-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CzHd6XHQXumJtDGpnsni4DcaM9yniA5vDUntzgq2v1vkEEe1v/GTK4hfp8X9dOtq YhilmXGDvf2De366q/gE5w== 0000950144-02-004420.txt : 20020430 0000950144-02-004420.hdr.sgml : 20020430 ACCESSION NUMBER: 0000950144-02-004420 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20020429 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WRL SERIES LIFE ACCOUNT CENTRAL INDEX KEY: 0000778209 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 033-00506 FILM NUMBER: 02623803 BUSINESS ADDRESS: STREET 1: 570 CARILLON PARKWAY CITY: ST PETERSBURG STATE: FL ZIP: 33716 BUSINESS PHONE: 2722991800 MAIL ADDRESS: STREET 1: 201 HIGHLAND AVENUE CITY: LARGO STATE: FL ZIP: 33770 497 1 g75879e497.txt WRL SERIES LIFE ACCOUNT SUPPLEMENT DATED MAY 1, 2002 TO PROSPECTUS DATED MAY 1, 1989 THE EQUITY PROTECTOR ISSUED THROUGH WRL SERIES LIFE ACCOUNT BY WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO THE FOLLOWING INFORMATION MODIFIES AND SUPPLEMENTS INFORMATION PROVIDED ON PAGE 4 OF THE PROSPECTUS UNDER THE HEADING "7. HOW ARE NET PREMIUMS ALLOCATED?" AND ON PAGES 12-13 UNDER THE HEADING "INVESTMENTS OF THE SERIES ACCOUNT - WRL SERIES FUND": As of April 26, 2002, the C.A.S.E. Growth portfolio merged into the Great Companies - America(SM) portfolio and the AEGON Balanced portfolio merged into the Transamerica Value Balanced portfolio. Effective May 1, 2002, the Pilgrim Baxter Mid Cap Growth portfolio changed its name to PBHG Mid Cap Growth, the GE International Equity portfolio changed its name to American Century International and will be sub-advised by American Century Investment, Inc. Also effective May 1, 2002, the NWQ Value Equity changed its name to PBHG/NWQ Value Select and will be co-sub-advised by Pilgrim Baxter & Associates, Ltd. and NWQ Investment Management Company, Inc.; Dean Asset Allocation portfolio changed its name to Transamerica Value Balanced and will be sub-advised by Transamerica Investment Management, LLC; J.P. Morgan Real Estate Securities portfolio changed its name to Clarion Real Estate Securities and will be sub-advised by Clarion CRA Securities, LP; and J.P. Morgan Money Market changed its name to Transamerica Money Market and will be sub-advised by Transamerica Investment Management, LLC. Effective May 1, 2002, you may direct the money in your Policy into eight new subaccounts of the WRL Series Life Account. The subaccounts invest exclusively in a corresponding portfolio of the Series Fund. The investment objectives of the new portfolios are summarized below. There is no assurance that these portfolios will achieve their stated objective. More detailed information, including a description of risks, can be found in the Series Fund and Fidelity VIP Funds prospectuses, which accompany this Supplement, and should be read carefully.
PORTFOLIO SUB-ADVISER INVESTMENT OBJECTIVE --------- ----------- -------------------- CONSERVATIVE ASSET AEGON/Transamerica Seeks current income and preservation ALLOCATION Fund Advisers, Inc. of capital. MODERATE ASSET AEGON/Transamerica Seeks capital appreciation. ALLOCATION Fund Advisers, Inc. MODERATELY AGGRESSIVE AEGON/Transamerica Seeks capital appreciation. ASSET ALLOCATION Fund Advisers, Inc. AGGRESSIVE ASSET AEGON/Transamerica Seeks capital appreciation and current ALLOCATION Fund Advisers, Inc. income. TRANSAMERICA Transamerica Investment Seeks maximum total return through a CONVERTIBLE SECURITIES Management, LLC combination of current income and capital appreciation. PIMCO TOTAL Pacific Investment Seeks maximum total return consistent RETURN Management Company, LLC with preservation of capital and prudent Investment management. TRANSAMERICA Transamerica Investment Seeks to maximize long-term growth. EQUITY Management, LLC TRANSAMERICA GROWTH Transamerica Investment Seeks to maximize long-term growth. OPPORTUNITIES Management, LLC
THE FOLLOWING INFORMATION REPLACES THE THIRD PARAGRAPH ON PAGE 5 OF THE PROSPECTUS UNDER THE HEADING "11. WHAT CHARGES ARE ASSESSED IN CONNECTION WITH THE POLICY?" The portfolios deduct management fees and expenses from the amounts you have invested in the portfolios. These fees and expenses reduce the value of your portfolio shares. Some portfolios also deduct 12b-1 fees from portfolio assets. These fees and expenses currently range from 0.39% to 1.50%. Annually, depending on the portfolio. See the Portfolio Annual Expense Table below, and the fund prospectuses. THE FOLLOWING INFORMATION IS ADDED TO PAGE 7, BEFORE THE SECTION ENTITLED "WESTERN RESERVE AND THE SERIES ACCOUNT" OF THE PROSPECTUS: The information contained in both the explanation and "Hypothetical Illustrations" is out-of-date and should not be relied upon. In addition, current hypothetical illustrations for the new portfolios are not included in Appendix A. THE FOLLOWING INFORMATION REPRESENTS BOTH THE ACTUAL ANNUAL EXPENSES OF THE EXISTING PORTFOLIOS INCURRED DURING 2001 (EXCEPT AS NOTED IN THE FOOTNOTES), AND THE ESTIMATED ANNUAL EXPENSES, AS A PERCENTAGE OF AVERAGE NET ASSETS, OF THE NEW PORTFOLIOS: 2 ANNUAL PORTFOLIO OPERATING EXPENSES (1) (As a percentage of average portfolio assets)
GROSS OTHER EXPENSES TOTAL FEES AND NET TOTAL (AFTER FEE WAIVER PORTFOLIO EXPENSES PORTFOLIO MANAGEMENT AND EXPENSE RULE 12B-1 ANNUAL WAIVED OR ANNUAL PORTFOLIO FEES REIMBURSEMENT) FEE EXPENSES REIMBURSED EXPENSES --------- ---- -------------- --- -------- ---------- -------- AEGON/TRANSAMERICA SERIES FUND, INC.(2)(8) Munder Net50 0.90% 0.10% N/A 1.72% 0.72% 1.00% Van Kampen Emerging Growth 0.80% 0.12% N/A 0.92% N/A 0.92% T. Rowe Price Small Cap 0.75% 0.25% N/A 1.05% 0.05% 1.00% PBHG Mid Cap Growth 0.87% 0.13% N/A 1.08% 0.08% 1.00% Alger Aggressive Growth 0.80% 0.17% N/A 0.97% N/A 0.97% Third Avenue Value 0.80% 0.12% N/A 0.92% N/A 0.92% Value Line Aggressive Growth 0.80% 0.20% N/A 1.56% 0.56% 1.00% American Century International 1.00% 0.50% N/A 1.63% 0.13% 1.50% Janus Global 0.80% 0.15% N/A 0.95% N/A 0.95% Gabelli Global Growth 1.00% 0.20% N/A 1.28% 0.08% 1.20% Great Companies - Global 2(6) 0.80% 0.20% N/A 1.59% 0.59% 1.00% Great Companies - Technology(SM) 0.80% 0.19% N/A 0.99% N/A 0.99% Janus Growth 0.80% 0.09% N/A 0.89% N/A 0.89% LKCM Capital Growth 0.80% 0.20% N/A 3.18% 2.18% 1.00% Goldman Sachs Growth 0.90% 0.10% N/A 1.21% 0.21% 1.00% GE U.S. Equity 0.80% 0.14% N/A 0.94% N/A 0.94% Great Companies - America(SM)(7) 0.80% 0.09% N/A 0.89% N/A 0.89% Salomon All Cap 0.85% 0.15% N/A 1.00% N/A 1.00% Dreyfus Mid Cap 0.85% 0.15% N/A 1.34% 0.34% 1.00% PBHG/NWQ Value Select 0.80% 0.14% N/A 0.94% N/A 0.94% T. Rowe Price Dividend Growth 0.90% 0.10% N/A 1.18% 0.18% 1.00% Transamerica Value Balanced(8) 0.75% 0.11% N/A 0.86% N/A 0.86% LKCM Strategic Total Return 0.80% 0.09% N/A 0.89% N/A 0.89% Clarion Real Estate Securities 0.80% 0.20% N/A 1.13% 0.13% 1.00% Federated Growth & Income 0.75% 0.11% N/A 0.86% N/A 0.86% Janus Balanced (3) 0.90% 0.50% N/A 1.40% N/A 1.40% AEGON Bond 0.45% 0.10% N/A 0.55% N/A 0.55% Transamerica Money Market(9) 0.35% 0.04% N/A 0.39% N/A 0.39% Conservative Asset Allocation(3)(6) 0.10% 1.26% N/A 1.36% N/A 1.36% Moderate Asset Allocation(3)(6) 0.10% 1.25% N/A 1.35% N/A 1.35% Moderately Aggressive Asset Allocation(3)(6) 0.10% 1.23% N/A 1.33% N/A 1.33% Aggressive Asset Allocation(3)(6) 0.10% 1.22% N/A 1.32% N/A 1.32% Transamerica Convertible Securities(3) 0.80% 0.50% N/A 1.30% N/A 1.30% PIMCO Total Return(3) 0.70% 0.50% N/A 1.20% N/A 1.20% Transamerica Equity 0.75% 0.10% N/A 0.91% 0.06% 0.85% Transamerica Growth Opportunities 0.85% 0.35% N/A 5.89% 4.69% 1.20% FIDELITY VARIABLE INSURANCE PRODUCTS FUND (VIP) - SERVICE CLASS 2(5) VIP Equity-Income Portfolio 0.48% 0.11% 0.25%(4) 0.84% N/A 0.84% VIP Contrafund(R) Portfolio 0.58% 0.11% 0.25%(4) 0.94% N/A 0.94% VIP Growth Opportunities Portfolio 0.58% 0.12% 0.25%(4) 0.95% N/A 0.95%
- ---------------- (1) The fee table information relating to the portfolios was provided to Western Reserve by the funds. Western Reserve has not independently verified such information. (2) Effective January 1, 1997, the Series Fund's Board authorized the Series Fund to charge each portfolio of the Series Fund an annual 12b-1 fee of up to 0.15% of each portfolio's average daily net assets. However, the Series Fund will not deduct the fee from any portfolio before April 30, 2003. You will receive advance written notice if a Rule 12b-1 fee is to be deducted. See the Series Fund prospectus for more detail. (3) Because this portfolio did not commence operations until May 1, 2002, the percentages set forth as "Other Expenses" and "Total Annual Expenses" are annualized. 3 (4) The 12b-1 fee deducted for the Fidelity Variable Insurance Products Fund - Service Class 2 (Fidelity VIP Funds) covers certain shareholder support services provided by companies selling variable contracts investing in the Fidelity VIP Funds. The 12b-1 fees assessed against the Fidelity VIP Funds shares held for the Polices will be remitted to AFSG, the principal underwriter for the Policies. (5) Total Portfolio Annual Expenses for Service Class 2 shares were lower than as shown in the Fee Table because a portion of the brokerage commission that the Fidelity VIP Funds paid was used to reduce each Fund's expenses, and/or reduce a portion of each Fund's custodian expenses. See the Fidelity VIP Funds' prospectuses. Actual expenses were: VIP Equity-Income Portfolio - 0.83%; VIP Contrafund(R) Portfolio - 0.90%; and VIP Growth Opportunities Portfolio - 0.93%. (6) This portfolio is a "fund of funds" that invests in other Series Fund portfolios. The Series Fund prospectus provides specific information on the fees and expenses of this portfolio. This portfolio has its own set of operating expenses, as does each of the underlying Series Fund portfolios in which it invests. The range of the average weighted expense ratio, including such indirect expenses of the underlying Series Fund portfolios, is expected to be 0.64% to 1.75% for the Moderate Asset Allocation, Moderately Aggressive Asset Allocation and the Aggressive Asset Allocation portfolios. The range for the Conservative Asset Allocation portfolio is expected to be 0.64% to 1.65%. A range is provided since the allocation of assets to various underlying Series Fund portfolios will fluctuate. Over time, the cost of investment in an asset allocation "fund of funds" portfolio will increase the cost of your investment and may cost you more than investing in a Series Fund portfolio without asset allocation. (7) As of April 26, 2002, the C.A.S.E. Growth portfolio merged into Great Companies - America(SM) portfolio. (8) As of April 26, 2002, the AEGON Balanced portfolio merged into Transamerica Value Balanced portfolio. Effective August 27, 2001, the management fee was reduced to 0.75%. (9) Effective May 1, 2002, the management fee was reduced to 0.35% The purpose of the preceding table is to help you understand the various costs and expenses that you will bear directly and indirectly. The table reflects charges and expenses of the portfolios of the funds for the fiscal year ended December 31, 2001 (except as noted in the footnotes). Expenses of the funds may be higher or lower in the future. For more information on the charges described in this table, see the fund prospectuses that accompany this Supplement. THE FOLLOWING ARE NEW PARAGRAPHS ADDED AFTER THE THIRD PARAGRAPH ON PAGE 15 OF THE PROSPECTUS UNDER THE HEADING "ALLOCATION OF PREMIUMS AND CASH VALUE - TRANSFERS." Some investors try to profit from various strategies known as market timing; for example, switching money into mutual funds when they expect to rise and taking money out when they expect prices to fall, or switching from one portfolio to another and then back out again after a short period of time. As money is shifted in and out, a fund incurs expenses for buying and selling securities. These costs are borne by all fund shareholders, including the long-term investors who do not generate the costs. This is why all portfolios have adopted special policies to discourage short-term trading. Specifically, each portfolio reserves the right to reject any transfer request that it regards as disruptive to efficient portfolio management. A transfer request could be rejected because of the timing of the investment or because of a history of excessive transfers by the owner. This Policy was not designed for professional market timing organizations or other persons that use programmed, large, or frequent transfers. The use of such transfers may be disruptive to the underlying portfolio and increase transaction costs. We reserve the right to reject any premium payment or transfer request from any person if, in our judgment, the payment or transfer or series of transfers would have a negative impact on a portfolio's operations or if a portfolio would reject our purchase order. We may impose other restrictions on transfers or even prohibit them for any owner who, in our view, has abused, or appears likely to abuse, the transfer privilege. THE PORTFOLIOS DO NOT PERMIT MARKET TIMING. DO NOT INVEST WITH US IF YOU ARE A MARKET TIMER. WHEN WE IDENTIFY YOU AS A MARKET TIMER, WE WILL IMMEDIATELY NOTIFY YOUR AGENT WHO WILL THEN NOTIFY YOU THAT ANY ADDITIONAL REQUESTS FOR TRANSFERS WILL BE SUBJECT TO CERTAIN RESTRICTIONS, INCLUDING THE LOSS OF ELECTRONIC AND TELEPHONE TRANSFER PRIVILEGES. We cannot guarantee that telephone and faxed transactions will always be available. For example, our offices may be closed during severe weather emergencies or there may be interruptions in telephone or fax service 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. Online transactions may not always be possible. Telephone and computer systems whether yours, your Internet service provider's, your agent's, or WRL's, can experience outages or slowdowns for a variety of reasons. These outages or slowdowns may prevent or delay our receipt of your request. If you are experiencing problems, you should make your request or inquiry in writing. You should protect your personal identification number (PIN) because self-service options will be available to your agent 4 of record and to anyone who provides your PIN. We will not be able to verify that the person using your PIN and providing instructions online is you or one authorized by you. THE FOLLOWING ARE NEW SUB-SECTIONS TO BE ADDED TO PAGE 28 OF THE PROSPECTUS UNDER THE HEADING "FEDERAL TAX MATTERS": Withholding. To the extent that Policy distributions are taxable, they are generally subject to withholding for the recipient's federal income tax liability. Recipients can generally elect, however, not to have tax withheld from distributions. THE FOLLOWING REPLACES THE ENTIRE SECTION UNDER THE HEADING "EXPERTS" ON PAGE 32 OF THE PROSPECTUS: The financial statements of WRL Series Life Account at December 31, 2001, and for each of the two years in the period ended December 31, 2001, appearing in this Supplement have been audited by Ernst & Young LLP, independent auditors as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing. The statutory-basis financial statements and schedules of Western Reserve at December 31, 2001 and 2000, and for each of the three years in the period ended December 31, 2001, appearing in this Supplement have been audited by Ernst & Young LLP, independent auditors as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing. For additional information, you may contact us at 1-800-851-9777, extension 6539 from 8:00a.m. - 8:00p.m. Eastern Time or visit our website at: www.westernreserve.com. More information about AFSG, the principal underwriter for the Policies, is available at http:/www.nasdr.com or by calling 1-800-289-9999. 5 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Policy Owners of the WRL Series Life Account Western Reserve Life Assurance Company of Ohio We have audited the accompanying statements of assets and liabilities of each of the subaccounts constituting the WRL Series Life Account (the "Separate Account," a separate account of Western Reserve Life Assurance Co. of Ohio) as of December 31, 2001, 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 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of mutual fund shares owned as of December 31, 2001, by correspondence with the mutual fund's transfer agent. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the respective subaccounts constituting the WRL Series Life Account at December 31, 2001, and the results of their operations and changes in net assets for the periods indicated thereon, in conformity with accounting principles generally accepted in the United States. /s/ ERNST & YOUNG LLP Des Moines, Iowa January 31, 2002 6 WRL SERIES LIFE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES AT DECEMBER 31, 2001 (ALL AMOUNTS EXCEPT PER UNIT AMOUNTS IN THOUSANDS)
WRL WRL WRL WRL WRL LKCM J.P. MORGAN AEGON JANUS JANUS STRATEGIC MONEY MARKET BOND GROWTH GLOBAL TOTAL RETURN SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT ASSETS: Investment in securities: Number of shares......................... 82,155 3,797 21,422 17,130 6,605 ======== ======== =========== ========= ======== Cost..................................... $ 82,155 $ 43,884 $ 1,041,848 $ 423,082 $ 98,671 ======== ======== =========== ========= ======== Investment, at net asset value............. $ 82,155 $ 45,408 $ 699,423 $ 313,827 $ 95,309 Dividend receivable........................ 13 0 0 0 0 Transfers receivable from depositor........ 249 0 240 85 22 -------- -------- ----------- --------- -------- Total assets............................. 82,417 45,408 699,663 313,912 95,331 -------- -------- ----------- --------- -------- LIABILITIES: Accrued expenses........................... 0 0 0 0 0 Transfers payable to depositor............. 0 699 0 0 0 -------- -------- ----------- --------- -------- Total liabilities........................ 0 699 0 0 0 -------- -------- ----------- --------- -------- Net assets............................... $ 82,417 $ 44,709 $ 699,663 $ 313,912 $ 95,331 ======== ======== =========== ========= ======== NET ASSETS CONSISTS OF: Policy owners' equity...................... $ 82,417 $ 44,709 $ 699,663 $ 313,912 $ 95,331 Depositor's equity......................... 0 0 0 0 0 -------- -------- ----------- --------- -------- Net assets applicable to units outstanding............................ $ 82,417 $ 44,709 $ 699,663 $ 313,912 $ 95,331 ======== ======== =========== ========= ======== Policy owners' units....................... 4,349 1,725 9,583 12,912 4,517 Depositor's units.......................... 0 0 0 0 0 -------- -------- ----------- --------- -------- Units outstanding........................ 4,349 1,725 9,583 12,912 4,517 ======== ======== =========== ========= ======== Accumulation unit value.................. $ 18.95 $ 25.91 $ 73.01 $ 24.31 $ 21.10 ======== ======== =========== ========= ========
See accompanying notes. 7 WRL SERIES LIFE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES AT DECEMBER 31, 2001 (ALL AMOUNTS EXCEPT PER UNIT AMOUNTS IN THOUSANDS)
WRL VAN WRL WRL WRL KAMPEN ALGER WRL FEDERATED TRANSAMERICA EMERGING AGGRESSIVE AEGON GROWTH & VALUE GROWTH GROWTH BALANCED INCOME BALANCED SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT ASSETS: Investment in securities: Number of shares......................... 19,892 15,214 1,733 3,770 3,152 ========= ========= ======== ======== ======== Cost..................................... $ 635,383 $ 328,586 $ 21,763 $ 50,591 $ 42,809 ========= ========= ======== ======== ======== Investment, at net asset value............. $ 386,700 $ 248,600 $ 22,030 $ 57,600 $ 41,892 Dividend receivable........................ 0 0 0 0 0 Transfers receivable from depositor........ 203 152 31 231 42 --------- --------- -------- -------- -------- Total assets............................. 386,903 248,752 22,061 57,831 41,934 --------- --------- -------- -------- -------- LIABILITIES: Accrued expenses........................... 0 0 0 0 0 Transfers payable to depositor............. 0 0 0 0 0 --------- --------- -------- -------- -------- Total liabilities........................ 0 0 0 0 0 --------- --------- -------- -------- -------- Net assets............................... $ 386,903 $ 248,752 $ 22,061 $ 57,831 $ 41,934 ========= ========= ======== ======== ======== NET ASSETS CONSISTS OF: Policy owners' equity...................... $ 386,903 $ 248,752 $ 22,061 $ 57,831 $ 41,934 Depositor's equity......................... 0 0 0 0 0 --------- --------- -------- -------- -------- Net assets applicable to units outstanding............................ $ 386,903 $ 248,752 $ 22,061 $ 57,831 $ 41,934 ========= ========= ======== ======== ======== Policy owners' units....................... 10,305 9,881 1,426 2,531 2,270 Depositor's units.......................... 0 0 0 0 0 --------- --------- -------- -------- -------- Units outstanding........................ 10,305 9,881 1,426 2,531 2,270 ========= ========= ======== ======== ======== Accumulation unit value.................. $ 37.54 $ 25.17 $ 15.47 $ 22.85 $ 18.47 ========= ========= ======== ======== ========
See accompanying notes. 8 WRL SERIES LIFE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES AT DECEMBER 31, 2001 (ALL AMOUNTS EXCEPT PER UNIT AMOUNTS IN THOUSANDS)
WRL WRL WRL WRL WRL THIRD C.A.S.E. NWQ INTERNATIONAL GE AVENUE GROWTH VALUE EQUITY EQUITY U.S. EQUITY VALUE SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT ASSETS: Investment in securities: Number of shares......................... 2,780 2,333 1,045 2,292 2,361 ======== ======== ======== ======== ======== Cost..................................... $ 34,310 $ 32,071 $ 11,685 $ 34,389 $ 32,340 ======== ======== ======== ======== ======== Investment, at net asset value............. $ 17,845 $ 32,877 $ 7,992 $ 30,992 $ 34,281 Dividend receivable........................ 0 0 0 0 0 Transfers receivable from depositor........ 2 13 191 28 64 -------- -------- -------- -------- -------- Total assets............................. 17,847 32,890 8,183 31,020 34,345 -------- -------- -------- -------- -------- LIABILITIES: Accrued expenses........................... 0 0 0 0 0 Transfers payable to depositor............. 0 0 0 0 0 -------- -------- -------- -------- -------- Total liabilities........................ 0 0 0 0 0 -------- -------- -------- -------- -------- Net assets............................... $ 17,847 $ 32,890 $ 8,183 $ 31,020 $ 34,345 ======== ======== ======== ======== ======== NET ASSETS CONSISTS OF: Policy owners' equity...................... $ 17,847 $ 32,890 $ 8,183 $ 31,020 $ 34,345 Depositor's equity......................... 0 0 0 0 0 -------- -------- -------- -------- -------- Net assets applicable to units outstanding............................ $ 17,847 $ 32,890 $ 8,183 $ 31,020 $ 34,345 ======== ======== ======== ======== ======== Policy owners' units....................... 1,963 2,103 868 1,942 2,296 Depositor's units.......................... 0 0 0 0 0 -------- -------- -------- -------- -------- Units outstanding........................ 1,963 2,103 868 1,942 2,296 ======== ======== ======== ======== ======== Accumulation unit value.................. $ 9.09 $ 15.64 $ 9.43 $ 15.97 $ 14.96 ======== ======== ======== ======== ========
See accompanying notes. 9 WRL SERIES LIFE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES AT DECEMBER 31, 2001 (ALL AMOUNTS EXCEPT PER UNIT AMOUNTS IN THOUSANDS)
WRL WRL WRL WRL J.P. MORGAN GOLDMAN WRL T. ROWE T. ROWE REAL ESTATE SACHS MUNDER PRICE PRICE SECURITIES GROWTH NET50 DIVIDEND GROWTH SMALL CAP SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT ASSETS: Investment in securities: Number of shares......................... 702 411 346 353 620 ======= ======= ======= ======= ======= Cost..................................... $ 7,588 $ 3,744 $ 3,354 $ 3,370 $ 6,760 ======= ======= ======= ======= ======= Investment, at net asset value............. $ 7,865 $ 3,737 $ 2,792 $ 3,416 $ 6,803 Dividend receivable........................ 0 0 0 0 0 Transfers receivable from depositor........ 34 13 12 3 29 ------- ------- ------- ------- ------- Total assets............................. 7,899 3,750 2,804 3,419 6,832 ------- ------- ------- ------- ------- LIABILITIES: Accrued expenses........................... 0 0 0 0 0 Transfers payable to depositor............. 0 0 0 0 0 ------- ------- ------- ------- ------- Total liabilities........................ 0 0 0 0 0 ------- ------- ------- ------- ------- Net assets............................... $ 7,899 $ 3,750 $ 2,804 $ 3,419 $ 6,832 ======= ======= ======= ======= ======= NET ASSETS CONSISTS OF: Policy owners' equity...................... $ 7,899 $ 3,750 $ 2,804 $ 3,419 $ 6,832 Depositor's equity......................... 0 0 0 0 0 ------- ------- ------- ------- ------- Net assets applicable to units outstanding............................ $ 7,899 $ 3,750 $ 2,804 $ 3,419 $ 6,832 ======= ======= ======= ======= ======= Policy owners' units....................... 693 428 351 361 684 Depositor's units.......................... 0 0 0 0 0 ------- ------- ------- ------- ------- Units outstanding........................ 693 428 351 361 684 ======= ======= ======= ======= ======= Accumulation unit value.................. $ 11.40 $ 8.76 $ 7.98 $ 9.48 $ 9.99 ======= ======= ======= ======= =======
See accompanying notes. 10 WRL SERIES LIFE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES AT DECEMBER 31, 2001 (ALL AMOUNTS EXCEPT PER UNIT AMOUNTS IN THOUSANDS)
WRL WRL WRL WRL WRL GREAT SALOMON PILGRIM BAXTER DREYFUS VALUE LINE COMPANIES - ALL CAP MID CAP GROWTH MID CAP AGGRESSIVE GROWTH AMERICA(SM) SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT ASSETS: Investment in securities: Number of shares......................... 2,331 3,401 471 158 1,665 ======== ======== ======= ======= ======== Cost..................................... $ 30,727 $ 56,960 $ 5,313 $ 1,396 $ 16,913 ======== ======== ======= ======= ======== Investment, at net asset value............. $ 30,447 $ 32,817 $ 5,315 $ 1,281 $ 16,583 Dividend receivable........................ 0 0 0 0 0 Transfers receivable from depositor........ 79 50 10 2 24 -------- -------- ------- ------- -------- Total assets............................. 30,526 32,867 5,325 1,283 16,607 -------- -------- ------- ------- -------- LIABILITIES: Accrued expenses........................... 0 0 0 0 0 Transfers payable to depositor............. 0 0 0 0 0 -------- -------- ------- ------- -------- Total liabilities........................ 0 0 0 0 0 -------- -------- ------- ------- -------- Net assets............................... $ 30,526 $ 32,867 $ 5,325 $ 1,283 $ 16,607 ======== ======== ======= ======= ======== NET ASSETS CONSISTS OF: Policy owners' equity...................... $ 30,526 $ 32,867 $ 5,325 $ 1,124 $ 16,410 Depositor's equity......................... 0 0 0 159 197 -------- -------- ------- ------- -------- Net assets applicable to units outstanding............................ $ 30,526 $ 32,867 $ 5,325 $ 1,283 $ 16,607 ======== ======== ======= ======= ======== Policy owners' units....................... 2,405 3,818 493 141 1,667 Depositor's units.......................... 0 0 0 20 20 -------- -------- ------- ------- -------- Units outstanding........................ 2,405 3,818 493 161 1,687 ======== ======== ======= ======= ======== Accumulation unit value.................. $ 12.70 $ 8.61 $ 10.81 $ 7.97 $ 9.84 ======== ======== ======= ======= ========
See accompanying notes. 11 WRL SERIES LIFE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES AT DECEMBER 31, 2001 (ALL AMOUNTS EXCEPT PER UNIT AMOUNTS IN THOUSANDS)
WRL WRL WRL WRL GREAT GREAT GABELLI LKCM COMPANIES - COMPANIES - GLOBAL CAPITAL TECHNOLOGY(SM) GLOBAL(2) GROWTH GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT ASSETS: Investment in securities: Number of shares......................... 1,443 314 923 172 ======= ======= ======= ======= Cost..................................... $ 7,899 $ 2,260 $ 7,916 $ 1,122 ======= ======= ======= ======= Investment, at net asset value............. $ 6,135 $ 2,229 $ 7,537 $ 1,155 Dividend receivable........................ 0 0 0 0 Transfers receivable from depositor........ 12 9 53 2 ------- ------- ------- ------- Total assets............................. 6,147 2,238 7,590 1,157 ------- ------- ------- ------- LIABILITIES: Accrued expenses........................... 0 0 0 0 Transfers payable to depositor............. 0 0 0 0 ------- ------- ------- ------- Total liabilities........................ 0 0 0 0 ------- ------- ------- ------- Net assets............................... $ 6,147 $ 2,238 $ 7,590 $ 1,157 ======= ======= ======= ======= NET ASSETS CONSISTS OF: Policy owners' equity...................... $ 6,063 $ 2,220 $ 7,570 $ 1,141 Depositor's equity......................... 84 18 20 16 ------- ------- ------- ------- Net assets applicable to units outstanding............................ $ 6,147 $ 2,238 $ 7,590 $ 1,157 ======= ======= ======= ======= Policy owners' units....................... 1,448 316 936 177 Depositor's units.......................... 20 3 3 3 ------- ------- ------- ------- Units outstanding........................ 1,468 319 939 180 ======= ======= ======= ======= Accumulation unit value.................. $ 4.19 $ 7.02 $ 8.08 $ 6.43 ======= ======= ======= =======
See accompanying notes. 12 WRL SERIES LIFE ACCOUNT STATEMENTS OF ASSETS AND LIABILITIES AT DECEMBER 31, 2001 (ALL AMOUNTS EXCEPT PER UNIT AMOUNTS IN THOUSANDS)
FIDELITY VIP III GROWTH FIDELITY VIP II FIDELITY VIP OPPORTUNITIES CONTRAFUND(R) EQUITY-INCOME SUBACCOUNT SUBACCOUNT SUBACCOUNT ASSETS: Investment in securities: Number of shares......................... 92 167 183 ======= ======= ======= Cost..................................... $ 1,415 $ 3,367 $ 4,159 ======= ======= ======= Investment, at net asset value............. $ 1,388 $ 3,331 $ 4,136 Dividend receivable........................ 0 0 0 Transfers receivable from depositor........ 9 4 25 ------- ------- ------- Total assets............................. 1,397 3,335 4,161 ------- ------- ------- LIABILITIES: Accrued expenses........................... 0 0 0 Transfers payable to depositor............. 0 0 0 ------- ------- ------- Total liabilities........................ 0 0 0 ------- ------- ------- Net assets............................... $ 1,397 $ 3,335 $ 4,161 ======= ======= ======= NET ASSETS CONSISTS OF: Policy owners' equity...................... $ 1,379 $ 3,315 $ 4,161 Depositor's equity......................... 18 20 0 ------- ------- ------- Net assets applicable to units outstanding............................ $ 1,397 $ 3,335 $ 4,161 ======= ======= ======= Policy owners' units....................... 190 407 401 Depositor's units.......................... 3 3 2 ------- ------- ------- Units outstanding........................ 193 410 403 ======= ======= ======= Accumulation unit value.................. $ 7.25 $ 8.14 $ 10.32 ======= ======= =======
See accompanying notes. 13 WRL SERIES LIFE ACCOUNT STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001 (ALL AMOUNTS IN THOUSANDS)
WRL WRL WRL WRL WRL LKCM J.P. MORGAN AEGON JANUS JANUS STRATEGIC MONEY MARKET BOND GROWTH GLOBAL TOTAL RETURN SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT INVESTMENT INCOME: Dividend income......................... $ 2,561 $ 235 $ 0 $ 3,099 $ 437 ---------- --------- ---------- ---------- -------- EXPENSES: Mortality and expense risk.............. 621 323 6,861 3,064 850 ---------- --------- ---------- ---------- -------- Net investment income (loss).......... 1,940 (88) (6,861) 35 (413) ---------- --------- ---------- ---------- -------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on sale of investment securities................. 0 46 37,427 5,742 1,444 Realized gain distributions............. 0 0 27,203 20 510 Change in unrealized appreciation (depreciation)........................ 0 2,228 (339,361) (103,306) (4,616) ---------- --------- ---------- ---------- -------- Net gain (loss) on investment securities.......................... 0 2,274 (274,731) (97,544) (2,662) ---------- --------- ---------- ---------- -------- Net increase (decrease) in net assets resulting from operations....................... $ 1,940 $ 2,186 $ (281,592) $ (97,509) $ (3,075) ========== ========= ========== ========== ========
WRL WRL WRL WRL VAN KAMPEN ALGER WRL FEDERATED TRANSAMERICA EMERGING AGGRESSIVE AEGON GROWTH & VALUE GROWTH GROWTH BALANCED INCOME BALANCED SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT INVESTMENT INCOME: Dividend income......................... $ 339 $ 0 $ 95 $ 783 $ 572 ---------- --------- ---------- ---------- -------- EXPENSES: Mortality and expense risk.............. 3,933 2,225 193 379 355 ---------- --------- ---------- ---------- -------- Net investment income (loss).......... (3,594) (2,225) (98) 404 217 ---------- --------- ---------- ---------- -------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on sale of investment securities................. (247,426) 4,373 288 378 81 Realized gain distributions............. 7,210 27 0 16 3 Change in unrealized appreciation (depreciation)........................ 44,394 (52,170) (994) 4,603 7 ---------- --------- ---------- ---------- -------- Net gain (loss) on investment securities.......................... (195,822) (47,770) (706) 4,997 91 ---------- --------- ---------- ---------- -------- Net increase (decrease) in net assets resulting from operations....................... $ (199,416) $ (49,995) $ (804) $ 5,401 $ 308 ========== ========= ========== ========== ========
See accompanying notes. 14 WRL SERIES LIFE ACCOUNT STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001 (ALL AMOUNTS IN THOUSANDS)
WRL WRL WRL WRL WRL THIRD C.A.S.E. NWQ INTERNATIONAL GE AVENUE GROWTH VALUE EQUITY EQUITY U.S. EQUITY VALUE SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT INVESTMENT INCOME: Dividend income......................... $ 2,324 $ 45 $ 263 $ 54 $ 31 -------- ------ -------- -------- ------- EXPENSES: Mortality and expense risk.............. 193 279 71 269 233 -------- ------ -------- -------- ------- Net investment income (loss).......... 2,131 (234) 192 (215) (202) -------- ------ -------- -------- ------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on sale of investment securities................. (1,711) 74 (507) 96 477 Realized gain distributions............. 33 2 24 239 45 Change in unrealized appreciation (depreciation)........................ (8,077) (769) (1,952) (3,268) 874 -------- ------ -------- -------- ------- Net gain (loss) on investment securities.......................... (9,755) (693) (2,435) (2,933) 1,396 -------- ------ -------- -------- ------- Net increase (decrease) in net assets resulting from operations....................... $ (7,624) $ (927) $ (2,243) $ (3,148) $ 1,194 ======== ====== ======== ======== =======
WRL WRL WRL WRL J.P. MORGAN GOLDMAN WRL T. ROWE T. ROWE REAL ESTATE SACHS MUNDER PRICE PRICE SECURITIES GROWTH NET50 DIVIDEND GROWTH SMALL CAP SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT INVESTMENT INCOME: Dividend income......................... $ 141 $ 18 $ 13 $ 0 $ 0 -------- ------ -------- -------- ------- EXPENSES: Mortality and expense risk.............. 45 20 20 19 35 -------- ------ -------- -------- ------- Net investment income (loss).......... 96 (2) (7) (19) (35) -------- ------ -------- -------- ------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on sale of investment securities................. 131 (385) (330) 16 (674) Realized gain distributions............. 0 2 0 9 0 Change in unrealized appreciation (depreciation)........................ 177 99 (532) (44) 399 -------- ------ -------- -------- ------- Net gain (loss) on investment securities.......................... 308 (284) (862) (19) (275) -------- ------ -------- -------- ------- Net increase (decrease) in net assets resulting from operations....................... $ 404 $ (286) $ (869) $ (38) $ (310) ======== ====== ======== ======== =======
See accompanying notes. 15 WRL SERIES LIFE ACCOUNT STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001 (ALL AMOUNTS IN THOUSANDS)
WRL WRL WRL WRL PILGRIM BAXTER WRL VALUE LINE GREAT SALOMON MID CAP DREYFUS AGGRESSIVE COMPANIES - ALL CAP GROWTH MID CAP GROWTH AMERICA(SM) SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT INVESTMENT INCOME: Dividend income......................... $ 379 $ 0 $ 49 $ 0 $ 40 -------- --------- ------ ------ -------- EXPENSES: Mortality and expense risk.............. 190 288 32 9 105 -------- --------- ------ ------ -------- Net investment income (loss).......... 189 (288) 17 (9) (65) -------- --------- ------ ------ -------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on sale of investment securities................. (130) (8,685) (172) (166) (51) Realized gain distributions............. 10 0 6 0 0 Change in unrealized appreciation (depreciation)........................ (356) (7,067) 24 68 (1,032) -------- --------- ------ ------ -------- Net gain (loss) on investment securities.......................... (476) (15,752) (142) (98) (1,083) -------- --------- ------ ------ -------- Net increase (decrease) in net assets resulting from operations....................... $ (287) $ (16,040) $ (125) $ (107) $ (1,148) ======== ========= ====== ====== ========
WRL WRL WRL WRL GREAT GREAT GABELLI LKCM COMPANIES- COMPANIES- GLOBAL CAPITAL TECHNOLOGY(SM) GLOBAL(2) GROWTH GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT(1) INVESTMENT INCOME: Dividend income......................... $ 0 $ 0 $ 6 $ 2 -------- --------- ------ ----- EXPENSES: Mortality and expense risk.............. 34 11 40 2 -------- --------- ------ ----- Net investment income (loss).......... (34) (11) (34) 0 -------- --------- ------ ----- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on sale of investment securities................. (1,355) (63) (53) (40) Realized gain distributions............. 0 0 0 0 Change in unrealized appreciation (depreciation)........................ (459) (16) (346) 33 -------- --------- ------ ----- Net gain (loss) on investment securities.......................... (1,814) (79) (399) (7) -------- --------- ------ ----- Net increase (decrease) in net assets resulting from operations....................... $ (1,848) $ (90) $ (433) $ (7) ======== ========= ====== =====
See accompanying notes. 16 WRL SERIES LIFE ACCOUNT STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001 (ALL AMOUNTS IN THOUSANDS)
FIDELITY VIP III FIDELITY VIP GROWTH FIDELITY VIP II EQUITY - OPPORTUNITIES CONTRAFUND(R) INCOME SUBACCOUNT SUBACCOUNT SUBACCOUNT INVESTMENT INCOME: Dividend income......................... $ 2 $ 9 $ 13 ------ ------ ----- EXPENSES: Mortality and expense risk.............. 8 18 21 ------ ------ ----- Net investment income (loss).......... (6) (9) (8) ------ ------ ----- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on sale of investment securities................. (161) (191) (67) Realized gain distributions............. 0 34 37 Change in unrealized appreciation (depreciation)........................ 43 11 (36) ------ ------ ----- Net gain (loss) on investment securities.......................... (118) (146) (66) ------ ------ ----- Net increase (decrease) in net assets resulting from operations....................... $ (124) $ (155) $ (74) ====== ====== =====
See accompanying notes. 17 WRL SERIES LIFE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED (ALL AMOUNTS IN THOUSANDS)
WRL WRL WRL J.P. MORGAN AEGON JANUS MONEY MARKET BOND GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT --------------------- ------------------- ------------------------ DECEMBER 31, DECEMBER 31, DECEMBER 31, --------------------- ------------------- ------------------------ 2001 2000 2001 2000 2001 2000 --------- --------- -------- -------- ---------- ----------- OPERATIONS: Net investment income (loss)..................... $ 1,940 $ 2,389 $ (88) $ 1,147 $ (6,861) $ 152,896 Net gain (loss) on investment securities......... 0 0 2,274 1,222 (274,731) (555,143) --------- --------- -------- -------- ---------- ----------- Net increase (decrease) in net assets resulting from operations................................ 1,940 2,389 2,186 2,369 (281,592) (402,247) --------- --------- -------- -------- ---------- ----------- CAPITAL UNIT TRANSACTIONS: Proceeds from units sold (transferred)........... 31,666 12,540 21,257 897 126,273 168,047 --------- --------- -------- -------- ---------- ----------- Less cost of units redeemed: Administrative charges......................... 4,916 3,274 3,034 2,341 71,004 69,288 Policy loans................................... 2,096 1,672 586 1,361 10,816 44,968 Surrender benefits............................. 4,288 5,687 977 735 22,233 38,262 Death benefits................................. 168 87 72 23 1,980 6,224 --------- --------- -------- -------- ---------- ----------- 11,468 10,720 4,669 4,460 106,033 158,742 --------- --------- -------- -------- ---------- ----------- Increase (decrease) in net assets from capital unit transactions............................ 20,198 1,820 16,588 (3,563) 20,240 9,305 --------- --------- -------- -------- ---------- ----------- Net increase (decrease) in net assets.......... 22,138 4,209 18,774 (1,194) (261,352) (392,942) Depositor's equity contribution (net redemption).................................... 0 0 0 0 0 0 NET ASSETS: Beginning of year................................ 60,279 56,070 25,935 27,129 961,015 1,353,957 --------- --------- -------- -------- ---------- ----------- End of year...................................... $ 82,417 $ 60,279 $ 44,709 $ 25,935 $ 699,663 $ 961,015 ========= ========= ======== ======== ========== =========== UNIT ACTIVITY: Units outstanding - beginning of year............ 3,278 3,206 1,072 1,232 9,366 9,293 Units issued..................................... 27,105 50,376 1,365 427 4,247 2,459 Units redeemed................................... (26,034) (50,304) (712) (587) (4,030) (2,386) --------- --------- -------- -------- ---------- ----------- Units outstanding - end of year.................. 4,349 3,278 1,725 1,072 9,583 9,366 ========= ========= ======== ======== ========== ===========
See accompanying notes. 18 WRL SERIES LIFE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED (ALL AMOUNTS IN THOUSANDS)
WRL WRL LKCM WRL JANUS STRATEGIC VAN KAMPEN GLOBAL TOTAL RETURN EMERGING GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT ---------------------- -------------------- ----------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, ---------------------- -------------------- ----------------------- 2001 2000 2001 2000 2001 2000 --------- ---------- -------- --------- ---------- ---------- OPERATIONS: Net investment income (loss)..................... $ 35 $ 98,726 $ (413) $ 7,415 $ (3,594) $ 168,610 Net gain (loss) on investment securities......... (97,544) (191,334) (2,662) (12,297) (195,822) (261,688) --------- ---------- -------- --------- ---------- ---------- Net increase (decrease) in net assets resulting from operations................................ (97,509) (92,608) (3,075) (4,882) (199,416) (93,078) --------- ---------- -------- --------- ---------- ---------- CAPITAL UNIT TRANSACTIONS: Proceeds from units sold (transferred)........... 47,977 112,253 12,375 10,776 64,879 145,357 --------- ---------- -------- --------- ---------- ---------- Less cost of units redeemed: Administrative charges......................... 31,569 31,746 8,111 7,939 38,288 35,247 Policy loans................................... 4,476 15,396 1,157 2,710 6,127 22,735 Surrender benefits............................. 10,117 12,985 2,908 2,844 13,487 20,687 Death benefits................................. 503 907 259 600 860 1,538 --------- ---------- -------- --------- ---------- ---------- 46,665 61,034 12,435 14,093 58,762 80,207 --------- ---------- -------- --------- ---------- ---------- Increase (decrease) in net assets from capital unit transactions............................ 1,312 51,219 (60) (3,317) 6,117 65,150 --------- ---------- -------- --------- ---------- ---------- Net increase (decrease) in net assets.......... (96,197) (41,389) (3,135) (8,199) (193,299) (27,928) Depositor's equity contribution (net redemption).................................... 0 0 0 0 0 0 NET ASSETS: Beginning of year................................ 410,109 451,498 98,466 106,665 580,202 608,130 --------- ---------- -------- --------- ---------- ---------- End of year...................................... $ 313,912 $ 410,109 $ 95,331 $ 98,466 $ 386,903 $ 580,202 ========= ========== ======== ========= ========== ========== UNIT ACTIVITY: Units outstanding - beginning of year............ 12,899 11,605 4,523 4,674 10,226 9,357 Units issued..................................... 3,942 4,570 1,239 1,327 7,855 11,606 Units redeemed................................... (3,929) (3,276) (1,245) (1,478) (7,776) (10,737) --------- ---------- -------- --------- ---------- ---------- Units outstanding - end of year.................. 12,912 12,899 4,517 4,523 10,305 10,226 ========= ========== ======== ========= ========== ==========
See accompanying notes. 19 WRL SERIES LIFE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED (ALL AMOUNTS IN THOUSANDS)
WRL WRL WRL ALGER AEGON FEDERATED AGGRESSIVE GROWTH BALANCED GROWTH & INCOME SUBACCOUNT SUBACCOUNT SUBACCOUNT ---------------------- ------------------- ------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, ---------------------- ------------------- ------------------- 2001 2000 2001 2000 2001 2000 --------- ---------- -------- -------- -------- -------- OPERATIONS: Net investment income (loss)..................... $ (2,225) $ 41,268 $ (98) $ 215 $ 404 $ 1,001 Net gain (loss) on investment securities......... (47,770) (168,747) (706) 742 4,997 4,230 --------- ---------- -------- -------- -------- -------- Net increase (decrease) in net assets resulting from operations...................... (49,995) (127,479) (804) 957 5,401 5,231 --------- ---------- -------- -------- -------- -------- CAPITAL UNIT TRANSACTIONS: Proceeds from units sold (transferred)........... 57,462 103,588 5,617 4,955 31,343 7,863 --------- ---------- -------- -------- -------- -------- Less cost of units redeemed: Administrative charges......................... 28,461 26,734 2,390 2,124 3,816 2,328 Policy loans................................... 3,294 12,341 351 442 422 628 Surrender benefits............................. 6,759 10,374 924 559 1,499 534 Death benefits................................. 373 666 39 18 59 110 --------- ---------- -------- -------- -------- -------- 38,887 50,115 3,704 3,143 5,796 3,600 --------- ---------- -------- -------- -------- -------- Increase (decrease) in net assets from capital unit transactions............... 18,575 53,473 1,913 1,812 25,547 4,263 --------- ---------- -------- -------- -------- -------- Net increase (decrease) in net assets.......... (31,420) (74,006) 1,109 2,769 30,948 9,494 Depositor's equity contribution (net redemption)............................... 0 0 0 0 0 0 NET ASSETS: Beginning of year................................ 280,172 354,178 20,952 18,183 26,883 17,389 --------- ---------- -------- -------- -------- -------- End of year...................................... $ 248,752 $ 280,172 $ 22,061 $ 20,952 $ 57,831 $ 26,883 ========= ========== ======== ======== ======== ======== UNIT ACTIVITY: Units outstanding - beginning of year............ 9,215 7,928 1,303 1,186 1,349 1,117 Units issued..................................... 4,796 3,925 623 569 2,283 996 Units redeemed................................... (4,130) (2,638) (500) (452) (1,101) (764) --------- ---------- -------- -------- -------- -------- Units outstanding - end of year.................. 9,881 9,215 1,426 1,303 2,531 1,349 ========= ========== ======== ======== ======== ========
See accompanying notes. 20 WRL SERIES LIFE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED (ALL AMOUNTS IN THOUSANDS)
WRL WRL WRL TRANSAMERICA C.A.S.E. NWQ VALUE BALANCED GROWTH VALUE EQUITY SUBACCOUNT SUBACCOUNT SUBACCOUNT ------------------- -------------------- ------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, ------------------- -------------------- ------------------- 2001 2000 2001 2000 2001 2000 -------- -------- -------- --------- -------- -------- OPERATIONS: Net investment income (loss)..................... $ 217 $ 2,290 $ 2,131 $ 4,321 $ (234) $ 412 Net gain (loss) on investment securities......... 91 2,493 (9,755) (10,421) (693) 2,965 -------- -------- -------- --------- -------- -------- Net increase (decrease) in net assets resulting from operations................................ 308 4,783 (7,624) (6,100) (927) 3,377 -------- -------- -------- --------- -------- -------- CAPITAL UNIT TRANSACTIONS: Proceeds from units sold (transferred)........... 13,027 1,235 7,132 5,488 8,780 2,652 -------- -------- -------- --------- -------- -------- Less cost of units redeemed: Administrative charges......................... 3,491 3,204 2,835 2,868 2,649 2,467 Policy loans................................... 671 785 405 767 294 596 Surrender benefits............................. 1,257 1,058 734 885 882 660 Death benefits................................. 195 75 31 33 26 96 -------- -------- -------- --------- -------- -------- 5,614 5,122 4,005 4,553 3,851 3,819 -------- -------- -------- --------- -------- -------- Increase (decrease) in net assets from capital unit transactions............................ 7,413 (3,887) 3,127 935 4,929 (1,167) -------- -------- -------- --------- -------- -------- Net increase (decrease) in net assets.......... 7,721 896 (4,497) (5,165) 4,002 2,210 Depositor's equity contribution (net redemption).................................... 0 0 0 0 0 0 NET ASSETS: Beginning of year................................ 34,213 33,317 22,344 27,509 28,888 26,678 -------- -------- -------- --------- -------- -------- End of year...................................... $ 41,934 $ 34,213 $ 17,847 $ 22,344 $ 32,890 $ 28,888 ======== ======== ======== ========= ======== ======== UNIT ACTIVITY: Units outstanding - beginning of year............ 1,881 2,128 1,713 1,657 1,797 1,895 Units issued..................................... 1,125 729 1,204 1,014 1,040 907 Units redeemed................................... (736) (976) (954) (958) (734) (1,005) -------- -------- -------- --------- -------- -------- Units outstanding - end of year.................. 2,270 1,881 1,963 1,713 2,103 1,797 ======== ======== ======== ========= ======== ========
See accompanying notes. 21 WRL SERIES LIFE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED (ALL AMOUNTS IN THOUSANDS)
WRL WRL WRL GE THIRD AVENUE INTERNATIONAL EQUITY U.S. EQUITY VALUE SUBACCOUNT SUBACCOUNT SUBACCOUNT --------------------- ------------------- ------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, --------------------- ------------------- ------------------- 2001 2000 2001 2000 2001 2000 --------- --------- -------- -------- -------- -------- OPERATIONS: Net investment income (loss)..................... $ 192 $ 1,124 $ (215) $ 1,071 $ (202) $ 426 Net gain (loss) on investment securities......... (2,435) (2,405) (2,933) (1,646) 1,396 1,699 -------- -------- -------- -------- -------- -------- Net increase (decrease) in net assets resulting from operations................................ (2,243) (1,281) (3,148) (575) 1,194 2,125 -------- -------- -------- -------- -------- -------- CAPITAL UNIT TRANSACTIONS: Proceeds from units sold (transferred)........... 3,756 3,155 8,860 7,853 19,475 12,970 -------- -------- -------- -------- -------- -------- Less cost of units redeemed: Administrative charges......................... 1,003 663 3,049 2,712 2,064 560 Policy loans................................... 76 150 319 440 289 894 Surrender benefits............................. 189 125 998 744 698 306 Death benefits................................. 6 5 97 27 8 11 -------- -------- -------- -------- -------- -------- 1,274 943 4,463 3,923 3,059 1,771 -------- -------- -------- -------- -------- -------- Increase (decrease) in net assets from capital unit transactions............................ 2,482 2,212 4,397 3,930 16,416 11,199 -------- -------- -------- -------- -------- -------- Net increase (decrease) in net assets.......... 239 931 1,249 3,355 17,610 13,324 Depositor's equity contribution (net redemption).................................... 0 0 0 0 0 0 NET ASSETS: Beginning of year................................ 7,944 7,013 29,771 26,416 16,735 3,411 -------- -------- -------- -------- -------- -------- End of year...................................... $ 8,183 $ 7,944 $ 31,020 $ 29,771 $ 34,345 $ 16,735 ======== ======== ======== ======== ======== ======== UNIT ACTIVITY: Units outstanding - beginning of year............ 639 475 1,683 1,468 1,177 322 Units issued..................................... 647 474 1,000 1,064 2,223 1,432 Units redeemed................................... (418) (310) (741) (849) (1,104) (577) -------- -------- -------- -------- -------- -------- Units outstanding - end of year.................. 868 639 1,942 1,683 2,296 1,177 ======== ======== ======== ======== ======== ========
See accompanying notes. 22 WRL SERIES LIFE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED (ALL AMOUNTS IN THOUSANDS)
WRL J.P. MORGAN WRL WRL REAL ESTATE GOLDMAN SACHS MUNDER SECURITIES GROWTH NET50 SUBACCOUNT SUBACCOUNT SUBACCOUNT ----------------- ----------------- --------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, ----------------- ----------------- --------------- 2001 2000 2001 2000 2001 2000 ------- ------- ------- ------- ------- ----- OPERATIONS: Net investment income (loss)..................... $ 96 $ 17 $ (2) $ 7 $ (7) $ 11 Net gain (loss) on investment securities......... 308 345 (284) (156) (862) (27) ------- ------- ------- ------- ------- ----- Net increase (decrease) in net assets resulting from operations................................ 404 362 (286) (149) (869) (16) ------- ------- ------- ------- ------- ----- CAPITAL UNIT TRANSACTIONS: Proceeds from units sold (transferred)........... 5,874 2,080 2,717 1,002 3,046 622 ------- ------- ------- ------- ------- ----- Less cost of units redeemed: Administrative charges......................... 545 86 273 123 187 52 Policy loans................................... 179 60 4 44 17 7 Surrender benefits............................. 131 36 22 8 31 2 Death benefits................................. 0 0 9 0 0 0 ------- ------- ------- ------- ------- ----- 855 182 308 175 235 61 ------- ------- ------- ------- ------- ----- Increase (decrease) in net assets from capital unit transactions............................ 5,019 1,898 2,409 827 2,811 561 ------- ------- ------- ------- ------- ----- Net increase (decrease) in net assets.......... 5,423 2,260 2,123 678 1,942 545 Depositor's equity contribution (net redemption).................................... 0 (411) 0 (28) 0 (27) NET ASSETS: Beginning of year................................ 2,476 627 1,627 977 862 344 ------- ------- ------- ------- ------- ----- End of year...................................... $ 7,899 $ 2,476 $ 3,750 $ 1,627 $ 2,804 $ 862 ======= ======= ======= ======= ======= ===== UNIT ACTIVITY: Units outstanding - beginning of year............ 239 78 158 87 80 31 Units issued..................................... 945 816 552 161 453 80 Units redeemed................................... (491) (655) (282) (90) (182) (31) ------- ------- ------- ------- ------- ----- Units outstanding - end of year.................. 693 239 428 158 351 80 ======= ======= ======= ======= ======= =====
See accompanying notes. 23 WRL SERIES LIFE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED (ALL AMOUNTS IN THOUSANDS)
WRL WRL WRL T. ROWE PRICE T. ROWE PRICE SALOMON DIVIDEND GROWTH SMALL CAP ALL CAP SUBACCOUNT SUBACCOUNT SUBACCOUNT --------------- ----------------- ------------------ DECEMBER 31, DECEMBER 31, DECEMBER 31, --------------- ----------------- ------------------ 2001 2000 2001 2000 2001 2000 ------- ----- ------- ------- -------- ------- OPERATIONS: Net investment income (loss)..................... $ (19) $ (4) $ (35) $ 5 $ 189 $ 57 Net gain (loss) on investment securities......... (19) 87 (275) (412) (476) 161 ------- ----- ------- ------- -------- ------- Net increase (decrease) in net assets resulting from operations................................ (38) 83 (310) (407) (287) 218 ------- ----- ------- ------- -------- ------- CAPITAL UNIT TRANSACTIONS: Proceeds from units sold (transferred)........... 2,751 516 5,178 2,291 26,248 7,892 ------- ----- ------- ------- -------- ------- Less cost of units redeemed: Administrative charges......................... 224 83 462 167 2,370 257 Policy loans................................... 3 7 27 27 402 76 Surrender benefits............................. 51 2 113 15 646 58 Death benefits................................. 1 0 2 0 89 0 ------- ----- ------- ------- -------- ------- 279 92 604 209 3,507 391 ------- ----- ------- ------- -------- ------- Increase (decrease) in net assets from capital unit transactions............................ 2,472 424 4,574 2,082 22,741 7,501 ------- ----- ------- ------- -------- ------- Net increase (decrease) in net assets.......... 2,434 507 4,264 1,675 22,454 7,719 Depositor's equity contribution (net redemption).................................... 0 (23) 0 (32) 0 (30) NET ASSETS: Beginning of year................................ 985 501 2,568 925 8,072 383 ------- ----- ------- ------- -------- ------- End of year...................................... $ 3,419 $ 985 $ 6,832 $ 2,568 $ 30,526 $ 8,072 ======= ===== ======= ======= ======== ======= UNIT ACTIVITY: Units outstanding - beginning of year............ 99 55 230 75 643 36 Units issued..................................... 484 132 898 301 2,831 836 Units redeemed................................... (222) (88) (444) (146) (1,069) (229) ------- ----- ------- ------- -------- ------- Units outstanding - end of year.................. 361 99 684 230 2,405 643 ======= ===== ======= ======= ======== =======
See accompanying notes. 24 WRL SERIES LIFE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED (ALL AMOUNTS IN THOUSANDS)
WRL WRL WRL PILGRIM BAXTER DREYFUS VALUE LINE MID CAP GROWTH MID CAP AGGRESSIVE GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT --------------------- ----------------- ----------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, --------------------- ----------------- ----------------- 2001 2000 2001 2000 2001 2000(1) --------- --------- ------- ------- ------- ------- OPERATIONS: Net investment income (loss)..................... $ (288) $ 81 $ 17 $ 20 $ (9) $ (4) Net gain (loss) on investment securities......... (15,752) (16,860) (142) 40 (98) (185) --------- --------- ------- ------- ------- ------- Net increase (decrease) in net assets resulting from operations................................ (16,040) (16,779) (125) 60 (107) (189) --------- --------- ------- ------- ------- ------- CAPITAL UNIT TRANSACTIONS: Proceeds from units sold (transferred)........... 15,784 55,513 4,160 1,562 434 1,091 --------- --------- ------- ------- ------- ------- Less cost of units redeemed: Administrative charges......................... 5,547 2,546 404 96 66 19 Policy loans................................... 417 1,156 29 21 30 16 Surrender benefits............................. 530 323 85 4 5 0 Death benefits................................. 85 72 3 0 10 0 --------- --------- ------- ------- ------- ------- 6,579 4,097 521 121 111 35 --------- --------- ------- ------- ------- ------- Increase (decrease) in net assets from capital unit transactions............................ 9,205 51,416 3,639 1,441 323 1,056 --------- --------- ------- ------- ------- ------- Net increase (decrease) in net assets.......... (6,835) 34,637 3,514 1,501 216 867 Depositor's equity contribution (net redemption).................................... 0 0 0 (27) 0 200 NET ASSETS: Beginning of year................................ 39,702 5,065 1,811 337 1,067 0 --------- --------- ------- ------- ------- ------- End of year...................................... $ 32,867 $ 39,702 $ 5,325 $ 1,811 $ 1,283 $ 1,067 ========= ========= ======= ======= ======= ======= UNIT ACTIVITY: Units outstanding - beginning of year............ 2,929 317 159 33 119 0 Units issued..................................... 3,589 4,015 636 311 155 132 Units redeemed................................... (2,700) (1,403) (302) (185) (113) (13) --------- --------- ------- ------- ------- ------- Units outstanding - end of year.................. 3,818 2,929 493 159 161 119 ========= ========= ======= ======= ======= =======
See accompanying notes. 25 WRL SERIES LIFE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED (ALL AMOUNTS IN THOUSANDS)
WRL WRL WRL GREAT GREAT GREAT COMPANIES - COMPANIES - COMPANIES - AMERICA(SM) TECHNOLOGY(SM) GLOBAL(2) SUBACCOUNT SUBACCOUNT SUBACCOUNT ------------------ ------------------- ----------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, ------------------ ------------------- ----------------- 2001 2000(1) 2001 2000(1) 2001 2000(1) -------- ------- -------- -------- ------- ------- OPERATIONS: Net investment income (loss)..................... $ (65) $ (28) $ (34) $ (13) $ (11) $ (1) Net gain (loss) on investment securities......... (1,083) 715 (1,814) (1,437) (79) (16) -------- ------- -------- -------- ------- ----- Net increase (decrease) in net assets resulting from operations................................ (1,148) 687 (1,848) (1,450) (90) (17) -------- ------- -------- -------- ------- ----- CAPITAL UNIT TRANSACTIONS: Proceeds from units sold (transferred)........... 10,837 8,008 5,801 4,240 2,057 494 -------- ------- -------- -------- ------- ----- Less cost of units redeemed: Administrative charges......................... 1,180 177 508 80 176 7 Policy loans................................... 106 110 36 53 12 1 Surrender benefits............................. 151 117 43 69 35 0 Death benefits................................. 136 0 7 0 0 0 -------- ------- -------- -------- ------- ----- 1,573 404 594 202 223 8 -------- ------- -------- -------- ------- ----- Increase (decrease) in net assets from capital unit transactions............................ 9,264 7,604 5,207 4,038 1,834 486 -------- ------- -------- -------- ------- ----- Net increase (decrease) in net assets.......... 8,116 8,291 3,359 2,588 1,744 469 Depositor's equity contribution (net redemption).................................... 0 200 0 200 0 25 NET ASSETS: Beginning of year................................ 8,491 0 2,788 0 494 0 -------- ------- -------- -------- ------- ----- End of year...................................... $ 16,607 $ 8,491 $ 6,147 $ 2,788 $ 2,238 $ 494 ======== ======= ======== ======== ======= ===== UNIT ACTIVITY: Units outstanding - beginning of year............ 751 0 416 0 58 0 Units issued..................................... 1,591 878 1,793 557 434 63 Units redeemed................................... (655) (127) (741) (141) (173) (5) -------- ------- -------- -------- ------- ----- Units outstanding - end of year.................. 1,687 751 1,468 416 319 58 ======== ======= ======== ======== ======= =====
See accompanying notes. 26 WRL SERIES LIFE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED (ALL AMOUNTS IN THOUSANDS)
WRL WRL GABELLI LKCM GLOBAL GROWTH CAPITAL GROWTH SUBACCOUNT SUBACCOUNT ----------------- -------------- DECEMBER 31, DECEMBER 31, ----------------- -------------- 2001 2000(1) 2001(1) ------- ------- -------------- OPERATIONS: Net investment income (loss)..................... $ (34) $ (1) $ 0 Net gain (loss) on investment securities......... (399) (34) (7) ------- ------- ------- Net increase (decrease) in net assets resulting from operations................................ (433) (35) (7) ------- ------- ------- CAPITAL UNIT TRANSACTIONS: Proceeds from units sold (transferred)........... 8,042 1,014 1,164 ------- ------- ------- Less cost of units redeemed: Administrative charges......................... 837 33 21 Policy loans................................... 18 0 3 Surrender benefits............................. 66 0 1 Death benefits................................. 69 0 0 ------- ------- ------- 990 33 25 ------- ------- ------- Increase (decrease) in net assets from capital unit transactions............................ 7,052 981 1,139 ------- ------- ------- Net increase (decrease) in net assets.......... 6,619 946 1,132 Depositor's equity contribution (net redemption).................................... 0 25 25 NET ASSETS: Beginning of year................................ 971 0 0 ------- ------- ------- End of year...................................... $ 7,590 $ 971 $ 1,157 ======= ======= ======= UNIT ACTIVITY: Units outstanding - beginning of year............ 107 0 0 Units issued..................................... 1,191 123 211 Units redeemed................................... (359) (16) (31) ------- ------- ------- Units outstanding - end of year.................. 939 107 180 ======= ======= =======
See accompanying notes. 27 WRL SERIES LIFE ACCOUNT STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED (ALL AMOUNTS IN THOUSANDS)
FIDELITY VIP III GROWTH FIDELITY VIP II FIDELITY VIP OPPORTUNITIES CONTRAFUND(R) EQUITY-INCOME SUBACCOUNT SUBACCOUNT SUBACCOUNT ----------------- ----------------- ----------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, ----------------- ----------------- ----------------- 2001 2000(1) 2001 2000(1) 2001 2000(1) ------- ------- ------- ------- ------- ------- OPERATIONS: Net investment income (loss)..................... $ (6) $ (2) $ (9) $ (3) $ (8) $ (1) Net gain (loss) on investment securities......... (118) (73) (146) (48) (66) 17 ------- ------ ------- ------- ------- ------ Net increase (decrease) in net assets resulting from operations................................ (124) (75) (155) (51) (74) 16 ------- ------ ------- ------- ------- ------ CAPITAL UNIT TRANSACTIONS: Proceeds from units sold (transferred)........... 1,100 633 2,727 1,085 4,211 276 ------- ------ ------- ------- ------- ------ Less cost of units redeemed: Administrative charges......................... 117 14 249 23 225 8 Policy loans................................... 9 5 0 5 0 2 Surrender benefits............................. 15 2 18 1 31 0 Death benefits................................. 0 0 0 0 0 0 ------- ------ ------- ------- ------- ------ 141 21 267 29 256 10 ------- ------ ------- ------- ------- ------ Increase (decrease) in net assets from capital unit transactions............................ 959 612 2,460 1,056 3,955 266 ------- ------ ------- ------- ------- ------ Net increase (decrease) in net assets.......... 835 537 2,305 1,005 3,881 282 Depositor's equity contribution (net redemption).................................... 0 25 0 25 (27) 25 NET ASSETS: Beginning of year................................ 562 0 1,030 0 307 0 ------- ------ ------- ------- ------- ------ End of year...................................... $ 1,397 $ 562 $ 3,335 $ 1,030 $ 4,161 $ 307 ======= ====== ======= ======= ======= ====== UNIT ACTIVITY: Units outstanding - beginning of year............ 66 0 110 0 28 0 Units issued..................................... 242 76 504 124 571 39 Units redeemed................................... (115) (10) (204) (14) (196) (11) ------- ------ ------- ------- ------- ------ Units outstanding - end of year.................. 193 66 410 110 403 28 ======= ====== ======= ======= ======= ======
See accompanying notes. 28 WRL SERIES LIFE ACCOUNT NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 2001 NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The WRL Series Life Account (the "Life Account"), was established as a variable life insurance separate account of Western Reserve Life Assurance Co. of Ohio ("WRL", or the "depositor") and is registered as a unit investment trust under the Investment Company Act of 1940, as amended. The Life Account contains thirty-two investment options referred to as subaccounts. Each subaccount invests exclusively in a corresponding Portfolio (the "Portfolio") of a Series Fund, which collectively is referred to as the "Fund". The WRL Series Life Account contains four funds (collectively referred to as the "Funds"). Each fund is a registered management investment company under the Investment Company Act of 1940, as amended. SUBACCOUNT INVESTMENT BY FUND: - ------------------------------- AEGON/TRANSAMERICA SERIES FUND, INC. (FORMERLY WRL SERIES FUND, INC.) J.P. Morgan Money Market AEGON Bond Janus Growth Janus Global LKCM Strategic Total Return Van Kampen Emerging Growth Alger Aggressive Growth AEGON Balanced Federated Growth & Income Transamerica Value Balanced C.A.S.E. Growth NWQ Value Equity International Equity GE U.S. Equity Third Avenue Value J.P. Morgan Real Estate Securities Goldman Sachs Growth Munder Net50 T. Rowe Price Dividend Growth T. Rowe Price Small Cap Salomon All Cap Pilgrim Baxter Mid Cap Growth Dreyfus Mid Cap Value Line Aggressive Growth Great Companies - America(SM) Great Companies - Technology(SM) Great Companies - Global(2) Gabelli Global Growth LKCM Capital Growth VARIABLE INSURANCE PRODUCTS FUND III (VIP III) Fidelity VIP III Growth Opportunities Portfolio - Service Class 2 (Referred to as "Fidelity VIP III Growth Opportunities") VARIABLE INSURANCE PRODUCTS FUND II (VIP II) Fidelity VIP II Contrafund(R) Portfolio - Service Class 2 (Referred to as "Fidelity VIP II Contrafund(R)") VARIABLE INSURANCE PRODUCTS FUND (VIP) Fidelity VIP Equity-Income Portfolio - Service Class 2 (Referred to as "Fidelity VIP Equity-Income") The following portfolio names have changed:
PORTFOLIO FORMERLY - --------- -------- J.P. Morgan Money Market WRL J.P. Morgan Money Market AEGON Bond WRL AEGON Bond Janus Growth WRL Janus Growth Janus Global WRL Janus Global LKCM Strategic Total Return WRL LKCM Strategic Total Return Van Kampen Emerging Growth WRL VKAM Emerging Growth Alger Aggressive Growth WRL Alger Aggressive Growth AEGON Balanced WRL AEGON Balanced Federated Growth & Income WRL Federated Growth & Income Transamerica Value Balanced WRL Dean Asset Allocation C.A.S.E. Growth WRL C.A.S.E. Growth NWQ Value Equity WRL NWQ Value Equity International Equity WRL GE International Equity GE U.S. Equity WRL GE U.S. Equity Third Avenue Value WRL Third Avenue Value J.P. Morgan Real Estate WRL J.P. Morgan Real Estate Securities Securities Goldman Sachs Growth WRL Goldman Sachs Growth Munder Net50 WRL Goldman Sachs Small Cap T. Rowe Price Dividend WRL T. Rowe Price Dividend Growth Growth T. Rowe Price Small Cap WRL T. Rowe Price Small Cap Salomon All Cap WRL Salomon All Cap Pilgrim Baxter Mid Cap WRL Pilgrim Baxter Mid Cap Growth Growth Dreyfus Mid Cap WRL Dreyfus Mid Cap Value Line Aggressive Growth WRL Value Line Aggressive Growth
29 WRL SERIES LIFE ACCOUNT NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AT DECEMBER 31, 2001 NOTE 1 -- (CONTINUED)
PORTFOLIO FORMERLY - --------- -------- Great WRL Great Companies - Companies - America(SM) America(SM) Great Companies - WRL Great Companies - Technology(SM) Technology(SM) Great Companies - Global(2) WRL Great Companies - Global(2) Gabelli Global Growth WRL Gabelli Global Growth LKCM Capital Growth WRL LKCM Capital Growth
Effective May 1, 2001, Munder Capital Management replaced Goldman Sachs Asset Management as sub-adviser to the Munder Net50 portfolio. At a special shareholder meeting held on May 29, 2001, the investment restrictions, strategy and investment objective were also changed. See the Prospectus and the Statement of Additional Information for a description of the portfolio's investment objective. The AEGON/Transamerica Series Fund, Inc. has entered into annually renewable investment advisory agreements for each Portfolio with AEGON/Transamerica Fund Advisers, Inc. ("AEGON/Transamerica Advisers", formerly WRL Investment Management, Inc.) as investment adviser. Costs incurred in connection with the advisory services rendered by AEGON/ Transamerica Advisers are paid by each Portfolio. AEGON/ Transamerica Advisers has entered into sub-advisory agreements with various management companies ("Sub-Advisers"), some of which are affiliates of WRL. Each Sub-Adviser is compensated directly by AEGON/Transamerica Advisers. The other three Funds have entered into participation agreements for each Portfolio with WRL. Each period reported on reflects a full twelve month period except as follows:
SUBACCOUNT INCEPTION DATE - ---------- -------------- WRL International Equity 01/02/1997 WRL GE U.S. Equity 01/02/1997 WRL Third Avenue Value 01/02/1998 WRL J.P. Morgan Real Estate Securities 05/01/1998 WRL Goldman Sachs Growth 07/01/1999 WRL Munder Net50 07/01/1999 WRL T. Rowe Price Dividend Growth 07/01/1999 WRL T. Rowe Price Small Cap 07/01/1999 WRL Salomon All Cap 07/01/1999
SUBACCOUNT INCEPTION DATE - ---------- -------------- WRL Pilgrim Baxter Mid Cap Growth 07/01/1999 WRL Dreyfus Mid Cap 07/01/1999 WRL Value Line Aggressive Growth 05/01/2000 WRL Great Companies - America(SM) 05/01/2000 WRL Great Companies - Technology(SM) 05/01/2000 WRL Great Companies - Global(2) 09/01/2000 WRL Gabelli - Global Growth 09/01/2000 WRL LKCM Capital Growth 02/05/2001 Fidelity VIP III Growth Opportunities 05/01/2000 Fidelity VIP II Contrafund(R) 05/01/2000 Fidelity VIP Equity-Income 05/01/2000
Effective September 1, 2000, the WRL Janus Global Portfolio is not available for investment to new policyowners. The Portfolio remains open to the policyowners who purchased the Policy before September 1, 2000. On February 5, 2001, WRL made initial contributions totaling $25,000 to the Life Account. The respective amounts of the contributions and units received are as follows:
SUBACCOUNT CONTRIBUTION UNITS - ---------- ------------ ----- WRL LKCM Capital Growth $ 25,000 2,500
The Life Account holds assets to support the benefits under certain flexible premium variable universal life insurance policies (the "Policies") issued by WRL. The Life Account's equity transactions are accounted for using the appropriate effective date at the corresponding accumulation unit value. The following significant accounting policies, which are in conformity with accounting principles generally accepted in the United States, have been consistently applied in the preparation of the Life Account Financial Statements. The preparation of the Financial Statements required management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. A. VALUATION OF INVESTMENTS AND SECURITIES TRANSACTIONS Investments in the Funds' shares are valued at the closing net asset value ("NAV") per share of the underlying Portfolio which value their investment securities at fair value, as determined by the Funds. Investment transactions are accounted for on the trade date at the Portfolio NAV next determined after receipt of sale or redemption orders without sales charges. Dividend income and capital gains distributions are recorded on the ex-dividend date. 30 WRL SERIES LIFE ACCOUNT NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AT DECEMBER 31, 2001 NOTE 1 -- (CONTINUED) The cost of investments sold is determined on a first-in, first-out basis. B. FEDERAL INCOME TAXES The operations of the Life Account are a part of and are taxed with the total operations of WRL, which is taxed as a life insurance company under the Internal Revenue Code. Under the Internal Revenue Code law, the investment income of the Life Account, including realized and unrealized capital gains, is not taxable to WRL as long as the earnings are credited under the Policies. Accordingly, no provision for Federal income taxes has been made. NOTE 2 -- EXPENSES AND RELATED PARTY TRANSACTIONS Charges are assessed by WRL in connection with the issuance and administration of the Policies. A. POLICY CHARGES Under some forms of the Policies, a sales charge and premium taxes are deducted by WRL prior to allocation of policy owner payments to the subaccounts. Contingent surrender charges may also apply. Under all forms of the Policy, monthly charges against policy cash values are made to compensate WRL for costs of insurance provided. B. LIFE ACCOUNT CHARGES A daily charge equal to an annual rate of 0.90% of average daily net assets is assessed to compensate WRL for assumption of mortality and expense risks for administrative services in connection with issuance and administration of the Policies. This charge (not assessed at the individual contract level) effectively reduces the value of a unit outstanding during the year. C. RELATED PARTY TRANSACTIONS AEGON/Transamerica Advisers is the investment adviser for the AEGON/Transamerica Series Fund, Inc. ("Fund"). The Fund has entered into annually renewable investment advisory agreements for each Portfolio. The agreements provide for an advisory fee at the following annual rate to AEGON/ Transamerica Advisers as a percentage of the average daily net assets of the portfolio.
PORTFOLIO ADVISORY FEE - --------- ------------ J.P. Morgan Money Market 0.40 % AEGON Bond 0.45 % Janus Growth 0.80 % Janus Global 0.80 % LKCM Strategic Total Return 0.80 % Van Kampen Emerging Growth 0.80 % Alger Aggressive Growth 0.80 % AEGON Balanced 0.80 % Federated Growth & Income 0.75 % Transamerica Value Balanced 0.75 % C.A.S.E. Growth 0.80 % NWQ Value Equity 0.80 % International Equity 1.00 % GE U.S. Equity 0.80 % Third Avenue Value 0.80 % J.P. Morgan Real Estate Securities 0.80 % Goldman Sachs Growth(1) 0.90 % Munder Net50 0.90 % T. Rowe Price Dividend Growth(1) 0.90 % T. Rowe Price Small Cap 0.75 % Salomon All Cap(1) 0.90 % Pilgrim Baxter Mid Cap Growth(1) 0.90 % Dreyfus Mid Cap(2) 0.85 % Value Line Aggressive Growth 0.80 % Great Companies - America(SM) 0.80 % Great Companies - Technology(SM) 0.80 % Great Companies - Global(2) 0.80 % Gabelli Global Growth(3) 1.00 % LKCM Capital Growth 0.80 %
- --------------- (1)AEGON/Transamerica Advisers receives compensation for its services at 0.90 % for the first $ 100 million of the portfolio's average daily net assets; and 0.80 % for the portfolio's average daily net assets above $ 100 million. (2)AEGON/Transamerica Advisers receives compensation for its services at 0.85 % for the first $ 100 million of the portfolio's average daily net assets; and 0.80 % for the portfolio's average daily net assets above $ 100 million. (3)AEGON/Transamerica Advisers receives compensation for its services at 1.00% of the first $500 million of the portfolio's average daily net assets; 0.90% of assets over $500 million up to $1 billion; and 0.80% of assets in excess of $1 billion. On August 24, 2001, AEGON/Transamerica Advisers entered into a interim sub-advisory agreement with Transamerica Investment Management, LLC ("Transamerica") to provide investment services to the Transamerica Value Balanced portfolio and compensate Transamerica as described in the Fund's Statement of Additional Information. In a Special Meeting held on December 14, 2001, shareholders approved a new sub-advisory agreement between AEGON/Transamerica Advisers and 31 WRL SERIES LIFE ACCOUNT NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AT DECEMBER 31, 2001 NOTE 2 -- (CONTINUED) Transamerica. Transamerica is an indirect wholly owned subsidiary of AEGON NV. AEGON/Transamerica Fund Services, Inc. ("AEGON/ Transamerica Services" formerly WRL Investment Services, Inc.) provides the Fund with administrative and transfer agency services. AEGON/Transamerica Advisers and AEGON/ Transamerica Services are wholly owned subsidiaries of WRL. WRL is an indirect wholly owned subsidiary of AEGON NV, a Netherlands corporation. NOTE 3 -- DIVIDEND DISTRIBUTIONS Dividends are not declared by the Life Account, since the increase in the value of the underlying investment in the Fund is reflected daily in the accumulation unit value used to calculate the equity value within the Life Account. Consequently, a dividend distribution by the underlying Fund does not change either the accumulation unit value or equity values within the Life Account. NOTE 4 -- SECURITIES TRANSACTIONS Securities transactions for the year ended December 31, 2001 are as follows (in thousands):
PURCHASES PROCEEDS OF FROM SALES SUBACCOUNT SECURITIES OF SECURITIES - ---------- ---------- ------------- WRL J.P. Morgan Money Market $ 374,839 $ 352,829 WRL AEGON Bond 22,544 5,318 WRL Janus Growth 166,541 126,357 WRL Janus Global 26,507 25,272 WRL LKCM Strategic Total Return 6,424 6,426 WRL Van Kampen Emerging Growth 239,931 230,309
PURCHASES PROCEEDS OF FROM SALES SUBACCOUNT SECURITIES OF SECURITIES - ---------- ---------- ------------- WRL Alger Aggressive Growth $ 49,314 $ 32,985 WRL AEGON Balanced 4,051 2,265 WRL Federated Growth & Income 29,454 3,704 WRL Transamerica Value Balanced 10,813 3,312 WRL C.A.S.E. Growth 8,667 3,370 WRL NWQ Value Equity 7,942 3,233 WRL International Equity 4,005 1,496 WRL GE U.S. Equity 7,537 3,107 WRL Third Avenue Value 20,105 3,678 WRL J.P. Morgan Real Estate Securities 7,355 2,262 WRL Goldman Sachs Growth 3,841 1,418 WRL Munder Net50 3,654 831 WRL T. Rowe Price Dividend Growth 3,642 1,183 WRL T. Rowe Price Small Cap 6,562 2,025 WRL Salomon All Cap 25,028 2,176 WRL Pilgrim Baxter Mid Cap Growth 16,772 7,780 WRL Dreyfus Mid Cap 4,949 1,296 WRL Value Line Aggressive Growth 866 554 WRL Great Companies - America(SM) 11,085 1,905 WRL Great Companies - Technology(SM) 6,460 1,295 WRL Great Companies - Global(2) 2,341 523 WRL Gabelli Global Growth 7,348 372 WRL LKCM Capital Growth 1,325 163 Fidelity VIP III Growth Opportunities 1,431 487 Fidelity VIP II Contrafund(R) 3,186 705 Fidelity VIP Equity-Income 4,895 963
32 WRL SERIES LIFE ACCOUNT NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AT DECEMBER 31, 2001 NOTE 5 -- FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED
WRL J.P. MORGAN MONEY MARKET SUBACCOUNT ----------------------------------------------------- DECEMBER 31, ----------------------------------------------------- 2001 2000 1999 1998 1997 --------- -------- -------- -------- -------- Accumulation unit value, beginning of year.................. $ 18.39 $ 17.49 $ 16.83 $ 16.13 $ 15.45 --------- -------- -------- -------- -------- Income from operations: Net investment income (loss)............................ 0.56 0.90 0.66 0.70 0.68 Net realized and unrealized gain (loss) on investment... 0.00 0.00 0.00 0.00 0.00 --------- -------- -------- -------- -------- Net income (loss) from operations..................... 0.56 0.90 0.66 0.70 0.68 --------- -------- -------- -------- -------- Accumulation unit value, end of year........................ $ 18.95 $ 18.39 $ 17.49 $ 16.83 $ 16.13 ========= ======== ======== ======== ======== Total return................................................ 3.05 % 5.17 % 3.92 % 4.36 % 4.37 % Ratios and supplemental data: Net assets at end of year (in thousands).................. $ 82,417 $ 60,279 $ 56,070 $ 24,576 $ 16,440 Ratio of net investment income (loss) to average net assets.................................................. 2.80 % 5.05 % 3.87 % 4.24 % 4.28 % Ratio of expenses to average net assets................... 0.90 % 0.90 % 0.90 % 0.90 % 0.90 %
WRL AEGON BOND SUBACCOUNT ----------------------------------------------------- DECEMBER 31, ----------------------------------------------------- 2001 2000 1999 1998 1997 --------- -------- -------- -------- -------- Accumulation unit value, beginning of year.................. $ 24.19 $ 22.01 $ 22.89 $ 21.12 $ 19.53 --------- -------- -------- -------- -------- Income from operations: Net investment income (loss)............................ (0.06) 1.04 1.13 1.01 1.01 Net realized and unrealized gain (loss) on investment... 1.78 1.14 (2.01) 0.76 0.58 --------- -------- -------- -------- -------- Net income (loss) from operations..................... 1.72 2.18 (0.88) 1.77 1.59 --------- -------- -------- -------- -------- Accumulation unit value, end of year........................ $ 25.91 $ 24.19 $ 22.01 $ 22.89 $ 21.12 ========= ======== ======== ======== ======== Total return................................................ 7.11 % 9.90 % (3.81)% 8.34 % 8.18 % Ratios and supplemental data: Net assets at end of year (in thousands).................. $ 44,709 $ 25,935 $ 27,129 $ 24,934 $ 17,657 Ratio of net investment income (loss) to average net assets.................................................. (0.24)% 4.58 % 5.10 % 4.58 % 5.06 % Ratio of expenses to average net assets................... 0.90 % 0.90 % 0.90 % 0.90 % 0.90 %
33 WRL SERIES LIFE ACCOUNT NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AT DECEMBER 31, 2001 NOTE 5 -- FINANCIAL HIGHLIGHTS (CONTINUED) FOR THE YEAR ENDED
WRL JANUS GROWTH SUBACCOUNT ------------------------------------------------------------- DECEMBER 31, ------------------------------------------------------------- 2001 2000 1999 1998 1997 ---------- ---------- ----------- --------- --------- Accumulation unit value, beginning of year............. $ 102.61 $ 145.70 $ 92.07 $ 56.48 $ 48.48 ---------- ---------- ----------- --------- --------- Income from operations: Net investment income (loss)....................... (0.73) 16.41 25.03 0.13 5.83 Net realized and unrealized gain (loss) on investment....................................... (28.87) (59.50) 28.60 35.46 2.17 ---------- ---------- ----------- --------- --------- Net income (loss) from operations................ (29.60) (43.09) 53.63 35.59 8.00 ---------- ---------- ----------- --------- --------- Accumulation unit value, end of year................... $ 73.01 $ 102.61 $ 145.70 $ 92.07 $ 56.48 ========== ========== =========== ========= ========= Total return........................................... (28.85)% (29.58)% 58.25 % 63.01 % 16.50 % Ratios and supplemental data: Net assets at end of year (in thousands)............. $ 699,663 $ 961,015 $ 1,353,957 $ 798,027 $ 450,271 Ratio of net investment income (loss) to average net assets............................................. (0.90)% 11.75 % 22.67 % 0.19 % 10.84 % Ratio of expenses to average net assets.............. 0.90 % 0.90 % 0.90 % 0.90 % 0.90 %
WRL JANUS GLOBAL SUBACCOUNT ------------------------------------------------------------- DECEMBER 31, ------------------------------------------------------------- 2001 2000 1999 1998 1997 ---------- ---------- ----------- --------- --------- Accumulation unit value, beginning of year............. $ 31.79 $ 38.91 $ 22.94 $ 17.80 $ 15.13 ---------- ---------- ----------- --------- --------- Income from operations: Net investment income (loss)....................... 0.00 7.93 2.44 0.82 2.30 Net realized and unrealized gain (loss) on investment....................................... (7.48) (15.05) 13.53 4.32 0.37 ---------- ---------- ----------- --------- --------- Net income (loss) from operations................ (7.48) (7.12) 15.97 5.14 2.67 ---------- ---------- ----------- --------- --------- Accumulation unit value, end of year................... $ 24.31 $ 31.79 $ 38.91 $ 22.94 $ 17.80 ========== ========== =========== ========= ========= Total return........................................... (23.53)% (18.28)% 69.58 % 28.86 % 17.69 % Ratios and supplemental data: Net assets at end of year (in thousands)............. $ 313,912 $ 410,109 $ 451,498 $ 233,256 $ 145,017 Ratio of net investment income (loss) to average net assets............................................. 0.01 % 20.55 % 9.07 % 3.92 % 13.39 % Ratio of expenses to average net assets.............. 0.90 % 0.90 % 0.90 % 0.90 % 0.90 %
34 WRL SERIES LIFE ACCOUNT NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AT DECEMBER 31, 2001 NOTE 5 -- FINANCIAL HIGHLIGHTS (CONTINUED) FOR THE YEAR ENDED
WRL LKCM STRATEGIC TOTAL RETURN SUBACCOUNT ------------------------------------------------------------ DECEMBER 31, ------------------------------------------------------------ 2001 2000 1999 1998 1997 ---------- ---------- ---------- --------- --------- Accumulation unit value, beginning of year............. $ 21.77 $ 22.82 $ 20.55 $ 18.91 $ 15.66 ---------- ---------- ---------- --------- --------- Income from operations: Net investment income (loss)....................... (0.09) 1.63 1.68 0.71 1.56 Net realized and unrealized gain (loss) on investment....................................... (0.58) (2.68) 0.59 0.93 1.69 ---------- ---------- ---------- --------- --------- Net income (loss) from operations................ (0.67) (1.05) 2.27 1.64 3.25 ---------- ---------- ---------- --------- --------- Accumulation unit value, end of year................... $ 21.10 $ 21.77 $ 22.82 $ 20.55 $ 18.91 ========== ========== ========== ========= ========= Total return........................................... (3.06)% (4.62)% 11.07 % 8.66 % 20.77 % Ratios and supplemental data: Net assets at end of year (in thousands)............. $ 95,331 $ 98,466 $ 106,665 $ 98,926 $ 80,753 Ratio of net investment income (loss) to average net assets............................................. (0.44)% 7.43 % 7.93 % 3.67 % 8.89 % Ratio of expenses to average net assets.............. 0.90 % 0.90 % 0.90 % 0.90 % 0.90 %
WRL VAN KAMPEN EMERGING GROWTH SUBACCOUNT ------------------------------------------------------------ DECEMBER 31, ------------------------------------------------------------ 2001 2000 1999 1998 1997 ---------- ---------- ---------- --------- --------- Accumulation unit value, beginning of year............. $ 56.74 $ 64.99 $ 31.96 $ 23.48 $ 19.51 ---------- ---------- ---------- --------- --------- Income from operations: Net investment income (loss)....................... (0.35) 16.83 9.32 0.91 2.20 Net realized and unrealized gain (loss) on investment....................................... (18.85) (25.08) 23.71 7.57 1.77 ---------- ---------- ---------- --------- --------- Net income (loss) from operations................ (19.20) (8.25) 33.03 8.48 3.97 ---------- ---------- ---------- --------- --------- Accumulation unit value, end of year................... $ 37.54 $ 56.74 $ 64.99 $ 31.96 $ 23.48 ========== ========== ========== ========= ========= Total return........................................... (33.83)% (12.70)% 103.33 % 36.11 % 20.37 % Ratios and supplemental data: Net assets at end of year (in thousands)............. $ 386,903 $ 580,202 $ 608,130 $ 262,665 $ 164,702 Ratio of net investment income (loss) to average net assets............................................. (0.82)% 23.62 % 23.19 % 3.44 % 10.18 % Ratio of expenses to average net assets.............. 0.90 % 0.90 % 0.90 % 0.90 % 0.90 %
35 WRL SERIES LIFE ACCOUNT NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AT DECEMBER 31, 2001 NOTE 5 -- FINANCIAL HIGHLIGHTS (CONTINUED) FOR THE YEAR ENDED
WRL ALGER AGGRESSIVE GROWTH SUBACCOUNT ---------------------------------------------------------------- DECEMBER 31, ---------------------------------------------------------------- 2001 2000 1999 1998 1997 ----------- ----------- ---------- ---------- ---------- Accumulation unit value, beginning of year......... $ 30.40 $ 44.67 $ 26.67 $ 18.10 $ 14.70 ----------- ----------- ---------- ---------- ---------- Income from operations: Net investment income (loss)................... (0.23) 4.76 4.90 1.33 1.75 Net realized and unrealized gain (loss) on investment................................... (5.00) (19.03) 13.10 7.24 1.65 ----------- ----------- ---------- ---------- ---------- Net income (loss) from operations............ (5.23) (14.27) 18.00 8.57 3.40 ----------- ----------- ---------- ---------- ---------- Accumulation unit value, end of year............... $ 25.17 $ 30.40 $ 44.67 $ 26.67 $ 18.10 =========== =========== ========== ========== ========== Total return....................................... (17.20)% (31.94)% 67.52 % 47.36 % 23.14 % Ratios and supplemental data: Net assets at end of year (in thousands)......... $ 248,752 $ 280,172 $ 354,178 $ 177,857 $ 94,652 Ratio of net investment income (loss) to average net assets..................................... (0.90)% 11.65 % 15.54 % 6.20 % 10.26 % Ratio of expenses to average net assets.......... 0.90 % 0.90 % 0.90 % 0.90 % 0.90 %
WRL AEGON BALANCED SUBACCOUNT ---------------------------------------------------------------- DECEMBER 31, ---------------------------------------------------------------- 2001 2000 1999 1998 1997 ----------- ----------- ---------- ---------- ---------- Accumulation unit value, beginning of year......... $ 16.08 $ 15.33 $ 15.02 $ 14.17 $ 12.21 ----------- ----------- ---------- ---------- ---------- Income from operations: Net investment income (loss)................... (0.07) 0.17 0.19 0.25 1.55 Net realized and unrealized gain (loss) on investment................................... (0.54) 0.58 0.12 0.60 0.41 ----------- ----------- ---------- ---------- ---------- Net income (loss) from operations............ (0.61) 0.75 0.31 0.85 1.96 ----------- ----------- ---------- ---------- ---------- Accumulation unit value, end of year............... $ 15.47 $ 16.08 $ 15.33 $ 15.02 $ 14.17 =========== =========== ========== ========== ========== Total return....................................... (3.80)% 4.88 % 2.11 % 5.98 % 16.06 % Ratios and supplemental data: Net assets at end of year (in thousands)......... $ 22,061 $ 20,952 $ 18,183 $ 14,864 $ 10,716 Ratio of net investment income (loss) to average net assets..................................... (0.46)% 1.10 % 1.26 % 1.76 % 11.62 % Ratio of expenses to average net assets.......... 0.90 % 0.90 % 0.90 % 0.90 % 0.90 %
36 WRL SERIES LIFE ACCOUNT NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AT DECEMBER 31, 2001 NOTE 5 -- FINANCIAL HIGHLIGHTS (CONTINUED) FOR THE YEAR ENDED
WRL FEDERATED GROWTH & INCOME SUBACCOUNT -------------------------------------------------------- DECEMBER 31, -------------------------------------------------------- 2001 2000 1999 1998 1997 --------- --------- --------- -------- --------- Accumulation unit value, beginning of year.................. $ 19.93 $ 15.57 $ 16.44 $ 16.09 $ 13.03 --------- --------- --------- -------- --------- Income from operations: Net investment income (loss)............................ 0.21 0.85 1.05 0.77 2.61 Net realized and unrealized gain (loss) on investment... 2.71 3.51 (1.92) (0.42) 0.45 --------- --------- --------- -------- --------- Net income (loss) from operations..................... 2.92 4.36 (0.87) 0.35 3.06 --------- --------- --------- -------- --------- Accumulation unit value, end of year........................ $ 22.85 $ 19.93 $ 15.57 $ 16.44 $ 16.09 ========= ========= ========= ======== ========= Total return................................................ 14.67 % 28.01 % (5.31)% 2.13 % 23.54 % Ratios and supplemental data: Net assets at end of year (in thousands).................. $ 57,831 $ 26,883 $ 17,389 $ 16,047 $ 9,063 Ratio of net investment income (loss) to average net assets.................................................. 0.95 % 5.00 % 6.51 % 4.83 % 18.50 % Ratio of expenses to average net assets................... 0.90 % 0.90 % 0.90 % 0.90 % 0.90 %
WRL TRANSAMERICA VALUE BALANCED SUBACCOUNT -------------------------------------------------------- DECEMBER 31, -------------------------------------------------------- 2001 2000 1999 1998 1997 --------- --------- --------- -------- --------- Accumulation unit value, beginning of year.................. $ 18.19 $ 15.66 $ 16.74 $ 15.60 $ 13.50 --------- --------- --------- -------- --------- Income from operations: Net investment income (loss)............................ 0.10 1.20 0.41 1.58 1.20 Net realized and unrealized gain (loss) on investment... 0.18 1.33 (1.49) (0.44) 0.90 --------- --------- --------- -------- --------- Net income (loss) from operations..................... 0.28 2.53 (1.08) 1.14 2.10 --------- --------- --------- -------- --------- Accumulation unit value, end of year........................ $ 18.47 $ 18.19 $ 15.66 $ 16.74 $ 15.60 ========= ========= ========= ======== ========= Total return................................................ 1.54 % 16.16 % (6.48)% 7.36 % 15.55 % Ratios and supplemental data: Net assets at end of year (in thousands).................. $ 41,934 $ 34,213 $ 33,317 $ 39,904 $ 29,123 Ratio of net investment income (loss) to average net assets.................................................. 0.55 % 7.33 % 2.50 % 9.69 % 8.14 % Ratio of expenses to average net assets................... 0.90 % 0.90 % 0.90 % 0.90 % 0.90 %
37 WRL SERIES LIFE ACCOUNT NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AT DECEMBER 31, 2001 NOTE 5 -- FINANCIAL HIGHLIGHTS (CONTINUED) FOR THE YEAR ENDED
WRL C.A.S.E. GROWTH SUBACCOUNT ----------------------------------------------------------- DECEMBER 31, ----------------------------------------------------------- 2001 2000 1999 1998 1997 ---------- ---------- --------- --------- --------- Accumulation unit value, beginning of year............ $ 13.04 $ 16.60 $ 12.51 $ 12.32 $ 10.81 ---------- ---------- --------- --------- --------- Income from operations: Net investment income (loss)...................... 1.14 2.56 1.52 1.24 1.51 Net realized and unrealized gain (loss) on investment...................................... (5.09) (6.12) 2.57 (1.05) 0.00 ---------- ---------- --------- --------- --------- Net income (loss) from operations............... (3.95) (3.56) 4.09 0.19 1.51 ---------- ---------- --------- --------- --------- Accumulation unit value, end of year.................. $ 9.09 $ 13.04 $ 16.60 $ 12.51 $ 12.32 ========== ========== ========= ========= ========= Total return.......................................... (30.31)% (21.42)% 32.65 % 1.56 % 14.00 % Ratios and supplemental data: Net assets at end of year (in thousands)............ $ 17,847 $ 22,344 $ 27,509 $ 17,730 $ 11,946 Ratio of net investment income (loss) to average net assets............................................ 9.90 % 16.28 % 10.16 % 10.21 % 12.65 % Ratio of expenses to average net assets............. 0.90 % 0.90 % 0.90 % 0.90 % 0.90 %
WRL NWQ VALUE EQUITY SUBACCOUNT ----------------------------------------------------------- DECEMBER 31, ----------------------------------------------------------- 2001 2000 1999 1998 1997 ---------- ---------- --------- --------- --------- Accumulation unit value, beginning of year............ $ 16.07 $ 14.08 $ 13.16 $ 13.94 $ 11.25 ---------- ---------- --------- --------- --------- Income from operations: Net investment income (loss)...................... (0.12) 0.23 0.20 0.95 0.14 Net realized and unrealized gain (loss) on investment...................................... (0.31) 1.76 0.72 (1.73) 2.55 ---------- ---------- --------- --------- --------- Net income (loss) from operations............... (0.43) 1.99 0.92 (0.78) 2.69 ---------- ---------- --------- --------- --------- Accumulation unit value, end of year.................. $ 15.64 $ 16.07 $ 14.08 $ 13.16 $ 13.94 ========== ========== ========= ========= ========= Total return.......................................... (2.68)% 14.17 % 6.98 % (5.63)% 23.93 % Ratios and supplemental data: Net assets at end of year (in thousands)............ $ 32,890 $ 28,888 $ 26,678 $ 26,083 $ 26,714 Ratio of net investment income (loss) to average net assets............................................ (0.75)% 1.58 % 1.42 % 6.84 % 1.05 % Ratio of expenses to average net assets............. 0.90 % 0.90 % 0.90 % 0.90 % 0.90 %
38 WRL SERIES LIFE ACCOUNT NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AT DECEMBER 31, 2001 NOTE 5 -- FINANCIAL HIGHLIGHTS (CONTINUED) FOR THE YEAR ENDED
WRL INTERNATIONAL EQUITY SUBACCOUNT ----------------------------------------------------------- DECEMBER 31, ----------------------------------------------------------- 2001 2000 1999 1998 1997(1) ---------- ---------- --------- --------- --------- Accumulation unit value, beginning of year............ $ 12.43 $ 14.76 $ 11.92 $ 10.65 $ 10.00 ---------- ---------- --------- --------- --------- Income from operations: Net investment income (loss)...................... 0.25 2.00 0.62 (0.09) (0.03) Net realized and unrealized gain (loss) on investment...................................... (3.25) (4.33) 2.22 1.36 0.68 ---------- ---------- --------- --------- --------- Net income (loss) from operations............... (3.00) (2.33) 2.84 1.27 0.65 ---------- ---------- --------- --------- --------- Accumulation unit value, end of year.................. $ 9.43 $ 12.43 $ 14.76 $ 11.92 $ 10.65 ========== ========== ========= ========= ========= Total return.......................................... (24.12)% (15.75)% 23.84 % 11.84 % 6.54 % Ratios and supplemental data: Net assets at end of year (in thousands)............ $ 8,183 $ 7,944 $ 7,013 $ 5,827 $ 2,289 Ratio of net investment income (loss) to average net assets............................................ 2.40 % 15.54 % 5.09 % (0.81)% (0.28)% Ratio of expenses to average net assets............. 0.90 % 0.90 % 0.90 % 0.90 % 0.90 %
WRL GE U.S. EQUITY SUBACCOUNT ----------------------------------------------------------- DECEMBER 31, ----------------------------------------------------------- 2001 2000 1999 1998 1997(1) ---------- ---------- --------- --------- --------- Accumulation unit value, beginning of year............ $ 17.69 $ 17.99 $ 15.33 $ 12.59 $ 10.00 ---------- ---------- --------- --------- --------- Income from operations: Net investment income (loss)...................... (0.12) 0.68 1.38 0.73 0.99 Net realized and unrealized gain (loss) on investment...................................... (1.60) (0.98) 1.28 2.01 1.60 ---------- ---------- --------- --------- --------- Net income (loss) from operations............... (1.72) (0.30) 2.66 2.74 2.59 ---------- ---------- --------- --------- --------- Accumulation unit value, end of year.................. $ 15.97 $ 17.69 $ 17.99 $ 15.33 $ 12.59 ========== ========== ========= ========= ========= Total return.......................................... (9.69)% (1.67)% 17.35 % 21.78 % 25.89 % Ratios and supplemental data: Net assets at end of year (in thousands)............ $ 31,020 $ 29,771 $ 26,416 $ 14,084 $ 3,258 Ratio of net investment income (loss) to average net assets............................................ (0.72)% 3.81 % 8.27 % 5.30 % 8.28 % Ratio of expenses to average net assets............. 0.90 % 0.90 % 0.90 % 0.90 % 0.90 %
39 WRL SERIES LIFE ACCOUNT NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AT DECEMBER 31, 2001 NOTE 5 -- FINANCIAL HIGHLIGHTS (CONTINUED) FOR THE YEAR ENDED
WRL THIRD AVENUE VALUE SUBACCOUNT ---------------------------------------------- DECEMBER 31, ---------------------------------------------- 2001 2000 1999 1998(1) --------- --------- --------- ---------- Accumulation unit value, beginning of year.................. $ 14.22 $ 10.59 $ 9.23 $ 10.00 --------- --------- --------- ---------- Income from operations: Net investment income (loss)............................ (0.11) 0.60 0.19 (0.05) Net realized and unrealized gain (loss) on investment......................................... 0.85 3.03 1.17 (0.72) --------- --------- --------- ---------- Net income (loss) from operations..................... 0.74 3.63 1.36 (0.77) --------- --------- --------- ---------- Accumulation unit value, end of year........................ $ 14.96 $ 14.22 $ 10.59 $ 9.23 ========= ========= ========= ========== Total return................................................ 5.22 % 34.26 % 14.68 % (7.67)% Ratios and supplemental data: Net assets at end of year (in thousands).................. $ 34,345 $ 16,735 $ 3,411 $ 2,807 Ratio of net investment income (loss) to average net assets...................................... (0.78)% 4.53 % 1.98 % (0.52)% Ratio of expenses to average net assets................... 0.90 % 0.90 % 0.90 % 0.90 %
WRL J.P. MORGAN REAL ESTATE SECURITIES SUBACCOUNT ---------------------------------------------- DECEMBER 31, ---------------------------------------------- 2001 2000 1999 1998(1) --------- --------- --------- ---------- Accumulation unit value, beginning of year.................. $ 10.36 $ 8.06 $ 8.46 $ 10.00 --------- --------- --------- ---------- Income from operations: Net investment income (loss)............................ 0.21 0.10 0.07 (0.05) Net realized and unrealized gain (loss) on investment......................................... 0.83 2.20 (0.47) (1.49) --------- --------- --------- ---------- Net income (loss) from operations..................... 1.04 2.30 (0.40) (1.54) --------- --------- --------- ---------- Accumulation unit value, end of year........................ $ 11.40 $ 10.36 $ 8.06 $ 8.46 ========= ========= ========= ========== Total return................................................ 10.06 % 28.46 % (4.63)% (15.44)% Ratios and supplemental data: Net assets at end of year (in thousands).................. $ 7,899 $ 2,476 $ 627 $ 709 Ratio of net investment income (loss) to average net assets...................................... 1.92 % 1.07 % 0.95 % (0.90)% Ratio of expenses to average net assets................... 0.90 % 0.90 % 0.90 % 0.90 %
40 WRL SERIES LIFE ACCOUNT NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AT DECEMBER 31, 2001 NOTE 5 -- FINANCIAL HIGHLIGHTS (CONTINUED) FOR THE YEAR ENDED
WRL GOLDMAN SACHS GROWTH SUBACCOUNT ---------------------------------- DECEMBER 31, ---------------------------------- 2001 2000 1999(1) ---------- --------- --------- Accumulation unit value, beginning of year.................. $ 10.29 $ 11.29 $ 10.00 ---------- --------- --------- Income from operations: Net investment income (loss)............................ (0.01) 0.06 (0.05) Net realized and unrealized gain (loss) on investment......................................... (1.52) (1.06) 1.34 ---------- --------- --------- Net income (loss) from operations..................... (1.53) (1.00) 1.29 ---------- --------- --------- Accumulation unit value, end of year........................ $ 8.76 $ 10.29 $ 11.29 ========== ========= ========= Total return................................................ (14.86)% (8.84)% 12.91 % Ratios and supplemental data: Net assets at end of year (in thousands).................. $ 3,750 $ 1,627 $ 977 Ratio of net investment income (loss) to average net assets...................................... (0.08)% 0.59 % (0.90)% Ratio of expenses to average net assets................... 0.90 % 0.90 % 0.90 %
WRL MUNDER NET50 SUBACCOUNT ---------------------------------- DECEMBER 31, ---------------------------------- 2001 2000 1999(1) ---------- --------- --------- Accumulation unit value, beginning of year.................. $ 10.80 $ 10.92 $ 10.00 ---------- --------- --------- Income from operations: Net investment income (loss)............................ (0.03) 0.22 0.76 Net realized and unrealized gain (loss) on investment......................................... (2.79) (0.34) 0.16 ---------- --------- --------- Net income (loss) from operations..................... (2.82) (0.12) 0.92 ---------- --------- --------- Accumulation unit value, end of year........................ $ 7.98 $ 10.80 $ 10.92 ========== ========= ========= Total return................................................ (26.09)% (1.15)% 9.23 % Ratios and supplemental data: Net assets at end of year (in thousands).................. $ 2,804 $ 862 $ 344 Ratio of net investment income (loss) to average net assets...................................... (0.29)% 2.00 % 15.66 % Ratio of expenses to average net assets................... 0.90 % 0.90 % 0.90 %
41 WRL SERIES LIFE ACCOUNT NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AT DECEMBER 31, 2001 NOTE 5 -- FINANCIAL HIGHLIGHTS (CONTINUED) FOR THE YEAR ENDED
WRL T. ROWE PRICE DIVIDEND GROWTH SUBACCOUNT ---------------------------------- DECEMBER 31, ---------------------------------- 2001 2000 1999(1) ---------- --------- --------- Accumulation unit value, beginning of year.................. $ 9.98 $ 9.16 $ 10.00 ---------- --------- --------- Income from operations: Net investment income (loss)............................ (0.08) (0.04) (0.04) Net realized and unrealized gain (loss) on investment... (0.42) 0.86 (0.80) ---------- --------- --------- Net income (loss) from operations..................... (0.50) 0.82 (0.84) ---------- --------- --------- Accumulation unit value, end of year........................ $ 9.48 $ 9.98 $ 9.16 ========== ========= ========= Total return................................................ (5.02)% 8.89 % (8.37)% Ratios and supplemental data: Net assets at end of year (in thousands).................. $ 3,419 $ 985 $ 501 Ratio of net investment income (loss) to average net assets.................................................. (0.90)% (0.42)% (0.90)% Ratio of expenses to average net assets................... 0.90 % 0.90 % 0.90 %
WRL T. ROWE PRICE SMALL CAP SUBACCOUNT ---------------------------------- DECEMBER 31, ---------------------------------- 2001 2000 1999(1) ---------- --------- --------- Accumulation unit value, beginning of year.................. $ 11.17 $ 12.31 $ 10.00 ---------- --------- --------- Income from operations: Net investment income (loss)............................ (0.09) 0.04 0.41 Net realized and unrealized gain (loss) on investment... (1.09) (1.18) 1.90 ---------- --------- --------- Net income (loss) from operations..................... (1.18) (1.14) 2.31 ---------- --------- --------- Accumulation unit value, end of year........................ $ 9.99 $ 11.17 $ 12.31 ========== ========= ========= Total return................................................ (10.52)% (9.27)% 23.09 % Ratios and supplemental data: Net assets at end of year (in thousands).................. $ 6,832 $ 2,568 $ 925 Ratio of net investment income (loss) to average net assets.................................................. (0.90)% 0.29 % 8.13 % Ratio of expenses to average net assets................... 0.90 % 0.90 % 0.90 %
42 WRL SERIES LIFE ACCOUNT NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AT DECEMBER 31, 2001 NOTE 5 -- FINANCIAL HIGHLIGHTS (CONTINUED) FOR THE YEAR ENDED
WRL SALOMON ALL CAP SUBACCOUNT ----------------------------------- DECEMBER 31, ----------------------------------- 2001 2000 1999(1) ---------- ---------- --------- Accumulation unit value, beginning of year.................. $ 12.55 $ 10.70 $ 10.00 ---------- ---------- --------- Income from operations: Net investment income (loss)............................ 0.11 0.23 0.40 Net realized and unrealized gain (loss) on investment... 0.04 1.62 0.30 ---------- ---------- --------- Net income (loss) from operations..................... 0.15 1.85 0.70 ---------- ---------- --------- Accumulation unit value, end of year........................ $ 12.70 $ 12.55 $ 10.70 ========== ========== ========= Total return................................................ 1.18 % 17.24 % 7.02 % Ratios and supplemental data: Net assets at end of year (in thousands).................. $ 30,526 $ 8,072 $ 383 Ratio of net investment income (loss) to average net assets.................................................. 0.89 % 1.91 % 8.07 % Ratio of expenses to average net assets................... 0.90 % 0.90 % 0.90 %
WRL PILGRIM BAXTER MID CAP GROWTH SUBACCOUNT ----------------------------------- DECEMBER 31, ----------------------------------- 2001 2000 1999(1) ---------- ---------- --------- Accumulation unit value, beginning of year.................. $ 13.56 $ 15.98 $ 10.00 ---------- ---------- --------- Income from operations: Net investment income (loss)............................ (0.09) 0.04 0.04 Net realized and unrealized gain (loss) on investment... (4.86) (2.46) 5.94 ---------- ---------- --------- Net income (loss) from operations..................... (4.95) (2.42) 5.98 ---------- ---------- --------- Accumulation unit value, end of year........................ $ 8.61 $ 13.56 $ 15.98 ========== ========== ========= Total return................................................ (36.50)% (15.16)% 59.78 % Ratios and supplemental data: Net assets at end of year (in thousands).................. $ 32,867 $ 39,702 $ 5,065 Ratio of net investment income (loss) to average net assets.................................................. (0.90)% 0.25 % 0.62 % Ratio of expenses to average net assets................... 0.90 % 0.90 % 0.90 %
43 WRL SERIES LIFE ACCOUNT NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AT DECEMBER 31, 2001 NOTE 5 -- FINANCIAL HIGHLIGHTS (CONTINUED) FOR THE YEAR ENDED
WRL WRL DREYFUS VALUE LINE MID CAP AGGRESSIVE GROWTH SUBACCOUNT SUBACCOUNT ---------------------------------- ----------------------- DECEMBER 31, DECEMBER 31, ---------------------------------- ----------------------- 2001 2000 1999(1) 2001 2000(1) ---------- --------- --------- ---------- ---------- Accumulation unit value, beginning of year........... $ 11.35 $ 10.14 $ 10.00 $ 8.98 $ 10.00 ---------- --------- --------- ---------- ---------- Income from operations: Net investment income (loss)..................... 0.05 0.23 (0.04) (0.07) (0.06) Net realized and unrealized gain (loss) on investment..................................... (0.59) 0.98 0.18 (0.94) (0.96) ---------- --------- --------- ---------- ---------- Net income (loss) from operations.............. (0.54) 1.21 0.14 (1.01) (1.02) ---------- --------- --------- ---------- ---------- Accumulation unit value, end of year................. $ 10.81 $ 11.35 $ 10.14 $ 7.97 $ 8.98 ========== ========= ========= ========== ========== Total return......................................... (4.80)% 11.91 % 1.44 % (11.21)% (10.24)% Ratios and supplemental data: Net assets at end of year (in thousands)........... $ 5,325 $ 1,811 $ 337 $ 1,283 $ 1,067 Ratio of net investment income (loss) to average net assets....................................... 0.44 % 2.02 % (0.90)% (0.90)% (0.90)% Ratio of expenses to average net assets............ 0.90 % 0.90 % 0.90 % 0.90 % 0.90 %
WRL WRL GREAT COMPANIES- GREAT COMPANIES- AMERICA(SM) TECHNOLOGY(SM) SUBACCOUNT SUBACCOUNT ---------------------- ----------------------- DECEMBER 31, DECEMBER 31, ---------------------- ----------------------- 2001 2000(1) 2001 2000(1) ---------- --------- ---------- ---------- Accumulation unit value, beginning of year........... $ 11.31 $ 10.00 $ 6.70 $ 10.00 ---------- --------- ---------- ---------- Income from operations: Net investment income (loss)..................... (0.05) (0.06) (0.04) (0.05) Net realized and unrealized gain (loss) on investment..................................... (1.42) 1.37 (2.47) (3.25) ---------- --------- ---------- ---------- Net income (loss) from operations.............. (1.47) 1.31 (2.51) (3.30) ---------- --------- ---------- ---------- Accumulation unit value, end of year................. $ 9.84 $ 11.31 $ 4.19 $ 6.70 ========== ========= ========== ========== Total return......................................... (12.98)% 13.12 % (37.51)% (33.01)% Ratios and supplemental data: Net assets at end of year (in thousands)........... $ 16,607 $ 8,491 $ 6,147 $ 2,788 Ratio of net investment income (loss) to average net assets....................................... (0.56)% (0.90)% (0.90)% (0.90)% Ratio of expenses to average net assets............ 0.90 % 0.90 % 0.90 % 0.90 %
44 WRL SERIES LIFE ACCOUNT NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AT DECEMBER 31, 2001 NOTE 5 -- FINANCIAL HIGHLIGHTS (CONTINUED) FOR THE YEAR ENDED
WRL WRL GREAT COMPANIES- GABELLI GLOBAL(2) GLOBAL GROWTH SUBACCOUNT SUBACCOUNT ----------------------------- ------------------------ DECEMBER 31, DECEMBER 31, ----------------------------- ------------------------ 2001 2000(1) 2001 2000(1) -------------- ---------- ---------- --------- Accumulation unit value, beginning of year.............. $ 8.52 $ 10.00 $ 9.07 $ 10.00 ---------- ---------- ---------- --------- Income from operations: Net investment income (loss)........................ (0.06) (0.03) (0.06) (0.03) Net realized and unrealized gain (loss) on investment........................................ (1.44) (1.45) (0.93) (0.90) ---------- ---------- ---------- --------- Net income (loss) from operations................. (1.50) (1.48) (0.99) (0.93) ---------- ---------- ---------- --------- Accumulation unit value, end of year.................... $ 7.02 $ 8.52 $ 8.08 $ 9.07 ========== ========== ========== ========= Total return............................................ (17.58)% (14.84)% (10.92)% (9.27)% Ratios and supplemental data: Net assets at end of year (in thousands).............. $ 2,238 $ 494 $ 7,590 $ 971 Ratio of net investment income (loss) to average net assets.............................................. (0.90)% (0.90)% (0.75)% (0.90)% Ratio of expenses to average net assets............... 0.90 % 0.90 % 0.90 % 0.90 %
WRL LKCM CAPITAL GROWTH SUBACCOUNT -------------- DECEMBER 31, -------------- 2001(1) -------------- Accumulation unit value, beginning of year.............. $ 10.00 ---------- Income from operations: Net investment income (loss)........................ (0.00) Net realized and unrealized gain (loss) on investment........................................ (3.57) ---------- Net income (loss) from operations................. (3.57) ---------- Accumulation unit value, end of year.................... $ 6.43 ========== Total return............................................ (35.70)% Ratios and supplemental data: Net assets at end of year (in thousands).............. $ 1,157 Ratio of net investment income (loss) to average net assets.............................................. (0.07)% Ratio of expenses to average net assets............... 0.90 %
45 WRL SERIES LIFE ACCOUNT NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) AT DECEMBER 31, 2001 NOTE 5 -- FINANCIAL HIGHLIGHTS (CONTINUED) FOR THE YEAR ENDED
FIDELITY VIP III FIDELITY VIP II GROWTH OPPORTUNITIES CONTRAFUND(R) SUBACCOUNT SUBACCOUNT ------------------------- ------------------------ DECEMBER 31, DECEMBER 31, ------------------------- ------------------------ 2001 2000(1) 2001 2000(1) ---------- ---------- ---------- --------- Accumulation unit value, beginning of year................. $ 8.56 $ 10.00 $ 9.38 $ 10.00 ---------- ---------- ---------- --------- Income from operations: Net investment income (loss)........................... (0.05) (0.06) (0.04) (0.06) Net realized and unrealized gain (loss) on investment........................................... (1.26) (1.38) (1.20) (0.56) ---------- ---------- ---------- --------- Net income (loss) from operations.................... (1.31) (1.44) (1.24) (0.62) ---------- ---------- ---------- --------- Accumulation unit value, end of year....................... $ 7.25 $ 8.56 $ 8.14 $ 9.38 ========== ========== ========== ========= Total return............................................... (15.40)% (14.36)% (13.25)% (6.16)% Ratios and supplemental data: Net assets at end of year (in thousands)................. $ 1,397 $ 562 $ 3,335 $ 1,030 Ratio of net investment income (loss) to average net assets................................................. (0.65)% (0.90)% (0.45)% (0.90)% Ratio of expenses to average net assets.................. 0.90 % 0.90 % 0.90 % 0.90 %
FIDELITY VIP EQUITY-INCOME SUBACCOUNT ------------------------- DECEMBER 31, ------------------------- 2001 2000(1) ---------- ---------- Accumulation unit value, beginning of year................. $ 10.99 $ 10.00 ---------- ---------- Income from operations: Net investment income (loss)........................... (0.04) (0.06) Net realized and unrealized gain (loss) on investment........................................... (0.63) 1.05 ---------- ---------- Net income (loss) from operations.................... (0.67) 0.99 ---------- ---------- Accumulation unit value, end of year....................... $ 10.32 $ 10.99 ========== ========== Total return............................................... (6.07)% 9.91 % Ratios and supplemental data: Net assets at end of year (in thousands)................. $ 4,161 $ 307 Ratio of net investment income (loss) to average net assets................................................. (0.35)% (0.90)% Ratio of expenses to average net assets.................. 0.90 % 0.90 %
Per unit information has been computed using average units outstanding throughout each period. Total return is not annualized for periods of less than one year. The ratio of net investment income (loss) to average net assets is annualized for periods of less than one year. The expense ratio considers only the expenses borne directly by the separate account and excludes expenses incurred directly by the underlying funds. 46 Report of Independent Auditors The Board of Directors Western Reserve Life Assurance Co. of Ohio We have audited the accompanying statutory-basis balance sheets of Western Reserve Life Assurance Co. of Ohio (an indirect wholly-owned subsidiary of AEGON N.V.) as of December 31, 2001 and 2000, and 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, 2001. Our audits also included the statutory-basis financial statement schedules required by Regulation S-X, Article 7. These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described in Note 1 to the financial statements, the Company presents its financial statements in conformity with accounting practices prescribed or permitted by the Insurance Department of the State of Ohio, which practices differ from accounting principles generally accepted in the United States. The variances between such practices and accounting principles generally accepted in the United States also are described in Note 1. The effects on the financial statements of these variances are not reasonably determinable but are presumed to be material. In our opinion, because of the effects of the matter described in the preceding paragraph, the financial statements referred to above do not present fairly, in conformity with accounting principles generally accepted in the United States, the financial position of Western Reserve Life Assurance Co. of Ohio at December 31, 2001 and 2000, or the results of its operations or its cash flow for each of the three years in the period ended December 31, 2001. However, in our opinion, the 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, 2001 and 2000, and the results of its operations and its cash flow for each of the three years in the period ended December 31, 2001, in conformity with accounting practices prescribed or permitted by the Insurance Department of the State of Ohio. Also, in our opinion, the related financial statement schedules, when considered 0110-0237837 47 in relation to the basic statutory-basis financial statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in Note 2 to the financial statements, in 2001 Western Reserve Life Assurance Co. of Ohio changed various accounting policies to be in accordance with the revised NAIC Accounting Practices and Procedures Manual, as adopted by the Insurance Department of the State of Ohio. As discussed in Note 8 to the financial statements, in 2001 Western Reserve Life Assurance Co. of Ohio changed the method used to value universal life and variable universal life policies. /s/ ERNST & YOUNG LLP Des Moines, Iowa February 15, 2002 0110-0237837 48 Western Reserve Life Assurance Co. of Ohio Balance Sheets -- Statutory Basis (Dollars in Thousands, Except per Share Amounts)
DECEMBER 31 2001 2000 --------------------------- ADMITTED ASSETS Cash and invested assets: Cash and short-term investments $ 141,080 $ 25,465 Bonds 78,489 92,652 Common stocks: Affiliated entities (cost: 2001 -- $543 and 2000 -- $243) 5,903 4,164 Other (cost: 2001 and 2000 -- $302) 472 352 Mortgage loans on real estate 13,821 14,041 Home office properties 43,520 33,571 Investment properties -- 10,808 Policy loans 285,178 284,335 Other invested assets 19,558 10,091 --------------------------- Total cash and invested assets 588,021 475,479 Net deferred income taxes 8,444 -- Federal and foreign income taxes recoverable -- 22,547 Premiums deferred and uncollected 1,237 908 Accrued investment income 1,463 1,475 Cash surrender value of life insurance policies 52,254 49,787 Other assets 7,563 5,905 Separate account assets 8,093,342 10,190,653 --------------------------- Total admitted assets $8,752,324 $10,746,754 ===========================
See accompanying notes. 0110-0237837 49
DECEMBER 31 2001 2000 --------------------------- LIABILITIES AND CAPITAL AND SURPLUS Liabilities: Aggregate reserves for policies and contracts: Life $ 399,187 $ 400,695 Annuity 336,587 288,370 Policy and contract claim reserves 14,358 13,474 Liability for deposit-type contracts 15,754 9,909 Other policyholders' funds 60 38 Remittances and items not allocated 14,493 21,192 Federal and foreign income taxes payable 26,150 -- Transfers to separate account due or accrued (493,930) (480,404) Asset valuation reserve 4,299 4,726 Interest maintenance reserve 4,861 5,934 Short-term note payable to affiliate -- 71,400 Payable to affiliate 645 17,406 Other liabilities 92,231 62,528 Separate account liabilities 8,089,904 10,185,342 --------------------------- Total liabilities 8,504,599 10,600,610 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 150,107 120,107 Unassigned surplus 95,118 23,537 --------------------------- Total capital and surplus 247,725 146,144 --------------------------- Total liabilities and capital and surplus $8,752,324 $10,746,754 ===========================
See accompanying notes. 0110-0237837 50 Western Reserve Life Assurance Co. of Ohio Statements of Operations -- Statutory Basis (Dollars in Thousands)
YEAR ENDED DECEMBER 31 2001 2000 1999 ------------------------------------------ Revenues: Premiums and other considerations, net of reinsurance: Life $ 653,398 $ 741,937 $ 584,729 Annuity 625,117 1,554,430 1,104,525 Net investment income 44,424 47,867 39,589 Amortization of interest maintenance reserve 1,440 1,656 1,751 Commissions and expense allowances on reinsurance ceded (10,789) 1,648 4,178 Income from fees associated with investment management, administration and contract guarantees for separate accounts 108,673 149,086 104,775 Other income 16,386 58,531 44,366 ------------------------------------------ 1,438,649 2,555,155 1,883,913 Benefits and expenses: Benefits paid or provided for: Life 56,155 58,813 35,591 Surrender benefits 800,264 888,060 689,535 Other benefits 57,032 47,855 32,201 Increase (decrease) in aggregate reserves for policies and contracts: Life 10,100 98,557 70,542 Annuity 48,217 (9,665) 3,446 Other - 67 (121) ------------------------------------------ 971,768 1,083,687 831,194 Insurance expenses: Commissions 176,023 316,337 246,334 General insurance expenses 110,808 120,798 112,536 Taxes, licenses and fees 18,714 23,193 19,019 Net transfers to separate accounts 216,797 1,068,213 625,598 Other expenses 556 36 - ------------------------------------------ 522,898 1,528,577 1,003,487 ------------------------------------------ 1,494,666 2,612,264 1,834,681 ------------------------------------------ Gain (loss) from operations before federal income tax expense (benefit) and net realized capital gains (losses) on investments (56,017) (57,109) 49,232 Federal income tax expense (benefit) 3,500 (17,470) 11,816 ------------------------------------------ Gain (loss) from operations before net realized capital gains (losses) on investments (59,517) (39,639) 37,416 Net realized capital gains (losses) on investments (net of related federal income taxes and amounts transferred to interest maintenance reserve) 100 (856) (716) ------------------------------------------ Net income (loss) $ (59,417) $ (40,495) $ 36,700 ==========================================
See accompanying notes. 0110-0237837 51 Western Reserve Life Assurance Co. of Ohio Statements of Changes in Capital and Surplus -- Statutory Basis (Dollars in Thousands)
TOTAL COMMON PAID-IN UNASSIGNED CAPITAL AND STOCK SURPLUS SURPLUS SURPLUS ----------------------------------------------------- Balance at January 1, 1999 $1,500 $120,107 $ 21,973 $143,580 Net income -- -- 36,700 36,700 Change in net unrealized capital gains -- -- 1,421 1,421 Change in non-admitted assets -- -- 703 703 Change in asset valuation reserve -- -- (961) (961) Change in surplus in separate accounts -- -- 451 451 Transfer from unassigned surplus to common stock (stock dividend) 1,000 -- (1,000) -- Settlement of prior period tax returns -- -- 1,000 1,000 Tax benefits on stock options exercised -- -- 2,022 2,022 ----------------------------------------------------- Balance at December 31, 1999 2,500 120,107 62,309 184,916 Net loss -- -- (40,495) (40,495) Change in net unrealized capital gains -- -- 1,571 1,571 Change in non-admitted assets -- -- (1,359) (1,359) Change in asset valuation reserve -- -- (917) (917) Change in surplus in separate accounts -- -- (314) (314) Settlement of prior period tax returns -- -- 30 30 Tax benefits on stock options exercised -- -- 2,712 2,712 ----------------------------------------------------- Balance at December 31, 2000 2,500 120,107 23,537 146,144 Net loss -- -- (59,417) (59,417) Capital contribution -- 30,000 -- 30,000 Cumulative effect of change in accounting principles 12,312 12,312 Change in valuation basis -- -- 11,609 11,609 Change in net deferred income tax asset -- -- (11,733) (11,733) Surplus effect of reinsurance transaction -- -- 11,851 11,851 Change in net unrealized capital gains -- -- (1,281) (1,281) Change in non-admitted assets -- -- 9,076 9,076 Change in asset valuation reserve -- -- 427 427 Change in surplus in separate accounts -- -- 97,374 97,374 Tax benefits on stock options exercised -- -- 1,363 1,363 ----------------------------------------------------- Balance at December 31, 2001 $2,500 $150,107 $ 95,118 $247,725 =====================================================
See accompanying notes. 0110-0237837 52 Western Reserve Life Assurance Co. of Ohio Statements of Cash Flow -- Statutory Basis (Dollars in Thousands)
YEAR ENDED DECEMBER 31 2001 2000 1999 ------------------------------------------ OPERATING ACTIVITIES Premiums and other considerations, net of reinsurance $1,295,480 $2,356,441 $1,738,870 Net investment income received 45,355 51,583 44,235 Life and accident and health claims paid (55,303) (55,030) (35,872) Surrender benefits and other fund withdrawals paid (800,321) (888,060) (689,535) Other benefits paid to policyholders (56,598) (43,721) (32,642) Commissions, other expenses and other taxes (315,087) (456,874) (382,372) Net transfers to separate accounts (27,317) (935,755) (628,762) Federal income taxes received (paid) 46,560 (8,236) (9,637) ------------------------------------------ Net cash provided by operating activities 132,769 20,348 4,285 INVESTING ACTIVITIES Proceeds from investments sold, matured or repaid: Bonds 29,163 45,079 114,177 Mortgage loans on real estate 282 227 212 Other (170) 345 18 ------------------------------------------ 29,275 45,651 114,407 Cost of investments acquired: Bonds (14,445) (18,005) (49,279) Common stocks (300) -- -- Mortgage loans on real estate -- (5,003) (1) Investment properties (13) (108) (286) Policy loans (843) (101,360) (69,993) Other invested assets (12,394) (11,203) -- Other -- -- (855) ------------------------------------------ (27,995) (135,679) (120,414) ------------------------------------------ Net cash provided by (used in) investing activities 1,280 (90,028) (6,007) FINANCING AND MISCELLANEOUS ACTIVITIES Other cash provided: Capital and surplus paid in 30,000 -- -- Borrowed money (71,400) 54,300 (27,100) Deposits and deposit-type contract funds and other liabilities without life or disability contingencies 23,298 -- -- Other sources 45,631 27,815 12,580 ------------------------------------------ 27,529 82,115 (14,520)
0110-0237837 53 Western Reserve Life Assurance Co. of Ohio Statements of Cash Flow -- Statutory Basis--(Continued) (Dollars in Thousands)
YEAR ENDED DECEMBER 31 2001 2000 1999 ------------------------------------------ FINANCING AND MISCELLANEOUS ACTIVITIES--(CONTINUED) Other cash applied: Withdrawals on deposit-type contract funds and other liabilities without life or disability contingencies $ 17,990 $ -- $ -- Other applications 27,973 10,902 33,634 ------------------------------------------ 45,963 10,902 33,634 ------------------------------------------ Net cash provided by (used in) financing activities (18,434) 71,213 (48,154) ------------------------------------------ Increase (decrease) in cash and short-term investments 115,615 1,533 (49,876) Cash and short-term investments at beginning of year 25,465 23,932 73,808 ------------------------------------------ Cash and short-term investments at end of year $ 141,080 $ 25,465 $ 23,932 ==========================================
See accompanying notes. 0110-0237837 54 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 First AUSA Life Insurance Company which, in turn, is an indirect, wholly owned subsidiary of AEGON USA, Inc. (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 written and a substantial portion of new annuities written are done 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 Insurance Department of the State of Ohio, 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 market 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 0110-0237837 55 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory Basis--(Continued) (Dollars in Thousands) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) operations for those designated as trading and as a separate component of shareholder's equity for those designated as available-for-sale. 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 it is determined that a decline in fair value is other than temporary, the cost basis of the security is written down to the undiscounted estimated future cash flows. Prior to April 1, 2001 under GAAP, changes in prepayment assumptions were accounted for in the same manner. Effective April 1, 2001 for GAAP purposes, 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 it is determined that a decline in fair value is other than temporary, the cost basis of the security is written down to the discounted fair value. If high credit quality securities are adjusted, the retrospective method is used. Investment properties are reported net of related obligations rather than on a gross basis. 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 include rent for the Company's occupancy of those properties. Changes between depreciated cost and admitted asset investment amounts are credited or charged directly to unassigned surplus rather than to income as would be required under GAAP. Valuation allowances, if necessary, are established for mortgage loans 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. Prior to January 1, 2001, valuation allowances were based on the difference between the unpaid loan balance and the estimated fair value of the underlying real estate. 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. 0110-0237837 56 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory Basis--(Continued) (Dollars in Thousands) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) The initial valuation allowance and subsequent changes in the allowance for mortgage loans as a result of a temporary impairment are charged or credited directly to unassigned surplus, 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. 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 would be reported in the income statement on a pretax basis in the period that the assets giving rise to the gains or losses are sold. The "asset valuation reserve" (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, acquisition costs related to 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" are excluded from the accompanying balance sheets and are charged directly to unassigned surplus. Under GAAP, such assets are included in the balance sheets. 0110-0237837 57 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory Basis--(Continued) (Dollars in Thousands) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) Universal Life and Annuity Policies: Subsequent to January 1, 2001, revenues for universal life and annuity policies with mortality or morbidity risk, except for guaranteed interest and group annuity contracts, consist of the entire premium received and benefits incurred represent the total of death benefits paid and the change in policy reserves. Premiums received for annuity policies without mortality or morbidity risk and for guaranteed interest and group annuity contracts are recorded using deposit accounting, and credited directly to an appropriate policy reserve account, without recognizing premium income. Prior to January 1, 2001, all revenues for universal life and annuity policies consist of the entire premium received and benefits incurred represent the total of death benefits paid and the change in policy reserves. Under GAAP, premiums received in excess of policy charges would not be recognized as premium revenue and benefits would represent the excess of benefits paid over the policy account value and interest credited to the account values. Benefit Reserves: Certain policy reserves are calculated 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: A liability for reinsurance balances would be provided for unsecured policy reserves ceded to reinsurers not authorized to assume such business. Changes to those amounts 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 received rather than being deferred and amortized with deferred policy acquisition costs as required under GAAP. Deferred Income Taxes: Effective January 1, 2001, deferred 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 by the end of the subsequent calendar year, plus 2) the lesser of the remaining gross deferred tax assets expected to be realized within one year of the balance 0110-0237837 58 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory Basis--(Continued) (Dollars in Thousands) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) sheet date or 10% of capital and surplus excluding any net deferred tax assets, EDP equipment and operating software and any net positive goodwill, plus 3) the amount of remaining gross deferred tax assets that can be offset against existing gross deferred tax liabilities. The remaining deferred tax assets are nonadmitted. Deferred taxes do not include amounts for state taxes. Prior to January 1, 2001, deferred federal income taxes were not provided for differences between the financial statement amounts and tax bases of assets and liabilities. Under GAAP, states taxes are included in the computation of deferred taxes, a deferred tax asset is recorded for the amount of gross deferred tax assets expected to be realized in future years, and a valuation allowance is established for deferred tax assets not expected to be realizable. 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 of less. Under GAAP, the corresponding caption of cash and cash equivalents include cash balances and investments with initial maturities of three months or less. The effects of these variances have not been determined by the Company, but are presumed to be material. INVESTMENTS Investments in bonds (except those to which the Securities Valuation Office of the NAIC has ascribed a value), mortgage loans on real estate and short-term investments are reported at cost adjusted for amortization of premiums and accrual of discounts. Amortization is computed using methods which result in a level yield over the expected life of the investment. The Company reviews its prepayment assumptions on mortgage and other asset-backed securities at regular intervals and adjusts amortization rates retrospectively when such assumptions are changed due to experience and/or expected future patterns. Common stocks of unaffiliated companies are carried at market, and the related unrealized capital gains/(losses) are reported in unassigned surplus. Common stocks of the Company's wholly owned affiliates are recorded at the GAAP basis equity in net assets. Home office and investment properties are reported at cost less allowances for depreciation. Depreciation is computed principally by the straight-line method. Policy loans are reported at unpaid principal. Other invested assets consist principally of investments in various joint ventures and are recorded at equity in underlying net assets. 0110-0237837 59 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory Basis--(Continued) (Dollars in Thousands) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) Other "admitted assets" are valued, principally at cost, as required or permitted by Ohio Insurance Laws. Realized capital gains and losses are determined on the basis of specific identification and are recorded net of related federal income taxes. The Asset Valuation Reserve (AVR) is established by the Company to provide for potential losses in the event of default by issuers of certain invested assets. These amounts are determined using a formula prescribed by the NAIC and are reported as a liability. The formula for the AVR provides for a corresponding adjustment for realized gains and losses. Under a formula prescribed by the NAIC, the Company defers, in the Interest Maintenance Reserve (IMR), the portion of realized 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 security. During 2001, 2000, and 1999, net realized capital gains (losses) of $367, $(276), and $(67), respectively, were credited to the IMR rather than being immediately recognized in the statements of operations. Amortization of these net gains aggregated $1,440, $1,656, and $1,751 for the years ended December 31, 2001, 2000, and 1999, respectively. 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. Further, income is not accrued when collection is uncertain. No investment income due and accrued has been excluded for the years ended December 31, 2001, 2000, and 1999, with respect to such practices. PREMIUMS AND ANNUITY CONSIDERATIONS Life and accident and health premiums are recognized as revenue when due. Subsequent to January 1, 2001, premiums for annuity policies with mortality and morbidity risk, except for guaranteed interest and group annuity contracts, are also recognized as revenue when due. Premiums received for annuity policies without mortality or morbidity risk and for guaranteed interest and group annuity contracts are recorded using deposit accounting. Prior to January 1, 2001, life, annuity, accident, and health premiums were recognized as revenue when due. 0110-0237837 60 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory Basis--(Continued) (Dollars in Thousands) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) AGGREGATE RESERVES FOR POLICIES Life and annuity 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. 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 aggregate policy reserves for life insurance policies are based principally upon the 1941, 1958, and 1980 Commissioners' Standard Ordinary Mortality Tables. The reserves are calculated using interest rates ranging from 2.25 to 5.50 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 Commissioners' Reserve Valuation Method. Deferred annuity reserves are calculated according to the Commissioners' 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 4.00 to 11.25 percent and mortality rates, where appropriate, from a variety of tables. REINSURANCE Reinsurance premiums and benefits paid or provided are accounted for on bases consistent with those used in accounting policies for the original policies issued and the terms of the reinsurance contracts. 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 statement 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 0110-0237837 61 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory Basis--(Continued) (Dollars in Thousands) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) frequency. The estimates are continually reviewed and adjusted as necessary as experience develops or new information becomes available. SEPARATE ACCOUNTS 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 sheets. The assets in the separate accounts are valued at market. Income and gains and losses with respect to the assets in the separate accounts accrue to the benefit of the policyholders and, accordingly, the operations of the separate accounts are not included in the accompanying financial statements. The separate accounts do not have any minimum guarantees and the investment risks associated with market value changes are borne entirely by the policyholders. The Company received variable contract premiums of $1,208,884, $2,336,299, and $1,675,642 in 2001, 2000, and 1999, respectively. All variable account contracts are subject to discretionary withdrawal by the policyholder at the market value of the underlying assets less the current surrender charge. Separate account contract holders have no claim against the assets of the general account. STOCK OPTION PLAN AEGON N.V. sponsors a stock option plan that includes eligible employees of the Company. Pursuant to the plan, the option price at the date of grant is equal to the market value of the stock. Under statutory accounting principles, the Company does not record any expense related to this plan. However, the Company is allowed to record a deduction in the consolidated tax return filed by the Company and certain affiliates. The tax benefit of this deduction has been credited directly to surplus. RECLASSIFICATIONS Certain reclassifications have been made to the 2000 and 1999 financial statements to conform to the 2001 presentation. 0110-0237837 62 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory Basis--(Continued) (Dollars in Thousands) 2. ACCOUNTING CHANGES The Company prepares its statutory financial statements in conformity with accounting practices prescribed or permitted by the State of Ohio. Effective January 1, 2001, the State of Ohio required that insurance companies domiciled in the State of Ohio prepare their statutory-basis financial statements in accordance with the NAIC Accounting Practices and Procedures Manual subject to any deviations prescribed or permitted by the State of Ohio insurance commissioner. Accounting changes adopted to conform to the provisions of the NAIC Accounting Practices and Procedures Manual are reported as changes in accounting principles. The cumulative effect of changes in accounting principles is reported as an adjustment to unassigned surplus in the period of the change in accounting principle. The cumulative effect is the difference between the amount of capital and surplus at the beginning of the year and the amount of capital and surplus that would have been reported at that date if the new accounting principles had been applied retroactively for all prior periods. As a result of these changes, the Company reported a change in accounting principle, as an adjustment that increased capital and surplus, of $12,312 as of January 1, 2001. This amount included the establishment of deferred tax assets of $12,696, offset by the release of mortgage loan origination fees of $25 and the establishment of a vacation accrual of $359. 3. FAIR VALUES OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, Disclosures about Fair Value of Financial Instruments, requires disclosure of fair value information about financial instruments, whether or not recognized in the statutory-basis balance sheets, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparisons to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. Statement of Financial Accounting Standards No. 107 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements and allows companies to forego the disclosures when those estimates can only be made at excessive cost. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. 0110-0237837 63 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory Basis--(Continued) (Dollars in Thousands) 3. FAIR VALUES OF FINANCIAL INSTRUMENTS--(CONTINUED) The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: Cash and Short-Term Investments: The carrying amounts reported in the statutory-basis balance sheets for these instruments approximate their fair values. Investment Securities: Fair values for bonds are based on quoted market prices, where available. For bonds not actively traded, fair values are estimated using values obtained from independent pricing services or, in the case of private placements, are estimated by discounting expected future cash flows using a current market rate applicable to the yield, credit quality, and maturity of the investments. The fair values for common stocks of unaffiliated entities are based on quoted market prices. Mortgage Loans on Real Estate and Policy Loans: 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. The fair value of policy loans are assumed to equal their carrying value. Separate Account Assets: The fair value of separate account assets are based on quoted market prices. Investment Contracts: Fair values for the Company's liabilities under investment-type insurance contracts are estimated using discounted cash flow calculations, based on interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued. Short-Term Note Payable to Affiliate: The carrying amounts reported in the statutory-basis balance sheets for these instruments approximate their fair values. Separate Account Annuity Liabilities: Separate account annuity liabilities approximate the market value of the separate account assets less a provision for the present value of future profits related to the underlying contracts. Fair values for the Company's insurance contracts other than investment 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. 0110-0237837 64 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory Basis--(Continued) (Dollars in Thousands) 3. FAIR VALUES OF FINANCIAL INSTRUMENTS--(CONTINUED) The following sets forth a comparison of the fair values and carrying amounts of the Company's financial instruments subject to the provisions of Statement of Financial Accounting Standards No. 107:
DECEMBER 31 2001 2000 -------------------------- ---------------------------- CARRYING CARRYING AMOUNT FAIR VALUE AMOUNT FAIR VALUE ------------------------------------------------------------ ADMITTED ASSETS Cash and short-term investments $ 141,080 $ 141,080 $ 25,465 $ 25,465 Bonds 78,489 80,722 92,652 93,766 Common stocks, other than affiliates 472 472 352 352 Mortgage loans on real estate 13,821 14,263 14,041 14,422 Policy loans 285,178 285,178 284,335 284,335 Separate account assets 8,093,342 8,093,342 10,190,653 10,190,653 LIABILITIES Investment contract liabilities 352,341 347,665 298,279 291,457 Short-term note payable to affiliate -- -- 71,400 71,400 Separate account annuity liabilities 5,792,373 5,709,486 7,305,380 7,142,011
4. INVESTMENTS The carrying amount and estimated fair value of investments in bonds are as follows:
GROSS GROSS ESTIMATED CARRYING UNREALIZED UNREALIZED FAIR AMOUNT GAINS LOSSES VALUE ------------------------------------------------------- DECEMBER 31, 2001 Bonds: United States Government and agencies $ 4,363 $ 173 $ -- $ 4,536 State, municipal and other government 1,480 135 -- 1,615 Public utilities 12,048 306 -- 12,354 Industrial and miscellaneous 39,429 2,470 1,358 40,541 Mortgage and other asset-backed securities 21,169 507 -- 21,676 ------------------------------------------------------- Total bonds $78,489 $3,591 $1,358 $80,722 =======================================================
0110-0237837 65 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory Basis--(Continued) (Dollars in Thousands) 4. INVESTMENTS--(CONTINUED)
GROSS GROSS ESTIMATED CARRYING UNREALIZED UNREALIZED FAIR AMOUNT GAINS LOSSES VALUE ------------------------------------------------------- DECEMBER 31, 2000 Bonds: United States Government and agencies $ 4,580 $ 78 $ 15 $ 4,643 State, municipal and other government 1,478 85 -- 1,563 Public utilities 13,061 75 159 12,977 Industrial and miscellaneous 42,482 1,673 811 43,344 Mortgage and other asset-backed securities 31,051 416 228 31,239 ------------------------------------------------------- Total bonds $92,652 $2,327 $1,213 $93,766 =======================================================
The carrying amount and fair value of bonds at December 31, 2001 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.
ESTIMATED CARRYING FAIR AMOUNT VALUE ----------------------- Due in one year or less $ 7,305 $ 7,408 Due one through five years 28,415 29,555 Due five through ten years 15,628 16,649 Due after ten years 5,972 5,434 ----------------------- 57,320 59,046 Mortgage and other asset-backed securities 21,169 21,676 ----------------------- $78,489 $80,722 =======================
0110-0237837 66 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory Basis--(Continued) (Dollars in Thousands) 4. INVESTMENTS--(CONTINUED) A detail of net investment income is presented below:
YEAR ENDED DECEMBER 31 2001 2000 1999 --------------------------------- Interest on bonds $ 7,050 $ 8,540 $12,094 Dividends from common stock of affiliated entities 18,495 26,453 18,555 Interest on mortgage loans 1,130 776 746 Rental income on investment properties 6,903 6,034 5,794 Interest on policy loans 17,746 14,372 9,303 Other investment income (51) 1 414 --------------------------------- Gross investment income 51,273 56,176 46,906 Investment expenses (6,849) (8,309) (7,317) --------------------------------- Net investment income $44,424 $47,867 $39,589 =================================
Proceeds from sales and maturities of debt securities and related gross realized gains and losses were as follows:
YEAR ENDED DECEMBER 31 2001 2000 1999 ---------------------------------- Proceeds $29,163 $45,079 $114,177 ================================== Gross realized gains $ 637 $ 117 $ 1,762 Gross realized losses -- 480 1,709 ---------------------------------- Net realized gains (losses) $ 637 $ (363) $ 53 ==================================
At December 31, 2001, bonds with an aggregate carrying value of $4,094 were on deposit with certain state regulatory authorities or were restrictively held in bank custodial accounts for benefit of such state regulatory authorities, as required by statute. 0110-0237837 67 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory Basis--(Continued) (Dollars in Thousands) 4. INVESTMENTS--(CONTINUED) Realized investment gains (losses) and changes in unrealized gains (losses) for investments are summarized below:
REALIZED ----------------------------- YEAR ENDED DECEMBER 31 2001 2000 1999 ----------------------------- Bonds $ 637 $ (363) $ 53 Other invested assets -- (1,115) 18 ----------------------------- 637 (1,478) 71 Tax benefit (expense) (170) 346 (854) Transfer to interest maintenance reserve (367) 276 67 ----------------------------- Net realized gains (losses) $ 100 $ (856) $(716) =============================
CHANGES IN UNREALIZED ------------------------------- YEAR ENDED DECEMBER 31 2001 2000 1999 ------------------------------- Other invested assets $(2,926) $ -- $ -- Common stocks 1,559 2,002 1,426 Mortgage loans on real estate 86 (431) (5) ------------------------------- Change in unrealized $(1,281) $1,571 $1,421 ===============================
Gross unrealized gains (losses) on common stocks were as follows:
UNREALIZED ------------------ DECEMBER 31 2001 2000 ------------------ Unrealized gains $5,930 $4,040 Unrealized losses (400) (69) ------------------ Net unrealized gains $5,530 $3,971 ==================
During 2001, the Company did not issue any mortgage loans. During 2000, the Company issued one mortgage loan with a lending rate of 7.97%. The percentage of the loan to the value of the security at the time of origination was 69%. The Company requires all mortgages to carry fire insurance equal to the value of the underlying property. During 2001, 2000, and 1999, no mortgage loans were foreclosed and transferred to real estate. During 2001 and 2000, the Company held a mortgage loan loss reserve in the asset valuation reserve of $135 and $-0-, respectively. 0110-0237837 68 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory Basis--(Continued) (Dollars in Thousands) 5. REINSURANCE The Company reinsures portions of 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 obligations under the reinsurance treaty. Premiums earned reflect the following reinsurance ceded amounts for the year ended December 31:
YEAR ENDED DECEMBER 31 2001 2000 1999 ------------------------------------------ Direct premiums $1,369,720 $2,385,134 $1,748,265 Reinsurance ceded (91,205) (88,767) (59,011) ------------------------------------------ Net premiums earned $1,278,515 $2,296,367 $1,689,254 ==========================================
The Company received reinsurance recoveries in the amount of $12,337, $8,856, and $4,916 during 2001, 2000, and 1999, respectively. At December 31, 2001 and 2000, estimated amounts recoverable from reinsurers that have been deducted from policy and contract claim reserves totaled $6,065 and $2,337, respectively. The aggregate reserves for policies and contracts were reduced for reserve credits for reinsurance ceded at December 31, 2001 and 2000 of $63,758 and $5,128, respectively. During 2001, the Company entered into a reinsurance transaction with Transamerica International Re (Bermuda) Ltd., an affiliate of the Company. Under the terms of this transaction, the Company ceded the obligation for future guaranteed minimum death benefits included in certain of its variable annuity contracts. The difference between the initial premiums ceded of $37,176 and the reserve credit taken of $55,408 was credited directly to unassigned surplus on a net of tax basis. The Company holds collateral in the form of letters of credit of $70,000. 0110-0237837 69 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory Basis--(Continued) (Dollars in Thousands) 6. INCOME TAXES The Company's net deferred tax asset is comprised of the following components:
DECEMBER 31, JANUARY 1, 2001 2001 ---------------------------- Gross deferred income tax assets $162,669 $82,191 Gross deferred income tax liabilities 95,916 3,705 Deferred income tax assets nonadmitted 58,309 65,790 ---------------------------- Net admitted deferred income tax asset $ 8,444 $12,696 ============================
Prior to 1984, as provided for under the Life insurance Company Tax Act of 1959, a portion of statutory income was not subject to current taxation but was accumulated for income tax purposes in a memorandum account referred to as the "policyholders' surplus account" (PSA). No federal income taxes have been provided for in the financial statements on income deferred in the PSA ($293 at December 31, 2001). To the extent that dividends are paid from the amount accumulated in the PSA, net earnings would be reduced by the amount of tax required to be paid. Should the entire amount in the PSA account become taxable, the tax thereon computed at the current rates would amount to approximately $103. The main components of deferred tax amounts, as well as the net change for the year ended December 31, 2001, are as follow:
DECEMBER 31, JANUARY 1, NET 2001 2001 CHANGE ----------------------------------------- Deferred income tax assets: sec.807(f) adjustment $ 1,977 $ 2,360 $ (383) Pension expenses 2,422 1,850 572 Tax basis deferred acquisition costs 76,692 69,122 7,570 Reserves 74,569 2,316 72,253 Other 7,009 6,543 466 ---------------------------------------- Total deferred income tax assets $162,669 $82,191 $80,478 ---------------------------------------- ---------------------------------------- Deferred income tax assets -- nonadmitted $ 58,309 $65,790 $(7,481) Deferred income tax liabilities: sec.807(f) adjustment -- liabilities 91,560 427 91,133 Other 4,356 3,278 1,078 ---------------------------------------- Total deferred income tax liabilities $ 95,916 $ 3,705 $92,211 ---------------------------------------- ----------------------------------------
0110-0237837 70 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory Basis--(Continued) (Dollars in Thousands) 6. INCOME TAXES--(CONTINUED) Federal income tax expense (benefit) differs from the amount computed by applying the statutory federal income tax rate to gain from operations before federal income tax expense and net realized capital gains/losses on investments for the following reasons:
DECEMBER 31 2001 2000 1999 ------------------------------------ Income tax expense (benefit) computed at the federal statutory rate (35%) $(19,606) $(19,988) $ 17,231 Deferred acquisition costs -- tax basis 7,570 14,725 11,344 Amortization of IMR (504) (580) (613) Depreciation (6) (426) (727) Dividends received deduction (8,705) (12,805) (10,784) Low income housing credits (1,944) -- -- Prior year under (over) accrual 3,340 560 (3,167) Reinsurance transactions 4,148 -- -- Reserves 19,541 123 (2,272) Other (334) 921 804 ------------------------------------ Federal income tax expense (benefit) $ 3,500 $(17,470) $ 11,816 ====================================
For federal income tax purposes, the Company joins in a consolidated income tax return filing with its parent and other affiliated companies. Under the terms of a tax sharing agreement between the Company and it affiliates, the Company computes federal income tax expense as if it were filing a separate income tax return, except that tax credits and net operating loss carryforwards are determined in the basis of the consolidated group. Additionally, the alternative minimum tax is computed for the consolidated group and the resulting tax, if any, is allocated back to the separate companies on the basis of the separate companies' alternative minimum taxable income. In 2000, the Company received $30 in interest from the Internal Revenue Service related to the 1993 tax year. In 1999, the Company received $1,000 from its former parent, an unaffiliated company, for reimbursement of prior period tax payments made by the Company but owed by the former parent. Tax settlements for 2000 and 1999 were credited directly to unassigned surplus. The Company's federal income tax returns have been examined by the Internal Revenue Service and the statute is closed through 1995. An examination is underway for 1996 and 1997. 0110-0237837 71 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory Basis--(Continued) (Dollars in Thousands) 7. POLICY AND CONTRACT ATTRIBUTES A portion of the Company's policy reserves and other policyholders' funds relate to liabilities established on a variety of the Company's products, primarily separate accounts that are not subject to significant mortality or morbidity risk; however, 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 are summarized as follows:
DECEMBER 31 2001 2000 ------------------------ ------------------------ PERCENT 2000 PERCENT AMOUNT OF TOTAL AMOUNT OF TOTAL ------------------------------------------------------ Subject to discretionary withdrawal with market value adjustment $ 11,429 0% $ 11,999 0% Subject to discretionary withdrawal at book value less surrender charge 102,240 2 72,456 1 Subject to discretionary withdrawal at market value 5,641,756 93 7,305,182 96 Subject to discretionary withdrawal at book value (minimal or no charges or adjustments) 294,012 5 210,648 3 Not subject to discretionary withdrawal 14,654 0 15,753 0 ------------------------ ------------------------ 6,064,091 100% 7,616,038 100% === === Less reinsurance ceded 60,224 2,145 ---------- ---------- Total policy reserves on annuities and deposit fund liabilities $6,003,867 $7,613,893 ========== ==========
A reconciliation of the amounts transferred to and from the separate accounts is presented below:
YEAR ENDED DECEMBER 31 2001 2000 1999 ------------------------------------------ Transfers as reported in the summary of operations of the separate accounts statement: Transfers to separate accounts $1,208,884 $2,336,299 $1,675,642 Transfers from separate accounts 1,107,157 1,268,865 1,056,207 ------------------------------------------ Net transfers to separate accounts 101,727 1,067,434 619,435 Change in valuation adjustment 98,321 -- -- Other 16,749 779 6,163 ------------------------------------------ Transfers as reported in the summary of operations of the life, accident and health annual statement $ 216,797 $1,068,213 $ 625,598 ==========================================
0110-0237837 72 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory Basis--(Continued) (Dollars in Thousands) 7. POLICY AND CONTRACT ATTRIBUTES--(CONTINUED) At December 31, 2001, the Company had variable annuities with guaranteed living benefits as follows:
SUBJECTED AMOUNT OF BENEFIT AND TYPE OF RISK ACCOUNT VALUE RESERVE HELD - -------------------------------------------------------------------------------------------- Guaranteed Minimum Income Benefit $75,101 $19
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 policy's paid-through date to the policy's next anniversary date. At December 31, 2001 and 2000, these assets (which are reported as premiums deferred and uncollected) and the amounts of the related gross premiums and loading, are as follows:
GROSS LOADING NET ------------------------------- DECEMBER 31, 2001 Ordinary direct renewal business $1,439 $407 $1,032 Ordinary new business 200 (5) 205 ------------------------------- $1,639 $402 $1,237 =============================== DECEMBER 31, 2000 Ordinary direct renewal business $ 991 $220 $ 771 Ordinary new business 133 (4) 137 ------------------------------- $1,124 $216 $ 908 ===============================
8. CONVERSION OF VALUATION SYSTEM During 2001, the Company converted to a new reserve valuation system for universal life and variable universal life policies. The new valuation system, which provides for more precise calculations, caused general account reserves to decrease by $11,609 and separate account reserves to decrease by $98,321. These amounts were credited directly to unassigned surplus. The decrease in separate account reserves is included in the change in surplus in separate accounts in the 2001 Statement of Changes in Capital and Surplus. 9. DIVIDEND RESTRICTIONS The Company is subject to limitations, imposed by the State of Ohio, on the payment of dividends to its parent company. Generally, dividends during any twelve month period 0110-0237837 73 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory Basis--(Continued) (Dollars in Thousands) 9. DIVIDEND RESTRICTIONS--(CONTINUED) 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 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 2002, without the prior approval of insurance regulatory authorities, is $24,523. 10. CAPITAL AND SURPLUS During 1999, the Company's Board of Director's approved an amendment to the Company's Articles of Incorporation which increased the number of authorized capital shares to 3,000,000. The Board of Directors also authorized a stock dividend in the amount of $1,000, which was transferred from unassigned surplus. This amendment and stock dividend were in response to a change in California law which requires all life insurance companies that do business in the state to have capital stock of at least $2,500. Life/health insurance companies are subject to certain risk-based capital (RBC) requirements as specified by the NAIC. Under those requirements, the amount is to be determined based on the various risk factors related to it. At December 2001, the Company meets the RBC requirements. 11. SALES, TRANSFER, AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES During 2001, the Company sold $17,515 of agent balances without recourse to Money Services, Inc., an affiliated company. The Company did not realize a gain or loss as a result of the sale. 12. RETIREMENT AND COMPENSATION PLANS The Company's employees participate in a qualified 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 the Statement of Financial Accounting Standards No. 87 expense as a percent of salaries. The benefits are based on years of service and the employee's compensation during the highest five consecutive years of employment. Pension expense aggregated $1,634, $1,224, and $1,105 for the years ended December 31, 2001, 2000, and 1999, respectively. The plan is subject to the reporting 0110-0237837 74 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory Basis--(Continued) (Dollars in Thousands) 12. RETIREMENT AND COMPENSATION PLANS--(CONTINUED) and disclosure requirements of the Employee Retirement and Income Security Act of 1974. The Company's employees also participate in a contributory 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 fifteen 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 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 $1,100, $930, and $816 for the years ended December 31, 2001, 2000, and 1999, 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 each of the years ended December 31, 2001, 2000, and 1999 was negligible. AEGON also sponsors an employee stock option plan for individuals employed at least three years 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 for 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 expenses of the postretirement plans calculated on the pay-as-you-go basis are charged to affiliates in accordance with an intercompany cost sharing arrangement. The Company expensed $233, $108, and $81 for the years ended December 31, 2001, 2000, and 1999, respectively. 0110-0237837 75 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory Basis--(Continued) (Dollars in Thousands) 13. RELATED PARTY TRANSACTIONS The Company shares certain officers, employees and general expenses with affiliated companies. The Company receives data processing, investment advisory and management, marketing and administration services from certain affiliates. During 2001, 2000, and 1999, the Company paid $16,904, $19,248, and $16,905, respectively, for such services, which approximates their costs to the affiliates. The Company provides office space, marketing and administrative services to certain affiliates. During 2001, 2000, and 1999, the Company received $6,752, $4,665, and $3,755, respectively, for such services, which approximates their cost. Payable to affiliates and intercompany borrowings bear interest at the thirty-day commercial paper rate. During 2001, 2000, and 1999, the Company paid net interest of $945, $2,262, and $1,997, respectively, to affiliates. The Company received capital contributions of $30,000 from its parent in 2001. At December 31, 2000, the Company had short-term note payables to an affiliate of $71,400. Interest on these notes approximated the thirty-day commercial paper rate at the time of issuance. In prior years, the Company purchased life insurance policies covering the lives of certain employees of the Company from an affiliate. At December 31, 2001 and 2000, the cash surrender value of these policies was $52,254 and $49,787, respectively. 14. COMMITMENTS AND CONTINGENCIES The Company is a party to legal proceedings incidental to its business. Although such litigation sometimes includes substantial demands for compensatory and punitive damages in addition to contract liability, 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 0110-0237837 76 Western Reserve Life Assurance Co. of Ohio Notes to Financial Statements -- Statutory Basis--(Continued) (Dollars in Thousands) 14. COMMITMENTS AND CONTINGENCIES--(CONTINUED) has been 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 $3,425 and $3,438 and an offsetting premium tax benefit of $764 and $777 at December 31, 2001 and 2000, respectively, for its estimated share of future guaranty fund assessments related to several major insurer insolvencies. The guaranty fund expense (credit) was $13, $(9), and $(20) for the years ended December 31, 2001, 2000, and 1999, respectively. 0110-0237837 77 Western Reserve Life Assurance Co. of Ohio Summary of Investments -- Other Than Investments in Related Parties (Dollars in Thousands) December 31, 2001 SCHEDULE I
AMOUNT AT WHICH FAIR SHOWN IN THE TYPE OF INVESTMENT COST(1) VALUE BALANCE SHEET - ---------------------------------------------------------------------------------------------- FIXED MATURITIES Bonds: United States Government and government agencies and authorities $ 4,681 $ 4,868 $ 4,681 States, municipalities, and political subdivisions 3,380 3,620 3,380 Public utilities 12,048 12,354 12,048 All other corporate bonds 58,380 59,880 58,380 ---------------------------------------- Total fixed maturities 78,489 80,722 78,489 EQUITY SECURITIES Common stocks (unaffiliated): Industrial, miscellaneous, and all other 302 472 472 ---------------------------------------- Total equity securities 302 472 472 Mortgage loans on real estate 13,821 13,821 Real estate 43,520 43,520 Policy loans 285,178 285,178 Cash and short-term investments 141,080 141,080 Other invested assets 19,558 19,558 -------- -------- Total investments $581,948 $582,118 ======== ========
(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. 0110-0237837 78 Western Reserve Life Assurance Co. of Ohio Supplementary Insurance Information (Dollars in Thousands) SCHEDULE III
BENEFITS, CLAIMS, FUTURE POLICY POLICY AND NET LOSSES AND OTHER BENEFITS AND CONTRACT PREMIUM INVESTMENT SETTLEMENT OPERATING EXPENSES LIABILITIES REVENUE INCOME* EXPENSES EXPENSES* ------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, 2001 Individual life $386,965 $14,219 $ 652,626 $14,014 $ 167,912 $216,211 Group life 12,222 135 772 731 1,226 535 Annuity 336,587 4 625,117 29,679 802,630 89,355 ------------------------------------------------------------------------------ $735,774 $14,358 $1,278,515 $44,424 $ 971,768 $306,101 ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, 2000 Individual life $389,458 $13,349 $ 741,090 $13,430 $ 267,540 $310,243 Group life 11,237 100 847 936 1,413 580 Annuity 259,199 25 1,554,430 33,501 814,734 149,541 ------------------------------------------------------------------------------ $659,894 $13,474 $2,296,367 $47,867 $1,083,687 $460,364 ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, 1999 Individual life $291,106 $ 9,152 $ 583,656 $10,754 $ 178,237 $261,284 Group life 11,032 100 1,073 706 1,437 599 Annuity 268,864 17 1,104,525 28,129 651,520 116,006 ------------------------------------------------------------------------------ $571,002 $ 9,269 $1,689,254 $39,589 $ 831,194 $377,889 ------------------------------------------------------------------------------ ------------------------------------------------------------------------------
*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. 0110-0237837 79 Western Reserve Life Assurance Co. of Ohio Reinsurance (Dollars in Thousands) SCHEDULE IV
ASSUMED PERCENTAGE OF CEDED TO FROM AMOUNT GROSS OTHER OTHER NET ASSUMED AMOUNT COMPANIES COMPANIES AMOUNT TO NET ----------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 Life insurance in force $78,786,575 $17,837,374 $-- $60,949,201 0.0% ======================================================================= Premiums: Individual life $ 684,987 $ 32,361 $-- $ 652,626 0.0% Group life 1,030 258 -- 772 0.0 Annuity 683,703 58,586 -- 625,117 0.0 ----------------------------------------------------------------------- $ 1,369,720 $ 91,205 $-- $ 1,278,515 0.0% ======================================================================= YEAR ENDED DECEMBER 31, 2000 Life insurance in force $76,903,969 $14,753,778 $-- $62,150,191 0.0% ======================================================================= Premiums: Individual life $ 774,550 $ 33,460 $-- $ 741,090 0.0% Group life 1,100 253 -- 847 0.0 Annuity 1,609,484 55,054 -- 1,554,430 0.0 ----------------------------------------------------------------------- $ 2,385,134 $ 88,767 $-- $ 2,296,367 0.0% ======================================================================= YEAR ENDED DECEMBER 31, 1999 Life insurance in force $63,040,741 $11,297,250 $-- $51,743,491 0.0% ======================================================================= Premiums: Individual life $ 604,628 $ 20,972 $-- $ 583,656 0.0% Group life 1,383 310 -- 1,073 0.0 Annuity 1,142,254 37,729 -- 1,104,525 0.0 ----------------------------------------------------------------------- $ 1,748,265 $ 59,011 $-- $ 1,689,254 0.0% =======================================================================
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