pay the annuity in equal payments over a fixed period of 5, 10, 15, 20, 25 or 30 years or any other fixed period acceptable to Western Reserve.
Payment Option B -- Life Income: Fixed Payments.
— | No Period Certain: We will make level payments only during the annuitant’s lifetime; |
— | Fixed Period Certain: We will make level payments for the longer of the annuitant’s lifetime or a fixed period of 5 or 10 years; or |
— | Guaranteed Return of Annuity Proceeds: We will make level payments for the longer of the annuitant’s lifetime or until the total dollar amount of payments we made to you equals the annuity proceeds. |
Payment Option C -- Joint and Survivor Life Income: Fixed Payments. We will make level payments during the joint lifetime of the annuitant and a joint annuitant of your choice. Payments will:
— | continue upon the death of the first payee for the remaining lifetime of the survivor; or |
— | be reduced by 1/3 upon the death of the first payee and continue for the remaining lifetime of the survivor. |
Note Carefully: The death benefit payable after the maturity date will be affected by the annuity option you choose.
If your Contract is a qualified contract, payment option A may not satisfy minimum required distribution rules. Consult a tax advisor before electing that payment option.
If:
— | you choose Life Income with No Period Certain or a Joint and Survivor Life Income; and |
— | the annuitant(s) dies, for example, before the due date of the second annuity payment; |
Then:
— | we may make only one annuity payment and there will be no death benefit payable. |
If:
— | you choose Fixed Installments, Life Income with Fixed Period Certain, or Guaranteed Return of Annuity Proceeds; and |
— | the person receiving payments dies prior to the end of the guaranteed period; |
Then:
— | the remaining guaranteed payments will be continued to that person’s beneficiary, or their value (determined at the date of death) may be paid in a single sum. |
After the first Contract anniversary and before the maturity date, you may partially annuitize your Contract without surrendering it completely. We treat partial annuitizations as partial withdrawals for purposes of calculating certain benefits under the Contract and elective riders. You may have to pay federal income tax and a penalty tax on any money you withdraw. See Section 7. Access to Your Money - Partial Annuitization for more details.
We will not pay interest on amounts represented by uncashed annuity payment checks if the postal or other delivery service is unable to deliver checks to the annuitant’s address of record. The annuitant is responsible for keeping Western Reserve informed of the annuitant’s current address of record.
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3. | PURCHASE |
We will not issue a Contract unless:
— | we receive the information we need to issue the Contract at our administrative office in good order; |
— | we receive a minimum initial purchase payment (except for 403(b) Contracts); and |
— | you and any joint owner and the annuitant are age 85 or younger. |
We may reject any application or purchase payments for any reason permitted by law.
You should make checks or drafts for purchase payments payable only to “Western Reserve Life” and send them to our administrative office. Your check or draft must be honored in order for us to pay any associated payments and benefits due under the Contract.
We do not accept cash. We reserve the right to not accept third party checks. A third party check is a check that is made payable to one person who endorses it and offers it as payment to a second person. Checks should normally be payable to “Western Reserve Life”, however, in some circumstances, at our discretion we may accept third party checks that are from a rollover or a transfer from other financial institutions. Any third party checks not accepted by the company will be returned.
We reserve the right to reject or accept any form of payment. Any unacceptable forms of payment will be returned.
The initial purchase payment for nonqualified Contracts must be at least $5,000. However, you may make a minimum initial purchase payment of $1,000, rather than $5,000, if you indicate on your application that you anticipate making minimum monthly payments of at least $100 by electronic funds transfer. For traditional or Roth IRAs, the minimum initial purchase payment is $1,000 and for qualified Contracts other than traditional or Roth IRAs, the minimum initial purchase payment is $100.
We will credit your initial purchase payment to your Contract within two business days after the day we receive it and your complete Contract information at our administrative office in good order. If we are unable to credit your initial purchase payment, we (or your agent) will contact you within five business days and explain why. We will also return your initial purchase payment at that time unless you tell us (or your agent) to keep it and credit it as soon as we receive all necessary application information.
The date on which we credit your initial purchase payment to your Contract is generally the Contract date. If the date we credit your premium to the contract falls on the 29th, 30th or 31st day of the month, your Contract date will be the 28th day of the month. The Contract date is used to determine Contract years, Contract months and Contract anniversaries.
Although we do not anticipate delays in processing your application, we may experience delays if agents fail to forward applications and purchase payments to our administrative office in a timely manner.
If you wish to make purchase payments by bank wire, please contact our administrative office at 1-800-851-9777 (Monday – Friday 8:30 a.m. – 7:00 p.m. Eastern Time).
You are not required to make any additional purchase payments. However, you can generally make additional purchase payments as often as you like during the lifetime of the annuitant and prior to the maturity date. We will accept purchase payments by bank wire or by check. Additional purchase payments must be at least $100 ($1,000 if by wire). We will credit any additional purchase payments you make to your Contract at the accumulation unit
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value computed at the end of the business day on which we receive them at our administrative office in good order. Our business day closes when the NYSE closes, usually at 4:00 p.m. Eastern Time. If we receive your purchase payments after the close of our business day, we will calculate and credit them as of the close of the next business day.
Maximum Total Purchase Payments
We reserve the right to reject cumulative premium payments over $1,000,000 (this includes subsequent premium payments) for all contracts with the same owner or same annuitant.
Allocation of Purchase Payments
On the Contract date, we will allocate your purchase payment to the investment choices you selected on your application. Your allocation must be in whole percentages and must total 100%. We will allocate additional purchase payments as you selected on your application, unless you request a different allocation.
You may change allocations for future additional purchase payments by writing or by telephoning the administrative office or by visiting our website – www.westernreserve.com, subject to the limitations described under Section 4. Investment Options – Telephone, Fax and Internet Transactions. The allocation change will apply to purchase payments received after the date we receive the change request at our administrative office in good order.
You should review periodically how your payments are divided among the subaccounts because market conditions and your overall financial objectives may change.
You may return your Contract for a refund within 10 days after you receive it, or whatever longer time may be required by state law. In most states, the amount of the refund will be the total purchase payments we have received, plus (or minus) any gains (or losses) in the amounts you invested in the subaccounts. You will keep any gains, and bear any losses, on amounts that you invested in the subaccounts. If state law requires, we will refund your original purchase payment(s). We determine the value of the refund as of the date we receive your written notice of cancellation and the returned Contract at our administrative office. We will pay the refund within 7 days after we receive your written notice of cancellation and the returned Contract. The Contract will then be deemed void. In some states you may have more than 10 days and/or receive a different refund amount.
You should expect your annuity value to change from valuation period to valuation period to reflect the investment performance of the portfolios, the interest credited to your value in the fixed account, and the fees and charges we deduct. A valuation period begins at the close of regular trading on each business day and ends at the close of regular trading on the next succeeding valuation date. A valuation date is any day the NYSE is open. Our business day closes when the NYSE closes, usually 4:00 p.m. Eastern Time. We observe the same holidays as the NYSE.
We measure the value of your Contract during the accumulation period by using a measurement called an accumulation unit. During the income phase, we use a measurement called an annuity unit. When you direct money into a subaccount, we credit your Contract with accumulation units for that subaccount. We determine how many accumulation units to credit by dividing the dollar amount you direct to the subaccount by the subaccount’s accumulation unit value as of the end of that valuation date. If you withdraw or transfer out of a subaccount, or if we assess a transfer charge, annual Contract charge, or any withdrawal charge, we subtract accumulation units from the subaccounts using the same method.
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Each subaccount’s accumulation unit value was set at $10 when the subaccount started. We recalculate the accumulation unit value for each subaccount at the close of each valuation date. The new accumulation unit value reflects the investment performance and the fees and expenses of the underlying portfolio and the daily deduction of the mortality and expense risk charge. For a detailed discussion of how we determine accumulation unit values, see the SAI.
4. | INVESTMENT CHOICES |
Currently the following underlying fund portfolios are offered through this Contract.
TRANSAMERICA SERIES TRUST – INITIAL CLASS
Portfolio Construction Manager: Morningstar Associates, LLC
Transamerica Asset Allocation – Conservative VP
Transamerica Asset Allocation – Growth VP
Transamerica Asset Allocation – Moderate VP
Transamerica Asset Allocation – Moderate Growth VP
Transamerica International Moderate Growth VP
Subadvised by BlackRock Investment Management, LLC
Transamerica BlackRock Large Cap Value VP
Subadvised by Capital Guardian Trust Company
Transamerica Capital Guardian Value VP
Subadvised by ING Clarion Real Estate Securities, L.P.
Transamerica Clarion Global Real Estate Securities VP
Subadvised by Federated Equity Management Company of Pennsylvania
Transamerica Federated Market Opportunity VP
Subadvised by JPMorgan Investment Advisors, Inc.
Transamerica JPMorgan Core Bond VP
Subadvised by J.P. Morgan Investment Management Inc.
Transamerica JPMorgan Enhanced Index VP
Subadvised by ClearBridge Advisors, LLC
Transamerica Legg Mason Partners All Cap VP
Subadvised by MFS® Investment Management
Transamerica MFS High Yield VP
Transamerica MFS International Equity VP
Subadvised by Columbia Management Advisors, LLC
Transamerica Marsico Growth VP
Subadvised by Munder Capital Management
Transamerica Munder Net50 VP
Subadvised by Pacific Investment Management Company LLC
Transamerica PIMCO Total Return VP
Subadvised by T. Rowe Price Associates, Inc.
Transamerica T. Rowe Price Equity Income VP
Transamerica T. Rowe Price Small Cap VP
Subadvised by Templeton Investment Counsel, LLC and Transamerica Investment Management, LLC
Transamerica Templeton Global VP
Subadvised by Third Avenue Management LLC
Transamerica Third Avenue Value VP
Subadvised by Transamerica Investment Management, LLC
Transamerica Balanced VP
Transamerica Convertible Securities VP
Transamerica Equity VP
Transamerica Growth Opportunities VP
Transamerica Money Market VP
Transamerica Science & Technology VP
Transamerica Small/Mid Cap Value VP
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Transamerica U.S. Government Securities VP
Transamerica Value Balanced VP
Subadvised by Morgan Stanley Investment Management Inc.
Transamerica Van Kampen Large Cap Core VP(1)
Subadvised by Van Kampen Asset Management
Transamerica Van Kampen Mid-Cap Growth VP
TRANSAMERICA SERIES TRUST – SERVICE CLASS
Managed by AEGON USA Investment Management, LLC
Transamerica Index 50 VP
Transamerica Index 75 VP
PROFUNDS(2)
Managed by ProFund Advisors LLC
ProFund VP Asia 30
ProFund VP Basic Materials
ProFund VP Bull
ProFund VP Consumer Services
ProFund VP Emerging Markets
ProFund VP Europe 30
ProFund VP Falling U.S. Dollar
ProFund VP Financials
ProFund VP International
ProFund VP Japan
ProFund VP Mid-Cap
ProFund VP Money Market
ProFund VP NASDAQ-100
ProFund VP Oil & Gas
ProFund VP Pharmaceuticals
ProFund VP Precious Metals
ProFund VP Short Emerging Markets
ProFund VP Short International
ProFund VP Short NASDAQ-100
ProFund VP Short Small-Cap
ProFund VP Small-Cap
ProFund VP Small-Cap Value
ProFund VP Telecommunications
ProFund VP UltraSmall-Cap
ProFund VP U.S. Government Plus
ProFund VP Utilities
ACCESS ONE TRUST(2)
Managed by ProFund Advisors LLC
Access VP High Yield FundSM
(1) | Transamerica Capital Guardian U.S. Equity VP merged into Transamerica Van Kampen Large Cap Core VP. |
(2) | The ProFunds and Access portfolios permit frequent transfers and investors in these portfolios may bear the additional costs and investment risks of frequent transfers. |
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The following subaccounts are only available to owners that held an investment in the subaccounts on May 1, 2003.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND – SERVICE CLASS 2
Managed by Fidelity Management & Research Company
Fidelity – VIP Equity-Income Portfolio
Fidelity – VIP Contrafund® Portfolio
Fidelity – VIP Growth Opportunities Portfolio
The following subaccount is closed to new investment as of December 12, 2005.
TRANSAMERICA SERIES TRUST – INITIAL CLASS
Subadvised by J.P. Morgan Investment Management Inc.
Transamerica JPMorgan Mid Cap Value VP
The general public may not purchase these portfolios. Their investment objectives and policies may be similar to other portfolios and mutual funds managed by the same investment adviser or sub-adviser that are sold directly to the public. You should not expect that the investment results of the other portfolios and mutual funds will be comparable to those portfolios offered by this prospectus.
There is no assurance that a portfolio will achieve its stated objective(s). For example, during extended periods of low interest rates, the yield of a money market subaccount may become extremely low and possibly negative. More detailed information may be found in the fund prospectuses. You should read the fund prospectuses carefully before you invest.
Please contact our administrative office at 1-800-851-9777 (Monday - Friday 8:30 a.m. - 7:00 p.m. Eastern Time) or visit our website (www.westernreserve.com) to obtain an additional copy of the fund prospectuses containing more complete information concerning the funds and portfolios.
Selection of Underlying Portfolios
The underlying portfolios offered through this product are selected by Western Reserve, and Western Reserve may consider various factors, including, but not limited to, asset class coverage, the strength of the adviser’s or sub-adviser’s reputation and tenure, brand recognition, performance, and the capability and qualification of each investment firm. Another factor that we may consider is whether the underlying portfolio or its service providers (e.g., the investment adviser or sub-advisers) or its affiliates will make payments to us or our affiliates. For additional information about these arrangements, see “Revenue We Receive.” We review the portfolios periodically and may remove a portfolio, or limit its availability to new premiums and/or transfers of cash value if we determine that a portfolio no longer satisfies one or more of the selection criteria, and/or if the portfolio has not attracted significant allocations from owners. We have included the Transamerica Series Trust (“TST”) portfolios at least in part because they are managed by Transamerica Asset Management, Inc. (“TAM”), our directly owned subsidiary.
We have developed this variable annuity product in cooperation with one or more distributors, and have included certain underlying fund portfolios based on their recommendations; their selection criteria may differ from our selection criteria.
You are responsible for choosing the portfolios, and the amounts allocated to each, that are appropriate for your own individual circumstances and your investment goals, financial situation, and risk tolerance. Because investment risk is borne by you, decisions regarding investment allocations should be carefully considered.
In making your investment selections, we encourage you to thoroughly investigate all of the information regarding the portfolios that is available to you, including each fund’s prospectus, statement of additional information and annual and semi/annual reports. Other sources such as newspapers and financial and other magazines provide more current information, including information about any regulatory actions or investigations relating to a fund or portfolio. After you select portfolios for your initial premium, you should monitor and periodically re-evaluate your allocations to determine if they are still appropriate.
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You bear the risk of any decline in the cash value of your Contract resulting from the performance of the Portfolios you have chosen.
We do not recommend or endorse any particular portfolio and we do not provide investment advice.
We do not guarantee that each portfolio will always be available for investment through the Contract. We reserve the right, subject to compliance with applicable laws, to add new portfolios or portfolio classes, close existing portfolios or portfolio classes to allocations of new premiums by existing owners or new Contract owners at any time, or substitute portfolio shares that are held by any subaccount for shares of a different portfolio. New or substitute portfolios or portfolio classes may have different fees and expenses and their availability may be limited to certain classes of purchasers. We will not add, delete or substitute any shares attributable to your interest in a subaccount without notice to you and prior approval of the SEC, to the extent required by applicable law.
We reserve the right to limit the number of subaccounts you are invested in at any one time.
Addition, Deletion or Substitution of Investments
We reserve the right, subject to compliance with applicable law, to add, remove or combine subaccounts, and substitute the shares that are held by the separate account for shares of another portfolio, at our discretion. We reserve the right to eliminate the shares of any portfolios of a fund and to substitute shares of another portfolio of a fund (or of another open-end registered investment company) if the shares of a portfolio are no longer available for investment or, if in our judgment further investment in any portfolio should become inappropriate in view of the purposes of the separate account. We will not, however, substitute shares attributable to an owner’s interest in a subaccount without notice to, and prior approval of, the Securities and Exchange Commission (the “SEC”) to the extent required by the Investment Company Act of 1940, as amended (the “1940 Act”), or other applicable law.
We also reserve the right to establish additional subaccounts, each of which would invest in a new portfolio of a fund, or in shares of another investment company, with a specified investment objective. New subaccounts may be established when, in the sole discretion of Western Reserve, marketing, tax, investment or other conditions warrant, and any new subaccounts will be made available to existing owners on a basis to be determined by Western Reserve. We may also eliminate one or more subaccounts if, in our sole discretion, marketing, tax, investment or other conditions warrant. In the event any subaccount is eliminated, Western Reserve will notify you and request a reallocation of the amounts invested in the eliminated subaccount.
Similarly, Western Reserve may, at its discretion, close a subaccount to new investment (either transfers or premium payments). Any amounts that would otherwise be invested in a closed subaccount (for premium allocations, portfolio rebalancing, dollar cost averaging, automatic checking account or payroll deductions for period premiums, etc.) will, if you do not provide instructions for a new allocation be invested in the subaccount that invests in the Transamerica Money Market VP Fund (or in a similar portfolio of money market instruments). If a portfolio of money market instruments is unavailable, Western Reserve will reinvest the amounts in another subaccount, or in the fixed account, if appropriate.
In the event of any such substitution or change, we may make such changes in the Contracts and other annuity contracts as may be necessary or appropriate to reflect such substitution or change. If deemed by us to be in the best interests of persons having voting rights under the Contracts, the separate account may be operated as a management company under the 1940 Act, or subject to any required approval, it may be deregistered under the 1940 Act in the event such registration is no longer required.
We reserve the right to change the investment objective of any subaccount. Additionally, if required by law or regulation, we will not materially change an investment objective of the separate account or of a portfolio designated for a subaccount unless a statement of change is filed with and approved by the appropriate insurance official of the state of Western Reserve’s domicile, or deemed approved in accordance with such law or regulation.
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Purchase payments you allocate to and amounts you transfer to the fixed account become part of the general account of Western Reserve. Interests in the general account have not been registered under the Securities Act of 1933 (the “1933 Act”), nor is the general account registered as an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). Accordingly, neither the general account nor any interests in the general account is generally subject to the provisions of the 1933 Act or 1940 Act. Western Reserve has been advised that the staff of the SEC has not reviewed the disclosure in this prospectus which relates to the fixed account.
We guarantee that the interest credited to the fixed account will not be less than 4% per year. We have no formula for determining fixed account interest rates. We establish the interest rate, at our sole discretion, for each purchase payment or transfer into the fixed account. Rates are guaranteed for at least one year, but will never be less than 4% per year.
Any money you allocate or transfer to the fixed account will be placed with the other general assets of Western Reserve. All assets in our general account are subject to the general liabilities of our business operations. The amount of money you are able to accumulate in the fixed account during the accumulation period depends upon the total interest credited. The amount of annuity payments you receive during the income phase under a fixed annuity option will remain level for the entire income phase. You may not transfer money between the fixed account and the subaccounts during the income phase.
When you request a transfer, or if we consent to a partial withdrawal from the fixed account, we will account for it on a first-in, first-out (‘‘FIFO’’) basis, for purposes of crediting your interest. This means that we will take the deduction from the oldest money you have put in the fixed account. You may transfer money from the fixed account to the subaccounts once during each Contract year, subject to certain restrictions. You may not transfer money between the fixed account and the subaccounts during the income phase. You may not make partial withdrawals from the fixed account unless we consent.
During the accumulation period, you or your agent/registered representative of record may make transfers from any subaccount. However, if you elect the asset rebalancing program, you may not make any transfers if you want to continue in the program. A transfer would automatically cancel your participation in the asset rebalancing program.
Currently, we allow you to transfer up to 100% of the amount in the fixed account. However, we reserve the right to require that you comply with one or more of the following:
— | That you only make one transfer per Contract year. This restriction does not apply to dollar cost averaging; |
— | That you request transfers from the fixed account in writing; |
— | That you only make transfers from the fixed account during the 30 days following each contract anniversary; and |
— | That you limit the maximum amount you transfer from the fixed account to the greater of: |
— | 25% of the amount in the fixed account; or |
— | the amount you transferred from the fixed account in the immediately prior Contract year. |
Before effecting any of these requirements, we will notify you in writing, and they will apply uniformly to all owners.
Except when used to pay premiums, we may also defer payment of any amounts from the fixed account for no longer than six months after we receive written notice of your request for the transfer. Transfers from the fixed account are not available through our Internet website.
Transfers may be made by telephone, fax or Internet, subject to limitations described below under Section 4. Investment Choices – Telephone, Fax and Internet Transactions. We consider all transfers made in any one day to be a single transfer.
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If you make more than 12 transfers from the subaccounts in any Contract year, we will charge you $10 for each additional transfer you make during that year. There is no charge for transfers from the fixed account, however, they will be counted toward the 12 free transfers allowed per Contract year. We do not currently charge for Internet transfers, although we reserve the right to do so in the future.
Transfers to and from the subaccounts will be processed based on the accumulation unit values determined at the end of the business day on which we receive your written, telephoned, or faxed request at our administrative office, provided we receive your request at our administrative office in good order before the close of our business day (usually 4:00 p.m. Eastern Time). If we receive your request at our administrative office after the close of our business day, we will process the transfer request using the accumulation unit value for the next business day.
Market Timing and Disruptive Trading
The market timing policy and the related procedures (discussed below) do not apply to the ProFunds or Access subaccounts because the corresponding portfolios are specifically designed to accommodate frequent transfer activity. If you invest in the ProFunds or Access subaccounts, you should be aware that you may bear the costs and increased risks of frequent transfers discussed below.
Statement of Policy. This variable insurance product was not designed for the use of market timers or frequent or disruptive traders (frequent transfers are considered to be disruptive). Such transfers may be harmful to the underlying fund portfolios and increase transaction costs.
Market timing and disruptive trading among the subaccounts or between the subaccounts and the fixed account can cause risks with adverse effects for other contract owners (and beneficiaries and underlying fund portfolios). These risks and harmful effects include:
(1) | dilution of the interests of long-term investors in a subaccount if purchases or transfers into or out of an underlying fund portfolio are made at prices that do not reflect an accurate value for the underlying fund portfolio’s investments (some market timers attempt to do this through methods known as “time-zone arbitrage” and “liquidity arbitrage”); |
(2) | an adverse effect on portfolio management, such as: |
(a) | impeding a portfolio manager’s ability to sustain an investment objective; |
(b) | causing the underlying fund portfolio to maintain a higher level of cash than would otherwise be the case; or |
(c) | causing an underlying fund portfolio to liquidate investments prematurely (or otherwise at an inopportune time) in order to pay withdrawals or transfers out of the underlying fund portfolio; and |
(3) | increased brokerage and administrative expenses. |
These costs are borne by all contract owners invested in those subaccounts, not just those making the transfers.
We have developed policies and procedures with respect to market timing and disruptive trading (which vary for certain subaccounts at the request of the corresponding underlying fund portfolios) and we do not make special arrangements or grant exceptions to accommodate market timing or disruptive trading. As discussed herein, we cannot detect or deter all market timing or potentially disruptive trading. Do not invest with us (except in the ProFunds or Access subaccounts as discussed above) if you intend to conduct market timing or potentially disruptive trading.
Detection. We employ various means in an attempt to detect and deter market timing and disruptive trading. However, despite our monitoring we may not be able to detect nor halt all harmful trading. In addition, because other insurance companies (and retirement plans) with different policies and procedures may invest in the underlying fund portfolios, we cannot guarantee that all harmful trading will be detected or that an underlying fund portfolio will not suffer harm from market timing and disruptive trading among subaccounts of variable products issued by these other insurance companies or retirement plans.
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Deterrence. If we determine you are engaged in market timing or disruptive trading, we may take one or more actions in an attempt to halt such trading. Your ability to make transfers is subject to modification or restriction if we determine, in our sole opinion, that your exercise of the transfer privilege may disadvantage or potentially harm the rights or interests of other contract owners (or others having an interest in the variable insurance products). As described below, restrictions may take various forms, but under our current policies and procedures will include loss of expedited transfer privileges. We consider transfers by telephone, fax, overnight mail, or the Internet to be “expedited” transfers. This means that we would accept only written transfer requests with an original signature transmitted to us only by standard United States Postal Service first class mail. We may also restrict the transfer privileges of others acting on your behalf, including your registered representative or an asset allocation or investment advisory service.
We reserve the right to reject any premium payment or transfer request from any person without prior notice, if, in our judgment, (1) the payment or transfer, or series of transfers, would have a negative impact on an underlying fund portfolio’s operations, or (2) if an underlying fund portfolio would reject or has rejected our purchase order or has instructed us not to allow that purchase or transfer, or (3) because of a history of market timing or disruptive trading. We may impose other restrictions on transfers, or even prohibit transfers for any owner who, in our view, has abused, or appears likely to abuse, the transfer privilege on a case-by-case basis. We may, at any time and without prior notice, discontinue transfer privileges, modify our procedures, impose holding period requirements or limit the number, size, frequency, manner, or timing of transfers we permit. Because determining whether to impose any such special restrictions depends on our judgment and discretion, it is possible that some contract owners could engage in disruptive trading that is not permitted for others. We also reserve the right to reverse a potentially harmful transfer if an underlying fund portfolio refuses or reverses our order; in such instances some contract owners may be treated differently than others in that some transfers may be reversed and others allowed. For all of these purposes, we may aggregate two or more variable insurance products that we believe are connected. If you engage a third party investment advisor for asset allocation services, then you may be subject to these transfer restrictions because of the actions of your investment advisor in providing these services.
In addition to our internal policies and procedures, we will administer your variable insurance product to comply with any applicable state, federal, and other regulatory requirements concerning transfers. We reserve the right to implement, administer, and charge you for any fee or restriction, including redemption fees, imposed by any underlying fund portfolio. To the extent permitted by law, we also reserve the right to defer the transfer privilege at any time that we are unable to purchase or redeem shares of any of the underlying fund portfolios.
Under our current policies and procedures, we do not:
— | impose redemption fees on transfers; or |
— | expressly limit the number or size of transfers in a given period except for certain subaccounts where an underlying fund portfolio has advised us to prohibit certain transfers that exceed a certain size. |
Redemption fees, transfer limits, and other procedures or restrictions may be more or less successful than ours in deterring market timing or other disruptive trading and in preventing or limiting harm from such trading.
In the absence of a prophylactic transfer restriction (e.g., expressly limiting the number of trades within a given period or limiting trades by their size), it is likely that some level of market timing and disruptive trading will occur before it is detected and steps taken to deter it (although some level of market timing and disruptive trading can occur with a prophylactic transfer restriction). As noted above, we do not impose a prophylactic transfer restriction and, therefore, it is likely that, some level of market timing and disruptive trading will occur before we are able to detect it and take steps in an attempt to deter it.
Please note that the limits and restrictions described herein are subject to our ability to monitor transfer activity. Our ability to detect market timing or disruptive trading may be limited by operational and technological systems, as well as by our ability to predict strategies employed by contract owners (or those acting on their behalf) to avoid detection. As a result, despite our efforts to prevent harmful trading activity among the variable investment options available under this variable insurance product, there is no assurance that we will be able to detect or deter market timing or disruptive trading by such contract owners or intermediaries acting on their behalf. Moreover, our ability to discourage and restrict market timing or disruptive trading may be limited by decisions of state regulatory bodies and court orders that we cannot predict.
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Furthermore, we may revise our policies and procedures in our sole discretion at any time and without prior notice, as we deem necessary or appropriate (1) to better detect and deter harmful trading that may adversely affect other contract owners, other persons with material rights under the variable insurance products, or underlying fund shareholders generally, (2) to comply with state or federal regulatory requirements, or (3) to impose additional or alternative restrictions on owners engaging in market timing or disruptive trading among the investment options under the variable insurance product. In addition, we may not honor transfer requests if any variable investment option that would be affected by the transfer is unable to purchase or redeem shares of its corresponding underlying fund portfolio.
Underlying Fund Portfolio Frequent Trading Policies. The underlying fund portfolios may have adopted their own policies and procedures with respect to frequent purchases and redemptions of their respective shares. Underlying fund portfolios may, for example, assess a redemption fee (which we reserve the right to collect) on shares held for a relatively short period of time. The prospectuses for the underlying fund portfolios describe any such policies and procedures. The frequent trading policies and procedures of an underlying fund portfolio may be different, and more or less restrictive, than the frequent trading policies and procedures of other underlying fund portfolios and the policies and procedures we have adopted for our variable insurance products to discourage market timing and disruptive trading. Contract owners should be aware that we may not have the contractual ability or the operational capacity to monitor Contract owners’ transfer requests and apply the frequent trading policies and procedures of the respective underlying funds that would be affected by the transfers. Accordingly, Contract owners and other persons who have material rights under our variable insurance products should assume that any protection they may have against potential harm from market timing and disruptive trading is the protection, if any, provided by the policies and procedures we have adopted for our variable insurance products to discourage market timing and disruptive trading in certain subaccounts.
Contract owners should be aware that we are required to provide to an underlying fund portfolio or its designee, promptly upon request, certain information about the trading activity of individual contract owners, and to restrict or prohibit further purchases or transfers by specific contract owners identified by an underlying fund portfolio as violating the frequent trading policies established for that portfolio.
Omnibus Orders. Contract owners and other persons with material rights under the variable insurance products also should be aware that the purchase and redemption orders received by the underlying fund portfolios generally are “omnibus” orders from intermediaries such as retirement plans and separate accounts funding variable insurance products. The omnibus orders reflect the aggregation and netting of multiple orders from individual retirement plan participants and individual owners of variable insurance products. The omnibus nature of these orders may limit the underlying fund portfolios’ ability to apply their respective frequent trading policies and procedures. We cannot guarantee that the underlying fund portfolios will not be harmed by transfer activity relating to the retirement plans or other insurance companies that may invest in the underlying fund portfolios. These other insurance companies are responsible for their own policies and procedures regarding frequent transfer activity. If their policies and procedures fail to successfully discourage harmful transfer activity, it will affect other owners of underlying fund portfolio shares, as well as the owners of all of the variable annuity or life insurance policies, including ours, whose variable investment options correspond to the affected underlying fund portfolios. In addition, if an underlying fund portfolio believes that an omnibus order we submit may reflect one or more transfer requests from owners engaged in market timing and disruptive trading, the underlying fund portfolio may reject the entire omnibus order and thereby delay or prevent us from implementing your request.
ProFunds and Access Subaccounts. The restrictions above do not apply to ProFunds or Access subaccounts. Because the above restrictions do not apply to the ProFunds or Access subaccounts, they may have a greater risk than others of suffering from the harmful effects of market timing and disruptive trading, as discussed above (i.e., dilution, an adverse effect on portfolio management, and increased expenses).
Dollar cost averaging allows you to transfer systematically a specific amount each month from the fixed account, the Transamerica Money Market VP subaccount, the Transamerica JPMorgan Core Bond VP subaccount, or any combination of these accounts to a different subaccount. You may specify the dollar amount to be transferred monthly; however, you must transfer a total of $1,000 monthly ($500 for New Jersey residents). To qualify, a minimum of $10,000 must be in each subaccount from which we make transfers.
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You may request dollar cost averaging at any time. To enter into dollar cost averaging, you must submit a completed request form, signed by the owner, to us at our administrative office in good order. There is no charge for this program. However, these transfers do count towards the 12 free transfers allowed during each Contract year.
If you make dollar cost averaging transfers from the fixed account, each month you may transfer no more than 1/10th of the dollar amount in the fixed account on the date you start dollar cost averaging. (Please note, a Dollar Cost Averaging Program will not begin on the 29th, 30th, or 31st of the month. If a program would have started on one of these dates, it will start on the 1st business day of the following month.)
By transferring a set amount on a regular schedule instead of transferring the total amount at one particular time, you may reduce the risk of investing in the portfolios only when the price is high. Dollar cost averaging does not guarantee a profit and it does not protect you from loss if market prices decline.
We reserve the right to discontinue offering dollar cost averaging 30 days after we send notice to you. Dollar cost averaging is not available if you have elected the asset rebalancing program or if you elect to participate in any asset allocation service provided by a third party. Dollar Cost averaging will terminate if we receive (at our mailing office) your or your authorized registered representative request to cancel your participation or the value in the account from which we make the transfers is depleted.
If we receive additional premium payments after a Dollar Cost Averaging program is completed; the additional premium will be allocated according to the current payment allocations at that time and will not reactivate a completed Dollar Cost Averaging program. New Dollar Cost Averaging instructions will be required to Dollar Cost Average this additional premium.
During the accumulation period you can instruct us to rebalance automatically the amounts in your subaccounts to maintain your desired asset allocation. This feature is called asset rebalancing. To enter into asset rebalancing, you must submit a completed request form, signed by the owner to our mailing office. To end participation in asset rebalancing, you or your authorized registered representative may call or write to our mailing office. Entrance to the asset rebalancing program is limited to once per Contract year. However, we will not rebalance if you are in the dollar cost averaging program or systematic partial withdrawal program, if you elect to participate in any asset allocation service provided by a third party or if you request any other transfer or if we receive your request to discontinue participation at our administrative office. Asset rebalancing ignores amounts in the fixed account. You can choose to rebalance monthly, quarterly, semi-annually, or annually.
If you request the Asset Rebalancing program, we will change your future payment allocation to match the subaccounts in your Asset Rebalancing Program.
To qualify for asset rebalancing, a minimum annuity value of $10,000 is required. Any annuity value in the fixed account may not be included in the asset rebalancing program. Asset rebalancing does not guarantee gains, nor does it assure that any subaccount will not have losses.
There is no charge for this program. However, each reallocation which occurs under asset rebalancing will be counted towards the 12 free transfers allowed during each Contract year.
We reserve the right to discontinue, modify or suspend the asset rebalancing program at any time.
Telephone, Fax and Internet Transactions
You may make transfers, change the allocation of additional purchase payments and request partial withdrawals and change the allocation of additional purchase payments by telephone. Telephonic partial withdrawals are not allowed in the following situations:
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— | for qualified Contracts (except IRAs); |
— | if you live, or if your Contract was issued, in a community property state; |
— | if the amount you want to withdraw is greater than $50,000; or |
— | if the address of record has been changed within the past 10 days. |
Upon instructions from you, the registered representative/agent of record for your Contract may also make telephonic transfers or partial withdrawals for you. If you do not want the ability to make transfers or partial withdrawals by telephone, you should notify us in writing.
You may make telephonic transfers, allocation changes, or request partial withdrawals by calling our toll-free number, 1-800-851-9777 (Monday – Friday 8:30 a.m. – 7:00 p.m. Eastern Time). You will be required to provide certain information for identification purposes when you request a transaction by telephone. We may also require written confirmation of your request. We will not be liable for following telephone requests that we believe are genuine. Telephone transfers for contracts owned by trusts will only be allowed if a current trust certification form with a signature guarantee is on file at our administrative office. If we do not employ reasonable confirmation procedures, we may be liable for losses due to unauthorized or fraudulent transactions.
Telephone, fax and Internet orders must be received at our administrative office before 4:00 p.m. Eastern Time to receive same-day pricing. Orders received at our office at or after 4:00 p.m. Eastern Time will receive the price computed at the end of the next business day.
We may deny the telephone transaction privileges to market timers and frequent or disruptive traders.
Please use the following fax numbers for the following types of transactions:
— | To request a transfer, please fax your request to us at 727-299-1648. We will not be responsible for same-day processing of transfers if you fax your transfer request to a number other than this fax number; and |
— | To request a partial withdrawal, please fax your request to us at 727-299-1620. We will not be responsible for same-day processing of partial withdrawals if you fax your partial withdrawal request to a number other than this fax number. |
You may make transfers and change premium allocations through our website – www.westernreserve.com.
We will not be responsible for transmittal problems which are not reported to us by the following business day. Any reports must be accompanied by proof of the faxed transmittal.
We cannot guarantee that telephone, fax or Internet transactions will always be available. For example, our administrative office may be closed during severe weather emergencies or there may be interruptions in telephone service or problems with our computer services that are beyond our control. If the volume of calls is unusually high, we might not have someone immediately available to receive your order. Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability under all circumstances. Outages or slowdowns may prevent or delay our receipt of your request.
In addition, you should protect your personal identification number (“PIN”) because self-service options will be available to your agent of record and to anyone who provides your PIN. We will not be able to verify that the person providing instructions via an automated telephone or online system is you or is authorized to act on your behalf.
We may discontinue the availability of telephone, fax or Internet transactions at any time.
Third Party Investment Services
Western Reserve or an affiliate may provide administrative or other support services to independent third parties you authorize to conduct transfers on your behalf, or who provide recommendations as to how your subaccount values should be allocated. This includes, but is not limited to, transferring subaccount values among subaccounts in accordance with various investment allocation strategies that these third parties employ.
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Western Reserve does not engage any third parties to offer investment allocation services of any type, so that persons or firms offering such services do so independent from any agency relationship they may have with Western Reserve for the sale of Contracts. Western Reserve therefore takes no responsibility for the investment allocations and transfers transacted on your behalf by such third parties or any investment allocation recommendations made by such parties.
Western Reserve does not currently charge you any additional fees for providing these support services. Western Reserve reserves the right to discontinue providing administrative and support services to owners utilizing independent third parties who provide investment allocation and transfer recommendations.
Note carefully:
— | Western Reserve does not offer, and does not engage any third parties to offer, investment allocation services of any type for use with the Contract. |
— | Western Reserve is not party to any agreement that you may have with any third parties that offer investment allocation services for use with your Contract. Western Reserve is not responsible for any recommendations such investment advisers make, any investment strategies they choose to follow, or any specific transfers they make on your behalf. |
— | Any fee that is charged by third parties offering investment allocation services for use with your Contract is in addition to the fees and expenses that apply under your Contract. |
— | If you make withdrawals of policy value to pay advisory fees, then taxes may apply to any such withdrawals and tax penalties may be assessed on withdrawals made before you attain age 59 1⁄2. |
5. | EXPENSES |
There are charges and expenses associated with your Contract that reduce the return on your investment in the Contract. Unless we indicate otherwise, the expenses described below apply only during the accumulation period. The charges we deduct are used to pay aggregate Contract costs and expenses that we incur in providing the services and benefits under the Contract and assuming the risks associated with the Contract and riders. The charges may result in a profit to us.
Mortality and Expense Risk Charge
We charge a fee as a compensation for bearing certain mortality and expense risks under the Contract. Examples include a guarantee of annuity rates, the death benefits, certain Contract expenses, and assuming the risk that the current charges will be insufficient in the future to cover costs of administering the Contract. The mortality and expense risk charge is equal, on an annual basis, to 1.25% of the average daily net assets that you have invested in each subaccount. This charge is deducted daily from the subaccounts during the accumulation period and the income phase.
If these charges do not cover our actual mortality and expense risk costs, we absorb the loss. Conversely, if these charges more than cover actual costs, the excess is added to our surplus. We expect to profit from these charges. We may use any profits to cover distribution costs.
We deduct an annual Contract charge of $30 from your annuity value on each Contract anniversary during the accumulation period and at surrender. We deduct this charge from the fixed account and each subaccount in proportion to the amount of annuity value in each account. We deduct the charge to cover our costs of administering the Contract.
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You are allowed to make 12 free transfers among the subaccounts per Contract year. If you make more than 12 transfers per Contract year, we charge $10 for each additional transfer. We deduct the charge from the amount transferred. Dollar cost averaging transfers and asset rebalancing are considered transfers. All transfer requests made on the same day are treated as a single request. There is no charge for transfers from the fixed account, however, they will be counted towards the 12 free allowed per Contract year. We do not currently charge for Internet transfers, although we reserve the right to do so in the future. We deduct the charge to compensate us for the cost of processing the transfer.
If you take a Contract loan, we will impose a $30 loan processing fee. We deduct this fee from the loan amount. This fee is not applicable in all states. This fee covers loan processing and other expenses associated with establishing and administering the loan reserve. Only certain types of qualified Contracts can take Contract loans.
Some states assess premium taxes on the purchase payments you make. A premium tax is a regulatory tax that some states assess on the purchase payments made into a contract. If we should have to pay any premium tax, we may deduct the tax from each purchase payment or from the accumulation unit value as we incur the tax. We may deduct the total amount of premium taxes, if any, from the annuity value when:
— | you elect to begin receiving annuity payments; |
— | you surrender the Contract; |
— | you request a partial withdrawal; or |
— | a death benefit is paid. |
Generally, premium taxes range from 0% to 3.50%, depending on the state.
Federal, State and Local Taxes
We may in the future deduct charges from the Contract for any taxes we incur because of the Contract. However, no deductions are being made at the present time.
We will deduct a charge for special services, such as overnight delivery, up to $25 per service provided.
During the accumulation period, except under certain qualified Contracts, you may withdraw part or all of the Contract’s annuity value. We impose a withdrawal charge to help us recover sales expenses, including broker/dealer compensation and printing, sales literature and advertising costs. We expect to profit from this charge. We deduct this charge from your annuity value at the time you request a partial withdrawal or complete surrender.
If you take a partial withdrawal or if you surrender your Contract completely, we will deduct a withdrawal charge of 5% of purchase payments withdrawn within five years after we receive a purchase payment. We calculate the withdrawal charge on the full amount we must withdraw from your annuity value in order to pay the withdrawal amount, including the withdrawal charge. To calculate withdrawal charges, we treat withdrawals as coming first from the oldest purchase payment, then the next oldest and so forth.
For the first withdrawal you make in any Contract year, we waive that portion of the withdrawal charge that is based on the first 10% of your Contract’s annuity value at the time of the withdrawal. Amounts of the first withdrawal in excess of the first 10% of your Contract’s annuity value and all subsequent withdrawals you make during the Contract year will be subject to a withdrawal charge. We will deduct the full withdrawal charge if you surrender your Contract completely; the 10% waiver will not apply to complete surrenders. We do not assess withdrawal charges when you annuitize or for systematic partial withdrawals. We waive the withdrawal charge under certain circumstances (see below).
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The following schedule shows the withdrawal charges that apply during the five years following each purchase payment:
Number of Years From Receipt of Each Purchase Payment |
Withdrawal Charge | |
0 – 5 | 5% | |
Over 5 | 0% |
For example, assume your Contract’s annuity value is $100,000 at the end of the second year since your initial purchase payment and you withdraw $30,000 as your first withdrawal of the Contract year. Because the $30,000 is more than 10% of your Contract’s annuity value ($10,000), you would pay a withdrawal charge of $1,052.63 on the remaining $20,000 (5% of $21,052.63, which is $20,000 plus the $1,052.63 withdrawal charge).
On a complete surrender, we deduct withdrawal charges on the amount of purchase payments paid that are subject to the withdrawal charge. For example, assume your initial purchase payment was $100,000, you have taken no partial withdrawals that Contract year, your annuity value is $106,000 in the second Contract year and you request a complete surrender. You would pay a withdrawal charge of $5,000 on the $100,000 purchase payment, (5% of $100,000). Likewise, if there was a market loss and you requested a complete surrender (annuity value is $80,000), you would pay a withdrawal charge of $5,000 (5% of $100,000).
Keep in mind that withdrawals may be taxable, and if made before age 59 1⁄2, may be subject to a 10% federal penalty tax. For tax purposes, withdrawals are considered to come from earnings first.
Systematic Partial Withdrawals. During any Contract year, you may make systematic partial withdrawals on a monthly, quarterly, semi-annual or annual basis without paying withdrawal charges. Systematic partial withdrawals must be at least $200 ($50 if by direct deposit). The amount of the systematic partial withdrawal may not exceed 10% of the annuity value at the time the withdrawal is made, divided by the number of withdrawals made per calendar year. We reserve the right to discontinue systematic partial withdrawals if any withdrawal would reduce your annuity value below $10,000.
You may elect to begin or discontinue systematic partial withdrawals at any time. However, we must receive written notice at least 30 days prior to the date systematic partial withdrawals are to be discontinued. (Additional limitations apply. See Section 7. Access to Your Money - Systematic Partial Withdrawals).
Nursing Care Facility Waiver. If your Contract contains a nursing care facility waiver, we will waive the withdrawal charge, provided:
— | you have been confined to a nursing care facility for 30 consecutive days or longer; |
— | your confinement began after the Contract date; and |
— | you provide us with written evidence of your confinement within two months after your confinement ends. |
We will waive the withdrawal charge under this waiver only for partial withdrawals and complete surrenders made during your confinement or within two months after your confinement ends. This waiver is not available in all states.
The value of the assets in each subaccount is reduced by the management fees and expenses paid by the portfolios. Some portfolios also deduct 12b-1 fees from portfolio assets. These fees and expenses reduce the value of your portfolio shares. A description of these fees and expenses is found in the fund prospectuses.
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We (and our affiliates) may directly or indirectly receive payments from the fund portfolios, their advisers, subadvisers, distributors or affiliates thereof, in connection with certain administrative, marketing and other services we (and our affiliates) provide and expenses we incur. We (and/or our affiliates) generally receive three types of payments:
— | Rule 12b-1 Fees. Our affiliate Transamerica Capital, Inc. (“TCI”) is the principal underwriter for the contracts. TCI receives some or all of the 12b-1 fees from the funds. Any 12b-1 fees received by TCI that are attributable to our variable annuity products are then credited to us as an administrative expense. These fees range from 0.00% to 0.25% of the average daily assets of the certain portfolios attributable to the Contracts and to certain other variable annuity and insurance products that we and our affiliates issue. |
— | Administrative, Marketing and Support Service Fees (“Service Fees”). As noted above, an investment adviser, sub-adviser, administrator and/or distributor (or affiliates thereof) of the underlying fund portfolios may make payments to us and/or our affiliates, including TCI. These payments may be derived, in whole or in part, from the profits the investment adviser or sub-adviser realized on the advisory fee deducted from underlying fund portfolio assets. Contract owners, through their indirect investment in the underlying fund portfolios, bear the costs of these advisory fees (see the prospectuses for the underlying funds for more information). The amount of the payments we (or our affiliates) receive is generally based on a percentage of the assets of the particular portfolios attributable to the Contract and to certain other variable annuity and insurance products that our affiliates and we issue. These percentages differ and the amounts may be significant. Some advisers or sub-advisers (or other affiliates) pay us more than others. |
The following chart provides the maximum combined percentages of 12b-1 fees and Service Fees that we anticipate will be paid to us on an annual basis:
Incoming Payments to Western Reserve and TCI | ||
Fund |
Maximum Fee % of assets(1) | |
Access One Trust | 0.50% | |
Transamerica Series Trust(2) | 0.25% | |
ProFunds | 0.50% | |
Variable Insurance Products Fund (Fidelity)(3) |
0.35% |
(1) | Payments are based on a percentage of the average assets of each underlying fund portfolio owned by the subaccounts available under this contract and under certain other variable insurance products offered by our affiliates and us. We and TCI may continue to receive 12b-1 fees and administrative fees on subaccounts that are closed to new investments, depending on the terms of the agreements supporting those payments and on the services we and TCI provide. |
(2) | Because Transamerica Series Trust (“TST”) is managed by Transamerica Asset Management, Inc. (“TAM”), an affiliate of ours, there are additional benefits to us and our affiliates for amounts you allocate to the TST underlying fund portfolios, in terms of our and our affiliates’ overall profitability. These additional benefits may be significant. Payments or other benefits may be received from TAM. Such payments or benefits may be entered into for a variety of purposes, such as to allocate resources to us to provide administrative services to the contractholders who invest in the TST underlying fund portfolios. These payments or benefits may take the form of internal credits, recognition, or cash payments. A variety of financial and accounting methods may be used to allocate resources and profits to us. Additionally, if a TST portfolio is sub-advised by an entity that is affiliated with us, we may retain more revenue than on those TST portfolios that are sub-advised by non-affiliated entities. During 2008 we received $18,513,307.29 from TAM pursuant to these benefits. This includes the 0.25% amount in the above chart. We anticipate receiving comparable amounts in the future. |
(3) | We receive this percentage once $100 million in fund shares are held by the subaccounts of Western Reserve and its affiliates. |
— | Other payments. We and our affiliates, including Transamerica Capital, Inc. (“TCI”), InterSecurities, Inc. (“ISI”), and World Group Securities (“WGS”), also directly or indirectly receive additional amounts or different percentages of assets under management from certain advisers and sub-advisers to the portfolios (or their affiliates) with regard to variable insurance products or mutual funds that are issued by us and our affiliates. These amounts may be derived, in whole or in part, from the profits the investment adviser or sub-adviser |
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receives from the advisory fee deducted from underlying fund portfolio assets. Contract owners, through their indirect investment in the underlying fund portfolios, bear the costs of these advisory fees. Certain advisers and sub-advisers of the underlying portfolios (or their affiliates) (1) may directly or indirectly pay TCI amounts up to $75,000 per year to participate in a “preferred sponsor” program that provides such advisers and sub-advisers with access to TCI’s wholesalers at TCI’s national and regional sales conferences as well as internal and external meetings and events that are attended by TCI’s wholesalers and/or other TCI employees; (2) may pay ISI varying amounts to obtain access to ISI’s wholesaling and selling representatives; (3) may provide us and/or certain affiliates and/or selling firms with occasional gifts, meals, tickets or other compensation as an incentive to market the portfolios and to cooperate with their promotional efforts; and (4) may reimburse our affiliated selling firms for exhibit booths and other items at national conferences of selling representatives. The amounts may be significant and provide the adviser or subadviser (or other affiliates) with increased access to us and to our affiliates involved in the distribution of the Contract. |
For the calendar year ended December 31, 2008, TCI received revenue sharing payments ranging from $4,000 to $35,295 (for a total of $418,058) from the following Fund managers and/or sub-advisers to participate in TCI’s events: AIM Advisors, Inc., Alliance Capital Management L.P., American Century Investment Management, Inc., BlackRock Investment Management, LLC., Columbia Management Advisors, Inc., Dreyfus, Evergreen Investments, Federated Investment Management Company, Fidelity Management and Research Company, Franklin Templeton Services, LLC, ING Clarion Real Estate Securities, Janus Capital Management, LLC, Jennison Associates LLC, JPMorgan Investment Management, Inc., Lehman Brothers, MFS Investment Management, Oppenheimer Funds, Inc., Pacific Investment Management Company LLC, Putnam, Schroders, T. Rowe Price Associates, Inc., Transamerica Investment Management, LLC, Morgan Stanley Investment Management, Inc., Van Kampen Asset Management, Vanguard, and ClearBridge Advisors, LLC.
Proceeds from certain of these payments by the underlying fund portfolios, the advisers, the sub-advisers and/or their affiliates may be used for any corporate purpose, including payment of expenses (1) that we and our affiliates incur in promoting, marketing, and administering the contract, and (2) that we incur, in our role as intermediary, in promoting, marketing, and administering the underlying fund portfolios. We and our affiliates may profit from these payments.
For further details about the compensation payments we make in connection with the sale of the Contracts, see “Distribution of the Contracts” in this prospectus.
6. | TAXES |
NOTE: We have prepared the following information on federal income taxes as a general discussion of the subject. It is not intended as tax advice to any individual. You should consult your own tax adviser about your own circumstances. We have included an additional discussion regarding taxes in the SAI.
Deferred annuity Contracts are a way of setting aside money for future needs like retirement. Congress recognized how important saving for retirement is and provided special rules in the Internal Revenue Code for annuities.
Simply stated, these rules generally provide that individuals will not be taxed on the earnings, if any, on the money held in an annuity contract until taken out. This is referred to as tax deferral. When a non-natural person (e.g., corporation or certain other entities other than tax-qualified trusts) owns a nonqualified contract, the contract will generally not be treated as an annuity for tax purposes and tax deferral will not apply.
There are different rules as to how you will be taxed depending on how you take the money out and the type of contract—qualified or nonqualified.
You will generally not be taxed on increases in the value of your contract until a distribution occurs (either as a partial withdrawal, surrender, or as annuity payments).
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Qualified and Nonqualified Contracts
If you purchase the contract under an individual retirement annuity, a 403(b) plan, 457 plan or a pension or profit sharing plan, your contract is referred to as a qualified contract.
Qualified contracts are issued in connection with the following:
— | Individual Retirement Annuity (IRA): A traditional IRA allows individuals to make contributions, which may be deductible, to the contract. A Roth IRA also allows individuals to make contributions to the contract, but it does not allow a deduction for contributions, and distributions may be tax-free if the owner meets certain rules. |
— | Tax-Sheltered Annuity (403(b) Plan): A 403(b) Plan may be made available to employees of certain public school systems and tax-exempt organizations and permits contributions to the contract on a pre-tax basis. Pursuant to new tax regulations, starting January 1, 2009 the Contract is not available for purchase under a 403(b) plan and we do not accept additional premiums or transfers to existing 403(b) Contracts. We generally are required to confirm, with your 403(b) plan sponsor or otherwise, that surrenders, loans or transfers you request from an existing 403(b) policy comply with applicable tax requirements before we process your request. |
— | Corporate Pension and Profit-Sharing and H.R. 10 Plan: Employers and self-employed individuals can establish pension or profit-sharing plans for their employees or themselves and make contributions to the contract on a pre-tax basis. |
— | Deferred Compensation Plan (457 Plan): Certain governmental and tax-exempt organizations can establish a plan to defer compensation on behalf of their employees through contributions to the contract. |
There are special rules that govern qualified policies. Generally, these rules restrict:
— | the amount that can be contributed to the contract during any year; |
— | the time when amounts can be paid from the contract; and |
— | the amount of any death benefit that may be allowed. |
Other restrictions may apply including terms of the plan in which you participate. Optional death benefit features in some cases may exceed the greater of the premium payments or the contract value. Such a death benefit could be characterized as an incidental benefit, the amount of which is limited in any pension or profit-sharing plan or 403(b) plan. Because an optional death benefit may exceed this limitation, anyone using the contract in connection with such plans should consult their tax adviser before purchasing an optional death benefit. 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 the death benefit options and riders available, with the contract, if any, comport with IRA qualification requirements.
There is no additional tax deferral benefit derived from placing qualified funds into a variable annuity. Features other than tax deferral should be considered in the purchase of a qualified contract. There are limits on the amount of contributions you can make to a qualified contract.
If you purchase the contract as an individual and not under an individual retirement annuity, 403(b) plan, 457 plan, or pension or profit sharing plan, your contract is referred to as a nonqualified contract.
Partial Withdrawals and Surrenders—Qualified Contracts Generally
In the case of a withdrawal under a qualified contract, a pro rata portion of the amount you receive is taxable, generally based on the ratio of your “investment in the contract” to your total account balance or accrued benefit under the retirement plan. Your “investment in the contract” generally equals the amount of any non-deductible purchase payments made by you or on your behalf. In some cases, your “investment in the contract” can be zero.
In addition, a penalty tax may be assessed on amounts partially withdrawn or surrendered from the contract prior to the date you reach age 59 1⁄2, unless you meet one of the exceptions to this rule. You may also be required to begin taking minimum distributions from the contract by a certain date. Pursuant to special legislation, required minimum distributions for the 2009 tax year generally are not required, and 2009 distributions that otherwise would be required minimum distributions may be eligible for rollover. The terms of the plan may limit the rights otherwise available to you under the contract. We have provided more information in the SAI.
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If you are attempting to satisfy minimum required distribution rules through partial surrenders, the value of any enhanced death benefit or other optional rider may need to be included in calculating the amount required to be distributed.
You should consult your legal counsel or tax adviser if you are considering purchasing a contract for use with any qualified retirement plan or arrangement.
Partial Withdrawals and Surrenders—403(b) Contracts
The rules described above for qualified policies generally apply to 403(b) policies. However, specific rules apply to surrenders from certain 403(b) policies. Partial withdrawals and surrenders can generally only be made when an owner:
— | reaches age 59 1⁄2; |
— | leaves his/her job; |
— | dies; |
— | becomes disabled (as that term is defined in the Internal Revenue Code); or |
— | declares hardship. However, in the case of hardship, the owner can only partially withdraw or surrender the premium payments and not any earnings. |
Please Note: In some instances the signature of the employer may be required.
For Contracts issued after 2008, amounts attributable to nonelective contributions may be subject to distribution restrictions specified in the employer’s section 403(b) plan.
If your Contract was issued pursuant to a 403(b) plan, starting January 1, 2009 we generally are required to confirm, with your 403(b) plan sponsor or otherwise, that withdrawals or transfers you request comply with applicable tax requirements and to decline requests that are not in compliance. We will defer such payments you request until all information required under the tax law has been received. By requesting a withdrawal or transfer, you consent to the sharing of confidential information about you, the Contract, and transactions under the Contract and any other 403(b) contracts or accounts you have under the 403(b) plan among us, your employer or plan sponsor, any plan administrator or recordkeeper, and other product providers.
Defaulted loans from Code Section 403(b) arrangements, and pledges and assignments of qualified policies generally are taxed in the same manner as surrenders from such policies. Please refer to the SAI for further information applicable to distributions from 403(b) policies.
Partial Withdrawals and Surrenders—Nonqualified Contracts
The information above describing the taxation of qualified policies does not apply to nonqualified policies. If you take a partial withdrawal or surrender (including systematic payouts and payouts under an optional feature, if any) from a nonqualified contract before the annuity commencement date, the Internal Revenue Code treats that partial withdrawal or surrender as first coming from earnings and then from your premium payments. When you make a partial withdrawal or surrender you are taxed on the amount of the partial withdrawal or surrender that is earnings. If you make a surrender, you are generally taxed on the amount that your surrender proceeds exceeds the “investment in the contract,” which is generally your premiums paid (adjusted for any prior partial withdrawals or portions thereof that were not taxable). In general loans, pledges, and assignments are taxed in the same manner as partial withdrawals and surrenders. Different rules apply for annuity payments. See “Annuity Payments” below.
The Internal Revenue Code also provides that partially withdrawn or surrendered earnings may be subject to a penalty tax. The amount of the penalty tax is equal to 10% of the amount that is includable in income. Some partial withdrawals and surrenders will be exempt from the penalty tax. They include, among others, any amounts:
— | paid on or after the taxpayer reaches age 59 1⁄2; |
— | paid after an owner dies; |
— | paid if the taxpayer becomes disabled (as that term is defined in the Internal Revenue Code); |
— | paid in a series of substantially equal payments made annually (or more frequently) under a lifetime annuity; |
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— | paid under an immediate annuity; or |
— | which come from premium payments made prior to August 14, 1982. |
All nonqualified deferred annuity policies that are issued by us (or our affiliates) to the same owner during any calendar year are treated as one annuity for purposes of determining the amount includable in the owner’s income when a taxable distribution occurs.
Taxation of Death Benefit Proceeds
Amounts may be distributed from the contract because of the death of the annuitant. Generally, such amounts should be includable in the income of the recipient:
— | if distributed in a lump sum, these amounts are taxed in the same manner as a surrender; or |
— | if distributed under an annuity payment option, these amounts are taxed in the same manner as annuity payments. |
Although the tax consequences may vary depending on the annuity payment option you select, in general, for nonqualified and certain qualified policies, only a portion of the annuity payments you receive will be includable in your gross income.
In general, the excludable portion of each annuity payment you receive will be determined as follows:
— | Fixed payments—by dividing the “investment in the contract” on the annuity commencement date by the total expected value of the annuity payments for the term of the payments. This is the percentage of each annuity payment that is excludable. |
— | Variable payments—by dividing the “investment in the contract” on the annuity commencement date by the total number of expected periodic payments. This is the amount of each annuity payment that is excludable. |
The remainder of each annuity payment is includable in gross income. Once the “investment in the contract” has been fully recovered, the full amount of any additional annuity payments is includable in gross income and taxed as ordinary income.
If you select more than one annuity payment option, special rules govern the allocation of the contract’s entire “investment in the contract” to each such option, for purposes of determining the excludable amount of each payment received under that option. We advise you to consult a competent tax adviser as to the potential tax effects of allocating amounts to any particular annuity payment option.
If, after the annuity commencement date, annuity payments stop because an annuitant died, the excess (if any) of the “investment in the contract” as of the annuity commencement date over the aggregate amount of annuity payments received that was excluded from gross income may possibly be allowable as a deduction in your tax return.
Diversification and Distribution Requirements
The Internal Revenue Code provides that the underlying investments for a variable annuity must satisfy certain diversification requirements in order to be treated as an annuity. The contract must also meet certain distribution requirements at the death of an owner in order to be treated as an annuity. These diversification and distribution requirements are discussed in the SAI. We may modify the contract to attempt to maintain favorable tax treatment.
While no attempt is being made to discuss the Federal estate tax implications of the Contract, a purchaser should keep in mind that the value of an annuity contract owned by a decedent and payable to a beneficiary by virtue of surviving the decedent is included in the decedent’s gross estate. Depending on the terms of the annuity contract, the value of the annuity included in the gross estate may be the value of the lump sum payment payable to the designated beneficiary or the actuarial value of the payments to be received by the beneficiary. Consult an estate planning advisor for more information.
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Generation-Skipping Transfer Tax
Under certain circumstances, the Internal Revenue Code may impose a “generation skipping transfer tax” when all or part of an annuity contract is transferred to, or a death benefit is paid to, an individual two or more generations younger than the Owner. Regulations issued under the Internal Revenue Code may require us to deduct the tax from your Contract, or from any applicable payment, and pay it directly to the IRS.
Annuity Purchases by Residents of Puerto Rico
The Internal Revenue Service has announced that income received by residents of Puerto Rico under life insurance or annuity contracts issued by a Puerto Rico branch of a United States life insurance company is U.S.-source income that is generally subject to United States Federal income tax.
Annuity Contracts Purchased by Nonresident Aliens and Foreign Corporations
The discussion above provided general information (but not tax advice) regarding U.S. federal income tax consequences to annuity owners that are U.S. persons. Taxable distributions made to owners who are not U.S. persons will generally be subject to U.S. federal income tax withholding at a 30% rate, unless a lower treaty rate applies. In addition, distributions may be subject to state and/or municipal taxes and taxes that may be imposed by the owner’s country of citizenship or residence. Prospective foreign owners are advised to consult with a qualified tax adviser regarding U.S., state, and foreign taxation for any annuity contract purchase.
Transfers, Assignments or Exchanges of Contracts
A transfer of ownership or assignment of a contract, the designation of an annuitant or payee or other beneficiary who is not also the owner, the selection of certain annuity commencement dates, or a change of annuitant, may result in certain income or gift tax consequences to the owner that are beyond the scope of this discussion. An owner contemplating any such transfer, assignment, selection, or change should contact a competent tax adviser with respect to the potential tax effects of such a transaction.
Although the likelihood of legislative or regulatory changes is uncertain, there is always the possibility that the tax treatment of the contract could change by legislation, regulation or otherwise. You should consult a tax adviser with respect to legal or regulatory developments and their effect on the contract.
We have the right to modify the contract to meet the requirements of any applicable laws or regulations, including legislative or regulatory changes that could otherwise diminish the favorable tax treatment that annuity contract owners currently receive.
It is possible that the Internal Revenue Service may take a position that fees for certain optional benefits (e.g., death benefits other than the death benefit) are deemed to be taxable distributions to you. In particular, the Internal Revenue Service may treat fees associated with certain optional benefits as a taxable surrender, which might also be subject to a tax penalty if the surrender occurs prior to age 59 1⁄2. Although we do not believe that the fees associated with any optional benefit provided under the contract should be treated as taxable surrenders, the tax rules associated with these benefits are unclear, and we advise that you consult your tax advisor prior to selecting any optional benefit under the contract.
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We may benefit from any foreign tax credits attributable to taxes paid by certain funds to foreign jurisdictions to the extent permitted under federal law.
7. | ACCESS TO YOUR MONEY |
Partial Withdrawals and Complete Surrenders
During the accumulation period, you can have access to the money in your Contract by making either a partial withdrawal or complete surrender.
If you want to surrender your Contract completely, you will receive your cash value, which equals the annuity value of your Contract minus:
— | any withdrawal charges; |
— | any premium taxes; |
— | any loans; |
— | any unpaid accrued interest |
— | the annual Contract charge; and |
— | any rider charges. |
The cash value will be determined at the accumulation unit value next determined as of the end of the business day (usually 4:00 p.m. Eastern Time) on which we receive your request for partial withdrawal or complete surrender at our administrative office in good order, unless you specify a later date in your request. Please note: All withdrawal requests must be submitted in good order to avoid a delay in processing your request.
No partial withdrawal is permitted if the withdrawal would reduce the cash value below $10,000. You may not make partial withdrawals from the fixed account unless we consent. Unless you tell us otherwise, we will take the partial withdrawal from each of the investment choices in proportion to the annuity value.
Remember that any partial withdrawal you take will reduce the annuity value. Under some circumstances, a partial withdrawal will reduce the death benefit by more than the dollar amount of the withdrawal. See Section 9. Death Benefit, for more details.
Income taxes, federal tax penalties and certain restrictions may apply to any partial withdrawals or any complete surrender you make. If your Contract was issued pursuant to a 403(b) plan, starting January 1, 2009 we generally are required to confirm, with your 403(b) plan sponsor or otherwise, that withdrawals or transfers you request comply with applicable tax requirements and to decline requests that are not in compliance. We will defer such payments you request until all information required under the tax law has been received. By requesting a withdrawal or transfer, you consent to the sharing of confidential information about you, the Contract, and transactions under the Contract and any other 403(b) contracts or accounts you have under the 403(b) plan among us, your employer or plan sponsor, any plan administrator or recordkeeper, and other product providers.
We must receive (at our administrative office in good order) a properly completed surrender request which must contain your original signature. We will accept fax or telephone requests for partial withdrawals as long as the withdrawal proceeds are being sent to the address of record. The maximum withdrawal amount you may request by telephone is $50,000.
When we incur extraordinary expenses, such as wire transfers or overnight mail expenses, for expediting delivery of your partial withdrawal or complete surrender payment, we will deduct that charge from the payment. We charge $25 for a wire transfer and $20 for an overnight delivery ($30 for Saturday delivery).
If the Contract’s owner is not an individual, additional information may be required. If you own a qualified Contract, the Code may require your spouse to consent to any withdrawal. Other restrictions will apply to Section 403(b) qualified Contracts and Texas Optional Retirement Program Contracts. For more information, call us at 1-800-851-9777 (Monday – Friday 8:30 a.m. – 7:00 p.m. Eastern Time).
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As a protection against fraud, we require that the following transaction requests include a Medallion signature guarantee:
— | All requests for disbursements (i.e. partial withdrawals and surrenders) $50,000 and over; |
— | Any non-electronic disbursement requests made on or within 15 days of a change to the address of record for a contract owner’s account; and |
— | Any disbursement request when Western Reserve has been directed to send proceeds to a different address from the address of record for that contract owner’s account. PLEASE NOTE: This requirement will not apply to disbursement request made in connection with exchanges of one annuity contract for another with the same owner in a “tax-free exchange” under Section 1035 of the Internal Revenue Code or a Qualified Direct Rollover to another insurance company. |
An investor can obtain a Medallion signature guarantee from more than 7,000 financial institutions across the United States and Canada that participate in a Medallion signature guarantee program. This includes many:
— | National and state banks; |
— | Savings banks and savings and loan associations; |
— | Securities brokers and dealers; and |
— | Credit unions |
The best source of a Medallion signature guarantee is a bank, savings and loan association, brokerage firm, or credit union with which you do business. Guarantor firms may, but frequently do not, charge a fee for their services.
A notary public cannot provide a Medallion signature guarantee. Notarization will not substitute for a Medallion signature guarantee.
After your first Contract anniversary and before the maturity date, you may partially annuitize your Contract without surrendering it completely. You may request that a portion of your Contract’s annuity value be applied to purchase a periodic annuity under a supplemental contract with us. Any subsequent partial annuitizations must be at least five years after the immediately preceding one. We will not process a request for partial annuitization if it will:
— | reduce the cash value below $10,000; |
— | exceed 50% of the cash value; or |
— | purchase a monthly income of less than $100. |
You must specify in your written request the subaccounts from which the amounts are to be partially withdrawn. You cannot use any cash value from the fixed account for partial annuitization. We will deduct premium taxes, if any, from the amount partially withdrawn.
You may have to pay federal income tax and a penalty tax on any money you withdraw.
Delay of Payment and Transfers
Payment of any amount due from the separate account for a partial withdrawal, a complete surrender, a death benefit, loans or on the death of the owner of a nonqualified Contract, will generally occur within seven days from the date all required information is received by us. We may be permitted to defer such payment from the separate account if:
— | the NYSE is closed for other than usual weekends or holidays or trading on the NYSE is otherwise restricted; or |
— | an emergency exists as defined by the SEC or the SEC requires that trading be restricted; or |
— | the SEC permits a delay for the protection of owners. |
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In addition, transfers of amounts from the subaccounts may be deferred under these circumstances.
Pursuant to the requirements of certain state laws, we reserve the right to defer payment of transfers, partial withdrawals, surrenders, death benefits and loan amounts from the fixed account for up to six months.
If mandated under applicable law or by regulation, we may be required to reject a purchase payment. We may be required to provide additional information about you or your account to governmental regulators. In addition, we may be required to block a Contract owner’s account and thereby refuse to pay any request for transfers, withdrawals, surrenders, loans or death benefits until instructions are received from the appropriate regulators.
Systematic Partial Withdrawals
During the accumulation period, you can elect to receive regular payments from your Contract without paying withdrawal charges by using systematic partial withdrawals. Unless you specify otherwise, we will deduct systematic partial withdrawal amounts from each subaccount (and, if we consent, the fixed account) in proportion to the value each subaccount bears to the annuity value at the time of the partial withdrawal. You can partially withdraw up to 10% of your annuity value annually in equal monthly, quarterly, semi-annual or annual payments of at least $200 ($50 if by direct deposit). Your annuity value must equal at least $25,000. We will not process a systematic partial withdrawal if the annuity value for the entire Contract would be reduced below $10,000. No systematic partial withdrawals are permitted from the fixed account without our prior consent.
There is no charge for taking systematic partial withdrawals. You may stop systematic partial withdrawals at any time. We reserve the right to discontinue offering systematic partial withdrawals 30 days after we send you written notice.
You can take systematic partial withdrawals during the accumulation period only. On the maturity date, you must annuitize the Contract and systematic partial withdrawal payments must stop.
Income taxes, federal tax penalties and other restrictions may apply to any systematic partial withdrawal you receive.
Contract Loans for Certain Qualified Contracts
You can take Contract loans during the accumulation period after the right to cancel period has expired when the Contract is used in connection with a tax-sheltered annuity plan under Section 403(b) of the Code (limit of one Contract loan per calendar year). If your Contract was issued pursuant to a 403(b) plan, starting January 1, 2009, we generally are required to confirm, with your 403(b) plan sponsor or otherwise, that loans you request comply with applicable tax requirements and to decline requests that are not in compliance. No additional loans will be allowed if there is a defaulted loan. There can be no more than two outstanding loans at any given time.
The maximum amount you may borrow against the Contract is the lesser of:
— | 50% of the annuity value; or |
— | $50,000 reduced by the highest outstanding loan balance during the one-year period immediately prior to the loan date. However, if the annuity value is less than $20,000, the maximum you may borrow against the Contract is the lesser of 80% of the annuity value or $10,000. |
The minimum loan amount is $1,000 (unless otherwise required by state law). You are responsible for requesting and repaying loans that comply with applicable tax requirements, and other laws, such as the Employee Retirement Income Security Act of 1974 (“ERISA”). In addition, the Department of Labor has issued regulations governing loans taken by plan participants under retirement plans subject to ERISA. These regulations require, in part, that a loan from an ERISA-governed plan be made under an enforceable agreement, charge a reasonable rate of interest, be adequately secured, provide a reasonable repayment schedule, and be made available on a basis that does not discriminate in favor of employees who are officers or shareholders or who are highly compensated.
Failure to comply with these requirements may result in penalties under the Code and ERISA. You and your employer are responsible for determining whether your plan is subject to, and complies with, ERISA and the Department of Labor’s regulations governing plan loans and the tax rules applicable to loans. Accordingly, you should consult a competent tax advisor before requesting a Contract loan.
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The loan amount will be withdrawn from your investment choices and transferred to the loan reserve. The loan reserve is part of the fixed account and is used as collateral for all Contract loans. We reserve the right to postpone distributing the loan amount from the fixed account for up to six months, if required.
On each Contract anniversary we will compare the amount of the Contract loan to the amount in the loan reserve. If all Contract loans and unpaid interest due on the loan exceed the amount in the loan reserve, we will withdraw the difference from the subaccounts and transfer it to the loan reserve. If the amount of the loan reserve exceeds the amount of the outstanding Contract loan, we will withdraw the difference and transfer it in accordance with your current purchase payment allocation. We reserve the right to transfer the excess to the fixed account if the amount used to establish the loan reserve was transferred from the fixed account.
If all Contract loans and unpaid interest due on the loan exceed the cash value, we will mail to your last known address and to any assignee of record a notice stating the amount due in order to reduce the loan amount so that the loan amount no longer exceeds the cash value. If the excess amount is not paid within 31 days after we mail the notice, the Contract will terminate without value.
You can repay any Contract loan in full:
— | while the Contract is in force; and |
— | during the accumulation period. |
Note Carefully: If you do not repay your Contract loan, we will deduct an amount equal to the unpaid loan balance plus any unpaid accrued interest from:
— | the amount of any death benefit proceeds; |
— | the amount we pay upon a partial withdrawal or complete surrender; or |
— | the amount we apply on the maturity date to provide annuity payments. |
You must pay interest on the loan at the rate of 6% per year. You are responsible for determining whether this interest rate is reasonable under ERISA. We deduct interest in arrears. Amounts in the loan reserve will earn interest at a minimum guaranteed effective annual interest rate of 4%. Principal and interest must be repaid:
— | in level quarterly or monthly payments over a 5-year period; or |
— | over a 10, 15 or 20-year period, if the loan is used to buy your principal residence. |
Please Note: Once established, you cannot change the due date or payment method.
An extended repayment period cannot go beyond the year you turn 70 1⁄2.
If:
— | a repayment is not received within 31 days from the original due date; |
Then:
— | under federal tax law you will be treated as having a deemed distribution of all Contract loans and unpaid accrued interest, and any applicable charges, including any withdrawal charge, will be assessed. |
This distribution will be reported as taxable to the Internal Revenue Service, may be subject to income and penalty tax, and may cause the Contract to not qualify under Section 403(b) of the Code.
You may fax your loan request to us at 727-299-1620.
The loan date is the date we process the loan request. We impose a $30 fee to cover loan processing and expenses associated with establishing and administering the loan reserve (not applicable in all states). For your protection, we will require a signature guarantee for any loan request within 30 days of an address change. We reserve the right to limit the number of Contract loans made per Contract year.
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Contract loans may not be available in all states.
8. | PERFORMANCE |
We periodically advertise performance of the subaccounts and investment portfolios. We may disclose at least four different kinds of non-standard performance.
First, we may disclose standardized total return figures for the subaccounts that reflect the deduction of all charges assessed during the accumulation period under the Contract, including the mortality and expense charge, the annual Contract charge and the withdrawal charge. These figures are based on the actual historical performance of the subaccounts investing in the underlying portfolios since their inception, adjusted to reflect current Contract charges.
Second, we may disclose total return figures on a non-standardized basis. This means that the data may be presented for different time periods and different dollar amounts. The data will not be reduced by the withdrawal charge currently assessed under the Contract. We will only disclose non-standardized performance data if it is accompanied by standardized total return data.
Third, we may present historic performance data for the portfolios since their inception reduced by some or all fees and charges under the Contract. Such adjusted historic performance includes data that precedes the inception dates of the subaccounts, but is designed to show the performance that would have resulted if the Contract had been available during that time.
The TST fund prospectus presents the total return of certain existing SEC-registered funds that are managed by sub-advisers to the TST fund portfolios. These funds have investment objectives, policies and strategies that are substantially similar to those of certain portfolios. We call the funds the ‘‘Similar Sub-Adviser Funds.’’ None of the fees and charges under the Contract has been deducted from the performance data of the Similar Sub-Adviser Funds. If Contract fees and charges were deducted, the investment returns would be lower. The similar Sub-Adviser Funds are not available for investment under the Contract.
9. | DEATH BENEFIT |
We will pay death benefit proceeds to your beneficiary(ies), under certain circumstances, if you are both an owner and annuitant, and you die during the accumulation period (that is before the maturity date). A beneficiary may choose to receive payment of his or her portion of the death benefit proceeds under a life annuity payment option, to continue the Contract in the accumulation period for a specified number of years, or to receive a lump sum payment. Death benefit provisions may differ from state to state.
If a beneficiary does not choose one of these options, then the default option for nonqualified Contracts is complete distribution of the beneficiary’s interest within 5 years of the deceased owner’s death, and the default option for qualified Contracts is payout over a beneficiary’s life expectancy. Please see Alternate Payment Elections Before the Maturity Date below for details.
We will determine the amount of and pay the death benefit proceeds, if any are payable on a policy, upon receipt at our administrative and service office of satisfactory proof of the annuitant’s death, written directions from each eligible recipient of death benefit proceeds regarding how to pay the death benefit, and any other documents, forms and information that we need (collectively referred to as “due proof of death”). Please note: Such due proof of death must be submitted in good order to avoid a delay in processing the death benefit claim.
Payments upon death are subject to certain distribution requirements under the Code. See the SAI for more details.
Only one death benefit will be payable under this Contract. Unless an Alternate Payment Election is selected by the beneficiary or the Contract is continued under the terms below, when we receive due proof of death, the Contract will terminate.
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Before the Maturity Date. Payment of the death benefit proceeds depends on the status of the person who dies, as shown below:
Person Who Dies Before Maturity Date | Benefit | |
If an owner dies BEFORE an annuitant who is not an owner: | Then, we pay the death benefit proceeds to the beneficiaries, if alive. (1)(2)(3)(4)(5)(6) If the sole beneficiary is the surviving spouse, then he or she may continue the Contract as the new owner/annuitant.(4) If the surviving spouse who is the sole beneficiary elects to continue the Contract, then the annuity value is adjusted to equal the death benefit proceeds and the death benefit is reset based on the age of the surviving spouse. | |
If the surviving spouse who continued the Contract dies: | Then, we pay the death benefit proceeds to the beneficiaries, if alive, (1)(2)(3)(5)(6) otherwise to the estate of the surviving spouse. | |
If an owner and an annuitant ARE NOT the same person, and an annuitant dies first: | Then, the contingent annuitant will become the new annuitant and the Contract continues. If no contingent annuitant is named or alive, then we will pay death benefit proceeds to the beneficiary(ies) in a lump sum, and the Contract terminates. |
(1) | If the beneficiary is alive, but is not the deceased owner’s spouse at the time of the deceased owner’s death, then the beneficiary must receive the death benefit proceeds in the manner and within the timeframes discussed below in Alternate Payment Elections Before the Maturity Date. |
(2) | If no beneficiary is alive on the date of death, then the death benefit proceeds are paid to the owner’s estate and the death benefit proceeds must be distributed within 5 years of the owner’s death. |
(3) | The Code requires that payment of the death benefit proceeds on the death of the owner be made in a certain manner and within certain strict timeframes. We discuss these timeframes in Alternative Payment Elections Before the Maturity Date below. |
(4) | If the sole beneficiary is the deceased owner’s surviving spouse, the surviving spouse may elect to continue the Contract in force as the new owner and annuitant. We will adjust the annuity value as of the death report day to equal the death benefit proceeds as of the death report day. We will pay a death benefit on the death of the surviving spouse and reset the age used in the death benefit provisions under the continuing Contract as of the death report day so that the death benefit is based on the age of the surviving spouse. Consequently, the phrase “the annuitant’s 80th birthday” will refer to the age of the surviving spouse. If the surviving spouse is over age 81 on the death report day of the first deceased owner, then we will calculate the death benefit paid on the death of the surviving spouse by taking the highest annuity value (i.e., the annuity value as of the death report day) and adding any subsequent purchase payments and subtracting the total partial withdrawals following the death report day of the first deceased owner. |
(5) | If a beneficiary elects to receive his or her portion of the death benefit proceeds within five years of the date of death of the annuitant, or over a period that does not exceed such beneficiary’s life expectancy (the “distribution period”), then the Contract will continue with some modifications until the end of the elected distribution period. We will adjust the annuity value as of the death report day to equal the death benefit proceeds as of the death report day and we will revise the way we calculate the death benefit so that it is based on the age of such beneficiary. We will pay a death benefit if such beneficiary dies during the distribution period. The Contract will terminate at the end of the distribution period. |
(6) | If there are multiple beneficiaries, each beneficiary may elect, individually, how he or she wishes to receive his or her proportionate share of the death benefit proceeds. |
Different rules apply if an owner or a beneficiary is not a natural person. See the SAI, your Contract or your agent for more information.
Please note: A joint owner (even if the joint owner is the spouse of the owner) is not entitled to receive the death benefit under this Contract; a joint owner may not continue the Contract on the death of an owner.
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After the Maturity Date. The death benefit payable, if any, on or after the maturity date depends on the annuity payment option selected. See Section 2. Annuity Payments (The Income Phase) - Annuity Payment Options Under the Contract for a description of the annuity payment options. Please note that not all payment options provide for a death benefit.
Amount of Death Benefit Before the Maturity Date
Death benefit provisions may differ from state to state. The death benefit may be paid (i) as a lump sum, (ii) as substantially equal payments while the Contract continues in the accumulation period for a specified number of years, or (iii) as annuity payments, but in all events will be paid in accordance with any applicable federal and state laws, rules and regulations.
On the earlier of the death of any owner, or the death of the annuitant (if no contingent annuitant is named), before the maturity date and before the fifth Contract anniversary, and if the death benefit proceeds are payable, the death benefit proceeds will be the greater of:
— | the annuity value of your Contract on the death report day; or |
— | the total purchase payments you make to the Contract, less partial withdrawals and partial annuitization amounts withdrawn from the Contract. |
On the death of any owner who is not the annuitant before the maturity date and on or after the fifth Contract anniversary, and if the death benefit proceeds are payable, the death benefit proceeds will be the greater of:
— | the annuity value of your Contract on the death report day; |
— | the total purchase payments you make to the Contract, less partial withdrawals and partial annuitization amounts withdrawn from the Contract; or |
— | the annuity value as of the fifth Contract anniversary, less partial withdrawals and partial annuitization amounts withdrawn from the Contract after the fifth Contract year. |
On the death of the annuitant who is not the owner (if no contingent annuitant is named) or the owner who is the annuitant, before the maturity date and on or after the fifth Contract anniversary, and if the death benefit proceeds are payable, the death benefit proceeds will be the greatest of:
— | the death benefits described above; or |
— | the highest annuity value as of any Contract anniversary occurring between (a) the later of May 1, 2000 and the fifth Contract anniversary and (b) the earlier of: |
— | the annuitant’s date of death; or |
— | the Contract anniversary nearest the annuitant’s 80th birthday. This benefit terminates at age 80. |
The highest annuity value will be increased by purchase payments made and decreased by adjusted partial withdrawals (including any partial annuitizations) taken since the Contract anniversary date with the highest annuity value. The adjusted partial withdrawal is equal to (a) times (b) where:
(a) | is the ratio of the death benefit to the annuity value, calculated on the date the partial withdrawal is processed, but prior to the processing; and |
(b) | is the amount of the partial withdrawal. |
The death benefit proceeds are reduced by any outstanding Contract loans and premium taxes due.
The death benefit proceeds are not payable after the maturity date.
Guaranteed Minimum Death Benefit Features
Additional Benefits with Spousal Continuation. If an owner dies before the maturity date, and if the sole beneficiary is the surviving spouse of the deceased owner, then the surviving spouse may elect to keep the Contract in force as sole owner and annuitant. We will increase the annuity value of the Contract as of the death report day to equal the death benefit proceeds as of the death report day to equal the death benefit proceeds as of the death report day. If such surviving spouse elects continuation, we will adjust the annuity value as of the death report day to equal the death benefit proceeds on the death report day, and we also will revise the way we calculate the death benefit so that it is based on the age of such surviving spouse.
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Additional Death Benefit on Beneficiary’s Death. If an owner dies before the maturity date and before the death of an annuitant who is not an owner, and if the deceased owner’s spouse who is named as the sole beneficiary does not elect to continue the Contract, then each beneficiary can elect to keep the Contract in the accumulation period (with some restrictions) and to receive his or her portion of the death benefit proceeds over a period not to exceed that beneficiary’s life expectancy (the “distribution period”). We will pay a death benefit if the beneficiary dies during the distribution period and permit such beneficiary to name a new beneficiary. We will revise the way we calculate the death benefit so that it is based on the age of such beneficiary.
Alternate Payment Elections Before the Maturity Date
If a beneficiary is entitled to receive the death benefit proceeds, a beneficiary may elect to receive the death benefit in a lump sum payment or to receive payment under one of the following options that provides for complete distribution and termination of this Contract at the end of the distribution period:
1. | within 5 years of the date of an owner’s death; |
2. | over the beneficiary’s lifetime, with payments beginning within one year of the deceased owner’s death; or |
3. | over a specified number of years, not to exceed the beneficiary’s life expectancy, with payments beginning within one year of an owner’s death. |
To determine payments, we may use the “account-based” method under which we recalculate the amount of the payment each year by dividing the remaining unpaid proceeds by the beneficiary’s current life expectancy, with payments beginning within one year of the deceased owner’s death.
Different rules may apply if the Contract is a qualified Contract.
Multiple beneficiaries may choose individually among any of these options.
If the deceased annuitant was an owner, and one or more beneficiaries chooses one of the above options instead of a lump sum payment, we will “reset” the age used in the death benefit provisions under the new option as of the death report day, so that the death benefit is based on the age of the particular new annuitant (i.e., the beneficiary). As a result, the phrase “the annuitant’s 80th birthday” will refer to the age of the particular beneficiary. If the beneficiary is over age 81 on the death report day of the deceased owner, then we will calculate the death benefit paid on the death of the particular beneficiary by taking the highest annuity value (i.e., the annuity value as of the death report day) and adding any subsequent purchase payments and subtracting the total partial withdrawals following the death report day of the first deceased owner. This option applies to both spousal and non-spousal beneficiaries.
If a beneficiary chooses 1 or 3 above, this Contract remains in effect and remains in the accumulation period until it terminates at the end of the elected period. The beneficiary’s proportionate share of the death benefit proceeds becomes the new annuity value. If a beneficiary chooses 2 above, the Contract remains in effect, but moves into the income phase with that beneficiary receiving payments under a life annuity payout option. Special restrictions apply to options 1 and 3 above. See the SAI for more details.
These Alternate Payment Elections do not apply if the annuitant who is not the owner dies and no contingent annuitant is named or alive. In such cases, the death benefit proceeds are payable in a lump sum to the beneficiary(ies) and the Contract terminates.
10. | OTHER INFORMATION |
You, as owner of the Contract, exercise all rights under the Contract, including the right to transfer ownership (subject to any assignee or irrevocable beneficiary’s consent). You can change an owner at any time by notifying us in writing at our administrative office in good order. An ownership change may be a taxable event.
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The annuitant is the person named in the application to receive annuity payments. If no person is named, an owner will be the annuitant. As of the maturity date, and upon our agreement, an owner may change the annuitant or, if annuity payment Option C has been selected, add a joint annuitant. On the maturity date, the annuitant(s) will become the payee(s) and receive the annuity payments.
A beneficiary is the person who receives the death benefit. You may change beneficiary(ies) during the lifetime of the annuitant, subject to the rights of any irrevocable beneficiary. Any change must be made in writing and received by us at our administrative office in good order and, if accepted, will be effective as of the date on which the request was signed by an owner. Before the maturity date, if an owner who is the annuitant dies, and no beneficiary is alive on the death report day, benefits payable at death will be paid to the owner’s estate. In the case of certain qualified Contracts, the Treasury Regulations prescribe certain limitations on the designation of a beneficiary. See the SAI for more details on the beneficiary.
Sending Forms and Transaction Requests in Good Order
We cannot process your requests for transactions relating to the Contract until we have received them in good order at our Administrative and Services Office. “Good order” means the actual receipt by us of the instructions relating to the requested transaction in writing (or, when appropriate, by telephone or electronically), along with all forms, information and supporting legal documentation necessary to effect the transaction. This information and documentation generally includes to the extent applicable to the transaction: your completed application; the Contract number; the transaction amount (in dollars or percentage terms); the names and allocations to and/or from the Subaccounts affected by the requested transaction; the signatures of all Contract Owners (exactly as registered on the Policy), if necessary; Social Security Number or Tax I.D.; and any other information or supporting documentation that we may require, including any spousal or Joint Owner’s consents. With respect to purchase requests, “good order” also generally includes receipt (by us) of sufficient funds to effect the purchase. We may, in our sole discretion, determine whether any particular transaction request is in good order, and we reserve the right to change or waive any good order requirement at any time.
You can also generally assign the Contract any time before the maturity date. We reserve the right, except to the extent prohibited by applicable laws, regulations, or actions of the State insurance commissioner, to require that an assignment will be effective only upon acceptance by us, and to refuse assignments or transfers at any time on a non-discriminatory basis. We will not be liable for any payment or other action we take in accordance with the Contract before we receive written notice of the assignment. An assignment may be a taxable event. There may be limitations on your ability to assign a qualified Contract and such assignments may be subject to tax penalties and taxed as distributions under the Code.
Western Reserve Life Assurance Co. of Ohio
Western Reserve was initially incorporated under the laws of Ohio on October 1, 1957. It is engaged in the business of writing life insurance policies and annuity contracts. Western Reserve is a wholly-owned indirect subsidiary of Transamerica Corporation, which conducts most of its operations through subsidiary companies engaged in the insurance business or in providing non-insurance financial services. All of the stock of Transamerica Corporation is indirectly owned by AEGON N.V. of the Netherlands, the securities of which are publicly traded. AEGON N.V., a holding company, conducts its business through subsidiary companies engaged primarily in the insurance business. Western Reserve is licensed in the District of Columbia, Guam, Puerto Rico and in all states except New York. All obligations arising under the Contracts, including the promise to make annuity payments, are general corporate obligations of Western Reserve.
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Financial Condition of the Company
Many financial services companies, including insurance companies, have been facing challenges in this unprecedented economic and market environment, and we are not immune to those challenges. It is important for you to understand the impact these events may have, not only on your Policy Value, but also on our ability to meet the guarantees under your Contract.
Assets in the Separate Account. You assume all of the investment risk for your Policy Value that is allocated to the Subaccounts of the Separate Account. Your Policy Value in those Subaccounts constitutes a portion of the assets of the Separate Account. These assets are segregated and insulated from our general account, and may not be charged with liabilities arising from any other business that we may conduct.
Assets in the General Account. You also may be permitted to make allocations to Guaranteed Period Options of the fixed account, which are supported by the assets in our general account. Any guarantees under a policy that exceed policy value, such as those associated with any optional death benefits, are paid from our general account (and not the Separate Account). Therefore, any amounts that we may be obligated to pay under the Contract in excess of Policy Value are subject to our financial strength and claims-paying ability and our long-term ability to make such payments. The assets of the Separate Account, however, are also available to cover the liabilities of our general account, but only to the extent that the Separate Account assets exceed the Separate Account liabilities arising under the Contracts supported by it.
We issue other types of insurance policies and financial products as well, and we also pay our obligations under these products from our assets in the general account.
Our Financial Condition. As an insurance company, we are required by state insurance regulation to hold a specified amount of reserves in order to meet all the contractual obligations of our general account. In order to meet our claims-paying obligations, we monitor our reserves so that we hold sufficient amounts to cover actual or expected policy and claims payments. However, it is important to note that there is no guarantee that we will always be able to meet our claims-paying obligations, and that there are risks to purchasing any insurance product.
State insurance regulators also require insurance companies to maintain a minimum amount of capital, which acts as a cushion in the event that the insurer suffers a financial impairment, based on the inherent risks in the insurer’s operations. These risks include those associated with losses that we may incur as the result of defaults on the payment of interest or principal on our general account assets, which include bonds, mortgages, general real estate investments, and stocks, as well as the loss in market value of these investements.
How to Obtain More Information. We encourage both existing and prospective Contract Owners to read and understand our financial statements. We prepare our financial statements on a statutory basis. Our financial statements, which are presented in conformity with accounting practices prescribed or permitted by the Ohio Department of Insurance – as well as the financial statements of the separate account – are located in the Statement of Additional Information (SAI). For a copy of the SAI, simply call or write us at the phone number or address of our Administrative and Service Office referenced in this prospectus. In addition, the SAI is available on the SEC’s website at http://www.sec.gov. Our financial strength ratings can be found on our website.
Western Reserve established a separate account, called the WRL Series Annuity Account, under the laws of the State of Ohio on April 12, 1988. The separate account is divided into subaccounts, each of which invests exclusively in shares of a mutual fund portfolio. Western Reserve may add, close, remove, combine or substitute subaccounts or investments held by the subaccounts, and reserves the right to change the investment objective of any subaccount, subject to applicable law as described in the SAI. In addition, the separate account may be used for other variable annuity contracts issued by Western Reserve.
The separate account is registered with the SEC as a unit investment trust under the 1940 Act. However, the SEC does not supervise the management, the investment practices, or the contracts of the separate account or Western Reserve.
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The assets of the separate account are held in Western Reserve’s name on behalf of the separate account and belong to Western Reserve. However, the assets underlying the Contracts are not chargeable with liabilities arising out of any other business Western Reserve may conduct. The income, gains and losses, realized and unrealized, from the assets allocated to each subaccount are credited to and charged against that subaccount without regard to the income, gains and losses from any other of our accounts or subaccounts.
Information about the separate account can be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. You may obtain information about the operation of the public reference room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a web site (www.sec.gov) that contains other information regarding the separate account.
You can generally exchange one annuity contract for another in a “tax-free exchange” under Section 1035 of the Internal Revenue Code. Before making an exchange, you should compare both annuities carefully. Remember that if you exchange another annuity for the one described in this prospectus, you might have to pay a withdrawal charge on your old contract, and there will be a new withdrawal charge period for this Contract and other charges may be higher (or lower) and the benefits may be different. If the exchange does not qualify for Section 1035 treatment, you may have to pay federal income tax, and penalty tax, on the exchange. You should not exchange another annuity for this one unless you determine, after knowing all the facts, that the exchange is in your best interest and not just better for the person selling you the Contract (that person will generally earn a commission if you buy this Contract through an exchange or otherwise).
To the extent required by law, Western Reserve will vote all shares of the portfolios in accordance with instructions we receive from you and other owners that have voting interests in the portfolios. We will send you and other owners requests for instructions on how to vote those shares. When we receive those instructions, we will vote all of the shares in accordance with those instructions. We will vote shares for which no timely instructions were received in the same proportion as the voting instructions we received. Accordingly, it is possible for a small number of contract owners (assuming there is a quorum) to determine the outcome of a vote, especially if they have large policy values. However, if we determine that we are permitted to vote the shares in our own right, we may do so. Each person having a voting interest will receive proxy material, reports, and other materials relating to the appropriate portfolio. More information on voting rights is provided in the SAI.
Distribution and Principal Underwriting Agreement. We have entered into a principal underwriting and distribution agreement with our affiliate, TCI, for the distribution and sale of the Contracts. We pay commissions to TCI which are passed through to selling firms. (See below). We also pay TCI an “override” that is a percentage of total commissions paid on sales of our Contracts which is not passed through to the selling firms and reimburse TCI for certain expenses it incurs in order to pay for the distribution of the Contracts.
Compensation to Broker-Dealers Selling the Contracts. The Contracts are offered to the public through broker-dealers (“selling firms”) that are licensed under the federal securities laws; the selling firm and/or its affiliates are also licensed under state insurance laws. The selling firms have entered into written selling agreements with us and with TCI as principal underwriter for the Contracts. We pay commissions through TCI to the selling firms for their sales of the Contracts.
A limited number of affiliated and unaffiliated broker-dealers may also be paid commissions and overrides to “wholesale” the Contracts, that is, to provide sales support and training to sales representatives at selling firms. We may also provide compensation to a limited number of broker-dealers for providing ongoing service in relation to Contracts that have already been purchased.
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The selling firms who have selling agreements with TCI and us are paid commissions for the promotion and sale of the Contracts according to one or more schedules. The amount and timing of commissions may vary depending on the selling agreement, but the maximum commission is 6% of premiums (additional amounts may be paid as overrides to wholesalers).
To the extent permitted by FINRA rules of the Financial Industry Regulatory Authority, Western Reserve, ISI and other affiliated parties may pay (or allow other broker-dealers to provide) promotional incentives or payments in the form of cash or non-cash compensation or reimbursement to some, but not all, selling firms and their sales representatives. These arrangements are described further below.
The sales representative who sells you the Contract typically receives a portion of the compensation we (and our affiliates) pay to the selling firms, depending on the agreement between the selling firm and its registered representative and the firm’s internal compensation program. These programs may include other types of cash and non-cash compensation and other benefits. Ask your sales representative for further information about the compensation your sales representative, and the selling firm that employs your sales representative, may receive in connection with your purchase of a Contract. Also inquire about any revenue sharing arrangements that we and our affiliates may have with the selling firm, including the conflicts of interests that such arrangements may create.
Special Compensation For Affiliated Wholesaling and Selling Firms. Our parent company provides paid-in capital to TCI and pays the cost of TCI’s operating and other expenses, including costs for facilities, legal and accounting services, and other internal administrative functions.
Western Reserve’s two main distribution channels are InterSecurities, Inc. (“ISI”) and World Group Securities (“WGS”), both affiliates, who sell Western Reserve products.
Western Reserve underwrites the cost of ISI’s various facilities, third-party services and internal administrative functions, including employee salaries, sales representative training and computer systems that are provided directly to ISI. These facilities and services are necessary for ISI’s administration and operation, and Western Reserve is compensated by ISI for these expenses based on ISI’s usage. In addition, Western Reserve and other affiliates pay for certain sales expenses of ISI, including the costs of preparing and producing prospectuses and sales promotional materials for the Contract.
ISI pays its branch managers a portion of the commissions received from Western Reserve for the sale of the Contracts. Sales representatives receive a portion of the commissions for their sales of Contracts in accordance with ISI’s internal compensation programs.
To support its sales of Western Reserve’s variable annuity products, WGS receives an expense allowance of 0.35% of the annual annuity premiums paid on variable annuities sold by WGS. Sales representatives receive a portion of the commissions for their sales of Contracts in accordance with WGS’s internal compensation programs.
Sales representatives and their managers at ISI and WGS may receive directly or indirectly additional cash benefits and non-cash compensation or reimbursements from us or our affiliates. Additional compensation or reimbursement arrangements may include payments in connection with the firm’s conferences or seminars, sales or training programs for invited selling representatives and other employees, seminars for the public, trips (such as travel, lodging and meals in connection therewith), entertainment, merchandise and other similar items, and payments, loans, loan guaranties, or loan forgiveness to assist a firm or a representative in connection with systems, operating, marketing and other business expenses. The amounts may be significant and may provide us with increased access to the sales representatives.
In addition, ISI’s managers and/or sales representatives who meet certain productivity standards may be eligible for additional compensation. Sales of the Contracts by affiliated selling firms may help sales representatives and/or their managers qualify for certain benefits, and may provide such persons with special incentive to sell our Contracts. For example, ISI’s and WGS’s registered representatives, general agents, marketing directors and supervisors may be eligible to participate in a voluntary stock purchase plan that permits participants to purchase stock of AEGON N.V. (Western Reserve’s ultimate parent) by allocating a portion of the commissions they earn to purchase such shares. A portion of the contributions of commissions by ISI’s representatives may be matched by ISI.
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ISI’s and WGS’s registered representatives may also be eligible to participate in a stock option and award plan. Registered representatives who meet certain production goals will be issued options on the stock of AEGON N.V.
Additional Compensation that We, TCI and/or our Affiliates Pay to Selected Selling Firms. We may pay certain selling firms additional cash amounts for “preferred product” treatment of the Contracts in their marketing programs in order to receive enhanced marketing services and increased access to their sales representatives. In exchange for providing us with access to their distribution network, such selling firms may receive additional compensation or reimbursement for, among other things, the hiring and training of sales personnel, marketing, sponsoring of conferences, meetings, seminars, and events and/or other services they provide to us and our affiliates. To the extent permitted by applicable law, we and other parties may allow other non-cash incentives and compensation to be paid to these selling firms. These special compensation arrangements are not offered to all selling firms and the terms of such arrangements may differ between selling firms.
Special compensation arrangements are calculated in different ways by different selling firms and may be based on past or anticipated sales of the Contracts or other criteria. For instance, Western Reserve made flat fee payments to several selling firms with payments ranging from $950 to $20,000 in 2008 for the sales of the Western Reserve’s insurance products.
During 2008, we had entered into “preferred product” arrangements with ISI, WGS, Broker Dealer Financial Services, Inc., Coordinated Capital Securities, Inc., First Founder Securities, Inc., Girard Securities, Inc., H. Beck, Inc., Harbour Investments, Inc., IMS Securities, Inc., Next Financial Group, Inc., Packerland Brokerage Services, Inc., Summit Brokerage Services, Inc., and Workman Securities Corporation. We paid the following amounts (in addition to sales commissions and expense allowances) to these firms:
Name of Firm |
Aggregate Amount Paid During 2008 | |
Next Financial Group, Inc. | $20,000 | |
H. Beck, Inc. | $18,000 | |
Girard Securities, Inc. | $14,000 | |
First Founders Securities, Inc. | $10,000 | |
Harbour Investments, Inc. | $10,000 | |
Workman Securities Corporation | $10,000 | |
Summit Brokerage Services, Inc. | $5,000 | |
Packerland Brokerage Services, Inc. | $3,500 | |
Broker Dealer Financial Services Corp | $3,250 | |
Coordinated Capital Securities, Inc. | $2,000 | |
IMS | $950 |
No specific charge is assessed directly to Contract owners or the separate account to cover commissions and other incentives or payments described above. We do intend to recoup commissions and other sales expenses and incentives we pay, however through fees and charges deducted under the Contract and other corporate revenue. You should be aware that a selling firm or its sales representatives may receive different compensation or incentives for selling one product over another. In some cases, these payments may create an incentive for the selling firm or its sales representatives to recommend or sell this Contract to you. You may wish to take such payments into account when considering and evaluating any recommendation relating to the Contracts.
The Contract does not participate or share in the profits or surplus earnings of Western Reserve. No dividends are payable on the Contract.
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Variations in Contract Provisions
Certain provisions of the Contracts may vary from the descriptions in this prospectus in order to comply with different state laws. See your Contract for variations since any such state variations will be included in your Contract or in riders or endorsements attached to your Contract.
We are a member of the Insurance Marketplace Standards Association (“IMSA”). IMSA is an independent, voluntary organization of life insurance companies. It promotes high ethical standards in the sales and advertising of individual life insurance, long-term care insurance and annuity products. Through its Principles and Code of Ethical Market Conduct, IMSA encourages its member companies to develop and implement policies and procedures to promote sound market practices. Companies must undergo a rigorous self and independent assessment of their practices to become a member of IMSA. The IMSA logo in our sales literature shows our ongoing commitment to these standards. You may find more information about IMSA and its ethical standards at www.imsaethics.org in the “Consumer” section or by contacting IMSA at: 240-744-3030.
There are no legal proceedings to which the separate account is a party or to which the assets of the separate account are subject. The Company, like other life insurance companies, is involved in lawsuits. In some class action and other lawsuits involving other 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 no pending or threatened lawsuits that are reasonably likely to have a material adverse impact on the separate account, on the ability of Transamerica Capital, Inc. to perform under its principal underwriting agreement, or on the ability of the Company to meet its obligations under the Contract.
The financial statements of Western Reserve and the separate account are included in the SAI.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Definitions of Special Terms
The Contract - General Provisions
Certain Federal Income Tax Consequences
Investment Experience
Historical Performance Data
Published Ratings
Administration
Records and Reports
Distribution of the Contracts
Other Products
Custody of Assets
Legal Matters
Independent Registered Public Accounting Firm
Other Information
Financial Statements*
*Not included in the re-filed Statement of Additional Information dated May 1, 2009.
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Inquiries and requests for an SAI should be directed to:
Western Reserve Life Assurance Co. of Ohio
Administrative Office
1-800-851-9777
(Monday – Friday 8:30 a.m. – 7:00 p.m. Eastern Time)
Or write to us at our mailing address:
Western Reserve Life Assurance Co. of Ohio
Attention: Customer Care Group
4333 Edgewood Road NE
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CONDENSED FINANCIAL INFORMATION
The accumulation unit values (“AUV”) and the number of accumulation units outstanding for each subaccount from the date of inception are shown in the following tables. The number of accumulation units combines the units outstanding for several variable annuity contracts issued by Western Reserve within each subaccount class.
1.25% | ||||||||
Subaccount | Year |
Beginning AUV |
Ending AUV |
# Units | ||||
Transamerica
Asset Allocation – Conservative VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 |
$13.986 $13.312 $12.315 $11.855 $10.942 $9.014 $10.000 |
$10.887 $13.986 $13.312 $12.315 $11.855 $10.942 $9.014 |
2,175,882 2,019,921 1,860,043 1,440,553 1,356,740 1,475,743 1,156,325 | ||||
Transamerica
Asset Allocation – Growth VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 |
$15.896 $14.937 $13.081 $11.801 $10.465 $8.102 $10.000 |
$9.477 $15.896 $14.937 $13.081 $11.801 $10.465 $8.102 |
3,053,848 4,144,462 3,903,180 2,366,009 1,991,217 1,682,369 416,136 | ||||
Transamerica
Asset Allocation – Moderate VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 |
$14.762 $13.846 $12.576 $11.852 $10.773 $8.736 $10.000 |
$10.794 $14.762 $13.846 $12.576 $11.852 $10.773 $8.736 |
4,856,860 6,242,962 6,300,284 4,937,799 4,569,992 3,690,383 1,734,722 | ||||
Transamerica
Asset Allocation- Moderate Growth VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 |
$15.460 $14.520 $12.915 $11.898 $10.611 $8.449 $10.000 |
$10.266 $15.460 $14.520 $12.915 $11.898 $10.611 $8.449 |
5,920,283 8,080,986 7,972,433 6,020,950 4,726,217 3,476,522 1,572,625 | ||||
Transamerica
International Moderate Growth VP – Initial Class |
2008 2007 2006 |
$11.103 $10.343 $10.000 |
$7.004 $11.103 $10.343 |
226,269 378,325 79,458 | ||||
Transamerica
BlackRock Large Cap Value VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 |
$26.583 $25.724 $22.277 $19.455 $16.647 $12.988 $15.330 $15.809 $13.896 $13.035 |
$17.356 $26.583 $25.724 $22.277 $19.455 $16.647 $12.988 $15.330 $15.809 $13.896 |
933,418 1,176,976 1,476,190 1,383,075 922,235 1,088,071 1,498,188 1,919,591 2,117,122 2,370,920 | ||||
Transamerica
Capital Guardian U.S. Equity VP – Initial Class(1) |
2008 2007 2006 2005 2004 2003 2002 |
$13.190 $13.376 $12.301 $11.716 $10.808 $8.017 $10.000 |
$7.768 $13.190 $13.376 $12.301 $11.716 $10.808 $8.017 |
498,694 704,019 800,817 863,334 783,507 566,973 247,562 | ||||
Transamerica
Capital Guardian Value VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 |
$13.692 $14.794 $12.858 $12.088 $10.488 $7.891 $10.000 |
$8.179 $13.692 $14.794 $12.858 $12.088 $10.488 $7.891 |
762,305 1,068,137 1,313,282 1,161,257 1,203,886 771,615 366,462 |
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1.25% | ||||||||
Subaccount | Year |
Beginning AUV |
Ending AUV |
# Units | ||||
Transamerica
Clarion Global Real Estate Securities VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 |
$29.384 $31.892 $22.696 $20.252 $15.435 $11.514 $11.254 $10.262 $8.016 $8.435 |
$16.721 $29.384 $31.892 $22.696 $20.252 $15.435 $11.514 $11.254 $10.262 $8.016 |
815,644 1,224,342 1,583,289 1,103,259 1,050,221 997,537 893,890 405,046 160,678 50,784 | ||||
Transamerica
Federated Market Opportunity VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 |
$30.974 $31.513 $31.052 $29.956 $27.776 $22.173 $22.237 $19.461 $15.256 $16.168 |
$29.205 $30.974 $31.513 $31.052 $29.956 $27.776 $22.173 $22.237 $19.461 $15.256 |
1,273,940 1,615,698 2,062,568 2,282,556 2,223,985 2,196,629 2,224,886 1,806,293 980,718 741,824 | ||||
Transamerica
JPMorgan Core Bond VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 |
$29.859 $28.271 $27.546 $27.265 $26.413 $25.646 $23.614 $22.124 $20.203 $21.076 |
$31.136 $29.859 $28.271 $27.546 $27.265 $26.413 $25.646 $23.614 $22.124 $20.203 |
988,483 1,094,236 1,149,438 1,145,883 1,171,779 1,464,971 2,034,334 2,019,539 1,556,606 1,843,337 | ||||
Transamerica
JPMorgan Enhanced Index VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 |
$13.578 $13.152 $11.549 $11.302 $10.309 $8.095 $10.000 |
$8.401 $13.578 $13.152 $11.549 $11.302 $10.309 $8.095 |
196,780 203,871 236,628 242,937 278,808 177,572 80,755 | ||||
Transamerica
JPMorgan Mid Cap Value VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 |
$18.048 $17.771 $15.347 $14.236 $12.581 $9.693 $11.246 $11.855 $10.630 $10.00 |
$11.963 $18.048 $17.771 $15.347 $14.236 $12.581 $9.693 $11.246 $11.855 $10.630 |
395,908 560,359 614,858 603,382 656,682 551,462 498,499 306,017 155,158 75,244 | ||||
Transamerica
Legg Mason Partners All Cap VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 |
$17.339 $17.377 $14.841 $14.438 $13.396 $10.036 $13.499 $13.389 $11.460 $10.000 |
$10.897 $17.339 $17.377 $14.841 $14.438 $13.396 $10.036 $13.499 $13.389 $11.460 |
761,665 1,111,649 1,191,798 1,162,551 1,443,646 1,750,342 1,985,408 2,519,433 857,047 119,851 |
55
1.25% | ||||||||
Subaccount | Year |
Beginning AUV |
Ending AUV |
# Units | ||||
Transamerica
MFS High Yield VP – Initial Class |
2008 2007 2006 2005 2004 2003 |
$13.065 $12.989 $11.854 $11.789 $10.875 $10.000 |
$9.652 $13.065 $12.989 $11.854 $11.789 $10.875 |
156,048 219,465 402,868 204,330 124,136 82,594 | ||||
Transamerica
MFS International Equity VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 |
$14.721 $13.656 $11.235 $10.079 $8.926 $7.213 $9.268 $12.258 $14.601 $11.832 |
$9.408 $14.721 $13.656 $11.235 $10.079 $8.926 $7.213 $9.268 $12.258 $14.601 |
1,450,763 1,793,603 1,888,022 1,314,850 978,314 852,134 369,488 417,800 482,175 402,792 | ||||
Transamerica
Marsico Growth VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 |
$12.046 $10.131 $9.736 $9.078 $8.190 $6.564 $8.979 $10.584 $11.652 $10.000 |
$7.026 $12.046 $10.131 $9.736 $9.078 $8.190 $6.564 $8.979 $10.584 $11.652 |
766,205 1,083,709 681,645 697,228 593,949 617,282 813,251 613,382 212,932 113,020 | ||||
Transamerica
Munder Net50 VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 |
$11.731 $10.149 $10.276 $9.628 $8.452 $5.137 $8.446 $11.467 $11.642 $10.000 |
$6.542 $11.731 $10.149 $10.276 $9.628 $8.452 $5.137 $8.446 $11.467 $11.642 |
247,926 439,474 273,126 328,423 410,322 633,137 382,018 124,079 60,748 36,799 | ||||
Transamerica
PIMCO Total Return VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 |
$12.601 $11.711 $11.379 $11.259 $10.911 $10.531 $10.000 |
$12.097 $12.601 $11.711 $11.379 $11.259 $10.911 $10.531 |
1,218,245 1,097,225 954,477 944,033 905,761 1,065,156 1,038,952 | ||||
Transamerica T.
Rowe Price Equity Income VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 |
$13.237 $12.973 $11.042 $10.739 $9.472 $7.560 $9.429 $9.963 $9.183 $10.000 |
$8.371 $13.237 $12.973 $11.042 $10.739 $9.472 $7.560 $9.429 $9.963 $9.183 |
1,101,367 1,485,868 1,580,068 1,342,650 1,035,027 883,624 738,954 762,476 379,187 197,282 | ||||
Transamerica T.
Rowe Price Small Cap VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 |
$14.522 $13.416 $13.113 $12.004 $11.014 $7.943 $11.071 $12.416 $13.733 $10.000 |
$9.143 $14.522 $13.416 $13.113 $12.004 $11.014 $7.943 $11.071 $12.416 $13.733 |
540,433 710,152 727,891 970,016 879,194 941,630 792,014 692,897 513,786 284,595 |
56
1.25% | ||||||||
Subaccount | Year |
Beginning AUV |
Ending AUV |
# Units | ||||
Transamerica
Templeton Global VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 |
$44.037 $38.691 $32.979 $31.072 $28.849 $23.701 $32.442 $42.578 $52.288 $30.943 |
$24.497 $44.037 $38.691 $32.979 $31.072 $28.849 $23.701 $32.442 $42.578 $52.288 |
2,177,799 2,752,962 2,711,611 2,552,065 2,855,526 3,400,736 4,524,820 6,380,103 8,269,031 8,766,540 | ||||
Transamerica
Third Avenue Value VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 |
$28.833 $28.849 $25.166 $21.448 $17.402 $12.837 $14.749 $14.067 $10.515 $9.201 |
$16.757 $28.833 $28.849 $25.166 $21.448 $17.402 $12.837 $14.749 $14.067 $10.515 |
1,923,003 2,492,466 2,837,628 2,589,779 2,107,636 2,087,199 2,040,765 1,999,811 1,212,914 504,953 | ||||
Transamerica
Balanced VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 |
$14.982 $13.353 $12.390 $11.620 $10.585 $9.411 $10.000 |
$10.002 $14.982 $13.353 $12.390 $11.620 $10.585 $9.411 |
293,030 935,844 834,953 299,688 266,344 268,864 434,657 | ||||
Transamerica
Convertible Securities VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 |
$16.609 $14.176 $12.943 $12.615 $11.287 $9.242 $10.000 |
$10.355 $16.609 $14.176 $12.943 $12.615 $11.287 $9.242 |
146,616 195,032 186,954 155,246 123,627 130,828 54,656 | ||||
Transamerica
Equity VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 |
$17.900 $15.587 $14.517 $12.613 $11.029 $8.510 $10.000 |
$9.545 $17.900 $15.587 $14.517 $12.613 $11.029 $8.510 |
14,906,518 18,213,827 19,101,643 3,882,223 3,945,590 1,276,065 979,830 | ||||
Transamerica
Growth Opportunities VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 |
$17.071 $14.043 $13.529 $11.786 $10.233 $7.897 $10.000 |
$9.963 $17.071 $14.043 $13.529 $11.786 $10.233 $7.897 |
1,080,159 1,522,935 1,221,279 1,100,745 1,016,326 574,967 47,044 | ||||
Transamerica
Money Market VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 |
$17.364 $16.741 $16.185 $15.929 $15.970 $16.043 $16.013 $15.594 $14.879 $14.369 |
$17.560 $17.364 $16.741 $16.185 $15.929 $15.970 $16.043 $16.013 $15.594 $14.879 |
3,004,663 2,075,364 1,728,722 1,589,446 1,294,319 2,528,768 4,470,642 4,888,699 3,862,923 6,518,077 |
57
1.25% | ||||||||
Subaccount | Year |
Beginning AUV |
Ending AUV |
# Units | ||||
Transamerica
Science and Technology VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 2001 2000 |
$5.334 $4.069 $4.079 $4.046 $3.792 $2.543 $4.162 $6.683 $10.000 |
$2.708 $5.334 $4.069 $4.079 $4.046 $3.792 $2.543 $4.162 $6.683 |
590,993 1,086,267 537,200 683,643 916,322 1,198,722 596,896 767,079 372,378 | ||||
Transamerica
Small/Mid Cap Value VP – Initial Class |
2008 2007 2006 2005 2004 |
$17.699 $14.367 $12.322 $10.987 $10.000 |
$10.336 $17.699 $14.367 $12.322 $10.987 |
771,855 890,370 872,822 701,255 36,781 | ||||
Transamerica
U.S. Government Securities VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 |
$11.678 $11.150 $10.932 $10.828 $10.615 $10.440 $10.000 |
$12.417 $11.678 $11.150 $10.932 $10.828 $10.615 $10.440 |
552,463 161,251 128,289 112,860 133,261 170,819 172,039 | ||||
Transamerica
Value Balanced VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 |
$24.961 $23.684 $20.804 $19.762 $18.198 $15.335 $18.019 $17.808 $15.385 $16.509 |
$17.123 $24.961 $23.684 $20.804 $19.762 $18.198 $15.335 $18.019 $17.808 $15.385 |
2,928,571 3,652,448 4,047,553 4,018,798 4,319,643 1,940,369 2,537,655 2,509,372 2,769,795 3,845,498 | ||||
Transamerica
Van Kampen Mid-Cap Growth VP – Initial Class |
2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 |
$44.972 $37.163 $34.237 $32.234 $30.464 $24.070 $36.411 $55.219 $63.478 $31.329 |
$23.855 $44.972 $37.163 $34.237 $32.234 $30.464 $24.070 $36.411 $55.219 $63.478 |
1,699,120 2,113,773 1,964,347 1,853,109 2,059,041 2,556,785 3,300,163 4,479,229 5,867,693 6,153,697 | ||||
Transamerica
Index 50 VP - Service Class |
2008 | $10.000 | $8.192 | 1,007 | ||||
Transamerica
Index 75 VP - Service Class |
2008 | $10.000 | $7.230 | 24,806 | ||||
ProFund VP Asia
30 |
2008 2007 |
$11.695 $10.000 |
$5.680 $11.695 |
95,691 57,062 | ||||
ProFund VP
Basic Materials |
2008 2007 |
$11.129 $10.000 |
$5.339 $11.129 |
108,458 79,100 | ||||
ProFund VP
Bull |
2008 2007 2006 |
$11.689 $11.430 $10.000 |
$7.195 $11.689 $11.430 |
30,748 37,883 327,086 | ||||
ProFund VP
Consumer Services |
2008 2007 |
$9.159 $10.000 |
$6.207 $9.159 |
1,608 279 | ||||
ProFund VP
Emerging Markets |
2008 2007 |
$11.480 $10.000 |
$5.658 $11.480 |
92,734 30,155 | ||||
ProFund VP
Europe 30 |
2008 2007 |
$10.298 $10.000 |
$5.695 $10.298 |
14,3721 37,992 | ||||
ProFund VP
Falling U.S. Dollar |
2008 2007 |
$10.585 $10.000 |
$9.919 $10.585 |
42,818 11,317 |
58
1.25% | ||||||||
Subaccount | Year |
Beginning AUV |
Ending AUV |
# Units | ||||
ProFund VP
Financials |
2008 2007 |
$8.645 $10.000 |
$4.223 $8.645 |
53,460 4,680 | ||||
ProFund VP
International |
2008 2007 |
$10.108 $10.000 |
$5.550 $10.108 |
14,326 12,443 | ||||
ProFund VP
Japan |
2008 2007 |
$9.131 $10.000 |
$5.334 $9.131 |
3,063 1,358 | ||||
ProFund VP
Mid-Cap |
2008 2007 |
$9.759 $10.000 |
$5.940 $9.759 |
35,575 1,582 | ||||
ProFund VP
Money Market |
2008 2007 2006 |
$10.404 $10.152 $10.000 |
$10.361 $10.404 $10.152 |
674,141 1,112,324 2,122 | ||||
ProFund VP
NASDAQ-100 |
2008 2007 2006 |
$13.254 $11.410 $10.000 |
$7.529 $13.254 $11.410 |
23,667 21,417 88,398 | ||||
ProFund VP Oil
& Gas |
2008 2007 |
$10.916 $10.000 |
$6.797 $10.916 |
169,320 31,214 | ||||
ProFund VP
Pharmaceuticals |
2008 2007 |
$10.001 $10.000 |
$7.950 $10.001 |
129.562 4,350 | ||||
ProFund VP
Precious Metals |
2008 2007 |
$11.785 $10.000 |
$8.059 $11.785 |
236,241 46,547 | ||||
ProFund VP
Short Emerging Markets |
2008 2007 |
$8.246 $10.000 |
$10.769 $8.246 |
43,947 0 | ||||
ProFund VP
Short International |
2008 2007 |
$9.836 $10.000 |
$13.428 $9.836 |
41,758 0 | ||||
ProFund VP
Short NASDAQ-100 |
2008 2007 |
$9.736 $10.000 |
$14.247 $9.736 |
37,934 2,649 | ||||
ProFund VP
Short Small Cap |
2008 2007 2006 |
$9.077 $8.793 $10.000 |
$11.124 $9.077 $8.793 |
45,685 52,456 7,040 | ||||
ProFund VP
Small-Cap |
2008 2007 2006 |
$10.839 $11.224 $10.000 |
$6.915 $10.839 $11.224 |
21,821 34,662 164,404 | ||||
ProFund VP
Small-Cap Value |
2008 2007 |
$9.166 $10.000 |
$6.274 $9.166 |
39,916 280 | ||||
ProFund VP
Telecommunications |
2008 2007 |
$9.545 $10.000 |
$6.182 $9.545 |
55,746 1,524 | ||||
ProFund VP
UltraSmall-Cap |
2008 2007 |
$8.870 $10.000 |
$2.962 $8.870 |
5,616 11 | ||||
ProFund VP U.S.
Government Plus |
2008 2007 |
$10.824 $10.000 |
$16.010 $10.824 |
181,793 44,438 | ||||
ProFund VP
Utilities |
2008 2007 |
$10.750 $10.000 |
$7.358 $10.750 |
49,425 232,985 | ||||
Access VP High
Yield FundSM |
2008 2007 |
$10.312 $10.000 |
$9.711 $10.312 |
294,180 0 | ||||
Fidelity –
VIP Contrafund® Portfolio – Service Class 2 |
2008 2007 2006 2005 2004 2003 2002 2001 2000 |
$15.278 $13.188 $11.983 $10.402 $9.147 $7.224 $8.093 $9.362 $10.000 |
$8.647 $15.278 $13.188 $11.983 $10.402 $9.147 $7.224 $8.093 $9.362 |
812,411 1,034,932 894,769 1,104,027 576,460 432,224 598,832 294,783 108,418 |
59
1.25% | ||||||||
Subaccount | Year |
Beginning AUV |
Ending AUV |
# Units | ||||
Fidelity –
VIP Equity-Income Portfolio – Service Class 2 |
2008 2007 2006 2005 2004 2003 2002 2001 2000 |
$14.630 $14.627 $12.350 $11.845 $10.783 $8.397 $10.263 $10.965 $10.000 |
$8.263 $14.630 $14.627 $12.350 $11.845 $10.783 $8.397 $10.263 $10.965 |
378,393 531,469 539,070 456,395 814,097 947,722 802,472 675,908 84,115 | ||||
Fidelity –
VIP Growth Opportunities Portfolio – Service Class 2 |
2008 2007 2006 2005 2004 2003 2002 2001 2000 |
$10.122 $8.339 $8.032 $7.484 $7.089 $5.547 $7.202 $8.544 $10.000 |
$4.485 $10.122 $8.339 $8.032 $7.484 $7.089 $5.547 $7.202 $8.544 |
180,557 357,882 88,725 92,068 77,995 96,533 133,384 167,449 86,943 |
(1) Transamerica Capital Guardian U.S. Equity VP merged into Transamerica Van Kampen Large Cap Core VP.
The Transamerica Van Kampen Large Cap Core VP had not commenced operations as of December 31, 2008 therefore, comparable data is not available.
60
WRL FREEDOM VARIABLE ANNUITY
Issued by
TRANSAMERICA PREMIER LIFE INSURANCE COMPANY*
WRL Series Annuity Account
Supplement Dated October 1, 2014
to the
Statement of Additional Information dated May 1, 2009
The following hereby amends and supplements your Statement of Additional Information:
*Effective on or about October 1, 2014, Western Reserve Life Assurance Co. of Ohio (“Western Reserve”) merged with and into its affiliate Transamerica Premier Life Insurance Company (“TPLIC”). Before the merger, the WRL Freedom Variable Annuity contracts (“Contracts”) were issued by Western Reserve. Upon consummation of the Merger, Western Reserve’s corporate existence ceased by operation of law, and TPLIC became responsible for all liabilities and obligations of Western Reserve, including those created under the Contracts.
The following updates the Distribution of the Contracts section of the Statement of Additional Information:
The Contracts are no longer sold to new purchasers.
The following hereby replaces the Independent Registered Public Accounting Firm section of the Statement of Additional Informations:
Independent Registered Public Accounting Firm
The financial statements of the WRL Series Annuity Account, December 31, 2013, and for the periods disclosed in the financial statements, and the statutory-basis financial statements and schedules of Transamerica Premier Life Insurance Company (formerly, Monumental Life Insurance Company) at December 31, 2013 and 2012, and for each of the three years in the period ended December 31, 2013, and Western Reserve Life Assurance Co. of Ohio at December 31, 2013 and 2012 (restated), and for each of the three years in the period ended December 31, 2013, appearing herein, have been audited by Ernst & Young LLP, Suite 3000, 801 Grand Avenue, Des Moines, Iowa 50309, Independent Registered Public Accounting Firm, as set forth in their respective reports thereon appearing elsewhere herein, and are included in reliance upon their reports given on their authority as experts in accounting and auditing.
The following hereby replaces the Financial Statements section of the Statement of Additional Information:
Financial Statements
The values of an owner’s interest in the separate account will be affected solely by the investment results of the selected
subaccount(s). Western
Reserve and TPLIC financial statements, which are included in this SAI, should be considered as only bearing on TPLIC’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 separate account.
The statutory basis financial statements of Transamerica Premier Life Insurance Company (formerly, Monumental Life Insurance Company) and Western Reserve Life Assurance Co. of Ohio, and the audited financial statements (U.S. GAAP basis) of the WRL Series Annuity Account are included herein. Unaudited pro forma combined financials statements showing the effects of the merger of Western Reserve Life Assurance Co. of Ohio with and into Transamerica Premier Life Insurance Company as of December 31, 2013, are also included.
Pro Forma Unaudited Consolidated Statutory Balance Sheet and Income Statement
Western Reserve Life Assurance Co. of Ohio, Transamerica Premier Life Insurance Company
(f.k.a. Monumental Life Insurance Company)
Effective on or about October 1, 2014, Western Reserve Life Assurance Co. of Ohio (WRL) will merge with and into its affiliate, Transamerica Premier Life Insurance Company (TPLIC), f.k.a. Monumental Life Insurance Company. Upon consummation of the merger, WRL’s corporate existence will cease by operation of law, whereby TPLIC will assume legal ownership of all of the assets and responsibility for all of the liabilities and obligations of WRL. The accompanying unaudited pro forma condensed combined statutory basis financial statements have been prepared in accordance with statutory accounting principles, which includes the balance sheet as of December 31, 2013 and income statements for the years ended 2013, 2012 and 2011 in a combined manner, as if the two entities had merged. Accordingly, they do not include all the information and notes required by accounting principles generally accepted in the United States for complete financial statements.
The unaudited pro forma condensed financial data is not intended to represent or to be indicative of our consolidated results of operations or financial position that we would have reported had the merger occurred as of the dates presented, and should not be taken as a representation of our future consolidated results of operations or financial position. The unaudited pro forma condensed combined financial statements do not reflect any operating efficiencies and/or cost savings that we may achieve with respect to the combined companies.
The unaudited pro forma condensed financial data should be read in conjunction with the historical financial statements and accompanying notes of WRL and Monumental Life Insurance Company (renamed TPLIC), which are included in this registration statement.
P-1
Pro Forma Unaudited Consolidated Statutory Balance Sheet
Western Reserve Life Assurance Co. of Ohio, Transamerica Premier Life Insurance Company
(f.k.a. Monumental Life Insurance Company)
As of December 31, 2013
TPLIC (MLIC) | ||||||||||||||||||||||
Dec 31, 2013 | ||||||||||||||||||||||
WRL | TPLIC (MLIC) | Eliminations | Reference | Totals | ||||||||||||||||||
ASSETS |
||||||||||||||||||||||
1. |
Bonds | $ | 1,448,053,453 | $ | 12,381,999,416 | $ | 0 | $ | 13,830,052,869 | |||||||||||||
2. |
Stocks: | |||||||||||||||||||||
2.1 | Preferred stocks | 0 | 9,540,762 | 9,540,762 | ||||||||||||||||||
2.2 | Common stocks | 35,347,839 | 62,267,638 | 97,615,477 | ||||||||||||||||||
3. |
Mortgage loans on real estate: | |||||||||||||||||||||
3.1 | First liens | 77,804,931 | 1,692,859,515 | 1,770,664,446 | ||||||||||||||||||
3.2 | Other than first liens | 0 | 0 | 0 | ||||||||||||||||||
4. |
Real estate | |||||||||||||||||||||
4.1 | Properties occupied by the company | 27,382,074 | 0 | 27,382,074 | ||||||||||||||||||
4.2 | Properties held for production of income | 0 | 384,967 | 384,967 | ||||||||||||||||||
4.3 | Properties held for sale | 6,259,139 | 6,900,282 | 13,159,421 | ||||||||||||||||||
5. |
Cash, cash equivalents and short-term investments | 110,546,907 | 558,922,981 | 669,469,888 | ||||||||||||||||||
6. |
Contract loans (including $ 0 premium notes) | 442,799,902 | 470,548,651 | 913,348,553 | ||||||||||||||||||
7. |
Derivatives | 0 | 186,389,116 | 186,389,116 | ||||||||||||||||||
8. |
Other invested assets | 3,011,913 | 796,355,167 | 799,367,080 | ||||||||||||||||||
9. |
Receivable for securities | 0 | 62 | 62 | ||||||||||||||||||
10. |
Securities lending reinvested collateral assets | 88,265,219 | 322,209,041 | 410,474,260 | ||||||||||||||||||
11. |
Aggregate write-ins for invested assets | 0 | 9,006,454 | 9,006,454 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
12. |
Subtotals, cash and invested assets (Lines 1 to 9) | 2,239,471,377 | 16,497,384,052 | 0 | 18,736,855,429 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
13. |
Title plants less $0 charged off (for Title insurers only) | 0 | 0 | 0 | 0 | |||||||||||||||||
14. |
Investment income due and accrued | 17,360,751 | 166,253,130 | 183,613,881 | ||||||||||||||||||
15. |
Premiums and considerations: | |||||||||||||||||||||
15.1 | Uncollected premiums and agents’ balances in course of collection | 102,285 | 46,971,091 | 47,073,376 | ||||||||||||||||||
15.2 | Deferred premiums, agents’ balances and installments booked but deferred and not yet due (including $0 earned but unbilled premiums) | 2,662,663 | 131,157,528 | 133,820,191 | ||||||||||||||||||
15.3. | Accrued retrospective premiums | 0 | 0 | 0 | ||||||||||||||||||
16. |
Reinsurance: | |||||||||||||||||||||
16.1 | Amounts recoverable from reinsurers | 1,909,962 | 6,374,104 | 8,284,066 | ||||||||||||||||||
16.2 | Funds held by or deposited with reinsured companies | 0 | 0 | 0 | ||||||||||||||||||
16.3 | Other amounts receivable under reinsurance contracts | 0 | 12,333,424 | 12,333,424 | ||||||||||||||||||
17. |
Amounts receivable relating to uninsured plans | 0 | 0 | 0 | ||||||||||||||||||
18.1 |
Current federal and foreign income tax recoverable and interest thereon | 0 | 5,495,809 | 5,495,809 | ||||||||||||||||||
18.2 |
Net deferred tax asset | 86,384,460 | 162,711,377 | 249,095,837 | ||||||||||||||||||
19. |
Guaranty funds receivable or on deposit | 943,953 | 3,242,833 | 4,186,786 | ||||||||||||||||||
20. |
Electronic data processing equipment and software | 0 | 0 | 0 | ||||||||||||||||||
21. |
Furniture and equipment, including health care delivery assets ($0) | 0 | 0 | 0 | ||||||||||||||||||
22. |
Net adjustment in assets and liabilities due to foreign exchange rates | 0 | 0 | 0 | ||||||||||||||||||
23. |
Receivable from parent, subsidiaries and affiliates | 19,858,988 | 57,107,606 | 76,966,594 | ||||||||||||||||||
24. |
Health care ($0) and other amounts receivable | 0 | 0 | 0 | ||||||||||||||||||
25. |
Aggregate write-ins for other than invested assets | 82,148,235 | 264,540,509 | 0 | 346,688,744 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
26. |
Total assets excluding Separate Accounts business (Lines 12 to 25) | 2,450,842,674 | 17,353,571,463 | 0 | 19,804,414,137 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
27. |
From Separate Accounts Statement | 6,969,476,743 | 14,526,002,778 | 0 | 21,495,479,521 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
28. |
Total (Lines 27 and 28) | $ | 9,420,319,417 | $ | 31,879,574,241 | $ | 0 | $ | 41,299,893,658 | |||||||||||||
|
|
|
|
|
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|
|
|
||||||||||||||
DETAILS OF ASSET WRITE-INS (Line 11) |
||||||||||||||||||||||
Receivable for derivative cash collateral |
$ | 0 | $ | 219,679 | $ | 0 | $ | 219,679 | ||||||||||||||
Invested asset collateral balance |
0 | $ | 8,786,775 | $ | 8,786,775 | |||||||||||||||||
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TOTAL OF ASSETS WRITE-INS FOR LINES 11 |
$ | 0 | $ | 9,006,454 | $ | 0 | $ | 9,006,454 | ||||||||||||||
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DETAILS OF ASSET WRITE-INS (Line 25) |
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Accounts receivable |
$ | 5,846,847 | $ | 41,164,204 | $ | 0 | $ | 47,011,051 | ||||||||||||||
Contribution receivable from parent |
0 | 135,000,000 | 135,000,000 | |||||||||||||||||||
Estimated premium tax offsets related to the provision for future GFA |
222,285 | 847,186 | 1,069,471 | |||||||||||||||||||
Investment receivable |
37,483 | 752,104 | 789,587 | |||||||||||||||||||
Company owned life insurance |
75,881,155 | 79,732,778 | 155,613,933 | |||||||||||||||||||
Goodwill |
0 | 6,582,224 | 6,582,224 | |||||||||||||||||||
State transferable tax credits |
160,465 | 462,013 | 622,478 | |||||||||||||||||||
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TOTAL OF ASSETS WRITE-INS FOR LINES 25 |
$ | 82,148,235 | $ | 264,540,509 | $ | 0 | $ | 346,688,744 | ||||||||||||||
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P-2
Pro Forma Unaudited Consolidated Statutory Balance Sheet
Western Reserve Life Assurance Co. of Ohio, Transamerica Premier Life Insurance Company
(f.k.a. Monumental Life Insurance Company)
As of December 31, 2013
TPLIC (MLIC) | ||||||||||||||||||||||
Dec 31, 2013 | ||||||||||||||||||||||
WRL | TPLIC (MLIC) | Eliminations | Reference | Totals | ||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||
1. |
Aggregate reserve for life contracts | $ | 1,909,589,432 | $ | 9,259,113,572 | $ | 0 | $ | 11,168,703,004 | |||||||||||||
2. |
Aggregate reserve for accident and health contracts | 1,157,547 | 716,358,263 | 717,515,810 | ||||||||||||||||||
3. |
Liability for deposit-type contracts | 21,519,616 | 675,894,726 | 697,414,342 | ||||||||||||||||||
4. |
Contract claims: | |||||||||||||||||||||
4.1 | Life | 25,085,544 | 127,458,689 | 152,544,233 | ||||||||||||||||||
4.2 | Accident and health | 0 | 110,668,627 | 110,668,627 | ||||||||||||||||||
5. |
Policyholders’ dividends and coupons due and unpaid | 0 | 75,358 | 75,358 | ||||||||||||||||||
6. |
Provision for policyholders’ dividends and coupons payable in following calendar year-estimated amounts: | |||||||||||||||||||||
6.1 | Dividends apportioned for payment to December 31, 2005 | 0 | 1,293,678 | 1,293,678 | ||||||||||||||||||
6.2 | Dividends not yet apportioned | 0 | 0 | 0 | ||||||||||||||||||
6.3 | Coupons and similar benefits | 0 | 0 | 0 | ||||||||||||||||||
7. |
Amount provisionally held for deferred dividend policies not included in Line 6 |
0 | 0 | 0 | ||||||||||||||||||
8. |
Premiums and annuity considerations for life and accident and health contracts received in advance less discount | 34,996 | 5,226,469 | 5,261,465 | ||||||||||||||||||
9. |
Contract liabilities not included elsewhere: | |||||||||||||||||||||
9.1 | Surrender values on canceled contracts | 0 | 0 | 0 | ||||||||||||||||||
9.2 | Provision for experience rating refunds | 0 | 6,735,207 | 6,735,207 | ||||||||||||||||||
9.3 | Other amounts payable on reinsurance | 2,408,262 | 2,949,115 | 5,357,377 | ||||||||||||||||||
9.4 | Interest Maintenance Reserve | 25,813,207 | 302,887,952 | 328,701,159 | ||||||||||||||||||
10. |
Commissions to agents due or accrued | 74,671 | 22,153,370 | 22,228,041 | ||||||||||||||||||
11. |
Commissions and expense allowances payable on reinsurance assumed | — | 1,870,790 | 1,870,790 | ||||||||||||||||||
12. |
General expenses due or accrued | 6,446,238 | 5,113,171 | 11,559,409 | ||||||||||||||||||
13 . |
Transfers to Separate Accounts due or accrued | (212,707,836 | ) | (2,957,359 | ) | (215,665,195 | ) | |||||||||||||||
14. |
Taxes, licenses and fees due or accrued, excluding federal income taxes | 4,350,885 | 23,288,386 | 27,639,271 | ||||||||||||||||||
15.1. |
Current federal and foreign income taxes | 17,160,329 | 0 | 17,160,329 | ||||||||||||||||||
15.2. |
Net deferred tax liability | 0 | 0 | 0 | ||||||||||||||||||
16. |
Unearned investment income | 9,736,113 | 5,639,380 | 15,375,493 | ||||||||||||||||||
17. |
Amounts withheld or retained by company as agent or trustee | 944,020 | 36,161,821 | 37,105,841 | ||||||||||||||||||
18. |
Amounts held for agents’ account, including agents’ credit balance | 120,119 | 1,072,781 | 1,192,900 | ||||||||||||||||||
19. |
Remittances and items not allocated | 10,776,233 | 4,159,410 | 14,935,643 | ||||||||||||||||||
20. |
Net adjustment in assets and liabilities due to foreign exchange rates | 0 | 0 | 0 | ||||||||||||||||||
21. |
Liability for benefits for employees and agents if not included above | 0 | 0 | 0 | ||||||||||||||||||
22. |
Borrowed money and interest thereon | 26,717,773 | 53,453,126 | 80,170,899 | ||||||||||||||||||
23. |
Dividends to stockholders declared and unpaid | 0 | 0 | 0 | ||||||||||||||||||
24. |
Miscellaneous liabilities: | |||||||||||||||||||||
24.1 | Asset valuation reserve | 17,642,203 | 243,971,748 | 261,613,951 | ||||||||||||||||||
24.2 | Reinsurance in unauthorized companies | 0 | 1,979,758 | 1,979,758 | ||||||||||||||||||
24.3 | Funds held under reinsurance treaties with unauthorized reinsurers | 78,160,850 | 4,274,528,544 | 4,352,689,394 | ||||||||||||||||||
24.4 | Payable to parent, subsidiaries and affiliates | 0 | 0 | 0 | ||||||||||||||||||
24.5 | Drafts outstanding | 0 | 0 | 0 | ||||||||||||||||||
24.6 | Liability for amounts held under uninsured accident and health plans | 0 | 0 | 0 | ||||||||||||||||||
24.7 | Funds held under coinsurance | 0 | (17,903 | ) | (17,903 | ) | ||||||||||||||||
24.8 | Derivatives | 4,100,401 | 25,231,400 | 29,331,801 | ||||||||||||||||||
24.9 | Payable for securities | 8,000,000 | 177 | 8,000,177 | ||||||||||||||||||
24.10 | Payable for securities lending | 88,265,219 | 322,209,046 | 410,474,265 | ||||||||||||||||||
24.11 | Capital notes and interest thereon | 0 | 0 | 0 | ||||||||||||||||||
25. |
Aggregate write-ins for liabilities | 0 | 155,827,442 | 0 | 155,827,442 | |||||||||||||||||
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26. |
Total liabilities excluding Separate Accounts business (Lines 1-25) | 2,045,395,822 | 16,382,346,744 | 0 | 18,427,742,566 | |||||||||||||||||
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27. |
From Separate Accounts Statement | 6,969,476,743 | 14,526,002,778 | 0 | 21,495,479,521 | |||||||||||||||||
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28. |
Total liabilities (Line 26 and 27) | $ | 9,014,872,565 | $ | 30,908,349,522 | $ | 0 | $ | 39,923,222,087 | |||||||||||||
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DETAILS OF LIABILITIES WRITE-INS (Line 25) |
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Payable for derivative cash collateral |
$ | 0 | $ | 150,114,562 | $ | 0 | $ | 150,114,562 | ||||||||||||||
Deferred derivative gain/loss |
0 | 3,616,019 | 3,616,019 | |||||||||||||||||||
Synthetic GICs and provision for liquidity reserves |
0 | 1,296,861 | 1,296,861 | |||||||||||||||||||
Interest payable on surplus notes |
0 | 800,000 | 800,000 | |||||||||||||||||||
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TOTAL OF LIABILITIES WRITE-INS FOR LINE 25 |
$ | 0 | $ | 155,827,442 | $ | 0 | $ | 155,827,442 | ||||||||||||||
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SURPLUS AND OTHER FUNDS |
||||||||||||||||||||||
29. |
Common capital stock | $ | 2,500,000 | $ | 10,137,150 | $ | (2,500,000 | ) | A | $ | 10,137,150 | |||||||||||
30. |
Preferred capital stock | 0 | 0 | 0 | 0 | |||||||||||||||||
31. |
Aggregate write-ins for other than special surplus funds | 0 | 0 | 0 | ||||||||||||||||||
32. |
Surplus notes | 0 | 160,000,000 | 160,000,000 | ||||||||||||||||||
33. |
Gross paid in and contributed surplus | 149,627,109 | 757,198,973 | 2,500,000 | A | 909,326,082 | ||||||||||||||||
34. |
Aggregate write-ins for special surplus funds | 0 | 0 | 0 | ||||||||||||||||||
35. |
Unassigned funds (surplus) | 253,319,743 | 43,888,596 | 0 | 297,208,339 | |||||||||||||||||
36. |
Less treasury stock, at cost: | |||||||||||||||||||||
36.1 | Common shares | 0 | 0 | 0 | ||||||||||||||||||
36.2 | Preferred shares | 0 | 0 | 0 | ||||||||||||||||||
37. |
Surplus (Total lines 31+32+33+34+35-36) | 402,946,852 | 961,087,569 | 2,500,000 | 1,366,534,421 | |||||||||||||||||
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38. |
Totals of Lines 29, 30 and 37 | 405,446,852 | 971,224,719 | 0 | 1,376,671,571 | |||||||||||||||||
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39. |
Totals of Lines 28 and 38 (Liabilities and Surplus) | $ | 9,420,319,417 | $ | 31,879,574,241 | $ | 0 | $ | 41,299,893,658 | |||||||||||||
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* | This balance sheet is an unaudited consolidation of the December 31, 2013 NAIC Annual Statement balance sheets for Western Reserve Life Assurance Co. of Ohio and Monumental Life Insurance Company. |
P-3
Pro Forma Unaudited Consolidated Statutory Income Statement
Western Reserve Life Assurance Co. of Ohio, Transamerica Premier Life Insurance Company
(f.k.a. Monumental Life Insurance Company)
For Year Ending December 31, 2013
TPLIC (MLIC) | ||||||||||||||||||||
Dec 31, 2013 | ||||||||||||||||||||
WRL | TPLIC (MLIC) | Eliminations | Reference | Totals | ||||||||||||||||
1 |
Premiums and annuity considerations for life and accident and health contracts | $ | 538,421,190 | $ | 1,586,270,078 | $ | 0 | $ | 2,124,691,268 | |||||||||||
2 |
Considerations for supplementary contracts with life contingencies | 2,669,815 | 120,206,309 | 122,876,124 | ||||||||||||||||
3 |
Net investment income | 92,490,364 | 729,328,837 | 821,819,201 | ||||||||||||||||
4 |
Amortization of Interest Maintenance Reserve (IMR) | 767,365 | 15,572,471 | 16,339,836 | ||||||||||||||||
5 |
Separate Accounts net gain from operations excluding unrealized gains or losses | 0 | 0 | 0 | ||||||||||||||||
6 |
Commissions and expense allowances on reinsurance ceded | (15,256,488 | ) | 209,399,681 | 194,143,193 | |||||||||||||||
7 |
Reserve adjustments on reinsurance ceded | (13,389,610 | ) | (226,237,769 | ) | (239,627,379 | ) | |||||||||||||
8 |
Miscellaneous Income: | |||||||||||||||||||
8.1 |
Income from fees associated with investment management, administration and contract guarantees from Separate Accounts | 291,415,707 | 40,882,844 | 332,298,551 | ||||||||||||||||
8.2 |
Charges and fees for deposit-type contracts | 0 | 0 | 0 | ||||||||||||||||
8.3 |
Aggregate write-ins for miscellaneous income | 23,275,893 | 15,358,736 | 0 | 38,634,629 | |||||||||||||||
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9 |
Totals (Lines 1 to 8.3) | 920,394,236 | 2,490,781,187 | 0 | 3,411,175,423 | |||||||||||||||
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10 |
Death benefits | 70,180,365 | 239,620,179 | 309,800,544 | ||||||||||||||||
11 |
Matured endowments (excluding guaranteed annual pure endowments) | 20,665 | 9,689,204 | 9,709,869 | ||||||||||||||||
12 |
Annuity benefits | 19,270,127 | 313,063,790 | 332,333,917 | ||||||||||||||||
13 |
Disability benefits and benefits under accident and health contracts | 1,580,884 | 272,277,322 | 273,858,206 | ||||||||||||||||
14 |
Coupons, guaranteed annual pure endowments and similar benefits | 0 | 0 | 0 | ||||||||||||||||
15 |
Surrender benefits and withdrawals for life contracts | 541,358,940 | 1,019,521,589 | 1,560,880,529 | ||||||||||||||||
16 |
Group conversions | 0 | 0 | 0 | ||||||||||||||||
17 |
Interest and adjustments on contract or deposit-type contract funds | 475,650 | 40,362,252 | 40,837,902 | ||||||||||||||||
18 |
Payments on supplementary contracts with life contingencies | 3,276,454 | 34,080,716 | 37,357,170 | ||||||||||||||||
19 |
Increase in aggregate reserves for life and accident and health contracts | 127,763,858 | (57,398,129 | ) | 0 | 70,365,729 | ||||||||||||||
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20 |
Totals (Lines 10 to 19) | 763,926,943 | 1,871,216,923 | 0 | 2,635,143,866 | |||||||||||||||
21 |
Commissions on premiums, annuity considerations and deposit-type contract funds | 155,583,798 | 275,345,715 | 430,929,513 | ||||||||||||||||
22 |
Commissions and expense allowances on reinsurance assumed | 0 | 42,743,256 | 42,743,256 | ||||||||||||||||
23 |
General insurance expenses | 72,084,952 | 220,220,369 | 292,305,321 | ||||||||||||||||
24 |
Insurance taxes, licenses and fees, excluding federal income taxes | 18,954,377 | 46,267,149 | 65,221,526 | ||||||||||||||||
25 |
Increase in loading on deferred and uncollected premiums | 77,142 | (2,835,678 | ) | (2,758,536 | ) | ||||||||||||||
26 |
Net transfers to or (from) Separate Accounts net of reinsurance | (280,807,082 | ) | (312,793,145 | ) | (593,600,227 | ) | |||||||||||||
27 |
Aggregate write-ins for deductions | 16,255,075 | 147,145,291 | 0 | 163,400,366 | |||||||||||||||
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28 |
Totals (Lines 20 to 27) | 746,075,205 | 2,287,309,880 | 0 | 3,033,385,085 | |||||||||||||||
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29 |
Net gain from operations before dividends to policyholders and federal income taxes (Line 9 minus Line 28) | 174,319,031 | 203,471,307 | 0 | 377,790,338 | |||||||||||||||
30 |
Dividends to policyholders | 20,746 | 1,258,647 | 1,279,393 | ||||||||||||||||
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31 |
Net gain from operations after dividends to policyholders and before federal income taxes (Line 29 minus Line 30) | 174,298,285 | 202,212,660 | 0 | 376,510,945 | |||||||||||||||
32 |
Federal and foreign income taxes incurred (excluding tax on capital gains) | 25,591,702 | 23,987,115 | 49,578,817 | ||||||||||||||||
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33 |
Net gain from operations after dividends to policyholders and federal income taxes and before realized capital gains or (losses) (Line 31 minus Line 32) | 148,706,583 | 178,225,545 | 0 | 326,932,128 | |||||||||||||||
34 |
Net realized capital gains or (losses) less capital gains tax and transferred to the IMR | 11,102,563 | (11,351,095 | ) | (248,532 | ) | ||||||||||||||
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35 |
Net income (Line 33 plus Line 34) | $ | 159,809,146 | $ | 166,874,450 | $ | 0 | $ | 326,683,596 | |||||||||||
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P-4
Pro Forma Unaudited Consolidated Statutory Income Statement
Western Reserve Life Assurance Co. of Ohio, Transamerica Premier Life Insurance Company
(f.k.a. Monumental Life Insurance Company)
For Year Ending December 31, 2013
TPLIC (MLIC) | ||||||||||||||||||||
Dec 31, 2013 | ||||||||||||||||||||
WRL | TPLIC (MLIC) | Eliminations | Reference | Totals | ||||||||||||||||
CAPITAL AND SURPLUS ACCOUNT |
||||||||||||||||||||
36 |
Capital and surplus, December 31, prior year | $ | 338,415,864 | $ | 811,320,218 | $ | 0 | $ | 1,149,736,082 | |||||||||||
37 |
Net income (Line 35) | 159,809,146 | 166,874,450 | 326,683,596 | ||||||||||||||||
38 |
Change in net unrealized capital gains (losses) | 4,188,807 | 96,957,088 | 101,145,895 | ||||||||||||||||
39 |
Change in net unrealized foreign exchange capital gain (loss) | 0 | (1,426,888 | ) | (1,426,888 | ) | ||||||||||||||
40 |
Change in net deferred income tax | (14,828,899 | ) | 1,497,207 | (13,331,692 | ) | ||||||||||||||
41 |
Change in nonadmitted assets and related items | (11,137,898 | ) | 3,579,313 | (7,558,585 | ) | ||||||||||||||
42 |
Change in liability for reinsurance in unauthorized companies | 264,898 | 187,382 | 452,280 | ||||||||||||||||
43 |
Change in reserve on account of change in valuation basis, (increase) or decrease | 0 | 0 | 0 | ||||||||||||||||
44 |
Change in asset valuation reserve | (5,603,238 | ) | (51,980,043 | ) | (57,583,281 | ) | |||||||||||||
45 |
Change in treasury stock | 0 | 0 | 0 | ||||||||||||||||
46 |
Surplus (contributed to) withdrawn from Separate Accounts during period | 0 | 0 | 0 | ||||||||||||||||
47 |
Other changes in surplus in Separate Accounts Statement | 0 | 0 | 0 | ||||||||||||||||
48 |
Change in surplus notes | 0 | 0 | 0 | ||||||||||||||||
49 |
Cumulative effect of changes in accounting principles | 0 | 0 | 0 | ||||||||||||||||
50 |
Capital changes: | |||||||||||||||||||
50.1 |
Paid in | 0 | 0 | (2,500,000 | ) | A | (2,500,000 | ) | ||||||||||||
50.2 |
Transferred from surplus (Stock Dividend) | 0 | 0 | 0 | ||||||||||||||||
50.3 |
Transferred to surplus | 0 | 0 | 0 | ||||||||||||||||
51 |
Surplus adjustment: | |||||||||||||||||||
51.1 |
Paid in | 0 | 135,925,882 | 2,500,000 | A | 138,425,882 | ||||||||||||||
51.2 |
Transferred to capital (Stock Dividend) | 0 | 0 | 0 | ||||||||||||||||
51.3 |
Transferred from capital | 0 | 0 | 0 | ||||||||||||||||
51.4 |
Change in surplus as a result of reinsurance | (15,661,828 | ) | (63,742,772 | ) | (79,404,600 | ) | |||||||||||||
52 |
Dividends to stockholders | (50,000,000 | ) | (135,000,000 | ) | (185,000,000 | ) | |||||||||||||
53 |
Aggregate write-ins for gains and losses in surplus | 0 | 7,032,882 | 7,032,882 | ||||||||||||||||
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54 |
Net change in capital and surplus (Lines 37 through 53) | 67,030,988 | 159,904,501 | 0 | 226,935,489 | |||||||||||||||
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55 |
Capital and surplus as of statement date (Lines 36 + 54) | $ | 405,446,852 | $ | 971,224,719 | $ | 0 | $ | 1,376,671,571 | |||||||||||
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DETAILS OF WRITE-INS (Line 8.3) |
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Miscellaneous income | $ | 18,494,295 | $ | 11,387,733 | $ | 0 | $ | 29,882,028 | ||||||||||||
Income earned on company owned life insurance | 3,607,401 | 2,504,067 | 6,111,468 | |||||||||||||||||
Surrender charges | 0 | 774,952 | 774,952 | |||||||||||||||||
Consideration on reinsurance recaptured | 1,174,197 | 691,984 | 1,866,181 | |||||||||||||||||
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TOTAL WRITE-INS FOR LINE 8.3 | $ | 23,275,893 | $ | 15,358,736 | $ | 0 | $ | 38,634,629 | ||||||||||||
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DETAILS OF WRITE-INS (Line 27) |
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Interest on surplus notes | $ | 0 | $ | 9,600,000 | $ | 0 | $ | 9,600,000 | ||||||||||||
Experience refunds | (580 | ) | 246,617 | 246,037 | ||||||||||||||||
Fines and penalties | 1,948 | 154,566 | 156,514 | |||||||||||||||||
Funds withheld ceded investment income | 16,253,707 | 138,639,686 | 154,893,393 | |||||||||||||||||
Reinsurance Allowances | 0 | 0 | 0 | |||||||||||||||||
Modco reserve adjustment | 0 | (10,254 | ) | (10,254 | ) | |||||||||||||||
Foreign currency translation adjustment | 0 | 0 | 0 | |||||||||||||||||
Change in synthetic GICs and provision for liquidity guarantees | 0 | (1,485,324 | ) | (1,485,324 | ) | |||||||||||||||
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TOTAL WRITE-INS FOR LINE 27 | $ | 16,255,075 | $ | 147,145,291 | $ | 0 | $ | 163,400,366 | ||||||||||||
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DETAILS OF WRITE-INS (Line 53) |
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Correction of error- change in nonadmitted deferred tax assets | $ | 0 | $ | 7,032,882 | $ | 0 | $ | 7,032,882 | ||||||||||||
0 | 0 | 0 | ||||||||||||||||||
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TOTAL WRITE-INS FOR LINE 53 | $ | 0 | $ | 7,032,882 | $ | 0 | $ | 7,032,882 | ||||||||||||
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|
* | This income statement is an unaudited consolidation of the December 31, 2013 NAIC Annual Statement income statements for Western Reserve Life Assurance Co. of Ohio and Monumental Life Insurance Company. |
P-5
Pro Forma Unaudited Consolidated Statutory Income Statement
Western Reserve Life Assurance Co. of Ohio, Transamerica Premier Life Insurance Company
(f.k.a. Monumental Life Insurance Company)
For Year Ending December 31, 2012
TPLIC (MLIC) | ||||||||||||||||||||
Dec 31, 2012 | ||||||||||||||||||||
WRL | TPLIC (MLIC) | Eliminations | Reference | Totals | ||||||||||||||||
1 |
Premiums and annuity considerations for life and accident and health contracts | $ | 486,919,136 | $ | 1,497,625,426 | $ | 0 | $ | 1,984,544,562 | |||||||||||
2 |
Considerations for supplementary contracts with life contingencies | (2,210,995 | ) | 24,091,339 | 21,880,344 | |||||||||||||||
3 |
Net investment income | 81,728,965 | 822,313,801 | 904,042,766 | ||||||||||||||||
4 |
Amortization of Interest Maintenance Reserve (IMR) | 1,516,879 | 11,028,711 | 12,545,590 | ||||||||||||||||
5 |
Separate Accounts net gain from operations excluding unrealized gains or losses | 0 | 0 | 0 | ||||||||||||||||
6 |
Commissions and expense allowances on reinsurance ceded | (3,414,666 | ) | 377,804,411 | 374,389,745 | |||||||||||||||
7 |
Reserve adjustments on reinsurance ceded | (24,697,078 | ) | (762,678,546 | ) | (787,375,624 | ) | |||||||||||||
8 |
Miscellaneous Income: | |||||||||||||||||||
8.1 |
Income from fees associated with investment management, administration and contract guarantees from Separate Accounts | 300,860,490 | 36,700,565 | 337,561,055 | ||||||||||||||||
8.2 |
Charges and fees for deposit-type contracts | 0 | 0 | 0 | ||||||||||||||||
8.3 |
Aggregate write-ins for miscellaneous income | 19,035,109 | 8,497,450 | 0 | 27,532,559 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
9 |
Totals (Lines 1 to 8.3) | 859,737,840 | 2,015,383,157 | 0 | 2,875,120,997 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
10 |
Death benefits | 70,668,289 | 183,519,981 | 254,188,270 | ||||||||||||||||
11 |
Matured endowments (excluding guaranteed annual pure endowments) | 22,545 | 11,213,370 | 11,235,915 | ||||||||||||||||
12 |
Annuity benefits | 21,113,855 | 306,294,955 | 327,408,810 | ||||||||||||||||
13 |
Disability benefits and benefits under accident and health contracts | 871,144 | 281,497,472 | 282,368,616 | ||||||||||||||||
14 |
Coupons, guaranteed annual pure endowments and similar benefits | 0 | 0 | 0 | ||||||||||||||||
15 |
Surrender benefits and withdrawals for life contracts | 423,202,502 | 824,936,262 | 1,248,138,764 | ||||||||||||||||
16 |
Group conversions | 0 | 0 | 0 | ||||||||||||||||
17 |
Interest and adjustments on contract or deposit-type contract funds | 649,406 | 36,904,416 | 37,553,822 | ||||||||||||||||
18 |
Payments on supplementary contracts with life contingencies | 2,238,541 | 18,437,164 | 20,675,705 | ||||||||||||||||
19 |
Increase in aggregate reserves for life and accident and health contracts | 35,664,048 | (483,691,447 | ) | 0 | (448,027,399 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
20 |
Totals (Lines 10 to 19) | 554,430,330 | 1,179,112,173 | 0 | 1,733,542,503 | |||||||||||||||
21 |
Commissions on premiums, annuity considerations and deposit-type contract funds | 160,308,691 | 258,895,773 | 419,204,464 | ||||||||||||||||
22 |
Commissions and expense allowances on reinsurance assumed | 0 | 48,695,771 | 48,695,771 | ||||||||||||||||
23 |
General insurance expenses | 74,016,655 | 218,791,750 | 292,808,405 | ||||||||||||||||
24 |
Insurance taxes, licenses and fees, excluding federal income taxes | 17,897,862 | 31,214,586 | 49,112,448 | ||||||||||||||||
25 |
Increase in loading on deferred and uncollected premiums | (54,095 | ) | (4,719,414 | ) | (4,773,509 | ) | |||||||||||||
26 |
Net transfers to or (from) Separate Accounts net of reinsurance | (107,485,224 | ) | (189,380,197 | ) | (296,865,421 | ) | |||||||||||||
27 |
Aggregate write-ins for deductions | 12,038,761 | 216,975,741 | 0 | 229,014,502 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
28 |
Totals (Lines 20 to 27) | 711,152,980 | 1,759,586,183 | 0 | 2,470,739,163 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
29 |
Net gain from operations before dividends to policyholders and federal income taxes (Line 9 minus Line 28) | 148,584,860 | 255,796,974 | 0 | 404,381,834 | |||||||||||||||
30 |
Dividends to policyholders | 21,801 | 1,279,154 | 1,300,955 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
31 |
Net gain from operations after dividends to policyholders and before federal income (Line 29 minus Line 30) | 148,563,059 | 254,517,820 | 0 | 403,080,879 | |||||||||||||||
32 |
Federal and foreign income taxes incurred (excluding tax on capital gains) | 13,976,714 | 103,095,420 | 117,072,134 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
33 |
Net gain from operations after dividends to policyholders and federal income taxes and before realized capital gains or (losses) (Line 31 minus Line 32) | 134,586,345 | 151,422,400 | 0 | 286,008,745 | |||||||||||||||
34 |
Net realized capital gains or (losses) less capital gains tax and transferred to the IMR | (4,590,812 | ) | (7,876,251 | ) | (12,467,063 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
35 |
Net income (Line 33 plus Line 34) | $ | 129,995,533 | $ | 143,546,149 | $ | 0 | $ | 273,541,682 | |||||||||||
|
|
|
|
|
|
|
|
|
P-6
Pro Forma Unaudited Consolidated Statutory Income Statement
Western Reserve Life Assurance Co. of Ohio, Transamerica Premier Life Insurance Company
(f.k.a. Monumental Life Insurance Company)
For Year Ending December 31, 2012
TPLIC (MLIC) | ||||||||||||||||||||
Dec 31, 2012 | ||||||||||||||||||||
WRL | TPLIC (MLIC) | Eliminations | Reference | Totals | ||||||||||||||||
CAPITAL AND SURPLUS ACCOUNT |
||||||||||||||||||||
36 |
Capital and surplus, December 31, prior year | $ | 275,198,023 | $ | 980,853,380 | $ | 0 | $ | 1,256,051,403 | |||||||||||
37 |
Net income (Line 35) | 129,995,533 | 143,546,149 | 273,541,682 | ||||||||||||||||
38 |
Change in net unrealized capital gains (losses) | 117,589 | (34,637,639 | ) | (34,520,050 | ) | ||||||||||||||
39 |
Change in net unrealized foreign exchange capital gain (loss) | 0 | 1,378,866 | 1,378,866 | ||||||||||||||||
40 |
Change in net deferred income tax | (12,436,991 | ) | 822,923 | (11,614,068 | ) | ||||||||||||||
41 |
Change in nonadmitted assets and related items | (9,918,907 | ) | (29,675,578 | ) | (39,594,485 | ) | |||||||||||||
42 |
Change in liability for reinsurance in unauthorized companies | — | 500,492 | 500,492 | ||||||||||||||||
43 |
Change in reserve on account of change in valuation basis, (increase) or decrease | 0 | 0 | 0 | ||||||||||||||||
44 |
Change in asset valuation reserve | (3,200,787 | ) | (9,467,487 | ) | (12,668,274 | ) | |||||||||||||
45 |
Change in treasury stock | 0 | 0 | 0 | ||||||||||||||||
46 |
Surplus (contributed to) withdrawn from Separate Accounts during period | 0 | 0 | 0 | ||||||||||||||||
47 |
Other changes in surplus in Separate Accounts Statement | 0 | 0 | 0 | ||||||||||||||||
48 |
Change in surplus notes | 0 | 0 | 0 | ||||||||||||||||
49 |
Cumulative effect of changes in accounting principles | 0 | 0 | 0 | ||||||||||||||||
50 |
Capital changes: | |||||||||||||||||||
50.1 |
Paid in | 0 | 0 | (2,500,000 | ) | A | (2,500,000 | ) | ||||||||||||
50.2 |
Transferred from surplus (Stock Dividend) | 0 | 0 | 0 | ||||||||||||||||
50.3 |
Transferred to surplus | 0 | 0 | 0 | ||||||||||||||||
51 |
Surplus adjustment: | |||||||||||||||||||
51.1 |
Paid in | 0 | 481,720 | 2,500,000 | A | 2,981,720 | ||||||||||||||
51.2 |
Transferred to capital (Stock Dividend) | 0 | 0 | 0 | ||||||||||||||||
51.3 |
Transferred from capital | 0 | 0 | 0 | ||||||||||||||||
51.4 |
Change in surplus as a result of reinsurance | (33,519,286 | ) | 207,517,392 | 173,998,106 | |||||||||||||||
52 |
Dividends to stockholders | (27,000,000 | ) | (450,000,000 | ) | (477,000,000 | ) | |||||||||||||
53 |
Aggregate write-ins for gains and losses in surplus | — | — | 0 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
54 |
Net change in capital and surplus (Lines 37 through 53) | 44,037,151 | (169,533,162 | ) | 0 | (125,496,011 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
55 |
Capital and surplus as of statement date (Lines 36 + 54) | $ | 319,235,174 | $ | 811,320,218 | $ | 0 | $ | 1,130,555,392 | |||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
DETAILS OF WRITE-INS (Line 8.3) |
||||||||||||||||||||
Miscellaneous income | $ | 17,160,566 | $ | 5,094,642 | $ | 0 | $ | 22,255,208 | ||||||||||||
Income earned on company owned life insurance | 1,874,543 | 2,445,497 | 4,320,040 | |||||||||||||||||
Surrender charges | 0 | 922,816 | 922,816 | |||||||||||||||||
Consideration on reinsurance recaptured | 0 | 34,495 | 34,495 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
TOTAL WRITE-INS FOR LINE 8.3 | $ | 19,035,109 | $ | 8,497,450 | $ | 0 | $ | 27,532,559 | ||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
DETAILS OF WRITE-INS (Line 27) |
||||||||||||||||||||
Interest on surplus notes | $ | 0 | $ | 9,600,000 | $ | 0 | $ | 9,600,000 | ||||||||||||
Experience refunds | (112 | ) | (319,009 | ) | (319,121 | ) | ||||||||||||||
Fines and penalties | 989 | 4,535 | 5,524 | |||||||||||||||||
Funds withheld ceded investment income | 12,037,884 | 213,972,859 | 226,010,743 | |||||||||||||||||
Reinsurance Allowances | 0 | 5,385 | 5,385 | |||||||||||||||||
Modco reserve adjustment | 0 | (10,045 | ) | (10,045 | ) | |||||||||||||||
Foreign currency translation adjustment | 0 | (4,228,000 | ) | (4,228,000 | ) | |||||||||||||||
Change in synthetic GICs and provision for liquidity guarantees | 0 | (2,049,984 | ) | (2,049,984 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
TOTAL WRITE-INS FOR LINE 27 | $ | 12,038,761 | $ | 216,975,741 | $ | 0 | $ | 229,014,502 | ||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
DETAILS OF WRITE-INS (Line 53) |
||||||||||||||||||||
$ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||
0 | 0 | 0 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
TOTAL WRITE-INS FOR LINE 53 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||
|
|
|
|
|
|
|
|
|
* | This income statement is an unaudited consolidation of the December 31, 2012 NAIC Annual Statement income statements for Western Reserve Life Assurance Co. of Ohio and Monumental Life Insurance Company. |
P-7
Pro Forma Unaudited Consolidated Statutory Income Statement
Western Reserve Life Assurance Co. of Ohio, Transamerica Premier Life Insurance Company
(f.k.a. Monumental Life Insurance Company)
For Year Ending December 31, 2011
TPLIC (MLIC) | ||||||||||||||||||||
Dec 31, 2011 | ||||||||||||||||||||
WRL | TPLIC (MLIC) | Eliminations | Reference | Totals | ||||||||||||||||
1 |
Premiums and annuity considerations for life and accident and health contracts | $ | 479,669,678 | $ | 1,391,712,990 | $ | 0 | $ | 1,871,382,668 | |||||||||||
2 |
Considerations for supplementary contracts with life contingencies | 929,177 | 11,508,812 | 12,437,989 | ||||||||||||||||
3 |
Net investment income | 80,031,434 | 842,041,493 | 922,072,927 | ||||||||||||||||
4 |
Amortization of Interest Maintenance Reserve (IMR) | 1,325,917 | 4,411,559 | 5,737,476 | ||||||||||||||||
5 |
Separate Accounts net gain from operations excluding unrealized gains or losses | 0 | 0 | 0 | ||||||||||||||||
6 |
Commissions and expense allowances on reinsurance ceded | (41,716,042 | ) | 529,883,046 | 488,167,004 | |||||||||||||||
7 |
Reserve adjustments on reinsurance ceded | (31,044,498 | ) | (151,483,511 | ) | (182,528,009 | ) | |||||||||||||
8 |
Miscellaneous Income: | |||||||||||||||||||
8.1 |
Income from fees associated with investment management, administration and contract guarantees from Separate Accounts | 312,161,423 | 34,847,072 | 347,008,495 | ||||||||||||||||
8.2 |
Charges and fees for deposit-type contracts | 0 | 0 | 0 | ||||||||||||||||
8.3 |
Aggregate write-ins for miscellaneous income | 20,019,069 | 8,884,717 | 0 | 28,903,786 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
9 |
Totals (Lines 1 to 8.3) | 821,376,158 | 2,671,806,178 | 0 | 3,493,182,336 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
10 |
Death benefits | 64,792,471 | 183,623,096 | 248,415,567 | ||||||||||||||||
11 |
Matured endowments (excluding guaranteed annual pure endowments) | 20,646 | 9,811,580 | 9,832,226 | ||||||||||||||||
12 |
Annuity benefits | 25,823,646 | 275,877,445 | 301,701,091 | ||||||||||||||||
13 |
Disability benefits and benefits under accident and health contracts | 1,214,897 | 305,136,009 | 306,350,906 | ||||||||||||||||
14 |
Coupons, guaranteed annual pure endowments and similar benefits | 0 | 0 | 0 | ||||||||||||||||
15 |
Surrender benefits and withdrawals for life contracts | 614,466,490 | 731,102,194 | 1,345,568,684 | ||||||||||||||||
16 |
Group conversions | 0 | 0 | 0 | ||||||||||||||||
17 |
Interest and adjustments on contract or deposit-type contract funds | 797,706 | 40,623,746 | 41,421,452 | ||||||||||||||||
18 |
Payments on supplementary contracts with life contingencies | 1,333,270 | 17,015,971 | 18,349,241 | ||||||||||||||||
19 |
Increase in aggregate reserves for life and accident and health contracts | 85,582,954 | (92,560,336 | ) | 0 | (6,977,382 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
20 |
Totals (Lines 10 to 19) | 794,032,080 | 1,470,629,705 | 0 | 2,264,661,785 | |||||||||||||||
21 |
Commissions on premiums, annuity considerations and deposit-type contract funds | 138,136,489 | 253,225,339 | 391,361,828 | ||||||||||||||||
22 |
Commissions and expense allowances on reinsurance assumed | 0 | 67,337,377 | 67,337,377 | ||||||||||||||||
23 |
General insurance expenses | 84,131,616 | 223,932,675 | 308,064,291 | ||||||||||||||||
24 |
Insurance taxes, licenses and fees, excluding federal income taxes | 14,478,324 | 28,925,224 | 43,403,548 | ||||||||||||||||
25 |
Increase in loading on deferred and uncollected premiums | 11,427 | (4,278,103 | ) | (4,266,676 | ) | ||||||||||||||
26 |
Net transfers to or (from) Separate Accounts net of reinsurance | (258,667,339 | ) | (136,669,812 | ) | (395,337,151 | ) | |||||||||||||
27 |
Aggregate write-ins for deductions | 39,366,107 | 225,231,807 | 0 | 264,597,914 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
28 |
Totals (Lines 20 to 27) | 811,488,704 | 2,128,334,212 | 0 | 2,939,822,916 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
29 |
Net gain from operations before dividends to policyholders and federal income taxes (Line 9 minus Line 28) | 9,887,454 | 543,471,966 | 0 | 553,359,420 | |||||||||||||||
30 |
Dividends to policyholders | 23,797 | 1,341,907 | 1,365,704 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
31 |
Net gain from operations after dividends to policyholders and before federal income taxes (Line 29 minus Line 30) | 9,863,657 | 542,130,059 | 0 | 551,993,716 | |||||||||||||||
32 |
Federal and foreign income taxes incurred (excluding tax on capital gains) | 9,379,020 | 31,580,088 | 40,959,108 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
33 |
Net gain from operations after dividends to policyholders and federal income taxes and before realized capital gains or (losses) (Line 31 minus Line 32) | 484,637 | 510,549,971 | 0 | 511,034,608 | |||||||||||||||
34 |
Net realized capital gains or (losses) less capital gains tax and transferred to the IMR | (12,431,038 | ) | (28,842,181 | ) | (41,273,219 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
35 |
Net income (Line 33 plus Line 34) | $ | (11,946,401 | ) | $ | 481,707,790 | $ | 0 | $ | 469,761,389 | ||||||||||
|
|
|
|
|
|
|
|
|
P-8
Pro Forma Unaudited Consolidated Statutory Income Statement
Western Reserve Life Assurance Co. of Ohio, Transamerica Premier Life Insurance Company
(f.k.a. Monumental Life Insurance Company)
For Year Ending December 31, 2011
TPLIC (MLIC) | ||||||||||||||||||||
Dec 31, 2011 | ||||||||||||||||||||
WRL | TPLIC (MLIC) | Eliminations | Reference | Totals | ||||||||||||||||
CAPITAL AND SURPLUS ACCOUNT |
||||||||||||||||||||
36 |
Capital and surplus, December 31, prior year | $ | 511,264,493 | $ | 1,174,423,154 | $ | 0 | $ | 1,685,687,647 | |||||||||||
37 |
Net income (Line 35) | (11,946,401 | ) | 481,707,790 | 469,761,389 | |||||||||||||||
38 |
Change in net unrealized capital gains (losses) | (3,720,586 | ) | (12,830,567 | ) | (16,551,153 | ) | |||||||||||||
39 |
Change in net unrealized foreign exchange capital gain (loss) | 0 | 747,269 | 747,269 | ||||||||||||||||
40 |
Change in net deferred income tax | 18,336,654 | 218,164,768 | 236,501,422 | ||||||||||||||||
41 |
Change in nonadmitted assets and related items | (27,615,648 | ) | (246,969,162 | ) | (274,584,810 | ) | |||||||||||||
42 |
Change in liability for reinsurance in unauthorized companies | (104,262 | ) | (233,738 | ) | (338,000 | ) | |||||||||||||
43 |
Change in reserve on account of change in valuation basis, (increase) or decrease | 0 | 0 | 0 | ||||||||||||||||
44 |
Change in asset valuation reserve | 378,352 | (30,846,724 | ) | (30,468,372 | ) | ||||||||||||||
45 |
Change in treasury stock | 0 | 0 | 0 | ||||||||||||||||
46 |
Surplus (contributed to) withdrawn from Separate Accounts during period | 0 | 0 | 0 | ||||||||||||||||
47 |
Other changes in surplus in Separate Accounts Statement | 0 | 0 | 0 | ||||||||||||||||
48 |
Change in surplus notes | 0 | 0 | 0 | ||||||||||||||||
49 |
Cumulative effect of changes in accounting principles | 0 | 0 | 0 | ||||||||||||||||
50 |
Capital changes: | |||||||||||||||||||
50.1 |
Paid in | 0 | 0 | (2,500,000 | ) | A | (2,500,000 | ) | ||||||||||||
50.2 |
Transferred from surplus (Stock Dividend) | 0 | 0 | 0 | ||||||||||||||||
50.3 |
Transferred to surplus | 0 | 0 | 0 | ||||||||||||||||
51 |
Surplus adjustment: | |||||||||||||||||||
51.1 |
Paid in | 0 | 175,092 | 2,500,000 | A | 2,675,092 | ||||||||||||||
51.2 |
Transferred to capital (Stock Dividend) | 0 | 0 | 0 | ||||||||||||||||
51.3 |
Transferred from capital | 0 | 0 | 0 | ||||||||||||||||
51.4 |
Change in surplus as a result of reinsurance | 41,629,207 | (321,586,829 | ) | (279,957,622 | ) | ||||||||||||||
52 |
Dividends to stockholders | (250,000,000 | ) | (300,000,000 | ) | (550,000,000 | ) | |||||||||||||
53 |
Aggregate write-ins for gains and losses in surplus | (3,023,786 | ) | 18,102,327 | 15,078,541 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
54 |
Net change in capital and surplus (Lines 37 through 53) | (236,066,470 | ) | (193,569,774 | ) | 0 | (429,636,244 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
55 |
Capital and surplus as of statement date (Lines 36 + 54) | $ | 275,198,023 | $ | 980,853,380 | $ | 0 | $ | 1,256,051,403 | |||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
DETAILS OF WRITE-INS (Line 8.3) |
||||||||||||||||||||
Miscellaneous income | $ | 17,739,643 | $ | 5,350,789 | $ | 0 | $ | 23,090,432 | ||||||||||||
Income earned on company owned life insurance | 2,279,426 | 2,386,749 | 4,666,175 | |||||||||||||||||
Surrender charges | 0 | 1,147,179 | 1,147,179 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
TOTAL WRITE-INS FOR LINE 8.3 | $ | 20,019,069 | $ | 8,884,717 | $ | 0 | $ | 28,903,786 | ||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
DETAILS OF WRITE-INS (Line 27) |
||||||||||||||||||||
Interest on surplus notes | $ | 0 | $ | 9,600,000 | $ | 0 | $ | 9,600,000 | ||||||||||||
Experience refunds | 0 | (140,105 | ) | (140,105 | ) | |||||||||||||||
Fines and penalties | 514 | 18,999 | 19,513 | |||||||||||||||||
Funds withheld ceded investment income | 10,065,593 | 211,608,375 | 221,673,968 | |||||||||||||||||
Reinsurance Allowances | 0 | 6,173 | 6,173 | |||||||||||||||||
Modco reserve adjustment | 0 | (21,045 | ) | (21,045 | ) | |||||||||||||||
Consideration on reinsurance recaptured | 29,300,000 | 3,039,400 | 32,339,400 | |||||||||||||||||
Change in synthetic GICs and provision for liquidity guarantees | 0 | 1,120,010 | 1,120,010 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
TOTAL WRITE-INS FOR LINE 27 | $ | 39,366,107 | $ | 225,231,807 | $ | 0 | $ | 264,597,914 | ||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
DETAILS OF WRITE-INS (Line 53) |
||||||||||||||||||||
Change in admitted deferred tax assets pursuant to SSAP No. 10R | $ | (3,023,786 | ) | $ | 23,738,700 | $ | 0 | $ | 20,714,914 | |||||||||||
Correction of error—funds withheld investment income | 0 | (5,636,373 | ) | (5,636,373 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
TOTAL WRITE-INS FOR LINE 53 | $ | (3,023,786 | ) | $ | 18,102,327 | $ | 0 | $ | 15,078,541 | |||||||||||
|
|
|
|
|
|
|
|
|
* | This income statement is an unaudited consolidation of the December 31, 2011 NAIC Annual Statement income statements for Western Reserve Life Assurance Co. of Ohio and Monumental Life Insurance Company. |
P-9
Pro Forma Unaudited Consolidated Statutory Balance Sheet and Income Statement
Western Reserve Life Assurance Co. of Ohio, Transamerica Premier Life Insurance Company
(f.k.a. Monumental Life Insurance Company)
Eliminations:
The following eliminations have been made to the combined WRL and TPLIC financial statements to more accurately depict the resultant combination of the entities in accordance with statutory accounting principles.
A - Reflect cancellation of WRL’s common stock held by AEGON USA, LLC:
WRL common capital stock owned by AEGON USA, LLC prior to merger |
$ | 2,500,000 |
WRL’s common shares shall be deemed cancelled by operation of law. As AEGON USA, LLC owns 100% of the common shares of Commonwealth General Corporation (CGC), a Delaware holding company, who in turn will own 100% of TPLIC, and AEGON USA also owns 100% of WRL, AEGON USA is indifferent as to the consideration issued in the merger, since such issuance is meaningless to AEGON USA as an economic matter. Under these circumstances, AEGON USA agrees to accept one share of common stock of CGC in exchange for its agreement to merge WRL into TPLIC.
Overview of eliminations by statutory financial lines:
Balance Sheet Adjustments: |
||||
Surplus and Other Fund Adjustments: |
||||
Line 29 - Common capital stock |
$ | (2,500,000 | ) | |
Line 30 - Preferred capital stock |
- | |||
Line 33 - Gross paid in & contributed surplus |
2,500,000 | |||
Line 35 - Unassigned |
— | |||
|
|
|||
Total Surplus and Other Fund Adjustments |
$ | — | ||
|
|
|||
Income Statement Adjustments: |
||||
Net Income Adjustments: |
||||
$ | — | |||
|
|
|||
Total Net Income Adjustments |
$ | — | ||
|
|
|||
Capital and Surplus Adjustments: |
||||
Line 36 - Capital and surplus as of the prior year |
$ | — | ||
Line 37 - Net Income |
— | |||
Line 38 - Change in net unrealized capital gains (losses) |
— | |||
Line 41 - Change in non-admitted assets and related items |
— | |||
Line 50.1 - Capital paid in |
(2,500,000 | ) | ||
Line 51.1 - Surplus paid in |
2,500,000 | |||
|
|
|||
Total Change in Capital and Surplus Adjustments |
$ | — | ||
|
|
P-10
F I N A N C I A L S T A T E M E N T S A N D S C H E D U L E S – S T A T U T O R Y B A S I S
Western Reserve Life Assurance Co. of Ohio
Years Ended December 31, 2013, 2012 (restated) and 2011
Western Reserve Life Assurance Co. of Ohio
Financial Statements and Schedules – Statutory Basis
Years Ended December 31, 2013, 2012 (restated) and 2011
1 | ||||
Audited Financial Statements |
||||
3 | ||||
5 | ||||
Statements of Changes in Capital and Surplus – Statutory Basis |
6 | |||
8 | ||||
10 | ||||
Summary of Investments – Other Than Investments in Related Parties |
70 | |||
71 | ||||
72 |
Report of Independent Auditors
The Board of Directors
Western Reserve Life Assurance Co. of Ohio
We have audited the accompanying statutory-basis financial statements of Western Reserve Life Assurance Company of Ohio, which comprise the balance sheets as of December 31, 2013 and 2012, the related statutory-basis statements of operations, changes in capital and surplus, and cash flow for each of the three years in the period ended December 31, 2013, and the related notes to the financial statements. Our audits also included the statutory-basis financial statement schedules required by Regulation S-X, Article 7.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in conformity with accounting practices prescribed or permitted by the Ohio Department of Insurance. Management also is responsible for the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles
As described in Note 1, to meet the requirements of Ohio the financial statements have been prepared in conformity with accounting practices prescribed or permitted by the Ohio Department of Insurance, which practices differ from U.S. generally accepted accounting principles. The variances between such practices and U.S. generally accepted accounting principles are described in Note 1. The effects on the accompanying financial statements of these variances are not reasonably determinable but are presumed to be material.
1
Adverse Opinion on U.S. Generally Accepted Accounting Principles
In our opinion, because of the effects of the matter described in the preceding paragraph, the statutory-basis financial statements referred to above do not present fairly, in conformity with U.S. generally accepted accounting principles, the financial position of Western Reserve Life Assurance Co. of Ohio at December 31, 2013 and 2012, or the results of its operations or its cash flows for each of the three years ended December 31, 2013.
Opinion on Statutory-Basis of Accounting
However, in our opinion, the statutory-basis financial statements referred to above present fairly, in all material respects, the financial position of Western Reserve Life Assurance Co. of Ohio at December 31, 2013 and 2012, and the results of its operations and its cash flows for the three years ended December 31, 2013 in conformity with accounting practices prescribed or permitted by the Ohio Department of Insurance. Also in our opinion, the related financial statement schedules, when considered in relation to the basic statutory-basis financial statements taken as a whole, present fairly in all material respects the information set forth therein.
Restatement
As discussed in Note 1 to the financial statements, the 2012 financial statements have been restated to correct an error in accounting for affiliated reinsurance receivables. Our opinion is not modified with respect to this matter.
2
Western Reserve Life Assurance Co. of Ohio
Balance Sheets – Statutory Basis
(Dollars in Thousands, Except per Share Amounts)
December 31 | ||||||||
2013 | 2012 | |||||||
Restated | ||||||||
Admitted assets |
||||||||
Cash and invested assets: |
||||||||
Bonds |
$ | 1,448,053 | $ | 1,116,229 | ||||
Common stocks: |
||||||||
Affiliated entities (cost: 2013- $24,343; 2012- $22,921) |
35,348 | 31,844 | ||||||
Unaffiliated entities (cost: 2013- $0; 2012- $117) |
— | 117 | ||||||
Mortgage loans on real estate |
77,805 | 50,714 | ||||||
Real estate, at cost less accumulated depreciation (2013 - 14,745; 2012 - $12,942) |
||||||||
Home office properties |
27,382 | 35,209 | ||||||
Properties held for sale |
6,259 | — | ||||||
Cash, cash equivalents and short-term investments |
110,547 | 184,234 | ||||||
Policy loans |
442,800 | 411,101 | ||||||
Securities lending reinvested collateral assets |
88,265 | 84,899 | ||||||
Other invested assets |
3,012 | 3,293 | ||||||
|
|
|
|
|||||
Total cash and invested assets |
2,239,471 | 1,917,640 | ||||||
Net deferred income tax asset |
86,385 | 105,141 | ||||||
Premiums deferred and uncollected |
2,765 | 2,735 | ||||||
Reinsurance receivable |
1,910 | 3,358 | ||||||
Receivable from parent, subsidiaries and affiliates |
19,859 | 10,992 | ||||||
Investment income due and accrued |
17,361 | 14,224 | ||||||
Cash surrender value of life insurance policies |
75,881 | 75,295 | ||||||
Other admitted assets |
7,210 | 7,263 | ||||||
Separate account assets |
6,969,477 | 6,477,241 | ||||||
|
|
|
|
|||||
Total admitted assets |
$ | 9,420,319 | $ | 8,613,889 | ||||
|
|
|
|
3
Western Reserve Life Assurance Co. of Ohio
Balance Sheets – Statutory Basis (continued)
(Dollars in Thousands, Except per Share Amounts)
December 31 | ||||||||
2013 | 2012 | |||||||
Restated | ||||||||
Liabilities and capital and surplus |
||||||||
Liabilities: |
||||||||
Aggregate reserves for policies and contracts: |
||||||||
Life |
$ | 1,520,248 | $ | 1,300,741 | ||||
Annuity |
389,341 | 481,279 | ||||||
Accident and health |
1,158 | 963 | ||||||
Life policy and contract claim reserves |
25,085 | 26,339 | ||||||
Liability for deposit-type contracts |
21,520 | 14,647 | ||||||
Other policyholders’ funds |
35 | 41 | ||||||
Interest maintenance reserve |
25,813 | 28,678 | ||||||
Remittances and items not allocated |
10,776 | 9,670 | ||||||
Federal income taxes payable |
17,160 | 17,951 | ||||||
Transfers from separate accounts due or accrued |
(212,708 | ) | (285,883 | ) | ||||
Asset valuation reserve |
17,642 | 12,039 | ||||||
Reinsurance in unauthorized companies |
— | 265 | ||||||
Funds held under coinsurance and other reinsurance treaties |
78,161 | 54,464 | ||||||
Unearned investment income |
9,736 | 9,509 | ||||||
Payable for securities |
8,000 | — | ||||||
Payable for securities lending |
88,265 | 83,058 | ||||||
Derivatives |
4,100 | 1,841 | ||||||
Other liabilities |
41,062 | 42,630 | ||||||
Separate account liabilities |
6,969,477 | 6,477,241 | ||||||
|
|
|
|
|||||
Total liabilities |
9,014,871 | 8,275,473 | ||||||
Capital and surplus: |
||||||||
Common stock, $1.00 par value, 3,000,000 shares authorized and 2,500,000 shares issued and outstanding |
2,500 | 2,500 | ||||||
Paid-in surplus |
149,627 | 149,627 | ||||||
Unassigned surplus |
253,321 | 186,289 | ||||||
|
|
|
|
|||||
Total capital and surplus |
405,448 | 338,416 | ||||||
|
|
|
|
|||||
Total liabilities and capital and surplus |
$ | 9,420,319 | $ | 8,613,889 | ||||
|
|
|
|
See accompanying notes.
4
Western Reserve Life Assurance Co. of Ohio
Statement of Operations – Statutory Basis
(Dollars in Thousands, Except per Share Amounts)
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Restated | ||||||||||||
Revenues: |
||||||||||||
Premiums and other considerations, net of reinsurance: |
||||||||||||
Life |
$ | 525,693 | $ | 469,503 | $ | 456,926 | ||||||
Annuity |
12,952 | 13,547 | 22,244 | |||||||||
Accident and health |
2,446 | 1,658 | 1,429 | |||||||||
Net investment income |
92,490 | 81,729 | 80,031 | |||||||||
Amortization of interest maintenance reserve |
767 | 1,516 | 1,326 | |||||||||
Commissions and expense allowances on reinsurance ceded |
(15,257 | ) | (8,070 | ) | (41,716 | ) | ||||||
Reserve adjustments on reinsurance ceded |
(13,390 | ) | (13,198 | ) | (31,044 | ) | ||||||
Income from fees associated with investment management, administration and contract guarantees for separate accounts |
291,416 | 300,860 | 312,161 | |||||||||
Income earned on company owned life insurance |
3,607 | 1,875 | 2,279 | |||||||||
Consideration received on reinsurance recapture |
1,174 | — | — | |||||||||
Income from administrative service agreement with affiliate |
24,966 | 23,814 | 24,411 | |||||||||
Other |
(6,470 | ) | (6,652 | ) | (6,671 | ) | ||||||
|
|
|
|
|
|
|||||||
920,394 | 866,582 | 821,376 | ||||||||||
Benefits and expenses: |
||||||||||||
Benefits paid or provided for: |
||||||||||||
Life |
70,180 | 70,941 | 64,792 | |||||||||
Surrender benefits |
541,359 | 423,203 | 418,362 | |||||||||
Annuity benefits |
19,270 | 21,114 | 25,824 | |||||||||
Other benefits |
5,354 | 3,781 | 3,367 | |||||||||
Increase (decrease) in aggregate reserves for policies and contracts: |
||||||||||||
Life |
219,507 | 94,292 | 66,540 | |||||||||
Annuity |
(91,938 | ) | (59,074 | ) | 19,085 | |||||||
Accident and health |
195 | 446 | (42 | ) | ||||||||
|
|
|
|
|
|
|||||||
763,927 | 554,703 | 597,928 | ||||||||||
Insurance expenses: |
||||||||||||
Commissions |
155,584 | 160,309 | 138,136 | |||||||||
General insurance expenses |
72,085 | 74,017 | 84,132 | |||||||||
Taxes, licenses and fees |
18,954 | 17,898 | 14,478 | |||||||||
Net transfers from separate accounts |
(280,807 | ) | (107,485 | ) | (62,563 | ) | ||||||
Consideration paid on reinsurance recapture |
— | — | 29,300 | |||||||||
Other expenses |
16,332 | 11,984 | 10,077 | |||||||||
|
|
|
|
|
|
|||||||
(17,852 | ) | 156,723 | 213,560 | |||||||||
|
|
|
|
|
|
|||||||
Total benefits and expenses |
746,075 | 711,426 | 811,488 | |||||||||
|
|
|
|
|
|
|||||||
Gain from operations before dividends to policyholders, federal income tax expense and net realized capital gains/losses on investments |
174,319 | 155,156 | 9,888 | |||||||||
Dividends to policyholders |
21 | 22 | 24 | |||||||||
|
|
|
|
|
|
|||||||
Gain from operations before federal income tax expense and net realized capital gains/losses on investments |
174,298 | 155,134 | 9,864 | |||||||||
Federal income tax expense |
25,592 | 20,548 | 9,379 | |||||||||
|
|
|
|
|
|
|||||||
Gain from operations before net realized capital gains/losses on investments |
148,706 | 134,586 | 485 | |||||||||
Net realized capital gain/ (loss) on investments (net of related federal income taxes and amounts tranferred to/from interest maintenance reserve) |
11,103 | (4,591 | ) | (12,431 | ) | |||||||
|
|
|
|
|
|
|||||||
Net income (loss) |
$ | 159,809 | $ | 129,995 | $ | (11,946 | ) | |||||
|
|
|
|
|
|
See accompanying notes.
5
Western Reserve Life Assurance Co. of Ohio
Statements of Changes in Capital and Surplus – Statutory Basis
(Dollars in Thousands)
Common Stock |
Aggregate Write-ins for Other than Special Surplus Funds |
Paid-in Surplus |
Unassigned Surplus |
Total Capital and Surplus |
||||||||||||||||
Balance at January 1, 2011 |
$ | 2,500 | $ | 70,527 | $ | 149,627 | $ | 288,610 | $ | 511,264 | ||||||||||
Net loss |
— | — | — | (11,946 | ) | (11,946 | ) | |||||||||||||
Change in net unrealized capital gains and losses, net of tax |
— | — | — | (3,720 | ) | (3,720 | ) | |||||||||||||
Change in nonadmitted assets |
— | — | — | (27,616 | ) | (27,616 | ) | |||||||||||||
Change in asset valuation reserve |
— | — | — | 378 | 378 | |||||||||||||||
Change in liability for reinsurance in unauthorized companies |
— | — | — | (104 | ) | (104 | ) | |||||||||||||
Dividend to stockholder |
— | — | — | (250,000 | ) | (250,000 | ) | |||||||||||||
Change in net deferred income tax asset |
— | — | — | 18,337 | 18,337 | |||||||||||||||
Change in surplus as a result of reinsurance |
— | — | — | 41,629 | 41,629 | |||||||||||||||
Change in admitted deferred tax asset pursuant to SSAP No. 10R |
— | (3,024 | ) | — | — | (3,024 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2011 |
2,500 | 67,503 | 149,627 | 55,568 | 275,198 | |||||||||||||||
Net income |
— | — | — | 129,995 | 129,995 | |||||||||||||||
Change in net unrealized capital gains and losses, net of tax |
— | — | — | 118 | 118 | |||||||||||||||
Change in nonadmitted assets |
— | — | — | (7,849 | ) | (7,849 | ) | |||||||||||||
Change in asset valuation reserve |
— | — | — | (3,201 | ) | (3,201 | ) | |||||||||||||
Dividend to stockholder |
— | — | — | (27,000 | ) | (27,000 | ) | |||||||||||||
Change in net deferred income tax asset |
— | — | — | (12,437 | ) | (12,437 | ) | |||||||||||||
Change in surplus as a result of reinsurance |
— | — | — | (21,315 | ) | (21,315 | ) | |||||||||||||
Change in admitted deferred tax assets pursuant to SSAP No. 101 |
— | (67,503 | ) | — | 67,503 | — | ||||||||||||||
Correction of error - reinsurance |
— | — | — | 4,907 | 4,907 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2012 - restated |
$ | 2,500 | $ | — | $ | 149,627 | $ | 186,289 | $ | 338,416 | ||||||||||
|
|
|
|
|
|
|
|
|
|
6
Western Reserve Life Assurance Co. of Ohio
Statements of Changes in Capital and Surplus – Statutory Basis (continued)
(Dollars in Thousands)
Common Stock |
Paid-in Surplus |
Unassigned Surplus |
Total Capital and Surplus |
|||||||||||||
Balance at December 31, 2012 - restated |
$ | 2,500 | $ | 149,627 | $ | 186,289 | $ | 338,416 | ||||||||
Net income |
— | — | 159,809 | 159,809 | ||||||||||||
Change in net unrealized capital gains and losses, net of tax |
— | — | 4,189 | 4,189 | ||||||||||||
Change in nonadmitted assets |
— | — | (11,138 | ) | (11,138 | ) | ||||||||||
Change in asset valuation reserve |
— | — | (5,603 | ) | (5,603 | ) | ||||||||||
Change in liability for reinsurance in unauthorized and certified companies |
— | — | 265 | 265 | ||||||||||||
Dividend to stockholder |
— | — | (50,000 | ) | (50,000 | ) | ||||||||||
Change in net deferred income tax asset |
— | — | (14,829 | ) | (14,829 | ) | ||||||||||
Change in surplus as a result of reinsurance |
— | — | (15,661 | ) | (15,661 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at December 31, 2013 |
$ | 2,500 | $ | 149,627 | $ | 253,321 | $ | 405,448 | ||||||||
|
|
|
|
|
|
|
|
See accompanying notes.
7
Western Reserve Life Assurance Co. of Ohio
Statements of Cash Flow – Statutory Basis
(Dollars in Thousands)
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Restated | ||||||||||||
Operating activities |
||||||||||||
Premiums collected, net of reinsurance |
$ | 540,933 | $ | 485,063 | $ | 480,756 | ||||||
Net investment income received |
96,249 | 84,038 | 85,361 | |||||||||
Miscellaneous income received |
278,156 | 277,542 | 271,567 | |||||||||
Benefit and loss related payments |
(636,087 | ) | (521,038 | ) | (698,717 | ) | ||||||
Commissions, expenses paid and aggregate write-ins for deductions |
(262,111 | ) | (264,731 | ) | (250,591 | ) | ||||||
Net transfers from separate accounts |
354,274 | 200,378 | 371,180 | |||||||||
Dividends paid to policyholders |
(21 | ) | (22 | ) | (24 | ) | ||||||
Federal and foreign income taxes paid |
(25,415 | ) | (5,134 | ) | (88,126 | ) | ||||||
|
|
|
|
|
|
|||||||
Net cash provided by operating activities |
345,978 | 256,096 | 171,406 | |||||||||
Investing activities |
||||||||||||
Proceeds from investments sold, matured or repaid: |
||||||||||||
Bonds |
321,363 | 337,040 | 263,103 | |||||||||
Common stocks |
117 | 2 | 120 | |||||||||
Mortgage loans on real estate |
3,846 | 9,355 | 6,267 | |||||||||
Other invested assets |
6 | 1 | — | |||||||||
Securities lending reinvested collateral assets |
— | 4,729 | 104,301 | |||||||||
Miscellaneous proceeds |
21,512 | 5,275 | 6 | |||||||||
|
|
|
|
|
|
|||||||
Total investment proceeds |
346,844 | 356,402 | 373,797 | |||||||||
Costs of investments acquired: |
||||||||||||
Bonds |
(657,368 | ) | (562,044 | ) | (212,793 | ) | ||||||
Common stocks |
(825 | ) | (1,143 | ) | (597 | ) | ||||||
Mortgage loans on real estate |
(31,484 | ) | (10,800 | ) | (43,694 | ) | ||||||
Real estate |
(235 | ) | (153 | ) | 66 | |||||||
Other invested assets |
(651 | ) | (502 | ) | (845 | ) | ||||||
Securities lending reinvested collateral assets |
(3,366 | ) | — | — | ||||||||
Miscellaneous applications |
(33 | ) | (4,550 | ) | (18,575 | ) | ||||||
|
|
|
|
|
|
|||||||
Total cost of investments acquired |
(693,962 | ) | (579,192 | ) | (276,438 | ) | ||||||
Net increase in policy loans |
(31,699 | ) | (5,064 | ) | (14,526 | ) | ||||||
|
|
|
|
|
|
|||||||
Net cost of investments acquired |
(725,661 | ) | (584,256 | ) | (290,964 | ) | ||||||
|
|
|
|
|
|
|||||||
Net cash (used in) provided by investing activities |
(378,817 | ) | (227,854 | ) | 82,833 |
8
Western Reserve Life Assurance Co. of Ohio
Statements of Cash Flow – Statutory Basis (continued)
(Dollars in Thousands)
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Restated | ||||||||||||
Financing and miscellaneous activities |
||||||||||||
Cash provided (applied): |
||||||||||||
Net deposits (withdrawals) on deposit-type contracts and other insurance liabilities |
(1,417 | ) | 1,424 | (2,510 | ) | |||||||
Borrowed funds |
331 | 21,064 | 5,229 | |||||||||
Dividends to stockholder |
(50,000 | ) | (27,000 | ) | (250,000 | ) | ||||||
Funds held under reinsurance treaty with unauthorized reinsurers |
23,697 | 20,836 | 18,404 | |||||||||
Receivable from parent, subsidiaries and affiliates |
(8,867 | ) | (8,925 | ) | 10,767 | |||||||
Payable to parent, subsidiaries and affiliates |
— | (26,732 | ) | 6,775 | ||||||||
Payable for securities lending |
3,366 | (4,726 | ) | (104,302 | ) | |||||||
Other cash provided (applied) |
(7,958 | ) | 9,696 | (10,387 | ) | |||||||
|
|
|
|
|
|
|||||||
Net cash (used in) provided by financing and miscellaneous activities |
(40,848 | ) | (14,363 | ) | (326,024 | ) | ||||||
|
|
|
|
|
|
|||||||
Net (decrease) increase in cash, cash equivalents and short-term investments |
(73,687 | ) | 13,880 | (71,785 | ) | |||||||
Cash, cash equivalents and short-term investments: |
||||||||||||
Beginning of year |
184,234 | 170,354 | 242,139 | |||||||||
|
|
|
|
|
|
|||||||
End of year |
$ | 110,547 | $ | 184,234 | $ | 170,354 | ||||||
|
|
|
|
|
|
See accompanying notes.
9
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis
(Dollars in Thousands)
1. Organization and Summary of Significant Accounting Policies
Organization
Western Reserve Life Assurance Co. of Ohio (the Company) is a stock life insurance company and is a wholly owned subsidiary of Aegon USA, LLC (Aegon). Aegon is an indirect, wholly owned subsidiary of Aegon N.V., a holding company organized under the laws of The Netherlands.
Nature of Business
The Company operates predominantly in the variable universal life and variable annuity areas of the life insurance business. The Company is licensed in 49 states, District of Columbia, Puerto Rico and Guam. Sales of the Company’s products are through financial planners, independent representatives, financial institutions and stockbrokers. The majority of the Company’s new life insurance, and a portion of new annuities, are written through an affiliated marketing organization.
Basis of Presentation
The preparation of financial statements of insurance companies requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.
The accompanying financial statements have been prepared in conformity with accounting practices prescribed or permitted by the Ohio Department of Insurance, which practices differ from accounting principles generally accepted in the United States (GAAP). The more significant variances from GAAP are:
Investments: Investments in bonds and mandatory redeemable preferred stocks are reported at amortized cost or fair value based on their National Association of Insurance Commissioners (NAIC) rating; for GAAP, such fixed maturity investments would be designated at purchase as held-to-maturity, trading or available-for-sale. Held-to-maturity fixed maturity investments would be reported at amortized cost, and the remaining fixed maturity investments would be reported at fair value with unrealized holding gains and losses reported in earnings for those designated as trading and as a separate component of other comprehensive income (OCI) for those designated as available-for-sale. Fair value for GAAP is based on indexes, third party pricing services, brokers, external fund managers and internal models. For statutory reporting, the NAIC allows insurance companies to report the fair value determined by the Securities Valuation Office of the NAIC (SVO) or determine the fair value by using a permitted valuation method.
10
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
All single class and multi-class mortgage-backed/asset-backed securities (e.g., CMOs) are adjusted for the effects of changes in prepayment assumptions on the related accretion of discount or amortization of premium of such securities using either the retrospective or prospective methods. If the fair value of the mortgage-backed/asset-backed security is less than amortized cost, an entity shall assess whether the impairment is other-than-temporary. An other-than-temporary impairment is considered to have occurred if the fair value of the mortgage-backed/asset-backed security is less than its amortized cost basis and the entity intends to sell the security or the entity does not have the intent and ability to hold the security for a period of time sufficient to recover the amortized cost basis. An other-than-temporary impairment is also considered to have occurred if the discounted estimated future cash flows are less than the amortized cost basis of the security.
If it is determined an other-than-temporary impairment has occurred as a result of the cash flow analysis, the security is written down to the discounted estimated future cash flows. If an other-than-temporary impairment has occurred due to intent to sell or lack of intent and ability to hold, the security is written down to fair value.
For GAAP, all securities, purchased or retained, that represent beneficial interests in securitized assets (e.g., CMO, CBO, CDO, CLO, MBS and ABS securities), other than high credit quality securities, are adjusted using the prospective method when there is a change in estimated future cash flows. If high credit quality securities are adjusted, the retrospective method is used. If it is determined that a decline in fair value is other-than-temporary and the entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current period credit loss, the other-than-temporary impairment should be recognized in earnings equal to the entire difference between the amortized cost basis and its fair value at the impairment date. If the entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery, the other-than-temporary impairment should be separated into a) the amount representing the credit loss, which is recognized in earnings, and b) the amount related to all other factors, which is recognized in OCI, net of applicable taxes.
11
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Derivative instruments used in hedging transactions that meet the criteria of an effective hedge are valued and reported in a manner that is consistent with the hedged asset or liability. Embedded derivatives are not accounted for separately from the host contract. Derivative instruments used in hedging transactions that do not meet or no longer meet the criteria of an effective hedge are accounted for at fair value, and the changes in the fair value are recorded in unassigned surplus as unrealized gains and losses. Under GAAP, the effective and ineffective portions of a single hedge are accounted for separately, and the change in fair value for cash flow hedges is credited or charged directly to a separate component of OCI rather than to income as required for fair value hedges, and an embedded derivative within a contract that is not clearly and closely related to the economic characteristics and risk of the host contract is accounted for separately from the host contract and valued and reported at fair value.
Derivative instruments are also used in replication transactions. In these transactions, the derivative is valued in a manner consistent with the cash investment and replicated asset. For GAAP, the derivative is reported at fair value with the changes in the fair value reported in income.
Investments in real estate are reported net of related obligations rather than on a gross basis as for GAAP. Real estate owned and occupied by the Company is included in investments rather than reported as an operating asset as under GAAP, and investment income and operating expenses for statutory reporting include rent for the Company’s occupancy of those properties. Changes between depreciated cost and admitted amounts are credited or charged directly to unassigned surplus rather than to income as would be required under GAAP.
Valuation allowances are established for mortgage loans, if necessary, based on the difference between the net value of the collateral, determined as the fair value of the collateral less estimated costs to obtain and sell, and the recorded investment in the mortgage loan. Under GAAP, such allowances are based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, if foreclosure is probable, on the estimated fair value of the collateral.
The initial valuation allowance and subsequent changes in the allowance for mortgage loans are charged or credited directly to unassigned surplus as part of the change in asset valuation reserve (AVR), rather than being included as a component of earnings as would be required under GAAP.
Valuation Reserves: Under a formula prescribed by the NAIC, the Company defers the portion of realized capital gains and losses on sales of fixed income investments, principally bonds and mortgage loans, attributable to changes in the general level of interest rates and amortizes those deferrals over the remaining period to maturity of the bond or mortgage loan based on groupings of individual securities sold in five year bands. That net deferral is reported as the interest maintenance reserve (IMR) in the accompanying balance sheets. Realized capital gains and losses are reported in income net of federal income tax and transfers to the IMR. Under
12
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
GAAP, realized capital gains and losses are reported in the statement of operations on a pre-tax basis in the period that the assets giving rise to the gains or losses are sold.
The AVR provides a valuation allowance for invested assets. The AVR is determined by an NAIC prescribed formula with changes reflected directly in unassigned surplus; AVR is not recognized for GAAP.
Subsidiaries: The accounts and operations of the Company’s subsidiaries are not consolidated with the accounts and operations of the Company as would be required under GAAP.
Policy Acquisition Costs: The costs of acquiring and renewing business are expensed when incurred. Under GAAP, incremental costs directly related to the successful acquisition of traditional life insurance and certain long-duration accident and health insurance, to the extent recoverable from future policy revenues, would be deferred and amortized over the premium-paying period of the related policies using assumptions consistent with those used in computing policy benefit reserves; for universal life insurance and investment products, to the extent recoverable from future gross profits, deferred policy acquisition costs are amortized generally in proportion to the present value of expected gross profits from surrender charges and investment, mortality and expense margins.
Nonadmitted Assets: Certain assets designated as “nonadmitted”, primarily net deferred tax assets and agent debit balances, and other assets not specifically identified as an admitted asset within the NAIC Accounting Practices and Procedures Manual (NAIC SAP), are excluded from the accompanying balance sheets and are charged directly to unassigned surplus. Under GAAP, such assets are included in the balance sheet to the extent they are not impaired.
Universal Life and Annuity Policies: Revenues for universal life and annuity policies with mortality or morbidity risk (including annuities with purchase rate guarantees) consist of the entire premium received. Benefits incurred represent surrenders and death benefits paid and the change in policy reserves. Premiums received and benefits incurred for annuity policies without mortality or morbidity risk and guaranteed interest in group annuity contracts are recorded directly to a policy reserve account using deposit accounting, without recognizing premium income or benefits expense. Interest on these policies is reflected in other benefits. Under GAAP, for universal life policies, premiums received in excess of policy charges would not be recognized as premium revenue and benefits would represent interest credited to the account values and the excess of benefits paid over the policy account value. Under GAAP, for all annuity policies without significant mortality risk, premiums received and benefits paid would be recorded directly to the reserve liability.
Benefit Reserves: Certain policy reserves are calculated based on statutorily required interest and mortality assumptions rather than on estimated expected experience or actual account balances as would be required under GAAP.
13
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Reinsurance: Any reinsurance amounts deemed to be uncollectible have been written off through a charge to operations. In addition, a liability for reinsurance balances would be established for unsecured policy reserves ceded to reinsurers not authorized to assume such business. Changes to the liability are credited or charged directly to unassigned surplus. Under GAAP, an allowance for amounts deemed uncollectible would be established through a charge to earnings.
Policy and contract liabilities ceded to reinsurers have been reported as reductions of the related reserves rather than as assets as would be required under GAAP.
Commissions allowed by reinsurers on business ceded are reported as income when incurred rather than being deferred and amortized with deferred policy acquisition costs as required under GAAP.
Deferred Income Taxes: The Company computes deferred income taxes in accordance with Statement of Statutory Accounting Principle (SSAP) No. 101, Income Taxes, A Replacement of SSAP No. 10R and SSAP No. 10 (SSAP No. 101). Under SSAP No. 101, admitted adjusted deferred income tax assets are limited to 1) the amount of federal income taxes paid in prior years that can be recovered through loss carrybacks for existing temporary differences that reverse during a timeframe corresponding with the Internal Revenue Service tax loss carryback provisions, not to exceed three years, plus 2) the amount of adjusted gross deferred income tax assets expected to be realized within three years limited to an amount that is no greater than 15% of current period’s adjusted statutory capital and surplus, plus 3) the amount of remaining adjusted gross deferred income tax assets that can be offset against existing gross deferred income tax liabilities after considering the character (i.e., ordinary versus capital) and reversal patterns of the deferred tax assets and liabilities. The remaining adjusted deferred income tax assets are nonadmitted.
Deferred income taxes do not include amounts for state taxes. Under GAAP, state taxes are included in the computation of deferred income taxes, a deferred income tax asset is recorded for the amount of gross deferred income tax assets expected to be realized in all future years, and a valuation allowance is established for deferred income tax assets not realizable.
Policyholder Dividends: Policyholder dividends are recognized when declared rather than over the term of the related policies.
Statements of Cash Flow: Cash, cash equivalents and short-term investments in the statements of cash flow represent cash balances and investments with initial maturities of one year or less. Under GAAP, the corresponding caption of cash and cash equivalents includes cash balances and investments with initial maturities of three months or less.
14
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Securities Lending Assets and Liabilities: For securities lending programs, cash collateral received which may be sold or repledged by the Company is reflected as a one-line entry on the balance sheet (securities lending reinvested collateral assets) and a corresponding liability is established to record the obligation to return the cash collateral. Collateral received which may not be sold or repledged is not recorded on the Company’s balance sheet. Under GAAP the reinvested collateral is included within invested assets (i.e. it is not one-line reported).
The effects of the foregoing variances from GAAP on the accompanying statutory-basis financial statements have not been determined by the Company, but are presumed to be material.
Other significant accounting policies are as follows:
Investments
Investments in bonds, except those to which the SVO has ascribed an NAIC designation of 6, are reported at amortized cost using the interest method.
Hybrid securities, as defined by the NAIC, are securities designed with characteristics of both debt and equity and provide protection to the issuer’s senior note holders. These securities meet the definition of a bond, in accordance with SSAP No. 26, Bonds, excluding Loan-backed and Structured Securities and therefore, are reported at amortized cost or fair value based upon their NAIC rating.
Single class and multi-class mortgage-backed/asset-backed securities are valued at amortized cost using the interest method, including anticipated prepayments, except for those with an initial NAIC designation of 6, which are valued at the lower of amortized cost or fair value. Prepayment assumptions are obtained from dealer surveys or internal estimates and are based on the current interest rate and economic environment. The retrospective adjustment method is used to value all such securities, except principal-only and interest-only securities, which are valued using the prospective method.
The Company closely monitors below investment grade holdings and those investment grade issuers where the Company has concerns. The Company also regularly monitors industry sectors. The Company considers relevant facts and circumstances in evaluating whether the impairment is other-than-temporary including: (1) the probability of the Company collecting all amounts due according to the contractual terms of the security in effect at the date of acquisition; (2) the Company’s decision to sell a security prior to its maturity at an amount below its carrying amount; and (3) the Company’s ability to hold a structured security for a period of time to allow for recovery of the value to its carrying amount. Additionally, financial condition, near term prospects of the issuer and nationally recognized credit rating changes are monitored. Non-structured securities in unrealized loss positions that are considered other-than-temporary are written down to fair value. Structured securities considered other-than-temporarily impaired are written down to discounted estimated cash flows if the impairment is the result of cash flow
15
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
analysis. If the Company has an intent to sell or lack of ability to hold a structured security, it is written down to fair value. For structured securities, cash flow trends and underlying levels of collateral are monitored. The Company will record a charge to the statement of operations to the extent that these securities are determined to be other-than-temporarily impaired.
Investments in both affiliated and unaffiliated preferred stocks in good standing are reported at cost or amortized cost. Investments in preferred stocks not in good standing are reported at the lower of cost or fair value, and the related net unrealized capital gains (losses) are reported in unassigned surplus along with any adjustment for federal income taxes.
Common stocks of unaffiliated companies are reported at fair value and the related net unrealized capital gains or losses are reported in unassigned surplus along with any adjustments for federal income taxes.
If the Company determines that a decline in the fair value of a common stock or a preferred stock is other-than-temporary, the Company writes it down to fair value as the new cost basis and the amount of the write down is accounted for as a realized loss in the statement of operations. The Company considers the following factors in determining whether a decline in value is other-than-temporary: (a) the financial condition and prospects of the issuer; (b) whether or not the Company has made a decision to sell the investment; and (c) the length of time and extent to which the value has been below cost.
Common stocks of affiliated noninsurance subsidiaries are reported based on underlying audited GAAP equity. The net change in the subsidiaries’ equity is included in the change in net unrealized capital gains or losses, reported in unassigned surplus along with any adjustment for federal income taxes.
There are no restrictions on common or preferred stock.
Short-term investments include investments with remaining maturities of one year or less at the time of acquisition and are principally stated at amortized cost.
Cash equivalents are short-term highly liquid investments with original maturities of three months or less and are principally stated at amortized cost.
Mortgage loans are reported at unpaid principal balances, less an allowance for impairment. A mortgage loan is considered to be impaired when it is probable that the Company will be unable to collect all principal and interest amounts due according to the contractual terms of the mortgage agreement. When management determines that the impairment is other-than-temporary, the mortgage loan is written down to realizable value and a realized loss is recognized.
Land is reported at cost. Real estate occupied by the Company is reported at depreciated cost net of encumbrances. Real estate that the Company classifies as held for sale is measured at lower
16
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
of carrying amount or fair value less cost to sell. Depreciation is calculated on a straight-line basis over the estimated useful lives of the properties. The Company recognizes an impairment loss if the Company determines that the carrying amount of the real estate is not recoverable and exceeds its fair value. The Company deems that the carrying amount of the asset is not recoverable if the carrying amount exceeds the sum of undiscounted cash flows expected to result from the use and disposition. The impairment loss is measured as the amount by which the asset’s carrying value exceeds its fair value.
Policy loans are reported at unpaid principal balance.
Investments in Low Income Housing Tax Credit (LIHTC) properties are valued at amortized cost. Tax credits are recognized in operations in the tax reporting year in which the tax credit is utilized by the Company.
Realized capital gains and losses are determined using the specific identification method and are recorded net of related federal income taxes. Changes in admitted asset carrying amounts of bonds, mortgage loans, preferred and common stocks are credited or charged directly to unassigned surplus.
Interest income is recognized on an accrual basis. The Company does not accrue income on bonds in default, mortgage loans on real estate in default and/or foreclosure or which are delinquent more than twelve months, or real estate where rent is in arrears for more than three months. Income is also not accrued when collection is uncertain. In addition, accrued interest is excluded from investment income when payment exceeds 90 days past due. At December 31, 2013 and 2012, the Company did not exclude any investment income due and accrued with respect to such practices.
For dollar repurchase agreements, the Company receives cash collateral in an amount at least equal to the fair value of the securities transferred by the Company in the transaction as of the transaction date. Cash received as collateral will be invested as needed or used for general corporate purposes of the Company.
Derivative Instruments
Overview: The Company may use various derivative instruments (options, caps, floors, swaps, foreign currency forwards and futures) to manage risks related to its ongoing business operations. On the transaction date of the derivative instrument, the Company designates the derivative as either (A) hedging (fair value, foreign currency fair value, cash flow, foreign currency cash flow, forecasted transactions or net investment in a foreign operation), (B) replication, (C) income generation or (D) held for other investment/risk management activities, which do not qualify for hedge accounting under SSAP No. 86, Accounting for Derivative Instruments and Hedging Activities (SSAP No. 86).
17
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Derivative instruments used in hedging relationships are accounted for on a basis that is consistent with the hedged item (amortized cost or fair value). Derivative instruments used in replication relationships are accounted for on a basis that is consistent with the cash instrument and the replicated asset (amortized cost or fair value). Derivative instruments used in income generation relationships are accounted for on a basis that is consistent with the associated covered asset or underlying interest to which the derivative indicates (amortized cost or fair value). Derivative instruments held for other investment/risk management activities receive fair value accounting.
Derivative instruments are subject to market risk, which is the possibility that future changes in market prices may make the instruments less valuable. The Company uses derivatives as hedges, consequently, when the value of the derivative changes, the value of a corresponding hedged asset or liability will move in the opposite direction. Market risk is a consideration when changes in the value of the derivative and the hedged item do not completely offset (correlation or basis risk) which is mitigated by active measuring and monitoring.
The Company is exposed to credit-related losses in the event of non-performance by counterparties to financial instruments, but it does not expect any counterparties to fail to meet their obligations given their high credit rating of ‘A’ or better. The credit exposure of interest rate swaps and currency swaps is represented by the fair value of contracts, aggregated at a counterparty level, with a positive fair value at the reporting date. The Company has entered into collateral agreements with certain counterparties wherein the counterparty is required to post assets on the Company’s behalf. The posted amount is equal to the difference between the net positive fair value of the contracts and an agreed upon threshold that is based on the credit rating of the counterparty. Inversely, if the net fair value of all contracts with this counterparty is negative, then the Company is required to post assets instead.
Instruments: Total return swaps are used in the asset/liability management process to mitigate the risk created when the Company has issued minimum guarantee insurance contracts linked to an index. These total return swaps generally provide for the exchange of the difference between fixed leg (tied to the S&P or interest rate index) and floating leg (tied to LIBOR) amounts based on an underlying notional amount (also tied to the underlying index). Typically, no cash is exchanged at the outset of the swap contract and a single net payment is exchanged each due date. Swaps that meet hedge accounting rules are carried in a manner consistent with the hedge item, generally at amortized cost, on the financial statements. If the swap is terminated prior to maturity, proceeds are exchanged equal to the fair value of the contract. These gains and losses may be included in IMR or AVR if the underlying instrument receives that treatment. Swaps not meeting hedge accounting rules are carried at fair value with fair value adjustments recorded in unassigned surplus.
Variance swaps are used in the asset/liability management process to mitigate the gamma risk created when the Company has issued minimum guarantee insurance contracts linked to an index. These variance swaps are similar to volatility options where the underlying index provides for the market value movements. Variance swaps do not accrue interest. Typically, no
18
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
cash is exchanged at the outset of initiating the variance swap and a single receipt or payment occurs at the maturity or termination of the contract. Variance swaps that meet hedge accounting rules are carried in a manner consistent with the hedged item, generally at amortized cost, on the financial statements. If terminated prior to maturity, proceeds are exchanged equal to the fair value of the contract. These gains and losses may be included in IMR or AVR if the underlying instrument receives that treatment. Swaps not meeting hedge accounting rules are carried at fair value with fair value adjustments recorded in capital and surplus.
Futures contracts are used to hedge the liability risk associated when the Company issues products providing the customer a return based on various global equity market indices. Futures are marked to market on a daily basis whereby a cash payment is made or received by the Company. These payments are recognized as realized gains or losses in the financial statements.
Separate Accounts
Separate accounts held by the Company primarily represent funds which are administered for individual variable universal life and variable annuity contracts. Assets held in trust for purchases of variable universal life and variable annuity contracts and the Company’s corresponding obligation to the contract owners are shown separately in the balance sheet. The assets in the accounts, carried at estimated fair value, consist of underlying mutual fund shares, common stocks, long-term bonds and short-term investments. The separate accounts, held for individual policyholders, do not have any minimum guarantees, and the investment risks associated with the fair value changes are borne entirely by the policyholder.
The Company received variable contract premiums of $282,851, $305,221 and $349,011, in 2013, 2012 and 2011, respectively. All variable account contracts are subject to discretionary withdrawal by the policyholder at the fair value of the underlying assets less the current surrender charge. Separate account contract holders have no claim against the assets of the general account.
Income and gains and losses with respect to the assets in the separate accounts accrue to the benefit of the contract owners and, accordingly, the operations of the separate accounts are not included in the accompanying financial statements. The Company received $291,416, $300,860 and $312,161, in 2013, 2012 and 2011, respectively, related to fees associated with investment management, administration and contractual guarantees for separate accounts.
Aggregate Reserves for Policies and Contracts
Life, annuity and accident and health benefit reserves are developed by actuarial methods and are determined based on published tables using statutorily specified interest rates and valuation methods that will provide, in the aggregate, reserves that are greater than or equal to the minimum required by law.
19
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The Company waives deduction of deferred fractional premiums upon death of the insured and returns any portion of premium for periods beyond the date of death. Surrender values on policies do not exceed the corresponding benefit reserves.
The aggregate policy reserves for life insurance policies are based principally upon the 1941, 1958, 1980 and 2001 Commissioner’s Standard Ordinary Mortality Tables. The reserves are calculated using interest rates ranging from 2.0 to 5.5 percent and are computed principally on the Net Level Premium Valuation and the Commissioner’s Reserve Valuation Methods. Reserves for universal life policies are based on account balances adjusted for the Commissioner’s Reserve Valuation Method.
Additional premiums are charged or additional mortality charges are assessed for policies issued on substandard lives according to underwriting classification. Generally, mean reserves are determined by computing the regular mean reserve for the plan at the true age and holding, in addition, one-half (1/2) of the extra premium charge for the year. For certain flexible premium and fixed premium universal life insurance products, reserves are calculated utilizing the Commissioner’s Reserve Valuation Method for universal life policies and recognizing any substandard ratings.
Deferred annuity reserves are calculated according to the Commissioner’s Annuity Reserve Valuation Method including excess interest reserves to cover situations where the future interest guarantees plus the decrease in surrender charges are in excess of the maximum valuation rates of interest. Reserves for immediate annuities and supplementary contracts with life contingencies are equal to the present value of future payments assuming interest rates ranging from 4 to 11.25 percent and mortality rates, where appropriate, from a variety of tables.
Accident and health policy reserves are equal to the greater of the gross unearned premiums or any required mid-terminal reserves plus net unearned premiums and the present value of amounts not yet due on both reported and unreported claims.
Tabular interest, tabular less actual reserves released and tabular cost have been determined by formula. Tabular interest on funds not involving life contingencies has also been determined by formula.
The liabilities related to guaranteed investment contracts and policyholder funds left on deposit with the Company generally are equal to fund balances less applicable surrender charges.
Policy and Contract Claim Reserves
Claim reserves represent the estimated accrued liability for claims reported to the Company and claims incurred but not yet reported through the balance sheet date. These reserves are estimated using either individual case-basis valuations or statistical analysis techniques. These estimates are subject to the effects of trends in claim severity and frequency. The estimates are continually
20
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
reviewed and adjusted as necessary as experience develops or new information becomes available.
Liability for Deposit-Type Contracts
Deposit-type contracts do not incorporate risk from the death or disability of policyholders. These types of contracts may include supplemental contracts and certain annuity contracts. Deposits and withdrawals on these contracts are recorded as a direct increase or decrease, respectively, to the liability balance, and are not reflected as premiums, benefits or changes in reserve in the statement of operations.
Premiums and Annuity Considerations
Revenues for policies with mortality or morbidity risk (including annuities with purchase rate guarantees) consist of the entire premium received and are recognized over the premium paying periods of the related policies. Consideration received and benefits paid for annuity policies without mortality or morbidity risk are recorded using deposit accounting, and recorded directly to an appropriate policy reserve account, without recognizing premium income.
Reinsurance
Coinsurance premiums, commissions, expense reimbursements and reserves related to reinsured business are accounted for on bases consistent with those used in accounting for the original policies and the terms of the reinsurance contracts. Gains associated with reinsurance of in force blocks of business are included in unassigned surplus and amortized into income as earnings emerge on the reinsured block of business. Premiums ceded and recoverable losses have been reported as a reduction of premium income and benefits, respectively. Policy liabilities and accruals are reported in the accompanying financial statements net of reinsurance ceded.
Recent Accounting Pronouncements
Effective December 31, 2013, the Company adopted revisions to SSAP No. 35R, Guaranty Fund and Other Assessments – Revised which incorporates subsequent event (Type II) disclosures for entities subject to Section 9010 of the Patient Protection and Affordable Care Act related to assessments payable. The adoption of this revision did not impact the financial position or results of operations of the Company as revisions relate to disclosures only. See Note 13 for further discussion.
Effective January 1, 2013, the Company adopted SSAP No. 92, Accounting for Postretirement Benefits Other Than Pensions, A Replacement of SSAP No. 14 and SSAP No. 102, Accounting for Pensions, A Replacement of SSAP No. 89. This guidance impacts accounting for defined benefit pension plans or other postretirement plans, along with related disclosures. SSAP No. 102 requires recognition of the funded status of the plan based on the projected benefit obligation instead of the accumulated benefit obligation as under SSAP No. 89. In addition, SSAP No. 92
21
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
and SSAP No. 102 require consideration of non-vested participants. The adoption of these standards did not impact the Company’s results of operations, financial position or disclosures as the Company does not sponsor the pension plan and is not directly liable under the plan. See Note 9 for further discussion of the Company’s pension plan and other postretirement plans as sponsored by Aegon.
Effective January 1, 2013, the Company adopted SSAP No. 103, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities which adopts with modifications the guidance in Accounting Standards Update (ASU) 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets and supersedes SSAP No. 91R, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. The adoption of this standard did not impact the financial position or results of operation of the Company.
Effective January 1, 2013, the Company adopted non-substantive revisions to SSAP No. 36, Troubled Debt Restructuring. These revisions adopt guidance from ASU 2011-02, Receivables – A Creditors’ Determination of Whether a Restructuring is a Troubled Debt Restructuring, which clarifies what constitutes a troubled debt restructuring and adopts with modification troubled debt restructuring disclosures for creditors from ASU 2010-20: Receivables (Topic 310), Disclosures About the Credit Quality of Financing Receivables and the Allowance for Credit Losses. The adoption of this revision did not impact the financial position or results of operations of the Company.
Effective December 31, 2012, the Company adopted non-substantive revisions to SSAP No. 86 to require disclosure of embedded credit derivatives within a financial instrument that expose the holder to the possibility of making future payments, and adopted guidance from Accounting Standards Update (ASU) 2010-11, Derivatives and Hedging – Scope Exception Related to Embedded Credit Derivatives, to clarify that seller credit derivative disclosures do not apply to embedded derivative features related to the transfer of credit risk that is only in the form of subordination of one financial instrument to another. The adoption of these revisions had no impact to the Company’s results of operations or financial position.
Effective December 31, 2012, the Company adopted non-substantive revisions to SSAP No. 86 to move one aspect of the criteria for a hedged forecasted transaction and incorporate it as criteria for a fair value hedge. The adoption of this revision had no impact to the Company’s results of operations or financial position.
Effective December 31, 2012, the Company adopted non-substantive revisions to SSAP No. 27, Disclosure of Information about Financial Instruments with Off-Balance-Sheet Risk, Financial Instruments with Concentrations of Credit Risk and Disclosures about Fair Value of Financial Instruments, which clarifies that embedded derivatives, which are not separately recognized as derivatives under statutory accounting, are included in the disclosures of financial instruments with off-balance-sheet risk. The adoption of this revision had no impact to the Company’s results of operations or financial position.
22
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Effective December 31, 2012, the Company adopted non-substantive revisions to SSAP No. 1, Disclosures of Accounting Policies, Risks and Uncertainties and Other Disclosures. These revisions require reference to the accounting policy and procedure footnote that describes permitted or prescribed practices when an individual note is impacted by such practices. The adoption of this requirement had no impact to the Company’s results of operation or financial position, but did require additional disclosures. See Note 6 Policy and Contract Attributes for further details.
Effective January 1, 2012, the Company adopted revisions to SSAP No. 100, Fair Value Measurements (SSAP No. 100). These revisions require new disclosures of fair value hierarchy and the method used to obtain the fair value measurement, a new footnote that summarizes hierarchy levels by type of financial instrument and gross presentation of purchases, sales, issues and settlements within the reconciliation for fair value measurements categorized within Level 3 of the hierarchy. The adoption of these revisions had no impact to the Company’s results of operations or financial position, but did require additional disclosures. See Note 2 Fair Values of Financial Instruments for further details.
Effective January 1, 2012, the Company began computing current and deferred income taxes in accordance with SSAP No. 101. This statement established statutory accounting principles for current and deferred federal and foreign income taxes and current state income taxes. The adoption of this statement resulted in the transfer of $67,503 from Aggregate Write-Ins for Other than Special Surplus Funds to Unassigned Funds and updates to the Company’s income tax disclosures. See Note 5 Income Taxes for further details.
For the year ended December 31, 2011, the Company adopted SSAP No. 10R, Income Taxes –Revised, A Temporary Replacement of SSAP No. 10 (SSAP No. 10R). This statement established statutory accounting principles for current and deferred federal and foreign income taxes and current state income taxes. The SSAP temporarily superseded SSAP No. 10, Income Taxes. SSAP No. 10R allowed an entity to elect to admit additional deferred tax assets (DTAs) utilizing a three year loss carryback provision, plus the lesser of a look-forward of three years on gross DTAs expected to be realized or 15% of statutory capital and surplus if the entity’s risk-based capital is above the 250% risk-based capital level where an action level could occur as a result of a trend test utilizing the old SSAP No. 10 provisions to calculate the DTA. Prior to the adoption of SSAP No. 10R, the admitted DTA was calculated by taking into consideration a one year loss carryback and look-forward on gross DTAs that can be expected to be realized and a 10% capital and surplus limit on the admitted amount of the DTA. The Company elected to admit additional deferred tax assets pursuant to SSAP No. 10R and as a result, the cumulative effect of the adoption of this standard was the difference between the calculation of the admitted DTA per SSAP No.10R and the old SSAP No. 10 methodology at December 31, 2011. This change in accounting principle increased surplus by a net amount of $67,503 at December 31, 2011, which has been recorded within the statements of changes in capital and surplus.
Effective December 31, 2011, the Company adopted SSAP No. 5R, Liabilities, Contingencies and Impairments of Assets – Revised. The revisions require the Company to recognize a liability
23
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
equal to the greater of (a) the fair value of the guarantee at its inception, even if the likelihood of payment under the guarantee is remote or (b) the contingent liability amount required to be recognized if it is probable that a liability has been incurred at the financial statement date and the amount of loss can reasonably be determined. While this guidance does not exclude guarantees issued as intercompany transactions or between related parties from the initial liability recognition requirement, there are a couple exceptions. Guarantees made to/or on behalf of a wholly-owned subsidiary and related party guarantees that are considered “unlimited” (for example, in response to a rating agency’s requirement to provide a commitment to support) are exempt from the initial liability recognition. Additional disclosures are also required under this new guidance for all guarantees, whether or not they meet the criteria for initial liability recognition. The adoption of this new accounting principle had no material impact to the Company’s results of operations or financial position, but did require additional disclosures regarding these guarantees.
Effective December 31, 2011, the Company adopted non-substantive revisions to SSAP No. 100, to incorporate the provisions of ASU 2010-06, Improving Disclosures about Fair Value Measurements. This revision required a new disclosure for assets and liabilities for which fair value is not measured and reported in the statement of financial position but is otherwise disclosed. The adoption of these revisions had no impact to the Company’s results of operations or financial position. See Note 2 for further details.
Effective December 31, 2011, the Company adopted non-substantive changes to SSAP No. 32, Investments in Preferred Stock (including investments in preferred stock of subsidiary, controlled, or affiliated entities). The amendment was made to clarify the definition of preferred stock. Under the revised SSAP No. 32, a preferred stock is defined as any class or series of shares the holders of which have any preference, either as to the payment of dividends or distribution of assets on liquidation, over the holder of common stock [as defined in SSAP No. 30, Investments in Common Stock (excluding investments in common stock of subsidiary, controlled, or affiliated entities)] issued by an entity. This revised definition had no impact to the Company.
Effective January 1, 2011, the Company adopted SSAP No. 35R, Guaranty Fund and Other Assessments – Revised. This statement modified the conditions required for recognizing a liability for insurance-related assessments and required additional disclosures to be made in the Notes to the Financial Statements. The adoption of this accounting principle had no financial impact to the Company.
Effective January 1, 2011, the Company adopted revisions to certain paragraphs of SSAP No. 43R – Loan-backed and Structured Securities to clarify the accounting for gains and losses between AVR and IMR. The revisions clarify that an AVR/IMR bifurcation analysis should be performed when SSAP No. 43R securities are sold (not just as a result of impairment). These changes were applied on a prospective basis and had no financial impact to the Company upon adoption.
24
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Effective January 1, 2011, the Company adopted revisions to SSAP No. 43R to clarify the definitions of loan-backed and structured securities. The clarified guidance was applied prospectively and had no financial impact to the Company upon adoption.
Effective January 1, 2014, the Company will adopt SSAP No. 105, Working Capital Finance Investments, which allows working capital finance investments to be admitted assets if certain criteria are met. The adoption of this standard had no impact to the financial position or results of operations of the Company.
Effective December 31, 2014 the Company will adopt revisions to SSAP No. 104R, Share-Based Payments, which provides guidance for share-based payments transactions with non-employees. The adoption of this revision is expected to be immaterial to the financial position and results of operations of the Company.
Reclassifications
Certain reclassifications have been made to the 2012 financial statements to conform to the 2013 presentation.
During 2013, the Company changed the presentation of derivative liabilities. As a result of these changes, $1,841 was reclassified between the Other liabilities line and the Derivatives line in the 2012 Balance Sheet to conform to the 2013 presentation.
Correction of Errors
In 2014 after the filing of the Annual Statement, the Company discovered an error in the reporting of an affiliated modified coinsurance transaction resulting in misstatements of the reserve adjustments on reinsurance ceded, commissions and expense allowances on reinsurance ceded, and benefit expenses in the Statement of Operations. The impact of this error on the aforementioned accounts as of December 31, 2011 was an understatement of net income of $7,549 ($4,907 net of tax). This was corrected and is reflected as a correction of an error in the capital and surplus accounts of the 2012 Statement of Changes in Capital and Surplus. The 2012 financial statements have been restated to properly reflect the impact of the error and the 2013 financial statements have been properly stated.
25
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Restatements
The Company identified errors in its prior year audited statutory financial statements related to affiliated reinsurance receivables. The Company has obtained approval from the Ohio Department of Insurance to restate its 2012 statutory financial statements. The following tables show the impact of the restatement.
Year Ended December 31, 2012 | ||||||||||||
Balance sheet | As Reported | Adjustment | As Restated | |||||||||
Total admitted assets |
||||||||||||
Net deferred income tax asset |
103,071 | 2,070 | 105,141 | |||||||||
Receivable from parent, subsidiaries and affiliates |
— | 10,992 | 10,992 | |||||||||
|
|
|
|
|
|
|||||||
Total admitted assets |
$ | 8,600,827 | $ | 13,062 | $ | 8,613,889 | ||||||
|
|
|
|
|
|
|||||||
Total liabilities |
||||||||||||
Payable to parent |
15,332 | (15,332 | ) | — | ||||||||
Federal income taxes payable |
8,738 | 9,213 | 17,951 | |||||||||
|
|
|
|
|
|
|||||||
Total liabilities |
$ | 8,281,592 | $ | (6,119 | ) | $ | 8,275,473 | |||||
|
|
|
|
|
|
|||||||
Year Ended December 31, 2012 | ||||||||||||
Statement of Operation | As Reported | Adjustment | As Restated | |||||||||
Commissions and expense allowances on reinsurance ceded |
(3,415 | ) | (4,655 | ) | (8,070 | ) | ||||||
Reserve adjustments on reinsurance ceded |
(24,697 | ) | 11,499 | (13,198 | ) | |||||||
Benefits paid or provided for: Life |
70,668 | 273 | 70,941 | |||||||||
Gain before benefit from income taxes |
148,563 | 6,571 | 155,134 | |||||||||
Expense from income taxes |
13,977 | 6,571 | 20,548 | |||||||||
|
|
|
|
|
|
|||||||
Net income |
$ | 129,995 | $ | — | $ | 129,995 | ||||||
|
|
|
|
|
|
|||||||
Year Ended December 31, 2012 | ||||||||||||
Statement of Changes in Capital and Surplus | As Reported | Adjustment | As Restated | |||||||||
Balance at January 1, 2012 |
$ | 275,198 | $ | — | $ | 275,198 | ||||||
Net income |
129,995 | — | 129,995 | |||||||||
Change in nonadmitted assets |
(9,919 | ) | 2,070 | (7,849 | ) | |||||||
Change in surplus as a result of reinsurance |
(33,519 | ) | 12,204 | (21,315 | ) | |||||||
Correction of error - reinsurance |
— | 4,907 | 4,907 | |||||||||
|
|
|
|
|
|
|||||||
Balance at December 31, 2012 |
$ | 319,235 | $ | 19,181 | $ | 338,416 | ||||||
|
|
|
|
|
|
26
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Year Ended December 31, 2012 | ||||||||||||
Consolidated Statement of Cash Flows | As Reported | Adjustment | As Restated | |||||||||
Operating activities: |
||||||||||||
Miscellaneous income received |
258,494 | 19,048 | 277,542 | |||||||||
Benefit and loss related payments |
(520,765 | ) | (273 | ) | (521,038 | ) | ||||||
|
|
|
|
|
|
|||||||
Net cash provided by (used in) operating activities |
$ | 237,321 | $ | 18,775 | $ | 256,096 | ||||||
|
|
|
|
|
|
|||||||
Investing activities: |
||||||||||||
|
|
|
|
|
|
|||||||
Net cash (used in) provided by investing activities |
$ | (227,854 | ) | $ | — | $ | (227,854 | ) | ||||
|
|
|
|
|
|
|||||||
Financing and miscellaneous activities: |
||||||||||||
Receivable from parent, subsidiaries and affiliates |
2,067 | (10,992 | ) | (8,925 | ) | |||||||
Payable to parent, subsidiaries and affiliates |
(11,400 | ) | (15,332 | ) | (26,732 | ) | ||||||
Other cash provided (applied) |
2,147 | 7,549 | 9,696 | |||||||||
|
|
|
|
|
|
|||||||
Net cash (used in) provided by financing and miscellaneous activities |
$ | 4,412 | $ | (18,775 | ) | $ | (14,363 | ) | ||||
|
|
|
|
|
|
2. Fair Values of Financial Instruments
The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Determination of fair value
The fair values of financial instruments are determined by management after taking into consideration several sources of data. When available, the Company uses quoted market prices in active markets to determine the fair value of its investments. The Company’s valuation policy utilizes a pricing hierarchy which dictates that publicly available prices are initially sought from indices and third-party pricing services. In the event that pricing is not available from these sources, those securities are submitted to brokers to obtain quotes. Lastly, securities are priced using internal cash flow modeling techniques. These valuation methodologies commonly use reported trades, bids, offers, issuer spreads, benchmark yields, estimated prepayment speeds, and/or estimated cash flows.
To understand the valuation methodologies used by third-party pricing services, the Company reviews and monitors their applicable methodology documents. Any changes to their methodologies are noted and reviewed for reasonableness. In addition, the Company performs in-depth reviews of prices received from third-party pricing services on a sample basis. The objective for such reviews is to demonstrate that the Company can corroborate detailed information such as assumptions, inputs and methodologies used in pricing individual securities against documented pricing methodologies. Only third-party pricing services and brokers with a substantial presence in the market and with appropriate experience and expertise are used.
27
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Each month, the Company performs an analysis of the information obtained from indices, third-party services, and brokers to ensure that the information is reasonable and produces a reasonable estimate of fair value. The Company considers both qualitative and quantitative factors as part of this analysis, including but not limited to, recent transactional activity for similar securities, review of pricing statistics and trends, and consideration of recent relevant market events. Other controls and procedures over pricing received from indices, third-party pricing services, or brokers include validation checks such as exception reports which highlight significant price changes, stale prices or un-priced securities.
Fair value hierarchy
The Company’s financial assets and liabilities carried at fair value are classified, for disclosure purposes, based on a hierarchy defined by SSAP No. 100. The hierarchy gives the highest ranking to fair values determined using unadjusted quoted prices in active markets for identical assets and liabilities (Level 1), and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3). An asset’s or a liability’s classification is based on the lowest level input that is significant to its measurement. For example, a Level 3 fair value measurement may include inputs that are both observable (Levels 1 and 2) and unobservable (Level 3).The levels of the fair value hierarchy are as follows:
Level 1 - | Unadjusted quoted prices for identical assets or liabilities in active markets accessible at the measurement date. | |
Level 2 - | Quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following: | |
a) Quoted prices for similar assets or liabilities in active markets | ||
b) Quoted prices for identical or similar assets or liabilities in non-active markets | ||
c) Inputs other than quoted market prices that are observable | ||
d) Inputs that are derived principally from or corroborated by observable market data through correlation or other means | ||
Level 3 - | Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect the Company’s own assumptions about the assumptions a market participant would use in pricing the asset or liability. |
28
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:
Cash Equivalents and Short-Term Investments: The carrying amounts reported in the accompanying balance sheets for these financial instruments approximate their fair values. Cash in not included in the below tables.
Short-Term Notes Receivable from Affiliates: The carrying amounts reported in the accompanying balance sheets for these financial instruments approximate their fair value.
Bonds and Stocks: The NAIC allows insurance companies to report the fair value determined by the SVO or to determine the fair value by using a permitted valuation method. The fair values of bonds and stocks are reported or determined using the following pricing sources: indexes, third party pricing services, brokers, external fund managers and internal models.
Fair values for fixed maturity securities (including redeemable preferred stock) actively traded are determined from third-party pricing services, which are determined as discussed above in the description of level one and level two values within the fair value hierarchy. For fixed maturity securities (including redeemable preferred stock) not actively traded, fair values are estimated using values obtained from third-party pricing services, or are based on non-binding broker quotes or internal models. In the case of private placements, fair values are estimated by discounting the expected future cash flows using current market rates applicable to the coupon rate, credit and maturity of the investments.
Mortgage Loans on Real Estate: The fair values for mortgage loans on real estate are estimated utilizing discounted cash flow analyses, using interest rates reflective of current market conditions and the risk characteristics of the loans.
Real Estate: Real estate held for sale is typically valued utilizing independent external appraisers in conjunctions with reviews by qualified internal appraisers. Valuations are primarily based on active market prices, adjusted for any difference in the nature, location or condition of the specific property. If such information is not available, other valuation methods are applied, considering the value that the property’s net earning power will support, the value indicated by recent sales of comparable properties and the current cost of reproducing or replacing the property.
Other Invested Assets: The fair values for other invested assets, which include investments in surplus notes issued by other insurance companies and fixed or variable rate investments with underlying characteristics of bonds, were determined primarily by using indexes, third party pricing services and internal models.
Derivative Financial Instruments: The estimated fair values of interest rate swaps, including interest rate and currency swaps, are based on pricing models or formulas using current assumptions.
29
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Policy Loans: The fair value of policy loans is equal to the book value of the loan, which is stated at unpaid principal balance.
Securities Lending Reinvested Collateral: The cash collateral from securities lending is reinvested in various short-term and long-term debt instruments. The fair values of these investments are determined using the methods described above under Cash Equivalents and Short-Term Investments and Bonds and Stocks.
Receivable from/Payable to Parent, Subsidiaries and Affiliates: The carrying amount of receivable from/payable to affiliates approximates their fair value.
Deposit-Type Contracts: The carrying amounts of deposit-type contracts reported in the accompanying balance sheets approximate their fair values.
Investment Contract Liabilities: The carrying value of the Company’s liabilities for deferred annuities with minimum guaranteed benefits is determined using a stochastic valuation as described in Note 6, which approximates the fair value. For investment contracts without minimum guarantees, fair value is estimated using discounted cash flows. For those liabilities that are short in duration, carrying amount approximates fair value. For investment contracts with no defined maturity, fair value is estimated to be the present surrender value.
Separate Account Assets and Annuity Liabilities: The fair value of separate account assets are based on quoted market prices when available. When not available, they are valued in the same manner as general account assets as further described in this note. The fair value of separate account annuity liabilities is based on the account value for separate accounts business without guarantees.
The Company accounts for its investments in affiliated common stock using the equity method of accounting; as such, they are not included in the following disclosures.
Fair values for the Company’s insurance contracts other than investment-type contracts (including separate account universal life liabilities) are not required to be disclosed. However, the fair values of liabilities under all insurance contracts are taken into consideration in the Company’s overall management of interest rate risk, which minimizes exposure to changing interest rates through the matching of investment maturities with amounts due under insurance contracts.
30
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The following tables set forth a comparison of the estimated fair values and carrying amounts of the Company’s financial instruments, including those not measured at fair value in the balance sheets, as of December 31, 2013 and 2012, respectively:
December 31 2013 |
||||||||||||||||||||||||
Estimated Fair Value |
Admitted Assets |
(Level 1) | (Level 2) | (Level 3) | Not Practicable (Carrying Value) |
|||||||||||||||||||
Admitted assets |
||||||||||||||||||||||||
Cash equivalents and short-term investments, other than affiliates |
$ | 106,781 | $ | 106,781 | $ | — | $ | 106,781 | $ | — | $ | — | ||||||||||||
Bonds |
1,481,846 | 1,448,053 | 92,402 | 1,360,214 | 29,230 | — | ||||||||||||||||||
Mortgage loans on real estate |
79,470 | 77,805 | — | — | 79,470 | — | ||||||||||||||||||
Other invested assets |
500 | 500 | — | 500 | — | — | ||||||||||||||||||
Policy loans |
442,800 | 442,800 | — | 442,800 | — | — | ||||||||||||||||||
Securities lending reinvested collateral |
88,261 | 88,265 | — | 88,261 | — | — | ||||||||||||||||||
Receivable from parent, subsidiaries and affiliates |
19,859 | 19,859 | — | 19,859 | — | — | ||||||||||||||||||
Separate account assets |
6,969,477 | 6,969,477 | 6,969,477 | — | — | — | ||||||||||||||||||
Liabilities |
||||||||||||||||||||||||
Investment contract liabilities |
415,572 | 408,065 | — | 3,735 | 411,837 | — | ||||||||||||||||||
Deposit-type contracts |
21,520 | 21,520 | — | 21,520 | — | — | ||||||||||||||||||
Equity swaps |
4,100 | 4,100 | — | 4,100 | — | — | ||||||||||||||||||
Separate account annuity liabilities |
3,383,676 | 3,383,676 | — | 3,383,676 | — | — | ||||||||||||||||||
December 31 2012 - restated |
||||||||||||||||||||||||
Estimated Fair Value |
Admitted Assets |
(Level 1) | (Level 2) | (Level 3) | Not Practicable (Carrying Value) |
|||||||||||||||||||
Admitted assets |
||||||||||||||||||||||||
Cash equivalents and short-term investments, other than affiliates |
$ | 182,489 | $ | 182,489 | $ | — | $ | 182,489 | $ | — | $ | — | ||||||||||||
Bonds |
1,205,473 | 1,116,229 | 72,215 | 1,124,699 | 8,559 | — | ||||||||||||||||||
Common stocks, other than affiliates |
117 | 117 | 117 | — | — | — | ||||||||||||||||||
Mortgage loans on real estate |
52,182 | 50,714 | — | — | 52,182 | — | ||||||||||||||||||
Policy loans |
411,101 | 411,101 | — | 411,101 | — | — | ||||||||||||||||||
Securities lending reinvested collateral |
84,804 | 84,899 | — | 84,804 | — | — | ||||||||||||||||||
Receivable from parent, subsidiaries and affiliates |
10,992 | 10,992 | — | 10,992 | — | — | ||||||||||||||||||
Separate account assets |
6,477,241 | 6,477,241 | 6,477,241 | — | — | — | ||||||||||||||||||
Liabilities |
||||||||||||||||||||||||
Investment contract liabilities |
495,984 | 493,117 | — | 9,346 | 486,638 | — | ||||||||||||||||||
Deposit-type contracts |
14,647 | 14,647 | — | 14,647 | — | — | ||||||||||||||||||
Interest rate swaps |
1,841 | 1,841 | — | 1,841 | — | — | ||||||||||||||||||
Separate account annuity liabilities |
3,251,991 | 3,251,991 | — | 3,251,991 | — | — |
31
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The following tables provide information about the Company’s financial assets and liabilities measured at fair value as of December 31, 2013 and 2012:
2013 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: |
||||||||||||||||
Bonds |
||||||||||||||||
Industrial and miscellaneous |
$ | — | $ | 1,455 | $ | 551 | $ | 2,006 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total bonds |
— | 1,455 | 551 | 2,006 | ||||||||||||
Cash equivalents and short-term investments |
||||||||||||||||
Government |
— | 3 | — | 3 | ||||||||||||
Industrial and miscellaneous |
— | 61,490 | — | 61,490 | ||||||||||||
Mutual funds |
— | 45,194 | — | 45,194 | ||||||||||||
Sweep accounts |
— | 94 | — | 94 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Short-term |
— | 106,781 | — | 106,781 | ||||||||||||
Separate account assets |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets at fair value |
$ | — | $ | 108,236 | $ | 551 | $ | 108,787 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities: |
||||||||||||||||
Derivative liabilities |
$ | — | $ | 4,100 | $ | — | $ | 4,100 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities at fair value |
$ | — | $ | 4,100 | $ | — | $ | 4,100 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
2012 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: |
||||||||||||||||
Bonds |
||||||||||||||||
Industrial and miscellaneous |
$ | — | $ | 1,246 | $ | 555 | $ | 1,801 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total bonds |
— | 1,246 | 555 | 1,801 | ||||||||||||
Common stock |
||||||||||||||||
Industrial and miscellaneous |
117 | — | — | 117 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total common stock |
117 | — | — | 117 | ||||||||||||
Cash equivalents and short-term investments |
||||||||||||||||
Government |
— | 3 | — | 3 | ||||||||||||
Industrial and miscellaneous |
— | 134,981 | — | 134,981 | ||||||||||||
Mutual funds |
— | 47,260 | — | 47,260 | ||||||||||||
Sweep accounts |
— | 245 | — | 245 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Short-term |
— | 182,489 | — | 182,489 | ||||||||||||
Separate account assets |
6,477,241 | — | — | 6,477,241 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets at fair value |
$ | 6,477,358 | $ | 183,735 | $ | 555 | $ | 6,661,648 | ||||||||
|
|
|
|
|
|
|
|
32
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Bonds classified in Level 2 are valued using inputs from third party pricing services or broker quotes. Level 3 measurements for bonds are primarily those valued using non-binding broker quotes, which cannot be corroborated by other market observable data or internal modeling which utilize inputs that are not market observable.
Short-term investments are classified as Level 2 as they are carried at amortized cost, which approximates fair value.
Derivatives classified as Level 2 represent over-the-counter (OTC) contracts valued using pricing models based on the net present value of estimated future cash flows, directly observed prices from exchange-traded derivatives, other OTC trades or external pricing services.
During 2013 and 2012, there were no transfers between Level 1 and 2, respectively.
33
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The following tables summarize the changes in assets and liabilities classified in Level 3 for 2013 and 2012:
Balance at January 1, 2013 |
Transfers into Level 3 |
Transfers out of Level 3 |
Total Gains and (Losses) Included in Net income (a) |
Total Gains and (Losses) Included in Surplus (b) |
||||||||||||||||
Bonds |
||||||||||||||||||||
Other |
$ | 555 | $ | — | $ | — | $ | 43 | $ | (27 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 555 | $ | — | $ | — | $ | 43 | $ | (27 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Issuances | Purchases | Sales | Settlements | Balance at December 31, 2013 |
||||||||||||||||
Bonds |
||||||||||||||||||||
Other |
$ | — | $ | — | $ | — | $ | 20 | $ | 551 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | — | $ | — | $ | — | $ | 20 | $ | 551 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at January 1, 2012 |
Transfers into Level 3 |
Transfers out of Level 3 |
Total Gains and (Losses) Included in Net income (a) |
Total Gains and (Losses) Included in Surplus (b) |
||||||||||||||||
Bonds |
||||||||||||||||||||
Other |
$ | 559 | $ | — | $ | — | $ | 51 | $ | (25 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 559 | $ | — | $ | — | $ | 51 | $ | (25 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Issuances | Purchases | Sales | Settlements | Balance at December 31, 2012 |
||||||||||||||||
Bonds |
||||||||||||||||||||
Other |
$ | — | $ | — | $ | — | $ | 30 | $ | 555 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | — | $ | — | $ | — | $ | 30 | $ | 555 | ||||||||||
|
|
|
|
|
|
|
|
|
|
(a) | Recorded as a component of Net Realized Capital Gains/Losses in the Statements of Operations |
(b) | Recorded as a component of Change in Net Unrealized Capital Gains/Losses in the Statements of Changes in Capital and Surplus |
The Company’s policy is to recognize transfers in and out of levels as of the beginning of the reporting period.
As indicated in Note 1, real estate held for sale is measured at the lower of carrying amount or fair value less cost to sell. The Company is exploring the sale of 2 parcels of land adjacent to its home office properties. Therefore, these 2 properties are carried at fair value less cost to sell as of December 31, 2013, which amounts to $6,259. There was no real estate carried at fair value as of December 31, 2012.
34
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Fair value was determined by utilizing an external appraisal following the sales comparison approach. The fair value measurements are classified in Level 3 as the comparable sales and adjustments for the specific attributes of these properties are not market observable inputs.
3. Investments
The carrying amount and estimated fair value of investments in bonds are as follows:
Gross | Gross | |||||||||||||||||||
Unrealized | Unrealized | |||||||||||||||||||
Gross | Losses 12 | Losses less | Estimated | |||||||||||||||||
Carrying | Unrealized | Months or | Than 12 | Fair | ||||||||||||||||
Amount | Gains | More | Months | Value | ||||||||||||||||
Unaffiliated bonds: |
||||||||||||||||||||
United States Government and agencies |
$ | 82,813 | $ | 1,150 | $ | 10 | $ | 2,075 | $ | 81,878 | ||||||||||
State, municipal and other government |
32,010 | 759 | 354 | 1,246 | 31,169 | |||||||||||||||
Hybrid securities |
19,038 | 2,622 | — | — | 21,660 | |||||||||||||||
Industrial and miscellaneous |
936,439 | 37,152 | 1,088 | 15,148 | 957,355 | |||||||||||||||
Mortgage and other asset-backed securities |
377,753 | 17,489 | 1,079 | 4,379 | 389,784 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 1,448,053 | $ | 59,172 | $ | 2,531 | $ | 22,848 | $ | 1,481,846 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross | Gross | |||||||||||||||||||
Unrealized | Unrealized | |||||||||||||||||||
Gross | Losses 12 | Losses less | Estimated | |||||||||||||||||
Carrying | Unrealized | Months or | Than 12 | Fair | ||||||||||||||||
Amount | Gains | More | Months | Value | ||||||||||||||||
Unaffiliated bonds: |
||||||||||||||||||||
United States Government and agencies |
$ | 52,940 | $ | 5,702 | $ | — | $ | — | $ | 58,642 | ||||||||||
State, municipal and other government |
27,378 | 3,421 | 50 | — | 30,749 | |||||||||||||||
Hybrid securities |
19,055 | 864 | 1,238 | — | 18,681 | |||||||||||||||
Industrial and miscellaneous |
720,424 | 68,173 | 24 | 1,072 | 787,501 | |||||||||||||||
Mortgage and other asset-backed securities |
296,432 | 19,586 | 6,083 | 35 | 309,900 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 1,116,229 | $ | 97,746 | $ | 7,395 | $ | 1,107 | $ | 1,205,473 | |||||||||||
|
|
|
|
|
|
|
|
|
|
At December 31, 2013 and 2012, respectively, for bonds that have been in a continuous loss position for greater than or equal to twelve months, the Company held 26 and 21 securities with a carrying amount of $49,119 and $51,454 and an unrealized loss of $2,531 and $7,394 with an
35
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
average price of 94.9 and 85.6 (fair value/amortized cost). Of this portfolio, 82.2% and 72.4% were investment grade with associated unrealized losses of $1,394 and $5,266, respectively.
At December 31, 2013 and 2012, respectively, for bonds that have been in a continuous loss position for less than twelve months, the Company held 178 and 17 securities with a carrying amount of $609,765 and $61,424 and an unrealized loss of $22,848 and $1,107 with an average price of 96.3 and 98.2 (fair value/amortized cost). Of this portfolio, 98.0% and 88.5% were investment grade with associated unrealized losses of $21,926 and $788, respectively.
The estimated fair value of bonds and common stocks with gross unrealized losses at December 31, 2013 and 2012 are as follows:
Losses 12 | Losses Less | |||||||||||
Months or | Than 12 | |||||||||||
More | Months | Total | ||||||||||
Unaffiliated bonds: |
||||||||||||
United States Government and agencies |
$ | 540 | $ | 64,656 | $ | 65,196 | ||||||
State, municipal and other government |
1,814 | 14,149 | 15,963 | |||||||||
Industrial and miscellaneous |
27,904 | 380,486 | 408,390 | |||||||||
Mortgage and other asset-backed securities |
16,330 | 127,625 | 143,955 | |||||||||
|
|
|
|
|
|
|||||||
$ | 46,588 | $ | 586,916 | $ | 633,504 | |||||||
|
|
|
|
|
|
|||||||
Losses 12 | Losses Less | |||||||||||
Months or | Than 12 | |||||||||||
More | Months | Total | ||||||||||
Unaffiliated bonds: |
||||||||||||
United States Government and agencies |
$ | — | $ | 550 | $ | 550 | ||||||
State, municipal and other government |
2,120 | — | 2,120 | |||||||||
Hybrid securities |
8,250 | — | 8,250 | |||||||||
Industrial and miscellaneous |
641 | 57,229 | 57,870 | |||||||||
Mortgage and other asset-backed securities |
33,049 | 2,539 | 35,588 | |||||||||
|
|
|
|
|
|
|||||||
44,060 | 60,318 | 104,378 | ||||||||||
Unaffiliated common stocks |
— | 116 | 116 | |||||||||
|
|
|
|
|
|
|||||||
$ | 44,060 | $ | 60,434 | $ | 104,494 | |||||||
|
|
|
|
|
|
36
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The carrying amount and estimated fair value of bonds at December 31, 2013, by contractual maturity, is shown below. Expected maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepay penalties.
Carrying Amount |
Estimated Fair Value |
|||||||
Due in one year or less |
$ | 25,979 | $ | 26,476 | ||||
Due after one year through five years |
294,870 | 311,620 | ||||||
Due after five years through ten years |
507,668 | 510,003 | ||||||
Due after ten years |
241,783 | 243,963 | ||||||
|
|
|
|
|||||
$ | 1,070,300 | $ | 1,092,062 | |||||
Mortgage and other asset-backed securities |
377,753 | 389,784 | ||||||
|
|
|
|
|||||
$ | 1,448,053 | $ | 1,481,846 | |||||
|
|
|
|
For impairment policies related to non-structured and structured securities, refer to Note 1 under Investments.
There were no loan-backed securities with a recognized other-than-temporary impairment (OTTI) due to intent to sell or lack of intent and ability to hold during the years ended December 31, 2013 or 2011. The following table provides the aggregate totals for loan-backed securities with a recognized OTTI due to intent to sell or lack of intent and ability to hold, in which the security is written down to fair value during the year ended December 31, 2012.
Amortized | ||||||||||||||||
Cost Basis | OTTI Recognized in Loss | |||||||||||||||
Before OTTI | Interest | Non-interest | Fair Value | |||||||||||||
Year Ended December 31, 2012 |
||||||||||||||||
OTTI recognized 4th Quarter: |
||||||||||||||||
Inability or lack of intent to retain the investment in the security for a period of time sufficient to recover the amortized cost basis |
$ | 8,122 | $ | — | $ | 117 | $ | 8,005 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total 4th Quarter OTTI on loan-backed securities |
8,122 | — | 117 | 8,005 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Aggregate total |
$ | 8,122 | $ | — | $ | 117 | $ | 8,005 | ||||||||
|
|
|
|
|
|
|
|
37
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The following tables provide the aggregate totals for loan-backed securities with a recognized OTTI due to the Company’s cash flow analysis, in which the security is written down to estimated future cash flows discounted at the security’s effective yield.
Amortized Cost | ||||||||||||||||
before Current | Amortized Cost | |||||||||||||||
Period OTTI | Recognized OTTI | After OTTI | Fair Value | |||||||||||||
Year ended December 31, 2013 |
||||||||||||||||
1st quarter present value of cash flows expected to be less than the amortized cost basis |
$ | 4,934 | $ | 244 | $ | 4,690 | $ | 930 | ||||||||
2nd quarter present value of cash flows expected to be less than the amortized cost basis |
3,857 | 64 | 3,793 | 403 | ||||||||||||
3rd quarter present value of cash flows expected to be less than the amortized cost basis |
6,137 | 505 | 5,632 | 1,815 | ||||||||||||
4th quarter present value of cash flows expected to be less than the amortized cost basis |
2,378 | 104 | 2,274 | 2,135 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Aggregate total |
$ | 17,306 | $ | 917 | $ | 16,389 | $ | 5,283 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Amortized Cost | ||||||||||||||||
before Current | Amortized Cost | |||||||||||||||
Period OTTI | Recognized OTTI | After OTTI | Fair Value | |||||||||||||
Year ended December 31, 2012 |
||||||||||||||||
1st quarter present value of cash flows expected to be less than the amortized cost basis |
$ | 1,582 | $ | 10 | $ | 1,572 | $ | 926 | ||||||||
2nd quarter present value of cash flows expected to be less than the amortized cost basis |
6,924 | 56 | 6,868 | 2,062 | ||||||||||||
3rd quarter present value of cash flows expected to be less than the amortized cost basis |
31 | 1 | 30 | 18 | ||||||||||||
4th quarter present value of cash flows expected to be less than the amortized cost basis |
14,707 | 317 | 14,390 | 9,570 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Aggregate total |
$ | 23,244 | $ | 384 | $ | 22,860 | $ | 12,576 | ||||||||
|
|
|
|
|
|
|
|
38
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Amortized Cost before Current Period OTTI |
Recognized OTTI | Amortized Cost After OTTI |
Fair Value | |||||||||||||
Year ended December 31, 2011 |
||||||||||||||||
1st quarter present value of cash flows expected to be less than the amortized cost basis |
$ | 1,000 | $ | 24 | $ | 976 | $ | 529 | ||||||||
2nd quarter present value of cash flows expected to be less than the amortized cost basis |
2,733 | 80 | 2,653 | 1,548 | ||||||||||||
3rd quarter present value of cash flows expected to be less than the amortized cost basis |
2,604 | 25 | 2,579 | 1,377 | ||||||||||||
4th quarter present value of cash flows expected to be less than the amortized cost basis |
3,821 | 108 | 3,713 | 2,307 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Aggregate total |
$ | 10,158 | $ | 237 | $ | 9,921 | $ | 5,761 | ||||||||
|
|
|
|
|
|
|
|
The following loan-backed and structured securities were held at December 31, 2013, for which an OTTI was recognized during the current reporting period:
CUSIP |
Amortized Cost Before Current Period OTTI |
Present Value of Projected Cash Flows |
Recognized OTTI |
Amortized Cost After OTTI |
Fair Value at Time of OTTI |
Quarter in which Impairment Occurred |
||||||||||||||||||
$ | 4,000 | $ | 3,869 | $ | 131 | $ | 3,869 | $ | 703 | 1Q 2013 | ||||||||||||||
934 | 822 | 112 | 822 | 227 | 1Q 2013 | |||||||||||||||||||
3,857 | 3,793 | 64 | 3,793 | 403 | 2Q 2013 | |||||||||||||||||||
3,783 | 3,598 | 185 | 3,598 | 355 | 3Q 2013 | |||||||||||||||||||
818 | 652 | 166 | 652 | 255 | 3Q 2013 | |||||||||||||||||||
813 | 785 | 28 | 785 | 727 | 4Q 2013 | |||||||||||||||||||
201 | 190 | 11 | 190 | 207 | 4Q 2013 |
The unrealized losses of loan-backed and structured securities where fair value is less than cost or amortized cost for which an OTTI has not been recognized in earnings as of December 31, 2013 and 2012 is as follows:
Losses 12 Months or More |
Losses Less Than 12 Months |
|||||||
Year Ended December 31, 2013 |
||||||||
The aggregate amount of unrealized losses |
$ | 1,974 | $ | 4,389 | ||||
The aggregate related fair value of securities with unrealized losses |
18,285 | 127,677 |
39
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Losses 12 Months or More |
Losses Less Than 12 Months |
|||||||
Year Ended December 31, 2012 |
||||||||
The aggregate amount of unrealized losses |
$ | 11,568 | $ | 35 | ||||
The aggregate related fair value of securities with unrealized losses |
34,850 | 4,056 |
Detail of net investment income is presented below:
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Income: |
||||||||||||
Bonds |
$ | 55,638 | $ | 47,292 | $ | 41,739 | ||||||
Common stocks |
15,510 | 13,925 | 18,667 | |||||||||
Mortgage loans on real estate |
2,542 | 2,091 | 1,502 | |||||||||
Real estate |
4,520 | 4,409 | 4,571 | |||||||||
Policy loans |
22,562 | 21,841 | 21,751 | |||||||||
Cash, cash equivalents and short-term investments |
213 | 314 | 386 | |||||||||
Derivatives |
23 | — | (516 | ) | ||||||||
Other invested assets |
(764 | ) | (684 | ) | (1,287 | ) | ||||||
Other |
1,250 | 1,130 | 515 | |||||||||
|
|
|
|
|
|
|||||||
Gross investment income |
101,494 | 90,318 | 87,328 | |||||||||
Less investment expenses |
9,004 | 8,589 | 7,297 | |||||||||
|
|
|
|
|
|
|||||||
Net investment income |
$ | 92,490 | $ | 81,729 | $ | 80,031 | ||||||
|
|
|
|
|
|
Proceeds from sales and other disposals (excluding maturities) of bonds and preferred stock and related gross realized capital gains and losses were as follows:
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Proceeds |
$ | 312,963 | $ | 324,065 | $ | 258,853 | ||||||
|
|
|
|
|
|
|||||||
Gross realized gains |
$ | 3,042 | $ | 6,484 | $ | 3,231 | ||||||
Gross realized losses |
(6,545 | ) | (1,347 | ) | (2,031 | ) | ||||||
|
|
|
|
|
|
|||||||
Net realized capital gains (losses) |
$ | (3,503 | ) | $ | 5,137 | $ | 1,200 | |||||
|
|
|
|
|
|
The Company had gross realized losses for the years ended December 31, 2013, 2012, and 2011 of $923, $417 and $311, respectively, which relate to losses recognized on other-than-temporary declines in fair values of bonds.
40
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Net realized capital gains (losses) on investments are summarized below:
Realized | ||||||||||||
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Bonds |
$ | (4,426 | ) | $ | 4,720 | $ | 889 | |||||
Common stocks |
— | 1 | — | |||||||||
Mortgage loans |
— | 252 | 237 | |||||||||
Real estate |
(830 | ) | — | — | ||||||||
Cash, cash equivalents and short-term investments |
— | — | 5 | |||||||||
Derivatives |
13,326 | (4,550 | ) | (13,204 | ) | |||||||
Other |
(33 | ) | (170 | ) | — | |||||||
|
|
|
|
|
|
|||||||
8,037 | 253 | (12,073 | ) | |||||||||
Federal income tax effect |
968 | (1,153 | ) | 402 | ||||||||
Transfer to interest maintenance reserve |
2,098 | (3,691 | ) | (760 | ) | |||||||
|
|
|
|
|
|
|||||||
Net realized capital gains (losses) on investments |
$ | 11,103 | $ | (4,591 | ) | $ | (12,431 | ) | ||||
|
|
|
|
|
|
The Company did not have any recorded investments in restructured securities at December 31, 2013 and 2011. At December 31, 2012, the Company had recorded investments in restructured securities of $118. The capital gain taken as a direct result of restructures in 2012 was $34. The Company often has impaired a security prior to the restructure date. These impairments are not included in the calculation of restructure related losses and are accounted for as a realized loss, reducing the cost basis of the security involved.
The changes in net unrealized capital gains and losses on investments were as follows:
Change in Unrealized | ||||||||||||
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Bonds |
$ | 4,581 | $ | 765 | $ | (999 | ) | |||||
Common stocks |
1 | (1 | ) | (3,237 | ) | |||||||
Affiliated entities |
2,679 | 342 | — | |||||||||
Derivatives |
(2,259 | ) | (1,330 | ) | 461 | |||||||
Other invested assets |
— | 222 | (206 | ) | ||||||||
|
|
|
|
|
|
|||||||
Change in unrealized capital gains (losses) |
5,002 | (2 | ) | (3,981 | ) | |||||||
Taxes on unrealized capital gains/losses |
— | 120 | 261 | |||||||||
|
|
|
|
|
|
|||||||
Change in unrealized capital gains (losses), net of tax |
$ | 5,002 | $ | 118 | $ | (3,720 | ) | |||||
|
|
|
|
|
|
41
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The credit quality of mortgage loans by type of property for the year ended December 31, 2013 were as follows:
Commercial | Total | |||||||
AAA - AA |
$ | 26,358 | $ | 26,358 | ||||
A |
51,447 | 51,447 | ||||||
|
|
|
|
|||||
$ | 77,805 | $ | 77,805 | |||||
|
|
|
|
The credit quality for commercial mortgage loans was determined based on an internal credit rating model which assigns a letter rating to each mortgage loan in the portfolio as an indicator of the credit quality of the mortgage loan. The internal credit rating model was designed based on rating agency methodology, then modified for credit risk associated with the Company’s mortgage lending process, taking into account such factors as projected future cash flows, net operating income, and collateral value. The model produces a credit rating score and an associated letter rating which is intended to align with S&P ratings as closely as possible. Information supporting the credit risk rating process is updated at least annually.
During 2013, the Company issued mortgage loans with a maximum interest rate of 3.80% and a minimum interest rate of 3.60% for commercial loans. During 2012, the Company issued mortgage loans with a maximum interest rate of 3.75% and a minimum interest rate of 3.70% for commercial loans. The maximum percentage of any one mortgage loan to the value of the underlying real estate originated during the years ending December 31, 2013 and 2012 at the time of origination was 64% and 70%, respectively. During 2013 and 2012, no loans were transferred from affiliated entities.
42
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The following tables provide the age analysis of mortgage loans aggregated by type:
Residential | Commercial | |||||||||||||||||||||||||||
December 31, 2013 | Farm | Insured | All Other | Insured | All Other | Mezzanine | Total | |||||||||||||||||||||
Recorded Investment (All) |
||||||||||||||||||||||||||||
(a) Current |
$ | — | $ | — | $ | — | $ | — | $ | 77,805 | $ | — | $ | 77,805 | ||||||||||||||
(b) 30-59 Days Past Due |
— | — | — | — | — | — | — | |||||||||||||||||||||
(c) 60-89 Days Past Due |
— | — | — | — | — | — | — | |||||||||||||||||||||
(d) 90-179 Days Past Due |
— | — | — | — | — | — | — | |||||||||||||||||||||
(e) 180+ Days Past Due |
— | — | — | — | — | — | — | |||||||||||||||||||||
Residential | Commercial | |||||||||||||||||||||||||||
December 31, 2012 | Farm | Insured | All Other | Insured | All Other | Mezzanine | Total | |||||||||||||||||||||
Recorded Investment (All) |
||||||||||||||||||||||||||||
(a) Current |
$ | — | $ | — | $ | — | $ | — | $ | 50,714 | $ | — | $ | 50,714 | ||||||||||||||
(b) 30-59 Days Past Due |
— | — | — | — | — | — | - | |||||||||||||||||||||
(c) 60-89 Days Past Due |
— | — | — | — | — | — | — | |||||||||||||||||||||
(d) 90-179 Days Past Due |
— | — | — | — | — | — | — | |||||||||||||||||||||
(e) 180+ Days Past Due |
— | — | — | — | — | — | — |
The Company accrues interest income on impaired loans to the extent deemed collectible (delinquent less than 91 days) and the loan continues to perform under its original or restructured contractual terms. Interest income on nonperforming loans generally is recognized on a cash basis. The Company did not recognize any interest income on impaired loans for the years ended December 31, 2013, 2012 or 2011. The Company did not recognize any interest income on a cash basis for the years ended December 31, 2013, 2012 or 2011.
During 2013, 2012 and 2011, no mortgage loans were foreclosed and transferred to real estate. At December 31, 2013 and 2012, the Company held a mortgage loan loss reserve in the AVR of $759 and $482, respectively.
43
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The Company’s mortgage loan portfolio is diversified by geographic region and specific collateral property type as follows:
Geographic Distribution |
Property Type Distribution |
|||||||||||||||||
December 31 | December 31 | |||||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||||
South Atlantic |
57 | % | 39 | % | Retail | 46 | % | 74 | % | |||||||||
W. South Central |
15 | 11 | Other | 34 | 2 | |||||||||||||
Pacific |
12 | 24 | Office | 20 | 24 | |||||||||||||
Middle Atlantic |
7 | 11 | ||||||||||||||||
W. North Central |
6 | 10 | ||||||||||||||||
Mountain |
3 | 5 |
At December 31, 2013, the Company had ownership interest in five LIHTC investments. The remaining years of unexpired tax credits ranged from two to eight and the properties were not subject to regulatory review. The length of time remaining for holding periods ranged from two to thirteen years. There are no contingent equity commitments expected to be paid in the future. There were no impairment losses, write-downs or reclassifications during 2013 related to these credits.
At December 31, 2012, the Company had ownership interest in five LIHTC investments. The remaining years of unexpired tax credits ranged from three to nine and the properties were not subject to regulatory review. The length of time remaining for holding periods ranged from three to fourteen years. There were no contingent equity commitments expected to be paid in the future. There were no impairment losses, write-downs or reclassifications during 2012 related to these credits.
The following tables provide the carrying value of state transferable tax credits gross of any related tax liabilities and total unused transferable tax credits by state and in total as of December 31, 2013 and 2012:
December 31, 2013 | ||||||||||
Description of State Transferable Tax Credits |
State | Carrying Value | Unused Amount* | |||||||
Low-Income Housing Tax Credits |
MA | $ | 160 | $ | 489 | |||||
|
|
|
|
|||||||
Total |
$ | 160 | $ | 489 | ||||||
|
|
|
|
|||||||
December 31, 2012 | ||||||||||
Description of State Transferable Tax Credits |
State | Carrying Value | Unused Amount* | |||||||
Low-Income Housing Tax Credits |
MA | $ | 426 | $ | 755 | |||||
|
|
|
|
|||||||
Total |
$ | 426 | $ | 755 | ||||||
|
|
|
|
* | The unused amount reflects credits that the Company deems will be realizable in the period from 2014 to 2015. |
The Company had no non-transferable state tax credits.
44
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The Company estimated the utilization of the remaining state transferable tax credits by projecting a future tax liability based on projected premium, tax rates and tax credits and comparing the projected future tax liability to the availability of remaining state transferable tax credits. The Company had no impairment losses related to state transferable tax credits.
The Company has entered into collateral agreements with certain counterparties wherein the counterparty is required to post assets on the Company’s behalf. The posted amount is equal to the difference between the net positive fair value of the contracts and an agreed upon threshold that is based on the credit rating of the counterparty. Inversely, if the net fair value of all contracts with this counterparty is negative, the Company is required to post assets instead. At December 31, 2013 and 2012, the Company does not have any contracts, aggregated at a counterparty level, with a positive fair value. At December 31, 2013 and 2012, the fair value of all contracts, aggregated at a counterparty level, with a negative fair value amount to $4,100 and $1,841, respectively.
At December 31, 2013 and 2012, respectively, the Company has recorded $(4,100) and $(1,841) for the component of derivative instruments utilized for hedging purposes that did not qualify for hedge accounting. This has been recorded directly to unassigned surplus as an unrealized loss.
The Company did not recognize any unrealized gains or losses during 2013 or 2012 that represented the component of derivative instruments gain or loss that was excluded from the assessment of hedge effectiveness.
At December 31, 2013 and 2012, respectively, the Company had outstanding receive fixed - pay fixed swaps with a notional amount of $690 and $8.
At December 31, 2013 and 2012, respectively, the Company had outstanding receive fixed - pay floating swaps with a notional amount of $14,368 and $0.
The Company recognized net realized gain (losses) from swaps in the amount of $(3,558), $(3,791) and $0 for the years ended December 31, 2013, 2012, and 2011, respectively.
Under exchange traded futures and options, the Company agrees to purchase a specified number of contracts from other parties and to post a variation margin on a daily basis in an amount equal to the difference in the daily fair values of those contracts. The parties with whom the Company enters into exchange traded futures and options are regulated futures commissions merchants who are members of a trading exchange. The Company recognized net realized gains (losses) from futures contracts in the amount of $16,914, $758 and $13,203 for the years ended December 31, 2013, 2012 and 2011, respectively.
45
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Open futures contracts at December 31, 2013 and 2012 are as follows:
Long/Short |
Number of Contracts |
Contract Type |
Opening Fair Value |
Year-End Fair Value |
||||||||
DJ EURO STOXX | ||||||||||||
Long |
967 | March 2014 Futures | $ | 28,040 | $ | 30,054 | ||||||
HANG SENG IDX | ||||||||||||
Long |
140 | January 2014 Futures | 162,918 | 163,331 | ||||||||
S&P 500 | ||||||||||||
Long |
306 | March 2014 Futures | 134,506 | 140,844 | ||||||||
S&P 500 | ||||||||||||
Short |
135 | March 2014 Futures | 59,917 | 62,137 | ||||||||
Long/Short |
Number of Contracts |
Contract Type |
Opening Fair Value |
Year-End Fair Value |
||||||||
DJ EURO STOXX | ||||||||||||
Long |
529 | March 2013 Futures | $ | 18,310 | $ | 18,290 | ||||||
HANG SENG IDX | ||||||||||||
Long |
60 | January 2013 Futures | 8,751 | 8,779 | ||||||||
S&P 500 | ||||||||||||
Long |
44 | March 2013 Futures | 15,070 | 15,621 |
46
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The following tables show the pledged or restricted assets as of December 31, 2013 and 2012, respectively:
Gross Restricted Current Year |
||||||||||||||||||||
Restricted Asset Category |
Total General Account (G/A) |
G/A Supporting Separate Account (S/A) Activity |
Total S/A Restricted Assets |
S/A Assets Supporting G/A Activity |
Total | |||||||||||||||
a. Subject to contractual obligation for which liability is not shown |
$ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
b. Collateral held under security lending agreements |
88,184 | — | — | — | 88,184 | |||||||||||||||
c. Subject to repurchase agreements |
— | — | — | — | — | |||||||||||||||
d. Subject to reverse repurchase agreements |
— | — | — | — | — | |||||||||||||||
e. Subject to dollar repurchase agreements |
26,475 | — | — | — | 26,475 | |||||||||||||||
f. Subject to dollar reverse repurchase agreements |
— | — | — | — | — | |||||||||||||||
g. Placed under option contracts |
— | — | — | — | — | |||||||||||||||
h. Letter stock or securities restricted as to sale |
— | — | — | — | — | |||||||||||||||
i. On deposit with state(s) |
3,526 | — | — | — | 3,526 | |||||||||||||||
j. On deposit with other regulatory bodies |
— | — | — | — | — | |||||||||||||||
k. Pledged as collateral not captured in other categories |
18,694 | — | — | — | 18,694 | |||||||||||||||
l. Other restricted assets |
— | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
m. Total Restricted Assets |
$ | 136,879 | $ | — | $ | — | $ | — | $ | 136,879 | ||||||||||
|
|
|
|
|
|
|
|
|
|
47
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Gross Restricted | Percentage | |||||||||||||||||||
Restricted Asset Category |
Total From Prior Year |
Increase/ (Decrease) |
Total Current Year Admitted Restricted |
Gross Restricted to Total Assets |
Admitted Restricted to Total Admitted Assets |
|||||||||||||||
a. Subject to contractual obligation for which liability is not shown |
$ | — | $ | — | $ | — | 0.00 | % | 0.00 | % | ||||||||||
b. Collateral held under security lending agreements |
84,932 | 3,252 | 88,184 | 0.94 | 0.94 | |||||||||||||||
c. Subject to repurchase agreements |
— | — | — | 0.00 | 0.00 | |||||||||||||||
d. Subject to reverse repurchase agreements |
— | — | — | 0.00 | 0.00 | |||||||||||||||
e. Subject to dollar repurchase agreements |
25,986 | 489 | 26,475 | 0.28 | 0.28 | |||||||||||||||
f. Subject to dollar reverse repurchase agreements |
— | — | — | 0.00 | 0.00 | |||||||||||||||
g. Placed under option contracts |
— | — | — | 0.00 | 0.00 | |||||||||||||||
h. Letter stock or securities restricted as to sale |
— | — | — | 0.00 | 0.00 | |||||||||||||||
i. On deposit with state(s) |
3,567 | (41 | ) | 3,526 | 0.04 | 0.04 | ||||||||||||||
j. On deposit with other regulatory bodies |
— | — | — | 0.00 | 0.00 | |||||||||||||||
k. Pledged as collateral not captured in other categories |
14,125 | 4,569 | 18,694 | 0.20 | 0.20 | |||||||||||||||
l. Other restricted assets |
— | — | — | 0.00 | 0.00 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
m. Total Restricted Assets |
$ | 128,610 | $ | 8,269 | $ | 136,879 | 1.46 | % | 1.46 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
Assets pledged as collateral not captured in other categories includes invested assets with a carrying value of $18,694 and $14,125, respectively, in conjunction with derivative transactions as of December 31, 2013 and 2012, respectively.
4. Reinsurance
The Company reinsures portions of the risk on certain insurance policies which exceed its established limits, thereby providing a greater diversification of risk and minimizing exposure on larger risks. The Company remains contingently liable with respect to any insurance ceded, and
48
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
this would become an actual liability in the event that the assuming insurance company became unable to meet its obligations under the reinsurance treaty.
Premiums earned reflect the following reinsurance amounts:
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Direct premiums |
$ | 729,989 | $ | 684,163 | $ | 670,285 | ||||||
Reinsurance assumed - affiliated |
— | — | 763 | |||||||||
Reinsurance ceded - affiliated |
(139,956 | ) | (149,569 | ) | (143,983 | ) | ||||||
Reinsurance ceded - non-affiliated |
(48,942 | ) | (49,886 | ) | (46,466 | ) | ||||||
|
|
|
|
|
|
|||||||
Net premiums earned |
$ | 541,091 | $ | 484,708 | $ | 480,599 | ||||||
|
|
|
|
|
|
The Company received reinsurance recoveries in the amount of $126,271, $137,800 (restated) and $129,708 during 2013, 2012 and 2011, respectively. At December 31, 2013 and 2012, estimated amounts recoverable from reinsurers that have been deducted from policy and contract claim reserves totaled $16,802 and $18,533, respectively. The aggregate reserves for policies and contracts were reduced for reserve credits for reinsurance ceded at December 31, 2013 and 2012 of $491,148 and $631,262, respectively. As of December 31, 2013 and 2012, the amount of reserve credits for reinsurance ceded that represented unauthorized affiliated companies were $433,483 and $571,479, respectively.
The Company would experience no reduction in surplus at December 31, 2013 if all reinsurance agreements were cancelled.
On July 1, 2013, the Company recaptured certain treaties from a non-affiliate, for which net consideration received was $1,174, life and claim reserves recaptured were $3,296, premiums recaptured were $2,004, and claims recaptured were $956, resulting in a pre-tax loss of $1,081, which was included in the Statement of Operations.
On April 26, 2011, Aegon N.V announced the divestiture of its life reinsurance operations, Transamerica Reinsurance to SCOR SE, a Societas Europaea organized under the laws of France (SCOR), which was effective August 9, 2011.
The life reinsurance business conducted by Transamerica Reinsurance was written through several of Aegon N.V.’s U.S. and international affiliates, all of which remain Aegon N.V. affiliates following the closing, except for Transamerica International Reinsurance Ireland, Limited, an Irish reinsurance company (TIRI). In preparation of the divestiture of the life reinsurance business to SCOR, during the second quarter of 2011, the Company, as well as other affiliated life insurance companies, recaptured certain business that had been reinsured to TIRI, subsequently ceding the majority of the business recaptured to Transamerica International Re
49
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
(Bermuda) Ltd. (TIRe), an affiliate. As a result of these transactions, the net impact to the Company was a pre-tax loss of $94,262, which was included in the statement of operations, and a net of tax gain of $63,421 which has been credited directly to unassigned surplus. Additional information surrounding these transactions is outlined below.
Effective April 1, 2011, the Company recaptured the traditional life business that was previously reinsured on a coinsurance funds withheld basis to TIRI, and subsequently reinsured this business to TIRe. The Company paid recapture consideration of $29,300 and released the associated funds withheld liability of $22,729 associated with the recapture, and received an initial ceding commission of $27,400 and established a funds withheld liability of $23,061 on the new cession to TIRe. Life, claim reserves and other assets associated with this block that were exchanged were $86,197, $9,563 and $2,344, respectively. The Company released into income a previously deferred unamortized gain resulting from the original cession of this business to TIRI in the amount of $175 ($120 net of tax) resulting in a pre-tax loss of $99,812 on the recapture which was included in the statement of operations as of December 31, 2011. The cession to TIRe resulted in a net of tax gain of $63,541, which was credited directly to unassigned surplus at December 31, 2011.
Effective April 1, 2011, TIRI, recaptured the BOLI/COLI catastrophic mortality risk that had previously been retro-ceded to the Company. The Company released life and claim reserves of $5,507 and $43, respectively, with no consideration exchanged, resulting in a pre-tax gain of $5,550 which was included in the statement of operations at December 31, 2011.
During 2013, 2012 and 2011, the Company amortized deferred gains from reinsurance transactions occurring prior to 2011 of $15,661, $21,315 (restated) and $21,792, respectively, into earnings on a net of tax basis with a corresponding charge to unassigned surplus.
Letters of credit held for all unauthorized reinsurers as of December 31, 2013, 2012 and 2011 were $196,300, $179,100 and $273,000, respectively.
50
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
5. Income Taxes
The net deferred income tax asset at December 31, 2013 and 2012 and the change from the prior year are comprised of the following components:
December 31, 2013 | ||||||||||||
Ordinary | Capital | Total | ||||||||||
Gross Deferred Tax Assets |
$ | 188,007 | $ | 5,014 | $ | 193,021 | ||||||
Statutory Valuation Allowance Adjustment |
— | — | — | |||||||||
|
|
|
|
|
|
|||||||
Adjusted Gross Deferred Tax Assets |
188,007 | 5,014 | 193,021 | |||||||||
Deferred Tax Assets Nonadmitted |
98,096 | — | 98,096 | |||||||||
|
|
|
|
|
|
|||||||
Subtotal (Net Deferred Tax Assets) |
89,911 | 5,014 | 94,925 | |||||||||
Deferred Tax Liabilities |
6,726 | 1,814 | 8,540 | |||||||||
|
|
|
|
|
|
|||||||
Net Admitted Deferred Tax Assets |
$ | 83,185 | $ | 3,200 | $ | 86,385 | ||||||
|
|
|
|
|
|
December 31, 2012 – restated | ||||||||||||
Ordinary | Capital | Total | ||||||||||
Gross Deferred Tax Assets |
$ | 204,072 | $ | 5,477 | $ | 209,549 | ||||||
Statutory Valuation Allowance Adjustment |
— | — | — | |||||||||
|
|
|
|
|
|
|||||||
Adjusted Gross Deferred Tax Assets |
204,072 | 5,477 | 209,549 | |||||||||
Deferred Tax Assets Nonadmitted |
94,756 | 225 | 94,981 | |||||||||
|
|
|
|
|
|
|||||||
Subtotal (Net Deferred Tax Assets) |
109,316 | 5,252 | 114,568 | |||||||||
Deferred Tax Liabilities |
8,074 | 1,353 | 9,427 | |||||||||
|
|
|
|
|
|
|||||||
Net Admitted Deferred Tax Assets |
$ | 101,242 | $ | 3,899 | $ | 105,141 | ||||||
|
|
|
|
|
|
Ordinary | Change Capital |
Total | ||||||||||
Gross Deferred Tax Assets |
$ | (16,065 | ) | $ | (463 | ) | $ | (16,528 | ) | |||
Statutory Valuation Allowance Adjustment |
— | — | — | |||||||||
|
|
|
|
|
|
|||||||
Adjusted Gross Deferred Tax Assets |
(16,065 | ) | (463 | ) | (16,528 | ) | ||||||
Deferred Tax Assets Nonadmitted |
3,340 | (225 | ) | 3,115 | ||||||||
|
|
|
|
|
|
|||||||
Subtotal (Net Deferred Tax Assets) |
(19,405 | ) | (238 | ) | (19,643 | ) | ||||||
Deferred Tax Liabilities |
(1,348 | ) | 461 | (887 | ) | |||||||
|
|
|
|
|
|
|||||||
Net Admitted Deferred Tax Assets |
$ | (18,057 | ) | $ | (699 | ) | $ | (18,756 | ) | |||
|
|
|
|
|
|
51
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The main components of deferred income tax amounts are as follows:
Year Ended December 31 | ||||||||||||
2013 | 2012 | Change | ||||||||||
Restated | ||||||||||||
Ordinary |
||||||||||||
Policyholder reserves |
$ | 87,923 | $ | 105,158 | (17,235 | ) | ||||||
Investments |
1,436 | 644 | 792 | |||||||||
Deferred acquisition costs |
83,907 | 85,238 | (1,331 | ) | ||||||||
Compensation and benefits accrual |
458 | 470 | (12 | ) | ||||||||
Receivables - nonadmitted |
13,607 | 10,866 | 2,741 | |||||||||
Corporate Provision |
— | 350 | (350 | ) | ||||||||
Other (including items <5% of ordinary tax assets) |
676 | 1,346 | (670 | ) | ||||||||
|
|
|
|
|
|
|||||||
Subtotal |
188,007 | 204,072 | (16,065 | ) | ||||||||
Nonadmitted |
98,096 | 94,756 | 3,340 | |||||||||
|
|
|
|
|
|
|||||||
Admitted ordinary deferred tax assets |
89,911 | 109,316 | (19,405 | ) | ||||||||
Capital: |
||||||||||||
Investments |
5,014 | 5,477 | (463 | ) | ||||||||
Other (including items <5% of total total capital tax assets) |
— | — | — | |||||||||
|
|
|
|
|
|
|||||||
Subtotal |
5,014 | 5,477 | (463 | ) | ||||||||
Nonadmitted |
— | 225 | (225 | ) | ||||||||
|
|
|
|
|
|
|||||||
Admitted capital deferred tax assets |
5,014 | 5,252 | (238 | ) | ||||||||
|
|
|
|
|
|
|||||||
Admitted deferred tax assets |
$ | 94,925 | $ | 114,568 | $ | (19,643 | ) | |||||
|
|
|
|
|
|
Year Ended December 31 | ||||||||||||
2013 | 2012 | Change | ||||||||||
Restated | ||||||||||||
Deferred Tax Liabilities: |
||||||||||||
Ordinary |
||||||||||||
Investments |
$ | 27 | $ | 295 | $ | (268 | ) | |||||
§807(f) adjustment |
6,075 | 7,769 | (1,694 | ) | ||||||||
Other (including items <5% of total ordinary tax liabilities) |
291 | 10 | 281 | |||||||||
|
|
|
|
|
|
|||||||
Subtotal |
6,393 | 8,074 | (1,681 | ) | ||||||||
Capital |
||||||||||||
Investments |
2,147 | 1,353 | 794 | |||||||||
Other (including items <5% of total capital tax liabilities) |
— | — | — | |||||||||
|
|
|
|
|
|
|||||||
Subtotal |
2,147 | 1,353 | 794 | |||||||||
|
|
|
|
|
|
|||||||
Deferred tax liabilities |
8,540 | 9,427 | (887 | ) | ||||||||
|
|
|
|
|
|
|||||||
Net deferred tax assets/liabilities |
$ | 86,385 | $ | 105,141 | $ | (18,756 | ) | |||||
|
|
|
|
|
|
The Company did not record a valuation allowance for deferred tax assets as of December 31, 2013 and 2012.
52
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
As discussed in Note 1, for the years ended December 31, 2013 and 2012 the Company admits deferred income tax assets pursuant to SSAP No. 101. The amount of admitted adjusted gross deferred income tax assets under each component of SSAP No. 101 is as follows:
December 31, 2013 | ||||||||||||
Ordinary | Capital | Total | ||||||||||
Admission Calculation Components SSAP No. 101 |
||||||||||||
2(a) Federal Income Taxes Paid in Prior Years Recoverable Through Loss Carrybacks |
$ | 59,186 | $ | 568 | $ | 59,754 | ||||||
2(b) Adjusted Gross Deferred Tax Assets Expected to be Realized (Excluding The Amount of Deferred Tax Assets From 2(a) above) After Application of the Threshold Limitation (the Lesser of 2(b)1 and 2(b)2 below) |
23,999 | 2,632 | 26,631 | |||||||||
1. Adjusted Gross Deferred Tax Assets Expected to be Realized Following the Balance Sheet Date |
23,999 | 2,632 | 26,631 | |||||||||
2. Adjusted Gross Deferred Tax Assets Allowed per Limitation Threshold |
XXX | XXX | 43,246 | |||||||||
2(c) Adjusted Gross Deferred Tax Assets (Excluding The Amount Of Deferred Tax Assets From 2( a) and 2(b) above) Offset by Gross Deferred Tax Liabilities |
6,726 | 1,814 | 8,540 | |||||||||
|
|
|
|
|
|
|||||||
2(d) Deferred Tax Assets Admitted as the result of application of SSAP No. 101, Total (2(a) + 2(b) + 2(c)) |
$ | 89,911 | $ | 5,014 | $ | 94,925 | ||||||
|
|
|
|
|
|
December 31, 2012 - restated | ||||||||||||
Ordinary | Capital | Total | ||||||||||
Admission Calculation Components SSAP No. 101 |
||||||||||||
2(a) Federal Income Taxes Paid in Prior Years Recoverable Through Loss Carrybacks |
$ | 78,322 | $ | 1,538 | $ | 79,860 | ||||||
2(b) Adjusted Gross Deferred Tax Assets Expected to be Realized (Excluding The Amount of Deferred Tax Assets From 2(a) above) After Application of the Threshold Limitation (the Lesser of 2(b)1 and 2(b)2 below) |
22,921 | 2,360 | 25,281 | |||||||||
1. Adjusted Gross Deferred Tax Assets Expected to be Realized Following the Balance Sheet Date |
22,921 | 2,360 | 25,281 | |||||||||
2. Adjusted Gross Deferred Tax Assets Allowed per Limitation Threshold |
XXX | XXX | 32,425 | |||||||||
2(c) Adjusted Gross Deferred Tax Assets (Excluding The Amount Of Deferred Tax Assets From 2( a) and 2(b) above) Offset by Gross Deferred Tax Liabilities |
8,074 | 1,353 | 9,427 | |||||||||
|
|
|
|
|
|
|||||||
2(d) Deferred Tax Assets Admitted as the result of application of SSAP No. 101, Total (2(a) + 2(b) + 2(c)) |
$ | 109,317 | $ | 5,251 | $ | 114,568 | ||||||
|
|
|
|
|
|
53
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Ordinary | Change Capital |
Total | ||||||||||
Admission Calculation Components SSAP No. 101 |
||||||||||||
2(a) Federal Income Taxes Paid in Prior Years Recoverable Through Loss Carrybacks |
$ | (19,136 | ) | $ | (970 | ) | $ | (20,106 | ) | |||
2(b) Adjusted Gross Deferred Tax Assets Expected to be Realized (Excluding The Amount of Deferred Tax Assets From 2(a) above) After Application of the Threshold Limitation (the Lesser of 2(b)1 and 2(b)2 below) |
1,078 | 272 | 1,350 | |||||||||
1. Adjusted Gross Deferred Tax Assets Expected to be Realized Following the Balance Sheet Date |
1,078 | 272 | 1,350 | |||||||||
2. Adjusted Gross Deferred Tax Assets Allowed per Limitation Threshold |
XXX | XXX | 10,821 | |||||||||
2(c) Adjusted Gross Deferred Tax Assets (Excluding The Amount Of Deferred Tax Assets From 2(a) and 2(b) above) Offset by Gross Deferred Tax Liabilities |
(1,348 | ) | 461 | (887 | ) | |||||||
|
|
|
|
|
|
|||||||
2(d) Deferred Tax Assets Admitted as the result of application of SSAP No. 101, Total (2(a) + 2(b) + 2(c)) |
$ | (19,406 | ) | $ | (237 | ) | $ | (19,643 | ) | |||
|
|
|
|
|
|
December 31 | ||||||||||||
2013 | 2012 | Change | ||||||||||
Restated | ||||||||||||
Ratio Percentage Used To Determine Recovery Period and Threshold Limitation Amount |
660 | % | 629 | % | 31 | % | ||||||
|
|
|
|
|
|
|||||||
Amount of Adjusted Capital and Surplus Used To Determine Recovery Period and Threshold Limitation in 2(b)2 above |
$ | 319,063 | $ | 233,275 | $ | 85,788 | ||||||
|
|
|
|
|
|
54
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The impact of tax planning strategies at December 31, 2013 and 2012 was as follows:
December 31, 2013 | ||||||||||||
Ordinary | Capital | |||||||||||
Percent | Percent | Total Percent | ||||||||||
Impact of Tax Planning Strategies: |
||||||||||||
Adjusted Gross DTAs |
$ | 188,007 | $ | 5,014 | $ | 193,021 | ||||||
(% of Total Adjusted Gross DTAs) |
0 | % | 89 | % | 2 | % | ||||||
|
|
|
|
|
|
|||||||
Net Admitted Adjusted Gross DTAs |
$ | 89,911 | $ | 5,014 | $ | 94,925 | ||||||
(% of Total Net Admitted Adjusted Gross DTAs) |
0 | % | 52 | % | 3 | % | ||||||
|
|
|
|
|
|
December 31, 2012 - restated | ||||||||||||
Ordinary | Capital | |||||||||||
Percent | Percent | Total Percent | ||||||||||
Impact of Tax Planning Strategies: |
||||||||||||
Adjusted Gross DTAs |
$ | 204,072 | $ | 5,477 | $ | 209,549 | ||||||
(% of Total Adjusted Gross DTAs) |
0 | % | 72 | % | 2 | % | ||||||
|
|
|
|
|
|
|||||||
Net Admitted Adjusted Gross DTAs |
$ | 109,317 | $ | 5,251 | $ | 114,568 | ||||||
(% of Total Net Admitted Adjusted Gross DTAs) |
0 | % | 38 | % | 2 | % | ||||||
|
|
|
|
|
|
Change | ||||||||||||
Ordinary | Capital | |||||||||||
Percent | Percent | Total Percent | ||||||||||
Impact of Tax Planning Strategies: |
||||||||||||
Adjusted Gross DTAs |
$ | (16,065 | ) | $ | (463 | ) | $ | (16,528 | ) | |||
(% of Total Adjusted Gross DTAs) |
0 | % | 17 | % | 0 | % | ||||||
|
|
|
|
|
|
|||||||
Net Admitted Adjusted Gross DTAs |
$ | (19,406 | ) | $ | (237 | ) | $ | (19,643 | ) | |||
(% of Total Net Admitted Adjusted Gross DTAs) |
0 | % | 14 | % | 1 | % | ||||||
|
|
|
|
|
|
The Company’s tax planning strategies do not include the use of reinsurance-related tax planning strategies.
55
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Current income taxes incurred consist of the following major components:
Year Ended December 31 | ||||||||||||
2013 | 2012 | Change | ||||||||||
Restated | ||||||||||||
Current Income Tax |
||||||||||||
Federal |
$ | 25,592 | $ | 20,548 | $ | 5,044 | ||||||
Foreign |
— | — | — | |||||||||
|
|
|
|
|
|
|||||||
Subtotal |
25,592 | 20,548 | 5,044 | |||||||||
|
|
|
|
|
|
|||||||
Federal income tax on net capital gains |
(968 | ) | 1,153 | (2,121 | ) | |||||||
Utilization of capital loss carry-forwards |
— | — | — | |||||||||
Other |
— | — | — | |||||||||
|
|
|
|
|
|
|||||||
Federal and foreign income taxes incurred |
$ | 24,624 | $ | 21,701 | $ | 2,923 | ||||||
|
|
|
|
|
|
Year Ended December 31 | ||||||||||||
2012 | 2011 | Change | ||||||||||
Restated | ||||||||||||
Current Income Tax |
||||||||||||
Federal |
$ | 20,548 | $ | 9,379 | $ | 11,169 | ||||||
Foreign |
— | — | — | |||||||||
|
|
|
|
|
|
|||||||
Subtotal |
20,548 | 9,379 | 11,169 | |||||||||
|
|
|
|
|
|
|||||||
Federal income tax on net capital gains |
1,153 | (402 | ) | 1,555 | ||||||||
Utilization of capital loss carry-forwards |
— | — | — | |||||||||
Other |
— | — | — | |||||||||
|
|
|
|
|
|
|||||||
Federal and foreign income taxes incurred |
$ | 21,701 | $ | 8,977 | $ | 12,724 | ||||||
|
|
|
|
|
|
56
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The Company’s current income tax incurred and change in deferred income tax differs from the amount obtained by applying the federal statutory rate of 35% to income before tax as follows:
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Restated | ||||||||||||
Current income taxes incurred |
$ | 24,624 | $ | 21,701 | $ | 8,977 | ||||||
Change in deferred income taxes (without tax on unrealized gains and losses) |
14,829 | 12,437 | (18,337 | ) | ||||||||
|
|
|
|
|
|
|||||||
Total income tax reported |
$ | 39,453 | $ | 34,138 | $ | (9,360 | ) | |||||
|
|
|
|
|
|
|||||||
Income before taxes |
$ | 182,335 | $ | 155,387 | $ | (2,209 | ) | |||||
35.00 | % | 35.00 | % | 35.00 | % | |||||||
|
|
|
|
|
|
|||||||
Expected income tax expense (benefit) at 35% statutory rate |
$ | 63,817 | $ | 54,385 | $ | (773 | ) | |||||
Increase (decrease) in actual tax reported resulting from: |
||||||||||||
Dividends received deduction |
(13,794 | ) | (9,949 | ) | (13,603 | ) | ||||||
Tax credits |
(499 | ) | (847 | ) | (1,817 | ) | ||||||
Tax-exempt Income |
(11 | ) | — | — | ||||||||
Tax adjustment for IMR |
(269 | ) | (531 | ) | (464 | ) | ||||||
Surplus adjustment for in-force ceded |
(5,481 | ) | (7,460 | ) | 14,570 | |||||||
Nondeductible expenses |
7 | 9 | 53 | |||||||||
Deferred tax benefit on other items in surplus |
(2,725 | ) | (258 | ) | (5,245 | ) | ||||||
Provision to return |
(583 | ) | (569 | ) | (498 | ) | ||||||
Life-owned life insurance |
(809 | ) | (808 | ) | (798 | ) | ||||||
Dividends from certain foreign corporations |
124 | 179 | 165 | |||||||||
Prior period adjustment |
— | — | (810 | ) | ||||||||
Other |
(324 | ) | (13 | ) | (140 | ) | ||||||
|
|
|
|
|
|
|||||||
Total income tax reported |
$ | 39,453 | $ | 34,138 | $ | (9,360 | ) | |||||
|
|
|
|
|
|
For federal income tax purposes, the Company joins in a consolidated income tax return filing with its indirect parent company, Transamerica Corporation, and other affiliated companies. The method of allocation between the companies is subject to a written tax allocation agreement. Under the terms of the tax allocation agreement, allocations are based on separate income tax return calculations. The Company is entitled to recoup federal income taxes paid in the event the future losses and credits reduce the greater of the Company’s separately computed income tax liability or the consolidated group’s income tax liability in the year generated. The Company is also entitled to recoup federal income taxes paid in the event the losses and credits reduce the greater of the Company’s separately computed income tax liability or the consolidated group’s income tax liability in any carryback or carryforward year when so applied. Intercompany income tax balances are settled within thirty days of payment to or filing with the Internal Revenue Service. A tax return has not yet been filed for 2013.
57
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
As of December 31, 2013 and 2012, the Company had no operating loss, capital loss or tax credit carryforwards available for tax purposes.
The Company incurred income taxes during 2013, 2012 and 2011 of $25,819, $23,920 (restated) and $10,171, respectively, which will be available for recoupment in the event of future net losses.
The amount of tax contingencies calculated for the Company as of December 31, 2013 and 2012 is $398 and $635, respectively. The total amount of tax contingencies that, if recognized, would affect the effective income tax rate is $398. The Company classifies interest and penalties related to income taxes as income tax expense. The Company’s interest expense related to income taxes for the years ending December 31, 2013, 2012 and 2011 is $17, $34 and $107, respectively. The total interest payable balance as of December 31, 2013 and 2012 is $16 and $43, respectively. The Company recorded no liability for penalties. It is not anticipated that the total amounts of unrecognized tax benefits will significantly increase within twelve months of the reporting date.
The Company’s federal income tax returns have been examined by the Internal Revenue Service and closing agreements have been executed through 2004. The examination for the years 2005 through 2006 have been completed and resulted in tax return adjustments that are currently undergoing final calculation at appeal. The examination for the years 2007 through 2008 has been completed and resulted in tax return adjustments that are currently being appealed. An examination is already in progress for the years 2009 and 2010. The Company believes that there are adequate defenses against or sufficient provisions established related to any open or contested tax positions.
58
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
6. Policy and Contract Attributes
A portion of the Company’s policy reserves and other policyholders’ funds (including separate account liabilities) relates to liabilities established on a variety of the Company’s annuity and deposit fund products. There may be certain restrictions placed upon the amount of funds that can be withdrawn without penalty. The amount of reserves on these products, by withdrawal characteristics, is summarized as follows:
December 31, 2013 | ||||||||||||||||
General Account |
Separate Account Non-Guaranteed |
Total | Percent | |||||||||||||
Subject to discretionary withdrawal |
||||||||||||||||
With fair value adjustment |
$ | 6,430 | $ | — | $ | 6,430 | 0 | % | ||||||||
At book value less surrender charge of 5% or more |
17,134 | — | 17,134 | 0 | ||||||||||||
At fair value |
10,146 | 3,383,580 | 3,393,727 | 85 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total with adjustment or at fair value |
33,710 | 3,383,580 | 3,417,291 | 85 | ||||||||||||
At book value without adjustment (minimal or no charge or adjustment) |
338,449 | — | 338,449 | 9 | ||||||||||||
Not subject to discretionary withdrawal |
224,984 | 24,398 | 249,381 | 6 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total annuity reserves and deposit liabilities |
597,143 | 3,407,978 | 4,005,121 | 100 | % | |||||||||||
|
|
|||||||||||||||
Less reinsurance ceded |
176,169 | — | 176,169 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Net annuity reserves and deposit liabilities |
$ | 420,974 | $ | 3,407,978 | $ | 3,828,952 | ||||||||||
|
|
|
|
|
|
59
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
December 31, 2012 | ||||||||||||||||
General Account |
Separate Account Non-Guaranteed |
Total | Percent | |||||||||||||
Subject to discretionary withdrawal |
||||||||||||||||
With fair value adjustment |
$ | 12,653 | $ | — | $ | 12,653 | 0 | % | ||||||||
At book value less surrender charge of 5% or more |
23,271 | — | 23,271 | 1 | ||||||||||||
At fair value |
10,303 | 3,251,952 | 3,262,255 | 79 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total with adjustment or at fair value |
46,226 | 3,251,952 | 3,298,179 | 80 | ||||||||||||
At book value without adjustment (minimal or no charge or adjustment) |
356,324 | — | 356,324 | 9 | ||||||||||||
Not subject to discretionary withdrawal |
460,643 | 17,530 | 478,173 | 11 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total annuity reserves and deposit liabilities |
863,193 | 3,269,482 | 4,132,676 | 100 | % | |||||||||||
|
|
|||||||||||||||
Less reinsurance ceded |
359,372 | — | 359,372 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Net annuity reserves and deposit liabilities |
$ | 503,822 | $ | 3,269,482 | $ | 3,773,304 | ||||||||||
|
|
|
|
|
|
Information regarding the separate accounts of the Company is as follows:
Guaranteed Indexed |
Nonindexed Guaranteed Less Than 4% |
Nonindexed Guaranteed More Than 4% |
Nonguaranteed Separate Accounts |
Total | ||||||||||||||||
Premiums, deposits and other considerations for the year ended December 31, 2013 |
$ | — | $ | — | $ | — | $ | 282,851 | $ | 282,851 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Reserves for accounts with assets at fair value at December 31, 2013 |
$ | — | $ | — | $ | — | $ | 6,751,640 | $ | 6,751,640 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Reserves for separate accounts by withdrawal characteristics as of December 31, 2013: |
||||||||||||||||||||
Subject to discretionary withdrawal: |
$ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
With fair value adjustment |
— | — | — | — | — | |||||||||||||||
At book value without fair value adjustment and with current surrender charge of 5% or more |
— | — | — | — | — | |||||||||||||||
At fair value |
— | — | — | 6,727,242 | 6,727,242 | |||||||||||||||
At book value without fair value adjustment and with current surrender charge of less than 5% |
— | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Subtotal |
— | — | — | 6,727,242 | 6,727,242 | |||||||||||||||
Not subject to discretionary withdrawal |
— | — | — | 24,398 | 24,398 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total separate account liabilities at December 31, 2013 |
$ | — | $ | — | $ | — | $ | 6,751,640 | $ | 6,751,640 | ||||||||||
|
|
|
|
|
|
|
|
|
|
60
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Guaranteed Indexed |
Nonindexed Guaranteed Less Than 4% |
Nonindexed Guaranteed More Than 4% |
Nonguaranteed Separate Accounts |
Total | ||||||||||||||||
Premiums, deposits and other considerations for the year ended December 31, 2012 |
$ | — | $ | — | $ | — | $ | 305,221 | $ | 305,221 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Reserves for accounts with assets at fair value at December 31, 2012 |
$ | — | $ | — | $ | — | $ | 6,184,833 | $ | 6,184,833 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Reserves for separate accounts by withdrawal characteristics as of December 31, 2012: |
||||||||||||||||||||
Subject to discretionary withdrawal: |
$ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
With fair value adjustment |
— | — | — | — | — | |||||||||||||||
At book value without fair value adjustment and with current surrender charge of 5% or more |
— | — | — | — | — | |||||||||||||||
At fair value |
— | — | — | 6,167,303 | 6,167,303 | |||||||||||||||
At book value without fair value adjustment and with current surrender charge of less than 5% |
— | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Subtotal |
— | — | — | 6,167,303 | 6,167,303 | |||||||||||||||
Not subject to discretionary withdrawal |
— | — | — | 17,530 | 17,530 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total separate account liabilities at December 31, 2012 |
$ | — | $ | — | $ | — | $ | 6,184,833 | $ | 6,184,833 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Guaranteed Indexed |
Nonindexed Guaranteed Less Than 4% |
Nonindexed Guaranteed More Than 4% |
Nonguaranteed Separate Accounts |
Total | ||||||||||||||||
Premiums, deposits and other considerations for the year ended December 31, 2011 |
$ | — | $ | — | $ | — | $ | 349,011 | $ | 349,011 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Reserves for accounts with assets at fair value at December 31, 2011 |
$ | — | $ | — | $ | — | $ | 6,130,295 | $ | 6,130,295 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Reserves for separate accounts by withdrawal characteristics as of December 31, 2011: |
||||||||||||||||||||
Subject to discretionary withdrawal: |
$ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
With fair value adjustment |
— | — | — | — | — | |||||||||||||||
At book value without fair value adjustment and with current surrender charge of 5% or more |
— | — | — | — | — | |||||||||||||||
At fair value |
— | — | — | 6,119,486 | 6,119,486 | |||||||||||||||
At book value without fair value adjustment and with current surrender charge of less than 5% |
— | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Subtotal |
— | — | — | 6,119,486 | 6,119,486 | |||||||||||||||
Not subject to discretionary withdrawal |
— | — | — | 10,809 | 10,809 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total separate account liabilities at December 31, 2011 |
$ | — | $ | — | $ | — | $ | 6,130,295 | $ | 6,130,295 | ||||||||||
|
|
|
|
|
|
|
|
|
|
61
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
A reconciliation of the amounts transferred to and from the Company’s separate accounts is presented below:
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Transfer as reported in the summary of operations of the separate accounts statement: |
||||||||||||
Transfers to separate accounts |
$ | 282,994 | $ | 305,223 | $ | 349,322 | ||||||
Transfers from separate accounts |
733,373 | 619,557 | 604,330 | |||||||||
|
|
|
|
|
|
|||||||
Net transfers from separate accounts |
(450,379 | ) | (314,334 | ) | (255,008 | ) | ||||||
Miscellaneous reconciling adjustments |
169,572 | 206,848 | 192,445 | |||||||||
|
|
|
|
|
|
|||||||
Net transfers as reported in the statement of operations of the Company |
$ | (280,807 | ) | $ | (107,485 | ) | $ | (62,563 | ) | |||
|
|
|
|
|
|
The legal insulation of separate account assets prevents such assets from being generally available to satisfy claims resulting from the general account. At December 31, 2013 and 2012, the Company’s separate account statement included legally insulated assets of $6,969,476 and $6,477,236, respectively. The assets legally insulated from general account claims at December 31, 2013 and 2012 are attributed to the following products:
Product |
2013 | 2012 | ||||||
Variable annuities |
$ | 3,418,039 | $ | 3,285,825 | ||||
Variable universal life |
433,847 | 502,202 | ||||||
WRL asset accumulator |
13,874 | 19,390 | ||||||
Variable life |
3,103,717 | 2,669,818 | ||||||
|
|
|
|
|||||
Total separate account assets |
$ | 6,969,477 | $ | 6,477,236 | ||||
|
|
|
|
The Company does not participate in securities lending transactions within the separate account.
For variable annuities with guaranteed living benefits and variable annuities with minimum guaranteed death benefits the Company complies with Actuarial Guideline XLIII (AG 43), which replaces Actuarial Guidelines 34 and 39. AG 43 specifies statutory reserve requirements for variable annuity contracts with benefit guarantees (VACARVM) and without benefit guarantees and related products. The AG 43 reserve calculation includes variable annuity products issued after January 1, 1981. Examples of covered guaranteed benefits include guaranteed minimum accumulation benefits, return of premium death benefits, guaranteed minimum income benefits, guaranteed minimum withdrawal benefits and guaranteed payout annuity floors. The aggregate reserve for contracts falling within the scope of AG 43 is equal to the conditional tail expectation (CTE) Amount, but not less than the standard scenario amount (SSA).
62
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
To determine the CTE Amount, the Company used 1,000 of the pre-packaged scenarios developed by the American Academy of Actuaries (AAA) produced in October 2005 and prudent estimate assumptions based on Company experience. The SSA was determined using the assumptions and methodology prescribed in AG 43 for determining the SSA.
At December 31, 2013 and 2012, the Company had variable and separate account annuities with minimum guaranteed benefits as follows:
Benefit and Type of Risk |
Subjected Account Value |
Amount of Reserve Held |
Reinsurance Reserve Credit |
|||||||||
Minimum guaranteed death benefit |
$ | 1,972,229 | $ | 43,201 | $ | 32,994 | ||||||
Minimum guaranteed income benefit |
911,702 | 151,267 | 140,999 | |||||||||
Minimum guaranteed withdrawal benefit |
743,795 | 121 | — | |||||||||
Minimum guaranteed death benefit |
$ | 1,944,966 | $ | 115,540 | $ | 72,996 | ||||||
Minimum guaranteed income benefit |
888,320 | 335,636 | 296,170 | |||||||||
Minimum guaranteed withdrawal benefit |
493,265 | 1,294 | — |
The Company offers variable and separate account annuities with minimum guaranteed benefits. In accordance with the guarantees provided, if the investment proceeds are insufficient to cover the rate of return guaranteed for the product, the policyholder proceeds will be remitted by the general account. As of December 31, 2013 and 2012, the general account of the Company had a maximum guarantee for separate account liabilities of $397,079 and $560,717, respectively. To compensate the general account for the risk taken, the separate account paid risk charges of $9,769, $10,487 and $11,446 to the general account in 2013, 2012 and 2011, respectively. During the years ended December 31, 2013, 2012 and 2011, the general account of the Company had paid $11,952, $12,243 and $12,975, respectively, toward separate account guarantees.
63
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Reserves on the Company’s traditional life insurance products are computed using mean reserving methodologies. These methodologies result in the establishment of assets for the amount of the net valuation premiums that are anticipated to be received between the policies’ paid-through date to the policy’s next anniversary date. At December 31, 2013 and 2012, the gross premium and loading amounts related to these assets (which are reported as premiums deferred and uncollected), are as follows:
Gross | Loading | Net | ||||||||||
Ordinary direct renewal business |
$ | — | $ | — | $ | — | ||||||
Ordinary new business |
1,739 | 1,026 | 2,765 | |||||||||
|
|
|
|
|
|
|||||||
$ | 1,739 | $ | 1,026 | $ | 2,765 | |||||||
|
|
|
|
|
|
|||||||
Ordinary direct renewal business |
$ | 1,631 | $ | 1,103 | $ | 2,734 | ||||||
Ordinary new business |
1 | — | 1 | |||||||||
|
|
|
|
|
|
|||||||
$ | 1,631 | $ | 1,103 | $ | 2,735 | |||||||
|
|
|
|
|
|
At December 31, 2013 and 2012, the Company had insurance in force aggregating $2,281,861 and $3,228,205, respectively, in which the gross premiums are less than the net premiums required by the valuation standards established by the Ohio Department of Insurance. The Company established policy reserves of $17,449 and $22,152 to cover these deficiencies at December 31, 2013 and 2012, respectively.
7. Capital and Surplus
The Company is subject to limitations, imposed by the Ohio Department of Insurance, on the payment of dividends to its stockholders. Generally, dividends during any year may not be paid, without prior regulatory approval, in excess of the greater of (a) 10 percent of Company’s statutory surplus as of the preceding December 31, or (b) net income for the preceding year. Subject to the availability of unassigned surplus at the time of such dividend, the maximum payment which may be made in 2014, without the prior approval of insurance regulatory authorities, is $159,809.
On December 23, 2013, the Company paid common stock dividends of $50,000 to its parent company, Aegon. The Company received dividends of $13,090 and $2,420, from its subsidiaries, Transamerica Asset Management, Inc., and Transamerica Fund Services, Inc, respectively, during 2013.
On December 21, 2012, the Company paid common stock dividends of $27,000 to its parent company, Aegon. The Company received dividends of $11,550, $2,200 and $175, from its subsidiaries, Transamerica Asset Management, Inc., Transamerica Fund Services, Inc, and Intersecurities Insurance Agency, Inc., respectively, during 2012.
64
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
On May 16, 2011, the Company paid common stock dividends of $250,000 to its parent company, Aegon. The amount consisted of $23,100 ordinary cash dividend and $226,900 extraordinary cash dividend. The Company received dividends of $11,165 and $7,502 from its subsidiaries, Transamerica Asset Management, Inc. and Transamerica Fund Services, Inc., respectively, during 2011. The Company made a capital contribution of $597 to Transamerica Asset Management, Inc. during 2011.
Life and health insurance companies are subject to certain RBC requirements as specified by the NAIC. Under those requirements, the amount of capital and surplus maintained by a life or health insurance company is to be determined based on the various risk factors related to it. At December 31, 2013, the Company meets the minimum RBC requirements.
8. Securities Lending
The Company participates in an agent-managed securities lending program. The Company receives collateral equal to 102% of the fair value of the loaned government/other domestic securities as of the transaction date. If the fair value of the collateral is at any time less than 102% of the fair value of the loaned securities, the counterparty is mandated to deliver additional collateral, the fair value of which, together with the collateral already held in connection with the lending transaction, is at least equal to 102% of the fair value of the loaned government/other domestic securities. In the event the Company loans a foreign security and the denomination of the currency of the collateral is other than the denomination of the currency of the loaned foreign security, the Company receives and maintains collateral equal to 105% of the fair value of the loaned security.
At December 31, 2013 and 2012, respectively, securities in the amount of $85,026 and $81,764 were on loan under securities lending agreements. The collateral the Company received from securities lending was in the form of cash and on open terms. This cash collateral is reinvested and is not available for general corporate purposes. The reinvested cash collateral had a fair value of $88,261 and $84,804 at December 31, 2013 and 2012, respectively.
The contractual maturities of the securities lending collateral positions are as follows:
Fair Value | ||||
Open |
$ | 88,184 | ||
30 days or less |
— | |||
31 to 60 days |
— | |||
61 to 90 days |
— | |||
Greater than 90 days |
— | |||
|
|
|||
Sub-Total |
88,184 | |||
Securities received |
— | |||
|
|
|||
Total collateral received |
$ | 88,184 | ||
|
|
65
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The Company receives primarily cash collateral in an amount in excess of the fair value of the securities lent. The Company reinvests the cash collateral into higher yielding securities than the securities which the Company has lent to other entities under the arrangement.
The maturity dates of the reinvested securities lending collateral are as follows:
Amortized Cost | Fair Value | |||||||
Open |
$ | 5,395 | $ | 5,395 | ||||
30 days or less |
41,077 | 41,073 | ||||||
31 to 60 days |
24,260 | 24,260 | ||||||
61 to 90 days |
12,634 | 12,634 | ||||||
91 to 120 days |
901 | 901 | ||||||
121 to 180 days |
3,998 | 3,998 | ||||||
181 to 365 days |
— | — | ||||||
1 to 2 years |
— | — | ||||||
2-3 years |
— | — | ||||||
Greater than 3 years |
— | — | ||||||
|
|
|
|
|||||
Total |
88,265 | 88,261 | ||||||
Securities received |
— | — | ||||||
|
|
|
|
|||||
Total collateral reinvested |
$ | 88,265 | $ | 88,261 | ||||
|
|
|
|
For securities lending, the Company’s sources of cash that it uses to return the cash collateral are dependent upon the liquidity of the current market conditions. Under current conditions, the Company has securities with a par value of $88,267 (fair value of $88,261) that are currently tradable securities that could be sold and used to pay for the $88,184 in collateral calls that could come due under a worst-case scenario.
9. Retirement and Compensation Plans
The Company’s employees participate in a qualified defined benefit plan sponsored by Aegon. The Company has no legal obligation for the plan. The Company recognizes pension expense equal to its allocation from Aegon. The pension expense is allocated among the participating companies based on International Accounting Standards 19 (IAS 19), Accounting for Employee Benefits and based upon actuarial participant benefit calculations. The benefits are based on years of service and the employee’s eligible annual compensation during the highest five consecutive years of employment. Pension expenses were $490, $627 and $1,255 for the years ended December 31, 2013, 2012 and 2011, respectively. The plan is subject to the reporting and disclosure requirements of the Employee Retirement and Income Security Act of 1974.
The Company’s employees also participate in a defined contribution plan sponsored by Aegon which is qualified under Section 401(k) of the Internal Revenue Service Code. Employees of the Company who customarily work at least 1,000 hours during each calendar year and meet the other eligibility requirements are participants of the plan. Participants may elect to contribute up to twenty-five percent of their salary to the plan. The Company will match an amount up to three percent of the participant’s salary. Participants may direct all of their contributions and plan
66
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
balances to be invested in a variety of investment options. The plan is subject to the reporting and disclosure requirements of the Employee Retirement and Income Security Act of 1974. Expense related to this plan was $260, $280 and $532 for the years ended December 31, 2013, 2012 and 2011, respectively.
Aegon sponsors supplemental retirement plans to provide the Company’s senior management with benefits in excess of normal pension benefits. The plans are noncontributory and benefits are based on years of service and the employee’s compensation level. The plans are unfunded and nonqualified under the Internal Revenue Code. In addition, Aegon has established incentive deferred compensation plans for certain key employees of the Company. The Company’s allocation of expense for these plans for 2013, 2012 and 2011 was none. Aegon also sponsors an employee stock option plan/stock appreciation rights for employees of the Company and a stock purchase plan for its producers, with the participating affiliated companies establishing their own eligibility criteria, producer contribution limits and company matching formula. These plans have been funded as deemed appropriate by management of Aegon and the Company.
In addition to pension benefits, the Company participates in plans sponsored by Aegon that provide postretirement medical, dental and life insurance benefits to employees meeting certain eligibility requirements. Portions of the medical and dental plans are contributory. The postretirement plan expenses are charged to affiliates in accordance with an intercompany cost sharing arrangement. The Company expensed $117, $110 and $210 for the years ended 2013, 2012 and 2011, respectively.
10. Related Party Transactions
The Company shares certain officers, employees and general expenses with affiliated companies.
The Company is party to a Cost Sharing agreement between Aegon companies, providing for needed services. The Company is also party to a Management and Administrative and Advisory agreement with Aegon USA Realty Advisors, Inc. whereby the Advisor serves as the administrator and advisor for the Company’s mortgage loan operations by administering the day-to-day real estate and mortgage loan operations of the Company. Aegon USA Investment Management, LLC acts as a discretionary investment manager under an Investment Management Agreement with the Company. The Company provides office space, marketing and administrative services to certain affiliates. The net amount received by the Company as a result of being a party to these agreements was $51,725, $44,117, and $33,717 during 2013, 2012 and 2011, respectively. The Company has an administration service agreement with Transamerica Asset Management, Inc. to provide administrative services to the Aegon/Transamerica Series Trust. The Company received $24,966, $23,814, and $24,411 from this agreement during 2013, 2012 and 2011, respectively.
Receivables from and payables to affiliates and intercompany borrowings bear interest at the thirty-day commercial paper rate. At December 31, 2013, and 2012, the Company reported a net amount of $19,859 and $10,992 (restated), respectively, due from affiliates. Terms of settlement
67
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
require that these amounts are settled within 90 days. During 2013, 2012 and 2011, the Company paid net interest of $8, $12, and $39, respectively, to affiliates.
In prior years, the Company purchased life insurance policies covering the lives of certain employees of the Company from an affiliate. At December 31, 2013 and 2012, the cash surrender value of these policies was $75,881 and $75,295, respectively.
11. Commitments and Contingencies
The Company is a party to legal proceedings involving a variety of issues incidental to its business. Lawsuits may be brought in nearly any federal or state court in the United States or in an arbitral forum. In addition, there continues to be significant federal and state regulatory activity relating to financial services companies. The Company’s legal proceedings are subject to many variables, and given its complexity and scope, outcomes cannot be predicted with certainty. Although legal proceedings sometimes include substantial demands for compensatory and punitive damages, and injunctive relief, it is management’s opinion that damages arising from such demands will not be material to the Company’s financial position.
The Company is subject to insurance guaranty laws in the states in which it writes business. These laws provide for assessments against insurance companies for the benefit of policyholders and claimants in the event of insolvency of other insurance companies. Assessments are charged to operations when received by the Company except where right of offset against other taxes paid is allowed by law. Amounts available for future offsets are recorded as an asset on the Company’s balance sheet. The future obligation for known insolvencies has been accrued based on the most recent information available from the National Organization of Life and Health Insurance Guaranty Association. Potential future obligations for unknown insolvencies are not determinable by the Company and are not required to be accrued for financial reporting purposes. The Company has established a reserve of $448 and $1,624 and an offsetting premium tax benefit of $222 and $809 at December 31, 2013 and 2012, respectively, for its estimated share of future guaranty fund assessments related to several major insurer insolvencies. The guaranty fund expense was $252, $60 and $(1,824) for 2013, 2012 and 2011, respectively.
The Company had no contingent commitments or LIHTC commitments as of December 31, 2013 and 2012.
The Company is required by the Commodity Futures Trading Commission (CFTC) to maintain assets on deposit with brokers for futures trading activity done on behalf of the Company. The broker has a secured interest with priority in the pledged assets, however, the Company has the right to recall and substitute the pledged assets. At December 31, 2013 and 2012, respectively, the Company pledged assets in the amount of $18,694 and $14,125 to satisfy the requirements of futures trading accounts.
68
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
12. Sales, Transfer, and Servicing of Financial Assets and Extinguishments of Liabilities
The Company enters into dollar repurchase agreements in which securities are delivered to the counterparty once adequate collateral has been received. At December 31, 2013 and 2012, the Company had dollar repurchase agreements outstanding in the amount of $26,475 and $25,986, respectively. The Company had an outstanding liability for borrowed money in the amount $26,718 and $26,355 at December 31, 2013 and 2012, respectively due to participation in dollar repurchase agreements which includes accrued interest. The Company did not participate in dollar repurchase agreements at December 31, 2011.
The contractual maturities of the dollar repurchase agreement positions are as follows:
Fair Value | ||||
Open |
$ | 26,624 | ||
30 days or less |
— | |||
31 to 60 days |
— | |||
61 to 90 days |
— | |||
Greater than 90 days |
— | |||
|
|
|||
Sub-Total |
26,624 | |||
Securities received |
— | |||
|
|
|||
Total collateral received |
$ | 26,624 | ||
|
|
In the course of the Company’s asset management, securities are sold and reacquired within 30 days of the sale date to enhance the Company’s yield on its investment portfolio. There were no securities of NAIC designation 3 or below sold during 2013 and reacquired within 30 days of the sale date.
13. Subsequent Events
The financial statements are adjusted to reflect events that occurred between the balance sheet date and the date when the financial statements are issued, provided they give evidence of conditions that existed at the balance sheet date (Type I). Events that are indicative of conditions that arose after the balance sheet date are disclosed, but do not result in an adjustment of the financial statements themselves (Type II). The Company has not identified any Type I or Type II subsequent events for the year ended December 31, 2013 through the date the financial statements are issued.
The Company is not subject to the annual fee imposed under section 9010 of the Affordable Care Act due to the Company’s health insurance premium falling below the $25 million threshold at which the fee applies.
69
Statement Schedules
Western Reserve Life Assurance Co. of Ohio
Summary of Investments – Other Than
Investments in Related Parties
(Dollars in Thousands)
Schedule I
Type of Investment |
Cost (1) | Fair Value | Amount at Which Shown in the Balance Sheet (2) |
|||||||||
Fixed maturities |
||||||||||||
Bonds: |
||||||||||||
United States government and government agencies and authorities |
$ | 112,477 $ | 112,950 | $ | 112,477 | |||||||
States, municipalities and political subdivisions |
53,342 | 52,613 | 53,342 | |||||||||
Foreign governments |
20,728 | 20,645 | 20,728 | |||||||||
Hybrid securities |
19,038 | 21,660 | 19,038 | |||||||||
All other corporate bonds |
1,243,373 | 1,273,978 | 1,242,468 | |||||||||
|
|
|
|
|
|
|||||||
Total fixed maturities |
1,448,958 | 1,481,846 | 1,448,053 | |||||||||
Mortgage loans on real estate |
77,805 | 77,805 | ||||||||||
Real estate |
33,641 | 33,641 | ||||||||||
Cash, cash equivalents and short-term investments |
110,547 | 110,547 | ||||||||||
Policy loans |
442,800 | 442,800 | ||||||||||
Securities lending reinvested collateral assets |
88,265 | 88,265 | ||||||||||
Other invested assets |
3,012 | 3,012 | ||||||||||
|
|
|
|
|||||||||
Total investments |
$ | 2,205,028 | $ | 2,204,123 | ||||||||
|
|
|
|
(1) | Original cost of equity securities and, as to fixed maturities, original cost reduced by repayments and adjusted for amortization of premiums or accruals of discounts. |
(2) | Corporate bonds of $2,006 are held at fair value rather than amortized cost due to having and NAIC 6 rating. |
70
Western Reserve Life Assurance Co. of Ohio
Supplementary Insurance Information
(Dollars in Thousands)
Schedule III
Future Policy Benefits and Expenses |
Policy and Contract Liabilities |
Premium Revenue |
Net Investment Income* |
Benefits, Claims, Losses and Settlement Expenses |
Other Operating Expenses* |
|||||||||||||||||||
Year ended December 31, 2013 |
||||||||||||||||||||||||
Individual life |
$ | 1,478,901 | $ | 24,359 | $ | 515,740 | $ | 69,314 | $ | 563,939 | $ | 345,287 | ||||||||||||
Group life and health |
42,505 | 84 | 12,399 | 1,834 | 12,357 | 4,341 | ||||||||||||||||||
Annuity |
389,341 | 642 | 12,952 | 21,342 | 187,631 | (367,480 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | 1,910,747 | $ | 25,085 | $ | 541,091 | $ | 92,490 | $ | 763,927 | $ | (17,852 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Year ended December 31, 2012 - restated |
||||||||||||||||||||||||
Individual life |
$ | 1,269,626 | $ | 24,833 | $ | 458,257 | $ | 57,260 | $ | 301,282 | $ | 358,243 | ||||||||||||
Group life and health |
32,078 | 313 | 12,904 | 1,296 | 9,674 | 9,421 | ||||||||||||||||||
Annuity |
481,279 | 1,193 | 13,547 | 23,173 | 243,747 | (210,941 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | 1,782,983 | $ | 26,339 | $ | 484,708 | $ | 81,729 | $ | 554,703 | $ | 156,723 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Year ended December 31, 2011 |
||||||||||||||||||||||||
Individual life |
$ | 1,182,368 | $ | 27,384 | $ | 447,724 | $ | 54,583 | $ | 248,384 | $ | 428,545 | ||||||||||||
Group life and health |
24,599 | 313 | 10,631 | 1,016 | 8,035 | 7,554 | ||||||||||||||||||
Annuity |
540,352 | 1,617 | 22,244 | 24,432 | 341,509 | (222,539 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | 1,747,319 | $ | 29,314 | $ | 480,599 | $ | 80,031 | $ | 597,928 | $ | 213,560 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
* | Allocations of net investment income and other operating expenses are based on a number of assumptions and estimates, and the results would change if different methods were applied. |
71
Western Reserve Life Assurance Co. of Ohio
(Dollars in Thousands)
Schedule IV
Gross Amount | Ceded to Other Companies |
Assumed From Other Companies |
Net Amount | Percentage of Amount Assumed to Net |
||||||||||||||||
Year ended December 31, 2013 |
||||||||||||||||||||
Life insurance in force |
$ | 90,587,615 | $ | 22,500,865 | $ | — | $ | 68,086,750 | 0 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Premiums: |
||||||||||||||||||||
Individual life |
$ | 674,998 | $ | 159,258 | $ | — | $ | 515,740 | 0 | % | ||||||||||
Group life and health |
28,039 | 15,640 | — | 12,399 | 0 | % | ||||||||||||||
Annuity |
26,952 | 14,000 | — | 12,952 | 0 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 729,989 | $ | 188,898 | $ | — | $ | 541,091 | 0 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Year ended December 31, 2012 |
||||||||||||||||||||
Life insurance in force |
$ | 119,611,140 | $ | 63,828,956 | $ | — | $ | 55,782,184 | 0 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Premiums: |
||||||||||||||||||||
Individual life |
$ | 633,538 | $ | 175,282 | $ | — | $ | 458,256 | 0 | % | ||||||||||
Group life and health |
26,038 | 13,133 | — | 12,905 | 0 | % | ||||||||||||||
Annuity |
24,587 | 11,040 | — | 13,547 | 0 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 684,163 | $ | 199,455 | $ | — | $ | 484,708 | 0 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Year ended December 31, 2011 |
||||||||||||||||||||
Life insurance in force |
$ | 115,294,179 | $ | 64,174,427 | $ | — | $ | 51,119,752 | 0 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Premiums: |
||||||||||||||||||||
Individual life |
$ | 612,636 | $ | 165,675 | $ | 763 | $ | 447,724 | 0 | % | ||||||||||
Group life |
23,890 | 13,259 | — | 10,631 | 0 | % | ||||||||||||||
Annuity |
33,760 | 11,516 | — | 22,244 | 0 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 670,286 | $ | 190,450 | $ | 763 | $ | 480,599 | 0 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
72
F I N A N C I A L S T A T E M E N T S A N D S C H E D U L E S – S T A T U T O R Y B A S I S
Monumental Life Insurance Company
Years Ended December 31, 2013, 2012 and 2011
Mon Life 2013 SEC
Monumental Life Insurance Company
Financial Statements and Schedules – Statutory Basis
Years Ended December 31, 2013, 2012 and 2011
Contents
Report of Independent Auditors |
1 | |||
Audited Financial Statements |
||||
Balance Sheets – Statutory Basis |
3 | |||
Statements of Operations – Statutory Basis |
5 | |||
Statements of Changes in Capital and Surplus – Statutory Basis |
7 | |||
Statements of Cash Flow – Statutory Basis |
9 | |||
Notes to Financial Statements – Statutory Basis |
11 | |||
Statutory-Basis Financial Statement Schedules |
||||
Summary of Investments – Other Than Investments in Related Parties |
102 | |||
Supplementary Insurance Information |
103 | |||
Reinsurance |
104 |
Mon Life 2013 SEC
Report of Independent Auditors
The Board of Directors
Monumental Life Insurance Company
We have audited the accompanying statutory-basis financial statements of Monumental Life Insurance Company, which comprise the balance sheets as of December 31, 2013 and 2012, the related statutory-basis statements of operations, changes in capital and surplus, and cash flow for each of the three years in the period ended December 31, 2013, and the related notes to the financial statements. Our audits also included the statutory-basis financial statement schedules required by Regulation S-X, Article 7.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in conformity with accounting practices prescribed or permitted by the Insurance Division, Department of Commerce, of the State of Iowa. Management also is responsible for the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles
As described in Note 1, to meet the requirements of Iowa the financial statements have been prepared in conformity with accounting practices prescribed or permitted by the Insurance Division, Department of Commerce, of the State of Iowa, which practices differ from U.S. generally accepted accounting principles. The variances between such practices and U.S. generally accepted accounting principles are described in Note 1. The effects on the accompanying financial statements of these variances are not reasonably determinable but are presumed to be material.
Mon Life 2013 SEC | 1 |
Adverse Opinion on U.S. Generally Accepted Accounting Principles
In our opinion, because of the effects of the matter described in the preceding paragraph, the statutory-basis financial statements referred to above do not present fairly, in conformity with U.S. generally accepted accounting principles, the financial position of Monumental Life Insurance Company at December 31, 2013 and 2012, or the results of its operations or its cash flows for each of the three years in the period ended December 31, 2013.
Opinion on Statutory-Basis of Accounting
However, in our opinion, the statutory-basis financial statements referred to above present fairly, in all material respects, the financial position of Monumental Life Insurance Company at December 31, 2013 and 2012, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting practices prescribed or permitted by the Insurance Division, Department of Commerce, of the State of Iowa. Also in our opinion, the related financial statement schedules, when considered in relation to the basic statutory-basis financial statements taken as a whole, present fairly in all material respects the information set forth therein.
Mon Life 2013 SEC | 2 |
Monumental Life Insurance Company
Balance Sheets – Statutory Basis
(Dollars in Thousands, Except per Share Amounts)
December 31 | ||||||||
2013 | 2012 | |||||||
Admitted assets |
||||||||
Cash and invested assets: |
||||||||
Cash, cash equivalents and short-term investments |
$ | 558,923 | $ | 1,355,524 | ||||
Bonds: |
||||||||
Affiliated entities |
57,200 | 57,200 | ||||||
Unaffiliated entities |
12,324,799 | 12,391,672 | ||||||
Preferred stocks |
9,541 | 8,418 | ||||||
Common stocks: |
||||||||
Affiliated entities (Cost: 2013- $32,862; 2012- $37,366) |
16,599 | 25,872 | ||||||
Unaffiliated (Cost: 2013- $44,500; 2012- $76,945) |
45,669 | 79,006 | ||||||
Mortgage loans on real estate |
1,692,860 | 1,864,851 | ||||||
Real estate, at cost less allowance for depreciation (2013—$26; 2012—$26) |
385 | 411 | ||||||
Real estate held for sale |
6,900 | 4,792 | ||||||
Policy loans |
470,549 | 477,665 | ||||||
Receivables for securities |
— | 2,798 | ||||||
Collateral balance |
8,787 | 11,367 | ||||||
Derivatives |
186,389 | 129,733 | ||||||
Securities lending reinvested collateral assets |
322,209 | 350,329 | ||||||
Other invested assets |
796,575 | 851,509 | ||||||
|
|
|
|
|||||
Total cash and invested assets |
16,497,385 | 17,611,147 | ||||||
Premiums deferred and uncollected |
178,129 | 201,418 | ||||||
Accrued investment income |
166,253 | 170,354 | ||||||
Federal and foreign income tax recoverable |
5,496 | 46,400 | ||||||
Net deferred income tax asset |
162,711 | 199,932 | ||||||
Receivable from parent, subsidiaries and affiliates |
30,774 | 1,788 | ||||||
Cash surrender value of life insurance policies |
79,733 | 77,229 | ||||||
Reinsurance receivable |
18,708 | 25,459 | ||||||
Goodwill |
6,582 | 7,773 | ||||||
Contribution receivable from parent |
135,000 | — | ||||||
Other assets |
46,466 | 46,172 | ||||||
Separate account assets |
14,526,003 | 12,669,510 | ||||||
|
|
|
|
|||||
Total admitted assets |
$ | 31,853,240 | $ | 31,057,182 | ||||
|
|
|
|
Mon Life 2013 SEC | 3 |
Monumental Life Insurance Company
Balance Sheets – Statutory Basis (continued)
(Dollars in Thousands, Except per Share Amounts)
December 31 | ||||||||
2013 | 2012 | |||||||
Liabilities and capital and surplus |
||||||||
Liabilities: |
||||||||
Aggregate reserves for policies and contracts: |
||||||||
Life |
$ | 5,833,288 | $ | 5,840,790 | ||||
Annuity |
3,425,826 | 3,629,809 | ||||||
Accident and health |
716,358 | 562,271 | ||||||
Policy and contract claim reserves: |
||||||||
Life |
127,459 | 78,293 | ||||||
Accident and health |
110,669 | 120,190 | ||||||
Liability for deposit-type contracts |
675,895 | 889,345 | ||||||
Other policyholders’ funds |
6,596 | 6,872 | ||||||
Remittances and items not allocated |
4,159 | 4,504 | ||||||
Reinsurance in unauthorized companies |
1,980 | 2,167 | ||||||
Asset valuation reserve |
243,972 | 191,992 | ||||||
Interest maintenance reserve |
302,888 | 361,935 | ||||||
Funds held under reinsurance agreements |
4,274,529 | 5,104,202 | ||||||
Payable for securities |
— | 2 | ||||||
Payable to parent, subsidiaries and affiliates |
— | 34,378 | ||||||
Transfers from separate accounts due or accrued |
(29,291 | ) | (265 | ) | ||||
Deferred derivative gain |
3,616 | 3,822 | ||||||
Derivatives |
25,231 | 72,512 | ||||||
Payable for securities lending |
322,209 | 350,329 | ||||||
Payable for derivative cash collateral |
150,115 | 213,947 | ||||||
Borrowed money |
53,453 | 6,222 | ||||||
Other liabilities |
107,061 | 103,035 | ||||||
Separate account liabilities |
14,526,003 | 12,669,510 | ||||||
|
|
|
|
|||||
Total liabilities |
30,882,016 | 30,245,862 | ||||||
Capital and surplus: |
||||||||
Common stock: |
||||||||
Class A common stock, $750 par value, 10,000 shares authorized, 9,818.93 issued and outstanding |
7,364 | 7,364 | ||||||
Class B common stock, $750 par value, 10,000 shares authorized, 3,697.27 issued and outstanding |
2,773 | 2,773 | ||||||
Surplus notes |
160,000 | 160,000 | ||||||
Paid-in surplus |
757,199 | 621,273 | ||||||
Unassigned surplus |
43,888 | 19,910 | ||||||
|
|
|
|
|||||
Total capital and surplus |
971,224 | 811,320 | ||||||
|
|
|
|
|||||
Total liabilities and capital and surplus |
$ | 31,853,240 | $ | 31,057,182 | ||||
|
|
|
|
See accompanying notes.
Mon Life 2013 SEC | 4 |
Monumental Life Insurance Company
Statements of Operations – Statutory Basis
(Dollars in Thousands)
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Revenues: |
||||||||||||
Premiums and other considerations, net of reinsurance: |
||||||||||||
Life |
$ | 449,210 | $ | 333,981 | $ | 262,979 | ||||||
Annuity |
701,427 | 606,706 | 546,479 | |||||||||
Accident and health |
555,840 | 581,030 | 593,764 | |||||||||
Net investment income |
729,329 | 822,314 | 842,041 | |||||||||
Amortization of interest maintenance reserve |
15,572 | 11,029 | 4,412 | |||||||||
Commissions and expense allowances on reinsurance ceded |
209,400 | 377,804 | 529,883 | |||||||||
Income from fees associated with investment management, administration and contract guarantees for separate accounts |
40,883 | 36,701 | 34,847 | |||||||||
Reserve adjustments on reinsurance ceded |
(226,238 | ) | (762,679 | ) | (151,484 | ) | ||||||
Consideration on reinsurance transaction |
692 | 34 | (3,039 | ) | ||||||||
Other income |
14,666 | 8,463 | 8,885 | |||||||||
|
|
|
|
|
|
|||||||
2,490,781 | 2,015,383 | 2,668,767 | ||||||||||
Benefits and expenses: |
||||||||||||
Benefits paid or provided for: |
||||||||||||
Life and accident and health benefits |
511,898 | 465,017 | 488,759 | |||||||||
Annuity benefits |
313,064 | 306,295 | 275,877 | |||||||||
Surrender benefits |
1,019,522 | 824,936 | 731,102 | |||||||||
Other benefits |
84,131 | 66,556 | 67,452 | |||||||||
Increase (decrease) in aggregate reserves for policies and contracts: |
||||||||||||
Life |
(7,502 | ) | (315,073 | ) | 71,596 | |||||||
Annuity |
(203,983 | ) | (210,254 | ) | (180,075 | ) | ||||||
Accident and health |
154,087 | 41,635 | 15,919 | |||||||||
|
|
|
|
|
|
|||||||
1,871,217 | 1,179,112 | 1,470,630 | ||||||||||
Insurance expenses: |
||||||||||||
Commissions |
318,089 | 307,592 | 320,563 | |||||||||
General insurance expenses |
220,220 | 218,792 | 223,933 | |||||||||
Taxes, licenses and fees |
46,267 | 31,215 | 28,925 | |||||||||
Net transfers from separate accounts |
(312,793 | ) | (189,380 | ) | (136,670 | ) | ||||||
Change in provision for liquidity guarantees |
(1,485 | ) | (2,050 | ) | 1,120 | |||||||
Reinsurance reserve adjustment |
(10 | ) | (10 | ) | (21 | ) | ||||||
Funds withheld ceded investment income |
138,640 | 213,973 | 211,608 | |||||||||
Experience refunds |
247 | (319 | ) | (140 | ) | |||||||
Other expenses |
6,918 | 662 | 5,347 | |||||||||
|
|
|
|
|
|
|||||||
416,093 | 580,475 | 654,665 | ||||||||||
|
|
|
|
|
|
|||||||
Total benefits and expenses |
2,287,310 | 1,759,587 | 2,125,295 | |||||||||
Gain from operations before dividends to policyholders, federal income tax expense and net realized capital losses on investments |
$ | 203,471 | $ | 255,796 | $ | 543,472 |
Mon Life 2013 SEC | 5 |
Monumental Life Insurance Company
Statements of Operations – Statutory Basis (continued)
(Dollars in Thousands)
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Dividends to policyholders |
$ | 1,259 | $ | 1,279 | $ | 1,342 | ||||||
|
|
|
|
|
|
|||||||
Gain from operations before federal income tax expense and net realized capital losses on investments |
202,212 | 254,517 | 542,130 | |||||||||
Federal income tax expense |
23,987 | 103,095 | 31,580 | |||||||||
|
|
|
|
|
|
|||||||
Gain from operations before net realized capital losses on investments |
178,225 | 151,422 | 510,550 | |||||||||
Net realized capital losses on investments (net of related federal income taxes and amounts tranferred to/from interest maintenance reserve) |
(11,351 | ) | (7,876 | ) | (28,842 | ) | ||||||
|
|
|
|
|
|
|||||||
Net income |
$ | 166,874 | $ | 143,546 | $ | 481,708 | ||||||
|
|
|
|
|
|
See accompanying notes.
Mon Life 2013 SEC | 6 |
Monumental Life Insurance Company
Statements of Changes in Capital and Surplus – Statutory Basis
(Dollars in Thousands)
Class A Common Stock |
Class B Common Stock |
Write-Ins for Other than Special Surplus Funds |
Surplus Notes |
Paid-in Surplus |
Unassigned Surplus (Deficit) |
Total Capital and Surplus |
||||||||||||||||||||||
Balance at January 1, 2011 |
$ | 7,364 | $ | 2,773 | $ | 97,381 | $ | 160,000 | $ | 620,616 | $ | 286,288 | 1,174,422 | |||||||||||||||
Net income |
— | — | — | — | — | 481,708 | 481,708 | |||||||||||||||||||||
Change in net unrealized capital gains/losses, net of taxes |
— | — | — | — | — | (12,083 | ) | (12,083 | ) | |||||||||||||||||||
Change in nonadmitted assets |
— | — | — | — | — | (246,969 | ) | (246,969 | ) | |||||||||||||||||||
Change in liability for reinsurance in unauthorized companies |
— | — | — | — | — | (234 | ) | (234 | ) | |||||||||||||||||||
Change in net deferred income tax asset |
— | — | — | — | — | 218,165 | 218,165 | |||||||||||||||||||||
Change in asset valuation reserve |
— | — | — | — | — | (30,847 | ) | (30,847 | ) | |||||||||||||||||||
Change in surplus as a result of reinsurance |
— | — | — | — | — | (321,587 | ) | (321,587 | ) | |||||||||||||||||||
Increase in admitted deferred tax assets pursuant to SSAP No. 10R |
— | — | 23,739 | — | — | — | 23,739 | |||||||||||||||||||||
Dividends to stockholders |
— | — | — | — | — | (300,000 | ) | (300,000 | ) | |||||||||||||||||||
Correction of funds withheld investment income |
— | — | — | — | — | (5,636 | ) | (5,636 | ) | |||||||||||||||||||
Long-term incentive compensation |
— | — | — | — | 175 | — | 175 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2011 |
7,364 | 2,773 | 121,120 | 160,000 | 620,791 | 68,805 | 980,853 | |||||||||||||||||||||
Net income |
— | — | — | — | — | 143,546 | 143,546 | |||||||||||||||||||||
Change in net unrealized capital gains/losses, net of taxes |
— | — | — | — | — | (33,259 | ) | (33,259 | ) | |||||||||||||||||||
Change in nonadmitted assets |
— | — | — | — | — | (29,674 | ) | (29,674 | ) | |||||||||||||||||||
Change in liability for reinsurance in unauthorized companies |
— | — | — | — | — | 500 | 500 | |||||||||||||||||||||
Change in net deferred income tax asset |
— | — | — | — | — | 823 | 823 | |||||||||||||||||||||
Change in asset valuation reserve |
— | — | — | — | — | (9,468 | ) | (9,468 | ) | |||||||||||||||||||
Change in surplus as a result of reinsurance |
— | — | — | — | — | 207,517 | 207,517 | |||||||||||||||||||||
Increase in admitted deferred tax assets pursuant to SSAP No. 10R |
— | — | (121,120 | ) | — | — | 121,120 | — | ||||||||||||||||||||
Dividends to stockholders |
— | — | — | — | — | (450,000 | ) | (450,000 | ) | |||||||||||||||||||
Long-term incentive compensation |
— | — | — | — | 482 | — | 482 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2012 |
$ | 7,364 | $ | 2,773 | $ | — | $ | 160,000 | $ | 621,273 | $ | 19,910 | $ | 811,320 |
Mon Life 2013 SEC | 7 |
Monumental Life Insurance Company
Statements of Changes in Capital and Surplus – Statutory Basis (continued)
(Dollars in Thousands)
Class A Common Stock |
Class B Common Stock |
Surplus Notes |
Paid-in Surplus |
Unassigned Surplus |
Total Capital and Surplus |
|||||||||||||||||||
Balance at December 31, 2012 |
$ | 7,364 | $ | 2,773 | $ | 160,000 | $ | 621,273 | $ | 19,910 | $ | 811,320 | ||||||||||||
Net income |
— | — | — | — | 166,874 | 166,874 | ||||||||||||||||||
Capital contribution |
— | — | — | 135,000 | — | 135,000 | ||||||||||||||||||
Change in net unrealized capital gains/losses, net of taxes |
— | — | — | — | 95,530 | 95,530 | ||||||||||||||||||
Change in nonadmitted assets |
— | — | — | — | 3,579 | 3,579 | ||||||||||||||||||
Change in liability for reinsurance in unauthorized companies |
— | — | — | — | 187 | 187 | ||||||||||||||||||
Change in net deferred income tax asset |
— | — | — | — | 1,497 | 1,497 | ||||||||||||||||||
Change in asset valuation reserve |
— | — | — | — | (51,980 | ) | (51,980 | ) | ||||||||||||||||
Change in surplus as a result of reinsurance |
— | — | — | — | (63,742 | ) | (63,742 | ) | ||||||||||||||||
Correction of error related to deferred tax asset |
— | — | — | — | 7,033 | 7,033 | ||||||||||||||||||
Dividends to stockholders |
— | — | — | — | (135,000 | ) | (135,000 | ) | ||||||||||||||||
Long-term incentive compensation |
— | — | — | 926 | — | 926 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at December 31, 2013 |
$ | 7,364 | $ | 2,773 | $ | 160,000 | $ | 757,199 | $ | 43,888 | $ | 971,224 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
Mon Life 2013 SEC | 8 |
Monumental Life Insurance Company
Statements of Cash Flow – Statutory Basis
(Dollars in Thousands)
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Operating activities |
||||||||||||
Premiums collected, net of reinsurance |
$ | 1,732,764 | $ | 1,537,729 | $ | 1,416,345 | ||||||
Net investment income |
761,406 | 853,775 | 877,714 | |||||||||
Reserve adjustments on reinsurance ceded |
(226,238 | ) | (762,679 | ) | (151,484 | ) | ||||||
Consideration on reinsurance transaction |
692 | 34 | (3,039 | ) | ||||||||
Commission and expense allowances on reinsurance ceded |
145,783 | 586,092 | 715,812 | |||||||||
Miscellaneous (loss) income |
56,927 | 45,527 | 34,367 | |||||||||
Benefit and loss related payments |
(1,911,975 | ) | (1,594,215 | ) | (1,594,795 | ) | ||||||
Net transfers from separate accounts |
283,766 | 189,238 | 137,889 | |||||||||
Commissions, expenses paid and aggregate write-ins for deductions |
(800,587 | ) | (815,311 | ) | (782,498 | ) | ||||||
Dividends paid to policyholders |
(1,295 | ) | (1,321 | ) | (1,383 | ) | ||||||
Federal income taxes paid (received) |
43,860 | (252,995 | ) | (20,870 | ) | |||||||
|
|
|
|
|
|
|||||||
Net cash provided by (used in) operating activities |
85,103 | (214,126 | ) | 628,058 | ||||||||
Investing activities |
||||||||||||
Proceeds from investments sold, matured or repaid: |
||||||||||||
Bonds |
2,194,421 | 5,234,590 | 2,889,949 | |||||||||
Stocks |
40,584 | 25,890 | 11,025 | |||||||||
Mortgage loans |
478,341 | 300,958 | 291,626 | |||||||||
Real estate |
2,950 | 3,570 | 2,828 | |||||||||
Other invested assets |
133,812 | 113,630 | 100,202 | |||||||||
Securities lending reinvested collateral assets |
— | — | 98,876 | |||||||||
Miscellaneous proceeds |
15,434 | 4,313 | 24,228 | |||||||||
|
|
|
|
|
|
|||||||
Total investment proceeds |
2,865,542 | 5,682,951 | 3,418,734 | |||||||||
Costs of investments acquired: |
||||||||||||
Bonds |
(2,136,260 | ) | (3,414,940 | ) | (2,112,595 | ) | ||||||
Stocks |
(4,960 | ) | (19,185 | ) | (54,748 | ) | ||||||
Mortgage loans |
(305,830 | ) | (37,799 | ) | (111,952 | ) | ||||||
Real estate |
(7,799 | ) | (5,071 | ) | (5,436 | ) | ||||||
Other invested assets |
(66,590 | ) | (57,944 | ) | (126,849 | ) | ||||||
Securities lending reinvested collateral assets |
28,210 | (21,939 | ) | — | ||||||||
Derivatives |
(66,568 | ) | (47,592 | ) | (115,760 | ) | ||||||
Miscellaneous applications |
(2,367 | ) | (1,828 | ) | — | |||||||
|
|
|
|
|
|
|||||||
Total cost of investments acquired |
(2,562,164 | ) | (3,606,298 | ) | (2,527,340 | ) | ||||||
Net decrease in policy loans |
7,116 | 9,378 | 2,742 | |||||||||
|
|
|
|
|
|
|||||||
Net cost of investments acquired |
(2,555,048 | ) | (3,596,920 | ) | (2,524,598 | ) | ||||||
|
|
|
|
|
|
|||||||
Net cash provided by investing activities |
310,494 | 2,086,031 | 894,136 |
Mon Life 2013 SEC | 9 |
Monumental Life Insurance Company
Statements of Cash Flow – Statutory Basis (continued)
(Dollars in Thousands)
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Financing and miscellaneous activities |
||||||||||||
Net withdrawals on deposit-type contracts and other insurance liabilities |
$ | (1,632,098 | ) | $ | (612,670 | ) | $ | (801,239 | ) | |||
Net change in reinsurance on deposit-type contracts and other insurance liabilities |
1,292,709 | 456,205 | 588,705 | |||||||||
Borrowed funds |
47,065 | 6,200 | — | |||||||||
Dividends to stockholders |
(135,000 | ) | (450,000 | ) | (300,000 | ) | ||||||
Funds held under reinsurance treaties with unauthorized reinsurers |
(829,691 | ) | (785,005 | ) | (1,266,655 | ) | ||||||
Receivable from parent, subsidiaries and affiliates |
(28,986 | ) | 102,834 | (6,744 | ) | |||||||
Payable to parent, subsidiaries and affiliates |
(34,378 | ) | (86,405 | ) | 16,142 | |||||||
Payable for securities lending |
(28,120 | ) | 21,939 | (98,876 | ) | |||||||
Other cash provided (applied) |
156,302 | 144,115 | (375,531 | ) | ||||||||
|
|
|
|
|
|
|||||||
Net cash used in financing and miscellaneous activities |
(1,192,197 | ) | (1,202,787 | ) | (2,244,198 | ) | ||||||
|
|
|
|
|
|
|||||||
Net (decrease) increase in cash, cash equivalents and short-term investments |
(796,601 | ) | 669,118 | (722,004 | ) | |||||||
Cash, cash equivalents and short-term investments: |
||||||||||||
Beginning of year |
1,355,524 | 686,406 | 1,408,410 | |||||||||
|
|
|
|
|
|
|||||||
End of year |
$ | 558,923 | $ | 1,355,524 | $ | 686,406 | ||||||
|
|
|
|
|
|
See accompanying notes.
Mon Life 2013 SEC | 10 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis
(Dollars in Thousands)
1. Organization and Summary of Significant Accounting Policies
Organization
Monumental Life Insurance Company (the Company) is a stock life insurance company owned by Commonwealth General Corporation (CGC) (87.7%) and Aegon USA, LLC (Aegon) (12.3%). Both CGC and Aegon are indirect, wholly owned subsidiaries of Aegon N.V., a holding company organized under the laws of The Netherlands.
Effective December 19, 2011, Capital General Development Corporation (CGDC), which previously owned 99.8% of the Company, merged into Capital General Development Corporation, LLC (CGDC, LLC), a wholly-owned subsidiary of the Company. The merger resulted in the 9,791.64 shares of Class A common stock and 3,686.99 shares of Class B common stock of the Company owned by CGDC transferring to CGDC, LLC. These shares of Class A and Class B common stock were deemed cancelled as a result of the merger. CGDC, LLC was formed on December 16, 2011 for purposes of this merger and dissolved effective December 31, 2011.
Prior to the merger, CGDC was owned by CGC (87.7%) and Aegon (12.3%). As consideration of the merger of CGDC into CGDC, LLC, the Company issued 8,585.39 shares of Class A common stock and 3,232.78 shares of Class B common stock to CGC, and 1,206.25 shares of Class A common stock and 454.21 shares of Class B common stock to Aegon. There was no impact to the Company’s total number of Class A and Class B common stock shares issued and outstanding, only a change in ownership of those shares. As such, this transaction had no impact on the Company’s balance sheets.
Nature of Business
The Company sells a full line of insurance products, including individual, credit and group coverages under life, annuity and accident and health policies as well as investment products, including guaranteed interest contracts and funding agreements. The Company is licensed in 49 states, the District of Columbia, Guam and Puerto Rico. Sales of the Company’s products are primarily through agents, brokers, financial institutions and direct response methods.
Basis of Presentation
The preparation of financial statements of insurance companies requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.
Mon Life 2013 SEC | 11 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The accompanying financial statements have been prepared in conformity with accounting practices prescribed or permitted by the Insurance Division, Department of Commerce, of the State of Iowa, which practices differ from accounting principles generally accepted in the United States (GAAP). The more significant variances from GAAP are:
Investments: Investments in bonds, including affiliated bonds and mandatory redeemable preferred stocks are reported at amortized cost or fair value based on their National Association of Insurance Commissioners (NAIC) rating; for GAAP, such fixed maturity investments would be designated at purchase as held-to-maturity, trading or available-for-sale. Held-to-maturity fixed investments would be reported at amortized cost, and the remaining fixed maturity investments would be reported at fair value with unrealized holding gains and losses reported in earnings for those designated as trading and as a separate component of other comprehensive income (OCI) for those designated as available-for-sale. Fair value for GAAP is based on indexes, third party pricing services, brokers, external fund managers and internal models. For statutory reporting, the NAIC allows insurance companies to report the fair value determined by the Securities Valuation Office of the NAIC (SVO) or determine the fair value by using a permitted valuation method.
All single class and multi-class mortgage-backed/asset-backed securities (e.g., CMOs) are adjusted for the effects of changes in prepayment assumptions on the related accretion of discount or amortization of premium of such securities using either the retrospective or prospective methods. If the fair value of the mortgage-backed/asset-backed security is less than amortized cost, an entity shall assess whether the impairment is other-than-temporary. An other-than-temporary impairment is also considered to have occurred if the fair value of the mortgage-backed/asset-backed security is less than its amortized cost basis and the entity intends to sell the security or the entity does not have the intent and ability to hold the security for a period of time sufficient to recover the amortized cost basis. An other-than-temporary impairment is also considered to have occurred if the discounted estimated future cash flows are less than the amortized cost basis of the security.
If it is determined an other-than-temporary impairment has occurred as a result of the cash flow analysis, the security is written down to the discounted estimated future cash flows. If an other-than-temporary impairment has occurred due to intent to sell or lack of intent and ability to hold, the security is written down to fair value.
For GAAP, all securities, purchased or retained, that represent beneficial interests in securitized assets (e.g., CMO, CBO, CDO, CLO, MBS and ABS securities), other than high credit quality securities, are adjusted using the prospective method when there is a change in estimated future cash flows. If high credit quality securities are adjusted, the retrospective method is used. If it is determined that a decline in fair value is other-than-temporary and the entity intends to sell the
Mon Life 2013 SEC | 12 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current period credit loss, the other-than-temporary impairment should be recognized in earnings equal to the entire difference between the amortized cost basis and its fair value at the impairment date. If the entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery, the other-than-temporary impairment should be separated into a) the amount representing the credit loss, which is recognized in earnings, and b) the amount related to all other factors, which is recognized in OCI, net of applicable taxes.
Derivative instruments used in hedging transactions that meet the criteria of an effective hedge are valued and reported in a manner that is consistent with the hedged asset or liability. Embedded derivatives are not accounted for separately from the host contract. Derivative instruments used in hedging transactions that do not meet or no longer meet the criteria of an effective hedge are accounted for at fair value, and the changes in the fair value are recorded in unassigned surplus as unrealized gains and losses. Under GAAP, the effective and ineffective portions of a single hedge are accounted for separately, and the change in fair value for cash flow hedges is credited or charged directly to a separate component of OCI rather than to income as required for fair value hedges, and an embedded derivative within a contract that is not clearly and closely related to the economic characteristics and risk of the host contract is accounted for separately from the host contract and valued and reported at fair value.
Derivative instruments are also used in replication transactions. In these transactions, the derivative is valued in a manner consistent with the cash investment and replicated asset. For GAAP, the derivative is reported at fair value with the changes in the fair value reported in income.
Investments in real estate are reported net of related obligations rather than on a gross basis as for GAAP. Real estate owned and occupied by the Company is included in investments rather than reported as an operating asset as under GAAP, and investment income and operating expenses for statutory reporting include rent for the Company’s occupancy of those properties. Changes between depreciated cost and admitted amounts are credited or charged directly to unassigned surplus rather than to income as would be required under GAAP.
Valuation allowances are established for mortgage loans, if necessary, based on the difference between the net value of the collateral, determined as the fair value of the collateral less estimated costs to obtain and sell, and the recorded investment in the mortgage loan. Under GAAP, such allowances are based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, if foreclosure is probable, on the estimated fair value of the collateral.
Mon Life 2013 SEC | 13 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The initial valuation allowance and subsequent changes in the allowance for mortgage loans are charged or credited directly to unassigned surplus as part of the change in asset valuation reserve (AVR), rather than being included as a component of earnings as would be required under GAAP.
Valuation Reserves: Under a formula prescribed by the NAIC, the Company defers the portion of realized capital gains and losses on sales of fixed income investments, principally bonds and mortgage loans, attributable to changes in the general level of interest rates and amortizes those deferrals over the remaining period to maturity of the bond or mortgage loan based on groupings of individual securities sold in five-year bands. That net deferral is reported as the interest maintenance reserve (IMR) in the accompanying balance sheets. Realized capital gains and losses are reported in income net of federal income tax and transfers to the IMR. Under GAAP, realized capital gains and losses are reported in the statement of operations on a pre-tax basis in the period that the assets giving rise to the gains or losses are sold.
The AVR provides a valuation allowance for invested assets. The AVR is determined by an NAIC prescribed formula with changes reflected directly in unassigned surplus; AVR is not recognized for GAAP.
Subsidiaries: The accounts and operations of the Company’s subsidiaries are not consolidated with the accounts and operations of the Company as would be required under GAAP.
Policy Acquisition Costs: The costs of acquiring and renewing business are expensed when incurred. Under GAAP, incremental costs directly related to the successful acquisition of traditional life insurance and certain long-duration accident and health insurance, to the extent recoverable from future policy revenues, would be deferred and amortized over the premium-paying period of the related policies using assumptions consistent with those used in computing policy benefit reserves; for universal life insurance and investment products, to the extent recoverable from future gross profits, deferred policy acquisition costs are amortized generally in proportion to the present value of expected gross profits from surrender charges and investment, mortality and expense margins.
Separate Accounts with Guarantees: Some of the Company’s separate accounts provide policyholders with a guaranteed return. In accordance with the guarantees provided, if the investment proceeds are insufficient to cover the rate of return guaranteed for the product, the policyholder proceeds will be remitted by the general account. These separate accounts are included in the general account for GAAP due to the nature of the guaranteed return.
Nonadmitted Assets: Certain assets designated as “nonadmitted”, primarily net deferred tax assets and other assets not specifically identified as an admitted asset within the NAIC
Mon Life 2013 SEC | 14 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Accounting Practices and Procedures Manual (NAIC SAP), are excluded from the accompanying balance sheets and are charged directly to unassigned surplus. Under GAAP, such assets are included in the balance sheet to the extent they are not impaired.
Universal Life and Annuity Policies: Revenues for universal life and annuity policies with mortality or morbidity risk (including annuities with purchase rate guarantees) consist of the entire premium received. Benefits incurred represent surrenders and death benefits paid and the change in policy reserves. Premiums received and benefits incurred for annuity policies without mortality or morbidity risk and guaranteed interest in group annuity contracts are recorded directly to a policy reserve account using deposit accounting, without recognizing premium income or benefits expense. Interest on these policies is reflected in other benefits. Under GAAP, for universal life policies, premiums received in excess of policy charges would not be recognized as premium revenue and benefits would represent interest credited to the account values and the excess of benefits paid over the policy account value. Under GAAP, for all annuity policies without significant mortality risk, premiums received and benefits paid would be recorded directly to the reserve liability.
Benefit Reserves: Certain policy reserves are calculated based on statutorily required interest and mortality assumptions rather than on estimated expected experience or actual account balances as would be required under GAAP.
Reinsurance: Any reinsurance amounts deemed to be uncollectible have been written off through a charge to operations. In addition, a liability for reinsurance balances would be established for unsecured policy reserves ceded to reinsurers not authorized to assume such business. Changes to the liability are credited or charged directly to unassigned surplus. Under GAAP, an allowance for amounts deemed uncollectible would be established through a charge to earnings.
Losses associated with an indemnity reinsurance transaction are reported within income when incurred rather than being deferred and amortized over the remaining life of the underlying reinsured contracts as would be required under GAAP. Policy and contract liabilities ceded to reinsurers have been reported as reductions of the related reserves rather than as assets as would be required under GAAP.
Commissions allowed by reinsurers on business ceded are reported as income when incurred rather than being deferred and amortized with deferred policy acquisition costs as required under GAAP.
Deferred Income Taxes: The Company computes deferred income taxes in accordance with Statement of Statutory Accounting Principle (SSAP) No. 101, Income Taxes, A Replacement of
Mon Life 2013 SEC | 15 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
SSAP No. 10R and SSAP No. 10. Under SSAP No. 101, admitted adjusted deferred income tax assets are limited to 1) the amount of federal income taxes paid in prior years that can be recovered through loss carrybacks for existing temporary differences that reverse during a timeframe corresponding with the Internal Revenue Service tax loss carryback provisions, not to exceed three years, plus 2) the amount of adjusted gross deferred income tax assets expected to be realized within three years limited to an amount that is no greater than 15% of current period’s adjusted statutory capital and surplus, plus 3) the amount of remaining adjusted gross deferred income tax assets that can be offset against existing gross deferred income tax liabilities after considering the character (i.e., ordinary versus capital) and reversal patterns of the deferred tax assets and liabilities. The remaining adjusted deferred income tax assets are nonadmitted.
Deferred income taxes do not include amounts for state taxes. Under GAAP, state taxes are included in the computation of deferred income taxes, a deferred income tax asset is recorded for the amount of gross deferred income tax assets expected to be realized in all future years, and a valuation allowance is established for deferred income tax assets not realizable.
Goodwill: Goodwill is admitted subject to an aggregate limitation of ten percent of the capital and surplus in the most recently filed annual statement excluding electronic data processing equipment, operating system software, net deferred income tax assets and net positive goodwill. Excess goodwill is nonadmitted. Goodwill is amortized over ten years. Under GAAP, goodwill is measured as the excess of the consideration transferred plus the fair value of any noncontrolling interest in the acquiree at the acquisition date as compared to the fair values of the identifiable net assets acquired. Goodwill is not amortized but is assessed for impairment on an annual basis, or more frequently if circumstances indicate that a possible impairment has occurred.
Policyholder Dividends: Policyholder dividends are recognized when declared rather than over the term of the related policies as would be required under GAAP.
Surplus Notes: Surplus notes are reported as surplus rather than liabilities as would be required under GAAP.
Statements of Cash Flow: Cash, cash equivalents and short-term investments in the statements of cash flow represent cash balances and investments with initial maturities of one year or less. Under GAAP, the corresponding caption of cash and cash equivalents includes cash balances and investments with initial maturities of three months or less.
Mon Life 2013 SEC | 16 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Securities Lending Assets and Liabilities: For securities lending programs, cash collateral received which may be sold or repledged by the Company is reflected as a one-line entry on the balance sheet (securities lending reinvested collateral assets) and a corresponding liability is established to record the obligation to return the cash collateral. Collateral received which may not be sold or repledged is not recorded on the Company’s balance sheet. Under GAAP, the reinvested collateral is included within invested assets (i.e. it is not one-line reported).
The effects of the foregoing variances from GAAP on the accompanying statutory-basis financial statements have not been determined by the Company, but are presumed to be material.
Other significant accounting policies are as follows:
Investments
Investments in bonds, except those to which the SVO has ascribed an NAIC designation of 6, are reported at amortized cost using the interest method.
Hybrid securities, as defined by the NAIC, are securities designed with characteristics of both debt and equity and provide protection to the issuer’s senior note holders. These securities meet the definition of a bond, in accordance with SSAP No. 26, Bonds, excluding Loan-backed and Structured Securities and therefore, are reported at amortized cost or fair value based upon their NAIC rating.
Single class and multi-class mortgage-backed/asset-backed securities are valued at amortized cost using the interest method, including anticipated prepayments, except for those with an initial NAIC designation of 6, which are valued at the lower of amortized cost or fair value. Prepayment assumptions are obtained from dealer surveys or internal estimates and are based on the current interest rate and economic environment. The retrospective adjustment method is used to value all such securities, except principal-only and interest-only securities, which are valued using the prospective method.
The Company closely monitors below investment grade holdings and those investment grade issuers where the Company has concerns. The Company also regularly monitors industry sectors. The Company considers relevant facts and circumstances in evaluating whether the impairment is other-than-temporary including: (1) the probability of the Company collecting all amounts due according to the contractual terms of the security in effect at the date of acquisition; (2) the Company’s decision to sell a security prior to its maturity at an amount below its carrying amount; and (3) the Company’s ability to hold a structured security for a period of time to allow for recovery of the value to its carrying amount. Additionally, financial condition, near term prospects of the issuer and nationally recognized credit rating changes are monitored. Non-
Mon Life 2013 SEC | 17 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
structured securities in unrealized loss positions that are considered other-than-temporary are written down to fair value. Structured securities considered other-than-temporarily impaired are written down to discounted estimated cash flows if the impairment is the result of cash flow analysis. If the Company has an intent to sell or lack of ability to hold a structured security, it is written down to fair value. For structured securities, cash flow trends and underlying levels of collateral are monitored. The Company will record a charge to the statement of operations to the extent that these securities are determined to be other-than-temporarily impaired.
Investments in preferred stocks in good standing are reported at cost or amortized cost. Investments in preferred stocks not in good standing are reported at the lower of cost or fair value, and the related net unrealized capital gains (losses) are reported in unassigned surplus along with any adjustment for federal income taxes.
Common stocks of unaffiliated companies are reported at fair value and the related net unrealized capital gains or losses are reported in unassigned surplus along with any adjustment for federal income taxes.
If the Company determines that a decline in the fair value of a common stock or a preferred stock is other-than-temporary, the Company writes it down to fair value as the new cost basis and the amount of the write down is accounted for as a realized loss in the statement of operations. The Company considers the following factors in determining whether a decline in value is other-than-temporary: (a) the financial condition and prospects of the issuer; (b) whether or not the Company has made a decision to sell the investment; and (c) the length of time and extent to which the value has been below cost.
Common stocks of affiliated noninsurance subsidiaries are reported based on underlying audited GAAP equity. The net change in the subsidiaries’ equity is included in the change in net unrealized capital gains or losses, reported in unassigned surplus along with any adjustment for federal income taxes.
There are no restrictions on common or preferred stock.
Short-term investments include investments with remaining maturities of one year or less at the time of acquisition and are principally stated at amortized cost.
Cash equivalents are short-term highly liquid investments with original maturities of three months or less and are principally stated at amortized cost.
Mortgage loans are reported at unpaid principal balances, less an allowance for impairment. A mortgage loan is considered to be impaired when it is probable that the Company will be unable
Mon Life 2013 SEC | 18 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
to collect all principal and interest amounts due according to the contractual terms of the mortgage agreement. When management determines that the impairment is other-than-temporary, the mortgage loan is written down to realizable value and a realized loss is recognized.
Land is reported at cost. Real estate occupied by the Company is reported at depreciated cost net of encumbrances. Real estate held for the production of income is reported at depreciated cost net of related obligations. Real estate that the Company classifies as held for sale is measured at lower of carrying amount or fair value less cost to sell. Depreciation is calculated on a straight-line basis over the estimated useful lives of the properties. The Company recognizes an impairment loss if the Company determines that the carrying amount of the real estate is not recoverable and exceeds its fair value. The Company deems that the carrying amount of the asset is not recoverable if the carrying amount exceeds the sum of undiscounted cash flows expected to result from the use and disposition. The impairment loss is measured as the amount by which the asset’s carrying value exceeds its fair value.
Policy loans are reported at unpaid principal balances.
The Company has minority ownership interests in joint ventures and limited partnerships. The Company carries these investments based on its interest in the underlying audited GAAP equity of the investee. For a decline in the fair value of an investment in a joint venture or limited partnership which is determined to be other-than-temporary, the Company writes it down to fair value as the new cost basis and the amount of the write down is accounted for as a realized loss in the statement of operations. The Company considers an impairment to have occurred if it is probable that the Company will be unable to recover the carrying amount of the investment or if there is evidence indicating inability of the investee to sustain earnings which would justify the carrying amount of the investment.
The Company’s investment in reverse mortgages is recorded net of an appropriate actuarial reserve. The actuarial reserve is calculated using the projected cash flows from the reverse mortgage product. Assumptions used in the actuarial model include an estimate of current home values, projected cash flows from the realization of the appreciated value of the property from its eventual sale (subject to certain limitations in the contract), mortality and termination rates based on group annuity mortality tables adjusted for the Company’s experience and a constant interest rate environment. The carrying amount of the investment in reverse mortgages of $31,763 and $35,444 at December 31, 2013 and 2012, respectively, is net of the reserve of $12,375 and $26,128, respectively. Interest income of $1,969 and $2,758 was recognized for the years ended December 31, 2013 and 2012 respectively. The Company’s commitment includes making advances to the borrower until termination of the contract. The contract is terminated at the time
Mon Life 2013 SEC | 19 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
the borrower moves, sells the property, dies, repays the loan balance or violates the provisions of the loan contract.
Investments in Low Income Housing Tax Credits (LIHTC) properties are valued at amortized cost. Tax credits are recognized in operations in the tax reporting year in which the tax credit is utilized by the Company.
Other “admitted assets” are valued principally at cost, as required or permitted by the Iowa Insurance Laws.
Realized capital gains and losses are determined using the specific identification method and are recorded net of related federal income taxes. Changes in admitted asset carrying amounts of bonds, mortgage loans, common and preferred stocks are credited or charged directly to unassigned surplus.
Interest income is recognized on an accrual basis. The Company does not accrue income on bonds in default, mortgage loans on real estate in default and/or foreclosure or which are delinquent more than twelve months, or on real estate where rent is in arrears for more than three months. Income is also not accrued when collection is uncertain. In addition, accrued interest is excluded from investment income when payment exceeds 90 days past due. At December 31, 2013 and 2012, the Company excluded investment income due and accrued for bonds in default of $210 and $155, respectively, with respect to such practices.
For dollar repurchase agreements, the Company receives cash collateral in an amount at least equal to the fair value of the securities transferred by the Company in the transaction as of the transaction date. Cash received as collateral is invested as needed or used for general corporate purposes of the Company.
Derivative Instruments
Overview: The Company may use various derivative instruments (options, caps, floors, swaps, foreign currency forwards and futures) to manage risks related to its ongoing business operations. On the transaction date of the derivative instrument, the Company designates the derivative as either (A) hedging (fair value, foreign currency fair value, cash flow, foreign currency cash flow, forecasted transactions or net investment in a foreign operation), (B) replication, (C) income generation or (D) held for other investment/risk management activities, which do not qualify for hedge accounting under SSAP No. 86, Accounting for Derivative Instruments and Hedging Activities (SSAP No. 86).
Mon Life 2013 SEC | 20 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Derivative instruments used in hedging relationships are accounted for on a basis that is consistent with the hedged item (amortized cost or fair value). Derivative instruments used in replication relationships are accounted for on a basis that is consistent with the cash instrument and the replicated asset (amortized cost or fair value). Derivative instruments used in income generation relationships are accounted for on a basis that is consistent with the associated covered asset or underlying interest to which the derivative indicates (amortized cost or fair value). Derivative instruments held for other investment/risk management activities receive fair value accounting.
Derivative instruments are subject to market risk, which is the possibility that future changes in market prices may make the instruments less valuable. The Company uses derivatives as hedges, consequently, when the value of the derivative changes, the value of a corresponding hedged asset or liability will move in the opposite direction. Market risk is a consideration when changes in the value of the derivative and the hedged item do not completely offset (correlation or basis risk) which is mitigated by active measuring and monitoring.
The Company is exposed to credit-related losses in the event of non-performance by counterparties to financial instruments, but it does not expect any counterparties to fail to meet their obligations given their high credit rating of ‘A’ or better. The credit exposure of interest rate swaps and currency swaps is represented by the fair value of contracts, aggregated at a counterparty level, with a positive fair value at the reporting date. The Company has entered into collateral agreements with certain counterparties wherein the counterparty is required to post assets on the Company’s behalf. The posted amount is equal to the difference between the net positive fair value of the contracts and an agreed upon threshold that is based on the credit rating of the counterparty. Inversely, if the net fair value of all contracts with this counterparty is negative, then the Company is required to post assets.
Instruments: Interest rate swaps are the primary derivative financial instruments used in the overall asset/liability management process to modify the interest rate characteristics of the underlying asset or liability. These interest rate swaps generally provide for the exchange of the difference between fixed and floating rate amounts based on an underlying notional amount. Typically, no cash is exchanged at the outset of the swap contract and a single net payment is exchanged each due date. Swaps that meet hedge accounting rules are carried in a manner consistent with the hedged item, generally at amortized cost, on the financial statements. If the swap is terminated prior to maturity, proceeds are exchanged equal to the fair value of the contract. These gains and losses may be included in IMR or AVR if the underlying instrument receives that treatment. Swaps not meeting hedge accounting rules are carried at fair value with fair value adjustments recorded in unassigned surplus.
Mon Life 2013 SEC | 21 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Interest rate basis swaps are used in the overall asset/liability management process to modify the interest rate characteristics of the underlying liability to mitigate the basis risk of assets and liabilities resetting on different indices. These interest rate swaps generally provide for the exchange of the difference between a floating rate on one index to a floating rate of another index, based upon an underlying notional amount. Typically, no cash is exchanged at the outset of the swap contract and a single net payment is exchanged at each due date. Swaps meeting hedge accounting rules are carried in a manner consistent with the hedged item, generally at amortized cost, on the financial statements. If the swap is terminated prior to maturity, proceeds are exchanged equal to the fair value of the contract. These gains and losses may be included in IMR or AVR if the underlying instrument receives that treatment. Swaps not meeting hedge accounting rules are carried at fair value with fair value adjustments recorded in unassigned surplus.
Cross currency swaps are utilized to mitigate risks when the Company holds foreign denominated assets or liabilities therefore converting the asset or liability to a U.S. dollar (USD) denominated security. These cross currency swap agreements involve the exchange of two principal amounts in two different currencies at the prevailing currency rate at contract inception. During the life of the swap, the counterparties exchange fixed or floating rate interest payments in the swapped currencies. At maturity, the principal amounts are again swapped at a pre-determined rate of exchange. Each asset or liability is hedged individually where the terms of the swap must meet the terms of the hedged instrument. For swaps qualifying for hedge accounting, the premium or discount is amortized into income over the life of the contract and the foreign currency translation adjustment is recorded as unrealized gain/loss in unassigned surplus. Swaps not meeting hedge accounting rules are carried at fair value with fair value adjustments recorded in unassigned surplus. If a swap is terminated prior to maturity, proceeds are exchanged equal to the fair value of the contract. These gains and losses may be included in IMR or AVR if the hedged instrument receives that treatment.
Futures contracts are used to hedge the liability risk associated when the Company issues products providing the customer a return based on various global equity market indices. Futures are marked to market on a daily basis whereby a cash payment is made or received by the Company. These payments are recognized as realized gains or losses in the financial statements.
Caps are used in the asset/liability management process to mitigate the interest rate risk created due to a rapidly rising interest rate environment. The caps are similar to options where the underlying interest rate index provides for the market value movements. The caps do not accrue interest until the interest rate environment exceeds the caps strike rate. Cash is exchanged at the onset, and a single receipt or payment occurs at the maturity or termination of the contract. Caps that meet hedge accounting rules are carried in a manner consistent with the hedged item, generally at amortized cost, on the financial statements. If terminated prior to maturity, proceeds
Mon Life 2013 SEC | 22 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
are exchanged equal to the fair value of the contract. These gains and losses may be included in IMR or AVR if the underlying instrument receives that treatment. Caps that do not meet hedge accounting rules are carried at fair value with fair value adjustments recorded in unassigned surplus.
The Company issues products providing the customer a return based on the various global equity market indices. The Company uses options to hedge the liability option risk associated with these products. Options are marked to fair value in the balance sheet and fair value adjustments are recorded as unassigned surplus in the financial statements.
The Company may sell products with expected benefit payments extending beyond investment assets currently available in the market. Because assets will have to be purchased in the future to fund future liability cash flows, the Company is exposed to the risk of future investments made at lower yields than what is assumed at the time of pricing. Forward-starting interest rate swaps are utilized to lock-in the current forward rate. The accrual of income begins at the forward date, rather than at the inception date. These forward-starting swaps meet hedge accounting rules and are carried at cost in the financial statements. Gains and losses realized upon termination of the forward-starting swap are deferred and used to adjust the basis of the asset purchased in the hedged forecasted period. The basis adjustment is then amortized into income as a yield adjustment to the asset over its life.
The Company invests in domestic corporate debt securities denominated in U.S. dollars. If the issuers of these debt obligations fail to make timely payments, the value of the investment declines materially. The Company manages credit default risk through the purchase of credit default swaps. As the buyer of credit default protection, the Company will pay a premium to an approved counterparty in exchange for a contingent payment should a defined credit event occur with respect to the underlying reference entity or asset. Typically, the periodic premium or fee is expressed in basis points per notional. Generally, the premium payment for default protection is made periodically, although it may be paid as an up-front fee for short dated transactions. Should a credit event occur, the Company may be required to deliver the reference asset to the counterparty for par. Alternatively, settlement may be in cash. These credit default swaps are carried on the balance sheet at amortized cost. Premium payments made by the Company are recognized as investment expense. If the Company is unable to prove hedge effectiveness, the credit default swaps not meeting hedge accounting rules are carried at fair value with fair value adjustments recorded in unassigned surplus.
A replication transaction is a derivative transaction entered into in conjunction with a cash instrument to reproduce the investment characteristics of an otherwise permissible investment. The Company replicates investment grade corporate bonds or sovereign debt by combining a highly rated security as a cash component with a credit default swap which, in effect, converts
Mon Life 2013 SEC | 23 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
the high quality asset into a lower rated investment grade asset or sovereign debt. The benefits of using the swap market to replicate credit include possible enhanced relative values as well as ease of executing larger transactions in a shortened time frame. Generally, a premium is received by the Company on a periodic basis and recognized in investment income. In the event the representative issuer defaults on its debt obligation referenced in the contract, a payment equal to the notional of the contract will be made by the Company and recognized as a capital loss.
The Company replicates hybrid fixed to floating treasuries by combining a U.S. Treasury cash component with a forward starting swap which, in effect converts a fixed U.S. Treasury into hybrid fixed to floating treasury. The purpose of these replications is to aid duration matching between the treasuries and the supported liabilities. Generally these swaps are carried at amortized cost with periodic interest payments beginning at a future date. Any early terminations are recognized as capital gains or losses. The Company complies with the specific rules established in AVR for replication transactions.
The Company holds some warrants linked to an Argentina Government GDP as part of an authorized workout from the Argentina Brady Bonds. The Company was put into these warrants and did not voluntarily transact into these types of instruments. The Company does not have any downside risk to the warrants, and only receives a payment if the GDP is above a specific threshold. These swaps are marked to fair value in the balance sheet and the fair value adjustment is recorded in capital and surplus.
Separate Accounts
Assets held in trust for purchases of variable annuity contracts and the Company’s corresponding obligation to the contract owners are shown separately in the balance sheets. The assets consist of shares in funds, considered common stock investments, which are valued daily and carried at fair value. Income and gains and losses with respect to the assets in the separate accounts accrue to the benefit of the contract owners and, accordingly, the operations of the separate accounts are not included in the accompanying financial statements.
The Company received variable contract premiums of $569,933, $466,320 and $402,855 in 2013, 2012 and 2011, respectively. In addition, the Company received $40,883, $36,701 and $34,847, in 2013, 2012 and 2011, respectively, related to fees associated with investment management, administration and contractual guarantees for separate accounts.
Separate account assets and liabilities reported in the accompanying financial statements consist of three types: guaranteed indexed, non-indexed guaranteed and nonguaranteed. Guaranteed indexed separate accounts represent funds invested by the Company for the benefit of contract holders who are guaranteed returns based on published indices. Non-indexed guaranteed separate
Mon Life 2013 SEC | 24 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
accounts represent funds invested by the Company for the benefit of contract holders who are guaranteed certain returns as specified in the contracts. Separate account asset performance different than guaranteed requirements is either transferred to or received from the general account and reported in the statements of operations. Guaranteed indexed and non-indexed guaranteed separate account assets and liabilities are carried at fair value.
The nonguaranteed separate account assets and liabilities represent group annuity funds segregated by the Company for the benefit of contract owners, who bear the investment risks. The assets and liabilities of the nonguaranteed separate accounts are carried at fair value.
Aggregate Reserves for Policies and Contracts
Life, annuity and accident and health benefit reserves are developed by actuarial methods and are determined based on published tables using statutorily specified interest rates and valuation methods that will provide, in the aggregate, reserves that are greater than or equal to the minimum or guaranteed cash value, or the amount required by law. For direct business issued after October 1964, the Company waives deduction of deferred fractional premiums upon death of the insured and returns any portion of the final premium for periods beyond the month of death. For policies assumed during 1992 from former affiliates, Monumental General Insurance Company and Monumental Life Insurance Group, Inc., and for all business from company mergers occurring in 1998, the Company waives deduction of deferred fractional premium upon death of the insured and returns any portion of the final premium paid beyond the month of death. For fixed premium life insurance business resulting from company mergers occurring in 2004 and 2007, the Company waives deduction of deferred fractional premiums upon death of the insured and refunds portions of premiums unearned after the date of death. Where appropriate, the Company holds a nondeduction and/or refund reserve. The reserve for these benefits is computed using aggregate methods. The reserves are equal to the greater of the cash surrender value and the legally computed reserve.
The aggregate policy reserves for life insurance policies are based principally upon the 1941, 1958, 1980 and 2001 Commissioner’s Standard Ordinary Mortality Tables, the 1912, 1941 and 1961 Standard Industrial Mortality Tables, the 1960 Commissioner’s Standard Group Mortality Table, and the American Men, Actuaries and American Experience Mortality Tables. The reserves are calculated using interest rates ranging from 2.0 to 6.5 percent and are computed principally on the Net Level Premium Valuation and the Commissioners’ Reserve Valuation Methods. Reserves for universal life policies are based on account balances adjusted for the Commissioner’s Reserve Valuation Method.
Additional premiums are charged or additional mortality charges are assessed for policies issued on substandard lives according to underwriting classification. Generally, mean reserves are
Mon Life 2013 SEC | 25 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
determined by computing the regular mean reserve for the plan at the true age and holding, in addition, one-half (1/2) of the extra premium charge for the year. For certain flexible premium and fixed premium universal life insurance products, reserves are calculated utilizing the Commissioner’s Reserve Valuation Method for universal life policies and recognizing any substandard ratings.
Deferred annuity reserves are calculated according to the Commissioner’s Annuity Reserve Valuation Method including excess interest reserves to cover situations where the future interest guarantees plus the decrease in surrender charges are in excess of the maximum valuation rates of interest. Reserves for immediate annuities and supplementary contracts with and without life contingencies are equal to the present value of future payments assuming interest rates ranging from 2.5 to 11.25 percent and mortality rates, where appropriate, from a variety of tables.
Annuity reserves also include guaranteed investment contracts (GICs) and funding agreements classified as life-type contracts as defined in SSAP No. 50, Classifications and Definitions of Insurance or Managed Care Contracts In Force. These liabilities have annuitization options at guaranteed rates and consist of floating interest rate and fixed interest rate contracts. The contract reserves are carried at the greater of the account balance or the value as determined for an annuity with cash settlement option, on a change in fund basis, according to the Commissioner’s Annuity Reserve Valuation Method.
Accident and health policy reserves are equal to the greater of the gross unearned premiums or any required mid-terminal reserves plus net unearned premiums and the present value of amounts not yet due on both reported and unreported claims.
Tabular interest, tabular less actual reserves released and tabular cost have been determined by formula. Tabular interest on funds not involving life contingencies has also been determined primarily by formula.
Policy and Contract Claim Reserves
Claim reserves represent the estimated accrued liability for claims reported to the Company and claims incurred but not yet reported through the balance sheet date. These reserves are estimated using either individual case-basis valuations or statistical analysis techniques. These estimates are subject to the effects of trends in claim severity and frequency. The estimates are continually reviewed and adjusted as necessary as experience develops or new information becomes available.
Mon Life 2013 SEC | 26 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Liability for Deposit-Type Contracts
Deposit-type contracts do not incorporate risk from the death or disability of policyholders. These types of contracts may include GICs, funding agreements and other annuity contracts. Deposits and withdrawals on these contracts are recorded as a direct increase or decrease, respectively, to the liability balance, and are not reported as premiums, benefits or changes in reserves in the statement of operations.
The Company issues certain funding agreements with well-defined class-based annuity purchase rates defining either specific or maximum purchase rate guarantees. However, these funding agreements are not issued to or for the benefit of an identifiable individual or group of individuals. These contracts are classified as deposit-type contracts in accordance with SSAP No. 50.
Municipal Repurchase Agreements
Municipal repurchase agreements are investment contracts issued to municipalities that pay either a fixed or floating rate of interest on the guaranteed deposit balance. The floating interest rate is based on a market index. The related liabilities are equal to the policyholder deposit and accumulated interest on the contract.
These municipal repurchase agreements require a minimum of 95% of the fair value of the securities transferred to be maintained as collateral. The Company did not participate in repurchase agreements during 2013 or 2012.
Premiums and Annuity Considerations
Revenues for policies with mortality or morbidity risk (including annuities with purchase rate guarantees) consist of the entire premium received and are recognized over the premium paying periods of the related policies. Consideration received and benefits paid for annuity policies without mortality or morbidity risk are recorded using deposit accounting and recorded directly to an appropriate policy reserve account, without recognizing premium revenue.
Claims and Claim Adjustment Expense
Liabilities for losses and loss/claim adjustment expenses for accident and health contracts are estimated using statistical claim development models to develop best estimates of liabilities for medical expense business and using tabular reserves employing mortality/morbidity tables and discount rates meeting minimum regulatory requirements for other business.
Mon Life 2013 SEC | 27 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Activity in the liability for unpaid claims and related processing costs net of reinsurance is summarized as follows:
Unpaid Claims Liability Beginning of Year |
Claims Incurred |
Claims Paid |
Unpaid Claims Liability End of Year |
|||||||||||||
Year ended December 31, 2013 |
||||||||||||||||
2013 |
$ | — | $ | 287,548 | $ | 175,537 | $ | 112,011 | ||||||||
2012 and prior |
195,349 | (7,707 | ) | 106,262 | 81,380 | |||||||||||
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195,349 | $ | 279,841 | $ | 281,799 | 193,391 | |||||||||||
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Active life reserve |
487,112 | 633,636 | ||||||||||||||
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Total accident and health reserves |
$ | 682,461 | $ | 827,027 | ||||||||||||
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Unpaid Claims Liability Beginning of Year |
Claims Incurred |
Claims Paid |
Unpaid Claims Liability End of Year |
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Year ended December 31, 2012 |
||||||||||||||||
2012 |
$ | — | $ | 297,471 | $ | 177,262 | $ | 120,209 | ||||||||
2011 and prior |
192,420 | (8,435 | ) | 108,845 | 75,140 | |||||||||||
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192,420 | $ | 289,036 | $ | 286,107 | 195,349 | |||||||||||
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Active life reserve |
453,015 | 487,112 | ||||||||||||||
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Total accident and health reserves |
$ | 645,435 | $ | 682,461 | ||||||||||||
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The Company’s unpaid claims reserve was decreased by $7,707 and $8,435 for the years ended December 31, 2013 and 2012, respectively, for health claims that occurred prior to those balance sheet dates. The change in 2013 and 2012 resulted primarily from variances in the estimated frequency of claims and claim severity.
The balance in the liability for unpaid accident and health claim adjustment expenses as of December 31, 2013 and 2012 was $2,367 and $2,096, respectively. The Company incurred $3,895 and paid $3,624 of claim adjustment expenses during 2013, of which $1,972 of the paid amount was attributable to insured or covered events of prior years. The Company incurred $3,036 and paid $3,066 of claim adjustment expenses during 2012, of which $1,475 of the paid amount was attributable to insured or covered events of prior years. The Company did not
Mon Life 2013 SEC | 28 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
increase or decrease the claim adjustment expense provision for insured events of prior years during 2013 or 2012.
Reinsurance
Reinsurance premiums, commissions, expense reimbursements and reserves related to reinsured business are accounted for on bases consistent with those used in accounting for the original policies and the terms of the reinsurance contracts. Gains associated with reinsurance of in force blocks of business are included in unassigned surplus and amortized into income as earnings emerge on the reinsured block of business. Premiums ceded and recoverable losses have been reported as a reduction of premium income and benefits, respectively. Policy liabilities and accruals are reported in the accompanying financial statements net of reinsurance ceded.
Stock Option Plan, Long-Term Incentive Compensation and Stock Appreciation Rights Plans
Certain management employees of the Company participate in a stock-based long-term incentive compensation plan issued by the Company’s indirect parent. In accordance with SSAP No. 13, Stock Options and Stock Purchase Plans, the expense or benefit related to this plan for the Company’s management employees has been charged to the Company, with an offsetting amount credit to paid-in surplus. The Company recorded an accrued expense in the amount of $926, $482 and $175 for the years ended December 31, 2013, 2012 and 2011, respectively.
Recent Accounting Pronouncements
Effective December 31, 2013, the Company adopted revisions to SSAP No. 35R, Guaranty Fund and Other Assessments – Revised which incorporates subsequent event (Type II) disclosures for entities subject to Section 9010 of the Patient Protection and Affordable Care Act related to assessments payable. The adoption of this revision did not impact the financial position or results of operations of the Company as revisions relate to disclosures only. See Note 16 for further discussion.
Effective January 1, 2013, the Company adopted SSAP No. 92, Accounting for Postretirement Benefits Other Than Pensions, A Replacement of SSAP No. 14 and SSAP No. 102, Accounting for Pensions, A Replacement of SSAP No. 89. This guidance impacts accounting for defined benefit pension plans or other postretirement plans, along with related disclosures. SSAP No. 102 requires recognition of the funded status of the plan based on the projected benefit obligation instead of the accumulated benefit obligation as under SSAP No. 89. In addition, SSAP No. 92 and SSAP No. 102 require consideration of non-vested participants. The adoption of these standards did not impact the Company’s results of operations, financial position or disclosures as
Mon Life 2013 SEC | 29 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
the Company does not sponsor the pension plan and is not directly liable under the plan. See Note 11 for further discussion of the Company’s pension plan and other postretirement plans as sponsored by Aegon.
Effective January 1, 2013, the Company adopted SSAP No. 103, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities which adopts with modifications the guidance in ASU 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets and supersedes SSAP No. 91R, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. The adoption of this standard did not impact the financial position or results of operation of the Company.
Effective January 1, 2013, the Company adopted non-substantive revisions to SSAP No. 36, Troubled Debt Restructuring. These revisions adopt guidance from ASU 2011-02, Receivables – A Creditors’ Determination of Whether a Restructuring is a Troubled Debt Restructuring, which clarifies what constitutes a troubled debt restructuring and adopts with modification troubled debt restructuring disclosures for creditors from ASU 2010-20: Receivables (Topic 310), Disclosures About the Credit Quality of Financing Receivables and the Allowance for Credit Losses. The adoption of this revision did not impact the financial position or results of operations of the Company.
Effective December 31, 2012, the Company adopted non-substantive revisions to SSAP No. 86 to require disclosure of embedded credit derivatives within a financial instrument that expose the holder to the possibility of making future payments, and adopted guidance from Accounting Standards Update (ASU) 2010-11, Derivatives and Hedging – Scope Exception Related to Embedded Credit Derivatives, to clarify that seller credit derivative disclosures do not apply to embedded derivative features related to the transfer of credit risk that is only in the form of subordination of one financial instrument to another. The adoption of these revisions had no impact to the Company’s results of operations or financial position.
Effective December 31, 2012, the Company adopted non-substantive revisions to SSAP No. 86 to move one aspect of the criteria for a hedged forecasted transaction and incorporate it as criteria for a fair value hedge. The adoption of this revision had no impact to the Company’s results of operations or financial position.
Effective December 31, 2012, the Company adopted non-substantive revisions to SSAP No. 27, Disclosure of Information about Financial Instruments with Off-Balance-Sheet Risk, Financial Instruments with Concentrations of Credit Risk and Disclosures about Fair Value of Financial Instruments, which clarifies that embedded derivatives, which are not separately recognized as derivatives under statutory accounting, are included in the disclosures of financial instruments
Mon Life 2013 SEC | 30 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
with off-balance-sheet risk. The adoption of this revision had no impact to the Company’s results of operations or financial position.
Effective December 31, 2012, the Company adopted non-substantive revisions to SSAP No. 1, Disclosures of Accounting Policies, Risks and Uncertainties and Other Disclosures. These revisions require reference to the accounting policy and procedure footnote that describes permitted or prescribed practices when an individual note is impacted by such practices. The adoption of this requirement had no impact to the Company’s results of operation or financial position and did not require any additional disclosures. See Note 8 Policy and Contract Attributes for further details.
Effective January 1, 2012, the Company adopted revisions to SSAP No. 100, Fair Value Measurements (SSAP No. 100). These revisions require new disclosures of fair value hierarchy and the method used to obtain the fair value measurement, a new footnote that summarizes hierarchy levels by type of financial instrument and gross presentation of purchases, sales, issues and settlements within the reconciliation for fair value measurements categorized within Level 3 of the hierarchy. The adoption of these revisions had no impact to the Company’s results of operations or financial position, but did require additional disclosures. See Note 4 Fair Values of Financial Instruments for further details.
Effective January 1, 2012, the Company began computing current and deferred income taxes in accordance with SSAP No. 101. This statement established statutory accounting principles for current and deferred federal and foreign income taxes and current state income taxes. The adoption of this statement resulted in the transfer of $121,120 from Aggregate Write-Ins for Other than Special Surplus Funds to Unassigned Funds and updates to the Company’s income tax disclosures. See Note 7 Income Taxes for further details.
For the year ended December 31, 2011, the Company adopted SSAP No. 10R, Income Taxes – Revised, A Temporary Replacement of SSAP No. 10 (SSAP No. 10R). This statement established statutory accounting principles for current and deferred federal and foreign income taxes and current state income taxes. The SSAP temporarily superseded SSAP No. 10, Income Taxes. SSAP No. 10R allowed an entity to elect to admit additional deferred tax assets (DTAs) utilizing a three year loss carryback provision, plus the lesser of a look-forward of three years on gross DTAs expected to be realized or 15% of statutory capital and surplus if the entity’s risk-based capital is above the 250% risk-based capital level where an action level could occur as a result of a trend test utilizing the old SSAP No. 10 provisions to calculate the DTA. Prior to the adoption of SSAP No. 10R, the admitted DTA was calculated by taking into consideration a one year loss carryback and look-forward on gross DTAs that can be expected to be realized and a 10% capital and surplus limit on the admitted amount of the DTA. The Company elected to admit additional deferred tax assets pursuant to SSAP No. 10R and as a result, the cumulative effect of the
Mon Life 2013 SEC | 31 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
adoption of this standard was the difference between the calculation of the admitted DTA per SSAP No.10R and the old SSAP No. 10 methodology at December 31, 2011. This change in accounting principle increased surplus by a net amount of $121,120, at December 31, 2011, which has been recorded within the statements of changes in capital and surplus.
Effective December 31, 2011, the Company adopted SSAP No. 5R, Liabilities, Contingencies and Impairments of Assets – Revised. The revisions require the Company to recognize a liability equal to the greater of (a) the fair value of the guarantee at its inception, even if the likelihood of payment under the guarantee is remote or (b) the contingent liability amount required to be recognized if it is probable that a liability has been incurred at the financial statement date and the amount of loss can reasonably be determined. While this guidance does not exclude guarantees issued as intercompany transactions or between related parties from the initial liability recognition requirement, there are certain exceptions. Guarantees made to/or on behalf of a wholly-owned subsidiary and related party guarantees that are considered “unlimited” (for example, in response to a rating agency’s requirement to provide a commitment to support) are exempt from the initial liability recognition. Additional disclosures are also required under this new guidance for all guarantees, whether or not they meet the criteria for initial liability recognition. The adoption of this new accounting principle had no material impact to the Company’s results of operations or financial position, but did require additional disclosures regarding these guarantees. See Note 14 on Commitments and Contingencies for further details.
Effective December 31, 2011, the Company adopted non-substantive revisions to SSAP No. 100, to incorporate the provisions of ASU 2010-06, Improving Disclosures about Fair Value Measurements. This revision required a new disclosure for assets and liabilities for which fair value is not measured and reported in the statement of financial position but is otherwise disclosed. The adoption of these revisions had no impact to the Company’s results of operations or financial position. See Note 4 for further details.
Effective December 31, 2011, the Company adopted non-substantive changes to SSAP No. 32, Investments in Preferred Stock (including investments in preferred stock of subsidiary, controlled, or affiliated entities). The amendment was made to clarify the definition of preferred stock. Under the revised SSAP No. 32, a preferred stock is defined as any class or series of shares the holders of which have any preference, either as to the payment of dividends or distribution of assets on liquidation, over the holder of common stock [as defined in SSAP No. 30, Investments in Common Stock (excluding investments in common stock of subsidiary, controlled, or affiliated entities)] issued by an entity. This revised definition had no impact to the Company.
Effective January 1, 2011, the Company adopted SSAP No. 35R, Guaranty Fund and Other Assessments – Revised. This statement modified the conditions required for recognizing a
Mon Life 2013 SEC | 32 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
liability for insurance-related assessments and required additional disclosures. The adoption of this accounting principle had no financial impact to the Company. See Note 14 for disclosures related to guaranty fund assessments. The adoption of this accounting principle had no financial impact to the Company.
Effective January 1, 2011, the Company adopted revisions to certain paragraphs of SSAP No. 43R, Loan-backed and Structured Securities to clarify the accounting for gains and losses between AVR and IMR. The revisions clarify that an AVR/IMR bifurcation analysis should be performed when SSAP No. 43R securities are sold (not just as a result of impairment). These changes were applied on a prospective basis and had no financial impact to the Company upon adoption.
Effective January 1, 2011, the Company adopted revisions to SSAP No. 43R to clarify the definitions of loan-backed and structured securities. The clarified guidance was applied prospectively and had no financial impact to the Company upon adoption.
Effective January 1, 2014, the Company will adopt SSAP No. 105, Working Capital Finance Investments, which allows working capital finance investments to be admitted assets if certain criteria are met. The adoption of this standard had no impact to the financial position or results of operations of the Company.
Effective December 31, 2014, the Company will adopt revisions to SSAP No. 104R, Share-Based Payments, which provides guidance for share-based payments transactions with non-employees. The adoption of this revision is expected to be immaterial to the financial position and results of operations of the Company.
Reclassifications
Certain reclassifications have been made to the 2012 financial statements to conform to the 2013 presentation.
During 2013, the Company changed the presentation of derivative liabilities. As a result of this change, $72,512 was reclassified between the Other liabilities line and the Derivatives line in the 2012 Balance Sheet to conform to the 2013 presentation.
During 2013, the Company changed the presentation of deposit-type contract fund deposit and withdrawal activity within the Statement of Cash Flow. As a result of this change, $613,183 was reclassified from Other cash provided (applied) to Net withdrawals on deposit-type contracts and other insurance liabilities within the 2012 Statement of Cash Flow to conform to the 2013 presentation.
Mon Life 2013 SEC | 33 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
On the 2012 Statements of Operations, $10,786 was reclassified from Premiums and other considerations, net of reinsurance: Annuity to Premiums and other considerations, net of reinsurance: Life as it was determined that this amount represented considerations for supplementary contracts with life contingencies and should be shown accordingly.
2. Prescribed and Permitted Statutory Accounting Practices
The State of Iowa recognizes only statutory accounting practices prescribed or permitted by the State of Iowa for determining and reporting the financial condition and results of operations of an insurance company for determining its solvency under Iowa Insurance Law.
The NAIC SAP has been adopted as a component of prescribed or permitted practices by the State of Iowa. The State of Iowa adopted a prescribed accounting practice that differs from that found in the NAIC SAP related to reserve credits and secondary guarantee reinsurance treaties. As prescribed by Iowa Administrative Code 191-17.3(2), the commissioner found that the Company is entitled to take reserve credit for such a reinsurance contract in the amount equal to the portion of total reserves attributable to the secondary guarantee, whereas this type of reinsurance does not meet the specific requirements of SSAP No. 61, Life, Deposit-Type and Accident and Health Reinsurance and Appendix A-791 of the NAIC SAP.
A reconciliation of the Company’s net income and capital and surplus between NAIC SAP and practices prescribed by the State of Iowa is shown below:
2013 | 2012 | 2011 | ||||||||||
Net income (loss) State of Iowa basis |
$ | 166,874 | $ | 143,456 | $ | 481,708 | ||||||
State prescribed practice for secondary guarantee reinsurance |
— | — | — | |||||||||
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Net income (loss), NAIC SAP |
$ | 166,874 | $ | 143,456 | $ | 481,708 | ||||||
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Statutory surplus, State of Iowa basis |
$ | 971,224 | $ | 811,320 | $ | 980,853 | ||||||
State prescribed practice for secondary guarantee reinsurance |
(38,696 | ) | (36,211 | ) | (33,734 | ) | ||||||
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Statutory surplus, NAIC SAP |
$ | 932,528 | $ | 775,109 | $ | 947,119 | ||||||
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Mon Life 2013 SEC | 34 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
3. Accounting Changes and Correction of Errors
During 2013, the Company determined the mark-to-market adjustment on certain swap unwinds within its synthetic asset mortgage loan program were incorrectly not made for purposes of determining taxable income at December 31, 2011. Upon reviewing the impact on the prior years, an adjustment of $7,033 was designated as a prior year correction of an error and presented as a change in unassigned surplus for the year ended December 31, 2013.
During the first quarter of 2011, it was determined that the investment income credit calculation that was utilized at year end 2010 to determine the amount of income to remit to an affiliated reinsurer was incorrect. This prior year error resulted in an understatement of the amount of funds withheld investment income that should have been remitted to the affiliated reinsurer for the year of 2010 in the amount of $5,636. This correction has been presented as a change in unassigned surplus.
4. Fair Values of Financial Instruments
The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Determination of fair value
The fair values of financial instruments are determined by management after taking into consideration several sources of data. When available, the Company uses quoted market prices in active markets to determine the fair value of its investments. The Company’s valuation policy utilizes a pricing hierarchy which dictates that publicly available prices are initially sought from indices and third-party pricing services. In the event that pricing is not available from these sources, those securities are submitted to brokers to obtain quotes. Lastly, securities are priced using internal cash flow modeling techniques. These valuation methodologies commonly use reported trades, bids, offers, issuer spreads, benchmark yields, estimated prepayment speeds, and/or estimated cash flows.
To understand the valuation methodologies used by third-party pricing services, the Company reviews and monitors their applicable methodology documents. Any changes to their methodologies are noted and reviewed for reasonableness. In addition, the Company performs in-depth reviews of prices received from third-party pricing services on a sample basis. The objective for such reviews is to demonstrate that the Company can corroborate detailed information such as assumptions, inputs and methodologies used in pricing individual securities
Mon Life 2013 SEC | 35 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
against documented pricing methodologies. Only third-party pricing services and brokers with a substantial presence in the market and with appropriate experience and expertise are used.
Each month, the Company performs an analysis of the information obtained from indices, third-party services and brokers to ensure that the information is reasonable and produces a reasonable estimate of fair value. The Company considers both qualitative and quantitative factors as part of this analysis, including but not limited to, recent transactional activity for similar securities, review of pricing statistics and trends, and consideration of recent relevant market events. Other controls and procedures over pricing received from indices, third-party pricing services or brokers include validation checks such as exception reports which highlight significant price changes, stale prices or un-priced securities.
Fair value hierarchy
The Company’s financial assets and liabilities carried at fair value are classified, for disclosure purposes, based on a hierarchy defined by SSAP No. 100. The hierarchy gives the highest ranking to fair values determined using unadjusted quoted prices in active markets for identical assets and liabilities (Level 1), and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3). An asset’s or a liability’s classification is based on the lowest level input that is significant to its measurement. For example, a Level 3 fair value measurement may include inputs that are both observable (Levels 1 and 2) and unobservable (Level 3). The levels of the fair value hierarchy are as follows:
Level 1 - | Unadjusted quoted prices for identical assets or liabilities in active markets accessible at the measurement date. |
Level 2 - | Quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following: |
a) | Quoted prices for similar assets or liabilities in active markets |
b) | Quoted prices for identical or similar assets or liabilities in non-active markets |
c) | Inputs other than quoted market prices that are observable |
d) | Inputs that are derived principally from or corroborated by observable market data through correlation or other means |
Level 3 - | Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect the Company’s own assumptions about the assumptions a market participant would use in pricing the asset or liability. |
Mon Life 2013 SEC | 36 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:
Cash Equivalents and Short-Term Investments: The carrying amounts reported in the accompanying balance sheets for these financial instruments approximate their fair values. Cash is not included in the below tables.
Short-Term Notes Receivable from Affiliates: The carrying amounts reported in the accompanying balance sheets for these financial instruments approximate their fair value.
Bonds and Stocks: The NAIC allows insurance companies to report the fair value determined by the SVO or to determine the fair value by using a permitted valuation method. The fair values of bonds and stocks are reported or determined using the following pricing sources: indexes, third party pricing services, brokers, external fund managers and internal models.
Fair values for fixed maturity securities (including redeemable preferred stock) actively traded are determined from third-party pricing services, which are determined as discussed above in the description of level one and level two values within the fair value hierarchy. For fixed maturity securities (including redeemable preferred stock) not actively traded, fair values are estimated using values obtained from third-party pricing services, or are based on non-binding broker quotes or internal models. In the case of private placements, fair values are estimated by discounting the expected future cash flows using current market rates applicable to the coupon rate, credit and maturity of the investments.
Mortgage Loans on Real Estate: The fair values for mortgage loans on real estate are estimated utilizing discounted cash flows analyses, using interest rates reflective of current market conditions and the risk characteristics of the loans.
Real estate: Real estate held for sale is typically valued utilizing independent external appraisers in conjunction with reviews by qualified internal appraisers. Valuations are primarily based on active market prices, adjusted for any difference in the nature, location or condition of the specific property. If such information is not available, other valuation methods are applied, considering the value that the property’s net earning power will support, the value indicated by recent sales of comparable properties and the current cost of reproducing or replacing the property.
Other Invested Assets: The fair values for other invested assets, which include investments in surplus notes issued by other insurance companies and fixed or variable rate investments with underlying characteristics of bonds, were determined primarily by using indexes, third party pricing services and internal models.
Mon Life 2013 SEC | 37 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Derivative Financial Instruments: The estimated fair values of interest rate caps and options are based upon the latest quoted market price at the balance sheet date. The estimated fair values of swaps, including interest rate and currency swaps are based on pricing models or formulas using current assumptions. The estimated fair value of credit default swaps are based upon the pricing differential as of the balance sheet date for similar swap agreements. The Company accounts for derivatives that receive and pass hedge accounting in the same manner as the underlying hedged instrument. If that instrument is held at amortized cost, then the derivative is also held at amortized cost.
Policy Loans: The fair value of policy loans is equal to the book value of the loan, which is stated at unpaid principal balance.
Securities Lending Reinvested Collateral: The cash collateral from securities lending is reinvested in various short-term and long-term debt instruments. The fair values of these investments are determined using the methods described above under Cash, Cash Equivalents and Short-Term Investments and Bonds and Stocks.
Receivable From/Payable to Parent, Subsidiaries and Affiliates: The carrying amount of receivable from/payable to affiliates approximates their fair value.
Separate Account Assets and Annuity Liabilities: The fair value of separate account assets are based on quoted market prices when available. When not available, they are valued in the same manner as general account assets as further described in this note. The fair value of separate account annuity liabilities is based on the account value for separate accounts business without guarantees. For separate accounts with guarantees, fair value is based on discounted cash flows.
Investment Contract Liabilities: Fair value for the Company’s liabilities under investment contracts, which include deferred annuities, GICs and funding agreements, are estimated using discounted cash flow calculations. The carrying value of the Company’s liabilities for deferred annuities with minimum guaranteed benefits is determined using a stochastic valuation as described in Note 8, which approximates the fair value. For investment contracts without minimum guarantees, fair value is estimated using discounted cash flows. For those liabilities that are short in duration, carrying amount approximates fair value.
Deposit-Type Contracts: The carrying amounts of deposit-type contracts reported in the accompanying balance sheets approximate their fair values.
Mon Life 2013 SEC | 38 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Surplus Notes: Fair values for surplus notes are estimated using a discounted cash flow analysis based on the Company’s current incremental borrowing rate for similar types of borrowing arrangements.
The Company accounts for its investments in affiliated common stock using the equity method of accounting; as such, they are not included in the following disclosures.
Fair values for the Company’s insurance contracts other than investment-type contracts (including separate account universal life liabilities) are not required to be disclosed. However, the fair values of liabilities under all insurance contracts are taken into consideration in the Company’s overall management of interest rate risk, such that the Company’s exposure to changing interest rates is minimized through the matching of investment maturities with amounts due under insurance contracts.
Mon Life 2013 SEC | 39 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The following tables set forth a comparison of the estimated fair values and carrying amounts of the Company’s financial instruments, including those not measured at fair value in the balance sheets, as of December 31, 2013 and 2012, respectively:
December 31 2013 |
||||||||||||||||||||||||
Aggregate Fair Value |
Admitted Assets |
(Level 1) | (Level 2) | (Level 3) | Not practicable (Carrying Value) |
|||||||||||||||||||
Admitted assets |
||||||||||||||||||||||||
Cash equivalents and short-term investments, other than affiliates |
$ | 471,024 | $ | 471,024 | $ | — | $ | 471,024 | $ | — | $ | — | ||||||||||||
Bonds |
12,966,536 | 12,381,999 | 805,464 | 11,658,490 | 502,582 | — | ||||||||||||||||||
Preferred stocks, other than affiliates |
8,955 | 9,541 | — | 8,819 | 136 | — | ||||||||||||||||||
Common stocks, other than affiliates |
45,668 | 45,668 | 4,313 | 1 | 41,354 | — | ||||||||||||||||||
Mortgage loans on real estate |
1,750,784 | 1,692,860 | — | — | 1,750,784 | — | ||||||||||||||||||
Other invested assets |
139,312 | 132,528 | — | 132,614 | 6,698 | — | ||||||||||||||||||
Options |
175,442 | 174,065 | 238 | 170,009 | 5,195 | — | ||||||||||||||||||
Interest rate swaps |
4,890 | 4,215 | — | 4,890 | — | — | ||||||||||||||||||
Currency swaps |
11,725 | 6,153 | — | 11,725 | — | — | ||||||||||||||||||
Credit default swaps |
3,864 | 1,955 | — | 3,864 | — | — | ||||||||||||||||||
Policy loans |
470,549 | 470,549 | — | 470,549 | — | — | ||||||||||||||||||
Securities lending reinvested collateral |
322,142 | 322,209 | — | 322,142 | — | — | ||||||||||||||||||
Receivable from parent, subsidiaries and affiliates |
30,774 | 30,774 | — | 57,108 | — | — | ||||||||||||||||||
Separate account assets |
13,637,553 | 13,637,553 | 11,637,283 | 1,998,253 | 2,017 | — | ||||||||||||||||||
Liabilities |
||||||||||||||||||||||||
Investment contract liabilities |
3,660,871 | 3,644,500 | — | 47,704 | 3,613,167 | — | ||||||||||||||||||
Interest rate swaps |
(141,882 | ) | 4,164 | — | (141,882 | ) | — | — | ||||||||||||||||
Currency swaps |
19,741 | 13,783 | — | 19,741 | — | — | ||||||||||||||||||
Credit default swaps |
(4,576 | ) | 7,285 | — | (4,576 | ) | — | — | ||||||||||||||||
Separate account annuity liabilities |
14,413,405 | 14,416,133 | — | 14,337,451 | 75,954 | — | ||||||||||||||||||
Surplus notes |
168,622 | 160,000 | — | — | 168,622 | — |
Mon Life 2013 SEC | 40 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
December 31 2012 |
||||||||||||||||||||||||
Aggregate Fair Value |
Admitted Assets |
(Level 1) | (Level 2) | (Level 3) | Not practicable (Carrying Value) |
|||||||||||||||||||
Admitted assets |
||||||||||||||||||||||||
Cash equivalents and short-term investments, other than affiliates |
$ | 1,340,103 | $ | 1,340,103 | $ | — | $ | 1,340,103 | $ | — | $ | — | ||||||||||||
Bonds |
13,724,625 | 12,448,872 | 657,112 | 12,371,746 | 695,767 | — | ||||||||||||||||||
Preferred stocks, other than affiliates |
7,715 | 8,418 | — | 7,579 | 136 | — | ||||||||||||||||||
Common stocks, other than affiliates |
79,006 | 79,006 | 5,773 | — | 73,233 | — | ||||||||||||||||||
Mortgage loans on real estate |
1,964,977 | 1,864,851 | — | — | 1,964,977 | — | ||||||||||||||||||
Other invested assets |
145,019 | 135,696 | — | 136,328 | 8,691 | — | ||||||||||||||||||
Floors, caps, options and swaptions |
96,009 | 96,009 | 65 | 95,944 | — | — | ||||||||||||||||||
Interest rate swaps |
474,682 | 27,728 | — | 474,682 | — | — | ||||||||||||||||||
Currency swaps |
13,552 | 5,960 | — | 13,552 | — | — | ||||||||||||||||||
Credit default swaps |
1,283 | 36 | — | 1,283 | — | — | ||||||||||||||||||
Policy loans |
477,665 | 477,665 | — | 477,665 | — | — | ||||||||||||||||||
Securities lending reinvested collateral |
350,162 | 350,329 | — | 350,162 | — | — | ||||||||||||||||||
Receivable from parent, subsidiaries and affiliates |
1,788 | 1,788 | — | 1,788 | — | — | ||||||||||||||||||
Separate account assets |
11,548,616 | 12,669,510 | 9,723,879 | 1,800,699 | 24,038 | — | ||||||||||||||||||
Liabilities |
||||||||||||||||||||||||
Investment contract liabilities |
4,522,569 | 4,619,786 | — | 435,540 | 4,087,029 | — | ||||||||||||||||||
Interest rate swaps |
146,339 | 26,853 | — | 146,339 | — | — | ||||||||||||||||||
Currency swaps |
37,673 | 39,587 | — | 37,673 | — | — | ||||||||||||||||||
Credit default swaps |
2,616 | 6,072 | — | 2,616 | — | — | ||||||||||||||||||
Payable to parent, subsidiaries and affiliates |
34,378 | 34,378 | — | 34,378 | — | — | ||||||||||||||||||
Separate account annuity liabilities |
12,605,439 | 12,605,099 | — | 12,435,092 | 170,347 | — | ||||||||||||||||||
Surplus notes |
178,570 | 160,000 | — | — | 178,570 | — |
Mon Life 2013 SEC | 41 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The following tables provide information about the Company’s financial assets and liabilities measured at fair value as of December 31, 2013 and 2012:
2013 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: |
||||||||||||||||
Bonds |
||||||||||||||||
Government |
$ | — | $ | 15,835 | $ | — | $ | 15,835 | ||||||||
Industrial and miscellaneous |
— | 12,688 | 42,852 | 55,540 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total bonds |
— | 28,523 | 42,852 | 71,375 | ||||||||||||
Preferred stock |
||||||||||||||||
Industrial and miscellaneous |
— | — | 136 | 136 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total preferred stock |
— | — | 136 | 136 | ||||||||||||
Common stock |
||||||||||||||||
Industrial and miscellaneous |
4,313 | 1 | 41,354 | 45,668 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total common stock |
4,313 | 1 | 41,354 | 45,668 | ||||||||||||
Short-term |
||||||||||||||||
Government |
— | 2 | — | 2 | ||||||||||||
Industrial and miscellaneous |
— | 285,271 | — | 285,271 | ||||||||||||
Mutual funds |
— | 185,481 | — | 185,481 | ||||||||||||
Sweep accounts |
— | 270 | — | 270 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total short-term |
— | 471,024 | — | 471,024 | ||||||||||||
Derivative assets |
238 | 186,624 | 5,195 | 192,057 | ||||||||||||
Separate account assets |
11,637,283 | 1,998,253 | 13,923 | 13,649,459 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets |
$ | 11,641,834 | $ | 2,684,425 | $ | 103,460 | $ | 14,429,719 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities: |
||||||||||||||||
Derivative liabilities |
$ | — | $ | 122,024 | $ | — | $ | 122,024 | ||||||||
Separate account liabilities |
538 | 1,129 | — | 1,667 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities |
$ | 538 | $ | 123,153 | $ | — | $ | 123,691 | ||||||||
|
|
|
|
|
|
|
|
Mon Life 2013 SEC | 42 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
2012 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: |
||||||||||||||||
Bonds |
||||||||||||||||
Industrial and miscellaneous |
$ | — | $ | 27,052 | $ | 15,467 | $ | 42,519 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total bonds |
— | 27,052 | 15,467 | 42,519 | ||||||||||||
Preferred stock |
||||||||||||||||
Industrial and miscellaneous |
— | — | 136 | 136 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total preferred stock |
— | — | 136 | 136 | ||||||||||||
Common stock |
||||||||||||||||
Industrial and miscellaneous |
5,773 | — | 73,233 | 79,006 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total common stock |
5,773 | — | 73,233 | 79,006 | ||||||||||||
Short-term investments |
||||||||||||||||
Government |
— | 2 | — | 2 | ||||||||||||
Industrial and miscellaneous |
— | 1,098,015 | — | 1,098,015 | ||||||||||||
Mutual funds |
— | 166,890 | — | 166,890 | ||||||||||||
Sweep accounts |
— | 75,196 | — | 75,196 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total short-term investments |
— | 1,340,103 | — | 1,340,103 | ||||||||||||
Derivative assets |
66 | 97,509 | — | 97,575 | ||||||||||||
Separate account assets |
9,723,879 | 1,800,700 | 24,038 | 11,548,617 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets |
$ | 9,729,718 | $ | 3,265,364 | $ | 112,874 | $ | 13,107,956 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities: |
||||||||||||||||
Derivative liabilities |
$ | — | $ | 21,020 | $ | — | $ | 21,020 | ||||||||
Separate account liabilities |
— | 1,722 | — | 1,722 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities |
$ | — | $ | 22,742 | $ | — | $ | 22,742 | ||||||||
|
|
|
|
|
|
|
|
Bonds classified in Level 2 are valued using inputs from third party pricing services or broker quotes. Level 3 measurements for bonds are primarily those valued using non-binding broker quotes, which cannot be corroborated by other market observable data or internal modeling which utilize inputs that are not market observable.
Preferred stock in Level 3 is being internally calculated.
Common stock in Level 3 is comprised primarily of shares in the Federal Home Loan Bank (FHLB) of Des Moines, which are valued at par as a proxy for fair value as they can only be redeemed by the bank. In addition, the Company owns common stock being carried at book value and some warrants that are valued using broker quotes.
Mon Life 2013 SEC | 43 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Short-term investments are classified as Level 2 as they are carried at amortized cost, which approximates fair value.
Derivatives classified as Level 2 would represent over-the-counter (OTC) contracts valued using pricing models based on the net present value of estimated future cash flows, directly observed prices from exchange-traded derivatives, other OTC trades or external pricing services.
Derivatives classified as Level 3 represent OTC contracts valued using internal pricing models based on observable bond market prices and other market observable data or third party pricing and broker quotes.
Separate account assets are valued and classified in the same way as general account assets (described above). For example, separate account assets in Level 3 are those valued using non-binding broker quotes, which cannot be corroborated by other market observable data or internal modeling which utilize inputs that are not market observable.
Separate account liabilities consist of derivative liabilities held on the separate accounts. They are valued in the same way as the general account derivatives (described above).
During 2013 and 2012, there were no transfers between Level 1 and 2, respectively.
Mon Life 2013 SEC | 44 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The following tables summarize the changes in assets classified in Level 3 for 2013 and 2012:
Balance at January 1, 2013 |
Transfers into Level 3 |
Transfers out of Level 3 |
Total Gains and (Losses) Included in Net income (a) |
Total Gains and (Losses) Included in Surplus (b) |
||||||||||||||||
Bonds |
||||||||||||||||||||
RMBS |
$ | 247 | $ | — | $ | — | $ | (128 | ) | $ | 95 | |||||||||
Other |
15,220 | 12,501 | — | (569 | ) | 17,686 | ||||||||||||||
Preferred stock |
136 | — | — | — | — | |||||||||||||||
Common stock |
73,233 | 84 | — | (13 | ) | (1,005 | ) | |||||||||||||
Derivatives |
— | — | — | 2,753 | — | |||||||||||||||
Separate account assets |
24,038 | — | 11,839 | 78 | 2,777 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 112,874 | $ | 12,585 | $ | 11,839 | $ | 2,121 | $ | 19,553 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Purchases | Issuances | Sales | Settlements | Balance at December 31, 2013 |
||||||||||||||||
Bonds |
||||||||||||||||||||
RMBS |
$ | — | $ | — | $ | — | $ | — | $ | 214 | ||||||||||
Other |
142 | — | — | 2,342 | 42,638 | |||||||||||||||
Preferred stock |
— | — | — | — | 136 | |||||||||||||||
Common stock |
15 | — | 18,725 | 12,234 | 41,355 | |||||||||||||||
Derivatives |
— | 2,442 | — | — | 5,195 | |||||||||||||||
Separate account assets |
— | — | — | 1,131 | 13,923 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 157 | $ | 2,442 | $ | 18,725 | $ | 15,707 | $ | 103,461 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Mon Life 2013 SEC | 45 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Balance at January 1, 2012 |
Transfers into Level 3 |
Transfers out of Level 3 |
Total Gains and (Losses) Included in Net income (a) |
Total Gains and (Losses) Included in Surplus (b) |
||||||||||||||||
Bonds |
||||||||||||||||||||
RMBS |
$ | 1,219 | $ | 621 | $ | 1,047 | $ | (198 | ) | $ | (236 | ) | ||||||||
Other |
13,224 | 3,149 | 2,993 | (1,835 | ) | 3,127 | ||||||||||||||
Preferred stock |
136 | — | — | — | — | |||||||||||||||
Common stock |
78,106 | — | 788 | — | (2,486 | ) | ||||||||||||||
Derivatives |
— | 4,257 | — | — | 1,400 | |||||||||||||||
Separate account assets |
31,150 | 1,145 | 1,033 | 104 | (6,422 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 123,835 | $ | 9,172 | $ | 5,861 | $ | (1,929 | ) | $ | (4,617 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Purchases | Issuances | Sales | Settlements | Balance at December 31, 2012 |
||||||||||||||||
Bonds |
||||||||||||||||||||
RMBS |
$ | — | $ | — | $ | — | $ | 112 | $ | 247 | ||||||||||
Other |
30 | 2,610 | — | 2,092 | 15,220 | |||||||||||||||
Preferred stock |
— | — | — | — | 136 | |||||||||||||||
Common stock |
— | 2,116 | — | 3,715 | 73,233 | |||||||||||||||
Derivatives |
6,369 | — | — | 12,026 | — | |||||||||||||||
Separate account assets |
— | — | — | 906 | 24,038 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 6,399 | $ | 4,726 | $ | — | $ | 18,851 | $ | 112,874 | ||||||||||
|
|
|
|
|
|
|
|
|
|
(a) | Recorded as a component of Net Realized Capital Gains/Losses in the Statements of Operations |
(b) | Recorded as a component of Change in Net Unrealized Capital Gains/Losses in the Statements of Changes in Capital and Surplus |
The Company’s policy is to recognize transfers in and out of levels as of the beginning of the reporting period.
Transfers in for bonds were attributed to securities being valued using third party vendor inputs at December 31, 2012 and 2011, subsequently changing to being internally modeled during 2013 and 2012. In addition, transfers in for bonds were attributed to securities being carried at amortized cost at December 31, 2012 and 2011, subsequently being carried at fair value during 2013 and 2012. Transfers in for bonds were also attributed to securities being valued using broker quotes which utilize observable inputs at December 31, 2011, subsequently changing to being valued using broker quotes which utilize unobservable inputs during 2012.
Mon Life 2013 SEC | 46 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Transfers out for bonds were attributed to securities being carried at fair value at December 31, 2011, subsequently changing to being carried at amortized cost during 2012. Also, transfers out for bonds were the result of securities being valued using internal models at December 31, 2011, subsequently changing to being valued using third party vendor inputs during 2012.
Transfers in for common stock were attributed to securities being valued using third party vendor inputs at December 31, 2012, subsequently changing to being internally modeled during 2013.
Transfers out for common stock were attributed to securities being valued using a stale price at December 31, 2011, subsequently changing to being valued using third party vendor inputs during 2012.
Transfers in for derivatives were attributed to securities being carried at amortized cost at December 31, 2011, subsequently changing to being carried at fair value during 2012.
Transfers in for separate account bonds were partly attributed to securities being valued using third party vendor inputs at December 31, 2011, subsequently changing to being valued using a stale price, thus causing the transfer into Level 3 during 2012. Transfers in for separate account bonds were also attributed to securities being carried at amortized cost at December 31, 2011, subsequently changing to being carried at fair value during 2012.
Transfers out for separate account bonds were partly attributed to securities being valued using non-binding broker quotes or internal modeling which utilize unobservable inputs at December 21, 2012, subsequently changing to being valued using third party vendor inputs during 2013. Transfers out for separate account bonds were attributed to securities being valued using internal modeling at December 31, 2011, subsequently changing to being valued using third party vendor inputs during 2012.
Nonrecurring fair value measurements
As indicated in Note 1, real estate held for sale is measured at the lower of carrying amount or fair value less cost to sell. As of December 31, 2013 and 2012, the Company has several properties that are held for sale. Therefore, these properties are carried at fair value less cost to sell, which amounts to $6,900 and $4,792 as of December 31, 2013 and 2012, respectively.
The properties held for sale include one home office property with a fair value of $3,500 as of December 31, 2013 and 2012. Fair value of this property was determined based upon an external appraisal following the income approach. In addition, several residential properties are held for sale with a fair value of $3,400 and $1,292 as of December 31, 2013 and 2012, respectively. Fair value for these residential properties was also determined based upon external appraisals.
Mon Life 2013 SEC | 47 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The fair value measurements are classified in Level 3 as the external appraisals utilize inputs and adjustments for the specific attributes of these properties that are not market observable.
5. Investments
The carrying amounts and estimated fair values of investments in bonds and preferred stocks are as follows:
Carrying Amount |
Gross Unrealized Gains |
Gross Unrealized Losses 12 Months or More |
Gross Unrealized Losses less Than 12 Months |
Estimated Fair Value |
||||||||||||||||
Unaffiliated bonds: |
||||||||||||||||||||
United States Government and agencies |
$ | 603,161 | $ | 11,257 | $ | 3,328 | $ | 16,419 | $ | 594,671 | ||||||||||
State, municipal and other government |
407,239 | 36,555 | 1,818 | 8,507 | 433,469 | |||||||||||||||
Hybrid securities |
405,592 | 7,433 | 53,637 | 73 | 359,315 | |||||||||||||||
Industrial and miscellaneous |
8,507,349 | 752,983 | 64,818 | 93,914 | 9,101,600 | |||||||||||||||
Mortgage and other asset-backed securities |
2,401,458 | 115,242 | 60,791 | 24,903 | 2,431,006 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
12,324,799 | 923,470 | 184,392 | 143,816 | 12,920,061 | ||||||||||||||||
Unaffiliated preferred stocks |
9,541 | 411 | 997 | — | 8,955 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 12,334,340 | $ | 923,881 | $ | 185,389 | $ | 143,816 | $ | 12,929,016 | |||||||||||
|
|
|
|
|
|
|
|
|
|
Mon Life 2013 SEC | 48 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Carrying Amount |
Gross Unrealized Gains |
Gross Unrealized Losses 12 Months or More |
Gross Unrealized Losses less Than 12 Months |
Estimated Fair Value |
||||||||||||||||
Unaffiliated bonds: |
||||||||||||||||||||
United States Government and agencies |
$ | 374,681 | $ | 69,908 | $ | 71 | $ | 32 | $ | 444,486 | ||||||||||
State, municipal and other government |
439,755 | 80,688 | 6,794 | 83 | 513,566 | |||||||||||||||
Hybrid securities |
407,536 | 10,892 | 102,392 | — | 316,036 | |||||||||||||||
Industrial and miscellaneous |
8,568,198 | 1,242,136 | 12,199 | 14,798 | 9,783,337 | |||||||||||||||
Mortgage and other asset-backed securities |
2,601,502 | 139,599 | 118,613 | 1,714 | 2,620,774 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
12,391,672 | 1,543,223 | 240,069 | 16,627 | 13,678,199 | ||||||||||||||||
Unaffiliated preferred stocks |
8,418 | 275 | 978 | — | 7,715 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 12,400,090 | $ | 1,543,498 | $ | 241,047 | $ | 16,627 | $ | 13,685,914 | |||||||||||
|
|
|
|
|
|
|
|
|
|
At December 31, 2013 and 2012, respectively, for bonds and preferred stocks that have been in a continuous loss position for greater than or equal to twelve months, the Company held 219 and 192 securities with a carrying amount of $1,506,148 and $1,524,672 and an unrealized loss of $185,389 and $241,047 with an average price of 87.7 and 84.2 (fair value/amortized cost). Of this portfolio, 76.4% and 66.6% were investment grade with associated unrealized losses of $124,981 and $107,124, respectively.
At December 31, 2013 and 2012, respectively, for bonds and preferred stocks that have been in a continuous loss position for less than twelve months, the Company held 461 and 144 securities with a carrying amount of $3,079,455 and $874,294 and an unrealized loss of $143,816 and $16,627 with an average price of 95.3 and 98.1 (fair value/amortized cost). Of this portfolio, 97.3% and 96.8% were investment grade with associated unrealized losses of $140,339 and $15,035, respectively.
At December 31, 2013 and 2012, respectively, for common stocks that have been in a continuous loss position for greater than or equal to twelve months, the Company held 3 and 3 securities with a cost of $14 and $14 and an unrealized loss of $1 and $1 with an average price of 96.9 and 96.9 (fair value/cost).
At December 31, 2013 and 2012, respectively, for common stocks that have been in a continuous loss position for less than twelve months, the Company held 2 and 5 securities with a cost of $14,052 and $28,665 and an unrealized loss of $1 and $78 with an average price of 100.0 and 99.7 (fair value/cost).
Mon Life 2013 SEC | 49 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The estimated fair value of bonds, preferred stocks and common stocks with gross unrealized losses at December 31, 2013 and 2012 is as follows:
Losses 12 Months or More |
Losses Less Than 12 Months |
Total | ||||||||||
Unaffiliated bonds: |
||||||||||||
United States Government and agencies |
$ | 15,070 | $ | 372,247 | $ | 387,317 | ||||||
State, municipal and other government |
9,976 | 110,669 | 120,645 | |||||||||
Hybrid securities |
197,309 | 22,080 | 219,389 | |||||||||
Industrial and miscellaneous |
590,431 | 1,823,597 | 2,414,028 | |||||||||
Mortgage and other asset-backed securities |
505,970 | 607,046 | 1,113,016 | |||||||||
|
|
|
|
|
|
|||||||
1,318,756 | 2,935,639 | 4,254,395 | ||||||||||
Unaffiliated preferred stocks |
2,003 | — | 2,003 | |||||||||
Unaffiliated common stocks |
14 | 14,051 | 14,065 | |||||||||
|
|
|
|
|
|
|||||||
$ | 1,320,773 | $ | 2,949,690 | $ | 4,270,463 | |||||||
|
|
|
|
|
|
|||||||
Losses 12 Months or More |
Losses Less Than 12 Months |
Total | ||||||||||
Unaffiliated bonds: |
||||||||||||
United States Government and agencies |
$ | 3,328 | $ | 14,923 | $ | 18,251 | ||||||
State, municipal and other government |
35,022 | 3,614 | 38,636 | |||||||||
Hybrid securities |
202,462 | — | 202,462 | |||||||||
Industrial and miscellaneous |
189,141 | 781,804 | 970,945 | |||||||||
Mortgage and other asset-backed securities |
851,649 | 57,326 | 908,975 | |||||||||
|
|
|
|
|
|
|||||||
1,281,602 | 857,667 | 2,139,269 | ||||||||||
Unaffiliated preferred stocks |
2,022 | — | 2,022 | |||||||||
Unaffiliated common stocks |
14 | 28,588 | 28,602 | |||||||||
|
|
|
|
|
|
|||||||
$ | 1,283,638 | $ | 886,255 | $ | 2,169,893 | |||||||
|
|
|
|
|
|
Mon Life 2013 SEC | 50 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The carrying amount and estimated fair value of bonds at December 31, 2013, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
Carrying Amount |
Estimated Fair Value |
|||||||
Due in one year or less |
$ | 216,702 | $ | 219,687 | ||||
Due after one year through five years |
1,968,356 | 2,103,074 | ||||||
Due after five years through ten years |
2,014,564 | 2,117,004 | ||||||
Due after ten years |
5,723,719 | 6,049,290 | ||||||
|
|
|
|
|||||
9,923,341 | 10,489,055 | |||||||
Mortgage and other asset-backed securities |
2,401,458 | 2,431,006 | ||||||
|
|
|
|
|||||
$ | 12,324,799 | $ | 12,920,061 | |||||
|
|
|
|
For impairment policies related to non-structured and structured securities, refer to Note 1 under Investments.
Banking
At December 31, 2013 the Company’s banking sector portfolio had investments in an unrealized loss position which had a fair value of $651,783 and a carrying value of $746,112, resulting in a gross unrealized loss of $94,329. The gross unrealized losses in the banking sub-sector primarily reflect low floating rate coupons on some securities, credit spread widening since the time of acquisition due to the Sovereign debt crisis in Europe, residual impact from the U.S. financial crisis, and global economic uncertainty. Following the implementation of new, more stringent global legislation on bank capital and liquidity requirements, credit spreads in the sector have outperformed the broader corporate market in 2013. Decisive steps by EU leaders and world central banks continue to stabilize the euro and improve funding conditions for most banks. Globally, there remain pockets of concentrated risk on bank balance sheets, and ratings for some countries and banks remain under pressure, but the banking sub-sector has largely been strengthened and oversight increased.
The value of the Company’s investments in deeply subordinated securities in the financial services sector may be significantly impacted if issuers of certain securities with optional deferral features exercise the option to defer coupon payments or are required to defer as a condition of receiving government aid. The deeply subordinated securities issued by non-US Banks are broadly referred to as capital securities which can be categorized as Tier 1 or Upper Tier 2. Capital securities categorized as “Tier 1” are typically perpetual with a non-cumulative coupon that can be deferred under certain conditions. Capital securities categorized as “Upper Tier 2” are
Mon Life 2013 SEC | 51 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
generally perpetual with a cumulative coupon that is deferrable under certain conditions. The deeply subordinated securities issued by US Banks can be categorized as Trust Preferred or Hybrid. Capital securities categorized as trust preferred typically have an original maturity of 30 years with call features after 10 years with a cumulative coupon that is deferrable under certain conditions. Capital securities categorized as hybrid typically have an original maturity of more than 30 years, may be perpetual and are generally subordinate to traditional trust preferred securities.
The Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the unrealized loss and does not consider those investments to be impaired as of December 31, 2013.
Subprime Mortgages
At December 31, 2013, the Company’s asset-backed securities (ABS) subprime mortgages portfolio had investments in an unrealized loss position which had a fair value of $382,043 and a carrying value of $418,865, resulting in a gross unrealized loss of $36,822. ABS – housing securities are secured by pools of residential mortgage loans primarily those which are categorized as subprime. The unrealized loss is primarily due to decreased liquidity and increased credit spreads in the market combined with significant increases in expected losses on loans within the underlying pools.
The Company does not currently invest in or originate whole loan residential mortgages. The Company categorizes ABS issued by a securitization trust as having subprime mortgage exposure when the average credit score of the underlying mortgage borrowers in a securitization trust is below 660 at issuance. The Company also categorizes ABS issued by a securitization trust with second lien mortgages as subprime mortgage exposure, even though a significant percentage of second lien mortgage borrowers may not necessarily have credit scores below 660 at issuance. The Company does not have any “direct” residential mortgages to subprime borrowers outside of the ABS structures.
All ABS subprime mortgage securities are monitored and reviewed on a monthly basis. Detailed cash flow models using the current collateral pool and capital structure on the portfolio are updated and are reviewed quarterly. Model output is generated under base and stress-case scenarios. The Company’s internal ABS-housing asset specialists utilize widely recognized industry modeling software to perform a loan-by-loan, bottom-up approach to modeling. Key assumptions used in the models are projected defaults, loss severities and prepayments. Each of these key assumptions varies greatly based on the significantly diverse characteristics of the current collateral pool for each security. Loan-to-value, loan size and borrower credit history are some of the key characteristics used to determine the level of assumption that is utilized. Defaults
Mon Life 2013 SEC | 52 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
were estimated by identifying the loans that are in various delinquency buckets and defaulting a certain percentage of them over the near-term and long-term. Assumed defaults on delinquent loans are dependent on the specific security’s collateral attributes and historical performance.
Loss severity assumptions were determined by observing historical rates from broader market data and by adjusting those rates for vintage specific pool performance, collateral type, mortgage insurance and estimated loan modifications. Prepayments were estimated by examining historical averages of prepayment activity on the underlying collateral. Once the entire pool is modeled, the results are closely analyzed by the Company’s internal asset specialist to determine whether or not the particular tranche or holding is at risk for not collecting all contractual cash flows, taking into account the seniority and other terms of the tranches held.
If cash flow models indicate a credit event will impact future cash flows and the Company does not have the intent to sell the tranche or holding and does have the intent and ability to hold the security, the security is impaired to discounted cash flows. As the remaining unrealized losses in the ABS subprime mortgage portfolio relate to holdings where the Company expects to receive full principal and interest, the Company does not consider the underlying investments to be impaired as of December 31, 2013.
There were no loan-backed securities with a recognized other-than-temporary impairment (OTTI) due to intent to sell or lack of intent and ability to hold during the years ended December 31, 2103, 2012 or 2011.
Mon Life 2013 SEC | 53 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The following tables provide the aggregate totals for loan-backed securities with a recognized OTTI due to the Company’s cash flow analysis, in which the security is written down to estimated future cash flows discounted at the security’s effective yield.
Amortized Cost before Current Period OTTI |
Recognized OTTI |
Amortized Cost After OTTI |
Fair Value | |||||||||||||
Year ended December 31, 2013 |
||||||||||||||||
1st quarter present value of cash flows expected to be less than the amortized cost basis |
$ | 64,235 | $ | 4,238 | $ | 59,997 | $ | 29,895 | ||||||||
2nd quarter present value of cash flows expected to be less than the amortized cost basis |
63,316 | 23,474 | 39,842 | 23,109 | ||||||||||||
3rd quarter present value of cash flows expected to be less than the amortized cost basis |
51,903 | 6,627 | 45,276 | 23,345 | ||||||||||||
4th quarter present value of cash flows expected to be less than the amortized cost basis |
42,936 | 6,503 | 36,433 | 22,696 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Aggregate total |
$ | 222,390 | $ | 40,842 | $ | 181,548 | $ | 99,045 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Amortized Cost before Current Period OTTI |
Recognized OTTI |
Amortized Cost After OTTI |
Fair Value | |||||||||||||
Year ended December 31, 2012 |
||||||||||||||||
1st quarter present value of cash flows expected to be less than the amortized cost basis |
$ | 39,343 | $ | 1,922 | $ | 37,421 | $ | 25,549 | ||||||||
2nd quarter present value of cash flows expected to be less than the amortized cost basis |
49,355 | 3,300 | 46,055 | 21,984 | ||||||||||||
3rd quarter present value of cash flows expected to be less than the amortized cost basis |
36,667 | 2,145 | 34,522 | 20,556 | ||||||||||||
4th quarter present value of cash flows expected to be less than the amortized cost basis |
36,404 | 885 | 35,519 | 17,847 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Aggregate total |
$ | 161,769 | $ | 8,252 | $ | 153,517 | $ | 85,936 | ||||||||
|
|
|
|
|
|
|
|
Mon Life 2013 SEC | 54 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Amortized Cost before Current Period OTTI |
Recognized OTTI |
Amortized Cost After OTTI |
Fair Value | |||||||||||||
Year ended December 31, 2011 |
||||||||||||||||
1st quarter present value of cash flows expected to be less than the amortized cost basis |
$ | 70,530 | $ | 5,417 | $ | 65,113 | $ | 32,730 | ||||||||
2nd quarter present value of cash flows expected to be less than the amortized cost basis |
78,321 | 4,614 | 73,707 | 32,487 | ||||||||||||
3rd quarter present value of cash flows expected to be less than the amortized cost basis |
58,385 | 3,162 | 55,223 | 35,076 | ||||||||||||
4th quarter present value of cash flows expected to be less than the amortized cost basis |
54,581 | 7,175 | 47,406 | 39,648 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Aggregate total |
$ | 261,817 | $ | 20,368 | $ | 241,449 | $ | 139,941 | ||||||||
|
|
|
|
|
|
|
|
Mon Life 2013 SEC | 55 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The following loan-backed and structured securities were held at December 31, 2013, for which an OTTI was recognized during the current reporting period:
CUSIP |
Amortized Cost before Current Period OTTI |
Present Value of Projected Cash Flows |
Recognized OTTI |
Amortized Cost After OTTI |
Fair Value at Time of OTTI |
Quarter in which Impairment Occurred |
||||||||||||||||||
$ | 9,270 | $ | 8,751 | $ | 519 | $ | 8,751 | $ | 341 | 1Q 2013 | ||||||||||||||
2,454 | 2,325 | 129 | 2,325 | 2,088 | 1Q 2013 | |||||||||||||||||||
84 | 82 | 2 | 82 | 45 | 1Q 2013 | |||||||||||||||||||
3,277 | 3,234 | 43 | 3,234 | 2,721 | 1Q 2013 | |||||||||||||||||||
753 | 311 | 442 | 311 | 169 | 1Q 2013 | |||||||||||||||||||
215 | 209 | 6 | 209 | 159 | 1Q 2013 | |||||||||||||||||||
11,205 | 10,969 | 236 | 10,969 | 10,570 | 1Q 2013 | |||||||||||||||||||
4,000 | 3,869 | 131 | 3,869 | 703 | 1Q 2013 | |||||||||||||||||||
213 | 205 | 8 | 205 | 199 | 1Q 2013 | |||||||||||||||||||
2,367 | 2,247 | 120 | 2,247 | 2,287 | 1Q 2013 | |||||||||||||||||||
5,692 | 5,230 | 462 | 5,230 | 3,740 | 1Q 2013 | |||||||||||||||||||
15 | 14 | 1 | 14 | 10 | 1Q 2013 | |||||||||||||||||||
4,666 | 4,576 | 90 | 4,576 | 3,462 | 1Q 2013 | |||||||||||||||||||
3,127 | 3,065 | 62 | 3,065 | 2,444 | 1Q 2013 | |||||||||||||||||||
47 | — | 47 | — | 1 | 1Q 2013 | |||||||||||||||||||
7,863 | 7,176 | 687 | 7,176 | 358 | 1Q 2013 | |||||||||||||||||||
8,849 | 7,653 | 1,196 | 7,653 | 525 | 1Q 2013 | |||||||||||||||||||
82 | 81 | 1 | 81 | 72 | 1Q 2013 | |||||||||||||||||||
8,737 | 4,832 | 3,905 | 4,832 | 298 | 2Q 2013 | |||||||||||||||||||
202 | 199 | 3 | 199 | 149 | 2Q 2013 | |||||||||||||||||||
7,108 | 3,498 | 3,610 | 3,498 | 6,137 | 2Q 2013 | |||||||||||||||||||
1,710 | 1,698 | 12 | 1,698 | 1,432 | 2Q 2013 | |||||||||||||||||||
10,701 | 10,522 | 179 | 10,522 | 10,201 | 2Q 2013 | |||||||||||||||||||
190 | 189 | 1 | 189 | 147 | 2Q 2013 | |||||||||||||||||||
3,857 | 3,793 | 64 | 3,793 | 403 | 2Q 2013 | |||||||||||||||||||
5,917 | 547 | 5,370 | 547 | 8 | 2Q 2013 | |||||||||||||||||||
2,226 | 4 | 2,222 | 4 | 2 | 2Q 2013 | |||||||||||||||||||
7,430 | 7,128 | 302 | 7,128 | 408 | 2Q 2013 | |||||||||||||||||||
7,498 | 6,902 | 596 | 6,902 | 3,863 | 2Q 2013 | |||||||||||||||||||
7,159 | 18 | 7,141 | 18 | 18 | 2Q 2013 |
Mon Life 2013 SEC | 56 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
CUSIP |
Amortized Cost before Current Period OTTI |
Projected Cash Flows |
Recognized OTTI |
Amortized Cost After OTTI |
Fair Value | Quarter in which Impairment Occurred |
||||||||||||||||||
554 | 486 | 68 | 486 | 28 | 2Q 2013 | |||||||||||||||||||
28 | 27 | 1 | 27 | 15 | 2Q 2013 | |||||||||||||||||||
4,819 | 2,950 | 1,869 | 2,950 | 90 | 3Q 2013 | |||||||||||||||||||
2,163 | 2,055 | 108 | 2,055 | 2,627 | 3Q 2013 | |||||||||||||||||||
64 | 63 | 1 | 63 | 108 | 3Q 2013 | |||||||||||||||||||
3,087 | 3,083 | 4 | 3,083 | 2,600 | 3Q 2013 | |||||||||||||||||||
291 | 283 | 8 | 283 | 383 | 3Q 2013 | |||||||||||||||||||
555 | 528 | 27 | 528 | 402 | 3Q 2013 | |||||||||||||||||||
193 | 183 | 10 | 183 | 145 | 3Q 2013 | |||||||||||||||||||
3,783 | 3,598 | 185 | 3,598 | 355 | 3Q 2013 | |||||||||||||||||||
719 | 714 | 5 | 714 | 540 | 3Q 2013 | |||||||||||||||||||
151 | 151 | — | 151 | 127 | 3Q 2013 | |||||||||||||||||||
352 | 341 | 11 | 341 | 245 | 3Q 2013 | |||||||||||||||||||
543 | 4 | 539 | 4 | 2 | 3Q 2013 | |||||||||||||||||||
3,245 | 3,162 | 83 | 3,162 | 2,691 | 3Q 2013 | |||||||||||||||||||
4,459 | 4,398 | 61 | 4,398 | 3,532 | 3Q 2013 | |||||||||||||||||||
3,497 | 3,273 | 224 | 3,273 | 2,843 | 3Q 2013 | |||||||||||||||||||
7,118 | 6,863 | 255 | 6,863 | 356 | 3Q 2013 | |||||||||||||||||||
6,899 | 6,751 | 148 | 6,751 | 3,855 | 3Q 2013 | |||||||||||||||||||
7,508 | 4,477 | 3,031 | 4,477 | 329 | 3Q 2013 | |||||||||||||||||||
2,430 | 2,373 | 57 | 2,373 | 2,102 | 3Q 2013 | |||||||||||||||||||
26 | 26 | — | 26 | 14 | 3Q 2013 | |||||||||||||||||||
2,937 | 1,013 | 1,924 | 1,013 | 57 | 4Q 2013 | |||||||||||||||||||
1,980 | 1,931 | 49 | 1,931 | 2,724 | 4Q 2013 | |||||||||||||||||||
2,983 | 2,902 | 81 | 2,902 | 2,589 | 4Q 2013 | |||||||||||||||||||
270 | 218 | 52 | 218 | 169 | 4Q 2013 | |||||||||||||||||||
189 | 164 | 25 | 164 | 154 | 4Q 2013 | |||||||||||||||||||
3,589 | 3,174 | 415 | 3,174 | 343 | 4Q 2013 | |||||||||||||||||||
3,127 | 2,974 | 153 | 2,974 | 2,684 | 4Q 2013 | |||||||||||||||||||
4,325 | 4,127 | 198 | 4,127 | 3,599 | 4Q 2013 | |||||||||||||||||||
1,818 | 1,490 | 328 | 1,490 | 1,620 | 4Q 2013 | |||||||||||||||||||
6,854 | 6,457 | 397 | 6,457 | 757 | 4Q 2013 | |||||||||||||||||||
6,716 | 6,518 | 198 | 6,518 | 4,026 | 4Q 2013 | |||||||||||||||||||
4,443 | 1,936 | 2,507 | 1,936 | 279 | 4Q 2013 | |||||||||||||||||||
1,995 | 1,851 | 144 | 1,851 | 2,111 | 4Q 2013 | |||||||||||||||||||
25 | 24 | 1 | 24 | 15 | 4Q 2013 | |||||||||||||||||||
1,685 | 1,652 | 33 | 1,652 | 1,571 | 4Q 2013 |
Mon Life 2013 SEC | 57 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The unrealized losses of loan-backed and structured securities where fair value is less than cost or amortized cost for which an OTTI has not been recognized in earnings as of December 31, 2013 and 2012 is as follows:
Losses 12 Months or More |
Losses Less Than 12 Months |
|||||||
Year ended December 31, 2013 |
||||||||
The aggregate amount of unrealized losses |
$ | 115,229 | $ | 24,886 | ||||
The aggregate related fair value of securities with unrealized losses |
605,686 | 607,046 | ||||||
Losses 12 Months or More |
Losses Less Than 12 Months |
|||||||
Year ended December 31, 2012 |
||||||||
The aggregate amount of unrealized losses |
$ | 235,956 | $ | 7,106 | ||||
The aggregate related fair value of securities with unrealized losses |
917,808 | 79,785 |
Detail of net investment income is presented below:
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Income: |
||||||||||||
Bonds |
$ | 608,872 | $ | 665,143 | $ | 698,531 | ||||||
Preferred stocks |
4,516 | 3,791 | 3,007 | |||||||||
Common stocks |
1,893 | 3,599 | 3,305 | |||||||||
Mortgage loans on real estate |
98,876 | 119,979 | 123,944 | |||||||||
Real estate |
1,247 | 1,018 | 1,095 | |||||||||
Policy loans |
29,032 | 29,076 | 30,126 | |||||||||
Cash, cash equivalents and short-term investments |
1,353 | 2,203 | 2,440 | |||||||||
Derivatives |
12,632 | 15,357 | 5,840 | |||||||||
Other invested assets |
3,991 | 13,212 | 8,697 | |||||||||
Other |
(738 | ) | 3,441 | 1,121 | ||||||||
|
|
|
|
|
|
|||||||
Gross investment income |
761,674 | 856,819 | 878,106 | |||||||||
Less investment expenses |
32,345 | 34,505 | 36,065 | |||||||||
|
|
|
|
|
|
|||||||
Net investment income |
$ | 729,329 | $ | 822,314 | $ | 842,041 | ||||||
|
|
|
|
|
|
Mon Life 2013 SEC | 58 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Proceeds from sales and other disposals (excluding maturities) of bonds and preferred stock and related gross realized capital gains and losses were as follows:
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Proceeds |
$ | 1,582,738 | $ | 4,357,730 | $ | 2,597,080 | ||||||
|
|
|
|
|
|
|||||||
Gross realized gains |
$ | 12,758 | $ | 417,006 | $ | 66,223 | ||||||
Gross realized losses |
(13,236 | ) | (27,531 | ) | (22,934 | ) | ||||||
|
|
|
|
|
|
|||||||
Net realized capital gains (losses) |
$ | (478 | ) | $ | 389,475 | $ | 43,289 | |||||
|
|
|
|
|
|
The Company had gross realized losses for the years ended December 31, 2013, 2012 and 2011 of $41,176, $22,898 and $33,707, respectively, which relate to losses recognized on other-than-temporary declines in the fair value of bonds and preferred stocks.
Net realized capital gains (losses) on investments are summarized below:
Realized | ||||||||||||
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Bonds |
$ | (41,648 | ) | $ | 366,392 | $ | 9,633 | |||||
Preferred stocks |
— | 185 | (51 | ) | ||||||||
Common stocks |
(203 | ) | 181 | 2,699 | ||||||||
Mortgage loans on real estate |
(30 | ) | (3,240 | ) | (8,533 | ) | ||||||
Real estate |
(2,742 | ) | (3,704 | ) | (1,869 | ) | ||||||
Cash, cash equivalents and short-term investments |
1 | 1 | 14 | |||||||||
Derivatives |
(66,568 | ) | (47,592 | ) | (115,760 | ) | ||||||
Other invested assets |
20,448 | 24,655 | 14,586 | |||||||||
|
|
|
|
|
|
|||||||
(90,742 | ) | 336,878 | (99,281 | ) | ||||||||
Federal income tax effect |
35,916 | (128,376 | ) | 24,360 | ||||||||
Transfer to (from) interest maintenance reserve |
43,475 | (216,378 | ) | 46,079 | ||||||||
|
|
|
|
|
|
|||||||
Net realized capital losses on investments |
$ | (11,351 | ) | $ | (7,876 | ) | $ | (28,842 | ) | |||
|
|
|
|
|
|
At December 31, 2013 and 2012, the Company had recorded investments in restructured securities of $320 and $7,170, respectively. The capital (losses) taken as a result of restructures in 2013, 2012 and 2011 were $(156), $(368) and $(6,868), respectively. The Company often has impaired a security prior to the restructure date. These impairments are not included in the calculation of restructure related losses and are accounted for as a realized loss, reducing the cost basis of the security involved.
Mon Life 2013 SEC | 59 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The changes in net unrealized capital gains and losses on investments were as follows:
Change in Unrealized | ||||||||||||
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Bonds |
$ | 50,095 | $ | (16,551 | ) | $ | 4,454 | |||||
Preferred stocks |
— | 1,408 | (1,408 | ) | ||||||||
Common stocks |
(892 | ) | (4,558 | ) | (5,607 | ) | ||||||
Affiliated entities |
(4,768 | ) | (5,899 | ) | (570 | ) | ||||||
Mortgage loans on real estate |
253 | 1,255 | (1,637 | ) | ||||||||
Derivatives |
94,576 | 26,867 | 3,422 | |||||||||
Other invested assets |
18,545 | (38,135 | ) | (4,716 | ) | |||||||
|
|
|
|
|
|
|||||||
Change in unrealized capital gains (losses), before tax |
157,809 | (35,613 | ) | (6,062 | ) | |||||||
Taxes on unrealized capital gains/loss |
(62,279 | ) | 2,354 | (6,021 | ) | |||||||
|
|
|
|
|
|
|||||||
Change in unrealized capital gains (losses), net of tax |
$ | 95,530 | $ | (33,259 | ) | $ | (12,083 | ) | ||||
|
|
|
|
|
|
The Company’s investments in mortgage loans principally involve commercial real estate.
The credit quality of mortgage loans by type of property for the year ended December 31, 2013 were as follows:
Farm | Commercial | Total | ||||||||||
AAA - AA |
$ | 755 | $ | 1,151,315 | $ | 1,152,070 | ||||||
A |
40,812 | 330,399 | 371,211 | |||||||||
BBB |
6,719 | 22,496 | 29,215 | |||||||||
BB |
— | 131,804 | 131,804 | |||||||||
B |
— | 3,352 | 3,352 | |||||||||
|
|
|
|
|
|
|||||||
$ | 48,286 | $ | 1,639,366 | $ | 1,687,652 | |||||||
|
|
|
|
|
|
The credit quality for commercial and farm mortgage loans was determined based on an internal credit rating model which assigns a letter rating to each mortgage loan in the portfolio as an indicator of the credit quality of the mortgage loan. The internal credit rating model was designed based on rating agency methodology, then modified for credit risk associated with the Company’s mortgage lending process, taking into account such factors as projected future cash flows, net operating income, and collateral value. The model produces a credit rating score and an associated letter rating which is intended to align with S&P ratings as closely as possible. Information supporting the credit risk rating process is updated at least annually.
During 2013, the maximum and minimum lending rates for mortgage loans during were 5.87% and 3.00%, respectively. The maximum percentage of any one mortgage loan to the value of the underlying real estate originated during the year ending December 31, 2013 at the time of
Mon Life 2013 SEC | 60 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
origination was 77%. During 2013, the Company did not reduce interest rates on any outstanding mortgages. At December 31, 2013, mortgage loans with a carrying value of $1,061 were non-income producing for the previous 180 days. There was no accrued interest related to these mortgage loans that required excluding the amount from investment income at December 31, 2013. The Company did not have any taxes, assessments and other amounts advanced not included in the mortgage loan total for the year ended December 31, 2013.
The following tables provide the age analysis of mortgage loans aggregated by type:
Residential | Commercial | |||||||||||||||||||||||||||
December 31, 2013 | Farm | Insured | All Other | Insured | All Other | Mezzanine | Total | |||||||||||||||||||||
Recorded Investment (All) |
||||||||||||||||||||||||||||
(a) Current |
$ | 48,286 | $ | — | $ | 3,930 | $ | — | $ | 1,505,460 | $ | 133,906 | $ | 1,691,582 | ||||||||||||||
(b) 30-59 Days Past Due |
— | — | 217 | — | — | — | 217 | |||||||||||||||||||||
(c) 60-89 Days Past Due |
— | — | — | — | — | — | — | |||||||||||||||||||||
(d) 90-179 Days Past Due |
— | — | — | — | — | — | — | |||||||||||||||||||||
(e) 180+ Days Past Due |
— | — | 1,061 | — | — | — | 1,061 | |||||||||||||||||||||
Residential | Commercial | |||||||||||||||||||||||||||
December 31, 2012 | Farm | Insured | All Other | Insured | All Other | Mezzanine | Total | |||||||||||||||||||||
Recorded Investment (All) |
||||||||||||||||||||||||||||
(a) Current |
$ | 74,872 | $ | — | $ | 4,176 | $ | — | $ | 1,608,517 | $ | 175,705 | $ | 1,863,270 | ||||||||||||||
(b) 30-59 Days Past Due |
— | — | 190 | — | — | — | 190 | |||||||||||||||||||||
(c) 60-89 Days Past Due |
— | — | 125 | — | — | — | 125 | |||||||||||||||||||||
(d) 90-179 Days Past Due |
— | — | 138 | — | — | — | 138 | |||||||||||||||||||||
(e) 180+ Days Past Due |
— | — | 1,128 | — | — | — | 1,128 |
During 2012, the maximum and minimum lending rates for mortgage loans during were 5.00% and 3.65%, respectively. The maximum percentage of any one mortgage loan to the value of the underlying real estate originated during the year ending December 31, 2012 at the time of origination was 67%. During 2012, the Company did not reduce interest rates on any outstanding mortgages. At December 31, 2012, mortgage loans with a carrying value of $1,128 were non-income producing for the previous 180 days. Accrued interest of $152 related to these mortgage loans was excluded from investment income at December 31, 2012. The Company did not have any taxes, assessments and other amounts advanced not included in the mortgage loan total for the year ended December 31, 2012.
At December 31, 2013 and 2012, respectively, the net admitted asset value in impaired loans with a related allowance for credit losses was $7,983 and $7,926. The Company held an allowance for credit losses on mortgage loans in the amount of $247 and $499 at December 31, 2013 and 2012, respectively. The average recorded investment in impaired loans during 2013 and 2012 was $7,915 and $7,735, respectively. There was no recorded investment in impaired loans without an allowance for credit losses during 2013 or 2012.
Mon Life 2013 SEC | 61 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The following table provides a reconciliation of the beginning and ending balances for the allowance for credit losses on mortgage loans:
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Balance at beginning of period |
$ | 499 | $ | 1,754 | $ | 117 | ||||||
Additions, net charged to operations |
— | — | 1,754 | |||||||||
Recoveries in amounts previously charged off |
(252 | ) | (1,255 | ) | (117 | ) | ||||||
|
|
|
|
|
|
|||||||
Balance at end of period |
$ | 247 | $ | 499 | $ | 1,754 | ||||||
|
|
|
|
|
|
The Company accrues interest income on impaired loans to the extent deemed collectible (delinquent less than 91 days) and the loan continues to perform under its original or restructured contractual terms. Interest income on nonperforming loans generally is recognized on a cash basis. The Company recognized $540, $552 and $312 of interest income on impaired loans for the years ended December 31, 2013, 2012 and 2011, respectively. The Company recognized interest income on a cash basis of $540, $552 and $312 for the years ended December 31, 2013, 2012 and 2011, respectively.
The fair value of property is determined based on an appraisal from a third-party appraiser, along with information obtained from discussions with internal asset managers and a listing broker regarding recent comparable sales data and other relevant property information. Impairment losses of $2,768, $3,996 and $2,373 were taken on real estate in 2013, 2012 and 2011, respectively, to write the book value down to the current fair value and were reflected as realized losses in the statements of operations.
During 2013 and 2012, respectively, mortgage loans of $7,754 and $4,690 were foreclosed or acquired by deed and transferred to real estate. At December 31, 2013 and 2012, the Company held a mortgage loan loss reserve in the AVR of $21,969 and $17,693, respectively.
Mon Life 2013 SEC | 62 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The Company’s mortgage loan portfolio is diversified by geographic region and specific collateral property type as follows:
Geographic Distribution |
||||||||
December 31 | ||||||||
2013 | 2012 | |||||||
Pacific |
25 | % | 22 | % | ||||
South Atlantic |
19 | 18 | ||||||
Middle Atlantic |
16 | 24 | ||||||
E. South Central |
13 | 12 | ||||||
W. South Central |
10 | 8 | ||||||
Mountain |
7 | 6 | ||||||
E. North Central |
5 | 4 | ||||||
W. North Central |
4 | 4 | ||||||
New England |
1 | 2 |
Property Type Distribution |
||||||||
December 31 | ||||||||
2013 | 2012 | |||||||
Office |
47 | % | 48 | % | ||||
Retail |
18 | 18 | ||||||
Apartment |
14 | 15 | ||||||
Industrial |
10 | 9 | ||||||
Other |
4 | 3 | ||||||
Medical |
4 | 3 | ||||||
Agricultural |
3 | 4 | ||||||
Residential |
0 | 0 |
At December 31, 2013, 2012 and 2011, the Company held mortgage loans with a total net admitted value of $378, $137 and $137, respectively, which had been restructured in accordance with SSAP No. 36, Troubled Debt Restructuring. There were no realized losses during the years ended December 31, 2013, 2012 and 2011 related to such restructurings. There were no commitments to lend additional funds to debtors owing receivables at December 31, 2013, 2012 or 2011.
During 2012, the Company recorded an impairment of $694 for its investment in Green Mountain Partners II, L.P. The impairment was taken because the decline in fair value of the fund was deemed to be other than temporary and a recovery in value from the remaining underlying investments in the fund was not anticipated. The write-down was included in net realized capital gains (losses) within the statements of operations.
During 2011, the Company recorded an impairment of $1,982 for its investment in Ridge Capital Fund I, L.P. The impairment was taken because the decline in fair value of the fund was deemed to be other than temporary and a recovery in value from the remaining underlying investments in the fund was not anticipated. The write-down was included in net realized capital gains (losses) within the statements of operations.
On December 31, 2010, the Company acquired two real estate related limited liability company interests (Transamerica Pyramid Properties, LLC and Transamerica Realty Properties, LLC) from Transamerica Life Insurance Company (TLIC), an affiliate, for a combined purchase price of $252,975. The price paid was based predominantly on the valuations of the properties within each of those entities. This transaction was accounted for as a business combination using the statutory purchase method and resulted in goodwill of $100,674, which was included in the
Mon Life 2013 SEC | 63 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
carrying amount of these other invested assets. Amortization in the amount of $10,067 was recorded during each of the years ending December 31, 2013 and 2012, which is reflected in the carrying value of these other invested assets with an offset to the change in net unrealized capital gains/losses. As the carrying amount of the total positive goodwill of the Company exceeded 10% of the September 30, 2013 capital and surplus, adjusted to exclude positive goodwill and net deferred tax assets as of September 30, 2013, goodwill in the amount of $10,702 associated with this transaction was nonadmitted at December 31, 2013. The entire goodwill balance associated with this transaction was admitted at December 31, 2012.
For the year ending December 31, 2013, the Company had ownership interests in forty-eight LIHTC properties. The remaining years of unexpired tax credits ranged from one to nine and none of the properties were subject to regulatory review. The length of time remaining for holding periods ranged from one to fourteen years. The amount of contingent equity commitments expected to be paid during the years 2014 to 2025 is $2,032. There were no impairment losses, write-downs or reclassifications during the year related to any of these credits.
For the year ending December 31, 2012, the Company had ownership interests in fifty-seven LIHTC properties. The remaining years of unexpired tax credits ranged from one to thirteen and none of the properties were subject to regulatory review. The length of time remaining for holding periods ranged from one to fifteen years. The amount of contingent equity commitments expected to be paid during the years 2013 to 2025 is $7,640. There were no impairment losses, write-downs or reclassifications during the year related to any of these credits.
The following tables provide the carrying value of state transferable tax credits gross of any related tax liabilities and total unused transferable tax credits by state and in total as of December 31, 2013 and 2012:
December 31, 2013 | ||||||||||||
Description of State Transferable and Non-transferable Tax Credits |
State | Carrying Value | Unused Amount* | |||||||||
Low-Income Housing Tax Credits |
MA | $ | 462 | $ | 1,033 | |||||||
|
|
|
|
|||||||||
Total |
$ | 462 | $ | 1,033 | ||||||||
|
|
|
|
|||||||||
December 31, 2012 | ||||||||||||
Description of State Transferable and Non-transferable Tax Credits |
State | Carrying Value | Unused Amount | |||||||||
Low-Income Housing Tax Credits |
MA | $ | 810 | $ | 1,381 | |||||||
|
|
|
|
|||||||||
Total |
$ | 810 | $ | 1,381 | ||||||||
|
|
|
|
*The | unused amount reflects credits that the Company deems will be realizable in the period from 2014 to 2015. |
Mon Life 2013 SEC | 64 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The Company had no non-transferable state tax credits.
The Company estimated the utilization of the remaining state transferable tax credits by projecting a future tax liability based on projected premium, tax rates and tax credits and comparing the projected future tax liability to the availability of remaining state transferable tax credits. The Company had no impairment losses related to state transferable tax credits as of December 31, 2013, 2012 and 2011.
Derivatives
The Company has entered into collateral agreements with certain counterparties wherein the counterparty is required to post assets (cash or securities) on the Company’s behalf in an amount equal to the difference between the net positive fair value of the contracts and an agreed upon threshold based on the credit rating of the counterparty. If the net fair value of all contracts with this counterparty is negative, then the Company is required to post similar assets (cash or securities).
At December 31, 2013 and 2012, the fair value of all derivative contracts, aggregated at a counterparty level, with a positive fair value amounted to $370,542 and $585,525, respectively.
At December 31, 2013 and 2012, the fair value of all derivative contracts, aggregated at a counterparty level, with a negative fair value amounted to $47,904 and $186,630, respectively.
For the years ended December 31, 2013, 2012 and 2011, the Company has recorded $88,048, $287 and $(14,830), respectively, for the component of derivative instruments utilized for hedging purposes that did not qualify for hedge accounting. This has been recorded directly to unassigned surplus as an unrealized gain (loss).
The Company did not recognize any unrealized gains or losses during 2013, 2012 or 2011 that represented the component of derivative instruments gain or loss that was excluded from the assessment of hedge effectiveness.
The maximum term over which the Company is hedging its exposure to the variability of future cash flows is approximately 20 years for forecasted hedge transactions.
For the years ended December 31, 2013, 2012 and 2011 none of the Company’s cash flow hedges have been discontinued as it was probable that the original forecasted transactions would occur by the end of the originally specified time period documented at inception of the hedging relationship.
Mon Life 2013 SEC | 65 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
As of December 31, 2013 and 2012, the company has accumulated deferred gains in the amount of $3,616 and $3,822, respectively, related to the termination of swaps that were hedging forecasted transactions. It is expected that these gains will be used as basis adjustments on futures asset purchases expected to transpire throughout 2026.
At December 31, 2013 and 2012, the Company had replicated assets with a fair value of $562,373 and $469,474, respectively, and credit default and forward starting interest rate swaps with a fair value of $8,188 and $(26,540), respectively.
For the year ended December 31, 2013 and 2012, the Company recognized $77 and $1,639 in capital losses related to replication transactions.
As stated in Note 1, the Company replicates investment grade corporate bonds by writing credit default swaps. As a writer of credit swaps, the Company actively monitors the underlying asset, being careful to note any events (default or similar credit event) that would require the Company to perform on the credit swap. If such events would take place, the Company has recourse provisions from the proceeds of the bankruptcy settlement of the underlying entity or by the sale of the underlying bond.
Mon Life 2013 SEC | 66 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
As of December 31, 2013, credit default swaps, used in replicating corporate bonds are as follows:
Maximum Future | ||||||||||||
Maturity | Payout | Current Fair | ||||||||||
Deal, Receive (Pay), Underlying |
Date | (Estimated) | Value | |||||||||
43231,SWAP, USD 1 / (USD 0), :912810PX0 |
12/20/2015 | $ | 10,000 | $ | 111 | |||||||
43285,SWAP, USD 1 / (USD 0), :CDXIG 17 |
12/20/2016 | 7,500 | 154 | |||||||||
43286,SWAP, USD 1 / (USD 0), :CDXIG17 |
12/20/2016 | 3,500 | 72 | |||||||||
43299,SWAP, USD 1 / (USD 0), :JP1200551248 |
3/20/2017 | 12,000 | 293 | |||||||||
43302,SWAP, USD 1 / (USD 0), :US50064FAD69 |
3/20/2017 | 10,000 | 198 | |||||||||
43307,SWAP, USD 1 / (USD 0), :US731011AN26 |
3/20/2017 | 15,000 | 264 | |||||||||
43310,SWAP, USD 1 / (USD 0), :US50064FAD69 |
3/20/2017 | 10,000 | 198 | |||||||||
43321,SWAP, USD 1 / (USD 0), :USY6826RAA06 |
3/20/2017 | 5,000 | 57 | |||||||||
43347,SWAP, USD 1 / (USD 0), :US416515AY06 |
6/20/2017 | 25,000 | 437 | |||||||||
47295,SWAP, USD 1 / (USD 0), :US59156RAN89 |
6/20/2017 | 25,000 | 418 | |||||||||
47296,SWAP, USD 1 / (USD 0), :US172967ES69 |
6/20/2017 | 25,000 | 420 | |||||||||
47297,SWAP, USD 1 / (USD 0), :US743410AW27 |
6/20/2017 | 25,000 | 345 | |||||||||
43374,SWAP, USD 1 / (USD 0), :CDX IG 18 |
6/20/2017 | 10,000 | 215 | |||||||||
43394,SWAP, USD 1 / (USD 0), :XS0114288789 |
9/20/2017 | 10,000 | (113 | ) | ||||||||
43601,SWAP, USD 1 / (USD 0), :US88322LAA70 |
9/20/2017 | 5,100 | 10 | |||||||||
43613,SWAP, USD 1 / (USD 0), :US455780AQ93 |
9/20/2017 | 7,800 | (206 | ) | ||||||||
46410,SWAP, USD 1 / (USD 0), :912810QL5 |
12/20/2017 | 20,000 | 426 | |||||||||
46411,SWAP, USD 1 / (USD 0), :912810QL5 |
12/20/2017 | 19,000 | 405 | |||||||||
46915,SWAP, USD 1 / (USD 0), :61761DAD4 |
12/20/2017 | 20,000 | 247 | |||||||||
47037,SWAP, USD 1 / (USD 0), :12624PAE5 |
12/20/2017 | 5,000 | 106 | |||||||||
47657,SWAP, USD 1 / (USD 0), :92939RBB7 |
12/20/2017 | 12,500 | 209 | |||||||||
48775,SWAP, USD 1 / (USD 0), :12624QAR4 |
12/20/2017 | 12,500 | 266 | |||||||||
49952,SWAP, USD 1 / (USD 0), :94987MAB7 |
12/20/2017 | 5,000 | 73 | |||||||||
53497,SWAP, USD 1 / (USD 0), :20048EAY7 |
12/20/2017 | 15,000 | 319 | |||||||||
53821,SWAP, USD 1 / (USD 0), :92937EAZ7 |
3/20/2018 | 22,000 | 432 | |||||||||
54329,SWAP, USD 1 / (USD 0), :76116FAG2 |
3/20/2018 | 10,000 | 30 | |||||||||
54865,SWAP, USD 5 / (USD 0), :61761QAE3 |
3/20/2018 | 15,000 | 2408 | |||||||||
55127,SWAP, USD 1 / (USD 0), :36228CUV3 |
3/20/2018 | 2,300 | (95 | ) | ||||||||
60519,SWAP, USD 1 / (USD 0), :912828TY6 |
6/20/2018 | 20,000 | 275 | |||||||||
60520,SWAP, USD 1 / (USD 0), :912828TY6 |
6/20/2018 | 20,000 | (7 | ) | ||||||||
60521,SWAP, USD 1 / (USD 0), :912828TY6 |
6/20/2018 | 10,000 | (1 | ) | ||||||||
59110,SWAP, USD 1 / (USD 0), :912828TY6 |
6/20/2018 | 20,000 | 200 | |||||||||
59117,SWAP, USD 1 / (USD 0), :912828TY6 |
6/20/2018 | 10,000 | (1 | ) | ||||||||
59280,SWAP, USD 1 / (USD 0), :912828TY6 |
6/20/2018 | 20,000 | 275 |
Mon Life 2013 SEC | 67 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
At December 31, 2013 and 2012, the Company held options with a fair value of $5,432 and $66, respectively.
At December 31, 2013 and 2012, the Company’s outstanding derivative financial instruments with on and off balance sheet risks, shown in notional amounts, are summarized as follows:
Notional Amount | ||||||||
2013 | 2012 | |||||||
Interest rate and currency swaps: |
||||||||
Receive floating—pay floating |
$ | — | $ | 31,620 | ||||
Receive fixed—pay floating |
43,970 | 88,562 | ||||||
Receive floating—pay fixed |
19,500 | 19,500 | ||||||
Receive fixed—pay fixed |
482,442 | — | ||||||
Swaps: |
||||||||
Receive fixed—pay floating |
1,701,576 | 2,748,946 | ||||||
Receive fixed—pay fixed |
53,003 | — | ||||||
Receive floating—pay fixed |
179,200 | 664,840 | ||||||
Receive floating—pay floating |
39,200 | 39,200 |
The Company recognized net realized gains (losses) from futures contracts in the amount of $3,578, $1,917 and $(399), for the years ended December 31, 2013, 2012 and 2011, respectively.
Open futures contracts at December 31, 2013 and 2012 were as follows:
Opening | Year-End | |||||||||||||
Fair | Fair | |||||||||||||
Long/Short |
Number of Contracts | Contract Type | Value | Value | ||||||||||
Long |
50 | S&P 500 March 2014 Futures |
$ | 22,253 | $ | 23,013 | ||||||||
Short |
116 | S&P 500 E-MINI March 2014 Futures |
10,325 | 10,678 | ||||||||||
Long |
10 | NASDAQ 100 E-MINI March 2014 Futures |
693 | 716 |
Mon Life 2013 SEC | 68 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Long/Short |
Number of Contracts | Contract Type | Opening Fair Value |
Year-End Fair Value |
||||||||
Long |
46 | S&P 500 March 2013 Futures |
$ | 16,262 | $ | 16,331 | ||||||
Short |
(69) | S&P 500 E-MINI March 2013 Futures |
(4,857 | ) | (4,774 | ) | ||||||
Long |
3 | NASDAQ 100 E-MINI March 2013 Futures |
$ | 157 | $ | 159 |
The following tables show the pledged or restricted assets as of December 31, 2013 and 2012, respectively:
Gross Restricted | ||||||||||||||||||||
Restricted Asset Category |
Total General Account (G/A) |
G/A Supporting Separate Account (S/A) Activity |
Total S/A Restricted Assets |
S/A Assets Supporting G/A Activity |
Total | |||||||||||||||
a. Subject to contractual obligation for which liability is not shown |
$ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
b. Collateral held under security lending agreements |
322,169 | — | — | — | 322,169 | |||||||||||||||
c. Subject to repurchase agreements |
— | — | — | — | — | |||||||||||||||
d. Subject to reverse repurchase agreements |
— | — | — | — | — | |||||||||||||||
e. Subject to dollar repurchase agreements |
52,930 | — | — | — | 52,930 | |||||||||||||||
f. Subject to dollar reverse repurchase agreements |
— | — | — | — | — | |||||||||||||||
g. Placed under option contracts |
— | — | — | — | — | |||||||||||||||
h. Letter stock or securities restricted as to sale |
— | — | — | — | — | |||||||||||||||
i. On deposit with state(s) |
9,184 | — | — | — | 9,184 | |||||||||||||||
j. On deposit with other regulatory bodies |
— | — | — | — | — | |||||||||||||||
k. Pledged as collateral not captured in other categories |
587,282 | — | — | — | 587,282 | |||||||||||||||
l. Other restricted assets - reinsurance |
189,895 | — | — | — | 189,895 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
m. Total Restricted Assets |
$ | 1,161,460 | $ | — | $ | — | $ | — | $ | 1,161,460 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Mon Life 2013 SEC | 69 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Gross Restricted | Percentage | |||||||||||||||||||
Restricted Asset Category |
Total From Prior Year |
Increase/ (Decrease) |
Total Current Year Admitted Restricted |
Gross Restricted to Total Assets |
Admitted Restricted to Total Admitted Assets |
|||||||||||||||
a. Subject to contractual obligation for which liability is not shown |
$ | — | $ | — | $ | — | 0.00 | % | 0.00 | % | ||||||||||
b. Collateral held under security lending agreements |
347,440 | (25,271 | ) | 322,169 | 1.01 | 1.01 | ||||||||||||||
c. Subject to repurchase agreements |
— | — | — | 0.00 | 0.00 | |||||||||||||||
d. Subject to reverse repurchase agreements |
— | — | — | 0.00 | 0.00 | |||||||||||||||
e. Subject to dollar repurchase agreements |
6,422 | 46,508 | 52,930 | 0.17 | 0.17 | |||||||||||||||
f. Subject to dollar reverse repurchase agreements |
— | — | — | 0.00 | 0.00 | |||||||||||||||
g. Placed under option contracts |
— | — | — | 0.00 | 0.00 | |||||||||||||||
h. Letter stock or securities restricted as to sale |
— | — | — | 0.00 | 0.00 | |||||||||||||||
i. On deposit with state(s) |
10,498 | (1,314 | ) | 9,184 | 0.03 | 0.03 | ||||||||||||||
j. On deposit with other regulatory bodies |
— | — | — | 0.00 | 0.00 | |||||||||||||||
k. Pledged as collateral not captured in other categories |
1,346,969 | (759,687 | ) | 587,282 | 1.84 | 1.84 | ||||||||||||||
l. Other restricted assets - reinsurance |
200,281 | (10,386 | ) | 189,895 | 0.60 | 0.60 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
m. Total Restricted Assets |
$ | 1,911,610 | $ | (750,150 | ) | $ | 1,161,460 | 3.65 | % | 3.65 | % | |||||||||
|
|
|
|
|
|
|
|
|
|
Assets pledged as collateral not captured in other categories includes the following:
Invested assets with a carrying value of $15,185 and $14,443 pledged in conjunction with derivative transactions as of December 31, 2013 and 2012, respectively.
Mon Life 2013 SEC | 70 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Invested assets with a carrying amount of $572,097 and $1,332,526 pledged in conjunction with funding agreement transactions as of December 31, 2013 and 2012, respectively.
6. Reinsurance
Certain premiums and benefits are assumed from and ceded to other insurance companies under various reinsurance agreements. The Company reinsures portions of the risk on certain insurance policies which exceed its established limits, thereby providing a greater diversification of risk and minimizing exposure on larger risks. The Company remains contingently liable with respect to any insurance ceded and this would become an actual liability in the event that the assuming insurance company became unable to meet its obligation under the reinsurance treaty.
Premiums earned reflect the following reinsurance amounts:
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Direct premiums |
$ | 2,068,373 | $ | 1,867,885 | $ | 1,794,666 | ||||||
Reinsurance assumed—non affiliates |
131,992 | 178,530 | 190,059 | |||||||||
Reinsurance assumed—affiliates |
25,047 | 28,940 | 22,874 | |||||||||
Reinsurance ceded—non affiliates |
(62,896 | ) | (61,142 | ) | (61,076 | ) | ||||||
Reinsurance ceded—affiliates |
(456,039 | ) | (492,496 | ) | (543,301 | ) | ||||||
|
|
|
|
|
|
|||||||
Net premiums earned |
$ | 1,706,477 | $ | 1,521,717 | $ | 1,403,222 | ||||||
|
|
|
|
|
|
The Company received reinsurance recoveries in the amount of $405,026, $450,571 and $455,081 during 2013, 2012 and 2011, respectively. At December 31, 2013 and 2012, estimated amounts recoverable from reinsurers that have been deducted from policy and contract claim reserves totaled $28,006 and $27,288, respectively. The aggregate reserves for policies and contracts were reduced for reserve credits for reinsurance ceded at December 31, 2013 and 2012 of $6,610,550 and $8,221,493, respectively, of which $6,523,603 and $8,112,442, respectively, were ceded to affiliates.
At December 31, 2013 and 2012, amounts recoverable from unaffiliated unauthorized reinsurers totaled $2,885 and $3,590, respectively, and reserve credits for reinsurance ceded totaled $10,367 and $13,406, respectively. The reinsurers hold collateral under these reinsurance agreements in the form of trust agreements totaling $19,539 and $18,269 at December 31, 2013 and 2012, respectively, that can be drawn on for amounts that remain unpaid for more than 120 days. There would be no reduction in surplus at December 31, 2013 if all reinsurance agreements were cancelled.
Mon Life 2013 SEC | 71 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
During 2013, the Company did not enter into any new reinsurance agreements in which a reserve credit was taken.
Effective September 30, 2012, the Company agreed to amend and restate the indemnity reinsurance treaty originally effective October 1, 2009 with MLIC Re, Inc., an affiliate. The amended and restated treaty now includes an experience refund mechanism and a revised schedule of coinsurance reserves. The Company received consideration of $425,000, paid a treaty settlement equal to the change in modified coinsurance reserves of $497,500 and increased ceded coinsurance reserves by $497,500 resulting in a pre-tax gain of $425,000 ($276,250 net of tax) which has been credited directly to unassigned surplus on a net of tax basis.
On April 26, 2011, Aegon N.V. announced the divestiture of its life reinsurance operations, Transamerica Reinsurance, to SCOR SE (SCOR), a Societas Europaea organized under the laws of France, which was effective August 9, 2011. The life reinsurance business conducted by Transamerica Reinsurance was written through several of Aegon N.V.’s U.S. and international affiliates, all of which remain Aegon N.V. affiliates following the closing, except for Transamerica International Reinsurance Ireland, Limited (TIRI), an Irish reinsurance company. In preparation of the disposition of the life reinsurance business to SCOR, during the second quarter of 2011, the Company, as well as other affiliated life insurance companies, recaptured certain business that had been reinsured to TIRI, subsequently ceding the majority of the business recaptured to Transamerica International Re (Bermuda) Ltd. (TIRe), an affiliate. As a result of these transactions, the net impact to the Company was a pre-tax loss of $20,567 which was included in the statement of operations, and a net of tax gain of $15,885 which was credited directly to unassigned surplus. These amounts include current year amortization of previously deferred gains, as well as releases of previously deferred gains from unassigned surplus into earnings. Additional information surrounding these transactions is outlined below.
Effective April 1, 2011, the Company recaptured the life, military universal life, final settlement and Korean accidental death business that was previously reinsured on a coinsurance and a coinsurance funds withheld basis to affiliates. The Company paid recapture consideration of $15,400, received invested assets of $12,200, released the associated funds withheld liability of $2,130, recaptured reserves of $24,805, assumed other assets of $5,248 and released into income a previously deferred unamortized gain resulting from the original transaction in the amount of $60 ($39 after-tax). The resulting pre-tax loss of $20,567 was included in the statement of operations.
Subsequently, effective April 1, 2011, the Company ceded the life and military universal life business on a coinsurance funds withheld basis to an affiliate. The Company received an initial ceding commission of $12,100, transferred other assets of $4,159, established a funds withheld
Mon Life 2013 SEC | 72 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
liability of $4,796 and released reserves of $20,770, resulting in a pre-tax gain of $23,915 ($15,545 on a net of tax basis) which was credited directly to unassigned surplus.
Effective December 31, 2011, the Company recaptured the credit life and credit disability business that was previously reinsured on a coinsurance funds withheld basis to an unaffiliated party. The Company released the associated funds withheld liability of $2,428, recaptured reserves of $4,466 and exchanged no consideration resulting in a pre-tax loss of $2,038 which was included in the statement of operations.
Subsequently, December 31, 2011, the Company ceded that credit life and credit disability business, as well as additional in force business written and assumed by the Company as well as all new policies issued thereafter, on a coinsurance funds withheld basis to an affiliate. The Company established a funds withheld liability of $19,980, released reserves of $39,420 and exchanged no consideration resulting in a pre-tax gain of $19,440 ($12,637 after-tax) which was credited directly to unassigned surplus on a net of tax basis.
Effective September 30, 2011, the Company recaptured the term life business previously coinsured to an affiliate. Also effective September 30, 2011, the same block of business was recaptured by an affiliate, from which it had been assumed. The Company recaptured reserves of $402,985, released reserves of the same amount and released into income a previously deferred unamortized gain resulting from the original cession of the business to an affiliate in the amount of $421,601 ($274,041 net of tax) resulting in a pre-tax gain of $421,601 was included in the statement of operations.
The Company entered into an assumption reinsurance transaction with TLIC effective September 30, 2008. TLIC was the issuer of a series of corporate-owned life insurance policies issued to Life Investors Insurance Company of America (LIICA), an affiliate. The assumption reinsurance transaction resulted in the Company assuming all liabilities of TLIC arising under these policies. The Company assumed reserves of $138,025 and received consideration of $125,828. The Company recorded $12,197 of goodwill related to this transaction. The Company amortized $1,130 and $1,073 of this balance during 2012 and 2011, respectively.
During 2013, 2012 and 2011, the Company amortized deferred gains from reinsurance transactions of $63,742, $68,733 and $59,795, respectively, into earnings on a net of tax basis with a corresponding charge to unassigned surplus.
Mon Life 2013 SEC | 73 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
7. Income Taxes
The net deferred income tax asset at December 31, 2013 and 2012 and the change from the prior year are comprised of the following components:
December 31, 2013 | ||||||||||||
Ordinary | Capital | Total | ||||||||||
Gross Deferred Tax Assets |
$ | 349,840 | $ | 137,099 | $ | 486,939 | ||||||
Statutory Valuation Allowance Adjustment |
— | — | — | |||||||||
|
|
|
|
|
|
|||||||
Adjusted Gross Deferred Tax Assets |
349,840 | 137,099 | 486,939 | |||||||||
Deferred Tax Assets Nonadmitted |
187,165 | 15,215 | 202,380 | |||||||||
|
|
|
|
|
|
|||||||
Subtotal (Net Deferred Tax Assets) |
162,675 | 121,884 | 284,559 | |||||||||
Deferred Tax Liabilities |
64,832 | 57,016 | 121,848 | |||||||||
|
|
|
|
|
|
|||||||
Net Admitted Deferred Tax Assets |
$ | 97,843 | $ | 64,868 | $ | 162,711 | ||||||
|
|
|
|
|
|
|||||||
December 31, 2012 | ||||||||||||
Ordinary | Capital | Total | ||||||||||
Gross Deferred Tax Assets |
$ | 345,565 | $ | 167,073 | $ | 512,638 | ||||||
Statutory Valuation Allowance Adjustment |
— | — | — | |||||||||
|
|
|
|
|
|
|||||||
Adjusted Gross Deferred Tax Assets |
345,565 | 167,073 | 512,638 | |||||||||
Deferred Tax Assets Nonadmitted |
202,027 | 14,941 | 216,968 | |||||||||
|
|
|
|
|
|
|||||||
Subtotal (Net Deferred Tax Assets) |
143,538 | 152,132 | 295,670 | |||||||||
Deferred Tax Liabilities |
39,461 | 56,277 | 95,738 | |||||||||
|
|
|
|
|
|
|||||||
Net Admitted Deferred Tax Assets |
$ | 104,077 | $ | 95,855 | $ | 199,932 | ||||||
|
|
|
|
|
|
|||||||
Ordinary | Change Capital |
Total | ||||||||||
Gross Deferred Tax Assets |
$ | 4,275 | $ | (29,974 | ) | $ | (25,699 | ) | ||||
Statutory Valuation Allowance Adjustment |
— | — | — | |||||||||
|
|
|
|
|
|
|||||||
Adjusted Gross Deferred Tax Assets |
4,275 | (29,974 | ) | (25,699 | ) | |||||||
Deferred Tax Assets Nonadmitted |
(14,862 | ) | 274 | (14,588 | ) | |||||||
|
|
|
|
|
|
|||||||
Subtotal (Net Deferred Tax Assets) |
19,137 | (30,248 | ) | (11,111 | ) | |||||||
Deferred Tax Liabilities |
25,371 | 739 | 26,110 | |||||||||
|
|
|
|
|
|
|||||||
Net Admitted Deferred Tax Assets |
$ | (6,234 | ) | $ | (30,987 | ) | $ | (37,221 | ) | |||
|
|
|
|
|
|
Mon Life 2013 SEC | 74 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The main components of deferred income tax amounts are as follows:
Year Ended December 31 | ||||||||||||
2013 | 2012 | Change | ||||||||||
Ordinary |
||||||||||||
Policyholder reserves |
$ | 206,923 | $ | 196,726 | $ | 10,197 | ||||||
Investments |
15,714 | 12,069 | 3,645 | |||||||||
Deferred acquisition costs |
108,377 | 113,728 | (5,351 | ) | ||||||||
Compensation and benefits accrual |
308 | 1,432 | (1,124 | ) | ||||||||
Receivables—nonadmitted |
13,879 | 16,270 | (2,391 | ) | ||||||||
Section 197 Intangible Amortization |
570 | 629 | (59 | ) | ||||||||
Corporate Provision |
105 | 202 | (97 | ) | ||||||||
Other (including items <5% of ordinary tax assets) |
3,964 | 4,509 | (545 | ) | ||||||||
|
|
|
|
|
|
|||||||
Subtotal |
349,840 | 345,565 | 4,275 | |||||||||
Nonadmitted |
187,165 | 202,027 | (14,862 | ) | ||||||||
|
|
|
|
|
|
|||||||
Admitted ordinary deferred tax assets |
162,675 | 143,538 | 19,137 | |||||||||
Capital: |
||||||||||||
Investments |
137,099 | 167,073 | (29,974 | ) | ||||||||
|
|
|
|
|
|
|||||||
Subtotal |
137,099 | 167,073 | (29,974 | ) | ||||||||
Statutory valuation allowance adjustment |
— | — | — | |||||||||
Nonadmitted |
15,215 | 14,941 | 274 | |||||||||
|
|
|
|
|
|
|||||||
Admitted capital deferred tax assets |
121,884 | 152,132 | (30,248 | ) | ||||||||
|
|
|
|
|
|
|||||||
Admitted deferred tax assets |
$ | 284,559 | $ | 295,670 | $ | (11,111 | ) | |||||
|
|
|
|
|
|
Mon Life 2013 SEC | 75 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Year Ended December 31 | ||||||||||||
2013 | 2012 | Change | ||||||||||
Deferred Tax Liabilities: |
||||||||||||
Ordinary |
||||||||||||
Investments |
$ | 46,938 | $ | 18,864 | $ | 28,074 | ||||||
§807(f) adjustment |
10,617 | 12,766 | (2,149 | ) | ||||||||
Reinsurance ceded. |
2,304 | 2,896 | (592 | ) | ||||||||
Intercompany gain amortization |
4,601 | 4,754 | (153 | ) | ||||||||
Other (including items <5% of total ordinary tax liabilities) |
372 | 181 | 191 | |||||||||
|
|
|
|
|
|
|||||||
Subtotal |
64,832 | 39,461 | 25,371 | |||||||||
Capital |
||||||||||||
Investments |
57,016 | 56,277 | 739 | |||||||||
|
|
|
|
|
|
|||||||
Subtotal |
57,016 | 56,277 | 739 | |||||||||
|
|
|
|
|
|
|||||||
Deferred tax liabilities |
121,848 | 95,738 | 26,110 | |||||||||
|
|
|
|
|
|
|||||||
Net deferred tax assets/liabilities |
$ | 162,711 | $ | 199,932 | $ | (37,221 | ) | |||||
|
|
|
|
|
|
As discussed in Note 1, for the years ended December 31, 2013 and 2012 the Company admits deferred income tax assets pursuant to SSAP No. 101. The amount of admitted adjusted gross deferred income tax assets under each component of SSAP No. 101 is as follows:
December 31, 2013 | ||||||||||||
Ordinary | Capital | Total | ||||||||||
Admission Calculation Components SSAP No. 101 |
||||||||||||
2(a) Federal Income Taxes Paid in Prior Years Recoverable Through Loss Carrybacks |
$ | 97,843 | $ | 44,058 | $ | 141,901 | ||||||
2(b) Adjusted Gross Deferred Tax Assets Expected to be Realized (Excluding The Amount of Deferred Tax Assets From 2(a) above) After Application of the Threshold Limitation (the Lesser of 2(b)1 and 2(b)2 below) |
— | 20,810 | 20,810 | |||||||||
1. Adjusted Gross Deferred Tax Assets Expected to be Realized Following the Balance Sheet Date |
— | 20,810 | 20,810 | |||||||||
2. Adjusted Gross Deferred Tax Assets Allowed per Limitation Threshold |
XXX | XXX | 120,297 | |||||||||
2(c) Adjusted Gross Deferred Tax Assets (Excluding The Amount Of Deferred Tax Assets From 2(a) and 2(b) above) Offset by Gross Deferred Tax Liabilities |
64,832 | 57,016 | 121,848 | |||||||||
|
|
|
|
|
|
|||||||
2(d) Deferred Tax Assets Admitted as the result of application of SSAP No. 101, Total (2(a) + 2(b) + 2(c)) |
$ | 162,675 | $ | 121,884 | $ | 284,559 | ||||||
|
|
|
|
|
|
Mon Life 2013 SEC | 76 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
December 31, 2012 | ||||||||||||
Ordinary | Capital | Total | ||||||||||
Admission Calculation Components SSAP No. 101 |
||||||||||||
2(a) Federal Income Taxes Paid in Prior Years Recoverable Through Loss Carrybacks |
$ | 104,077 | $ | 95,855 | $ | 199,932 | ||||||
2(b) Adjusted Gross Deferred Tax Assets Expected to be Realized (Excluding The Amount of Deferred Tax Assets From 2(a) above) After Application of the Threshold Limitation (the Lesser of 2(b)1 and 2(b)2 below) |
— | — | — | |||||||||
1. Adjusted Gross Deferred Tax Assets Expected to be Realized Following the Balance Sheet Date |
— | — | — | |||||||||
2. Adjusted Gross Deferred Tax Assets Allowed per Limitation Threshold |
XXX | XXX | 107,057 | |||||||||
2(c) Adjusted Gross Deferred Tax Assets (Excluding The Amount Of Deferred Tax Assets From 2(a) and 2(b) above) Offset by Gross Deferred Tax Liabilities |
39,461 | 56,277 | 95,738 | |||||||||
|
|
|
|
|
|
|||||||
2(d) Deferred Tax Assets Admitted as the result of application of SSAP No. 101, Total (2(a) + 2(b) +2(c)) |
$ | 143,538 | $ | 152,132 | $ | 295,670 | ||||||
|
|
|
|
|
|
|||||||
Ordinary | Change Capital |
Total | ||||||||||
Admission Calculation Components SSAP No. 101 |
||||||||||||
2(a) Federal Income Taxes Paid in Prior Years Recoverable Through Loss Carrybacks |
$ | (6,234 | ) | $ | (51,797 | ) | $ | (58,031 | ) | |||
2(b) Adjusted Gross Deferred Tax Assets Expected to be Realized (Excluding The Amount of Deferred Tax Assets From 2(a) above) After Application of the Threshold Limitation (the Lesser of 2(b)1 and 2(b)2 below) |
— | 20,810 | 20,810 | |||||||||
1. Adjusted Gross Deferred Tax Assets Expected to be Realized Following the Balance Sheet Date |
— | 20,810 | 20,810 | |||||||||
2. Adjusted Gross Deferred Tax Assets Allowed per Limitation Threshold |
XXX | XXX | 13,240 | |||||||||
2(c) Adjusted Gross Deferred Tax Assets (Excluding The Amount Of Deferred Tax Assets From 2(a) and 2(b) above) Offset by Gross Deferred Tax Liabilities |
25,371 | 739 | 26,110 | |||||||||
|
|
|
|
|
|
|||||||
2(d) Deferred Tax Assets Admitted as the result of application of SSAP No. 101, Total (2(a) + 2(b) + 2(c)) |
$ | 19,137 | $ | (30,248 | ) | $ | (11,111 | ) | ||||
|
|
|
|
|
|
Mon Life 2013 SEC | 77 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
December 31 | ||||||||||||
2013 | 2012 | Change | ||||||||||
Ratio Percentage Used To Determine Recovery Period and Threshold Limitation Amount |
578 | % | 564 | % | 14 | % | ||||||
|
|
|
|
|
|
|||||||
Amount of Adjusted Capital and Surplus Used To Determine Recovery Period and Threshold Limitation in 2(b)2 above |
$ | 801,931 | $ | 603,615 | $ | 198,316 | ||||||
|
|
|
|
|
|
The impact of tax planning strategies at December 31, 2013 and 2012 was as follows:
December 31, 2013 | ||||||||||||
Ordinary Percent |
Capital Percent |
Total Percent | ||||||||||
Impact of Tax Planning Strategies: |
||||||||||||
Adjusted Gross DTAs |
$ | 349,840 | $ | 137,099 | $ | 486,939 | ||||||
(% of Total Adjusted Gross DTAs) |
0 | % | 58 | % | 16 | % | ||||||
|
|
|
|
|
|
|||||||
Net Admitted Adjusted Gross DTAs |
$ | 162,675 | $ | 121,884 | $ | 284,559 | ||||||
(% of Total Net Admitted Adjusted Gross DTAs) |
0 | % | 17 | % | 7 | % | ||||||
|
|
|
|
|
|
|||||||
December 31, 2012 | ||||||||||||
Ordinary Percent |
Capital Percent |
Total Percent | ||||||||||
Impact of Tax Planning Strategies: |
||||||||||||
Adjusted Gross DTAs |
$ | 345,565 | $ | 167,073 | $ | 512,638 | ||||||
(% of Total Adjusted Gross DTAs) |
0 | % | 23 | % | 7 | % | ||||||
|
|
|
|
|
|
|||||||
Net Admitted Adjusted Gross DTAs |
$ | 143,538 | $ | 152,132 | $ | 295,670 | ||||||
(% of Total Net Admitted Adjusted Gross DTAs) |
0 | % | 0 | % | 0 | % | ||||||
|
|
|
|
|
|
Mon Life 2013 SEC | 78 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Ordinary Percent |
Change Capital Percent |
Total Percent | ||||||||||
Impact of Tax Planning Strategies: |
||||||||||||
Adjusted Gross DTAs |
$ | 4,275 | $ | (29,974 | ) | $ | (25,699 | ) | ||||
(% of Total Adjusted Gross DTAs) |
0 | % | 35 | % | 9 | % | ||||||
|
|
|
|
|
|
|||||||
Net Admitted Adjusted Gross DTAs |
$ | 19,137 | $ | (30,248 | ) | $ | (11,111 | ) | ||||
(% of Total Net Admitted Adjusted Gross DTAs) |
0 | % | 17 | % | 7 | % | ||||||
|
|
|
|
|
|
The Company’s tax planning strategies do not include the use of reinsurance-related tax planning strategies.
Current income taxes incurred consist of the following major components:
Year Ended December 31 | ||||||||||||
2013 | 2012 | Change | ||||||||||
Current Income Tax |
||||||||||||
Federal |
$ | 23,987 | $ | 103,095 | $ | (79,108 | ) | |||||
|
|
|
|
|
|
|||||||
Subtotal |
23,987 | 103,095 | (79,108 | ) | ||||||||
|
|
|
|
|
|
|||||||
Federal income tax on net capital gains |
(35,916 | ) | 128,376 | (164,292 | ) | |||||||
|
|
|
|
|
|
|||||||
Federal and foreign income taxes incurred |
$ | (11,929 | ) | $ | 231,471 | $ | (243,400 | ) | ||||
|
|
|
|
|
|
|||||||
Year Ended December 31 | ||||||||||||
2012 | 2011 | Change | ||||||||||
Current Income Tax |
||||||||||||
Federal |
$ | 103,095 | $ | 31,580 | $ | 71,515 | ||||||
|
|
|
|
|
|
|||||||
Subtotal |
103,095 | 31,580 | 71,515 | |||||||||
|
|
|
|
|
|
|||||||
Federal income tax on net capital gains |
128,376 | (24,360 | ) | 152,736 | ||||||||
|
|
|
|
|
|
|||||||
Federal and foreign income taxes incurred |
$ | 231,471 | $ | 7,220 | $ | 224,251 | ||||||
|
|
|
|
|
|
|||||||
Year Ended December 31 | ||||||||||||
2011 | 2010 | Change | ||||||||||
Current Income Tax |
||||||||||||
Federal |
$ | 31,580 | $ | 39,987 | $ | (8,407 | ) | |||||
|
|
|
|
|
|
|||||||
Subtotal |
31,580 | 39,987 | (8,407 | ) | ||||||||
|
|
|
|
|
|
|||||||
Federal income tax on net capital gains |
(24,360 | ) | 28,435 | (52,795 | ) | |||||||
|
|
|
|
|
|
|||||||
Federal and foreign income taxes incurred |
$ | 7,220 | $ | 68,422 | $ | (61,202 | ) | |||||
|
|
|
|
|
|
Mon Life 2013 SEC | 79 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The Company did not report a valuation allowance for deferred income tax assets as of December 31, 2013 or 2012.
The Company’s current income tax incurred and change in deferred income tax differs from the amount obtained by applying the federal statutory rate of 35% to income before tax as follows:
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Current income taxes incurred |
$ | (11,929 | ) | $ | 231,472 | $ | 7,220 | |||||
Change in deferred income taxes |
(10,470 | ) | (823 | ) | (218,165 | ) | ||||||
(without tax on unrealized gains and losses) |
||||||||||||
|
|
|
|
|
|
|||||||
Total income tax reported |
$ | (22,399 | ) | $ | 230,649 | $ | (210,945 | ) | ||||
|
|
|
|
|
|
|||||||
Income before taxes |
$ | 107,663 | $ | 591,395 | $ | 442,849 | ||||||
35.00 | % | 35.00 | % | 35.00 | % | |||||||
|
|
|
|
|
|
|||||||
Expected income tax expense (benefit) at 35% statutory rate |
$ | 37,682 | $ | 206,988 | $ | 154,997 | ||||||
Increase (decrease) in actual tax reported resulting from: |
||||||||||||
Dividends received deduction |
(3,157 | ) | (3,847 | ) | (4,257 | ) | ||||||
Tax credits |
(18,501 | ) | (21,244 | ) | (24,476 | ) | ||||||
Tax-exempt Income |
(8 | ) | (6 | ) | (182 | ) | ||||||
Tax adjustment for IMR |
(5,450 | ) | (3,860 | ) | (1,544 | ) | ||||||
Surplus adjustment for in-force ceded |
(22,310 | ) | 72,631 | (112,555 | ) | |||||||
Nondeductible expenses |
694 | 766 | 483 | |||||||||
Deferred tax benefit on other items in surplus |
(3,209 | ) | (7,569 | ) | (17,505 | ) | ||||||
Provision to return |
357 | (2,625 | ) | 9,962 | ||||||||
Life-owned life insurance |
(876 | ) | (856 | ) | (835 | ) | ||||||
Dividends from certain foreign corporations |
319 | 423 | 329 | |||||||||
Prior period adjustment |
(8,973 | ) | (5,876 | ) | (23,612 | ) | ||||||
Pre-tax income of SMLLC’s |
— | (4,441 | ) | (2,550 | ) | |||||||
Change in basis due to corporate restructuring |
— | — | (185,900 | ) | ||||||||
Other |
1,033 | 165 | (3,300 | ) | ||||||||
|
|
|
|
|
|
|||||||
Total income tax reported |
$ | (22,399 | ) | $ | 230,649 | $ | (210,945 | ) | ||||
|
|
|
|
|
|
For federal income tax purposes, the Company joins in a consolidated income tax return filing with its indirect parent company, Transamerica Corporation, and other affiliated companies. The method of allocation between the companies is subject to a written tax allocation agreement. Under the terms of the tax allocation agreement, allocations are based on separate income tax return calculations. The Company is entitled to recoup federal income taxes paid in the event the future losses and credits reduce the greater of the Company’s separately computed income tax
Mon Life 2013 SEC | 80 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
liability or the consolidated group’s income tax liability in the year generated. The Company is also entitled to recoup federal income taxes paid in the event the losses and credits reduce the greater of the Company’s separately computed income tax liability or the consolidated group’s income tax liability in any carryback or carryforward year when so applied. Intercompany income tax balances are settled within thirty days of payment to or filing with the Internal Revenue Service. A tax return has not yet been filed for 2013.
As of December 31, 2013 and 2012, the Company had no operating loss or tax credit carryforwards available for tax purposes. The Company did not have a capital loss carryforward at December 31, 2013 and 2012.
The Company incurred income taxes during 2013, 2012 and 2011 of $19,577, $224,089, and $14,014, respectively, which will be available for recoupment in the event of future net losses.
The amount of tax contingencies calculated for the Company as of December 31, 2013 and 2012 is $194 and $198, respectively. The total amount of tax contingencies that, if recognized, would affect the effective income tax rate is $194. The Company classifies interest and penalties related to income taxes as income tax expense. The Company’s interest (benefit) expense related to income taxes for the years ending December 31, 2013, 2012 and 2011 is $(525), $766 and $(136), respectively. The total interest payable balance as of December 31, 2013 and 2012 is $8 and $9, respectively. The Company recorded no liability for penalties. It is not anticipated that the total amounts of unrecognized tax benefits will significantly increase within twelve months of the reporting date.
The Company’s federal income tax returns have been examined by the Internal Revenue Service and closing agreements have been executed through 2004. The examination for the years 2005 through 2006 have been completed and resulted in tax return adjustments that are currently undergoing final calculation at appeal. The examination for the years 2007 through 2008 has been completed and resulted in tax return adjustments that are currently being appealed. An examination is already in progress for the years 2009 and 2010. The Company believes that there are adequate defenses against or sufficient provisions established related to any open or contested tax positions.
8. Policy and Contract Attributes
Participating life insurance policies were issued by the Company which entitle policyholders to a share in the earnings of the participating policies, provided that a dividend distribution, which is determined annually based on mortality and persistency experience of the participating policies, is authorized by the Company. Participating insurance constituted less than 1% of ordinary life insurance in force at December 31, 2013 and 2012.
Mon Life 2013 SEC | 81 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
For the years ended December 31, 2013, 2012 and 2011, premiums for participating life insurance policies were $1,185, $1,232 and $1,298, respectively. The Company accounts for its policyholder dividends based on dividend scales and experience of the policies. The Company paid dividends in the amount of $1,259, $1,279 and $1,342 to policyholders during 2013, 2012 and 2011, respectively, and did not allocate any additional income to such policyholders.
A portion of the Company’s policy reserves and other policyholders’ funds (including separate account liabilities) relates to liabilities established on a variety of the Company’s annuity and deposit fund products. There may be certain restrictions placed upon the amount of funds that can be withdrawn without penalty. The amount of reserves on these products, by withdrawal characteristics, is summarized as follows:
December 31, 2013 | ||||||||||||||||||||
General Account |
Separate Account with Guarantees |
Separate Account Non- Guaranteed |
Total | Percent | ||||||||||||||||
Subject to discretionary withdrawal |
||||||||||||||||||||
With fair value adjustment |
$ | 28,645 | $ | 20,697 | $ | — | $ | 49,342 | 0 | % | ||||||||||
At book value less surrender charge of 5% or more |
13,831 | — | — | 13,831 | 0 | |||||||||||||||
At fair value |
74 | — | 14,304,849 | 14,304,923 | 60 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total with adjustment or at fair value |
42,550 | 20,697 | 14,304,849 | 14,368,096 | 60 | |||||||||||||||
At book value without adjustment |
||||||||||||||||||||
(minimal or no charge or adjustment) |
3,867,503 | — | — | 3,867,503 | 16 | |||||||||||||||
Not subject to discretionary withdrawal |
5,415,525 | 78,682 | 63,097 | 5,557,304 | 24 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total annuity reserves and deposit liabilities |
9,325,578 | 99,379 | 14,367,946 | 23,792,903 | 100 | % | ||||||||||||||
|
|
|||||||||||||||||||
Less reinsurance ceded |
5,017,441 | — | — | 5,017,441 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Net annuity reserves and deposit liabilities |
$ | 4,308,137 | $ | 99,379 | $ | 14,367,946 | $ | 18,775,462 | ||||||||||||
|
|
|
|
|
|
|
|
Mon Life 2013 SEC | 82 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
December 31, 2012 | ||||||||||||||||||||
General Account |
Separate Account with Guarantees |
Separate Account Non- Guaranteed |
Total | Percent | ||||||||||||||||
Subject to discretionary withdrawal |
||||||||||||||||||||
With fair value adjustment |
$ | 42,069 | $ | 23,609 | $ | — | $ | 65,678 | 0 | % | ||||||||||
At book value less surrender charge of 5% or more |
22,755 | — | — | 22,755 | 0 | |||||||||||||||
At fair value |
111 | — | 12,400,461 | 12,400,572 | 52 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total with adjustment or at fair value |
64,935 | 23,609 | 12,400,461 | 12,489,005 | 52 | |||||||||||||||
At book value without adjustment |
||||||||||||||||||||
(minimal or no charge or adjustment) |
4,276,647 | — | — | 4,276,647 | 18 | |||||||||||||||
Not subject to discretionary withdrawal |
6,934,154 | 170,007 | 54,778 | 7,158,939 | 30 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total annuity reserves and deposit liabilities |
11,275,736 | 193,616 | 12,455,239 | 23,924,591 | 100 | % | ||||||||||||||
|
|
|||||||||||||||||||
Less reinsurance ceded |
6,637,964 | — | — | 6,637,964 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Net annuity reserves and deposit liabilities |
$ | 4,637,772 | $ | 193,616 | $ | 12,455,239 | $ | 17,286,627 | ||||||||||||
|
|
|
|
|
|
|
|
Included in the liability for deposit-type contracts at December 31, 2013 and 2012 are approximately $53,121 and $52,574, respectively, of funding agreements issued to special purpose entities in conjunction with non-recourse medium-term note programs. Under these programs, the proceeds from each note series issuance are used to purchase a funding agreement from the Company which secures that particular series of notes. In general, the payment terms of the note series match the payment terms of the funding agreement that secures that series. Claims for the principal and interest for these funding agreements are afforded equal priority as other policyholders.
At December 31, 2013 the contractual maturities were as follows:
Year |
Amount | |||
2014 |
$ | — | ||
2015 |
— | |||
2016 |
— | |||
2017 |
— | |||
Thereafter |
53,121 |
The Company’s liability for deposit-type contracts includes GIC’s and Funding Agreements assumed from Transamerica Life Insurance Company, an affiliate. The liabilities assumed are $900,065 and $900,084 at December 31, 2013 and 2012, respectively.
Mon Life 2013 SEC | 83 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Certain separate and variable accounts held by the Company represent funds for which the benefit is determined by the performance and/or fair value of the investments held in the separate account. The assets and the liabilities of these are carried at fair value. These variable annuities generally provide an additional minimum guaranteed death benefit. Some variable annuities also provide a minimum guaranteed income benefit. The Company’s Guaranteed Indexed separate accounts provide customers a return based on the total performance of a specified financial index plus an enhancement. Hedging instruments that return the chosen index are purchased by the Company and held within the separate account. The assets in the accounts, carried at fair value, consist primarily of long-term bonds. Information regarding the separate accounts of the Company are as follows:
Guaranteed Indexed |
Nonindexed Guaranteed Less Than 4% |
Nonguaranteed | Total | |||||||||||||
Premiums, deposits and other considerations for the year ended December 31, 2013 |
$ | — | $ | 132 | $ | 569,801 | $ | 569,933 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Reserves for separate accounts as of December 31, 2013 with assets at fair value |
$ | 78,682 | $ | 20,697 | $ | 14,377,033 | $ | 14,476,412 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 78,682 | $ | 20,697 | $ | 14,377,033 | $ | 14,476,412 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Reserves by withdrawal characteristics as of December 31, 2013: |
||||||||||||||||
With fair value adjustment |
$ | 78,682 | $ | 20,697 | $ | — | $ | 99,379 | ||||||||
At fair value |
— | — | 14,313,937 | 14,313,937 | ||||||||||||
Not subject to discretionary withdrawal |
— | — | 63,096 | 63,096 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total separate account liabilities at December 31, 2013 |
$ | 78,682 | $ | 20,697 | $ | 14,377,033 | $ | 14,476,412 | ||||||||
|
|
|
|
|
|
|
|
Mon Life 2013 SEC | 84 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Guaranteed Indexed |
Nonindexed Guaranteed Less Than 4% |
Nonguaranteed | Total | |||||||||||||
Premiums, deposits and other considerations for the year ended December 31, 2012 |
$ | — | $ | 120 | $ | 466,200 | $ | 466,320 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Reserves for separate accounts as of December 31, 2012 with assets at fair value |
$ | 170,007 | $ | 23,609 | $ | 12,462,862 | $ | 12,656,478 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total as of December 31, 2012 |
$ | 170,007 | $ | 23,609 | $ | 12,462,862 | $ | 12,656,478 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Reserves by withdrawal characteristics as of December 31, 2012: |
||||||||||||||||
With fair value adjustment |
$ | 170,007 | $ | 23,609 | $ | — | $ | 193,616 | ||||||||
At fair value |
— | — | 12,408,084 | 12,408,084 | ||||||||||||
Not subject to discretionary withdrawal |
— | — | 54,778 | 54,778 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total separate account liabilities at December 31, 2012 |
$ | 170,007 | $ | 23,609 | $ | 12,462,862 | $ | 12,656,478 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Guaranteed Indexed |
Nonindexed Guaranteed Less Than 4% |
Nonguaranteed | Total | |||||||||||||
Premiums, deposits and other considerations for the year ended December 31, 2011 |
$ | — | $ | 107 | $ | 402,748 | $ | 402,855 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Reserves for separate accounts as of December 31, 2011 with assets at fair value |
$ | 170,658 | $ | 25,929 | $ | 11,260,745 | $ | 11,457,332 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total as of December 31, 2011 |
$ | 170,658 | $ | 25,929 | $ | 11,260,745 | $ | 11,457,332 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Reserves by withdrawal characteristics as of December 31, 2011: |
||||||||||||||||
With fair value adjustment |
$ | 170,658 | $ | 25,929 | $ | — | $ | 196,587 | ||||||||
At fair value |
— | — | 11,203,196 | 11,203,196 | ||||||||||||
Not subject to discretionary withdrawal |
$ | — | — | 57,549 | 57,549 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total separate account liabilities at December 31, 2011 |
$ | 170,658 | $ | 25,929 | $ | 11,260,745 | $ | 11,457,332 | ||||||||
|
|
|
|
|
|
|
|
Mon Life 2013 SEC | 85 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
A reconciliation of the amounts transferred to and from the Company’s separate accounts is presented below:
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Transfer as reported in the summary of operations of the separate accounts statement: |
||||||||||||
Transfers to separate accounts |
$ | 569,933 | $ | 466,321 | $ | 402,855 | ||||||
Transfers from separate accounts |
(888,332 | ) | (656,788 | ) | (540,288 | ) | ||||||
|
|
|
|
|
|
|||||||
Net transfers from separate accounts |
(318,399 | ) | (190,467 | ) | (137,433 | ) | ||||||
Miscellaneous reconciling adjustments |
5,606 | 1,087 | 763 | |||||||||
|
|
|
|
|
|
|||||||
Net transfers as reported in the statement of operations of the life, accident and health annual statement |
$ | (312,793 | ) | $ | (189,380 | ) | $ | (136,670 | ) | |||
|
|
|
|
|
|
The legal insulation of separate account assets prevents such assets from being generally available to satisfy claims resulting from the general account. At December 31, 2013 and 2012, the Company’s separate account statement included legally insulated assets of $14,524,270 and $12,530,256, respectively. The assets legally insulated from general account claims at December 31, 2013 and 2012 are attributed to the following products:
Product |
2013 | 2012 | ||||||
Variable annuities |
$ | 12,390,614 | 10,609,856 | |||||
Group annuities |
1,993,324 | 1,715,754 | ||||||
Modified separate account |
131,244 | 197,024 | ||||||
Variable life |
9,088 | 7,623 | ||||||
|
|
|
|
|||||
Total separate account assets |
$ | 14,524,270 | $ | 12,530,256 | ||||
|
|
|
|
The Company does not participate in securities lending transactions within the separate account.
For variable annuities with guaranteed living benefits and variable annuities with minimum guaranteed death benefits the Company complies with Actuarial Guideline XLIII (AG 43), which replaces Actuarial Guidelines 34 and 39. AG 43 specifies statutory reserve requirements for variable annuity contracts with benefit guarantees (VACARVM) and without benefit guarantees and related products. The AG 43 reserve calculation includes variable annuity products issued after January 1, 1981. Examples of covered guaranteed benefits include guaranteed minimum accumulation benefits, return of premium death benefits, guaranteed minimum income benefits, guaranteed minimum withdrawal benefits and guaranteed payout annuity floors. The aggregate
Mon Life 2013 SEC | 86 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
reserve for contracts falling within the scope of AG 43 is equal to the conditional tail expectation (CTE) Amount, but not less than the standard scenario amount (SSA).
To determine the CTE Amount, the Company used 1,000 of the pre-packaged scenarios developed by the American Academy of Actuaries (AAA) produced in October 2005 and prudent estimate assumptions based on company experience. The SSA was determined using the assumptions and methodology prescribed in AG 43 for determining the SSA.
At December 31, 2013 and 2012, the Company had variable and separate account annuities with minimum guaranteed benefits as follows:
Benefit and Type of Risk |
Subjected Account Value |
Amount of Reserve Held |
Reinsurance Reserve Credit |
|||||||||
Minimum guaranteed death benefit |
$ | 7,417,616 | $ | 2,889 | $ | — | ||||||
Minimum guaranteed income benefit |
11,336 | 1,018 | — | |||||||||
Minimum guaranteed withdrawal benefit |
160,497 | — | — | |||||||||
Minimum guaranteed death benefit |
$ | 6,541,811 | $ | 3,495 | $ | — | ||||||
Minimum guaranteed income benefit |
9,960 | 1,602 | — | |||||||||
Minimum guaranteed withdrawal benefit |
102,022 | — | — |
The Company offers variable and separate account annuities with minimum guaranteed benefits. In accordance with the guarantees provided, if the investment proceeds are insufficient to cover the rate of return guaranteed for the product, the policyholder proceeds will be remitted by the general account. As of December 31, 2013 and 2012, the general account of the Company had a maximum guarantee for separate account liabilities of $107,007 and $170,007, respectively. To compensate the general account for the risk taken, the separate account paid risk charges of $1,392, $545 and $104 to the general account in 2013, 2012 and 2011, respectively. During the years ended December 31, 2013, 2012 and 2011, the general account of the Company had paid $501, $239 and $613, respectively, toward separate account guarantees.
Mon Life 2013 SEC | 87 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Reserves on the Company’s traditional life insurance products are computed using mean reserving methodologies. These methodologies result in the establishment of assets for the amount of the net valuation premiums that are anticipated to be received between the policies’s paid-through date to the policy’s next anniversary date. At December 31, 2013 and 2012, the gross premium and loading amounts related to these assets (which are reported as premiums deferred and uncollected), are as follows:
Gross | Loading | Net | ||||||||||
Life and annuity: |
||||||||||||
Ordinary direct first year business |
$ | 16,769 | $ | 12,176 | $ | 4,593 | ||||||
Ordinary direct renewal business |
194,579 | 51,318 | 143,261 | |||||||||
Group life direct business |
13,030 | 3,386 | 9,644 | |||||||||
Credit direct business |
440 | — | 440 | |||||||||
Reinsurance ceded |
(20,766 | ) | — | (20,766 | ) | |||||||
|
|
|
|
|
|
|||||||
Total life and annuity |
204,052 | 66,880 | 137,172 | |||||||||
Accident and health: |
||||||||||||
Direct |
35,888 | — | 35,888 | |||||||||
Reinsurance assumed |
6,714 | — | 6,714 | |||||||||
Reinsurance ceded |
(1,645 | ) | — | (1,645 | ) | |||||||
|
|
|
|
|
|
|||||||
Total accident and health |
40,957 | — | 40,957 | |||||||||
|
|
|
|
|
|
|||||||
$ | 245,009 | $ | 66,880 | $ | 178,129 | |||||||
|
|
|
|
|
|
|||||||
Gross | Loading | Net | ||||||||||
Life and annuity: |
||||||||||||
Ordinary direct first year business |
$ | 17,360 | $ | 12,774 | $ | 4,586 | ||||||
Ordinary direct renewal business |
201,276 | 53,166 | 148,110 | |||||||||
Group life direct business |
14,508 | 3,775 | 10,733 | |||||||||
Credit direct business |
508 | — | 508 | |||||||||
Reinsurance ceded |
(19,565 | ) | — | (19,565 | ) | |||||||
|
|
|
|
|
|
|||||||
Total life and annuity |
214,087 | 69,715 | 144,372 | |||||||||
Accident and health: |
||||||||||||
Direct |
47,336 | — | 47,336 | |||||||||
Reinsurance assumed |
11,786 | — | 11,786 | |||||||||
Reinsurance ceded |
(2,076 | ) | — | (2,076 | ) | |||||||
|
|
|
|
|
|
|||||||
Total accident and health |
57,046 | — | 57,046 | |||||||||
|
|
|
|
|
|
|||||||
$ | 271,133 | $ | 69,715 | $ | 201,418 | |||||||
|
|
|
|
|
|
Mon Life 2013 SEC | 88 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
The Company anticipates investment income as a factor in the premium deficiency calculation, in accordance with SSAP No. 54, Individual and Group Accident and Health Contracts. At December 31, 2013 and 2012, the Company established a premium deficiency reserve of $117,300 and $0, respectively.
At December 31, 2013 and 2012, the Company had insurance in force aggregating $4,156,319 and $4,262,496, respectively, in which the gross premiums are less than the net premiums required by the valuation standards established by the Insurance Division, Department of Commerce, of the State of Iowa. The Company established policy reserves of $50,445 and $42,640 to cover these deficiencies at December 31, 2013 and 2012, respectively.
The Company’s primary method utilized to estimate premium adjustments for contracts subject to redetermination is to review experience periodically and to adjust premiums for differences between the experience anticipated at the time of redetermination and that underlying the original premiums. The Company has not limited its degree of discretion contractually; however, in some states it has agreed not to raise premiums in order to recoup past losses. The Company forgoes premium changes on existing policies at its option if the administrative cost and other business issues associated with the change outweigh the direct financial impact of the change. Also, the Company has extra-contractually guaranteed the current premium scale for certain policies.
Liabilities for losses and loss/claim adjustment expenses for accident and health contracts are estimated using statistical claim development models to develop best estimates of liabilities for medical expense business and using tabular reserves employing mortality/morbidity tables and discount rates meeting minimum regulatory requirements for other business. The balance in the liability for unpaid accident and health claim adjustment expenses as of December 31, 2013 and 2012 was $2,367 and $2,096, respectively.
9. Capital and Surplus
The Company is subject to limitations, imposed by the State of Iowa, on the payment of dividends to its stockholders. Generally, dividends during any twelve-month period may not be paid, without prior regulatory approval, in excess of the greater of (a) 10 percent of statutory surplus as of the preceding December 31, or (b) statutory gain from operations before net realized capital gains (losses) on investments for the preceding year. Subject to the availability of unassigned surplus at the time of such dividend, the Company can make a dividend payment of up to $178,225 without the prior approval of insurance regulatory authorities in 2014.
The Company paid an ordinary common stock dividend of $118,422 and $16,578 to its parent companies, CGC and Aegon, respectively, on December 26, 2013. The Company reported a contribution receivable from parent companies of $135,000 at December 31, 2013. Capital
Mon Life 2013 SEC | 89 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
contributions of $118,422 and $16,578 were received from CGC and Aegon, respectively, on February 14, 2014. The Company paid a capital contribution of $368 to its subsidiary, Aegon Direct Marketing Services, Inc., on December 31, 2013.
The Company paid an ordinary common stock dividend of $394,560 and $55,440 to its parent companies, CGC and Aegon, respectively, on December 21, 2012. The Company paid a capital contribution of $368 to its subsidiary, Aegon Direct Marketing Services, Inc., on December 31, 2012.
On December 23, 2011, the Company paid a common stock dividend of $300,000 to its parent companies. Of this amount, $117,400 was an ordinary cash dividend and $182,600 was an extraordinary cash dividend. CGC received $263,100 and Aegon received $36,900.
Life and health insurance companies are subject to certain RBC requirements as specified by the NAIC. Under those requirements, the amount of capital and surplus maintained by a life or health insurance company is to be determined based on the various risk factors related to it. At December 31, 2013, the Company meets the minimum RBC requirements.
The Company has two classes of common stock, Class A and Class B. Each outstanding share of Class A is entitled to four votes for any matter submitted to a vote at a meeting of stockholders, whereas each outstanding share of Class B is entitled to on such vote.
On December 23, 2004, the Company received $117,168 from CGDC and $42,832 from Aegon, both affiliates, in exchange for surplus notes. Prior to the merger discussed in Note 1, CGDC dividended the Company’s surplus notes to its direct shareholders in the amount of $102,734 to CGC and $14,434 to Aegon. These notes are due 20 years from the date of issuance at an interest rate of 6% and are subordinate and junior in right of payment to all obligations and liabilities of the Company. In the event of liquidation of the Company, full payment of the surplus notes shall be made before the holders of common stock become entitled to any distribution of the remaining assets of the Company. The Company received approval from the Insurance Division, Department of Commerce, of the State of Iowa prior to paying quarterly interest payments.
Mon Life 2013 SEC | 90 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Additional information related to the surplus notes at December 31, 2013 and 2012 is as follows:
For Year Ending |
Balance Outstanding |
Interest Paid Current Year |
Cumulative Interest Paid |
Accrued Interest |
||||||||||||
2013 |
||||||||||||||||
CGC |
$ | 102,734 | $ | 6,164 | $ | 61,695 | $ | 514 | ||||||||
AEGON |
57,266 | 3,436 | 24,918 | 286 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 160,000 | $ | 9,600 | $ | 86,613 | $ | 800 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
2012 |
||||||||||||||||
CGC |
$ | 102,734 | $ | 6,164 | $ | 55,531 | $ | 514 | ||||||||
AEGON |
57,266 | 3,436 | 21,483 | 286 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 160,000 | $ | 9,600 | $ | 77,014 | $ | 800 | ||||||||
|
|
|
|
|
|
|
|
10. Securities Lending
The Company participates in an agent-managed securities lending program. The Company receives collateral equal to 102% of the fair value of the loaned domestic securities as of the transaction date. If the fair value of the collateral is at any time less than 102% of the fair value of the loaned securities, the counterparty is mandated to deliver additional collateral, the fair value of which, together with the collateral already held in connection with the lending transaction, is at least equal to 102% of the fair value of the loaned government or domestic securities. In the event the Company loans a foreign security and the denomination of the currency of the collateral is other than the denomination of the currency of the loaned foreign security, the Company receives and maintains collateral equal to 105% of the fair value of the loaned security.
At December 31, 2013 and 2012, respectively, securities in the amount of $310,280 and $333,420 were on loan under securities lending agreements as part of this program. At December 31, 2013, the collateral the Company received from securities lending activities was in the form of cash and on open terms. This cash collateral is reinvested and is not available for general corporate purposes. The reinvested cash collateral has a fair value of $322,142 and $350,162 at December 31, 2013 and 2012, respectively.
Mon Life 2013 SEC | 91 |
Monumental Life Insurance Company
Notes to Financial Statements — Statutory Basis (continued)
(Dollars in Thousands)
The contractual maturities of the securities lending collateral positions are as follows:
Fair Value | ||||
Open |
$ | 322,169 | ||
30 days or less |
— | |||
31 to 60 days |
— | |||
61 to 90 days |
— | |||
Greater than 90 days |
— | |||
|
|
|||
Total |
322,169 | |||
Securities received |
— | |||
|
|
|||
Total collateral received |
$ | 322,169 | ||
|
|
The Company receives primarily cash collateral in an amount in excess of the fair value of the securities lent. The Company reinvests the cash collateral into higher yielding securities than the securities which the Company has lent to other entities under the arrangement.
The maturity dates of the reinvested securities lending collateral are as follows:
Amortized Cost | Fair Value | |||||||
Open |
$ | 31,493 | $ | 31,493 | ||||
30 days or less |
107,759 | 107,759 | ||||||
31 to 60 days |
100,576 | 100,576 | ||||||
61 to 90 days |
61,175 | 61,175 | ||||||
91 to 120 days |
1,516 | 1,516 | ||||||
121 to 180 days |
18,394 | 18,394 | ||||||
Greater than 3 years |
1,296 | 1,229 | ||||||
|
|
|
|
|||||
Total |
322,209 | 322,142 | ||||||
Securities received |
— | — | ||||||
|
|
|
|
|||||
Total collateral reinvested |
$ | 322,209 | $ | 322,142 | ||||
|
|
|
|
For securities lending, the Company’s sources of cash that it uses to return the cash collateral is dependent upon the liquidity of the current market conditions. Under current conditions, the Company has securities with a par value of $322,254 (fair value of $322,142) that are currently tradable securities that could be sold and used to pay for the $322,169 in collateral calls that could come due under a worst-case scenario.
11. Retirement and Compensation Plans
The Company’s employees participate in a qualified defined benefit pension plan sponsored by Aegon. The Company has no legal obligation for the plan. The Company recognizes pension
Mon Life 2013 SEC | 92 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
expense equal to its allocation from Aegon. The pension expense is allocated among the participating companies based on International Accounting Standards 19 (IAS 19), Accounting for Employee Benefits and based upon actuarial participant benefit calculations. The benefits are based on years of service and the employee’s eligible annual compensation. Pension expenses were $4,311, $4,350 and $5,134, for the years ended December 31, 2013, 2012 and 2011, respectively. The plan is subject to the reporting and disclosure requirements of the Employee Retirement Income Security Act of 1974.
The Company’s employees also participate in a defined contribution plan sponsored by Aegon which is qualified under Section 401(k) of the Internal Revenue Service Code. Employees of the Company who customarily work at least 1,000 hours during each calendar year and meet the other eligibility requirements are participants of the plan. Participants may elect to contribute up to 25% of their salary to the plan. The Company will match an amount up to three percent of the participant’s salary. Participants may direct all of their contributions and plan balances to be invested in a variety of investment options. The plan is subject to the reporting and disclosure requirements of the Employee Retirement Income Security Act of 1974. Expense related to this plan was $1,219, $1,276 and $1,682, for the years ended December 31, 2013, 2012 and 2011, respectively.
Aegon sponsors supplemental retirement plans to provide the Company’s senior management with benefits in excess of normal pension benefits. The plans are noncontributory, and benefits are based on years of service and the employee’s compensation level. The plans are unfunded and nonqualified under the Internal Revenue Service Code. In addition, Aegon has established incentive deferred compensation plans for certain key employees of the Company. The Company’s allocation of expense for these plans for each of the years ended December 31, 2013, 2012 and 2011 was insignificant. Aegon also sponsors an employee stock option plan/stock appreciation rights for employees of the company and a stock purchase plan for its producers, with the participating affiliated companies establishing their own eligibility criteria, producer contribution limits and company matching formula. These plans have been accrued or funded as deemed appropriate by management of Aegon and the Company.
In addition to pension benefits, the Company participates in plans sponsored by Aegon that provide postretirement medical, dental and life insurance benefits to employees meeting certain eligibility requirements. Portions of the medical and dental plans are contributory. The postretirement plan expenses are charged to affiliates in accordance with an intercompany cost sharing arrangement. The Company expensed $1,246, $1,285 and $1,307 related to these plans for the years ended December 31, 2013, 2012 and 2011, respectively.
Mon Life 2013 SEC | 93 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
12. Related Party Transactions
The Company shares certain officers, employees and general expenses with affiliated companies.
The Company is party to a common cost allocation service arrangement between Aegon companies, in which various affiliated companies may perform specified administrative functions in connection with the operation of the Company, in consideration of reimbursement of actual costs of services rendered. The Company is also a party to a Management and Administrative and Advisory agreement with Aegon USA Realty Advisors, Inc. whereby the advisor serves as the administrator and advisor for the Company’s mortgage loan operations. Aegon USA Investment Management, LLC acts as a discretionary investment manager under an Investment Management Agreement with the Company. During 2013, 2012 and 2011, the Company paid $108,918, $100,736 and $47,194, respectively, for these services, which approximates their costs to the affiliates.
Transamerica Capital, Inc. provides wholesaling distribution services for the Company under a distribution agreement. The Company incurred expenses under this agreement of $61, $71 and $64 for the years ended December 31, 2013, 2012 and 2011, respectively.
At December 31, 2013 and 2012, the Company reported a net amount of $30,774 and $32,590 due to parent, subsidiary and affiliated companies, respectively. Terms of settlement require that these amounts be settled within 90 days. Receivables from and payables to affiliates bear interest at the thirty-day commercial paper rate. During 2013, 2012 and 2011, the Company paid net interest of $26, $40 and $111, respectively, to affiliates.
The Company has an administration service agreement with Transamerica Asset Management, Inc. to provide administrative services to the Aegon/Transamerica Series Trust. The Company received $471, $436 and $385 for these services during 2013, 2012 and 2011, respectively.
The Company had no short-term notes receivable at December 31, 2013 and 2012.
In prior years, the Company purchased life insurance policies covering the lives of certain employees of the Company from an affiliate. At December 31, 2013 and 2012, the cash surrender value of these policies was $79,733 and $77,229, respectively.
During 1998, TLIC issued life insurance policies to LIICA, covering the lives of certain LIICA employees. As discussed in Note 6—Reinsurance, the Company entered into an assumption reinsurance transaction with TLIC effective September 30, 2008, resulting in the Company assuming all liabilities of TLIC arising under these policies. Accordingly, the Company held
Mon Life 2013 SEC | 94 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
aggregate reserves for policies and contracts related to these policies of $161,384 and $156,981 at December 31, 2013 and 2012, respectively.
13. Managing General Agents
The Company utilizes managing general agents and third-party administrators in its operation. Information regarding these entities for the year ended December 31, 2013 is as follows:
Name and Address of Managing General Agent or Third-Party Administrator |
FEIN | Exclusive Contract |
Types of Business Written | Types of Authority Granted |
Total Direct Premiums Written/ Produced By |
|||||||||||||
The Vanguard Group, Inc. 100 Vanguard Blvd. |
23-1945930 | No | Deferred and Income Annuities | C, B, P, U | $ | 522,058 | ||||||||||||
Gallagher Bollinger, Inc. 101 JFK Parkway |
22-0781130 | No | Group A&H, Life | C, CA, P, U | 91,233 | |||||||||||||
All Other TPA Premiums |
184 | |||||||||||||||||
|
|
|||||||||||||||||
Total |
$ | 613,475 | ||||||||||||||||
|
|
C- | Claims Payment |
CA- | Claims Adjustment |
B- | Binding Authority |
P- | Premium Collection |
U- | Underwriting |
For years ended December 31, 2013, 2012 and 2011, the Company had $522,058, $422,874 and $345,517, respectively, of direct premiums written by The Vanguard Group, Inc. For years ended December 31, 2013, 2012 and 2011, the Company had $91,233, $93,480 and $104,706, respectively, of direct premiums written by Gallagher Bollinger, Inc. For years ended December 31, 2013, 2012 and 2011, the Company had $184, $146 and $576, respectively, of direct premiums written by all other managing general agents.
14. Commitments and Contingencies
The Company has issued synthetic GIC contracts to benefit plan sponsors on assets totaling $59,317,033 and $58,306,775 as of December 31, 2013 and 2012, respectively. A synthetic GIC is an off-balance sheet fee-based product sold primarily to tax qualified plans. The plan sponsor retains ownership and control of the related plan assets. The Company provides book value benefit responsiveness in the event that qualified plan benefit requests exceed plan cash flows. In
Mon Life 2013 SEC | 95 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
certain contracts, the Company agrees to make advances to meet benefit payment needs and earns a market interest rate on these advances. The periodically adjusted contract-crediting rate is the means by which investment and benefit responsive experience is passed through to participants. In return for the book value benefit responsive guarantee, the Company receives a premium that varies based on such elements as benefit responsive exposure and contract size. The Company underwrites the plans for the possibility of having to make benefit payments and also must agree to the investment guidelines to ensure appropriate credit quality and cash flow. A contract reserve has been established for the possibility of unexpected benefit payments at below market interest rates of $127 and $1,612 at December 31, 2013 and 2012, respectively.
At December 31, 2013 and 2012, the Company has no mortgage loan commitments. At December 31, 2011, the Company had mortgage loan commitments of $4,160. The Company has contingent commitments of $42,822 and $46,975 at December 31, 2013 and 2012, respectively, to provide additional funding for various joint ventures, partnerships and limited liability companies, which includes LIHTC commitments of $2,032 and $7,640, respectively.
At December 31, 2013 and 2012, the Company has private placement commitments outstanding of $24,000 and $0, respectively.
At December 31, 2013 and 2012, no securities were acquired (sold) on a “to be announced” (TBA) basis.
The Company may pledge assets as collateral for derivative transactions. At December 31, 2013 and 2012, the Company has pledged invested assets with a carrying value of $15,185 and $14,443, respectively, and fair value of $15,853 and $17,892, respectively, in conjunction with these transactions.
Cash collateral received from derivative counterparties as well as the obligation to return the collateral is recorded on the Company’s balance sheet. The amount of cash collateral posted as of December 31, 2013 and 2012, respectively, was $149,006 and $213,917. In addition, securities in the amount of $206,338 and $224,372 were posted to the Company as of December 31, 2013 and 2012, respectively, which were not included on the balance sheet of the Company as the Company does not have the ability to sell or repledge the collateral. A portion of the cash collateral received by the Company has been reposted as collateral to other counterparties. The amount of cash collateral reposted was $0 and $2,580 as of December 31, 2013 and 2012, respectively.
The Company may pledge assets as collateral for transactions involving funding agreements. At December 31, 2013 and 2012, the Company has pledged invested assets with a carrying amount
Mon Life 2013 SEC | 96 |
Monumental Life Insurance Company
Notes to Financial Statements — Statutory Basis (continued)
(Dollars in Thousands)
of $14,780 and $245,905 respectively, and fair value of $14,564 and $276,565 respectively, in conjunction with these transactions.
The Company has provided back-stop guarantees for the performance of non-insurance affiliates or subsidiaries that are involved in the guaranteed sale of investments in low-income housing tax credit partnerships. The nature of the obligation is to provide third party investors with a minimum guaranteed annual and cumulative return on their contributed capital which is based on tax credits and tax losses generated from the low income housing tax credit partnerships. Guarantee payments arise if low income housing tax credit partnerships experience unexpected significant decreases in tax credits and tax losses or there are compliance issues with the partnerships. A significant portion of the remaining term of the guarantees is between 13-21 years. In accordance with SSAP No. 5R, the Company did not recognize a liability for the low income housing tax credit since the amount is considered immaterial to the Company’s financial results. The maximum potential amount of future payments (undiscounted) that the Company could be required to make under these guarantees was $173 and $245 at December 31, 2013 and 2012, respectively. No payments are required as of December 31, 2013. The current assessment of risk of making payments under these guarantees is remote.
The following table provides an aggregate compilation of guarantee obligations as of December 31, 2013 and 2012:
December 31 | ||||||||
2013 | 2012 | |||||||
Aggregate maximum potential of future payments of all guarantees (undiscounted) |
$ | 173 | $ | 245 | ||||
|
|
|
|
|||||
Current liability recognized in financial statements: |
||||||||
Noncontingent liabilities |
$ | — | $ | — | ||||
|
|
|
|
|||||
Contingent liabilities |
$ | — | $ | — | ||||
|
|
|
|
|||||
Ultimate financial statement impact if action required: |
||||||||
Other |
$ | 173 | $ | 245 | ||||
|
|
|
|
|||||
Total impact if action required |
$ | 173 | $ | 245 | ||||
|
|
|
|
The Company has issued funding agreements to FHLB, and the funds received are reported as deposit-type liabilities per SSAP No. 52, Deposit-Type Contracts. Total reserves are equal to the funding agreements balance. These funding agreements are used for investment spread management purposes and are subject to the same asset/liability management practices as other deposit-type business. All of the funding agreements issued to FHLB are classified in the general account as it is a general obligation of the Company. Collateral is required by FHLB to support repayment of the funding agreements. In addition, FHLB requires their common stock to be purchased.
Mon Life 2013 SEC | 97 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Year Ended December 31 | ||||||||
2013 | 2012 | |||||||
FHLB stock purchased/owned as part of the agreement |
$ | 26,000 | $ | 27,800 | ||||
Collateral pledged to the FHLB |
557,317 | 1,086,622 | ||||||
Borrowing capacity currently available |
897,824 | 560,000 | ||||||
Agreement General Account |
||||||||
Assets |
1,742,275 | 1,690,805 | ||||||
Liabilities |
1,300,000 | 1,300,130 |
The Company has provided guarantees for the obligations of noninsurance affiliates who have accepted assignments of structured settlement payment obligations from other insurers and purchase structured settlement insurance policies from subsidiaries of the Company that match those obligations. The guarantees made by the Company are specific to each structured settlement contract and vary in date and duration of the obligation. These are numerous and are backed by the reserves established by the Company to represent the present value of the future payments for those contracts. The statutory reserve established at December 31, 2012 for the total payout block is $2,383,901. As this reserve is already recorded on the balance sheet of the Company, there was no additional liability recorded due to the adoption of SSAP No. 5R.
The Company is a party to legal proceedings involving a variety of issues incidental to its business, including class actions. Lawsuits may be brought in nearly any federal or state court in the United States or in an arbitral forum. In addition, there continues to be significant federal and state regulatory activity relating to financial services companies. The Company’s legal proceedings are subject to many variables, and given its complexity and scope, outcomes cannot be predicted with certainty. Although legal proceedings sometimes include substantial demands for compensatory and punitive damages, and injunctive relief, it is management’s opinion that damages arising from such demands will not be material to the Company’s financial position.
In addition, the insurance industry has increasingly and routinely been the subject of litigation, investigations, regulatory activity and challenges by various governmental and enforcement authorities and policyholder advocate groups concerning certain practices. For example, unclaimed property administrators and state insurance regulators are performing unclaimed property examinations of the life insurance industry in the U.S., including the Company. These are in some cases multi-state examinations that include the collective action of many of the states. Additionally, some states are conducting separate examinations or instituting separate enforcement actions in regard to unclaimed property laws and related claims practices. As other insurers in the United States have done, the Company identified certain additional internal processes that it has implemented or is in the process of implementing. As of December 31, 2013 and 2012, the Company’s reserves related to this matter were $45,219 and $10,297, respectively.
Mon Life 2013 SEC | 98 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
Also, various major insurers in the U.S. have entered into settlements with insurance regulators recently regarding claims settlement practices. Certain examinations are still ongoing.
The Company is subject to insurance guaranty laws in the states in which it writes business. These laws provide for assessments against insurance companies for the benefit of policyholders and claimants in the event of insolvency of other insurance companies. Assessments are charged to operations when received by the Company except where right of offset against other taxes paid is allowed by law. Amounts available for future offsets are recorded as an asset on the Company’s balance sheet. The future obligation for known insolvencies has been accrued based on the most recent information available from the National Organization of Life and Health Insurance Guaranty Associations. Potential future obligations for unknown insolvencies are not determinable by the Company and are not required to be accrued for financial reporting purposes. The Company has established a reserve of $2,212 and $3,395 and an offsetting premium tax benefit of $847 and $1,347 at December 31, 2013 and 2012, respectively, for its estimated share of future guaranty fund assessments related to several major insurer insolvencies. The guaranty fund expense (benefit) was $990, $(2,874) and $(8,063), at December 31, 2013, 2012 and 2011, respectively.
15. Sales, Transfer, and Servicing of Financial Assets and Extinguishments of Liabilities
Municipal repurchase agreements require a minimum of 95% of the fair value of the securities transferred to be maintained as collateral. At December 31, 2013 and 2012, the Company had no recorded liabilities for municipal repurchase agreements.
The Company enters into dollar repurchase agreements in which securities are delivered to the counterparty once adequate collateral has been received. At December 31, 2013 and 2012, the Company had dollar repurchase agreements outstanding in the amount of $52,930 and $5,825, respectively. The Company had an outstanding liability for borrowed money in the amount $53,453 and $6,222 at December 31, 2013 and 2012, respectively due to participation in dollar repurchase agreements which includes accrued interest.
Mon Life 2013 SEC | 99 |
Monumental Life Insurance Company
Notes to Financial Statements — Statutory Basis (continued)
(Dollars in Thousands)
The contractual maturities of dollar repurchase agreements are as follows:
Fair Value | ||||
Open |
$ | 53,266 | ||
30 days or less |
— | |||
31 to 60 days |
— | |||
61 to 90 days |
— | |||
Greater than 90 days |
— | |||
|
|
|||
Total |
53,266 | |||
Securities received |
— | |||
|
|
|||
Total collateral received |
$ | 53,266 | ||
|
|
In the course of the Company’s asset management, securities are sold and reacquired within 30 days of the sale date to enhance the Company’s yield on its investment portfolio. The details by NAIC designation 3 or below of securities sold during 2013 and reacquired within 30 days of the sale date are:
Number of Transactions |
Book Value of Securities Sold |
Cost of Securities Repurchased |
Gain/(Loss) | |||||||||||||
Bonds: |
||||||||||||||||
NAIC 6 |
1 | $ | 36 | $ | 72 | $ | 3 |
16. Subsequent Events
The financial statements are adjusted to reflect events that occurred between the balance sheet date and the date when the financial statements are issued, provided they give evidence of conditions that existed at the balance sheet date (Type I). Events that are indicative of conditions that arose after the balance sheet date are disclosed, but do not result in an adjustment of the financial statements themselves (Type II). With the exception of the Affordable Care Act annual fee described below, the Company has not identified any Type I or Type II subsequent events for the year ended December 31, 2013 through the date the financial statements are issued.
On January 1, 2014, the Company will be subject to an annual fee under section 9010 of the Affordable Care Act (ACA). This annual fee will be allocated to individual health insurers based on the ratio of the amount of the entity’s net premiums written during the preceding calendar year to the amount of health insurance for any U.S. health risk that is written during the preceding calendar year. A health insurance entity’s portion of the annual fee becomes payable once the entity provides health insurance for any U.S. health risk for each calendar year beginning on or after January 1, 2014. As of December 31, 2013, the Company has written health insurance
Mon Life 2013 SEC | 100 |
Monumental Life Insurance Company
Notes to Financial Statements – Statutory Basis (continued)
(Dollars in Thousands)
subject to the ACA assessment, expects to conduct health insurance business in 2014, and estimates their portion of the annual health insurance industry fee to be payable on September 30, 2014 to be $1,381. This assessment is not expected to have a material impact on risk based capital in 2014.
Mon Life 2013 SEC | 101 |
Statutory-Basis
Financial Statement Schedules
Mon Life 2013 SEC |
Monumental Life Insurance Company
Summary of Investments – Other Than Investments in Related Parties
(Dollars in Thousands)
Schedule I
Type of Investment |
Cost (1) | Market Value | Amount at Which Shown in the Balance Sheet (2) |
|||||||||
Fixed maturities |
||||||||||||
Bonds: |
||||||||||||
United States government and government agencies and authorities |
$ | 702,488 | $ | 698,416 | $ | 702,757 | ||||||
States, municipalities and political subdivisions |
365,585 | 397,439 | 365,585 | |||||||||
Foreign governments |
196,331 | 188,850 | 192,500 | |||||||||
Hybrid Securities |
654,097 | 582,931 | 654,097 | |||||||||
All other corporate bonds |
10,453,434 | 11,052,424 | 10,409,860 | |||||||||
Redeemable preferred stocks |
9,541 | 8,955 | 9,541 | |||||||||
|
|
|
|
|
|
|||||||
Total fixed maturities |
12,381,476 | 12,929,015 | 12,334,340 | |||||||||
Equity securities |
||||||||||||
Common stocks: |
||||||||||||
Industrial, miscellaneous and all other |
44,500 | 45,669 | 45,669 | |||||||||
|
|
|
|
|
|
|||||||
Total equity securities |
44,500 | 45,669 | 45,669 | |||||||||
Mortgage loans on real estate |
1,692,860 | 1,692,860 | ||||||||||
Real estate |
7,285 | 7,285 | ||||||||||
Policy loans |
470,549 | 470,549 | ||||||||||
Other long-term investments |
336,388 | 336,388 | ||||||||||
Securities Lending |
322,209 | 322,209 | ||||||||||
Cash, cash equivalents and short-term investments |
558,923 | 558,923 | ||||||||||
|
|
|
|
|||||||||
Total investments |
$ | 15,814,190 | $ | 15,768,223 | ||||||||
|
|
|
|
(1) | Original cost of equity securities and, as to fixed maturities, original cost reduced by repayments and adjusted for amortization of premiums or accrual discounts. |
(2) | United States government and corporate bonds of $71,375 are held at fair value rather than amortized cost due to having an NAIC 6 rating. |
Mon Life 2013 SEC | 102 |
Monumental Life Insurance Company
Supplementary Insurance Information
(Dollars in Thousands)
Schedule III
Future Policy Benefits and Expenses |
Unearned Premiums |
Policy and Contract Liabilities |
Premium Revenue |
Net Investment Income* |
Benefits, Claims Losses and Settlement Expenses |
Other Operating Expenses* |
||||||||||||||||||||||
Year ended December 31, 2013 |
||||||||||||||||||||||||||||
Individual life |
$ | 5,234,408 | $ | — | $ | 105,825 | $ | 400,933 | $ | 285,191 | $ | 249,758 | $ | 301,105 | ||||||||||||||
Individual health |
616,993 | 24,181 | 43,741 | 163,907 | 30,895 | 221,766 | 83,668 | |||||||||||||||||||||
Group life and health |
643,125 | 30,939 | 88,494 | 440,210 | 34,434 | 271,048 | 175,801 | |||||||||||||||||||||
Annuity |
3,425,826 | — | 68 | 701,427 | 378,809 | 1,128,645 | (144,481 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
$ | 9,920,352 | $ | 55,120 | $ | 238,128 | $ | 1,706,477 | $ | 729,329 | $ | 1,871,217 | $ | 416,093 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Year ended December 31, 2012 |
||||||||||||||||||||||||||||
Individual life |
$ | 5,237,303 | $ | — | $ | 62,480 | $ | 270,263 | $ | 310,669 | $ | (133,512 | ) | $ | 274,367 | |||||||||||||
Individual health |
456,177 | 25,536 | 48,467 | 175,625 | 29,136 | 113,040 | 60,804 | |||||||||||||||||||||
Group life and health |
646,721 | 37,324 | 87,409 | 458,397 | 37,114 | 270,127 | 201,138 | |||||||||||||||||||||
Annuity |
3,629,809 | — | 127 | 617,432 | 445,395 | 929,457 | 44,166 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
$ | 9,970,010 | $ | 62,860 | $ | 198,483 | $ | 1,521,717 | $ | 822,314 | $ | 1,179,112 | $ | 580,475 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Year ended December 31, 2011 |
||||||||||||||||||||||||||||
Individual life |
$ | 5,530,556 | $ | — | $ | 52,163 | $ | 208,344 | $ | 306,133 | $ | 245,580 | $ | 260,215 | ||||||||||||||
Individual health |
410,107 | 29,906 | 49,827 | 174,245 | 24,563 | 95,201 | 71,698 | |||||||||||||||||||||
Group life and health |
667,286 | 38,644 | 93,530 | 474,154 | 37,963 | 297,090 | 210,966 | |||||||||||||||||||||
Annuity |
3,840,063 | — | 41 | 546,479 | 470,382 | 832,759 | 111,786 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
$ | 10,448,012 | $ | 68,550 | $ | 195,561 | $ | 1,403,222 | $ | 839,041 | $ | 1,470,630 | $ | 654,665 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* | Allocations of net investment income and other operating expenses are based on a number and assumptions of estimates, and the results would change if different methods were applied. |
Mon Life 2013 SEC | 103 |
Monumental Life Insurance Company
Reinsurance
(Dollars in Thousands)
Schedule IV
Gross Amount |
Ceded to Other Companies |
Assumed From Other Companies |
Net Amount |
Percentage of Amount Assumed to Net |
||||||||||||||||
Year ended December 31, 2013 |
||||||||||||||||||||
Life insurance in force |
$ | 53,926,362 | $ | 34,924,942 | $ | 3,588,743 | 22,590,163 | 16 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Premiums: |
||||||||||||||||||||
Individual life |
$ | 786,161 | $ | 396,054 | $ | 10,826 | $ | 400,933 | 3 | % | ||||||||||
Individual health |
116,968 | 8,564 | 55,503 | 163,907 | 34 | % | ||||||||||||||
Group life and health |
461,308 | 86,001 | 64,902 | 440,209 | 15 | % | ||||||||||||||
Annuity |
703,936 | 28,317 | 25,808 | 701,427 | 4 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 2,068,373 | $ | 518,936 | $ | 157,039 | $ | 1,706,476 | 9 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Year ended December 31, 2012 |
||||||||||||||||||||
Life insurance in force |
$ | 59,790,366 | $ | 39,457,731 | $ | 2,789,989 | $ | 23,122,624 | 12 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Premiums: |
||||||||||||||||||||
Individual life |
$ | 678,988 | $ | 421,821 | $ | 13,096 | $ | 270,263 | 5 | % | ||||||||||
Individual health |
120,598 | 7,260 | 62,287 | 175,625 | 35 | % | ||||||||||||||
Group life and health |
470,794 | 93,042 | 80,645 | 458,397 | 18 | % | ||||||||||||||
Annuity |
597,505 | 31,514 | 51,441 | 617,432 | 8 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 1,867,885 | $ | 553,637 | $ | 207,469 | $ | 1,521,717 | 14 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Year ended December 31, 2011 |
||||||||||||||||||||
Life insurance in force |
$ | 62,029,782 | $ | 41,743,562 | $ | 2,686,755 | $ | 22,972,975 | 12 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Premiums: |
||||||||||||||||||||
Individual life |
$ | 657,650 | $ | 456,986 | $ | 7,679 | $ | 208,343 | 4 | % | ||||||||||
Individual health |
124,649 | 22,292 | 71,889 | 174,246 | 41 | % | ||||||||||||||
Group life and health |
487,397 | 93,904 | 80,661 | 474,154 | 17 | % | ||||||||||||||
Annuity |
524,970 | 31,195 | 52,704 | 546,479 | 10 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 1,794,666 | $ | 604,377 | $ | 212,933 | $ | 1,403,222 | 15 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
Mon Life 2013 SEC | 104 |
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Years Ended December 31, 2013 and 2012
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Financial Statements
Years Ended December 31, 2013 and 2012
Contents
Report of Independent Registered Public Accounting Firm |
1 | |||
2 | ||||
5 | ||||
15 |
The Board of Directors and Contract Owners
Of WRL Series Annuity Account
Western Reserve Life Assurance Co. of Ohio
We have audited the accompanying statements of assets and liabilities of the subaccounts of Western Reserve Life Assurance Co. of Ohio WRL Series Annuity Account (the Separate Account), comprised of subaccounts as listed in the accompanying statements of assets and liabilities, as of December 31, 2013, and the related statements of operations and changes in net assets for the periods indicated thereon. These financial statements are the responsibility of the Separate Account’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Separate Account’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Separate Account’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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. Our procedures included confirmation of securities owned as of December 31, 2013 by correspondence with the fund companies or their transfer agents. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the respective subaccounts of Western Reserve Life Assurance Co. of Ohio WRL Series Annuity Account, at December 31, 2013, the results of their operations and changes in their net assets for the periods indicated thereon, in conformity with U.S. generally accepted accounting principles.
Des Moines, Iowa
April 28, 2014
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Statements of Assets and Liabilities
Subaccount |
Number of Shares | Cost | Assets at Market Value |
Due (to)/from General Account |
Net Assets | Units Outstanding | Range of Unit Values | |||||||||||||||||||||||||
Fidelity® VIP Contrafund® Service Class 2 |
832,018.556 | $ | 19,806,584 | $ | 28,097,267 | $ | 6 | $ | 28,097,273 | 1,509,718 | $ | 13.071339 | $ | 19.031329 | ||||||||||||||||||
Fidelity® VIP Equity-Income Service Class 2 |
474,648.052 | 8,661,414 | 10,859,947 | 23 | 10,859,970 | 636,126 | 13.575772 | 17.455006 | ||||||||||||||||||||||||
Fidelity® VIP Growth Opportunities Service Class 2 |
123,713.542 | 1,919,149 | 3,671,818 | 4 | 3,671,822 | 294,968 | 11.755376 | 14.798628 | ||||||||||||||||||||||||
Fidelity® VIP Index 500 Service Class 2 |
1,519.826 | 196,776 | 280,499 | (90 | ) | 280,409 | 16,813 | 16.666036 | 17.318411 | |||||||||||||||||||||||
Access VP High Yield |
121,954.639 | 3,473,160 | 3,659,859 | (2 | ) | 3,659,857 | 231,376 | 11.397664 | 16.018027 | |||||||||||||||||||||||
ProFund VP Asia 30 |
55,320.122 | 2,792,286 | 3,096,820 | 8 | 3,096,828 | 345,193 | 8.780652 | 11.578500 | ||||||||||||||||||||||||
ProFund VP Basic Materials |
58,877.898 | 2,863,490 | 3,264,191 | (10 | ) | 3,264,181 | 289,506 | 10.998595 | 12.496797 | |||||||||||||||||||||||
ProFund VP Bull |
275,113.415 | 9,218,066 | 10,421,296 | (1 | ) | 10,421,295 | 757,362 | 10.794435 | 13.988223 | |||||||||||||||||||||||
ProFund VP Consumer Services |
76,688.359 | 3,628,333 | 4,378,905 | (10 | ) | 4,378,895 | 264,798 | 12.980028 | 18.714509 | |||||||||||||||||||||||
ProFund VP Emerging Markets |
288,266.956 | 7,156,932 | 6,883,815 | (4 | ) | 6,883,811 | 917,069 | 7.332194 | 8.557317 | |||||||||||||||||||||||
ProFund VP Europe 30 |
17,593.679 | 402,848 | 455,148 | (3 | ) | 455,145 | 48,595 | 9.073301 | 14.371285 | |||||||||||||||||||||||
ProFund VP Falling U.S. Dollar |
7,901.223 | 220,799 | 219,496 | — | 219,496 | 24,962 | 8.574057 | 8.873207 | ||||||||||||||||||||||||
ProFund VP Financials |
167,187.721 | 3,985,863 | 4,677,912 | (5 | ) | 4,677,907 | 654,455 | 6.944230 | 13.969761 | |||||||||||||||||||||||
ProFund VP International |
213,056.551 | 4,723,026 | 5,113,357 | 1 | 5,113,358 | 605,839 | 8.036375 | 12.366225 | ||||||||||||||||||||||||
ProFund VP Japan |
59,304.302 | 1,007,361 | 1,120,851 | 3 | 1,120,854 | 144,283 | 7.416025 | 14.756053 | ||||||||||||||||||||||||
ProFund VP Mid-Cap |
251,639.551 | 7,804,973 | 8,608,589 | (1 | ) | 8,608,588 | 655,474 | 10.726576 | 13.380684 | |||||||||||||||||||||||
ProFund VP Money Market |
9,100,787.150 | 9,100,787 | 9,100,787 | 67 | 9,100,854 | 944,489 | 9.356808 | 9.956191 | ||||||||||||||||||||||||
ProFund VP NASDAQ-100 |
188,284.174 | 5,188,151 | 5,738,902 | 133 | 5,739,035 | 291,134 | 12.890709 | 20.136156 | ||||||||||||||||||||||||
ProFund VP Oil & Gas |
106,284.265 | 5,082,017 | 5,684,082 | 14 | 5,684,096 | 507,327 | 10.958729 | 13.289701 | ||||||||||||||||||||||||
ProFund VP Pharmaceuticals |
84,370.133 | 2,640,118 | 2,884,615 | — | 2,884,615 | 194,314 | 13.554831 | 15.542001 | ||||||||||||||||||||||||
ProFund VP Precious Metals |
133,903.915 | 4,702,138 | 3,153,437 | 6 | 3,153,443 | 545,424 | 5.639083 | 5.933219 | ||||||||||||||||||||||||
ProFund VP Short Emerging Markets |
18,558.404 | 260,038 | 240,702 | 2 | 240,704 | 56,849 | 3.927542 | 10.041681 | ||||||||||||||||||||||||
ProFund VP Short International |
19,777.724 | 293,682 | 254,342 | (23 | ) | 254,319 | 52,607 | 4.656037 | 8.019521 | |||||||||||||||||||||||
ProFund VP Short NASDAQ-100 |
51,350.743 | 289,648 | 249,051 | (179 | ) | 248,872 | 76,965 | 3.105089 | 7.136463 | |||||||||||||||||||||||
ProFund VP Short Small-Cap |
34,672.179 | 191,384 | 148,744 | (5 | ) | 148,739 | 58,090 | 2.441886 | 7.299878 | |||||||||||||||||||||||
ProFund VP Small-Cap |
224,619.931 | 8,089,286 | 8,942,119 | 62 | 8,942,181 | 599,307 | 10.981250 | 15.182532 | ||||||||||||||||||||||||
ProFund VP Small-Cap Value |
94,264.183 | 3,397,275 | 3,938,358 | — | 3,938,358 | 299,537 | 12.791418 | 14.947117 | ||||||||||||||||||||||||
ProFund VP Telecommunications |
101,346.975 | 883,806 | 888,813 | — | 888,813 | 90,482 | 9.271068 | 13.172378 | ||||||||||||||||||||||||
ProFund VP U.S. Government Plus |
55,393.550 | 1,174,509 | 981,020 | 10 | 981,030 | 77,824 | 7.369245 | 13.085493 | ||||||||||||||||||||||||
ProFund VP UltraSmall-Cap |
234,403.974 | 4,241,028 | 5,836,659 | (5 | ) | 5,836,654 | 518,379 | 10.981749 | 19.426020 | |||||||||||||||||||||||
ProFund VP Utilities |
64,568.592 | 2,216,153 | 2,265,066 | (3 | ) | 2,265,063 | 209,910 | 10.452257 | 11.676106 | |||||||||||||||||||||||
TA Aegon High Yield Bond Initial Class |
2,163,968.038 | 17,733,082 | 17,744,538 | 108 | 17,744,646 | 919,309 | 11.710311 | 19.682831 | ||||||||||||||||||||||||
TA Aegon High Yield Bond Service Class |
36,317.045 | 296,468 | 301,431 | (1 | ) | 301,430 | 15,979 | 18.120298 | 19.205131 | |||||||||||||||||||||||
TA Aegon Money Market Initial Class |
50,426,265.609 | 50,426,266 | 50,426,266 | (15 | ) | 50,426,251 | 3,713,621 | 9.103554 | 16.526375 | |||||||||||||||||||||||
TA Aegon Money Market Service Class |
459,775.090 | 459,775 | 459,775 | 1 | 459,776 | 46,441 | 9.584449 | 10.158210 | ||||||||||||||||||||||||
TA Aegon Tactical Vanguard ETF - Conservative Service Class |
80,044.729 | 823,635 | 877,290 | 1 | 877,291 | 78,562 | 11.120949 | 11.211769 | ||||||||||||||||||||||||
TA Aegon Tactical Vanguard ETF - Growth Service Class |
183,293.909 | 1,811,524 | 2,168,367 | (3 | ) | 2,168,364 | 174,342 | 12.364749 | 12.465721 | |||||||||||||||||||||||
TA Aegon U.S. Government Securities Initial Class |
1,001,124.588 | 13,117,721 | 12,343,866 | (10 | ) | 12,343,856 | 898,355 | 9.758266 | 14.077335 | |||||||||||||||||||||||
TA Aegon U.S. Government Securities Service Class |
18,265.556 | 241,186 | 229,781 | (2 | ) | 229,779 | 17,931 | 12.176983 | 12.906104 | |||||||||||||||||||||||
TA AllianceBernstein Dynamic Allocation Initial Class |
518,237.861 | 4,360,301 | 4,731,512 | — | 4,731,512 | 300,485 | 10.540405 | 16.173635 | ||||||||||||||||||||||||
TA AllianceBernstein Dynamic Allocation Service Class |
18,516.921 | 131,165 | 167,948 | 12 | 167,960 | 10,392 | 15.306082 | 16.222539 | ||||||||||||||||||||||||
TA Asset Allocation - Conservative Initial Class |
7,208,838.261 | 73,793,962 | 81,459,872 | 268 | 81,460,140 | 4,977,583 | 10.596882 | 16.837505 |
See accompanying notes.
2
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Statements of Assets and Liabilities
Subaccount |
Number of Shares | Cost | Assets at Market Value |
Due (to)/from General Account |
Net Assets | Units Outstanding | Range of Unit Values | |||||||||||||||||||||||||
TA Asset Allocation - Conservative Service Class |
123,898.184 | $ | 1,243,206 | $ | 1,386,421 | $ | 5 | $ | 1,386,426 | 80,772 | $ | 16.438178 | $ | 17.422419 | ||||||||||||||||||
TA Asset Allocation - Growth Initial Class |
10,246,810.977 | 83,401,109 | 115,788,964 | (555 | ) | 115,788,409 | 6,593,469 | 13.253707 | 17.947808 | |||||||||||||||||||||||
TA Asset Allocation - Growth Service Class |
323,242.364 | 2,649,547 | 3,623,547 | 7 | 3,623,554 | 175,117 | 19.734736 | 20.916525 | ||||||||||||||||||||||||
TA Asset Allocation - Moderate Initial Class |
13,648,176.918 | 133,847,321 | 165,142,941 | (546 | ) | 165,142,395 | 9,576,571 | 10.872371 | 17.681067 | |||||||||||||||||||||||
TA Asset Allocation - Moderate Service Class |
279,015.382 | 2,726,162 | 3,339,814 | — | 3,339,814 | 178,461 | 17.855550 | 18.924634 | ||||||||||||||||||||||||
TA Asset Allocation - Moderate Growth Initial Class |
17,820,251.051 | 195,939,023 | 227,386,403 | 26 | 227,386,429 | 12,874,348 | 12.546468 | 18.039775 | ||||||||||||||||||||||||
TA Asset Allocation - Moderate Growth Service Class |
418,442.018 | 4,178,598 | 5,276,554 | 5 | 5,276,559 | 265,378 | 18.929526 | 20.062981 | ||||||||||||||||||||||||
TA Barrow Hanley Dividend Focused Initial Class |
4,343,571.430 | 59,607,330 | 83,353,136 | (9 | ) | 83,353,127 | 2,936,992 | 12.528682 | 30.697511 | |||||||||||||||||||||||
TA Barrow Hanley Dividend Focused Service Class |
50,669.276 | 715,336 | 973,863 | 10 | 973,873 | 43,229 | 21.539013 | 22.828804 | ||||||||||||||||||||||||
TA BNP Paribas Large Cap Growth Initial Class |
1,099,106.373 | 16,520,012 | 25,323,411 | — | 25,323,411 | 1,125,187 | 12.910725 | 22.738448 | ||||||||||||||||||||||||
TA BNP Paribas Large Cap Growth Service Class |
6,722.915 | 96,130 | 157,316 | 9 | 157,325 | 7,049 | 21.916162 | 22.477511 | ||||||||||||||||||||||||
TA Clarion Global Real Estate Securities Initial Class |
3,147,536.866 | 35,229,998 | 36,731,755 | 309 | 36,732,064 | 1,234,984 | 10.776792 | 36.553808 | ||||||||||||||||||||||||
TA Clarion Global Real Estate Securities Service Class |
53,432.686 | 618,227 | 649,741 | 1 | 649,742 | 27,501 | 22.663392 | 24.020804 | ||||||||||||||||||||||||
TA Hanlon Income Service Class |
556,937.432 | 6,203,930 | 6,187,575 | (20 | ) | 6,187,555 | 5,883,695 | 1.031545 | 10.007772 | |||||||||||||||||||||||
TA International Moderate Growth Initial Class |
572,495.280 | 5,016,344 | 5,719,228 | 13 | 5,719,241 | 520,832 | 10.656511 | 11.109932 | ||||||||||||||||||||||||
TA International Moderate Growth Service Class |
1,137.053 | 10,051 | 11,268 | — | 11,268 | 1,061 | 10.457502 | 10.902412 | ||||||||||||||||||||||||
TA Janus Balanced Service Class |
188,155.860 | 2,072,424 | 2,361,356 | (2 | ) | 2,361,354 | 2,052,294 | 1.136652 | 1.155268 | |||||||||||||||||||||||
TA Jennison Growth Initial Class |
2,171,453.007 | 18,741,766 | 23,256,262 | (5 | ) | 23,256,257 | 1,453,202 | 13.721467 | 16.889295 | |||||||||||||||||||||||
TA Jennison Growth Service Class |
14,092.884 | 124,131 | 147,693 | — | 147,693 | 9,374 | 15.617495 | 15.931659 | ||||||||||||||||||||||||
TA JPMorgan Core Bond Initial Class |
4,057,373.217 | 52,462,036 | 51,204,050 | 284 | 51,204,334 | 1,885,514 | 9.751824 | 38.455324 | ||||||||||||||||||||||||
TA JPMorgan Core Bond Service Class |
55,076.704 | 752,514 | 739,129 | (1 | ) | 739,128 | 52,782 | 13.520409 | 14.329943 | |||||||||||||||||||||||
TA JPMorgan Enhanced Index Initial Class |
1,054,550.333 | 14,844,658 | 18,549,540 | (4 | ) | 18,549,536 | 1,039,321 | 13.943918 | 18.303332 | |||||||||||||||||||||||
TA JPMorgan Enhanced Index Service Class |
8,054.341 | 111,276 | 141,676 | 1 | 141,677 | 6,904 | 19.860714 | 21.050037 | ||||||||||||||||||||||||
TA JPMorgan Mid Cap Value Initial Class |
880,298.498 | 12,205,968 | 18,503,874 | 5 | 18,503,879 | 668,186 | 26.042803 | 28.327822 | ||||||||||||||||||||||||
TA JPMorgan Mid Cap Value Service Class |
10,141.873 | 133,294 | 211,661 | 8 | 211,669 | 7,721 | 26.011793 | 27.569522 | ||||||||||||||||||||||||
TA JPMorgan Tactical Allocation Initial Class |
3,975,427.350 | 52,717,155 | 52,793,675 | 38 | 52,793,713 | 1,739,859 | 10.262369 | 33.642033 | ||||||||||||||||||||||||
TA JPMorgan Tactical Allocation Service Class |
44,519.148 | 568,322 | 619,707 | 6 | 619,713 | 44,276 | 13.386315 | 14.188206 | ||||||||||||||||||||||||
TA MFS International Equity Initial Class |
5,712,915.218 | 38,650,764 | 49,816,621 | (13 | ) | 49,816,608 | 3,191,584 | 11.510743 | 20.348335 | |||||||||||||||||||||||
TA MFS International Equity Service Class |
36,961.047 | 248,702 | 317,495 | — | 317,495 | 13,880 | 21.884916 | 23.195370 | ||||||||||||||||||||||||
TA Morgan Stanley Capital Growth Initial Class |
2,576,800.008 | 28,078,025 | 38,986,984 | 414 | 38,987,398 | 1,497,988 | 13.903060 | 26.933505 | ||||||||||||||||||||||||
TA Morgan Stanley Capital Growth Service Class |
8,311.261 | 95,574 | 124,669 | — | 124,669 | 5,033 | 23.682567 | 25.100234 | ||||||||||||||||||||||||
TA Morgan Stanley Mid-Cap Growth Initial Class |
4,261,563.622 | 113,513,200 | 161,683,724 | 489 | 161,684,213 | 3,243,706 | 12.054798 | 68.244066 | ||||||||||||||||||||||||
TA Morgan Stanley Mid-Cap Growth Service Class |
25,318.603 | 709,973 | 940,839 | (6 | ) | 940,833 | 36,512 | 24.584463 | 26.056784 | |||||||||||||||||||||||
TA Multi-Managed Balanced Initial Class |
9,839,110.341 | 113,319,217 | 133,516,727 | (2 | ) | 133,516,725 | 6,647,491 | 10.704699 | 20.377790 | |||||||||||||||||||||||
TA Multi-Managed Balanced Service Class |
49,798.795 | 590,413 | 666,806 | 1 | 666,807 | 32,484 | 19.504134 | 20.672020 | ||||||||||||||||||||||||
TA PIMCO Tactical - Balanced Service Class |
221,386.065 | 2,386,230 | 2,548,154 | — | 2,548,154 | 2,502,314 | 1.006637 | 1.023106 | ||||||||||||||||||||||||
TA PIMCO Tactical - Conservative Service Class |
87,505.629 | 915,661 | 953,811 | (6 | ) | 953,805 | 976,114 | 0.952272 | 10.349705 | |||||||||||||||||||||||
TA PIMCO Tactical - Growth Service Class |
52,990.039 | 549,399 | 602,497 | (1 | ) | 602,496 | 534,963 | 0.987191 | 10.926239 | |||||||||||||||||||||||
TA PIMCO Total Return Initial Class |
4,745,372.116 | 56,436,548 | 53,907,427 | 14 | 53,907,441 | 3,516,503 | 9.612432 | 15.749672 | ||||||||||||||||||||||||
TA PIMCO Total Return Service Class |
84,497.834 | 989,033 | 953,981 | (10 | ) | 953,971 | 68,847 | 13.454113 | 14.259691 | |||||||||||||||||||||||
TA Systematic Small/Mid Cap Value Initial Class |
5,005,596.109 | 97,753,840 | 118,482,460 | 29 | 118,482,489 | 4,244,695 | 15.592731 | 29.594545 | ||||||||||||||||||||||||
TA Systematic Small/Mid Cap Value Service Class |
83,525.780 | 1,612,573 | 1,946,986 | (7 | ) | 1,946,979 | 69,429 | 26.980051 | 28.437628 |
See accompanying notes.
3
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Statements of Assets and Liabilities
Subaccount |
Number of Shares | Cost | Assets at Market Value |
Due (to)/from General Account |
Net Assets | Units Outstanding | Range of Unit Values | |||||||||||||||||||||||||
TA T. Rowe Price Small Cap Initial Class |
2,833,021.984 | $ | 29,782,191 | $ | 40,342,233 | $ | (11 | ) | $ | 40,342,222 | 1,622,505 | $ | 14.141261 | $ | 27.153794 | |||||||||||||||||
TA T. Rowe Price Small Cap Service Class |
35,974.803 | 370,363 | 496,812 | 6 | 496,818 | 15,741 | 30.264779 | 32.077056 | ||||||||||||||||||||||||
TA Vanguard ETF - Balanced Service Class |
254,893.623 | 2,889,368 | 2,984,804 | 2 | 2,984,806 | 247,587 | 11.801533 | 12.169791 | ||||||||||||||||||||||||
TA Vanguard ETF - Growth Service Class |
369,617.830 | 3,494,077 | 4,073,188 | — | 4,073,188 | 331,314 | 12.014181 | 12.389096 | ||||||||||||||||||||||||
TA WMC Diversified Growth Initial Class |
13,204,351.986 | 312,650,851 | 420,426,567 | 9 | 420,426,576 | 21,566,331 | 13.181404 | 22.215036 | ||||||||||||||||||||||||
TA WMC Diversified Growth Service Class |
56,475.330 | 1,234,626 | 1,776,149 | (1 | ) | 1,776,148 | 84,682 | 19.988563 | 21.185372 |
See accompanying notes.
4
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Statements of Operations and Change in Net Assets
Year Ended December 31, 2012
Investment Income: |
Investment Expense: |
Increase (Decrease) in Net Assets from Operations: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Subaccount |
Net Assets as of January 1, 2012: |
Reinvested Dividends |
Mortality and Expense Risk and Administrative Charges |
Net Investment Income (Loss) |
Capital Gain Distributions |
Realized Gain (Loss) on Investments |
Net Realized Capital Gains (Losses) on Investments |
Net Change in Unrealized Appreciation (Depreciation) |
Net Gain (Loss) on Investment |
Net Increase (Decrease) in Net Assets Resulting from Operations |
Increase (Decrease) in Net Assets from Contract Transactions |
Total Increase (Decrease) in Net Assets |
Net Assets as of December 31, 2012 |
|||||||||||||||||||||||||||||||||||||||
Fidelity® VIP Contrafund® Service Class 2 |
$ | 24,580,502 | $ | 274,217 | $ | 354,236 | $ | (80,019 | ) | $ | — | $ | (880,664 | ) | $ | (880,664 | ) | $ | 4,395,357 | $ | 3,514,693 | $ | 3,434,674 | $ | (3,438,844 | ) | $ | (4,170 | ) | $ | 24,576,332 | |||||||||||||||||||||
Fidelity® VIP Equity-Income Service Class 2 |
10,438,450 | 287,544 | 146,391 | 141,153 | 657,237 | (779,526 | ) | (122,289 | ) | 1,478,582 | 1,356,293 | 1,497,446 | (1,854,978 | ) | (357,532 | ) | 10,080,918 | |||||||||||||||||||||||||||||||||||
Fidelity® VIP Growth Opportunities Service Class 2 |
3,267,264 | 5,038 | 48,906 | (43,868 | ) | — | 79,764 | 79,764 | 530,340 | 610,104 | 566,236 | (565,395 | ) | 841 | 3,268,105 | |||||||||||||||||||||||||||||||||||||
Fidelity® VIP Index 500 Service Class 2 |
218,743 | 4,446 | 4,184 | 262 | 3,006 | 1,046 | 4,052 | 25,195 | 29,247 | 29,509 | (7,888 | ) | 21,621 | 240,364 | ||||||||||||||||||||||||||||||||||||||
Access VP High Yield |
4,315,511 | 131,731 | 48,163 | 83,568 | — | 133,747 | 133,747 | 167,544 | 301,291 | 384,859 | (1,771,445 | ) | (1,386,586 | ) | 2,928,925 | |||||||||||||||||||||||||||||||||||||
ProFund VP Asia 30 |
2,458,400 | — | 37,632 | (37,632 | ) | — | (715,344 | ) | (715,344 | ) | 775,223 | 59,879 | 22,247 | (108,874 | ) | (86,627 | ) | 2,371,773 | ||||||||||||||||||||||||||||||||||
ProFund VP Basic Materials |
6,002,319 | 15,216 | 64,127 | (48,911 | ) | — | (446,090 | ) | (446,090 | ) | 774,594 | 328,504 | 279,593 | (2,998,125 | ) | (2,718,532 | ) | 3,283,787 | ||||||||||||||||||||||||||||||||||
ProFund VP Bull |
3,025,920 | — | 53,040 | (53,040 | ) | — | 505,811 | 505,811 | (19,028 | ) | 486,783 | 433,743 | 2,019,152 | 2,452,895 | 5,478,815 | |||||||||||||||||||||||||||||||||||||
ProFund VP Consumer Services |
6,392,237 | — | 47,369 | (47,369 | ) | 8,174 | 655,831 | 664,005 | (47,645 | ) | 616,360 | 568,991 | (5,016,221 | ) | (4,447,230 | ) | 1,945,007 | |||||||||||||||||||||||||||||||||||
ProFund VP Emerging Markets |
5,679,386 | 77,353 | 103,691 | (26,338 | ) | — | (781,123 | ) | (781,123 | ) | 884,206 | 103,083 | 76,745 | 1,302,835 | 1,379,580 | 7,058,966 | ||||||||||||||||||||||||||||||||||||
ProFund VP Europe 30 |
196,452 | 3,987 | 2,412 | 1,575 | — | (1,651 | ) | (1,651 | ) | 26,408 | 24,757 | 26,332 | 153,380 | 179,712 | 376,164 | |||||||||||||||||||||||||||||||||||||
ProFund VP Falling U.S. Dollar |
384,496 | — | 4,060 | (4,060 | ) | — | (19,711 | ) | (19,711 | ) | 16,490 | (3,221 | ) | (7,281 | ) | (172,149 | ) | (179,430 | ) | 205,066 | ||||||||||||||||||||||||||||||||
ProFund VP Financials |
1,217,438 | 8,237 | 44,450 | (36,213 | ) | — | (406,975 | ) | (406,975 | ) | 238,349 | (168,626 | ) | (204,839 | ) | 415,417 | 210,578 | 1,428,016 | ||||||||||||||||||||||||||||||||||
ProFund VP International |
1,147,807 | — | 29,797 | (29,797 | ) | — | (72,353 | ) | (72,353 | ) | 437,895 | 365,542 | 335,745 | 2,931,105 | 3,266,850 | 4,414,657 | ||||||||||||||||||||||||||||||||||||
ProFund VP Japan |
251,863 | — | 13,499 | (13,499 | ) | — | (233,667 | ) | (233,667 | ) | 30,775 | (202,892 | ) | (216,391 | ) | 52,466 | (163,925 | ) | 87,938 | |||||||||||||||||||||||||||||||||
ProFund VP Mid-Cap |
2,186,356 | — | 52,487 | (52,487 | ) | — | 282,987 | 282,987 | 115,339 | 398,326 | 345,839 | 4,682,438 | 5,028,277 | 7,214,633 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Money Market |
18,340,831 | 3,172 | 227,413 | (224,241 | ) | — | — | — | — | — | (224,241 | ) | (5,262,944 | ) | (5,487,185 | ) | 12,853,646 | |||||||||||||||||||||||||||||||||||
ProFund VP NASDAQ-100 |
4,720,266 | — | 105,186 | (105,186 | ) | — | 838,090 | 838,090 | 32,501 | 870,591 | 765,405 | (618,208 | ) | 147,197 | 4,867,463 | |||||||||||||||||||||||||||||||||||||
ProFund VP Oil & Gas |
8,133,363 | 9,960 | 103,327 | (93,367 | ) | 723,961 | (563,246 | ) | 160,715 | (384,575 | ) | (223,860 | ) | (317,227 | ) | (2,379,640 | ) | (2,696,867 | ) | 5,436,496 | ||||||||||||||||||||||||||||||||
ProFund VP Pharmaceuticals |
6,680,073 | 34,462 | 49,179 | (14,717 | ) | — | 555,681 | 555,681 | (331,307 | ) | 224,374 | 209,657 | (5,021,605 | ) | (4,811,948 | ) | 1,868,125 | |||||||||||||||||||||||||||||||||||
ProFund VP Precious Metals |
8,567,955 | — | 106,578 | (106,578 | ) | — | (1,505,184 | ) | (1,505,184 | ) | 207,424 | (1,297,760 | ) | (1,404,338 | ) | (1,055,290 | ) | (2,459,628 | ) | 6,108,327 |
See Accompanying Notes.
(1) | See Footnote 1 |
5
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Statements of Operations and Change in Net Assets
Year Ended December 31, 2012
Investment Income: |
Investment Expense: |
Increase (Decrease) in Net Assets from Operations: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Subaccount |
Net Assets as of January 1, 2012: |
Reinvested Dividends |
Mortality and Expense Risk and Administrative Charges |
Net Investment Income (Loss) |
Capital Gain Distributions |
Realized Gain (Loss) on Investments |
Net Realized Capital Gains (Losses) on Investments |
Net Change in Unrealized Appreciation (Depreciation) |
Net Gain (Loss) on Investment |
Net Increase (Decrease) in Net Assets Resulting from Operations |
Increase (Decrease) in Net Assets from Contract Transactions |
Total Increase (Decrease) in Net Assets |
Net Assets as of December 31, 2012 |
|||||||||||||||||||||||||||||||||||||||
ProFund VP Short Emerging Markets |
$ | 336,461 | $ | — | $ | 5,506 | $ | (5,506 | ) | $ | — | $ | 4,104 | $ | 4,104 | $ | (34,582 | ) | $ | (30,478 | ) | $ | (35,984 | ) | $ | (41,857 | ) | $ | (77,841 | ) | $ | 258,620 | ||||||||||||||||||||
ProFund VP Short International |
360,355 | — | 4,750 | (4,750 | ) | 7,115 | (38,585 | ) | (31,470 | ) | (65,931 | ) | (97,401 | ) | (102,151 | ) | 92,230 | (9,921 | ) | 350,434 | ||||||||||||||||||||||||||||||||
ProFund VP Short NASDAQ-100 |
709,959 | — | 8,818 | (8,818 | ) | — | (170,697 | ) | (170,697 | ) | 9,532 | (161,165 | ) | (169,983 | ) | 207,118 | 37,135 | 747,094 | ||||||||||||||||||||||||||||||||||
ProFund VP Short Small-Cap |
394,397 | — | 5,676 | (5,676 | ) | — | (58,466 | ) | (58,466 | ) | (18,678 | ) | (77,144 | ) | (82,820 | ) | (2,495 | ) | (85,315 | ) | 309,082 | |||||||||||||||||||||||||||||||
ProFund VP Small-Cap |
2,487,644 | — | 47,960 | (47,960 | ) | 23,716 | 86,310 | 110,026 | 249,101 | 359,127 | 311,167 | 3,637,038 | 3,948,205 | 6,435,849 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Small-Cap Value |
1,877,903 | — | 37,713 | (37,713 | ) | — | 388,770 | 388,770 | 10,359 | 399,129 | 361,416 | (873,164 | ) | (511,748 | ) | 1,366,155 | ||||||||||||||||||||||||||||||||||||
ProFund VP Telecommunications |
314,714 | 93,922 | 66,698 | 27,224 | — | 656,584 | 656,584 | 81,854 | 738,438 | 765,662 | 2,842,742 | 3,608,404 | 3,923,118 | |||||||||||||||||||||||||||||||||||||||
ProFund VP U.S. Government Plus |
4,257,423 | — | 50,193 | (50,193 | ) | 432,984 | 165,538 | 598,522 | (866,659 | ) | (268,137 | ) | (318,330 | ) | (863,886 | ) | (1,182,216 | ) | 3,075,207 | |||||||||||||||||||||||||||||||||
ProFund VP UltraSmall-Cap |
2,299,496 | — | 33,457 | (33,457 | ) | — | 10,452 | 10,452 | 416,858 | 427,310 | 393,853 | (683,880 | ) | (290,027 | ) | 2,009,469 | ||||||||||||||||||||||||||||||||||||
ProFund VP Utilities |
12,125,437 | 129,383 | 97,139 | 32,244 | — | 468,958 | 468,958 | (874,345 | ) | (405,387 | ) | (373,143 | ) | (6,905,040 | ) | (7,278,183 | ) | 4,847,254 | ||||||||||||||||||||||||||||||||||
TA Aegon High Yield Bond Initial Class |
23,866,535 | 1,669,213 | 358,048 | 1,311,165 | — | 478,304 | 478,304 | 1,929,524 | 2,407,828 | 3,718,993 | 289,574 | 4,008,567 | 27,875,102 | |||||||||||||||||||||||||||||||||||||||
TA Aegon High Yield Bond Service Class |
359,686 | 20,468 | 5,339 | 15,129 | — | 14,230 | 14,230 | 24,516 | 38,746 | 53,875 | (53,361 | ) | 514 | 360,200 | ||||||||||||||||||||||||||||||||||||||
TA Aegon Money Market Initial Class |
78,653,529 | 3,121 | 852,596 | (849,475 | ) | — | — | — | — | — | (849,475 | ) | (20,313,581 | ) | (21,163,056 | ) | 57,490,473 | |||||||||||||||||||||||||||||||||||
TA Aegon Money Market Service Class |
999,714 | 42 | 11,565 | (11,523 | ) | — | — | — | — | — | (11,523 | ) | (234,037 | ) | (245,560 | ) | 754,154 | |||||||||||||||||||||||||||||||||||
TA Aegon Tactical Vanguard ETF - Conservative Service Class |
555,299 | 2,938 | 10,609 | (7,671 | ) | 4,008 | 11,557 | 15,565 | 26,004 | 41,569 | 33,898 | 86,159 | 120,057 | 675,356 | ||||||||||||||||||||||||||||||||||||||
TA Aegon Tactical Vanguard ETF - Growth Service Class |
2,581,513 | 16,516 | 34,696 | (18,180 | ) | — | 34,956 | 34,956 | 210,958 | 245,914 | 227,734 | (434,901 | ) | (207,167 | ) | 2,374,346 | ||||||||||||||||||||||||||||||||||||
TA Aegon U.S. Government Securities Initial Class |
21,817,334 | 287,174 | 253,089 | 34,085 | 417,676 | 184,435 | 602,111 | 11,133 | 613,244 | 647,329 | (5,103,071 | ) | (4,455,742 | ) | 17,361,592 | |||||||||||||||||||||||||||||||||||||
TA Aegon U.S. Government Securities Service Class |
471,819 | 5,208 | 5,478 | (270 | ) | 8,469 | 10,350 | 18,819 | (4,326 | ) | 14,493 | 14,223 | (206,950 | ) | (192,727 | ) | 279,092 | |||||||||||||||||||||||||||||||||||
TA AllianceBernstein Dynamic Allocation Initial Class |
10,044,256 | 55,662 | 102,668 | (47,006 | ) | — | 525,227 | 525,227 | (122,064 | ) | 403,163 | 356,157 | (5,106,321 | ) | (4,750,164 | ) | 5,294,092 | |||||||||||||||||||||||||||||||||||
TA AllianceBernstein Dynamic Allocation Service Class |
226,318 | 1,153 | 2,334 | (1,181 | ) | — | 3,460 | 3,460 | 5,829 | 9,289 | 8,108 | (67,488 | ) | (59,380 | ) | 166,938 | ||||||||||||||||||||||||||||||||||||
TA Asset Allocation - Conservative Initial Class |
98,712,929 | 3,195,033 | 1,485,011 | 1,710,022 | — | 2,938,648 | 2,938,648 | 1,283,543 | 4,222,191 | 5,932,213 | (4,820,876 | ) | 1,111,337 | 99,824,266 |
See Accompanying Notes.
(1) | See Footnote 1 |
6
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Statements of Operations and Change in Net Assets
Year Ended December 31, 2012
Investment Income: |
Investment Expense: |
Increase (Decrease) in Net Assets from Operations: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Subaccount |
Net Assets as of January 1, 2012: |
Reinvested Dividends |
Mortality and Expense Risk and Administrative Charges |
Net Investment Income (Loss) |
Capital Gain Distributions |
Realized Gain (Loss) on Investments |
Net Realized Capital Gains (Losses) on Investments |
Net Change in Unrealized Appreciation (Depreciation) |
Net Gain (Loss) on Investment |
Net Increase (Decrease) in Net Assets Resulting from Operations |
Increase (Decrease) in Net Assets from Contract Transactions |
Total Increase (Decrease) in Net Assets |
Net Assets as of December 31, 2012 |
|||||||||||||||||||||||||||||||||||||||
TA Asset Allocation - Conservative Service Class |
$ | 2,803,826 | $ | 72,397 | $ | 35,490 | $ | 36,907 | $ | — | $ | 68,430 | $ | 68,430 | $ | 40,477 | $ | 108,907 | $ | 145,814 | $ | (572,576 | ) | $ | (426,762 | ) | $ | 2,377,064 | ||||||||||||||||||||||||
TA Asset Allocation - Growth Initial Class |
105,375,443 | 1,377,335 | 1,491,820 | (114,485 | ) | — | (11,464,814 | ) | (11,464,814 | ) | 22,649,608 | 11,184,794 | 11,070,309 | (16,121,509 | ) | (5,051,200 | ) | 100,324,243 | ||||||||||||||||||||||||||||||||||
TA Asset Allocation - Growth Service Class |
3,328,355 | 35,839 | 45,251 | (9,412 | ) | — | (24,566 | ) | (24,566 | ) | 382,626 | 358,060 | 348,648 | (369,237 | ) | (20,589 | ) | 3,307,766 | ||||||||||||||||||||||||||||||||||
TA Asset Allocation - Moderate Initial Class |
183,076,483 | 4,616,584 | 2,545,509 | 2,071,075 | — | (2,486,198 | ) | (2,486,198 | ) | 13,980,211 | 11,494,013 | 13,565,088 | (28,892,713 | ) | (15,327,625 | ) | 167,748,858 | |||||||||||||||||||||||||||||||||||
TA Asset Allocation - Moderate Service Class |
4,419,150 | 103,098 | 58,376 | 44,722 | — | (81,542 | ) | (81,542 | ) | 355,050 | 273,508 | 318,230 | (813,545 | ) | (495,315 | ) | 3,923,835 | |||||||||||||||||||||||||||||||||||
TA Asset Allocation - Moderate Growth Initial Class |
217,836,894 | 5,353,756 | 3,118,641 | 2,235,115 | — | (814,294 | ) | (814,294 | ) | 17,464,952 | 16,650,658 | 18,885,773 | (29,208,459 | ) | (10,322,686 | ) | 207,514,208 | |||||||||||||||||||||||||||||||||||
TA Asset Allocation - Moderate Growth Service Class |
5,535,555 | 122,688 | 73,449 | 49,239 | — | (165,668 | ) | (165,668 | ) | 593,447 | 427,779 | 477,018 | (689,417 | ) | (212,399 | ) | 5,323,156 | |||||||||||||||||||||||||||||||||||
TA Barrow Hanley Dividend Focused Initial Class |
73,028,759 | 1,280,897 | 1,004,169 | 276,728 | — | 2,272,326 | 2,272,326 | 4,420,606 | 6,692,932 | 6,969,660 | (10,177,321 | ) | (3,207,661 | ) | 69,821,098 | |||||||||||||||||||||||||||||||||||||
TA Barrow Hanley Dividend Focused Service Class |
991,177 | 13,321 | 12,577 | 744 | — | 28,782 | 28,782 | 52,311 | 81,093 | 81,837 | (248,000 | ) | (166,163 | ) | 825,014 | |||||||||||||||||||||||||||||||||||||
TA BNP Paribas Large Cap Growth Initial Class |
15,488,812 | 148,043 | 245,535 | (97,492 | ) | — | 1,281,988 | 1,281,988 | 1,218,063 | 2,500,051 | 2,402,559 | (202,744 | ) | 2,199,815 | 17,688,627 | |||||||||||||||||||||||||||||||||||||
TA BNP Paribas Large Cap Growth Service Class |
116,082 | 755 | 1,664 | (909 | ) | — | 8,533 | 8,533 | 9,456 | 17,989 | 17,080 | (17,100 | ) | (20 | ) | 116,062 | ||||||||||||||||||||||||||||||||||||
TA Clarion Global Real Estate Securities Initial Class |
36,835,287 | 1,626,533 | 565,513 | 1,061,020 | — | (95,895 | ) | (95,895 | ) | 7,497,505 | 7,401,610 | 8,462,630 | (4,568,638 | ) | 3,893,992 | 40,729,279 | ||||||||||||||||||||||||||||||||||||
TA Clarion Global Real Estate Securities Service Class |
601,543 | 21,291 | 9,209 | 12,082 | — | (10,224 | ) | (10,224 | ) | 132,956 | 122,732 | 134,814 | (65,755 | ) | 69,059 | 670,602 | ||||||||||||||||||||||||||||||||||||
TA Hanlon Income Service Class |
10,751,432 | 198,293 | 127,882 | 70,411 | — | 44,856 | 44,856 | 76,578 | 121,434 | 191,845 | (2,508,187 | ) | (2,316,342 | ) | 8,435,090 | |||||||||||||||||||||||||||||||||||||
TA International Moderate Growth Initial Class |
6,873,911 | 201,903 | 94,986 | 106,917 | — | 100,156 | 100,156 | 499,174 | 599,330 | 706,247 | (1,438,531 | ) | (732,284 | ) | 6,141,627 | |||||||||||||||||||||||||||||||||||||
TA International Moderate Growth Service Class |
14,378 | 318 | 204 | 114 | — | 169 | 169 | 1,029 | 1,198 | 1,312 | (3,766 | ) | (2,454 | ) | 11,924 | |||||||||||||||||||||||||||||||||||||
TA Janus Balanced Service Class |
1,321,648 | — | 18,199 | (18,199 | ) | — | 9,758 | 9,758 | 146,614 | 156,372 | 138,173 | (239,874 | ) | (101,701 | ) | 1,219,947 | ||||||||||||||||||||||||||||||||||||
TA Jennison Growth Initial Class |
16,988,026 | 12,600 | 262,327 | (249,727 | ) | 1,285,476 | 928,719 | 2,214,195 | 407,393 | 2,621,588 | 2,371,861 | (2,206,864 | ) | 164,997 | 17,153,023 | |||||||||||||||||||||||||||||||||||||
TA Jennison Growth Service Class |
168,313 | — | 2,655 | (2,655 | ) | 12,113 | 8,696 | 20,809 | 6,258 | 27,067 | 24,412 | (44,048 | ) | (19,636 | ) | 148,677 | ||||||||||||||||||||||||||||||||||||
TA JPMorgan Core Bond Initial Class |
77,365,793 | 2,097,235 | 1,091,207 | 1,006,028 | 32,210 | 1,644,555 | 1,676,765 | 62,323 | 1,739,088 | 2,745,116 | (5,858,299 | ) | (3,113,183 | ) | 74,252,610 | |||||||||||||||||||||||||||||||||||||
TA JPMorgan Core Bond Service Class |
1,090,211 | 24,939 | 14,946 | 9,993 | 395 | 27,944 | 28,339 | (3,482 | ) | 24,857 | 34,850 | (192,970 | ) | (158,120 | ) | 932,091 |
See Accompanying Notes.
(1) | See Footnote 1 |
7
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Statements of Operations and Change in Net Assets
Year Ended December 31, 2012
Investment Income: |
Investment Expense: |
Increase (Decrease) in Net Assets from Operations: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Subaccount |
Net Assets as of January 1, 2012: |
Reinvested Dividends |
Mortality and Expense Risk and Administrative Charges |
Net Investment Income (Loss) |
Capital Gain Distributions |
Realized Gain (Loss) on Investments |
Net Realized Capital Gains (Losses) on Investments |
Net Change in Unrealized Appreciation (Depreciation) |
Net Gain (Loss) on Investment |
Net Increase (Decrease) in Net Assets Resulting from Operations |
Increase (Decrease) in Net Assets from Contract Transactions |
Total Increase (Decrease) in Net Assets |
Net Assets as of December 31, 2012 |
|||||||||||||||||||||||||||||||||||||||
TA JPMorgan Enhanced Index Initial Class |
$ | 9,401,614 | $ | 129,165 | $ | 189,200 | $ | (60,035 | ) | $ | — | $ | 705,138 | $ | 705,138 | $ | 742,820 | $ | 1,447,958 | $ | 1,387,923 | $ | 2,163,348 | $ | 3,551,271 | $ | 12,952,885 | |||||||||||||||||||||||||
TA JPMorgan Enhanced Index Service Class |
117,608 | 1,240 | 2,029 | (789 | ) | — | 12,194 | 12,194 | 6,420 | 18,614 | 17,825 | (11,153 | ) | 6,672 | 124,280 | |||||||||||||||||||||||||||||||||||||
TA JPMorgan Mid Cap Value Initial Class |
16,250,751 | 125,321 | 236,199 | (110,878 | ) | — | 243,786 | 243,786 | 2,766,449 | 3,010,235 | 2,899,357 | (2,589,069 | ) | 310,288 | 16,561,039 | |||||||||||||||||||||||||||||||||||||
TA JPMorgan Mid Cap Value Service Class |
180,119 | 1,210 | 2,593 | (1,383 | ) | — | 240 | 240 | 34,156 | 34,396 | 33,013 | (7,601 | ) | 25,412 | 205,531 | |||||||||||||||||||||||||||||||||||||
TA JPMorgan Tactical Allocation Initial Class |
64,545,636 | 373,323 | 857,838 | (484,515 | ) | — | (3,057,442 | ) | (3,057,442 | ) | 7,356,809 | 4,299,367 | 3,814,852 | (10,212,669 | ) | (6,397,817 | ) | 58,147,819 | ||||||||||||||||||||||||||||||||||
TA JPMorgan Tactical Allocation Service Class |
944,334 | 4,449 | 12,007 | (7,558 | ) | — | (50,703 | ) | (50,703 | ) | 110,150 | 59,447 | 51,889 | (203,746 | ) | (151,857 | ) | 792,477 | ||||||||||||||||||||||||||||||||||
TA MFS International Equity Initial Class |
40,089,567 | 701,824 | 610,160 | 91,664 | — | (2,610,643 | ) | (2,610,643 | ) | 10,151,347 | 7,540,704 | 7,632,368 | (2,451,037 | ) | 5,181,331 | 45,270,898 | ||||||||||||||||||||||||||||||||||||
TA MFS International Equity Service Class |
306,445 | 3,907 | 3,864 | 43 | — | (15,632 | ) | (15,632 | ) | 69,458 | 53,826 | 53,869 | (65,086 | ) | (11,217 | ) | 295,228 | |||||||||||||||||||||||||||||||||||
TA Morgan Stanley Capital Growth Initial Class |
29,713,971 | — | 433,582 | (433,582 | ) | 5,624,329 | (1,148,413 | ) | 4,475,916 | (79,916 | ) | 4,396,000 | 3,962,418 | (4,686,942 | ) | (724,524 | ) | 28,989,447 | ||||||||||||||||||||||||||||||||||
TA Morgan Stanley Capital Growth Service Class |
142,708 | — | 2,262 | (2,262 | ) | 30,375 | 12,827 | 43,202 | (23,234 | ) | 19,968 | 17,706 | (34,962 | ) | (17,256 | ) | 125,452 | |||||||||||||||||||||||||||||||||||
TA Morgan Stanley Mid-Cap Growth Initial Class |
146,092,090 | — | 1,947,642 | (1,947,642 | ) | 7,091,951 | 739,881 | 7,831,832 | 4,995,628 | 12,827,460 | 10,879,818 | (24,298,535 | ) | (13,418,717 | ) | 132,673,373 | ||||||||||||||||||||||||||||||||||||
TA Morgan Stanley Mid-Cap Growth Service Class |
1,054,875 | — | 13,491 | (13,491 | ) | 42,478 | 70,641 | 113,119 | (34,214 | ) | 78,905 | 65,414 | (329,595 | ) | (264,181 | ) | 790,694 | |||||||||||||||||||||||||||||||||||
TA Multi-Managed Balanced Initial Class |
124,580,912 | 2,057,125 | 1,721,908 | 335,217 | 19,048,051 | 2,951,496 | 21,999,547 | (9,010,031 | ) | 12,989,516 | 13,324,733 | (15,433,310 | ) | (2,108,577 | ) | 122,472,335 | ||||||||||||||||||||||||||||||||||||
TA Multi-Managed Balanced Service Class |
549,672 | 8,563 | 7,770 | 793 | 90,411 | 5,674 | 96,085 | (37,741 | ) | 58,344 | 59,137 | (55,379 | ) | 3,758 | 553,430 | |||||||||||||||||||||||||||||||||||||
TA PIMCO Tactical - Balanced Service Class |
3,299,946 | 34,434 | 29,040 | 5,394 | — | (73,951 | ) | (73,951 | ) | 69,176 | (4,775 | ) | 619 | (1,410,912 | ) | (1,410,293 | ) | 1,889,653 | ||||||||||||||||||||||||||||||||||
TA PIMCO Tactical - Conservative Service Class |
2,681,447 | 26,948 | 34,105 | (7,157 | ) | — | (80,176 | ) | (80,176 | ) | 100,388 | 20,212 | 13,055 | (853,626 | ) | (840,571 | ) | 1,840,876 | ||||||||||||||||||||||||||||||||||
TA PIMCO Tactical - Growth Service Class |
575,105 | 2,673 | 7,222 | (4,549 | ) | — | (24,183 | ) | (24,183 | ) | 22,450 | (1,733 | ) | (6,282 | ) | (68,325 | ) | (74,607 | ) | 500,498 | ||||||||||||||||||||||||||||||||
TA PIMCO Total Return Initial Class |
66,663,393 | 2,895,103 | 981,835 | 1,913,268 | — | 768,641 | 768,641 | 1,321,912 | 2,090,553 | 4,003,821 | 5,892,018 | 9,895,839 | 76,559,232 | |||||||||||||||||||||||||||||||||||||||
TA PIMCO Total Return Service Class |
1,095,305 | 38,733 | 14,812 | 23,921 | — | 19,563 | 19,563 | 14,377 | 33,940 | 57,861 | (168,481 | ) | (110,620 | ) | 984,685 | |||||||||||||||||||||||||||||||||||||
TA Systematic Small/Mid Cap Value Initial Class |
30,728,786 | 141,807 | 406,220 | (264,413 | ) | 6,864,107 | 2,149,668 | 9,013,775 | (4,767,073 | ) | 4,246,702 | 3,982,289 | (8,197,692 | ) | (4,215,403 | ) | 26,513,383 | |||||||||||||||||||||||||||||||||||
TA Systematic Small/Mid Cap Value Service Class |
780,713 | 1,795 | 8,781 | (6,986 | ) | 160,271 | 61,233 | 221,504 | (112,149 | ) | 109,355 | 102,369 | (250,592 | ) | (148,223 | ) | 632,490 |
See Accompanying Notes.
(1) | See Footnote 1 |
8
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Statements of Operations and Change in Net Assets
Year Ended December 31, 2012
Investment Income: |
Investment Expense: |
Increase (Decrease) in Net Assets from Operations: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Subaccount |
Net Assets as of January 1, 2012: |
Reinvested Dividends |
Mortality and Expense Risk and Administrative Charges |
Net Investment Income (Loss) |
Capital Gain Distributions |
Realized Gain (Loss) on Investments |
Net Realized Capital Gains (Losses) on Investments |
Net Change in Unrealized Appreciation (Depreciation) |
Net Gain (Loss) on Investment |
Net Increase (Decrease) in Net Assets Resulting from Operations |
Increase (Decrease) in Net Assets from Contract Transactions |
Total Increase (Decrease) in Net Assets |
Net Assets as of December 31, 2012 |
|||||||||||||||||||||||||||||||||||||||
TA T. Rowe Price Small Cap Initial Class |
$ | 25,475,878 | $ | — | $ | 417,340 | $ | (417,340 | ) | $ | 2,085,712 | $ | 3,554,813 | $ | 5,640,525 | $ | (1,731,047 | ) | $ | 3,909,478 | $ | 3,492,138 | $ | (440,498 | ) | $ | 3,051,640 | $ | 28,527,518 | |||||||||||||||||||||||
TA T. Rowe Price Small Cap Service Class |
332,758 | — | 5,134 | (5,134 | ) | 26,820 | 42,484 | 69,304 | (22,775 | ) | 46,529 | 41,395 | (54,525 | ) | (13,130 | ) | 319,628 | |||||||||||||||||||||||||||||||||||
TA Vanguard ETF - Balanced Service Class |
520,892 | 10,230 | 10,966 | (736 | ) | 20,832 | 8,319 | 29,151 | 24,647 | 53,798 | 53,062 | 422,728 | 475,790 | 996,682 | ||||||||||||||||||||||||||||||||||||||
TA Vanguard ETF - Growth Service Class |
2,413,614 | 41,486 | 35,905 | 5,581 | 211,615 | 25,956 | 237,571 | (2,472 | ) | 235,099 | 240,680 | 74,153 | 314,833 | 2,728,447 | ||||||||||||||||||||||||||||||||||||||
TA WMC Diversified Growth Initial Class |
370,487,799 | 1,186,474 | 5,148,607 | (3,962,133 | ) | — | (3,275,791 | ) | (3,275,791 | ) | 50,304,796 | 47,029,005 | 43,066,872 | (51,641,696 | ) | (8,574,824 | ) | 361,912,975 | ||||||||||||||||||||||||||||||||||
TA WMC Diversified Growth Service Class |
1,849,995 | 2,030 | 24,873 | (22,843 | ) | — | (12,175 | ) | (12,175 | ) | 240,981 | 228,806 | 205,963 | (365,033 | ) | (159,070 | ) | 1,690,925 |
See Accompanying Notes.
(1) | See Footnote 1 |
9
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Statements of Operations and Change in Net Assets
Year Ended December 31, 2013
Investment Income: |
Investment Expense: |
Increase (Decrease) in Net Assets from Operations: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Subaccount |
Net Assets as of January 1, 2013: |
Reinvested Dividends |
Mortality and Expense Risk and Administrative Charges |
Net Investment Income (Loss) |
Capital Gain Distributions |
Realized Gain (Loss) on Investments |
Net Realized Capital Gains (Losses) on Investments |
Net Change in Unrealized Appreciation (Depreciation) |
Net Gain (Loss) on Investment |
Net Increase (Decrease) in Net Assets Resulting from Operations |
Increase (Decrease) in Net Assets from Contract Transactions |
Total Increase (Decrease) in Net Assets |
Net Assets as of December 31, 2013 |
|||||||||||||||||||||||||||||||||||||||
Fidelity® VIP Contrafund® Service Class 2 |
$ | 24,576,332 | $ | 213,513 | $ | 363,053 | $ | (149,540 | ) | $ | 7,477 | $ | (14,523 | ) | $ | (7,046 | ) | $ | 6,836,271 | $ | 6,829,225 | $ | 6,679,685 | $ | (3,158,744 | ) | $ | 3,520,941 | $ | 28,097,273 | ||||||||||||||||||||||
Fidelity® VIP Equity-Income Service Class 2 |
10,080,918 | 232,777 | 148,812 | 83,965 | 687,543 | (126,877 | ) | 560,666 | 1,798,482 | 2,359,148 | 2,443,113 | (1,664,061 | ) | 779,052 | 10,859,970 | |||||||||||||||||||||||||||||||||||||
Fidelity® VIP Growth Opportunities Service Class 2 |
3,268,105 | 1,589 | 47,496 | (45,907 | ) | 1,741 | 166,305 | 168,046 | 912,948 | 1,080,994 | 1,035,087 | (631,370 | ) | 403,717 | 3,671,822 | |||||||||||||||||||||||||||||||||||||
Fidelity® VIP Index 500 Service Class 2 |
240,364 | 4,275 | 4,742 | (467 | ) | 2,658 | 7,366 | 10,024 | 58,520 | 68,544 | 68,077 | (28,032 | ) | 40,045 | 280,409 | |||||||||||||||||||||||||||||||||||||
Access VP High Yield |
2,928,925 | 85,056 | 45,875 | 39,181 | 86,182 | 117,345 | 203,527 | 13,315 | 216,842 | 256,023 | 474,909 | 730,932 | 3,659,857 | |||||||||||||||||||||||||||||||||||||||
ProFund VP Asia 30 |
2,371,773 | 1,650 | 39,944 | (38,294 | ) | — | (22,347 | ) | (22,347 | ) | 411,333 | 388,986 | 350,692 | 374,363 | 725,055 | 3,096,828 | ||||||||||||||||||||||||||||||||||||
ProFund VP Basic Materials |
3,283,787 | 30,419 | 44,461 | (14,042 | ) | — | 16,441 | 16,441 | 453,092 | 469,533 | 455,491 | (475,097 | ) | (19,606 | ) | 3,264,181 | ||||||||||||||||||||||||||||||||||||
ProFund VP Bull |
5,478,815 | — | 116,943 | (116,943 | ) | 135,386 | 838,354 | 973,740 | 1,120,349 | 2,094,089 | 1,977,146 | 2,965,334 | 4,942,480 | 10,421,295 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Consumer Services |
1,945,007 | 8,677 | 47,825 | (39,148 | ) | 9,837 | 342,508 | 352,345 | 687,226 | 1,039,571 | 1,000,423 | 1,433,465 | 2,433,888 | 4,378,895 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Emerging Markets |
7,058,966 | 50,595 | 96,631 | (46,036 | ) | — | (275,951 | ) | (275,951 | ) | (309,480 | ) | (585,431 | ) | (631,467 | ) | 456,312 | (175,155 | ) | 6,883,811 | ||||||||||||||||||||||||||||||||
ProFund VP Europe 30 |
376,164 | 3,001 | 5,912 | (2,911 | ) | — | 16,466 | 16,466 | 29,408 | 45,874 | 42,963 | 36,018 | 78,981 | 455,145 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Falling U.S. Dollar |
205,066 | — | 2,484 | (2,484 | ) | — | (8,628 | ) | (8,628 | ) | 5,470 | (3,158 | ) | (5,642 | ) | 20,072 | 14,430 | 219,496 | ||||||||||||||||||||||||||||||||||
ProFund VP Financials |
1,428,016 | 11,806 | 51,768 | (39,962 | ) | — | 344,175 | 344,175 | 588,620 | 932,795 | 892,833 | 2,357,058 | 3,249,891 | 4,677,907 | ||||||||||||||||||||||||||||||||||||||
ProFund VP International |
4,414,657 | — | 61,175 | (61,175 | ) | 129,613 | 331,066 | 460,679 | 88,358 | 549,037 | 487,862 | 210,839 | 698,701 | 5,113,358 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Japan |
87,938 | — | 13,556 | (13,556 | ) | — | 208,027 | 208,027 | 101,043 | 309,070 | 295,514 | 737,402 | 1,032,916 | 1,120,854 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Mid-Cap |
7,214,633 | — | 113,559 | (113,559 | ) | 361,006 | 819,233 | 1,180,239 | 720,635 | 1,900,874 | 1,787,315 | (393,360 | ) | 1,393,955 | 8,608,588 | |||||||||||||||||||||||||||||||||||||
ProFund VP Money Market |
12,853,646 | 2,690 | 187,274 | (184,584 | ) | — | — | — | — | — | (184,584 | ) | (3,568,208 | ) | (3,752,792 | ) | 9,100,854 | |||||||||||||||||||||||||||||||||||
ProFund VP NASDAQ-100 |
4,867,463 | — | 59,459 | (59,459 | ) | — | 619,522 | 619,522 | 621,891 | 1,241,413 | 1,181,954 | (310,382 | ) | 871,572 | 5,739,035 | |||||||||||||||||||||||||||||||||||||
ProFund VP Oil & Gas |
5,436,496 | 24,111 | 81,683 | (57,572 | ) | 213,912 | 9,057 | 222,969 | 966,402 | 1,189,371 | 1,131,799 | (884,199 | ) | 247,600 | 5,684,096 | |||||||||||||||||||||||||||||||||||||
ProFund VP Pharmaceuticals |
1,868,125 | 50,067 | 36,739 | 13,328 | 135,834 | 216,425 | 352,259 | 214,231 | 566,490 | 579,818 | 436,672 | 1,016,490 | 2,884,615 | |||||||||||||||||||||||||||||||||||||||
ProFund VP Precious Metals |
6,108,327 | — | 54,054 | (54,054 | ) | — | (1,297,128 | ) | (1,297,128 | ) | (785,401 | ) | (2,082,529 | ) | (2,136,583 | ) | (818,301 | ) | (2,954,884 | ) | 3,153,443 |
See Accompanying Notes.
(1) | See Footnote 1 |
10
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Statements of Operations and Change in Net Assets
Year Ended December 31, 2013
Investment Income: |
Investment Expense: |
Increase (Decrease) in Net Assets from Operations: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Subaccount |
Net Assets as of January 1, 2013: |
Reinvested Dividends |
Mortality and Expense Risk and Administrative Charges |
Net Investment Income (Loss) |
Capital Gain Distributions |
Realized Gain (Loss) on Investments |
Net Realized Capital Gains (Losses) on Investments |
Net Change in Unrealized Appreciation (Depreciation) |
Net Gain (Loss) on Investment |
Net Increase (Decrease) in Net Assets Resulting from Operations |
Increase (Decrease) in Net Assets from Contract Transactions |
Total Increase (Decrease) in Net Assets |
Net Assets as of December 31, 2013 |
|||||||||||||||||||||||||||||||||||||||
ProFund VP Short Emerging Markets |
$ | 258,620 | $ | — | $ | 3,890 | $ | (3,890 | ) | $ | — | $ | (14,893 | ) | $ | (14,893 | ) | $ | 13,150 | $ | (1,743 | ) | $ | (5,633 | ) | $ | (12,283 | ) | $ | (17,916 | ) | $ | 240,704 | |||||||||||||||||||
ProFund VP Short International |
350,434 | — | 4,127 | (4,127 | ) | — | (117,355 | ) | (117,355 | ) | 43,705 | (73,650 | ) | (77,777 | ) | (18,338 | ) | (96,115 | ) | 254,319 | ||||||||||||||||||||||||||||||||
ProFund VP Short NASDAQ-100 |
747,094 | — | 7,175 | (7,175 | ) | — | (174,377 | ) | (174,377 | ) | (16,509 | ) | (190,886 | ) | (198,061 | ) | (300,161 | ) | (498,222 | ) | 248,872 | |||||||||||||||||||||||||||||||
ProFund VP Short Small-Cap |
309,082 | — | 3,343 | (3,343 | ) | — | (85,482 | ) | (85,482 | ) | (2,012 | ) | (87,494 | ) | (90,837 | ) | (69,506 | ) | (160,343 | ) | 148,739 | |||||||||||||||||||||||||||||||
ProFund VP Small-Cap |
6,435,849 | — | 112,953 | (112,953 | ) | 191,401 | 1,518,550 | 1,709,951 | 622,761 | 2,332,712 | 2,219,759 | 286,573 | 2,506,332 | 8,942,181 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Small-Cap Value |
1,366,155 | 4,650 | 38,292 | (33,642 | ) | — | 304,147 | 304,147 | 489,985 | 794,132 | 760,490 | 1,811,713 | 2,572,203 | 3,938,358 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Telecommunications |
3,923,118 | 69,568 | 32,094 | 37,474 | 105,314 | 118,492 | 223,806 | (70,062 | ) | 153,744 | 191,218 | (3,225,523 | ) | (3,034,305 | ) | 888,813 | ||||||||||||||||||||||||||||||||||||
ProFund VP U.S. Government Plus |
3,075,207 | 3,060 | 21,584 | (18,524 | ) | 86,299 | (439,412 | ) | (353,113 | ) | (5,310 | ) | (358,423 | ) | (376,947 | ) | (1,717,230 | ) | (2,094,177 | ) | 981,030 | |||||||||||||||||||||||||||||||
ProFund VP UltraSmall-Cap |
2,009,469 | — | 57,418 | (57,418 | ) | — | 902,707 | 902,707 | 1,435,553 | 2,338,260 | 2,280,842 | 1,546,343 | 3,827,185 | 5,836,654 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Utilities |
4,847,254 | 68,608 | 40,997 | 27,611 | — | 67,748 | 67,748 | 188,640 | 256,388 | 283,999 | (2,866,190 | ) | (2,582,191 | ) | 2,265,063 | |||||||||||||||||||||||||||||||||||||
TA Aegon High Yield Bond Initial Class |
27,875,102 | 1,061,266 | 285,945 | 775,321 | — | 1,702,880 | 1,702,880 | (1,525,061 | ) | 177,819 | 953,140 | (11,083,596 | ) | (10,130,456 | ) | 17,744,646 | ||||||||||||||||||||||||||||||||||||
TA Aegon High Yield Bond Service Class |
360,200 | 17,695 | 4,740 | 12,955 | — | 11,925 | 11,925 | (9,984 | ) | 1,941 | 14,896 | (73,666 | ) | (58,770 | ) | 301,430 | ||||||||||||||||||||||||||||||||||||
TA Aegon Money Market Initial Class |
57,490,473 | 2,709 | 745,498 | (742,789 | ) | — | — | — | — | — | (742,789 | ) | (6,321,433 | ) | (7,064,222 | ) | 50,426,251 | |||||||||||||||||||||||||||||||||||
TA Aegon Money Market Service Class |
754,154 | 30 | 8,348 | (8,318 | ) | — | — | — | — | — | (8,318 | ) | (286,060 | ) | (294,378 | ) | 459,776 | |||||||||||||||||||||||||||||||||||
TA Aegon Tactical Vanguard ETF - Conservative Service Class |
675,356 | 7,310 | 10,529 | (3,219 | ) | 8,257 | 7,672 | 15,929 | 24,286 | 40,215 | 36,996 | 164,939 | 201,935 | 877,291 | ||||||||||||||||||||||||||||||||||||||
TA Aegon Tactical Vanguard ETF - Growth Service Class |
2,374,346 | 19,001 | 31,557 | (12,556 | ) | — | 163,665 | 163,665 | 173,660 | 337,325 | 324,769 | (530,751 | ) | (205,982 | ) | 2,168,364 | ||||||||||||||||||||||||||||||||||||
TA Aegon U.S. Government Securities Initial Class |
17,361,592 | 332,436 | 212,490 | 119,946 | 311,074 | (90,298 | ) | 220,776 | (900,190 | ) | (679,414 | ) | (559,468 | ) | (4,458,268 | ) | (5,017,736 | ) | 12,343,856 | |||||||||||||||||||||||||||||||||
TA Aegon U.S. Government Securities Service Class |
279,092 | 4,538 | 3,196 | 1,342 | 5,029 | (833 | ) | 4,196 | (15,245 | ) | (11,049 | ) | (9,707 | ) | (39,606 | ) | (49,313 | ) | 229,779 | |||||||||||||||||||||||||||||||||
TA AllianceBernstein Dynamic Allocation Initial Class |
5,294,092 | 61,435 | 75,120 | (13,685 | ) | — | 175,894 | 175,894 | 116,472 | 292,366 | 278,681 | (841,261 | ) | (562,580 | ) | 4,731,512 | ||||||||||||||||||||||||||||||||||||
TA AllianceBernstein Dynamic Allocation Service Class |
166,938 | 1,662 | 2,270 | (608 | ) | — | 2,461 | 2,461 | 7,688 | 10,149 | 9,541 | (8,519 | ) | 1,022 | 167,960 | |||||||||||||||||||||||||||||||||||||
TA Asset Allocation - Conservative Initial Class |
99,824,266 | 2,981,896 | 1,370,815 | 1,611,081 | 147,094 | 6,790,171 | 6,937,265 | (1,443,921 | ) | 5,493,344 | 7,104,425 | (25,468,551 | ) | (18,364,126 | ) | 81,460,140 |
See Accompanying Notes.
(1) | See Footnote 1 |
11
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Statements of Operations and Change in Net Assets
Year Ended December 31, 2013
Investment Income: |
Investment Expense: |
Increase (Decrease) in Net Assets from Operations: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Subaccount |
Net Assets as of January 1, 2013: |
Reinvested Dividends |
Mortality and Expense Risk and Administrative Charges |
Net Investment Income (Loss) |
Capital Gain Distributions |
Realized Gain (Loss) on Investments |
Net Realized Capital Gains (Losses) on Investments |
Net Change in Unrealized Appreciation (Depreciation) |
Net Gain (Loss) on Investment |
Net Increase (Decrease) in Net Assets Resulting from Operations |
Increase (Decrease) in Net Assets from Contract Transactions |
Total Increase (Decrease) in Net Assets |
Net Assets as of December 31, 2013 |
|||||||||||||||||||||||||||||||||||||||
TA Asset Allocation - Conservative Service Class |
$ | 2,377,064 | $ | 42,038 | $ | 22,174 | $ | 19,864 | $ | 2,243 | $ | 142,961 | $ | 145,204 | $ | (46,803 | ) | $ | 98,401 | $ | 118,265 | $ | (1,108,903 | ) | $ | (990,638 | ) | $ | 1,386,426 | |||||||||||||||||||||||
TA Asset Allocation - Growth Initial Class |
100,324,243 | 1,285,977 | 1,507,551 | (221,574 | ) | — | (487,417 | ) | (487,417 | ) | 24,610,141 | 24,122,724 | 23,901,150 | (8,436,984 | ) | 15,464,166 | 115,788,409 | |||||||||||||||||||||||||||||||||||
TA Asset Allocation - Growth Service Class |
3,307,766 | 33,799 | 46,040 | (12,241 | ) | — | (82,268 | ) | (82,268 | ) | 851,766 | 769,498 | 757,257 | (441,469 | ) | 315,788 | 3,623,554 | |||||||||||||||||||||||||||||||||||
TA Asset Allocation - Moderate Initial Class |
167,748,858 | 3,993,375 | 2,371,606 | 1,621,769 | — | 2,735,889 | 2,735,889 | 14,193,053 | 16,928,942 | 18,550,711 | (21,157,174 | ) | (2,606,463 | ) | 165,142,395 | |||||||||||||||||||||||||||||||||||||
TA Asset Allocation - Moderate Service Class |
3,923,835 | 77,668 | 49,047 | 28,621 | — | 90,244 | 90,244 | 276,756 | 367,000 | 395,621 | (979,642 | ) | (584,021 | ) | 3,339,814 | |||||||||||||||||||||||||||||||||||||
TA Asset Allocation - Moderate Growth Initial Class |
207,514,208 | 4,931,652 | 3,082,408 | 1,849,244 | — | (61,282 | ) | (61,282 | ) | 33,830,337 | 33,769,055 | 35,618,299 | (15,746,078 | ) | 19,872,221 | 227,386,429 | ||||||||||||||||||||||||||||||||||||
TA Asset Allocation - Moderate Growth Service Class |
5,323,156 | 110,299 | 71,468 | 38,831 | — | 20,302 | 20,302 | 802,822 | 823,124 | 861,955 | (908,552 | ) | (46,597 | ) | 5,276,559 | |||||||||||||||||||||||||||||||||||||
TA Barrow Hanley Dividend Focused Initial Class |
69,821,098 | 1,799,460 | 1,085,112 | 714,348 | — | 3,854,857 | 3,854,857 | 14,806,608 | 18,661,465 | 19,375,813 | (5,843,784 | ) | 13,532,029 | 83,353,127 | ||||||||||||||||||||||||||||||||||||||
TA Barrow Hanley Dividend Focused Service Class |
825,014 | 19,084 | 12,349 | 6,735 | — | 46,257 | 46,257 | 167,307 | 213,564 | 220,299 | (71,440 | ) | 148,859 | 973,873 | ||||||||||||||||||||||||||||||||||||||
TA BNP Paribas Large Cap Growth Initial Class |
17,688,627 | 212,252 | 307,751 | (95,499 | ) | — | 1,254,514 | 1,254,514 | 4,720,006 | 5,974,520 | 5,879,021 | 1,755,763 | 7,634,784 | 25,323,411 | ||||||||||||||||||||||||||||||||||||||
TA BNP Paribas Large Cap Growth Service Class |
116,062 | 1,185 | 1,990 | (805 | ) | — | 15,416 | 15,416 | 24,063 | 39,479 | 38,674 | 2,589 | 41,263 | 157,325 | ||||||||||||||||||||||||||||||||||||||
TA Clarion Global Real Estate Securities Initial Class |
40,729,279 | 2,240,305 | 571,930 | 1,668,375 | — | 1,893,650 | 1,893,650 | (2,725,587 | ) | (831,937 | ) | 836,438 | (4,833,653 | ) | (3,997,215 | ) | 36,732,064 | |||||||||||||||||||||||||||||||||||
TA Clarion Global Real Estate Securities Service Class |
670,602 | 35,250 | 9,907 | 25,343 | — | (47,874 | ) | (47,874 | ) | 36,239 | (11,635 | ) | 13,708 | (34,568 | ) | (20,860 | ) | 649,742 | ||||||||||||||||||||||||||||||||||
TA Hanlon Income Service Class |
8,435,090 | 275,186 | 97,595 | 177,591 | — | 37,809 | 37,809 | (120,243 | ) | (82,434 | ) | 95,157 | (2,342,692 | ) | (2,247,535 | ) | 6,187,555 | |||||||||||||||||||||||||||||||||||
TA International Moderate Growth Initial Class |
6,141,627 | 118,664 | 83,786 | 34,878 | — | 161,737 | 161,737 | 418,647 | 580,384 | 615,262 | (1,037,648 | ) | (422,386 | ) | 5,719,241 | |||||||||||||||||||||||||||||||||||||
TA International Moderate Growth Service Class |
11,924 | 194 | 179 | 15 | — | 684 | 684 | 424 | 1,108 | 1,123 | (1,779 | ) | (656 | ) | 11,268 | |||||||||||||||||||||||||||||||||||||
TA Janus Balanced Service Class |
1,219,947 | 13,929 | 24,896 | (10,967 | ) | — | 41,230 | 41,230 | 261,130 | 302,360 | 291,393 | 850,014 | 1,141,407 | 2,361,354 | ||||||||||||||||||||||||||||||||||||||
TA Jennison Growth Initial Class |
17,153,023 | 53,171 | 272,413 | (219,242 | ) | 1,534,824 | 788,633 | 2,323,457 | 3,970,621 | 6,294,078 | 6,074,836 | 28,398 | 6,103,234 | 23,256,257 | ||||||||||||||||||||||||||||||||||||||
TA Jennison Growth Service Class |
148,677 | 76 | 2,017 | (1,941 | ) | 8,974 | 14,749 | 23,723 | 18,439 | 42,162 | 40,221 | (41,205 | ) | (984 | ) | 147,693 | ||||||||||||||||||||||||||||||||||||
TA JPMorgan Core Bond Initial Class |
74,252,610 | 1,732,231 | 821,841 | 910,390 | — | 803,563 | 803,563 | (3,665,417 | ) | (2,861,854 | ) | (1,951,464 | ) | (21,096,812 | ) | (23,048,276 | ) | 51,204,334 | ||||||||||||||||||||||||||||||||||
TA JPMorgan Core Bond Service Class |
932,091 | 21,625 | 12,322 | 9,303 | — | 12,111 | 12,111 | (52,275 | ) | (40,164 | ) | (30,861 | ) | (162,102 | ) | (192,963 | ) | 739,128 |
See Accompanying Notes.
(1) | See Footnote 1 |
12
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Statements of Operations and Change in Net Assets
Year Ended December 31, 2013
Investment Income: |
Investment Expense: |
Increase (Decrease) in Net Assets from Operations: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Subaccount |
Net Assets as of January 1, 2013: |
Reinvested Dividends |
Mortality and Expense Risk and Administrative Charges |
Net Investment Income (Loss) |
Capital Gain Distributions |
Realized Gain (Loss) on Investments |
Net Realized Capital Gains (Losses) on Investments |
Net Change in Unrealized Appreciation (Depreciation) |
Net Gain (Loss) on Investment |
Net Increase (Decrease) in Net Assets Resulting from Operations |
Increase (Decrease) in Net Assets from Contract Transactions |
Total Increase (Decrease) in Net Assets |
Net Assets as of December 31, 2013 |
|||||||||||||||||||||||||||||||||||||||
TA JPMorgan Enhanced Index Initial Class |
$ | 12,952,885 | $ | 102,005 | $ | 233,306 | $ | (131,301 | ) | $ | 106,156 | $ | 1,174,455 | $ | 1,280,611 | $ | 2,736,684 | $ | 4,017,295 | $ | 3,885,994 | $ | 1,710,657 | $ | 5,596,651 | $ | 18,549,536 | |||||||||||||||||||||||||
TA JPMorgan Enhanced Index Service Class |
124,280 | 638 | 1,884 | (1,246 | ) | 850 | 15,577 | 16,427 | 18,036 | 34,463 | 33,217 | (15,820 | ) | 17,397 | 141,677 | |||||||||||||||||||||||||||||||||||||
TA JPMorgan Mid Cap Value Initial Class |
16,561,039 | 85,139 | 245,070 | (159,931 | ) | 204,048 | 725,558 | 929,606 | 3,838,868 | 4,768,474 | 4,608,543 | (2,665,703 | ) | 1,942,840 | 18,503,879 | |||||||||||||||||||||||||||||||||||||
TA JPMorgan Mid Cap Value Service Class |
205,531 | 713 | 2,628 | (1,915 | ) | 2,253 | 10,803 | 13,056 | 42,636 | 55,692 | 53,777 | (47,639 | ) | 6,138 | 211,669 | |||||||||||||||||||||||||||||||||||||
TA JPMorgan Tactical Allocation Initial Class |
58,147,819 | 602,265 | 757,508 | (155,243 | ) | — | (1,327,420 | ) | (1,327,420 | ) | 3,679,023 | 2,351,603 | 2,196,360 | (7,550,466 | ) | (5,354,106 | ) | 52,793,713 | ||||||||||||||||||||||||||||||||||
TA JPMorgan Tactical Allocation Service Class |
792,477 | 5,945 | 9,133 | (3,188 | ) | — | 2,550 | 2,550 | 26,737 | 29,287 | 26,099 | (198,863 | ) | (172,764 | ) | 619,713 | ||||||||||||||||||||||||||||||||||||
TA MFS International Equity Initial Class |
45,270,898 | 537,347 | 661,880 | (124,533 | ) | — | 1,070,534 | 1,070,534 | 6,162,050 | 7,232,584 | 7,108,051 | (2,562,341 | ) | 4,545,710 | 49,816,608 | |||||||||||||||||||||||||||||||||||||
TA MFS International Equity Service Class |
295,228 | 2,904 | 4,031 | (1,127 | ) | — | (234 | ) | (234 | ) | 45,551 | 45,317 | 44,190 | (21,923 | ) | 22,267 | 317,495 | |||||||||||||||||||||||||||||||||||
TA Morgan Stanley Capital Growth Initial Class |
28,989,447 | 220,291 | 447,291 | (227,000 | ) | 144,397 | (361,175 | ) | (216,778 | ) | 13,027,584 | 12,810,806 | 12,583,806 | (2,585,855 | ) | 9,997,951 | 38,987,398 | |||||||||||||||||||||||||||||||||||
TA Morgan Stanley Capital Growth Service Class |
125,452 | 698 | 1,677 | (979 | ) | 611 | 6,975 | 7,586 | 39,531 | 47,117 | 46,138 | (46,921 | ) | (783 | ) | 124,669 | ||||||||||||||||||||||||||||||||||||
TA Morgan Stanley Mid-Cap Growth Initial Class |
132,673,373 | 1,181,576 | 1,953,826 | (772,250 | ) | 2,957,565 | 2,492,231 | 5,449,796 | 41,431,633 | 46,881,429 | 46,109,179 | (17,098,339 | ) | 29,010,840 | 161,684,213 | |||||||||||||||||||||||||||||||||||||
TA Morgan Stanley Mid-Cap Growth Service Class |
790,694 | 5,117 | 11,442 | (6,325 | ) | 17,612 | 46,468 | 64,080 | 208,982 | 273,062 | 266,737 | (116,598 | ) | 150,139 | 940,833 | |||||||||||||||||||||||||||||||||||||
TA Multi-Managed Balanced Initial Class |
122,472,335 | 2,044,432 | 1,728,786 | 315,646 | 4,192,538 | 2,475,944 | 6,668,482 | 12,499,281 | 19,167,763 | 19,483,409 | (8,439,019 | ) | 11,044,390 | 133,516,725 | ||||||||||||||||||||||||||||||||||||||
TA Multi-Managed Balanced Service Class |
553,430 | 10,646 | 9,033 | 1,613 | 24,562 | 28,548 | 53,110 | 47,343 | 100,453 | 102,066 | 11,311 | 113,377 | 666,807 | |||||||||||||||||||||||||||||||||||||||
TA PIMCO Tactical - Balanced Service Class |
1,889,653 | 13,257 | 28,865 | (15,608 | ) | — | (4,776 | ) | (4,776 | ) | 221,694 | 216,918 | 201,310 | 457,191 | 658,501 | 2,548,154 | ||||||||||||||||||||||||||||||||||||
TA PIMCO Tactical - Conservative Service Class |
1,840,876 | 6,045 | 19,461 | (13,416 | ) | — | (56,148 | ) | (56,148 | ) | 148,245 | 92,097 | 78,681 | (965,752 | ) | (887,071 | ) | 953,805 | ||||||||||||||||||||||||||||||||||
TA PIMCO Tactical - Growth Service Class |
500,498 | 4,884 | 11,275 | (6,391 | ) | — | 30,225 | 30,225 | 82,534 | 112,759 | 106,368 | (4,370 | ) | 101,998 | 602,496 | |||||||||||||||||||||||||||||||||||||
TA PIMCO Total Return Initial Class |
76,559,232 | 1,227,829 | 885,918 | 341,911 | 697,800 | (1,577 | ) | 696,223 | (3,686,178 | ) | (2,989,955 | ) | (2,648,044 | ) | (20,003,747 | ) | (22,651,791 | ) | 53,907,441 | |||||||||||||||||||||||||||||||||
TA PIMCO Total Return Service Class |
984,685 | 17,089 | 14,393 | 2,696 | 10,695 | 427 | 11,122 | (58,390 | ) | (47,268 | ) | (44,572 | ) | 13,858 | (30,714 | ) | 953,971 | |||||||||||||||||||||||||||||||||||
TA Systematic Small/Mid Cap Value Initial Class |
26,513,383 | 440,167 | 1,178,142 | (737,975 | ) | 211,691 | 1,328,699 | 1,540,390 | 22,479,033 | 24,019,423 | 23,281,448 | 68,687,658 | 91,969,106 | 118,482,489 | ||||||||||||||||||||||||||||||||||||||
TA Systematic Small/Mid Cap Value Service Class |
632,490 | 5,773 | 21,714 | (15,941 | ) | 3,951 | 57,982 | 61,933 | 383,501 | 445,434 | 429,493 | 884,996 | 1,314,489 | 1,946,979 |
See Accompanying Notes.
(1) | See Footnote 1 |
13
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Statements of Operations and Change in Net Assets
Year Ended December 31, 2013
Investment Income: |
Investment Expense: |
Increase (Decrease) in Net Assets from Operations: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Subaccount |
Net Assets as of January 1, 2013: |
Reinvested Dividends |
Mortality and Expense Risk and Administrative Charges |
Net Investment Income (Loss) |
Capital Gain Distributions |
Realized Gain (Loss) on Investments |
Net Realized Capital Gains (Losses) on Investments |
Net Change in Unrealized Appreciation (Depreciation) |
Net Gain (Loss) on Investment |
Net Increase (Decrease) in Net Assets Resulting from Operations |
Increase (Decrease) in Net Assets from Contract Transactions |
Total Increase (Decrease) in Net Assets |
Net Assets as of December 31, 2013 |
|||||||||||||||||||||||||||||||||||||||
TA T. Rowe Price Small Cap Initial Class |
$ | 28,527,518 | $ | 25,511 | $ | 501,786 | $ | (476,275 | ) | $ | 1,476,975 | $ | 2,711,032 | $ | 4,188,007 | $ | 8,372,918 | $ | 12,560,925 | $ | 12,084,650 | $ | (269,946 | ) | $ | 11,814,704 | $ | 40,342,222 | ||||||||||||||||||||||||
TA T. Rowe Price Small Cap Service Class |
319,628 | — | 5,794 | (5,794 | ) | 18,638 | 20,359 | 38,997 | 109,802 | 148,799 | 143,005 | 34,185 | 177,190 | 496,818 | ||||||||||||||||||||||||||||||||||||||
TA Vanguard ETF - Balanced Service Class |
996,682 | 15,884 | 17,173 | (1,289 | ) | 19,680 | 43,342 | 63,022 | 64,206 | 127,228 | 125,939 | 1,862,185 | 1,988,124 | 2,984,806 | ||||||||||||||||||||||||||||||||||||||
TA Vanguard ETF - Growth Service Class |
2,728,447 | 37,183 | 43,569 | (6,386 | ) | 60,053 | 92,689 | 152,742 | 352,939 | 505,681 | 499,295 | 845,446 | 1,344,741 | 4,073,188 | ||||||||||||||||||||||||||||||||||||||
TA WMC Diversified Growth Initial Class |
361,912,975 | 4,046,241 | 5,149,608 | (1,103,367 | ) | — | 4,510,547 | 4,510,547 | 100,574,698 | 105,085,245 | 103,981,878 | (45,468,277 | ) | 58,513,601 | 420,426,576 | |||||||||||||||||||||||||||||||||||||
TA WMC Diversified Growth Service Class |
1,690,925 | 13,439 | 23,037 | (9,598 | ) | — | 81,479 | 81,479 | 385,877 | 467,356 | 457,758 | (372,535 | ) | 85,223 | 1,776,148 |
See Accompanying Notes.
(1) | See Footnote 1 |
14
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
1. Organization and Summary of Significant Accounting Policies
Organization
WRL Series Annuity Account (the Separate Account) is a segregated investment account of Western Reserve Life Assurance Co. of Ohio (WRL), an indirect wholly owned subsidiary of AEGON N.V., a holding company organized under the laws of The Netherlands.
The Separate Account is registered with the Securities and Exchange Commission as a Unit Investment Trust pursuant to provisions of the Investment Company Act of 1940. The Separate Account consists of multiple investment subaccounts. Each subaccount invests exclusively in the corresponding portfolio of a Mutual Fund. Each Mutual Fund is registered as an open-end management investment company under the Investment Company Act of 1940, as amended. Activity in these specified investment subaccounts is available to contract owners of WRL Freedom Attainer®, WRL Freedon Premier®, WRL Freedom Conqueror®, WRL Freedom Wealth Creator®, WRL Freedom Access®, WRL Freedom Enhancer®, WRL Freedom Bellwether®, and WRL Freedom Variable Annuity.
In the prior year, both Service Class and Initial Class were presented together within one subaccount. For the current year presentation, Service Class and Initial Class shares have been restated and now are reflected separately.
Subaccount Investment by Mutual Fund:
Subaccount |
Mutual Fund | |
Fidelity® Variable Insurance Products Fund |
Fidelity® Variable Insurance Products Fund | |
Fidelity® VIP Contrafund® Service Class 2 |
Fidelity® VIP Contrafund® Portfolio Service Class 2 | |
Fidelity® VIP Equity-Income Service Class 2 |
Fidelity® VIP Equity-Income Portfolio Service Class 2 | |
Fidelity® VIP Growth Opportunities Service Class 2 |
Fidelity® VIP Growth Opportunities Portfolio Service Class 2 | |
Fidelity® VIP Index 500 Service Class 2 |
Fidelity® VIP Index 500 Portfolio Service Class 2 | |
Access One Trust |
Access One Trust | |
Access VP High Yield |
Access VP High Yield | |
ProFunds |
ProFunds | |
ProFund VP Asia 30 |
ProFund VP Asia 30 | |
ProFund VP Basic Materials |
ProFund VP Basic Materials | |
ProFund VP Bull |
ProFund VP Bull | |
ProFund VP Consumer Services |
ProFund VP Consumer Services | |
ProFund VP Emerging Markets |
ProFund VP Emerging Markets | |
ProFund VP Europe 30 |
ProFund VP Europe 30 | |
ProFund VP Falling U.S. Dollar |
ProFund VP Falling U.S. Dollar | |
ProFund VP Financials |
ProFund VP Financials | |
ProFund VP International |
ProFund VP International | |
ProFund VP Japan |
ProFund VP Japan | |
ProFund VP Mid-Cap |
ProFund VP Mid-Cap | |
ProFund VP Money Market |
ProFund VP Money Market | |
ProFund VP NASDAQ-100 |
ProFund VP NASDAQ-100 | |
ProFund VP Oil & Gas |
ProFund VP Oil & Gas | |
ProFund VP Pharmaceuticals |
ProFund VP Pharmaceuticals | |
ProFund VP Precious Metals |
ProFund VP Precious Metals | |
ProFund VP Short Emerging Markets |
ProFund VP Short Emerging Markets | |
ProFund VP Short International |
ProFund VP Short International | |
ProFund VP Short NASDAQ-100 |
ProFund VP Short NASDAQ-100 | |
ProFund VP Short Small-Cap |
ProFund VP Short Small-Cap | |
ProFund VP Small-Cap |
ProFund VP Small-Cap |
15
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
1. Organization and Summary of Significant Accounting Policies (continued)
Subaccount Investment by Mutual Fund:
Subaccount |
Mutual Fund | |
ProFund VP Small-Cap Value |
ProFund VP Small-Cap Value | |
ProFund VP Telecommunications |
ProFund VP Telecommunications | |
ProFunds |
ProFunds | |
ProFund VP U.S. Government Plus |
ProFund VP U.S. Government Plus | |
ProFund VP UltraSmall-Cap |
ProFund VP UltraSmall-Cap | |
ProFund VP Utilities |
ProFund VP Utilities | |
Transamerica Series Trust |
Transamerica Series Trust | |
TA Aegon High Yield Bond Initial Class |
Transamerica Aegon High Yield Bond VP Initial Class | |
TA Aegon High Yield Bond Service Class |
Transamerica Aegon High Yield Bond VP Service Class | |
TA Aegon Money Market Initial Class |
Transamerica Aegon Money Market VP Initial Class | |
TA Aegon Money Market Service Class |
Transamerica Aegon Money Market VP Service Class | |
TA Aegon Tactical Vanguard ETF - Conservative Service Class |
Transamerica Aegon Tactical Vanguard ETF - Conservative VP Service Class | |
TA Aegon Tactical Vanguard ETF - Growth Service Class |
Transamerica Aegon Tactical Vanguard ETF - Growth VP Service Class | |
TA Aegon U.S. Government Securities Initial Class |
Transamerica Aegon U.S. Government Securities VP Initial Class | |
TA Aegon U.S. Government Securities Service Class |
Transamerica Aegon U.S. Government Securities VP Service Class | |
TA AllianceBernstein Dynamic Allocation Initial Class |
Transamerica AllianceBernstein Dynamic Allocation VP Initial Class | |
TA AllianceBernstein Dynamic Allocation Service Class |
Transamerica AllianceBernstein Dynamic Allocation VP Service Class | |
TA Asset Allocation - Conservative Initial Class |
Transamerica Asset Allocation - Conservative VP Initial Class | |
TA Asset Allocation - Conservative Service Class |
Transamerica Asset Allocation - Conservative VP Service Class | |
TA Asset Allocation - Growth Initial Class |
Transamerica Asset Allocation - Growth VP Initial Class | |
TA Asset Allocation - Growth Service Class |
Transamerica Asset Allocation - Growth VP Service Class | |
TA Asset Allocation - Moderate Initial Class |
Transamerica Asset Allocation - Moderate VP Initial Class | |
TA Asset Allocation - Moderate Service Class |
Transamerica Asset Allocation - Moderate VP Service Class | |
TA Asset Allocation - Moderate Growth Initial Class |
Transamerica Asset Allocation - Moderate Growth VP Initial Class | |
TA Asset Allocation - Moderate Growth Service Class |
Transamerica Asset Allocation - Moderate Growth VP Service Class | |
TA Barrow Hanley Dividend Focused Initial Class |
Transamerica Barrow Hanley Dividend Focused VP Initial Class | |
TA Barrow Hanley Dividend Focused Service Class |
Transamerica Barrow Hanley Dividend Focused VP Service Class | |
TA BNP Paribas Large Cap Growth Initial Class |
Transamerica BNP Paribas Large Cap Growth VP Initial Class | |
TA BNP Paribas Large Cap Growth Service Class |
Transamerica BNP Paribas Large Cap Growth VP Service Class | |
TA Clarion Global Real Estate Securities Initial Class |
Transamerica Clarion Global Real Estate Securities VP Initial Class | |
TA Clarion Global Real Estate Securities Service Class |
Transamerica Clarion Global Real Estate Securities VP Service Class | |
TA Hanlon Income Service Class |
Transamerica Hanlon Income VP Service Class | |
TA International Moderate Growth Initial Class |
Transamerica International Moderate Growth VP Initial Class | |
TA International Moderate Growth Service Class |
Transamerica International Moderate Growth VP Service Class | |
TA Janus Balanced Service Class |
Transamerica Janus Balanced VP Service Class | |
TA Jennison Growth Initial Class |
Transamerica Jennison Growth VP Initial Class | |
TA Jennison Growth Service Class |
Transamerica Jennison Growth VP Service Class | |
TA JPMorgan Core Bond Initial Class |
Transamerica JPMorgan Core Bond VP Initial Class | |
TA JPMorgan Core Bond Service Class |
Transamerica JPMorgan Core Bond VP Service Class | |
TA JPMorgan Enhanced Index Initial Class |
Transamerica JPMorgan Enhanced Index VP Initial Class | |
TA JPMorgan Enhanced Index Service Class |
Transamerica JPMorgan Enhanced Index VP Service Class | |
TA JPMorgan Mid Cap Value Initial Class |
Transamerica JPMorgan Mid Cap Value VP Initial Class | |
TA JPMorgan Mid Cap Value Service Class |
Transamerica JPMorgan Mid Cap Value VP Service Class |
16
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
1. Organization and Summary of Significant Accounting Policies (continued)
Subaccount Investment by Mutual Fund:
Subaccount |
Mutual Fund | |
Transamerica Series Trust |
Transamerica Series Trust | |
TA JPMorgan Tactical Allocation Initial Class |
Transamerica JPMorgan Tactical Allocation VP Initial Class | |
TA JPMorgan Tactical Allocation Service Class |
Transamerica JPMorgan Tactical Allocation VP Service Class | |
TA MFS International Equity Initial Class |
Transamerica MFS International Equity Initial Class | |
TA MFS International Equity Service Class |
Transamerica MFS International Equity Service Class | |
TA Morgan Stanley Capital Growth Initial Class |
Transamerica Morgan Stanley Capital Growth VP Initial Class | |
TA Morgan Stanley Capital Growth Service Class |
Transamerica Morgan Stanley Capital Growth VP Service Class | |
TA Morgan Stanley Mid-Cap Growth Initial Class |
Transamerica Morgan Stanley Mid-Cap Growth VP Initial Class | |
TA Morgan Stanley Mid-Cap Growth Service Class |
Transamerica Morgan Stanley Mid-Cap Growth VP Service Class | |
TA Multi-Managed Balanced Initial Class |
Transamerica Multi-Managed Balanced VP Initial Class | |
TA Multi-Managed Balanced Service Class |
Transamerica Multi-Managed Balanced VP Service Class | |
TA PIMCO Tactical - Balanced Service Class |
Transamerica PIMCO Tactical - Balanced VP Service Class | |
TA PIMCO Tactical - Conservative Service Class |
Transamerica PIMCO Tactical - Conservative VP Service Class | |
TA PIMCO Tactical - Growth Service Class |
Transamerica PIMCO Tactical - Growth VP Service Class | |
TA PIMCO Total Return Initial Class |
Transamerica PIMCO Total Return VP Initial Class | |
TA PIMCO Total Return Service Class |
Transamerica PIMCO Total Return VP Service Class | |
TA Systematic Small/Mid Cap Value Initial Class |
Transamerica Systematic Small/Mid Cap Value VP Initial Class | |
TA Systematic Small/Mid Cap Value Service Class |
Transamerica Systematic Small/Mid Cap Value VP Service Class | |
TA T. Rowe Price Small Cap Initial Class |
Transamerica T. Rowe Price Small Cap VP Initial Class | |
TA T. Rowe Price Small Cap Service Class |
Transamerica T. Rowe Price Small Cap VP Service Class | |
TA Vanguard ETF - Balanced Service Class |
Transamerica Vanguard ETF - Balanced VP Service Class | |
TA Vanguard ETF - Growth Service Class |
Transamerica Vanguard ETF - Growth VP Service Class | |
TA WMC Diversified Growth Initial Class |
Transamerica WMC Diversified Growth VP Initial Class | |
TA WMC Diversified Growth Service Class |
Transamerica WMC Diversified Growth VP Service Class |
Each period reported on reflects a full twelve month period except as follows:
Subaccount |
Inception Date | |
TA Aegon Tactical Vanguard ETF - Conservative Service Class |
||
TA Aegon Tactical Vanguard ETF - Growth Service Class |
||
TA Jennison Growth Initial Class |
||
TA Jennison Growth Service Class |
||
TA Hanlon Income Service Class |
||
TA Janus Balanced Service Class |
||
TA PIMCO Tactical - Balanced Service Class |
||
TA PIMCO Tactical - Conservative Service Class |
||
TA PIMCO Tactical - Growth Service Class |
||
TA BNP Paribas Large Cap Growth Initial Class |
||
TA BNP Paribas Large Cap Growth Service Class |
17
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
1. Organization and Summary of Significant Accounting Policies (continued)
The following subaccount name changes were made effective during the fiscal year ended December 31, 2013:
Subaccount |
Formerly | |
TA Barrow Hanley Dividend Focused Initial Class |
TA BlackRock Large Cap Value Initial Class | |
TA Barrow Hanley Dividend Focused Service Class |
TA BlackRock Large Cap Value Service Class | |
TA BNP Paribas Large Cap Growth Initial Class |
TA Multi Managed Large-Cap Core Initial Class | |
TA BNP Paribas Large Cap Growth Service Class |
TA Multi Managed Large-Cap Core Service Class | |
TA Vanguard ETF - Balanced Service Class |
TA Vanguard ETF Index - Balanced Service Class | |
TA Vanguard ETF - Growth Service Class |
TA Vanguard ETF Index - Growth Service Class |
During the current year the following subaccounts were liquidated and subsequently reinvested:
Reinvested Subaccount |
Liquidated Subaccount | |
TA Third Avenue Value Initial Class |
TA Systematic Small/Mid Cap Value Initial Class | |
TA Third Avenue Value Service Class |
TA Systematic Small/Mid Cap Value Service Class |
Investments
Net purchase payments received by the Separate Account are invested in the portfolios of the Mutual Funds as selected by the contract owner. Investments are stated at the closing net asset values per share on December 31, 2013.
Realized capital gains and losses from sales of shares in the Separate Account are determined on the first-in, first-out basis. Investment transactions are accounted for on the trade date (date the order to buy or sell is executed) and dividend income is recorded on the ex-dividend date. Unrealized gains or losses from investments in the Mutual Funds are included in the Statements of Operations and Changes in Net Assets.
Dividend Income
Dividends received from the Mutual Fund investments are reinvested to purchase additional mutual fund shares.
Accounting Policy
The financial statements included herein have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for variable annuity separate accounts registered as unit investment trusts. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions regarding matters that affect the reported amount of assets and liabilities. Actual results could differ from those estimates.
18
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
2. Investments
The aggregate cost of purchases and proceeds from sales of investments for the period ended December 31, 2013 were as follows:
Subaccount |
Purchases | Sales | ||||||
Fidelity® VIP Contrafund® Service Class 2 |
$ | 897,742 | $ | 4,198,821 | ||||
Fidelity® VIP Equity-Income Service Class 2 |
1,036,665 | 1,929,566 | ||||||
Fidelity® VIP Growth Opportunities Service Class 2 |
45,410 | 721,059 | ||||||
Fidelity® VIP Index 500 Service Class 2 |
6,935 | 32,716 | ||||||
Access VP High Yield |
2,306,012 | 1,705,740 | ||||||
ProFund VP Asia 30 |
1,190,918 | 854,853 | ||||||
ProFund VP Basic Materials |
1,042,437 | 1,531,577 | ||||||
ProFund VP Bull |
13,381,719 | 10,397,865 | ||||||
ProFund VP Consumer Services |
3,707,577 | 2,303,424 | ||||||
ProFund VP Emerging Markets |
4,500,264 | 4,090,019 | ||||||
ProFund VP Europe 30 |
1,091,454 | 1,058,347 | ||||||
ProFund VP Falling U.S. Dollar |
204,869 | 187,285 | ||||||
ProFund VP Financials |
4,965,499 | 2,648,400 | ||||||
ProFund VP International |
6,703,554 | 6,424,280 | ||||||
ProFund VP Japan |
2,321,173 | 1,597,328 | ||||||
ProFund VP Mid-Cap |
16,246,372 | 16,392,287 | ||||||
ProFund VP Money Market |
60,483,957 | 64,236,875 | ||||||
ProFund VP NASDAQ-100 |
7,326,847 | 7,696,866 | ||||||
ProFund VP Oil & Gas |
2,096,558 | 2,824,422 | ||||||
ProFund VP Pharmaceuticals |
2,470,652 | 1,884,819 | ||||||
ProFund VP Precious Metals |
1,760,358 | 2,632,720 | ||||||
ProFund VP Short Emerging Markets |
587,470 | 603,642 | ||||||
ProFund VP Short International |
350,737 | 373,164 | ||||||
ProFund VP Short NASDAQ-100 |
1,684,719 | 1,991,836 | ||||||
ProFund VP Short Small-Cap |
536,120 | 608,854 | ||||||
ProFund VP Small-Cap |
22,467,693 | 22,102,124 | ||||||
ProFund VP Small-Cap Value |
4,159,902 | 2,381,859 | ||||||
ProFund VP Telecommunications |
364,950 | 3,447,686 | ||||||
ProFund VP U.S. Government Plus |
1,615,734 | 3,264,896 | ||||||
ProFund VP UltraSmall-Cap |
4,573,232 | 3,084,306 | ||||||
ProFund VP Utilities |
1,680,302 | 4,518,879 | ||||||
TA AEGON High Yield Bond Initial Class |
9,047,811 | 19,355,865 | ||||||
TA Aegon High Yield Bond Service Class |
178,920 | 239,635 | ||||||
TA Aegon Money Market Initial Class |
23,696,672 | 30,760,742 | ||||||
TA Aegon Money Market Service Class |
154,036 | 447,976 | ||||||
TA Aegon Tactical Vanguard ETF - Conservative Service Class |
283,557 | 113,580 |
19
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
2. Investments (continued)
Subaccount |
Purchases | Sales | ||||||
TA Aegon Tactical Vanguard ETF - Growth Service Class |
$ | 573,576 | $ | 1,116,882 | ||||
TA AEGON U.S. Government Securities Initial Class |
4,263,501 | 8,290,876 | ||||||
TA Aegon U.S. Government Securities Service Class |
70,333 | 103,583 | ||||||
TA AllianceBernstein Dynamic Allocation Initial Class |
1,446,950 | 2,302,079 | ||||||
TA AllianceBernstein Dynamic Allocation Service Class |
41,538 | 50,665 | ||||||
TA Asset Allocation - Conservative Initial Class |
17,304,137 | 41,014,964 | ||||||
TA Asset Allocation - Conservative Service Class |
81,340 | 1,168,126 | ||||||
TA Asset Allocation - Growth Initial Class |
6,384,351 | 15,042,364 | ||||||
TA Asset Allocation - Growth Service Class |
103,838 | 557,548 | ||||||
TA Asset Allocation - Moderate Initial Class |
13,965,537 | 33,500,616 | ||||||
TA Asset Allocation - Moderate Service Class |
173,107 | 1,124,106 | ||||||
TA Asset Allocation - Moderate Growth Initial Class |
18,623,434 | 32,520,712 | ||||||
TA Asset Allocation - Moderate Growth Service Class |
535,064 | 1,404,933 | ||||||
TA Barrow Hanley Dividend Focused Initial Class |
8,681,991 | 13,809,610 | ||||||
TA Barrow Hanley Dividend Focused Service Class |
168,158 | 232,862 | ||||||
TA BNP Paribas Large Cap Growth Initial Class |
4,590,679 | 2,930,565 | ||||||
TA BNP Paribas Large Cap Growth Service Class |
35,104 | 33,321 | ||||||
TA Clarion Global Real Estate Securities Initial Class |
7,687,287 | 10,853,275 | ||||||
TA Clarion Global Real Estate Securities Service Class |
153,635 | 162,859 | ||||||
TA Hanlon Income Service Class |
940,953 | 3,070,387 | ||||||
TA International Moderate Growth Initial Class |
855,941 | 1,858,864 | ||||||
TA International Moderate Growth Service Class |
21,303 | 23,065 | ||||||
TA Janus Balanced Service Class |
1,329,706 | 481,982 | ||||||
TA Jennison Growth Initial Class |
6,063,293 | 4,719,127 | ||||||
TA Jennison Growth Service Class |
97,482 | 131,653 | ||||||
TA JPMorgan Core Bond Initial Class |
4,713,916 | 24,900,831 | ||||||
TA JPMorgan Core Bond Service Class |
128,668 | 281,468 | ||||||
TA JPMorgan Enhanced Index Initial Class |
6,878,977 | 5,193,322 | ||||||
TA JPMorgan Enhanced Index Service Class |
110,223 | 126,437 | ||||||
TA JPMorgan Mid Cap Value Initial Class |
607,992 | 3,229,242 | ||||||
TA JPMorgan Mid Cap Value Service Class |
2,969 | 50,271 | ||||||
TA JPMorgan Tactical Allocation Initial Class |
2,069,925 | 9,773,585 | ||||||
TA JPMorgan Tactical Allocation Service Class |
28,754 | 230,955 | ||||||
TA MFS International Equity Initial Class |
7,630,633 | 10,316,314 | ||||||
TA MFS International Equity Service Class |
122,889 | 145,937 | ||||||
TA Morgan Stanley Capital Growth Initial Class |
3,253,681 | 5,922,659 |
20
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
2. Investments (continued)
Subaccount |
Purchases | Sales | ||||||
TA Morgan Stanley Capital Growth Service Class |
$ | 53,387 | $ | 100,666 | ||||
TA Morgan Stanley Mid-Cap Growth Initial Class |
8,428,234 | 23,339,455 | ||||||
TA Morgan Stanley Mid-Cap Growth Service Class |
220,673 | 325,981 | ||||||
TA Multi-Managed Balanced Initial Class |
13,596,656 | 17,526,151 | ||||||
TA Multi-Managed Balanced Service Class |
324,484 | 286,974 | ||||||
TA PIMCO Tactical - Balanced Service Class |
1,430,947 | 989,391 | ||||||
TA PIMCO Tactical - Conservative Service Class |
417,602 | 1,396,766 | ||||||
TA PIMCO Tactical - Growth Service Class |
707,042 | 717,792 | ||||||
TA PIMCO Total Return Initial Class |
14,801,271 | 33,765,981 | ||||||
TA PIMCO Total Return Service Class |
424,940 | 397,732 | ||||||
TA Systematic Small/Mid Cap Value Initial Class |
83,441,912 | 15,280,882 | ||||||
TA Systematic Small/Mid Cap Value Service Class |
1,430,793 | 557,768 | ||||||
TA T. Rowe Price Small Cap Initial Class |
10,104,701 | 9,373,953 | ||||||
TA T. Rowe Price Small Cap Service Class |
136,752 | 89,627 | ||||||
TA Vanguard ETF - Balanced Service Class |
2,408,743 | 528,168 | ||||||
TA Vanguard ETF - Growth Service Class |
1,220,304 | 320,640 | ||||||
TA WMC Diversified Growth Initial Class |
7,587,391 | 54,158,356 | ||||||
TA WMC Diversified Growth Service Class |
265,061 | 647,241 |
21
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
3. Change in Units
The change in units outstanding were as follows:
Year Ended December 31, 2013 | Year Ended December 31, 2012 | |||||||||||||||||||||||
Subaccount |
Units Purchased | Units Redeemed and Transferred to/from |
Net Increase (Decrease) |
Units Purchased | Units Redeemed and Transferred to/from |
Net Increase (Decrease) |
||||||||||||||||||
Fidelity® VIP Contrafund® Service Class 2 |
8,288 | (201,841 | ) | (193,553 | ) | — | (248,007 | ) | (248,007 | ) | ||||||||||||||
Fidelity® VIP Equity-Income Service Class 2 |
980 | (109,332 | ) | (108,352 | ) | — | (145,087 | ) | (145,087 | ) | ||||||||||||||
Fidelity® VIP Growth Opportunities Service Class 2 |
— | (61,313 | ) | (61,313 | ) | — | (63,505 | ) | (63,505 | ) | ||||||||||||||
Fidelity® VIP Index 500 Service Class 2 |
— | (1,862 | ) | (1,862 | ) | — | (628 | ) | (628 | ) | ||||||||||||||
Access VP High Yield |
8,962 | 21,452 | 30,414 | — | (131,515 | ) | (131,515 | ) | ||||||||||||||||
ProFund VP Asia 30 |
577 | 45,065 | 45,642 | — | (54,202 | ) | (54,202 | ) | ||||||||||||||||
ProFund VP Basic Materials |
— | (50,800 | ) | (50,800 | ) | — | (325,665 | ) | (325,665 | ) | ||||||||||||||
ProFund VP Bull |
84,033 | 166,150 | 250,183 | — | 192,503 | 192,503 | ||||||||||||||||||
ProFund VP Consumer Services |
23,117 | 79,541 | 102,658 | — | (479,137 | ) | (479,137 | ) | ||||||||||||||||
ProFund VP Emerging Markets |
9,061 | 41,242 | 50,303 | 200,606 | (67,180 | ) | 133,426 | |||||||||||||||||
ProFund VP Europe 30 |
2,020 | (1,211 | ) | 809 | — | 18,667 | 18,667 | |||||||||||||||||
ProFund VP Falling U.S. Dollar |
9,141 | (6,719 | ) | 2,422 | — | (18,911 | ) | (18,911 | ) | |||||||||||||||
ProFund VP Financials |
12,341 | 385,006 | 397,347 | — | (17,086 | ) | (17,086 | ) | ||||||||||||||||
ProFund VP International |
41,034 | (60,568 | ) | (19,534 | ) | 34,202 | 403,410 | 437,612 | ||||||||||||||||
ProFund VP Japan |
13,650 | 118,165 | 131,815 | — | (46,176 | ) | (46,176 | ) | ||||||||||||||||
ProFund VP Mid-Cap |
36,727 | (86,053 | ) | (49,326 | ) | — | 461,159 | 461,159 | ||||||||||||||||
ProFund VP Money Market |
299,944 | (672,933 | ) | (372,989 | ) | — | (535,295 | ) | (535,295 | ) | ||||||||||||||
ProFund VP NASDAQ-100 |
37,410 | (73,482 | ) | (36,072 | ) | 42,465 | (77,160 | ) | (34,695 | ) | ||||||||||||||
ProFund VP Oil & Gas |
1,417 | (87,634 | ) | (86,217 | ) | — | (307,567 | ) | (307,567 | ) | ||||||||||||||
ProFund VP Pharmaceuticals |
4,728 | 26,685 | 31,413 | — | (479,870 | ) | (479,870 | ) | ||||||||||||||||
ProFund VP Precious Metals |
49,402 | (151,136 | ) | (101,734 | ) | — | (117,681 | ) | (117,681 | ) | ||||||||||||||
ProFund VP Short Emerging Markets |
35,467 | (40,237 | ) | (4,770 | ) | 1,102 | (9,820 | ) | (8,718 | ) | ||||||||||||||
ProFund VP Short International |
8,361 | (12,728 | ) | (4,367 | ) | 12,169 | (1,471 | ) | 10,698 | |||||||||||||||
ProFund VP Short NASDAQ-100 |
16,088 | (103,170 | ) | (87,082 | ) | 11,898 | 27,575 | 39,473 | ||||||||||||||||
ProFund VP Short Small-Cap |
16,910 | (42,324 | ) | (25,414 | ) | 23,523 | (24,891 | ) | (1,368 | ) | ||||||||||||||
ProFund VP Small-Cap |
82,649 | (62,485 | ) | 20,164 | — | 325,509 | 325,509 | |||||||||||||||||
ProFund VP Small-Cap Value |
2,585 | 156,470 | 159,055 | — | (81,382 | ) | (81,382 | ) |
22
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
3. Change in Units (continued)
Year Ended December 31, 2013 | Year Ended December 31, 2012 | |||||||||||||||||||||||
Subaccount |
Units Purchased | Units Redeemed and Transferred to/from |
Net Increase (Decrease) |
Units Purchased | Units Redeemed and Transferred to/from |
Net Increase (Decrease) |
||||||||||||||||||
ProFund VP Telecommunications |
1,094 | (363,861 | ) | (362,767 | ) | 958,706 | (546,369 | ) | 412,337 | |||||||||||||||
ProFund VP U.S. Government Plus |
8,639 | (120,976 | ) | (112,337 | ) | — | (70,866 | ) | (70,866 | ) | ||||||||||||||
ProFund VP UltraSmall-Cap |
18,285 | 172,154 | 190,439 | — | (151,738 | ) | (151,738 | ) | ||||||||||||||||
ProFund VP Utilities |
— | (294,315 | ) | (294,315 | ) | — | (744,352 | ) | (744,352 | ) | ||||||||||||||
TA AEGON High Yield Bond Initial Class |
4,522 | (603,529 | ) | (599,007 | ) | 126,025 | (111,207 | ) | 14,818 | |||||||||||||||
TA Aegon High Yield Bond Service Class |
— | (4,075 | ) | (4,075 | ) | — | (3,101 | ) | (3,101 | ) | ||||||||||||||
TA Aegon Money Market Initial Class |
371,676 | (804,336 | ) | (432,660 | ) | — | (1,518,888 | ) | (1,518,888 | ) | ||||||||||||||
TA Aegon Money Market Service Class |
3,864 | (31,792 | ) | (27,928 | ) | — | (23,137 | ) | (23,137 | ) | ||||||||||||||
TA Aegon Tactical Vanguard ETF - Conservative Service Class |
— | 14,725 | 14,725 | 21,962 | (13,366 | ) | 8,596 | |||||||||||||||||
TA Aegon Tactical Vanguard ETF - Growth Service Class |
23,043 | (68,155 | ) | (45,112 | ) | — | (41,680 | ) | (41,680 | ) | ||||||||||||||
TA Aegon U.S. Government Securities Initial Class |
4,599 | (321,120 | ) | (316,521 | ) | — | (364,899 | ) | (364,899 | ) | ||||||||||||||
TA Aegon U.S. Government Securities Service Class |
— | (3,005 | ) | (3,005 | ) | — | (16,022 | ) | (16,022 | ) | ||||||||||||||
TA AllianceBernstein Dynamic Allocation Initial Class |
4,882 | (58,371 | ) | (53,489 | ) | — | (347,731 | ) | (347,731 | ) | ||||||||||||||
TA AllianceBernstein Dynamic Allocation Service Class |
— | (494 | ) | (494 | ) | — | (4,685 | ) | (4,685 | ) | ||||||||||||||
TA Asset Allocation - Conservative Initial Class |
24,486 | (1,610,256 | ) | (1,585,770 | ) | — | (301,408 | ) | (301,408 | ) | ||||||||||||||
TA Asset Allocation - Conservative Service Class |
9 | (68,322 | ) | (68,313 | ) | — | (36,881 | ) | (36,881 | ) | ||||||||||||||
TA Asset Allocation - Growth Initial Class |
702,313 | (1,244,489 | ) | (542,176 | ) | — | (1,179,241 | ) | (1,179,241 | ) | ||||||||||||||
TA Asset Allocation - Growth Service Class |
343 | (24,816 | ) | (24,473 | ) | — | (22,836 | ) | (22,836 | ) | ||||||||||||||
TA Asset Allocation - Moderate Initial Class |
168,197 | (1,467,007 | ) | (1,298,810 | ) | — | (1,905,076 | ) | (1,905,076 | ) | ||||||||||||||
TA Asset Allocation - Moderate Service Class |
717 | (56,753 | ) | (56,036 | ) | — | (50,128 | ) | (50,128 | ) | ||||||||||||||
TA Asset Allocation - Moderate Growth Initial Class |
76,427 | (1,027,650 | ) | (951,223 | ) | — | (1,992,025 | ) | (1,992,025 | ) | ||||||||||||||
TA Asset Allocation - Moderate Growth Service Class |
661 | (49,905 | ) | (49,244 | ) | — | (41,638 | ) | (41,638 | ) | ||||||||||||||
TA Barrow Hanley Dividend Focused Initial Class |
5,343 | (222,760 | ) | (217,417 | ) | — | (478,645 | ) | (478,645 | ) | ||||||||||||||
TA Barrow Hanley Dividend Focused Service Class |
8 | (3,726 | ) | (3,718 | ) | — | (15,138 | ) | (15,138 | ) | ||||||||||||||
TA BNP Paribas Large Cap Growth Initial Class |
12,530 | 81,597 | 94,127 | 37,935 | (47,588 | ) | (9,653 | ) | ||||||||||||||||
TA BNP Paribas Large Cap Growth Service Class |
1 | 248 | 249 | — | (1,042 | ) | (1,042 | ) | ||||||||||||||||
TA Clarion Global Real Estate Securities Initial Class |
71,156 | (227,880 | ) | (156,724 | ) | 154,547 | (308,139 | ) | (153,592 | ) |
23
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
3. Change in Units (continued)
Year Ended December 31, 2013 | Year Ended December 31, 2012 | |||||||||||||||||||||||
Subaccount |
Units Purchased | Units Redeemed and Transferred to/from |
Net Increase (Decrease) |
Units Purchased | Units Redeemed and Transferred to/from |
Net Increase (Decrease) |
||||||||||||||||||
TA Clarion Global Real Estate Securities Service Class |
17 | (1,587 | ) | (1,570 | ) | — | (3,079 | ) | (3,079 | ) | ||||||||||||||
TA Hanlon Income Service Class |
95,396 | (2,382,967 | ) | (2,287,571 | ) | — | (2,502,971 | ) | (2,502,971 | ) | ||||||||||||||
TA International Moderate Growth Initial Class |
4,416 | (105,325 | ) | (100,909 | ) | — | (152,387 | ) | (152,387 | ) | ||||||||||||||
TA International Moderate Growth Service Class |
5 | (180 | ) | (175 | ) | — | (416 | ) | (416 | ) | ||||||||||||||
TA Janus Balanced Service Class |
29,340 | 777,036 | 806,376 | — | (252,010 | ) | (252,010 | ) | ||||||||||||||||
TA Jennison Growth Initial Class |
12,792 | (14,821 | ) | (2,029 | ) | — | (190,348 | ) | (190,348 | ) | ||||||||||||||
TA Jennison Growth Service Class |
398 | (3,762 | ) | (3,364 | ) | — | (3,648 | ) | (3,648 | ) | ||||||||||||||
TA JPMorgan Core Bond Initial Class |
3,991 | (794,205 | ) | (790,214 | ) | 117,243 | (255,033 | ) | (137,790 | ) | ||||||||||||||
TA JPMorgan Core Bond Service Class |
220 | (11,526 | ) | (11,306 | ) | — | (13,050 | ) | (13,050 | ) | ||||||||||||||
TA JPMorgan Enhanced Index Initial Class |
187,323 | (95,450 | ) | 91,873 | 78,740 | 80,776 | 159,516 | |||||||||||||||||
TA JPMorgan Enhanced Index Service Class |
9 | (1,009 | ) | (1,000 | ) | 203 | (825 | ) | (622 | ) | ||||||||||||||
TA JPMorgan Mid Cap Value Initial Class |
— | (109,811 | ) | (109,811 | ) | — | (129,350 | ) | (129,350 | ) | ||||||||||||||
TA JPMorgan Mid Cap Value Service Class |
— | (2,034 | ) | (2,034 | ) | — | (389 | ) | (389 | ) | ||||||||||||||
TA JPMorgan Tactical Allocation Initial Class |
212,542 | (451,804 | ) | (239,262 | ) | — | (349,397 | ) | (349,397 | ) | ||||||||||||||
TA JPMorgan Tactical Allocation Service Class |
2 | (14,517 | ) | (14,515 | ) | — | (15,586 | ) | (15,586 | ) | ||||||||||||||
TA MFS International Equity Initial Class |
190,277 | (371,580 | ) | (181,303 | ) | — | (218,560 | ) | (218,560 | ) | ||||||||||||||
TA MFS International Equity Service Class |
186 | (1,335 | ) | (1,149 | ) | — | (3,688 | ) | (3,688 | ) | ||||||||||||||
TA Morgan Stanley Capital Growth Initial Class |
6,396 | (134,889 | ) | (128,493 | ) | — | (275,409 | ) | (275,409 | ) | ||||||||||||||
TA Morgan Stanley Capital Growth Service Class |
1 | (2,412 | ) | (2,411 | ) | 206 | (2,346 | ) | (2,140 | ) | ||||||||||||||
TA Morgan Stanley Mid-Cap Growth Initial Class |
7,578 | (423,753 | ) | (416,175 | ) | — | (757,491 | ) | (757,491 | ) | ||||||||||||||
TA Morgan Stanley Mid-Cap Growth Service Class |
16 | (5,563 | ) | (5,547 | ) | — | (18,476 | ) | (18,476 | ) | ||||||||||||||
TA Multi-Managed Balanced Initial Class |
216,384 | (666,193 | ) | (449,809 | ) | — | (916,414 | ) | (916,414 | ) | ||||||||||||||
TA Multi-Managed Balanced Service Class |
2 | 1,056 | 1,058 | — | (3,190 | ) | (3,190 | ) | ||||||||||||||||
TA PIMCO Tactical - Balanced Service Class |
60,679 | 395,266 | 455,945 | — | (1,516,641 | ) | (1,516,641 | ) | ||||||||||||||||
TA PIMCO Tactical - Conservative Service Class |
46,070 | (1,114,781 | ) | (1,068,711 | ) | — | (935,011 | ) | (935,011 | ) | ||||||||||||||
TA PIMCO Tactical - Growth Service Class |
106,397 | (148,407 | ) | (42,010 | ) | — | (82,136 | ) | (82,136 | ) | ||||||||||||||
TA PIMCO Total Return Initial Class |
65,976 | (1,320,730 | ) | (1,254,754 | ) | 93,474 | 281,739 | 375,213 |
24
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
3. Change in Units (continued)
Year Ended December 31, 2013 | Year Ended December 31, 2012 | |||||||||||||||||||||||
Subaccount |
Units Purchased | Units Redeemed and Transferred to/from |
Net Increase (Decrease) |
Units Purchased | Units Redeemed and Transferred to/from |
Net Increase (Decrease) |
||||||||||||||||||
TA PIMCO Total Return Service Class |
252 | 893 | 1,145 | — | (11,623 | ) | (11,623 | ) | ||||||||||||||||
TA Systematic Small/Mid Cap Value Initial Class |
160,208 | 2,814,607 | 2,974,815 | — | (415,896 | ) | (415,896 | ) | ||||||||||||||||
TA Systematic Small/Mid Cap Value Service Class |
62 | 39,166 | 39,228 | — | (12,377 | ) | (12,377 | ) | ||||||||||||||||
TA T. Rowe Price Small Cap Initial Class |
168,058 | (173,989 | ) | (5,931 | ) | 35,958 | (59,435 | ) | (23,477 | ) | ||||||||||||||
TA T. Rowe Price Small Cap Service Class |
4 | 1,376 | 1,380 | — | (2,614 | ) | (2,614 | ) | ||||||||||||||||
TA Vanguard ETF - Balanced Service Class |
123,188 | 33,575 | 156,763 | 29,054 | 11,052 | 40,106 | ||||||||||||||||||
TA Vanguard ETF - Growth Service Class |
46,668 | 24,527 | 71,195 | 2,296 | 4,756 | 7,052 | ||||||||||||||||||
TA WMC Diversified Growth Initial Class |
130,650 | (2,827,774 | ) | (2,697,124 | ) | — | (3,473,880 | ) | (3,473,880 | ) | ||||||||||||||
TA WMC Diversified Growth Service Class |
291 | (20,700 | ) | (20,409 | ) | — | (23,091 | ) | (23,091 | ) |
25
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
4. Financial Highlights
The Separate Account offers various death benefit options, which have differing fees that are charged against the contract owner’s account balance. These charges are discussed in more detail in the individual’s policy. Differences in the fee structures for these units result in different unit values, expense ratios, and total returns.
Subaccount |
Year Ended | Units | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio |
Net Assets | Investment Income Ratio* |
Expense Ratio** Lowest to Highest |
Total Return*** Corresponding to Lowest to Highest Expense Ratio |
|||||||||||||||||||||||||||||||||||||||
Fidelity® VIP Contrafund® Service Class 2 |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 1,509,718 | $ | 19.03 | to | $ | 13.07 | $ | 28,097,273 | 0.82 | % | 1.25 | % | to | 2.50 | % | 29.34 | % | to | 27.76 | % | ||||||||||||||||||||||||||
12/31/2012 | 1,703,271 | 14.71 | to | 10.23 | 24,576,332 | 1.08 | 1.25 | to | 2.50 | 14.70 | to | 13.29 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 1,951,278 | 12.83 | to | 10.51 | 24,580,502 | 0.75 | 1.25 | to | 2.50 | (3.98 | ) | to | (5.15 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 2,174,148 | 13.36 | to | 12.60 | 28,600,501 | 0.98 | 1.25 | to | 2.50 | 15.48 | to | 14.86 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 2,575,567 | 11.57 | to | 10.97 | 29,369,358 | 1.16 | 1.25 | to | 1.80 | 33.80 | to | 33.07 | ||||||||||||||||||||||||||||||||||
Fidelity® VIP Equity-Income Service Class 2 |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 636,126 | 17.46 | to | 15.68 | 10,859,970 | 2.21 | 1.25 | to | 2.50 | 26.25 | to | 24.71 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 744,478 | 13.83 | to | 12.57 | 10,080,918 | 2.78 | 1.25 | to | 2.50 | 15.60 | to | 14.19 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 889,565 | 11.96 | to | 11.01 | 10,438,450 | 2.13 | 1.25 | to | 2.50 | (0.59 | ) | to | (1.80 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 1,063,959 | 12.03 | to | 11.35 | 12,592,362 | 1.57 | 1.25 | to | 2.50 | 13.50 | to | 12.89 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 1,270,306 | 10.60 | to | 10.05 | 13,263,253 | 2.05 | 1.25 | to | 1.80 | 28.28 | to | 27.59 | ||||||||||||||||||||||||||||||||||
Fidelity® VIP Growth Opportunities Service Class 2 |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 294,968 | 12.67 | to | 14.80 | 3,671,822 | 0.05 | 1.25 | to | 2.50 | 35.84 | to | 34.19 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 356,281 | 9.32 | to | 11.03 | 3,268,105 | 0.15 | 1.25 | to | 2.50 | 17.84 | to | 16.40 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 419,786 | 7.91 | to | 7.42 | 3,267,264 | — | 1.25 | to | 1.80 | 0.71 | to | 0.17 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 461,392 | 7.86 | to | 7.41 | 3,567,194 | — | 1.25 | to | 1.80 | 21.95 | to | 21.29 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 638,516 | 6.44 | to | 6.11 | 4,058,057 | 0.25 | 1.25 | to | 1.80 | 43.67 | to | 42.89 | ||||||||||||||||||||||||||||||||||
Fidelity® VIP Index 500 Service Class 2 |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 16,813 | 17.32 | to | 16.67 | 280,409 | 1.61 | 1.40 | to | 1.80 | 30.09 | to | 29.58 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 18,675 | 13.31 | to | 12.86 | 240,364 | 1.90 | 1.40 | to | 1.80 | 14.03 | to | 13.58 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 19,303 | 11.68 | to | 11.32 | 218,743 | 1.66 | 1.40 | to | 1.80 | 0.38 | to | (0.01 | ) | |||||||||||||||||||||||||||||||||
12/31/2010 | 21,946 | 11.63 | to | 11.33 | 248,696 | 1.70 | 1.40 | to | 1.80 | 13.15 | to | 12.70 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 24,049 | 10.28 | to | 10.05 | 241,815 | 2.34 | 1.40 | to | 1.80 | 24.56 | to | 24.07 | ||||||||||||||||||||||||||||||||||
Access VP High Yield |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 231,376 | 16.02 | to | 11.40 | 3,659,857 | 2.66 | 1.25 | to | 2.50 | 8.66 | to | 7.34 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 200,962 | 14.74 | to | 14.32 | 2,928,925 | 3.91 | 1.25 | to | 2.50 | 12.71 | to | 12.10 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 332,477 | 13.08 | to | 12.78 | 4,315,511 | 1.00 | 1.25 | to | 1.80 | 1.48 | to | 0.93 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 298,006 | 12.89 | to | 12.66 | 3,821,747 | 8.72 | 1.25 | to | 1.80 | 14.94 | to | 14.32 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 733,601 | 11.21 | to | 11.07 | 8,198,167 | 8.70 | 1.25 | to | 1.80 | 15.47 | to | 14.85 | ||||||||||||||||||||||||||||||||||
ProFund VP Asia 30 |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 345,193 | 9.09 | to | 10.79 | 3,096,828 | 0.06 | 1.25 | to | 2.50 | 13.55 | to | 12.17 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 299,551 | 8.00 | to | 10.32 | 2,371,773 | — | 1.25 | to | 2.50 | 14.04 | to | 12.65 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 353,753 | 7.02 | to | 6.85 | 2,458,400 | 0.04 | 1.25 | to | 2.50 | (27.90 | ) | to | (28.29 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 663,458 | 9.73 | to | 9.56 | 6,414,341 | 0.07 | 1.25 | to | 1.80 | 12.50 | to | 11.89 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 657,444 | 8.65 | to | 8.54 | 5,665,586 | 1.06 | 1.25 | to | 1.80 | 52.30 | to | 51.47 | ||||||||||||||||||||||||||||||||||
ProFund VP Basic Materials |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 289,506 | 11.38 | to | 11.07 | 3,264,181 | 0.97 | 1.25 | to | 2.50 | 16.97 | to | 15.54 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 340,306 | 9.73 | to | 10.82 | 3,283,787 | 0.34 | 1.25 | to | 2.50 | 7.14 | to | 5.83 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 665,971 | 9.08 | to | 8.87 | 6,002,319 | 0.13 | 1.25 | to | 2.50 | (17.19 | ) | to | (17.63 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 912,348 | 10.97 | to | 10.77 | 9,958,355 | 0.54 | 1.25 | to | 1.80 | 28.10 | to | 27.40 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 649,687 | 8.56 | to | 8.45 | 5,545,294 | 0.75 | 1.25 | to | 1.80 | 60.37 | to | 59.50 | ||||||||||||||||||||||||||||||||||
ProFund VP Bull |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 757,362 | 13.99 | to | 12.79 | 10,421,295 | — | 1.25 | to | 2.50 | 28.15 | to | 26.59 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 507,179 | 10.92 | to | 10.53 | 5,478,815 | — | 1.25 | to | 2.50 | 12.48 | to | 11.87 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 314,676 | 9.70 | to | 9.42 | 3,025,920 | — | 1.25 | to | 1.80 | (1.23 | ) | to | (1.76 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 410,450 | 9.83 | to | 9.59 | 4,006,999 | 0.14 | 1.25 | to | 1.80 | 11.19 | to | 10.59 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 875,361 | 8.84 | to | 8.67 | 7,696,051 | 1.16 | 1.25 | to | 1.80 | 22.81 | to | 22.15 |
26
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
4. Financial Highlights (continued)
Subaccount |
Year Ended | Units | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio |
Net Assets | Investment Income Ratio* |
Expense Ratio** Lowest to Highest |
Total Return*** Corresponding to Lowest to Highest Expense Ratio |
|||||||||||||||||||||||||||||||||||||||
ProFund VP Consumer Services |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 264,798 | $ | 16.69 | to | $ | 15.77 | $ | 4,378,895 | 0.27 | % | 1.25 | % | to | 2.50 | % | 38.14 | % | to | 36.46 | % | ||||||||||||||||||||||||||
12/31/2012 | 162,140 | 12.08 | to | 11.56 | 1,945,007 | — | 1.25 | to | 2.50 | 20.59 | to | 19.11 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 641,277 | 10.02 | to | 11.51 | 6,392,237 | — | 1.25 | to | 2.50 | 4.20 | to | 2.93 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 383,045 | 9.61 | to | 9.44 | 3,668,029 | — | 1.25 | to | 2.50 | 19.89 | to | 19.24 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 12,259 | 8.02 | to | 7.92 | 97,962 | — | 1.25 | to | 1.80 | 29.19 | to | 28.49 | ||||||||||||||||||||||||||||||||||
ProFund VP Emerging Markets |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 917,069 | 7.59 | to | 7.97 | 6,883,811 | 0.74 | 1.25 | to | 2.50 | (7.58 | ) | to | (8.71 | ) | ||||||||||||||||||||||||||||||||
12/31/2012 | 866,766 | 8.21 | to | 8.73 | 7,058,966 | 1.07 | 1.25 | to | 2.50 | 5.25 | to | 3.96 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 733,340 | 7.80 | to | 8.40 | 5,679,386 | — | 1.25 | to | 2.50 | (20.69 | ) | to | (21.66 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 1,507,451 | 9.84 | to | 9.66 | 14,751,885 | — | 1.25 | to | 2.50 | 8.41 | to | 7.83 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 1,520,159 | 9.07 | to | 8.96 | 13,741,556 | 0.12 | 1.25 | to | 1.80 | 60.35 | to | 59.49 | ||||||||||||||||||||||||||||||||||
ProFund VP Europe 30 |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 48,595 | 9.39 | to | 14.37 | 455,145 | 0.71 | 1.25 | to | 2.50 | 20.13 | to | 18.67 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 47,786 | 7.82 | to | 12.11 | 376,164 | 2.24 | 1.25 | to | 2.50 | 15.15 | to | 13.74 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 29,119 | 6.79 | to | 6.63 | 196,452 | 0.42 | 1.25 | to | 2.50 | (10.01 | ) | to | (10.49 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 45,403 | 7.54 | to | 7.41 | 340,241 | 1.81 | 1.25 | to | 1.80 | 1.37 | to | 0.82 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 70,963 | 7.44 | to | 7.35 | 525,522 | 2.68 | 1.25 | to | 1.80 | 30.66 | to | 29.95 | ||||||||||||||||||||||||||||||||||
ProFund VP Falling U.S. Dollar |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 24,962 | 8.87 | to | 8.57 | 219,496 | — | 1.25 | to | 1.80 | (3.22 | ) | to | (3.74 | ) | ||||||||||||||||||||||||||||||||
12/31/2012 | 22,540 | 9.17 | to | 8.91 | 205,066 | — | 1.25 | to | 1.80 | (2.00 | ) | to | (2.53 | ) | ||||||||||||||||||||||||||||||||
12/31/2011 | 41,451 | 9.36 | to | 9.14 | 384,496 | — | 1.25 | to | 1.80 | (3.92 | ) | to | (4.44 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 40,145 | 9.74 | to | 9.56 | 388,977 | — | 1.25 | to | 1.80 | (3.79 | ) | to | (4.31 | ) | ||||||||||||||||||||||||||||||||
12/31/2009 | 65,539 | 10.12 | to | 9.99 | 661,187 | 3.06 | 1.25 | to | 1.80 | 2.04 | to | 1.49 | ||||||||||||||||||||||||||||||||||
ProFund VP Financials |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 654,455 | 7.19 | to | 13.13 | 4,677,907 | 0.33 | 1.25 | to | 2.50 | 30.45 | to | 28.86 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 257,108 | 5.51 | to | 10.33 | 1,428,016 | 0.27 | 1.25 | to | 2.50 | 23.18 | to | 21.67 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 274,194 | 4.47 | to | 8.49 | 1,217,438 | — | 1.25 | to | 2.50 | (14.89 | ) | to | (15.93 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 428,069 | 5.26 | to | 5.16 | 2,237,141 | 0.39 | 1.25 | to | 2.50 | 9.56 | to | 8.97 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 458,108 | 4.80 | to | 4.74 | 2,189,669 | 2.19 | 1.25 | to | 1.80 | 13.59 | to | 12.97 | ||||||||||||||||||||||||||||||||||
ProFund VP International |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 605,839 | 8.32 | to | 12.37 | 5,113,358 | — | 1.25 | to | 2.50 | 18.02 | to | 16.58 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 625,373 | 7.05 | to | 6.85 | 4,414,657 | — | 1.25 | to | 2.50 | 14.50 | to | 13.87 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 187,761 | 6.15 | to | 6.01 | 1,147,807 | — | 1.25 | to | 1.80 | (15.40 | ) | to | (15.85 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 597,504 | 7.27 | to | 7.14 | 4,326,839 | — | 1.25 | to | 1.80 | 6.47 | to | 5.90 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 524,061 | 6.83 | to | 6.75 | 3,569,383 | 0.03 | 1.25 | to | 1.80 | 23.11 | to | 22.44 | ||||||||||||||||||||||||||||||||||
ProFund VP Japan |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 144,283 | 7.67 | to | 14.76 | 1,120,854 | — | 1.25 | to | 2.35 | 46.41 | to | 44.83 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 12,468 | 5.24 | to | 5.09 | 87,938 | — | 1.25 | to | 2.35 | 21.42 | to | 20.77 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 58,644 | 4.32 | to | 4.22 | 251,863 | — | 1.25 | to | 1.80 | (19.54 | ) | to | (19.98 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 6,346 | 5.37 | to | 5.27 | 33,989 | — | 1.25 | to | 1.80 | (7.69 | ) | to | (8.19 | ) | ||||||||||||||||||||||||||||||||
12/31/2009 | 17,413 | 5.81 | to | 5.74 | 101,037 | 0.19 | 1.25 | to | 1.80 | 8.97 | to | 8.38 | ||||||||||||||||||||||||||||||||||
ProFund VP Mid-Cap |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 655,474 | 13.32 | to | 12.91 | 8,608,588 | — | 1.25 | to | 2.50 | 29.18 | to | 27.60 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 704,800 | 10.31 | to | 10.02 | 7,214,633 | — | 1.25 | to | 2.50 | 14.11 | to | 13.49 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 243,641 | 9.04 | to | 8.83 | 2,186,356 | — | 1.25 | to | 1.80 | (5.36 | ) | to | (5.87 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 411,183 | 9.55 | to | 9.38 | 3,905,297 | — | 1.25 | to | 1.80 | 22.52 | to | 21.86 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 331,619 | 7.80 | to | 7.70 | 2,577,703 | — | 1.25 | to | 1.80 | 31.24 | to | 30.53 | ||||||||||||||||||||||||||||||||||
ProFund VP Money Market |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 944,489 | 9.75 | to | 9.52 | 9,100,854 | 0.02 | 1.25 | to | 2.50 | (1.21 | ) | to | (2.42 | ) | ||||||||||||||||||||||||||||||||
12/31/2012 | 1,317,478 | 9.87 | to | 9.52 | 12,853,646 | 0.02 | 1.25 | to | 2.50 | (1.22 | ) | to | (1.76 | ) | ||||||||||||||||||||||||||||||||
12/31/2011 | 1,852,773 | 9.99 | to | 9.69 | 18,340,831 | 0.02 | 1.25 | to | 1.80 | (1.21 | ) | to | (1.74 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 981,614 | 10.11 | to | 9.87 | 9,813,635 | 0.02 | 1.25 | to | 1.80 | (1.21 | ) | to | (1.75 | ) | ||||||||||||||||||||||||||||||||
12/31/2009 | 1,848,310 | 10.24 | to | 10.04 | 18,791,752 | 0.04 | 1.25 | to | 1.80 | (1.20 | ) | to | (1.74 | ) |
27
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
4. Financial Highlights (continued)
Subaccount |
Year Ended | Units | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio |
Net Assets | Investment Income Ratio* |
Expense Ratio** Lowest to Highest |
Total Return*** Corresponding to Lowest to Highest Expense Ratio |
|||||||||||||||||||||||||||||||||||||||
ProFund VP NASDAQ-100 |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 291,134 | $ | 20.14 | to | $ | 14.09 | $ | 5,739,035 | — | % | 1.25 | % | to | 2.50 | % | 32.62 | % | to | 31.00 | % | ||||||||||||||||||||||||||
12/31/2012 | 327,206 | 15.18 | to | 10.76 | 4,867,463 | — | 1.25 | to | 2.50 | 14.79 | to | 13.38 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 361,901 | 13.23 | to | 12.83 | 4,720,266 | — | 1.25 | to | 2.50 | 0.21 | to | (0.34 | ) | |||||||||||||||||||||||||||||||||
12/31/2010 | 440,010 | 13.20 | to | 12.88 | 5,769,428 | — | 1.25 | to | 1.80 | 16.79 | to | 16.15 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 315,036 | 11.30 | to | 11.09 | 3,536,691 | — | 1.25 | to | 1.80 | 50.13 | to | 49.32 | ||||||||||||||||||||||||||||||||||
ProFund VP Oil & Gas |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 507,327 | 11.34 | to | 13.29 | 5,684,096 | 0.43 | 1.25 | to | 2.50 | 22.54 | to | 21.05 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 593,544 | 9.26 | to | 10.98 | 5,436,496 | 0.14 | 1.25 | to | 2.50 | 1.62 | to | 0.37 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 901,111 | 9.11 | to | 10.94 | 8,133,363 | 0.15 | 1.25 | to | 2.50 | 0.99 | to | (0.24 | ) | |||||||||||||||||||||||||||||||||
12/31/2010 | 1,307,431 | 9.02 | to | 8.86 | 11,724,883 | 0.40 | 1.25 | to | 2.50 | 16.31 | to | 15.68 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 980,907 | 7.75 | to | 7.66 | 7,577,975 | — | 1.25 | to | 1.80 | 14.07 | to | 13.46 | ||||||||||||||||||||||||||||||||||
ProFund VP Pharmaceuticals |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 194,314 | 15.00 | to | 13.55 | 2,884,615 | 2.03 | 1.25 | to | 2.50 | 30.00 | to | 28.42 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 162,901 | 11.54 | to | 11.27 | 1,868,125 | 0.94 | 1.25 | to | 2.50 | 10.47 | to | 9.11 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 642,771 | 10.45 | to | 11.09 | 6,680,073 | 0.80 | 1.25 | to | 2.50 | 14.70 | to | 13.31 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 87,635 | 9.11 | to | 8.95 | 794,819 | 5.61 | 1.25 | to | 2.50 | (0.76 | ) | to | (1.30 | ) | ||||||||||||||||||||||||||||||||
12/31/2009 | 93,710 | 9.18 | to | 9.06 | 857,333 | 2.84 | 1.25 | to | 1.80 | 15.45 | to | 14.83 | ||||||||||||||||||||||||||||||||||
ProFund VP Precious Metals |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 545,424 | 5.84 | to | 5.70 | 3,153,443 | — | 1.25 | to | 2.50 | (38.71 | ) | to | (39.46 | ) | ||||||||||||||||||||||||||||||||
12/31/2012 | 647,158 | 9.52 | to | 9.25 | 6,108,327 | — | 1.25 | to | 2.50 | (15.61 | ) | to | (16.07 | ) | ||||||||||||||||||||||||||||||||
12/31/2011 | 764,839 | 11.28 | to | 11.02 | 8,567,955 | — | 1.25 | to | 1.80 | (20.21 | ) | to | (20.64 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 813,507 | 14.14 | to | 13.89 | 11,446,052 | — | 1.25 | to | 1.80 | 31.29 | to | 30.58 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 748,005 | 10.77 | to | 10.64 | 8,029,178 | 0.85 | 1.25 | to | 1.80 | 33.66 | to | 32.93 | ||||||||||||||||||||||||||||||||||
ProFund VP Short Emerging Markets |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 56,849 | 4.06 | to | 7.24 | 240,704 | — | 1.25 | to | 2.50 | (1.46 | ) | to | (2.66 | ) | ||||||||||||||||||||||||||||||||
12/31/2012 | 61,619 | 4.12 | to | 7.44 | 258,620 | — | 1.25 | to | 2.50 | (14.12 | ) | to | (15.18 | ) | ||||||||||||||||||||||||||||||||
12/31/2011 | 70,337 | 4.80 | to | 8.77 | 336,461 | — | 1.25 | to | 2.50 | 9.30 | to | 7.97 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 91,871 | 4.39 | to | 4.32 | 402,532 | — | 1.25 | to | 2.50 | (19.43 | ) | to | (19.86 | ) | ||||||||||||||||||||||||||||||||
12/31/2009 | 53,469 | 5.45 | to | 5.39 | 290,588 | — | 1.25 | to | 1.80 | (49.35 | ) | to | (49.62 | ) | ||||||||||||||||||||||||||||||||
ProFund VP Short International |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 52,607 | 4.82 | to | 4.66 | 254,319 | — | 1.25 | to | 1.80 | (21.98 | ) | to | (22.41 | ) | ||||||||||||||||||||||||||||||||
12/31/2012 | 56,974 | 6.18 | to | 6.00 | 350,434 | — | 1.25 | to | 1.80 | (21.15 | ) | to | (21.58 | ) | ||||||||||||||||||||||||||||||||
12/31/2011 | 46,276 | 7.83 | to | 7.65 | 360,355 | — | 1.25 | to | 1.80 | 0.55 | to | 0.01 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 39,900 | 7.79 | to | 7.65 | 309,380 | — | 1.25 | to | 1.80 | (15.75 | ) | to | (16.21 | ) | ||||||||||||||||||||||||||||||||
12/31/2009 | 92,914 | 9.25 | to | 9.13 | 856,218 | — | 1.25 | to | 1.80 | (31.14 | ) | to | (31.52 | ) | ||||||||||||||||||||||||||||||||
ProFund VP Short NASDAQ-100 |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 76,965 | 3.21 | to | 3.85 | 248,872 | — | 1.25 | to | 2.50 | (30.28 | ) | to | (31.13 | ) | ||||||||||||||||||||||||||||||||
12/31/2012 | 164,047 | 4.61 | to | 5.59 | 747,094 | — | 1.25 | to | 2.50 | (19.80 | ) | to | (20.79 | ) | ||||||||||||||||||||||||||||||||
12/31/2011 | 124,574 | 5.75 | to | 7.05 | 709,959 | — | 1.25 | to | 2.50 | (11.58 | ) | to | (12.66 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 123,309 | 6.50 | to | 6.38 | 797,131 | — | 1.25 | to | 2.50 | (22.16 | ) | to | (22.58 | ) | ||||||||||||||||||||||||||||||||
12/31/2009 | 74,390 | 8.35 | to | 8.25 | 618,831 | 0.24 | 1.25 | to | 1.80 | (41.39 | ) | to | (41.71 | ) | ||||||||||||||||||||||||||||||||
ProFund VP Short Small-Cap |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 58,090 | 2.54 | to | 3.63 | 148,739 | — | 1.25 | to | 2.50 | (32.10 | ) | to | (32.93 | ) | ||||||||||||||||||||||||||||||||
12/31/2012 | 83,504 | 3.75 | to | 5.42 | 309,082 | — | 1.25 | to | 2.50 | (19.97 | ) | to | (20.95 | ) | ||||||||||||||||||||||||||||||||
12/31/2011 | 84,872 | 4.68 | to | 6.85 | 394,397 | — | 1.25 | to | 2.50 | (10.21 | ) | to | (11.30 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 54,602 | 5.21 | to | 5.09 | 283,165 | — | 1.25 | to | 2.50 | (29.82 | ) | to | (30.20 | ) | ||||||||||||||||||||||||||||||||
12/31/2009 | 131,678 | 7.43 | to | 7.29 | 972,429 | 0.45 | 1.25 | to | 1.80 | (33.21 | ) | to | (33.57 | ) | ||||||||||||||||||||||||||||||||
ProFund VP Small-Cap |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 599,307 | 15.18 | to | 13.77 | 8,942,181 | — | 1.25 | to | 2.50 | 35.49 | to | 33.84 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 579,143 | 11.21 | to | 11.13 | 6,435,849 | — | 1.25 | to | 2.50 | 13.33 | to | 11.94 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 253,634 | 9.89 | to | 9.59 | 2,487,644 | — | 1.25 | to | 2.50 | (6.82 | ) | to | (7.32 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 560,405 | 10.61 | to | 10.35 | 5,905,131 | — | 1.25 | to | 1.80 | 23.25 | to | 22.58 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 190,693 | 8.61 | to | 8.45 | 1,631,864 | — | 1.25 | to | 1.80 | 24.51 | to | 23.84 |
28
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
4. Financial Highlights (continued)
Subaccount |
Year Ended | Units | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio |
Net Assets | Investment Income Ratio* |
Expense Ratio** Lowest to Highest |
Total Return*** Corresponding to Lowest to Highest Expense Ratio |
|||||||||||||||||||||||||||||||||||||||
ProFund VP Small-Cap Value |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 299,537 | $ | 13.29 | to | $ | 14.95 | $ | 3,938,358 | 0.18 | % | 1.25 | % | to | 2.50 | % | 35.98 | % | to | 34.32 | % | ||||||||||||||||||||||||||
12/31/2012 | 140,482 | 9.78 | to | 9.50 | 1,366,155 | — | 1.25 | to | 1.80 | 14.72 | to | 14.09 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 221,864 | 8.52 | to | 8.32 | 1,877,903 | — | 1.25 | to | 1.80 | (5.28 | ) | to | (5.80 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 86,822 | 9.00 | to | 8.84 | 777,227 | 0.08 | 1.25 | to | 1.80 | 20.60 | to | 19.94 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 223,032 | 7.46 | to | 7.37 | 1,657,473 | 0.28 | 1.25 | to | 1.80 | 18.92 | to | 18.27 | ||||||||||||||||||||||||||||||||||
ProFund VP Telecommunications |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 90,482 | 9.59 | to | 11.77 | 888,813 | 3.35 | 1.25 | to | 2.50 | 10.69 | to | 9.34 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 453,249 | 8.67 | to | 10.77 | 3,923,118 | 2.14 | 1.25 | to | 2.50 | 15.07 | to | 13.66 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 40,912 | 7.53 | to | 7.36 | 314,714 | 3.68 | 1.25 | to | 2.50 | 0.61 | to | 0.07 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 276,512 | 7.49 | to | 7.35 | 2,055,447 | 4.52 | 1.25 | to | 1.80 | 14.26 | to | 13.64 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 35,284 | 6.55 | to | 6.47 | 230,306 | 5.06 | 1.25 | to | 1.80 | 6.00 | to | 5.42 | ||||||||||||||||||||||||||||||||||
ProFund VP U.S. Government Plus |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 77,824 | 13.09 | to | 7.37 | 981,030 | 0.20 | 1.25 | to | 2.50 | (20.11 | ) | to | (21.09 | ) | ||||||||||||||||||||||||||||||||
12/31/2012 | 190,161 | 16.38 | to | 15.91 | 3,075,207 | — | 1.25 | to | 2.50 | (0.28 | ) | to | (0.82 | ) | ||||||||||||||||||||||||||||||||
12/31/2011 | 261,027 | 16.43 | to | 16.05 | 4,257,423 | 0.14 | 1.25 | to | 1.80 | 41.75 | to | 40.99 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 161,089 | 11.59 | to | 11.38 | 1,858,207 | 0.46 | 1.25 | to | 1.80 | 8.76 | to | 8.17 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 123,927 | 10.65 | to | 10.52 | 1,315,086 | 0.06 | 1.25 | to | 1.80 | (33.45 | ) | to | (33.81 | ) | ||||||||||||||||||||||||||||||||
ProFund VP UltraSmall-Cap |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 518,379 | 11.37 | to | 19.43 | 5,836,654 | — | 1.25 | to | 2.50 | 84.36 | to | 82.11 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 327,940 | 6.16 | to | 10.67 | 2,009,469 | — | 1.25 | to | 2.50 | 27.91 | to | 26.34 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 479,678 | 4.82 | to | 8.44 | 2,299,496 | — | 1.25 | to | 2.50 | (19.83 | ) | to | (20.81 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 475,160 | 6.01 | to | 5.90 | 2,854,196 | — | 1.25 | to | 2.50 | 46.61 | to | 45.82 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 433,884 | 4.10 | to | 4.05 | 1,772,706 | 0.16 | 1.25 | to | 1.80 | 38.45 | to | 37.70 | ||||||||||||||||||||||||||||||||||
ProFund VP Utilities |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 209,910 | 10.82 | to | 11.51 | 2,265,063 | 2.44 | 1.25 | to | 2.50 | 11.91 | to | 10.55 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 504,225 | 9.67 | to | 10.41 | 4,847,254 | 1.85 | 1.25 | to | 2.50 | (1.10 | ) | to | (2.31 | ) | ||||||||||||||||||||||||||||||||
12/31/2011 | 1,248,577 | 9.77 | to | 9.55 | 12,125,437 | 1.69 | 1.25 | to | 2.50 | 16.06 | to | 15.44 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 503,345 | 8.42 | to | 8.27 | 4,213,911 | 2.47 | 1.25 | to | 1.80 | 4.64 | to | 4.08 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 876,905 | 8.05 | to | 7.95 | 7,033,306 | 3.62 | 1.25 | to | 1.80 | 9.37 | to | 8.78 | ||||||||||||||||||||||||||||||||||
TA Aegon High Yield Bond Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 919,309 | 19.68 | to | 11.71 | 17,744,646 | 5.16 | 1.25 | to | 2.50 | 5.28 | to | 4.00 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 1,518,316 | 18.70 | to | 11.26 | 27,875,102 | 6.63 | 1.25 | to | 2.50 | 15.91 | to | 14.49 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 1,503,498 | 16.13 | to | 11.03 | 23,866,535 | 4.76 | 1.25 | to | 2.50 | 3.48 | to | 2.22 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 1,879,909 | 15.59 | to | 14.95 | 28,897,082 | 14.69 | 1.25 | to | 2.50 | 11.05 | to | 10.45 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 1,545,581 | 14.04 | to | 13.53 | 21,438,339 | 10.41 | 1.25 | to | 1.80 | 45.42 | to | 44.64 | ||||||||||||||||||||||||||||||||||
TA Aegon High Yield Bond Service Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 15,979 | 19.21 | to | 18.12 | 301,430 | 5.25 | 1.25 | to | 1.80 | 5.01 | to | 4.45 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 20,054 | 18.29 | to | 17.35 | 360,200 | 5.48 | 1.25 | to | 1.80 | 15.65 | to | 15.02 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 23,155 | 15.81 | to | 15.08 | 359,686 | 6.20 | 1.25 | to | 1.80 | 3.25 | to | 2.69 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 28,358 | 15.32 | to | 14.69 | 427,430 | 12.36 | 1.25 | to | 1.80 | 10.78 | to | 10.19 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 31,341 | 13.83 | to | 13.33 | 428,883 | 10.81 | 1.25 | to | 1.80 | 45.04 | to | 44.26 | ||||||||||||||||||||||||||||||||||
TA Aegon Money Market Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 3,713,621 | 16.53 | to | 9.10 | 50,426,251 | 0.01 | 1.25 | to | 2.50 | (1.23 | ) | to | (2.43 | ) | ||||||||||||||||||||||||||||||||
12/31/2012 | 4,146,281 | 16.73 | to | 9.33 | 57,490,473 | 0.01 | 1.25 | to | 2.50 | (1.24 | ) | to | (2.45 | ) | ||||||||||||||||||||||||||||||||
12/31/2011 | 5,665,169 | 16.94 | to | 9.56 | 78,653,529 | 0.01 | 1.25 | to | 2.50 | (1.23 | ) | to | (2.43 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 5,445,265 | 17.15 | to | 10.95 | 77,328,796 | 0.01 | 1.25 | to | 2.50 | (1.23 | ) | to | (1.76 | ) | ||||||||||||||||||||||||||||||||
12/31/2009 | 6,497,285 | 17.37 | to | 11.14 | 94,383,299 | 0.16 | 1.25 | to | 1.80 | (1.11 | ) | to | (1.64 | ) | ||||||||||||||||||||||||||||||||
TA Aegon Money Market Service Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 46,441 | 10.16 | to | 9.58 | 459,776 | 0.01 | 1.25 | to | 1.80 | (1.23 | ) | to | (1.76 | ) | ||||||||||||||||||||||||||||||||
12/31/2012 | 74,369 | 10.28 | to | 9.76 | 754,154 | 0.00 | 1.25 | to | 1.80 | (1.24 | ) | to | (1.77 | ) | ||||||||||||||||||||||||||||||||
12/31/2011 | 97,506 | 10.41 | to | 9.93 | 999,714 | 0.01 | 1.25 | to | 1.80 | (1.23 | ) | to | (1.76 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 92,195 | 10.54 | to | 10.11 | 957,943 | 0.00 | 1.25 | to | 1.80 | (1.23 | ) | to | (1.76 | ) | ||||||||||||||||||||||||||||||||
12/31/2009 | 120,340 | 10.67 | to | 10.29 | 1,280,352 | 0.05 | 1.25 | to | 1.80 | (1.22 | ) | to | (1.76 | ) |
29
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
4. Financial Highlights (continued)
Subaccount |
Year Ended | Units | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio |
Net Assets | Investment Income Ratio* |
Expense Ratio** Lowest to Highest |
Total Return*** Corresponding to Lowest to Highest Expense Ratio |
|||||||||||||||||||||||||||||||||||||||
TA Aegon Tactical Vanguard ETF - Conservative Service Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 78,562 | $ | 11.21 | to | $ | 11.12 | $ | 877,291 | 1.00 | % | 1.25 | % | to | 1.65 | % | 5.75 | % | to | 5.33 | % | ||||||||||||||||||||||||||
12/31/2012 | 63,837 | 10.60 | to | 10.56 | 675,356 | 0.41 | 1.25 | to | 1.65 | 5.46 | to | 5.04 | ||||||||||||||||||||||||||||||||||
12/31/2011 | (1) | 55,241 | 10.05 | to | 10.05 | 555,299 | — | 1.25 | to | 1.65 | 0.54 | to | 0.52 | |||||||||||||||||||||||||||||||||
TA Aegon Tactical Vanguard ETF - Growth Service Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 174,342 | 12.47 | to | 12.36 | 2,168,364 | 0.82 | 1.25 | to | 1.65 | 15.07 | to | 14.62 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 219,454 | 10.83 | to | 10.79 | 2,374,346 | 0.65 | 1.25 | to | 1.65 | 9.58 | to | 9.14 | ||||||||||||||||||||||||||||||||||
12/31/2011 | (1) | 261,134 | 9.89 | to | 9.88 | 2,581,513 | — | 1.25 | to | 1.65 | (1.14 | ) | to | (1.16 | ) | |||||||||||||||||||||||||||||||
TA Aegon U.S. Government Securities Initial Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 898,355 | 14.08 | to | 9.76 | 12,343,856 | 2.21 | 1.25 | to | 2.50 | (3.44 | ) | to | (4.62 | ) | ||||||||||||||||||||||||||||||||
12/31/2012 | 1,214,876 | 14.58 | to | 10.79 | 17,361,592 | 1.59 | 1.25 | to | 2.50 | 3.84 | to | 2.57 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 1,579,775 | 14.04 | to | 13.32 | 21,817,334 | 2.81 | 1.25 | to | 2.50 | 6.28 | to | 5.71 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 1,667,086 | 13.21 | to | 12.60 | 21,716,833 | 3.19 | 1.25 | to | 1.80 | 3.11 | to | 2.56 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 1,705,040 | 12.81 | to | 12.28 | 21,528,264 | 2.34 | 1.25 | to | 1.80 | 3.18 | to | 2.62 | ||||||||||||||||||||||||||||||||||
TA Aegon U.S. Government Securities Service Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 17,931 | 12.91 | to | 12.18 | 229,779 | 1.84 | 1.25 | to | 1.80 | (3.69 | ) | to | (4.21 | ) | ||||||||||||||||||||||||||||||||
12/31/2012 | 20,936 | 13.40 | to | 12.71 | 279,092 | 1.30 | 1.25 | to | 1.80 | 3.56 | to | 3.00 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 36,958 | 12.94 | to | 12.34 | 471,819 | 2.12 | 1.25 | to | 1.80 | 5.96 | to | 5.39 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 38,349 | 12.21 | to | 11.71 | 463,368 | 2.34 | 1.25 | to | 1.80 | 2.94 | to | 2.38 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 63,311 | 11.86 | to | 11.44 | 743,013 | 1.86 | 1.25 | to | 1.80 | 2.91 | to | 2.36 | ||||||||||||||||||||||||||||||||||
TA AllianceBernstein Dynamic Allocation Initial Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 300,485 | 16.17 | to | 10.54 | 4,731,512 | 1.18 | 1.25 | to | 2.50 | 5.86 | to | 4.57 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 353,974 | 15.28 | to | 10.30 | 5,294,092 | 0.78 | 1.25 | to | 2.50 | 4.82 | to | 3.54 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 701,705 | 14.58 | to | 9.95 | 10,044,256 | 0.74 | 1.25 | to | 2.50 | 0.56 | to | (0.66 | ) | |||||||||||||||||||||||||||||||||
12/31/2010 | 848,312 | 14.49 | to | 13.82 | 12,101,067 | 5.30 | 1.25 | to | 2.50 | 7.94 | to | 7.36 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 818,018 | 13.43 | to | 12.88 | 10,833,528 | 3.67 | 1.25 | to | 1.80 | 29.68 | to | 28.98 | ||||||||||||||||||||||||||||||||||
TA AllianceBernstein Dynamic Allocation Service Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 10,392 | 16.22 | to | 15.31 | 167,960 | 0.95 | 1.25 | to | 1.80 | 5.57 | to | 5.00 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 10,886 | 15.37 | to | 14.58 | 166,938 | 0.64 | 1.25 | to | 1.80 | 4.48 | to | 3.92 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 15,571 | 14.71 | to | 14.03 | 226,318 | 0.65 | 1.25 | to | 1.80 | 0.41 | to | (0.13 | ) | |||||||||||||||||||||||||||||||||
12/31/2010 | 21,575 | 14.65 | to | 14.05 | 312,547 | 5.36 | 1.25 | to | 1.80 | 7.80 | to | 7.22 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 17,912 | 13.59 | to | 13.10 | 242,438 | 3.60 | 1.25 | to | 1.80 | 29.55 | to | 28.85 | ||||||||||||||||||||||||||||||||||
TA Asset Allocation - Conservative Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 4,977,583 | 16.84 | to | 11.13 | 81,460,140 | 3.13 | 1.25 | to | 2.50 | 8.02 | to | 6.70 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 6,563,353 | 15.59 | to | 10.44 | 99,824,266 | 3.12 | 1.25 | to | 2.50 | 6.13 | to | 4.83 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 6,864,761 | 14.69 | to | 10.50 | 98,712,929 | 2.67 | 1.25 | to | 2.50 | 1.39 | to | 0.16 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 7,880,298 | 14.49 | to | 13.82 | 112,213,242 | 3.16 | 1.25 | to | 2.50 | 7.59 | to | 7.01 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 9,115,916 | 13.46 | to | 12.91 | 120,899,053 | 4.11 | 1.25 | to | 1.80 | 23.68 | to | 23.01 | ||||||||||||||||||||||||||||||||||
TA Asset Allocation - Conservative Service Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 80,772 | 17.42 | to | 16.44 | 1,386,426 | 2.61 | 1.25 | to | 1.80 | 7.74 | to | 7.16 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 149,085 | 16.17 | to | 15.34 | 2,377,064 | 2.84 | 1.25 | to | 1.80 | 5.87 | to | 5.29 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 185,966 | 15.27 | to | 14.57 | 2,803,826 | 2.52 | 1.25 | to | 1.80 | 1.10 | to | 0.55 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 235,945 | 15.11 | to | 14.49 | 3,530,405 | 3.28 | 1.25 | to | 1.80 | 7.36 | to | 6.79 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 308,898 | 14.07 | to | 13.57 | 4,298,921 | 4.06 | 1.25 | to | 1.80 | 23.36 | to | 22.70 | ||||||||||||||||||||||||||||||||||
TA Asset Allocation - Growth Initial Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 6,593,469 | 17.95 | to | 13.25 | 115,788,409 | 1.21 | 1.25 | to | 2.50 | 25.25 | to | 23.72 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 7,135,645 | 14.33 | to | 10.71 | 100,324,243 | 1.31 | 1.25 | to | 2.50 | 11.20 | to | 9.84 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 8,314,886 | 12.89 | to | 10.92 | 105,375,443 | 1.19 | 1.25 | to | 2.50 | (6.58 | ) | to | (7.72 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 9,762,573 | 13.79 | to | 13.16 | 132,713,030 | 1.07 | 1.25 | to | 2.50 | 13.53 | to | 12.92 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 11,684,528 | 12.15 | to | 11.65 | 140,103,780 | 2.72 | 1.25 | to | 1.80 | 28.22 | to | 27.52 |
30
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
4. Financial Highlights (continued)
Subaccount |
Year Ended | Units | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio |
Net Assets | Investment Income Ratio* |
Expense Ratio** Lowest to Highest |
Total Return*** Corresponding to Lowest to Highest Expense Ratio |
|||||||||||||||||||||||||||||||||||||||
TA Asset Allocation - Growth Service Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 175,117 | $ | 20.92 | to | $ | 19.73 | $ | 3,623,554 | 0.99 | % | 1.25 | % | to | 1.80 | % | 24.83 | % | to | 24.15 | % | ||||||||||||||||||||||||||
12/31/2012 | 199,590 | 16.76 | to | 15.90 | 3,307,766 | 1.07 | 1.25 | to | 1.80 | 11.00 | to | 10.39 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 222,426 | 15.10 | to | 14.40 | 3,328,355 | 0.96 | 1.25 | to | 1.80 | (6.86 | ) | to | (7.36 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 277,688 | 16.21 | to | 15.54 | 4,471,585 | 0.85 | 1.25 | to | 1.80 | 13.23 | to | 12.62 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 329,776 | 14.31 | to | 13.80 | 4,692,267 | 2.41 | 1.25 | to | 1.80 | 27.94 | to | 27.25 | ||||||||||||||||||||||||||||||||||
TA Asset Allocation - Moderate Initial Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 9,576,571 | 17.68 | to | 11.09 | 165,142,395 | 2.41 | 1.25 | to | 2.50 | 12.10 | to | 10.73 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 10,875,381 | 15.77 | to | 11.01 | 167,748,858 | 2.61 | 1.25 | to | 2.50 | 8.08 | to | 6.75 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 12,780,457 | 14.59 | to | 10.31 | 183,076,483 | 2.19 | 1.25 | to | 2.50 | (0.65 | ) | to | (1.86 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 15,649,795 | 14.69 | to | 14.01 | 226,241,286 | 2.88 | 1.25 | to | 2.50 | 9.01 | to | 8.43 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 18,095,102 | 13.48 | to | 12.92 | 240,389,717 | 4.21 | 1.25 | to | 1.80 | 24.84 | to | 24.17 | ||||||||||||||||||||||||||||||||||
TA Asset Allocation - Moderate Service Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 178,461 | 18.92 | to | 17.86 | 3,339,814 | 2.14 | 1.25 | to | 1.80 | 11.84 | to | 11.23 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 234,497 | 16.92 | to | 16.05 | 3,923,835 | 2.43 | 1.25 | to | 1.80 | 7.76 | to | 7.17 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 284,625 | 15.70 | to | 14.98 | 4,419,150 | 2.10 | 1.25 | to | 1.80 | (0.94 | ) | to | (1.48 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 365,448 | 15.85 | to | 15.20 | 5,741,190 | 2.77 | 1.25 | to | 1.80 | 8.78 | to | 8.19 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 483,518 | 14.57 | to | 14.05 | 6,998,290 | 4.00 | 1.25 | to | 1.80 | 24.64 | to | 23.97 | ||||||||||||||||||||||||||||||||||
TA Asset Allocation - Moderate Growth Initial Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 12,874,348 | 18.04 | to | 12.55 | 227,386,429 | 2.26 | 1.25 | to | 2.50 | 17.91 | to | 16.47 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 13,825,571 | 15.30 | to | 10.77 | 207,514,208 | 2.44 | 1.25 | to | 2.50 | 9.27 | to | 7.93 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 15,817,596 | 14.00 | to | 10.20 | 217,836,894 | 2.02 | 1.25 | to | 2.50 | (3.22 | ) | to | (4.40 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 17,912,360 | 14.47 | to | 13.80 | 255,413,586 | 2.17 | 1.25 | to | 2.50 | 11.34 | to | 10.74 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 20,570,030 | 12.99 | to | 12.46 | 263,905,231 | 3.32 | 1.25 | to | 1.80 | 26.58 | to | 25.89 | ||||||||||||||||||||||||||||||||||
TA Asset Allocation - Moderate Growth Service Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 265,378 | 20.06 | to | 18.93 | 5,276,559 | 2.06 | 1.25 | to | 1.80 | 17.57 | to | 16.94 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 314,622 | 17.06 | to | 16.19 | 5,323,156 | 2.23 | 1.25 | to | 1.80 | 9.00 | to | 8.41 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 356,260 | 15.65 | to | 14.93 | 5,535,555 | 1.77 | 1.25 | to | 1.80 | (3.48 | ) | to | (4.00 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 463,577 | 16.22 | to | 15.55 | 7,467,760 | 1.97 | 1.25 | to | 1.80 | 11.02 | to | 10.42 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 610,894 | 14.61 | to | 14.09 | 8,856,779 | 3.14 | 1.25 | to | 1.80 | 26.29 | to | 25.61 | ||||||||||||||||||||||||||||||||||
TA Barrow Hanley Dividend Focused Initial Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 2,936,992 | 30.70 | to | 12.53 | 83,353,127 | 2.31 | 1.25 | to | 2.65 | 28.64 | to | 26.88 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 3,154,409 | 23.86 | to | 10.31 | 69,821,098 | 1.77 | 1.25 | to | 2.65 | 10.34 | to | 8.98 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 3,633,054 | 21.63 | to | 9.88 | 73,028,759 | 1.71 | 1.25 | to | 2.50 | 1.47 | to | 0.23 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 4,256,493 | 21.32 | to | 15.11 | 84,458,072 | 0.80 | 1.25 | to | 2.50 | 9.08 | to | 8.49 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 3,317,466 | 19.54 | to | 13.92 | 60,408,295 | 1.41 | 1.25 | to | 1.80 | 12.58 | to | 11.97 | ||||||||||||||||||||||||||||||||||
TA Barrow Hanley Dividend Focused Service Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 43,229 | 22.83 | to | 21.54 | 973,873 | 2.12 | 1.25 | to | 1.80 | 28.32 | to | 27.63 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 46,947 | 17.79 | to | 16.88 | 825,014 | 1.46 | 1.25 | to | 1.80 | 10.09 | to | 9.49 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 62,085 | 16.16 | to | 15.41 | 991,177 | 1.47 | 1.25 | to | 1.80 | 1.19 | to | 0.65 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 82,319 | 15.97 | to | 15.31 | 1,298,967 | 0.80 | 1.25 | to | 1.80 | 8.79 | to | 8.20 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 44,100 | 14.68 | to | 14.15 | 641,647 | 1.03 | 1.25 | to | 1.80 | 12.31 | to | 11.70 | ||||||||||||||||||||||||||||||||||
TA BNP Paribas Large Cap Growth Initial Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 1,125,187 | 22.74 | to | 12.91 | 25,323,411 | 0.99 | 1.25 | to | 2.50 | 31.46 | to | 29.86 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 1,031,060 | 17.30 | to | 11.34 | 17,688,627 | 0.86 | 1.25 | to | 2.50 | 15.68 | to | 14.26 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 1,040,713 | 14.95 | to | 14.74 | 15,488,812 | 0.74 | 1.25 | to | 2.50 | (3.47 | ) | to | (3.99 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 952,269 | 15.49 | to | 15.35 | 14,710,762 | 0.68 | 1.25 | to | 1.80 | 17.70 | to | 17.07 | ||||||||||||||||||||||||||||||||||
12/31/2009 | (1) | 973,587 | 13.16 | to | 13.11 | 12,800,863 | 0.67 | 1.25 | to | 1.80 | 31.61 | to | 31.13 | |||||||||||||||||||||||||||||||||
TA BNP Paribas Large Cap Growth Service Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 7,049 | 22.48 | to | 21.92 | 157,325 | 0.83 | 1.25 | to | 1.80 | 31.17 | to | 30.46 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 6,800 | 17.14 | to | 16.80 | 116,062 | 0.62 | 1.25 | to | 1.80 | 15.38 | to | 14.75 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 7,842 | 14.85 | to | 14.64 | 116,082 | 0.53 | 1.25 | to | 1.80 | (3.73 | ) | to | (4.25 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 7,396 | 15.43 | to | 15.29 | 113,954 | 0.54 | 1.25 | to | 1.80 | 17.41 | to | 16.77 | ||||||||||||||||||||||||||||||||||
12/31/2009 | (1) | 7,621 | 13.14 | to | 13.09 | 100,079 | 0.60 | 1.25 | to | 1.80 | 31.41 | to | 30.94 |
31
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
4. Financial Highlights (continued)
Subaccount |
Year Ended | Units | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio |
Net Assets | Investment Income Ratio* |
Expense Ratio** Lowest to Highest |
Total Return*** Corresponding to Lowest to Highest Expense Ratio |
|||||||||||||||||||||||||||||||||||||||
TA Clarion Global Real Estate Securities Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 1,234,984 | $ | 29.75 | to | $ | 10.78 | $ | 36,732,064 | 5.54 | % | 1.25 | % | to | 2.50 | % | 2.61 | % | to | 1.36 | % | ||||||||||||||||||||||||||
12/31/2012 | 1,391,708 | 28.99 | to | 10.63 | 40,729,279 | 4.04 | 1.25 | to | 2.50 | 23.70 | to | 22.18 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 1,545,300 | 23.43 | to | 9.96 | 36,835,287 | 6.90 | 1.25 | to | 2.50 | (6.90 | ) | to | (8.03 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 1,727,126 | 25.17 | to | 19.69 | 44,493,266 | 6.17 | 1.25 | to | 2.50 | 14.24 | to | 12.85 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 1,972,318 | 22.03 | to | 27.16 | 44,438,692 | — | 1.25 | to | 2.50 | 31.77 | to | 31.06 | ||||||||||||||||||||||||||||||||||
TA Clarion Global Real Estate Securities Service Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 27,501 | 24.02 | to | 22.66 | 649,742 | 5.04 | 1.25 | to | 1.80 | 2.43 | to | 1.87 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 29,071 | 23.45 | to | 22.25 | 670,602 | 3.28 | 1.25 | to | 1.80 | 23.43 | to | 22.76 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 32,150 | 19.00 | to | 18.12 | 601,543 | 6.51 | 1.25 | to | 1.80 | (7.17 | ) | to | (7.67 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 39,553 | 20.47 | to | 19.63 | 799,388 | 6.23 | 1.25 | to | 1.80 | 13.88 | to | 13.26 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 44,147 | 17.97 | to | 17.33 | 785,527 | — | 1.25 | to | 1.80 | 31.36 | to | 30.65 | ||||||||||||||||||||||||||||||||||
TA Hanlon Income Service Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 5,883,695 | 1.05 | to | 10.01 | 6,187,555 | 3.88 | 1.25 | to | 2.50 | 1.67 | to | 0.43 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 8,171,266 | 1.03 | to | 9.97 | 8,435,090 | 2.12 | 1.25 | to | 2.50 | 2.18 | to | 0.93 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 10,674,237 | 1.01 | to | 9.87 | 10,751,432 | 1.59 | 1.25 | to | 2.50 | 1.66 | to | 0.42 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 10,307,320 | 0.99 | to | 0.99 | 10,224,117 | 0.22 | 1.25 | to | 2.50 | (1.12 | ) | to | (1.51 | ) | ||||||||||||||||||||||||||||||||
12/31/2009 | (1) | 2,752,195 | 1.00 | to | 1.00 | 2,762,759 | — | 1.25 | to | 1.65 | 0.40 | to | 0.35 | |||||||||||||||||||||||||||||||||
TA International Moderate Growth Initial Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 520,832 | 11.11 | to | 11.01 | 5,719,241 | 1.99 | 1.25 | to | 2.50 | 11.33 | to | 9.97 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 621,741 | 9.98 | to | 10.01 | 6,141,627 | 3.00 | 1.25 | to | 2.50 | 11.41 | to | 10.04 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 774,128 | 8.96 | to | 9.10 | 6,873,911 | 2.12 | 1.25 | to | 2.50 | (8.51 | ) | to | (9.63 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 845,937 | 9.79 | to | 9.55 | 8,221,001 | 2.64 | 1.25 | to | 2.50 | 9.14 | to | 8.55 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 862,116 | 8.97 | to | 8.79 | 7,687,303 | 2.66 | 1.25 | to | 1.80 | 28.09 | to | 27.40 | ||||||||||||||||||||||||||||||||||
TA International Moderate Growth Service Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 1,061 | 10.90 | to | 10.46 | 11,268 | 1.67 | 1.25 | to | 1.80 | 11.08 | to | 10.48 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 1,236 | 9.82 | to | 9.47 | 11,924 | 2.37 | 1.25 | to | 1.80 | 11.09 | to | 10.48 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 1,652 | 8.84 | to | 8.57 | 14,378 | 2.20 | 1.25 | to | 1.80 | (8.67 | ) | to | (9.17 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 5,575 | 9.67 | to | 9.43 | 53,494 | 2.27 | 1.25 | to | 1.80 | 8.88 | to | 8.29 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 9,235 | 8.89 | to | 8.71 | 81,800 | 2.56 | 1.25 | to | 1.80 | 27.73 | to | 27.04 | ||||||||||||||||||||||||||||||||||
TA Janus Balanced Service Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 2,052,294 | 1.16 | to | 1.14 | 2,361,354 | 0.75 | 1.25 | to | 1.65 | 17.55 | to | 17.09 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 1,245,918 | 0.98 | to | 0.97 | 1,219,947 | — | 1.25 | to | 1.65 | 11.10 | to | 10.66 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 1,497,928 | 0.88 | to | 0.88 | 1,321,648 | 0.16 | 1.25 | to | 1.65 | (11.91 | ) | to | (12.26 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 1,653,753 | 1.00 | to | 1.00 | 1,658,369 | 0.15 | 1.25 | to | 1.65 | 1.83 | to | 1.43 | ||||||||||||||||||||||||||||||||||
12/31/2009 | (1) | 569,313 | 0.99 | to | 0.99 | 561,332 | — | 1.25 | to | 1.65 | (1.39 | ) | to | (1.43 | ) | |||||||||||||||||||||||||||||||
TA Jennison Growth Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 1,453,202 | 16.08 | to | 13.72 | 23,256,257 | 0.27 | 1.25 | to | 2.50 | 36.00 | to | 34.35 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 1,455,231 | 11.82 | to | 10.21 | 17,153,023 | 0.07 | 1.25 | to | 2.50 | 14.33 | to | 12.93 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 1,645,579 | 10.34 | to | 10.13 | 16,988,026 | 0.12 | 1.25 | to | 2.50 | (1.85 | ) | to | (3.05 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | (1) | 1,557,296 | 10.54 | to | 10.45 | 16,399,633 | 0.04 | 1.25 | to | 2.50 | 5.37 | to | 4.50 | |||||||||||||||||||||||||||||||||
TA Jennison Growth Service Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 9,374 | 15.93 | to | 15.62 | 147,693 | 0.06 | 1.25 | to | 1.80 | 35.60 | to | 34.87 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 12,738 | 11.75 | to | 11.58 | 148,677 | — | 1.25 | to | 1.80 | 13.98 | to | 13.36 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 16,386 | 10.31 | to | 10.21 | 168,313 | — | 1.25 | to | 1.80 | (1.99 | ) | to | (2.52 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | (1) | 22,673 | 10.52 | to | 10.48 | 238,187 | 0.03 | 1.25 | to | 1.80 | 5.18 | to | 4.79 | |||||||||||||||||||||||||||||||||
TA JPMorgan Core Bond Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 1,885,514 | 38.46 | to | 9.99 | 51,204,334 | 2.89 | 1.25 | to | 2.50 | (3.05 | ) | to | (4.24 | ) | ||||||||||||||||||||||||||||||||
12/31/2012 | 2,675,728 | 39.67 | to | 10.43 | 74,252,610 | 2.67 | 1.25 | to | 2.50 | 3.68 | to | 2.41 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 2,813,518 | 38.26 | to | 17.77 | 77,365,793 | 4.43 | 1.25 | to | 2.50 | 6.20 | to | 5.63 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 2,798,909 | 36.03 | to | 16.82 | 72,834,139 | 6.41 | 1.25 | to | 1.80 | 6.91 | to | 6.33 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 3,172,334 | 33.70 | to | 15.82 | 78,914,402 | 4.60 | 1.25 | to | 1.80 | 8.23 | to | 7.64 |
32
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
4. Financial Highlights (continued)
Subaccount |
Year Ended | Units | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio |
Net Assets | Investment Income Ratio* |
Expense Ratio** Lowest to Highest |
Total Return*** Corresponding to Lowest to Highest Expense Ratio |
|||||||||||||||||||||||||||||||||||||||
TA JPMorgan Core Bond Service Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 52,782 | $ | 14.33 | to | $ | 13.52 | $ | 739,128 | 2.52 | % | 1.25 | % | to | 1.80 | % | (3.34 | )% | to | (3.86 | )% | ||||||||||||||||||||||||||
12/31/2012 | 64,088 | 14.82 | to | 14.06 | 932,091 | 2.38 | 1.25 | to | 1.80 | 3.45 | to | 2.89 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 77,138 | 14.33 | to | 13.67 | 1,090,211 | 3.89 | 1.25 | to | 1.80 | 5.92 | to | 5.35 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 83,987 | 13.53 | to | 12.97 | 1,127,399 | 5.53 | 1.25 | to | 1.80 | 6.66 | to | 6.09 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 99,322 | 12.68 | to | 12.23 | 1,250,018 | 4.04 | 1.25 | to | 1.80 | 8.03 | to | 7.45 | ||||||||||||||||||||||||||||||||||
TA JPMorgan Enhanced Index Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 1,039,321 | 18.30 | to | 13.94 | 18,549,536 | 0.70 | 1.25 | to | 2.50 | 30.88 | to | 29.29 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 947,448 | 13.98 | to | 13.37 | 12,952,885 | 1.13 | 1.25 | to | 2.50 | 14.91 | to | 13.50 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 787,932 | 12.17 | to | 11.78 | 9,401,614 | 1.28 | 1.25 | to | 2.50 | (0.50 | ) | to | (1.71 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 698,433 | 12.23 | to | 11.67 | 8,428,860 | 1.55 | 1.25 | to | 2.50 | 13.75 | to | 13.14 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 511,186 | 10.75 | to | 10.31 | 5,429,304 | 2.07 | 1.25 | to | 1.80 | 27.99 | to | 27.30 | ||||||||||||||||||||||||||||||||||
TA JPMorgan Enhanced Index Service Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 6,904 | 21.05 | to | 19.86 | 141,677 | 0.50 | 1.25 | to | 1.80 | 30.50 | to | 29.80 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 7,904 | 16.13 | to | 15.30 | 124,280 | 0.92 | 1.25 | to | 1.80 | 14.65 | to | 14.03 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 8,526 | 14.07 | to | 13.42 | 117,608 | 1.58 | 1.25 | to | 1.80 | (0.76 | ) | to | (1.30 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 8,878 | 14.18 | to | 13.59 | 122,864 | 1.41 | 1.25 | to | 1.80 | 13.44 | to | 12.82 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 11,100 | 12.50 | to | 12.05 | 136,872 | 1.61 | 1.25 | to | 1.80 | 27.72 | to | 27.03 | ||||||||||||||||||||||||||||||||||
TA JPMorgan Mid Cap Value Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 668,186 | 28.33 | to | 26.04 | 18,503,879 | 0.48 | 1.25 | to | 1.80 | 30.19 | to | 29.49 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 777,997 | 21.76 | to | 20.11 | 16,561,039 | 0.74 | 1.25 | to | 1.80 | 19.03 | to | 18.38 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 907,347 | 18.28 | to | 16.99 | 16,250,751 | 1.11 | 1.25 | to | 1.80 | 0.76 | to | 0.21 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 1,058,609 | 18.14 | to | 16.95 | 18,841,622 | 1.83 | 1.25 | to | 1.80 | 21.47 | to | 20.81 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 1,239,998 | 14.94 | to | 14.03 | 18,192,687 | 1.80 | 1.25 | to | 1.80 | 24.85 | to | 24.17 | ||||||||||||||||||||||||||||||||||
TA JPMorgan Mid Cap Value Service Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 7,721 | 27.57 | to | 26.01 | 211,669 | 0.36 | 1.25 | to | 1.80 | 29.84 | to | 29.14 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 9,755 | 21.23 | to | 20.14 | 205,531 | 0.62 | 1.25 | to | 1.80 | 18.74 | to | 18.10 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 10,144 | 17.88 | to | 17.06 | 180,119 | 1.01 | 1.25 | to | 1.80 | 0.48 | to | (0.07 | ) | |||||||||||||||||||||||||||||||||
12/31/2010 | 11,453 | 17.80 | to | 17.07 | 202,455 | 1.89 | 1.25 | to | 1.80 | 21.31 | to | 20.65 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 12,457 | 14.67 | to | 14.15 | 181,713 | 1.32 | 1.25 | to | 1.80 | 24.56 | to | 23.89 | ||||||||||||||||||||||||||||||||||
TA JPMorgan Tactical Allocation Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 1,739,859 | 33.64 | to | 10.26 | 52,793,713 | 1.09 | 1.25 | to | 2.65 | 4.21 | to | 2.79 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 1,979,121 | 32.28 | to | 10.54 | 58,147,819 | 0.60 | 1.25 | to | 2.65 | 6.38 | to | 5.08 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 2,328,518 | 30.35 | to | 10.03 | 64,545,636 | 1.75 | 1.25 | to | 2.50 | 2.35 | to | 1.11 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 2,782,149 | 29.65 | to | 18.50 | 75,711,325 | 3.63 | 1.25 | to | 2.50 | (1.34 | ) | to | (1.88 | ) | ||||||||||||||||||||||||||||||||
12/31/2009 | 3,484,177 | 30.05 | to | 18.86 | 96,134,859 | 3.15 | 1.25 | to | 1.80 | 2.91 | to | 2.35 | ||||||||||||||||||||||||||||||||||
TA JPMorgan Tactical Allocation Service Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 44,276 | 14.19 | to | 13.39 | 619,713 | 0.88 | 1.25 | to | 1.80 | 3.99 | to | 3.43 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 58,791 | 13.64 | to | 12.94 | 792,477 | 0.51 | 1.25 | to | 1.80 | 6.13 | to | 5.56 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 74,377 | 12.86 | to | 12.26 | 944,334 | 1.59 | 1.25 | to | 1.80 | 2.17 | to | 1.62 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 94,773 | 12.58 | to | 12.07 | 1,177,906 | 3.20 | 1.25 | to | 1.80 | (1.65 | ) | to | (2.18 | ) | ||||||||||||||||||||||||||||||||
12/31/2009 | 99,370 | 12.79 | to | 12.33 | 1,258,374 | 2.57 | 1.25 | to | 1.80 | 2.66 | to | 2.11 | ||||||||||||||||||||||||||||||||||
TA MFS International Equity Initial Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 3,191,584 | 16.82 | to | 11.51 | 49,816,608 | 1.15 | 1.25 | to | 2.65 | 16.63 | to | 15.04 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 3,372,887 | 14.42 | to | 10.60 | 45,270,898 | 1.64 | 1.25 | to | 2.65 | 20.64 | to | 19.16 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 3,591,447 | 11.95 | to | 8.90 | 40,089,567 | 1.19 | 1.25 | to | 2.50 | (11.17 | ) | to | (12.25 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 4,227,966 | 13.45 | to | 16.89 | 53,174,053 | 1.40 | 1.25 | to | 2.50 | 9.13 | to | 7.80 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 4,751,429 | 12.33 | to | 8.93 | 54,556,971 | 2.68 | 1.25 | to | 2.50 | 31.05 | to | 30.34 | ||||||||||||||||||||||||||||||||||
TA MFS International Equity Service Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 13,880 | 23.20 | to | 21.88 | 317,495 | 0.99 | 1.25 | to | 1.80 | 16.31 | to | 15.69 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 15,029 | 19.94 | to | 18.92 | 295,228 | 1.40 | 1.25 | to | 1.80 | 20.36 | to | 19.71 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 18,717 | 16.57 | to | 15.80 | 306,445 | 1.08 | 1.25 | to | 1.80 | (11.32 | ) | to | (11.80 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 20,731 | 18.68 | to | 17.92 | 383,525 | 1.28 | 1.25 | to | 1.80 | 8.94 | to | 8.36 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 20,461 | 17.15 | to | 16.54 | 348,905 | 2.50 | 1.25 | to | 1.80 | 30.60 | to | 29.90 |
33
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
4. Financial Highlights (continued)
Subaccount |
Year Ended | Units | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio |
Net Assets | Investment Income Ratio* |
Expense Ratio** Lowest to Highest |
Total Return*** Corresponding to Lowest to Highest Expense Ratio |
|||||||||||||||||||||||||||||||||||||||
TA Morgan Stanley Capital Growth Initial Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 1,497,988 | $ | 26.93 | to | $ | 18.81 | $ | 38,987,398 | 0.68 | % | 1.25 | % | to | 2.50 | % | 46.42 | % | to | 44.64 | % | ||||||||||||||||||||||||||
12/31/2012 | 1,626,481 | 18.39 | to | 13.00 | 28,989,447 | — | 1.25 | to | 2.50 | 14.11 | to | 12.72 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 1,901,890 | 16.12 | to | 11.54 | 29,713,971 | — | 1.25 | to | 2.50 | (6.97 | ) | to | (8.10 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 2,210,630 | 17.33 | to | 14.94 | 37,282,472 | 0.87 | 1.25 | to | 2.50 | 25.86 | to | 25.18 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 2,414,325 | 13.77 | to | 11.94 | 32,408,709 | 2.56 | 1.25 | to | 1.80 | 26.33 | to | 25.65 | ||||||||||||||||||||||||||||||||||
TA Morgan Stanley Capital Growth Service Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 5,033 | 25.10 | to | 23.68 | 124,669 | 0.58 | 1.25 | to | 1.80 | 46.06 | to | 45.27 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 7,444 | 17.18 | to | 16.30 | 125,452 | — | 1.25 | to | 1.80 | 13.77 | to | 13.16 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 9,584 | 15.10 | to | 14.41 | 142,708 | — | 1.25 | to | 1.80 | (7.15 | ) | to | (7.65 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 11,159 | 16.27 | to | 15.60 | 179,226 | 0.71 | 1.25 | to | 1.80 | 25.52 | to | 24.84 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 13,500 | 12.96 | to | 12.50 | 172,717 | 2.08 | 1.25 | to | 1.80 | 25.99 | to | 25.31 | ||||||||||||||||||||||||||||||||||
TA Morgan Stanley Mid-Cap Growth Initial Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 3,243,706 | 68.24 | to | 13.44 | 161,684,213 | 0.81 | 1.25 | to | 2.65 | 37.42 | to | 35.55 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 3,659,881 | 49.66 | to | 8.88 | 132,673,373 | — | 1.25 | to | 2.65 | 7.73 | to | 6.41 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 4,417,372 | 46.10 | to | 10.91 | 146,092,090 | 0.30 | 1.25 | to | 2.50 | (7.86 | ) | to | (8.98 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 3,524,701 | 50.03 | to | 9.02 | 140,928,078 | 0.12 | 1.25 | to | 2.50 | 32.25 | to | 31.54 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 3,884,750 | 37.83 | to | 6.86 | 119,852,340 | — | 1.25 | to | 1.80 | 58.58 | to | 57.72 | ||||||||||||||||||||||||||||||||||
TA Morgan Stanley Mid-Cap Growth Service Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 36,512 | 26.06 | to | 24.58 | 940,833 | 0.60 | 1.25 | to | 1.80 | 37.11 | to | 36.37 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 42,059 | 19.00 | to | 18.03 | 790,694 | — | 1.25 | to | 1.80 | 7.43 | to | 6.84 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 60,535 | 17.69 | to | 16.87 | 1,054,875 | 0.21 | 1.25 | to | 1.80 | (8.06 | ) | to | (8.56 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 28,244 | 19.24 | to | 18.45 | 535,248 | 0.02 | 1.25 | to | 1.80 | 31.93 | to | 31.22 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 29,364 | 14.58 | to | 14.06 | 422,678 | — | 1.25 | to | 1.80 | 58.14 | to | 57.29 | ||||||||||||||||||||||||||||||||||
TA Multi-Managed Balanced Initial Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 6,647,491 | 20.38 | to | 11.42 | 133,516,725 | 1.60 | 1.25 | to | 2.65 | 16.64 | to | 15.04 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 7,097,300 | 17.47 | to | 12.06 | 122,472,335 | 1.62 | 1.25 | to | 2.65 | 11.17 | to | 9.81 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 8,013,714 | 15.72 | to | 10.98 | 124,580,912 | 2.25 | 1.25 | to | 2.50 | 2.75 | to | 1.50 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 9,132,778 | 15.29 | to | 14.59 | 138,329,252 | 0.68 | 1.25 | to | 2.50 | 22.59 | to | 21.93 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 1,034,888 | 12.48 | to | 11.96 | 12,748,201 | 1.89 | 1.25 | to | 1.80 | 24.74 | to | 24.06 | ||||||||||||||||||||||||||||||||||
TA Multi-Managed Balanced Service Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 32,484 | 20.67 | to | 19.50 | 666,807 | 1.58 | 1.25 | to | 1.80 | 16.30 | to | 15.67 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 31,426 | 0.93 | to | 0.91 | 553,430 | 1.48 | 1.25 | to | 1.80 | 11.00 | to | 10.40 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 34,616 | 0.93 | to | 0.92 | 549,672 | 2.20 | 1.25 | to | 1.80 | 2.47 | to | 1.92 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 37,047 | 0.97 | to | 0.97 | 574,662 | 0.50 | 1.25 | to | 1.80 | 22.35 | to | 21.69 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 15,303 | 1.02 | to | 1.02 | 194,151 | 1.63 | 1.25 | to | 1.80 | 24.38 | to | 23.71 | ||||||||||||||||||||||||||||||||||
TA PIMCO Tactical - Balanced Service Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 2,502,314 | 1.02 | to | 1.01 | 2,548,154 | 0.62 | 1.25 | to | 1.65 | 10.47 | to | 10.03 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 2,046,369 | 1.67 | to | 1.49 | 1,889,653 | 1.58 | 0.55 | to | 1.60 | (0.27 | ) | to | (0.66 | ) | ||||||||||||||||||||||||||||||||
12/31/2011 | 3,563,010 | 1.48 | to | 1.33 | 3,299,946 | 1.19 | 0.55 | to | 1.60 | (4.60 | ) | to | (4.97 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 3,642,348 | 1.60 | to | 1.45 | 3,540,922 | 0.41 | 0.55 | to | 1.60 | (4.66 | ) | to | (5.03 | ) | ||||||||||||||||||||||||||||||||
12/31/2009 | (1) | 496,089 | 1.37 | to | 1.26 | 506,447 | — | 0.55 | to | 1.60 | 2.28 | to | 2.24 | |||||||||||||||||||||||||||||||||
TA PIMCO Tactical - Conservative Service Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 976,114 | 0.97 | to | 0.95 | 953,805 | 0.43 | 1.25 | to | 2.35 | 6.82 | to | 6.40 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 2,044,825 | 0.91 | to | 0.90 | 1,840,876 | 1.15 | 1.25 | to | 1.65 | 0.26 | to | (0.13 | ) | |||||||||||||||||||||||||||||||||
12/31/2011 | 2,979,836 | 0.90 | to | 0.90 | 2,681,447 | 1.30 | 1.25 | to | 1.65 | (8.60 | ) | to | (8.96 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 2,388,545 | 0.99 | to | 0.98 | 2,356,550 | 0.76 | 1.25 | to | 1.65 | (3.32 | ) | to | (3.70 | ) | ||||||||||||||||||||||||||||||||
12/31/2009 | (1) | 332,818 | 1.02 | to | 1.02 | 340,353 | — | 1.25 | to | 1.65 | 2.27 | to | 2.22 | |||||||||||||||||||||||||||||||||
TA PIMCO Tactical - Growth Service Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 534,963 | 1.00 | to | 0.99 | 602,496 | 0.65 | 1.25 | to | 2.50 | 15.36 | to | 14.91 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 576,973 | 0.87 | to | 0.86 | 500,498 | 0.49 | 1.25 | to | 1.65 | (0.56 | ) | to | (0.95 | ) | ||||||||||||||||||||||||||||||||
12/31/2011 | 659,109 | 0.87 | to | 0.87 | 575,105 | 1.31 | 1.25 | to | 1.65 | (12.70 | ) | to | (13.05 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 817,802 | 1.00 | to | 1.00 | 818,222 | 1.05 | 1.25 | to | 1.65 | (1.93 | ) | to | (2.32 | ) | ||||||||||||||||||||||||||||||||
12/31/2009 | (1) | 159,393 | 1.02 | to | 1.02 | 162,819 | — | 1.25 | to | 1.65 | 2.16 | to | 2.12 |
34
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
4. Financial Highlights (continued)
Subaccount |
Year Ended | Units | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio |
Net Assets | Investment Income Ratio* |
Expense Ratio** Lowest to Highest |
Total Return*** Corresponding to Lowest to Highest Expense Ratio |
|||||||||||||||||||||||||||||||||||||||
TA PIMCO Total Return Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 3,516,503 | $ | 15.75 | to | $ | 9.99 | $ | 53,907,441 | 1.94 | % | 1.25 | % | to | 2.50 | % | (3.75 | )% | to | (4.92 | )% | ||||||||||||||||||||||||||
12/31/2012 | 4,771,257 | 16.36 | to | 10.51 | 76,559,232 | 4.14 | 1.25 | to | 2.50 | 6.22 | to | 4.91 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 4,396,044 | 15.41 | to | 10.65 | 66,663,393 | 2.45 | 1.25 | to | 2.50 | 4.96 | to | 3.68 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 4,903,407 | 14.68 | to | 14.00 | 70,988,935 | 4.37 | 1.25 | to | 2.50 | 5.87 | to | 5.30 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 4,703,006 | 13.86 | to | 13.29 | 64,458,368 | 6.58 | 1.25 | to | 1.80 | 14.60 | to | 13.98 | ||||||||||||||||||||||||||||||||||
TA PIMCO Total Return Service Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 68,847 | 14.26 | to | 13.45 | 953,971 | 1.73 | 1.25 | to | 1.80 | (3.97 | ) | to | (4.48 | ) | ||||||||||||||||||||||||||||||||
12/31/2012 | 67,702 | 14.85 | to | 14.09 | 984,685 | 3.77 | 1.25 | to | 1.80 | 5.99 | to | 5.42 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 79,325 | 14.01 | to | 13.36 | 1,095,305 | 2.27 | 1.25 | to | 1.80 | 4.64 | to | 4.08 | ||||||||||||||||||||||||||||||||||
12/31/2010 | 98,685 | 13.39 | to | 12.84 | 1,310,749 | 3.78 | 1.25 | to | 1.80 | 5.62 | to | 5.04 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 103,981 | 12.68 | to | 12.22 | 1,307,689 | 6.54 | 1.25 | to | 1.80 | 14.32 | to | 13.70 | ||||||||||||||||||||||||||||||||||
TA Systematic Small/Mid Cap Value Initial Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 4,244,695 | 28.02 | to | 15.59 | 118,482,489 | 0.52 | 1.25 | to | 2.50 | 34.64 | to | 32.99 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 1,269,880 | 20.81 | to | 11.72 | 26,513,383 | 0.49 | 1.25 | to | 2.50 | 14.94 | to | 13.53 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 1,685,776 | 18.10 | to | 11.11 | 30,728,786 | 0.14 | 1.25 | to | 2.50 | (3.86 | ) | to | (5.03 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 1,806,231 | 18.83 | to | 20.64 | 34,384,127 | 0.65 | 1.25 | to | 2.50 | 28.80 | to | 27.24 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 2,083,421 | 14.62 | to | 14.21 | 30,846,005 | 3.22 | 1.25 | to | 2.50 | 41.45 | to | 40.68 | ||||||||||||||||||||||||||||||||||
TA Systematic Small/Mid Cap Value Service Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 69,429 | 28.44 | to | 26.98 | 1,946,979 | 0.37 | 1.25 | to | 1.80 | 34.36 | to | 33.63 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 30,201 | 21.17 | to | 20.19 | 632,490 | 0.27 | 1.25 | to | 1.80 | 14.60 | to | 13.98 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 42,578 | 18.47 | to | 17.71 | 780,713 | 0.04 | 1.25 | to | 1.80 | (4.06 | ) | to | (4.57 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 42,501 | 19.25 | to | 18.56 | 814,512 | 0.70 | 1.25 | to | 1.80 | 28.45 | to | 27.75 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 46,462 | 14.99 | to | 14.53 | 693,149 | 2.75 | 1.25 | to | 1.80 | 41.14 | to | 40.37 | ||||||||||||||||||||||||||||||||||
TA T. Rowe Price Small Cap Initial Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 1,622,505 | 27.15 | to | 14.14 | 40,342,222 | 0.07 | 1.25 | to | 2.50 | 42.29 | to | 40.56 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 1,628,436 | 19.08 | to | 10.55 | 28,527,518 | — | 1.25 | to | 2.50 | 14.26 | to | 12.86 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 1,651,913 | 16.70 | to | 13.03 | 25,475,878 | — | 1.25 | to | 2.50 | 0.44 | to | (0.10 | ) | |||||||||||||||||||||||||||||||||
12/31/2010 | 1,923,072 | 16.63 | to | 13.04 | 30,009,087 | — | 1.25 | to | 1.80 | 32.77 | to | 32.05 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 1,941,533 | 12.52 | to | 9.88 | 22,850,062 | — | 1.25 | to | 1.80 | 36.99 | to | 36.25 | ||||||||||||||||||||||||||||||||||
TA T. Rowe Price Small Cap Service Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 15,741 | 32.08 | to | 30.26 | 496,818 | — | 1.25 | to | 1.80 | 41.92 | to | 41.16 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 14,361 | 22.60 | to | 21.44 | 319,628 | — | 1.25 | to | 1.80 | 13.98 | to | 13.36 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 16,975 | 19.83 | to | 18.91 | 332,758 | — | 1.25 | to | 1.80 | 0.26 | to | (0.28 | ) | |||||||||||||||||||||||||||||||||
12/31/2010 | 18,011 | 19.78 | to | 18.97 | 351,941 | — | 1.25 | to | 1.80 | 32.41 | to | 31.69 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 21,581 | 14.94 | to | 14.40 | 320,059 | — | 1.25 | to | 1.80 | 36.62 | to | 35.88 | ||||||||||||||||||||||||||||||||||
TA Vanguard ETF - Balanced Service Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 247,587 | 12.17 | to | 11.80 | 2,984,806 | 1.22 | 1.25 | to | 1.80 | 10.06 | to | 9.46 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 90,824 | 11.06 | to | 10.78 | 996,682 | 1.32 | 1.25 | to | 1.80 | 7.05 | to | 6.47 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 50,718 | 10.33 | to | 10.13 | 520,892 | 1.12 | 1.25 | to | 1.80 | 0.22 | to | (0.32 | ) | |||||||||||||||||||||||||||||||||
12/31/2010 | 44,410 | 10.31 | to | 10.16 | 455,799 | 0.85 | 1.25 | to | 1.80 | 9.33 | to | 8.74 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 16,731 | 9.43 | to | 9.34 | 157,399 | 0.29 | 1.25 | to | 1.80 | 15.09 | to | 14.47 | ||||||||||||||||||||||||||||||||||
TA Vanguard ETF - Growth Service Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 331,314 | 12.39 | to | 12.01 | 4,073,188 | 1.18 | 1.25 | to | 1.80 | 17.31 | to | 16.68 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 260,119 | 10.56 | to | 10.30 | 2,728,447 | 1.61 | 1.25 | to | 1.80 | 10.17 | to | 9.57 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 253,067 | 9.59 | to | 9.40 | 2,413,614 | 1.37 | 1.25 | to | 1.80 | (2.35 | ) | to | (2.88 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 264,369 | 9.82 | to | 9.68 | 2,585,107 | 1.14 | 1.25 | to | 1.80 | 11.61 | to | 11.01 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 239,694 | 8.80 | to | 8.72 | 2,102,979 | 0.41 | 1.25 | to | 1.80 | 21.66 | to | 21.00 | ||||||||||||||||||||||||||||||||||
TA WMC Diversified Growth Initial Class |
||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 21,566,331 | 19.70 | to | 13.23 | 420,426,576 | 1.05 | 1.25 | to | 2.50 | 30.83 | to | 29.24 | ||||||||||||||||||||||||||||||||||
12/31/2012 | 24,263,455 | 15.06 | to | 11.25 | 361,912,975 | 0.31 | 1.25 | to | 2.50 | 11.76 | to | 10.39 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 27,737,335 | 13.48 | to | 10.19 | 370,487,799 | 0.36 | 1.25 | to | 2.50 | (4.92 | ) | to | (6.08 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 22,319,020 | 14.17 | to | 16.58 | 313,874,807 | 0.53 | 1.25 | to | 2.50 | 16.36 | to | 14.94 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 25,515,389 | 12.18 | to | 11.68 | 308,710,484 | 0.94 | 1.25 | to | 2.50 | 27.60 | to | 26.91 |
35
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
4. Financial Highlights (continued)
Subaccount |
Year Ended | Units | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio |
Net Assets | Investment Income Ratio* |
Expense Ratio** Lowest to Highest |
Total Return*** Corresponding to Lowest to Highest Expense Ratio |
|||||||||||||||||||||||||||||||||||||||
TA WMC Diversified Growth Service Class |
|
|||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 84,682 | $ | 21.19 | to | $ | 19.99 | $ | 1,776,148 | 0.78 | % | 1.25 | % | to | 1.80 | % | 30.50 | % | to | 29.80 | % | ||||||||||||||||||||||||||
12/31/2012 | 105,091 | 16.23 | to | 15.40 | 1,690,925 | 0.11 | 1.25 | to | 1.80 | 11.46 | to | 10.86 | ||||||||||||||||||||||||||||||||||
12/31/2011 | 128,182 | 14.56 | to | 13.89 | 1,849,995 | 0.30 | 1.25 | to | 1.80 | (5.11 | ) | to | (5.62 | ) | ||||||||||||||||||||||||||||||||
12/31/2010 | 110,484 | 15.35 | to | 14.72 | 1,681,890 | 0.32 | 1.25 | to | 1.80 | 16.03 | to | 15.41 | ||||||||||||||||||||||||||||||||||
12/31/2009 | 127,063 | 13.23 | to | 12.75 | 1,668,788 | 0.48 | 1.25 | to | 1.80 | 27.31 | to | 26.62 |
(1) | See footnote 1 |
* | These amounts represent the dividends, excluding distributions of capital gains, received by the subaccount from the Mutual Fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that are assessed against contract owner accounts either through reductions in the unit values or the redemption of units. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the Mutual Fund in which the subaccounts invest. |
** | These amounts represent the annualized contract expenses of the subaccount, consisting primarily of mortality and expense charges, for each period indicated. These ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the Mutual Fund have been excluded. |
*** | These amounts represent the total return for the periods indicated, including changes in the value of the Mutual Fund, and expenses assessed through the reduction of unit values. These ratios do not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. Effective 2012, total returns reflect a full twelve month period and total returns for subaccounts opened during the year have not been disclosed as they may not be indicative of a full year return. Effective 2011, expense ratios not in effect for the full twelve months are not reflected in the total return as they may not be indicative of a full year return. |
36
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
5. Administrative and Mortality and Expense Risk Charges
WRL deducts a daily administrative charge equal to an annual rate ranging from 0% to .40% of the daily net assets value of each subaccount for administrative expenses. WRL deducts an annual charge during the accumulation phase, not to exceed $35, proportionately from the subaccounts’ unit values. An annual charge ranging from .85% to 2.25% is deducted (based on the death benefit selected) from the unit values of the subaccounts of the Separate Account for WRL’s assumption of certain mortality and expense risks incurred in connection with the contract. The charge is assessed daily based on the net asset value of the Mutual Fund. Charges for administrative and mortality and expense risk are an expense of the subaccount. Charges reflected above are those currently assessed and may be subject to change. Contract owners should see their actual policy and any related attachments to determine their specific charges.
6. Income Tax
Operations of the Separate Account form a part of WRL, which is taxed as a life insurance company under Subchapter L of the Internal Revenue Code of 1986, as amended (the Code). The operations of the Separate Account are accounted for separately from other operations of WRL for purposes of federal income taxation. The Separate Account is not separately taxable as a regulated investment company under Subchapter M of the Code and is not otherwise taxable as an entity separate from WRL. Under existing federal income tax laws, the income of the Separate Account is not taxable to WRL, as long as earnings are credited under the variable annuity contracts.
7. Dividend Distributions
Dividends are not declared by the Separate Account, since the increase in the value of the underlying investment in the Mutual Funds is reflected daily in the accumulation unit price used to calculate the equity value within the Separate Account. Consequently, a dividend distribution by the Mutual Funds does not change either the accumulation unit price or equity values within the Separate Account.
37
Western Reserve Life Assurance Co. of Ohio
WRL Series Annuity Account
Notes to Financial Statements
8. Fair Value Measurements and Fair Value Hierarchy
The Accounting Standards Codification™ (ASC) 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the nature of inputs used to measure fair value and enhances disclosure requirements for fair value measurements.
The Separate Account has categorized its financial instruments into a three level hierarchy which is based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.
Financial assets and liabilities recorded at fair value on the Statements of Assets and Liabilities are categorized as follows:
Level 1. Unadjusted quoted prices for identical assets or liabilities in an active market.
Level 2. Quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:
a) | Quoted prices for similar assets or liabilities in active markets |
b) | Quoted prices for identical or similar assets or liabilities in non-active markets |
c) | Inputs other than quoted market prices that are observable |
d) | Inputs that are derived principally from or corroborated by observable market data through correlation or other means. |
Level 3. Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.
All investments in the Mutual Funds included in the Statements of Assets and Liabilities are stated at fair value and are based upon daily unadjusted quoted prices, therefore are considered Level 1.
9. Subsequent Events
The Separate Account has evaluated the financial statements for subsequent events through the date which the financial statements were issued. During this period, there were no subsequent events requiring recognition or disclosure in the financial statements.
38
STATEMENT OF ADDITIONAL INFORMATION
WRL FREEDOM VARIABLE ANNUITY
Issued through
WRL SERIES ANNUITY ACCOUNT
Offered by
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
This Statement of Additional Information (“SAI”) expands upon subjects discussed in the current prospectus for the WRL Freedom Variable Annuity offered by Western Reserve Life Assurance Co. of Ohio. You may obtain a copy of the prospectus dated May 1, 2009 by calling 1-800-851-9777 (Monday – Friday 8:30 a.m. – 7:00 p.m. Eastern Time), by writing to Western Reserve Life, Attention: Customer Care Group, 4333 Edgewood Road NE, Cedar Rapids, Iowa 52499-0001 or by visiting our website at www.westernreserve.com. The prospectus sets forth information that a prospective investor should know before investing in a Contract. Terms used in the current prospectus for the Contract are incorporated in this SAI.
This SAI is not a prospectus and should be read only in conjunction with the prospectus for the Contract and with the prospectuses for the funds.
Dated: May 1, 2009
WR00007-5/2009
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accumulation period | The period between the Contract date and the maturity date while the Contract is in force. | |
accumulation unit value | An accounting unit of measure we use to calculate subaccount values during the accumulation period. | |
administrative office | Our administrative office phone number is 1-800-851-9777. | |
age | The issue age, which is annuitant’s age on the birthday nearest the Contract date, plus the number of completed Contract years. When we use the term “age” in this SAI, it has the same meaning as “attained age” in the Contract. | |
annuitant | The person on whose life any annuity payments will be based. | |
annuity unit value | An accounting unit of measure we use to calculate annuity payments from the subaccounts after the maturity date. | |
annuity value | The sum of the separate account value and the fixed account value at the end of any valuation period. | |
beneficiary(ies) | The person(s) you elect to receive the death benefit proceeds under the Contract. | |
cash value | The annuity value less any applicable premium taxes, any withdrawal charge, any loans and unpaid accrued interest, the annual Contract charge, and any rider charges. | |
Code | The Internal Revenue Code of 1986, as amended. | |
contingent annuitant | The person named by the owner to become the new annuitant upon the death of the current annuitant during the accumulation period, if the owner is still alive. | |
Contract anniversary | The same day in each succeeding year as the Contract date. If there is no day in a calendar year which coincides with the Contract date, the Contract anniversary will be the first day of the next month. | |
Contract date | Generally, the later of the date on which the initial purchase payment is received, or the date that the properly completed application is received, at Western Reserve’s administrative office. We measure Monthiversaries, Contract years, Contract months, and Contract anniversaries from the Contract date. | |
death benefit proceeds | The death benefit proceeds are the amount, if any, payable under the death benefit described in your Contract on the earlier of: (1) the death of any owner, or (2) the death of the annuitant, if no contingent annuitant is named. | |
death report day | The valuation date on which we have received both: (a) proof of the earlier of: (1) the death of any owner, or (2) the death of the annuitant, if no contingent annuitant is named, and (b) a beneficiary’s election regarding payment. If the spouse of the deceased owner elects to continue the Contract (if sole beneficiary), there are two death report days (one relating to the death of the first to die and the second relating to the death of the spouse who continues the Contract). If there is no spousal continuation of the Contract, then there is only one death report day for the Contract. If there are multiple beneficiaries, the death report day is the earliest date on which we receive both proof of death and any beneficiary’s completed election form. | |
fixed account | An investment option to which you can direct your money under the Contract, other than the separate account. It provides a guarantee of principal and interest. The assets supporting the fixed account are held in the general account. | |
fixed account value | During the accumulation period, your Contract’s value in the fixed account. | |
funds | Investment companies which are registered with the U.S. Securities and Exchange Commission. The Contract allows you to invest in the portfolios of the funds through our subaccounts. We reserve the right to add portfolios of other registered investment companies as investment choices under the Contract in the future. | |
in force | Condition under which the Contract is active and an owner is entitled to exercise all rights under the Contract. | |
maturity date | The date on which the accumulation period ends and annuity payments begin. The latest maturity date is the annuitant’s 90th birthday. | |
Monthiversary | The same day in the month as the Contract date. When there is no date in a calendar month that coincides with the Contract date, the Monthiversary is the first day of the next month. | |
NYSE | New York Stock Exchange. | |
nonqualified Contracts | Contracts issued other than in connection with retirement plans. |
1
owner (you, your) |
The person(s) entitled to exercise all rights and privileges under the Contract. The annuitant is an owner unless the application states otherwise, or unless a change of ownership is made at a later time. If two owners are named, the Contract is owned jointly and the consent of each owner is required to exercise ownership rights under the Contract. Please note: A joint owner receives no benefits under this Contract. A joint owner (even if the joint owner is the spouse of the owner) is not entitled to receive the death benefit under this Contract; a joint owner may not continue the Contract on the death of an owner. | |
portfolio | A separate investment portfolio of a fund. | |
purchase payments/premium |
Amounts paid by an owner or on an owner’s behalf to Western Reserve as consideration for the benefits provided by the Contract. When we use the term “purchase payment” or “premium” in this SAI, it has the same meaning as “net payment” in the Contract, which means the purchase payment less any applicable premium taxes. | |
qualified Contracts | Contracts issued in connection with retirement plans that qualify for special federal income tax treatment under the Code. | |
separate account | WRL Series Annuity Account, a unit investment trust consisting of subaccounts. Each subaccount of the separate account invests solely in shares of a corresponding portfolio of a fund. | |
separate account value | During the accumulation period, your Contract’s value in the separate account, which equals the sum of the values in each subaccount. | |
subaccount | A subdivision of the separate account that invests exclusively in the shares of a specified portfolio and supports the Contracts. Subaccounts corresponding to each portfolio hold assets under the Contract during the accumulation period. | |
surrender | The termination of a Contract at the option of an owner. | |
valuation date/ business day |
Each day on which the NYSE is open for trading, except when a subaccount’s corresponding portfolio does not value its shares. Western Reserve is open for business on each day that the NYSE is open. When we use the term “business day,” it has the same meaning as valuation date. | |
valuation period | The period of time over which we determine the change in the value of the subaccounts in order to price accumulation units and annuity units. Each valuation period begins at the close of normal trading on the NYSE (currently 4:00 p.m. Eastern Time on each valuation date) and ends at the close of normal trading of the NYSE on the next valuation date. | |
Western Reserve (we, us, our) |
Western Reserve Life Assurance Co. of Ohio. |
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In order to supplement the description in the prospectus, the following provides additional information about Western Reserve and the Contract, which may be of interest to a prospective purchaser.
THE CONTRACT—GENERAL PROVISIONS
The Contract shall belong to the owner upon issuance of the Contract after completion of an application and delivery of the initial purchase payment. While the annuitant is living, the owner may: (1) assign the Contract; (2) surrender the Contract; (3) amend or modify the Contract with Western Reserve’s consent; (4) receive annuity payments or name a payee to receive the payments; and (5) exercise, receive and enjoy every other right and benefit contained in the Contract. The exercise of these rights may be subject to the consent of any assignee or irrevocable beneficiary; and of an owner’s spouse in a community or marital property state.
A beneficiary may be named in the Contract application or in a written notice to our administrative office. The beneficiary will receive the death benefit upon the owner’s or annuitant’s death. If no beneficiary survives the decedent, the owner’s estate will receive the death benefit.
An owner may change the ownership of the Contract in a written notice to our administrative office. When this change takes effect, all rights of ownership in the Contract will pass to the new owner. A change of ownership may have tax consequences.
When there is a change of owner, the change will take effect as of the date Western Reserve accepts the written notice at our administrative office. We assume no liability for any payments made, or actions taken before a change is accepted, and shall not be responsible for the validity or effect of any change of ownership.
The Contract and any endorsements or riders thereon and the Contract application constitute the entire contract between Western Reserve and the owner. All statements in the application are representations and not warranties. No statement will cause the Contract to be void or to be used in defense of a claim unless contained in the application.
If the age or gender of the annuitant has been misstated, Western Reserve will change the annuity benefit payable to that which the purchase payments would have purchased for the correct age or gender. The dollar amount of any underpayment Western Reserve makes shall be paid in full with the next payment due such person or the beneficiary. The dollar amount of any overpayment Western Reserve makes due to any misstatement shall be deducted from payments subsequently accruing to such person or beneficiary. Any underpayment or overpayment will include interest at 5% per year, from the date of the wrong payment to the date of the adjustment. The age of the annuitant may be established at any time by the submission of proof Western Reserve finds satisfactory.
During the lifetime of the annuitant and prior to the maturity date, the owner may choose an annuity payment option or change the election. If no election is made prior to the maturity date, annuity payments will be made under payment Option B, with 120 payments guaranteed.
Thirty days prior to the maturity date, we will mail to the owner a notice and a form upon which the owner can select allocation options for the annuity proceeds as of the maturity date. We reserve the right to limit transfers to once per year after the maturity date. The owner may also, prior to the maturity date, select or change the frequency of annuity payments, which may be monthly, quarterly, semi-annually or annually, provided that the annuity option and payment frequency provides for payments of at least $20 per period. If none of these is possible, a lump sum payment will be made.
Death of Owner. Federal tax law requires that if any owner dies before the maturity date, then the entire value of the Contract must generally be distributed within five years of the date of death of such owner. Special rules apply where (1) the spouse of the deceased owner is the sole beneficiary, (2) an owner is not a natural person and the primary annuitant dies or is changed, or (3) any owner dies after the maturity date. See Certain Federal Income Tax Consequences of this SAI for a detailed description of these rules. Other rules may apply to qualified Contracts.
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If an owner dies before the annuitant and before the maturity date:
— | if no beneficiary is named and alive, the owner’s estate will become the new owner. The death benefit proceeds must be distributed within five years of the former owner’s death; |
— | if the sole beneficiary is alive and is the owner’s spouse at the time of the deceased owner’s death, the spouse may elect to continue the Contract as the new owner; or |
— | if the beneficiary is alive and the owner’s spouse has not elected to continue the Contract, the death benefit proceeds must be distributed either: |
— | within five years of the former owner’s death; or |
— | over the lifetime of the beneficiary, if a natural person, with payments beginning within one year of the former owner’s death; or |
— | over a period that does not exceed the life expectancy (as defined by the Code and regulations adopted under the Code) of the beneficiary, if a natural person, with payments beginning within one year of the former owner’s death. |
To determine payments, we may use the “account-based” method under which we recalculate the amount of the payment each year by dividing the remaining unpaid proceeds by the beneficiary’s current life expectancy, with payments beginning within one year of the deceased owner’s death.
Death of Annuitant. If the annuitant who is not an owner dies during the accumulation period and no contingent annuitant is named, then the death benefit proceeds are payable to the beneficiary in a lump sum distribution. We will terminate the Contract upon receipt of due proof of death.
If the annuitant was an owner, and the sole beneficiary was not the deceased annuitant’s spouse who elects to continue the Contract, (1) the death benefit must be distributed within five years of the date of the annuitant/deceased owner’s death, or (2) payments must begin no later than one year after the annuitant/deceased owner’s death and must be made (i) for the beneficiary’s lifetime or (ii) for a period certain (so long as any certain period does not exceed the beneficiary’s life expectancy). Payments may be made in accordance with the “account-based” method under which we recalculate the amount of the payment each year by dividing the remaining unpaid proceeds by the beneficiary’s current life expectancy, with payments beginning within one year of the deceased owner’s death. Death benefit proceeds which are not paid to or for the benefit of a natural person must be distributed within five years of the date of the annuitant/deceased owner’s death. If the sole beneficiary is the annuitant/deceased owner’s surviving spouse, such spouse will continue the Contract as the new annuitant and owner instead of receiving the death benefit. (See Certain Federal Income Tax Consequences.) We will increase the annuity value as of the death report day to equal the amount of the death benefit proceeds as of the death report day.
If a beneficiary elects to receive the death benefit proceeds under alternate payment option (1) or 2(ii) above, then we will: (a) allow partial withdrawals and transfers among the subaccounts and the fixed account; (b) deduct the transfer fee from each transfer after the first 12 transfers during the Contract year; (c) deduct the annual Contract charge each Contract year; and (d) not permit payment of the death benefit proceeds under the annuity provisions of the Contract upon complete distribution.
The beneficiary may name a new beneficiary for payment of the death benefit proceeds. If no new beneficiary is named, such payment will be made to the contingent beneficiary if named by the owner. If no new beneficiary or contingent beneficiary is named, such payment will be made to the beneficiary’s estate.
If no new beneficiary or contingent beneficiary is named, any death benefit proceeds will be paid to the beneficiary’s estate immediately.
Beneficiary. The beneficiary designation in the application will remain in effect until changed. An owner may change the designated beneficiary(ies) during the annuitant’s lifetime by sending written notice to us at our administrative office. A beneficiary’s consent to such change is not required unless the beneficiary was irrevocably designated or law requires consent. (If an irrevocable beneficiary dies, an owner may then designate a new beneficiary.) The change will take effect as of the date an owner signs the written notice. We will not be liable for any payment made before the written notice is received at our administrative office. Unless we receive written notice from an owner to the contrary, no beneficiary may assign any payments under the Contract before such payments are due. To the extent permitted by law, no payments under the Contract will be subject to the claims of any beneficiary’s creditors.
During the annuitant’s lifetime and prior to the maturity date (subject to any irrevocable beneficiary’s rights) the owner may assign any rights or benefits provided by a nonqualified Contract. The assignment of a Contract will be treated as a distribution of the annuity value for federal tax purposes. Any assignment must be made in writing and accepted by us. An assignment will be effective as of the date the request is received at our administrative office and is accepted by us. We assume no liability for any payments made or actions taken before a change is accepted and shall not be responsible for the validity or effect of any assignment.
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With regard to qualified Contracts, ownership of the Contract generally may be assigned, but any assignment may be subject to restrictions, penalties, taxation as a distribution, or even prohibition under the Code, and must be permitted under the terms of the underlying retirement plan.
Proof of Age, Gender and Survival
We may require proper proof of age and gender of any annuitant or joint annuitant prior to making the first annuity payment. Prior to making any payment, we may require proper proof that the annuitant or joint annuitant is alive and legally qualified to receive such payment. If required by law to ignore differences in gender of any payee, annuity payments will be determined using unisex rates.
The Contract will not share in Western Reserve’s surplus earnings; no dividends will be paid.
The Contract may be acquired by an employee or registered representative of any broker/dealer authorized to sell the Contract or by their spouse or minor children, or by an officer, director, trustee or bona fide full-time employee of Western Reserve or its affiliated companies or their spouse or minor children. In such a case, we may credit an amount equal to a percentage of each purchase payment to the Contract due to lower acquisition costs we experience on those purchases. We may offer, in our discretion, certain employer sponsored savings plans, reduced or waived fees and charges including, but not limited to, the withdrawal charge and the annual Contract charge, for certain sales under circumstances which may result in savings of certain costs and expenses. In addition, there may be other circumstances of which we are not presently aware which could result in reduced sales or distribution expenses. Credits to the Contract or reductions in these fees and charges will not be unfairly discriminatory against any owner.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary does not constitute tax advice. It is a general discussion of certain of the expected federal income tax consequences of investment in and distributions with respect to a Contract, based on the Internal Revenue Code of 1986, as amended, proposed and final Treasury regulations thereunder, judicial authority, and current administrative rulings and practice. This summary discusses only certain federal income tax consequences to “United States Persons,” and does not discuss state, local, or foreign tax consequences. United States Persons means citizens or residents of the United States, domestic corporations, domestic partnerships and trusts or estates that are subject to United States federal income tax regardless of the source of their income.
Diversification Requirements. Section 817(h) of the Code provides that in order for a non-qualified variable contract which is based on a segregated asset account to qualify as an annuity contract under the Code, the investments made by such account must be “adequately diversified” in accordance with Treasury regulations. The Treasury regulations issued under Section 817(h) (Treas. Reg. § 1.817-5) apply a diversification requirement to each of the subaccounts of the separate account. The separate account, through the funds and their portfolios, intends to comply with the diversification requirements of the Treasury.
Section 817(h) applies to variable annuity contracts other than pension plan contracts. The regulations reiterate that the diversification requirements do not apply to pension plan contracts. All of the qualified retirement plans (described below) are defined as pension plan contracts for these purposes. Notwithstanding the exception of qualified contracts from application of the diversification rules, the investment vehicle for Western Reserve’s qualified Contracts (i.e., the funds) will be structured to comply with the diversification standards because it serves as the investment vehicle for nonqualified contracts as well as qualified contracts.
Owner Control. In some circumstances, owners of variable contracts who retain excessive control over the investment of the underlying separate account assets may be treated as the owners of those assets and may be subject to tax on income produced by those assets. Although published guidance in this area does not address certain aspects of the Contracts, we believe that the owner of a Contract should not be treated as the owner of the separate account assets. We reserve the right to modify the Contracts to bring them into conformity with applicable standards should such modification be necessary to prevent owners of the Contracts from being treated as the owners of the underlying separate account assets.
Distribution Requirements. The Code also requires that nonqualified contracts contain specific provisions for distribution of contract proceeds upon the death of an owner. In order to be treated as an annuity contract for federal income tax purposes, the Code requires that such contracts provide that if any owner dies on or after the maturity date and before the entire interest in the contract has been distributed, the remaining portion must be distributed at least as rapidly as under the method in effect on such owner’s death. If any owner dies before the maturity date, the entire interest in the contract must generally be distributed within five years after such
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owner’s date of death or be applied to provide an immediate annuity under which payments will begin within one year of such owner’s death and will be made for the life of the “designated beneficiary” or for a period not extending beyond the life expectancy of the “designated beneficiary”. However, if such owner’s death occurs prior to the maturity date, and such owner’s surviving spouse is the “designated beneficiary”, then the contract may be continued with the surviving spouse as the new owner. If any owner is not a natural person, then for purposes of these distribution requirements, the primary annuitant shall be treated as an owner and any death or change of such primary annuitant shall be treated as the death of the owner. Non-qualified Contracts contain provisions intended to comply with these requirements of the Code. No regulations interpreting these requirements of the Code have yet been issued and thus no assurance can be given that the provisions contained in the Contracts satisfy all such Code requirements. The provisions contained in the Contracts will be reviewed and modified if necessary to maintain their compliance with the Code requirements when clarified by regulation or otherwise.
The following discussion is based on the assumption that the Contract qualifies as an annuity contract for federal income tax purposes.
In General. Code Section 72 governs taxation of annuities in general. We believe that an owner who is an individual will not be taxed on increases in the value of a contract until such amounts are withdrawn or distributed. 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 plan, generally will be treated as a distribution. The taxable portion of a distribution is taxable as ordinary income.
Non-Natural Persons. Pursuant to Section 72(u) of the Code, a nonqualified contract held by a taxpayer other than a natural person generally will not be treated as an annuity contract under the Code; accordingly, an owner who is not a natural person will recognize as ordinary income for a taxable year the excess, if any, of the contract value over the “investment in the contract”. There are some exceptions to this rule and a prospective purchaser of the contract that is not a natural person should discuss these with a competent tax adviser.
Withholding. The portion of any distribution under a Contract that is includable in gross income will be subject to federal income tax withholding unless the recipient of such distribution elects not to have federal income tax withheld and properly notifies us. For certain qualified Contracts, certain distributions are subject to mandatory withholding. The withholding rate varies according to the type of distribution and the owner’s tax status. For qualified Contracts, “eligible rollover distributions” from section 401(a) plans, section 403(a) annuities and section 403(b) tax-sheltered annuities and governmental section 457 deferred compensation plans are subject to a mandatory federal income tax withholding of 20%. For this purpose, an eligible rollover distribution is a distribution from such a plan to an employee, or employee’s former or surviving spouse, except certain distributions such as distributions required by the Code, hardship distributions, certain after-tax contributions, or distributions in a specified annuity form. The 20% withholding does not apply, however, to nontaxable distributions or if the owner chooses a “direct rollover” from the plan to another tax-qualified plan, 403(b) plan, governmental section 457 plan or IRA.
Qualified Contracts. The qualified Contract is designed for use with several types of tax-qualified retirement plans. The tax rules applicable to participants and beneficiaries in tax-qualified retirement plans vary according to the type of plan and the terms and conditions of the plan. 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. Some retirement plans are subject to distribution and other requirements that are not incorporated into the Contracts and our Contract administration procedures. Owners, participants and beneficiaries are responsible for determining that contributions, distributions and other transactions with respect to the Contract comply with applicable law.
For qualified plans under sections 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), or in the case of an IRA (other than a Roth IRA) distributions generally must begin no later than April 1 of the calendar year in which the owner (or plan participant) reaches age 70 1⁄2. Pursuant to special legislation, required minimum distributions for the 2009 tax year generally are not required, and 2009 distributions that otherwise would be required minimum distributions may be eligible for rollover. Each owner is responsible for requesting distributions under the Contract that satisfy applicable tax rules.
If you are attempting to satisfy minimum required distribution rules through partial surrenders, the value of any enhanced death benefit or other optional rider may need to be included in calculating the amount required to be distributed. Consult a tax advisor.
We make no attempt to provide more than general information about use of the Contract with the various types of retirement plans. Purchasers of Contracts for use with any retirement plan should consult their legal counsel and tax advisor regarding the suitability of the Contract.
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Individual Retirement Annuities. In order to qualify as a traditional individual retirement annuity (“IRA”) under section 408(b) of the Code, a Contract must contain certain provisions: (i) the owner must be the annuitant; (ii) the Contract generally is not transferable by the owner, e.g., the owner may not designate a new owner, designate a contingent owner or assign the Contract as collateral security; (iii) subject to special rules, the total purchase payments for any tax year on behalf of any individual may not exceed $5,000 for 2009 ($6,000 if age 50 or older), except in the case of a rollover amount or contribution under section 402(c), 403(a)(4), 403(b)(8) or 408(d)(3) of the Code; (iv) annuity payments or partial withdrawals must begin no later than April 1 of the calendar year following the calendar year in which the annuitant attains age 70 1⁄2 and must be made in a specified form and manner; (v) an annuity payment option with a period certain that will guarantee annuity payments beyond the life expectancy of the annuitant and the beneficiary may not be selected; (vi) certain payments of death benefits must be made in the event the annuitant dies prior to the distribution of the annuity value; (vii) the entire interest of the owner is non-forfeitable; and (viii) premiums must not be fixed. Contracts intended to qualify as traditional IRAs under section 408(b) of the Code contain such provisions. No regular contributions may be made. 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 subject to a 10% penalty tax.
Roth Individual Retirement Annuities (Roth IRA). The Roth IRA, under section 408A of the Code, contains many of the same provisions as a traditional IRA. However, there are some differences. First, the contributions 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 to the rollover or conversion and to distributions attributable thereto. You should consult a tax advisor before combining any converted amounts with any other Roth IRA contributions, including any other conversion amounts from other tax years. The Roth IRA is available to individuals with earned income and whose modified adjusted gross income is under $120,000 for single filers, $176,000 for married filing jointly, and $10,000 for married filing separately. The amount per individual that may be contributed to all IRAs (Roth and traditional) is $5,000 for 2009 ($6,000 if age 50 or older). Secondly, the distributions are taxed differently. The Roth IRA offers tax-free distributions when made five tax years after the first contribution to any Roth IRA of the individual and made after attaining age 59 1⁄2, or to pay for qualified first time homebuyer expenses (lifetime maximum of $10,000), or due to death or disability. All other distributions are subject to income tax when made from earnings and may be subject to a premature withdrawal penalty tax unless an exception applies. A 10% penalty tax may apply to amounts attributable to a conversion from an IRA if the amounts are distributed within the five taxable years beginning with the year in which the conversion was made. Unlike the traditional IRA, there are no minimum required distributions during the owner’s lifetime; however, required distributions at death are generally the same.
Section 403(b) Plans. Under section 403(b) of the Code, payments made by public school systems and certain tax exempt organizations to purchase Contracts for their employees are excludable from the gross income of the employee, subject to certain limitations. However, such payments may be subject to FICA (Social Security) taxes. The Contract includes a death benefit that in some cases may exceed the greater of the purchase payments or the annuity 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 advisor. Additionally, in accordance with the requirements of the Code, section 403(b) annuities generally may not permit distribution of (i) elective contributions made in years beginning after December 31, 1988, (ii) earnings on those contributions, and (iii) earnings on amounts attributed to elective contributions held as of the end of the last year beginning before January 1, 1989. Distributions of such amounts will be allowed only upon the death of the employee, on or after attainment of age 59 1⁄2, severence from employment, disability, or financial hardship, except that income attributable to elective contributions may not be distributed in the case of hardship. For Contracts issued after 2008, amounts attributable to nonelective contributions may be subject to distribution restrictions specified in the employer’s section 403(b) plan.
If your Contract was issued pursuant to a 403(b) plan, starting January 1, 2009 we generally are required to confirm, with your 403(b) plan sponsor or otherwise, that withdrawals or transfers you request comply with applicable tax requirements and to decline requests that are not in compliance. We will defer such payments you request until all information required under the tax law has been received. By requesting a withdrawal or transfer, you consent to the sharing of confidential information about you, the Contract, and transactions under the Contract and any other 403(b) contracts or accounts you have under the 403(b) plan among us, your employer or plan sponsor, any plan administrator or recordkeeper, and other product providers.
Corporate Pension, Profit Sharing Plans and H.R. 10 Plans. Sections 401(a) and 403(a) of the Code permit corporate employers to establish various types of retirement plans for employees and self-employed individuals to establish qualified plans for themselves and their employees. Such retirement plans may permit the purchase of the Contracts to accumulate retirement savings. Adverse tax consequences to the plan, the participant or both may result if the Contract is assigned or transferred to any individual as a means to provide benefit payments. The Contract includes a death benefit that in some cases may exceed the greater of the purchase payments or the annuity value. The death benefit could be characterized as an incidental benefit, the amount of which is limited in a 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 advisor.
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Deferred Compensation Plans. Section 457 of the Code, while not actually providing for a qualified plan (as that term is used in the Code), provides for certain deferred compensation plans with respect to service for state governments, local governments, political subdivisions, agencies, instrumentalities and certain affiliates of such entities, and tax exempt organizations. The Contracts can be used with such plans. Under such plans a participant may specify the form of investment in which his or her participation will be made. For non-governmental section 457 plans, all such investments, however, are owned by the sponsoring employer, and are subject to the claims of the general creditors of the sponsoring employer. Depending on the terms of the particular plan, a non-governmental employer may be entitled to draw on deferred amounts for purposes unrelated to its section 457 plan obligations.
Western Reserve at present is taxed as a life insurance company under Part I of Subchapter L of the Code. The separate account is treated as part of us and, accordingly, will not be taxed separately as a “regulated investment company” under Subchapter M of the Code. We do not expect to incur any federal income tax liability with respect to investment income and net capital gains arising from the activities of the separate account retained as part of the reserves under the Contract. Based on this expectation, it is anticipated that no charges will be made against the separate account for federal income taxes. If, in future years, any federal income taxes are incurred by us with respect to the separate account, we may make a charge to the separate account.
Allocations of a purchase payment directed to a subaccount are credited in the form of accumulation units. Each subaccount has a distinct accumulation unit value. The number of units credited is determined by dividing the purchase payment or amount transferred to the subaccount by the accumulation unit value of the subaccount as of the end of the valuation period during which the allocation is made. For each subaccount, the accumulation unit value for a given business day is based on the net asset value of a share of the corresponding portfolio of a fund less any applicable charges or fees.
Upon allocation to the selected subaccount of the separate account, purchase payments are converted into accumulation units of the subaccount. The number of accumulation units to be credited is determined by dividing the dollar amount allocated to each subaccount by the value of an accumulation unit for that subaccount as next determined after the premium payment is received at the administrative and service office or, in the case of the initial premium payment, when the enrollment form is completed, whichever is later. The value of an accumulation unit for each subaccount was arbitrarily established at the inception of each subaccount. Thereafter, the value of an accumulation unit is determined as of the close of trading on each day the New York Stock Exchange is open for business.
An index (the “net investment factor”) which measures the investment performance of a subaccount during a valuation period is used to determine the value of an accumulation unit for the next subsequent valuation period. The net investment factor may be greater or less than or equal to one; therefore, the value of an accumulation unit may increase, decrease, or remain the same from one valuation period to the next. You bear this investment risk. The net investment performance of a subaccount and deduction of certain charges affect the accumulation unit value.
The net investment factor for any subaccount for any valuation period is determined by dividing (a) by (b) and subtracting (c) from the result, where:
(a) | is the net result of: |
(1) | the net asset value per share of the shares held in the subaccount determined at the end of the current valuation period, plus |
(2) | the per share amount of any dividend or capital gain distribution made with respect to the shares held in the subaccount if the ex-dividend date occurs during the current valuation period, plus or minus |
(3) | a per share credit or charge for any taxes determined by WRL to have resulted during the valuation period from the investment operations of the subaccount; |
(b) | is the net asset value per share of the shares held in the subaccount determined as of the end of the immediately preceding valuation period; and |
(c) | is an amount representing the separate account charge and any optional benefit fees, if applicable. |
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Illustration of Separate Account Accumulation Unit Value Calculations
Formula and Illustration for Determining the Net Investment Factor
Net Investment Factor = | (A + B - C) - E | |
D |
Where: | ||||
A = | The net asset value of an underlying fund portfolio share as of the end of the current valuation period. | |||
Assume A = $11.57 | ||||
B = | The per share amount of any dividend or capital gains distribution since the end of the immediately preceding valuation period. | |||
Assume B = 0 | ||||
C = | The per share charge or credit for any taxes reserved for at the end of the current valuation period. | |||
Assume C = 0 | ||||
D = | The net asset value of an underlying fund portfolio share at the end of the immediately preceding valuation period. | |||
Assume D = $11.40 | ||||
E = | The daily deduction for the mortality and expense risk fee and the administrative charge, and any optional benefit fees. Assume E totals 1.25% on an annual basis; on a daily basis, this equals .000034035. |
Then, the net investment factor = | ($11.57 + 0 - 0) - .000034035 = Z = 1.014878246 | |
($11.40) |
Formula and Illustration for Determining Accumulation Unit Value
Accumulation Unit Value = A * B
Where: | ||||
A = | The accumulation unit value for the immediately preceding valuation period. | |||
Assume = $X | ||||
B = | The net investment factor for the current valuation period. | |||
Assume = Y |
Then, the accumulation unit value = $X * Y = $Z
Annuity Unit Value And Annuity Payment Rates
The amount of variable annuity payments will vary with annuity unit values. Annuity unit values rise if the net investment performance of the subaccount (that is, the portfolio performance minus subaccount fees and charges including the mortality and expense risk charge that will equal an annual rate of 1.25%) exceeds the assumed interest rate of 5% annually. Conversely, annuity unit values fall if the net investment performance of the subaccount is less than the assumed rate. The value of a variable annuity unit in each subaccount was established at $10.00 on the date operations began for that subaccount. The value of a variable annuity unit on any subsequent business day is equal to (a) multiplied by (b) multiplied by (c), where:
(a) | is the variable annuity unit value for that subaccount on the immediately preceding business day; |
(b) | is the net investment factor for that subaccount for the valuation period; and |
(c) | is the investment return adjustment factor for the valuation period. |
The investment return adjustment factor for the valuation period is the product of discount factors of .99986634 per day to recognize the 5% effective annual assumed investment return. The valuation period is the period from the close of the immediately preceding business day to the close of the current business day.
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The net investment factor for the Contract used to calculate the value of a variable annuity unit in each subaccount for the valuation period is determined by dividing (i) by (ii) and subtracting (iii) from the result, where:
(i) | is the result of: |
(1) | the net asset value of a portfolio share held in that subaccount determined at the end of the current valuation period; plus |
(2) | the per share amount of any dividend or capital gain distributions made by the portfolio for shares held in that subaccount if the ex-dividend date occurs during the valuation period; plus or minus |
(3) | a per share charge or credit for any taxes reserved for which we determine to have resulted from the investment operations of the subaccount. |
(ii) | is the net asset value of a portfolio share held in that subaccount determined as of the end of the immediately preceding valuation period. |
(iii) | is a factor representing the mortality and expense risk charge and the administrative charge. This factor is equal, on an annual basis, to 1.25% of the daily net asset value of the portfolio share held in that subaccount. |
The dollar amount of subsequent variable annuity payments will depend upon changes in applicable annuity unit values.
The annuity payment rates generally vary according to the annuity option elected and the gender and adjusted age of the annuitant at the maturity date. See Annuity Payment Options – Determination of the First Variable and Fixed Payment, which contains a table for determining the adjusted age of the annuitant.
Illustration of Calculations for Annuity Unit Value
and Variable Annuity Payments
Formula and Illustration for Determining Annuity Unit Value
Annuity unit value = ABC
Where: | A = | Annuity unit value for the immediately preceding valuation period. | ||||
Assume | = $X | |||||
B = | Net investment factor for the valuation period for which the annuity unit value is being calculated. | |||||
Assume | = Y | |||||
C = | A factor to neutralize the assumed interest rate of 5% built into the annuity tables used. | |||||
Assume | = Z |
Then, the annuity unit value is: $XYZ = $Q
Formula and Illustration for Determining Amount of
First Monthly Variable Annuity Payment
First monthly variable annuity payment = | AB | |
$1,000 |
Where: | A = | The annuity value as of the maturity date. | ||||
Assume | = $X | |||||
B = | The annuity purchase rate per $1,000 based upon the option selected, the gender and adjusted age of the annuitant according to the tables contained in the Contract. | |||||
Assume | = $Y |
Then, the first monthly variable annuity payment = | $XY = $Z | |
1,000 |
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Formula and Illustration for Determining the Number of Annuity Units
Represented by Each Monthly Variable Annuity Payment
Number of annuity units = | A | |
B |
Where: | A = | The dollar amount of the first monthly variable annuity payment. | ||||
Assume | = $X | |||||
B = | The annuity unit value for the valuation date on which the first monthly payment is due. | |||||
Assume | = $Y |
Then, the number of annuity units = | $X = Z | |
$Y |
Yield - The yield quotation set forth in the prospectus for the Transamerica Money Market VP subaccount is for the seven days ended on the date of the most recent balance sheet of the separate account included in the registration statement, and is computed by determining the net change, exclusive of capital changes and income other than investment income, in the value of a hypothetical pre-existing account having a balance of one unit in the Transamerica Money Market VP subaccount at the beginning of the period, subtracting a hypothetical charge reflecting deductions from owner accounts, and dividing the difference by the value of the account at the beginning of the base period to obtain the base period return, and multiplying the base period return by (365/7) with the resulting figure carried to at least the nearest hundredth of one percent.
Effective Yield - The effective yield quotation for the Transamerica Money Market VP subaccount set forth in the prospectus is for the seven days ended on the date of the most recent balance sheet of the separate account included in the registration statement. The effective yield is computed by determining the net change, exclusive of capital changes and income other than investment income, in the value of a hypothetical pre-existing subaccount having a balance of one unit in the Transamerica Money Market VP subaccount at the beginning of the period. A hypothetical charge, reflecting deductions from owner accounts, is subtracted from the balance. The difference is divided by the value of the subaccount at the beginning of the base period to obtain the base period return, which is then compounded by adding 1. Next, the sum is raised to a power equal to 365 divided by 7, and 1 is subtracted from the result. The following formula describes the computation:
EFFECTIVE YIELD = ({BASE PERIOD RETURN + 1}365/7) - 1
The effective yield is shown at least to the nearest hundredth of one percent.
Hypothetical Charge - For purposes of the yield and effective yield computations, the hypothetical charge reflects all fees and charges that are charged to all owner accounts in proportion to the length of the base period, including the annual Contract charge. The yield and effective yield quotations do not reflect any deduction for premium taxes or transfer charges that may be applicable to a particular Contract, nor do they reflect the withdrawal charge that may be assessed at the time of withdrawal in an amount ranging up to 5% of the requested withdrawal amount. Nor do the yield and effective yield calculations take into account the surrender charges imposed under the Contract or the charges for any optional riders. The specific withdrawal charge percentage applicable to a particular withdrawal depends on the length of time purchase payments have been held under the Contract and whether withdrawals have been made previously during that Contract year. (See Section 5. Expenses -- Withdrawal Charge of the prospectus.) No fees or sales charges are assessed upon annuitization under the Contracts, except premium taxes. Realized gains and losses from the sale of securities, and unrealized appreciation and depreciation of assets held by the Transamerica Money Market VP subaccount and the fund are excluded from the calculation of yield.
The yield on amounts held in the Transamerica Money Market VP subaccount normally will 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 Transamerica Money Market VP subaccount actual yield is affected by changes in interest rates on money market securities, average portfolio maturity of Transamerica Money Market VP, the types and quality of portfolio securities held by Transamerica Money Market VP and its operating expenses. Because of the charges and deductions imposed under a Contract, the yield for the Transamerica Money Market VP Subaccount will be lower than the yield for the corresponding money market portfolio.
11
The total return quotations set forth in the prospectus for all of the subaccounts, except the Transamerica Money Market VP subaccount, holding assets for the Contracts during the accumulation period are average annual total return quotations for the one, five, and ten-year periods, (or, if a subaccount has been in existence for a period of less than one, five or ten years, for such lesser period) ended on the date of the most recent balance sheet of the separate account, and for the period from the first date any subaccount investing in an underlying portfolio commenced operations until the aforesaid date. The quotations are computed by determining the average annual compounded rates of return over the relevant periods that would equal the initial amount invested to the ending redeemable value, adjusted to reflect current subaccount charges, according to the following formula:
P(1 + T)n = ERV
Where: | P | = | a hypothetical initial payment of $1,000 | |||
T | = | average annual total return | ||||
n | = | number of years | ||||
ERV | = | ending redeemable value of a hypothetical $1,000 payment made at the | ||||
beginning of each period at the end of each period. |
For purposes of the total return quotations for all of the subaccounts, except the Transamerica Money Market VP subaccount, the calculations take into account all current fees that are charged under the Contract to all owner accounts during the accumulation period. Such fees include the mortality and expense risk charge and the annual Contract charge. The calculations also assume a complete surrender as of the end of the particular period; therefore, the withdrawal charge is deducted. The calculations do not reflect any deduction for premium taxes or any transfer or withdrawal charges that may be applicable to a particular Contract.
We may present the total return data stated in the prospectus on a non-standardized basis. This means that the data will not be reduced by the withdrawal charge under the Contract and that the data may be presented for different time periods and for different purchase payment amounts. Non-standardized performance data will only be disclosed if standardized performance data for the required periods is also disclosed.
We may also disclose cumulative total returns and average annual compound rates of return (T) for the subaccounts based on the inception date of the subaccounts investing in the underlying portfolios. We calculate cumulative total returns according to the following formula:
(1 + T)n - 1
Where: T and n are the same values as above
In addition, we may present historic performance data for the portfolios since their inception reduced by some or all of the fees and charges under the Contract. Such adjusted historic performance includes data that precedes the inception dates of the subaccounts. This data is designed to show the performance that would have resulted if the Contract had been in existence during that time.
For instance, we may disclose average annual total returns for the portfolios reduced by some or all fees and charges under the Contract, as if the Contract had been in existence. Such fees and charges include the mortality and expense risk charge and the annual Contract charge. Such data may or may not assume a complete surrender of the Contract at the end of the period.
Advertising and Sales Literature
From time to time we may refer to the diversifying process of asset allocation based on the Modern Portfolio Theory developed by Nobel Prize winning economist Harry Markowitz. The basic assumptions of Modern Portfolio Theory are: (1) the selection of individual investments has little impact on portfolio performance, (2) market timing strategies seldom work, (3) markets are efficient, and (4) portfolio selection should be made among asset classes. Modern Portfolio Theory allows an investor to determine an efficient portfolio selection that may provide a higher return with the same risk or the same return with lower risk.
When presenting the asset allocation process we may outline the process of personal and investment risk analysis including determining individual risk tolerances and a discussion of the different types of investment risk. We may classify investors into four categories based on their risk tolerance and will quote various industry experts on which types of investments are best suited to each of the four risk categories. The industry experts quoted may include Ibbotson Associates, CDA Investment Technologies, Lipper Analytical Services and any other expert which has been deemed by us to be appropriate. We may also provide an historical overview of the performance of a variety of investment market indices, the performance of these indices over time, and the performance of different asset classes, such as stocks, bonds, cash equivalents, etc. We may also discuss investment volatility including the range of
12
returns for different asset classes and over different time horizons, and the correlation between the returns of different asset classes. We may also discuss the basis of portfolio optimization including the required inputs and the construction of efficient portfolios using sophisticated computer-based techniques. Finally, we may describe various investment strategies and methods of implementation, the periodic rebalancing of diversified portfolios, the use of dollar cost averaging techniques, a comparison of the tax impact of purchase payments made on a “before tax” basis through a tax-qualified plan with those made on an “after tax” basis outside of a tax-qualified plan, and a comparison of tax-deferred versus non tax-deferred accumulation of purchase payments.
As described in the prospectus, in general, an owner is not taxed on increases in value under a Contract until a distribution is made under the Contract. As a result, the Contract will benefit from tax deferral during the accumulation period, as the annuity value may grow more rapidly than under a comparable investment where certain increases in value are taxed on a current basis. From time to time, we may use narrative, numerical or graphic examples to show hypothetical benefits of tax deferral in advertising and sales literature.
We may from time to time publish in advertisements, sales literature and reports to owners, the ratings and other information assigned to it by one or more independent rating organizations such as A.M. Best Company, Standard & Poor’s Insurance Rating Services, Moody’s Investors Service, Inc. and Fitch Ratings. These ratings are opinions of an operating insurance company’s financial strength and capacity to meet its obligations to Contract owners. These ratings do not apply to the separate account, its subaccounts, the funds or their portfolios, or to their performance.
Western Reserve performs administrative services for the Contracts. These services include issuance of the Contracts, maintenance of records concerning the Contracts, and certain valuation services.
All records and accounts relating to the separate account will be maintained by Western Reserve. As presently required by the 1940 Act and regulations promulgated thereunder, Western Reserve will mail to all Contract owners at their last known address of record, at least annually, reports containing such information as may be required under the 1940 Act or by any other applicable law or regulation. Contract owners will also receive confirmation of each financial transaction including: purchase payments, transfers, partial withdrawals, and a complete surrender, and any other reports required by law or regulation.
We currently offer the Contracts on a continuous basis. We anticipate continuing to offer the Contracts, but reserve the right to discontinue the offering.
TCI serves as principal underwriter for the Contracts. TCI’s home office is located at 4600 S Syracuse St. Suite 1100 Denver, Colorado 80237-2719. TCI is an affiliate of Western Reserve and, like Western Reserve, is an indirect, wholly owned subsidiary of AEGON USA. TCI is registered as a broker-dealer with the Securities and Exchange Commission under the Securities Exchange Act of 1934 and is a member of NASD, Inc. TCI is not a member of the Securities Investor Protection Corporation.
The Contracts are offered to the public through sales representatives of broker-dealers (“selling firms”) that have entered into selling agreements with us and with TCI. Sales representatives with these selling firms are appointed as our insurance agents.
During fiscal years 2007 and 2006, before TCI replaced our affiliate AFSG Securities Corporation (“AFSG”) as principal underwriter for the Contracts, the amounts paid to AFSG in connection with all Contracts sold through the separate account were $297,458 and $869,131 respectively and during fiscal years 2008 and 2007, $635,178 and $492,218, respectively, were paid to TCI. TCI passed through commissions it received to selling firms for their sales and did not retain any portion of them. We and our affiliates provide paid-in capital to TCI (and provided paid-in capital to AFSG) and pay for TCI’s (and paid for AFSG’s) operating and other expenses, including overhead, legal and accounting fees.
We and/or TCI or ISI may pay certain selling firms additional cash amounts for: (1) “preferred product” treatment of the Contracts in their marketing programs, which may include marketing services and increased access to their sales representatives; (2) sales promotions relating to the Contracts; (3) costs associated with sales conferences and educational seminars for their sales representatives; and (4) other sales expenses or the selling firms. We and/or TCI may make bonus payments to certain selling firms based on aggregate sales or persistency standards. These additional payments are not offered to all selling firms, and the terms of any particular agreement governing the payments may vary among selling firms.
13
Western Reserve makes other variable annuity contracts available that may also be funded through the separate account. These variable annuity contracts may have different features, such as different investment choices or charges.
The assets of the separate account are held by Western Reserve. The assets of the separate account are kept physically segregated and held apart from our general account and any other separate account. Western Reserve maintains records of all purchases and redemptions of shares of the funds. Additional protection for the assets of the separate account is provided by a blanket bond issued to AEGON USA, Inc. (“AEGON USA”) in the aggregate amount of $12 million, covering all of the employees of AEGON USA and its affiliates, including Western Reserve. A Stockbrokers Blanket Bond, issued to AEGON U.S.A. Securities, Inc. provides additional fidelity coverage to a limit of $10 million.
Sutherland Asbill & Brennan LLP, of Washington, D.C. has provided legal advice to WRL relating to certain matters under the federal securities laws.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The financial statements of the Separate Account at December 31, 2008 and for the periods disclosed in the financial statements, and the statutory-basis financial statements and schedules of Western Reserve at December 31, 2008 and 2007, and for each of the three years in the period ended December 31, 2008, appearing herein, have been audited by Ernst & Young LLP, 801 Grand Avenue, Suite 3000, Des Moines, Iowa 50309, Independent Registered Public Accounting Firm, as set forth in their respective reports thereon appearing elsewhere herein, and are included in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing.
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 SAI. Not all of the information set forth in the Registration Statement, amendments and exhibits thereto has been included in the prospectus or this SAI. Statements contained in the prospectus and this SAI 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.
The values of an owner’s interest in the separate account will be affected solely by the investment results of the selected
subaccount(s). Western
Reserve’s financial statements which are included in this SAI, should be considered only as bearing on our ability to meet our obligations under the Contracts. They should not be considered as bearing on the investment performance of the assets
held in the separate account.
Financial statements for Western Reserve at of December 31, 2008 and 2007 and for each of the three years in the period ended December 31, 2008 have been prepared on the basis of statutory accounting principles, rather than accounting principles generally accepted in the United States.
14
PART C | OTHER INFORMATION | |||||||
Item 24. | Financial Statements and Exhibits | |||||||
(a) | Financial Statements | |||||||
All required financial statements are included in Part B of this Registration Statement. | ||||||||
(b) | Exhibits: | |||||||
(1) | (a) | Resolution of the Board of Directors establishing the WRL Series Annuity Account. Note 1 | ||||||
(b) | Resolution of Board of Directors of Transamerica Premier Life Insurance Company re-domesticating WRL Series Annuity Account. Note 15 | |||||||
(c) | Resolution of Board of Directors of Transamerica Premier Life Insurance Company Approving Plan of Merger with Western Reserve Life Assurance Co. of Ohio. Note 15 | |||||||
(d) | Resolution of Board of Directors of Western Reserve Life Assurance Co. of Ohio Approving Plan of Merger with Transamerica Premier Life Insurance Company. Note 15 | |||||||
(2) | Not Applicable. | |||||||
(3) | (a) | Amended and Restated Principal Underwriting Agreement - Monumental Life Insurance Company and Transamerica Capital, Inc. Note 2 | ||||||
(b) | Amendment to Amended and Restated Principal Underwriting Agreement. Note 15 | |||||||
(c) | Form of Broker/Dealer Life Insurance Company Product Sales Agreement by and between TCI Securities Corporation and the Broker/Dealer. Note 3 | |||||||
(4) | (a) | Form of Contract. Note 4 | ||||||
(b) | Contract Loan Endorsements. Note 4 | |||||||
(c) | Nursing Care Endorsements. Note 4 | |||||||
(d) | Enhanced Death Benefit Endorsement (EA128). Note 5 | |||||||
(e) | Guaranteed Minimum Income Benefit Rider (GIB02). Note 6 | |||||||
(f) | Additional Earnings Rider (AER01). Note 6 | |||||||
(g) | Additional Earnings Rider (AER02). Note 7 | |||||||
(h) | Guaranteed Minimum Death Benefit Endorsement (EA 144). Note 8 | |||||||
(5) | (a) | Form of Application. Note 1 | ||||||
(6) | (a) | Restated Articles of Incorporation and Articles of Re-domestication of Transamerica Premier Life Insurance Company. Note 15 | ||||||
(b) | Amended and Restated By-Laws Transamerica Premier Life Insurance Company. Note 15 | |||||||
(7) | Not Applicable |
(8) | (a) | Participation Agreement (Access One and ProFunds). Note 9 | ||||||
(a)(1) | Amendment No. 1 to Participation Agreement (Access One and ProFunds). Note 15 | |||||||
(a)(2) | Amendment No. 2 to Participation Agreement (Access One and ProFunds). Note 10 | |||||||
(a)(3) | Amendment to Agreements (Confidential Information Access One and ProFunds). Note 11 | |||||||
(a)(4) | Amendment No. 6 to Participation Agreement (Access One and ProFunds). Note 12 | |||||||
(8) | (b) | Participation Agreement (Fidelity). Note 13 | ||||||
(8) | (c) | Participation Agreement (TST). Note 14 | ||||||
(c)(1) | Amendment No. 1 to Participation Agreement (TST). Note 12 | |||||||
(c)(2) | Amended Schedule A 07-01-14 to Participation Agreement (TST). Note 15 | |||||||
(9) | Opinion of Counsel. Note 15 | |||||||
(10) | Consent of Independent Registered Public Accounting Firm. Note 15 | |||||||
(11) | Not applicable. | |||||||
(12) | Not applicable. | |||||||
(13) | Powers of Attorney. Brenda K. Clancy, Scott W. Ham, C. Michiel van Katwijk, Robert J. Kontz, Mark W. Mullin, Arthur C. Schneider, Jason Orlandi, and Eric J. Martin. Note 15 | |||||||
Note 1. | Incorporated herein by reference to Post-Effective Amendment No. 11 to Form N-4 Registration Statement (File No. 033-49556) filed on April 20, 1998. | |||||||
Note 2. | Incorporated herein by reference to Post-Effective Amendment No. 9 to Form N-4 Registration Statement (File No. 333-146323) filed on April 25, 2013. | |||||||
Note 3. | Incorporated herein by reference to Initial Filing to Form N-4 Registration Statement (File No. 333-185574) filed on December 20, 2012. | |||||||
Note 4. | Incorporated herein by reference to Post-Effective Amendment No. 16 to Form N-4 Registration Statement (File No. 033-24856) filed on April 30, 1998. | |||||||
Note 5. | Incorporated herein by reference to Post-Effective Amendment No. 3 to Form N-4 Registration Statement (File No. 333-24959) filed on April 22, 1999. | |||||||
Note 6. | Incorporated herein by reference to Post-Effective Amendment No. 3 to Form N-4 Registration Statement (File No. 333-82705) filed on February 19, 2002. | |||||||
Note 7. | Incorporated herein by reference to Post-Effective Amendment No. 5 to Form N-4 Registration Statement (File No. 333-93169) filed on April 14, 2003. | |||||||
Note 8. | Incorporated herein by reference to Post-Effective Amendment No. 22 to Form N-4 Registration Statement (File No. 033-24856) filed on April 29, 2003. |
Note 9. | Incorporated herein by reference to Post-Effective Amendment No. 8 to Form N-4 Registration Statement (File No. 333-108525) filed on February 13, 2007. | |||||||
Note 10. | Incorporated herein by reference to Pre-Effective Amendment No. 1 to Form N-4 Registration Statement (File No. 333-145461) filed on October 23, 2007. | |||||||
Note 11. | Incorporated herein by reference to Post-Effective Amendment No. 23 to Form N-4 Registration Statement (File No. 333-108525) filed on April 22, 2013. | |||||||
Note 12. | Incorporated herein by reference to Post-Effective Amendment No. 24 to Form N-4 Registration Statement (File No. 333-108525) filed on August 16, 2013. | |||||||
Note 13. | Incorporated herein by reference to Post-Effective Amendment No. 28 to Form N-4 Registration Statement (Filed No. 333-108525) dated April 30, 2014 | |||||||
Note 14. | Incorporated herein by reference to Pre-Effective Amendment No. 1 to Form N-4 Registration Statement (File No. 333-185573) filed on April 10, 2013. | |||||||
Note 15. | Filed herewith. |
Item 25. Directors and Officers of the Depositor (Transamerica Premier Life Insurance Company)
Name and Business Address
|
Principal Positions and Offices with Depositor
| |
Brenda K. Clancy 4333 Edgewood Road NE |
Director, Chairman of the Board, President and Chief Executive Officer | |
Scott W. Ham 4333 Edgewood Road NE |
Director, and Division President – Life & Protection | |
C. Michiel van Katwijk 100 Light Street |
Director, Chief Financial Officer, Treasurer and Senior Vice President | |
Robert J. Kontz 4333 Edgewood Road NE |
Director and Vice President | |
Mark W. Mullin 100 Light Street |
Director | |
Arthur C. Schneider 4333 Edgewood Road, N.E. |
Director, Chief Tax Officer and Senior Vice President | |
Jason Orlandi 4333 Edgewood Road, N.E. |
Director, Senior Vice President, Secretary and General Counsel | |
Eric J. Martin 4333 Edgewood Road, N.E. |
Corporate Controller and Senior Vice President | |
1150 S. Olive St. |
Vice President |
Item 26. Persons Controlled by or under Common Control with the Depositor or Registrant.
Company Name |
Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
25 East 38th Street, LLC |
Delaware | Sole Member: Yarra Rapids, LLC | Real estate investments | |||
239 West 20th Street, LLC |
Delaware | Sole Member: Yarra Rapids, LLC | Real estate investments | |||
313 East 95th Street, LLC |
Delaware | Sole Member: Yarra Rapids, LLC | Real estate investments | |||
319 East 95th Street, LLC |
Delaware | Sole Member: Yarra Rapids, LLC | Real estate investments | |||
44764 Yukon Inc. |
Canada | 100% Creditor Resources, Inc. | Holding company | |||
AEGON Alliances, Inc. |
Virginia | 100% Commonwealth General Corporation | Insurance company marketing support | |||
AEGON Asset Management Services, Inc. |
Delaware | 100% AUSA Holding Company | Registered investment advisor | |||
AEGON Assignment Corporation |
Illinois | 100% AEGON Financial Services Group, Inc. | Administrator of structured settlements | |||
AEGON Assignment Corporation of Kentucky |
Kentucky | 100% AEGON Financial Services Group, Inc. | Administrator of structured settlements | |||
AEGON Canada ULC |
Canada | AEGON Canada Holding B.V. owns 174,588,712 shares of Common Stock; 1,500 shares of Series II Preferred stock; 2 shares of Series III Preferred stock. TIHI Canada Holding, LLC owns 1,441,941.26 shares of Class B - Series I Preferred stock. | Holding company | |||
AEGON Capital Management Inc. |
Canada | 100% AEGON Asset Management (Canada) B.V. | Portfolio management company/investment advisor | |||
AEGON Direct & Affinity Marketing Services Australia Pty Limited |
Australia | 100% Transamerica Direct Marketing Asia Pacific Pty Ltd. | Marketing/operations company | |||
AEGON Direct & Affinity Marketing Services Co., Ltd. |
Japan | 100% AEGON DMS Holding B.V. | Marketing company | |||
AEGON Direct & Affinity Marketing Services Limited |
Hong Kong | 100% AEGON DMS Holding B.V. | Provide consulting services ancillary to the marketing of insurance products overseas. | |||
AEGON Direct & Affinity Marketing Services (Thailand) Limited |
Thailand | 97% Transamerica International Direct Marketing Consultants, LLC; remaining 3% held by various AEGON employees | Marketing of insurance products in Thailand | |||
AEGON Direct Marketing Services, Inc. |
Maryland | Monumental Life Insurance Company owns 103,324 shares; Commonwealth General Corporation owns 37,161 shares | Marketing company | |||
AEGON Direct Marketing Services Europe Ltd. |
United Kingdom | 100% Cornerstone International Holdings, Ltd. | Marketing | |||
AEGON Direct Marketing Services Insurance Broker (HK) Limited |
Hong Kong | 100% AEGON Direct Marketing Services Hong Kong Limited | Brokerage company | |||
AEGON Direct Marketing Services International, Inc. |
Maryland | 100% AUSA Holding Company | Marketing arm for sale of mass marketed insurance coverage | |||
AEGON Direct Marketing Services Korea Co., Ltd. |
Korea | 100% AEGON DMS Holding B.V. | Provide consulting services ancillary to the marketing of insurance products overseas. |
Company Name |
Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
AEGON Direct Marketing Services Mexico, S.A. de C.V. |
Mexico | 100% AEGON DMS Holding B.V. | Provide management advisory and technical consultancy services. | |||
AEGON Direct Marketing Services Mexico Servicios, S.A. de C.V. |
Mexico | 100% AEGON DMS Holding B.V. | Provide marketing, trading, telemarketing and advertising services in favor of any third party, particularly in favor of insurance and reinsurance companies. | |||
AEGON Direct Marketing Services, Inc. |
Taiwan | 100% AEGON DMS Holding B.V. | Authorized business: Enterprise management consultancy, credit investigation services, to engage in business not prohibited or restricted under any law of R.O.C., except business requiring special permission of government. | |||
AEGON Financial Services Group, Inc. |
Minnesota | 100% Transamerica Life Insurance Company | Marketing | |||
AEGON Fund Management Inc. |
Canada | 100% AEGON Asset Management (Canada) B.V. | Mutual fund manager | |||
AEGON Funding Company, LLC. |
Delaware | 100% AEGON USA, LLC | Issue debt securities-net proceeds used to make loans to affiliates | |||
AEGON Institutional Markets, Inc. |
Delaware | 100% Commonwealth General Corporation | Provider of investment, marketing and administrative services to insurance companies | |||
AEGON Life Insurance Agency Inc. |
Taiwan | 100% AEGON Direct Marketing Services, Inc. (Taiwan Domiciled) | Life insurance | |||
AEGON Managed Enhanced Cash, LLC |
Delaware | Members: Transamerica Life Insurance Company (89.5727%) ; Monumental Life Insurance Company (10.4273%) | Investment vehicle for securities lending cash collateral | |||
AEGON Management Company |
Indiana | 100% AEGON U.S. Holding Corporation | Holding company | |||
AEGON N.V. |
Netherlands | 22.446% of Vereniging AEGON Netherlands Membership Association | Holding company | |||
AEGON Structured Settlements, Inc. |
Kentucky | 100% Commonwealth General Corporation | Administers structured settlements of plaintiff’s physical injury claims against property and casualty insurance companies. | |||
AEGON U.S. Holding Corporation |
Delaware | 100% Transamerica Corporation | Holding company | |||
AEGON USA Asset Management Holding, LLC |
Iowa | 100% AUSA Holding Company | Holding company | |||
AEGON USA Investment Management, LLC |
Iowa | 100% AEGON USA Asset Management Holding, LLC | Investment advisor | |||
AEGON USA Real Estate Services, Inc. |
Delaware | 100% AEGON USA Realty Advisors, Inc. | Real estate and mortgage holding company | |||
AEGON USA Realty Advisors, LLC |
Iowa | Sole Member - AEGON USA Asset Management Holding, LLC | Administrative and investment services | |||
AEGON USA Realty Advisors of California, Inc. |
Iowa | 100% AEGON USA Realty Advisors, Inc. | Investments |
Company Name |
Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
AEGON USA, LLC |
Iowa | 100% AEGON U.S. Holding Corporation | Holding company | |||
AFSG Securities Corporation |
Pennsylvania | 100% Commonwealth General Corporation | Inactive | |||
ALH Properties Eight LLC |
Delaware | 100% FGH USA LLC | Real estate | |||
ALH Properties Eleven LLC |
Delaware | 100% FGH USA LLC | Real estate | |||
ALH Properties Four LLC |
Delaware | 100% FGH USA LLC | Real estate | |||
ALH Properties Nine LLC |
Delaware | 100% FGH USA LLC | Real estate | |||
ALH Properties Seven LLC |
Delaware | 100% FGH USA LLC | Real estate | |||
ALH Properties Seventeen LLC |
Delaware | 100% FGH USA LLC | Real estate | |||
ALH Properties Sixteen LLC |
Delaware | 100% FGH USA LLC | Real estate | |||
ALH Properties Ten LLC |
Delaware | 100% FGH USA LLC | Real estate | |||
ALH Properties Twelve LLC |
Delaware | 100% FGH USA LLC | Real estate | |||
ALH Properties Two LLC |
Delaware | 100% FGH USA LLC | Real estate | |||
AMTAX HOLDINGS 308, LLC |
Ohio | TAHP Fund II, LLC - 100% member; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 347, LLC |
Ohio | TAHP Fund II, LLC - 100% member; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 388, LLC |
Ohio | TAHP Fund II, LLC - 100% member; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 483, LLC |
Ohio | TAHP Fund I, LLC - 100% MEMBER; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 546, LLC |
Ohio | TAHP Fund II, LLC - 100% member; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 559, LLC |
Ohio | TAHP Fund I, LLC - 100% MEMBER; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 561, LLC |
Ohio | TAHP Fund VII, LLC - 100% member; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 567, LLC |
Ohio | TAHP Fund I, LLC - 100% MEMBER; TAH Pentagon Funds LLC - non-owner manager | Affordable housing |
Company Name |
Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
AMTAX HOLDINGS 588, LLC |
Ohio | TAHP Fund I, LLC - 100% MEMBER; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 613, LLC |
Ohio | Garnet LIHTC Fund VII, LLC - 99% member; Cupples State LIHTC Investors, LLC - 1% member; TAH Pentagon Funds, LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 639, LLC |
Ohio | TAHP Fund I, LLC - 100% MEMBER; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 649, LLC |
Ohio | TAHP Fund I, LLC - 100% MEMBER; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 672, LLC |
Ohio | TAHP Fund I, LLC - 100% MEMBER; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 713, LLC |
Ohio | TAHP Fund II, LLC - 100% member; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
Apollo Housing Capital Arrowhead Gardens, LLC |
Delaware | Garnet LIHTC Fund XXXV, LLC - sole Member | Affordable housing | |||
Asia Investment Holding Limited |
Hong Kong | 99% Transamerica Life Insurance Company | Holding company | |||
AUSA Holding Company |
Maryland | 100% AEGON USA, LLC | Holding company | |||
AUSA Properties, Inc. |
Iowa | 100% AUSA Holding Company | Own, operate and manage real estate | |||
AXA Equitable AgriFinance, LLC |
Delaware | Members: AEGON USA Realty Advisors, LLC (50%); AXA Equitable Life Insurance Company, a non-affiliate of AEGON (50%) | Agriculturally-based real estate advisory services | |||
Bay Area Community Investments I, LP |
California | Partners: 69.995% Transamerica Life Insurance Company; 29.995% Monumental Life Insurance Company; 0.01% Transamerica Affordable housing, Inc. | Investments in low income housing tax credit properties | |||
Bay State Community Investments I, LLC |
Delaware | 100% Monumental Life Insurance Company | Investments in low income housing tax credit properties | |||
Bay State Community Investments II, LLC |
Delaware | 100% Monumental Life Insurance Company | Investments in low income housing tax credit properties | |||
Canadian Premier Life Insurance Company |
Canada | 100% Transamerica Life Canada | Insurance company | |||
CBC Insurance Revenue Securitization, LLC |
Delaware | 100% Clark Consulting, LLC | Special purpose | |||
Cedar Funding, Ltd. |
Cayman Islands | 100% Transamerica Life Insurance Company | Investments |
Company Name |
Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Clark, LLC |
Delaware | Sole Member - Diversified Retirement Corporation | Holding company | |||
Clark Consulting, LLC |
Delaware | 100% Clark, LLC | Financial consulting firm | |||
Clark Investment Strategies, Inc. |
Delaware | 100% Clark Consulting, LLC | Registered investment advisor | |||
Clark Securities, Inc. |
California | 100% Clark Consulting, LLC | Broker-Dealer | |||
Commonwealth General Corporation |
Delaware | 100% AEGONUSA, LLC | Holding company | |||
Consumer Membership Services Canada Inc. |
Canada | 100% AEGON Canada ULC | Marketing of credit card protection membership services in Canada | |||
Cornerstone International Holdings Ltd. |
UK | 100% AEGON DMS Holding B.V. | Holding company | |||
CRG Insurance Agency, Inc. |
California | 100% Clark Consulting, Inc. | Insurance agency | |||
Creditor Resources, Inc. |
Michigan | 100% AUSA Holding Company | Credit insurance | |||
CRI Canada Ltd. |
Canada | 44764 Yukon Inc. owns all preferred shares of stock; various non-AEGON entities/investors own common shares of stock | Holding company | |||
CRI Solutions Inc. |
Maryland | 100% Creditor Resources, Inc. | Sales of reinsurance and credit insurance | |||
Cupples State LIHTC Investors, LLC |
Delaware | 100% Garnet LIHTC Fund VIII, LLC | Investments | |||
Erfahrungsschatz GmbH |
Germany | 100% Cornerstone International Holdings, Ltd. | Marketing/membership | |||
FD TLIC, Limited Liability Company |
New York | 100% Transamerica Life Insurance Company | Broadway production | |||
FD TLIC Ltd. |
United Kingdom | 100% FD TLIC, LLC | Theatre production | |||
FGH Realty Credit LLC |
Delaware | 100% FGH USA, LLC | Real estate | |||
FGH USA LLC |
Delaware | 100% RCC North America LLC | Real estate | |||
FGP 90 West Street LLC |
Delaware | 100% FGH USA LLC | Real estate | |||
FGP West Mezzanine LLC |
Delaware | 100% FGH USA LLC | Real estate | |||
FGP West Street LLC |
Delaware | 100% FGP West Mezzanine LLC | Real estate | |||
FGP West Street Two LLC |
Delaware | 100% FGH USA LLC | Real estate | |||
Fifth FGP LLC |
Delaware | 100% FGH USA LLC | Real estate | |||
Financial Planning Services, Inc. |
District of Columbia | 100% Commonwealth General Corporation | Special-purpose subsidiary | |||
First FGP LLC |
Delaware | 100% FGH USA LLC | Real estate | |||
Fong LCS Associates, LLC |
Delaware | 100% Investors Warranty of America, Inc. | Investments | |||
Fourth FGP LLC |
Delaware | 100% FGH USA LLC | Real estate |
Company Name |
Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Garnet Assurance Corporation |
Kentucky | 100%Transamerica Life Insurance Company | Investments | |||
Garnet Assurance Corporation II |
Iowa | 100% Commonwealth General Corporation | Business investments | |||
Garnet Assurance Corporation III |
Iowa | 100% Transamerica Life Insurance Company | Business investments | |||
Garnet Community Investments, LLC |
Delaware | 100% Monumental Life Insurance Company | Investments | |||
Garnet Community Investments II, LLC |
Delaware | 100% Monumental Life Insurance Company | Securities | |||
Garnet Community Investments III, LLC |
Delaware | 100%Transamerica Life Insurance Company | Business investments | |||
Garnet Community Investments IV, LLC |
Delaware | 100% Monumental Life Insurance Company | Investments | |||
Garnet Community Investments V, LLC |
Delaware | 100% Monumental Life Insurance Company | Investments | |||
Garnet Community Investments VI, LLC |
Delaware | 100% Monumental Life Insurance Company | Investments | |||
Garnet Community Investments VII, LLC |
Delaware | 100% Monumental Life Insurance Company | Investments | |||
Garnet Community Investments VIII, LLC |
Delaware | 100% Monumental Life Insurance Company | Investments | |||
Garnet Community Investments IX, LLC |
Delaware | 100% Monumental Life Insurance Company | Investments | |||
Garnet Community Investments X, LLC |
Delaware | 100% Monumental Life Insurance Company | Investments | |||
Garnet Community Investments XI, LLC |
Delaware | 100% Monumental Life Insurance Company | Investments | |||
Garnet Community Investments XII, LLC |
Delaware | 100% Monumental Life Insurance Company | Investments | |||
Garnet Community Investments XVIII, LLC |
Delaware | 100% Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XX, LLC |
Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXIV, LLC |
Delaware | Sole Member - Transamerica Life Insurance Company | Real estate investments | |||
Garnet Community Investments XXV, LLC |
Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investment XXVI, LLC |
Delaware | 100% Transamerica Life Insurance Company | Investments |
Company Name |
Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Garnet Community Investments XXVII, LLC |
Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investment XXVIII, LLC |
Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXIX, LLC |
Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXX, LLC |
Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXXI, LLC |
Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXXII, LLC |
Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXXIII, LLC |
Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXXIV, LLC |
Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXXV, LLC |
Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXXVI, LLC |
Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXXVII, LLC |
Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXXVIII, LLC |
Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXXIX, LLC |
Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XL, LLC |
Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XLI, LLC |
Delaware | Sole Member: Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XLII, LLC |
Delaware | Sole Member: Transamerica Life Insurance Company | Investments | |||
Garnet LIHTC Fund II, LLC |
Delaware | Members: Garnet Community Investments II, LLC (99.99%); Transamerica Life Insurance Company (0.01%) | Investments | |||
Garnet LIHTC Fund III, LLC |
Delaware | Members: Garnet Community Investments III, LLC (0.01%); Jefferson-Pilot Life Insurance Company, a non-AEGON affiliate (99.99%) | Investments |
Company Name |
Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Garnet LIHTC Fund IV, LLC |
Delaware | Members: Garnet Community Investments IV, LLC (0.01%); Goldenrod Asset Management, Inc., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund V, LLC |
Delaware | Members: Garnet Community Investments V, LLC (0.01%); Lease Plan North America, Inc., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund VI, LLC |
Delaware | Members: Garnet Community Investments VI, LLC (0.01%); Pydna Corporation, a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund VII, LLC |
Delaware | Members: Garnet Community Investments VII, LLC (0.01%); J.P. Morgan Chase Bank, N.A., a non-AEGON affiliate(99.99%) | Investments | |||
Garnet LIHTC Fund VIII, LLC |
Delaware | Members: Garnet Community Investments VIII, LLC (0.01%); J.P. Morgan Chase Bank, N.A., a non-AEGON affiliate(99.99%) | Investments | |||
Garnet LIHTC Fund IX, LLC |
Delaware | Members: Garnet Community Investments IX, LLC (0.01%); Bank of America, N.A., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund X, LLC |
Delaware | Members: Garnet Community Investments X, LLC (0.01%); Goldenrod Asset Management, a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XI, LLC |
Delaware | Members: Garnet Community Investments XI, LLC (0.01%); NorLease, Inc., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XII, LLC |
Delaware | Garnet Community Investments XII, LLC (.01%); and the following non-AEGON affiliates: Bank of America, N.A.( 73.39%); J.P. Morgan Chase Bank, N.A. (13.30%); NorLease, Inc. (13.30%) | Investments | |||
Garnet LIHTC Fund XII-A, LLC |
Delaware | Garnet Community Investments XII, LLC (0.01%); Bank of America, N.A., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XII-B, LLC |
Delaware | Garnet Community Investments XII, LLC (0.01%); J.P. Morgan Chase Bank, N.A., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XII-C, LLC |
Delaware | Garnet Community Investments XII, LLC (.01%); NorLease, Inc., a non-AEGON affiliate (99.99%) | Investments |
Company Name |
Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Garnet LIHTC Fund XIII, LLC |
Delaware | Garnet Community Investments XII, LLC (.01%); and the following non-AEGON affiliates: Bank of America, N.A.( 73.39%); J.P. Morgan Chase Bank, N.A. (13.30%); NorLease, Inc. (13.30%) | Investments | |||
Garnet LIHTC Fund XIII-A, LLC |
Delaware | Garnet Community Investments XII, LLC (.01%); J.P. Morgan Chase Bank, N.A., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XIII-B, LLC |
Delaware | Garnet Community Investments XII, LLC (.01%); NorLease, Inc., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XIV, LLC |
Delaware | 0.01% Garnet Community Investments, LLC; 49.995% Wells Fargo Bank, N.A.; and 49.995% Goldenrod Asset Management, Inc. | Investments | |||
Garnet LIHTC Fund XV, LLC |
Delaware | Members: Garnet Community Investments, LLC (0.01%); Bank of America, N.A., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XVI, LLC |
Delaware | Members: Garnet Community Investments, LLC (0.01%); FNBC Leasing Corporation, a non-AEGON entity (99.99%) | Investments | |||
Garnet LIHTC Fund XVII, LLC |
Delaware | Members: Garnet Community Investments, LLC (0.01%); ING USA Annuity and Life Insurance company, a non-affiliate of AEGON (12.999%), and ReliaStar Life Insurance Company, a non-affiliate of AEGON (86.991%). | Investments | |||
Garnet LIHTC Fund XVIII, LLC |
Delaware | Members: Garnet Community Investments XVIII, LLC (0.01%); Verizon Capital Corp., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XIX, LLC |
Delaware | Members: Garnet Community Investments, LLC (0.01%); Bank of America, N.A., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XX, LLC |
Delaware | Sole Member - Garnet Community Investments XX, LLC | Investments | |||
Garnet LIHTC Fund XXI, LLC |
Delaware | 100% Garnet Community Investments, LLC | Investments | |||
Garnet LIHTC Fund XXII, LLC |
Delaware | Members: Garnet Community Investments, LLC (0.01%); NorLease, Inc., a non-AEGON affiliate (99.99%) | Investments |
Company Name |
Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Garnet LIHTC Fund XXIII, LLC |
Delaware | Members: Garnet Community Investments, LLC (0.01%); Idacorp Financial Services, Inc., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XXIV, LLC |
Delaware | Members: Garnet Community Investments XXIV, LLC (0.01% as Managing Member); Transamerica Life Insurance Company (21.26%); non-affiliates of AEGON: New York Life Insurance Company (25.51%), New York Life Insurance and Annuity Corporation (21.73%) and Principal Life Insurance Company (31.49%) | Investments | |||
Garnet LIHTC Fund XXV, LLC |
Delaware | Members: Garnet Community Investment XXV, LLC (0.01%); Garnet LIHTC Fund XXVIII LLC (1%); non-affiliates of AEGON: Mt. Hamilton Fund, LLC (97.99%); Google Affordable housing I LLC (1%) | Investments | |||
Garnet LIHTC Fund XXVI, LLC |
Delaware | Members: Garnet Community Investments XXVI, LLC (0.01%); American Income Life Insurance Company, a non-affiliate of AEGON (99.99%) | Investments | |||
Garnet LIHTC Fund XXVII, LLC |
Delaware | Members: Garnet Community Investments XXVII, LLC (0.01%); Transamerica Life Insurance Company (16.7045%); non-affiliates of AEGON: Aetna Life Insurance Company (30.2856%); New York Life Insurance Company (22.7142%); ProAssurance Casualty Company (3.6343%); ProAssurance Indemnity Company (8.4800%); State Street Bank and Trust Company (18.1714%) | Investments | |||
Garnet LIHTC Fund XXVIII, LLC |
Delaware | Members: Garnet Community Investments XXVIII LLC (0.01%); non-affiliates of AEGON: USAA Casualty Insurance Company (17.998%); USAA General Indemnity Company (19.998%); USAA Life Insurance Company (3.999%); United Services Automobile Association (57.994%) | Real estate investments | |||
Garnet LIHTC Fund XXIX, LLC |
Delaware | Members: Garnet Community Investments XXIX, LLC (.01%); non-affiliate of AEGON: Bank of America, N.A. (99.99%) | Investments | |||
Garnet LIHTC Fund XXX, LLC |
Delaware | Garnet Community Investments XXX, LLC (0.01%); non-affiliate of AEGON, New York Life Insurance Company (99.99%) | Investments |
Company Name |
Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Garnet LIHTC Fund XXXI, LLC |
Delaware | Members: Garnet Community Investments XXXI, LLC (0.1%); non-affiliates of AEGON: Thunderbolt Peak Fund, LLC (98.99%); Google Affordable housing I, LLC (1%) | Investments | |||
Garnet LIHTC Fund XXXII, LLC |
Delaware | Sole Member: Garnet Community Investments XXXVII, LLC. | Investments | |||
Garnet LIHTC Fund XXXIII, LLC |
Delaware | Members: Garnet Community Investment XXXIII, LLC (0.01%); non-affiliate of AEGON, NorLease, Inc. (99.99%) | Investments | |||
Garnet LIHTC Fund XXXIV, LLC |
Delaware | Members: non-AEGON affiliate, U.S. Bancorp Community Development Corporation (99.99%); Garnet Community Investments XXXIV, LLC (.01%) | Investments | |||
Garnet LIHTC Fund XXXV, LLC |
Delaware | Members: Garnet Community Investment XXXV, LLC (0.01%); non-affiliate of AEGON, Microsoft Corporation (99.99%) | Investments | |||
Garnet LIHTC Fund XXXVI, LLC |
Delaware | Members: Garnet Community Investments XXXVI, LLC (1%) as managing member; JPM Capital Corporation, a non-AEGON affiliate (99%) as investor member | Investments | |||
Garnet LIHTC Fund XXXVII, LLC |
Delaware | Members: Garnet Community Investments XXXVII, LLC (.01%); LIH Realty Corporation, a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XXXVIII, LLC |
Delaware | Sole Member - Garnet Community Investments XXXVIII, LLC | Investments | |||
Garnet LIHTC Fund XXXIX, LLC |
Delaware | Members: Garnet Community Investments XXXIX, LLC at 1% managing member and non-AEGON affiliate, FNBC Leasing Corporation as the 99% investor member. | Investments | |||
Garnet LIHTC Fund XL, LLC |
Delaware | Members: Garnet Community Investments XL, LLC as a .01% member and non-AEGON affiliate, Partner Reinsurance Company of the U.S. as the 99.99% member. | Investments | |||
Garnet LIHTC Fund XLI, LLC |
Delaware | Sole Member - Garnet Community Investment XLI, LLC | Investments |
Company Name |
Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Ganet LIHTC Fund XLII, LLC |
Delaware | Members: Garnet Community Investments XLII, LLC (.01%) managing member; non-affiliates of AEGON: Community Trust Bank (83.33%) investor member; Metropolitan Bank (16.66%) investor member. | Investmetns | |||
Global Preferred Re Limited |
Bermuda | 100% AEGON USA, LLC | Reinsurance | |||
Harbor View Re Corp. |
Hawaii | 100% Commonwealth General Corporation | Captive insurance company | |||
Horizons Acquisition 5, LLC |
Florida | Sole Member - PSL Acquisitions Operating, LLC | Development company | |||
Horizons St. Lucie Development, LLC |
Florida | Sole Member - PSL Acquisitions Operating, LLC | Development company | |||
Imani Fe, LP |
California | Partners: Garnet LIHTC Fund XIV, LL (99.99% investor limited partner); Transamerica Affordable housing, Inc. (non-owner manager); non-affiliates of AEGON: ABS Imani Fe, LLC (.0034% class A limited partner); Central Valley Coalition for Affordable housing (.0033% co-managing general partner); Grant Housing and Economic Development Corporation (.0033% managing partner) | Affordable housing | |||
Intersecurities Insurance Agency, Inc. |
California | 100% Western Reserve Life Assurance Co. of Ohio | Insurance agency | |||
Interstate North Office Park GP, LLC |
Delaware | 100% Interstate North Office Park Owner, LLC | Investments | |||
Interstate North Office Park, LP |
Delaware | 100% Interstate North Office Park Owner, LLC | Investments | |||
Interstate North Office Park Owner, LLC |
Delaware | 100% Investors Warranty of America, Inc. | Investments | |||
Interstate North Office Park (Land) GP, LLC |
Delaware | 100% Interstate North Office Park Owner, LLC | Investments | |||
Interstate North Office Park (Land) LP |
Delaware | 100% Interstate North Office Park Owner, LLC | Investments | |||
Investors Warranty of America, Inc. |
Iowa | 100% AUSA Holding Company | Leases business equipment | |||
LCS Associates, LLC |
Delaware | 100% Investors Warranty of America, Inc. | Investments | |||
Legacy General Insurance Company |
Canada | 100% AEGON Canada ULC | Insurance company |
Company Name |
Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Life Investors Alliance LLC |
Delaware | Sole Member - Transamerica Life Insurance Company | Purchase, own, and hold the equity interest of other entities | |||
LIICA Holdings, LLC |
Delaware | Sole Member: Transamerica Life Insurance Company | To form and capitalize LIICA Re I, Inc. | |||
LIICA Re I, Inc. |
Vermont | 100% LIICA Holdings, LLC | Captive insurance company | |||
LIICA Re II, Inc. |
Vermont | 100% Transamerica Life Insurance Company | Captive insurance company | |||
Massachusetts Fidelity Trust Company |
Iowa | 100% AUSA Holding Company | Trust company | |||
McDonald Corporate Tax Credit Fund IV Limited Partnership |
Delaware | Partners: Monumental Life Insurance Company - 99.9% General Partner; TAH-McD IV, LLC - 0.10% General Partner | Tax credit fund | |||
MLIC Re I, Inc. |
Vermont | 100% Stonebridge Life Insurance Company | Captive insurance company | |||
Money Services, Inc. |
Delaware | 100% AUSA Holding Company | Provides financial counseling for employees and agents of affiliated companies | |||
Monumental Financial Services, Inc. |
Maryland | 100% AEGON USA, LLC | DBA in the State of West Virginia for United Financial Services, Inc. | |||
Monumental General Administrators, Inc. |
Maryland | 100% AUSA Holding Company | Provides management services to unaffiliated third party administrator | |||
nVISION Financial, Inc. |
Iowa | 100% AUSA Holding Company | Special-purpose subsidiary | |||
New Markets Community Investment Fund, LLC |
Iowa | 50% AEGON Institutional Markets, Inc.; 50% AEGON USA Realty Advisors, Inc. | Community development entity | |||
Oncor Insurance Services, LLC |
Iowa | Sole Member - Life Investors Financial Group, Inc. | Direct sales of term life insurance | |||
Pearl Holdings, Inc. I |
Delaware | 100% AEGON USA Asset Management Holding, LLC | Holding company | |||
Pearl Holdings, Inc. II |
Delaware | 100% AEGON USA Asset Management Holding, LLC | Holding company | |||
Peoples Benefit Services, LLC |
Pennsylvania | Sole Member - Stonebridge Life Insurance Company | Special-purpose subsidiary | |||
Pine Falls Re, Inc. |
Vermont | 100% Stonebridge Life Insurance Company | Captive insurance company | |||
Primus Guaranty, Ltd. |
Bermuda | Members: Transamerica Life Insurance Company (20% 13.1%) and non-affiliates of AEGON and the public holders own the remainder. | Provides protection from default risk of investment grade corporate and sovereign issues of financial obligations. | |||
PSL Acquisitions Operating, LLC |
Iowa | Sole Member: Investors Warranty of America, Inc. | Owner of Core subsidiary entities | |||
Pyramid Insurance Company, Ltd. |
Hawaii | 100% Transamerica Corporation | Property & Casualty Insurance |
Company Name |
Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
RCC North America LLC |
Delaware | 100% AEGON USA, LLC | Real estate | |||
Real Estate Alternatives Portfolio 1 LLC |
Delaware | Members: Transamerica Life Insurance Company (90.96%); Monumental Life Insurance Company (6.30%); Transamerica Financial Life Insurance Company (2.74%). Manager: AEGON USA Realty Advisors, Inc. | Real estate alternatives investment | |||
Real Estate Alternatives Portfolio 2 LLC |
Delaware | Members are: Transamerica Life Insurance Company (90.25%); Transamerica Financial Life Insurance Company (7.5%); Stonebridge Life Insurance Company (2.25%). Manager: AEGON USA Realty Advisors, Inc. | Real estate alternatives investment | |||
Real Estate Alternatives Portfolio 3 LLC |
Delaware | Members are: Transamerica Life Insurance Company (73.4%); Monumental Life Insurance Company (25.6%); Stonebridge Life Insurance Company (1%). Manager: AEGON USA Realty Advisors, Inc. | Real estate alternatives investment | |||
Real Estate Alternatives Portfolio 3A, Inc. |
Delaware | Members: Monumental Life Insurance Company (37%); Transamerica Financial Life Insurance Company (9.4%); Transamerica Life Insurance Company (52.6%); Stonebridge Life Insurance Company (1%) | Real estate alternatives investment | |||
Real Estate Alternatives Portfolio 4 HR, LLC |
Delaware | Members are: Transamerica Life Insurance Company (64%); Monumental Life Insurance Company (32%); Transamerica Financial Life Insurance Company (4%). Manager: AEGON USA Realty Advisors, Inc. | Investment vehicle for alternative real estate investments that are established annually for our affiliated companies common investment | |||
Real Estate Alternatives Portfolio 4 MR, LLC |
Delaware | Members are: Transamerica Life Insurance Company (64%); Monumental Life Insurance Company (32%); Transamerica Financial Life Insurance Company (4%). Manager: AEGON USA Realty Advisors, Inc. | Investment vehicle for alternative real estate investments that are established annually for our affiliated companies common investment | |||
River Ridge Insurance Company |
Vermont | 100% AEGON Management Company | Captive insurance company | |||
SB Frazer Owner, LLC |
Delaware | 100% Stonebridge Life Insurance Company | Investments | |||
Second FGP LLC |
Delaware | 100% FGH USA LLC | Real estate | |||
Selient Inc. |
Canada | 100% AEGON Canada ULC | Application service provider providing loan origination platforms to Canadian credit unions. | |||
Seventh FGP LLC |
Delaware | 100% FGH USA LLC | Real estate |
Company Name |
Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Short Hills Management Company |
New Jersey | 100% AEGON U.S. Holding Corporation | Dormant | |||
Southwest Equity Life Insurance Company |
Arizona | Voting common stock is allocated 75% of total cumulative vote - AEGON USA, LLC. Participating Common stock (100% owned by non-AEGON shareholders) is allocated 25% of total cumulative vote. | Insurance | |||
St. Lucie West Development Company, LLC |
Florida | Sole Member - PSL Acquisitions Operating, LLC | Development company | |||
Stonebridge Benefit Services, Inc. |
Delaware | 100% Commonwealth General Corporation | Health discount plan | |||
Stonebridge International Insurance Ltd. |
UK | 100% Cornerstone International Holdings Ltd. | General insurance company | |||
Stonebridge Life Insurance Company |
Vermont | 100% Commonwealth General Corporation | Insurance company | |||
Stonebridge Reinsurance Company |
Vermont | 100% Stonebridge Life Insurance Company | Captive insurance company | |||
TAH-MCD IV, LLC |
Iowa | Sole Member - Transamerica Affordable housing, Inc. | Serve as the general partner for McDonald Corporate Tax Credit Fund IV Limited Partnership. | |||
TAH Pentagon Funds, LLC |
Iowa | Sole Member - Transamerica Affordable housing, Inc. | Serve as a general partner in a lower-tier tax credit entity | |||
TAHP Fund 1, LLC |
Delaware | Sole Member - Garnet LIHTC Fund IX, LLC | Real estate investments | |||
TAHP Fund 2, LLC |
Delaware | Sole Member - Garnet LIHTC Fund VIII, LLC | Low incoming housing tax credit | |||
TAHP Fund VII, LLC |
Delaware | Investor Member: Garnet LIHTC Fund XIX, LLC | Real estate investments | |||
TCF Asset Management Corporation |
Colorado | 100% TCFC Asset Holdings, Inc. | A depository for foreclosed real and personal property. | |||
TCFC Air Holdings, Inc. |
Delaware | 100% Transamerica Commercial Finance Corporation, I | Holding company | |||
TCFC Asset Holdings, Inc. |
Delaware | 100% Transamerica Commercial Finance Corporation, I | Holding company | |||
The AEGON Trust Advisory Board: Mark W. Mullin, Alexander R. Wynaendts, and Craig D. Vermie |
Delaware | 100% AEGON International B.V. | Voting Trust | |||
The RCC Group, Inc. |
Delaware | 100% FGH USA LLC | Real estate |
Company Name |
Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
THH Acquisitions, LLC |
Iowa | Sole Member - Investors Warranty of America, Inc. | Acquirer of Core South Carolina mortgage loans from Investors Warranty of America, Inc. and holder of foreclosed real estate. | |||
TIHI Canada Holding, LLC |
Iowa | Sole Member - Transamerica International Holdings, Inc. | Holding company | |||
TLIC Oakbrook Reinsurance, Inc. |
Iowa | 100% Transamerica Life Insurance Company | Limited purpose subsidiary life insurance company | |||
TLIC Riverwood Reinsurance, Inc. |
Iowa | 100% Transamerica Life Insurance Company | Limited purpose subsidiary life insurance company | |||
Tradition Development Company, LLC |
Florida | Sole Member - PSL Acquisitions Operating, LLC | Development company | |||
Tradition Irrigation Company, LLC |
Florida | Sole Member - PSL Acquisitions Operating, LLC | Irrigation company | |||
Tradition Land Company, LLC |
Iowa | Sole Member: Investors Warranty of America, Inc. | Acquirer of Core Florida mortgage loans from Investors Warranty and holder of foreclosed real estate. | |||
Transamerica Accounts Holding Corporation |
Delaware | 100% TCFC Asset Holdings, Inc. | Holding company | |||
Transamerica Advisors Life Insurance Company |
Arkansas | 100% AEGON USA, LLC | Insurance company | |||
Transamerica Affinity Marketing Corretora de Seguros Ltda. |
Brazil | 749,000 quota shares owned by AEGON DMS Holding B.V.; 1 quota share owned by AEGON International B.V. | Brokerage company | |||
Transamerica Affinity Services, Inc. |
Maryland | 100% AEGON Direct Marketing Services, Inc. | Marketing company | |||
Transamerica Affordable housing, Inc. |
California | 100% Transamerica Realty Services, LLC | General partner LHTC Partnership | |||
Transamerica Agency Network, Inc. |
Iowa | 100% AUSA Holding Company | Special purpose subsidiary | |||
Transamerica Annuity Service Corporation |
New Mexico | 100% Transamerica International Holdings, Inc. | Performs services required for structured settlements | |||
Transamerica Asset Management, Inc. |
Florida | Western Reserve Life Assurance Co. of Ohio owns 77%; AUSA Holding Co. owns 23%. | Fund advisor | |||
Transamerica Aviation LLC |
Delaware | 100% TCFC Air Holdings, Inc. | Special purpose corporation | |||
Transamerica (Bermuda) Services Center, Ltd. |
Bermuda | 100% AEGON International B.V. | Special purpose corporation | |||
Transamerica Capital, Inc. |
California | 100% AUSA Holding Company | Broker/Dealer | |||
Transamerica Casualty Insurance Company |
Ohio | 100% AEGON USA, LLC | Insurance company |
Company Name |
Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Transamerica Commercial Finance Corporation, I |
Delaware | 100% Transamerica Finance Corporation | Holding company | |||
Transamerica Consumer Finance Holding Company |
Delaware | 100% TCFC Asset Holdings, Inc. | Consumer finance holding company | |||
Transamerica Corporation |
Delaware | 100% The AEGON Trust | Major interest in insurance and finance | |||
Transamerica Corporation |
Oregon | 100% Transamerica Corporation | Holding company | |||
Transamerica Direct Marketing Asia Pacific Pty Ltd. |
Australia | 100% AEGON DMS Holding B.V. | Holding company | |||
Transamerica Direct Marketing Consultants Private Limited |
India | 99.95% AEGON DMS Holding B.V.; non-AEGON affiliate, Keshav Sunderraj owns .05% | Marketing consultant | |||
Transamerica Distribution Finance - Overseas, Inc. |
Delaware | 100% TCFC Asset Holdings, Inc. | Commercial Finance | |||
Transamerica Finance Corporation |
Delaware | 100% Transamerica Corporation | Commercial & Consumer Lending & equipment leasing | |||
Transamerica Financial Advisors, Inc. |
Delaware | 1,000 shares owned by AUSA Holding Company; 209 shares owned by Transamerica International Holdings, Inc.; 729 shares owned by AEGON Asset Management Services, Inc. | Broker/Dealer | |||
Transamerica Financial Life Insurance Company |
New York | 87.40% AEGON USA, LLC; 12.60% Transamerica Life Insurance Company | Insurance | |||
Transamerica Fund Services, Inc. |
Florida | Western Reserve Life Assurance Co. of Ohio owns 44%; AUSA Holding Company owns 56% | Mutual fund | |||
Transamerica Funding LP |
U.K. | 99% Transamerica Leasing Holdings, Inc.; 1% Transamerica Commercial Finance Corporation, I | Intermodal leasing | |||
Transamerica Home Loan |
California | 100% Transamerica Consumer Finance Holding Company | Consumer mortgages | |||
Transamerica Insurance Marketing Asia Pacific Pty Ltd. |
Australia | 100% Transamerica Direct Marketing Asia Pacific Pty Ltd. | Insurance intermediary | |||
Transamerica International Direct Marketing Consultants, LLC |
Maryland | 51% Hugh J. McAdorey; 49% AEGON Direct Marketing Services, Inc. | Provide consulting services ancillary to the marketing of insurance products overseas. | |||
Transamerica International Holdings, Inc. |
Delaware | 100% AEGON USA, LLC | Holding company | |||
Transamerica International RE (Bermuda) Ltd. |
Bermuda | 100% AEGON USA, LLC | Reinsurance | |||
Transamerica International Re Escritório de Representação no Brasil Ltd |
Brazil | 95% Transamerica International Re(Bermuda) Ltd.; 5% Transamerica International Holdings, Inc. | Insurance and reinsurance consulting |
Company Name |
Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Transamerica Investment Management, LLC |
Delaware | Sole Member - AEGON USA Asset Management Holding, LLC | Investment advisor | |||
Transamerica Investors Securities Corporation |
Delaware | 100% Transamerica Retirement Solutions Corporation | Broker/Dealer | |||
Transamerica Leasing Holdings Inc. |
Delaware | 100% Transamerica Finance Corporation | Holding company | |||
Transamerica Life Canada |
Canada | 100% AEGON Canada ULC | Life insurance company | |||
Transamerica Life Insurance Company |
Iowa | 676,190 shares Common Stock owned by Transamerica International Holdings, Inc.; 86,590 shares of Preferred Stock owned by Transamerica Corporation; 30,564 shares of Preferred Stock owned by AEGON USA, LLC | Insurance | |||
Transamerica Life (Bermuda) Ltd. |
Bermuda | 100% Transamerica Life Insurance Company | Long-term life insurer in Bermuda - will primarily write fixed universal life and term insurance | |||
Transamerica Oakmont Corporation |
California | 100% Transamerica International Holdings, Inc. | General partner retirement properties | |||
Transamerica Pacific Insurance Company, Ltd. |
Hawaii | 26,000 shares common stock owned by Commonwealth General Corporation; 1,000 shares of common stock owned by Transamerica International Holdings, Inc. | Life insurance | |||
Transamerica Premier Life Insurance Company |
Iowa | 100% Commonwealth General Corporation | Insurance Company | |||
Transamerica Pyramid Properties LLC |
Iowa | 100% Monumental Life Insurance Company | Realty limited liability company | |||
Transamerica Realty Investment Properties LLC |
Delaware | 100% Monumental Life Insurance Company | Realty limited liability company | |||
Transamerica Realty Services, LLC |
Delaware | AUSA Holding Company - sole Member | Real estate investments | |||
Transamerica Resources, Inc. |
Maryland | 100% Monumental General Administrators, Inc. | Provides education and information regarding retirement and economic issues. | |||
Transamerica Retirement Advisors, Inc. |
Delaware | 100% Transamerica Retirement Solutions Corporation | Investment advisor | |||
Transamerica Retirement Insurance Agency, Inc. |
Delaware | 100% Transamerica Retirement Solutions Corporation | Conduct business as an insurance agency. | |||
Transamerica Retirement Solutions Corporation |
Delaware | 100% AUSA Holding Company | Retirement plan services. |
Company Name |
Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Transamerica Securities Inc. |
Canada | 100% World Financial Group Holding Company of Canada, Inc. | Mutual fund dealer | |||
Transamerica Small Business Capital, Inc. |
Delaware | 100% TCFC Asset Holdings, Inc. | Holding company | |||
Transamerica Stable Value Solutions Inc. |
Delaware | 100% Commonwealth General Corporation | Principle Business: Provides management services to the stable value division of AEGON insurers who issue synthetic GIC contracts. | |||
Transamerica Travel and Conference Services, LLC |
Iowa | 100% Money Services, Inc. | Travel and conference services | |||
Transamerica Vendor Financial Services Corporation |
Delaware | 100% TCFC Asset Holdings, Inc. | Provides commercial leasing | |||
Transamerica Ventures, LLC |
Delaware | 100% AUSA Holding Company | Investments | |||
Transamerica Ventures Fund, LLC |
Delaware | 100% AUSA Holding Company | Investments | |||
United Financial Services, Inc. |
Maryland | 100% AEGON USA, LLC | General agency | |||
Universal Benefits, LLC |
Iowa | 100% AUSA Holding Company | Third party administrator | |||
Western Reserve Life Assurance Co. of Ohio |
Ohio | 100% AEGON USA, LLC | Insurance | |||
WFG China Holdings, Inc. |
Delaware | 100% World Financial Group, Inc. | Hold interest in Insurance Agency located in Peoples Republic of China | |||
WFG Insurance Agency of Puerto Rico, Inc. |
Puerto Rico | 100% World Financial Group Insurance Agency, Inc. | Insurance agency | |||
WFG Properties Holdings, LLC |
Georgia | 100% World Financial Group, Inc. | Marketing | |||
WFG Reinsurance Limited |
Bermuda | 51% owned by World Financial Group, Inc.; remaining 49% is annually offered to independent contractors associated with WFG Reinsurance Ltd. | Reinsurance | |||
World Financial Group Canada Inc. |
Canada | 100% World Financial Group Holding Company of Canada Inc. | Marketing | |||
World Financial Group Holding Company of Canada Inc. |
Canada | 100% Transamerica International Holdings, Inc. | Holding company | |||
World Financial Group, Inc. |
Delaware | 100% AEGON Asset Management Services, Inc. | Marketing | |||
World Financial Group Insurance Agency of Canada Inc. |
Ontario | 50% World Financial Group Holding Co. of Canada Inc.; 50% World Financial Group Subholding Co. of Canada Inc. | Insurance agency | |||
World Financial Group Insurance Agency of Hawaii, Inc. |
Hawaii | 100% World Financial Group Insurance Agency, Inc. | Insurance agency | |||
World Financial Group Insurance Agency of Massachusetts, Inc. |
Massachusetts | 100% World Financial Group Insurance Agency, Inc. | Insurance agency |
Company Name |
Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
World Financial Group Insurance Agency of Wyoming, Inc. |
Wyoming | 100% World Financial Group Insurance Agency, Inc. | Insurance agency | |||
World Financial Group Insurance Agency, Inc. |
California | 100% Western Reserve Life Assurance Co. of Ohio | Insurance agency | |||
World Financial Group Subholding Company of Canada Inc. |
Canada | 100% World Financial Group Holding Company of Canada, Inc. | Holding company | |||
Yarra Rapids, LLC |
Delaware | Members are: Real Estate Alternatives Portfolio 4MR, LLC (49%) and non-AEGON affiliate (51%) | Real estate investments | |||
Zahorik Company, Inc. |
California | 100% AUSA Holding Company | Inactive | |||
Zero Beta Fund, LLC |
Delaware | Members are: Transamerica Life Insurance Company (82.35%); Monumental Life Insurance Company (16.16%); Transamerica Financial Life Insurance Company (1.49%) Manager: AEGON USA Investment Management LLC | Aggregating vehicle formed to hold various fund investments. |
Item 27. Number of Contract Owners
As of August 31, 2014, there were 2634 Owners of the Contracts.
Item 28. Indemnification
The Iowa Code (Sections 490.850 et. seq.) provides for permissive indemnification in certain situations, mandatory indemnification in other situations, and prohibits indemnification in certain situations. The Code also specifies producers for determining when indemnification payments can be made.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Depositor pursuant to the foregoing provisions, or otherwise, the Depositor 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 Depositor of expenses incurred or paid by a director, officer or controlling person in connection with the securities being registered), the Depositor 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.
Item 29. Principal Underwriters–
(a) Transamerica Capital, Inc. serves as the principal underwriter for:
Transamerica Capital, Inc. serves as the principal underwriter for the Retirement Builder Variable Annuity Account, Separate Account VA B, Separate Account VA Q, Separate Account VA FF, Separate Account VA HH, Separate Account VA-1, Separate Account VA-2L, Separate Account VA-5, Separate Account VA-6, Separate Account VA-7, Separate Account VA-8, Separate Account Fund B, Separate Account Fund C, Transamerica Corporate Separate Account Sixteen, Transamerica Separate Account R3, Separate Account VL, Separate Account VUL-1; Separate Account VUL-2, Separate Account VUL-3, Separate Account VUL-4, Separate Account VUL-5, Separate Account VUL-6, Separate Account VUL-A, and Variable Life Account A. These accounts are separate accounts of Transamerica Life Insurance Company.
Transamerica Capital, Inc. serves as principal underwriter for Separate Account VA BNY, Separate Account VA QNY, TFLIC Separate Account VNY, Separate Account VA-2LNY, TFLIC Separate Account C, Separate Account VA-5NLNY, Separate Account VA-6NY, TFLIC Series Annuity Account, TFLIC Series Life Account. ML of New York Variable Annuity Separate Account, ML of New York Variable Annuity Separate Account A, ML of New York Variable Annuity Separate Account B, ML of New York Variable Annuity Separate Account C, ML of New York Variable Annuity Separate Account D, ML of New York Variable Life Separate Account, and ML of New York Variable Life Separate Account II. These accounts are separate accounts of Transamerica Financial Life Insurance Company.
Transamerica Capital, Inc. also serves as principal underwriter for Separate Account VA BB, Separate Account VA CC, Separate Account VL E, Separate Account VA U, Separate Account VA V, Separate Account VA AA, WRL Series Life Account, WRL Series Life Account G, WRL Series Life Corporate Account, WRL Series Annuity Account and WRL Series Annuity Account B. This account is a separate account of Transamerica Premier Life Insurance Company (formerly known as Monumental Life Insurance Company).
Transamerica Capital, Inc. also serves as principal underwriter for Merrill Lynch Life Variable Annuity Separate Account, Merrill Lynch Life Variable Annuity Separate Account A, Merrill Lynch Life Variable Annuity Separate Account B, Merrill Lynch Life Variable Annuity Separate Account C, Merrill Lynch Life Variable Annuity Separate Account D, Merrill Lynch Variable Life Separate Account, and Merrill Lynch Life Variable Life Separate Account II. These accounts are separate accounts of Transamerica Advisors Life Insurance Company.
Transamerica Capital, Inc. also serves as principal underwriter for Transamerica Series Trust, Transamerica Funds, Transamerica Investors, Inc., Transamerica Partners Funds Group, Transamerica Partners Funds Group II, Transamerica Partners Portfolios, and Transamerica Asset Allocation Variable Funds.
(b) | Directors and Officers of Transamerica Capital, Inc.: |
Name |
Principal Business Address |
Position and Offices with Underwriter | ||
Michael W. Brandsma
|
(2) | Director, President and Chief Financial Officer | ||
David W. Hopewell
|
(1) | Director | ||
David R. Paulsen
|
(2) | Director, Chief Executive Officer and Chief Sales Officer | ||
Blake S. Bostwick
|
(2) | Chief Marketing Officer and Chief Operations Officer | ||
Courtney John
|
(2) | Chief Compliance Officer and Vice President | ||
Amy Angle
|
(3) | Assistant Vice President | ||
Elizabeth Belanger
|
(4) | Assistant Vice President | ||
Dennis P. Gallagher
|
(5) | Assistant Vice President | ||
Brenda L. Smith
|
(5) | Assistant Vice President | ||
Lisa Wachendorf
|
(1) | Assistant Vice President | ||
Arthur D. Woods
|
(5) | Assistant Vice President | ||
Jeffrey T. McGlaun
|
(3) | Assistant Treasurer | ||
Carrie N. Powicki
|
(2) | Secretary | ||
C. Michael van Katwijk
|
(3) | Treasurer |
(1) | 4333 Edgewood Road N.E., Cedar Rapids, IA 52499-0001 |
(2) | 4600 S Syracuse St, Suite 1100, Denver, CO 80237-2719 |
(3) | 100 Light Street, Floor B1, Baltimore, MD 21202 |
(4) | 440 Mamaroneck Avenue, Harrison, NY 10528 |
(5) | 570 Carillon Parkway, St. Petersburg, FL 33716 |
(c) Compensation to Principal Underwriter:
Name of Principal Underwriter |
Net Underwriting Discounts and |
Compensation on | Brokerage | |||||
Commissions(1) | Redemption | Commissions | Compensation | |||||
Transamerica Capital, Inc. |
$ 377,129 | 0 | 0 | 0 |
(1) Fiscal Year 2013
Item 30. Location of Accounts and Records
The records required to be maintained by Section 31(a) of the Investment Company Act of 1940 and Rules 31a-1 to 31a-3 promulgated thereunder, are maintained by Manager Regulatory Filing Unit, Transamerica Premier Life Insurance Company at 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499-0001.
Item 31. Management Services.
All management Contracts are discussed in Part A or Part B.
Item 32. Undertakings
(a) | Registrant undertakes that it will file a post-effective amendment to this registration statement as frequently as necessary to ensure that the audited financial statements in the registration statement are never more than 16 months old for so long as Premiums under the Contract may be accepted. |
(b) | Registrant undertakes that it will include either (i) a postcard or similar written communication affixed to or included in the Prospectus that the applicant can remove to send for a Statement of Additional Information or (ii) a space in the Policy application that an applicant can check to request a Statement of Additional Information. |
(c) | Registrant undertakes to deliver any Statement of Additional Information and any financial statements required to be made available under this Form promptly upon written or oral request to Transamerica at the address or phone number listed in the Prospectus. |
(d) | Transamerica Premier Life Insurance Company hereby represents that the fees and charges deducted under the policies, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by Transamerica Premier Life Insurance Company. |
SECTION 403(B) REPRESENTATIONS
Transamerica Premier Life Insurance Company represents that 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, in connection with redeemability restrictions on Section 403(b) Policies, and that paragraphs numbered (1) through (4) of that letter will be complied with.
TEXAS ORP REPRESENTATION
The Registrant intends to offer policies to participants in the Texas Option Retirement Program. In connection with that offering, the Registrant is relying on Rule 6c-7 under the Investment Company Act of 1940 and is complying with, or shall comply with, paragraphs (a) – (d) of that Rule.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has caused this Registration Statement to be signed on its behalf, in the City of Cedar Rapids and State of Iowa, on this 1st day of October, 2014.
WRL SERIES ANNUITY ACCOUNT
TRANSAMERICA PREMIER LIFE INSURANCE COMPANY Depositor |
|
Brenda K. Clancy* Director, Chairman of the Board, President and Chief Executive Officer |
As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signatures |
Title |
Date | ||
Brenda K. Clancy* |
Director, Chairman of the Board, President and Chief Executive Officer | , 2014 | ||
Scott W. Ham* |
Director and Division President – Life & Protection | , 2014 | ||
C. Michiel van Katwijk* |
Director, Chief Financial Officer, Treasurer and Senior Vice President | , 2014 | ||
Robert J. Kontz* |
Director and Vice President | , 2014 | ||
Mark W. Mullin* |
Director | , 2014 | ||
Arthur C. Schneider* |
Director, Chief Tax Officer and Senior Vice President | , 2014 | ||
Jason Orlandi* |
Director, Senior Vice President, Secretary and General Counsel | , 2014 | ||
Eric J. Martin* |
Corporate Controller and Senior Vice President | , 2014 | ||
/s/ Alison Ryan |
Vice President | October 1, 2014 |
*By: Alison Ryan – Attorney-in-Fact pursuant to Powers of Attorney filed herewith.
Registration No.
333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM N-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FOR
WRL SERIES ANNUITY ACCOUNT
Exhibit No. | Description of Exhibit | Page No.* | ||
(l)(b) | Resolution of Board of Directors of Transamerica Premier Life Insurance Company re-domesticating WRL Series Annuity Account | |||
(l)(c) | Resolution of Board of Directors of Transamerica Premier Life Insurance Company Approving Plan of Merger with Western Reserve Life Assurance Co. of Ohio | |||
(1)(d) | Resolution of Board of Directors of Western Reserve Life Assurance Co. of Ohio Approving Plan of Merger with Transamerica Premier Life Insurance Company | |||
(3)(b) | Amendment to Amended and Restated Principal Underwriting Agreement | |||
(6)(a) | Restated Articles of Incorporation and Articles of Re-domestication of Transamerica Premier Life Insurance Company | |||
(6)(b) | Amended and Restated By-Laws Transamerica Premier Life Insurance Company | |||
(8)(a)(1) | Amendment No. 1 to Participation Agreement (Access One and ProFunds) | |||
(8)(c)(2) | Amended Schedule A 07-01-14 to Participation Agreement (TST) | |||
(9) | Opinion of Counsel | |||
(10) | Consent of Independent Registered Public Accounting Firm | |||
(13) | Powers of Attorney |
* Page numbers included only in manually executed original.
This ‘N-4’ Filing | Date | Other Filings | ||
---|---|---|---|---|
12/31/14 | ||||
Filed on: | 10/1/14 | N-4 | ||
9/30/14 | N-4 | |||
8/31/14 | ||||
7/31/14 | ||||
4/30/14 | 485BPOS | |||
4/28/14 | ||||
4/25/14 | ||||
2/14/14 | ||||
1/1/14 | ||||
12/31/13 | 24F-2NT, N-30D, NSAR-U | |||
12/26/13 | ||||
12/23/13 | ||||
11/4/13 | 497 | |||
9/30/13 | ||||
8/16/13 | ||||
7/1/13 | ||||
5/1/13 | 485BPOS | |||
4/25/13 | 497J | |||
4/22/13 | 485BPOS | |||
4/10/13 | ||||
1/1/13 | ||||
12/31/12 | 24F-2NT, NSAR-U | |||
12/21/12 | ||||
12/20/12 | ||||
9/30/12 | ||||
9/17/12 | ||||
9/14/12 | 497 | |||
7/26/12 | 497 | |||
4/17/12 | ||||
1/1/12 | ||||
12/31/11 | 24F-2NT, NSAR-U | |||
12/30/11 | ||||
12/23/11 | ||||
12/19/11 | ||||
12/16/11 | ||||
12/12/11 | ||||
12/9/11 | 497 | |||
9/30/11 | ||||
8/9/11 | ||||
5/16/11 | ||||
4/26/11 | 485BPOS | |||
4/1/11 | ||||
1/1/11 | ||||
12/31/10 | 24F-2NT, N-30D, NSAR-U | |||
8/18/10 | 497 | |||
8/16/10 | ||||
6/14/10 | 497 | |||
5/1/10 | 485BPOS | |||
4/30/10 | 497J | |||
11/20/09 | ||||
11/19/09 | 497 | |||
10/1/09 | ||||
9/30/09 | 497 | |||
5/1/09 | 485BPOS | |||
4/30/09 | ||||
1/1/09 | ||||
12/31/08 | 24F-2NT, N-30D, NSAR-U | |||
9/30/08 | ||||
5/1/08 | 485BPOS | |||
12/31/07 | 24F-2NT, N-30D, NSAR-U | |||
10/23/07 | ||||
9/6/07 | ||||
4/1/07 | ||||
2/13/07 | ||||
6/12/06 | ||||
5/1/06 | 485BPOS | |||
12/31/05 | 24F-2NT, N-30D, NSAR-U | |||
12/12/05 | ||||
12/23/04 | ||||
10/1/04 | ||||
5/1/03 | 485BPOS | |||
4/29/03 | 485BPOS | |||
4/14/03 | 485BPOS | |||
5/1/02 | 485BPOS | |||
2/19/02 | 485APOS | |||
5/1/00 | 485BPOS | |||
5/3/99 | 497, 497J | |||
4/22/99 | 485BPOS | |||
5/1/98 | ||||
4/30/98 | 485BPOS | |||
4/20/98 | 485BPOS | |||
1/2/98 | ||||
1/2/97 | 497 | |||
5/1/96 | ||||
1/3/95 | ||||
3/1/94 | ||||
3/1/93 | ||||
12/3/92 | ||||
List all Filings |
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 9/29/20 WRL Series Annuity Account N-4 6:9.6M Donnelley … Solutions/FA |