As filed with the Securities and Exchange Commission on October 1, 2014
Registration Nos. 333- /811-4420
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-6 | ||||
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 | [X] | |||
PRE-EFFECTIVE AMENDMENT NO. | [ ] | |||
POST-EFFECTIVE AMENDMENT NO. | [ ] | |||
and/or | ||||
REGISTRATION STATEMENT UNDER THE INVESTMENT | ||||
COMPANY ACT OF 1940 | ||||
Amendment No. 138 | [X] |
WRL SERIES LIFE ACCOUNT
(Registrant)
TRANSAMERICA PREMIER LIFE INSURANCE COMPANY
(Depositor)
(Former Depositor, Western Reserve Life Assurance Co. of Ohio)
570 Carillon Parkway
St. Petersburg, FL 33716
(Address of Depositors Principal Executive Offices)
Depositors Telephone Number:
(727) 299-1800
Arthur D. Woods, Esq.
Vice President and Senior Counsel
Transamerica Premier Life Insurance Company
570 Carillon Parkway
St. Petersburg, FL 33716
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
As soon as practicable after effectiveness of this registration statement.
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
Title of securities being registered:
Units of interest in a separate account under individual flexible premium variable life policies.
Explanatory Note
Registrant is filing this Registration Statement for the purpose of registering interests under WRL Financial Freedom Builder variable universal life insurance policies (Policies) on a new Form N-6. Interests under the Policies were previously registered on Form N-6 (File No. 333-23359) and funded by WRL Series Life Account (File No. 811-4420). Upon effectiveness of the merger between Western Reserve Life Assurance Co. of Ohio (WRL) with and into Transamerica Premier Life Insurance Company (TPLIC; formerly, Monumental Life Insurance Company{Monumental}) TPLIC became the obligor of the Policies and WRL Series Life Account was transferred intact to TPLIC.
PART A
Information Required in a Prospectus
Transamerica® Associate Freedom Elite Builder
WRL Financial Freedom Builder
WRL Freedom Elite
WRL Freedom Elite Builder
Transamerica® Freedom Elite Builder II
WRL Freedom Equity Protector
WRL Freedom Wealth Protector
Transamerica® Xcelerator Exec
Flexible Premium Variable Life Insurance Policies
Issued by
TRANSAMERICA PREMIER LIFE INSURANCE COMPANY
WRL Series Life Account)
Supplement Dated October 1, 2014
to the
Prospectuses dated May 1, 2014
Administrative Office: 570 Carillon Parkway, St. Petersburg, Florida 33716
Mailing Address: 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499
Transamerica Premier Life Insurance Company (TPLIC, Transamerica Premier, or the Company) is amending each prospectus listed above for certain flexible premium variable life insurance policies (each a Policy; together the Policies) for the purpose of providing information regarding the merger (the Merger) of the issuer of your Policy, Western Reserve Life Assurance Co. of Ohio (WRL or Western Reserve), with and into TPLIC. This supplement should be read and maintained with the prospectus for your Policy.
Currently, WRL Freedom Equity Protector, WRL Freedom Elite, and WRL Financial Freedom Builder are not available for new sales. Following the Merger, TPLIC will not offer those policies; additionally, effective upon the merger date, WRL Freedom Elite Builder and WRL Freedom Wealth Protector will not be available for new sales.
Transamerica® Freedom Elite Builder II, Transamerica® Associate Freedom Elite Builder, and Transamerica® Xcelerator Exec will continue to be available for new sales after the Merger.
The Merger. Effective on or about October 1, 2014, WRL merged with and into its affiliate, TPLIC (prior to July 31, 2014, known as Monumental Life Insurance Company). Before the Merger, the Policies were issued by WRL. Upon consummation of the Merger, WRLs corporate existence ceased by operation of law, and TPLIC assumed legal ownership of all of the assets of WRL, including the separate account funding the Policies, and the assets of the separate account. As a result of the Merger, TPLIC became responsible for all liabilities and obligations of WRL, including those created under the Policies. The Policies have thereby become flexible premium variable life insurance policies funded by a separate account of TPLIC. Accordingly, all references in the prospectus to Western Reserve Life Assurance Co. of Ohio are amended to refer to Transamerica Premier Life Insurance Company.
The Merger did not affect the terms of, or the rights and obligations under your Policy, other than to change the company that provides your Policy benefits from WRL to TPLIC. The Merger also did not result in any adverse tax consequences for any Policy owners, and Policy owners will not be charged additional fees or expenses as a result of the Merger. You will receive a Policy endorsement from TPLIC that reflects the change from WRL to TPLIC.
In conjunction with the merger, WRL Freedom Elite Builder II was renamed Transamerica® Freedom Elite Builder II; WRL Associate Freedom Elite Builder was renamed Transamerica® Associate Freedom Elite Builder; and WRL Xcelerator Exec was renamed Transamerica® Xcelerator Exec. Accordingly, all references in the prospectuses listed above to WRL for those products should be replaced with Transamerica®.
Please note: Upon receipt of all regulatory approvals, anticipated to be by year-end, the link for all electronic transactions will change from www.westernreserve.com to www.premier.transamerica.com.
* * * * * *
The following investment options are available under the Policies:
TRANSAMERICA SERIES TRUST | TRANSAMERICA SERIES TRUST (CONT.) | PROFUNDS (CONT.) | ||
TRANSAMERICA AEGON ACTIVE ASSET ALLOCATION CONSERVATIVE VP | TRANSAMERICA MULTI-MANAGED BALANCED VP | PROFUND VP NASDAQ-100 | ||
TRANSAMERICA AEGON ACTIVE ASSET ALLOCATION MODERATE GROWTH VP | TRANSAMERICA PIMCO TACTICAL BALANCED VP | PROFUND VP OIL & GAS | ||
TRANSAMERICA AEGON ACTIVE ASSET ALLOCATION MODERATE VP | TRANSAMERICA PIMCO TACTICAL CONSERVATIVE VP | PROFUND VP PHARMACEUTICALS | ||
TRANSAMERICA AEGON HIGH YIELD BOND VP | TRANSAMERICA PIMCO TACTICAL GROWTH VP | PROFUND VP PRECIOUS METALS | ||
TRANSAMERICA AEGON MONEY MARKET VP | TRANSAMERICA PIMCO TOTAL RETURN VP | PROFUND VP SHORT EMERGING MARKETS | ||
TRANSAMERICA AEGON U.S. GOVERNMENT SECURITIES VP | TRANSAMERICA SYSTEMATIC SMALL/MID CAP VALUE VP | PROFUND VP SHORT INTERNATIONAL | ||
TRANSAMERICA ALLIANCEBERNSTEIN DYNAMIC ALLOCATION VP | TRANSAMERICA T. ROWE PRICE SMALL CAP VP | PROFUND VP SHORT NASDAQ-100 | ||
TRANSAMERICA ASSET ALLOCATION CONSERVATIVE VP | TRANSAMERICA TORRAY CONCENTRATED GROWTH VP | PROFUND VP SHORT SMALL-CAP | ||
TRANSAMERICA ASSET ALLOCATION GROWTH VP | TRANSAMERICA VANGUARD ETF PORTFOLIO-BALANCED VP | PROFUND VP SMALL-CAP | ||
TRANSAMERICA ASSET ALLOCATION MODERATE GROWTH VP | TRANSAMERICA VANGUARD ETF PORTFOLIO-GROWTH VP | PROFUND VP SMALL-CAP VALUE | ||
TRANSAMERICA ASSET ALLOCATION MODERATE VP | TRANSAMERICA WMC DIVERSIFIED GROWTH VP | PROFUND VP TELECOMMUNICATIONS | ||
TRANSAMERICA BARROW HANLEY DIVIDEND FOCUSED VP |
PROFUNDS |
PROFUND VP ULTRANASDAQ-100 | ||
TRANSAMERICA BLACKROCK GLOBAL ALLOCATION VP | PROFUND VP ASIA 30 | PROFUND VP ULTRASMALL-CAP | ||
TRANSAMERICA BLACKROCK TACTICAL ALLOCATION VP | PROFUND VP BASIC MATERIALS | PROFUND VP U.S. GOVERNMENT PLUS | ||
TRANSAMERICA CLARION GLOBAL REAL ESTATE SECURITIES VP | PROFUND VP BULL | PROFUND VP UTILITIES | ||
TRANSAMERICA INTERNATIONAL MODERATE GROWTH VP | PROFUND VP CONSUMER SERVICES | ACCESS ONE TRUST | ||
TRANSAMERICA JPMORGAN CORE BOND VP | PROFUND VP EMERGING MARKETS | ACCESS VP HIGH YIELD FUND | ||
TRANSAMERICA JPMORGAN ENHANCED INDEX VP | PROFUND VP EUROPE 30 |
FIDELITY FUNDS | ||
TRANSAMERICA JPMORGAN TACTICAL ALLOCATION VP | PROFUND VP FALLING U.S. DOLLAR | FIDELITY INDEX 500 PORTFOLIO | ||
TRANSAMERICA JANUS BALANCED VP |
PROFUND VP FINANCIALS |
ALLIANCEBERNSTEIN
VARIABLE | ||
TRANSAMERICA JENNISON GROWTH VP | PROFUND VP INTERNATIONAL | ALLIANCEBERSTEIN BALANCED WEALTH STRATEGY PORTFOLIO | ||
TRANSAMERICA MFS INTERNATIONAL EQUITY VP |
PROFUND VP JAPAN |
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST | ||
TRANSAMERICA MORGAN STANLEY CAPITAL GROWTH VP | PROFUND VP MID-CAP | FRANKLIN FOUNDING FUNDS ALLOCATION VIP FUND | ||
TRANSAMERICA MORGAN STANLEY MID-CAP GROWTH VP | PROFUND VP MONEY MARKET |
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The following replaces the heading Western Reserve, The Separate Account, The Fixed Account and the Portfolios and the description of the insurance company depositor of the separate account that funds your Policy, and updates the description of the Separate Account:
TRANSAMERICA PREMIER, THE SEPARATE ACCOUNT, THE FIXED ACCOUNT AND THE PORTFOLIOS
TRANSAMERICA PREMIER LIFE INSURANCE COMPANY
Transamerica Premier Life Insurance Company (formerly, Monumental Life Insurance Company) was incorporated under the laws of the State of Maryland on March 5, 1858. It was re-domesticated to the State of Iowa on April 1, 2007. It is engaged in the sale of life and health insurance and annuity policies. The Company is a wholly-owned indirect subsidiary of Transamerica Corporation which conducts most of its operations through subsidiary companies engaged in the insurance business or in providing non-insurance financial services. All of the stock of Transamerica Corporation is indirectly owned by Aegon N.V. of The Netherlands, the securities of which are publicly traded. Aegon N.V., a holding company, conducts its business through subsidiary companies engaged primarily in the insurance business. The Company is licensed in the District of Columbia, Guam, Puerto Rico and all states except New York.
On July 31, 2014, Monumental Life Insurance Company changed its name to Transamerica Premier Life Insurance Company (TPLIC).
All obligations arising under the Policies, including the promise to make life insurance and annuity payments, are general corporate obligations of the Company. Accordingly no financial institution, brokerage firm or insurance agency is responsible for the financial obligations of the Company arising under the Policies.
THE SEPARATE ACCOUNT
WRL Series Life Account was a separate account of Western Reserve, established under Ohio law. Effective on October 1, 2014, WRL Series Life Account was re-domesticated under the laws of the State of Iowa and reestablished under TPLIC. The separate account receives and invests the premium payments that are allocated to it for investment in shares of the underlying fund portfolios. The separate account is registered with the SEC as a unit investment trust under the Investment Company Act of 1940 (the 1940 Act). However, the SEC does not supervise the management, the investment practices, or the policies of the separate account or the Company. Income, gains and losses (whether or not realized), from assets allocated to the separate account are, in accordance with the policies, credited to or charged against the separate account without regard to the Companys other income gains or losses.
The separate account is divided into subaccounts, each of which invests in shares of a specific portfolio of a fund. These subaccounts buy and sell portfolio shares at net asset value without any sales charge. Any dividends and distributions from a portfolio are reinvested at net asset value in shares of that portfolio.
The assets of the separate account are held in the Companys name on behalf of the separate account and belong to the Company. However, the portion of the assets of the separate account equal to the reserves and other policy liabilities with respect to the separate account are not chargeable with liabilities arising out of any other business the Company may conduct. The separate account may include other subaccounts that are not available under these policies.
* * * * * * *
The following replaces the second paragraph under the heading Additional InformationLegal Proceedings in your prospectus:
We are currently being audited on behalf of multiple states treasury and controllers offices for compliance with laws and regulations concerning the identification, reporting and escheatment of unclaimed benefits or abandoned funds. The audits focus on insurance company processes and procedures for identifying unreported death claims, and their use of the Social Security Master Death File to identify deceased policy and contract holders. In addition, we are the subject of multiple state Insurance Department inquiries and market conduct examinations with a similar focus on the handling of unreported claims and abandoned property. The audits and related examination activity have resulted in or may result in additional payments to beneficiaries, escheatment of funds deemed abandoned, administrative penalties and changes
in our procedures for the identification of unreported claims and handling of escheatable property. We do not believe that any regulatory actions or agreements that have resulted from or will result from these examinations has had or will have a material adverse impact on the separate account, on TCIs ability to perform under its principal underwriting agreement, or on our ability to meet our obligations under the policy. Although it is possible that the outcome of any such examination could have a material adverse impact on results of Transamerica Premiers operations in any particular reporting period as the proceedings are resolved, TPLIC believes that it has adequately reserved for the unclaimed matters described here.
* * * * * * *
The following herby replaces the first paragraph under the heading Additional Information-Financial Statements:
The statutory basis financial statements of Transamerica Premier Life Insurance Company (formerly, Monumental Life Insurance Company) and Western Reserve Life Assurance Co. of Ohio, and the audited financial statements (U.S. GAAP basis) of the WRL Series Life Account are included in the SAI. Unaudited pro forma combined financial statements showing the effects of the merger of Western Reserve Life Assurance Co. of Ohio with and into Transamerica Premier Life Insurance Company as of December 31, 2013, are also included.
PROSPECTUS
May 1, 2014
WRL FINANCIAL FREEDOM BUILDER®
issued through
WRL Series Life Account by
Western Reserve Life Assurance Co. of Ohio
Administrative Office
570 Carillon Parkway
St. Petersburg, Florida 33716
Please direct transactions, claim forms, payments and other correspondence and notices as follows:
Transaction Type |
Direct or Send to: | |
Telephonic Transaction |
1-727- 299-1800 or 1-800-851-9777 (toll free) | |
Facsimile Transaction |
1-727-299-1648 (subaccount transfers only) 1-727-299-1620 (all other facsimile transactions) | |
Electronic Transaction |
www.westernreserve.com | |
All payments made by check, and all claims, correspondence and notices |
Mailing Address: 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499 |
An Individual Flexible Premium Variable Life Insurance Policy
This prospectus describes the WRL Financial Freedom Builder®, a flexible premium variable life insurance policy (the Policy). You can allocate your Policys cash value to the fixed account (which credits a specified guaranteed interest rate) and/or to the WRL Series Life Account, which invests through its subaccounts in portfolios of the Transamerica Series Trust Initial Class (the Series Trust), Fidelity Variable Insurance Products Funds Service Class 2 (the Fidelity VIP Funds), the ProFunds, the Access One Trust (Access Trust), the AllianceBernstein Variable Products Series Fund, Inc. (AllianceBernstein), and the Franklin Templeton Variable Insurance Product Trust (Franklin Templeton), (collectively, the funds). Please refer to the next page of this prospectus for the list of portfolios available to you under the Policy. We do not currently offer this Policy for sale to new purchasers.
The value of your Policy that is allocated to the subaccounts may fluctuate. You bear the risk that your Policy value may decrease.
If you already own a life insurance policy, it may not be to your advantage to buy additional insurance or to replace your policy with the Policy described in this prospectus. Additionally, it may not be to your advantage to borrow money to purchase the Policy or to take withdrawals from another policy you own to make premium payments under the Policy.
Prospectuses for the portfolios of the funds must accompany this prospectus. Certain portfolios may not be available in all states. Please read these documents before investing and save them for future reference.
The Policy is not a bank deposit. The Policy is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
PORTFOLIOS AVAILABLE UNDER YOUR POLICY
TRANSAMERICA SERIES TRUST* | TRANSAMERICA SERIES TRUST* | PROFUNDS | ||||||||
Ø | TRANSAMERICA AEGON ACTIVE ASSET ALLOCATION CONSERVATIVE VP | Ø | TRANSAMERICA MULTI-MANAGED BALANCED VP | Ø | PROFUND VP NASDAQ-100 | |||||
Ø | TRANSAMERICA AEGON ACTIVE ASSET ALLOCATION MODERATE GROWTH VP | Ø | TRANSAMERICA PIMCO TACTICAL BALANCED VP | Ø | PROFUND VP OIL & GAS | |||||
Ø | TRANSAMERICA AEGON ACTIVE ASSET ALLOCATION MODERATE VP | Ø | TRANSAMERICA PIMCO TACTICAL CONSERVATIVE VP | Ø | PROFUND VP PHARMACEUTICALS | |||||
Ø | TRANSAMERICA AEGON HIGH YIELD BOND VP | Ø | TRANSAMERICA PIMCO TACTICAL GROWTH VP | Ø | PROFUND VP PRECIOUS METALS | |||||
Ø | TRANSAMERICA AEGON MONEY MARKET VP | Ø | TRANSAMERICA PIMCO TOTAL RETURN VP | Ø | PROFUND VP SHORT EMERGING MARKETS | |||||
Ø | TRANSAMERICA AEGON U.S. GOVERNMENT SECURITIES VP | Ø | TRANSAMERICA SYSTEMATIC SMALL/MID CAP VALUE VP | Ø | PROFUND VP SHORT INTERNATIONAL | |||||
Ø | TRANSAMERICA ALLIANCEBERNSTEIN DYNAMIC ALLOCATION VP | Ø | TRANSAMERICA T. ROWE PRICE SMALL CAP VP | Ø | PROFUND VP SHORT NASDAQ-100 | |||||
Ø | TRANSAMERICA ASSET ALLOCATION CONSERVATIVE VP | Ø | TRANSAMERICA TORRAY CONCENTRATED GROWTH VP | Ø | PROFUND VP SHORT SMALL-CAP | |||||
Ø | TRANSAMERICA ASSET ALLOCATION GROWTH VP | Ø | TRANSAMERICA VANGUARD ETF PORTFOLIO-BALANCED VP | Ø | PROFUND VP SMALL-CAP | |||||
Ø | TRANSAMERICA ASSET ALLOCATION MODERATE GROWTH VP | Ø | TRANSAMERICA VANGUARD ETF PORTFOLIO-GROWTH VP | Ø | PROFUND VP SMALL-CAP VALUE | |||||
Ø | TRANSAMERICA ASSET ALLOCATION MODERATE VP | Ø | TRANSAMERICA WMC DIVERSIFIED GROWTH VP | Ø | PROFUND VP TELECOMMUNICATIONS | |||||
Ø | TRANSAMERICA BARROW HANLEY DIVIDEND FOCUSED VP | PROFUNDS | Ø | PROFUND VP ULTRANASDAQ-100 | ||||||
Ø | TRANSAMERICA BLACKROCK GLOBAL ALLOCATION VP | Ø | PROFUND VP ASIA 30 | Ø | PROFUND VP ULTRASMALL-CAP | |||||
Ø | TRANSAMERICA BLACKROCK TACTICAL ALLOCATION VP | Ø | PROFUND VP BASIC MATERIALS | Ø | PROFUND VP U.S. GOVERNMENT PLUS | |||||
Ø | TRANSAMERICA CLARION GLOBAL REAL ESTATE SECURITIES VP | Ø | PROFUND VP BULL | Ø | PROFUND VP UTILITIES | |||||
Ø | TRANSAMERICA INTERNATIONAL MODERATE GROWTH VP | Ø | PROFUND VP CONSUMER SERVICES | ACCESS TRUST | ||||||
Ø | TRANSAMERICA JPMORGAN CORE BOND VP | Ø | PROFUND VP EMERGING MARKETS | Ø | ACCESS VP HIGH YIELD FUND | |||||
Ø | TRANSAMERICA JPMORGAN ENHANCED INDEX VP | Ø | PROFUND VP EUROPE 30 | FIDELITY FUNDS** | ||||||
Ø | TRANSAMERICA JPMORGAN TACTICAL ALLOCATION VP | Ø | PROFUND VP FALLING U.S. DOLLAR | Ø | FIDELITY INDEX 500 PORTFOLIO | |||||
Ø | TRANSAMERICA JANUS BALANCED VP | Ø | PROFUND VP FINANCIALS | ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. | ||||||
Ø | TRANSAMERICA JENNISON GROWTH VP | Ø | PROFUND VP INTERNATIONAL | Ø | ALLIANCEBERSTEIN BALANCED WEALTH STRATEGY PORTFOLIO | |||||
Ø | TRANSAMERICA MFS INTERNATIONAL EQUITY VP | Ø | PROFUND VP JAPAN | FRANKLIN TEMPLETON VARIABLE PRODUCTS TRUST | ||||||
Ø | TRANSAMERICA MORGAN STANLEY CAPITAL GROWTH VP | Ø | PROFUND VP MID-CAP | Ø | FRANKLIN FOUNDING FUNDS ALLOCATION VIP FUND | |||||
Ø | TRANSAMERICA MORGAN STANLEY MID-CAP GROWTH VP | Ø | PROFUND VP MONEY MARKET |
*Transamerica JPMorgan Mid Cap Value VP, previously offered as an investment option under the Policy, does not accept new investments from current or prospective investors; the prospectus for this portfolio was mailed to policyowners invested in the portfolio under separate cover.
**Effective May 1, 2003, the Fidelity VIP Contrafund® Portfolio, Fidelity VIP Equity-Income Portfolio and the Fidelity VIP Growth Opportunities Portfolio were no longer available for sale to new investors. Prospectuses for those portfolios were mailed under separate cover to policyowners currently invested in the portfolios.
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iii
POLICY BENEFITS/RISKS SUMMARY WRL FINANCIAL FREEDOM BUILDER®
This summary describes the Policys important benefits and risks. The sections in this prospectus following this summary discuss the Policy in more detail. Additional discussion is also included in the Statement of Additional Information (SAI). For your convenience, we have provided a Glossary at the end of this prospectus that defines certain words and phrases used in this prospectus.
| The WRL Financial Freedom Builder® is an individual flexible premium variable life insurance policy, which gives you the potential for long-term life insurance coverage with the opportunity for tax-deferred accumulation of cash value. |
| The Policy is designed to be long-term in nature in order to provide significant life insurance benefits for you. You should only purchase the Policy if you have the financial ability to keep it in force for a substantial period of time. You should consider the Policy in conjunction with other insurance that you own. |
| Your Policy offers supplemental riders, and depending on which riders are selected, certain charges may be deducted from the Policys cash value as part of the monthly deductions. |
| You will have a free look period once we deliver your Policy. You may return the Policy with the original signature during this period and receive a refund. Please see the section of this prospectus entitled Canceling a Policy for a description of the free look period. |
| After the third Policy year you may either change the death benefit option or decrease the specified amount once each Policy year. A decrease in specified amount is limited to no more than 20% of the specified amount before the decrease. The new specified amount cannot be less than the minimum specified amount as shown in your Policy. We do not allow increases in specified amount. For further details, please see Death Benefits Decreasing the Specified Amount in this prospectus. |
| You can invest your net premium in, and transfer your cash value to, subaccounts. While allocated to subaccounts, your cash value will fluctuate with the daily performance of the portfolios in which the subaccounts invest. |
| You may place your money in the fixed account where it earns an interest rate declared in advance for a specified period (at least 4% annual interest) or in any of the subaccounts of the WRL Series Life Account (the Separate Account), which are described in this prospectus. The fixed account is not available to you if your Policy was issued in the State of New Jersey. |
| The Policys cash value will increase or decrease depending on the investment performance of the subaccounts, the premiums you pay, the fees and charges that we deduct, the interest we credit to the fixed account, and the effects of any Policy transactions (such as transfers, loans and cash withdrawals). Returns are not guaranteed. The Policy is not suitable as a short-term investment or savings vehicle. |
| Your Policy has a no lapse guarantee which means that as long as requirements are met, your Policy will remain in force and no grace period will begin until the no lapse date shown on your Policy schedule page. This is true even if your net surrender value is too low to pay the monthly deductions, as long as, on any Monthiversary, you have paid premiums (minus any cash withdrawals, minus any outstanding loan amount, minus any accrued loan interest, and minus any decrease charge) that equal or exceed the sum of the minimum monthly guarantee premiums in effect for each month from the Policy date up to and including the current month. The no lapse period guarantee is discussed in more detail in the section of this prospectus entitled Policy Lapse and Reinstatement. |
| There may be adverse consequences should you decide to surrender your Policy early, such as payment of a surrender charge during the first 15 Policy years. |
The Policy is designed to be flexible to meet your specific circumstances and life insurance needs. Within certain limits, you can:
| Choose the timing, amount and frequency of premium payments. |
| Change the Death Benefit Option. |
| Decrease the amount of life insurance coverage. |
| Change the beneficiary. |
| Transfer cash value among investment options available under the Policy. |
| Take a loan against the Policy. |
| Take cash withdrawals or surrender the Policy. |
1
If the insured dies while the Policy is in force, we will pay a death benefit to the named beneficiary(ies) subject to applicable law and in accordance with the terms of the Policy. The amount of the death benefit generally depends on the specified amount of insurance that you select, the death benefit option that you choose, your Policys cash value, and any additional life insurance provided by riders that you purchase. The death benefit proceeds are reduced by any outstanding loan amount, including accrued loan interest, and any charges that are due and unpaid if the insured dies during the grace period.
You may choose one of three Death Benefit Options:
| Under Option A, the death benefit is the greatest of: |
> | The specified amount; or |
> | The minimum death benefit under the Guideline Premium Test; or |
> | The amount required for the Policy to qualify as a life insurance policy under Section 7702 of the Internal Revenue Code. |
| Under Option B. the death benefit is the greatest of: |
> | The specified amount plus the Policys cash value on the date of the insureds death; or |
> | The minimum death benefit under the Guideline Premium Test; or |
> | The amount required for the Policy to qualify as a life insurance policy under Section 7702 of the Internal Revenue Code. |
| Under Option C, the death benefit is the greatest of: |
> | The amount payable under Option A; or |
> | The specified amount, multiplied by an age-based factor, plus the Policys cash value on the date of the insureds death; or |
> | The amount required for the Policy to qualify as a life insurance policy under Section 7702 of the Internal Revenue Code. |
Cash value is the sum of the value of your investments in the subaccounts plus the value of the fixed account (including the loan reserve account) on any business day. It is not guaranteed it depends on the performance of the investment options that you have chosen, the timing and the amount of premium payments you have made, Policy charges deducted, and how much you have withdrawn from the Policy.
You can access your cash value in several ways:
| Withdrawals You can withdraw part of your Policys surrender value once each policy year after the first policy year. Withdrawals are described in more detail in the section of this prospectus entitled Surrenders and Cash Withdrawals Cash Withdrawals. |
| Loans After the first policy year, you can take a loan from the Policy using your Policys net surrender value as security. Loans and loan interest rates are described in more detail in the section of this prospectus entitled Loans. |
| Surrender You can surrender or cash in your Policy for its net surrender value while the insured is alive. Surrenders are described in more detail in the section of this prospectus entitled Surrenders and Cash Withdrawals Surrenders. You may pay a substantial surrender charge if you surrender your Policy. |
You can choose to allocate your net premiums and cash value among the subaccounts, each of which invests in a corresponding portfolio of the various underlying funds. Your Policy also offers a fixed account option, which provides a guaranteed minimum rate of interest.
You can transfer your cash value among the fixed account and the subaccounts during the life of your Policy. You can accumulate cash value in the fixed account and the subaccounts without paying any current income tax. We may limit the number of transfers out of the fixed account and, in some cases, may limit your transfer activity to deter disruptive trading and market timing. We may charge a $25 transfer processing fee for each transfer after the first 12 transfers in a Policy year.
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For more details, please refer to the section entitled Transfers in this prospectus.
We intend the Policy to qualify as a life insurance contract under the Internal Revenue Code so that the death benefit generally should not be taxable income to the beneficiary. If your policy is not a Modified Endowment Contract (MEC) you will generally not be taxed on the gain in the Policy unless you take a cash withdrawal in excess of your basis in the Policy or a loan that is not repaid prior to surrender of your Policy. If your Policy is a MEC, cash withdrawals, loans, assignments, and pledges are treated first as taxable income to you to the extent of gain then in the policy and then as non-taxable recovery of basis. In addition, such gains may be subject to a 10% penalty tax if received before age 59 1⁄2. Please refer to the section of this prospectus entitled Federal Income Tax Considerations for more details.
The Policy is designed to help meet long-term financial objectives by paying a death benefit to family members and/or other named beneficiaries. It is not suitable as a short-term savings vehicle. It may not be the right kind of policy if you plan to withdraw money or surrender the Policy for short-term needs. A charge may be assessed on withdrawals. You may pay substantial charges if you surrender your Policy. See the section of this prospectus Fee Tables and your Policy for charges assessed when taking cash withdrawals or surrendering your Policy.
Please discuss your insurance needs and financial objectives with your registered representative.
Risk of an Increase in Current Fees and Expenses
Certain fees and expenses are currently assessed at less than their guaranteed maximum levels. In the future, these charges may be increased up to the guaranteed (maximum) levels. If fees and expenses are increased, you may need to increase the amount and/or frequency of premiums to keep the Policy in force.
If you invest your Policys cash value in one or more subaccounts, then you will be subject to the risk that investment performance of the subaccounts will be unfavorable and that your cash value will decrease. Also, we deduct Policy fees and charges from your cash value, which can significantly reduce your cash value. During times of poor investment performance, this deduction will have an even greater impact on your cash value. You could lose everything you invest and your Policy could lapse without value, unless you pay additional premiums. If you allocate premiums to the fixed account, then we credit your fixed account value with interest at a rate declared by us. You assume the risk that the interest rate on the fixed account may decrease, although it will never be lower than the guaranteed minimum annual effective rate of 4%.
Risks of Managing General Account Assets
The general account assets of Western Reserve Life Assurance Co. of Ohio (WRL; Western Reserve; the Company) are used to support the payment of the death benefit under the Policies. To the extent that Western Reserve is required to pay amounts in addition to the Policys subaccount value under the death benefit, such amounts will come from general account assets. You should be aware that the general account assets are exposed to the risks normally associated with a portfolio of fixed-income securities, including interest rate, option, liquidity and credit risk and are also subject to the claims of Western Reserves general creditors. Western Reserves financial statements contained in the Statement of Additional Information include a further discussion of risks inherent with the general account investments.
Federal tax laws limit the premium payments you can make in relation to your Policys Death Benefit. We may refuse all or part of a premium payment that you make, or remove all or part of a premium from your Policy and return it to you with earnings under certain circumstances to maintain qualification of the Policy as a life insurance contract for federal income tax purposes. Please refer to the section in this prospectus entitled Premiums for more details.
Your Policy will stay in force as long as the net surrender value is sufficient to cover your monthly deductions and Policy charges, or as long as the no lapse guarantee is in effect. Insufficient premium payments, poor investment performance, withdrawals, and unpaid loans or loan interest may cause your Policy to lapse which means you will no
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longer have insurance coverage. A Policy lapse may have adverse tax consequences. There are costs associated with reinstating a lapsed Policy. For a detailed discussion of your Policys Lapse and Reinstatement provisions, please refer to the section of this prospectus entitled Policy Lapse and Reinstatement.
Making a withdrawal or taking a loan may:
| Reduce your Policys specified amount. |
| Reduce the death benefit proceeds paid to your beneficiary. |
| Make your Policy more susceptible to lapsing. |
| Trigger federal income taxes and possibly a penalty tax. |
Cash withdrawals will reduce your cash value. Withdrawals, especially those taken during periods of poor investment performance by the subaccounts, could considerably reduce or eliminate some benefits or guarantees of the Policy. Federal income taxes and a penalty tax may apply to loans, cash withdrawals and surrenders. Please see the section of this prospectus entitled Federal Income Tax Considerations.
Be sure to plan carefully before using these Policy benefits. For a detailed description of withdrawals and loans, and any associated risks, please see the sections of this prospectus Surrenders and Cash Withdrawals Cash Withdrawals and/or Loans.
If you surrender your Policy during the first 15 Policy years you will pay a surrender charge. The surrender charge may be significant. Federal income tax and/or a penalty tax may also apply. Please see the section of this prospectus entitled Federal Income Tax Considerations.
Tax Consequences of Withdrawals, Surrenders and Loans
You may be subject to income tax if you take any withdrawals or surrender the Policy, or if your Policy lapses and you have not paid any outstanding policy indebtedness. If your Policy is a MEC, cash withdrawals, surrenders, assignments, pledges, and loans that you receive or make during the life of the Policy may be taxable and subject to a federal tax penalty equal to 10% of the taxable amount if taken prior to reaching age 59 1⁄2. Other tax issues to consider when you own a life insurance policy are described in more detail in the section of this prospectus entitled Federal Income Tax Considerations.
Note: You should consult with your own qualified tax advisor to apply the law to your particular circumstances.
A comprehensive discussion of the risks of each portfolio may be found in each portfolios prospectus. Please refer to the prospectuses for the portfolios for more information.
There is no assurance that any portfolio will meet its investment objective.
The following tables describe the fees and expenses that you will pay when buying, owning and surrendering your Policy. If the amount of a charge depends on the personal characteristics of the insured or the owner, then the fee table lists the minimum and maximum charges we assess under the Policy, and the fees and charges of a representative insured with the characteristics set forth below. These charges may not be representative of the charges you will pay.
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The first table describes the fees and expenses that you will pay when buying or owning the Policy, paying premiums, making cash withdrawals from the Policy, surrendering the Policy, or transferring Policy cash value among the subaccounts and the fixed account.
Transaction Fees
| ||||||
Charge |
When Charge is Deducted |
Amount Deducted | ||||
Guaranteed Charge
|
Current Charge1 | |||||
Premium Charge | Upon payment of each premium | |||||
Premium Expense Charge | First 10 Policy years = 6.0% of each premium payment; and 2.5% of premiums in Policy years 11+ | First 10 Policy years = 6.0% of each premium payment; and 2.5% of premiums in Policy years 11+ | ||||
Premium Collection Charge | $3.00 per premium | $3.00 per premium | ||||
Cash Withdrawal Charge2 | Upon withdrawal | 2.0% of the amount withdrawn, not to exceed $25 |
2.0% of the amount withdrawn, not to exceed $25 | |||
Surrender Charge3 | Upon full surrender of the Policy during the first 15 Policy years | |||||
Maximum Charge4 | $57.00 per $1,000 of specified amount during first Policy year. | $57.00 per $1,000 of specified amount during first Policy year. | ||||
Minimum Charge5 | $7.68 per $1,000 of specified amount during the first Policy year. | $7.68 per $1,000 of specified amount during the first Policy year. | ||||
Charge for a Policy6
insuring a male, issue age 30 in the ultimate select non-tobacco use class |
$12.52 per $1,000 of specified amount during first Policy year. | $12.52 per $1,000 of specified amount during first Policy year. |
1 The Company reserves the right at any time to change the current charge, but never to a level that exceeds the guaranteed charge.
2 When we incur the expense of expedited delivery of your partial withdrawal or complete surrender payment, we currently assess the following additional charges: $30 for overnight delivery ($35 for Saturday delivery); and $50 for wire service. You can obtain further information about these charges by contacting our administrative office.
3 The surrender charge will vary based on the issue age, gender and underwriting class of the insured on the Policy. The surrender charge is calculated as the surrender charge per $1,000 of specified amount, multiplied by the number of thousands of dollars in the Policys specified amount (as stated in the Policy), multiplied by the surrender charge factor. The surrender charge factor varies with the insureds age and number of years the Policy has been in force. The surrender charge factor on a Policy where the insureds age on the Policy date is less than 40 will be 1.00 for the first 5 Policy years and then decrease by 0.10 each Policy year until it reaches zero at the end of the 15th Policy year after the Policy date. For a Policy where the age on the Policy date is greater than 39, the surrender charge factor is less than 1.00 at the end of the First Policy year and decreases every year until it reaches zero at the end of the 15th Policy year after the Policy date. The surrender charge shown in the table may not be typical of the charges you will pay. More detailed information about the surrender charges applicable to you is available from your registered representative.
4 This maximum surrender charge is based on an insured with the following characteristics: male, issue age 80, in the standard tobacco use underwriting class. This maximum charge may also apply to insureds with other characteristics.
5 This minimum surrender charge is based on an insured with the following characteristics: female, issue age 4, in the juvenile underwriting class. This minimum charge may also apply to insureds with other characteristics.
6Because we no longer offer this version of the WRL Financial Freedom Builder, the information regarding the representative insured has not been updated since sales terminated in 2003.
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Transaction Fees
| ||||||
Charge |
When Charge is Deducted |
Amount Deducted | ||||
Guaranteed Charge
|
Current Charge1 | |||||
Transfer Charge7 | Upon transfer | $25 for each transfer in excess of 12 per Policy year
|
$25 for each transfer in excess of 12 per Policy year | |||
Change in Net Premium Allocation Charge | Upon change of allocation instructions for premium payments in excess of one per Policy quarter |
$25 | None | |||
Pro Rata Decrease Charge | Deducted when specified amount is decreased during the first 15 Policy years | Equal to the surrender charge (as of the date of the decrease) applicable to that portion of the specified amount that is decreased.
|
Equal to the surrender charge (as of the date of the decrease) applicable to that portion of the specified amount that is decreased. | |||
Terminal Illness Accelerated Death Benefit Rider8 |
When rider is exercised | Discount Factor | Discount Factor |
The table below describes the fees and expenses that you will pay periodically during the time that you own the Policy, not including portfolio fees and expenses.
Periodic Charges Other Than Portfolio Operating Expenses
| ||||||
Charge |
When
Charge is |
Amount Deducted | ||||
Guaranteed Charge
|
Current Charge1 | |||||
Monthly Policy Charge | Monthly, on the Policy date and on each Monthiversary |
$7.50 per month | $5.00 per month |
7 The first 12 transfers per Policy year are free.
8 We do not assess an administrative charge for this rider, however, if the rider is exercised, we do reduce the single sum benefit by a discount factor to compensate us for income lost due to early payment of the death benefit. The discount factor is equal to the Applicable Federal Interest Rate (1.79% for 2014) or the Policy loan interest rate expressed in arrears, whichever is greater, (discount factor). For a complete description of the Terminal Illness Accelerated Death Benefit Rider, please refer to the section entitled Terminal Illness Accelerated Death Benefit Rider in this prospectus.
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Periodic Charges Other Than Portfolio Operating Expenses
| ||||||
Charge |
When Charge is Deducted |
Amount Deducted | ||||
Guaranteed Charge
|
Current Charge | |||||
Cost of Insurance9 (without Extra Ratings)10 |
Monthly, on the Policy date and on each Monthiversary until the insured reaches attained age 95 |
|||||
Maximum Charge11 |
$24.85 per $1,000 of net amount at risk per month12 | $21.12 per $1,000 of net amount at risk per month12 | ||||
Minimum Charge13 |
$0.06 per $1,000 of net amount at risk per month12
|
$0.06 per $1,000 of net amount at risk per month12 | ||||
Initial Charge for a male6 insured, issue age 30, in the ultimate select non-tobacco use class |
$0.12 per $1,000 of net amount at risk per month12 | $0.12 per $1,000 of net amount at risk per month12 | ||||
Mortality and Expense Risk Charge | Daily | Annual rate of 0.90% of average daily net assets of each subaccount in which you are invested | Annual rate of 0.90% for Policy years 1 15, and 0.75% for Policy years 16+, of average daily net assets of each subaccount in which you are invested | |||
Loan Interest Spread14 | On Policy Anniversary15 | 1.49% (effective annual rate, after rounding) | 0.74% (effective annual rate, after rounding) |
9Cost of insurance rates are based on a number of factors including, but not limited to: each insureds attained age, gender, underwriting class, the Policys specified amount, Policy year, and the net amount at risk. Cost of insurance rates generally will increase each year with the age of the insured. The cost of insurance rates shown in the table may not be representative of the charges you will pay. Your Policys schedule page will indicate the guaranteed cost of insurance charges applicable to your Policy. You can obtain more detailed information concerning your cost of insurance charges by contacting your registered representative.
10We may place insureds in substandard underwriting classes with extra ratings that reflect higher mortality risks and that result in higher cost of insurance rates. If the insured possesses additional mortality risks, we may add a surcharge to the cost of insurance rates up to a total charge of $83.33 monthly per $1,000 of net amount at risk.
11This maximum charge is based on an insured with the following characteristics: male, issue age 75, standard tobacco underwriting class and in the 20th Policy year. This maximum charge may also apply to insureds with other characteristics.
12The net amount at risk equals the death benefit on a Monthiversary divided by 1.0032737 minus the cash value on such Monthiversary.
13This minimum charge is based on an insured with the following characteristics: female, age 10 at issue, juvenile underwriting class and in the first Policy year. This minimum charge may also apply to insureds with other characteristics.
14The Loan Interest Spread is the difference between the amount of interest we charge you for a loan and the amount of interest we credit to your loan reserve account. We charge you an annual interest rate on a Policy loan of 5.2% in advance (5.49% effective annual interest rate) on each Policy anniversary. We will also currently credit the amount in the loan collateral account with an effective annual interest rate of 4.75% (4.0% minimum guaranteed). After the 10th Policy year, on all amounts you have borrowed, we currently credit interest to the part of the cash value in excess of the premiums paid less withdrawals at an interest rate equal to the interest rate we charge on the total loan.
15While a Policy loan is outstanding, loan interest is payable in advance on each Policy anniversary. If prior to the next Policy anniversary, there is a loan repayment, Policy lapse or surrender, Policy termination, or the insureds death, we will refund the amount of any loan interest we charged in advance for the period between the date of any such occurrence above and the next Policy anniversary.
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Periodic Charges Other Than Portfolio Operating Expenses | ||||||
Charge | When Charge is Deducted |
Amount Deducted | ||||
Guaranteed Charge
|
Current Charge | |||||
Optional Rider Charges:16 | ||||||
Accidental Death Benefit Rider | Monthly, on the Policy date and on each Monthiversary until the insured reaches attained age 70 | |||||
Maximum Charge17 |
$0.18 per $1,000 of rider face amount per month | $0.18 per $1,000 of rider face amount per month | ||||
Minimum Charge18 |
$0.10 per $1,000 of rider face amount per month | $0.10 per $1,000 of rider face amount per month | ||||
Initial Charge for a male6 insured, issue age 30
|
$0.10 per $1,000 of rider face amount per month | $0.10 per $1,000 of rider face amount per month | ||||
Disability Waiver Rider19 | Monthly, on the Policy date and on each Monthiversary until the insured reaches attained age 60 | |||||
Maximum Charge20 |
$0.39 per $1,000 of Policys net amount at risk per month12 | $0.39 per $1,000 of Policys net amount at risk per month12 | ||||
Minimum Charge21 |
$0.03 per $1,000 of Policys net amount at risk per month12 | $0.03 per $1,000 of Policys net amount at risk per month12 | ||||
Initial charge for a male6 insured, issue age 30 |
$0.04 per $1,000 of Policys net amount at risk per month12
|
$0.04 per $1,000 of Policys net amount at risk per month12 |
16 Optional Rider cost of insurance charges are based on a number of factors, including, but not limited to: some combination of each insureds issue age or attained age, gender and underwriting class, Policy year, and rider face amount. The cost of insurance rates shown in the table may not be representative of the charges you will pay. The rider will indicate the maximum guaranteed rider charges applicable to your Policy. You can obtain more information about this rider by contacting your registered representative.
17 This maximum charge is based on an insured with the following characteristics: male, issue age 50 and in the 20th Policy year. This maximum charge may also apply to insureds with other characteristics.
18 This minimum charge is based on an insured with the following characteristics: male, issue age 45 and in the first Policy year. This minimum charge may also apply to insureds with other characteristics.
19 Disability Waiver charges are based on the insureds issue age, gender and specified amount. The charges shown are for Base Policy only (no riders and benefits). You can obtain more information about these riders by contacting your registered representative.
20 This maximum charge is based on an insured with the following characteristics: female, issue age 55. This maximum charge may also apply to insureds with other characteristics.
21 This minimum charge is based on an insured with the following characteristics: male, issue age 25. This minimum charge may also apply to insureds with other characteristics.
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Periodic Charges Other Than Portfolio Operating Expenses | ||||||
Charge | When Charge is Deducted |
Amount Deducted | ||||
Guaranteed Charge
|
Current Charge1 | |||||
Disability Waiver and Income Rider22 | Monthly, on the Policy date and on each Monthiversary until the insured reaches attained age 60
|
|||||
Maximum Charge23 |
$0.86 per $10 monthly rider units | $0.86 per $10 monthly rider units | ||||
Minimum Charge24 |
$0.20 per $10 monthly rider units | $0.20 per $10 monthly rider units | ||||
Initial charge for a male6 insured, issue age 30
|
$0.23 per $10 monthly rider units | $0.23 per $10 monthly rider units | ||||
Childrens Insurance Rider25 | Monthly, on the Policy date and on each Monthiversary until the Monthiversary after the last insured child reaches his/her 25th birthday (or the death of the last child)
|
$0.60 per $1,000 of rider face amount per month | $0.60 per $1,000 of rider face amount per month | |||
Other Insured Rider26 (without Extra Ratings)10 |
Monthly, on the Policy date and on each Monthiversary until the insured reaches attained age 95
|
|||||
Maximum Charge11 |
$24.85 per $1,000 of rider face amount per month | $21.12 per $1,000 of rider face amount per month | ||||
Minimum Charge13 |
$0.06 per $1,000 of rider face amount per month | $0.06 per $1,000 of rider face amount per month | ||||
Initial Charge for a male6 insured, issue age 30, in the ultimate select non-tobacco use class
|
$0.12 per $1,000 of rider face amount per month | $0.12 per $1,000 of rider face amount per month |
22 The charge for this rider is based on the insureds issue age, gender and number of units of monthly disability income selected.
23 This maximum charge is based on an insured with the following characteristics: female, issue age 55. This maximum charge may also apply to insureds with other characteristics.
24 This minimum charge is based on an insured with the following characteristics: male, issue age 27. This minimum charge may also apply to insureds with other characteristics.
25 The charge for this rider is based on the rider face amount and the cost per $1,000 does not vary.
26 Rider cost of insurance charges are based on each other insureds issue age, gender and underwriting class, Policy year, and the rider face amount. Cost of insurance rates for this rider generally will increase each year with the age of the other insured. The cost of insurance rates shown in the table may not be representative of the charges you will pay. The rider will indicate the maximum guaranteed rider charges applicable to your Policy. You can obtain more information about this rider by contacting your registered representative.
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Periodic Charges Other Than Portfolio Operating Expenses
| ||||||
Charge |
When Charge |
Amount Deducted | ||||
Guaranteed Charge
|
Current Charge1 | |||||
Primary Insured Rider (without Extra Ratings)10 |
Monthly, on the Policy date and on each Monthiversary until the insured reaches attained age 90 | |||||
Maximum Charge27 |
$18.46 per $1,000 of rider face amount per month | $14.91 per $1,000 of rider face amount per month | ||||
Minimum Charge13 |
$0.06 per $1,000 of rider face amount per month
|
$0.05 per $1,000 of rider face amount per month | ||||
Initial charge for a male6 insured, issue age 30, in the ultimate select non-tobacco use class
|
$0.12 per $1,000 of rider face amount per month | $0.10 per $1,000 of rider face amount per month | ||||
Primary Insured Plus Rider (without Extra Ratings)10 |
Monthly, on the Policy date and on each Monthiversary until the insured reaches attained age 85 | |||||
Maximum Charge |
$13.54 per $1,000 of rider face amount per month28 | $10.93 per $1,000 of rider face amount per month29 | ||||
Minimum Charge |
$0.08 per $1,000 of rider face amount per month30 | $0.04 per $1,000 of rider face amount per month31 | ||||
Initial charge for a male insured, issue age 30, in the ultimate select non-tobacco use class
|
$0.12 per $1,000 of rider face amount per month | $0.06 per $1,000 of rider face amount per month |
27 This maximum charge is based on an insured with the following characteristics: male, issue age 70, standard tobacco underwriting class and in the 20th Policy year. This maximum charge may also apply to insureds with other characteristics.
28 This maximum charge is based on an insured with the following characteristics: male, issue age 75, standard tobacco use class and in the 10th Policy year. This maximum charge may also apply to insureds with other characteristics.
29 This maximum charge is based on an insured with the following characteristics: male, issue age 69, standard tobacco use class and the 16th Policy year. This maximum charge may also apply to insureds with other characteristics.
30 This minimum charge is based on an insured with the following characteristics: female, issue age 18, non-tobacco use class and in the first Policy year. This minimum charge may also apply to insureds with other characteristics.
31 This minimum charge is based on an insured with the following characteristics: female, issue age 29, ultimate select non-tobacco use class and in the first Policy year. This minimum charge may also apply to insureds with other characteristics.
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For information concerning compensation paid for the sale of the Policy, please see Sale of the Policies.
Range of Expenses for the Portfolios
The next table shows the lowest and highest total operating expenses charged by the portfolios during the fiscal year ended December 31, 2013. 1, 2 Expenses of the portfolios may be higher or lower in the future. More detail concerning each portfolios fees and expenses is contained in the prospectus for each portfolio.
Lowest | Highest | |||||||
Total Annual Portfolio Operating Expenses (total of all expenses that are deducted from portfolio assets, including management fees, 12b-1 fees, and other expenses) | 0.35% | 2.45% | ||||||
Net Annual Portfolio Operating Expenses (total of all expenses that are deducted from portfolio assets, including management fees, 12b-1 fees, and other expenses, after contractual waiver of fees and expenses)3 | 0.35% | 1.71% |
1 The portfolio expenses used to prepare this table were provided to Western Reserve by the funds. The expenses shown are those incurred for the year ended December 31, 2013. Current or future expenses may be greater or less than those shown.
2 The table showing the range of expenses for the portfolios takes into account the expenses of several Transamerica Series Trust asset allocation portfolios and the Franklin Founding Funds Allocation VIP Fund that are each a fund of funds. A fund of funds portfolio typically allocates its assets, within predetermined percentage ranges, among certain other Fund portfolios and affiliated Fund portfolios (each such portfolio an Acquired Fund). Each fund of funds has its own set of operating expenses, as does each of the portfolios in which it invests. In determining the range of portfolio expenses, Western Reserve took into account the information received from those funds on the combined actual expenses for each of the fund of funds and for the portfolios in which it invests. The combined expense information includes the Acquired Fund (i.e., the underlying funds) fees and expenses for the Transamerica Series Trust asset allocation portfolios and the Franklin Founding Funds Allocation VIP Fund. See the prospectuses for the Transamerica Series Trust and the Franklin Founding Funds Allocation VIP Fund for a presentation of the applicable Acquired Fund fees and expenses.
3 The range of Net Annual Portfolio Operating Expenses takes into account contractual arrangements for 30 portfolios that require a portfolios investment adviser to reimburse or waive portfolio expenses until April 30, 2015.
WESTERN RESERVE, THE SEPARATE ACCOUNT, THE FIXED ACCOUNT AND THE PORTFOLIOS
Western Reserve Life Assurance Co. of Ohio, located at 570 Carillon Parkway, St. Petersburg, Florida 33716, is the insurance company issuing the Policy. We are obligated to pay all benefits under the Policy.
Financial Condition of the Company
The benefits under your Policy are paid by Western Reserve from its General Account assets and/or your cash value held in the Companys Separate Account. It is important that you understand that payments of the benefits is not guaranteed and depends upon certain factors discussed below.
Assets in the Separate Account. You assume all of the investment risk for your cash value that is allocated to the subaccounts of the separate account. Your cash value in those subaccounts constitutes a portion of the assets of the separate account. These assets are segregated and insulated from our general account, and may not be charged with liabilities arising from any other business that we may conduct. See The Separate Account.
Assets in the General Account. You also may be permitted to make allocations to the fixed account, which is supported by the assets in our general account. See The Fixed Account. Any guarantees under the Policy that exceed your cash value, such as those associated with the Policys death benefit are paid from our general account (and not the separate account). Therefore, any amounts that we may be obligated to pay under the Policy in excess of subaccount value are subject to our financial strength and claims paying ability and our long term ability to make such payments. The assets of the separate account, however, are also available to cover the liabilities of our general account, but only to the extent that the separate account assets exceed the separate account liabilities arising under the Policies supported by it.
We issue other types of insurance policies and financial products as well, and we also pay our obligations under these products from our assets in the general account.
Our Financial Condition. As an insurance company, we are required by state insurance regulation to hold a specified amount of reserves in order to meet all the contractual obligations of our general account. We monitor reserves so that we hold sufficient amounts to cover actual or expected policy and claims payments. In addition, we may hedge our
11
investments in our general account, and may require purchasers of certain of the variable insurance products that we offer to allocate premium payments and cash value in accordance with specified investment requirements. However, it is important to note that there is no guarantee that we will always be able to meet our claims-paying obligations, and that there are risks to purchasing any insurance products.
State insurance regulators also require insurance companies to maintain a minimum amount of capital, which acts as a cushion in the event that the insurer suffers a financial impairment, based on the inherent risks in the insurers operations. These risks include those associated with losses that we may incur as the result of defaults on the payment of interest or principal on our general account assets, which include bonds, mortgages, general real estate investments, and stocks, as well as the loss in market value of these investments. We may also experience liquidity risk if our general account assets cannot be readily converted into cash to meet obligations to our policyowners or to provide the collateral necessary to finance our business operations.
How to Obtain More Information. We encourage both existing and prospective policyowners to read and understand our financial statements. We prepare our financial statements on a statutory basis. Our financial statements, which are presented in conformity with accounting practices prescribed or permitted by the Ohio Department of Insurance - as well as the financial statements of the separate account - are located in the Statement of Additional Information (SAI). The SAI is available at no charge by writing to our mailing address Western Reserve Life Assurance Co. of Ohio, 4333 Edgewood Rd. NE, Cedar Rapids, Iowa 52499 or by calling us at (800) 851-9777, or by visiting our website www.westernreserve.com. In addition, the SAI is available on the SECs website at http://www.sec.gov. Our financial strength ratings, which reflect the opinions of leading independent rating agencies of WRLs ability to meet its obligations to its policy owners, are available on our website and the websites of these nationally recognized statistical ratings organizations A.M. Best Company (www.ambest.com), Moodys Investors Service (www.moodys.com), Standard & Poors Rating Services (www.standardandpoors.com) and Fitch, Inc. (www.fitchratings.com).
The separate account is an investment account of Western Reserve, established under Ohio law. We own the assets in the separate account, and we may use assets in the separate account to support other variable life insurance policies we issue. The separate account is registered with the Securities and Exchange Commission (SEC) as a unit investment trust under the Investment Company Act of 1940, as amended (the 1940 Act).
The separate account is divided into subaccounts, each of which invests in shares of a specific portfolio of a fund. These subaccounts buy and sell portfolio shares at net asset value without any sales charge. Any dividends and distributions from a portfolio are reinvested at net asset value in shares of that portfolio.
Income, gains, and losses credited to, or charged against, a subaccount of the separate account reflect the subaccounts own investment experience and not the investment experience of our other assets. The separate accounts assets may not be used to pay any of our liabilities other than those arising from the Policies and other variable life insurance policies we issue. If the separate accounts assets exceed the required reserves and other liabilities, we may transfer the excess to our general account.
Changes to the Separate Account. As permitted by applicable law, we reserve the right to make certain changes to the structure and operation of the separate account, which may include:
| Remove, combine, or add subaccounts and make the new or combined subaccounts available to you at our discretion. |
| Combine the separate account or any subaccounts with one or more different separate accounts or subaccounts. |
| Close certain subaccounts to allocations of new net premiums by current or new policyowners at any time at our discretion. |
| Transfer assets of the separate account or any subaccount which we determine to be associated with the class of policies to which the Policy belongs, to another separate account or subaccount. |
| Operate the separate account as a management company under the 1940 Act, or as any other form of investment company permitted by law. |
| Establish additional separate accounts or subaccounts to invest in new portfolios of the funds. |
| Manage the separate account at the direction of a committee. |
| Endorse the Policy, as permitted by law, to reflect changes to the separate account and subaccounts as may be required by applicable law. |
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| Change the investment objective of a subaccount. |
| Substitute, add, or delete fund portfolios in which subaccounts currently invest net premiums, to include portfolios of newly designated funds. (Fund portfolios will not be added, deleted or substituted without prior approval of the SEC to the extent required by the 1940 Act or other applicable laws.) |
| Fund additional classes of variable life insurance policies through the separate account. |
| Restrict or eliminate any voting privileges of owners or other persons who have voting privileges in connection with the operation of the separate account. |
Some, but not all, of these future changes may be the result of changes in applicable laws or interpretation of the laws. We will not make any such changes without receiving any necessary approval of the SEC and applicable state insurance departments. We will notify you of any changes. We reserve the right to make other structural and operational changes affecting the separate account.
In addition, the portfolios that sell their shares to the subaccounts may discontinue offering their shares to the subaccounts.
The fixed account is part of Western Reserves general account. We use general account assets to support our insurance and annuity obligations other than those funded by the separate accounts. Subject to applicable law, Western Reserve has sole discretion over the investment of the fixed accounts assets. Western Reserve bears the full investment risk for all amounts contributed to the fixed account. Please see the section above entitled Risks of Managing General Account Assets. Western Reserve guarantees that the amounts allocated to the fixed account will be credited interest daily at an annual net effective interest rate of at least 4.0%. We will determine any interest rate credited in excess of the guaranteed rate at our sole discretion. We have no formula for determining fixed account interest rates in excess of the guaranteed rate or any duration for such rates.
Money you place in the fixed account will begin earning interest credited daily and compounded annually at the current interest rate in effect at the time it is allocated. We may declare current interest rates from time to time. We may declare more than one interest rate for different money based upon the date of allocation or transfer to the fixed account. When we declare a current interest rate higher than the guaranteed rate on amounts allocated to the fixed account, we guarantee the higher rate on those amounts for at least one year (the guarantee period) unless those amounts are transferred to the loan reserve. At the end of the guarantee period we may declare a new current interest rate on those amounts and any accrued interest thereon. We will guarantee this new current interest rate for another guarantee period. We credit interest greater than 4.0% during any guarantee period at our sole discretion. You assume the risk that the interest rate on the fixed account may decrease although it will never be lower than a guaranteed minimum annual effective rate of 4%.
We allocate amounts from the fixed account for cash withdrawals, transfers to the subaccounts or the monthly deductions charges on a first in, first out basis (FIFO) for the purpose of crediting interest.
New Jersey: The fixed account is not available to you if your Policy was issued in the State of New Jersey. You may not direct or transfer any premium payments or cash value to the fixed account. The fixed account is available to you only in connection with Policy loans.
The fixed account has not been registered with the Securities and Exchange Commission and the staff of the Securities and Exchange Commission has not reviewed the disclosure in this prospectus relating to the fixed account. Disclosures regarding the fixed account, however, may be subject to certain generally applicable provisions of the federal securities laws relating to the accuracy and completeness of statements made in this prospectus.
The separate account invests in shares of the portfolios of a fund. Each portfolio is an investment division of a fund, which is an open-end investment management company registered with the SEC. Such registration does not involve supervision of the management or investment practices or policies of the portfolios by the SEC.
Each portfolios assets are held separate from the assets of the other portfolios, and each portfolio has investment objectives and policies that are different from those of the other portfolios. Thus, each portfolio operates as a separate investment fund, and the income or loss of one portfolio has no effect on the investment performance of any other portfolio. Pending any required approval by a state insurance regulatory authority, certain subaccounts and corresponding portfolios may not be available to residents of some states.
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Each portfolios investment objective(s) and policies are summarized below. There is no assurance that a portfolio will achieve its stated objective(s). Certain portfolios may have investment objectives and policies similar to other portfolios that are managed by the same investment adviser or sub-adviser. The investment results of the portfolios, however, may be higher or lower than those of such other portfolios. We do not guarantee or make any representation that the investment results of the portfolios will be comparable to any other portfolio, even those with the same investment adviser or manager.
Certain portfolios invest substantially all of their assets in portfolios of other funds. (See the chart below listing portfolios available under the Policy.) As a result, you will pay fees and expenses at both portfolio levels. This will reduce your investment return. These arrangements are referred to as fund of funds or master-feeder funds. Funds of funds or master-feeder structures may have higher expenses than portfolios that invest directly in debt or equity securities.
Certain portfolios may employ hedging strategies to provide for downside protection during sharp downward movements in equity markets. (See chart below listing portfolios available under the Policy.) The cost of these hedging strategies could limit the upside participation of the portfolio in rising equity markets relative to other portfolios. You should consult with your agent to determine which combination of investment choices is appropriate for you.
The ProFunds and Access Trust portfolios permit frequent transfers. Frequent transfers may increase portfolio turnover. A high level of portfolio turnover may negatively impact performance by increasing transaction costs. In addition, large movements of assets into and out of a ProFunds or Access Trust portfolio may negatively affect a portfolios ability to achieve its investment objective or maintain a consistent level of operating expenses. See Disruptive Trading and Market Timing. Some ProFunds or Access Trust portfolios may use investment techniques not associated with most mutual fund portfolios. Investors in the ProFunds or Access Trust portfolios will bear additional investment risks. See the ProFunds or Access Trust prospectus for a description of the investment risks associated with investing in the ProFunds or Access Trust portfolios.
You can find more detailed information about the portfolios, including a description of risks, in the fund prospectuses. You may obtain a free copy of the fund prospectuses by contacting us at our administrative office at 1-800-851-9777 or visiting our website at www.westernreserve.com. You should read the fund prospectuses carefully.
Note: If you received a summary prospectus for a portfolio listed below, please follow the directions on the first page of the summary prospectus to obtain a copy of the full fund prospectus.
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Portfolio | Investment Adviser/Sub- Adviser |
Investment Objective | ||
TRANSAMERICA SERIES TRUST: | ||||
Transamerica Aegon Active Asset Allocation Conservative VP1 |
Transamerica Asset Management, Inc.
Aegon USA Investment Management, LLC |
Seeks current income and preservation of capital. | ||
Transamerica Aegon Active Asset Allocation Moderate Growth VP1 |
Transamerica Asset Management, Inc.
Aegon USA Investment Management, LLC |
Seeks capital appreciation with current income as a secondary objective. | ||
Transamerica Aegon Active Asset Allocation Moderate VP1 |
Transamerica Asset Management, Inc.
Aegon USA Investment Management, LLC |
Seeks capital appreciation and current income. | ||
Transamerica Aegon High Yield Bond VP2 |
Transamerica Asset Management, Inc.
Aegon USA Investment Management, LLC |
Seeks a high level of current income by investing in high yield debt securities. | ||
Transamerica Aegon Money Market VP3 |
Transamerica Asset Management, Inc.
Aegon USA Investment Management, LLC |
Seeks maximum current income from money market securities consistent with liquidity and preservation of principal. | ||
Transamerica Aegon U.S. Government Securities VP |
Transamerica Asset Management, Inc.
Aegon USA Investment Management, LLC |
Seeks to provide as high a level of total return as is consistent with prudent investment strategies. |
1Each of these asset allocation portfolios is a fund-of-funds and invests in a combination of underlying Exchange Traded Funds (ETFs). Please see each portfolios prospectus for a description of the investment strategy and the risks associated with investing in the portfolio.
2Under normal market conditions, this portfolio invests at least 80% of its net assets in credit default swaps and other financial instruments that in combination have economic characteristics similar to the high yield debt (junk bonds) market and/or in high yield debt securities.
3There can be no assurance that the Transamerica Aegon Money Market VP portfolio will be able to maintain a stable net asset value per share. During extended periods of low interest rates, and partly as a result of insurance charges, the yield on the Transamerica Aegon Money Market VP subaccount may become extremely low and possibly negative.
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Portfolio | Investment Adviser/Sub- Adviser |
Investment Objective | ||
Transamerica AllianceBernstein Dynamic Allocation VP |
Transamerica Asset Management, Inc.
AllianceBernstein, LLP |
Seeks capital appreciation and current income. | ||
Transamerica Asset Allocation Conservative VP4 |
Transamerica Asset Management, Inc.
Aegon USA Investment Management, Inc. |
Seeks current income and preservation of capital. | ||
Transamerica Asset Allocation Growth VP4 |
Transamerica Asset Management, Inc.
Aegon USA Investment Management, Inc. |
Seeks long-term capital appreciation. | ||
Transamerica Asset Allocation Moderate Growth VP4 |
Transamerica Asset Management, Inc.
Aegon USA Investment Management, Inc. |
Seeks capital appreciation with current income as a secondary objective. | ||
Transamerica Asset Allocation Moderate VP4 |
Transamerica Asset Management, Inc.
Aegon USA Investment Management, Inc. |
Seeks capital appreciation and current income. | ||
Transamerica Barrow Hanley Dividend Focused VP |
Transamerica Asset Management, Inc.
Barrow, Hanley, Mewhinney & Strauss, LLC |
Seeks total return gained from the combination of dividend yield, growth of dividends and capital gains. | ||
Transamerica BlackRock Global Allocation VP5 |
Transamerica Asset Management, Inc.
BlackRock Investment Management, LLC |
Seeks high total investment return. | ||
Transamerica BlackRock Tactical Allocation VP6 |
Transamerica Asset Management, Inc.
BlackRock Investment Management, LLC |
Seeks capital appreciation with current income as a secondary objective. | ||
Transamerica Clarion Global Real Estate Securities VP |
Transamerica Asset Management, Inc.
CBRE Clarion Real Estate Securities, L.P. |
Seeks long-term total return from investments primarily in equity securities of real estate companies. Total return consists of realized and unrealized capital gains and losses plus income. |
4Each of these asset allocation portfolios is a fund of funds and invests in a combination of underlying portfolios of Transamerica Series Trust and Transamerica Funds. Please see each portfolios prospectus for a description of the investment strategy and the risks associated with investing in the portfolio.
5Effective May 1, 2014, this portfolio was restructured from a feeder fund to a stand-alone fund. Please see the portfolios prospectus for a description of the investment strategy and the risks associated with investing in the portfolio.
6 Effective May 1, 2014, Transamerica Hanlon Income VP merged with this portfolio. This portfolio utilizes both a tactical asset allocation strategy and a strategic asset allocation strategy to seek to achieve its objective by investing in underlying funds that consist of ETFs and money market mutual funds. Please see the portfolios prospectus for a complete description of the portfolios investment strategies and the risks of investing in the portfolio.
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Portfolio |
Investment Adviser/Sub- Adviser |
Investment Objective | ||
Transamerica International Moderate Growth VP4 |
Transamerica Asset Management, Inc.
Aegon USA Investment Management, Inc. |
Seeks capital appreciation with current income as a secondary objective. | ||
Transamerica JPMorgan Core Bond VP |
Transamerica Asset Management, Inc.
JPMorgan Investment Advisors Inc. |
Seeks total return, consisting of income and capital appreciation. | ||
Transamerica JPMorgan Enhanced Index VP |
Transamerica Asset Management, Inc.
J. P. Morgan Investment Management Inc. |
Seeks to earn a total return modestly in excess of the total return performance of the Standard & Poors 500 Composite Stock Index (S&P 500) (including the reinvestment of dividends) while maintaining a volatility of return similar to the S&P 500. | ||
Transamerica JPMorgan Tactical Allocation VP |
Transamerica Asset Management, Inc.
J. P. Morgan Investment Management Inc. |
Seeks current income and preservation of capital. | ||
Transamerica Janus Balanced VP |
Transamerica Asset Management, Inc.
Janus Capital Management LLC |
Seeks long-term capital growth, consistent with preservation of capital and balanced by current income. | ||
Transamerica Jennison Growth VP |
Transamerica Asset Management, Inc.
Jennison Associates, LLC. |
Seeks long-term growth of capital. | ||
Transamerica MFS International Equity VP |
Transamerica Asset Management, Inc.
MFS® Investment Management |
Seeks capital growth. | ||
Transamerica Morgan Stanley Capital Growth VP |
Transamerica Asset Management, Inc.
Morgan Stanley Investment Management Inc. |
Seeks to maximize long-term growth. | ||
Transamerica Morgan Stanley Mid-Cap Growth VP |
Transamerica Asset Management, Inc.
Morgan Stanley Investment Management Inc. |
Seeks capital appreciation. |
4Each of these asset allocation portfolios is a fund of funds and invests in a combination of underlying portfolios of Transamerica Series Trust and Transamerica Funds. Please see each portfolios prospectus for a description of the investment strategy and the risks associated with investing in the portfolio.
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Portfolio |
Investment Adviser/Sub-Adviser | Investment Objective | ||
Transamerica Multi-Managed Balanced VP |
Transamerica Asset Management, Inc. J. P. Morgan Investment Management Inc. Aegon USA Investment Management, Inc. |
Seeks to provide a high total investment return through investments in a broadly diversified portfolio of stocks, bonds and money market instruments. | ||
Transamerica PIMCO Tactical-Balanced VP |
Transamerica Asset Management, Inc. Pacific Investment Management Company LLC |
Seeks a combination of capital appreciation and income. | ||
Transamerica PIMCO Tactical-Conservative VP |
Transamerica Asset Management, Inc. Pacific Investment Management Company LLC |
Seeks a combination of capital appreciation and income. | ||
Transamerica PIMCO Tactical-Growth VP |
Transamerica Asset Management, Inc. Pacific Investment Management Company LLC |
Seeks a combination of capital appreciation and income. | ||
Transamerica PIMCO Total Return VP |
Transamerica Asset Management, Inc. Pacific Investment Management Company LLC |
Seeks maximum total return consistent with preservation of capital and prudent investment management. | ||
Transamerica Systematic Small/Mid Cap Value VP |
Transamerica Asset Management, Inc. Systematic Financial Management L.P. |
Seeks to maximize total return. | ||
Transamerica T. Rowe Price Small Cap VP |
Transamerica Asset Management, Inc. T. Rowe Price Associates, Inc. |
Seeks long-term growth of capital by investing primarily in common stocks of small growth companies. | ||
Transamerica Torray Concentrated Growth VP7 |
Transamerica Asset Management, Inc. Torray LLC |
Seeks long-term growth of capital. | ||
Transamerica Vanguard ETF Portfolio-Balanced VP |
Transamerica Asset Management, Inc. Aegon USA Investment Management, LLC |
Seeks to balance capital appreciation and income. | ||
Transamerica Vanguard ETF Portfolio-Growth V5 |
Transamerica Asset Management, Inc. Aegon USA Investment Management, LLC |
Seeks capital appreciation as a primary objective and income as a secondary objective. | ||
Transamerica WMC Diversified Growth VP |
Transamerica Asset Management, Inc. Wellington Management Company, LLP |
Seeks to maximize long-term growth. |
7Formerly, Transamerica BNP Paribas Large Cap growth VP.
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Portfolio |
Investment Adviser/Sub-Adviser | Investment Objective | ||
FIDELITY FUNDS: | ||||
Fidelity VIP Index 500 Portfolio |
Fidelity Management & Research Company | Seeks investment results that correspond to the total return of common stocks publicly traded in the United States, as represented by the Standard & Poors 500SM Index. | ||
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.: | ||||
AllianceBernstein Balanced Wealth Strategy Portfolio |
AllianceBernstein L.P. | Seeks to maximize total return. | ||
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST: | ||||
Franklin Templeton Founding Funds Allocation VIP Fund8 |
See Footnote 9 | Seeks capital appreciation with a secondary goal of income. | ||
PROFUNDS: | ||||
ProFund VP Asia 3010 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the daily performance of the ProFunds Asia 30 Index. The fund does not seek to achieve its stated objective over a period of time greater than one day. | ||
ProFund VP Basic Materials10 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Basic Materials Index. The fund does not seek to achieve its stated objective over a period of time greater than one day. | ||
ProFund VP Bull10 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the daily performance of the S&P 500 Index SM. The fund does not seek to achieve its stated objective over a period of time greater than one day. |
8Formerly, Franklin Templeton VIP Founding Funds Allocation Fund. This portfolio is a fund of funds and invests in a combination of Class 1 shares of the Franklin Income Securities Fund, Mutual Shares Securities Fund and Templeton Growth Securities Fund. Please see the portfolios prospectus for a description of the investment strategy and the risks associated with investing in the portfolio.
9Franklin Templeton Services, LLC is the portfolios administrator; the portfolio does not have an investment manager nor does it pay any investment management fees.
10The ProFunds VP and Access Trust portfolios permit frequent transfers, which in turn may increase portfolio turnover. A high level of portfolio turnover may negatively impact performance by increasing transaction costs. In addition, large movements of assets into and out of a ProFunds or Access Trust VP portfolio may negatively impact a funds ability to achieve its investment objective or maintain a consistent level of operating expenses. Please see the ProFunds VP or Access Trust prospectus for a description of the investment objectives and risks associated with investing in the ProFunds or Access Trust VP portfolios.
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Portfolio |
Investment Adviser/Sub-Adviser | Investment Objective | ||
ProFund VP Consumer Services10 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Consumer Services Index®. The fund does not seek to achieve its stated objective over a period of time greater than one day. | ||
ProFund VP Emerging Markets10 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Bank of New York Emerging Markets 50 ADR Index. The fund does not seek to achieve its stated objective over a period of time greater than one day. | ||
ProFund VP Europe 3010 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the daily performance of the ProFunds Europe 30 Index. The fund does not seek to achieve its stated objective over a period of time greater than one day. | ||
ProFund VP Falling U.S. Dollar10 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the inverse (opposite) of the daily performance of the U.S. Dollar Index (USDX) ®. The fund does not seek to achieve its stated objective over a period of time greater than one day. | ||
ProFund VP Financials10 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Financials Index. The fund does not seek to achieve its stated objective over a period of time greater than one day. | ||
ProFund VP International10 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Morgan Stanley Capital International Europe, Australasia and Far East (MSCI EAFE) Index. The fund does not seek to achieve its stated objective over a period of time greater than one day. |
10The ProFunds VP and Access Trust portfolios permit frequent transfers, which in turn may increase portfolio turnover. A high level of portfolio turnover may negatively impact performance by increasing transaction costs. In addition, large movements of assets into and out of a ProFunds or Access Trust VP portfolio may negatively impact a funds ability to achieve its investment objective or maintain a consistent level of operating expenses. Please see the ProFunds VP or Access Trust prospectus for a description of the investment objectives and risks associated with investing in the ProFunds or Access Trust VP portfolios.
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Portfolio |
Investment Adviser/Sub-Adviser | Investment Objective | ||
ProFund VP Japan10 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Nikkei 225 Stock Average. The fund does not seek to achieve its stated objective over a period of time greater than one day. | ||
ProFund VP Mid-Cap10 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the daily performance of the S&P MidCap 400 Index®. The fund does not seek to achieve its stated objective over a period of time greater than one day. | ||
ProFund VP Money Market10,11 |
ProFund Advisors LLC | Seeks a high level of current income consistent with liquidity and preservation of capital. The fund does not seek to achieve its stated objective over a period of time greater than one day. | ||
ProFund VP NASDAQ-10010 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the daily performance of the NASDAQ-100 Index. The fund does not seek to achieve its stated objective over a period of time greater than one day. | ||
ProFund VP Oil & Gas10 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Oil & Gas Index. The fund does not seek to achieve its stated objective over a period of time greater than one day. | ||
ProFund VP Pharmaceuticals10 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Pharmaceuticals Index. The fund does not seek to achieve its stated objective over a period of time greater than one day. |
10The ProFunds VP and Access Trust portfolios permit frequent transfers, which in turn may increase portfolio turnover. A high level of portfolio turnover may negatively impact performance by increasing transaction costs. In addition, large movements of assets into and out of a ProFunds or Access Trust VP portfolio may negatively impact a funds ability to achieve its investment objective or maintain a consistent level of operating expenses. Please see the ProFunds VP or Access Trust prospectus for a description of the investment objectives and risks associated with investing in the ProFunds or Access Trust VP portfolios.
11There can be no assurance that the ProFund VP Money Market portfolio will be able to maintain a stable net asset value per share. During extended periods of low interest rates, and partly as a result of insurance charges, the yield on the ProFund VP Money Market subaccount may become extremely low and possibly negative.
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Portfolio |
Investment Adviser/Sub-Adviser | Investment Objective | ||
ProFund VP Precious Metals10 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones Precious Metals Index. The fund does not seek to achieve its stated objective over a period of time greater than one day. | ||
ProFund VP Short Emerging Markets10 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the inverse (-1x) of the daily performance of the Bank of New York Emerging Markets 50 ADR Index. The fund does not seek to achieve its stated objective over a period of time greater than one day. | ||
ProFund VP Short |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the inverse (-1x) of the daily performance of the Morgan Stanley Capital International Europe, Australasia and Far East (MSCI EAFE) Index. The fund does not seek to achieve its stated objective over a period of time greater than one day. | ||
ProFund VP Short |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the inverse (-1x) of the daily performance of the NASDAQ-100 Index. The fund does not seek to achieve its stated objective over a period of time greater than one day. | ||
ProFund VP Short Small-Cap10 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the inverse (opposite) of the daily performance of the Russell 2000 Index. | ||
ProFund VP Small-Cap10 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Russell 2000 Index. The fund does not seek to achieve its stated objective over a period of time greater than one day. |
10The ProFunds VP and Access Trust portfolios permit frequent transfers, which in turn may increase portfolio turnover. A high level of portfolio turnover may negatively impact performance by increasing transaction costs. In addition, large movements of assets into and out of a ProFunds or Access Trust VP portfolio may negatively impact a funds ability to achieve its investment objective or maintain a consistent level of operating expenses. Please see the ProFunds VP or Access Trust prospectus for a description of the investment objectives and risks associated with investing in the ProFunds or Access Trust VP portfolios.
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Portfolio |
Investment Adviser/Sub-Adviser | Investment Objective | ||
ProFund VP Small-Cap Value10 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the daily performance of the S&P SmallCap 600®/Citigroup Value Index. The fund does not seek to achieve its stated objective over a period of time greater than one day. | ||
ProFund VP Telecommunications10 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Telecommunications Index. The fund does not seek to achieve its stated objective over a period of time greater than one day. | ||
ProFund VP UltraNASDAQ-10010 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to twice (200%) the daily performance of the NASDAQ-100® Index. The fund does not seek to achieve its stated objective over a period of time greater than one day. | ||
ProFund VP UltraSmall-Cap10 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to twice (200%) the daily performance of the Russell 2000 Index. The fund does not seek to achieve its stated objective over a period of time greater than one day. | ||
ProFund VP U. S. Government Plus10 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to one and one-quarter times (125%) the daily price movement of the most recently issued 30-year U.S. Treasury Bond. The fund does not seek to achieve its stated objective over a period of time greater than one day. | ||
ProFund VP Utilities10 |
ProFund Advisors LLC | Seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Utilities Index. The fund does not seek to achieve its stated objective over a period of time greater than one day. | ||
ACCESS TRUST: | ||||
Access VP High Yield Fund10,12 |
ProFund Advisors LLC | Seeks to provide investment results that correspond generally to the total return of the high yield market consistent with maintaining reasonable liquidity. |
10The ProFunds VP and Access Trust portfolios permit frequent transfers, which in turn may increase portfolio turnover. A high level of portfolio turnover may negatively impact performance by increasing transaction costs. In addition, large movements of assets into and out of a ProFunds or Access Trust VP portfolio may negatively impact a funds ability to achieve its investment objective or maintain a consistent level of operating expenses. Please see the ProFunds VP or Access Trust prospectus for a description of the investment objectives and risks associated with investing in the ProFunds or Access Trust VP portfolios.
12Under normal market conditions, this portfolio invests at least 80% of its net assets in credit default swaps and other financial instruments that in combination have economic characteristics similar to the high yield debt (junk bonds) market and/or in high yield debt securities.
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Transamerica Asset Management, Inc. (TAM), located at 570 Carillon Parkway, St. Petersburg, Florida 33716, serves as investment adviser to the Transamerica Series Trust (Series Trust) and manages the Series Trust in accordance with policies and guidelines established by the Series Trusts Board of Trustees. TAM is directly owned by Western Reserve (77%) and AUSA Holding Company (23%). For certain portfolios, TAM has engaged investment sub-advisers to provide portfolio management services. TAM and each investment sub-adviser are registered investment advisers under the Investment Advisers Act of 1940, as amended. See the Series Trust prospectuses for more information regarding TAM and the investment sub-advisers.
Fidelity Management & Research Company (FMR), located at 82 Devonshire Street, Boston, Massachusetts 02109, serves as investment adviser to the Fidelity VIP Funds and manages the Fidelity VIP Funds in accordance with policies and guidelines established by the Fidelity VIP Funds Board of Trustees. For certain portfolios, FMR has engaged investment sub-advisers to provide portfolio management services with regard to foreign investments. FMR and each sub-adviser are registered investment advisers under the Investment Advisers Act of 1940, as amended. See the Fidelity VIP Funds prospectuses for more information regarding FMR and the investment sub-advisers.
ProFund Advisors LLC (ProFund Advisors), located at 7501 Wisconsin Avenue, Suite 1000, Bethesda, Maryland 20814, serves as the investment adviser and provides management services to all of the ProFunds and Access Trust portfolios. ProFund Advisors oversees the investment and reinvestment of the assets in each ProFunds VP portfolio in accordance with policies and guidelines established by the ProFunds Board of Trustees. ProFund Advisors is a registered investment adviser under the Investment Advisers Act of 1940, as amended. See the respective ProFund and/or Access Trust VP prospectuses for more information regarding ProFund Advisors.
AllianceBernstein L.P. (AllianceBernstein), located at 1345 Avenue of the Americas, New York, New York 10105, serves as investment adviser to the Alliance Bernstein Variable Products Series Fund, Inc. and manages the AllianceBernstein Balanced Wealth Strategy Portfolio in accordance with the policies and guidelines established by the AllianceBernstein Board of Directors. Please see the prospectus for the portfolio for more information regarding AllianceBernstein L.P.
Franklin Advisers, L.P. (Franklin), located at One Franklin Parkway, San Mateo, California 94403, serves as investment adviser to the Franklin Templeton Variable Insurance Products Trust and manages the Franklin Founding Funds Allocation VIP Fund. Franklin Templeton Services, LLC (FT Services) serves as administrator for the Franklin Founding Funds Allocation VIP Fund and provides certain administrative services and facilities for the adviser, and oversees rebalancing of the portfolios assets. FT Services is paid a fee for its services from the portfolio. Franklin oversees the investment and reinvestment of the portfolios assets in accordance with policies and guidelines established by the Trusts Board of Trustees. Please see the portfolios prospectus for more information regarding Franklin and FT Services.
Selection of Underlying Portfolios
The underlying portfolios offered through this product are selected by Western Reserve. Western Reserve may consider various factors, including, but not limited to, asset class coverage, the alignment of the investment objectives of an underlying portfolio with our hedging strategy, the strength of the advisers or sub-advisers reputation and tenure, brand recognition, performance, and the capability and qualification of each investment firm. Another factor that we may consider is whether the underlying portfolio or its service providers (e.g., the investment adviser or sub-advisers) or its affiliates will make payments to us or our affiliates in connection with certain administrative, marketing, and support services, or whether affiliates of the portfolio can provide marketing and distribution support for sales of the Policies. (For additional information on these arrangements, please refer to the section of this prospectus entitled Revenue We Receive.) We review the portfolios periodically and may remove a portfolio, or limit its availability to new premiums and/or transfers of cash value if we determine that a portfolio no longer satisfies one or more of the selection criteria, and/or if the portfolio has not attracted significant allocations from policyowners. We have included the Transamerica Series Trust portfolios at least in part because they are managed by TAM, our directly owned subsidiary.
You are responsible for choosing the portfolios, and the amounts allocated to each, that are appropriate for your own individual circumstances and your investment goals, financial situation, and risk tolerance. Because investment risk is borne by you, you should carefully consider any decisions that you make regarding investment allocations.
In making your investment selections, we encourage you to thoroughly investigate all of the information that is available to you regarding the portfolios, including each funds prospectus, statement of additional information and annual and semi-annual reports. After you select portfolios for your initial premium, you should monitor and periodically re-evaluate your allocations to determine if they are still appropriate.
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You bear the risk of any decline in your cash value resulting from the performance of the portfolios you have chosen.
We do not recommend or endorse any particular portfolio and we do not provide investment advice.
Addition, Deletion or Substitution of Portfolios
We do not guarantee that each portfolio will always be available for investment through the Policy. We reserve the right, subject to compliance with applicable law, to add new portfolios or portfolio classes, close existing portfolios or portfolio classes, or substitute portfolio shares that are held by any subaccount for shares of a different portfolio. New or substitute portfolios may have different fees and expenses and their availability may be limited to certain classes of purchasers. We will not add, delete or substitute any shares attributable to your interest in a subaccount without notice to you and prior approval of the SEC, to the extent required by the 1940 Act or other applicable law. We may also decide to purchase securities from other portfolios for the separate account. We reserve the right to transfer separate account assets to another separate account that we determine to be associated with the class of contracts to which the Policy belongs.
Your Right to Vote Portfolio Shares
Even though we are the legal owner of the portfolio shares held in the subaccounts, and have the right to vote on all matters submitted to shareholders of the portfolios, we will vote our shares only as policyowners instruct, as long as such action is required by law.
Before a vote of a portfolios shareholders occurs, you will receive voting materials from us. We will ask you to instruct us on how to vote and to return your voting instructions to us in a timely manner. You will have the right to instruct us on the number of portfolio shares that corresponds to the amount of cash value you have in that portfolio (as of a date set by the portfolio).
If we do not receive voting instructions on time from some policyowners, we will vote those shares in the same proportion as the timely voting instructions we receive. Therefore, because of proportional voting, a small number of policyowners may control the outcome of a vote. Should federal securities laws, regulations and interpretations change, we may elect to vote portfolio shares in our own right. If required by state insurance officials, or if permitted under federal regulation, we may disregard certain owner voting instructions. If we ever disregard voting instructions, we will send you a summary in the next annual report to policyowners advising you of the action and the reasons we took such action.
This section describes the charges and deductions that we make under the Policy in consideration for: (1) the services and benefits we provide; (2) the costs and expenses we incur; and (3) the risks we assume. The fees and charges deducted under the Policy may result in a profit to us.
Services and benefits we provide under the Policy: | The death benefit, cash and loan benefits. | |
Investment options, including premium allocations. | ||
Administration of elective options. | ||
The distribution of reports to owners. | ||
Costs and expenses we incur: | Costs associated with processing and underwriting applications. | |
Expenses of issuing and administering the Policy (including any Policy riders). | ||
Overhead and other expenses for providing services and benefits and sales and marketing expenses, including compensation paid in connection with the sale of the Policies. | ||
Other costs of doing business, such as collecting premiums, maintaining records, processing claims, effecting transactions, and paying federal, state and local premium and other taxes and fees. | ||
Risks we assume: | That the charges we may deduct may be insufficient to meet our actual claims because insureds die sooner than we estimate. | |
That the costs of providing the services and benefits under the Policies may exceed the charges we are allowed to deduct. |
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Some or all the charges we deduct are used to pay aggregate Policy costs and expenses we incur in providing the services and benefits under the Policy and assuming the risks associated with the Policy.
Before we allocate the net premium payments you make, we will deduct the following charges.
The premium expense charge is equal to: |
6.0% of premiums during the first ten Policy years; and | |
2.5% of premiums thereafter. |
Note: Certain events (such as decreases in the specified amount, a change in death benefit option, or a cash withdrawal if you choose Option A or Option C death benefit) may affect the specified amount in force. Premium expense charges will be based on the specified amount in force on the Base Policy at the time we receive the premium.
Some or all of the premium expense charges we deduct are used to pay the aggregate policy costs and expenses we incur, including distribution costs and/or state premium taxes. Although state premium tax rates imposed on us vary from state to state, the premium expense charge deducted will not vary with the state of residence of the policyowner.
The premium collection charge is equal to: | $3.00 per premium payment. | |
We will not increase this charge. |
Monthly deductions will be withdrawn from each subaccount (and/or any available fixed account) in accordance with the current premium allocation instructions. If the value of any account is insufficient to pay its portion of the monthly deductions then we will take the monthly deductions on a pro rata basis from all accounts (i.e., in the same proportion that the value in each subaccount and the fixed account bears to the total cash value on the Monthiversary).
Because portions of the monthly deductions (such as cost of insurance) can vary monthly, the monthly deductions will also vary.
Each monthly deduction consists of: | The monthly Policy charge for the Policy; plus | |
The monthly cost of insurance charge for the Policy (including any surcharge associated with flat or table substandard ratings); plus | ||
The portion of the monthly deductions for any benefits provided by riders attached to the Policy; plus | ||
The pro rata decrease charge (if applicable) incurred as a result of a decrease in the specified amount. | ||
Monthly Policy Charge: | ||
This charge currently equals $5.00 each Policy month. After the first Policy year, we may increase this charge. | ||
We guarantee this charge will never be more than $7.50 per month. | ||
Cost of Insurance Charge: | ||
We deduct this charge each month. It varies each month and is determined as follows: | ||
1. Divide the death benefit on the Monthiversary by 1.0032737 (this factor reduces the net amount at risk, for purposes of computing the cost of insurance, by taking into account assumed monthly earnings at an annual rate of 4.0%). | ||
2. Subtract the cash value on the Monthiversary. | ||
3. Multiply the appropriate monthly cost of insurance rate for the Policy. | ||
Optional Insurance Riders: | ||
The monthly deductions will include charges for any optional insurance benefits you add to your Policy by rider. Please refer to the section below entitled Rider Charges for a description of the rider charges. |
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To determine the appropriate monthly cost of insurance rates we refer to a schedule of current cost of insurance rates and consider a number of factors including, but not limited to: the insureds attained age on the Policy date, gender, underwriting class, and the length of time that the Policy has been in force. Cost of insurance rates generally will increase each year with the age of the insured. The factors that affect the net amount at risk include investment performance of the portfolios in which you invest, payment of premiums, the fees and charges deducted under the Policy, the death benefit option you choose, as well as any Policy transactions (such as loans, cash withdrawals, transfers, and changes in specified amount). Monthly cost of insurance rates may change from time to time. The actual monthly cost of insurance rates are primarily based on our expectations as to future mortality experience and expenses. Monthly cost of insurance rates may be changed by us from time to time. The actual rates we charge will never be greater than the Table of Guaranteed Maximum Life Insurance Rates stated in your Policy. These guaranteed rates are based on the Commissioners 1980 Standard Ordinary Mortality Tobacco and Non-Tobacco Tables (1980 C.S.O. Tables) and the insureds attained age, gender, and underwriting.
The underwriting class of the insured will affect the cost of insurance rates. In determining underwriting classifications, we apply certain criteria that are based on an assessment of the insureds life expectancy. We currently place insureds into preferred and standard classes. We also place insureds into substandard classes with extra ratings, which reflect higher mortality risks and will result in higher cost of insurance rates. Examples of reasons an insured may be placed into an extra risk factor underwriting class include, but are not limited to, medical history, avocation, occupation, driving record, or planned future travel (where permitted by state law).
We may issue certain policies on a simplified, guaranteed issue or expedited basis. Cost of insurance rates for any policies issued on a simplified, guaranteed issue or expedited basis may cause healthy individuals to pay higher cost of insurance rates than they would pay under a substantially similar policy that we offer using different underwriting criteria.
The guaranteed cost of insurance rates under the riders and for any increase in rider face amount are determined in the same manner used to determine the Base Policys cost of insurance charges. Generally, the current cost of insurance rates for the optional riders are lower than the current cost of insurance rates on the Base Policy without riders.
Mortality and Expense Risk Charge
We deduct a daily charge from your cash value in each subaccount that, together with other fees and charges, compensates us for services rendered, the expenses expected to be incurred and the risks assumed. This charge is equal to:
| The value of each subaccount; multiplied by |
| The daily pro rata portion of the annual mortality and expense risk charge rate. |
Currently, the annual rate for the mortality and expense risk charge is equal to 0.90% of the average daily net assets of each subaccount. We may reduce this charge to 0.75% in the 16th Policy year, but we do not guarantee that we will do so, and we reserve the right to maintain this charge at the 0.90% level after the 15th Policy year.
If this charge, combined with other Policy fees and charges, does not cover our total actual costs for services rendered and expenses incurred, we absorb the loss. Conversely, if these fees and charges more than cover actual costs, the excess is added to our surplus. We expect to profit from these charges.
You may surrender your Policy for its cash surrender value at any time upon written request (in good order). If you exercise this option, the Policy and all attached riders will terminate.
If you surrender your Policy completely during the first 15 years, we deduct a surrender charge from your cash value and pay the remaining cash value (less any outstanding loan amount) to you. The surrender charge helps us recover distribution expenses that we incur in connection with the Policy, including sales commissions paid to selling firms and printing and advertising costs, as well as aggregate Policy expenses.
The formula we use to compute the surrender charge reduces that charge at older ages in compliance with state laws. There is no surrender charge if you wait until the end of the 15th Policy year to surrender your Policy.
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The surrender charge may be significant. You should evaluate this charge carefully before you consider a surrender. Under some circumstances the level of surrender charges might result in no net surrender value available if you surrender your Policy in the early Policy years. This will depend on a number of factors, but is more likely if:
| You pay premiums equal to or not much higher than the minimum monthly guarantee premium shown in your Policy; and/or |
| Investment performance is low. |
The surrender charge is equal to: | | The surrender charge per $1,000 of specified amount (varies by issue age, gender and underwriting class on the Policy date); multiplied by | ||
| The number of thousands of specified amount as it is stated in the Policy; multiplied by | |||
| The surrender charge factor. |
The surrender charge per thousand applies to each $1,000 of specified amount, using the rates found in Appendix A of this prospectus.
The surrender charge factor varies by the insureds issue age on the Policy date and number of years the Policy has been in force. In no event are the surrender charge factors any greater than those shown in the table below. We generally determine the surrender charge factor from the Policy date to the surrender date, regardless of whether there were any prior lapses and reinstatements. Please see Surrender Charge Factors in Appendix A-1.
If you decrease the specified amount during the first 15 Policy years we will deduct a pro rata decrease charge from your cash value.
The pro rata decrease charge is equal to: | | The surrender charge per $1,000 of specified amount (varies by issue age, gender and underwriting class on the Policy date); multiplied by | ||
| The number of thousands of specified amount decreased; multiplied by | |||
| The surrender charge factor applicable at the time of the decrease. (See Appendix A.) |
We will not deduct the pro rata decrease charge from the cash value when a specified amount decrease results from:
| A change in the death benefit option; or |
| A cash withdrawal (when you select death benefit Option A). |
If a pro rata decrease charge is deducted because of a decrease in specified amount, any future decrease charges incurred during the surrender charge period will be based on the reduced specified amount.
We will determine the pro rata decrease charge using the above formula, regardless of whether your Policy has lapsed and been reinstated, or you have previously decreased your specified amount. We will not allow a decrease in specified amount if the pro rata decrease charge will cause the Policy to go into a grace period. A decrease in specified amount will generally decrease the insurance protection of the Policy.
We currently allow you to make 12 transfers each Policy year free of charge. Except as listed below, we charge $25 for each additional transfer. We deduct the transfer charge from the amount being transferred. We will not increase this charge.
| For purposes of assessing this transfer charge, all transfers made in one day, regardless of the number of subaccounts affected by the transfer, will be considered a single transfer. |
| Transfers resulting from loans or the exercise of conversion rights currently are not treated as transfers for the purpose of assessing this charge. |
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| Transfers via the Internet are not treated as transfers for the purpose of assessing this charge. |
| Transfers among the ProFunds and/or Access Trust subaccounts are not treated as transfers for the purpose of assessing this charge. |
| Transfers under dollar cost averaging and asset rebalancing are not treated as transfers for the purpose of assessing this charge. |
We currently charge you an effective annual interest rate on a Policy loan of 5.2% in advance (5.49% effective annual interest rate, after rounding) on each Policy anniversary. We also currently credit the amount in the loan reserve with an effective annual interest rate of 4.75% (in arrears) (4.0% guaranteed minimum). After offsetting the 4.75% interest we credit, the net cost of standard loans currently is 0.74% annually, after rounding (1.49% maximum guaranteed, after rounding). After the 10th Policy year, we apply preferred loan rates on an amount equal to the cash value minus total premiums paid (less any cash withdrawals) and minus any outstanding loan amount including accrued loan interest. The current preferred loan interest rate credited is 5.49% effective annually, after rounding, and is not guaranteed.
Change in Net Premium Allocation Charge
We currently do not charge you if you change your net premium allocation. However, in the future we may decide to charge you $25 if you make more than one change every three months in your allocation schedule. We will notify you if we decide to impose this charge.
After the first Policy year, you may take one cash withdrawal per Policy year if your net surrender value is sufficient to cover the amount of the withdrawal and the associated cash withdrawal charge. When you take a cash withdrawal, we charge a processing fee of $25 or 2% of the amount you withdraw, whichever is less. We deduct this amount from the withdrawal, and we pay you the balance. We will not increase this charge.
We currently do not make any deductions for taxes from the separate account. We may do so in the future to the extent that such taxes are imposed by federal or state agencies.
The following charges apply if you elect any of the Riders available under your Policy as noted below. (See Supplemental Benefits (Riders)).
| Terminal Illness Accelerated Death Benefit Rider. We do not assess an administrative charge for this rider, however, if the rider exercised, we reduce the single sum benefit by a discount factor to compensate us for income lost due to the early payment of the death benefit. The discount rate is based on the Applicable Federal Interest Rate (1.79% for 2014) or the Policy loan interest rate, whichever is greater. For a complete description of the Terminal Illness Accelerated Death Benefit Rider, please refer to the section entitled Terminal Illness Accelerated Death Benefit Rider in this prospectus. |
| Primary Insured Rider (PIR) and Primary Insured Rider Plus (PIR Plus). We assess a cost of insurance charge based on the insureds issue age, gender and underwriting class, the Policy year and the rider face amount. Charges generally will increase each year with the age of the insured. |
| Other Insured Rider. We assess a cost of insurance charge based on each other insureds issue age, gender and underwriting class, Policy year and the rider face amount. Charges generally will increase each year with the age of the insured. |
| Childrens Insurance Rider. We assess a cost of insurance charge based on the rider face amount regardless of the number of children insured. |
| Accidental Death Benefit Rider. We assess a cost of insurance charge based on the primary insureds attained age and rider face amount. Charges generally will increase each year with the age of the insured. |
| Disability Waiver Rider. We assess a rider charge based on the primary insureds issue age, gender and net amount at risk for the Policy, as well as a charge based on those riders that would be eligible to have monthly deductions waived. |
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| Disability Waiver and Income Rider. We assess a rider charge based on the primary insureds issue age, gender and the amount of monthly waiver of premium benefit that would be paid in the event of total disability, as defined in the rider. |
The value of each subaccount will reflect the fees and expenses paid by the corresponding portfolio - including, but not limited to - management fees and expenses, operating expenses and any 12b-1 fees. These fees and expenses reduce the value of your portfolio shares. See the fund prospectuses for more detailed information about the portfolios.
We (and our affiliates) may directly or indirectly receive payments from the portfolios, their advisers, sub-advisers, distributors or affiliates in connection with certain administrative, marketing and other support services we (and our affiliates) provide and expenses we incur in selling our variable insurance products.
These arrangements are sometimes referred to as revenue sharing arrangements and are described further below. While only certain of the types of payments described below may be made in connection with your particular Policy, all such payments may nonetheless influence or impact actions we (and/or our affiliates) take, and recommendations we (and our affiliates) make, regarding each of the variable insurance products that we (and our affiliates) offer, including your Policy.
We (and/or our affiliates) may receive some or all of the following types of payments:
| Rule 12b-1 Fees. We, and/or our affiliate, Transamerica Capital, Inc. (TCI), which is the principal underwriter for the Policies, indirectly receive 12b-1 fees from certain funds available as investment choices under our variable insurance products. Any 12b-1 fees received by TCI that are attributable to our variable insurance products are then credited to us. These fees range from 0.00% to 0.35% of the average daily assets of the certain portfolios attributable to the Policies and to certain other variable insurance products that we and our affiliates issue. |
| Administrative, Marketing and Support Service Fees (Support Fees). The investment adviser, sub-adviser, administrators, and/or distributors (or affiliates thereof) of the portfolios may make payments to us and/or our affiliates, including TCI. These payments may be derived, in whole or in part, from the profits the investment adviser or sub-adviser realizes on the advisory fee deducted from portfolio assets. Policyowners, through their indirect investment in the portfolios, bear the costs of these fees. (See the prospectuses for the funds for more information.) The amount of the payments we (or our affiliates) receive is generally based on a percentage of the assets of the particular portfolios attributable to the Policy and to certain other variable insurance products that our affiliates and we issue. These percentages differ and the amounts may be significant. Some advisers or sub-advisers (or other affiliates) pay us more than others. |
The chart below provides the maximum combined percentages of 12b-1 fees and Support Fees that we anticipate will be paid to us on an annual basis:
Incoming Payments to Western Reserve and TCI | ||||||
Fund | Maximum Fee % of assets* |
Fund | Maximum Fee % of assets* | |||
Transamerica Series Trust ** | -- | Fidelity Variable Insurance Products Funds | 0.39%*** | |||
ProFunds | 0.50% | Access One Trust | 0.50% | |||
Alliance Bernstein | 0.25% | Franklin Templeton | 0.35% |
*Payments are based on a percentage of the average assets of each fund portfolio owned by the subaccounts that are available under the Policy and under certain other variable insurance products offered by our affiliates and us. We, and/or TCI may continue to receive 12b-1 fees and administrative fees on subaccounts that are closed to new investments, depending on the terms of the agreements supporting those payments and on the services we or TCI provide.
**Because the Transamerica Series Trust is managed by an affiliate, there are additional benefits to us and our affiliates for amounts you allocate to the Transamerica Series Trust portfolios, in terms of our and our affiliates overall profitability. During 2013 we received $11,771,226.39 from TAM.
***We receive this percentage once $100 million in fund shares are held by the subaccounts of Western Reserve and its affiliates.
Other payments. We and our affiliates, including TCI and Transamerica Financial Advisors, Inc. (TFA), also directly or indirectly receive additional amounts or different percentages of assets under management from certain advisers and sub-advisers to the portfolios (or their affiliates) with regard to variable insurance products or mutual funds that are issued or managed by us and our affiliates. These payments may be derived in whole or in part, from the profits the
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investment adviser or sub-adviser receives from the advisory fee deducted from portfolio assets. Policyowners, through their indirect investment in the portfolios, bear the costs of those advisory fees (see the prospectuses for the funds for more information.
Certain advisers and sub-advisers of the underlying portfolios (or their affiliates) (1) may pay TCI amounts up to $100,000 per year to participate in a preferred sponsor program that provides such advisers and sub-advisers with access to TCIs wholesalers at TCIs national and regional sales conferences that are attended by TCIs wholesalers, (2) may pay to TFA, directly or indirectly, varying amounts to obtain access to TFAs wholesaling and selling representatives, (3) may provide us and/or certain affiliates and/or selling firms with occasional gifts, meals, tickets or other compensation as an incentive to market the portfolios and to assist with their promotional efforts, and (4) may reimburse our affiliated selling firms for exhibit booths and other items at national conferences of selling representatives. The amounts may be significant and these arrangements provide the adviser or sub-adviser (or other affiliates) with increased access to us and to our affiliates involved in the distribution of the Policy.
For the calendar year ended December 31, 2013, TCI received total revenue sharing payments in the amount of $5,212,365.52 from the following fund managers and/or sub-advisers to participate in TCIs events: Aegon USA Investment Management, Inc., AllianceBernstein Investments, American Funds, Black Rock Investment Management, Fidelity Investments, Franklin Templeton Investments, Hanlon Investment Management Inc., ING Clarion Real Estate Securities (CBRE), JP Morgan Asset Management, Janus Capital, Jennison Associates, Legg Mason Capital Management, Logan Circle Investment Partners, Madison Asset Management, LLC, MFS, Morgan Stanley Investment Management, Morningstar Advisors, Natixis Global Asset Management, Neuberger Berman, OppenheimerFunds, Pacific Investment Management Company, Ranger Investments, Schroder, Systematic Financial Management, SunTrust Investments, TS&W, Vanguard and Wellington Management Company.
Please Note: Some of the aforementioned managers and/or sub-advisers may not be associated with underlying fund portfolios currently available in this product.
Proceeds from certain of these payments by the funds, the advisers, the sub-advisers and/or their affiliates may be profit to us, and may be used for any corporate purpose, including payment of expenses (i) that we and our affiliates incur in promoting, issuing, marketing and administering the Policies; and (ii) that we incur, in our role as intermediary, in promoting, marketing and administering the fund portfolios.
For further details about the compensation payments we make in connection with the sale of the Policies, see Sale of the Policies in this prospectus.
Depending on the state of issue, your Policy may be an individual Policy or a certificate issued under a group policy. The Policy is subject to the insurance laws and regulations of each state or jurisdiction in which it is available for distribution. There may be differences between the Policy issued and the general Policy description contained in this prospectus because of requirements of the state where your Policy is issued. Some of the state specific differences are included in the prospectus, but this prospectus does not include references to all state specific differences. All state specific Policy features will be described in your Policy.
The Policy belongs to the owner named in the application. The owner may exercise all of the rights and options described in the Policy. If the owner dies before the insured and no contingent owner is named, then ownership of the Policy will pass to the owners estate.
The principal rights an owner may exercise are:
| To designate or change beneficiaries before the death of the insured. |
| To receive amounts payable before the death of the insured. |
| To assign the Policy. (If you assign the Policy, your rights and the rights of anyone who is to receive payment under the Policy are subject to the terms of that assignment.) |
| To change the owner of the Policy. |
| To change the specified amount or death benefit option type of the Policy. |
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No designation or change in designation of an owner will take effect unless we receive a transfer of ownership form. The request will take effect as of the date we receive it, in good order, at our mailing address, or by fax at our administrative office (1-727-299-1620), subject to payment or other action taken by us before it was received.
Any modifications or waiver of any rights or requirements under the Policy must be in writing, in good order, and signed by our president or secretary. No registered representative may bind us by making any promise not contained in the Policy.
Upon notice to you, we may modify the Policy:
| To make the Policy or the separate account comply with any law or regulation issued by a governmental agency to which we are subject; or |
| To assure qualification of the Policy as a life insurance contract under the Internal Revenue Code or to meet applicable requirements of federal or state laws relating to variable life policies; or |
| To reflect a change in the operation of the separate account; or |
| To provide additional subaccounts and/or fixed account options. |
Purchasing a Policy (Note: This Policy is not available for new sales.)
To purchase a Policy, you must submit a completed application, in good order, and an initial premium to us through any licensed life insurance agent who is also a registered representative of a broker-dealer having a selling agreement with TCI, the principal underwriter for the Policy and us.
There may be delays in our receipt and processing of applications and premium payments that are outside of our control for example, because of the failure of a selling broker-dealer or registered representative to promptly forward the application to us at our mailing address, or because of delays in determining whether the Policy is suitable for you. Any such delays will affect when your Policy can be issued.
You select the specified amount of insurance coverage for your Policy within the following limits. Our current minimum specified amount for a Policy for issue ages 0-45 is generally $50,000. It declines to $25,000 for issue ages 46-80.
We will generally only issue a Policy to you if you provide sufficient evidence that the insured meets our insurability standards. Your application is subject to our underwriting rules, and we may reject any application for any reason permitted by law. We will not issue a Policy to you if the insured is over age 80. The insured must be insurable and acceptable to us under our underwriting rules on the later of:
| The date of your application; or |
| The date the insured completes all of the medical tests and examinations that we require. |
Tax-Free Section 1035 Exchanges
You can generally exchange one life insurance policy for another policy covering the same insured in a tax-free exchange under Section 1035 of the Internal Revenue Code. Before making an exchange, you should compare both life insurance policies carefully. Remember that if you exchange another life insurance policy for the one described in this prospectus, you might have to pay a surrender charge on your old policy, other charges may be higher (or lower), and the benefits may be different. If the exchange does not qualify for Section 1035 treatment, or if your current Policy is subject to a Policy loan, you may also have to pay federal income tax on the exchange. You should not exchange another life insurance policy for this one unless you determine, after knowing all the facts, that the exchange is in your best interest and not just better for the person selling you the Policy. (That person will generally earn a commission if you buy this Policy through an exchange or otherwise.)
When Insurance Coverage Takes Effect
Except as provided in the conditional receipt (Conditional Receipt), if issued, or in connection with certain Section 1035 Exchanges, insurance coverage under the Policy will not take effect until after all of the following conditions have been met: (1) the first full premium must be received by the Company at our mailing address; (2) during the lifetime of every proposed insured, the proposed owner must have personally received and accepted the Policy which was applied for and all answers on the application must be true and correct on the date such Policy is received and accepted; and (3) on the date of the later of either (1) or (2) above, all of the statements and answers given in the application must be true and complete, and there must have been no change in the insurability of any proposed insured.
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Conditional Insurance Coverage. If you pay the full initial premium listed and have met all of the requirements in the Conditional Receipt attached to the application, and we deliver the Conditional Receipt to you, the insured may have conditional insurance coverage under the terms of the Conditional Receipt. The conditional insurance coverage may vary by state and/or underwriting standards. Because we do not accept initial premiums in advance for Policies with a specified amount in excess of $1,000,000, we do not offer conditional insurance coverage for those Policies. Conditional insurance coverage is void if the check or draft you gave us to pay the initial premium is not honored when we first present it for payment.
The aggregate amount of conditional insurance coverage, if any, is the lesser of: | The amounts applied for under all Conditional Receipts issued by us; or | |
$500,000 of life insurance. | ||
Subject to the conditions and limitations of the Conditional Receipt, conditional insurance under the terms of the Policy applied for may become effective as of the later of: | ||
The date of application; or The date of the last medical examination, test, and other screenings required by us, if any (the Effective Date). Such conditional insurance will take effect as of the Effective Date, so long as all of the following requirements are met: | ||
1. The person proposed to be insured is found to have been insurable as of the Effective Date, exactly as applied for in accordance with our underwriting rules and standards, without any modifications as to plan, amount, or premium rate. | ||
2. As of the Effective Date, all statements and answers given in the application must be true. | ||
3. The payment made with the application must not be less than the full initial premium for the mode of payment chosen in the application and must be received at our mailing address within the lifetime of the proposed insured. | ||
4. All medical examinations, tests, and other screenings required of the proposed insured by us are completed and the results received at our mailing address within 60 days of the date the application was signed. | ||
5. All parts of the application, any supplemental application, questionnaires, addendum and/or amendment to the application are signed and received, in good order, at our mailing address. | ||
Any conditional life insurance coverage terminates on the earliest of: | 60 days from the date the application was signed; The date we either mail notice to the applicant of the rejection of the application and/or mail a refund of any amounts paid with the application; When the insurance applied for goes into effect under the terms of the Policy that you applied for; or The date we offer to provide insurance on terms that differ from the insurance for which you have applied. | |
Special limitations of the Conditional Receipt: | The Conditional Receipt is not valid unless: | |
> All blanks in the Conditional Receipt are completed; and | ||
> The receipt is signed by an authorized Company representative. |
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Other limitations: | There is no Conditional Receipt coverage for riders or any additional benefits, if any, for which you may have applied. | |
If one or more of the receipts conditions have not been met exactly, or if a proposed insured dies by suicide, we will not be liable except to return any payment made with the application. | ||
If we do not approve and accept the application within 60 days of the date you signed the application, the application will be deemed to be rejected by us and there will be no conditional insurance coverage. In that case, Western Reserves liability will be limited to returning any payment(s) you have made upon return of this receipt to us. |
For 1035 Exchanges:
Coverage may begin earlier in Section 1035 exchange situations as provided in the Absolute Assignment to Effect Internal Revenue Code Section 1035 Exchange and Rollover form. As provided in that form, the insurance coverage shall take effect as of the date the replaced policy is surrendered, and before delivery of the Policy, if the following conditions have been met:
The Policy has been approved for issue even if approved other than as applied for - and accepted in writing by the proposed owner and either:
1. | The replaced policy has been surrendered and the surrender proceeds thereafter received by the Company are themselves sufficient to place the Policy in force; or |
2. | If, in addition to the surrender of the replaced policy from the existing issuer, premium is paid during the proposed insureds lifetime (either with the application for the Policy or thereafter if permitted by the Company in writing) and if such premium together with any surrender proceeds thereafter received, are sufficient to place the Policy in force. |
Charges may be applied beginning on the date that the coverage takes effect.
Full Insurance Coverage and Allocation of Initial Premium. Once we determine that the insured meets our underwriting requirements and you have paid the initial premium, full insurance coverage will begin and we will begin to take the monthly deductions from your net premium. This date is the Policy date (or the record date if the Policy is backdated). Any premium payments we receive before the Policy date (or record date, if applicable) will be held in a non-interest bearing suspense account. On the Policy date (or the record date if your Policy is backdated), the entire amount in the non-interest bearing suspense account will be allocated to the subaccounts and/or the fixed account as you specified in your application. Please Note: Your premiums are credited on the record date, not the backdated Policy date.
On any day we credit net premiums or transfer cash value to a subaccount, we will convert the dollar amount of the net premium (or transfer) into subaccount units at the unit value for that subaccount, determined at the end of the day on which we receive the premium or transaction request. We will credit amounts to the subaccounts only on a valuation date, that is, on a date the New York Stock Exchange (NYSE) is open for trading.
Transaction Type: | Priced when received at our: | |
payment by check | mailing address, unless other address appears on your billing coupon | |
transfer request | administrative office | |
payment by wire transfer | administrative office | |
electronic credit and debit transactions (e.g., payments through direct deposit, debit transfers, and forms of e-commerce payments | administrative office |
If you request, we may backdate a Policy by assigning a Policy date earlier than the date the Policy is issued. However, in no event will we backdate a Policy earlier than the earliest date allowed by state law or by our underwriting rules. Your request must be in writing and, if we approve the request, will amend your application. Your premiums, however, will be credited on the date the Policy is issued, not the backdated Policy date. Please Note: State specific rules may apply to a request to backdate a policy. Please contact your registered representative for further information.
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Cost of insurance charges are based in part on the age of the insured on the Policy date. Generally, cost of insurance charges are lower at a younger age. We will deduct the monthly deductions, including cost of insurance charges, for the period that the Policy is backdated. This means that while the monthly deductions may be lower than what would have been charged had we not backdated the Policy, you will be paying for insurance during a period when the Policy was not in force.
You must instruct us on how to allocate your net premium among the subaccounts and the fixed account according to these guidelines:
| Allocation percentages must be in whole numbers. |
| If you select dollar cost averaging, we may require you to have a minimum of $5,000 in each subaccount from which we will make transfers and you may be required to transfer at least a total of $100 monthly. |
| If you select asset rebalancing, the cash value of your Policy, if an existing Policy, or your minimum initial premium, if a new Policy, must be at least $5,000. |
Currently, you may change the allocation instructions for additional premium payments without charge by writing us at our mailing address or calling us at our administrative office at 1-800-851-9777, Monday - Friday, between the hours of 8:30 a.m. - 7:00 p.m. Eastern Time. You may also change allocations through our web site at www.westernreserve.com.
Please Note: Certain subaccounts have similar names. When providing your allocation instructions, please state or write the full name of the subaccount that you select for your allocation to ensure that those allocation instructions are in good order. The change will be effective as of the valuation date on which we receive the change request, in good order, at our administrative office or mailing address. Upon instructions from you, your authorized representative for your Policy may also change your allocation instructions for you. The minimum amount you can allocate to a particular subaccount is 1% of a net premium payment. We reserve the right to charge $25 for each change of allocation in excess of one per Policy year quarter.
Whenever you direct money into a subaccount, we will credit your Policy with the number of units for that subaccount that can be bought for the dollar payment. Premium payments received at our mailing address, or at the address on your billing coupon (for payments made by check), or at our administrative office (for payments made by wire transfer and through electronic credit and debit transactions) before the NYSE closes, are priced using the unit value determined at the closing of the regular business session of the NYSE (usually at 4:00 p.m. Eastern Time). If we receive a premium payment after the NYSE closes or on a day the NYSE is closed for trading, we will process the order using the subaccount value determined at the close of the next regular session of the NYSE. We will credit amounts to the subaccounts only on a valuation date, that is, on a date the NYSE is open for trading. Your cash value will vary with the investment experience of the subaccounts you have chosen. You bear the investment risk for amounts you allocate to the subaccounts.
You should periodically review how your cash value is allocated among the subaccounts and the fixed account because market conditions and your overall financial objectives may change.
You generally have flexibility to determine the frequency and the amount of the premiums you pay. Before we issue the Policy to you, we may require you to pay a premium at least equal to a minimum monthly guarantee premium set forth in your Policy. Thereafter (subject to the limitations described below), you may make premium payments at any time and in an amount of at least $50. Under some circumstances, you may be required to pay extra premiums to prevent a lapse. Your minimum monthly guarantee premium may change if you request a change in your Policy. If this happens, we will notify you of the new minimum monthly guarantee premium. See Minimum Monthly Guarantee Premium below.
You can determine a planned periodic payment schedule, which allows you to pay level premiums at fixed intervals over a specified period of time. The amount and frequency you choose will be shown in your Policy. You are not required to
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pay premiums according to this schedule. You may change the amount, frequency, and the time period over which you make your planned periodic payments. Please be sure to notify us or your selling firm of any address changes so that we may be able to keep your current address on record.
Even if you make your planned periodic payments on schedule, your Policy still may lapse. How long your Policy remains in force depends on the Policys net surrender value. If the net surrender value is not high enough to pay the monthly deductions when due (and your no lapse period has expired) then your Policy will lapse (unless you make the payment we specify during the 61-day grace period).
Minimum Monthly Guarantee Premium
The full initial premium is the only premium you are required to pay under the Policy. However, you greatly increase your risk of lapse if you fail to regularly pay premiums at least as large as the current minimum monthly guarantee premium.
The initial minimum monthly guarantee premium is shown on your Policys schedule page, and depends on a number of factors, including the issue age, gender, underwriting class of the insured, and the specified amount requested. We will adjust the minimum monthly guarantee premium if you change death benefit options, decrease the specified amount, if any riders are added or terminated, or if in force riders are increased or decreased. We will notify you of the new minimum monthly guarantee premium.
Until the no lapse date shown on your Policy schedule page, your Policy will remain in force and no grace period will begin, even if your net surrender value is too low to pay the monthly deductions, as long as on any Monthiversary the total amount of the premiums you have paid (minus any cash withdrawals, minus any outstanding loan amount, and minus any pro rata decrease charge) equals or exceeds the sum of the minimum monthly guarantee premium in effect for each month from the Policy date up to and including the current month. (Your initial minimum monthly guarantee premium is shown on your Policy schedule page. You may obtain information about your minimum monthly guarantee premium and assistance to determine the amount of premiums you must pay to keep your Policy in force by contacting our administrative office.) Please see the section of this prospectus entitled Policy Lapse and Reinstatement.
After the no lapse period guarantee ends, paying the current minimum monthly guarantee premium each month will not necessarily keep your Policy in force. You may need to pay additional premiums to keep the Policy in force.
We may require premium payments to be at least $50 ($1,000 if by wire). If the payment mode is monthly direct deposit, we may require minimum payments of $100.00. We may return premiums less than the minimum. We will not allow the premiums you pay to exceed the current maximum premium limitations, if applicable, by which the Policy qualifies as life insurance under federal tax laws. (For more information regarding the Guideline Premium Test, please refer to the section entitled Death Benefit in this prospectus.)
This maximum is set forth in your Policy. If you make a payment that would cause your total premiums to be greater than the maximum premium limitations, we generally will return the excess portion of the premium payment within 60 days after the end of the Policy year. In addition, we reserve the right to refund a premium or require evidence of insurability if the premium would increase the death benefit by more than the amount of the premium. We will not accept a payment that will cause the Policy to become a modified endowment contract without your consent.
We will accept premium payments by wire transfer. If you wish to make payments by wire transfer, you should contact our administrative office at 1-800-851-9777 for instructions on wiring funds to us. Certain charges are deducted from the premium payments you make.
Tax-Free Exchanges (1035 Exchanges). After receiving your initial premium and your Policy is issued, we will accept a part of or all of your subsequent premiums from one or more contracts insuring the same insured that qualify for tax-free exchanges under Section 1035 of the Internal Revenue Code. If you contemplate such an exchange, you should consult a competent tax advisor to learn the potential tax effects of such a transaction.
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Please Note: We may hold premium payments in a non-interest bearing account for up to 14 days if applying the premium payment would cause the Policy to violate Internal Revenue Code Section 7702 or other provisions of the Internal Revenue Code. Please refer to the section of this prospectus entitled Federal Income Tax Considerations for more information regarding tax considerations regarding your Policy or consult a qualified tax advisor.
You or your authorized representative of record may make transfers among the subaccounts or among the subaccounts and the fixed account. You will be bound by any transfers made by your authorized representative. We determine the amount you have available for transfers at the end of the valuation period when we receive your transfer request. We may, at any time, discontinue transfer privileges, modify our procedures, or limit the number of transfers we permit.
The following features apply to transfers under the Policy:
| Your Policy may be limited to a cumulative transfer out of the fixed account each Policy year of the greater of 25% of the amount in the fixed account, or the amount transferred out the previous Policy year. However, the transfer may not be greater than the unloaned portion of the fixed account on that date. See Fixed Account Transfers. |
| Currently we do not, but reserve the right to, limit the number of transfers out of the fixed account to one per Policy year. If we modify or stop this current practice, we will notify you at the time of your transfer. |
| You may request transfers in writing (in a form we accept) to our mailing address, by fax or by telephone to our administrative office, or electronically through our website (www.westernreserve.com). Please note: Certain subaccounts have similar names. It is important that you state or write the full name of the subaccount when making a transfer request to ensure that any transfer request that you submit is in good order. |
| There is no minimum amount that must be transferred. |
| There is no minimum amount that must remain in a subaccount after a transfer. |
| Except as listed below, we may deduct a $25 charge from the amount transferred for each transfer in excess of 12 transfers in a Policy year: |
1. | We consider all transfers made in any one day to be a single transfer. |
2. | Transfers via the Internet are not treated as transfers for the purpose of assessing the transfer charge. |
3. | Transfers among the ProFunds and/or Access Trust subaccounts are not treated as transfers for the purpose of assessing the transfer charge. |
4. | Transfers under asset rebalancing and dollar cost averaging currently are not treated as transfers for the purpose of assessing the transfer charge. |
We will process any transfer order that is received, in good order, in writing at our mailing address, or by fax or by telephone at our administrative office, before the NYSE closes (usually 4:00 p.m. Eastern Time) using the subaccount unit value determined at the end of that session of the NYSE. If we receive the transfer order after the NYSE closes or on a day that the NYSE is closed for trading, we will process the order using the subaccount unit value determined at the close of the next regular business session of the NYSE. (If you send your request by fax, be sure to use the correct fax number. Please see Telephone, Fax and Online Privileges.)
Disruptive Trading and Market Timing
The market timing policy and the related procedures (discussed below) do not apply to the ProFunds or Access Trust subaccounts because the corresponding portfolios are specifically designed to accommodate frequent transfer activity. If you invest in the ProFunds or Access Trust subaccounts, you should be aware that you may bear the costs and increased risks of frequent transfers discussed below.
Statement of Policy. This variable insurance Policy was not designed to facilitate frequent or large trading through transfers among the subaccounts or between the subaccounts and the fixed account by market timers or frequent or disruptive traders. (Both frequent and large transfers may be considered disruptive.)
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Market timing and disruptive trading can adversely affect you, other policyowners, beneficiaries and underlying fund portfolios. The adverse effects include: (1) dilution of the interests of long-term investors in a subaccount if purchases or transfers into or out of an underlying fund portfolio are made at prices that do not reflect an accurate value for the underlying fund portfolios investments (some market timers attempt to do this through methods known as time-zone arbitrage and liquidity arbitrage); (2) an adverse effect on portfolio management, such as (a) impeding a portfolio managers ability to sustain an investment objective; (b) causing the underlying fund portfolio to maintain a higher level of cash than would otherwise be the case; or (c) causing an underlying fund portfolio to liquidate investments prematurely (or otherwise at an inopportune time) in order to pay withdrawals or transfers out of the underlying fund portfolio; and (3) increased brokerage and administrative expenses. These costs are borne by all policyowners invested in those subaccounts, not just those making the transfers.
We have developed policies and procedures with respect to market timing and disruptive trading (which vary for certain subaccounts at the request of the corresponding underlying fund portfolios) and we do not make special arrangements or grant exceptions to accommodate market timing or potentially disruptive trading. As discussed herein, we cannot detect or deter all market timing or potentially disruptive trading. Do not invest with us if you intend to conduct market timing or potentially disruptive trading or have concerns about our inability to detect or prevent any such trading.
Detection. We employ various means in an attempt to detect and deter market timing and disruptive trading. However, despite our monitoring we may not be able to detect nor halt all harmful trading. In addition, because other insurance companies (and retirement plans) with different policies and procedures may invest in the underlying fund portfolios, we cannot guarantee that all harmful trading will be detected or that an underlying fund portfolio will not suffer harm from market timing and disruptive trading among subaccounts of variable products issued by these other insurance companies or retirement plans.
Deterrence. If we determine that you or anyone acting on your behalf is engaged in market timing or disruptive trading, we may take one or more actions in an attempt to halt such trading. Your ability to make transfers is subject to modification or restriction if we determine, in our sole opinion, that your exercise of the transfer privilege may disadvantage or potentially harm the rights or interests of other policyowners (or others having an interest in the variable insurance products). As described below, restrictions may take various forms, but under our current policies and procedures will include loss of expedited transfer privileges. We consider transfers by telephone, fax, overnight mail, or the Internet to be expedited transfers. This means that we would accept only written transfer requests with an original signature sent to us only by U.S. mail. We may also restrict the transfer privileges of others acting on your behalf, including your registered representative or an asset allocation or investment advisory service.
We reserve the right to reject any premium payment or transfer request from any person without prior notice, if, in our judgment, (1) the premium payment or transfer, or series of premium payments or transfers, would have a negative impact on an underlying fund portfolios operations, or (2) if an underlying fund portfolio would reject or has rejected our purchase order or has instructed us not to allow that purchase or transfer, or (3) because of a history of market timing or disruptive trading. We may impose other restrictions on transfers, or even prohibit transfers for any policyowner who, in our view, has abused, or appears likely to abuse, the transfer privilege on a case-by-case basis. We may, at any time and without prior notice, discontinue transfer privileges, modify our procedures, impose holding period requirements or limit the number, size, frequency, manner, or timing of transfers we permit. We also reserve the right to reverse a potentially harmful transfer if an underlying fund portfolio refuses or reverses our order; in such instances some policyowners may be treated differently than others in that some transfers may be reversed and others allowed. For all of these purposes, we may aggregate two or more trades or variable insurance products that we believe are connected by policyowners or persons engaged in trading on behalf of policyowners.
In addition, transfers for multiple policies invested in the Transamerica Series Trust underlying fund portfolios which are submitted together may be disruptive at certain levels. At the present time, such aggregated transactions likely will not cause disruption if less than one million dollars total is being transferred with respect to any one underlying fund portfolio (a smaller amount may apply to smaller portfolios). Please note that transfers of less than one million dollars may be disruptive in some circumstances; we may change the maximum dollar amount of permitted transfers quickly and without notice.
Please note: If you engage a third party investment adviser for asset allocation services, then you may be subject to these transfer restrictions because of the actions of your investment adviser in providing these services.
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In addition to our internal policies and procedures, we will administer your variable life policy to comply with any applicable state, federal, and other regulatory requirements concerning transfers. We reserve the right to implement, administer, and charge you for any fee or restriction, including redemption fees, imposed by any underlying fund portfolio. To the extent permitted by law, we also reserve the right to defer the transfer privilege at any time that we are unable to purchase or redeem shares of any of the underlying fund portfolios.
Under our current policies and procedures, we do not:
| impose redemption fees on transfers; or |
| expressly limit the number or size of transfers in a given period except for certain subaccounts where an underlying fund portfolio has advised us to prohibit certain transfers that exceed a certain size; or |
| provide a certain number of allowable transfers in a given period. |
Redemption fees, transfer limits, and other procedures or restrictions imposed by the underlying funds or our competitors may be more or less successful than ours in deterring market timing or other disruptive trading and in preventing or limiting harm from such trading.
We do not impose any prophylactic transfer restrictions. In the absence of any such restrictions (e.g., expressly limiting the number of trades within a given period or limiting trades by their size), it is possible that some level of market timing and disruptive trading will occur before we detect it and take steps to deter it.
Please note that the limits and restrictions described herein are subject to our ability to monitor transfer activity. Our ability to detect market timing or disruptive trading may be limited by operational and technological systems, as well as by our ability to predict strategies employed by policyowners (or those acting on their behalf ) to avoid detection. As a result, despite our efforts to prevent harmful trading activity among the variable investment options available under this variable insurance product, there is no assurance that we will be able to detect or deter market timing or disruptive trading by such policyowners or intermediaries acting on their behalf. Moreover, our ability to discourage and restrict market timing or disruptive trading may be limited by decisions of state regulatory bodies and court orders that we cannot predict.
Furthermore, we may revise our policies and procedures in our sole discretion at any time and without prior notice, as we deem necessary or appropriate (1) to better detect and deter harmful trading that may adversely affect other policyowners, other persons with material rights under the variable insurance products, or underlying fund shareholders generally, (2) to comply with state or federal regulatory requirements, or (3) to impose additional or alternative restrictions on policyowners engaging in market timing or disruptive trading among the investment options under the variable insurance product. In addition, we may not honor transfer requests if any variable investment option that would be affected by the transfer is unable to purchase or redeem shares of its corresponding underlying fund portfolio.
Underlying Fund Portfolio Frequent Trading Policies. The underlying fund portfolios may have adopted their own policies and procedures with respect to frequent purchases and redemptions of their respective shares. Underlying fund portfolios may, for example, assess a redemption fee (which we reserve the right to collect) on shares held for less than a certain period of time. The prospectuses for the underlying fund portfolios describe any such policies and procedures. The frequent trading policies and procedures of an underlying fund portfolio may be different, and more or less restrictive, than the frequent trading policies and procedures of other underlying fund portfolios and the policies and procedures we have adopted for our variable insurance products to discourage market timing and disruptive trading. Policyowners should be aware that we do not monitor transfer requests from policyowners or persons acting on behalf of policyowners for compliance with, nor do we apply, the frequent trading policies and procedures of the respective underlying fund portfolios that would be affected by the transfers.
Policyowners should be aware that we are required to provide to an underlying fund portfolio or its payee, promptly upon request, certain information about the trading activity of individual policyowners, and to restrict or prohibit further purchases or transfers by specific policyowners or persons acting on their behalf, if identified by an underlying fund portfolio as violating the frequent trading policies established for the underlying fund portfolio.
Omnibus Orders. Policyowners and other persons with material rights under the variable insurance products also should be aware that the purchase and redemption orders received by the underlying fund portfolios generally are omnibus orders from intermediaries such as retirement plans and separate accounts funding variable insurance products. The omnibus orders reflect the aggregation and netting of multiple orders from individual retirement plan participants and individual policyowners of variable insurance products. The omnibus nature of these orders may limit the underlying fund portfolios ability to apply their respective frequent trading policies and procedures. We cannot guarantee that the underlying fund portfolios will not be harmed by transfer activity relating to the retirement plans or other insurance companies that may invest
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in the underlying fund portfolios. These other insurance companies are responsible for their own policies and procedures regarding frequent transfer activity. If their policies and procedures fail to successfully discourage harmful transfer activity, it may affect other policyowners of underlying fund portfolio shares, as well as the policyowners of all of the variable annuity or life insurance policies, including ours, whose variable investment options correspond to the affected underlying fund portfolios. In addition, if an underlying fund portfolio believes that an omnibus order we submit may reflect one or more transfer requests from policyowners engaged in market timing or disruptive trading, the underlying fund portfolio may reject the entire omnibus order and thereby delay or prevent us from implementing your request.
ProFunds and Access Trust Subaccounts. Because the above restrictions do not apply to the ProFunds or Access Trust subaccounts, they may have a greater risk than others of suffering from the harmful effects of market timing and disruptive trading as discussed above (i.e., dilution, an adverse effect on portfolio management and increased expenses).
Telephone, Fax and Online Privileges
Telephone transfer privileges will automatically apply to your Policy unless you provide other instructions. The telephone transfer privileges allow you to give authority to the registered representative or agent of record for your Policy to make telephone transfers and to change the allocation of future payments among the subaccounts and the fixed account on your behalf according to your instructions. To make a telephone transfer, you may call us at our administrative office at 1-800-851-9777, Monday - Friday, between the hours of 8:30 a.m. - 7:00 p.m. Eastern Time, or fax your instructions to our subaccount transfer fax number at 1-727-299-1648 (for all other fax requests, please use 1-727-299-1620). You also may request transfers electronically through our website, www.westernreserve.com. Please note: Certain subaccounts have similar names. When providing your allocation instructions, please state or write the full name of the subaccount that you have selected for your allocation to ensure that those allocation instructions are in good order.
Please note the following regarding telephone, Internet or fax transfers:
| We will employ reasonable procedures to confirm that the instructions are genuine. |
| If we follow these procedures, we are not liable for any loss, damage, cost or expense from complying with telephone instructions we reasonably believe to be authentic. You bear the risk of any such loss. |
| If we do not employ reasonable confirmation procedures, we may be liable for losses due to unauthorized or fraudulent instructions. |
| Such procedures may include requiring forms of personal identification prior to acting upon telephone instructions, providing written confirmation of transactions to owners, and/or tape recording telephone instructions received from owners. |
| We may also require that you send us the telephone, Internet or fax transfer order in writing. |
| If you do not want the ability to make telephone or Internet transfers, you should notify us in writing at our mailing address or through our fax number (1-727-299-1620). |
| We will not be responsible for same day processing of transfers if the transfer order is faxed to a number other than 1-727-299-1648 or 1-727-299-1620. |
| We will not be responsible for any transmittal problems when you fax us your order unless you report it to us within five business days and send us proof of your fax transmittal. We may discontinue this option at any time. |
We cannot guarantee that telephone and electronic 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 at our administrative office. Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability under all circumstances.
Similarly, online transactions processed via the Internet may not always be possible. Telephone and computer systems, whether yours, your Internet service providers, your registered representatives or Western Reserves, 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) and your user ID and password because self-service options will be available to your authorized representative and to anyone who provides your identifying information. We will not be able to verify that the person using your PIN on the automated phone line or providing instructions online is you or one authorized by you.
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Currently, we do not, but reserve the right to, limit the number of transfers out of the fixed account to one per Policy year. If we change this, we will notify you at the time of your transfer. We also reserve the right to limit the maximum amount you may transfer from the fixed account each year to the greater of 25% of the amount in the fixed account or the amount you transferred from the fixed account in the immediately preceding Policy year.
These current restrictions do not apply if you have selected dollar cost averaging. However, the transfer may not be greater than the unloaned portion of the fixed account on the valuation date on which we receive the transfer request.
We will make the transfer at the end of the valuation date on which we receive the request, in good order, at our administrative office (for telephonic and facsimile transactions), at our mailing address (for written correspondence), or electronically through our website. We reserve the right to require that you make the transfer request in writing and that we receive the written transfer request no later than 30 days after a Policy anniversary.
Except when used to pay premiums, we also may defer payment of any amounts from the fixed account for no longer than six months after we receive written notice.
New Jersey: The fixed account is not available to you as an investment option your Policy was issued in the State of New Jersey. You may not direct or transfer any money to the fixed account.
If, within 24 months of your Policy date, you transfer all of your subaccount values to the fixed account, then we will not charge you a transfer fee, even if applicable. You must make your request in writing, in good order, to our mailing address.
In the event of a material change in the investment policy of any portfolio, you may transfer all subaccount value in that portfolio to the fixed account without a transfer charge. We must receive your request to transfer the subaccount value to the fixed account in good order within 60 days after the effective date of the change of investment policy or the date you receive notification of such change, whichever is later.
Dollar cost averaging is a strategy designed to reduce the average purchase price per unit. The strategy spreads the allocation of your premium into the subaccounts over a period of time. This potentially allows you to reduce the risk of allocating most of your premium into the subaccounts at a time when prices are high. The success of this strategy is not assured and depends on market trends. You should consider carefully your financial ability to continue the program over a long enough period of time to purchase units when their value is low as well as when it is high. We make no guarantee that dollar cost averaging will result in a profit or protect you against loss.
Under dollar cost averaging, we automatically transfer a set dollar amount from the Transamerica Aegon Money Market VP subaccount, the Transamerica JPMorgan Core Bond VP subaccount or the fixed account to a subaccount that you choose. We will make the transfers monthly as of the end of the valuation date after the first Monthiversary after the Policy date. We will make the first transfer in the month after we receive your request, in good order, at our mailing address or by facsimile at our administrative office, provided that we receive the form by the 25th day of the month. (Note: As stated on the dollar cost averaging form, the date that you select cannot be the 29th, 30th or 31st of any month.)
To start dollar cost averaging: | You must submit to us, in good order, in writing to our mailing address (or by facsimile to our administrative office), a completed form, signed by the owner requesting dollar cost averaging. | |
You may be required to have at least $5,000 in each subaccount or the fixed account from which we will make transfers. | ||
Your total transfers each month under dollar cost averaging may be limited to a minimum of $100. | ||
Each month, you may not transfer more than one-tenth of the amount that was in your fixed account at the beginning of dollar cost averaging. |
You may request dollar cost averaging at any time. There is no charge for dollar cost averaging.
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Dollar cost averaging will terminate if any of the following occur: |
We receive, in good order, at our mailing address (or by facsimile, or by telephone to our administrative office) a request to discontinue participation from you or your authorized representative. | |
The value in the accounts from which we make the transfers is depleted. | ||
You elect to participate in the asset rebalancing program. | ||
You elect to participate in any asset allocation services provided by a third party. |
If you terminate your participation in the dollar cost averaging program and later decide that you would like to participate again, you must sign and submit (in good order) a new dollar cost averaging form. We may modify, suspend, or discontinue dollar cost averaging at any time.
We also offer an asset rebalancing program under which you may transfer amounts periodically to maintain a particular allocation percentage among the subaccounts you have selected. Cash value allocated to each subaccount will grow or decline in value at different rates. The asset rebalancing program automatically reallocates the cash value in the subaccounts at the end of each period to match your Policys currently effective premium allocation schedule. Cash value in the fixed account i not available for this program and this program is not available in conjunction with the dollar cost averaging program. We make no guarantee that asset rebalancing will result in a profit or protect you from a loss.
You may elect asset rebalancing to occur on a monthly, quarterly, semi-annual or annual basis. Once we receive the asset rebalancing request form, in good order, at our mailing address (or by facsimile at our administrative office), we will change your premium allocation instructions to match your asset rebalancing instructions, and we will implement the assets rebalancing program on the date you indicated. If you do not indicate a specific date, we will use the date we receive the form. We will credit the amounts transferred at the unit value next determined on the dates the transfers are made. If a day on which rebalancing would ordinarily occur falls on a day on which the NYSE is closed, rebalancing will occur on the next day that the NYSE is open.
To start asset rebalancing: | You must submit to us, in good order, in writing to our mailing address (or by facsimile or telephone to our administrative office), a completed asset rebalancing request form signed by the owner before the maturity date. | |
You may be required to have a minimum cash value of $5,000 or make a $5,000 initial premium payment. |
There is no charge for the asset rebalancing program. (We reserve the right to count such allocations as part of your free transfers in the future.)
Asset rebalancing will cease if: | You elect to participate in the dollar cost averaging program. | |
We receive, in good order, at our mailing address (or by facsimile or telephone at our administrative office), a request to discontinue participation by you or your authorized representative. | ||
You make any transfer to or from any subaccount other than under a scheduled rebalancing. | ||
You elect to participate in any asset allocation services provided by a third party. |
You may start and stop participation in the asset rebalancing program at any time, but we may restrict your right to re-enter the program to once each Policy year. If you wish to resume the asset rebalancing program, you must complete a new request form. We may modify, suspend, or discontinue the asset rebalancing program at any time.
Third Party Asset Allocation Services
We do not offer any asset allocation programs or any allocation models for use with your life insurance policy. You may authorize and engage your own investment advisor to manage your account. These investment advisors may be firms or persons who also are appointed by us, or whose affiliated broker-dealers are appointed by us, as authorized sellers of the Policies. Even if this is the case, however, please note that the investment advisor you engage to provide advice and/or make
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transfers for you is not acting on our behalf, but rather is acting on your behalf. We do not offer advice about how to allocate your cash value under any circumstance. We are not responsible for any recommendations such investment advisors make, any investment models or asset allocation programs they choose to follow, or any specific transfers they make on your behalf.
Any fee that is charged by your investment advisor is in addition to the fees and expenses that apply under your Policy. We are not a party to the agreement you have with your investment advisor. You will, however, receive confirmations of transactions that affect your Policy. Note: If you make withdrawals of cash value to pay advisory fees, then taxes may apply to any such withdrawals and tax penalties may be assessed on withdrawals.
If your investment advisor has also acted as your insurance agent with respect to the sale of your Policy, he or she may be receiving compensation for services provided both as an insurance agent and investment advisor. Alternatively, the investment advisor may compensate the registered representative from whom you purchased your Policy for the referral that led you to enter into your investment advisory relationship with the investment advisor. If you are interested in the details about the compensation that your investment advisor and/or your registered representative receive in connection with your Policy, you should ask them for more details.
We, or an affiliate of ours, will process the financial transactions placed by your authorized registered representative or investment advisors. We reserve the right to discontinue doing so at any time and for any reason. We may require registered representatives or investment advisors, who are authorized by multiple policyowners to make financial transactions, to enter into an administrative agreement with Western Reserve as a condition of our accepting transactions on your behalf. The administrative agreement may impose limitations on the registered representative/agents or investment advisors ability to request financial transactions on your behalf. These limitations, which are described in the section entitled Transfers Disruptive Trading and Market Timing, are intended (1) to minimize the detrimental impact of an investment professional who is in a position to transfer large amounts of money for multiple clients in a particular portfolio or type of portfolio; or (ii) to comply with specific restrictions or limitations imposed by a portfolio of Western Reserve.
Please Note:
| Limitations that we may impose on your authorized registered representative or investment advisor under the terms of the administrative agreement do not apply to financial transactions requested by an owner on their own behalf, except as otherwise described in this prospectus. Any third party asset allocation service may be terminated at any time by the owner or by the third party service by sending written instruction to our mailing address. |
| The practices and procedures described above do not apply to any asset allocation portfolios that are available as investment options under the Policy. |
Your cash value:
| Is determined on the Policy date and on each valuation date. |
| Equals the sum of all values in each subaccount and the fixed account, including any amounts held in the loan reserve account (part of the fixed account) to secure any outstanding Policy loan. |
| Serves as the starting point for calculating values under a Policy. |
| Varies from day to day, depending on the investment experience of the subaccounts you choose, the interest credited to the fixed account, the charges deducted and any other Policy transactions (such as additional premium payments, transfers, withdrawals and Policy loans). |
| Has no guaranteed minimum amount and may be more or less than premiums paid. |
The net surrender value is the amount we pay when you surrender your Policy while it is in force. We determine the net surrender value at the end of the valuation period when we receive your written surrender request, in good order, at our mailing address. You may also fax your request to 1-727-299-1620.
Net surrender value on any valuation date equals: | The cash value as of such date; minus | |
Any surrender charge as of such date; minus | ||
Any outstanding Policy loan amount(s); plus | ||
Any interest you paid in advance on the loan(s) for the period between the date of the surrender and the next Policy anniversary. |
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The cash value in a subaccount is referred to as subaccount value. At the end of any valuation period, the subaccount value is equal to the number of units that the Policy has in the subaccount, multiplied by the unit value of that subaccount. (Note: Subaccount transactions are converted to units for accounting purposes.)
The number of units in any subaccount on any valuation date equals: | The initial units purchased at unit value on the Policy date; plus | |
Units purchased with additional net premium(s); plus | ||
Units purchased due to a loan repayment; minus | ||
Units purchased through transfers from another subaccount or the fixed account; minus | ||
Units redeemed to pay for monthly deductions; minus | ||
Units redeemed to pay for cash withdrawals; minus | ||
Units redeemed as part of a transfer to another subaccount or the fixed account (including the loan reserve account); minus | ||
Units redeemed to pay pro rata decrease, cash withdrawal and transfer charges; minus | ||
Units redeemed due to any refund of premiums allocated to that subaccount. |
Every time you allocate, transfer or withdraw money to or from a subaccount, we convert that dollar amount into units. We determine the number of units we credit to, or subtract from, your Policy by dividing the dollar amount of the allocation, transfer or cash withdrawal by the unit value for that subaccount next determined at the end of the valuation period on which the premium allocation, transfer request or cash withdrawal request is received: (i) at our mailing address (for written requests or payments by check); (ii) at our administrative office (for requests by fax or by telephone, or for payments made through electronic credit and debit transactions); or (iii) electronically through our website.
The value (or price) of each subaccount unit will reflect the investment performance of the portfolio in which the subaccount invests. Unit values will vary among subaccounts. The unit value at the inception of each class of units of each subaccount was originally established at $10 per unit. The unit value may increase or decrease from one valuation period to the next.
The unit value of any subaccount at the end of a valuation period is calculated as: | The total value of the portfolio shares held in the subaccount, including the value of any dividends or capital gains distribution declared and reinvested by the portfolio during the valuation period. This value is determined by multiplying the number of portfolio shares owned by the subaccount by the portfolios net asset value per share determined at the end of the valuation period; minus | |
A charge equal to the daily net assets of the subaccount multiplied by the daily equivalent of the mortality and expense risk charge; minus | ||
The accrued amount of reserve for any taxes or other economic burden resulting from applying tax laws that we determine to be properly attributable to the subaccount; and the result divided by | ||
The number of outstanding units in the subaccount before the purchase or redemption of any units on that date. |
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The portfolio in which any subaccount invests will determine its net asset value per share once daily, as of the close of the regular business session of the NYSE (usually 4:00 p.m. Eastern Time) except on customary national holidays on which the NYSE is closed, which coincides with the end of each valuation period.
On the Policy date, the fixed account value is equal to the cash value allocated to the fixed account, less the portion of the first monthly deduction that is subtracted from the fixed account.
The fixed account value at the end of any valuation period is equal to: | The sum of net premiums allocated to the fixed account; plus | |
Any amounts transferred from a subaccount to the fixed account (including amounts transferred to the loan reserve account); plus | ||
Total interest credited to the fixed account; minus | ||
Amounts charged to pay for monthly deductions; minus | ||
Amounts withdrawn or surrendered from the fixed account to pay for cash withdrawals, transfer charges, or any other fees and charges; minus | ||
Amounts transferred from the fixed account to a subaccount (including amounts transferred from the loan reserve account); minus | ||
Any refund of premium allocated to the fixed account. |
We will determine the amount of the death benefit proceeds on any Policy in force on the date of death upon receipt, in good order, at our administrative office of satisfactory proof of the insureds death, plus written direction (from each eligible recipient of death benefit proceeds) regarding distribution of the death benefit payment, and any other documents, forms and information we need. Wewill pay interest on the Death Benefit from the date of death to the date of payment. We may require that the Policy be returned. We will pay the death benefit proceeds to the primary beneficiary(ies), if living, or to a contingent beneficiary. If each beneficiary dies before the insured and there is no contingent beneficiary, we will pay the death benefit proceeds to the owner or the owners estate. We will pay the death benefit proceeds in a lump sum or under a payment option.
The final death benefit payment is equal to: | The amount determined based on the death benefit option that you select (described below); minus | |
Any monthly deductions due during the grace period (if applicable); minus | ||
Any outstanding loan amount; plus | ||
Any additional insurance in force provided by rider; plus | ||
Any interest you paid in advance on the loan(s) for the period between the date of death and the next Policy anniversary. |
We may further adjust the amount of the death benefit proceeds if we contest the Policy or if you misstate the insureds age or gender.
The Policy offers three death benefit options Option A, Option B and Option C. The death benefit is determined at the end of the valuation period in which the insured dies. You must select one of the three death benefit options we offer. This is an important decision. If you do not choose a death benefit option in your application, the Option A death benefit option will automatically be in effect. No matter which death benefit option you choose, we guarantee that, as long as the Policy does not lapse, the death benefit will never be less than the specified amount on the date of the insureds death adjusted as shown above.
The Policy is intended to qualify under Section 7702 of the Internal Revenue Code, as a life insurance policy for federal tax purposes. The death benefit is intended to qualify for the federal income tax exclusion. The provisions of the Policy and any attached endorsement or rider will be interpreted or amended to ensure such qualification, regardless of any language to the contrary.
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To the extent the death benefit is increased to maintain qualification as a life insurance policy, we will make appropriate adjustments to any monthly deductions or supplemental benefits that are consistent with such an increase. Adjustments will be reflected in the monthly deductions.
Option A
The death benefit equals the greatest of: | The specified amount; or | |
A specified percentage called the limitation percentage as shown on your Policys schedule page, multiplied by the cash value on the insureds date of death; or | ||
The amount required for the Policy to qualify as a life insurance policy under Section 7702 of the Internal Revenue Code. |
Under Option A, your death benefit remains level unless the limitation percentage multiplied by the cash value is greater than the specified amount; then the death benefit will vary as the cash value varies.
The limitation percentage is the minimum percentage of cash value we must pay as the death benefit under federal tax requirements. It is based on the attained age of the insured at the beginning of each Policy year. The following table indicates the limitation percentages for different ages:
Attained Age | Limitation Percentage | |
40 and under | 250% | |
41 to 45 | 250% minus 7% for each age over age 40 | |
46 to 50 | 215% minus 6% for each age over age 45 | |
51 to 55 | 185% minus 7% for each age over age 50 | |
56 to 60 | 150% minus 4% for each age over age 55 | |
61 to 65 | 130% minus 2% for each age over age 60 | |
66 to 70 | 120% minus 1% for each age over age 65 | |
71 to 75 | 115% minus 2% for each age over age 70 | |
76 to 90 | 105% | |
91 to 95 | 105% minus 1% for each age over age 90 | |
96 and older | 100% |
If the federal tax code requires us to determine the death benefit by reference to these limitation percentages, the Policy is described as in the corridor. An increase in the cash value will increase our risk, and we will increase the cost of insurance we deduct from the cash value.
Option A Example. Assume that the insureds attained age is under 40, and that there are no outstanding loans. Under Option A, a Policy with a $50,000 specified amount will generally pay $50,000 in death benefits. However, because the death benefit must be equal to or be greater than 2.5 times the cash value, any time the cash value of the Policy exceeds $20,000, the death benefit will exceed the $50,000 specified amount. (The figure $20,000 is derived by solving for cash value in the following calculation: $50,000 = 2.5 times the cash value.) Each additional dollar added to the cash value above $20,000 will increase the death benefit by $2.50.
Similarly, as long as the cash value exceeds $20,000, each dollar taken out of the cash value will reduce the death benefit by $2.50. If at any time the cash value multiplied by the limitation percentage is less than the specified amount, then the death benefit will equal the specified amount of the Policy reduced by the dollar value of any cash withdrawals.
Option B
The death benefit equals the greatest of: | The specified amount plus the cash value on the insureds date of death; or | |
The limitation percentage, as shown on your Policys schedule page; multiplied by the cash value on the insureds date of death; or | ||
The amount required for the Policy to qualify as a life insurance policy under Section 7702 of the Internal Revenue Code. |
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Under Option B, the death benefit always varies as the cash value varies.
Option B Example. Assume that the insureds attained age is under 40 and that there are no outstanding loans. Under Option B, a Policy with a specified amount of $50,000 will generally pay a death benefit of $50,000 plus cash value. Thus, a Policy with a cash value of $10,000 will have a death benefit of $60,000 ($50,000 + $10,000). The death benefit, however, must be at least 2.5 times the cash value. As a result, if the cash value of the Policy exceeds $33,333, the death benefit will be greater than the specified amount plus cash value. (The figure of $33,333 is derived by solving for cash value in the calculation 2.5 multiplied by cash value = $50,000 plus cash value: 2.5 multiplied by $33,333 = $50,000 plus $33,333.) Each additional dollar of cash value above $33,333 will increase the death benefit by $2.50.
Similarly, any time the cash value exceeds $33,333, each dollar taken out of the cash value will reduce the death benefit by $2.50. If at any time, cash value multiplied by the limitation percentage is less than the specified amount plus the cash value, then the death benefit will be the specified amount plus the cash value of the Policy.
Option C
The death benefit equals the greatest of: | 1. The death benefit under Option A; or 2. The specified amount, multiplied by an age based factor equal to the lesser of: | |||
1.0 or 0.04 multiplied by (95 minus insureds attained age at death) (the factor will never be less than zero); plus the cash value on the insureds date of death; or | ||||
3. The amount required for the Policy to qualify as a life insurance policy under Section 7702 of the Internal Revenue Code. |
Under Option C, the death benefit varies with the cash value and the insureds attained age.
Option C Three Examples.
1. | Assume that the insured is attained age 75 and that there are no outstanding loans. Under Option C, a Policy with a specified amount of $50,000 and with a cash value of $12,000 will have a death benefit of $52,000 ($50,000 x the minimum of {1.0 and (0.04 x (95-75))) + $12,000}. The death benefit, however, must be at least 105% of cash value as shown in the limitation percentage table above. |
2. | Assume that the insured is attained age 75 and that there are no outstanding loans. Under Option C, a Policy with a specified amount of $50,000 and with a cash value of $9,000 will have a death benefit equal to the specified amount of $50,000, since the calculation of $50,000 times the minimum of {1.0 and (0.04 x (95-75))} plus $9,000 is less than the specified amount. |
3. | Assume that the insured is under attained age 71 and that there are no outstanding loans. Under Option C, a Policy with a specified amount of $100,000 and with a cash value of $10,000 will have a death benefit of $110,000, because through attained age 70 the minimum of {1.0 and (0.04 x (95-age))} is always 1.0. Until the insured attains age 71, the Option C death benefit is the same as the Option B death benefit. |
Effect of Cash Withdrawals on the Death Benefit
If Option A is in effect, a cash withdrawal will reduce the specified amount of the Policy by an amount equal to the amount of the cash withdrawal. We will not impose a pro rata decrease charge when the specified amount is decreased as a result of taking a cash withdrawal. Regardless of the death benefit option in effect, a cash withdrawal will reduce the death benefit by at least the amount of the withdrawal. For a description of the effect of cash withdrawals on the death benefit option that you select, please refer to the section entitled Surrenders and Cash Withdrawals Cash Withdrawal Conditions in this prospectus.
Choosing Death Benefit Options
You must choose one death benefit option on your application. This is an important decision. The death benefit option you choose will have an impact on the dollar value of the death benefit, on your cash value, and on the amount of cost of insurance charges you pay. If you do not select a death benefit option on your application, then Option A will become the death benefit option for your Policy by default.
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You may find Option A more suitable for you if your goal is to increase your cash value through positive investment experience. You may find Option B more suitable if your goal is to increase your total death benefit. You may find Option C more suitable if your goal is to increase your total death benefit before you reach attained age 70, and to increase your cash value through positive investment experience thereafter.
Changing the Death Benefit Option
After the third Policy year, you may change your death benefit option once each Policy year. Changing the death benefit option may affect the specified amount. We will notify you of the new specified amount.
Changes to the Death Benefit Option are subject to the following:
| You must send your written request, in good order, to our mailing address or fax it to our administrative office at 1-727-299-1620. (If you send your request by fax, be sure to use the correct fax number. Please see Telephone, Fax and Online Privileges.) |
| The effective date of the change will be the Monthiversary on or following the date when we receive your request for a change. |
| You may not make a change that would decrease the specified amount below the minimum specified amount shown on your Policy schedule page. |
| There may be adverse federal tax consequences. You should consult a tax advisor before changing your Policys death benefit option. |
Decreasing the Specified Amount
You may decrease the specified amount once each Policy year, at any time after the third Policy year. A decrease in the specified amount may affect your cost of insurance charge, your Guideline Premium Test limitation, your minimum monthly guarantee premium, and may affect your ability to maintain the no lapse guarantee. A change in specified amount may affect the Policys qualification test as life insurance under IRC 7702 and could cause the Policy to become a Modified Endowment Contract under IRC 7702a and may have adverse federal tax consequences.
You should consult a tax advisor before decreasing your Policys specified amount.
Conditions for decreasing the specified amount: | You must send your written request, in good order, to our mailing address or you may fax it to us at 1-727-299-1620. Decreases are allowed only after the third Policy year. You may not decrease your specified amount lower than the minimum specified amount shown on your Policy schedule page. You may not decrease your specified amount if it would disqualify your Policy as life insurance under the Internal Revenue Code. We may limit the amount of the decrease to no more than 20% of the specified amount. A decrease in specified amount will take effect on the Monthiversary on or next following the date we receive your written request, in good order, at our mailing address. We will assess a pro rata decrease charge against the cash value if you request a decrease in your specified amount within the first 15 Policy years. |
No Increases in the Specified Amount
We do not allow increases in the specified amount. If you want additional insurance, you may purchase a term rider (PIR or PIR Plus) or purchase an additional policy(ies) naming the same owner.
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There are several ways of receiving proceeds under the death benefit and surrender provisions of the Policy, other than in a lump sum. These are described under Settlement Options in this prospectus.
SURRENDERS AND CASH WITHDRAWALS
You must make a written request to surrender your Policy for its net surrender value as calculated at the end of the valuation date on which we
receive your request, in good order, at our mailing address. You also may fax your request to our administrative office at
1-727-299-1620. We may require an original signature with such request. Written requests to surrender a Policy
that are received at our mailing address (or faxed to our administrative office) before the NYSE closes are priced using the subaccount unit value determined at the close of that regular business session of the NYSE (usually 4:00 p.m. Eastern Time).
If we receive a written request at our mailing address or a fax request at our administrative office after the NYSE closes or on a day that the NYSE is closed for trading, we will process the surrender request using the subaccount unit value
determined at the close of the next regular business session of the NYSE. Please Note: All surrender requests must be submitted in good order to avoid a delay in processing your request.
The insured must be alive, the Policy must be in force, and it must be before the maturity date when you make your written request. A surrender is effective as of the date when we receive your written request, in good order, at our mailing address. You will incur a surrender charge if you surrender the Policy during the first 15 Policy years.
Once you surrender your Policy, all coverage and other benefits under it cease and cannot be reinstated. We will normally pay you the net surrender value in a lump sum (by check) within seven days or under a settlement option. A surrender may have tax consequences. For more information on tax consequences, please refer to the section entitled Federal Income Tax Considerations in this prospectus.
After the first Policy year, you may request a cash withdrawal of a portion of your surrender value subject to certain conditions. (Note: All requests for a withdrawal must be submitted in good order to avoid a delay in processing your request.)
Cash withdrawal conditions: | You must send your written cash withdrawal request with an original signature, in good order, to our mailing address. If your withdrawal request is less than $500,000, then you may fax it to us at 1-727-299-1620. | |
We reserve the right to limit the number of withdrawals to one cash withdrawal per Policy year. | ||
We may limit the amount you can withdraw to a minimum of $500, and to no more than 10% of the net surrender value. The remaining net surrender value after the cash withdrawal must be at least $500. | ||
You may not take a cash withdrawal if it will reduce the specified amount below the minimum specified amount set forth in the Policy. | ||
You may specify the subaccount(s) and the fixed account from which to make the withdrawal. If you do not specify an account, we will take the withdrawal from each account in accordance with your current premium allocation instructions. If this is not possible, the withdrawal amount will be withdrawn pro-rata from all accounts. | ||
We generally will pay a cash withdrawal request within seven days following the valuation date we receive the request, in good order. | ||
We will deduct a processing fee equal to $25 or 2% of the amount you withdraw, whichever is less. We deduct this amount from the withdrawal, and we pay you the balance. | ||
You may not take a cash withdrawal that would disqualify your Policy as life insurance under the Internal Revenue Code. | ||
A cash withdrawal may have tax consequences. |
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A cash withdrawal will reduce the cash value by the amount of the cash withdrawal, and in most cases, will reduce the death benefit by at least the amount of the cash withdrawal. When death benefit Option A is in effect, a cash withdrawal will reduce the specified amount of the Policy by an amount equal to the amount of the cash withdrawal. You also may have to pay higher minimum monthly guarantee premiums. We will not impose a pro rata decrease charge when the specified amount is decreased as a result of taking a cash withdrawal.
When we incur extraordinary expenses, such as overnight mail expenses or wire service fees, for expediting delivery of your cash withdrawal or complete surrender payment, we will deduct that charge from the payment. We currently charge $30 for an overnight delivery ($35 for Saturday delivery) and $50 for wire service. You can obtain further information about these charges by contacting us at our administrative office or our mailing address.
You may cancel the Policy for a refund during the free look period by returning it, with a written request to cancel the Policy, to our mailing address. You also may fax your request to 1-727-299-1620 along with page 3 of the Policy. (If you send your request by fax, be sure to use the correct fax number.) The free look period generally expires 10 days after you receive the Policy but in some states you may have more than 10 days. If you decide to cancel the Policy during the free look period, we will treat the Policy as if it had never been issued. We will pay the refund within seven days after we receive, in good order, the written request and the returned Policy at our administrative office or mailing address.
If your state requires us to allocate premiums according to a policyowners instructions during the free look period then the amount of the refund will be:
| Your cash value in the subaccounts and the fixed account on the date the written request and Policy are received, in good order, at our mailing address or administrative office. |
| Any charges and taxes we deduct from your premiums; plus |
| Any monthly deductions or other charges we deducted from amounts you allocated to the subaccounts and the fixed account; plus |
Some states may require us to refund all of the premiums you paid for the Policy.
California Policyowners Age 60 and Over
For policies issued in the state of California, if the policyowner is age 60 or older as of the Policy effective date, the Policys free look period is 30 days from the date of delivery. During the 30-day free look period, we will hold the net premiums in the fixed account, unless you direct us to allocate the net premiums as per your most recent allocation instructions. On the day following the end of the 30-day free look period, we will automatically transfer the accumulated value to subaccounts that you selected. This automatic transfer is excluded from the transfer limitations described later in this prospectus.
You can specifically direct the allocation of your net premiums to the subaccounts during the 30-day free look period:
| On your application. |
| In writing any time before the end of the 30-day free look period. |
Signature guarantees are relied upon as a means of preventing the perpetration of fraud in financial transactions, including the disbursement of funds or assets from a victims account with a financial institution or a provider of financial services. They provide protection to investors by, for example, making it more difficult for a person to take another persons money by forging a signature on a written request for the disbursement of funds.
As a protection against fraud, we may require that the following transaction requests include a Medallion signature guarantee:
| All requests for disbursements (i.e., cash withdrawals and surrenders) of $500,000 or more. |
| Any disbursement request made on or within 10 days of our receipt of a request to change the address of record for an owners Policy. |
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| Any disbursement request when Western Reserve has been directed to send proceeds to a different address from the address of record for that owners account. Please Note: This requirement will not apply to disbursement requests made in connection with exchanges of one policy for another with the same owner in a tax-free exchange under Section 1035 of the Internal Revenue Code. |
An investor can obtain a signature guarantee from financial institutions across the United States and Canada that participate in a Medallion signature guarantee program. This includes many:
| National and state banks |
| Savings banks and savings and loan associations |
| Securities brokers and dealers |
| Credit unions |
The best source of a signature guarantee is a bank, savings and loan association, brokerage firm, or credit union with which you do business. Guarantor firms may, but frequently do not, charge a fee for their services.
A notary public cannot provide a signature guarantee. Notarization will not substitute for a signature guarantee.
After the first Policy year (as long as the Policy is in force) you may borrow money from the Policy using the Policys net surrender value as the only security for the loan. We may permit a loan prior to the first Policy anniversary for Policies issued pursuant to 1035 Exchanges. A loan that is taken from and secured by a Policy may have tax consequences. See Federal Income Tax Considerations.
Policy loans are subject to | We may require you to borrow at least $500. | |
certain conditions: | The maximum amount you may borrow is 90% of the cash value, minus any surrender charge and minus any outstanding loan amount. |
When you take a loan, we will withdraw an amount equal to the requested loan (plus interest in advance until the next Policy anniversary) from each of the subaccounts and the fixed account based on your current premium allocation instructions (unless you specify otherwise). If this is not possible, the withdrawal amount will be withdrawn from all accounts. We will transfer that amount to the loan reserve account. The loan reserve account is part of our fixed account.
We normally pay the amount of the loan within seven days after we receive a loan request, in good order, at our mailing address or, in limited circumstances described below, by telephone or fax or at our administrative office. We may postpone payment of loans under certain conditions.
You may request a loan of up to $50,000 by telephone by calling us at our administrative office at 1-800-851-9777, Monday - Friday, between the hours of 8:30 a.m. - 7:00 p.m. Eastern Time. If you do not want the ability to request a loan by telephone, you should notify us in writing at our mailing address. You will be required to provide certain information for identification purposes when you request a loan by telephone. We may ask you to provide us with written confirmation of your request. We will not be liable for processing a loan request if we believe the request is genuine. (Note: All loan requests must be submitted in good order to avoid a delay in processing your request.)
If your loan request is less than $500,000, then you may fax it to us at 1-727-299-1620. (If you send your request by fax, be sure to use the correct fax number.) If your loan request exceeds $500,000 or if the address of record has been changed within the past 10 days, we may reject your request or require a signature guarantee. We will not be responsible for any transmittal problems when you fax your request unless you report it to us within five business days and send us proof of your fax transmittal.
You can repay a loan at any time while the Policy is in force. Loan repayments must be sent to our mailing address and will be credited as of the date received. You also may call us at 1-800-851-9777 to request a manual draft to be applied to a loan repayment or to pay off the loan.
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At each Policy anniversary, we will compare the outstanding loan amount to the amount in the loan reserve account. At each such time, if the outstanding loan amount exceeds the amount in the loan reserve account, we will withdraw the difference from the subaccounts and the fixed account and transfer it to the loan reserve account, in the same manner as when a loan is made. If the amount in the loan reserve account exceeds the amount of the outstanding loan, we will withdraw the difference from the loan reserve and transfer it to the subaccounts and the fixed account in the same manner as current premiums are allocated. No charge will be imposed for these transfers, and these transfers are not treated as transfers in calculating the transfer charge. We reserve the right to require a transfer to the fixed account if the loans were originally transferred from the fixed account.
The Loan Interest Spread is the difference between the amount of interest we charge you for a loan and the amount of interest we credit to your loan reserve account. We charge you an annual interest rate on a Policy loan of 5.2% in advance (5.49% effective annual interest rate) on each Policy anniversary. We will also currently credit the amount in the loan reserve account with an effective annual interest rate of 4.75% (4.0% minimum guaranteed).
Loan Reserve Account Interest Rate Credited
We will credit the amount in the loan reserve account with interest at an effective annual rate of at least 4.0%. We may credit a higher rate, but we are not obligated to do so.
| We currently credit interest at an effective annual rate of 4.75% in arrears on amounts you borrow during the first ten Policy years. |
| After the tenth Policy year, on all amounts that you have borrowed, we currently credit interest to the part of the cash value in excess of the premiums paid less withdrawals at an interest rate equal to the interest rate we charge on the total loan. The remaining portion, equal to the cost basis, is currently credited an effective annual rate of 4.75% in arrears. |
A Policy loan reduces the death benefit proceeds and net surrender value by the amount of any outstanding loan amount. Repaying the loan causes the death benefit proceeds and net surrender value to increase by the amount of the repayment. As long as a loan is outstanding, we hold an amount in the loan reserve equal to the amount of the outstanding loan plus interest charged in advance until the next Policy anniversary. This amount is not affected by the separate accounts investment performance and may not be credited with the interest rates accruing on any unloaned portion of the cash value in the fixed account. Amounts transferred from the separate account to the loan reserve account will reduce the value in the separate account and we will credit such amounts with an interest rate declared by us rather than a rate of return reflecting the investment results of the separate account.
We also currently charge interest on Policy loans at an annual interest rate of 5.2% in advance. Because interest is added to the amount of the Policy loan to be repaid, the size of the loan will constantly increase unless the Policy loan is repaid.
There are risks involved in taking a Policy loan, including the potential for a Policy to lapse if projected earnings, taking into account outstanding loans, are not achieved. A Policy loan may also have possible adverse tax consequences. You should consult a tax advisor before taking out a Policy loan.
We will notify you (and any assignee of record) if a loan causes your net surrender value to reach zero. If you do not submit a sufficient payment within 61 days from the date of the notice, your Policy may lapse.
POLICY LAPSE AND REINSTATEMENT
Your Policy may not necessarily lapse (terminate without value) if you fail to make a planned periodic payment. However, even if you make all your planned periodic payments, there is a possibility that your Policy will lose value and lapse. This Policy provides a no lapse guarantee as described below. Once your no lapse period ends, or if the no lapse guarantee is not in effect, your Policy may lapse (terminate without value) if the net surrender value on any Monthiversary is less than the monthly deductions due on that day. Such lapse might occur if unfavorable investment experience, loans and cash withdrawals cause a decrease in the net surrender value, or you have not paid sufficient premiums (as discussed below) to offset the cost monthly deductions.
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If the net surrender value is not enough to pay the monthly deductions, we will mail a notice to your last known address according to our records and any assignee of record. The notice will specify the minimum payment you must pay and the final date by which we must receive the payment to prevent a lapse. We generally require that you make the payment within 61 days after the date of the notice. This 61-day period is called the grace period. We pay the death benefit proceeds if an insured dies during the grace period. If we do not receive the specified minimum payment by the end of the grace period, all coverage under the Policy will terminate without value.
Your Policy is a flexible premium policy that is subject to certain monthly deductions that are dependent upon, among other factors, the characteristics of the insureds, riders associated with your Policy, and your Policys specified amount. If you Policy does lapse and you choose to reinstate it, you will be required to make additional payments. The payments needed to reinstate the Policy will depend on whether the no lapse date has passed. Please refer to the section below entitled Reinstatement for a description of the payments that may be required to reinstate your Policy.
As noted above, the Policy provides a no lapse guarantee during the no lapse period. As long as you keep the no lapse guarantee in effect, your Policy will not lapse and no grace period will begin. Even if your net surrender value is not enough to pay your monthly deductions, the Policy will not lapse as long as the no lapse guarantee is in effect. The no lapse guarantee will not extend beyond the no lapse date stated in your Policy. Each month we determine whether the no lapse guarantee is still in effect. If the no lapse guarantee is not in effect and the Policy is still in force, it can be restored by paying, at any time before the no lapse date, minimum monthly guarantee premiums sufficient to cover the period from the Policy date up to and including the current month.
No lapse date | For issue ages 0-60, the no lapse date is the lesser of 20 years or until the insureds attained age is 65. For issue ages 61-80, the no lapse date is the fifth Policy anniversary. The no lapse date is specified in your Policy. | |
Keeping the no lapse guarantee in effect: | The no lapse guarantee will not remain in effect if you do not pay sufficient minimum monthly guarantee premiums. You must pay total premiums (minus cash withdrawals, any outstanding loan amounts, and any pro rata decrease charge) that equal at least: > the sum of the minimum monthly guarantee premiums in effect for each month from the Policy date up to and including the current month. | |
Effect of changes on minimum monthly guarantee premium: |
We will recalculate the amount of the minimum monthly guarantee premium if, while the no lapse guarantee is in effect, you change death benefit options, decrease the specified amount, or if supplemental benefits riders are added, terminated, reduced or increased. Depending on the change made to the Policy or rider and the resulting impact on the level of the minimum monthly guaranteed premium, you may need to pay additional premiums to keep the Policy in force. We normally will not extend the length of the no lapse guarantee. |
You will lessen the risk of Policy lapse if you keep the no lapse guarantee in effect. Before you take a cash withdrawal or a loan or decrease the specified amount or add, increase or decrease a rider you should consider carefully the effect it will have on the no lapse guarantee.
See Minimum Monthly Guarantee Premium for a discussion of how the minimum monthly guarantee premium is calculated and can change.
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We may reinstate a lapsed Policy within five years after the lapse (and prior to the maturity date). You may not reinstate the Policy if it has been surrendered for cash surrender value. Any reinstatement must be made during the lifetime of the insured. Before we reinstate the Policy we will require all of the following:
| Submit a written application for reinstatement to our mailing address or fax your request to our administrative office at 1-727-299-1620. (If you send your request by fax, be sure to use the correct fax number.) |
| Submit the insureds written consent to reinstate. |
| Provide evidence of insurability satisfactory to us that the insured continues to qualify for the same underwriting class and any substandard rating upon which we based issuance of the Policy. |
| Make a minimum premium payment as follows: |
| If the no lapse period has expired, then the policyowner must pay an amount sufficient to provide a net premium equal to any uncollected monthly deductions due up to the time of termination, plus two monthly deductions due in advance at the time of reinstatement, plus an amount sufficient to increase the cash value above surrender charges that would apply at the time of reinstatement. |
| If the no lapse period has not expired, the required premium will be the lesser of the premium described above, or the total minimum monthly guarantee premium from policy issue through the month of lapse, plus two months of minimum monthly guarantee premiums, minus premiums previously paid net of withdrawals, outstanding loans, accrued loan interest, and decrease charges. |
The cash value of the loan reserve account on the reinstatement date will be zero. Your net surrender value on the reinstatement date will equal the cash value at the time your Policy lapsed, plus any net premiums you pay at reinstatement, minus one monthly deduction and any surrender charge that we would assess if you were to surrender the Policy. The reinstatement date for your Policy will be the Monthiversary on or following the day we approve your application for reinstatement. We may decline a request for reinstatement. We will not reinstate indebtedness (i.e., outstanding loans plus any accrued interest at the time your Policy lapsed).
FEDERAL INCOME TAX CONSIDERATIONS
The following summarizes some of the basic federal income tax considerations associated with a Policy and does not purport to be complete or to cover all situations. This discussion is not intended as tax advice. Please consult counsel or other qualified tax advisors for more complete information. We base this discussion on our understanding of the present federal income tax laws as they are currently interpreted by the Internal Revenue Service (the IRS). Federal income tax laws and the current interpretations by the IRS may change.
A Policy must satisfy certain requirements set forth in the Internal Revenue Code (the Code) in order to qualify as a life insurance policy for federal income tax purposes and to receive the tax treatment normally accorded life insurance policies under federal tax law. Guidance as to how these requirements are to be applied is limited. Nevertheless, we believe that the Policy should generally satisfy the applicable Code requirements.
It is also uncertain whether death benefits under policies where the maturity date has been extended will be excludible from the beneficiarys gross income and whether policy cash value will be deemed to be distributed to you on the original maturity date. Such a deemed distribution may be taxable. If it is subsequently determined that a Policy does not satisfy the applicable requirements, we may take appropriate steps to bring the Policy into compliance with such requirements and we reserve the right to restrict Policy transactions in order to do so.
In certain circumstances, owners of variable life insurance policies have been considered for federal income tax purposes to be the owners of the assets of the separate account supporting their policies due to their ability to exercise investment control over those assets. Where this is the case, the policyowners have been currently taxed on income and gains attributable to the separate account assets. There is little guidance in this area, and some features of the Policies, such as your flexibility to allocate premiums and cash values, have not been explicitly addressed in published rulings. We believe that the Policy does not give you investment control over separate account assets.
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In addition, the Code requires that the investments of the separate account be adequately diversified in order to treat the Policy as a life insurance policy for federal income tax purposes. We intend that the separate account, through the portfolios, will satisfy these diversification requirements.
The following discussion assumes that the Policy will qualify as a life insurance policy for federal income tax purposes.
Tax Treatment of Policy Benefits
In General. We believe that the Policy described in this prospectus is a life insurance policy under Code Section 7702. Section 7702 defines a life insurance policy for federal income tax purposes and places limits on the relationship of the cash value to the death benefit. As life insurance policies, the death benefits of the policies are generally excludable from the gross income of the beneficiaries. In the absence of any guidance from the IRS on the issue, we believe that providing an amount at risk after attained age 99 in the manner provided should be sufficient to maintain the excludability of the death benefit after attained age 99. However, lack of specific IRS guidance makes the tax treatment of the death benefit after attained age 99 uncertain. Also, any increase in cash value should generally not be taxable until received by you or your designee. However, if your Policy is a modified endowment contract as defined in Code Section 7702A you may be taxed to the extent of gain in the Policy when you take a Policy loan, pledge or assign the Policy. Federal, state and local transfer, estate and other tax consequences of ownership or receipt of Policy proceeds depend on your circumstances and the beneficiarys circumstances. A tax advisor should be consulted on these consequences.
Generally, you will not be deemed to be in constructive receipt of the cash value until there is a distribution. When distributions from a Policy occur, or when loans are taken out from or secured by a Policy (e.g., by assignment), the tax consequences depend on whether the Policy is classified as a MEC. Moreover, if a loan from a Policy that is not a MEC is outstanding when the Policy is surrendered or lapses, the amount of outstanding indebtedness will be considered an amount distributed and will be taxed accordingly.
Modified Endowment Contracts. Under the Code, certain life insurance policies are classified as MECs and receive less favorable tax treatment than other life insurance policies. The rules are too complex to summarize here, but generally depend on the amount of premiums paid during the first seven Policy years or in the seven Policy years following certain changes in the Policy. Certain changes in the Policy after it is issued could also cause the Policy to be classified as a MEC. Among other things, a reduction in benefits could cause a Policy to become a MEC. Due to the Policys flexibility, each Policys circumstances will determine whether the Policy is classified as a MEC. If you do not want your Policy to be classified as a MEC, you should consult a tax advisor to determine the circumstances, if any, under which your Policy would or would not be classified as a MEC.
Upon issue of your Policy, we will notify you as to whether or not your Policy is classified as a MEC based on the initial premium we receive. If your Policy is not a MEC at issue, then you will also be notified of the maximum amount of additional premiums you can pay without causing your Policy to be classified as a MEC. If a payment would cause your Policy to become a MEC, you and your registered representative will be notified. At that time, you will need to notify us if you want to continue your Policy as a MEC. Unless you notify us that you do want to continue your Policy as a MEC, we will refund the dollar amount of the excess premium that would cause the Policy to become a MEC.
Distributions (other than Death Benefits) from MECs. Policies classified as MECs are subject to the following tax rules:
| All distributions other than death benefits from a MEC, including distributions upon surrender and cash withdrawals, will be treated first as distributions of gain taxable as ordinary income. They will be treated as tax-free recovery of the owners investment in the Policy only after all gain has been distributed. Your investment in the Policy is generally your total premium payments. When a distribution is taken from the Policy, your investment in the Policy is reduced by the amount of the distribution that is tax-free. |
| Loans taken from or secured by (e.g., by assignment) or pledges of such a Policy and increases in cash value secured by such loan or pledge are treated as distributions and taxed accordingly. If the Policy is part of a collateral assignment split dollar arrangement, the initial assignment as well as increases in cash value during the assignment may be treated as distributions and considered taxable. |
| A 10% additional federal income tax is imposed on the amount included in income except where the distribution or loan is made when you have reached age 59 1⁄2 or are disabled, or where the distribution is part of a series of substantially equal periodic payments for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and the beneficiary. |
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| If a Policy becomes a MEC, distributions that occur during the Policy year will be taxed as distributions from a MEC. In addition, the IRS has the authority, but has not yet done so, to issue regulations providing that distributions from a Policy that are made within two years before the Policy becomes a MEC will also be taxed in this manner. |
Distributions (other than Death Benefits) from Policies that are not MECs. Distributions from a Policy that is not a MEC are generally treated first as a recovery of your investment in the Policy, and as taxable income after the recovery of all investment in the Policy. However, certain distributions, which must be made in order to enable the Policy to continue to qualify as a life insurance policy for federal income tax purposes if Policy benefits are reduced during the first 15 Policy years, may be treated in whole or in part as ordinary income subject to tax. Distributions from or loans from or secured by a Policy that is not a MEC are not subject to the 10% additional tax applicable to MECs.
Policy Loans. Loans from or secured by a Policy that is not a MEC are generally not treated as distributions. Instead, such loans are treated as indebtedness. If a loan from a Policy that is not a MEC is outstanding when the Policy is surrendered or lapses, the amount of the outstanding indebtedness will be taxed as if it were a distribution at that time. The tax consequences associated with Policy loans outstanding after the first 10 Policy years with preferred loan rates are less clear and a tax advisor should be consulted about such loans.
Deductibility of Policy Loan Interest. In general, interest you pay on a loan from a Policy will not be deductible. Before taking out a Policy loan, you should consult a tax advisor as to the tax consequences.
Investment in the Policy. Your investment in the Policy is generally the sum of the premium payments you made. When a distribution from the Policy occurs, your investment in the Policy is reduced by the amount of the distribution that is tax-free.
Withholding. To the extent that Policy distributions are taxable, they are generally subject to withholding for the recipients federal income tax liability. The federal income tax withholding rate is generally 10% of the taxable amount of the distribution. Withholding applies only if the taxable amount of all distributions is at least $200 during a taxable year. Some states also require withholding for state income taxes. With the exception of amounts that represent eligible rollover distributions from Pension Plans and 403(b) arrangements, which are subject to mandatory withholding of 20% for federal tax, recipients can generally elect, however, not to have tax withheld from distributions. If the taxable distributions are delivered to foreign countries, U.S. persons may not elect out of withholding. Taxable distributions to non-resident aliens are generally subject to withholding at a 30% rate unless withholding is eliminated under an international treaty with the United States. The payment of death benefits is generally not subject to withholding.
Business Uses of the Policy. The Policy may be used in various arrangements, including nonqualified deferred compensation or salary continuance plans, split dollar insurance plans, executive bonus plans, retiree medical benefit plans and others. The tax consequences of such plans and business uses of the Policy may vary depending on the particular facts and circumstances of each individual arrangement and business uses of the Policy. Therefore, if you are contemplating using the Policy in any such arrangement, you should be sure to consult a tax advisor as to tax attributes of the arrangement and in its use of life insurance. In recent years, moreover, Congress and the IRS have adopted new rules relating to nonqualified deferred compensation and to life insurance owned by businesses and life insurance companies used in split-dollar arrangements. The IRS recently issued new guidance regarding concerns in the use of life insurance in employee welfare plans, including, but not limited to, the deduction of employer contributions and the status of such plans as listed transactions. Any business contemplating the purchase of a new Policy or a change in an existing Policy should consult a tax advisor. Recent legislation under Section 101(j) of the Internal Revenue Code has imposed notice, consent and other provisions on policies owned by employers and certain of their affiliates, owners and employees in order to receive death benefits tax-free and inserted additional tax reporting requirements.
Alternative Minimum Tax. There also may be an indirect tax upon the income in the Policy or the proceeds of a Policy under the federal corporate alternative minimum tax, if the policyowner is subject to that tax.
Terminal Illness Accelerated Death Benefit Rider. We believe that the single-sum payment we make under this rider should be fully excludable from the gross income of the beneficiary, except in certain business contexts. You should consult a tax advisor about the consequences of adding this rider to your Policy, or requesting a single-sum payment.
Continuation of Policy Beyond Attained Age 99. The tax consequences of continuing the Policy beyond the insureds attained age 99 are unclear and may include taxation of the gain in the Policy at the original maturity date or the taxation of the death benefit in whole or in part. You should consult a tax advisor if you intend to keep the Policy in force beyond the insureds attained age 99.
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Other Tax Considerations. The transfer of the Policy or designation of a beneficiary may have federal, state, and/or local transfer and inheritance tax consequences, including the imposition of gift, estate, and generation-skipping transfer taxes. The individual situation of each owner or beneficiary will determine the extent, if any, to which federal, state, and local transfer and inheritance taxes may be imposed and how ownership or receipt of Policy proceeds will be treated for purposes of federal, state and local estate, inheritance, generation-skipping and other taxes. Special Rules for Pension Plans and Section 403(b) Arrangements. If the Policy is purchased in connection with a section 401(a) qualified pension or profit sharing plan, including a section 401(k) plan, or in connection with a section 403(b) plan or program, federal and state and estate tax consequences could differ from those stated in this prospectus. The purchase may also affect the qualified status of the plan. You should consult a qualified tax advisor in connection with such purchase. Policies owned under these types of plans may be subject to the Employee Retirement Income Security Act of 1974, or ERISA, which may impose additional requirements on the purchase of policies by such plans. You should consult a qualified advisor regarding ERISA.
Please Note:
| Foreign Account Tax Compliance Act (FATCA). The discussion above provides general information regarding U.S. federal income tax consequences to life and annuity purchasers that are U.S. citizens or residents. Purchasers that are not U.S. citizens or residents will generally be subject to U.S. federal withholding tax on taxable distributions from life policies and annuity contracts at a 30% rate, unless a lower treaty rate applies. In addition, such purchasers may be subject to state and/or municipal taxes and taxes that may be imposed by the purchasers country of citizenship or residence. Additional documentation may be required with respect to entity purchasers (including foreign corporations, partnerships, and trusts) that are not U.S. residents, and additional withholding may be imposed if such documentation is not provided. Prospective purchasers are advised to consult with a qualified tax adviser regarding U.S., state, and foreign taxation with respect to a life policy or an annuity contract purchase. |
| In 2001, Congress enacted the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), which modified the estate, gift and generation-skipping transfer taxes through 2009 and eliminated the estate tax (but not the gift tax) and replaced it with a carryover basis income tax regime for estates of decedents dying in 2010, and also eliminated the generation-skipping transfer tax for transfers made in 2010. The 2010 Taxpayer Relief Act generally extended the EGTRRA provisions existing in 2009 and reunified the estate and gift transfer taxes for 2011 and 2012. The American Taxpayer Relief Act of 2012 made permanent certain of the changes to the estate, gift and generation-skipping transfer taxes. This recent history of changes in these important tax provisions underscores the importance of seeking guidance from a qualified advisor to help ensure that your estate plan adequately addresses your needs and that of your beneficiaries under all possible scenarios. |
If you surrender the Policy, you may elect to receive the net surrender value in either a lump sum by check or as a series of regular income payments under one of the three settlement options described below. In either event, life insurance coverage ends. Also, when the insured dies, the beneficiary may apply the lump sum death benefit proceeds to one of the same settlement options. If the regular payment under a settlement option would be less than $100, we will instead pay the proceeds in one lump sum. We may make other settlement options available in the future.
Once we begin making payments under a settlement option, you or the beneficiary will no longer have any value in the subaccounts or the fixed account. Instead, the only entitlement will be the amount of the payment specified under the terms of the settlement option chosen. Depending upon the circumstances, the effective date of a settlement option is the surrender date or the insureds date of death.
Under any settlement option, the dollar amount of each payment will depend on:
| The amount of the surrender on the surrender date or death benefit proceeds on the insureds date of death. |
| The interest rate we credit on those amounts (we guarantee a minimum annual interest rate of 3.0%). |
| The mortality tables we use. |
| The specific payment option(s) you choose. |
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Option 1Equal Monthly Installments for a Fixed Period | We will pay the proceeds, plus interest, in equal monthly installments for a fixed period of your choice, but not longer than 240 months. | |
We will stop making payments once we have made all the payments for the period selected. | ||
Option 2Equal Monthly Installments for Life (Life Income) | At your or the beneficiarys direction, we will make equal monthly installments: | |
Only for the life of the payee, at the end of which payments will end; or | ||
For the longer of the payees life, or for 10 years if the payee dies before the end of the first 10 years of payments; or | ||
For the longer of the payees life, or until the total amount of all payments we have made equals the proceeds that were applied to the settlement option. | ||
Option 3Equal Monthly Installments for the Life of the Payee and then to a Designated Survivor (Joint and Survivor) | We will make equal monthly payments during the joint lifetime of two persons, first to a chosen payee, and then to a co-payee, if living, upon the death of the payee. | |
Payments to the co-payee, if living, upon the payees death will equal either: | ||
> The full amount paid to the payee before the payees death; or | ||
> Two-thirds of the amount paid to the payee before the payees death. | ||
All payments will cease upon the death of the co-payee. |
If the insured is living and the Policy is in force, the Policy will mature on the Policy anniversary nearest the insureds 95th birthday. This is the maturity date. On the maturity date we will pay you the net surrender value of your Policy.
If your Policy was issued before May 1, 1999, and you send a written request to our mailing address, we may extend the maturity date if your Policy is still in force on the maturity date and there are no adverse tax consequences in doing so. You must submit a written request for the extension between 90 and 180 days prior to the maturity date. We must agree to the extension.
If your Policy was issued on or after May 1, 1999, and you send a written request to our mailing address, we will extend the maturity date if your Policy is still in force on the maturity date. Any riders in force on the scheduled maturity date will terminate on that date and will not be extended. Interest on any outstanding Policy loans will continue to accrue during the period for which the maturity date is extended. You must submit a written request to our mailing address, for the extension between 90 and 180 days prior to the maturity date and elect one of the following:
1. | If you had previously selected death benefit Option B or C, we will change the death benefit to Option A. On each valuation date, we will adjust the specified amount to equal the cash value, and the limitation percentage will be 100%. We will not permit you to make additional premium payments unless it is required to prevent the Policy from lapsing. We will waive all future monthly deductions; or |
2. | We will automatically extend the maturity date until the next Policy anniversary. You must submit a written request to our mailing address, between 90 and 180 days before each subsequent Policy anniversary, stating that you wish to extend the maturity date for another Policy year. All benefits and charges will continue as set forth in your Policy. We will charge the then current cost of insurance rates. |
If you choose 2 above, you may change your election to 1 above at any time. However, if you choose 1 above, then you may not change your election to 2 above.
The tax consequences of extending the maturity date beyond the 100th birthday of the insured are uncertain and may include taxation of the gain in the Policy at the original maturity date or taxation of the death benefit in whole or in part. You should consult a tax advisor as to those consequences.
We usually pay the amounts of any surrender, cash withdrawal, death benefit proceeds, or settlement options within seven calendar days after we receive all applicable written notices and/or due proofs of death (in good order) at our mailing address. However, we can postpone such payments if any of the following occur:
| The NYSE is closed, other than customary weekend and holiday closing, or trading on the NYSE is restricted as determined by the SEC. |
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| The SEC permits, by an order, the postponement for the protection of policyowners. |
| The SEC determines that an emergency exists that would make the disposal of securities held in the separate account or the determination of their value not reasonably practicable. |
| When mandated under applicable law. |
In addition, pursuant to SEC rules, if the Transamerica Aegon Money Market VP portfolio or the ProFund VP Money Market portfolio suspends payment of redemption proceeds in connection with a liquidation of such portfolio, we will delay payment of any transfer, partial withdrawal, surrender, loan, or death benefit from the Transamerica Aegon Money Market VP subaccount or the ProFund VP Money Market subaccount until the portfolio is liquidated.
If you have submitted a recent check or draft, we have the right to defer payment of surrenders, cash withdrawals, death benefit proceeds, or payments under a settlement option until such check or draft has been honored. We also reserve the right to defer payment of transfers, cash withdrawals, death benefit proceeds, or surrenders from the fixed account for up to six months.
If mandated under applicable law, we may be required to reject a premium payment and/or block a policyowners account and thereby refuse to pay any request for transfers, withdrawals, surrenders, loans or death benefits until instructions are received from the appropriate regulators. We may also be required to provide additional information about you or your account to governmental regulators.
You may enter into a split dollar arrangement with another owner or another person(s) whereby the payment of premiums and the right to receive the benefits under the Policy (i.e., cash surrender value of insurance proceeds) are split between the parties. There are different ways of allocating these rights.
For example, an employer and employee might agree that under a Policy on the life of the employee, the employer will pay the premiums and will have the right to receive the cash surrender value. The employee may designate the beneficiary to receive any insurance proceeds in excess of the cash surrender value. If the employee dies while such an arrangement is in effect, the employer would receive from the insurance proceeds the amount that he would have been entitled to receive upon surrender of the Policy and the employees beneficiary would receive the balance of the proceeds.
No transfer of Policy rights pursuant to a split dollar arrangement will be binding on us unless in writing and received by us at our mailing address in good order. Split dollar arrangements may have tax consequences. You should consult a tax advisor before entering into a split dollar arrangement.
The Sarbanes-Oxley Act (the Act) was enacted in 2002. The Act prohibits, with limited exceptions, publicly-traded companies, including non-U.S. companies that have securities listed on exchanges in the United States, from extending, directly or through a subsidiary, many types of personal loans to their directors or executive officers. It is possible that this prohibition may be interpreted as applying to split-dollar life insurance policies for directors and executive officers of such companies, since such insurance arguably can be viewed as involving a loan from the employer for at least some purposes.
Although the prohibition on loans of publicly-traded companies was generally effective as of July 30, 2002, there is an exception for loans outstanding as of the date of enactment, as long as there is no material modification to the loan terms and the loan is not renewed after July 30, 2002. Any affected business contemplating the payment of a premium on an existing Policy, or the purchase of a new Policy, in connection with a split-dollar life insurance arrangement should consult legal counsel.
In addition, the IRS issued guidance that affects the tax treatment of split-dollar arrangements and the Treasury Department issued final regulations that would significantly affect the tax treatment of such arrangements. The IRS guidance and the final regulations affect all split dollar arrangements, not just those involving publicly-traded companies. Consult your qualified tax advisor with respect to the effect of this current and proposed guidance on your split dollar policy.
Your Policy will terminate and all benefits under it will cease on the earliest of the following:
| The date the Policy matures. |
| The date the Policy lapses. |
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| The date we receive (in good order) your written request to surrender or terminate; or |
| The date of the insureds death. |
You may assign your Policy by filing a written request with us. We will not be bound by any assignment until we record it in our records. Unless otherwise specified by you, the assignment will then take effect on the date this assignment form is received in good order by the Company and accepted at our administrative office, unless the Policy states otherwise. We assume no responsibility for the validity or effect of any assignment of the Policy or of any interest in it. Any death benefit which becomes payable to an assignee will be payable in a single sum and will be subject to proof of the assignees interest and the extent of the assignment.
SUPPLEMENTAL BENEFITS (RIDERS)
The following supplemental benefits (riders) are available and may be added to your Policy. Monthly charges for these riders are deducted from the cash value as part of the monthly deductions. The riders available with the Policies do not build cash value and provide benefits that do not vary with the investment experience of the separate account. These riders may not be available in all states, certain benefits and features may vary by state and they may be available under a different name in some states. Adding these supplemental benefits to an existing Policy or canceling them may have tax consequences; you should consult a tax advisor before doing so.
Primary Insured Rider (PIR) and Primary Insured Rider Plus (PIR Plus)
Under the PIR and the PIR Plus, we provide term insurance coverage on the insured on a different basis from the coverage in your Policy.
Features of PIR and PIR Plus: | The rider increases the Policys death benefit by the riders face amount. | |
The PIR may be purchased for issue ages 0-80. | ||
The PIR Plus may be purchased for issue ages 18-80. | ||
The PIR terminates when the insured reaches attained age 90, and the PIR Plus terminates when the insured reaches attained age 85. | ||
The minimum purchase amount for the PIR and PIR Plus is $25,000. There is no maximum purchase amount. | ||
We do not assess any additional surrender charge for PIR and PIR Plus. | ||
Generally PIR and PIR Plus coverage costs less than the insurance coverage under the Policy, but has no cash value. | ||
You may cancel or reduce your rider coverage without decreasing your Policys specified amount. | ||
You may generally decrease your specified amount without reducing your rider coverage. | ||
Conditions to convert the rider: | Your request must be in writing and sent to our mailing address, in good order. | |
The primary insured has not reached his/her 70th birthday. | ||
The new policy is any term insurance policy that we currently offer. | ||
Subject to the minimum specified amount required for the new policy, the amount of the insurance under the new policy will equal the specified amount in force under the rider as long as it meets the minimum specified amount requirements of a Base Policy. | ||
We will base your premium on the primary insureds underwriting class under the rider. | ||
Termination of the rider: | The rider will terminate on the earliest of: | |
When the insured reaches attained age 90 for a PIR and when the insured reaches attained age 85 for a PIR Plus; or | ||
The date the Policy terminates for any reason except for the death of the primary insured; or | ||
The date you fully convert the rider; or | ||
The Monthiversary when the rider terminates upon the owners written request. |
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It may cost you less to reduce your PIR or PIR Plus coverage than to decrease your Policys specified amount, because we do not deduct a surrender charge in connection with your PIR or PIR Plus. It may cost you more to keep a higher specified amount under the Base Policy, because the specified amount may have a cost of insurance that is higher than the cost of the same amount of coverage under your PIR or PIR Plus. You should consult your registered representative to determine if you would benefit from PIR or PIR Plus. We may discontinue offering PIR or PIR Plus at any time. We may also modify the terms of these riders for new policies.
This rider may insure the spouse (or a non-spouse Other Insured where required by state law) and/or dependent children of the primary insured. Please note that if a non-spouse Other Insured, as required under state law, is the insured, there may be adverse tax consequences. You should consult a qualified tax advisor in connection with the purchase of this rider. Subject to the terms of the rider, we will pay the specified amount of the rider to the primary beneficiary selected when we receive (in good order at our mailing address) proof of that Other Insureds death occurred while the rider was in force. Available for other insured issue ages 0-80, our minimum specified amount for this rider is $10,000. The maximum specified amount is the lesser of $500,000 or the total amount of coverage on the primary insured. The maximum number of Other Insured Riders that is allowed on any one Policy is five (5). Please refer to the applicable fee tables for your Policy to determine the respective charges for this rider. Subject to the following conditions, on any Monthiversary while the rider is in force, you may convert it to a new policy on the Other Insureds life (without evidence of insurability).
Conditions to convert the rider: | Your request, in good order, must be in writing and sent to our mailing address. | |
The Other Insured has not reached his/her 70th birthday. | ||
The new policy is any term insurance policy that we currently offer for conversion. | ||
Subject to the minimum specified amount required for the new policy, the amount of the insurance under the new policy will equal the face amount in force under the rider as long as it meets the minimum specified amount requirements of the original Policy. | ||
We will base the premium for the new policy on the Other Insureds underwriting class under the rider. | ||
Termination of the rider: | The rider will terminate on the earliest of: | |
The maturity date of the Policy; or | ||
The Policy anniversary nearest to the other insureds 95th birthday; or | ||
The date the Policy terminates for any reason except for the death of the primary insured; or | ||
31 days after the death of the primary insured; or | ||
The date of conversion of this rider; or | ||
The Monthiversary when the rider terminates upon the owners written request. |
This rider provides insurance on the primary insureds children who are between the ages of 15 days and 18 years old on the effective date of the rider or when later added to the rider due to birth or legal adoption. The coverage for any insured child will terminate on the Monthiversary following that childs 25th birthday (or that childs death, if sooner).
Our minimum face amount for this rider is $2,000 and the maximum face amount is $10,000. We will pay a death benefit once we receive proof, in good order, at our mailing address that the insured child died while the rider was in force for that child. At each insured childs age 25 this rider may be converted to a new policy for five times the face amount of the rider. If the primary insured dies while the rider is in force, we will terminate the rider 31 days after the death, and we will offer a separate life insurance policy to each insured child for an amount equal to the face amount of the rider.
Accidental Death Benefit Rider
Available to primary insureds issue ages 15-59, the minimum specified amount for this rider is $10,000. The maximum specified amount available for the rider is the lesser of (i) $150,000 or (ii) 150% of the Policys specified amount.
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Subject to certain limitations, we will pay the face amount if the primary insureds death results solely from accidental bodily injury where:
| The death is caused by external, violent, and accidental means. |
| The death occurs within 90 days of the accident. |
| The death occurs while the rider is in force. |
The rider will terminate on the earliest of:
| The Policy anniversary nearest the primary insureds 70th birthday; or |
| The date the Policy terminates; or |
| The Monthiversary when this rider is terminated upon the owners written request. |
Subject to certain conditions, we will waive the Policys monthly deductions while the insured is disabled. You may purchase this rider if the primary insureds issue age is between 15-55,at the time the rider is purchased.
Before we waive any monthly deductions, we must receive proof, in good order, at our mailing address that:
| The primary insured is totally disabled. |
| The rider was in force when the primary insured became disabled. |
| The primary insureds total disability began before the Policy anniversary nearest his/her 60th birthday. |
| The primary insureds total disability has existed continuously for at least six months. |
We will not waive any deduction that becomes due more than one year before we receive written notice of your claim, after the primary insureds recovery from disability, or after termination of this rider. While the primary insured is totally disabled and receiving benefits under this rider, no grace period will begin for the Policy provided that the cash value minus loans and loan interest remains positive. It is possible that additional premium payments will be required to keep the Policy in force while the waiver of monthly deductions benefit is being paid.
Termination of the rider: | The rider will terminate on the earliest of: | |
The Policy anniversary on or following the primary insureds 60th birthday, unless the primary insured is totally disabled; or | ||
The date of recovery from disability (with respect to benefits accruing during the continuance of an existing total disability after the Policy anniversary on or following the primary insureds 60th birthday); or | ||
The date the Policy terminates; or | ||
The Monthiversary when this rider is terminated upon the owners written request. |
If we are paying benefits under the rider on the Policy anniversary after the insureds 60th birthday, then the rider will not terminate and benefits will continue until the date the primary insured is no longer totally disabled.
Disability Waiver and Income Rider
This rider has the same benefits as the Disability Waiver Rider, but adds a monthly income benefit for up to 120 months. This rider may be purchased if your issue age is 15-55. The minimum income amount for this rider is $10. The maximum income amount is the lesser of 0.2% of your specified amount or $300 per month.
Terminal Illness Accelerated Death Benefit Rider
This rider allows us to pay all or a portion of the death benefit once we receive proof, in good order, at our mailing address that the insured is ill and has a life expectancy of one year or less. A doctor must certify the insureds life expectancy.
We will pay a single-sum benefit equal to:
| The death benefit on the date we pay the single-sum benefit; multiplied by |
| The percentage of the death benefit you elected to receive (election percentage); divided by |
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| 1 + i (i equals the Applicable Federal Interest Rate (1.79% for 2014) or the Policy loan interest rate expressed in arrears, whichever is greater) (discount factor); minus |
| Any indebtedness at the time we pay the single-sum benefit, multiplied by The election percentage. |
The maximum terminal illness death benefit used to determine the single sum benefit as defined above is equal to:
| The death benefit available under the Policy once we receive satisfactory proof that the insured is ill; plus |
| The benefit available under any PIR or PIR Plus in force. |
A single-sum benefit may not exceed $500,000.
You elect the election percentage. It may not be greater than 100%.
The rider terminates at the earliest of:
| The date the Policy terminates. |
| The date a settlement option takes effect. |
| The date we pay a single-sum benefit. |
| The date you terminate the rider. |
We will not pay a benefit under the rider if the insureds terminal condition results from self-inflicted injuries that occur during the period specified in your Policys suicide provision.
We do not assess an administrative charge for this rider; if the rider is exercised, however, we do reduce the single sum benefit by a discount factor to compensate us for expected lost income due to the early payment of the death benefit. This rider may not be available in all states, or its terms may vary depending on a states insurance law requirements.
For example, suppose before the owner elects the single sum benefit, a Policy has a $400,000 death benefit and a $10,000 loan balance. The Applicable Federal Interest Rate for 2014 is 1.79% and the Policy loan interest rate is 5.2% in advance, or 5.49 in arrears. Because the greater of these is 5.49%, that is the interest rate that will be used to discount the single sum benefit. The owner elects to accelerate 50% of the death benefit, so the single sum benefit equals $184,600, which is {($400,000 x 0.50 / 1.0549)($10,000 x 0.50)}. After the acceleration, the remaining death benefit is $200,000, which is 50% of $400,000, and all Policy values will be reduced by 50%.
Note: Before adding this rider to an existing Policy or requesting payment under the rider, you should consult a tax advisor to discuss the tax consequences of doing so.
Unclaimed and Abandoned Property
Every state has unclaimed property laws that generally provide for escheatment to the state of unclaimed property (including proceeds of annuity, life and other insurance policies) under various circumstances. In addition to the state unclaimed property laws, we may be required to escheat property pursuant to regulatory demand, finding, agreement or settlement. To help prevent such escheatment, it is important that you keep your contact and other information on file with us up to date, including the names, contact information and identifying information for owners, insureds, annuitants, beneficiaries and other payees. Such updates should be communicated in a form and manner satisfactory to us.
Sending Forms and Transaction Requests in Good Order
We cannot process your instructions to process a transaction relating to the policy until we have received your instructions in good order at our mailing address (or our administrative office or website, as appropriate). Good order means the actual receipt by us of the instructions relating to a transaction in writing or, when appropriate, by telephone or facsimile, or electronically, along with all forms, information and supporting legal documentation (including any required spousal or joint owners consents) we require in order to effect the transaction. To be in good order, instructions must be sufficiently clear so that we do not need to exercise any discretion to follow such instructions.
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Distribution and Principal Underwriting Agreement. TCI, our affiliate, serves as principal underwriter for the Policies pursuant to the terms of a principal underwriting and distribution agreement with TCI for the distribution and sale of the Policies. We reimburse TCI for certain expenses it incurs in order to pay for the distribution of the Policies.
We have discontinued new sales of the Policies. You may, however, continue to make premium payments to fund your Policy pursuant to its terms, and exercise other rights and options under your Policysuch as reallocating your Policy value among investment options, making partial withdrawals, surrendering your Policy, and making changes in ownership of your Policy.
Compensation to Broker-Dealers Who Sold the Policies. The Policies have been offered to the public through broker-dealers (selling firms) that are licensed under the federal securities laws; the selling firm and/or its affiliates are also licensed under state insurance laws. The selling firms have entered into written selling agreements with us and with TCI as principal underwriter for the Policies. We pay ongoing commissions through TCI to the selling firms for their past sales of the Policies. We may also provide compensation to a limited number of broker-dealers for providing ongoing service in relation to Policies that have already been purchased.
The selling firms are paid commissions for the promotion and sale of the Policies according to one or more schedules. The amount and timing of commissions may vary depending on the selling agreement. The sales commission paid to broker-dealers during 2013 was, on average, 3.50% of all premiums paid during Policy years 2 10. We will pay an additional trail commission of up to 0.30% of the Policys subaccount value (excluding the fixed account) on the Policy anniversary if the cash value (minus amounts attributable to loans) equals at least $5,000.
To the extent permitted by FINRA rules, Western Reserve, TCI, TFA and other affiliated parties may pay (or allow other broker-dealers to provide) promotional incentives or payments in the form of cash or non-cash compensation or reimbursement to some, but not all, selling firms and their sales representatives. These arrangements, which may be referred to as revenue sharing arrangements, are described further below.
The sales representative who sold you the Policy typically received a portion of the compensation we (and our affiliates) paid to his or her selling firm, depending on the agreement between the selling firm and its sales representative and the firms internal compensation program. These programs may include other types of cash and non-cash compensation and other benefits.
Special Compensation for Affiliated Wholesaling and Selling Firms. Our parent company provides paid-in capital to TCI and pays for the cost of TCIs operating and other expenses, including costs for facilities, legal and accounting services, and other internal administrative functions.
Western Reserves main distribution channel is TFA, an affiliate that sells Western Reserve products. Western Reserve covers the cost of TFAs various facilities, third-party services and internal administrative functions, including employee salaries, sales representative training and computer systems that are provided directly to TFA. These facilities and services are necessary for TFAs administration and operation, and Western Reserve is compensated by TFA for these expenses based on TFAs usage. In addition, Western Reserve and other affiliates pay for certain distribution expenses of TFA, including the costs of preparing and producing prospectuses and sales promotional materials for the Policy that are distributed to current owners of the Policy.
In addition, TFAs managers and/or sales representatives who meet certain productivity standards may be eligible for additional compensation. If you purchased the Policy through one of our affiliated selling firms, then your payment of additional premiums on the Policy may help sales representatives of that selling firm, and/or their managers, qualify for certain cash or non-cash benefits, and may provide such persons with special incentive to sell our Policies. For example, TFAs registered representatives, general agents, marketing directors and supervisors may be eligible to participate in a voluntary stock purchase plan that permits participants to purchase stock of Aegon N.V. (Western Reserves ultimate parent) by allocating a portion of the commissions they earn to purchase such shares. A portion of the contributions of commissions by TFAs representatives may be matched by TFA. TFAs sales representatives may also be eligible to participate in a stock option and award plan. Registered representatives who meet certain production goals will be issued options on the stock of Aegon N.V.
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Additional Compensation that We Pay to Selected Selling Firms. We may continue to pay certain selling firms additional cash amounts for preferred product treatment of our life insurance policies in their marketing programs in order to receive enhanced marketing services and increased access to their sales representatives
Special compensation arrangements are calculated in different ways by different selling firms and may be based on past sales of the Policies or other criteria. For instance, overridesi.e., commissions paid to an agent or managing general agent for premium volume produced by other agentswere offered as incentives to our affiliates, TFA and Life Investors Financial Group, for certain products in 2013.
No specific charge is assessed directly to policyowners or the separate account to cover commissions and other incentives or payments described above. We do intend to recoup commissions and other sales expenses and other incentive we pay, however, through fees and charges deducted under the Policy and other corporate revenue.
You should be aware that a selling firm or its sales representatives may receive different compensation or incentives for selling one product over another. In some cases, these differences may have created an incentive for the selling firm or its sales representatives to have recommended or sold the Policy to you.
We, like other life insurance companies, are subject to regulatory and legal proceedings, including class action lawsuits, in the ordinary course of our business. Such legal and regulatory matters include proceedings specific to us and other proceedings generally applicable to business practices in the industry in which we operate. In some lawsuits and regulatory proceedings involving insurers, substantial damages have been sought and/or material settlement payments have been made. Although the outcome of any litigation or regulatory proceeding cannot be predicted with certainty, at the present time, we believe that there are no pending or threatened proceedings or lawsuits that are likely to have a material adverse impact on the separate account, on TCIs ability to perform under its principal underwriting agreement, or on our ability to meet our obligations under the Policy.
We are currently being audited on behalf of multiple states treasury and controllers offices for compliance with laws and regulations concerning the identification, reporting and escheatment of unclaimed benefits or abandoned funds. The audits focus on insurance company processes and procedures for identifying unreported death claims, and their use of the Social Security Master Death File to identify deceased Policy and contract holders. In addition, we are the subject of multiple state Insurance Department inquiries and market conduct examinations with a similar focus on the handling of unreported claims and abandoned property. The audits and related examination activity have resulted in or may result in additional payments to beneficiaries, escheatment of funds deemed abandoned, administrative penalties and changes in our procedures for the identification of unreported claims and handling of escheatable property. We do not believe that any regulatory actions or agreements that have resulted from or will result from these examinations has had or will have a material adverse impact on the separate account, on TCIs ability to perform under its principal underwriting agreement, or on our ability to meet our obligations under the Policy.
The financial statements of Western Reserve and the separate account are included in the SAI.
Additional information regarding the investment performance of the portfolios appears in the fund prospectus, which accompany this prospectus.
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accounts | The options to which you can allocate your money. The accounts include the fixed account and the subaccounts in the separate account. | |
administrative office | Our administrative office address is 570 Carillon Parkway, St. Petersburg, Florida, 33716. Our phone number is 1-800-851-9777; our facsimile numbers are 1-727-299-1648 (for subaccount transfers only); and 1-727-299-1620 (for all other fax requests). Our administrative office serves as the recipient of all website (www.westernreserve.com), telephonic and facsimile transactions, including, but not limited to transfer requests and premium payments made by wire transfer and through electronic credit and debit transactions (e.g., payments through direct deposit, debit transfers, and forms of e-commerce payments.) Our hours are Monday Friday from 8:30 a.m. 7:00 p.m. Eastern Time. Please do not send any checks, claims, correspondence or notices to this office; send them to the mailing address. | |
attained age | The issue age of the person insured, plus the number of completed years since the Policy date. | |
beneficiary(ies) | The person or persons you select to receive the death benefit from the Policy. You name the primary beneficiary and contingent beneficiary(ies). | |
cash value | The sum of your Policys value in the subaccounts and the fixed account. If there is a Policy loan outstanding, the cash value includes any amounts held in our fixed account to secure the Policy loan. | |
death benefit proceeds | The amount we will pay to the beneficiary(ies) on the insureds death. The death benefit proceeds are reduced by any outstanding loan amount, including accrued interest, and any charges that are due and payable. We will increase the death benefit proceeds by any interest you paid in advance on the loan for the period between the date of death and the next Policy anniversary. | |
face amount | The dollar amount of coverage stated in any rider that you may add to your Policy. | |
fixed account | An option to which you may allocate net premiums and cash value. We guarantee that any amounts you allocate to the fixed account will earn interest at a declared rate. The fixed account is part of our general account. The fixed account is not available to you if your Policy was issued in the State of New Jersey. | |
free look period | The period during which you may return the Policy and receive a refund as described in this prospectus. The length of the free look period varies by state. The free look period is listed in the Policy. | |
funds | Investment companies which are registered with the U.S. Securities and Exchange Commission. The Policy allows you to invest in the portfolios of the funds through our subaccounts. We reserve the right to add other registered investment companies to the Policy in the future. | |
good order | An instruction that is received by the Company, that is sufficiently complete and clear, along with forms, information and supporting legal documentation (including any required spousal or joint owners consents) so that the Company does not need to exercise any discretion to follow such instruction. All orders to process a withdrawal request, a loan request, a request to surrender your Policy a fund transfer request, or a death benefit claim must be in good order. | |
in force | While coverage under the Policy is active and the insureds life remains insured. | |
indebtedness | Outstanding loan amounts plus any accrued interest at the time your Policy lapsed. |
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initial premium | The amount you must pay before insurance coverage begins under the Policy. The initial premium is shown on the schedule page of your Policy. | |
insured | The person whose life is insured by the Policy. | |
issue age | The insureds age on his or her birthday nearest to the Policy date. | |
lapse | When life insurance coverage ends because you do not have enough cash value in the Policy to pay the monthly deductions, the surrender charge and any outstanding loan amount, and you have not made a sufficient payment by the end of a grace period. | |
loan amount | The total amount of all outstanding Policy loans, including both principal and interest due. | |
loan reserve account | A part of the fixed account to which amounts are transferred as collateral for Policy loans. | |
mailing address | Our mailing address is 4333 Edgewood Road, N.E., Cedar Rapids, Iowa, 52499. All premium payments and loan repayments made by check, and all claims, correspondence and notices must be sent to this address. | |
maturity date | The Policy anniversary nearest the insureds 95th birthday if the insured is living and the Policy is still in force. It is the date when life insurance coverage under this Policy ends. You may continue coverage, at your option, under the Policys extended maturity date benefit provision. | |
minimum monthly guarantee premium | The amount shown on the Policy schedule page (unless changed when you change death benefit options, or decrease the specified amount or increase or add a rider) that we use during the no lapse period to determine whether a grace period will begin. We will adjust the minimum monthly guarantee premium if you change death benefit options, decrease the specified amount, or add, terminate, increase or decrease a rider, and you may need to pay additional premiums to keep the no lapse guarantee in effect. We make this determination whenever your net surrender value is not enough to meet monthly deductions. A grace period will begin whenever your net surrender value is not enough to meet monthly deductions. | |
Monthiversary | This is the day of each month when we determine Policy charges and deduct them from cash value. It is the same date each month as the Policy date. If there is no valuation date in the calendar month that coincides with the Policy date, the Monthiversary is the next valuation date. | |
monthly deductions | The monthly Policy charge, plus the monthly cost of insurance, plus the monthly charge for any riders added to your Policy, plus, if any, the pro rata decrease charge incurred as a result of a decrease in your specified amount. | |
mortality and expense risk charge | This charge is a daily deduction from each subaccount that is taken before determining the unit value of that subaccount. | |
net premium | The part of your premium that we allocate to the fixed account or the subaccounts. The net premium is equal to the premium you paid minus the premium expense charge and the premium collection charge. | |
net surrender value | The amount we will pay you if you surrender the Policy while it is in force. The net surrender value on the date you surrender is equal to: the cash value, minus any outstanding loan amount, plus any interest you paid in advance on the loan for the period between the date of surrender and the next Policy anniversary, and minus any surrender charge. |
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no lapse date | For issue ages 0-60, the no lapse date is either the anniversary on which the insureds attained age is 65 or the twentieth Policy anniversary, whichever is earlier. For issue ages 61-80, the no lapse date is the fifth Policy anniversary. The no lapse date is specified in your Policy. | |
no lapse period | The period of time between the Policy date and the no lapse date during which the Policy will not lapse as long as certain conditions are met. | |
NYSE | The New York Stock Exchange. | |
planned periodic premium |
A premium payment you make in a level amount at a fixed interval over a specified period of time. | |
Policy date | The date when our underwriting process is complete, full life insurance coverage goes into effect, we begin to make monthly deductions, and your initial net premium is allocated to the Transamerica Aegon Money Market VP subaccount. The Policy date is shown on the schedule page of your Policy. We measure Policy months, years, and anniversaries from the Policy date. | |
portfolio | One of the separate investment portfolios of a fund. | |
premium expense charge | The charge that is deducted from each premium payment before determining the net premium that will be credited to the cash value. | |
premiums | All payments you make under the Policy other than loan repayments. | |
record date | The date we record your Policy on our books as an in force Policy, and we allocate your cash value from the Transamerica Aegon Money Market VP subaccount to the accounts that you selected on your application. | |
separate account | The WRL Series Life Account. It is a separate investment account that is divided into subaccounts. We established the separate account to receive and invest net premiums under the Policy and other variable life insurance policies we issue. | |
specified amount (may be referred to as face amount in riders) |
The minimum death benefit we will pay under the Policy provided the Policy is in force. The in force specified amount (also referred to as the current specified amount) is the initial specified amount of life insurance that you have selected shown on the Policys schedule page, unless you decrease the specified amount. In addition, we will reduce the specified amount by the dollar amount of any cash withdrawal if you choose the Option A (level) death benefit. | |
subaccount | A subdivision of the separate account that invests exclusively in shares of one investment portfolio of a fund. | |
surrender charge | If, during the first 15 Policy years, you fully surrender the Policy, we will deduct a surrender charge from your cash value. | |
termination | When the insureds life is no longer insured under the Policy or any rider, and neither the Policy (nor any rider) is in force. | |
valuation date | Each day the New York Stock Exchange is open for trading. Western Reserve is open for business whenever the New York Stock Exchange is open. Please Note: Any day that Western Reserve is open for business, but the New York Stock Exchange is not open for normal trading, is not considered a valuation date. | |
valuation period | The period of time over which we determine the change in the value of the subaccounts. Each valuation period begins at the close of normal trading on the New York Stock Exchange (usually 4:00 p.m. Eastern Time on each valuation date) and ends at the close of normal trading of the New York Stock Exchange on the next valuation date. |
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we, us, our, the Company (Western Reserve), WRL | Western Reserve Life Assurance Co. of Ohio. | |
written notice | The written notice you must sign and send us to request or exercise your rights as owner under the Policy. To be complete and in good order, it must: (1) be in a form we accept, (2) contain the information and documentation that we determine we need to take the action you request, and (3) be received at our mailing address. | |
you, your (owner or policyowner) | The person entitled to exercise all rights as owner under the Policy. |
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APPENDIX A SURRENDER CHARGE PER THOUSAND
(Based on the gender and underwriting class of the insured)
Issue Age |
Male Ultimate Select/ Select |
Male Ultimate Standard/ |
Male/ Female Juvenile |
Female Ultimate Select/ Select |
Female Ultimate Standard/ | |||||
0 |
N/A | N/A | 11.76 | N/A | N/A | |||||
1 |
N/A | N/A | 8.16 | N/A | N/A | |||||
2 |
N/A | N/A | 8.16 | N/A | N/A | |||||
3 |
N/A | N/A | 7.92 | N/A | N/A | |||||
4 |
N/A | N/A | 7.68 | N/A | N/A | |||||
5 |
N/A | N/A | 7.68 | N/A | N/A | |||||
6 |
N/A | N/A | 7.68 | N/A | N/A | |||||
7 |
N/A | N/A | 7.68 | N/A | N/A | |||||
8 |
N/A | N/A | 7.68 | N/A | N/A | |||||
9 |
N/A | N/A | 7.68 | N/A | N/A | |||||
10 |
N/A | N/A | 7.68 | N/A | N/A | |||||
11 |
N/A | N/A | 7.68 | N/A | N/A | |||||
12 |
N/A | N/A | 7.68 | N/A | N/A | |||||
13 |
N/A | N/A | 7.92 | N/A | N/A | |||||
14 |
N/A | N/A | 8.16 | N/A | N/A | |||||
15 |
N/A | N/A | 8.40 | N/A | N/A | |||||
16 |
N/A | N/A | 8.52 | N/A | N/A | |||||
17 |
N/A | N/A | 8.88 | N/A | N/A | |||||
18 |
8.72 | 9.20 | 8.72 | 9.20 | ||||||
19 |
8.84 | 9.32 | 8.84 | 9.32 | ||||||
20 |
8.96 | 9.44 | 8.96 | 9.44 | ||||||
21 |
9.16 | 9.88 | 9.16 | 9.64 | ||||||
22 |
9.32 | 10.04 | 9.32 | 9.80 | ||||||
23 |
9.52 | 10.24 | 9.52 | 10.00 | ||||||
24 |
9.68 | 10.40 | 9.68 | 10.40 | ||||||
25 |
9.88 | 10.84 | 9.88 | 10.60 | ||||||
26 |
10.56 | 11.28 | 10.32 | 11.04 | ||||||
27 |
11.00 | 11.72 | 10.76 | 11.48 | ||||||
28 |
11.40 | 12.12 | 11.16 | 12.12 | ||||||
29 |
12.08 | 12.80 | 11.84 | 12.56 | ||||||
30 |
12.52 | 13.24 | 12.28 | 13.00 | ||||||
31 |
13.04 | 14.00 | 12.80 | 13.52 | ||||||
32 |
13.76 | 14.48 | 13.52 | 14.24 | ||||||
33 |
14.28 | 15.24 | 14.04 | 14.76 | ||||||
34 |
14.76 | 15.96 | 14.52 | 15.48 | ||||||
35 |
15.52 | 16.48 | 15.28 | 16.00 | ||||||
36 |
16.20 | 17.40 | 15.96 | 16.92 | ||||||
37 |
17.20 | 18.40 | 16.72 | 17.92 | ||||||
38 |
18.12 | 19.56 | 17.64 | 18.60 | ||||||
39 |
19.08 | 20.76 | 18.36 | 19.56 |
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Issue Age |
Male Ultimate Select/ Select |
Male Ultimate Standard/ Standard |
Female Ultimate Select/ Select |
Female Ultimate Standard/ Standard | ||||
40 |
20.28 | 21.96 | 19.32 | 20.52 | ||||
41 |
21.64 | 23.56 | 20.68 | 22.12 | ||||
42 |
23.08 | 25.24 | 22.12 | 23.80 | ||||
43 |
24.44 | 27.08 | 23.15 | 25.40 | ||||
44 |
26.04 | 29.16 | 23.86 | 26.96 | ||||
45 |
27.44 | 31.04 | 24.59 | 27.83 | ||||
46 |
28.72 | 32.80 | 25.38 | 28.76 | ||||
47 |
29.84 | 34.56 | 26.22 | 29.73 | ||||
48 |
31.00 | 36.32 | 27.11 | 30.75 | ||||
49 |
32.24 | 38.32 | 28.04 | 31.84 | ||||
50 |
33.56 | 40.56 | 29.05 | 32.99 | ||||
51 |
34.98 | 42.56 | 30.11 | 34.20 | ||||
52 |
36.49 | 45.24 | 31.24 | 35.48 | ||||
53 |
38.10 | 47.68 | 32.45 | 36.84 | ||||
54 |
39.83 | 50.84 | 33.72 | 38.28 | ||||
55 |
41.68 | 53.28 | 35.09 | 39.79 | ||||
56 |
43.63 | 55.79 | 36.54 | 41.39 | ||||
57 |
45.74 | 57.00 | 38.08 | 43.06 | ||||
58 |
47.98 | 57.00 | 39.74 | 44.88 | ||||
59 |
50.38 | 57.00 | 41.54 | 46.85 | ||||
60 |
52.97 | 57.00 | 43.47 | 48.97 | ||||
61 |
55.74 | 57.00 | 45.57 | 51.26 | ||||
62 |
57.00 | 57.00 | 47.82 | 53.73 | ||||
63 |
57.00 | 57.00 | 50.26 | 56.41 | ||||
64 |
57.00 | 57.00 | 52.88 | 57.00 | ||||
65 |
57.00 | 57.00 | 55.68 | 57.00 | ||||
66 and over |
57.00 | 57.00 | 57.00 | 57.00 |
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APPENDIX A-1: SURRENDER CHARGE FACTORS
SURRENDER CHARGE FACTORS | ||||||||||||||||||
END OF YEAR:* |
ISSUE AGE: | |||||||||||||||||
0-39 | 40-44 | 45-49 | 50-54 | 55-59 | 60-64 | 65-69 | 70-74 | 75-80 | ||||||||||
At Issue | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | |||||||||
1 | 1.00 | .98 | .98 | .97 | .97 | .96 | .96 | .95 | .94 | |||||||||
2 | 1.00 | .97 | .96 | .95 | .94 | .93 | .92 | .91 | .89 | |||||||||
3 | 1.00 | .96 | .94 | .93 | .91 | .90 | .88 | .87 | .84 | |||||||||
4 | 1.00 | .94 | .92 | .91 | .88 | .87 | .84 | .83 | .79 | |||||||||
5 | 1.00 | .92 | .90 | .89 | .85 | .84 | .80 | .79 | .74 | |||||||||
6 | .90 | .90 | .90 | .85 | .82 | .81 | .76 | .75 | .69 | |||||||||
7 | .80 | .80 | .80 | .80 | .80 | .77 | .72 | .71 | .64 | |||||||||
8 | .70 | .70 | .70 | 70 | .70 | .70 | .70 | .67 | .59 | |||||||||
9 | .60 | .60 | .60 | .60 | .60 | .60 | .60 | .60 | .54 | |||||||||
10 | .50 | .50 | .50 | .50 | .50 | .50 | .50 | .50 | .49 | |||||||||
11 | .40 | .40 | .40 | .40 | .40 | .40 | .40 | .40 | .40 | |||||||||
12 | .30 | .30 | .30 | .30 | .30 | .30 | .30 | .30 | .30 | |||||||||
13 | .20 | .20 | .20 | .20 | .20 | .20 | .20 | .20 | .20 | |||||||||
14 | .10 | .10 | .10 | .10 | .10 | .10 | .10 | .10 | .10 | |||||||||
15+ | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
* | The factor on any date other than a Policy anniversary will be determined proportionately using the factor at the end of the Policy year before surrender and the factor at the end of the Policy year of surrender. |
Surrender Charge Example: Assume a male tobacco user purchases the Policy at issue age 30 with a specified amount of $100,000 and the Policy is surrendered in Policy year 7. The surrender charge per thousand is $12.52. This is multiplied by the surrender charge factor of .90.
The surrender |
= | The surrender charge per thousand ($12.52) | ||||
charge |
x | The number of thousands of initial specified amount (100) | ||||
x | The surrender charge factor (0.90) | |||||
= | $1,126.80 |
72
Personalized Illustrations of Policy Benefits
To help you understand how your Policy values could vary over time under different sets of assumptions, we will provide you, without charge and upon request, with certain personalized hypothetical illustrations showing the death benefit, net surrender value and cash value. These hypothetical illustrations will be based on the age and insurance risk characteristics of the insured persons under your Policy and such factors as the specified amount, death benefit option, premium payment amounts, and hypothetical rates of return (within limits) that you request. The illustrations are not a representation or guarantee of investment returns or cash value.
Inquiries
To learn more about the Policy, you should read the SAI dated the same date as this prospectus. The SAI has been filed with the SEC and is incorporated herein by reference.
For a free copy of the SAI, for other information about the Policy, and to obtain personalized illustrations, please contact your registered representative, or send your request to our mailing address at:
Western Reserve Life
4333 Edgewood Rd. NE
Cedar Rapids, IA 52499
1-800-851-9777
Facsimile: 1-727-299-1620
(Monday - Friday from 8:30 a.m. - 7:00 p.m. Eastern Time)
www.westernreserve.com
More information about the Registrant (including the SAI) may be reviewed and copied at the SECs Public Reference Room in Washington, D.C. For information on the operation of the Public Reference Room, please contact the SEC at 202-551-8090. You may also obtain copies of reports and other information about the Registrant on the SECs website at http://www.sec.gov and copies of this information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC at 100 F Street, NE, Washington, D.C. 20549. The Registrants file numbers are listed below.
TCI serves as the principal underwriter for the Policies. More information about TCI is available at http://www.finra.org or by calling -800-289-9999. You also can obtain an investor brochure from The Financial Industry Regulatory Authority (FINRA) describing its Public Disclosure Program.
SEC File No. 333-23359/811-4420
05/2014
73
PART B
Information Required in a Statement of Additional Information
October 1, 2014
STATEMENT OF ADDITIONAL INFORMATION
WRL FINANCIAL FREEDOM BUILDER®
issued through
WRL Series Life Account
By
Transamerica Premier Life Insurance Company
(Former Depositor, Western Reserve Life Assurance Co. of Ohio)
Administrative Office:
570 Carillon Parkway
St. Petersburg, Florida 33716
Please direct transactions, claim forms, payments and other correspondence and notices as follows:
Transaction Type |
Direct or Send to | |
Telephonic Transaction |
1-727- 299-1800 or 1-800-851-9777 (toll free) | |
Facsimile Transaction |
1-727-299-1648 (subaccount transfers only) 1-727-299-1620 (all other facsimile transactions) | |
Electronic Transaction |
www.westernreserve.com* | |
All payments made by check, and all claims, correspondence and notices | Mailing Address: 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499 |
*Upon receipt of all regulatory approvals, this site will change to www.premier.transamerica.com This change is expected to take place by year-end.
This Statement of Additional Information (SAI) expands upon subjects discussed in the current prospectus for the WRL Financial Freedom Builder® flexible premium variable life insurance policy offered by Transamerica Premier Life Insurance Company (TPLIC or Transamerica Premier). You may obtain a copy of the prospectus dated May 1, 2014, by calling our administrative office at 1-800-851-9777 (Monday Friday from 8:30 a.m. 7:00 p.m. Eastern time), or by writing to the mailing address at, Transamerica Premier, 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499. The prospectus sets forth information that a prospective investor should know before investing in a Policy. Terms used in this SAI have the same meanings as in the prospectus for the Policy.
This SAI is not a prospectus and should be read only in conjunction with the prospectuses for the Policy and the Transamerica Series Trust Initial Class, Fidelity Variable Insurance Products Service Class 2 Shares, the ProFunds, the Access One Trust, the AllianceBernstein Variable Products Series Fund, and the Franklin Templeton Variable Insurance Products Trust.
WRL00188-10/2014
Table of Contents
1 | ||
1 | ||
2 | ||
2 | ||
2 | ||
2 | ||
2 | ||
3 | ||
3 | ||
Additional Information about Western Reserve and the Separate Account |
3 | |
4 | ||
4 | ||
4 | ||
4 | ||
5 | ||
5 | ||
5 | ||
5 | ||
5 | ||
5 | ||
6 | ||
6 | ||
P-1 | ||
G-1-A | ||
G-1 | ||
S-1 |
i
In order to supplement the description in the prospectus, the following provides additional information about Transamerica Premier and the Policy, which may be of interest to a prospective purchaser.
The Policy General Provisions
The Policy belongs to the owner named in the application. The owner may exercise all of the rights and options described in the Policy. The owner is the insured unless the application specifies a different person as the insured. If the owner dies before the insured and no contingent owner is named, then ownership of the Policy will pass to the owners estate. The owner may exercise certain rights described below.
Changing the Owner | Change the owner by providing written notice, in good order, to us at our mailing address at any time while the insured is alive and the Policy is in force. | |||
Change is effective as of the date that the written notice is accepted by us in good order, at our mailing address. | ||||
Changing the owner does not automatically change the beneficiary. | ||||
Changing the owner may have tax consequences. You should consult a tax advisor before changing the owner. | ||||
We are not liable for payments we made before we received the written notice at our mailing address. | ||||
Choosing the Beneficiary | The owner designates the beneficiary (the person to receive the death benefit when the insured dies) in the application. | |||
If the owner designates more than one beneficiary, then each beneficiary shares equally in any death benefit proceeds unless the beneficiary designation states otherwise. | ||||
If the beneficiary dies before the insured, then any contingent beneficiary becomes the beneficiary. | ||||
If both the beneficiary and contingent beneficiary die before the insured, then the death benefit will be paid to the owner or the owners estate upon the insureds death. | ||||
Changing the Beneficiary | The owner changes the beneficiary by providing written notice to us, in good order, at our mailing address. | |||
Change is effective as of the date the owner signs the written notice. | ||||
We are not liable for any payments we made before we received the written notice at our mailing address. | ||||
Assigning the Policy | The owner may assign Policy rights while the insured is alive. | |||
The owner retains any ownership rights that are not assigned. | ||||
Assignee may not change the owner or the beneficiary, and may not elect or change an optional method of payment. Any amount payable to the assignee will be paid in a lump sum. | ||||
Claims under any assignment are subject to proof of interest and the extent of the assignment. | ||||
We are not: | ||||
> bound by any assignment unless we receive a written notice of the assignment at our mailing address; | ||||
> responsible for the validity of any assignment; | ||||
> liable for any payment we made before we received written notice of the assignment at our mailing address; or |
1
> bound by any assignment which results in adverse tax consequences to the owner, insured(s) or beneficiary(ies). | ||||
Assigning the Policy may have tax consequences. You should consult a tax advisor before assigning the Policy. |
Our Right to Contest the Policy
In issuing the Policy, we rely on all statements made by or for the insured in the application or in a supplemental application. Therefore, if you make any material misrepresentation of a fact in the application (or any supplemental application), then we may contest the Policys validity or may resist a claim under the Policy for two years from the Policy date. For any portion of the specified amount that is issued as a result of a conversion, the contestability period is measured from the later of the policy date of the policy that was converted or the latest effective date of reinstatement of the converted policy.
In the absence of fraud, we cannot bring any legal action to contest the validity of the Policy after the Policy has been in force during the insureds lifetime for two years from the Policy date, or if reinstated, for two years from the date of reinstatement.
If the insured commits suicide, while sane or insane, within two years of the Policy date (or two years from the reinstatement date, if the Policy lapses and is reinstated), the Policy will terminate and our liability is limited to an amount equal to the premiums paid, less any outstanding loan amount, and less any cash withdrawals. We will pay this amount to the beneficiary in one sum. For any portion of the specified amount that is issued as a result of a conversion, the suicide period is measured from the later of the Policy date of the Policy that was converted or the latest effective date of reinstatement of the converted policy.
If the age or gender of the insured was stated incorrectly in the application or any supplemental application, then the death benefit will be adjusted based on what the cost of insurance charge for the most recent monthly deduction would have purchased based on the insureds correct age and gender.
Only our President or Secretary may modify the Policy or waive any of our rights or requirements under the Policy. Any modification or waiver must be in writing. No agent may bind us by making any promise not contained in the Policy.
If we modify the Policy, we will provide you notice and we will make appropriate endorsements to the Policy.
Shares of the portfolios are sold to other separate accounts that we (or our affiliates) establish to support other variable annuity contracts and variable life insurance policies we (or our affiliates) issue. Shares of some portfolios are also sold to separate accounts of unaffiliated life insurance companies. It is possible in the future that you may be disadvantaged when the separate account invests in a portfolio that also (1) invests in separate accounts of unaffiliated life insurance companies, and (2) invests in separate accounts (including those of our affiliates) funding variable annuity contracts.
Neither we nor the funds currently foresee that you would be disadvantaged in this manner. Each funds board of directors/trustees monitors its fund to identify any material conflicts that may arise between the interests of owners of variable annuity contracts and those of owners of variable life insurance policies, as well as between the interests of owners of contracts issued by different unaffiliated life insurance companies (material conflicts). Such boards of directors/trustees are obligated to determine what action, if any, must be taken to resolve any material conflicts that arise. Such action could include requiring the separate account, or separate accounts of affiliated or unaffiliated insurance companies, to withdraw their investments in a portfolio and such withdrawals could have adverse consequences to owners. In addition, we have entered into an agreement with each fund on behalf of the separate account governing the separate accounts investment in that funds portfolios (the participation agreement). The participation agreement contains provisions designed to protect owners in the event of material conflicts.
Material conflicts affecting owners could result in a number of situations including: (1) differences in state insurance law applicable to different life insurance companies whose separate accounts are invested in a portfolio; (2) changes in tax law or regulations that result in changes to a portfolio that have a disparate effect on different life insurance companies whose separate accounts are invested in the portfolio, or on different types of variable contracts invested in the portfolio; (3) actions or omissions by a fund that operate to the advantage of one group of variable contract owners at the expense of another group or groups; (4) changes to a portfolio approved at a shareholders meeting as a result of voting by one group of variable contract owners to the disadvantage of another group or groups; and (5) disparate provisions in the participation agreements of different unaffiliated insurance companies or the pursuit of remedies under such an agreement by one insurance company to the detriment of one or more other insurance companies.
2
Notwithstanding our reasonable efforts and those of the funds, there is the risk that actions or omissions of the fund in response to material conflicts may disadvantage our policyowners. If we believe that a funds response to any of these events or conflicts is insufficient to protect our policyowners, we will undertake appropriate actions on our own, which may include withdrawing the separate accounts investments in the fund.
If a funds Board of Directors/Trustees were to conclude that separate funds should be established for variable life insurance and variable annuity separate accounts, Transamerica Premier will bear the attendant expenses, but variable life insurance policyowners and variable annuity contract owners would no longer have the economies of scale resulting from a larger combined fund.
Addition, Deletion, or Substitution of Portfolios
We do not guarantee that each portfolio will always be available for investment through the Policy. We reserve the right, subject to compliance with applicable law, to add new portfolios, close existing portfolios, or substitute portfolio shares that are held by any subaccount for shares of a different portfolio. New or substitute portfolios may have different fees and expenses and their availability may be limited to certain classes of purchasers. We will only add, delete or substitute shares of another portfolio of a fund (or of another open-end, registered investment company) if the shares of a portfolio are no longer available for investment, or if in our judgment further investment in any portfolio would become inappropriate in view of the purposes of the separate account. We will not add, delete or substitute any shares attributable to your interest in a subaccount without notice to you and prior approval of the SEC, to the extent required by the 1940 Act or other applicable law. We may also decide to purchase for the separate account securities from other portfolios. We reserve the right to transfer separate account assets to another separate account that we determine to be associated with the class of contracts to which the Policy belongs.
We also reserve the right to establish additional subaccounts of the separate account, each of which would invest in a new portfolio of a fund, or in shares of another investment company, with specified investment objectives. We may establish new subaccounts when, in our sole discretion, marketing, tax or investment conditions warrant. We will make any new subaccounts available to existing owners on a basis we determine. We may also eliminate one or more subaccounts for the same reasons as stated above.
In the event of any such substitution or change, we may make such changes in this and other policies as may be necessary or appropriate to reflect such substitution or change. If we deem it to be in the best interests of persons having voting rights under the Policies, and when permitted by law, the separate account may be (1) operated as a management company under the 1940 Act, (2) deregistered under the 1940 Act in the event such registration is no longer required, (3) managed under the direction of a committee, or (4) combined with one or more other separate accounts, or subaccounts.
Additional Information about Transamerica Premier and the Separate Account
Transamerica Premier Life Insurance Company (Transamerica Premier) was originally founded in 1858 in the state of Maryland as Maryland Mutual Life and Fire Insurance Company of Baltimore and was the states first insurance company; it then changed its name to Monumental Life Insurance Company in 1935. Monumental Life Insurance Company changed its name to Transamerica Premier Life Insurance Company on July 31, 2014. Transamerica Premier is incorporated under Iowa law and is principally engaged in offering life insurance policies and annuity contracts. Transamerica Premier is licensed to sell insurance in all states (except New York), Puerto Rico, Guam, and in the District of Columbia. Transamerica Premier submits annual statements on its operations and finances to insurance officials in all states and jurisdictions in which it does business. The Policy described in the prospectus has been filed with, and where required, approved by, insurance officials in those jurisdictions in which it is sold.
Transamerica Premier established the separate account as a separate investment account under Ohio law in 1985 and the separate account was re-domesticated to Iowa in 2014. Transamerica Premier owns the assets in the separate account and is obligated to pay all benefits under the Policies. The separate account is used to support other life insurance policies of Transamerica Premier, as well as for other purposes permitted by law. The separate account is registered with the SEC as a unit investment trust under the 1940 Act and qualifies as a separate account within the meaning of the federal securities laws.
Transamerica Premier holds the assets of the separate account physically segregated and apart from the general account. Transamerica Premier maintains records of all purchases and sales of portfolio shares by each of the subaccounts. A blanket bond was issued to AEGON USA, Inc. (AEGON USA) in the aggregate amount of $12 million, covering all of the employees of AEGON USA and its affiliates, including Transamerica Premier. A Stockbrokers Blanket Bond, issued to AEGON U.S.A. Securities, Inc. providing fidelity coverage, covers the activities of registered representatives of TCI to a limit of $10 million.
3
Legal Matters
Arthur D. Woods, Vice President and Senior Counsel of Transamerica Premier, has provided legal advice on certain matters in connection with the issuance and operation of the Policy.
Variations in Policy Provisions
Certain provisions of the Policy may vary from the descriptions in the prospectus, depending on when and where the Policy was issued, in order to comply with different state laws. These variations may include differences in charges, or Policy features may be unavailable or known by a different name. Please refer to your Policy; any variations will be included in your Policy or in riders or endorsements attached to your Policy.
Personalized Illustrations of Policy Benefits
In order to help you understand how your Policy values would vary over time under different sets of assumptions, we will provide you with certain personalized illustrations upon request. These will be based on the age and insurance risk characteristics of the insured persons under your Policy and such factors as the specified amount, death benefit option, premium payment amounts, and rates of return (within limits) that you request.
The illustrations are not a representation or guarantee of investment returns or cash value. You may request illustrations that reflect the expenses of the portfolios in which you intend to invest.
We no longer offer the Policies to the public.
Our affiliate, Transamerica Capital, Inc. (TCI), serves as principal underwriter for the Policies. TCIs home office is located at 4600 S. Syracuse Street, Suite 1100, Denver, Colorado 80237. TCI is an affiliate of Transamerica Premier and, like Transamerica Premier, is an indirect, wholly owned subsidiary of AEGON USA. TCI is registered as a broker-dealer with the Securities and Exchange Commission under the Securities Exchange Act of 1934 and is a member of Financial Industry Regulatory Industry (FINRA). TCI is not a member of the Securities Investor Protection Corporation.
During fiscal years 2013, 2012 and 2011, the amounts paid to TCI in connection with all Policies sold through the separate account were $12,715,049.51, $14,916,446, and $17,156,676, respectively. TCI passes through to selling firms commissions it receives to selling firms for their sales, and does not retain any portion of any commissions. Our parent company provides paid-in capital to TCI and pays for TCIs operating and other expenses, including overhead, legal and accounting fees.
We and/or TCI or Transamerica Financial Advisors, Inc. may pay certain selling firms additional cash amounts for: (1) preferred product treatment of the Policies in their marketing programs, which may include marketing services and increased access to their sales representatives; (2) sales promotions relating to the Policies; (3) costs associated with sales conferences and educational seminars for their sales representatives; and (4) other expenses of the firm. These additional payments are not offered to all selling firms, and the terms of any particular agreement governing the payments may vary among selling firms.
At least once each year, or more often as required by law, we will mail to policyowners at their last known address a report showing the following information as of the end of the report period:
> | the current cash value | > | any activity since the last report | |||
> | the current net surrender value | > | projected values | |||
> | the current death benefit | > | investment experience of each subaccount | |||
> | Outstanding loans | > | any other information required by law |
You may request additional copies of reports, but we may charge a fee for such additional copies. In addition, we will send written confirmations of any premium payments and other financial transactions you request including: changes in specified amount, changes in death benefit option, transfers, partial withdrawals, increases in loan amount, loan interest payments, loan repayments, lapses and reinstatements. We also will send copies of the annual and semi-annual report to shareholders for each portfolio in which you are indirectly invested.
4
We will maintain all records relating to the separate account and the fixed account.
Independent Registered Public Accounting Firm
The financial statements of the separate account at December 31, 2013, and for the periods disclosed in the financial statements, and the statutory-basis financial statements and schedules of Transamerica Premier and Western Reserve Life Assurance Co. of Ohio (Western Reserve) at December 31, 2013 and 2012 (restated for Western Reserve Life Assurance Co. of Ohio), and for each of the three years in the period ended December 31, 2013, appearing herein, have been audited by Ernst & Young LLP, 801 Grand Avenue, Suite 3000, Des Moines, Iowa 50309, independent registered public accounting firm, as set forth in the firms respective reports thereon appearing elsewhere herein, and are included in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing.
This Policy uses mortality tables that distinguish between men and women. As a result, the Policy pays different benefits to men and women of the same age. Montana prohibits our use of actuarial tables that distinguish between males and females to determine premiums and policy benefits for policies issued on the lives of its residents. Therefore, we will base the premiums and benefits in Policies that we issue in Montana, to insure residents of that state, on actuarial tables that do not differentiate on the basis of gender.
Your cost of insurance charge is based on a number of factors, including, but not limited to, the insureds gender, issue age on the Policy date, length of time from the Policy date, and underwriting class. We currently place insureds into the following underwriting classes:
| ultimate select |
| Select |
| ultimate standard |
| Standard |
We also place insureds in various sub-standard underwriting classes, which involve a higher mortality risk and higher charges. We generally charge higher rates for insureds who use tobacco.
Other Performance Data in Advertising Sales Literature
We may compare each subaccounts performance to the performance of:
| other variable life issuers in general; |
| variable life insurance policies which invest in mutual funds with similar investment objectives and policies, as reported by Lipper Analytical Services, Inc. (Lipper) and Morningstar, Inc. (Morningstar); and other services, companies, individuals, or industry or financial publications (e.g., Forbes, Money, The Wall Street Journal, Business Week, Barrons, Kiplingers Personal Finance, and Fortune); |
> | Lipper and Morningstar rank variable annuity contracts and variable life policies. Their performance analysis ranks such policies and contracts on the basis of total return, and assumes reinvestment of distributions; but it does not show sales charges, redemption fees or certain expense deductions at the separate account level. |
| the Standard & Poors Index of 500 Common Stocks, or other widely recognized indices; |
> | unmanaged indices may assume the reinvestment of dividends, but usually do not reflect deductions for the expenses of operating or managing an investment portfolio; or |
| other types of investments, such as: |
> | certificates of deposit; |
> | savings accounts and U.S. Treasuries; |
> | certain interest rate and inflation indices (e.g., the Consumer Price Index); or |
> | indices measuring the performance of a defined group of securities recognized by investors as representing a particular segment of the securities markets (e.g., Nasdaq 100 Index, NYSE Acra Oil Index, Morgan Stanley High-Technology 35 Index, PHLX Gold/Silver Index, or S&P 100 Index). |
5
Transamerica Premiers Published Ratings
We may publish in advertisements, sales literature, or reports we send to you the ratings and other information that an independent ratings organization assigns to us. These organizations include: A.M. Best Company, Moodys Investors Service, Inc., Standard & Poors Insurance Rating Services, and Fitch Ratings. These ratings are opinions regarding an operating insurance companys financial capacity to meet the obligations of its insurance policies in accordance with their terms. These ratings do not apply to the separate account, the subaccounts, the funds or their portfolios, or to their performance.
Western Reserve Life Assurance Co. of Ohio (Western Reserve) and Transamerica Premiers statutory-basis financial statements and schedules, which include the Report of Independent Registered Public Accounting Firm, appear on the following pages. These statutory-basis financial statements and schedules should be distinguished from the separate accounts financial statements, and you should consider these statutory-basis financial statements and schedules only as bearing upon Transamerica Premiers ability to meet its obligations under the Policies. You should not consider our statutory-basis financial statements and schedules as bearing upon the investment performance of the assets held in the separate account.
Western Reserves and Transamerica Premiers statutory-basis financial statements and schedules at December 31, 2013 and 2012 (restated for Western Reserve), and for each of the three years in the period ended December 31, 2013, have been prepared on the basis of statutory accounting principles rather than U.S. generally accepted accounting principles.
Unaudited pro forma combined financial statements showing the effects of the merger of Western Reserve and Transamerica Premier are also included on the following pages.
The separate accounts financial statements for the period ended December 31, 2013, which include the Report of Independent Registered Public Accounting Firm, also appear on the following pages.
6
Unaudited Pro Forma Financials
Pro Forma Unaudited Consolidated Statutory Balance Sheet and Income Statement
Western Reserve Life Assurance Co. of Ohio, Transamerica Premier Life Insurance Company
(f.k.a. Monumental Life Insurance Company)
Effective on or about October 1, 2014, Western Reserve Life Assurance Co. of Ohio (WRL) will merge with and into its affiliate, Transamerica Premier Life Insurance Company (TPLIC), f.k.a. Monumental Life Insurance Company. Upon consummation of the merger, WRLs corporate existence will cease by operation of law, whereby TPLIC will assume legal ownership of all of the assets and responsibility for all of the liabilities and obligations of WRL. The accompanying unaudited pro forma condensed combined statutory basis financial statements have been prepared in accordance with statutory accounting principles, which includes the balance sheet as of December 31, 2013 and income statements for the years ended 2013, 2012 and 2011 in a combined manner, as if the two entities had merged. Accordingly, they do not include all the information and notes required by accounting principles generally accepted in the United States for complete financial statements.
The unaudited pro forma condensed financial data is not intended to represent or to be indicative of our consolidated results of operations or financial position that we would have reported had the merger occurred as of the dates presented, and should not be taken as a representation of our future consolidated results of operations or financial position. The unaudited pro forma condensed combined financial statements do not reflect any operating efficiencies and/or cost savings that we may achieve with respect to the combined companies.
The unaudited pro forma condensed financial data should be read in conjunction with the historical financial statements and accompanying notes of WRL and Monumental Life Insurance Company (renamed TPLIC), which are included in this registration statement.
P-1
Pro Forma Unaudited Consolidated Statutory Balance Sheet
Western Reserve Life Assurance Co. of Ohio, Transamerica Premier Life Insurance Company
(f.k.a. Monumental Life Insurance Company)
As of December 31, 2013
TPLIC (MLIC) | ||||||||||||||||||||||
Dec 31, 2013 | ||||||||||||||||||||||
WRL | TPLIC (MLIC) | Eliminations | Reference | Totals | ||||||||||||||||||
ASSETS |
||||||||||||||||||||||
1. |
Bonds | $ | 1,448,053,453 | $ | 12,381,999,416 | $ | 0 | $ | 13,830,052,869 | |||||||||||||
2. |
Stocks: | |||||||||||||||||||||
2.1 | Preferred stocks | 0 | 9,540,762 | 9,540,762 | ||||||||||||||||||
2.2 | Common stocks | 35,347,839 | 62,267,638 | 97,615,477 | ||||||||||||||||||
3. |
Mortgage loans on real estate: | |||||||||||||||||||||
3.1 | First liens | 77,804,931 | 1,692,859,515 | 1,770,664,446 | ||||||||||||||||||
3.2 | Other than first liens | 0 | 0 | 0 | ||||||||||||||||||
4. |
Real estate | |||||||||||||||||||||
4.1 | Properties occupied by the company | 27,382,074 | 0 | 27,382,074 | ||||||||||||||||||
4.2 | Properties held for production of income | 0 | 384,967 | 384,967 | ||||||||||||||||||
4.3 | Properties held for sale | 6,259,139 | 6,900,282 | 13,159,421 | ||||||||||||||||||
5. |
Cash, cash equivalents and short-term investments | 110,546,907 | 558,922,981 | 669,469,888 | ||||||||||||||||||
6. |
Contract loans (including $ 0 premium notes) | 442,799,902 | 470,548,651 | 913,348,553 | ||||||||||||||||||
7. |
Derivatives | 0 | 186,389,116 | 186,389,116 | ||||||||||||||||||
8. |
Other invested assets | 3,011,913 | 796,355,167 | 799,367,080 | ||||||||||||||||||
9. |
Receivable for securities | 0 | 62 | 62 | ||||||||||||||||||
10. |
Securities lending reinvested collateral assets | 88,265,219 | 322,209,041 | 410,474,260 | ||||||||||||||||||
11. |
Aggregate write-ins for invested assets | 0 | 9,006,454 | 9,006,454 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
12. |
Subtotals, cash and invested assets (Lines 1 to 9) | 2,239,471,377 | 16,497,384,052 | 0 | 18,736,855,429 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
13. |
Title plants less $0 charged off (for Title insurers only) | 0 | 0 | 0 | 0 | |||||||||||||||||
14. |
Investment income due and accrued | 17,360,751 | 166,253,130 | 183,613,881 | ||||||||||||||||||
15. |
Premiums and considerations: | |||||||||||||||||||||
15.1 | Uncollected premiums and agents balances in course of collection | 102,285 | 46,971,091 | 47,073,376 | ||||||||||||||||||
15.2 | Deferred premiums, agents balances and installments booked but deferred and not yet due (including $0 earned but unbilled premiums) | 2,662,663 | 131,157,528 | 133,820,191 | ||||||||||||||||||
15.3. | Accrued retrospective premiums | 0 | 0 | 0 | ||||||||||||||||||
16. |
Reinsurance: | |||||||||||||||||||||
16.1 | Amounts recoverable from reinsurers | 1,909,962 | 6,374,104 | 8,284,066 | ||||||||||||||||||
16.2 | Funds held by or deposited with reinsured companies | 0 | 0 | 0 | ||||||||||||||||||
16.3 | Other amounts receivable under reinsurance contracts | 0 | 12,333,424 | 12,333,424 | ||||||||||||||||||
17. |
Amounts receivable relating to uninsured plans | 0 | 0 | 0 | ||||||||||||||||||
18.1 |
Current federal and foreign income tax recoverable and interest thereon | 0 | 5,495,809 | 5,495,809 | ||||||||||||||||||
18.2 |
Net deferred tax asset | 86,384,460 | 162,711,377 | 249,095,837 | ||||||||||||||||||
19. |
Guaranty funds receivable or on deposit | 943,953 | 3,242,833 | 4,186,786 | ||||||||||||||||||
20. |
Electronic data processing equipment and software | 0 | 0 | 0 | ||||||||||||||||||
21. |
Furniture and equipment, including health care delivery assets ($0) | 0 | 0 | 0 | ||||||||||||||||||
22. |
Net adjustment in assets and liabilities due to foreign exchange rates | 0 | 0 | 0 | ||||||||||||||||||
23. |
Receivable from parent, subsidiaries and affiliates | 19,858,988 | 57,107,606 | 76,966,594 | ||||||||||||||||||
24. |
Health care ($0) and other amounts receivable | 0 | 0 | 0 | ||||||||||||||||||
25. |
Aggregate write-ins for other than invested assets | 82,148,235 | 264,540,509 | 0 | 346,688,744 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
26. |
Total assets excluding Separate Accounts business (Lines 12 to 25) | 2,450,842,674 | 17,353,571,463 | 0 | 19,804,414,137 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
27. |
From Separate Accounts Statement | 6,969,476,743 | 14,526,002,778 | 0 | 21,495,479,521 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
28. |
Total (Lines 27 and 28) | $ | 9,420,319,417 | $ | 31,879,574,241 | $ | 0 | $ | 41,299,893,658 | |||||||||||||
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|
|
|
|
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|
|
|
||||||||||||||
DETAILS OF ASSET WRITE-INS (Line 11) |
||||||||||||||||||||||
Receivable for derivative cash collateral |
$ | 0 | $ | 219,679 | $ | 0 | $ | 219,679 | ||||||||||||||
Invested asset collateral balance |
0 | $ | 8,786,775 | $ | 8,786,775 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
TOTAL OF ASSETS WRITE-INS FOR LINES 11 |
$ | 0 | $ | 9,006,454 | $ | 0 | $ | 9,006,454 | ||||||||||||||
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|
|
|
|
|
|
|
|
||||||||||||||
DETAILS OF ASSET WRITE-INS (Line 25) |
||||||||||||||||||||||
Accounts receivable |
$ | 5,846,847 | $ | 41,164,204 | $ | 0 | $ | 47,011,051 | ||||||||||||||
Contribution receivable from parent |
0 | 135,000,000 | 135,000,000 | |||||||||||||||||||
Estimated premium tax offsets related to the provision for future GFA |
222,285 | 847,186 | 1,069,471 | |||||||||||||||||||
Investment receivable |
37,483 | 752,104 | 789,587 | |||||||||||||||||||
Company owned life insurance |
75,881,155 | 79,732,778 | 155,613,933 | |||||||||||||||||||
Goodwill |
0 | 6,582,224 | 6,582,224 | |||||||||||||||||||
State transferable tax credits |
160,465 | 462,013 | 622,478 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
TOTAL OF ASSETS WRITE-INS FOR LINES 25 |
$ | 82,148,235 | $ | 264,540,509 | $ | 0 | $ | 346,688,744 | ||||||||||||||
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|
P-2
Pro Forma Unaudited Consolidated Statutory Balance Sheet
Western Reserve Life Assurance Co. of Ohio, Transamerica Premier Life Insurance Company
(f.k.a. Monumental Life Insurance Company)
As of December 31, 2013
TPLIC (MLIC) | ||||||||||||||||||||||
Dec 31, 2013 | ||||||||||||||||||||||
WRL | TPLIC (MLIC) | Eliminations | Reference | Totals | ||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||
1. |
Aggregate reserve for life contracts | $ | 1,909,589,432 | $ | 9,259,113,572 | $ | 0 | $ | 11,168,703,004 | |||||||||||||
2. |
Aggregate reserve for accident and health contracts | 1,157,547 | 716,358,263 | 717,515,810 | ||||||||||||||||||
3. |
Liability for deposit-type contracts | 21,519,616 | 675,894,726 | 697,414,342 | ||||||||||||||||||
4. |
Contract claims: | |||||||||||||||||||||
4.1 | Life | 25,085,544 | 127,458,689 | 152,544,233 | ||||||||||||||||||
4.2 | Accident and health | 0 | 110,668,627 | 110,668,627 | ||||||||||||||||||
5. |
Policyholders dividends and coupons due and unpaid | 0 | 75,358 | 75,358 | ||||||||||||||||||
6. |
Provision for policyholders dividends and coupons payable in following calendar year-estimated amounts: | |||||||||||||||||||||
6.1 | Dividends apportioned for payment to December 31, 2005 | 0 | 1,293,678 | 1,293,678 | ||||||||||||||||||
6.2 | Dividends not yet apportioned | 0 | 0 | 0 | ||||||||||||||||||
6.3 | Coupons and similar benefits | 0 | 0 | 0 | ||||||||||||||||||
7. |
Amount provisionally held for deferred dividend policies not included in Line 6 |
0 | 0 | 0 | ||||||||||||||||||
8. |
Premiums and annuity considerations for life and accident and health contracts received in advance less discount | 34,996 | 5,226,469 | 5,261,465 | ||||||||||||||||||
9. |
Contract liabilities not included elsewhere: | |||||||||||||||||||||
9.1 | Surrender values on canceled contracts | 0 | 0 | 0 | ||||||||||||||||||
9.2 | Provision for experience rating refunds | 0 | 6,735,207 | 6,735,207 | ||||||||||||||||||
9.3 | Other amounts payable on reinsurance | 2,408,262 | 2,949,115 | 5,357,377 | ||||||||||||||||||
9.4 | Interest Maintenance Reserve | 25,813,207 | 302,887,952 | 328,701,159 | ||||||||||||||||||
10. |
Commissions to agents due or accrued | 74,671 | 22,153,370 | 22,228,041 | ||||||||||||||||||
11. |
Commissions and expense allowances payable on reinsurance assumed | | 1,870,790 | 1,870,790 | ||||||||||||||||||
12. |
General expenses due or accrued | 6,446,238 | 5,113,171 | 11,559,409 | ||||||||||||||||||
13 . |
Transfers to Separate Accounts due or accrued | (212,707,836 | ) | (2,957,359 | ) | (215,665,195 | ) | |||||||||||||||
14. |
Taxes, licenses and fees due or accrued, excluding federal income taxes | 4,350,885 | 23,288,386 | 27,639,271 | ||||||||||||||||||
15.1. |
Current federal and foreign income taxes | 17,160,329 | 0 | 17,160,329 | ||||||||||||||||||
15.2. |
Net deferred tax liability | 0 | 0 | 0 | ||||||||||||||||||
16. |
Unearned investment income | 9,736,113 | 5,639,380 | 15,375,493 | ||||||||||||||||||
17. |
Amounts withheld or retained by company as agent or trustee | 944,020 | 36,161,821 | 37,105,841 | ||||||||||||||||||
18. |
Amounts held for agents account, including agents credit balance | 120,119 | 1,072,781 | 1,192,900 | ||||||||||||||||||
19. |
Remittances and items not allocated | 10,776,233 | 4,159,410 | 14,935,643 | ||||||||||||||||||
20. |
Net adjustment in assets and liabilities due to foreign exchange rates | 0 | 0 | 0 | ||||||||||||||||||
21. |
Liability for benefits for employees and agents if not included above | 0 | 0 | 0 | ||||||||||||||||||
22. |
Borrowed money and interest thereon | 26,717,773 | 53,453,126 | 80,170,899 | ||||||||||||||||||
23. |
Dividends to stockholders declared and unpaid | 0 | 0 | 0 | ||||||||||||||||||
24. |
Miscellaneous liabilities: | |||||||||||||||||||||
24.1 | Asset valuation reserve | 17,642,203 | 243,971,748 | 261,613,951 | ||||||||||||||||||
24.2 | Reinsurance in unauthorized companies | 0 | 1,979,758 | 1,979,758 | ||||||||||||||||||
24.3 | Funds held under reinsurance treaties with unauthorized reinsurers | 78,160,850 | 4,274,528,544 | 4,352,689,394 | ||||||||||||||||||
24.4 | Payable to parent, subsidiaries and affiliates | 0 | 0 | 0 | ||||||||||||||||||
24.5 | Drafts outstanding | 0 | 0 | 0 | ||||||||||||||||||
24.6 | Liability for amounts held under uninsured accident and health plans | 0 | 0 | 0 | ||||||||||||||||||
24.7 | Funds held under coinsurance | 0 | (17,903 | ) | (17,903 | ) | ||||||||||||||||
24.8 | Derivatives | 4,100,401 | 25,231,400 | 29,331,801 | ||||||||||||||||||
24.9 | Payable for securities | 8,000,000 | 177 | 8,000,177 | ||||||||||||||||||
24.10 | Payable for securities lending | 88,265,219 | 322,209,046 | 410,474,265 | ||||||||||||||||||
24.11 | Capital notes and interest thereon | 0 | 0 | 0 | ||||||||||||||||||
25. |
Aggregate write-ins for liabilities | 0 | 155,827,442 | 0 | 155,827,442 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
26. |
Total liabilities excluding Separate Accounts business (Lines 1-25) | 2,045,395,822 | 16,382,346,744 | 0 | 18,427,742,566 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
27. |
From Separate Accounts Statement | 6,969,476,743 | 14,526,002,778 | 0 | 21,495,479,521 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
28. |
Total liabilities (Line 26 and 27) | $ | 9,014,872,565 | $ | 30,908,349,522 | $ | 0 | $ | 39,923,222,087 | |||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
DETAILS OF LIABILITIES WRITE-INS (Line 25) |
||||||||||||||||||||||
Payable for derivative cash collateral |
$ | 0 | $ | 150,114,562 | $ | 0 | $ | 150,114,562 | ||||||||||||||
Deferred derivative gain/loss |
0 | 3,616,019 | 3,616,019 | |||||||||||||||||||
Synthetic GICs and provision for liquidity reserves |
0 | 1,296,861 | 1,296,861 | |||||||||||||||||||
Interest payable on surplus notes |
0 | 800,000 | 800,000 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
TOTAL OF LIABILITIES WRITE-INS FOR LINE 25 |
$ | 0 | $ | 155,827,442 | $ | 0 | $ | 155,827,442 | ||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
SURPLUS AND OTHER FUNDS |
||||||||||||||||||||||
29. |
Common capital stock | $ | 2,500,000 | $ | 10,137,150 | $ | (2,500,000 | ) | A | $ | 10,137,150 | |||||||||||
30. |
Preferred capital stock | 0 | 0 | 0 | 0 | |||||||||||||||||
31. |
Aggregate write-ins for other than special surplus funds | 0 | 0 | 0 | ||||||||||||||||||
32. |
Surplus notes | 0 | 160,000,000 | 160,000,000 | ||||||||||||||||||
33. |
Gross paid in and contributed surplus | 149,627,109 | 757,198,973 | 2,500,000 | A | 909,326,082 | ||||||||||||||||
34. |
Aggregate write-ins for special surplus funds | 0 | 0 | 0 | ||||||||||||||||||
35. |
Unassigned funds (surplus) | 253,319,743 | 43,888,596 | 0 | 297,208,339 | |||||||||||||||||
36. |
Less treasury stock, at cost: | |||||||||||||||||||||
36.1 | Common shares | 0 | 0 | 0 | ||||||||||||||||||
36.2 | Preferred shares | 0 | 0 | 0 | ||||||||||||||||||
37. |
Surplus (Total lines 31+32+33+34+35-36) | 402,946,852 | 961,087,569 | 2,500,000 | 1,366,534,421 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
38. |
Totals of Lines 29, 30 and 37 | 405,446,852 | 971,224,719 | 0 | 1,376,671,571 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
39. |
Totals of Lines 28 and 38 (Liabilities and Surplus) | $ | 9,420,319,417 | $ | 31,879,574,241 | $ | 0 | $ | 41,299,893,658 | |||||||||||||
|
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|
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|
|
* | This balance sheet is an unaudited consolidation of the December 31, 2013 NAIC Annual Statement balance sheets for Western Reserve Life Assurance Co. of Ohio and Monumental Life Insurance Company. |
P-3
Pro Forma Unaudited Consolidated Statutory Income Statement
Western Reserve Life Assurance Co. of Ohio, Transamerica Premier Life Insurance Company
(f.k.a. Monumental Life Insurance Company)
For Year Ending December 31, 2013
TPLIC (MLIC) | ||||||||||||||||||||
Dec 31, 2013 | ||||||||||||||||||||
WRL | TPLIC (MLIC) | Eliminations | Reference | Totals | ||||||||||||||||
1 |
Premiums and annuity considerations for life and accident and health contracts | $ | 538,421,190 | $ | 1,586,270,078 | $ | 0 | $ | 2,124,691,268 | |||||||||||
2 |
Considerations for supplementary contracts with life contingencies | 2,669,815 | 120,206,309 | 122,876,124 | ||||||||||||||||
3 |
Net investment income | 92,490,364 | 729,328,837 | 821,819,201 | ||||||||||||||||
4 |
Amortization of Interest Maintenance Reserve (IMR) | 767,365 | 15,572,471 | 16,339,836 | ||||||||||||||||
5 |
Separate Accounts net gain from operations excluding unrealized gains or losses | 0 | 0 | 0 | ||||||||||||||||
6 |
Commissions and expense allowances on reinsurance ceded | (15,256,488 | ) | 209,399,681 | 194,143,193 | |||||||||||||||
7 |
Reserve adjustments on reinsurance ceded | (13,389,610 | ) | (226,237,769 | ) | (239,627,379 | ) | |||||||||||||
8 |
Miscellaneous Income: | |||||||||||||||||||
8.1 |
Income from fees associated with investment management, administration and contract guarantees from Separate Accounts | 291,415,707 | 40,882,844 | 332,298,551 | ||||||||||||||||
8.2 |
Charges and fees for deposit-type contracts | 0 | 0 | 0 | ||||||||||||||||
8.3 |
Aggregate write-ins for miscellaneous income | 23,275,893 | 15,358,736 | 0 | 38,634,629 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
9 |
Totals (Lines 1 to 8.3) | 920,394,236 | 2,490,781,187 | 0 | 3,411,175,423 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
10 |
Death benefits | 70,180,365 | 239,620,179 | 309,800,544 | ||||||||||||||||
11 |
Matured endowments (excluding guaranteed annual pure endowments) | 20,665 | 9,689,204 | 9,709,869 | ||||||||||||||||
12 |
Annuity benefits | 19,270,127 | 313,063,790 | 332,333,917 | ||||||||||||||||
13 |
Disability benefits and benefits under accident and health contracts | 1,580,884 | 272,277,322 | 273,858,206 | ||||||||||||||||
14 |
Coupons, guaranteed annual pure endowments and similar benefits | 0 | 0 | 0 | ||||||||||||||||
15 |
Surrender benefits and withdrawals for life contracts | 541,358,940 | 1,019,521,589 | 1,560,880,529 | ||||||||||||||||
16 |
Group conversions | 0 | 0 | 0 | ||||||||||||||||
17 |
Interest and adjustments on contract or deposit-type contract funds | 475,650 | 40,362,252 | 40,837,902 | ||||||||||||||||
18 |
Payments on supplementary contracts with life contingencies | 3,276,454 | 34,080,716 | 37,357,170 | ||||||||||||||||
19 |
Increase in aggregate reserves for life and accident and health contracts | 127,763,858 | (57,398,129 | ) | 0 | 70,365,729 | ||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
20 |
Totals (Lines 10 to 19) | 763,926,943 | 1,871,216,923 | 0 | 2,635,143,866 | |||||||||||||||
21 |
Commissions on premiums, annuity considerations and deposit-type contract funds | 155,583,798 | 275,345,715 | 430,929,513 | ||||||||||||||||
22 |
Commissions and expense allowances on reinsurance assumed | 0 | 42,743,256 | 42,743,256 | ||||||||||||||||
23 |
General insurance expenses | 72,084,952 | 220,220,369 | 292,305,321 | ||||||||||||||||
24 |
Insurance taxes, licenses and fees, excluding federal income taxes | 18,954,377 | 46,267,149 | 65,221,526 | ||||||||||||||||
25 |
Increase in loading on deferred and uncollected premiums | 77,142 | (2,835,678 | ) | (2,758,536 | ) | ||||||||||||||
26 |
Net transfers to or (from) Separate Accounts net of reinsurance | (280,807,082 | ) | (312,793,145 | ) | (593,600,227 | ) | |||||||||||||
27 |
Aggregate write-ins for deductions | 16,255,075 | 147,145,291 | 0 | 163,400,366 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
28 |
Totals (Lines 20 to 27) | 746,075,205 | 2,287,309,880 | 0 | 3,033,385,085 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
29 |
Net gain from operations before dividends to policyholders and federal income taxes (Line 9 minus Line 28) | 174,319,031 | 203,471,307 | 0 | 377,790,338 | |||||||||||||||
30 |
Dividends to policyholders | 20,746 | 1,258,647 | 1,279,393 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
31 |
Net gain from operations after dividends to policyholders and before federal income taxes (Line 29 minus Line 30) | 174,298,285 | 202,212,660 | 0 | 376,510,945 | |||||||||||||||
32 |
Federal and foreign income taxes incurred (excluding tax on capital gains) | 25,591,702 | 23,987,115 | 49,578,817 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
33 |
Net gain from operations after dividends to policyholders and federal income taxes and before realized capital gains or (losses) (Line 31 minus Line 32) | 148,706,583 | 178,225,545 | 0 | 326,932,128 | |||||||||||||||
34 |
Net realized capital gains or (losses) less capital gains tax and transferred to the IMR | 11,102,563 | (11,351,095 | ) | (248,532 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
35 |
Net income (Line 33 plus Line 34) | $ | 159,809,146 | $ | 166,874,450 | $ | 0 | $ | 326,683,596 | |||||||||||
|
|
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|
|
|
|
|
|
P-4
Pro Forma Unaudited Consolidated Statutory Income Statement
Western Reserve Life Assurance Co. of Ohio, Transamerica Premier Life Insurance Company
(f.k.a. Monumental Life Insurance Company)
For Year Ending December 31, 2013
TPLIC (MLIC) | ||||||||||||||||||||
Dec 31, 2013 | ||||||||||||||||||||
WRL | TPLIC (MLIC) | Eliminations | Reference | Totals | ||||||||||||||||
CAPITAL AND SURPLUS ACCOUNT |
||||||||||||||||||||
36 |
Capital and surplus, December 31, prior year | $ | 338,415,864 | $ | 811,320,218 | $ | 0 | $ | 1,149,736,082 | |||||||||||
37 |
Net income (Line 35) | 159,809,146 | 166,874,450 | 326,683,596 | ||||||||||||||||
38 |
Change in net unrealized capital gains (losses) | 4,188,807 | 96,957,088 | 101,145,895 | ||||||||||||||||
39 |
Change in net unrealized foreign exchange capital gain (loss) | 0 | (1,426,888 | ) | (1,426,888 | ) | ||||||||||||||
40 |
Change in net deferred income tax | (14,828,899 | ) | 1,497,207 | (13,331,692 | ) | ||||||||||||||
41 |
Change in nonadmitted assets and related items | (11,137,898 | ) | 3,579,313 | (7,558,585 | ) | ||||||||||||||
42 |
Change in liability for reinsurance in unauthorized companies | 264,898 | 187,382 | 452,280 | ||||||||||||||||
43 |
Change in reserve on account of change in valuation basis, (increase) or decrease | 0 | 0 | 0 | ||||||||||||||||
44 |
Change in asset valuation reserve | (5,603,238 | ) | (51,980,043 | ) | (57,583,281 | ) | |||||||||||||
45 |
Change in treasury stock | 0 | 0 | 0 | ||||||||||||||||
46 |
Surplus (contributed to) withdrawn from Separate Accounts during period | 0 | 0 | 0 | ||||||||||||||||
47 |
Other changes in surplus in Separate Accounts Statement | 0 | 0 | 0 | ||||||||||||||||
48 |
Change in surplus notes | 0 | 0 | 0 | ||||||||||||||||
49 |
Cumulative effect of changes in accounting principles | 0 | 0 | 0 | ||||||||||||||||
50 |
Capital changes: | |||||||||||||||||||
50.1 |
Paid in | 0 | 0 | (2,500,000 | ) | A | (2,500,000 | ) | ||||||||||||
50.2 |
Transferred from surplus (Stock Dividend) | 0 | 0 | 0 | ||||||||||||||||
50.3 |
Transferred to surplus | 0 | 0 | 0 | ||||||||||||||||
51 |
Surplus adjustment: | |||||||||||||||||||
51.1 |
Paid in | 0 | 135,925,882 | 2,500,000 | A | 138,425,882 | ||||||||||||||
51.2 |
Transferred to capital (Stock Dividend) | 0 | 0 | 0 | ||||||||||||||||
51.3 |
Transferred from capital | 0 | 0 | 0 | ||||||||||||||||
51.4 |
Change in surplus as a result of reinsurance | (15,661,828 | ) | (63,742,772 | ) | (79,404,600 | ) | |||||||||||||
52 |
Dividends to stockholders | (50,000,000 | ) | (135,000,000 | ) | (185,000,000 | ) | |||||||||||||
53 |
Aggregate write-ins for gains and losses in surplus | 0 | 7,032,882 | 7,032,882 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
54 |
Net change in capital and surplus (Lines 37 through 53) | 67,030,988 | 159,904,501 | 0 | 226,935,489 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
55 |
Capital and surplus as of statement date (Lines 36 + 54) | $ | 405,446,852 | $ | 971,224,719 | $ | 0 | $ | 1,376,671,571 | |||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
DETAILS OF WRITE-INS (Line 8.3) |
||||||||||||||||||||
Miscellaneous income | $ | 18,494,295 | $ | 11,387,733 | $ | 0 | $ | 29,882,028 | ||||||||||||
Income earned on company owned life insurance | 3,607,401 | 2,504,067 | 6,111,468 | |||||||||||||||||
Surrender charges | 0 | 774,952 | 774,952 | |||||||||||||||||
Consideration on reinsurance recaptured | 1,174,197 | 691,984 | 1,866,181 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
TOTAL WRITE-INS FOR LINE 8.3 | $ | 23,275,893 | $ | 15,358,736 | $ | 0 | $ | 38,634,629 | ||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
DETAILS OF WRITE-INS (Line 27) |
||||||||||||||||||||
Interest on surplus notes | $ | 0 | $ | 9,600,000 | $ | 0 | $ | 9,600,000 | ||||||||||||
Experience refunds | (580 | ) | 246,617 | 246,037 | ||||||||||||||||
Fines and penalties | 1,948 | 154,566 | 156,514 | |||||||||||||||||
Funds withheld ceded investment income | 16,253,707 | 138,639,686 | 154,893,393 | |||||||||||||||||
Reinsurance Allowances | 0 | 0 | 0 | |||||||||||||||||
Modco reserve adjustment | 0 | (10,254 | ) | (10,254 | ) | |||||||||||||||
Foreign currency translation adjustment | 0 | 0 | 0 | |||||||||||||||||
Change in synthetic GICs and provision for liquidity guarantees | 0 | (1,485,324 | ) | (1,485,324 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
TOTAL WRITE-INS FOR LINE 27 | $ | 16,255,075 | $ | 147,145,291 | $ | 0 | $ | 163,400,366 | ||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
DETAILS OF WRITE-INS (Line 53) |
||||||||||||||||||||
Correction of error- change in nonadmitted deferred tax assets | $ | 0 | $ | 7,032,882 | $ | 0 | $ | 7,032,882 | ||||||||||||
0 | 0 | 0 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
TOTAL WRITE-INS FOR LINE 53 | $ | 0 | $ | 7,032,882 | $ | 0 | $ | 7,032,882 | ||||||||||||
|
|
|
|
|
|
|
|
|
* | This income statement is an unaudited consolidation of the December 31, 2013 NAIC Annual Statement income statements for Western Reserve Life Assurance Co. of Ohio and Monumental Life Insurance Company. |
P-5
Pro Forma Unaudited Consolidated Statutory Income Statement
Western Reserve Life Assurance Co. of Ohio, Transamerica Premier Life Insurance Company
(f.k.a. Monumental Life Insurance Company)
For Year Ending December 31, 2012
TPLIC (MLIC) | ||||||||||||||||||||
Dec 31, 2012 | ||||||||||||||||||||
WRL | TPLIC (MLIC) | Eliminations | Reference | Totals | ||||||||||||||||
1 |
Premiums and annuity considerations for life and accident and health contracts | $ | 486,919,136 | $ | 1,497,625,426 | $ | 0 | $ | 1,984,544,562 | |||||||||||
2 |
Considerations for supplementary contracts with life contingencies | (2,210,995 | ) | 24,091,339 | 21,880,344 | |||||||||||||||
3 |
Net investment income | 81,728,965 | 822,313,801 | 904,042,766 | ||||||||||||||||
4 |
Amortization of Interest Maintenance Reserve (IMR) | 1,516,879 | 11,028,711 | 12,545,590 | ||||||||||||||||
5 |
Separate Accounts net gain from operations excluding unrealized gains or losses | 0 | 0 | 0 | ||||||||||||||||
6 |
Commissions and expense allowances on reinsurance ceded | (3,414,666 | ) | 377,804,411 | 374,389,745 | |||||||||||||||
7 |
Reserve adjustments on reinsurance ceded | (24,697,078 | ) | (762,678,546 | ) | (787,375,624 | ) | |||||||||||||
8 |
Miscellaneous Income: | |||||||||||||||||||
8.1 |
Income from fees associated with investment management, administration and contract guarantees from Separate Accounts | 300,860,490 | 36,700,565 | 337,561,055 | ||||||||||||||||
8.2 |
Charges and fees for deposit-type contracts | 0 | 0 | 0 | ||||||||||||||||
8.3 |
Aggregate write-ins for miscellaneous income | 19,035,109 | 8,497,450 | 0 | 27,532,559 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
9 |
Totals (Lines 1 to 8.3) | 859,737,840 | 2,015,383,157 | 0 | 2,875,120,997 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
10 |
Death benefits | 70,668,289 | 183,519,981 | 254,188,270 | ||||||||||||||||
11 |
Matured endowments (excluding guaranteed annual pure endowments) | 22,545 | 11,213,370 | 11,235,915 | ||||||||||||||||
12 |
Annuity benefits | 21,113,855 | 306,294,955 | 327,408,810 | ||||||||||||||||
13 |
Disability benefits and benefits under accident and health contracts | 871,144 | 281,497,472 | 282,368,616 | ||||||||||||||||
14 |
Coupons, guaranteed annual pure endowments and similar benefits | 0 | 0 | 0 | ||||||||||||||||
15 |
Surrender benefits and withdrawals for life contracts | 423,202,502 | 824,936,262 | 1,248,138,764 | ||||||||||||||||
16 |
Group conversions | 0 | 0 | 0 | ||||||||||||||||
17 |
Interest and adjustments on contract or deposit-type contract funds | 649,406 | 36,904,416 | 37,553,822 | ||||||||||||||||
18 |
Payments on supplementary contracts with life contingencies | 2,238,541 | 18,437,164 | 20,675,705 | ||||||||||||||||
19 |
Increase in aggregate reserves for life and accident and health contracts | 35,664,048 | (483,691,447 | ) | 0 | (448,027,399 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
20 |
Totals (Lines 10 to 19) | 554,430,330 | 1,179,112,173 | 0 | 1,733,542,503 | |||||||||||||||
21 |
Commissions on premiums, annuity considerations and deposit-type contract funds | 160,308,691 | 258,895,773 | 419,204,464 | ||||||||||||||||
22 |
Commissions and expense allowances on reinsurance assumed | 0 | 48,695,771 | 48,695,771 | ||||||||||||||||
23 |
General insurance expenses | 74,016,655 | 218,791,750 | 292,808,405 | ||||||||||||||||
24 |
Insurance taxes, licenses and fees, excluding federal income taxes | 17,897,862 | 31,214,586 | 49,112,448 | ||||||||||||||||
25 |
Increase in loading on deferred and uncollected premiums | (54,095 | ) | (4,719,414 | ) | (4,773,509 | ) | |||||||||||||
26 |
Net transfers to or (from) Separate Accounts net of reinsurance | (107,485,224 | ) | (189,380,197 | ) | (296,865,421 | ) | |||||||||||||
27 |
Aggregate write-ins for deductions | 12,038,761 | 216,975,741 | 0 | 229,014,502 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
28 |
Totals (Lines 20 to 27) | 711,152,980 | 1,759,586,183 | 0 | 2,470,739,163 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
29 |
Net gain from operations before dividends to policyholders and federal income taxes (Line 9 minus Line 28) | 148,584,860 | 255,796,974 | 0 | 404,381,834 | |||||||||||||||
30 |
Dividends to policyholders | 21,801 | 1,279,154 | 1,300,955 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
31 |
Net gain from operations after dividends to policyholders and before federal income (Line 29 minus Line 30) | 148,563,059 | 254,517,820 | 0 | 403,080,879 | |||||||||||||||
32 |
Federal and foreign income taxes incurred (excluding tax on capital gains) | 13,976,714 | 103,095,420 | 117,072,134 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
33 |
Net gain from operations after dividends to policyholders and federal income taxes and before realized capital gains or (losses) (Line 31 minus Line 32) | 134,586,345 | 151,422,400 | 0 | 286,008,745 | |||||||||||||||
34 |
Net realized capital gains or (losses) less capital gains tax and transferred to the IMR | (4,590,812 | ) | (7,876,251 | ) | (12,467,063 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
35 |
Net income (Line 33 plus Line 34) | $ | 129,995,533 | $ | 143,546,149 | $ | 0 | $ | 273,541,682 | |||||||||||
|
|
|
|
|
|
|
|
|
P-6
Pro Forma Unaudited Consolidated Statutory Income Statement
Western Reserve Life Assurance Co. of Ohio, Transamerica Premier Life Insurance Company
(f.k.a. Monumental Life Insurance Company)
For Year Ending December 31, 2012
TPLIC (MLIC) | ||||||||||||||||||||
Dec 31, 2012 | ||||||||||||||||||||
WRL | TPLIC (MLIC) | Eliminations | Reference | Totals | ||||||||||||||||
CAPITAL AND SURPLUS ACCOUNT |
||||||||||||||||||||
36 |
Capital and surplus, December 31, prior year | $ | 275,198,023 | $ | 980,853,380 | $ | 0 | $ | 1,256,051,403 | |||||||||||
37 |
Net income (Line 35) | 129,995,533 | 143,546,149 | 273,541,682 | ||||||||||||||||
38 |
Change in net unrealized capital gains (losses) | 117,589 | (34,637,639 | ) | (34,520,050 | ) | ||||||||||||||
39 |
Change in net unrealized foreign exchange capital gain (loss) | 0 | 1,378,866 | 1,378,866 | ||||||||||||||||
40 |
Change in net deferred income tax | (12,436,991 | ) | 822,923 | (11,614,068 | ) | ||||||||||||||
41 |
Change in nonadmitted assets and related items | (9,918,907 | ) | (29,675,578 | ) | (39,594,485 | ) | |||||||||||||
42 |
Change in liability for reinsurance in unauthorized companies | | 500,492 | 500,492 | ||||||||||||||||
43 |
Change in reserve on account of change in valuation basis, (increase) or decrease | 0 | 0 | 0 | ||||||||||||||||
44 |
Change in asset valuation reserve | (3,200,787 | ) | (9,467,487 | ) | (12,668,274 | ) | |||||||||||||
45 |
Change in treasury stock | 0 | 0 | 0 | ||||||||||||||||
46 |
Surplus (contributed to) withdrawn from Separate Accounts during period | 0 | 0 | 0 | ||||||||||||||||
47 |
Other changes in surplus in Separate Accounts Statement | 0 | 0 | 0 | ||||||||||||||||
48 |
Change in surplus notes | 0 | 0 | 0 | ||||||||||||||||
49 |
Cumulative effect of changes in accounting principles | 0 | 0 | 0 | ||||||||||||||||
50 |
Capital changes: | |||||||||||||||||||
50.1 |
Paid in | 0 | 0 | (2,500,000 | ) | A | (2,500,000 | ) | ||||||||||||
50.2 |
Transferred from surplus (Stock Dividend) | 0 | 0 | 0 | ||||||||||||||||
50.3 |
Transferred to surplus | 0 | 0 | 0 | ||||||||||||||||
51 |
Surplus adjustment: | |||||||||||||||||||
51.1 |
Paid in | 0 | 481,720 | 2,500,000 | A | 2,981,720 | ||||||||||||||
51.2 |
Transferred to capital (Stock Dividend) | 0 | 0 | 0 | ||||||||||||||||
51.3 |
Transferred from capital | 0 | 0 | 0 | ||||||||||||||||
51.4 |
Change in surplus as a result of reinsurance | (33,519,286 | ) | 207,517,392 | 173,998,106 | |||||||||||||||
52 |
Dividends to stockholders | (27,000,000 | ) | (450,000,000 | ) | (477,000,000 | ) | |||||||||||||
53 |
Aggregate write-ins for gains and losses in surplus | | | 0 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
54 |
Net change in capital and surplus (Lines 37 through 53) | 44,037,151 | (169,533,162 | ) | 0 | (125,496,011 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
55 |
Capital and surplus as of statement date (Lines 36 + 54) | $ | 319,235,174 | $ | 811,320,218 | $ | 0 | $ | 1,130,555,392 | |||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
DETAILS OF WRITE-INS (Line 8.3) |
||||||||||||||||||||
Miscellaneous income | $ | 17,160,566 | $ | 5,094,642 | $ | 0 | $ | 22,255,208 | ||||||||||||
Income earned on company owned life insurance | 1,874,543 | 2,445,497 | 4,320,040 | |||||||||||||||||
Surrender charges | 0 | 922,816 | 922,816 | |||||||||||||||||
Consideration on reinsurance recaptured | 0 | 34,495 | 34,495 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
TOTAL WRITE-INS FOR LINE 8.3 | $ | 19,035,109 | $ | 8,497,450 | $ | 0 | $ | 27,532,559 | ||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
DETAILS OF WRITE-INS (Line 27) |
||||||||||||||||||||
Interest on surplus notes | $ | 0 | $ | 9,600,000 | $ | 0 | $ | 9,600,000 | ||||||||||||
Experience refunds | (112 | ) | (319,009 | ) | (319,121 | ) | ||||||||||||||
Fines and penalties | 989 | 4,535 | 5,524 | |||||||||||||||||
Funds withheld ceded investment income | 12,037,884 | 213,972,859 | 226,010,743 | |||||||||||||||||
Reinsurance Allowances | 0 | 5,385 | 5,385 | |||||||||||||||||
Modco reserve adjustment | 0 | (10,045 | ) | (10,045 | ) | |||||||||||||||
Foreign currency translation adjustment | 0 | (4,228,000 | ) | (4,228,000 | ) | |||||||||||||||
Change in synthetic GICs and provision for liquidity guarantees | 0 | (2,049,984 | ) | (2,049,984 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
TOTAL WRITE-INS FOR LINE 27 | $ | 12,038,761 | $ | 216,975,741 | $ | 0 | $ | 229,014,502 | ||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
DETAILS OF WRITE-INS (Line 53) |
||||||||||||||||||||
$ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||
0 | 0 | 0 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
TOTAL WRITE-INS FOR LINE 53 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||
|
|
|
|
|
|
|
|
|
* | This income statement is an unaudited consolidation of the December 31, 2012 NAIC Annual Statement income statements for Western Reserve Life Assurance Co. of Ohio and Monumental Life Insurance Company. |
P-7
Pro Forma Unaudited Consolidated Statutory Income Statement
Western Reserve Life Assurance Co. of Ohio, Transamerica Premier Life Insurance Company
(f.k.a. Monumental Life Insurance Company)
For Year Ending December 31, 2011
TPLIC (MLIC) | ||||||||||||||||||||
Dec 31, 2011 | ||||||||||||||||||||
WRL | TPLIC (MLIC) | Eliminations | Reference | Totals | ||||||||||||||||
1 |
Premiums and annuity considerations for life and accident and health contracts | $ | 479,669,678 | $ | 1,391,712,990 | $ | 0 | $ | 1,871,382,668 | |||||||||||
2 |
Considerations for supplementary contracts with life contingencies | 929,177 | 11,508,812 | 12,437,989 | ||||||||||||||||
3 |
Net investment income | 80,031,434 | 842,041,493 | 922,072,927 | ||||||||||||||||
4 |
Amortization of Interest Maintenance Reserve (IMR) | 1,325,917 | 4,411,559 | 5,737,476 | ||||||||||||||||
5 |
Separate Accounts net gain from operations excluding unrealized gains or losses | 0 | 0 | 0 | ||||||||||||||||
6 |
Commissions and expense allowances on reinsurance ceded | (41,716,042 | ) | 529,883,046 | 488,167,004 | |||||||||||||||
7 |
Reserve adjustments on reinsurance ceded | (31,044,498 | ) | (151,483,511 | ) | (182,528,009 | ) | |||||||||||||
8 |
Miscellaneous Income: | |||||||||||||||||||
8.1 |
Income from fees associated with investment management, administration and contract guarantees from Separate Accounts | 312,161,423 | 34,847,072 | 347,008,495 | ||||||||||||||||
8.2 |
Charges and fees for deposit-type contracts | 0 | 0 | 0 | ||||||||||||||||
8.3 |
Aggregate write-ins for miscellaneous income | 20,019,069 | 8,884,717 | 0 | 28,903,786 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
9 |
Totals (Lines 1 to 8.3) | 821,376,158 | 2,671,806,178 | 0 | 3,493,182,336 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
10 |
Death benefits | 64,792,471 | 183,623,096 | 248,415,567 | ||||||||||||||||
11 |
Matured endowments (excluding guaranteed annual pure endowments) | 20,646 | 9,811,580 | 9,832,226 | ||||||||||||||||
12 |
Annuity benefits | 25,823,646 | 275,877,445 | 301,701,091 | ||||||||||||||||
13 |
Disability benefits and benefits under accident and health contracts | 1,214,897 | 305,136,009 | 306,350,906 | ||||||||||||||||
14 |
Coupons, guaranteed annual pure endowments and similar benefits | 0 | 0 | 0 | ||||||||||||||||
15 |
Surrender benefits and withdrawals for life contracts | 614,466,490 | 731,102,194 | 1,345,568,684 | ||||||||||||||||
16 |
Group conversions | 0 | 0 | 0 | ||||||||||||||||
17 |
Interest and adjustments on contract or deposit-type contract funds | 797,706 | 40,623,746 | 41,421,452 | ||||||||||||||||
18 |
Payments on supplementary contracts with life contingencies | 1,333,270 | 17,015,971 | 18,349,241 | ||||||||||||||||
19 |
Increase in aggregate reserves for life and accident and health contracts | 85,582,954 | (92,560,336 | ) | 0 | (6,977,382 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
20 |
Totals (Lines 10 to 19) | 794,032,080 | 1,470,629,705 | 0 | 2,264,661,785 | |||||||||||||||
21 |
Commissions on premiums, annuity considerations and deposit-type contract funds | 138,136,489 | 253,225,339 | 391,361,828 | ||||||||||||||||
22 |
Commissions and expense allowances on reinsurance assumed | 0 | 67,337,377 | 67,337,377 | ||||||||||||||||
23 |
General insurance expenses | 84,131,616 | 223,932,675 | 308,064,291 | ||||||||||||||||
24 |
Insurance taxes, licenses and fees, excluding federal income taxes | 14,478,324 | 28,925,224 | 43,403,548 | ||||||||||||||||
25 |
Increase in loading on deferred and uncollected premiums | 11,427 | (4,278,103 | ) | (4,266,676 | ) | ||||||||||||||
26 |
Net transfers to or (from) Separate Accounts net of reinsurance | (258,667,339 | ) | (136,669,812 | ) | (395,337,151 | ) | |||||||||||||
27 |
Aggregate write-ins for deductions | 39,366,107 | 225,231,807 | 0 | 264,597,914 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
28 |
Totals (Lines 20 to 27) | 811,488,704 | 2,128,334,212 | 0 | 2,939,822,916 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
29 |
Net gain from operations before dividends to policyholders and federal income taxes (Line 9 minus Line 28) | 9,887,454 | 543,471,966 | 0 | 553,359,420 | |||||||||||||||
30 |
Dividends to policyholders | 23,797 | 1,341,907 | 1,365,704 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
31 |
Net gain from operations after dividends to policyholders and before federal income taxes (Line 29 minus Line 30) | 9,863,657 | 542,130,059 | 0 | 551,993,716 | |||||||||||||||
32 |
Federal and foreign income taxes incurred (excluding tax on capital gains) | 9,379,020 | 31,580,088 | 40,959,108 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
33 |
Net gain from operations after dividends to policyholders and federal income taxes and before realized capital gains or (losses) (Line 31 minus Line 32) | 484,637 | 510,549,971 | 0 | 511,034,608 | |||||||||||||||
34 |
Net realized capital gains or (losses) less capital gains tax and transferred to the IMR | (12,431,038 | ) | (28,842,181 | ) | (41,273,219 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
35 |
Net income (Line 33 plus Line 34) | $ | (11,946,401 | ) | $ | 481,707,790 | $ | 0 | $ | 469,761,389 | ||||||||||
|
|
|
|
|
|
|
|
|
P-8
Pro Forma Unaudited Consolidated Statutory Income Statement
Western Reserve Life Assurance Co. of Ohio, Transamerica Premier Life Insurance Company
(f.k.a. Monumental Life Insurance Company)
For Year Ending December 31, 2011
TPLIC (MLIC) | ||||||||||||||||||||
Dec 31, 2011 | ||||||||||||||||||||
WRL | TPLIC (MLIC) | Eliminations | Reference | Totals | ||||||||||||||||
CAPITAL AND SURPLUS ACCOUNT |
||||||||||||||||||||
36 |
Capital and surplus, December 31, prior year | $ | 511,264,493 | $ | 1,174,423,154 | $ | 0 | $ | 1,685,687,647 | |||||||||||
37 |
Net income (Line 35) | (11,946,401 | ) | 481,707,790 | 469,761,389 | |||||||||||||||
38 |
Change in net unrealized capital gains (losses) | (3,720,586 | ) | (12,830,567 | ) | (16,551,153 | ) | |||||||||||||
39 |
Change in net unrealized foreign exchange capital gain (loss) | 0 | 747,269 | 747,269 | ||||||||||||||||
40 |
Change in net deferred income tax | 18,336,654 | 218,164,768 | 236,501,422 | ||||||||||||||||
41 |
Change in nonadmitted assets and related items | (27,615,648 | ) | (246,969,162 | ) | (274,584,810 | ) | |||||||||||||
42 |
Change in liability for reinsurance in unauthorized companies | (104,262 | ) | (233,738 | ) | (338,000 | ) | |||||||||||||
43 |
Change in reserve on account of change in valuation basis, (increase) or decrease | 0 | 0 | 0 | ||||||||||||||||
44 |
Change in asset valuation reserve | 378,352 | (30,846,724 | ) | (30,468,372 | ) | ||||||||||||||
45 |
Change in treasury stock | 0 | 0 | 0 | ||||||||||||||||
46 |
Surplus (contributed to) withdrawn from Separate Accounts during period | 0 | 0 | 0 | ||||||||||||||||
47 |
Other changes in surplus in Separate Accounts Statement | 0 | 0 | 0 | ||||||||||||||||
48 |
Change in surplus notes | 0 | 0 | 0 | ||||||||||||||||
49 |
Cumulative effect of changes in accounting principles | 0 | 0 | 0 | ||||||||||||||||
50 |
Capital changes: | |||||||||||||||||||
50.1 |
Paid in | 0 | 0 | (2,500,000 | ) | A | (2,500,000 | ) | ||||||||||||
50.2 |
Transferred from surplus (Stock Dividend) | 0 | 0 | 0 | ||||||||||||||||
50.3 |
Transferred to surplus | 0 | 0 | 0 | ||||||||||||||||
51 |
Surplus adjustment: | |||||||||||||||||||
51.1 |
Paid in | 0 | 175,092 | 2,500,000 | A | 2,675,092 | ||||||||||||||
51.2 |
Transferred to capital (Stock Dividend) | 0 | 0 | 0 | ||||||||||||||||
51.3 |
Transferred from capital | 0 | 0 | 0 | ||||||||||||||||
51.4 |
Change in surplus as a result of reinsurance | 41,629,207 | (321,586,829 | ) | (279,957,622 | ) | ||||||||||||||
52 |
Dividends to stockholders | (250,000,000 | ) | (300,000,000 | ) | (550,000,000 | ) | |||||||||||||
53 |
Aggregate write-ins for gains and losses in surplus | (3,023,786 | ) | 18,102,327 | 15,078,541 | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
54 |
Net change in capital and surplus (Lines 37 through 53) | (236,066,470 | ) | (193,569,774 | ) | 0 | (429,636,244 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
55 |
Capital and surplus as of statement date (Lines 36 + 54) | $ | 275,198,023 | $ | 980,853,380 | $ | 0 | $ | 1,256,051,403 | |||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
DETAILS OF WRITE-INS (Line 8.3) |
||||||||||||||||||||
Miscellaneous income | $ | 17,739,643 | $ | 5,350,789 | $ | 0 | $ | 23,090,432 | ||||||||||||
Income earned on company owned life insurance | 2,279,426 | 2,386,749 | 4,666,175 | |||||||||||||||||
Surrender charges | 0 | 1,147,179 | 1,147,179 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
TOTAL WRITE-INS FOR LINE 8.3 | $ | 20,019,069 | $ | 8,884,717 | $ | 0 | $ | 28,903,786 | ||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
DETAILS OF WRITE-INS (Line 27) |
||||||||||||||||||||
Interest on surplus notes | $ | 0 | $ | 9,600,000 | $ | 0 | $ | 9,600,000 | ||||||||||||
Experience refunds | 0 | (140,105 | ) | (140,105 | ) | |||||||||||||||
Fines and penalties | 514 | 18,999 | 19,513 | |||||||||||||||||
Funds withheld ceded investment income | 10,065,593 | 211,608,375 | 221,673,968 | |||||||||||||||||
Reinsurance Allowances | 0 | 6,173 | 6,173 | |||||||||||||||||
Modco reserve adjustment | 0 | (21,045 | ) | (21,045 | ) | |||||||||||||||
Consideration on reinsurance recaptured | 29,300,000 | 3,039,400 | 32,339,400 | |||||||||||||||||
Change in synthetic GICs and provision for liquidity guarantees | 0 | 1,120,010 | 1,120,010 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
TOTAL WRITE-INS FOR LINE 27 | $ | 39,366,107 | $ | 225,231,807 | $ | 0 | $ | 264,597,914 | ||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
DETAILS OF WRITE-INS (Line 53) |
||||||||||||||||||||
Change in admitted deferred tax assets pursuant to SSAP No. 10R | $ | (3,023,786 | ) | $ | 23,738,700 | $ | 0 | $ | 20,714,914 | |||||||||||
Correction of errorfunds withheld investment income | 0 | (5,636,373 | ) | (5,636,373 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
TOTAL WRITE-INS FOR LINE 53 | $ | (3,023,786 | ) | $ | 18,102,327 | $ | 0 | $ | 15,078,541 | |||||||||||
|
|
|
|
|
|
|
|
|
* | This income statement is an unaudited consolidation of the December 31, 2011 NAIC Annual Statement income statements for Western Reserve Life Assurance Co. of Ohio and Monumental Life Insurance Company. |
P-9
Pro Forma Unaudited Consolidated Statutory Balance Sheet and Income Statement
Western Reserve Life Assurance Co. of Ohio, Transamerica Premier Life Insurance Company
(f.k.a. Monumental Life Insurance Company)
Eliminations:
The following eliminations have been made to the combined WRL and TPLIC financial statements to more accurately depict the resultant combination of the entities in accordance with statutory accounting principles.
A - Reflect cancellation of WRLs common stock held by AEGON USA, LLC:
WRL common capital stock owned by AEGON USA, LLC prior to merger |
$ | 2,500,000 |
WRLs common shares shall be deemed cancelled by operation of law. As AEGON USA, LLC owns 100% of the common shares of Commonwealth General Corporation (CGC), a Delaware holding company, who in turn will own 100% of TPLIC, and AEGON USA also owns 100% of WRL, AEGON USA is indifferent as to the consideration issued in the merger, since such issuance is meaningless to AEGON USA as an economic matter. Under these circumstances, AEGON USA agrees to accept one share of common stock of CGC in exchange for its agreement to merge WRL into TPLIC.
Overview of eliminations by statutory financial lines:
Balance Sheet Adjustments: |
||||
Surplus and Other Fund Adjustments: |
||||
Line 29 - Common capital stock |
$ | (2,500,000 | ) | |
Line 30 - Preferred capital stock |
- | |||
Line 33 - Gross paid in & contributed surplus |
2,500,000 | |||
Line 35 - Unassigned |
| |||
|
|
|||
Total Surplus and Other Fund Adjustments |
$ | | ||
|
|
|||
Income Statement Adjustments: |
||||
Net Income Adjustments: |
||||
$ | | |||
|
|
|||
Total Net Income Adjustments |
$ | | ||
|
|
|||
Capital and Surplus Adjustments: |
||||
Line 36 - Capital and surplus as of the prior year |
$ | | ||
Line 37 - Net Income |
| |||
Line 38 - Change in net unrealized capital gains (losses) |
| |||
Line 41 - Change in non-admitted assets and related items |
| |||
Line 50.1 - Capital paid in |
(2,500,000 | ) | ||
Line 51.1 - Surplus paid in |
2,500,000 | |||
|
|
|||
Total Change in Capital and Surplus Adjustments |
$ | | ||
|
|
P-10
Western Reserve Life Assurance Co. of Ohio Audited Financials
F I N A N C I A L S T A T E M E N T S A N D S C H E D U L E S S T A T U T O R Y B A S I S
Western Reserve Life Assurance Co. of Ohio
Years Ended December 31, 2013, 2012 (restated) and 2011
Western Reserve Life Assurance Co. of Ohio
Financial Statements and Schedules Statutory Basis
Years Ended December 31, 2013, 2012 (restated) and 2011
1 | ||||
Audited Financial Statements |
||||
3 | ||||
5 | ||||
Statements of Changes in Capital and Surplus Statutory Basis |
6 | |||
8 | ||||
10 | ||||
Summary of Investments Other Than Investments in Related Parties |
70 | |||
71 | ||||
72 |
Report of Independent Auditors
The Board of Directors
Western Reserve Life Assurance Co. of Ohio
We have audited the accompanying statutory-basis financial statements of Western Reserve Life Assurance Company of Ohio, which comprise the balance sheets as of December 31, 2013 and 2012, the related statutory-basis statements of operations, changes in capital and surplus, and cash flow for each of the three years in the period ended December 31, 2013, and the related notes to the financial statements. Our audits also included the statutory-basis financial statement schedules required by Regulation S-X, Article 7.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in conformity with accounting practices prescribed or permitted by the Ohio Department of Insurance. Management also is responsible for the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.
Auditors responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles
As described in Note 1, to meet the requirements of Ohio the financial statements have been prepared in conformity with accounting practices prescribed or permitted by the Ohio Department of Insurance, which practices differ from U.S. generally accepted accounting principles. The variances between such practices and U.S. generally accepted accounting principles are described in Note 1. The effects on the accompanying financial statements of these variances are not reasonably determinable but are presumed to be material.
1
Adverse Opinion on U.S. Generally Accepted Accounting Principles
In our opinion, because of the effects of the matter described in the preceding paragraph, the statutory-basis financial statements referred to above do not present fairly, in conformity with U.S. generally accepted accounting principles, the financial position of Western Reserve Life Assurance Co. of Ohio at December 31, 2013 and 2012, or the results of its operations or its cash flows for each of the three years ended December 31, 2013.
Opinion on Statutory-Basis of Accounting
However, in our opinion, the statutory-basis financial statements referred to above present fairly, in all material respects, the financial position of Western Reserve Life Assurance Co. of Ohio at December 31, 2013 and 2012, and the results of its operations and its cash flows for the three years ended December 31, 2013 in conformity with accounting practices prescribed or permitted by the Ohio Department of Insurance. Also in our opinion, the related financial statement schedules, when considered in relation to the basic statutory-basis financial statements taken as a whole, present fairly in all material respects the information set forth therein.
Restatement
As discussed in Note 1 to the financial statements, the 2012 financial statements have been restated to correct an error in accounting for affiliated reinsurance receivables. Our opinion is not modified with respect to this matter.
/s/ Ernst & Young LLP
April 28, 2014
2
Western Reserve Life Assurance Co. of Ohio
Balance Sheets Statutory Basis
(Dollars in Thousands, Except per Share Amounts)
December 31 | ||||||||
2013 | 2012 | |||||||
Restated | ||||||||
Admitted assets |
||||||||
Cash and invested assets: |
||||||||
Bonds |
$ | 1,448,053 | $ | 1,116,229 | ||||
Common stocks: |
||||||||
Affiliated entities (cost: 2013- $24,343; 2012- $22,921) |
35,348 | 31,844 | ||||||
Unaffiliated entities (cost: 2013- $0; 2012- $117) |
| 117 | ||||||
Mortgage loans on real estate |
77,805 | 50,714 | ||||||
Real estate, at cost less accumulated depreciation (2013 - 14,745; 2012 - $12,942) |
||||||||
Home office properties |
27,382 | 35,209 | ||||||
Properties held for sale |
6,259 | | ||||||
Cash, cash equivalents and short-term investments |
110,547 | 184,234 | ||||||
Policy loans |
442,800 | 411,101 | ||||||
Securities lending reinvested collateral assets |
88,265 | 84,899 | ||||||
Other invested assets |
3,012 | 3,293 | ||||||
|
|
|
|
|||||
Total cash and invested assets |
2,239,471 | 1,917,640 | ||||||
Net deferred income tax asset |
86,385 | 105,141 | ||||||
Premiums deferred and uncollected |
2,765 | 2,735 | ||||||
Reinsurance receivable |
1,910 | 3,358 | ||||||
Receivable from parent, subsidiaries and affiliates |
19,859 | 10,992 | ||||||
Investment income due and accrued |
17,361 | 14,224 | ||||||
Cash surrender value of life insurance policies |
75,881 | 75,295 | ||||||
Other admitted assets |
7,210 | 7,263 | ||||||
Separate account assets |
6,969,477 | 6,477,241 | ||||||
|
|
|
|
|||||
Total admitted assets |
$ | 9,420,319 | $ | 8,613,889 | ||||
|
|
|
|
3
Western Reserve Life Assurance Co. of Ohio
Balance Sheets Statutory Basis (continued)
(Dollars in Thousands, Except per Share Amounts)
December 31 | ||||||||
2013 | 2012 | |||||||
Restated | ||||||||
Liabilities and capital and surplus |
||||||||
Liabilities: |
||||||||
Aggregate reserves for policies and contracts: |
||||||||
Life |
$ | 1,520,248 | $ | 1,300,741 | ||||
Annuity |
389,341 | 481,279 | ||||||
Accident and health |
1,158 | 963 | ||||||
Life policy and contract claim reserves |
25,085 | 26,339 | ||||||
Liability for deposit-type contracts |
21,520 | 14,647 | ||||||
Other policyholders funds |
35 | 41 | ||||||
Interest maintenance reserve |
25,813 | 28,678 | ||||||
Remittances and items not allocated |
10,776 | 9,670 | ||||||
Federal income taxes payable |
17,160 | 17,951 | ||||||
Transfers from separate accounts due or accrued |
(212,708 | ) | (285,883 | ) | ||||
Asset valuation reserve |
17,642 | 12,039 | ||||||
Reinsurance in unauthorized companies |
| 265 | ||||||
Funds held under coinsurance and other reinsurance treaties |
78,161 | 54,464 | ||||||
Unearned investment income |
9,736 | 9,509 | ||||||
Payable for securities |
8,000 | | ||||||
Payable for securities lending |
88,265 | 83,058 | ||||||
Derivatives |
4,100 | 1,841 | ||||||
Other liabilities |
41,062 | 42,630 | ||||||
Separate account liabilities |
6,969,477 | 6,477,241 | ||||||
|
|
|
|
|||||
Total liabilities |
9,014,871 | 8,275,473 | ||||||
Capital and surplus: |
||||||||
Common stock, $1.00 par value, 3,000,000 shares authorized and 2,500,000 shares issued and outstanding |
2,500 | 2,500 | ||||||
Paid-in surplus |
149,627 | 149,627 | ||||||
Unassigned surplus |
253,321 | 186,289 | ||||||
|
|
|
|
|||||
Total capital and surplus |
405,448 | 338,416 | ||||||
|
|
|
|
|||||
Total liabilities and capital and surplus |
$ | 9,420,319 | $ | 8,613,889 | ||||
|
|
|
|
See accompanying notes.
4
Western Reserve Life Assurance Co. of Ohio
Statement of Operations Statutory Basis
(Dollars in Thousands, Except per Share Amounts)
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Restated | ||||||||||||
Revenues: |
||||||||||||
Premiums and other considerations, net of reinsurance: |
||||||||||||
Life |
$ | 525,693 | $ | 469,503 | $ | 456,926 | ||||||
Annuity |
12,952 | 13,547 | 22,244 | |||||||||
Accident and health |
2,446 | 1,658 | 1,429 | |||||||||
Net investment income |
92,490 | 81,729 | 80,031 | |||||||||
Amortization of interest maintenance reserve |
767 | 1,516 | 1,326 | |||||||||
Commissions and expense allowances on reinsurance ceded |
(15,257 | ) | (8,070 | ) | (41,716 | ) | ||||||
Reserve adjustments on reinsurance ceded |
(13,390 | ) | (13,198 | ) | (31,044 | ) | ||||||
Income from fees associated with investment management, administration and contract guarantees for separate accounts |
291,416 | 300,860 | 312,161 | |||||||||
Income earned on company owned life insurance |
3,607 | 1,875 | 2,279 | |||||||||
Consideration received on reinsurance recapture |
1,174 | | | |||||||||
Income from administrative service agreement with affiliate |
24,966 | 23,814 | 24,411 | |||||||||
Other |
(6,470 | ) | (6,652 | ) | (6,671 | ) | ||||||
|
|
|
|
|
|
|||||||
920,394 | 866,582 | 821,376 | ||||||||||
Benefits and expenses: |
||||||||||||
Benefits paid or provided for: |
||||||||||||
Life |
70,180 | 70,941 | 64,792 | |||||||||
Surrender benefits |
541,359 | 423,203 | 418,362 | |||||||||
Annuity benefits |
19,270 | 21,114 | 25,824 | |||||||||
Other benefits |
5,354 | 3,781 | 3,367 | |||||||||
Increase (decrease) in aggregate reserves for policies and contracts: |
||||||||||||
Life |
219,507 | 94,292 | 66,540 | |||||||||
Annuity |
(91,938 | ) | (59,074 | ) | 19,085 | |||||||
Accident and health |
195 | 446 | (42 | ) | ||||||||
|
|
|
|
|
|
|||||||
763,927 | 554,703 | 597,928 | ||||||||||
Insurance expenses: |
||||||||||||
Commissions |
155,584 | 160,309 | 138,136 | |||||||||
General insurance expenses |
72,085 | 74,017 | 84,132 | |||||||||
Taxes, licenses and fees |
18,954 | 17,898 | 14,478 | |||||||||
Net transfers from separate accounts |
(280,807 | ) | (107,485 | ) | (62,563 | ) | ||||||
Consideration paid on reinsurance recapture |
| | 29,300 | |||||||||
Other expenses |
16,332 | 11,984 | 10,077 | |||||||||
|
|
|
|
|
|
|||||||
(17,852 | ) | 156,723 | 213,560 | |||||||||
|
|
|
|
|
|
|||||||
Total benefits and expenses |
746,075 | 711,426 | 811,488 | |||||||||
|
|
|
|
|
|
|||||||
Gain from operations before dividends to policyholders, federal income tax expense and net realized capital gains/losses on investments |
174,319 | 155,156 | 9,888 | |||||||||
Dividends to policyholders |
21 | 22 | 24 | |||||||||
|
|
|
|
|
|
|||||||
Gain from operations before federal income tax expense and net realized capital gains/losses on investments |
174,298 | 155,134 | 9,864 | |||||||||
Federal income tax expense |
25,592 | 20,548 | 9,379 | |||||||||
|
|
|
|
|
|
|||||||
Gain from operations before net realized capital gains/losses on investments |
148,706 | 134,586 | 485 | |||||||||
Net realized capital gain/ (loss) on investments (net of related federal income taxes and amounts tranferred to/from interest maintenance reserve) |
11,103 | (4,591 | ) | (12,431 | ) | |||||||
|
|
|
|
|
|
|||||||
Net income (loss) |
$ | 159,809 | $ | 129,995 | $ | (11,946 | ) | |||||
|
|
|
|
|
|
See accompanying notes.
5
Western Reserve Life Assurance Co. of Ohio
Statements of Changes in Capital and Surplus Statutory Basis
(Dollars in Thousands)
Common Stock |
Aggregate Write-ins for Other than Special Surplus Funds |
Paid-in Surplus |
Unassigned Surplus |
Total Capital and Surplus |
||||||||||||||||
Balance at January 1, 2011 |
$ | 2,500 | $ | 70,527 | $ | 149,627 | $ | 288,610 | $ | 511,264 | ||||||||||
Net loss |
| | | (11,946 | ) | (11,946 | ) | |||||||||||||
Change in net unrealized capital gains and losses, net of tax |
| | | (3,720 | ) | (3,720 | ) | |||||||||||||
Change in nonadmitted assets |
| | | (27,616 | ) | (27,616 | ) | |||||||||||||
Change in asset valuation reserve |
| | | 378 | 378 | |||||||||||||||
Change in liability for reinsurance in unauthorized companies |
| | | (104 | ) | (104 | ) | |||||||||||||
Dividend to stockholder |
| | | (250,000 | ) | (250,000 | ) | |||||||||||||
Change in net deferred income tax asset |
| | | 18,337 | 18,337 | |||||||||||||||
Change in surplus as a result of reinsurance |
| | | 41,629 | 41,629 | |||||||||||||||
Change in admitted deferred tax asset pursuant to SSAP No. 10R |
| (3,024 | ) | | | (3,024 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2011 |
2,500 | 67,503 | 149,627 | 55,568 | 275,198 | |||||||||||||||
Net income |
| | | 129,995 | 129,995 | |||||||||||||||
Change in net unrealized capital gains and losses, net of tax |
| | | 118 | 118 | |||||||||||||||
Change in nonadmitted assets |
| | | (7,849 | ) | (7,849 | ) | |||||||||||||
Change in asset valuation reserve |
| | | (3,201 | ) | (3,201 | ) | |||||||||||||
Dividend to stockholder |
| | | (27,000 | ) | (27,000 | ) | |||||||||||||
Change in net deferred income tax asset |
| | | (12,437 | ) | (12,437 | ) | |||||||||||||
Change in surplus as a result of reinsurance |
| | | (21,315 | ) | (21,315 | ) | |||||||||||||
Change in admitted deferred tax assets pursuant to SSAP No. 101 |
| (67,503 | ) | | 67,503 | | ||||||||||||||
Correction of error - reinsurance |
| | | 4,907 | 4,907 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2012 - restated |
$ | 2,500 | $ | | $ | 149,627 | $ | 186,289 | $ | 338,416 | ||||||||||
|
|
|
|
|
|
|
|
|
|
6
Western Reserve Life Assurance Co. of Ohio
Statements of Changes in Capital and Surplus Statutory Basis (continued)
(Dollars in Thousands)
Common Stock |
Paid-in Surplus |
Unassigned Surplus |
Total Capital and Surplus |
|||||||||||||
Balance at December 31, 2012 - restated |
$ | 2,500 | $ | 149,627 | $ | 186,289 | $ | 338,416 | ||||||||
Net income |
| | 159,809 | 159,809 | ||||||||||||
Change in net unrealized capital gains and losses, net of tax |
| | 4,189 | 4,189 | ||||||||||||
Change in nonadmitted assets |
| | (11,138 | ) | (11,138 | ) | ||||||||||
Change in asset valuation reserve |
| | (5,603 | ) | (5,603 | ) | ||||||||||
Change in liability for reinsurance in unauthorized and certified companies |
| | 265 | 265 | ||||||||||||
Dividend to stockholder |
| | (50,000 | ) | (50,000 | ) | ||||||||||
Change in net deferred income tax asset |
| | (14,829 | ) | (14,829 | ) | ||||||||||
Change in surplus as a result of reinsurance |
| | (15,661 | ) | (15,661 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at December 31, 2013 |
$ | 2,500 | $ | 149,627 | $ | 253,321 | $ | 405,448 | ||||||||
|
|
|
|
|
|
|
|
See accompanying notes.
7
Western Reserve Life Assurance Co. of Ohio
Statements of Cash Flow Statutory Basis
(Dollars in Thousands)
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Restated | ||||||||||||
Operating activities |
||||||||||||
Premiums collected, net of reinsurance |
$ | 540,933 | $ | 485,063 | $ | 480,756 | ||||||
Net investment income received |
96,249 | 84,038 | 85,361 | |||||||||
Miscellaneous income received |
278,156 | 277,542 | 271,567 | |||||||||
Benefit and loss related payments |
(636,087 | ) | (521,038 | ) | (698,717 | ) | ||||||
Commissions, expenses paid and aggregate write-ins for deductions |
(262,111 | ) | (264,731 | ) | (250,591 | ) | ||||||
Net transfers from separate accounts |
354,274 | 200,378 | 371,180 | |||||||||
Dividends paid to policyholders |
(21 | ) | (22 | ) | (24 | ) | ||||||
Federal and foreign income taxes paid |
(25,415 | ) | (5,134 | ) | (88,126 | ) | ||||||
|
|
|
|
|
|
|||||||
Net cash provided by operating activities |
345,978 | 256,096 | 171,406 | |||||||||
Investing activities |
||||||||||||
Proceeds from investments sold, matured or repaid: |
||||||||||||
Bonds |
321,363 | 337,040 | 263,103 | |||||||||
Common stocks |
117 | 2 | 120 | |||||||||
Mortgage loans on real estate |
3,846 | 9,355 | 6,267 | |||||||||
Other invested assets |
6 | 1 | | |||||||||
Securities lending reinvested collateral assets |
| 4,729 | 104,301 | |||||||||
Miscellaneous proceeds |
21,512 | 5,275 | 6 | |||||||||
|
|
|
|
|
|
|||||||
Total investment proceeds |
346,844 | 356,402 | 373,797 | |||||||||
Costs of investments acquired: |
||||||||||||
Bonds |
(657,368 | ) | (562,044 | ) | (212,793 | ) | ||||||
Common stocks |
(825 | ) | (1,143 | ) | (597 | ) | ||||||
Mortgage loans on real estate |
(31,484 | ) | (10,800 | ) | (43,694 | ) | ||||||
Real estate |
(235 | ) | (153 | ) | 66 | |||||||
Other invested assets |
(651 | ) | (502 | ) | (845 | ) | ||||||
Securities lending reinvested collateral assets |
(3,366 | ) | | | ||||||||
Miscellaneous applications |
(33 | ) | (4,550 | ) | (18,575 | ) | ||||||
|
|
|
|
|
|
|||||||
Total cost of investments acquired |
(693,962 | ) | (579,192 | ) | (276,438 | ) | ||||||
Net increase in policy loans |
(31,699 | ) | (5,064 | ) | (14,526 | ) | ||||||
|
|
|
|
|
|
|||||||
Net cost of investments acquired |
(725,661 | ) | (584,256 | ) | (290,964 | ) | ||||||
|
|
|
|
|
|
|||||||
Net cash (used in) provided by investing activities |
(378,817 | ) | (227,854 | ) | 82,833 |
8
Western Reserve Life Assurance Co. of Ohio
Statements of Cash Flow Statutory Basis (continued)
(Dollars in Thousands)
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Restated | ||||||||||||
Financing and miscellaneous activities |
||||||||||||
Cash provided (applied): |
||||||||||||
Net deposits (withdrawals) on deposit-type contracts and other insurance liabilities |
(1,417 | ) | 1,424 | (2,510 | ) | |||||||
Borrowed funds |
331 | 21,064 | 5,229 | |||||||||
Dividends to stockholder |
(50,000 | ) | (27,000 | ) | (250,000 | ) | ||||||
Funds held under reinsurance treaty with unauthorized reinsurers |
23,697 | 20,836 | 18,404 | |||||||||
Receivable from parent, subsidiaries and affiliates |
(8,867 | ) | (8,925 | ) | 10,767 | |||||||
Payable to parent, subsidiaries and affiliates |
| (26,732 | ) | 6,775 | ||||||||
Payable for securities lending |
3,366 | (4,726 | ) | (104,302 | ) | |||||||
Other cash provided (applied) |
(7,958 | ) | 9,696 | (10,387 | ) | |||||||
|
|
|
|
|
|
|||||||
Net cash (used in) provided by financing and miscellaneous activities |
(40,848 | ) | (14,363 | ) | (326,024 | ) | ||||||
|
|
|
|
|
|
|||||||
Net (decrease) increase in cash, cash equivalents and short-term investments |
(73,687 | ) | 13,880 | (71,785 | ) | |||||||
Cash, cash equivalents and short-term investments: |
||||||||||||
Beginning of year |
184,234 | 170,354 | 242,139 | |||||||||
|
|
|
|
|
|
|||||||
End of year |
$ | 110,547 | $ | 184,234 | $ | 170,354 | ||||||
|
|
|
|
|
|
See accompanying notes.
9
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis
(Dollars in Thousands)
December 31, 2013
1. Organization and Summary of Significant Accounting Policies
Organization
Western Reserve Life Assurance Co. of Ohio (the Company) is a stock life insurance company and is a wholly owned subsidiary of Aegon USA, LLC (Aegon). Aegon is an indirect, wholly owned subsidiary of Aegon N.V., a holding company organized under the laws of The Netherlands.
Nature of Business
The Company operates predominantly in the variable universal life and variable annuity areas of the life insurance business. The Company is licensed in 49 states, District of Columbia, Puerto Rico and Guam. Sales of the Companys products are through financial planners, independent representatives, financial institutions and stockbrokers. The majority of the Companys new life insurance, and a portion of new annuities, are written through an affiliated marketing organization.
Basis of Presentation
The preparation of financial statements of insurance companies requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.
The accompanying financial statements have been prepared in conformity with accounting practices prescribed or permitted by the Ohio Department of Insurance, which practices differ from accounting principles generally accepted in the United States (GAAP). The more significant variances from GAAP are:
Investments: Investments in bonds and mandatory redeemable preferred stocks are reported at amortized cost or fair value based on their National Association of Insurance Commissioners (NAIC) rating; for GAAP, such fixed maturity investments would be designated at purchase as held-to-maturity, trading or available-for-sale. Held-to-maturity fixed maturity investments would be reported at amortized cost, and the remaining fixed maturity investments would be reported at fair value with unrealized holding gains and losses reported in earnings for those designated as trading and as a separate component of other comprehensive income (OCI) for those designated as available-for-sale. Fair value for GAAP is based on indexes, third party pricing services, brokers, external fund managers and internal models. For statutory reporting, the NAIC allows insurance companies to report the fair value determined by the Securities Valuation Office of the NAIC (SVO) or determine the fair value by using a permitted valuation method.
10
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
All single class and multi-class mortgage-backed/asset-backed securities (e.g., CMOs) are adjusted for the effects of changes in prepayment assumptions on the related accretion of discount or amortization of premium of such securities using either the retrospective or prospective methods. If the fair value of the mortgage-backed/asset-backed security is less than amortized cost, an entity shall assess whether the impairment is other-than-temporary. An other-than-temporary impairment is considered to have occurred if the fair value of the mortgage-backed/asset-backed security is less than its amortized cost basis and the entity intends to sell the security or the entity does not have the intent and ability to hold the security for a period of time sufficient to recover the amortized cost basis. An other-than-temporary impairment is also considered to have occurred if the discounted estimated future cash flows are less than the amortized cost basis of the security.
If it is determined an other-than-temporary impairment has occurred as a result of the cash flow analysis, the security is written down to the discounted estimated future cash flows. If an other-than-temporary impairment has occurred due to intent to sell or lack of intent and ability to hold, the security is written down to fair value.
For GAAP, all securities, purchased or retained, that represent beneficial interests in securitized assets (e.g., CMO, CBO, CDO, CLO, MBS and ABS securities), other than high credit quality securities, are adjusted using the prospective method when there is a change in estimated future cash flows. If high credit quality securities are adjusted, the retrospective method is used. If it is determined that a decline in fair value is other-than-temporary and the entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current period credit loss, the other-than-temporary impairment should be recognized in earnings equal to the entire difference between the amortized cost basis and its fair value at the impairment date. If the entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery, the other-than-temporary impairment should be separated into a) the amount representing the credit loss, which is recognized in earnings, and b) the amount related to all other factors, which is recognized in OCI, net of applicable taxes.
11
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Derivative instruments used in hedging transactions that meet the criteria of an effective hedge are valued and reported in a manner that is consistent with the hedged asset or liability. Embedded derivatives are not accounted for separately from the host contract. Derivative instruments used in hedging transactions that do not meet or no longer meet the criteria of an effective hedge are accounted for at fair value, and the changes in the fair value are recorded in unassigned surplus as unrealized gains and losses. Under GAAP, the effective and ineffective portions of a single hedge are accounted for separately, and the change in fair value for cash flow hedges is credited or charged directly to a separate component of OCI rather than to income as required for fair value hedges, and an embedded derivative within a contract that is not clearly and closely related to the economic characteristics and risk of the host contract is accounted for separately from the host contract and valued and reported at fair value.
Derivative instruments are also used in replication transactions. In these transactions, the derivative is valued in a manner consistent with the cash investment and replicated asset. For GAAP, the derivative is reported at fair value with the changes in the fair value reported in income.
Investments in real estate are reported net of related obligations rather than on a gross basis as for GAAP. Real estate owned and occupied by the Company is included in investments rather than reported as an operating asset as under GAAP, and investment income and operating expenses for statutory reporting include rent for the Companys occupancy of those properties. Changes between depreciated cost and admitted amounts are credited or charged directly to unassigned surplus rather than to income as would be required under GAAP.
Valuation allowances are established for mortgage loans, if necessary, based on the difference between the net value of the collateral, determined as the fair value of the collateral less estimated costs to obtain and sell, and the recorded investment in the mortgage loan. Under GAAP, such allowances are based on the present value of expected future cash flows discounted at the loans effective interest rate or, if foreclosure is probable, on the estimated fair value of the collateral.
The initial valuation allowance and subsequent changes in the allowance for mortgage loans are charged or credited directly to unassigned surplus as part of the change in asset valuation reserve (AVR), rather than being included as a component of earnings as would be required under GAAP.
Valuation Reserves: Under a formula prescribed by the NAIC, the Company defers the portion of realized capital gains and losses on sales of fixed income investments, principally bonds and mortgage loans, attributable to changes in the general level of interest rates and amortizes those deferrals over the remaining period to maturity of the bond or mortgage loan based on groupings of individual securities sold in five year bands. That net deferral is reported as the interest maintenance reserve (IMR) in the accompanying balance sheets. Realized capital gains and losses are reported in income net of federal income tax and transfers to the IMR. Under
12
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
GAAP, realized capital gains and losses are reported in the statement of operations on a pre-tax basis in the period that the assets giving rise to the gains or losses are sold.
The AVR provides a valuation allowance for invested assets. The AVR is determined by an NAIC prescribed formula with changes reflected directly in unassigned surplus; AVR is not recognized for GAAP.
Subsidiaries: The accounts and operations of the Companys subsidiaries are not consolidated with the accounts and operations of the Company as would be required under GAAP.
Policy Acquisition Costs: The costs of acquiring and renewing business are expensed when incurred. Under GAAP, incremental costs directly related to the successful acquisition of traditional life insurance and certain long-duration accident and health insurance, to the extent recoverable from future policy revenues, would be deferred and amortized over the premium-paying period of the related policies using assumptions consistent with those used in computing policy benefit reserves; for universal life insurance and investment products, to the extent recoverable from future gross profits, deferred policy acquisition costs are amortized generally in proportion to the present value of expected gross profits from surrender charges and investment, mortality and expense margins.
Nonadmitted Assets: Certain assets designated as nonadmitted, primarily net deferred tax assets and agent debit balances, and other assets not specifically identified as an admitted asset within the NAIC Accounting Practices and Procedures Manual (NAIC SAP), are excluded from the accompanying balance sheets and are charged directly to unassigned surplus. Under GAAP, such assets are included in the balance sheet to the extent they are not impaired.
Universal Life and Annuity Policies: Revenues for universal life and annuity policies with mortality or morbidity risk (including annuities with purchase rate guarantees) consist of the entire premium received. Benefits incurred represent surrenders and death benefits paid and the change in policy reserves. Premiums received and benefits incurred for annuity policies without mortality or morbidity risk and guaranteed interest in group annuity contracts are recorded directly to a policy reserve account using deposit accounting, without recognizing premium income or benefits expense. Interest on these policies is reflected in other benefits. Under GAAP, for universal life policies, premiums received in excess of policy charges would not be recognized as premium revenue and benefits would represent interest credited to the account values and the excess of benefits paid over the policy account value. Under GAAP, for all annuity policies without significant mortality risk, premiums received and benefits paid would be recorded directly to the reserve liability.
Benefit Reserves: Certain policy reserves are calculated based on statutorily required interest and mortality assumptions rather than on estimated expected experience or actual account balances as would be required under GAAP.
13
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Reinsurance: Any reinsurance amounts deemed to be uncollectible have been written off through a charge to operations. In addition, a liability for reinsurance balances would be established for unsecured policy reserves ceded to reinsurers not authorized to assume such business. Changes to the liability are credited or charged directly to unassigned surplus. Under GAAP, an allowance for amounts deemed uncollectible would be established through a charge to earnings.
Policy and contract liabilities ceded to reinsurers have been reported as reductions of the related reserves rather than as assets as would be required under GAAP.
Commissions allowed by reinsurers on business ceded are reported as income when incurred rather than being deferred and amortized with deferred policy acquisition costs as required under GAAP.
Deferred Income Taxes: The Company computes deferred income taxes in accordance with Statement of Statutory Accounting Principle (SSAP) No. 101, Income Taxes, A Replacement of SSAP No. 10R and SSAP No. 10 (SSAP No. 101). Under SSAP No. 101, admitted adjusted deferred income tax assets are limited to 1) the amount of federal income taxes paid in prior years that can be recovered through loss carrybacks for existing temporary differences that reverse during a timeframe corresponding with the Internal Revenue Service tax loss carryback provisions, not to exceed three years, plus 2) the amount of adjusted gross deferred income tax assets expected to be realized within three years limited to an amount that is no greater than 15% of current periods adjusted statutory capital and surplus, plus 3) the amount of remaining adjusted gross deferred income tax assets that can be offset against existing gross deferred income tax liabilities after considering the character (i.e., ordinary versus capital) and reversal patterns of the deferred tax assets and liabilities. The remaining adjusted deferred income tax assets are nonadmitted.
Deferred income taxes do not include amounts for state taxes. Under GAAP, state taxes are included in the computation of deferred income taxes, a deferred income tax asset is recorded for the amount of gross deferred income tax assets expected to be realized in all future years, and a valuation allowance is established for deferred income tax assets not realizable.
Policyholder Dividends: Policyholder dividends are recognized when declared rather than over the term of the related policies.
Statements of Cash Flow: Cash, cash equivalents and short-term investments in the statements of cash flow represent cash balances and investments with initial maturities of one year or less. Under GAAP, the corresponding caption of cash and cash equivalents includes cash balances and investments with initial maturities of three months or less.
14
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Securities Lending Assets and Liabilities: For securities lending programs, cash collateral received which may be sold or repledged by the Company is reflected as a one-line entry on the balance sheet (securities lending reinvested collateral assets) and a corresponding liability is established to record the obligation to return the cash collateral. Collateral received which may not be sold or repledged is not recorded on the Companys balance sheet. Under GAAP the reinvested collateral is included within invested assets (i.e. it is not one-line reported).
The effects of the foregoing variances from GAAP on the accompanying statutory-basis financial statements have not been determined by the Company, but are presumed to be material.
Other significant accounting policies are as follows:
Investments
Investments in bonds, except those to which the SVO has ascribed an NAIC designation of 6, are reported at amortized cost using the interest method.
Hybrid securities, as defined by the NAIC, are securities designed with characteristics of both debt and equity and provide protection to the issuers senior note holders. These securities meet the definition of a bond, in accordance with SSAP No. 26, Bonds, excluding Loan-backed and Structured Securities and therefore, are reported at amortized cost or fair value based upon their NAIC rating.
Single class and multi-class mortgage-backed/asset-backed securities are valued at amortized cost using the interest method, including anticipated prepayments, except for those with an initial NAIC designation of 6, which are valued at the lower of amortized cost or fair value. Prepayment assumptions are obtained from dealer surveys or internal estimates and are based on the current interest rate and economic environment. The retrospective adjustment method is used to value all such securities, except principal-only and interest-only securities, which are valued using the prospective method.
The Company closely monitors below investment grade holdings and those investment grade issuers where the Company has concerns. The Company also regularly monitors industry sectors. The Company considers relevant facts and circumstances in evaluating whether the impairment is other-than-temporary including: (1) the probability of the Company collecting all amounts due according to the contractual terms of the security in effect at the date of acquisition; (2) the Companys decision to sell a security prior to its maturity at an amount below its carrying amount; and (3) the Companys ability to hold a structured security for a period of time to allow for recovery of the value to its carrying amount. Additionally, financial condition, near term prospects of the issuer and nationally recognized credit rating changes are monitored. Non-structured securities in unrealized loss positions that are considered other-than-temporary are written down to fair value. Structured securities considered other-than-temporarily impaired are written down to discounted estimated cash flows if the impairment is the result of cash flow
15
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
analysis. If the Company has an intent to sell or lack of ability to hold a structured security, it is written down to fair value. For structured securities, cash flow trends and underlying levels of collateral are monitored. The Company will record a charge to the statement of operations to the extent that these securities are determined to be other-than-temporarily impaired.
Investments in both affiliated and unaffiliated preferred stocks in good standing are reported at cost or amortized cost. Investments in preferred stocks not in good standing are reported at the lower of cost or fair value, and the related net unrealized capital gains (losses) are reported in unassigned surplus along with any adjustment for federal income taxes.
Common stocks of unaffiliated companies are reported at fair value and the related net unrealized capital gains or losses are reported in unassigned surplus along with any adjustments for federal income taxes.
If the Company determines that a decline in the fair value of a common stock or a preferred stock is other-than-temporary, the Company writes it down to fair value as the new cost basis and the amount of the write down is accounted for as a realized loss in the statement of operations. The Company considers the following factors in determining whether a decline in value is other-than-temporary: (a) the financial condition and prospects of the issuer; (b) whether or not the Company has made a decision to sell the investment; and (c) the length of time and extent to which the value has been below cost.
Common stocks of affiliated noninsurance subsidiaries are reported based on underlying audited GAAP equity. The net change in the subsidiaries equity is included in the change in net unrealized capital gains or losses, reported in unassigned surplus along with any adjustment for federal income taxes.
There are no restrictions on common or preferred stock.
Short-term investments include investments with remaining maturities of one year or less at the time of acquisition and are principally stated at amortized cost.
Cash equivalents are short-term highly liquid investments with original maturities of three months or less and are principally stated at amortized cost.
Mortgage loans are reported at unpaid principal balances, less an allowance for impairment. A mortgage loan is considered to be impaired when it is probable that the Company will be unable to collect all principal and interest amounts due according to the contractual terms of the mortgage agreement. When management determines that the impairment is other-than-temporary, the mortgage loan is written down to realizable value and a realized loss is recognized.
Land is reported at cost. Real estate occupied by the Company is reported at depreciated cost net of encumbrances. Real estate that the Company classifies as held for sale is measured at lower
16
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
of carrying amount or fair value less cost to sell. Depreciation is calculated on a straight-line basis over the estimated useful lives of the properties. The Company recognizes an impairment loss if the Company determines that the carrying amount of the real estate is not recoverable and exceeds its fair value. The Company deems that the carrying amount of the asset is not recoverable if the carrying amount exceeds the sum of undiscounted cash flows expected to result from the use and disposition. The impairment loss is measured as the amount by which the assets carrying value exceeds its fair value.
Policy loans are reported at unpaid principal balance.
Investments in Low Income Housing Tax Credit (LIHTC) properties are valued at amortized cost. Tax credits are recognized in operations in the tax reporting year in which the tax credit is utilized by the Company.
Realized capital gains and losses are determined using the specific identification method and are recorded net of related federal income taxes. Changes in admitted asset carrying amounts of bonds, mortgage loans, preferred and common stocks are credited or charged directly to unassigned surplus.
Interest income is recognized on an accrual basis. The Company does not accrue income on bonds in default, mortgage loans on real estate in default and/or foreclosure or which are delinquent more than twelve months, or real estate where rent is in arrears for more than three months. Income is also not accrued when collection is uncertain. In addition, accrued interest is excluded from investment income when payment exceeds 90 days past due. At December 31, 2013 and 2012, the Company did not exclude any investment income due and accrued with respect to such practices.
For dollar repurchase agreements, the Company receives cash collateral in an amount at least equal to the fair value of the securities transferred by the Company in the transaction as of the transaction date. Cash received as collateral will be invested as needed or used for general corporate purposes of the Company.
Derivative Instruments
Overview: The Company may use various derivative instruments (options, caps, floors, swaps, foreign currency forwards and futures) to manage risks related to its ongoing business operations. On the transaction date of the derivative instrument, the Company designates the derivative as either (A) hedging (fair value, foreign currency fair value, cash flow, foreign currency cash flow, forecasted transactions or net investment in a foreign operation), (B) replication, (C) income generation or (D) held for other investment/risk management activities, which do not qualify for hedge accounting under SSAP No. 86, Accounting for Derivative Instruments and Hedging Activities (SSAP No. 86).
17
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Derivative instruments used in hedging relationships are accounted for on a basis that is consistent with the hedged item (amortized cost or fair value). Derivative instruments used in replication relationships are accounted for on a basis that is consistent with the cash instrument and the replicated asset (amortized cost or fair value). Derivative instruments used in income generation relationships are accounted for on a basis that is consistent with the associated covered asset or underlying interest to which the derivative indicates (amortized cost or fair value). Derivative instruments held for other investment/risk management activities receive fair value accounting.
Derivative instruments are subject to market risk, which is the possibility that future changes in market prices may make the instruments less valuable. The Company uses derivatives as hedges, consequently, when the value of the derivative changes, the value of a corresponding hedged asset or liability will move in the opposite direction. Market risk is a consideration when changes in the value of the derivative and the hedged item do not completely offset (correlation or basis risk) which is mitigated by active measuring and monitoring.
The Company is exposed to credit-related losses in the event of non-performance by counterparties to financial instruments, but it does not expect any counterparties to fail to meet their obligations given their high credit rating of A or better. The credit exposure of interest rate swaps and currency swaps is represented by the fair value of contracts, aggregated at a counterparty level, with a positive fair value at the reporting date. The Company has entered into collateral agreements with certain counterparties wherein the counterparty is required to post assets on the Companys behalf. The posted amount is equal to the difference between the net positive fair value of the contracts and an agreed upon threshold that is based on the credit rating of the counterparty. Inversely, if the net fair value of all contracts with this counterparty is negative, then the Company is required to post assets instead.
Instruments: Total return swaps are used in the asset/liability management process to mitigate the risk created when the Company has issued minimum guarantee insurance contracts linked to an index. These total return swaps generally provide for the exchange of the difference between fixed leg (tied to the S&P or interest rate index) and floating leg (tied to LIBOR) amounts based on an underlying notional amount (also tied to the underlying index). Typically, no cash is exchanged at the outset of the swap contract and a single net payment is exchanged each due date. Swaps that meet hedge accounting rules are carried in a manner consistent with the hedge item, generally at amortized cost, on the financial statements. If the swap is terminated prior to maturity, proceeds are exchanged equal to the fair value of the contract. These gains and losses may be included in IMR or AVR if the underlying instrument receives that treatment. Swaps not meeting hedge accounting rules are carried at fair value with fair value adjustments recorded in unassigned surplus.
Variance swaps are used in the asset/liability management process to mitigate the gamma risk created when the Company has issued minimum guarantee insurance contracts linked to an index. These variance swaps are similar to volatility options where the underlying index provides for the market value movements. Variance swaps do not accrue interest. Typically, no
18
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
cash is exchanged at the outset of initiating the variance swap and a single receipt or payment occurs at the maturity or termination of the contract. Variance swaps that meet hedge accounting rules are carried in a manner consistent with the hedged item, generally at amortized cost, on the financial statements. If terminated prior to maturity, proceeds are exchanged equal to the fair value of the contract. These gains and losses may be included in IMR or AVR if the underlying instrument receives that treatment. Swaps not meeting hedge accounting rules are carried at fair value with fair value adjustments recorded in capital and surplus.
Futures contracts are used to hedge the liability risk associated when the Company issues products providing the customer a return based on various global equity market indices. Futures are marked to market on a daily basis whereby a cash payment is made or received by the Company. These payments are recognized as realized gains or losses in the financial statements.
Separate Accounts
Separate accounts held by the Company primarily represent funds which are administered for individual variable universal life and variable annuity contracts. Assets held in trust for purchases of variable universal life and variable annuity contracts and the Companys corresponding obligation to the contract owners are shown separately in the balance sheet. The assets in the accounts, carried at estimated fair value, consist of underlying mutual fund shares, common stocks, long-term bonds and short-term investments. The separate accounts, held for individual policyholders, do not have any minimum guarantees, and the investment risks associated with the fair value changes are borne entirely by the policyholder.
The Company received variable contract premiums of $282,851, $305,221 and $349,011, in 2013, 2012 and 2011, respectively. All variable account contracts are subject to discretionary withdrawal by the policyholder at the fair value of the underlying assets less the current surrender charge. Separate account contract holders have no claim against the assets of the general account.
Income and gains and losses with respect to the assets in the separate accounts accrue to the benefit of the contract owners and, accordingly, the operations of the separate accounts are not included in the accompanying financial statements. The Company received $291,416, $300,860 and $312,161, in 2013, 2012 and 2011, respectively, related to fees associated with investment management, administration and contractual guarantees for separate accounts.
Aggregate Reserves for Policies and Contracts
Life, annuity and accident and health benefit reserves are developed by actuarial methods and are determined based on published tables using statutorily specified interest rates and valuation methods that will provide, in the aggregate, reserves that are greater than or equal to the minimum required by law.
19
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The Company waives deduction of deferred fractional premiums upon death of the insured and returns any portion of premium for periods beyond the date of death. Surrender values on policies do not exceed the corresponding benefit reserves.
The aggregate policy reserves for life insurance policies are based principally upon the 1941, 1958, 1980 and 2001 Commissioners Standard Ordinary Mortality Tables. The reserves are calculated using interest rates ranging from 2.0 to 5.5 percent and are computed principally on the Net Level Premium Valuation and the Commissioners Reserve Valuation Methods. Reserves for universal life policies are based on account balances adjusted for the Commissioners Reserve Valuation Method.
Additional premiums are charged or additional mortality charges are assessed for policies issued on substandard lives according to underwriting classification. Generally, mean reserves are determined by computing the regular mean reserve for the plan at the true age and holding, in addition, one-half (1/2) of the extra premium charge for the year. For certain flexible premium and fixed premium universal life insurance products, reserves are calculated utilizing the Commissioners Reserve Valuation Method for universal life policies and recognizing any substandard ratings.
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 to 11.25 percent and mortality rates, where appropriate, from a variety of tables.
Accident and health policy reserves are equal to the greater of the gross unearned premiums or any required mid-terminal reserves plus net unearned premiums and the present value of amounts not yet due on both reported and unreported claims.
Tabular interest, tabular less actual reserves released and tabular cost have been determined by formula. Tabular interest on funds not involving life contingencies has also been determined by formula.
The liabilities related to guaranteed investment contracts and policyholder funds left on deposit with the Company generally are equal to fund balances less applicable surrender charges.
Policy and Contract Claim Reserves
Claim reserves represent the estimated accrued liability for claims reported to the Company and claims incurred but not yet reported through the balance sheet date. These reserves are estimated using either individual case-basis valuations or statistical analysis techniques. These estimates are subject to the effects of trends in claim severity and frequency. The estimates are continually
20
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
reviewed and adjusted as necessary as experience develops or new information becomes available.
Liability for Deposit-Type Contracts
Deposit-type contracts do not incorporate risk from the death or disability of policyholders. These types of contracts may include supplemental contracts and certain annuity contracts. Deposits and withdrawals on these contracts are recorded as a direct increase or decrease, respectively, to the liability balance, and are not reflected as premiums, benefits or changes in reserve in the statement of operations.
Premiums and Annuity Considerations
Revenues for policies with mortality or morbidity risk (including annuities with purchase rate guarantees) consist of the entire premium received and are recognized over the premium paying periods of the related policies. Consideration received and benefits paid for annuity policies without mortality or morbidity risk are recorded using deposit accounting, and recorded directly to an appropriate policy reserve account, without recognizing premium income.
Reinsurance
Coinsurance premiums, commissions, expense reimbursements and reserves related to reinsured business are accounted for on bases consistent with those used in accounting for the original policies and the terms of the reinsurance contracts. Gains associated with reinsurance of in force blocks of business are included in unassigned surplus and amortized into income as earnings emerge on the reinsured block of business. Premiums ceded and recoverable losses have been reported as a reduction of premium income and benefits, respectively. Policy liabilities and accruals are reported in the accompanying financial statements net of reinsurance ceded.
Recent Accounting Pronouncements
Effective December 31, 2013, the Company adopted revisions to SSAP No. 35R, Guaranty Fund and Other Assessments Revised which incorporates subsequent event (Type II) disclosures for entities subject to Section 9010 of the Patient Protection and Affordable Care Act related to assessments payable. The adoption of this revision did not impact the financial position or results of operations of the Company as revisions relate to disclosures only. See Note 13 for further discussion.
Effective January 1, 2013, the Company adopted SSAP No. 92, Accounting for Postretirement Benefits Other Than Pensions, A Replacement of SSAP No. 14 and SSAP No. 102, Accounting for Pensions, A Replacement of SSAP No. 89. This guidance impacts accounting for defined benefit pension plans or other postretirement plans, along with related disclosures. SSAP No. 102 requires recognition of the funded status of the plan based on the projected benefit obligation instead of the accumulated benefit obligation as under SSAP No. 89. In addition, SSAP No. 92
21
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
and SSAP No. 102 require consideration of non-vested participants. The adoption of these standards did not impact the Companys results of operations, financial position or disclosures as the Company does not sponsor the pension plan and is not directly liable under the plan. See Note 9 for further discussion of the Companys pension plan and other postretirement plans as sponsored by Aegon.
Effective January 1, 2013, the Company adopted SSAP No. 103, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities which adopts with modifications the guidance in Accounting Standards Update (ASU) 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets and supersedes SSAP No. 91R, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. The adoption of this standard did not impact the financial position or results of operation of the Company.
Effective January 1, 2013, the Company adopted non-substantive revisions to SSAP No. 36, Troubled Debt Restructuring. These revisions adopt guidance from ASU 2011-02, Receivables A Creditors Determination of Whether a Restructuring is a Troubled Debt Restructuring, which clarifies what constitutes a troubled debt restructuring and adopts with modification troubled debt restructuring disclosures for creditors from ASU 2010-20: Receivables (Topic 310), Disclosures About the Credit Quality of Financing Receivables and the Allowance for Credit Losses. The adoption of this revision did not impact the financial position or results of operations of the Company.
Effective December 31, 2012, the Company adopted non-substantive revisions to SSAP No. 86 to require disclosure of embedded credit derivatives within a financial instrument that expose the holder to the possibility of making future payments, and adopted guidance from Accounting Standards Update (ASU) 2010-11, Derivatives and Hedging Scope Exception Related to Embedded Credit Derivatives, to clarify that seller credit derivative disclosures do not apply to embedded derivative features related to the transfer of credit risk that is only in the form of subordination of one financial instrument to another. The adoption of these revisions had no impact to the Companys results of operations or financial position.
Effective December 31, 2012, the Company adopted non-substantive revisions to SSAP No. 86 to move one aspect of the criteria for a hedged forecasted transaction and incorporate it as criteria for a fair value hedge. The adoption of this revision had no impact to the Companys results of operations or financial position.
Effective December 31, 2012, the Company adopted non-substantive revisions to SSAP No. 27, Disclosure of Information about Financial Instruments with Off-Balance-Sheet Risk, Financial Instruments with Concentrations of Credit Risk and Disclosures about Fair Value of Financial Instruments, which clarifies that embedded derivatives, which are not separately recognized as derivatives under statutory accounting, are included in the disclosures of financial instruments with off-balance-sheet risk. The adoption of this revision had no impact to the Companys results of operations or financial position.
22
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Effective December 31, 2012, the Company adopted non-substantive revisions to SSAP No. 1, Disclosures of Accounting Policies, Risks and Uncertainties and Other Disclosures. These revisions require reference to the accounting policy and procedure footnote that describes permitted or prescribed practices when an individual note is impacted by such practices. The adoption of this requirement had no impact to the Companys results of operation or financial position, but did require additional disclosures. See Note 6 Policy and Contract Attributes for further details.
Effective January 1, 2012, the Company adopted revisions to SSAP No. 100, Fair Value Measurements (SSAP No. 100). These revisions require new disclosures of fair value hierarchy and the method used to obtain the fair value measurement, a new footnote that summarizes hierarchy levels by type of financial instrument and gross presentation of purchases, sales, issues and settlements within the reconciliation for fair value measurements categorized within Level 3 of the hierarchy. The adoption of these revisions had no impact to the Companys results of operations or financial position, but did require additional disclosures. See Note 2 Fair Values of Financial Instruments for further details.
Effective January 1, 2012, the Company began computing current and deferred income taxes in accordance with SSAP No. 101. This statement established statutory accounting principles for current and deferred federal and foreign income taxes and current state income taxes. The adoption of this statement resulted in the transfer of $67,503 from Aggregate Write-Ins for Other than Special Surplus Funds to Unassigned Funds and updates to the Companys income tax disclosures. See Note 5 Income Taxes for further details.
For the year ended December 31, 2011, the Company adopted SSAP No. 10R, Income Taxes Revised, A Temporary Replacement of SSAP No. 10 (SSAP No. 10R). This statement established statutory accounting principles for current and deferred federal and foreign income taxes and current state income taxes. The SSAP temporarily superseded SSAP No. 10, Income Taxes. SSAP No. 10R allowed an entity to elect to admit additional deferred tax assets (DTAs) utilizing a three year loss carryback provision, plus the lesser of a look-forward of three years on gross DTAs expected to be realized or 15% of statutory capital and surplus if the entitys risk-based capital is above the 250% risk-based capital level where an action level could occur as a result of a trend test utilizing the old SSAP No. 10 provisions to calculate the DTA. Prior to the adoption of SSAP No. 10R, the admitted DTA was calculated by taking into consideration a one year loss carryback and look-forward on gross DTAs that can be expected to be realized and a 10% capital and surplus limit on the admitted amount of the DTA. The Company elected to admit additional deferred tax assets pursuant to SSAP No. 10R and as a result, the cumulative effect of the adoption of this standard was the difference between the calculation of the admitted DTA per SSAP No.10R and the old SSAP No. 10 methodology at December 31, 2011. This change in accounting principle increased surplus by a net amount of $67,503 at December 31, 2011, which has been recorded within the statements of changes in capital and surplus.
Effective December 31, 2011, the Company adopted SSAP No. 5R, Liabilities, Contingencies and Impairments of Assets Revised. The revisions require the Company to recognize a liability
23
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
equal to the greater of (a) the fair value of the guarantee at its inception, even if the likelihood of payment under the guarantee is remote or (b) the contingent liability amount required to be recognized if it is probable that a liability has been incurred at the financial statement date and the amount of loss can reasonably be determined. While this guidance does not exclude guarantees issued as intercompany transactions or between related parties from the initial liability recognition requirement, there are a couple exceptions. Guarantees made to/or on behalf of a wholly-owned subsidiary and related party guarantees that are considered unlimited (for example, in response to a rating agencys requirement to provide a commitment to support) are exempt from the initial liability recognition. Additional disclosures are also required under this new guidance for all guarantees, whether or not they meet the criteria for initial liability recognition. The adoption of this new accounting principle had no material impact to the Companys results of operations or financial position, but did require additional disclosures regarding these guarantees.
Effective December 31, 2011, the Company adopted non-substantive revisions to SSAP No. 100, to incorporate the provisions of ASU 2010-06, Improving Disclosures about Fair Value Measurements. This revision required a new disclosure for assets and liabilities for which fair value is not measured and reported in the statement of financial position but is otherwise disclosed. The adoption of these revisions had no impact to the Companys results of operations or financial position. See Note 2 for further details.
Effective December 31, 2011, the Company adopted non-substantive changes to SSAP No. 32, Investments in Preferred Stock (including investments in preferred stock of subsidiary, controlled, or affiliated entities). The amendment was made to clarify the definition of preferred stock. Under the revised SSAP No. 32, a preferred stock is defined as any class or series of shares the holders of which have any preference, either as to the payment of dividends or distribution of assets on liquidation, over the holder of common stock [as defined in SSAP No. 30, Investments in Common Stock (excluding investments in common stock of subsidiary, controlled, or affiliated entities)] issued by an entity. This revised definition had no impact to the Company.
Effective January 1, 2011, the Company adopted SSAP No. 35R, Guaranty Fund and Other Assessments Revised. This statement modified the conditions required for recognizing a liability for insurance-related assessments and required additional disclosures to be made in the Notes to the Financial Statements. The adoption of this accounting principle had no financial impact to the Company.
Effective January 1, 2011, the Company adopted revisions to certain paragraphs of SSAP No. 43R Loan-backed and Structured Securities to clarify the accounting for gains and losses between AVR and IMR. The revisions clarify that an AVR/IMR bifurcation analysis should be performed when SSAP No. 43R securities are sold (not just as a result of impairment). These changes were applied on a prospective basis and had no financial impact to the Company upon adoption.
24
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Effective January 1, 2011, the Company adopted revisions to SSAP No. 43R to clarify the definitions of loan-backed and structured securities. The clarified guidance was applied prospectively and had no financial impact to the Company upon adoption.
Effective January 1, 2014, the Company will adopt SSAP No. 105, Working Capital Finance Investments, which allows working capital finance investments to be admitted assets if certain criteria are met. The adoption of this standard had no impact to the financial position or results of operations of the Company.
Effective December 31, 2014 the Company will adopt revisions to SSAP No. 104R, Share-Based Payments, which provides guidance for share-based payments transactions with non-employees. The adoption of this revision is expected to be immaterial to the financial position and results of operations of the Company.
Reclassifications
Certain reclassifications have been made to the 2012 financial statements to conform to the 2013 presentation.
During 2013, the Company changed the presentation of derivative liabilities. As a result of these changes, $1,841 was reclassified between the Other liabilities line and the Derivatives line in the 2012 Balance Sheet to conform to the 2013 presentation.
Correction of Errors
In 2014 after the filing of the Annual Statement, the Company discovered an error in the reporting of an affiliated modified coinsurance transaction resulting in misstatements of the reserve adjustments on reinsurance ceded, commissions and expense allowances on reinsurance ceded, and benefit expenses in the Statement of Operations. The impact of this error on the aforementioned accounts as of December 31, 2011 was an understatement of net income of $7,549 ($4,907 net of tax). This was corrected and is reflected as a correction of an error in the capital and surplus accounts of the 2012 Statement of Changes in Capital and Surplus. The 2012 financial statements have been restated to properly reflect the impact of the error and the 2013 financial statements have been properly stated.
25
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Restatements
The Company identified errors in its prior year audited statutory financial statements related to affiliated reinsurance receivables. The Company has obtained approval from the Ohio Department of Insurance to restate its 2012 statutory financial statements. The following tables show the impact of the restatement.
Year Ended December 31, 2012 | ||||||||||||
Balance sheet | As Reported | Adjustment | As Restated | |||||||||
Total admitted assets |
||||||||||||
Net deferred income tax asset |
103,071 | 2,070 | 105,141 | |||||||||
Receivable from parent, subsidiaries and affiliates |
| 10,992 | 10,992 | |||||||||
|
|
|
|
|
|
|||||||
Total admitted assets |
$ | 8,600,827 | $ | 13,062 | $ | 8,613,889 | ||||||
|
|
|
|
|
|
|||||||
Total liabilities |
||||||||||||
Payable to parent |
15,332 | (15,332 | ) | | ||||||||
Federal income taxes payable |
8,738 | 9,213 | 17,951 | |||||||||
|
|
|
|
|
|
|||||||
Total liabilities |
$ | 8,281,592 | $ | (6,119 | ) | $ | 8,275,473 | |||||
|
|
|
|
|
|
|||||||
Year Ended December 31, 2012 | ||||||||||||
Statement of Operation | As Reported | Adjustment | As Restated | |||||||||
Commissions and expense allowances on reinsurance ceded |
(3,415 | ) | (4,655 | ) | (8,070 | ) | ||||||
Reserve adjustments on reinsurance ceded |
(24,697 | ) | 11,499 | (13,198 | ) | |||||||
Benefits paid or provided for: Life |
70,668 | 273 | 70,941 | |||||||||
Gain before benefit from income taxes |
148,563 | 6,571 | 155,134 | |||||||||
Expense from income taxes |
13,977 | 6,571 | 20,548 | |||||||||
|
|
|
|
|
|
|||||||
Net income |
$ | 129,995 | $ | | $ | 129,995 | ||||||
|
|
|
|
|
|
|||||||
Year Ended December 31, 2012 | ||||||||||||
Statement of Changes in Capital and Surplus | As Reported | Adjustment | As Restated | |||||||||
Balance at January 1, 2012 |
$ | 275,198 | $ | | $ | 275,198 | ||||||
Net income |
129,995 | | 129,995 | |||||||||
Change in nonadmitted assets |
(9,919 | ) | 2,070 | (7,849 | ) | |||||||
Change in surplus as a result of reinsurance |
(33,519 | ) | 12,204 | (21,315 | ) | |||||||
Correction of error - reinsurance |
| 4,907 | 4,907 | |||||||||
|
|
|
|
|
|
|||||||
Balance at December 31, 2012 |
$ | 319,235 | $ | 19,181 | $ | 338,416 | ||||||
|
|
|
|
|
|
26
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Year Ended December 31, 2012 | ||||||||||||
Consolidated Statement of Cash Flows | As Reported | Adjustment | As Restated | |||||||||
Operating activities: |
||||||||||||
Miscellaneous income received |
258,494 | 19,048 | 277,542 | |||||||||
Benefit and loss related payments |
(520,765 | ) | (273 | ) | (521,038 | ) | ||||||
|
|
|
|
|
|
|||||||
Net cash provided by (used in) operating activities |
$ | 237,321 | $ | 18,775 | $ | 256,096 | ||||||
|
|
|
|
|
|
|||||||
Investing activities: |
||||||||||||
|
|
|
|
|
|
|||||||
Net cash (used in) provided by investing activities |
$ | (227,854 | ) | $ | | $ | (227,854 | ) | ||||
|
|
|
|
|
|
|||||||
Financing and miscellaneous activities: |
||||||||||||
Receivable from parent, subsidiaries and affiliates |
2,067 | (10,992 | ) | (8,925 | ) | |||||||
Payable to parent, subsidiaries and affiliates |
(11,400 | ) | (15,332 | ) | (26,732 | ) | ||||||
Other cash provided (applied) |
2,147 | 7,549 | 9,696 | |||||||||
|
|
|
|
|
|
|||||||
Net cash (used in) provided by financing and miscellaneous activities |
$ | 4,412 | $ | (18,775 | ) | $ | (14,363 | ) | ||||
|
|
|
|
|
|
2. Fair Values of Financial Instruments
The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Determination of fair value
The fair values of financial instruments are determined by management after taking into consideration several sources of data. When available, the Company uses quoted market prices in active markets to determine the fair value of its investments. The Companys valuation policy utilizes a pricing hierarchy which dictates that publicly available prices are initially sought from indices and third-party pricing services. In the event that pricing is not available from these sources, those securities are submitted to brokers to obtain quotes. Lastly, securities are priced using internal cash flow modeling techniques. These valuation methodologies commonly use reported trades, bids, offers, issuer spreads, benchmark yields, estimated prepayment speeds, and/or estimated cash flows.
To understand the valuation methodologies used by third-party pricing services, the Company reviews and monitors their applicable methodology documents. Any changes to their methodologies are noted and reviewed for reasonableness. In addition, the Company performs in-depth reviews of prices received from third-party pricing services on a sample basis. The objective for such reviews is to demonstrate that the Company can corroborate detailed information such as assumptions, inputs and methodologies used in pricing individual securities against documented pricing methodologies. Only third-party pricing services and brokers with a substantial presence in the market and with appropriate experience and expertise are used.
27
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Each month, the Company performs an analysis of the information obtained from indices, third-party services, and brokers to ensure that the information is reasonable and produces a reasonable estimate of fair value. The Company considers both qualitative and quantitative factors as part of this analysis, including but not limited to, recent transactional activity for similar securities, review of pricing statistics and trends, and consideration of recent relevant market events. Other controls and procedures over pricing received from indices, third-party pricing services, or brokers include validation checks such as exception reports which highlight significant price changes, stale prices or un-priced securities.
Fair value hierarchy
The Companys financial assets and liabilities carried at fair value are classified, for disclosure purposes, based on a hierarchy defined by SSAP No. 100. The hierarchy gives the highest ranking to fair values determined using unadjusted quoted prices in active markets for identical assets and liabilities (Level 1), and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3). An assets or a liabilitys classification is based on the lowest level input that is significant to its measurement. For example, a Level 3 fair value measurement may include inputs that are both observable (Levels 1 and 2) and unobservable (Level 3).The levels of the fair value hierarchy are as follows:
Level 1 - | Unadjusted quoted prices for identical assets or liabilities in active markets accessible at the measurement date. | |
Level 2 - | Quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following: | |
a) Quoted prices for similar assets or liabilities in active markets | ||
b) Quoted prices for identical or similar assets or liabilities in non-active markets | ||
c) Inputs other than quoted market prices that are observable | ||
d) Inputs that are derived principally from or corroborated by observable market data through correlation or other means | ||
Level 3 - | Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect the Companys own assumptions about the assumptions a market participant would use in pricing the asset or liability. |
28
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:
Cash Equivalents and Short-Term Investments: The carrying amounts reported in the accompanying balance sheets for these financial instruments approximate their fair values. Cash in not included in the below tables.
Short-Term Notes Receivable from Affiliates: The carrying amounts reported in the accompanying balance sheets for these financial instruments approximate their fair value.
Bonds and Stocks: The NAIC allows insurance companies to report the fair value determined by the SVO or to determine the fair value by using a permitted valuation method. The fair values of bonds and stocks are reported or determined using the following pricing sources: indexes, third party pricing services, brokers, external fund managers and internal models.
Fair values for fixed maturity securities (including redeemable preferred stock) actively traded are determined from third-party pricing services, which are determined as discussed above in the description of level one and level two values within the fair value hierarchy. For fixed maturity securities (including redeemable preferred stock) not actively traded, fair values are estimated using values obtained from third-party pricing services, or are based on non-binding broker quotes or internal models. In the case of private placements, fair values are estimated by discounting the expected future cash flows using current market rates applicable to the coupon rate, credit and maturity of the investments.
Mortgage Loans on Real Estate: The fair values for mortgage loans on real estate are estimated utilizing discounted cash flow analyses, using interest rates reflective of current market conditions and the risk characteristics of the loans.
Real Estate: Real estate held for sale is typically valued utilizing independent external appraisers in conjunctions with reviews by qualified internal appraisers. Valuations are primarily based on active market prices, adjusted for any difference in the nature, location or condition of the specific property. If such information is not available, other valuation methods are applied, considering the value that the propertys net earning power will support, the value indicated by recent sales of comparable properties and the current cost of reproducing or replacing the property.
Other Invested Assets: The fair values for other invested assets, which include investments in surplus notes issued by other insurance companies and fixed or variable rate investments with underlying characteristics of bonds, were determined primarily by using indexes, third party pricing services and internal models.
Derivative Financial Instruments: The estimated fair values of interest rate swaps, including interest rate and currency swaps, are based on pricing models or formulas using current assumptions.
29
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Policy Loans: The fair value of policy loans is equal to the book value of the loan, which is stated at unpaid principal balance.
Securities Lending Reinvested Collateral: The cash collateral from securities lending is reinvested in various short-term and long-term debt instruments. The fair values of these investments are determined using the methods described above under Cash Equivalents and Short-Term Investments and Bonds and Stocks.
Receivable from/Payable to Parent, Subsidiaries and Affiliates: The carrying amount of receivable from/payable to affiliates approximates their fair value.
Deposit-Type Contracts: The carrying amounts of deposit-type contracts reported in the accompanying balance sheets approximate their fair values.
Investment Contract Liabilities: The carrying value of the Companys liabilities for deferred annuities with minimum guaranteed benefits is determined using a stochastic valuation as described in Note 6, which approximates the fair value. For investment contracts without minimum guarantees, fair value is estimated using discounted cash flows. For those liabilities that are short in duration, carrying amount approximates fair value. For investment contracts with no defined maturity, fair value is estimated to be the present surrender value.
Separate Account Assets and Annuity Liabilities: The fair value of separate account assets are based on quoted market prices when available. When not available, they are valued in the same manner as general account assets as further described in this note. The fair value of separate account annuity liabilities is based on the account value for separate accounts business without guarantees.
The Company accounts for its investments in affiliated common stock using the equity method of accounting; as such, they are not included in the following disclosures.
Fair values for the Companys insurance contracts other than investment-type contracts (including separate account universal life liabilities) are not required to be disclosed. However, the fair values of liabilities under all insurance contracts are taken into consideration in the Companys overall management of interest rate risk, which minimizes exposure to changing interest rates through the matching of investment maturities with amounts due under insurance contracts.
30
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The following tables set forth a comparison of the estimated fair values and carrying amounts of the Companys financial instruments, including those not measured at fair value in the balance sheets, as of December 31, 2013 and 2012, respectively:
December 31 2013 |
||||||||||||||||||||||||
Estimated Fair Value |
Admitted Assets |
(Level 1) | (Level 2) | (Level 3) | Not Practicable (Carrying Value) |
|||||||||||||||||||
Admitted assets |
||||||||||||||||||||||||
Cash equivalents and short-term investments, other than affiliates |
$ | 106,781 | $ | 106,781 | $ | | $ | 106,781 | $ | | $ | | ||||||||||||
Bonds |
1,481,846 | 1,448,053 | 92,402 | 1,360,214 | 29,230 | | ||||||||||||||||||
Mortgage loans on real estate |
79,470 | 77,805 | | | 79,470 | | ||||||||||||||||||
Other invested assets |
500 | 500 | | 500 | | | ||||||||||||||||||
Policy loans |
442,800 | 442,800 | | 442,800 | | | ||||||||||||||||||
Securities lending reinvested collateral |
88,261 | 88,265 | | 88,261 | | | ||||||||||||||||||
Receivable from parent, subsidiaries and affiliates |
19,859 | 19,859 | | 19,859 | | | ||||||||||||||||||
Separate account assets |
6,969,477 | 6,969,477 | 6,969,477 | | | | ||||||||||||||||||
Liabilities |
||||||||||||||||||||||||
Investment contract liabilities |
415,572 | 408,065 | | 3,735 | 411,837 | | ||||||||||||||||||
Deposit-type contracts |
21,520 | 21,520 | | 21,520 | | | ||||||||||||||||||
Equity swaps |
4,100 | 4,100 | | 4,100 | | | ||||||||||||||||||
Separate account annuity liabilities |
3,383,676 | 3,383,676 | | 3,383,676 | | | ||||||||||||||||||
December 31 2012 - restated |
||||||||||||||||||||||||
Estimated Fair Value |
Admitted Assets |
(Level 1) | (Level 2) | (Level 3) | Not Practicable (Carrying Value) |
|||||||||||||||||||
Admitted assets |
||||||||||||||||||||||||
Cash equivalents and short-term investments, other than affiliates |
$ | 182,489 | $ | 182,489 | $ | | $ | 182,489 | $ | | $ | | ||||||||||||
Bonds |
1,205,473 | 1,116,229 | 72,215 | 1,124,699 | 8,559 | | ||||||||||||||||||
Common stocks, other than affiliates |
117 | 117 | 117 | | | | ||||||||||||||||||
Mortgage loans on real estate |
52,182 | 50,714 | | | 52,182 | | ||||||||||||||||||
Policy loans |
411,101 | 411,101 | | 411,101 | | | ||||||||||||||||||
Securities lending reinvested collateral |
84,804 | 84,899 | | 84,804 | | | ||||||||||||||||||
Receivable from parent, subsidiaries and affiliates |
10,992 | 10,992 | | 10,992 | | | ||||||||||||||||||
Separate account assets |
6,477,241 | 6,477,241 | 6,477,241 | | | | ||||||||||||||||||
Liabilities |
||||||||||||||||||||||||
Investment contract liabilities |
495,984 | 493,117 | | 9,346 | 486,638 | | ||||||||||||||||||
Deposit-type contracts |
14,647 | 14,647 | | 14,647 | | | ||||||||||||||||||
Interest rate swaps |
1,841 | 1,841 | | 1,841 | | | ||||||||||||||||||
Separate account annuity liabilities |
3,251,991 | 3,251,991 | | 3,251,991 | | |
31
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The following tables provide information about the Companys financial assets and liabilities measured at fair value as of December 31, 2013 and 2012:
2013 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: |
||||||||||||||||
Bonds |
||||||||||||||||
Industrial and miscellaneous |
$ | | $ | 1,455 | $ | 551 | $ | 2,006 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total bonds |
| 1,455 | 551 | 2,006 | ||||||||||||
Cash equivalents and short-term investments |
||||||||||||||||
Government |
| 3 | | 3 | ||||||||||||
Industrial and miscellaneous |
| 61,490 | | 61,490 | ||||||||||||
Mutual funds |
| 45,194 | | 45,194 | ||||||||||||
Sweep accounts |
| 94 | | 94 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Short-term |
| 106,781 | | 106,781 | ||||||||||||
Separate account assets |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets at fair value |
$ | | $ | 108,236 | $ | 551 | $ | 108,787 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities: |
||||||||||||||||
Derivative liabilities |
$ | | $ | 4,100 | $ | | $ | 4,100 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities at fair value |
$ | | $ | 4,100 | $ | | $ | 4,100 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
2012 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: |
||||||||||||||||
Bonds |
||||||||||||||||
Industrial and miscellaneous |
$ | | $ | 1,246 | $ | 555 | $ | 1,801 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total bonds |
| 1,246 | 555 | 1,801 | ||||||||||||
Common stock |
||||||||||||||||
Industrial and miscellaneous |
117 | | | 117 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total common stock |
117 | | | 117 | ||||||||||||
Cash equivalents and short-term investments |
||||||||||||||||
Government |
| 3 | | 3 | ||||||||||||
Industrial and miscellaneous |
| 134,981 | | 134,981 | ||||||||||||
Mutual funds |
| 47,260 | | 47,260 | ||||||||||||
Sweep accounts |
| 245 | | 245 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Short-term |
| 182,489 | | 182,489 | ||||||||||||
Separate account assets |
6,477,241 | | | 6,477,241 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets at fair value |
$ | 6,477,358 | $ | 183,735 | $ | 555 | $ | 6,661,648 | ||||||||
|
|
|
|
|
|
|
|
32
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Bonds classified in Level 2 are valued using inputs from third party pricing services or broker quotes. Level 3 measurements for bonds are primarily those valued using non-binding broker quotes, which cannot be corroborated by other market observable data or internal modeling which utilize inputs that are not market observable.
Short-term investments are classified as Level 2 as they are carried at amortized cost, which approximates fair value.
Derivatives classified as Level 2 represent over-the-counter (OTC) contracts valued using pricing models based on the net present value of estimated future cash flows, directly observed prices from exchange-traded derivatives, other OTC trades or external pricing services.
During 2013 and 2012, there were no transfers between Level 1 and 2, respectively.
33
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The following tables summarize the changes in assets and liabilities classified in Level 3 for 2013 and 2012:
Balance at January 1, 2013 |
Transfers into Level 3 |
Transfers out of Level 3 |
Total Gains and (Losses) Included in Net income (a) |
Total Gains and (Losses) Included in Surplus (b) |
||||||||||||||||
Bonds |
||||||||||||||||||||
Other |
$ | 555 | $ | | $ | | $ | 43 | $ | (27 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 555 | $ | | $ | | $ | 43 | $ | (27 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Issuances | Purchases | Sales | Settlements | Balance at December 31, 2013 |
||||||||||||||||
Bonds |
||||||||||||||||||||
Other |
$ | | $ | | $ | | $ | 20 | $ | 551 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | | $ | | $ | | $ | 20 | $ | 551 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at January 1, 2012 |
Transfers into Level 3 |
Transfers out of Level 3 |
Total Gains and (Losses) Included in Net income (a) |
Total Gains and (Losses) Included in Surplus (b) |
||||||||||||||||
Bonds |
||||||||||||||||||||
Other |
$ | 559 | $ | | $ | | $ | 51 | $ | (25 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 559 | $ | | $ | | $ | 51 | $ | (25 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Issuances | Purchases | Sales | Settlements | Balance at December 31, 2012 |
||||||||||||||||
Bonds |
||||||||||||||||||||
Other |
$ | | $ | | $ | | $ | 30 | $ | 555 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | | $ | | $ | | $ | 30 | $ | 555 | ||||||||||
|
|
|
|
|
|
|
|
|
|
(a) | Recorded as a component of Net Realized Capital Gains/Losses in the Statements of Operations |
(b) | Recorded as a component of Change in Net Unrealized Capital Gains/Losses in the Statements of Changes in Capital and Surplus |
The Companys policy is to recognize transfers in and out of levels as of the beginning of the reporting period.
As indicated in Note 1, real estate held for sale is measured at the lower of carrying amount or fair value less cost to sell. The Company is exploring the sale of 2 parcels of land adjacent to its home office properties. Therefore, these 2 properties are carried at fair value less cost to sell as of December 31, 2013, which amounts to $6,259. There was no real estate carried at fair value as of December 31, 2012.
34
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Fair value was determined by utilizing an external appraisal following the sales comparison approach. The fair value measurements are classified in Level 3 as the comparable sales and adjustments for the specific attributes of these properties are not market observable inputs.
3. Investments
The carrying amount and estimated fair value of investments in bonds are as follows:
Gross | Gross | |||||||||||||||||||
Unrealized | Unrealized | |||||||||||||||||||
Gross | Losses 12 | Losses less | Estimated | |||||||||||||||||
Carrying | Unrealized | Months or | Than 12 | Fair | ||||||||||||||||
Amount | Gains | More | Months | Value | ||||||||||||||||
December 31, 2013 |
||||||||||||||||||||
Unaffiliated bonds: |
||||||||||||||||||||
United States Government and agencies |
$ | 82,813 | $ | 1,150 | $ | 10 | $ | 2,075 | $ | 81,878 | ||||||||||
State, municipal and other government |
32,010 | 759 | 354 | 1,246 | 31,169 | |||||||||||||||
Hybrid securities |
19,038 | 2,622 | | | 21,660 | |||||||||||||||
Industrial and miscellaneous |
936,439 | 37,152 | 1,088 | 15,148 | 957,355 | |||||||||||||||
Mortgage and other asset-backed securities |
377,753 | 17,489 | 1,079 | 4,379 | 389,784 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 1,448,053 | $ | 59,172 | $ | 2,531 | $ | 22,848 | $ | 1,481,846 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross | Gross | |||||||||||||||||||
Unrealized | Unrealized | |||||||||||||||||||
Gross | Losses 12 | Losses less | Estimated | |||||||||||||||||
Carrying | Unrealized | Months or | Than 12 | Fair | ||||||||||||||||
Amount | Gains | More | Months | Value | ||||||||||||||||
December 31, 2012 |
||||||||||||||||||||
Unaffiliated bonds: |
||||||||||||||||||||
United States Government and agencies |
$ | 52,940 | $ | 5,702 | $ | | $ | | $ | 58,642 | ||||||||||
State, municipal and other government |
27,378 | 3,421 | 50 | | 30,749 | |||||||||||||||
Hybrid securities |
19,055 | 864 | 1,238 | | 18,681 | |||||||||||||||
Industrial and miscellaneous |
720,424 | 68,173 | 24 | 1,072 | 787,501 | |||||||||||||||
Mortgage and other asset-backed securities |
296,432 | 19,586 | 6,083 | 35 | 309,900 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 1,116,229 | $ | 97,746 | $ | 7,395 | $ | 1,107 | $ | 1,205,473 | |||||||||||
|
|
|
|
|
|
|
|
|
|
At December 31, 2013 and 2012, respectively, for bonds that have been in a continuous loss position for greater than or equal to twelve months, the Company held 26 and 21 securities with a carrying amount of $49,119 and $51,454 and an unrealized loss of $2,531 and $7,394 with an
35
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
average price of 94.9 and 85.6 (fair value/amortized cost). Of this portfolio, 82.2% and 72.4% were investment grade with associated unrealized losses of $1,394 and $5,266, respectively.
At December 31, 2013 and 2012, respectively, for bonds that have been in a continuous loss position for less than twelve months, the Company held 178 and 17 securities with a carrying amount of $609,765 and $61,424 and an unrealized loss of $22,848 and $1,107 with an average price of 96.3 and 98.2 (fair value/amortized cost). Of this portfolio, 98.0% and 88.5% were investment grade with associated unrealized losses of $21,926 and $788, respectively.
The estimated fair value of bonds and common stocks with gross unrealized losses at December 31, 2013 and 2012 are as follows:
Losses 12 | Losses Less | |||||||||||
Months or | Than 12 | |||||||||||
More | Months | Total | ||||||||||
December 31, 2013 |
||||||||||||
Unaffiliated bonds: |
||||||||||||
United States Government and agencies |
$ | 540 | $ | 64,656 | $ | 65,196 | ||||||
State, municipal and other government |
1,814 | 14,149 | 15,963 | |||||||||
Industrial and miscellaneous |
27,904 | 380,486 | 408,390 | |||||||||
Mortgage and other asset-backed securities |
16,330 | 127,625 | 143,955 | |||||||||
|
|
|
|
|
|
|||||||
$ | 46,588 | $ | 586,916 | $ | 633,504 | |||||||
|
|
|
|
|
|
|||||||
Losses 12 | Losses Less | |||||||||||
Months or | Than 12 | |||||||||||
More | Months | Total | ||||||||||
December 31, 2012 |
||||||||||||
Unaffiliated bonds: |
||||||||||||
United States Government and agencies |
$ | | $ | 550 | $ | 550 | ||||||
State, municipal and other government |
2,120 | | 2,120 | |||||||||
Hybrid securities |
8,250 | | 8,250 | |||||||||
Industrial and miscellaneous |
641 | 57,229 | 57,870 | |||||||||
Mortgage and other asset-backed securities |
33,049 | 2,539 | 35,588 | |||||||||
|
|
|
|
|
|
|||||||
44,060 | 60,318 | 104,378 | ||||||||||
Unaffiliated common stocks |
| 116 | 116 | |||||||||
|
|
|
|
|
|
|||||||
$ | 44,060 | $ | 60,434 | $ | 104,494 | |||||||
|
|
|
|
|
|
36
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The carrying amount and estimated fair value of bonds at December 31, 2013, by contractual maturity, is shown below. Expected maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepay penalties.
Carrying Amount |
Estimated Fair Value |
|||||||
Due in one year or less |
$ | 25,979 | $ | 26,476 | ||||
Due after one year through five years |
294,870 | 311,620 | ||||||
Due after five years through ten years |
507,668 | 510,003 | ||||||
Due after ten years |
241,783 | 243,963 | ||||||
|
|
|
|
|||||
$ | 1,070,300 | $ | 1,092,062 | |||||
Mortgage and other asset-backed securities |
377,753 | 389,784 | ||||||
|
|
|
|
|||||
$ | 1,448,053 | $ | 1,481,846 | |||||
|
|
|
|
For impairment policies related to non-structured and structured securities, refer to Note 1 under Investments.
There were no loan-backed securities with a recognized other-than-temporary impairment (OTTI) due to intent to sell or lack of intent and ability to hold during the years ended December 31, 2013 or 2011. The following table provides the aggregate totals for loan-backed securities with a recognized OTTI due to intent to sell or lack of intent and ability to hold, in which the security is written down to fair value during the year ended December 31, 2012.
Amortized | ||||||||||||||||
Cost Basis | OTTI Recognized in Loss | |||||||||||||||
Before OTTI | Interest | Non-interest | Fair Value | |||||||||||||
Year Ended December 31, 2012 |
||||||||||||||||
OTTI recognized 4th Quarter: |
||||||||||||||||
Inability or lack of intent to retain the investment in the security for a period of time sufficient to recover the amortized cost basis |
$ | 8,122 | $ | | $ | 117 | $ | 8,005 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total 4th Quarter OTTI on loan-backed securities |
8,122 | | 117 | 8,005 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Aggregate total |
$ | 8,122 | $ | | $ | 117 | $ | 8,005 | ||||||||
|
|
|
|
|
|
|
|
37
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The following tables provide the aggregate totals for loan-backed securities with a recognized OTTI due to the Companys cash flow analysis, in which the security is written down to estimated future cash flows discounted at the securitys effective yield.
Amortized Cost | ||||||||||||||||
before Current | Amortized Cost | |||||||||||||||
Period OTTI | Recognized OTTI | After OTTI | Fair Value | |||||||||||||
Year ended December 31, 2013 |
||||||||||||||||
1st quarter present value of cash flows expected to be less than the amortized cost basis |
$ | 4,934 | $ | 244 | $ | 4,690 | $ | 930 | ||||||||
2nd quarter present value of cash flows expected to be less than the amortized cost basis |
3,857 | 64 | 3,793 | 403 | ||||||||||||
3rd quarter present value of cash flows expected to be less than the amortized cost basis |
6,137 | 505 | 5,632 | 1,815 | ||||||||||||
4th quarter present value of cash flows expected to be less than the amortized cost basis |
2,378 | 104 | 2,274 | 2,135 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Aggregate total |
$ | 17,306 | $ | 917 | $ | 16,389 | $ | 5,283 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Amortized Cost | ||||||||||||||||
before Current | Amortized Cost | |||||||||||||||
Period OTTI | Recognized OTTI | After OTTI | Fair Value | |||||||||||||
Year ended December 31, 2012 |
||||||||||||||||
1st quarter present value of cash flows expected to be less than the amortized cost basis |
$ | 1,582 | $ | 10 | $ | 1,572 | $ | 926 | ||||||||
2nd quarter present value of cash flows expected to be less than the amortized cost basis |
6,924 | 56 | 6,868 | 2,062 | ||||||||||||
3rd quarter present value of cash flows expected to be less than the amortized cost basis |
31 | 1 | 30 | 18 | ||||||||||||
4th quarter present value of cash flows expected to be less than the amortized cost basis |
14,707 | 317 | 14,390 | 9,570 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Aggregate total |
$ | 23,244 | $ | 384 | $ | 22,860 | $ | 12,576 | ||||||||
|
|
|
|
|
|
|
|
38
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Amortized Cost before Current Period OTTI |
Recognized OTTI | Amortized Cost After OTTI |
Fair Value | |||||||||||||
Year ended December 31, 2011 |
||||||||||||||||
1st quarter present value of cash flows expected to be less than the amortized cost basis |
$ | 1,000 | $ | 24 | $ | 976 | $ | 529 | ||||||||
2nd quarter present value of cash flows expected to be less than the amortized cost basis |
2,733 | 80 | 2,653 | 1,548 | ||||||||||||
3rd quarter present value of cash flows expected to be less than the amortized cost basis |
2,604 | 25 | 2,579 | 1,377 | ||||||||||||
4th quarter present value of cash flows expected to be less than the amortized cost basis |
3,821 | 108 | 3,713 | 2,307 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Aggregate total |
$ | 10,158 | $ | 237 | $ | 9,921 | $ | 5,761 | ||||||||
|
|
|
|
|
|
|
|
The following loan-backed and structured securities were held at December 31, 2013, for which an OTTI was recognized during the current reporting period:
CUSIP |
Amortized Cost Before Current Period OTTI |
Present Value of Projected Cash Flows |
Recognized OTTI |
Amortized Cost After OTTI |
Fair Value at Time of OTTI |
Quarter in which Impairment Occurred |
||||||||||||||||||
35729PPC8 |
$ | 4,000 | $ | 3,869 | $ | 131 | $ | 3,869 | $ | 703 | 1Q 2013 | |||||||||||||
759950FJ2 |
934 | 822 | 112 | 822 | 227 | 1Q 2013 | ||||||||||||||||||
35729PPC8 |
3,857 | 3,793 | 64 | 3,793 | 403 | 2Q 2013 | ||||||||||||||||||
35729PPC8 |
3,783 | 3,598 | 185 | 3,598 | 355 | 3Q 2013 | ||||||||||||||||||
759950FJ2 |
818 | 652 | 166 | 652 | 255 | 3Q 2013 | ||||||||||||||||||
12668WAC1 |
813 | 785 | 28 | 785 | 727 | 4Q 2013 | ||||||||||||||||||
759950FJ2 |
201 | 190 | 11 | 190 | 207 | 4Q 2013 |
The unrealized losses of loan-backed and structured securities where fair value is less than cost or amortized cost for which an OTTI has not been recognized in earnings as of December 31, 2013 and 2012 is as follows:
Losses 12 Months or More |
Losses Less Than 12 Months |
|||||||
Year Ended December 31, 2013 |
||||||||
The aggregate amount of unrealized losses |
$ | 1,974 | $ | 4,389 | ||||
The aggregate related fair value of securities with unrealized losses |
18,285 | 127,677 |
39
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Losses 12 Months or More |
Losses Less Than 12 Months |
|||||||
Year Ended December 31, 2012 |
||||||||
The aggregate amount of unrealized losses |
$ | 11,568 | $ | 35 | ||||
The aggregate related fair value of securities with unrealized losses |
34,850 | 4,056 |
Detail of net investment income is presented below:
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Income: |
||||||||||||
Bonds |
$ | 55,638 | $ | 47,292 | $ | 41,739 | ||||||
Common stocks |
15,510 | 13,925 | 18,667 | |||||||||
Mortgage loans on real estate |
2,542 | 2,091 | 1,502 | |||||||||
Real estate |
4,520 | 4,409 | 4,571 | |||||||||
Policy loans |
22,562 | 21,841 | 21,751 | |||||||||
Cash, cash equivalents and short-term investments |
213 | 314 | 386 | |||||||||
Derivatives |
23 | | (516 | ) | ||||||||
Other invested assets |
(764 | ) | (684 | ) | (1,287 | ) | ||||||
Other |
1,250 | 1,130 | 515 | |||||||||
|
|
|
|
|
|
|||||||
Gross investment income |
101,494 | 90,318 | 87,328 | |||||||||
Less investment expenses |
9,004 | 8,589 | 7,297 | |||||||||
|
|
|
|
|
|
|||||||
Net investment income |
$ | 92,490 | $ | 81,729 | $ | 80,031 | ||||||
|
|
|
|
|
|
Proceeds from sales and other disposals (excluding maturities) of bonds and preferred stock and related gross realized capital gains and losses were as follows:
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Proceeds |
$ | 312,963 | $ | 324,065 | $ | 258,853 | ||||||
|
|
|
|
|
|
|||||||
Gross realized gains |
$ | 3,042 | $ | 6,484 | $ | 3,231 | ||||||
Gross realized losses |
(6,545 | ) | (1,347 | ) | (2,031 | ) | ||||||
|
|
|
|
|
|
|||||||
Net realized capital gains (losses) |
$ | (3,503 | ) | $ | 5,137 | $ | 1,200 | |||||
|
|
|
|
|
|
The Company had gross realized losses for the years ended December 31, 2013, 2012, and 2011 of $923, $417 and $311, respectively, which relate to losses recognized on other-than-temporary declines in fair values of bonds.
40
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Net realized capital gains (losses) on investments are summarized below:
Realized | ||||||||||||
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Bonds |
$ | (4,426 | ) | $ | 4,720 | $ | 889 | |||||
Common stocks |
| 1 | | |||||||||
Mortgage loans |
| 252 | 237 | |||||||||
Real estate |
(830 | ) | | | ||||||||
Cash, cash equivalents and short-term investments |
| | 5 | |||||||||
Derivatives |
13,326 | (4,550 | ) | (13,204 | ) | |||||||
Other |
(33 | ) | (170 | ) | | |||||||
|
|
|
|
|
|
|||||||
8,037 | 253 | (12,073 | ) | |||||||||
Federal income tax effect |
968 | (1,153 | ) | 402 | ||||||||
Transfer to interest maintenance reserve |
2,098 | (3,691 | ) | (760 | ) | |||||||
|
|
|
|
|
|
|||||||
Net realized capital gains (losses) on investments |
$ | 11,103 | $ | (4,591 | ) | $ | (12,431 | ) | ||||
|
|
|
|
|
|
The Company did not have any recorded investments in restructured securities at December 31, 2013 and 2011. At December 31, 2012, the Company had recorded investments in restructured securities of $118. The capital gain taken as a direct result of restructures in 2012 was $34. The Company often has impaired a security prior to the restructure date. These impairments are not included in the calculation of restructure related losses and are accounted for as a realized loss, reducing the cost basis of the security involved.
The changes in net unrealized capital gains and losses on investments were as follows:
Change in Unrealized | ||||||||||||
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Bonds |
$ | 4,581 | $ | 765 | $ | (999 | ) | |||||
Common stocks |
1 | (1 | ) | (3,237 | ) | |||||||
Affiliated entities |
2,679 | 342 | | |||||||||
Derivatives |
(2,259 | ) | (1,330 | ) | 461 | |||||||
Other invested assets |
| 222 | (206 | ) | ||||||||
|
|
|
|
|
|
|||||||
Change in unrealized capital gains (losses) |
5,002 | (2 | ) | (3,981 | ) | |||||||
Taxes on unrealized capital gains/losses |
| 120 | 261 | |||||||||
|
|
|
|
|
|
|||||||
Change in unrealized capital gains (losses), net of tax |
$ | 5,002 | $ | 118 | $ | (3,720 | ) | |||||
|
|
|
|
|
|
41
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The credit quality of mortgage loans by type of property for the year ended December 31, 2013 were as follows:
Commercial | Total | |||||||
AAA - AA |
$ | 26,358 | $ | 26,358 | ||||
A |
51,447 | 51,447 | ||||||
|
|
|
|
|||||
$ | 77,805 | $ | 77,805 | |||||
|
|
|
|
The credit quality for commercial mortgage loans was determined based on an internal credit rating model which assigns a letter rating to each mortgage loan in the portfolio as an indicator of the credit quality of the mortgage loan. The internal credit rating model was designed based on rating agency methodology, then modified for credit risk associated with the Companys mortgage lending process, taking into account such factors as projected future cash flows, net operating income, and collateral value. The model produces a credit rating score and an associated letter rating which is intended to align with S&P ratings as closely as possible. Information supporting the credit risk rating process is updated at least annually.
During 2013, the Company issued mortgage loans with a maximum interest rate of 3.80% and a minimum interest rate of 3.60% for commercial loans. During 2012, the Company issued mortgage loans with a maximum interest rate of 3.75% and a minimum interest rate of 3.70% for commercial loans. The maximum percentage of any one mortgage loan to the value of the underlying real estate originated during the years ending December 31, 2013 and 2012 at the time of origination was 64% and 70%, respectively. During 2013 and 2012, no loans were transferred from affiliated entities.
42
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The following tables provide the age analysis of mortgage loans aggregated by type:
Residential | Commercial | |||||||||||||||||||||||||||
December 31, 2013 | Farm | Insured | All Other | Insured | All Other | Mezzanine | Total | |||||||||||||||||||||
Recorded Investment (All) |
||||||||||||||||||||||||||||
(a) Current |
$ | | $ | | $ | | $ | | $ | 77,805 | $ | | $ | 77,805 | ||||||||||||||
(b) 30-59 Days Past Due |
| | | | | | | |||||||||||||||||||||
(c) 60-89 Days Past Due |
| | | | | | | |||||||||||||||||||||
(d) 90-179 Days Past Due |
| | | | | | | |||||||||||||||||||||
(e) 180+ Days Past Due |
| | | | | | | |||||||||||||||||||||
Residential | Commercial | |||||||||||||||||||||||||||
December 31, 2012 | Farm | Insured | All Other | Insured | All Other | Mezzanine | Total | |||||||||||||||||||||
Recorded Investment (All) |
||||||||||||||||||||||||||||
(a) Current |
$ | | $ | | $ | | $ | | $ | 50,714 | $ | | $ | 50,714 | ||||||||||||||
(b) 30-59 Days Past Due |
| | | | | | - | |||||||||||||||||||||
(c) 60-89 Days Past Due |
| | | | | | | |||||||||||||||||||||
(d) 90-179 Days Past Due |
| | | | | | | |||||||||||||||||||||
(e) 180+ Days Past Due |
| | | | | | |
The Company accrues interest income on impaired loans to the extent deemed collectible (delinquent less than 91 days) and the loan continues to perform under its original or restructured contractual terms. Interest income on nonperforming loans generally is recognized on a cash basis. The Company did not recognize any interest income on impaired loans for the years ended December 31, 2013, 2012 or 2011. The Company did not recognize any interest income on a cash basis for the years ended December 31, 2013, 2012 or 2011.
During 2013, 2012 and 2011, no mortgage loans were foreclosed and transferred to real estate. At December 31, 2013 and 2012, the Company held a mortgage loan loss reserve in the AVR of $759 and $482, respectively.
43
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The Companys mortgage loan portfolio is diversified by geographic region and specific collateral property type as follows:
Geographic Distribution |
Property Type Distribution |
|||||||||||||||||
December 31 | December 31 | |||||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||||
South Atlantic |
57 | % | 39 | % | Retail | 46 | % | 74 | % | |||||||||
W. South Central |
15 | 11 | Other | 34 | 2 | |||||||||||||
Pacific |
12 | 24 | Office | 20 | 24 | |||||||||||||
Middle Atlantic |
7 | 11 | ||||||||||||||||
W. North Central |
6 | 10 | ||||||||||||||||
Mountain |
3 | 5 |
At December 31, 2013, the Company had ownership interest in five LIHTC investments. The remaining years of unexpired tax credits ranged from two to eight and the properties were not subject to regulatory review. The length of time remaining for holding periods ranged from two to thirteen years. There are no contingent equity commitments expected to be paid in the future. There were no impairment losses, write-downs or reclassifications during 2013 related to these credits.
At December 31, 2012, the Company had ownership interest in five LIHTC investments. The remaining years of unexpired tax credits ranged from three to nine and the properties were not subject to regulatory review. The length of time remaining for holding periods ranged from three to fourteen years. There were no contingent equity commitments expected to be paid in the future. There were no impairment losses, write-downs or reclassifications during 2012 related to these credits.
The following tables provide the carrying value of state transferable tax credits gross of any related tax liabilities and total unused transferable tax credits by state and in total as of December 31, 2013 and 2012:
December 31, 2013 | ||||||||||
Description of State Transferable Tax Credits |
State | Carrying Value | Unused Amount* | |||||||
Low-Income Housing Tax Credits |
MA | $ | 160 | $ | 489 | |||||
|
|
|
|
|||||||
Total |
$ | 160 | $ | 489 | ||||||
|
|
|
|
|||||||
December 31, 2012 | ||||||||||
Description of State Transferable Tax Credits |
State | Carrying Value | Unused Amount* | |||||||
Low-Income Housing Tax Credits |
MA | $ | 426 | $ | 755 | |||||
|
|
|
|
|||||||
Total |
$ | 426 | $ | 755 | ||||||
|
|
|
|
* | The unused amount reflects credits that the Company deems will be realizable in the period from 2014 to 2015. |
The Company had no non-transferable state tax credits.
44
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The Company estimated the utilization of the remaining state transferable tax credits by projecting a future tax liability based on projected premium, tax rates and tax credits and comparing the projected future tax liability to the availability of remaining state transferable tax credits. The Company had no impairment losses related to state transferable tax credits.
The Company has entered into collateral agreements with certain counterparties wherein the counterparty is required to post assets on the Companys behalf. The posted amount is equal to the difference between the net positive fair value of the contracts and an agreed upon threshold that is based on the credit rating of the counterparty. Inversely, if the net fair value of all contracts with this counterparty is negative, the Company is required to post assets instead. At December 31, 2013 and 2012, the Company does not have any contracts, aggregated at a counterparty level, with a positive fair value. At December 31, 2013 and 2012, the fair value of all contracts, aggregated at a counterparty level, with a negative fair value amount to $4,100 and $1,841, respectively.
At December 31, 2013 and 2012, respectively, the Company has recorded $(4,100) and $(1,841) for the component of derivative instruments utilized for hedging purposes that did not qualify for hedge accounting. This has been recorded directly to unassigned surplus as an unrealized loss.
The Company did not recognize any unrealized gains or losses during 2013 or 2012 that represented the component of derivative instruments gain or loss that was excluded from the assessment of hedge effectiveness.
At December 31, 2013 and 2012, respectively, the Company had outstanding receive fixed - pay fixed swaps with a notional amount of $690 and $8.
At December 31, 2013 and 2012, respectively, the Company had outstanding receive fixed - pay floating swaps with a notional amount of $14,368 and $0.
The Company recognized net realized gain (losses) from swaps in the amount of $(3,558), $(3,791) and $0 for the years ended December 31, 2013, 2012, and 2011, respectively.
Under exchange traded futures and options, the Company agrees to purchase a specified number of contracts from other parties and to post a variation margin on a daily basis in an amount equal to the difference in the daily fair values of those contracts. The parties with whom the Company enters into exchange traded futures and options are regulated futures commissions merchants who are members of a trading exchange. The Company recognized net realized gains (losses) from futures contracts in the amount of $16,914, $758 and $13,203 for the years ended December 31, 2013, 2012 and 2011, respectively.
45
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Open futures contracts at December 31, 2013 and 2012 are as follows:
Long/Short |
Number of Contracts |
Contract Type |
Opening Fair Value |
Year-End Fair Value |
||||||||
December 31, 2013 |
||||||||||||
DJ EURO STOXX | ||||||||||||
Long |
967 | March 2014 Futures | $ | 28,040 | $ | 30,054 | ||||||
HANG SENG IDX | ||||||||||||
Long |
140 | January 2014 Futures | 162,918 | 163,331 | ||||||||
S&P 500 | ||||||||||||
Long |
306 | March 2014 Futures | 134,506 | 140,844 | ||||||||
S&P 500 | ||||||||||||
Short |
135 | March 2014 Futures | 59,917 | 62,137 | ||||||||
Long/Short |
Number of Contracts |
Contract Type |
Opening Fair Value |
Year-End Fair Value |
||||||||
December 31, 2012 |
||||||||||||
DJ EURO STOXX | ||||||||||||
Long |
529 | March 2013 Futures | $ | 18,310 | $ | 18,290 | ||||||
HANG SENG IDX | ||||||||||||
Long |
60 | January 2013 Futures | 8,751 | 8,779 | ||||||||
S&P 500 | ||||||||||||
Long |
44 | March 2013 Futures | 15,070 | 15,621 |
46
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The following tables show the pledged or restricted assets as of December 31, 2013 and 2012, respectively:
Gross Restricted Current Year |
||||||||||||||||||||
Restricted Asset Category |
Total General Account (G/A) |
G/A Supporting Separate Account (S/A) Activity |
Total S/A Restricted Assets |
S/A Assets Supporting G/A Activity |
Total | |||||||||||||||
a. Subject to contractual obligation for which liability is not shown |
$ | | $ | | $ | | $ | | $ | | ||||||||||
b. Collateral held under security lending agreements |
88,184 | | | | 88,184 | |||||||||||||||
c. Subject to repurchase agreements |
| | | | | |||||||||||||||
d. Subject to reverse repurchase agreements |
| | | | | |||||||||||||||
e. Subject to dollar repurchase agreements |
26,475 | | | | 26,475 | |||||||||||||||
f. Subject to dollar reverse repurchase agreements |
| | | | | |||||||||||||||
g. Placed under option contracts |
| | | | | |||||||||||||||
h. Letter stock or securities restricted as to sale |
| | | | | |||||||||||||||
i. On deposit with state(s) |
3,526 | | | | 3,526 | |||||||||||||||
j. On deposit with other regulatory bodies |
| | | | | |||||||||||||||
k. Pledged as collateral not captured in other categories |
18,694 | | | | 18,694 | |||||||||||||||
l. Other restricted assets |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
m. Total Restricted Assets |
$ | 136,879 | $ | | $ | | $ | | $ | 136,879 | ||||||||||
|
|
|
|
|
|
|
|
|
|
47
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Gross Restricted | Percentage | |||||||||||||||||||
Restricted Asset Category |
Total From Prior Year |
Increase/ (Decrease) |
Total Current Year Admitted Restricted |
Gross Restricted to Total Assets |
Admitted Restricted to Total Admitted Assets |
|||||||||||||||
a. Subject to contractual obligation for which liability is not shown |
$ | | $ | | $ | | 0.00 | % | 0.00 | % | ||||||||||
b. Collateral held under security lending agreements |
84,932 | 3,252 | 88,184 | 0.94 | 0.94 | |||||||||||||||
c. Subject to repurchase agreements |
| | | 0.00 | 0.00 | |||||||||||||||
d. Subject to reverse repurchase agreements |
| | | 0.00 | 0.00 | |||||||||||||||
e. Subject to dollar repurchase agreements |
25,986 | 489 | 26,475 | 0.28 | 0.28 | |||||||||||||||
f. Subject to dollar reverse repurchase agreements |
| | | 0.00 | 0.00 | |||||||||||||||
g. Placed under option contracts |
| | | 0.00 | 0.00 | |||||||||||||||
h. Letter stock or securities restricted as to sale |
| | | 0.00 | 0.00 | |||||||||||||||
i. On deposit with state(s) |
3,567 | (41 | ) | 3,526 | 0.04 | 0.04 | ||||||||||||||
j. On deposit with other regulatory bodies |
| | | 0.00 | 0.00 | |||||||||||||||
k. Pledged as collateral not captured in other categories |
14,125 | 4,569 | 18,694 | 0.20 | 0.20 | |||||||||||||||
l. Other restricted assets |
| | | 0.00 | 0.00 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
m. Total Restricted Assets |
$ | 128,610 | $ | 8,269 | $ | 136,879 | 1.46 | % | 1.46 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
Assets pledged as collateral not captured in other categories includes invested assets with a carrying value of $18,694 and $14,125, respectively, in conjunction with derivative transactions as of December 31, 2013 and 2012, respectively.
4. Reinsurance
The Company reinsures portions of the risk on certain insurance policies which exceed its established limits, thereby providing a greater diversification of risk and minimizing exposure on larger risks. The Company remains contingently liable with respect to any insurance ceded, and
48
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
this would become an actual liability in the event that the assuming insurance company became unable to meet its obligations under the reinsurance treaty.
Premiums earned reflect the following reinsurance amounts:
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Direct premiums |
$ | 729,989 | $ | 684,163 | $ | 670,285 | ||||||
Reinsurance assumed - affiliated |
| | 763 | |||||||||
Reinsurance ceded - affiliated |
(139,956 | ) | (149,569 | ) | (143,983 | ) | ||||||
Reinsurance ceded - non-affiliated |
(48,942 | ) | (49,886 | ) | (46,466 | ) | ||||||
|
|
|
|
|
|
|||||||
Net premiums earned |
$ | 541,091 | $ | 484,708 | $ | 480,599 | ||||||
|
|
|
|
|
|
The Company received reinsurance recoveries in the amount of $126,271, $137,800 (restated) and $129,708 during 2013, 2012 and 2011, respectively. At December 31, 2013 and 2012, estimated amounts recoverable from reinsurers that have been deducted from policy and contract claim reserves totaled $16,802 and $18,533, respectively. The aggregate reserves for policies and contracts were reduced for reserve credits for reinsurance ceded at December 31, 2013 and 2012 of $491,148 and $631,262, respectively. As of December 31, 2013 and 2012, the amount of reserve credits for reinsurance ceded that represented unauthorized affiliated companies were $433,483 and $571,479, respectively.
The Company would experience no reduction in surplus at December 31, 2013 if all reinsurance agreements were cancelled.
On July 1, 2013, the Company recaptured certain treaties from a non-affiliate, for which net consideration received was $1,174, life and claim reserves recaptured were $3,296, premiums recaptured were $2,004, and claims recaptured were $956, resulting in a pre-tax loss of $1,081, which was included in the Statement of Operations.
On April 26, 2011, Aegon N.V announced the divestiture of its life reinsurance operations, Transamerica Reinsurance to SCOR SE, a Societas Europaea organized under the laws of France (SCOR), which was effective August 9, 2011.
The life reinsurance business conducted by Transamerica Reinsurance was written through several of Aegon N.V.s U.S. and international affiliates, all of which remain Aegon N.V. affiliates following the closing, except for Transamerica International Reinsurance Ireland, Limited, an Irish reinsurance company (TIRI). In preparation of the divestiture of the life reinsurance business to SCOR, during the second quarter of 2011, the Company, as well as other affiliated life insurance companies, recaptured certain business that had been reinsured to TIRI, subsequently ceding the majority of the business recaptured to Transamerica International Re
49
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
(Bermuda) Ltd. (TIRe), an affiliate. As a result of these transactions, the net impact to the Company was a pre-tax loss of $94,262, which was included in the statement of operations, and a net of tax gain of $63,421 which has been credited directly to unassigned surplus. Additional information surrounding these transactions is outlined below.
Effective April 1, 2011, the Company recaptured the traditional life business that was previously reinsured on a coinsurance funds withheld basis to TIRI, and subsequently reinsured this business to TIRe. The Company paid recapture consideration of $29,300 and released the associated funds withheld liability of $22,729 associated with the recapture, and received an initial ceding commission of $27,400 and established a funds withheld liability of $23,061 on the new cession to TIRe. Life, claim reserves and other assets associated with this block that were exchanged were $86,197, $9,563 and $2,344, respectively. The Company released into income a previously deferred unamortized gain resulting from the original cession of this business to TIRI in the amount of $175 ($120 net of tax) resulting in a pre-tax loss of $99,812 on the recapture which was included in the statement of operations as of December 31, 2011. The cession to TIRe resulted in a net of tax gain of $63,541, which was credited directly to unassigned surplus at December 31, 2011.
Effective April 1, 2011, TIRI, recaptured the BOLI/COLI catastrophic mortality risk that had previously been retro-ceded to the Company. The Company released life and claim reserves of $5,507 and $43, respectively, with no consideration exchanged, resulting in a pre-tax gain of $5,550 which was included in the statement of operations at December 31, 2011.
During 2013, 2012 and 2011, the Company amortized deferred gains from reinsurance transactions occurring prior to 2011 of $15,661, $21,315 (restated) and $21,792, respectively, into earnings on a net of tax basis with a corresponding charge to unassigned surplus.
Letters of credit held for all unauthorized reinsurers as of December 31, 2013, 2012 and 2011 were $196,300, $179,100 and $273,000, respectively.
50
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
5. Income Taxes
The net deferred income tax asset at December 31, 2013 and 2012 and the change from the prior year are comprised of the following components:
December 31, 2013 | ||||||||||||
Ordinary | Capital | Total | ||||||||||
Gross Deferred Tax Assets |
$ | 188,007 | $ | 5,014 | $ | 193,021 | ||||||
Statutory Valuation Allowance Adjustment |
| | | |||||||||
|
|
|
|
|
|
|||||||
Adjusted Gross Deferred Tax Assets |
188,007 | 5,014 | 193,021 | |||||||||
Deferred Tax Assets Nonadmitted |
98,096 | | 98,096 | |||||||||
|
|
|
|
|
|
|||||||
Subtotal (Net Deferred Tax Assets) |
89,911 | 5,014 | 94,925 | |||||||||
Deferred Tax Liabilities |
6,726 | 1,814 | 8,540 | |||||||||
|
|
|
|
|
|
|||||||
Net Admitted Deferred Tax Assets |
$ | 83,185 | $ | 3,200 | $ | 86,385 | ||||||
|
|
|
|
|
|
December 31, 2012 restated | ||||||||||||
Ordinary | Capital | Total | ||||||||||
Gross Deferred Tax Assets |
$ | 204,072 | $ | 5,477 | $ | 209,549 | ||||||
Statutory Valuation Allowance Adjustment |
| | | |||||||||
|
|
|
|
|
|
|||||||
Adjusted Gross Deferred Tax Assets |
204,072 | 5,477 | 209,549 | |||||||||
Deferred Tax Assets Nonadmitted |
94,756 | 225 | 94,981 | |||||||||
|
|
|
|
|
|
|||||||
Subtotal (Net Deferred Tax Assets) |
109,316 | 5,252 | 114,568 | |||||||||
Deferred Tax Liabilities |
8,074 | 1,353 | 9,427 | |||||||||
|
|
|
|
|
|
|||||||
Net Admitted Deferred Tax Assets |
$ | 101,242 | $ | 3,899 | $ | 105,141 | ||||||
|
|
|
|
|
|
Ordinary | Change Capital |
Total | ||||||||||
Gross Deferred Tax Assets |
$ | (16,065 | ) | $ | (463 | ) | $ | (16,528 | ) | |||
Statutory Valuation Allowance Adjustment |
| | | |||||||||
|
|
|
|
|
|
|||||||
Adjusted Gross Deferred Tax Assets |
(16,065 | ) | (463 | ) | (16,528 | ) | ||||||
Deferred Tax Assets Nonadmitted |
3,340 | (225 | ) | 3,115 | ||||||||
|
|
|
|
|
|
|||||||
Subtotal (Net Deferred Tax Assets) |
(19,405 | ) | (238 | ) | (19,643 | ) | ||||||
Deferred Tax Liabilities |
(1,348 | ) | 461 | (887 | ) | |||||||
|
|
|
|
|
|
|||||||
Net Admitted Deferred Tax Assets |
$ | (18,057 | ) | $ | (699 | ) | $ | (18,756 | ) | |||
|
|
|
|
|
|
51
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The main components of deferred income tax amounts are as follows:
Year Ended December 31 | ||||||||||||
2013 | 2012 | Change | ||||||||||
Restated | ||||||||||||
Ordinary |
||||||||||||
Policyholder reserves |
$ | 87,923 | $ | 105,158 | (17,235 | ) | ||||||
Investments |
1,436 | 644 | 792 | |||||||||
Deferred acquisition costs |
83,907 | 85,238 | (1,331 | ) | ||||||||
Compensation and benefits accrual |
458 | 470 | (12 | ) | ||||||||
Receivables - nonadmitted |
13,607 | 10,866 | 2,741 | |||||||||
Corporate Provision |
| 350 | (350 | ) | ||||||||
Other (including items <5% of ordinary tax assets) |
676 | 1,346 | (670 | ) | ||||||||
|
|
|
|
|
|
|||||||
Subtotal |
188,007 | 204,072 | (16,065 | ) | ||||||||
Nonadmitted |
98,096 | 94,756 | 3,340 | |||||||||
|
|
|
|
|
|
|||||||
Admitted ordinary deferred tax assets |
89,911 | 109,316 | (19,405 | ) | ||||||||
Capital: |
||||||||||||
Investments |
5,014 | 5,477 | (463 | ) | ||||||||
Other (including items <5% of total total capital tax assets) |
| | | |||||||||
|
|
|
|
|
|
|||||||
Subtotal |
5,014 | 5,477 | (463 | ) | ||||||||
Nonadmitted |
| 225 | (225 | ) | ||||||||
|
|
|
|
|
|
|||||||
Admitted capital deferred tax assets |
5,014 | 5,252 | (238 | ) | ||||||||
|
|
|
|
|
|
|||||||
Admitted deferred tax assets |
$ | 94,925 | $ | 114,568 | $ | (19,643 | ) | |||||
|
|
|
|
|
|
Year Ended December 31 | ||||||||||||
2013 | 2012 | Change | ||||||||||
Restated | ||||||||||||
Deferred Tax Liabilities: |
||||||||||||
Ordinary |
||||||||||||
Investments |
$ | 27 | $ | 295 | $ | (268 | ) | |||||
§807(f) adjustment |
6,075 | 7,769 | (1,694 | ) | ||||||||
Other (including items <5% of total ordinary tax liabilities) |
291 | 10 | 281 | |||||||||
|
|
|
|
|
|
|||||||
Subtotal |
6,393 | 8,074 | (1,681 | ) | ||||||||
Capital |
||||||||||||
Investments |
2,147 | 1,353 | 794 | |||||||||
Other (including items <5% of total capital tax liabilities) |
| | | |||||||||
|
|
|
|
|
|
|||||||
Subtotal |
2,147 | 1,353 | 794 | |||||||||
|
|
|
|
|
|
|||||||
Deferred tax liabilities |
8,540 | 9,427 | (887 | ) | ||||||||
|
|
|
|
|
|
|||||||
Net deferred tax assets/liabilities |
$ | 86,385 | $ | 105,141 | $ | (18,756 | ) | |||||
|
|
|
|
|
|
The Company did not record a valuation allowance for deferred tax assets as of December 31, 2013 and 2012.
52
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
As discussed in Note 1, for the years ended December 31, 2013 and 2012 the Company admits deferred income tax assets pursuant to SSAP No. 101. The amount of admitted adjusted gross deferred income tax assets under each component of SSAP No. 101 is as follows:
December 31, 2013 | ||||||||||||
Ordinary | Capital | Total | ||||||||||
Admission Calculation Components SSAP No. 101 |
||||||||||||
2(a) Federal Income Taxes Paid in Prior Years Recoverable Through Loss Carrybacks |
$ | 59,186 | $ | 568 | $ | 59,754 | ||||||
2(b) Adjusted Gross Deferred Tax Assets Expected to be Realized (Excluding The Amount of Deferred Tax Assets From 2(a) above) After Application of the Threshold Limitation (the Lesser of 2(b)1 and 2(b)2 below) |
23,999 | 2,632 | 26,631 | |||||||||
1. Adjusted Gross Deferred Tax Assets Expected to be Realized Following the Balance Sheet Date |
23,999 | 2,632 | 26,631 | |||||||||
2. Adjusted Gross Deferred Tax Assets Allowed per Limitation Threshold |
XXX | XXX | 43,246 | |||||||||
2(c) Adjusted Gross Deferred Tax Assets (Excluding The Amount Of Deferred Tax Assets From 2( a) and 2(b) above) Offset by Gross Deferred Tax Liabilities |
6,726 | 1,814 | 8,540 | |||||||||
|
|
|
|
|
|
|||||||
2(d) Deferred Tax Assets Admitted as the result of application of SSAP No. 101, Total (2(a) + 2(b) + 2(c)) |
$ | 89,911 | $ | 5,014 | $ | 94,925 | ||||||
|
|
|
|
|
|
December 31, 2012 - restated | ||||||||||||
Ordinary | Capital | Total | ||||||||||
Admission Calculation Components SSAP No. 101 |
||||||||||||
2(a) Federal Income Taxes Paid in Prior Years Recoverable Through Loss Carrybacks |
$ | 78,322 | $ | 1,538 | $ | 79,860 | ||||||
2(b) Adjusted Gross Deferred Tax Assets Expected to be Realized (Excluding The Amount of Deferred Tax Assets From 2(a) above) After Application of the Threshold Limitation (the Lesser of 2(b)1 and 2(b)2 below) |
22,921 | 2,360 | 25,281 | |||||||||
1. Adjusted Gross Deferred Tax Assets Expected to be Realized Following the Balance Sheet Date |
22,921 | 2,360 | 25,281 | |||||||||
2. Adjusted Gross Deferred Tax Assets Allowed per Limitation Threshold |
XXX | XXX | 32,425 | |||||||||
2(c) Adjusted Gross Deferred Tax Assets (Excluding The Amount Of Deferred Tax Assets From 2( a) and 2(b) above) Offset by Gross Deferred Tax Liabilities |
8,074 | 1,353 | 9,427 | |||||||||
|
|
|
|
|
|
|||||||
2(d) Deferred Tax Assets Admitted as the result of application of SSAP No. 101, Total (2(a) + 2(b) + 2(c)) |
$ | 109,317 | $ | 5,251 | $ | 114,568 | ||||||
|
|
|
|
|
|
53
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Ordinary | Change Capital |
Total | ||||||||||
Admission Calculation Components SSAP No. 101 |
||||||||||||
2(a) Federal Income Taxes Paid in Prior Years Recoverable Through Loss Carrybacks |
$ | (19,136 | ) | $ | (970 | ) | $ | (20,106 | ) | |||
2(b) Adjusted Gross Deferred Tax Assets Expected to be Realized (Excluding The Amount of Deferred Tax Assets From 2(a) above) After Application of the Threshold Limitation (the Lesser of 2(b)1 and 2(b)2 below) |
1,078 | 272 | 1,350 | |||||||||
1. Adjusted Gross Deferred Tax Assets Expected to be Realized Following the Balance Sheet Date |
1,078 | 272 | 1,350 | |||||||||
2. Adjusted Gross Deferred Tax Assets Allowed per Limitation Threshold |
XXX | XXX | 10,821 | |||||||||
2(c) Adjusted Gross Deferred Tax Assets (Excluding The Amount Of Deferred Tax Assets From 2(a) and 2(b) above) Offset by Gross Deferred Tax Liabilities |
(1,348 | ) | 461 | (887 | ) | |||||||
|
|
|
|
|
|
|||||||
2(d) Deferred Tax Assets Admitted as the result of application of SSAP No. 101, Total (2(a) + 2(b) + 2(c)) |
$ | (19,406 | ) | $ | (237 | ) | $ | (19,643 | ) | |||
|
|
|
|
|
|
December 31 | ||||||||||||
2013 | 2012 | Change | ||||||||||
Restated | ||||||||||||
Ratio Percentage Used To Determine Recovery Period and Threshold Limitation Amount |
660 | % | 629 | % | 31 | % | ||||||
|
|
|
|
|
|
|||||||
Amount of Adjusted Capital and Surplus Used To Determine Recovery Period and Threshold Limitation in 2(b)2 above |
$ | 319,063 | $ | 233,275 | $ | 85,788 | ||||||
|
|
|
|
|
|
54
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The impact of tax planning strategies at December 31, 2013 and 2012 was as follows:
December 31, 2013 | ||||||||||||
Ordinary | Capital | |||||||||||
Percent | Percent | Total Percent | ||||||||||
Impact of Tax Planning Strategies: |
||||||||||||
Adjusted Gross DTAs |
$ | 188,007 | $ | 5,014 | $ | 193,021 | ||||||
(% of Total Adjusted Gross DTAs) |
0 | % | 89 | % | 2 | % | ||||||
|
|
|
|
|
|
|||||||
Net Admitted Adjusted Gross DTAs |
$ | 89,911 | $ | 5,014 | $ | 94,925 | ||||||
(% of Total Net Admitted Adjusted Gross DTAs) |
0 | % | 52 | % | 3 | % | ||||||
|
|
|
|
|
|
December 31, 2012 - restated | ||||||||||||
Ordinary | Capital | |||||||||||
Percent | Percent | Total Percent | ||||||||||
Impact of Tax Planning Strategies: |
||||||||||||
Adjusted Gross DTAs |
$ | 204,072 | $ | 5,477 | $ | 209,549 | ||||||
(% of Total Adjusted Gross DTAs) |
0 | % | 72 | % | 2 | % | ||||||
|
|
|
|
|
|
|||||||
Net Admitted Adjusted Gross DTAs |
$ | 109,317 | $ | 5,251 | $ | 114,568 | ||||||
(% of Total Net Admitted Adjusted Gross DTAs) |
0 | % | 38 | % | 2 | % | ||||||
|
|
|
|
|
|
Change | ||||||||||||
Ordinary | Capital | |||||||||||
Percent | Percent | Total Percent | ||||||||||
Impact of Tax Planning Strategies: |
||||||||||||
Adjusted Gross DTAs |
$ | (16,065 | ) | $ | (463 | ) | $ | (16,528 | ) | |||
(% of Total Adjusted Gross DTAs) |
0 | % | 17 | % | 0 | % | ||||||
|
|
|
|
|
|
|||||||
Net Admitted Adjusted Gross DTAs |
$ | (19,406 | ) | $ | (237 | ) | $ | (19,643 | ) | |||
(% of Total Net Admitted Adjusted Gross DTAs) |
0 | % | 14 | % | 1 | % | ||||||
|
|
|
|
|
|
The Companys tax planning strategies do not include the use of reinsurance-related tax planning strategies.
55
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Current income taxes incurred consist of the following major components:
Year Ended December 31 | ||||||||||||
2013 | 2012 | Change | ||||||||||
Restated | ||||||||||||
Current Income Tax |
||||||||||||
Federal |
$ | 25,592 | $ | 20,548 | $ | 5,044 | ||||||
Foreign |
| | | |||||||||
|
|
|
|
|
|
|||||||
Subtotal |
25,592 | 20,548 | 5,044 | |||||||||
|
|
|
|
|
|
|||||||
Federal income tax on net capital gains |
(968 | ) | 1,153 | (2,121 | ) | |||||||
Utilization of capital loss carry-forwards |
| | | |||||||||
Other |
| | | |||||||||
|
|
|
|
|
|
|||||||
Federal and foreign income taxes incurred |
$ | 24,624 | $ | 21,701 | $ | 2,923 | ||||||
|
|
|
|
|
|
Year Ended December 31 | ||||||||||||
2012 | 2011 | Change | ||||||||||
Restated | ||||||||||||
Current Income Tax |
||||||||||||
Federal |
$ | 20,548 | $ | 9,379 | $ | 11,169 | ||||||
Foreign |
| | | |||||||||
|
|
|
|
|
|
|||||||
Subtotal |
20,548 | 9,379 | 11,169 | |||||||||
|
|
|
|
|
|
|||||||
Federal income tax on net capital gains |
1,153 | (402 | ) | 1,555 | ||||||||
Utilization of capital loss carry-forwards |
| | | |||||||||
Other |
| | | |||||||||
|
|
|
|
|
|
|||||||
Federal and foreign income taxes incurred |
$ | 21,701 | $ | 8,977 | $ | 12,724 | ||||||
|
|
|
|
|
|
56
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The Companys current income tax incurred and change in deferred income tax differs from the amount obtained by applying the federal statutory rate of 35% to income before tax as follows:
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Restated | ||||||||||||
Current income taxes incurred |
$ | 24,624 | $ | 21,701 | $ | 8,977 | ||||||
Change in deferred income taxes (without tax on unrealized gains and losses) |
14,829 | 12,437 | (18,337 | ) | ||||||||
|
|
|
|
|
|
|||||||
Total income tax reported |
$ | 39,453 | $ | 34,138 | $ | (9,360 | ) | |||||
|
|
|
|
|
|
|||||||
Income before taxes |
$ | 182,335 | $ | 155,387 | $ | (2,209 | ) | |||||
35.00 | % | 35.00 | % | 35.00 | % | |||||||
|
|
|
|
|
|
|||||||
Expected income tax expense (benefit) at 35% statutory rate |
$ | 63,817 | $ | 54,385 | $ | (773 | ) | |||||
Increase (decrease) in actual tax reported resulting from: |
||||||||||||
Dividends received deduction |
(13,794 | ) | (9,949 | ) | (13,603 | ) | ||||||
Tax credits |
(499 | ) | (847 | ) | (1,817 | ) | ||||||
Tax-exempt Income |
(11 | ) | | | ||||||||
Tax adjustment for IMR |
(269 | ) | (531 | ) | (464 | ) | ||||||
Surplus adjustment for in-force ceded |
(5,481 | ) | (7,460 | ) | 14,570 | |||||||
Nondeductible expenses |
7 | 9 | 53 | |||||||||
Deferred tax benefit on other items in surplus |
(2,725 | ) | (258 | ) | (5,245 | ) | ||||||
Provision to return |
(583 | ) | (569 | ) | (498 | ) | ||||||
Life-owned life insurance |
(809 | ) | (808 | ) | (798 | ) | ||||||
Dividends from certain foreign corporations |
124 | 179 | 165 | |||||||||
Prior period adjustment |
| | (810 | ) | ||||||||
Other |
(324 | ) | (13 | ) | (140 | ) | ||||||
|
|
|
|
|
|
|||||||
Total income tax reported |
$ | 39,453 | $ | 34,138 | $ | (9,360 | ) | |||||
|
|
|
|
|
|
For federal income tax purposes, the Company joins in a consolidated income tax return filing with its indirect parent company, Transamerica Corporation, and other affiliated companies. The method of allocation between the companies is subject to a written tax allocation agreement. Under the terms of the tax allocation agreement, allocations are based on separate income tax return calculations. The Company is entitled to recoup federal income taxes paid in the event the future losses and credits reduce the greater of the Companys separately computed income tax liability or the consolidated groups income tax liability in the year generated. The Company is also entitled to recoup federal income taxes paid in the event the losses and credits reduce the greater of the Companys separately computed income tax liability or the consolidated groups income tax liability in any carryback or carryforward year when so applied. Intercompany income tax balances are settled within thirty days of payment to or filing with the Internal Revenue Service. A tax return has not yet been filed for 2013.
57
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
As of December 31, 2013 and 2012, the Company had no operating loss, capital loss or tax credit carryforwards available for tax purposes.
The Company incurred income taxes during 2013, 2012 and 2011 of $25,819, $23,920 (restated) and $10,171, respectively, which will be available for recoupment in the event of future net losses.
The amount of tax contingencies calculated for the Company as of December 31, 2013 and 2012 is $398 and $635, respectively. The total amount of tax contingencies that, if recognized, would affect the effective income tax rate is $398. The Company classifies interest and penalties related to income taxes as income tax expense. The Companys interest expense related to income taxes for the years ending December 31, 2013, 2012 and 2011 is $17, $34 and $107, respectively. The total interest payable balance as of December 31, 2013 and 2012 is $16 and $43, respectively. The Company recorded no liability for penalties. It is not anticipated that the total amounts of unrecognized tax benefits will significantly increase within twelve months of the reporting date.
The Companys federal income tax returns have been examined by the Internal Revenue Service and closing agreements have been executed through 2004. The examination for the years 2005 through 2006 have been completed and resulted in tax return adjustments that are currently undergoing final calculation at appeal. The examination for the years 2007 through 2008 has been completed and resulted in tax return adjustments that are currently being appealed. An examination is already in progress for the years 2009 and 2010. The Company believes that there are adequate defenses against or sufficient provisions established related to any open or contested tax positions.
58
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
6. Policy and Contract Attributes
A portion of the Companys policy reserves and other policyholders funds (including separate account liabilities) relates to liabilities established on a variety of the Companys annuity and deposit fund products. There may be certain restrictions placed upon the amount of funds that can be withdrawn without penalty. The amount of reserves on these products, by withdrawal characteristics, is summarized as follows:
December 31, 2013 | ||||||||||||||||
General Account |
Separate Account Non-Guaranteed |
Total | Percent | |||||||||||||
Subject to discretionary withdrawal |
||||||||||||||||
With fair value adjustment |
$ | 6,430 | $ | | $ | 6,430 | 0 | % | ||||||||
At book value less surrender charge of 5% or more |
17,134 | | 17,134 | 0 | ||||||||||||
At fair value |
10,146 | 3,383,580 | 3,393,727 | 85 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total with adjustment or at fair value |
33,710 | 3,383,580 | 3,417,291 | 85 | ||||||||||||
At book value without adjustment (minimal or no charge or adjustment) |
338,449 | | 338,449 | 9 | ||||||||||||
Not subject to discretionary withdrawal |
224,984 | 24,398 | 249,381 | 6 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total annuity reserves and deposit liabilities |
597,143 | 3,407,978 | 4,005,121 | 100 | % | |||||||||||
|
|
|||||||||||||||
Less reinsurance ceded |
176,169 | | 176,169 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Net annuity reserves and deposit liabilities |
$ | 420,974 | $ | 3,407,978 | $ | 3,828,952 | ||||||||||
|
|
|
|
|
|
59
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
December 31, 2012 | ||||||||||||||||
General Account |
Separate Account Non-Guaranteed |
Total | Percent | |||||||||||||
Subject to discretionary withdrawal |
||||||||||||||||
With fair value adjustment |
$ | 12,653 | $ | | $ | 12,653 | 0 | % | ||||||||
At book value less surrender charge of 5% or more |
23,271 | | 23,271 | 1 | ||||||||||||
At fair value |
10,303 | 3,251,952 | 3,262,255 | 79 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total with adjustment or at fair value |
46,226 | 3,251,952 | 3,298,179 | 80 | ||||||||||||
At book value without adjustment (minimal or no charge or adjustment) |
356,324 | | 356,324 | 9 | ||||||||||||
Not subject to discretionary withdrawal |
460,643 | 17,530 | 478,173 | 11 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total annuity reserves and deposit liabilities |
863,193 | 3,269,482 | 4,132,676 | 100 | % | |||||||||||
|
|
|||||||||||||||
Less reinsurance ceded |
359,372 | | 359,372 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Net annuity reserves and deposit liabilities |
$ | 503,822 | $ | 3,269,482 | $ | 3,773,304 | ||||||||||
|
|
|
|
|
|
Information regarding the separate accounts of the Company is as follows:
Guaranteed Indexed |
Nonindexed Guaranteed Less Than 4% |
Nonindexed Guaranteed More Than 4% |
Nonguaranteed Separate Accounts |
Total | ||||||||||||||||
Premiums, deposits and other considerations for the year ended December 31, 2013 |
$ | | $ | | $ | | $ | 282,851 | $ | 282,851 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Reserves for accounts with assets at fair value at December 31, 2013 |
$ | | $ | | $ | | $ | 6,751,640 | $ | 6,751,640 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Reserves for separate accounts by withdrawal characteristics as of December 31, 2013: |
||||||||||||||||||||
Subject to discretionary withdrawal: |
$ | | $ | | $ | | $ | | $ | | ||||||||||
With fair value adjustment |
| | | | | |||||||||||||||
At book value without fair value adjustment and with current surrender charge of 5% or more |
| | | | | |||||||||||||||
At fair value |
| | | 6,727,242 | 6,727,242 | |||||||||||||||
At book value without fair value adjustment and with current surrender charge of less than 5% |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Subtotal |
| | | 6,727,242 | 6,727,242 | |||||||||||||||
Not subject to discretionary withdrawal |
| | | 24,398 | 24,398 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total separate account liabilities at December 31, 2013 |
$ | | $ | | $ | | $ | 6,751,640 | $ | 6,751,640 | ||||||||||
|
|
|
|
|
|
|
|
|
|
60
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Guaranteed Indexed |
Nonindexed Guaranteed Less Than 4% |
Nonindexed Guaranteed More Than 4% |
Nonguaranteed Separate Accounts |
Total | ||||||||||||||||
Premiums, deposits and other considerations for the year ended December 31, 2012 |
$ | | $ | | $ | | $ | 305,221 | $ | 305,221 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Reserves for accounts with assets at fair value at December 31, 2012 |
$ | | $ | | $ | | $ | 6,184,833 | $ | 6,184,833 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Reserves for separate accounts by withdrawal characteristics as of December 31, 2012: |
||||||||||||||||||||
Subject to discretionary withdrawal: |
$ | | $ | | $ | | $ | | $ | | ||||||||||
With fair value adjustment |
| | | | | |||||||||||||||
At book value without fair value adjustment and with current surrender charge of 5% or more |
| | | | | |||||||||||||||
At fair value |
| | | 6,167,303 | 6,167,303 | |||||||||||||||
At book value without fair value adjustment and with current surrender charge of less than 5% |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Subtotal |
| | | 6,167,303 | 6,167,303 | |||||||||||||||
Not subject to discretionary withdrawal |
| | | 17,530 | 17,530 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total separate account liabilities at December 31, 2012 |
$ | | $ | | $ | | $ | 6,184,833 | $ | 6,184,833 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Guaranteed Indexed |
Nonindexed Guaranteed Less Than 4% |
Nonindexed Guaranteed More Than 4% |
Nonguaranteed Separate Accounts |
Total | ||||||||||||||||
Premiums, deposits and other considerations for the year ended December 31, 2011 |
$ | | $ | | $ | | $ | 349,011 | $ | 349,011 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Reserves for accounts with assets at fair value at December 31, 2011 |
$ | | $ | | $ | | $ | 6,130,295 | $ | 6,130,295 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Reserves for separate accounts by withdrawal characteristics as of December 31, 2011: |
||||||||||||||||||||
Subject to discretionary withdrawal: |
$ | | $ | | $ | | $ | | $ | | ||||||||||
With fair value adjustment |
| | | | | |||||||||||||||
At book value without fair value adjustment and with current surrender charge of 5% or more |
| | | | | |||||||||||||||
At fair value |
| | | 6,119,486 | 6,119,486 | |||||||||||||||
At book value without fair value adjustment and with current surrender charge of less than 5% |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Subtotal |
| | | 6,119,486 | 6,119,486 | |||||||||||||||
Not subject to discretionary withdrawal |
| | | 10,809 | 10,809 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total separate account liabilities at December 31, 2011 |
$ | | $ | | $ | | $ | 6,130,295 | $ | 6,130,295 | ||||||||||
|
|
|
|
|
|
|
|
|
|
61
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
A reconciliation of the amounts transferred to and from the Companys separate accounts is presented below:
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Transfer as reported in the summary of operations of the separate accounts statement: |
||||||||||||
Transfers to separate accounts |
$ | 282,994 | $ | 305,223 | $ | 349,322 | ||||||
Transfers from separate accounts |
733,373 | 619,557 | 604,330 | |||||||||
|
|
|
|
|
|
|||||||
Net transfers from separate accounts |
(450,379 | ) | (314,334 | ) | (255,008 | ) | ||||||
Miscellaneous reconciling adjustments |
169,572 | 206,848 | 192,445 | |||||||||
|
|
|
|
|
|
|||||||
Net transfers as reported in the statement of operations of the Company |
$ | (280,807 | ) | $ | (107,485 | ) | $ | (62,563 | ) | |||
|
|
|
|
|
|
The legal insulation of separate account assets prevents such assets from being generally available to satisfy claims resulting from the general account. At December 31, 2013 and 2012, the Companys separate account statement included legally insulated assets of $6,969,476 and $6,477,236, respectively. The assets legally insulated from general account claims at December 31, 2013 and 2012 are attributed to the following products:
Product |
2013 | 2012 | ||||||
Variable annuities |
$ | 3,418,039 | $ | 3,285,825 | ||||
Variable universal life |
433,847 | 502,202 | ||||||
WRL asset accumulator |
13,874 | 19,390 | ||||||
Variable life |
3,103,717 | 2,669,818 | ||||||
|
|
|
|
|||||
Total separate account assets |
$ | 6,969,477 | $ | 6,477,236 | ||||
|
|
|
|
The Company does not participate in securities lending transactions within the separate account.
For variable annuities with guaranteed living benefits and variable annuities with minimum guaranteed death benefits the Company complies with Actuarial Guideline XLIII (AG 43), which replaces Actuarial Guidelines 34 and 39. AG 43 specifies statutory reserve requirements for variable annuity contracts with benefit guarantees (VACARVM) and without benefit guarantees and related products. The AG 43 reserve calculation includes variable annuity products issued after January 1, 1981. Examples of covered guaranteed benefits include guaranteed minimum accumulation benefits, return of premium death benefits, guaranteed minimum income benefits, guaranteed minimum withdrawal benefits and guaranteed payout annuity floors. The aggregate reserve for contracts falling within the scope of AG 43 is equal to the conditional tail expectation (CTE) Amount, but not less than the standard scenario amount (SSA).
62
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
To determine the CTE Amount, the Company used 1,000 of the pre-packaged scenarios developed by the American Academy of Actuaries (AAA) produced in October 2005 and prudent estimate assumptions based on Company experience. The SSA was determined using the assumptions and methodology prescribed in AG 43 for determining the SSA.
At December 31, 2013 and 2012, the Company had variable and separate account annuities with minimum guaranteed benefits as follows:
Benefit and Type of Risk |
Subjected Account Value |
Amount of Reserve Held |
Reinsurance Reserve Credit |
|||||||||
December 31, 2013 |
||||||||||||
Minimum guaranteed death benefit |
$ | 1,972,229 | $ | 43,201 | $ | 32,994 | ||||||
Minimum guaranteed income benefit |
911,702 | 151,267 | 140,999 | |||||||||
Minimum guaranteed withdrawal benefit |
743,795 | 121 | | |||||||||
December 31, 2012 |
||||||||||||
Minimum guaranteed death benefit |
$ | 1,944,966 | $ | 115,540 | $ | 72,996 | ||||||
Minimum guaranteed income benefit |
888,320 | 335,636 | 296,170 | |||||||||
Minimum guaranteed withdrawal benefit |
493,265 | 1,294 | |
The Company offers variable and separate account annuities with minimum guaranteed benefits. In accordance with the guarantees provided, if the investment proceeds are insufficient to cover the rate of return guaranteed for the product, the policyholder proceeds will be remitted by the general account. As of December 31, 2013 and 2012, the general account of the Company had a maximum guarantee for separate account liabilities of $397,079 and $560,717, respectively. To compensate the general account for the risk taken, the separate account paid risk charges of $9,769, $10,487 and $11,446 to the general account in 2013, 2012 and 2011, respectively. During the years ended December 31, 2013, 2012 and 2011, the general account of the Company had paid $11,952, $12,243 and $12,975, respectively, toward separate account guarantees.
63
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Reserves on the Companys traditional life insurance products are computed using mean reserving methodologies. These methodologies result in the establishment of assets for the amount of the net valuation premiums that are anticipated to be received between the policies paid-through date to the policys next anniversary date. At December 31, 2013 and 2012, the gross premium and loading amounts related to these assets (which are reported as premiums deferred and uncollected), are as follows:
Gross | Loading | Net | ||||||||||
December 31, 2013 |
||||||||||||
Ordinary direct renewal business |
$ | | $ | | $ | | ||||||
Ordinary new business |
1,739 | 1,026 | 2,765 | |||||||||
|
|
|
|
|
|
|||||||
$ | 1,739 | $ | 1,026 | $ | 2,765 | |||||||
|
|
|
|
|
|
|||||||
December 31, 2012 |
||||||||||||
Ordinary direct renewal business |
$ | 1,631 | $ | 1,103 | $ | 2,734 | ||||||
Ordinary new business |
1 | | 1 | |||||||||
|
|
|
|
|
|
|||||||
$ | 1,631 | $ | 1,103 | $ | 2,735 | |||||||
|
|
|
|
|
|
At December 31, 2013 and 2012, the Company had insurance in force aggregating $2,281,861 and $3,228,205, respectively, in which the gross premiums are less than the net premiums required by the valuation standards established by the Ohio Department of Insurance. The Company established policy reserves of $17,449 and $22,152 to cover these deficiencies at December 31, 2013 and 2012, respectively.
7. Capital and Surplus
The Company is subject to limitations, imposed by the Ohio Department of Insurance, on the payment of dividends to its stockholders. Generally, dividends during any year may not be paid, without prior regulatory approval, in excess of the greater of (a) 10 percent of Companys statutory surplus as of the preceding December 31, or (b) net income for the preceding year. Subject to the availability of unassigned surplus at the time of such dividend, the maximum payment which may be made in 2014, without the prior approval of insurance regulatory authorities, is $159,809.
On December 23, 2013, the Company paid common stock dividends of $50,000 to its parent company, Aegon. The Company received dividends of $13,090 and $2,420, from its subsidiaries, Transamerica Asset Management, Inc., and Transamerica Fund Services, Inc, respectively, during 2013.
On December 21, 2012, the Company paid common stock dividends of $27,000 to its parent company, Aegon. The Company received dividends of $11,550, $2,200 and $175, from its subsidiaries, Transamerica Asset Management, Inc., Transamerica Fund Services, Inc, and Intersecurities Insurance Agency, Inc., respectively, during 2012.
64
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
On May 16, 2011, the Company paid common stock dividends of $250,000 to its parent company, Aegon. The amount consisted of $23,100 ordinary cash dividend and $226,900 extraordinary cash dividend. The Company received dividends of $11,165 and $7,502 from its subsidiaries, Transamerica Asset Management, Inc. and Transamerica Fund Services, Inc., respectively, during 2011. The Company made a capital contribution of $597 to Transamerica Asset Management, Inc. during 2011.
Life and health insurance companies are subject to certain RBC requirements as specified by the NAIC. Under those requirements, the amount of capital and surplus maintained by a life or health insurance company is to be determined based on the various risk factors related to it. At December 31, 2013, the Company meets the minimum RBC requirements.
8. Securities Lending
The Company participates in an agent-managed securities lending program. The Company receives collateral equal to 102% of the fair value of the loaned government/other domestic securities as of the transaction date. If the fair value of the collateral is at any time less than 102% of the fair value of the loaned securities, the counterparty is mandated to deliver additional collateral, the fair value of which, together with the collateral already held in connection with the lending transaction, is at least equal to 102% of the fair value of the loaned government/other domestic securities. In the event the Company loans a foreign security and the denomination of the currency of the collateral is other than the denomination of the currency of the loaned foreign security, the Company receives and maintains collateral equal to 105% of the fair value of the loaned security.
At December 31, 2013 and 2012, respectively, securities in the amount of $85,026 and $81,764 were on loan under securities lending agreements. The collateral the Company received from securities lending was in the form of cash and on open terms. This cash collateral is reinvested and is not available for general corporate purposes. The reinvested cash collateral had a fair value of $88,261 and $84,804 at December 31, 2013 and 2012, respectively.
The contractual maturities of the securities lending collateral positions are as follows:
Fair Value | ||||
Open |
$ | 88,184 | ||
30 days or less |
| |||
31 to 60 days |
| |||
61 to 90 days |
| |||
Greater than 90 days |
| |||
|
|
|||
Sub-Total |
88,184 | |||
Securities received |
| |||
|
|
|||
Total collateral received |
$ | 88,184 | ||
|
|
65
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The Company receives primarily cash collateral in an amount in excess of the fair value of the securities lent. The Company reinvests the cash collateral into higher yielding securities than the securities which the Company has lent to other entities under the arrangement.
The maturity dates of the reinvested securities lending collateral are as follows:
Amortized Cost | Fair Value | |||||||
Open |
$ | 5,395 | $ | 5,395 | ||||
30 days or less |
41,077 | 41,073 | ||||||
31 to 60 days |
24,260 | 24,260 | ||||||
61 to 90 days |
12,634 | 12,634 | ||||||
91 to 120 days |
901 | 901 | ||||||
121 to 180 days |
3,998 | 3,998 | ||||||
181 to 365 days |
| | ||||||
1 to 2 years |
| | ||||||
2-3 years |
| | ||||||
Greater than 3 years |
| | ||||||
|
|
|
|
|||||
Total |
88,265 | 88,261 | ||||||
Securities received |
| | ||||||
|
|
|
|
|||||
Total collateral reinvested |
$ | 88,265 | $ | 88,261 | ||||
|
|
|
|
For securities lending, the Companys sources of cash that it uses to return the cash collateral are dependent upon the liquidity of the current market conditions. Under current conditions, the Company has securities with a par value of $88,267 (fair value of $88,261) that are currently tradable securities that could be sold and used to pay for the $88,184 in collateral calls that could come due under a worst-case scenario.
9. Retirement and Compensation Plans
The Companys employees participate in a qualified defined benefit plan sponsored by Aegon. The Company has no legal obligation for the plan. The Company recognizes pension expense equal to its allocation from Aegon. The pension expense is allocated among the participating companies based on International Accounting Standards 19 (IAS 19), Accounting for Employee Benefits and based upon actuarial participant benefit calculations. The benefits are based on years of service and the employees eligible annual compensation during the highest five consecutive years of employment. Pension expenses were $490, $627 and $1,255 for the years ended December 31, 2013, 2012 and 2011, respectively. The plan is subject to the reporting and disclosure requirements of the Employee Retirement and Income Security Act of 1974.
The Companys employees also participate in a defined contribution plan sponsored by Aegon which is qualified under Section 401(k) of the Internal Revenue Service Code. Employees of the Company who customarily work at least 1,000 hours during each calendar year and meet the other eligibility requirements are participants of the plan. Participants may elect to contribute up to twenty-five percent of their salary to the plan. The Company will match an amount up to three percent of the participants salary. Participants may direct all of their contributions and plan
66
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
balances to be invested in a variety of investment options. The plan is subject to the reporting and disclosure requirements of the Employee Retirement and Income Security Act of 1974. Expense related to this plan was $260, $280 and $532 for the years ended December 31, 2013, 2012 and 2011, respectively.
Aegon sponsors supplemental retirement plans to provide the Companys senior management with benefits in excess of normal pension benefits. The plans are noncontributory and benefits are based on years of service and the employees 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 Companys allocation of expense for these plans for 2013, 2012 and 2011 was none. Aegon also sponsors an employee stock option plan/stock appreciation rights for employees of the Company and a stock purchase plan for its producers, with the participating affiliated companies establishing their own eligibility criteria, producer contribution limits and company matching formula. These plans have been funded as deemed appropriate by management of Aegon and the Company.
In addition to pension benefits, the Company participates in plans sponsored by Aegon that provide postretirement medical, dental and life insurance benefits to employees meeting certain eligibility requirements. Portions of the medical and dental plans are contributory. The postretirement plan expenses are charged to affiliates in accordance with an intercompany cost sharing arrangement. The Company expensed $117, $110 and $210 for the years ended 2013, 2012 and 2011, respectively.
10. Related Party Transactions
The Company shares certain officers, employees and general expenses with affiliated companies.
The Company is party to a Cost Sharing agreement between Aegon companies, providing for needed services. The Company is also party to a Management and Administrative and Advisory agreement with Aegon USA Realty Advisors, Inc. whereby the Advisor serves as the administrator and advisor for the Companys mortgage loan operations by administering the day-to-day real estate and mortgage loan operations of the Company. Aegon USA Investment Management, LLC acts as a discretionary investment manager under an Investment Management Agreement with the Company. The Company provides office space, marketing and administrative services to certain affiliates. The net amount received by the Company as a result of being a party to these agreements was $51,725, $44,117, and $33,717 during 2013, 2012 and 2011, respectively. The Company has an administration service agreement with Transamerica Asset Management, Inc. to provide administrative services to the Aegon/Transamerica Series Trust. The Company received $24,966, $23,814, and $24,411 from this agreement during 2013, 2012 and 2011, respectively.
Receivables from and payables to affiliates and intercompany borrowings bear interest at the thirty-day commercial paper rate. At December 31, 2013, and 2012, the Company reported a net amount of $19,859 and $10,992 (restated), respectively, due from affiliates. Terms of settlement
67
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
require that these amounts are settled within 90 days. During 2013, 2012 and 2011, the Company paid net interest of $8, $12, and $39, respectively, to affiliates.
In prior years, the Company purchased life insurance policies covering the lives of certain employees of the Company from an affiliate. At December 31, 2013 and 2012, the cash surrender value of these policies was $75,881 and $75,295, respectively.
11. Commitments and Contingencies
The Company is a party to legal proceedings involving a variety of issues incidental to its business. Lawsuits may be brought in nearly any federal or state court in the United States or in an arbitral forum. In addition, there continues to be significant federal and state regulatory activity relating to financial services companies. The Companys legal proceedings are subject to many variables, and given its complexity and scope, outcomes cannot be predicted with certainty. Although legal proceedings sometimes include substantial demands for compensatory and punitive damages, and injunctive relief, it is managements opinion that damages arising from such demands will not be material to the Companys 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 Companys balance sheet. The future obligation for known insolvencies has been accrued based on the most recent information available from the National Organization of Life and Health Insurance Guaranty Association. Potential future obligations for unknown insolvencies are not determinable by the Company and are not required to be accrued for financial reporting purposes. The Company has established a reserve of $448 and $1,624 and an offsetting premium tax benefit of $222 and $809 at December 31, 2013 and 2012, respectively, for its estimated share of future guaranty fund assessments related to several major insurer insolvencies. The guaranty fund expense was $252, $60 and $(1,824) for 2013, 2012 and 2011, respectively.
The Company had no contingent commitments or LIHTC commitments as of December 31, 2013 and 2012.
The Company is required by the Commodity Futures Trading Commission (CFTC) to maintain assets on deposit with brokers for futures trading activity done on behalf of the Company. The broker has a secured interest with priority in the pledged assets, however, the Company has the right to recall and substitute the pledged assets. At December 31, 2013 and 2012, respectively, the Company pledged assets in the amount of $18,694 and $14,125 to satisfy the requirements of futures trading accounts.
68
Western Reserve Life Assurance Co. of Ohio
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
12. Sales, Transfer, and Servicing of Financial Assets and Extinguishments of Liabilities
The Company enters into dollar repurchase agreements in which securities are delivered to the counterparty once adequate collateral has been received. At December 31, 2013 and 2012, the Company had dollar repurchase agreements outstanding in the amount of $26,475 and $25,986, respectively. The Company had an outstanding liability for borrowed money in the amount $26,718 and $26,355 at December 31, 2013 and 2012, respectively due to participation in dollar repurchase agreements which includes accrued interest. The Company did not participate in dollar repurchase agreements at December 31, 2011.
The contractual maturities of the dollar repurchase agreement positions are as follows:
Fair Value | ||||
Open |
$ | 26,624 | ||
30 days or less |
| |||
31 to 60 days |
| |||
61 to 90 days |
| |||
Greater than 90 days |
| |||
|
|
|||
Sub-Total |
26,624 | |||
Securities received |
| |||
|
|
|||
Total collateral received |
$ | 26,624 | ||
|
|
In the course of the Companys asset management, securities are sold and reacquired within 30 days of the sale date to enhance the Companys yield on its investment portfolio. There were no securities of NAIC designation 3 or below sold during 2013 and reacquired within 30 days of the sale date.
13. Subsequent Events
The financial statements are adjusted to reflect events that occurred between the balance sheet date and the date when the financial statements are issued, provided they give evidence of conditions that existed at the balance sheet date (Type I). Events that are indicative of conditions that arose after the balance sheet date are disclosed, but do not result in an adjustment of the financial statements themselves (Type II). The Company has not identified any Type I or Type II subsequent events for the year ended December 31, 2013 through the date the financial statements are issued.
The Company is not subject to the annual fee imposed under section 9010 of the Affordable Care Act due to the Companys health insurance premium falling below the $25 million threshold at which the fee applies.
69
Statement Schedules
Western Reserve Life Assurance Co. of Ohio
Summary of Investments Other Than
Investments in Related Parties
(Dollars in Thousands)
December 31, 2013
Schedule I
Type of Investment |
Cost (1) | Fair Value | Amount at Which Shown in the Balance Sheet (2) |
|||||||||
Fixed maturities |
||||||||||||
Bonds: |
||||||||||||
United States government and government agencies and authorities |
$ | 112,477 $ | 112,950 | $ | 112,477 | |||||||
States, municipalities and political subdivisions |
53,342 | 52,613 | 53,342 | |||||||||
Foreign governments |
20,728 | 20,645 | 20,728 | |||||||||
Hybrid securities |
19,038 | 21,660 | 19,038 | |||||||||
All other corporate bonds |
1,243,373 | 1,273,978 | 1,242,468 | |||||||||
|
|
|
|
|
|
|||||||
Total fixed maturities |
1,448,958 | 1,481,846 | 1,448,053 | |||||||||
Mortgage loans on real estate |
77,805 | 77,805 | ||||||||||
Real estate |
33,641 | 33,641 | ||||||||||
Cash, cash equivalents and short-term investments |
110,547 | 110,547 | ||||||||||
Policy loans |
442,800 | 442,800 | ||||||||||
Securities lending reinvested collateral assets |
88,265 | 88,265 | ||||||||||
Other invested assets |
3,012 | 3,012 | ||||||||||
|
|
|
|
|||||||||
Total investments |
$ | 2,205,028 | $ | 2,204,123 | ||||||||
|
|
|
|
(1) | Original cost of equity securities and, as to fixed maturities, original cost reduced by repayments and adjusted for amortization of premiums or accruals of discounts. |
(2) | Corporate bonds of $2,006 are held at fair value rather than amortized cost due to having and NAIC 6 rating. |
70
Western Reserve Life Assurance Co. of Ohio
Supplementary Insurance Information
(Dollars in Thousands)
Schedule III
Future Policy Benefits and Expenses |
Policy and Contract Liabilities |
Premium Revenue |
Net Investment Income* |
Benefits, Claims, Losses and Settlement Expenses |
Other Operating Expenses* |
|||||||||||||||||||
Year ended December 31, 2013 |
||||||||||||||||||||||||
Individual life |
$ | 1,478,901 | $ | 24,359 | $ | 515,740 | $ | 69,314 | $ | 563,939 | $ | 345,287 | ||||||||||||
Group life and health |
42,505 | 84 | 12,399 | 1,834 | 12,357 | 4,341 | ||||||||||||||||||
Annuity |
389,341 | 642 | 12,952 | 21,342 | 187,631 | (367,480 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | 1,910,747 | $ | 25,085 | $ | 541,091 | $ | 92,490 | $ | 763,927 | $ | (17,852 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Year ended December 31, 2012 - restated |
||||||||||||||||||||||||
Individual life |
$ | 1,269,626 | $ | 24,833 | $ | 458,257 | $ | 57,260 | $ | 301,282 | $ | 358,243 | ||||||||||||
Group life and health |
32,078 | 313 | 12,904 | 1,296 | 9,674 | 9,421 | ||||||||||||||||||
Annuity |
481,279 | 1,193 | 13,547 | 23,173 | 243,747 | (210,941 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | 1,782,983 | $ | 26,339 | $ | 484,708 | $ | 81,729 | $ | 554,703 | $ | 156,723 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Year ended December 31, 2011 |
||||||||||||||||||||||||
Individual life |
$ | 1,182,368 | $ | 27,384 | $ | 447,724 | $ | 54,583 | $ | 248,384 | $ | 428,545 | ||||||||||||
Group life and health |
24,599 | 313 | 10,631 | 1,016 | 8,035 | 7,554 | ||||||||||||||||||
Annuity |
540,352 | 1,617 | 22,244 | 24,432 | 341,509 | (222,539 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | 1,747,319 | $ | 29,314 | $ | 480,599 | $ | 80,031 | $ | 597,928 | $ | 213,560 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
* | Allocations of net investment income and other operating expenses are based on a number of assumptions and estimates, and the results would change if different methods were applied. |
71
Western Reserve Life Assurance Co. of Ohio
(Dollars in Thousands)
Schedule IV
Gross Amount | Ceded to Other Companies |
Assumed From Other Companies |
Net Amount | Percentage of Amount Assumed to Net |
||||||||||||||||
Year ended December 31, 2013 |
||||||||||||||||||||
Life insurance in force |
$ | 90,587,615 | $ | 22,500,865 | $ | | $ | 68,086,750 | 0 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Premiums: |
||||||||||||||||||||
Individual life |
$ | 674,998 | $ | 159,258 | $ | | $ | 515,740 | 0 | % | ||||||||||
Group life and health |
28,039 | 15,640 | | 12,399 | 0 | % | ||||||||||||||
Annuity |
26,952 | 14,000 | | 12,952 | 0 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 729,989 | $ | 188,898 | $ | | $ | 541,091 | 0 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Year ended December 31, 2012 |
||||||||||||||||||||
Life insurance in force |
$ | 119,611,140 | $ | 63,828,956 | $ | | $ | 55,782,184 | 0 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Premiums: |
||||||||||||||||||||
Individual life |
$ | 633,538 | $ | 175,282 | $ | | $ | 458,256 | 0 | % | ||||||||||
Group life and health |
26,038 | 13,133 | | 12,905 | 0 | % | ||||||||||||||
Annuity |
24,587 | 11,040 | | 13,547 | 0 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 684,163 | $ | 199,455 | $ | | $ | 484,708 | 0 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Year ended December 31, 2011 |
||||||||||||||||||||
Life insurance in force |
$ | 115,294,179 | $ | 64,174,427 | $ | | $ | 51,119,752 | 0 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Premiums: |
||||||||||||||||||||
Individual life |
$ | 612,636 | $ | 165,675 | $ | 763 | $ | 447,724 | 0 | % | ||||||||||
Group life |
23,890 | 13,259 | | 10,631 | 0 | % | ||||||||||||||
Annuity |
33,760 | 11,516 | | 22,244 | 0 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 670,286 | $ | 190,450 | $ | 763 | $ | 480,599 | 0 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
72
Transamerica Premier Life Insurance Company financials
F I N A N C I A L S T A T E M E N T S A N D S C H E D U L E S S T A T U T O R Y B A S I S
Monumental Life Insurance Company
Years Ended December 31, 2013, 2012 and 2011
Mon Life 2013 SEC
Monumental Life Insurance Company
Financial Statements and Schedules Statutory Basis
Years Ended December 31, 2013, 2012 and 2011
Contents
Report of Independent Auditors |
1 | |||
Audited Financial Statements |
||||
Balance Sheets Statutory Basis |
3 | |||
Statements of Operations Statutory Basis |
5 | |||
Statements of Changes in Capital and Surplus Statutory Basis |
7 | |||
Statements of Cash Flow Statutory Basis |
9 | |||
Notes to Financial Statements Statutory Basis |
11 | |||
Statutory-Basis Financial Statement Schedules |
102 | |||
Summary of Investments Other Than Investments in Related Parties |
103 | |||
Supplementary Insurance Information |
104 | |||
Reinsurance |
105 |
Mon Life 2013 SEC
Report of Independent Auditors
The Board of Directors
Monumental Life Insurance Company
We have audited the accompanying statutory-basis financial statements of Monumental Life Insurance Company, which comprise the balance sheets as of December 31, 2013 and 2012, the related statutory-basis statements of operations, changes in capital and surplus, and cash flow for each of the three years in the period ended December 31, 2013, and the related notes to the financial statements. Our audits also included the statutory-basis financial statement schedules required by Regulation S-X, Article 7.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in conformity with accounting practices prescribed or permitted by the Insurance Division, Department of Commerce, of the State of Iowa. Management also is responsible for the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.
Auditors responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles
As described in Note 1, to meet the requirements of Iowa the financial statements have been prepared in conformity with accounting practices prescribed or permitted by the Insurance Division, Department of Commerce, of the State of Iowa, which practices differ from U.S. generally accepted accounting principles. The variances between such practices and U.S. generally accepted accounting principles are described in Note 1. The effects on the accompanying financial statements of these variances are not reasonably determinable but are presumed to be material.
Mon Life 2013 SEC | 1 |
Adverse Opinion on U.S. Generally Accepted Accounting Principles
In our opinion, because of the effects of the matter described in the preceding paragraph, the statutory-basis financial statements referred to above do not present fairly, in conformity with U.S. generally accepted accounting principles, the financial position of Monumental Life Insurance Company at December 31, 2013 and 2012, or the results of its operations or its cash flows for each of the three years in the period ended December 31, 2013.
Opinion on Statutory-Basis of Accounting
However, in our opinion, the statutory-basis financial statements referred to above present fairly, in all material respects, the financial position of Monumental Life Insurance Company at December 31, 2013 and 2012, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting practices prescribed or permitted by the Insurance Division, Department of Commerce, of the State of Iowa. Also in our opinion, the related financial statement schedules, when considered in relation to the basic statutory-basis financial statements taken as a whole, present fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
April 25, 2014
Mon Life 2013 SEC | 2 |
Monumental Life Insurance Company
Balance Sheets Statutory Basis
(Dollars in Thousands, Except per Share Amounts)
December 31 | ||||||||
2013 | 2012 | |||||||
Admitted assets |
||||||||
Cash and invested assets: |
||||||||
Cash, cash equivalents and short-term investments |
$ | 558,923 | $ | 1,355,524 | ||||
Bonds: |
||||||||
Affiliated entities |
57,200 | 57,200 | ||||||
Unaffiliated entities |
12,324,799 | 12,391,672 | ||||||
Preferred stocks |
9,541 | 8,418 | ||||||
Common stocks: |
||||||||
Affiliated entities (Cost: 2013- $32,862; 2012- $37,366) |
16,599 | 25,872 | ||||||
Unaffiliated (Cost: 2013- $44,500; 2012- $76,945) |
45,669 | 79,006 | ||||||
Mortgage loans on real estate |
1,692,860 | 1,864,851 | ||||||
Real estate, at cost less allowance for depreciation (2013$26; 2012$26) |
385 | 411 | ||||||
Real estate held for sale |
6,900 | 4,792 | ||||||
Policy loans |
470,549 | 477,665 | ||||||
Receivables for securities |
| 2,798 | ||||||
Collateral balance |
8,787 | 11,367 | ||||||
Derivatives |
186,389 | 129,733 | ||||||
Securities lending reinvested collateral assets |
322,209 | 350,329 | ||||||
Other invested assets |
796,575 | 851,509 | ||||||
|
|
|
|
|||||
Total cash and invested assets |
16,497,385 | 17,611,147 | ||||||
Premiums deferred and uncollected |
178,129 | 201,418 | ||||||
Accrued investment income |
166,253 | 170,354 | ||||||
Federal and foreign income tax recoverable |
5,496 | 46,400 | ||||||
Net deferred income tax asset |
162,711 | 199,932 | ||||||
Receivable from parent, subsidiaries and affiliates |
30,774 | 1,788 | ||||||
Cash surrender value of life insurance policies |
79,733 | 77,229 | ||||||
Reinsurance receivable |
18,708 | 25,459 | ||||||
Goodwill |
6,582 | 7,773 | ||||||
Contribution receivable from parent |
135,000 | | ||||||
Other assets |
46,466 | 46,172 | ||||||
Separate account assets |
14,526,003 | 12,669,510 | ||||||
|
|
|
|
|||||
Total admitted assets |
$ | 31,853,240 | $ | 31,057,182 | ||||
|
|
|
|
Mon Life 2013 SEC | 3 |
Monumental Life Insurance Company
Balance Sheets Statutory Basis (continued)
(Dollars in Thousands, Except per Share Amounts)
December 31 | ||||||||
2013 | 2012 | |||||||
Liabilities and capital and surplus |
||||||||
Liabilities: |
||||||||
Aggregate reserves for policies and contracts: |
||||||||
Life |
$ | 5,833,288 | $ | 5,840,790 | ||||
Annuity |
3,425,826 | 3,629,809 | ||||||
Accident and health |
716,358 | 562,271 | ||||||
Policy and contract claim reserves: |
||||||||
Life |
127,459 | 78,293 | ||||||
Accident and health |
110,669 | 120,190 | ||||||
Liability for deposit-type contracts |
675,895 | 889,345 | ||||||
Other policyholders funds |
6,596 | 6,872 | ||||||
Remittances and items not allocated |
4,159 | 4,504 | ||||||
Reinsurance in unauthorized companies |
1,980 | 2,167 | ||||||
Asset valuation reserve |
243,972 | 191,992 | ||||||
Interest maintenance reserve |
302,888 | 361,935 | ||||||
Funds held under reinsurance agreements |
4,274,529 | 5,104,202 | ||||||
Payable for securities |
| 2 | ||||||
Payable to parent, subsidiaries and affiliates |
| 34,378 | ||||||
Transfers from separate accounts due or accrued |
(29,291 | ) | (265 | ) | ||||
Deferred derivative gain |
3,616 | 3,822 | ||||||
Derivatives |
25,231 | 72,512 | ||||||
Payable for securities lending |
322,209 | 350,329 | ||||||
Payable for derivative cash collateral |
150,115 | 213,947 | ||||||
Borrowed money |
53,453 | 6,222 | ||||||
Other liabilities |
107,061 | 103,035 | ||||||
Separate account liabilities |
14,526,003 | 12,669,510 | ||||||
|
|
|
|
|||||
Total liabilities |
30,882,016 | 30,245,862 | ||||||
Capital and surplus: |
||||||||
Common stock: |
||||||||
Class A common stock, $750 par value, 10,000 shares authorized, 9,818.93 issued and outstanding |
7,364 | 7,364 | ||||||
Class B common stock, $750 par value, 10,000 shares authorized, 3,697.27 issued and outstanding |
2,773 | 2,773 | ||||||
Surplus notes |
160,000 | 160,000 | ||||||
Paid-in surplus |
757,199 | 621,273 | ||||||
Unassigned surplus |
43,888 | 19,910 | ||||||
|
|
|
|
|||||
Total capital and surplus |
971,224 | 811,320 | ||||||
|
|
|
|
|||||
Total liabilities and capital and surplus |
$ | 31,853,240 | $ | 31,057,182 | ||||
|
|
|
|
See accompanying notes.
Mon Life 2013 SEC | 4 |
Monumental Life Insurance Company
Statements of Operations Statutory Basis
(Dollars in Thousands)
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Revenues: |
||||||||||||
Premiums and other considerations, net of reinsurance: |
||||||||||||
Life |
$ | 449,210 | $ | 333,981 | $ | 262,979 | ||||||
Annuity |
701,427 | 606,706 | 546,479 | |||||||||
Accident and health |
555,840 | 581,030 | 593,764 | |||||||||
Net investment income |
729,329 | 822,314 | 842,041 | |||||||||
Amortization of interest maintenance reserve |
15,572 | 11,029 | 4,412 | |||||||||
Commissions and expense allowances on reinsurance ceded |
209,400 | 377,804 | 529,883 | |||||||||
Income from fees associated with investment management, administration and contract guarantees for separate accounts |
40,883 | 36,701 | 34,847 | |||||||||
Reserve adjustments on reinsurance ceded |
(226,238 | ) | (762,679 | ) | (151,484 | ) | ||||||
Consideration on reinsurance transaction |
692 | 34 | (3,039 | ) | ||||||||
Other income |
14,666 | 8,463 | 8,885 | |||||||||
|
|
|
|
|
|
|||||||
2,490,781 | 2,015,383 | 2,668,767 | ||||||||||
Benefits and expenses: |
||||||||||||
Benefits paid or provided for: |
||||||||||||
Life and accident and health benefits |
511,898 | 465,017 | 488,759 | |||||||||
Annuity benefits |
313,064 | 306,295 | 275,877 | |||||||||
Surrender benefits |
1,019,522 | 824,936 | 731,102 | |||||||||
Other benefits |
84,131 | 66,556 | 67,452 | |||||||||
Increase (decrease) in aggregate reserves for policies and contracts: |
||||||||||||
Life |
(7,502 | ) | (315,073 | ) | 71,596 | |||||||
Annuity |
(203,983 | ) | (210,254 | ) | (180,075 | ) | ||||||
Accident and health |
154,087 | 41,635 | 15,919 | |||||||||
|
|
|
|
|
|
|||||||
1,871,217 | 1,179,112 | 1,470,630 | ||||||||||
Insurance expenses: |
||||||||||||
Commissions |
318,089 | 307,592 | 320,563 | |||||||||
General insurance expenses |
220,220 | 218,792 | 223,933 | |||||||||
Taxes, licenses and fees |
46,267 | 31,215 | 28,925 | |||||||||
Net transfers from separate accounts |
(312,793 | ) | (189,380 | ) | (136,670 | ) | ||||||
Change in provision for liquidity guarantees |
(1,485 | ) | (2,050 | ) | 1,120 | |||||||
Reinsurance reserve adjustment |
(10 | ) | (10 | ) | (21 | ) | ||||||
Funds withheld ceded investment income |
138,640 | 213,973 | 211,608 | |||||||||
Experience refunds |
247 | (319 | ) | (140 | ) | |||||||
Other expenses |
6,918 | 662 | 5,347 | |||||||||
|
|
|
|
|
|
|||||||
416,093 | 580,475 | 654,665 | ||||||||||
|
|
|
|
|
|
|||||||
Total benefits and expenses |
2,287,310 | 1,759,587 | 2,125,295 | |||||||||
Gain from operations before dividends to policyholders, federal income tax expense and net realized capital losses on investments |
$ | 203,471 | $ | 255,796 | $ | 543,472 |
Mon Life 2013 SEC | 5 |
Monumental Life Insurance Company
Statements of Operations Statutory Basis (continued)
(Dollars in Thousands)
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Dividends to policyholders |
$ | 1,259 | $ | 1,279 | $ | 1,342 | ||||||
|
|
|
|
|
|
|||||||
Gain from operations before federal income tax expense and net realized capital losses on investments |
202,212 | 254,517 | 542,130 | |||||||||
Federal income tax expense |
23,987 | 103,095 | 31,580 | |||||||||
|
|
|
|
|
|
|||||||
Gain from operations before net realized capital losses on investments |
178,225 | 151,422 | 510,550 | |||||||||
Net realized capital losses on investments (net of related federal income taxes and amounts tranferred to/from interest maintenance reserve) |
(11,351 | ) | (7,876 | ) | (28,842 | ) | ||||||
|
|
|
|
|
|
|||||||
Net income |
$ | 166,874 | $ | 143,546 | $ | 481,708 | ||||||
|
|
|
|
|
|
See accompanying notes.
Mon Life 2013 SEC | 6 |
Monumental Life Insurance Company
Statements of Changes in Capital and Surplus Statutory Basis
(Dollars in Thousands)
Class A Common Stock |
Class B Common Stock |
Write-Ins for Other than Special Surplus Funds |
Surplus Notes |
Paid-in Surplus |
Unassigned Surplus (Deficit) |
Total Capital and Surplus |
||||||||||||||||||||||
Balance at January 1, 2011 |
$ | 7,364 | $ | 2,773 | $ | 97,381 | $ | 160,000 | $ | 620,616 | $ | 286,288 | 1,174,422 | |||||||||||||||
Net income |
| | | | | 481,708 | 481,708 | |||||||||||||||||||||
Change in net unrealized capital gains/losses, net of taxes |
| | | | | (12,083 | ) | (12,083 | ) | |||||||||||||||||||
Change in nonadmitted assets |
| | | | | (246,969 | ) | (246,969 | ) | |||||||||||||||||||
Change in liability for reinsurance in unauthorized companies |
| | | | | (234 | ) | (234 | ) | |||||||||||||||||||
Change in net deferred income tax asset |
| | | | | 218,165 | 218,165 | |||||||||||||||||||||
Change in asset valuation reserve |
| | | | | (30,847 | ) | (30,847 | ) | |||||||||||||||||||
Change in surplus as a result of reinsurance |
| | | | | (321,587 | ) | (321,587 | ) | |||||||||||||||||||
Increase in admitted deferred tax assets pursuant to SSAP No. 10R |
| | 23,739 | | | | 23,739 | |||||||||||||||||||||
Dividends to stockholders |
| | | | | (300,000 | ) | (300,000 | ) | |||||||||||||||||||
Correction of funds withheld investment income |
| | | | | (5,636 | ) | (5,636 | ) | |||||||||||||||||||
Long-term incentive compensation |
| | | | 175 | | 175 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2011 |
7,364 | 2,773 | 121,120 | 160,000 | 620,791 | 68,805 | 980,853 | |||||||||||||||||||||
Net income |
| | | | | 143,546 | 143,546 | |||||||||||||||||||||
Change in net unrealized capital gains/losses, net of taxes |
| | | | | (33,259 | ) | (33,259 | ) | |||||||||||||||||||
Change in nonadmitted assets |
| | | | | (29,674 | ) | (29,674 | ) | |||||||||||||||||||
Change in liability for reinsurance in unauthorized companies |
| | | | | 500 | 500 | |||||||||||||||||||||
Change in net deferred income tax asset |
| | | | | 823 | 823 | |||||||||||||||||||||
Change in asset valuation reserve |
| | | | | (9,468 | ) | (9,468 | ) | |||||||||||||||||||
Change in surplus as a result of reinsurance |
| | | | | 207,517 | 207,517 | |||||||||||||||||||||
Increase in admitted deferred tax assets pursuant to SSAP No. 10R |
| | (121,120 | ) | | | 121,120 | | ||||||||||||||||||||
Dividends to stockholders |
| | | | | (450,000 | ) | (450,000 | ) | |||||||||||||||||||
Long-term incentive compensation |
| | | | 482 | | 482 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2012 |
$ | 7,364 | $ | 2,773 | $ | | $ | 160,000 | $ | 621,273 | $ | 19,910 | $ | 811,320 |
Mon Life 2013 SEC | 7 |
Monumental Life Insurance Company
Statements of Changes in Capital and Surplus Statutory Basis (continued)
(Dollars in Thousands)
Class A Common Stock |
Class B Common Stock |
Surplus Notes |
Paid-in Surplus |
Unassigned Surplus |
Total Capital and Surplus |
|||||||||||||||||||
Balance at December 31, 2012 |
$ | 7,364 | $ | 2,773 | $ | 160,000 | $ | 621,273 | $ | 19,910 | $ | 811,320 | ||||||||||||
Net income |
| | | | 166,874 | 166,874 | ||||||||||||||||||
Capital contribution |
| | | 135,000 | | 135,000 | ||||||||||||||||||
Change in net unrealized capital gains/losses, net of taxes |
| | | | 95,530 | 95,530 | ||||||||||||||||||
Change in nonadmitted assets |
| | | | 3,579 | 3,579 | ||||||||||||||||||
Change in liability for reinsurance in unauthorized companies |
| | | | 187 | 187 | ||||||||||||||||||
Change in net deferred income tax asset |
| | | | 1,497 | 1,497 | ||||||||||||||||||
Change in asset valuation reserve |
| | | | (51,980 | ) | (51,980 | ) | ||||||||||||||||
Change in surplus as a result of reinsurance |
| | | | (63,742 | ) | (63,742 | ) | ||||||||||||||||
Correction of error related to deferred tax asset |
| | | | 7,033 | 7,033 | ||||||||||||||||||
Dividends to stockholders |
| | | | (135,000 | ) | (135,000 | ) | ||||||||||||||||
Long-term incentive compensation |
| | | 926 | | 926 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at December 31, 2013 |
$ | 7,364 | $ | 2,773 | $ | 160,000 | $ | 757,199 | $ | 43,888 | $ | 971,224 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
Mon Life 2013 SEC | 8 |
Monumental Life Insurance Company
Statements of Cash Flow Statutory Basis
(Dollars in Thousands)
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Operating activities |
||||||||||||
Premiums collected, net of reinsurance |
$ | 1,732,764 | $ | 1,537,729 | $ | 1,416,345 | ||||||
Net investment income |
761,406 | 853,775 | 877,714 | |||||||||
Reserve adjustments on reinsurance ceded |
(226,238 | ) | (762,679 | ) | (151,484 | ) | ||||||
Consideration on reinsurance transaction |
692 | 34 | (3,039 | ) | ||||||||
Commission and expense allowances on reinsurance ceded |
145,783 | 586,092 | 715,812 | |||||||||
Miscellaneous (loss) income |
56,927 | 45,527 | 34,367 | |||||||||
Benefit and loss related payments |
(1,911,975 | ) | (1,594,215 | ) | (1,594,795 | ) | ||||||
Net transfers from separate accounts |
283,766 | 189,238 | 137,889 | |||||||||
Commissions, expenses paid and aggregate write-ins for deductions |
(800,587 | ) | (815,311 | ) | (782,498 | ) | ||||||
Dividends paid to policyholders |
(1,295 | ) | (1,321 | ) | (1,383 | ) | ||||||
Federal income taxes paid (received) |
43,860 | (252,995 | ) | (20,870 | ) | |||||||
|
|
|
|
|
|
|||||||
Net cash provided by (used in) operating activities |
85,103 | (214,126 | ) | 628,058 | ||||||||
Investing activities |
||||||||||||
Proceeds from investments sold, matured or repaid: |
||||||||||||
Bonds |
2,194,421 | 5,234,590 | 2,889,949 | |||||||||
Stocks |
40,584 | 25,890 | 11,025 | |||||||||
Mortgage loans |
478,341 | 300,958 | 291,626 | |||||||||
Real estate |
2,950 | 3,570 | 2,828 | |||||||||
Other invested assets |
133,812 | 113,630 | 100,202 | |||||||||
Securities lending reinvested collateral assets |
| | 98,876 | |||||||||
Miscellaneous proceeds |
15,434 | 4,313 | 24,228 | |||||||||
|
|
|
|
|
|
|||||||
Total investment proceeds |
2,865,542 | 5,682,951 | 3,418,734 | |||||||||
Costs of investments acquired: |
||||||||||||
Bonds |
(2,136,260 | ) | (3,414,940 | ) | (2,112,595 | ) | ||||||
Stocks |
(4,960 | ) | (19,185 | ) | (54,748 | ) | ||||||
Mortgage loans |
(305,830 | ) | (37,799 | ) | (111,952 | ) | ||||||
Real estate |
(7,799 | ) | (5,071 | ) | (5,436 | ) | ||||||
Other invested assets |
(66,590 | ) | (57,944 | ) | (126,849 | ) | ||||||
Securities lending reinvested collateral assets |
28,210 | (21,939 | ) | | ||||||||
Derivatives |
(66,568 | ) | (47,592 | ) | (115,760 | ) | ||||||
Miscellaneous applications |
(2,367 | ) | (1,828 | ) | | |||||||
|
|
|
|
|
|
|||||||
Total cost of investments acquired |
(2,562,164 | ) | (3,606,298 | ) | (2,527,340 | ) | ||||||
Net decrease in policy loans |
7,116 | 9,378 | 2,742 | |||||||||
|
|
|
|
|
|
|||||||
Net cost of investments acquired |
(2,555,048 | ) | (3,596,920 | ) | (2,524,598 | ) | ||||||
|
|
|
|
|
|
|||||||
Net cash provided by investing activities |
310,494 | 2,086,031 | 894,136 |
Mon Life 2013 SEC | 9 |
Monumental Life Insurance Company
Statements of Cash Flow Statutory Basis (continued)
(Dollars in Thousands)
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Financing and miscellaneous activities |
||||||||||||
Net withdrawals on deposit-type contracts and other insurance liabilities |
$ | (1,632,098 | ) | $ | (612,670 | ) | $ | (801,239 | ) | |||
Net change in reinsurance on deposit-type contracts and other insurance liabilities |
1,292,709 | 456,205 | 588,705 | |||||||||
Borrowed funds |
47,065 | 6,200 | | |||||||||
Dividends to stockholders |
(135,000 | ) | (450,000 | ) | (300,000 | ) | ||||||
Funds held under reinsurance treaties with unauthorized reinsurers |
(829,691 | ) | (785,005 | ) | (1,266,655 | ) | ||||||
Receivable from parent, subsidiaries and affiliates |
(28,986 | ) | 102,834 | (6,744 | ) | |||||||
Payable to parent, subsidiaries and affiliates |
(34,378 | ) | (86,405 | ) | 16,142 | |||||||
Payable for securities lending |
(28,120 | ) | 21,939 | (98,876 | ) | |||||||
Other cash provided (applied) |
156,302 | 144,115 | (375,531 | ) | ||||||||
|
|
|
|
|
|
|||||||
Net cash used in financing and miscellaneous activities |
(1,192,197 | ) | (1,202,787 | ) | (2,244,198 | ) | ||||||
|
|
|
|
|
|
|||||||
Net (decrease) increase in cash, cash equivalents and short-term investments |
(796,601 | ) | 669,118 | (722,004 | ) | |||||||
Cash, cash equivalents and short-term investments: |
||||||||||||
Beginning of year |
1,355,524 | 686,406 | 1,408,410 | |||||||||
|
|
|
|
|
|
|||||||
End of year |
$ | 558,923 | $ | 1,355,524 | $ | 686,406 | ||||||
|
|
|
|
|
|
See accompanying notes.
Mon Life 2013 SEC | 10 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis
(Dollars in Thousands)
1. Organization and Summary of Significant Accounting Policies
Organization
Monumental Life Insurance Company (the Company) is a stock life insurance company owned by Commonwealth General Corporation (CGC) (87.7%) and Aegon USA, LLC (Aegon) (12.3%). Both CGC and Aegon are indirect, wholly owned subsidiaries of Aegon N.V., a holding company organized under the laws of The Netherlands.
Effective December 19, 2011, Capital General Development Corporation (CGDC), which previously owned 99.8% of the Company, merged into Capital General Development Corporation, LLC (CGDC, LLC), a wholly-owned subsidiary of the Company. The merger resulted in the 9,791.64 shares of Class A common stock and 3,686.99 shares of Class B common stock of the Company owned by CGDC transferring to CGDC, LLC. These shares of Class A and Class B common stock were deemed cancelled as a result of the merger. CGDC, LLC was formed on December 16, 2011 for purposes of this merger and dissolved effective December 31, 2011.
Prior to the merger, CGDC was owned by CGC (87.7%) and Aegon (12.3%). As consideration of the merger of CGDC into CGDC, LLC, the Company issued 8,585.39 shares of Class A common stock and 3,232.78 shares of Class B common stock to CGC, and 1,206.25 shares of Class A common stock and 454.21 shares of Class B common stock to Aegon. There was no impact to the Companys total number of Class A and Class B common stock shares issued and outstanding, only a change in ownership of those shares. As such, this transaction had no impact on the Companys balance sheets.
Nature of Business
The Company sells a full line of insurance products, including individual, credit and group coverages under life, annuity and accident and health policies as well as investment products, including guaranteed interest contracts and funding agreements. The Company is licensed in 49 states, the District of Columbia, Guam and Puerto Rico. Sales of the Companys products are primarily through agents, brokers, financial institutions and direct response methods.
Basis of Presentation
The preparation of financial statements of insurance companies requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.
Mon Life 2013 SEC | 11 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The accompanying financial statements have been prepared in conformity with accounting practices prescribed or permitted by the Insurance Division, Department of Commerce, of the State of Iowa, which practices differ from accounting principles generally accepted in the United States (GAAP). The more significant variances from GAAP are:
Investments: Investments in bonds, including affiliated bonds and mandatory redeemable preferred stocks are reported at amortized cost or fair value based on their National Association of Insurance Commissioners (NAIC) rating; for GAAP, such fixed maturity investments would be designated at purchase as held-to-maturity, trading or available-for-sale. Held-to-maturity fixed investments would be reported at amortized cost, and the remaining fixed maturity investments would be reported at fair value with unrealized holding gains and losses reported in earnings for those designated as trading and as a separate component of other comprehensive income (OCI) for those designated as available-for-sale. Fair value for GAAP is based on indexes, third party pricing services, brokers, external fund managers and internal models. For statutory reporting, the NAIC allows insurance companies to report the fair value determined by the Securities Valuation Office of the NAIC (SVO) or determine the fair value by using a permitted valuation method.
All single class and multi-class mortgage-backed/asset-backed securities (e.g., CMOs) are adjusted for the effects of changes in prepayment assumptions on the related accretion of discount or amortization of premium of such securities using either the retrospective or prospective methods. If the fair value of the mortgage-backed/asset-backed security is less than amortized cost, an entity shall assess whether the impairment is other-than-temporary. An other-than-temporary impairment is also considered to have occurred if the fair value of the mortgage-backed/asset-backed security is less than its amortized cost basis and the entity intends to sell the security or the entity does not have the intent and ability to hold the security for a period of time sufficient to recover the amortized cost basis. An other-than-temporary impairment is also considered to have occurred if the discounted estimated future cash flows are less than the amortized cost basis of the security.
If it is determined an other-than-temporary impairment has occurred as a result of the cash flow analysis, the security is written down to the discounted estimated future cash flows. If an other-than-temporary impairment has occurred due to intent to sell or lack of intent and ability to hold, the security is written down to fair value.
For GAAP, all securities, purchased or retained, that represent beneficial interests in securitized assets (e.g., CMO, CBO, CDO, CLO, MBS and ABS securities), other than high credit quality securities, are adjusted using the prospective method when there is a change in estimated future cash flows. If high credit quality securities are adjusted, the retrospective method is used. If it is determined that a decline in fair value is other-than-temporary and the entity intends to sell the
Mon Life 2013 SEC | 12 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current period credit loss, the other-than-temporary impairment should be recognized in earnings equal to the entire difference between the amortized cost basis and its fair value at the impairment date. If the entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery, the other-than-temporary impairment should be separated into a) the amount representing the credit loss, which is recognized in earnings, and b) the amount related to all other factors, which is recognized in OCI, net of applicable taxes.
Derivative instruments used in hedging transactions that meet the criteria of an effective hedge are valued and reported in a manner that is consistent with the hedged asset or liability. Embedded derivatives are not accounted for separately from the host contract. Derivative instruments used in hedging transactions that do not meet or no longer meet the criteria of an effective hedge are accounted for at fair value, and the changes in the fair value are recorded in unassigned surplus as unrealized gains and losses. Under GAAP, the effective and ineffective portions of a single hedge are accounted for separately, and the change in fair value for cash flow hedges is credited or charged directly to a separate component of OCI rather than to income as required for fair value hedges, and an embedded derivative within a contract that is not clearly and closely related to the economic characteristics and risk of the host contract is accounted for separately from the host contract and valued and reported at fair value.
Derivative instruments are also used in replication transactions. In these transactions, the derivative is valued in a manner consistent with the cash investment and replicated asset. For GAAP, the derivative is reported at fair value with the changes in the fair value reported in income.
Investments in real estate are reported net of related obligations rather than on a gross basis as for GAAP. Real estate owned and occupied by the Company is included in investments rather than reported as an operating asset as under GAAP, and investment income and operating expenses for statutory reporting include rent for the Companys occupancy of those properties. Changes between depreciated cost and admitted amounts are credited or charged directly to unassigned surplus rather than to income as would be required under GAAP.
Valuation allowances are established for mortgage loans, if necessary, based on the difference between the net value of the collateral, determined as the fair value of the collateral less estimated costs to obtain and sell, and the recorded investment in the mortgage loan. Under GAAP, such allowances are based on the present value of expected future cash flows discounted at the loans effective interest rate or, if foreclosure is probable, on the estimated fair value of the collateral.
Mon Life 2013 SEC | 13 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The initial valuation allowance and subsequent changes in the allowance for mortgage loans are charged or credited directly to unassigned surplus as part of the change in asset valuation reserve (AVR), rather than being included as a component of earnings as would be required under GAAP.
Valuation Reserves: Under a formula prescribed by the NAIC, the Company defers the portion of realized capital gains and losses on sales of fixed income investments, principally bonds and mortgage loans, attributable to changes in the general level of interest rates and amortizes those deferrals over the remaining period to maturity of the bond or mortgage loan based on groupings of individual securities sold in five-year bands. That net deferral is reported as the interest maintenance reserve (IMR) in the accompanying balance sheets. Realized capital gains and losses are reported in income net of federal income tax and transfers to the IMR. Under GAAP, realized capital gains and losses are reported in the statement of operations on a pre-tax basis in the period that the assets giving rise to the gains or losses are sold.
The AVR provides a valuation allowance for invested assets. The AVR is determined by an NAIC prescribed formula with changes reflected directly in unassigned surplus; AVR is not recognized for GAAP.
Subsidiaries: The accounts and operations of the Companys subsidiaries are not consolidated with the accounts and operations of the Company as would be required under GAAP.
Policy Acquisition Costs: The costs of acquiring and renewing business are expensed when incurred. Under GAAP, incremental costs directly related to the successful acquisition of traditional life insurance and certain long-duration accident and health insurance, to the extent recoverable from future policy revenues, would be deferred and amortized over the premium-paying period of the related policies using assumptions consistent with those used in computing policy benefit reserves; for universal life insurance and investment products, to the extent recoverable from future gross profits, deferred policy acquisition costs are amortized generally in proportion to the present value of expected gross profits from surrender charges and investment, mortality and expense margins.
Separate Accounts with Guarantees: Some of the Companys separate accounts provide policyholders with a guaranteed return. In accordance with the guarantees provided, if the investment proceeds are insufficient to cover the rate of return guaranteed for the product, the policyholder proceeds will be remitted by the general account. These separate accounts are included in the general account for GAAP due to the nature of the guaranteed return.
Nonadmitted Assets: Certain assets designated as nonadmitted, primarily net deferred tax assets and other assets not specifically identified as an admitted asset within the NAIC
Mon Life 2013 SEC | 14 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Accounting Practices and Procedures Manual (NAIC SAP), are excluded from the accompanying balance sheets and are charged directly to unassigned surplus. Under GAAP, such assets are included in the balance sheet to the extent they are not impaired.
Universal Life and Annuity Policies: Revenues for universal life and annuity policies with mortality or morbidity risk (including annuities with purchase rate guarantees) consist of the entire premium received. Benefits incurred represent surrenders and death benefits paid and the change in policy reserves. Premiums received and benefits incurred for annuity policies without mortality or morbidity risk and guaranteed interest in group annuity contracts are recorded directly to a policy reserve account using deposit accounting, without recognizing premium income or benefits expense. Interest on these policies is reflected in other benefits. Under GAAP, for universal life policies, premiums received in excess of policy charges would not be recognized as premium revenue and benefits would represent interest credited to the account values and the excess of benefits paid over the policy account value. Under GAAP, for all annuity policies without significant mortality risk, premiums received and benefits paid would be recorded directly to the reserve liability.
Benefit Reserves: Certain policy reserves are calculated based on statutorily required interest and mortality assumptions rather than on estimated expected experience or actual account balances as would be required under GAAP.
Reinsurance: Any reinsurance amounts deemed to be uncollectible have been written off through a charge to operations. In addition, a liability for reinsurance balances would be established for unsecured policy reserves ceded to reinsurers not authorized to assume such business. Changes to the liability are credited or charged directly to unassigned surplus. Under GAAP, an allowance for amounts deemed uncollectible would be established through a charge to earnings.
Losses associated with an indemnity reinsurance transaction are reported within income when incurred rather than being deferred and amortized over the remaining life of the underlying reinsured contracts as would be required under GAAP. Policy and contract liabilities ceded to reinsurers have been reported as reductions of the related reserves rather than as assets as would be required under GAAP.
Commissions allowed by reinsurers on business ceded are reported as income when incurred rather than being deferred and amortized with deferred policy acquisition costs as required under GAAP.
Deferred Income Taxes: The Company computes deferred income taxes in accordance with Statement of Statutory Accounting Principle (SSAP) No. 101, Income Taxes, A Replacement of
Mon Life 2013 SEC | 15 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
SSAP No. 10R and SSAP No. 10. Under SSAP No. 101, admitted adjusted deferred income tax assets are limited to 1) the amount of federal income taxes paid in prior years that can be recovered through loss carrybacks for existing temporary differences that reverse during a timeframe corresponding with the Internal Revenue Service tax loss carryback provisions, not to exceed three years, plus 2) the amount of adjusted gross deferred income tax assets expected to be realized within three years limited to an amount that is no greater than 15% of current periods adjusted statutory capital and surplus, plus 3) the amount of remaining adjusted gross deferred income tax assets that can be offset against existing gross deferred income tax liabilities after considering the character (i.e., ordinary versus capital) and reversal patterns of the deferred tax assets and liabilities. The remaining adjusted deferred income tax assets are nonadmitted.
Deferred income taxes do not include amounts for state taxes. Under GAAP, state taxes are included in the computation of deferred income taxes, a deferred income tax asset is recorded for the amount of gross deferred income tax assets expected to be realized in all future years, and a valuation allowance is established for deferred income tax assets not realizable.
Goodwill: Goodwill is admitted subject to an aggregate limitation of ten percent of the capital and surplus in the most recently filed annual statement excluding electronic data processing equipment, operating system software, net deferred income tax assets and net positive goodwill. Excess goodwill is nonadmitted. Goodwill is amortized over ten years. Under GAAP, goodwill is measured as the excess of the consideration transferred plus the fair value of any noncontrolling interest in the acquiree at the acquisition date as compared to the fair values of the identifiable net assets acquired. Goodwill is not amortized but is assessed for impairment on an annual basis, or more frequently if circumstances indicate that a possible impairment has occurred.
Policyholder Dividends: Policyholder dividends are recognized when declared rather than over the term of the related policies as would be required under GAAP.
Surplus Notes: Surplus notes are reported as surplus rather than liabilities as would be required under GAAP.
Statements of Cash Flow: Cash, cash equivalents and short-term investments in the statements of cash flow represent cash balances and investments with initial maturities of one year or less. Under GAAP, the corresponding caption of cash and cash equivalents includes cash balances and investments with initial maturities of three months or less.
Mon Life 2013 SEC | 16 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Securities Lending Assets and Liabilities: For securities lending programs, cash collateral received which may be sold or repledged by the Company is reflected as a one-line entry on the balance sheet (securities lending reinvested collateral assets) and a corresponding liability is established to record the obligation to return the cash collateral. Collateral received which may not be sold or repledged is not recorded on the Companys balance sheet. Under GAAP, the reinvested collateral is included within invested assets (i.e. it is not one-line reported).
The effects of the foregoing variances from GAAP on the accompanying statutory-basis financial statements have not been determined by the Company, but are presumed to be material.
Other significant accounting policies are as follows:
Investments
Investments in bonds, except those to which the SVO has ascribed an NAIC designation of 6, are reported at amortized cost using the interest method.
Hybrid securities, as defined by the NAIC, are securities designed with characteristics of both debt and equity and provide protection to the issuers senior note holders. These securities meet the definition of a bond, in accordance with SSAP No. 26, Bonds, excluding Loan-backed and Structured Securities and therefore, are reported at amortized cost or fair value based upon their NAIC rating.
Single class and multi-class mortgage-backed/asset-backed securities are valued at amortized cost using the interest method, including anticipated prepayments, except for those with an initial NAIC designation of 6, which are valued at the lower of amortized cost or fair value. Prepayment assumptions are obtained from dealer surveys or internal estimates and are based on the current interest rate and economic environment. The retrospective adjustment method is used to value all such securities, except principal-only and interest-only securities, which are valued using the prospective method.
The Company closely monitors below investment grade holdings and those investment grade issuers where the Company has concerns. The Company also regularly monitors industry sectors. The Company considers relevant facts and circumstances in evaluating whether the impairment is other-than-temporary including: (1) the probability of the Company collecting all amounts due according to the contractual terms of the security in effect at the date of acquisition; (2) the Companys decision to sell a security prior to its maturity at an amount below its carrying amount; and (3) the Companys ability to hold a structured security for a period of time to allow for recovery of the value to its carrying amount. Additionally, financial condition, near term prospects of the issuer and nationally recognized credit rating changes are monitored. Non-
Mon Life 2013 SEC | 17 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
structured securities in unrealized loss positions that are considered other-than-temporary are written down to fair value. Structured securities considered other-than-temporarily impaired are written down to discounted estimated cash flows if the impairment is the result of cash flow analysis. If the Company has an intent to sell or lack of ability to hold a structured security, it is written down to fair value. For structured securities, cash flow trends and underlying levels of collateral are monitored. The Company will record a charge to the statement of operations to the extent that these securities are determined to be other-than-temporarily impaired.
Investments in preferred stocks in good standing are reported at cost or amortized cost. Investments in preferred stocks not in good standing are reported at the lower of cost or fair value, and the related net unrealized capital gains (losses) are reported in unassigned surplus along with any adjustment for federal income taxes.
Common stocks of unaffiliated companies are reported at fair value and the related net unrealized capital gains or losses are reported in unassigned surplus along with any adjustment for federal income taxes.
If the Company determines that a decline in the fair value of a common stock or a preferred stock is other-than-temporary, the Company writes it down to fair value as the new cost basis and the amount of the write down is accounted for as a realized loss in the statement of operations. The Company considers the following factors in determining whether a decline in value is other-than-temporary: (a) the financial condition and prospects of the issuer; (b) whether or not the Company has made a decision to sell the investment; and (c) the length of time and extent to which the value has been below cost.
Common stocks of affiliated noninsurance subsidiaries are reported based on underlying audited GAAP equity. The net change in the subsidiaries equity is included in the change in net unrealized capital gains or losses, reported in unassigned surplus along with any adjustment for federal income taxes.
There are no restrictions on common or preferred stock.
Short-term investments include investments with remaining maturities of one year or less at the time of acquisition and are principally stated at amortized cost.
Cash equivalents are short-term highly liquid investments with original maturities of three months or less and are principally stated at amortized cost.
Mortgage loans are reported at unpaid principal balances, less an allowance for impairment. A mortgage loan is considered to be impaired when it is probable that the Company will be unable
Mon Life 2013 SEC | 18 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
to collect all principal and interest amounts due according to the contractual terms of the mortgage agreement. When management determines that the impairment is other-than-temporary, the mortgage loan is written down to realizable value and a realized loss is recognized.
Land is reported at cost. Real estate occupied by the Company is reported at depreciated cost net of encumbrances. Real estate held for the production of income is reported at depreciated cost net of related obligations. Real estate that the Company classifies as held for sale is measured at lower of carrying amount or fair value less cost to sell. Depreciation is calculated on a straight-line basis over the estimated useful lives of the properties. The Company recognizes an impairment loss if the Company determines that the carrying amount of the real estate is not recoverable and exceeds its fair value. The Company deems that the carrying amount of the asset is not recoverable if the carrying amount exceeds the sum of undiscounted cash flows expected to result from the use and disposition. The impairment loss is measured as the amount by which the assets carrying value exceeds its fair value.
Policy loans are reported at unpaid principal balances.
The Company has minority ownership interests in joint ventures and limited partnerships. The Company carries these investments based on its interest in the underlying audited GAAP equity of the investee. For a decline in the fair value of an investment in a joint venture or limited partnership which is determined to be other-than-temporary, the Company writes it down to fair value as the new cost basis and the amount of the write down is accounted for as a realized loss in the statement of operations. The Company considers an impairment to have occurred if it is probable that the Company will be unable to recover the carrying amount of the investment or if there is evidence indicating inability of the investee to sustain earnings which would justify the carrying amount of the investment.
The Companys investment in reverse mortgages is recorded net of an appropriate actuarial reserve. The actuarial reserve is calculated using the projected cash flows from the reverse mortgage product. Assumptions used in the actuarial model include an estimate of current home values, projected cash flows from the realization of the appreciated value of the property from its eventual sale (subject to certain limitations in the contract), mortality and termination rates based on group annuity mortality tables adjusted for the Companys experience and a constant interest rate environment. The carrying amount of the investment in reverse mortgages of $31,763 and $35,444 at December 31, 2013 and 2012, respectively, is net of the reserve of $12,375 and $26,128, respectively. Interest income of $1,969 and $2,758 was recognized for the years ended December 31, 2013 and 2012 respectively. The Companys commitment includes making advances to the borrower until termination of the contract. The contract is terminated at the time
Mon Life 2013 SEC | 19 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
the borrower moves, sells the property, dies, repays the loan balance or violates the provisions of the loan contract.
Investments in Low Income Housing Tax Credits (LIHTC) properties are valued at amortized cost. Tax credits are recognized in operations in the tax reporting year in which the tax credit is utilized by the Company.
Other admitted assets are valued principally at cost, as required or permitted by the Iowa Insurance Laws.
Realized capital gains and losses are determined using the specific identification method and are recorded net of related federal income taxes. Changes in admitted asset carrying amounts of bonds, mortgage loans, common and preferred stocks are credited or charged directly to unassigned surplus.
Interest income is recognized on an accrual basis. The Company does not accrue income on bonds in default, mortgage loans on real estate in default and/or foreclosure or which are delinquent more than twelve months, or on real estate where rent is in arrears for more than three months. Income is also not accrued when collection is uncertain. In addition, accrued interest is excluded from investment income when payment exceeds 90 days past due. At December 31, 2013 and 2012, the Company excluded investment income due and accrued for bonds in default of $210 and $155, respectively, with respect to such practices.
For dollar repurchase agreements, the Company receives cash collateral in an amount at least equal to the fair value of the securities transferred by the Company in the transaction as of the transaction date. Cash received as collateral is invested as needed or used for general corporate purposes of the Company.
Derivative Instruments
Overview: The Company may use various derivative instruments (options, caps, floors, swaps, foreign currency forwards and futures) to manage risks related to its ongoing business operations. On the transaction date of the derivative instrument, the Company designates the derivative as either (A) hedging (fair value, foreign currency fair value, cash flow, foreign currency cash flow, forecasted transactions or net investment in a foreign operation), (B) replication, (C) income generation or (D) held for other investment/risk management activities, which do not qualify for hedge accounting under SSAP No. 86, Accounting for Derivative Instruments and Hedging Activities (SSAP No. 86).
Mon Life 2013 SEC | 20 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Derivative instruments used in hedging relationships are accounted for on a basis that is consistent with the hedged item (amortized cost or fair value). Derivative instruments used in replication relationships are accounted for on a basis that is consistent with the cash instrument and the replicated asset (amortized cost or fair value). Derivative instruments used in income generation relationships are accounted for on a basis that is consistent with the associated covered asset or underlying interest to which the derivative indicates (amortized cost or fair value). Derivative instruments held for other investment/risk management activities receive fair value accounting.
Derivative instruments are subject to market risk, which is the possibility that future changes in market prices may make the instruments less valuable. The Company uses derivatives as hedges, consequently, when the value of the derivative changes, the value of a corresponding hedged asset or liability will move in the opposite direction. Market risk is a consideration when changes in the value of the derivative and the hedged item do not completely offset (correlation or basis risk) which is mitigated by active measuring and monitoring.
The Company is exposed to credit-related losses in the event of non-performance by counterparties to financial instruments, but it does not expect any counterparties to fail to meet their obligations given their high credit rating of A or better. The credit exposure of interest rate swaps and currency swaps is represented by the fair value of contracts, aggregated at a counterparty level, with a positive fair value at the reporting date. The Company has entered into collateral agreements with certain counterparties wherein the counterparty is required to post assets on the Companys behalf. The posted amount is equal to the difference between the net positive fair value of the contracts and an agreed upon threshold that is based on the credit rating of the counterparty. Inversely, if the net fair value of all contracts with this counterparty is negative, then the Company is required to post assets.
Instruments: Interest rate swaps are the primary derivative financial instruments used in the overall asset/liability management process to modify the interest rate characteristics of the underlying asset or liability. These interest rate swaps generally provide for the exchange of the difference between fixed and floating rate amounts based on an underlying notional amount. Typically, no cash is exchanged at the outset of the swap contract and a single net payment is exchanged each due date. Swaps that meet hedge accounting rules are carried in a manner consistent with the hedged item, generally at amortized cost, on the financial statements. If the swap is terminated prior to maturity, proceeds are exchanged equal to the fair value of the contract. These gains and losses may be included in IMR or AVR if the underlying instrument receives that treatment. Swaps not meeting hedge accounting rules are carried at fair value with fair value adjustments recorded in unassigned surplus.
Mon Life 2013 SEC | 21 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Interest rate basis swaps are used in the overall asset/liability management process to modify the interest rate characteristics of the underlying liability to mitigate the basis risk of assets and liabilities resetting on different indices. These interest rate swaps generally provide for the exchange of the difference between a floating rate on one index to a floating rate of another index, based upon an underlying notional amount. Typically, no cash is exchanged at the outset of the swap contract and a single net payment is exchanged at each due date. Swaps meeting hedge accounting rules are carried in a manner consistent with the hedged item, generally at amortized cost, on the financial statements. If the swap is terminated prior to maturity, proceeds are exchanged equal to the fair value of the contract. These gains and losses may be included in IMR or AVR if the underlying instrument receives that treatment. Swaps not meeting hedge accounting rules are carried at fair value with fair value adjustments recorded in unassigned surplus.
Cross currency swaps are utilized to mitigate risks when the Company holds foreign denominated assets or liabilities therefore converting the asset or liability to a U.S. dollar (USD) denominated security. These cross currency swap agreements involve the exchange of two principal amounts in two different currencies at the prevailing currency rate at contract inception. During the life of the swap, the counterparties exchange fixed or floating rate interest payments in the swapped currencies. At maturity, the principal amounts are again swapped at a pre-determined rate of exchange. Each asset or liability is hedged individually where the terms of the swap must meet the terms of the hedged instrument. For swaps qualifying for hedge accounting, the premium or discount is amortized into income over the life of the contract and the foreign currency translation adjustment is recorded as unrealized gain/loss in unassigned surplus. Swaps not meeting hedge accounting rules are carried at fair value with fair value adjustments recorded in unassigned surplus. If a swap is terminated prior to maturity, proceeds are exchanged equal to the fair value of the contract. These gains and losses may be included in IMR or AVR if the hedged instrument receives that treatment.
Futures contracts are used to hedge the liability risk associated when the Company issues products providing the customer a return based on various global equity market indices. Futures are marked to market on a daily basis whereby a cash payment is made or received by the Company. These payments are recognized as realized gains or losses in the financial statements.
Caps are used in the asset/liability management process to mitigate the interest rate risk created due to a rapidly rising interest rate environment. The caps are similar to options where the underlying interest rate index provides for the market value movements. The caps do not accrue interest until the interest rate environment exceeds the caps strike rate. Cash is exchanged at the onset, and a single receipt or payment occurs at the maturity or termination of the contract. Caps that meet hedge accounting rules are carried in a manner consistent with the hedged item, generally at amortized cost, on the financial statements. If terminated prior to maturity, proceeds
Mon Life 2013 SEC | 22 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
are exchanged equal to the fair value of the contract. These gains and losses may be included in IMR or AVR if the underlying instrument receives that treatment. Caps that do not meet hedge accounting rules are carried at fair value with fair value adjustments recorded in unassigned surplus.
The Company issues products providing the customer a return based on the various global equity market indices. The Company uses options to hedge the liability option risk associated with these products. Options are marked to fair value in the balance sheet and fair value adjustments are recorded as unassigned surplus in the financial statements.
The Company may sell products with expected benefit payments extending beyond investment assets currently available in the market. Because assets will have to be purchased in the future to fund future liability cash flows, the Company is exposed to the risk of future investments made at lower yields than what is assumed at the time of pricing. Forward-starting interest rate swaps are utilized to lock-in the current forward rate. The accrual of income begins at the forward date, rather than at the inception date. These forward-starting swaps meet hedge accounting rules and are carried at cost in the financial statements. Gains and losses realized upon termination of the forward-starting swap are deferred and used to adjust the basis of the asset purchased in the hedged forecasted period. The basis adjustment is then amortized into income as a yield adjustment to the asset over its life.
The Company invests in domestic corporate debt securities denominated in U.S. dollars. If the issuers of these debt obligations fail to make timely payments, the value of the investment declines materially. The Company manages credit default risk through the purchase of credit default swaps. As the buyer of credit default protection, the Company will pay a premium to an approved counterparty in exchange for a contingent payment should a defined credit event occur with respect to the underlying reference entity or asset. Typically, the periodic premium or fee is expressed in basis points per notional. Generally, the premium payment for default protection is made periodically, although it may be paid as an up-front fee for short dated transactions. Should a credit event occur, the Company may be required to deliver the reference asset to the counterparty for par. Alternatively, settlement may be in cash. These credit default swaps are carried on the balance sheet at amortized cost. Premium payments made by the Company are recognized as investment expense. If the Company is unable to prove hedge effectiveness, the credit default swaps not meeting hedge accounting rules are carried at fair value with fair value adjustments recorded in unassigned surplus.
A replication transaction is a derivative transaction entered into in conjunction with a cash instrument to reproduce the investment characteristics of an otherwise permissible investment. The Company replicates investment grade corporate bonds or sovereign debt by combining a highly rated security as a cash component with a credit default swap which, in effect, converts
Mon Life 2013 SEC | 23 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
the high quality asset into a lower rated investment grade asset or sovereign debt. The benefits of using the swap market to replicate credit include possible enhanced relative values as well as ease of executing larger transactions in a shortened time frame. Generally, a premium is received by the Company on a periodic basis and recognized in investment income. In the event the representative issuer defaults on its debt obligation referenced in the contract, a payment equal to the notional of the contract will be made by the Company and recognized as a capital loss.
The Company replicates hybrid fixed to floating treasuries by combining a U.S. Treasury cash component with a forward starting swap which, in effect converts a fixed U.S. Treasury into hybrid fixed to floating treasury. The purpose of these replications is to aid duration matching between the treasuries and the supported liabilities. Generally these swaps are carried at amortized cost with periodic interest payments beginning at a future date. Any early terminations are recognized as capital gains or losses. The Company complies with the specific rules established in AVR for replication transactions.
The Company holds some warrants linked to an Argentina Government GDP as part of an authorized workout from the Argentina Brady Bonds. The Company was put into these warrants and did not voluntarily transact into these types of instruments. The Company does not have any downside risk to the warrants, and only receives a payment if the GDP is above a specific threshold. These swaps are marked to fair value in the balance sheet and the fair value adjustment is recorded in capital and surplus.
Separate Accounts
Assets held in trust for purchases of variable annuity contracts and the Companys corresponding obligation to the contract owners are shown separately in the balance sheets. The assets consist of shares in funds, considered common stock investments, which are valued daily and carried at fair value. Income and gains and losses with respect to the assets in the separate accounts accrue to the benefit of the contract owners and, accordingly, the operations of the separate accounts are not included in the accompanying financial statements.
The Company received variable contract premiums of $569,933, $466,320 and $402,855 in 2013, 2012 and 2011, respectively. In addition, the Company received $40,883, $36,701 and $34,847, in 2013, 2012 and 2011, respectively, related to fees associated with investment management, administration and contractual guarantees for separate accounts.
Separate account assets and liabilities reported in the accompanying financial statements consist of three types: guaranteed indexed, non-indexed guaranteed and nonguaranteed. Guaranteed indexed separate accounts represent funds invested by the Company for the benefit of contract holders who are guaranteed returns based on published indices. Non-indexed guaranteed separate
Mon Life 2013 SEC | 24 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
accounts represent funds invested by the Company for the benefit of contract holders who are guaranteed certain returns as specified in the contracts. Separate account asset performance different than guaranteed requirements is either transferred to or received from the general account and reported in the statements of operations. Guaranteed indexed and non-indexed guaranteed separate account assets and liabilities are carried at fair value.
The nonguaranteed separate account assets and liabilities represent group annuity funds segregated by the Company for the benefit of contract owners, who bear the investment risks. The assets and liabilities of the nonguaranteed separate accounts are carried at fair value.
Aggregate Reserves for Policies and Contracts
Life, annuity and accident and health benefit reserves are developed by actuarial methods and are determined based on published tables using statutorily specified interest rates and valuation methods that will provide, in the aggregate, reserves that are greater than or equal to the minimum or guaranteed cash value, or the amount required by law. For direct business issued after October 1964, the Company waives deduction of deferred fractional premiums upon death of the insured and returns any portion of the final premium for periods beyond the month of death. For policies assumed during 1992 from former affiliates, Monumental General Insurance Company and Monumental Life Insurance Group, Inc., and for all business from company mergers occurring in 1998, the Company waives deduction of deferred fractional premium upon death of the insured and returns any portion of the final premium paid beyond the month of death. For fixed premium life insurance business resulting from company mergers occurring in 2004 and 2007, the Company waives deduction of deferred fractional premiums upon death of the insured and refunds portions of premiums unearned after the date of death. Where appropriate, the Company holds a nondeduction and/or refund reserve. The reserve for these benefits is computed using aggregate methods. The reserves are equal to the greater of the cash surrender value and the legally computed reserve.
The aggregate policy reserves for life insurance policies are based principally upon the 1941, 1958, 1980 and 2001 Commissioners Standard Ordinary Mortality Tables, the 1912, 1941 and 1961 Standard Industrial Mortality Tables, the 1960 Commissioners Standard Group Mortality Table, and the American Men, Actuaries and American Experience Mortality Tables. The reserves are calculated using interest rates ranging from 2.0 to 6.5 percent and are computed principally on the Net Level Premium Valuation and the Commissioners Reserve Valuation Methods. Reserves for universal life policies are based on account balances adjusted for the Commissioners Reserve Valuation Method.
Additional premiums are charged or additional mortality charges are assessed for policies issued on substandard lives according to underwriting classification. Generally, mean reserves are
Mon Life 2013 SEC | 25 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
determined by computing the regular mean reserve for the plan at the true age and holding, in addition, one-half (1/2) of the extra premium charge for the year. For certain flexible premium and fixed premium universal life insurance products, reserves are calculated utilizing the Commissioners Reserve Valuation Method for universal life policies and recognizing any substandard ratings.
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 and without life contingencies are equal to the present value of future payments assuming interest rates ranging from 2.5 to 11.25 percent and mortality rates, where appropriate, from a variety of tables.
Annuity reserves also include guaranteed investment contracts (GICs) and funding agreements classified as life-type contracts as defined in SSAP No. 50, Classifications and Definitions of Insurance or Managed Care Contracts In Force. These liabilities have annuitization options at guaranteed rates and consist of floating interest rate and fixed interest rate contracts. The contract reserves are carried at the greater of the account balance or the value as determined for an annuity with cash settlement option, on a change in fund basis, according to the Commissioners Annuity Reserve Valuation Method.
Accident and health policy reserves are equal to the greater of the gross unearned premiums or any required mid-terminal reserves plus net unearned premiums and the present value of amounts not yet due on both reported and unreported claims.
Tabular interest, tabular less actual reserves released and tabular cost have been determined by formula. Tabular interest on funds not involving life contingencies has also been determined primarily by formula.
Policy and Contract Claim Reserves
Claim reserves represent the estimated accrued liability for claims reported to the Company and claims incurred but not yet reported through the balance sheet date. These reserves are estimated using either individual case-basis valuations or statistical analysis techniques. These estimates are subject to the effects of trends in claim severity and frequency. The estimates are continually reviewed and adjusted as necessary as experience develops or new information becomes available.
Mon Life 2013 SEC | 26 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Liability for Deposit-Type Contracts
Deposit-type contracts do not incorporate risk from the death or disability of policyholders. These types of contracts may include GICs, funding agreements and other annuity contracts. Deposits and withdrawals on these contracts are recorded as a direct increase or decrease, respectively, to the liability balance, and are not reported as premiums, benefits or changes in reserves in the statement of operations.
The Company issues certain funding agreements with well-defined class-based annuity purchase rates defining either specific or maximum purchase rate guarantees. However, these funding agreements are not issued to or for the benefit of an identifiable individual or group of individuals. These contracts are classified as deposit-type contracts in accordance with SSAP No. 50.
Municipal Repurchase Agreements
Municipal repurchase agreements are investment contracts issued to municipalities that pay either a fixed or floating rate of interest on the guaranteed deposit balance. The floating interest rate is based on a market index. The related liabilities are equal to the policyholder deposit and accumulated interest on the contract.
These municipal repurchase agreements require a minimum of 95% of the fair value of the securities transferred to be maintained as collateral. The Company did not participate in repurchase agreements during 2013 or 2012.
Premiums and Annuity Considerations
Revenues for policies with mortality or morbidity risk (including annuities with purchase rate guarantees) consist of the entire premium received and are recognized over the premium paying periods of the related policies. Consideration received and benefits paid for annuity policies without mortality or morbidity risk are recorded using deposit accounting and recorded directly to an appropriate policy reserve account, without recognizing premium revenue.
Claims and Claim Adjustment Expense
Liabilities for losses and loss/claim adjustment expenses for accident and health contracts are estimated using statistical claim development models to develop best estimates of liabilities for medical expense business and using tabular reserves employing mortality/morbidity tables and discount rates meeting minimum regulatory requirements for other business.
Mon Life 2013 SEC | 27 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Activity in the liability for unpaid claims and related processing costs net of reinsurance is summarized as follows:
Unpaid Claims Liability Beginning of Year |
Claims Incurred |
Claims Paid |
Unpaid Claims Liability End of Year |
|||||||||||||
Year ended December 31, 2013 |
||||||||||||||||
2013 |
$ | | $ | 287,548 | $ | 175,537 | $ | 112,011 | ||||||||
2012 and prior |
195,349 | (7,707 | ) | 106,262 | 81,380 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
195,349 | $ | 279,841 | $ | 281,799 | 193,391 | |||||||||||
|
|
|
|
|||||||||||||
Active life reserve |
487,112 | 633,636 | ||||||||||||||
|
|
|
|
|||||||||||||
Total accident and health reserves |
$ | 682,461 | $ | 827,027 | ||||||||||||
|
|
|
|
|||||||||||||
Unpaid Claims Liability Beginning of Year |
Claims Incurred |
Claims Paid |
Unpaid Claims Liability End of Year |
|||||||||||||
Year ended December 31, 2012 |
||||||||||||||||
2012 |
$ | | $ | 297,471 | $ | 177,262 | $ | 120,209 | ||||||||
2011 and prior |
192,420 | (8,435 | ) | 108,845 | 75,140 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
192,420 | $ | 289,036 | $ | 286,107 | 195,349 | |||||||||||
|
|
|
|
|||||||||||||
Active life reserve |
453,015 | 487,112 | ||||||||||||||
|
|
|
|
|||||||||||||
Total accident and health reserves |
$ | 645,435 | $ | 682,461 | ||||||||||||
|
|
|
|
The Companys unpaid claims reserve was decreased by $7,707 and $8,435 for the years ended December 31, 2013 and 2012, respectively, for health claims that occurred prior to those balance sheet dates. The change in 2013 and 2012 resulted primarily from variances in the estimated frequency of claims and claim severity.
The balance in the liability for unpaid accident and health claim adjustment expenses as of December 31, 2013 and 2012 was $2,367 and $2,096, respectively. The Company incurred $3,895 and paid $3,624 of claim adjustment expenses during 2013, of which $1,972 of the paid amount was attributable to insured or covered events of prior years. The Company incurred $3,036 and paid $3,066 of claim adjustment expenses during 2012, of which $1,475 of the paid amount was attributable to insured or covered events of prior years. The Company did not
Mon Life 2013 SEC | 28 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
increase or decrease the claim adjustment expense provision for insured events of prior years during 2013 or 2012.
Reinsurance
Reinsurance premiums, commissions, expense reimbursements and reserves related to reinsured business are accounted for on bases consistent with those used in accounting for the original policies and the terms of the reinsurance contracts. Gains associated with reinsurance of in force blocks of business are included in unassigned surplus and amortized into income as earnings emerge on the reinsured block of business. Premiums ceded and recoverable losses have been reported as a reduction of premium income and benefits, respectively. Policy liabilities and accruals are reported in the accompanying financial statements net of reinsurance ceded.
Stock Option Plan, Long-Term Incentive Compensation and Stock Appreciation Rights Plans
Certain management employees of the Company participate in a stock-based long-term incentive compensation plan issued by the Companys indirect parent. In accordance with SSAP No. 13, Stock Options and Stock Purchase Plans, the expense or benefit related to this plan for the Companys management employees has been charged to the Company, with an offsetting amount credit to paid-in surplus. The Company recorded an accrued expense in the amount of $926, $482 and $175 for the years ended December 31, 2013, 2012 and 2011, respectively.
Recent Accounting Pronouncements
Effective December 31, 2013, the Company adopted revisions to SSAP No. 35R, Guaranty Fund and Other Assessments Revised which incorporates subsequent event (Type II) disclosures for entities subject to Section 9010 of the Patient Protection and Affordable Care Act related to assessments payable. The adoption of this revision did not impact the financial position or results of operations of the Company as revisions relate to disclosures only. See Note 16 for further discussion.
Effective January 1, 2013, the Company adopted SSAP No. 92, Accounting for Postretirement Benefits Other Than Pensions, A Replacement of SSAP No. 14 and SSAP No. 102, Accounting for Pensions, A Replacement of SSAP No. 89. This guidance impacts accounting for defined benefit pension plans or other postretirement plans, along with related disclosures. SSAP No. 102 requires recognition of the funded status of the plan based on the projected benefit obligation instead of the accumulated benefit obligation as under SSAP No. 89. In addition, SSAP No. 92 and SSAP No. 102 require consideration of non-vested participants. The adoption of these standards did not impact the Companys results of operations, financial position or disclosures as
Mon Life 2013 SEC | 29 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
the Company does not sponsor the pension plan and is not directly liable under the plan. See Note 11 for further discussion of the Companys pension plan and other postretirement plans as sponsored by Aegon.
Effective January 1, 2013, the Company adopted SSAP No. 103, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities which adopts with modifications the guidance in ASU 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets and supersedes SSAP No. 91R, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. The adoption of this standard did not impact the financial position or results of operation of the Company.
Effective January 1, 2013, the Company adopted non-substantive revisions to SSAP No. 36, Troubled Debt Restructuring. These revisions adopt guidance from ASU 2011-02, Receivables A Creditors Determination of Whether a Restructuring is a Troubled Debt Restructuring, which clarifies what constitutes a troubled debt restructuring and adopts with modification troubled debt restructuring disclosures for creditors from ASU 2010-20: Receivables (Topic 310), Disclosures About the Credit Quality of Financing Receivables and the Allowance for Credit Losses. The adoption of this revision did not impact the financial position or results of operations of the Company.
Effective December 31, 2012, the Company adopted non-substantive revisions to SSAP No. 86 to require disclosure of embedded credit derivatives within a financial instrument that expose the holder to the possibility of making future payments, and adopted guidance from Accounting Standards Update (ASU) 2010-11, Derivatives and Hedging Scope Exception Related to Embedded Credit Derivatives, to clarify that seller credit derivative disclosures do not apply to embedded derivative features related to the transfer of credit risk that is only in the form of subordination of one financial instrument to another. The adoption of these revisions had no impact to the Companys results of operations or financial position.
Effective December 31, 2012, the Company adopted non-substantive revisions to SSAP No. 86 to move one aspect of the criteria for a hedged forecasted transaction and incorporate it as criteria for a fair value hedge. The adoption of this revision had no impact to the Companys results of operations or financial position.
Effective December 31, 2012, the Company adopted non-substantive revisions to SSAP No. 27, Disclosure of Information about Financial Instruments with Off-Balance-Sheet Risk, Financial Instruments with Concentrations of Credit Risk and Disclosures about Fair Value of Financial Instruments, which clarifies that embedded derivatives, which are not separately recognized as derivatives under statutory accounting, are included in the disclosures of financial instruments
Mon Life 2013 SEC | 30 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
with off-balance-sheet risk. The adoption of this revision had no impact to the Companys results of operations or financial position.
Effective December 31, 2012, the Company adopted non-substantive revisions to SSAP No. 1, Disclosures of Accounting Policies, Risks and Uncertainties and Other Disclosures. These revisions require reference to the accounting policy and procedure footnote that describes permitted or prescribed practices when an individual note is impacted by such practices. The adoption of this requirement had no impact to the Companys results of operation or financial position and did not require any additional disclosures. See Note 8 Policy and Contract Attributes for further details.
Effective January 1, 2012, the Company adopted revisions to SSAP No. 100, Fair Value Measurements (SSAP No. 100). These revisions require new disclosures of fair value hierarchy and the method used to obtain the fair value measurement, a new footnote that summarizes hierarchy levels by type of financial instrument and gross presentation of purchases, sales, issues and settlements within the reconciliation for fair value measurements categorized within Level 3 of the hierarchy. The adoption of these revisions had no impact to the Companys results of operations or financial position, but did require additional disclosures. See Note 4 Fair Values of Financial Instruments for further details.
Effective January 1, 2012, the Company began computing current and deferred income taxes in accordance with SSAP No. 101. This statement established statutory accounting principles for current and deferred federal and foreign income taxes and current state income taxes. The adoption of this statement resulted in the transfer of $121,120 from Aggregate Write-Ins for Other than Special Surplus Funds to Unassigned Funds and updates to the Companys income tax disclosures. See Note 7 Income Taxes for further details.
For the year ended December 31, 2011, the Company adopted SSAP No. 10R, Income Taxes Revised, A Temporary Replacement of SSAP No. 10 (SSAP No. 10R). This statement established statutory accounting principles for current and deferred federal and foreign income taxes and current state income taxes. The SSAP temporarily superseded SSAP No. 10, Income Taxes. SSAP No. 10R allowed an entity to elect to admit additional deferred tax assets (DTAs) utilizing a three year loss carryback provision, plus the lesser of a look-forward of three years on gross DTAs expected to be realized or 15% of statutory capital and surplus if the entitys risk-based capital is above the 250% risk-based capital level where an action level could occur as a result of a trend test utilizing the old SSAP No. 10 provisions to calculate the DTA. Prior to the adoption of SSAP No. 10R, the admitted DTA was calculated by taking into consideration a one year loss carryback and look-forward on gross DTAs that can be expected to be realized and a 10% capital and surplus limit on the admitted amount of the DTA. The Company elected to admit additional deferred tax assets pursuant to SSAP No. 10R and as a result, the cumulative effect of the
Mon Life 2013 SEC | 31 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
adoption of this standard was the difference between the calculation of the admitted DTA per SSAP No.10R and the old SSAP No. 10 methodology at December 31, 2011. This change in accounting principle increased surplus by a net amount of $121,120, at December 31, 2011, which has been recorded within the statements of changes in capital and surplus.
Effective December 31, 2011, the Company adopted SSAP No. 5R, Liabilities, Contingencies and Impairments of Assets Revised. The revisions require the Company to recognize a liability equal to the greater of (a) the fair value of the guarantee at its inception, even if the likelihood of payment under the guarantee is remote or (b) the contingent liability amount required to be recognized if it is probable that a liability has been incurred at the financial statement date and the amount of loss can reasonably be determined. While this guidance does not exclude guarantees issued as intercompany transactions or between related parties from the initial liability recognition requirement, there are certain exceptions. Guarantees made to/or on behalf of a wholly-owned subsidiary and related party guarantees that are considered unlimited (for example, in response to a rating agencys requirement to provide a commitment to support) are exempt from the initial liability recognition. Additional disclosures are also required under this new guidance for all guarantees, whether or not they meet the criteria for initial liability recognition. The adoption of this new accounting principle had no material impact to the Companys results of operations or financial position, but did require additional disclosures regarding these guarantees. See Note 14 on Commitments and Contingencies for further details.
Effective December 31, 2011, the Company adopted non-substantive revisions to SSAP No. 100, to incorporate the provisions of ASU 2010-06, Improving Disclosures about Fair Value Measurements. This revision required a new disclosure for assets and liabilities for which fair value is not measured and reported in the statement of financial position but is otherwise disclosed. The adoption of these revisions had no impact to the Companys results of operations or financial position. See Note 4 for further details.
Effective December 31, 2011, the Company adopted non-substantive changes to SSAP No. 32, Investments in Preferred Stock (including investments in preferred stock of subsidiary, controlled, or affiliated entities). The amendment was made to clarify the definition of preferred stock. Under the revised SSAP No. 32, a preferred stock is defined as any class or series of shares the holders of which have any preference, either as to the payment of dividends or distribution of assets on liquidation, over the holder of common stock [as defined in SSAP No. 30, Investments in Common Stock (excluding investments in common stock of subsidiary, controlled, or affiliated entities)] issued by an entity. This revised definition had no impact to the Company.
Effective January 1, 2011, the Company adopted SSAP No. 35R, Guaranty Fund and Other Assessments Revised. This statement modified the conditions required for recognizing a
Mon Life 2013 SEC | 32 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
liability for insurance-related assessments and required additional disclosures. The adoption of this accounting principle had no financial impact to the Company. See Note 14 for disclosures related to guaranty fund assessments. The adoption of this accounting principle had no financial impact to the Company.
Effective January 1, 2011, the Company adopted revisions to certain paragraphs of SSAP No. 43R, Loan-backed and Structured Securities to clarify the accounting for gains and losses between AVR and IMR. The revisions clarify that an AVR/IMR bifurcation analysis should be performed when SSAP No. 43R securities are sold (not just as a result of impairment). These changes were applied on a prospective basis and had no financial impact to the Company upon adoption.
Effective January 1, 2011, the Company adopted revisions to SSAP No. 43R to clarify the definitions of loan-backed and structured securities. The clarified guidance was applied prospectively and had no financial impact to the Company upon adoption.
Effective January 1, 2014, the Company will adopt SSAP No. 105, Working Capital Finance Investments, which allows working capital finance investments to be admitted assets if certain criteria are met. The adoption of this standard had no impact to the financial position or results of operations of the Company.
Effective December 31, 2014, the Company will adopt revisions to SSAP No. 104R, Share-Based Payments, which provides guidance for share-based payments transactions with non-employees. The adoption of this revision is expected to be immaterial to the financial position and results of operations of the Company.
Reclassifications
Certain reclassifications have been made to the 2012 financial statements to conform to the 2013 presentation.
During 2013, the Company changed the presentation of derivative liabilities. As a result of this change, $72,512 was reclassified between the Other liabilities line and the Derivatives line in the 2012 Balance Sheet to conform to the 2013 presentation.
During 2013, the Company changed the presentation of deposit-type contract fund deposit and withdrawal activity within the Statement of Cash Flow. As a result of this change, $613,183 was reclassified from Other cash provided (applied) to Net withdrawals on deposit-type contracts and other insurance liabilities within the 2012 Statement of Cash Flow to conform to the 2013 presentation.
Mon Life 2013 SEC | 33 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
On the 2012 Statements of Operations, $10,786 was reclassified from Premiums and other considerations, net of reinsurance: Annuity to Premiums and other considerations, net of reinsurance: Life as it was determined that this amount represented considerations for supplementary contracts with life contingencies and should be shown accordingly.
2. Prescribed and Permitted Statutory Accounting Practices
The State of Iowa recognizes only statutory accounting practices prescribed or permitted by the State of Iowa for determining and reporting the financial condition and results of operations of an insurance company for determining its solvency under Iowa Insurance Law.
The NAIC SAP has been adopted as a component of prescribed or permitted practices by the State of Iowa. The State of Iowa adopted a prescribed accounting practice that differs from that found in the NAIC SAP related to reserve credits and secondary guarantee reinsurance treaties. As prescribed by Iowa Administrative Code 191-17.3(2), the commissioner found that the Company is entitled to take reserve credit for such a reinsurance contract in the amount equal to the portion of total reserves attributable to the secondary guarantee, whereas this type of reinsurance does not meet the specific requirements of SSAP No. 61, Life, Deposit-Type and Accident and Health Reinsurance and Appendix A-791 of the NAIC SAP.
A reconciliation of the Companys net income and capital and surplus between NAIC SAP and practices prescribed by the State of Iowa is shown below:
2013 | 2012 | 2011 | ||||||||||
Net income (loss) State of Iowa basis |
$ | 166,874 | $ | 143,456 | $ | 481,708 | ||||||
State prescribed practice for secondary guarantee reinsurance |
| | | |||||||||
|
|
|
|
|
|
|||||||
Net income (loss), NAIC SAP |
$ | 166,874 | $ | 143,456 | $ | 481,708 | ||||||
|
|
|
|
|
|
|||||||
Statutory surplus, State of Iowa basis |
$ | 971,224 | $ | 811,320 | $ | 980,853 | ||||||
State prescribed practice for secondary guarantee reinsurance |
(38,696 | ) | (36,211 | ) | (33,734 | ) | ||||||
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|
|
|
|
|
|||||||
Statutory surplus, NAIC SAP |
$ | 932,528 | $ | 775,109 | $ | 947,119 | ||||||
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|
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|
Mon Life 2013 SEC | 34 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
3. Accounting Changes and Correction of Errors
During 2013, the Company determined the mark-to-market adjustment on certain swap unwinds within its synthetic asset mortgage loan program were incorrectly not made for purposes of determining taxable income at December 31, 2011. Upon reviewing the impact on the prior years, an adjustment of $7,033 was designated as a prior year correction of an error and presented as a change in unassigned surplus for the year ended December 31, 2013.
During the first quarter of 2011, it was determined that the investment income credit calculation that was utilized at year end 2010 to determine the amount of income to remit to an affiliated reinsurer was incorrect. This prior year error resulted in an understatement of the amount of funds withheld investment income that should have been remitted to the affiliated reinsurer for the year of 2010 in the amount of $5,636. This correction has been presented as a change in unassigned surplus.
4. Fair Values of Financial Instruments
The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Determination of fair value
The fair values of financial instruments are determined by management after taking into consideration several sources of data. When available, the Company uses quoted market prices in active markets to determine the fair value of its investments. The Companys valuation policy utilizes a pricing hierarchy which dictates that publicly available prices are initially sought from indices and third-party pricing services. In the event that pricing is not available from these sources, those securities are submitted to brokers to obtain quotes. Lastly, securities are priced using internal cash flow modeling techniques. These valuation methodologies commonly use reported trades, bids, offers, issuer spreads, benchmark yields, estimated prepayment speeds, and/or estimated cash flows.
To understand the valuation methodologies used by third-party pricing services, the Company reviews and monitors their applicable methodology documents. Any changes to their methodologies are noted and reviewed for reasonableness. In addition, the Company performs in-depth reviews of prices received from third-party pricing services on a sample basis. The objective for such reviews is to demonstrate that the Company can corroborate detailed information such as assumptions, inputs and methodologies used in pricing individual securities
Mon Life 2013 SEC | 35 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
against documented pricing methodologies. Only third-party pricing services and brokers with a substantial presence in the market and with appropriate experience and expertise are used.
Each month, the Company performs an analysis of the information obtained from indices, third-party services and brokers to ensure that the information is reasonable and produces a reasonable estimate of fair value. The Company considers both qualitative and quantitative factors as part of this analysis, including but not limited to, recent transactional activity for similar securities, review of pricing statistics and trends, and consideration of recent relevant market events. Other controls and procedures over pricing received from indices, third-party pricing services or brokers include validation checks such as exception reports which highlight significant price changes, stale prices or un-priced securities.
Fair value hierarchy
The Companys financial assets and liabilities carried at fair value are classified, for disclosure purposes, based on a hierarchy defined by SSAP No. 100. The hierarchy gives the highest ranking to fair values determined using unadjusted quoted prices in active markets for identical assets and liabilities (Level 1), and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3). An assets or a liabilitys classification is based on the lowest level input that is significant to its measurement. For example, a Level 3 fair value measurement may include inputs that are both observable (Levels 1 and 2) and unobservable (Level 3). The levels of the fair value hierarchy are as follows:
Level 1 - | Unadjusted quoted prices for identical assets or liabilities in active markets accessible at the measurement date. |
Level 2 - | Quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following: |
a) | Quoted prices for similar assets or liabilities in active markets |
b) | Quoted prices for identical or similar assets or liabilities in non-active markets |
c) | Inputs other than quoted market prices that are observable |
d) | Inputs that are derived principally from or corroborated by observable market data through correlation or other means |
Level 3 - | Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect the Companys own assumptions about the assumptions a market participant would use in pricing the asset or liability. |
Mon Life 2013 SEC | 36 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:
Cash Equivalents and Short-Term Investments: The carrying amounts reported in the accompanying balance sheets for these financial instruments approximate their fair values. Cash is not included in the below tables.
Short-Term Notes Receivable from Affiliates: The carrying amounts reported in the accompanying balance sheets for these financial instruments approximate their fair value.
Bonds and Stocks: The NAIC allows insurance companies to report the fair value determined by the SVO or to determine the fair value by using a permitted valuation method. The fair values of bonds and stocks are reported or determined using the following pricing sources: indexes, third party pricing services, brokers, external fund managers and internal models.
Fair values for fixed maturity securities (including redeemable preferred stock) actively traded are determined from third-party pricing services, which are determined as discussed above in the description of level one and level two values within the fair value hierarchy. For fixed maturity securities (including redeemable preferred stock) not actively traded, fair values are estimated using values obtained from third-party pricing services, or are based on non-binding broker quotes or internal models. In the case of private placements, fair values are estimated by discounting the expected future cash flows using current market rates applicable to the coupon rate, credit and maturity of the investments.
Mortgage Loans on Real Estate: The fair values for mortgage loans on real estate are estimated utilizing discounted cash flows analyses, using interest rates reflective of current market conditions and the risk characteristics of the loans.
Real estate: Real estate held for sale is typically valued utilizing independent external appraisers in conjunction with reviews by qualified internal appraisers. Valuations are primarily based on active market prices, adjusted for any difference in the nature, location or condition of the specific property. If such information is not available, other valuation methods are applied, considering the value that the propertys net earning power will support, the value indicated by recent sales of comparable properties and the current cost of reproducing or replacing the property.
Other Invested Assets: The fair values for other invested assets, which include investments in surplus notes issued by other insurance companies and fixed or variable rate investments with underlying characteristics of bonds, were determined primarily by using indexes, third party pricing services and internal models.
Mon Life 2013 SEC | 37 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Derivative Financial Instruments: The estimated fair values of interest rate caps and options are based upon the latest quoted market price at the balance sheet date. The estimated fair values of swaps, including interest rate and currency swaps are based on pricing models or formulas using current assumptions. The estimated fair value of credit default swaps are based upon the pricing differential as of the balance sheet date for similar swap agreements. The Company accounts for derivatives that receive and pass hedge accounting in the same manner as the underlying hedged instrument. If that instrument is held at amortized cost, then the derivative is also held at amortized cost.
Policy Loans: The fair value of policy loans is equal to the book value of the loan, which is stated at unpaid principal balance.
Securities Lending Reinvested Collateral: The cash collateral from securities lending is reinvested in various short-term and long-term debt instruments. The fair values of these investments are determined using the methods described above under Cash, Cash Equivalents and Short-Term Investments and Bonds and Stocks.
Receivable From/Payable to Parent, Subsidiaries and Affiliates: The carrying amount of receivable from/payable to affiliates approximates their fair value.
Separate Account Assets and Annuity Liabilities: The fair value of separate account assets are based on quoted market prices when available. When not available, they are valued in the same manner as general account assets as further described in this note. The fair value of separate account annuity liabilities is based on the account value for separate accounts business without guarantees. For separate accounts with guarantees, fair value is based on discounted cash flows.
Investment Contract Liabilities: Fair value for the Companys liabilities under investment contracts, which include deferred annuities, GICs and funding agreements, are estimated using discounted cash flow calculations. The carrying value of the Companys liabilities for deferred annuities with minimum guaranteed benefits is determined using a stochastic valuation as described in Note 8, which approximates the fair value. For investment contracts without minimum guarantees, fair value is estimated using discounted cash flows. For those liabilities that are short in duration, carrying amount approximates fair value.
Deposit-Type Contracts: The carrying amounts of deposit-type contracts reported in the accompanying balance sheets approximate their fair values.
Mon Life 2013 SEC | 38 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Surplus Notes: Fair values for surplus notes are estimated using a discounted cash flow analysis based on the Companys current incremental borrowing rate for similar types of borrowing arrangements.
The Company accounts for its investments in affiliated common stock using the equity method of accounting; as such, they are not included in the following disclosures.
Fair values for the Companys insurance contracts other than investment-type contracts (including separate account universal life liabilities) are not required to be disclosed. However, the fair values of liabilities under all insurance contracts are taken into consideration in the Companys overall management of interest rate risk, such that the Companys exposure to changing interest rates is minimized through the matching of investment maturities with amounts due under insurance contracts.
Mon Life 2013 SEC | 39 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The following tables set forth a comparison of the estimated fair values and carrying amounts of the Companys financial instruments, including those not measured at fair value in the balance sheets, as of December 31, 2013 and 2012, respectively:
December 31 2013 |
||||||||||||||||||||||||
Aggregate Fair Value |
Admitted Assets |
(Level 1) | (Level 2) | (Level 3) | Not practicable (Carrying Value) |
|||||||||||||||||||
Admitted assets |
||||||||||||||||||||||||
Cash equivalents and short-term investments, other than affiliates |
$ | 471,024 | $ | 471,024 | $ | | $ | 471,024 | $ | | $ | | ||||||||||||
Bonds |
12,966,536 | 12,381,999 | 805,464 | 11,658,490 | 502,582 | | ||||||||||||||||||
Preferred stocks, other than affiliates |
8,955 | 9,541 | | 8,819 | 136 | | ||||||||||||||||||
Common stocks, other than affiliates |
45,668 | 45,668 | 4,313 | 1 | 41,354 | | ||||||||||||||||||
Mortgage loans on real estate |
1,750,784 | 1,692,860 | | | 1,750,784 | | ||||||||||||||||||
Other invested assets |
139,312 | 132,528 | | 132,614 | 6,698 | | ||||||||||||||||||
Options |
175,442 | 174,065 | 238 | 170,009 | 5,195 | | ||||||||||||||||||
Interest rate swaps |
4,890 | 4,215 | | 4,890 | | | ||||||||||||||||||
Currency swaps |
11,725 | 6,153 | | 11,725 | | | ||||||||||||||||||
Credit default swaps |
3,864 | 1,955 | | 3,864 | | | ||||||||||||||||||
Policy loans |
470,549 | 470,549 | | 470,549 | | | ||||||||||||||||||
Securities lending reinvested collateral |
322,142 | 322,209 | | 322,142 | | | ||||||||||||||||||
Receivable from parent, subsidiaries and affiliates |
30,774 | 30,774 | | 57,108 | | | ||||||||||||||||||
Separate account assets |
13,637,553 | 13,637,553 | 11,637,283 | 1,998,253 | 2,017 | | ||||||||||||||||||
Liabilities |
||||||||||||||||||||||||
Investment contract liabilities |
3,660,871 | 3,644,500 | | 47,704 | 3,613,167 | | ||||||||||||||||||
Interest rate swaps |
(141,882 | ) | 4,164 | | (141,882 | ) | | | ||||||||||||||||
Currency swaps |
19,741 | 13,783 | | 19,741 | | | ||||||||||||||||||
Credit default swaps |
(4,576 | ) | 7,285 | | (4,576 | ) | | | ||||||||||||||||
Separate account annuity liabilities |
14,413,405 | 14,416,133 | | 14,337,451 | 75,954 | | ||||||||||||||||||
Surplus notes |
168,622 | 160,000 | | | 168,622 | |
Mon Life 2013 SEC | 40 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
December 31 2012 |
||||||||||||||||||||||||
Aggregate Fair Value |
Admitted Assets |
(Level 1) | (Level 2) | (Level 3) | Not practicable (Carrying Value) |
|||||||||||||||||||
Admitted assets |
||||||||||||||||||||||||
Cash equivalents and short-term investments, other than affiliates |
$ | 1,340,103 | $ | 1,340,103 | $ | | $ | 1,340,103 | $ | | $ | | ||||||||||||
Bonds |
13,724,625 | 12,448,872 | 657,112 | 12,371,746 | 695,767 | | ||||||||||||||||||
Preferred stocks, other than affiliates |
7,715 | 8,418 | | 7,579 | 136 | | ||||||||||||||||||
Common stocks, other than affiliates |
79,006 | 79,006 | 5,773 | | 73,233 | | ||||||||||||||||||
Mortgage loans on real estate |
1,964,977 | 1,864,851 | | | 1,964,977 | | ||||||||||||||||||
Other invested assets |
145,019 | 135,696 | | 136,328 | 8,691 | | ||||||||||||||||||
Floors, caps, options and swaptions |
96,009 | 96,009 | 65 | 95,944 | | | ||||||||||||||||||
Interest rate swaps |
474,682 | 27,728 | | 474,682 | | | ||||||||||||||||||
Currency swaps |
13,552 | 5,960 | | 13,552 | | | ||||||||||||||||||
Credit default swaps |
1,283 | 36 | | 1,283 | | | ||||||||||||||||||
Policy loans |
477,665 | 477,665 | | 477,665 | | | ||||||||||||||||||
Securities lending reinvested collateral |
350,162 | 350,329 | | 350,162 | | | ||||||||||||||||||
Receivable from parent, subsidiaries and affiliates |
1,788 | 1,788 | | 1,788 | | | ||||||||||||||||||
Separate account assets |
11,548,616 | 12,669,510 | 9,723,879 | 1,800,699 | 24,038 | | ||||||||||||||||||
Liabilities |
||||||||||||||||||||||||
Investment contract liabilities |
4,522,569 | 4,619,786 | | 435,540 | 4,087,029 | | ||||||||||||||||||
Interest rate swaps |
146,339 | 26,853 | | 146,339 | | | ||||||||||||||||||
Currency swaps |
37,673 | 39,587 | | 37,673 | | | ||||||||||||||||||
Credit default swaps |
2,616 | 6,072 | | 2,616 | | | ||||||||||||||||||
Payable to parent, subsidiaries and affiliates |
34,378 | 34,378 | | 34,378 | | | ||||||||||||||||||
Separate account annuity liabilities |
12,605,439 | 12,605,099 | | 12,435,092 | 170,347 | | ||||||||||||||||||
Surplus notes |
178,570 | 160,000 | | | 178,570 | |
Mon Life 2013 SEC | 41 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The following tables provide information about the Companys financial assets and liabilities measured at fair value as of December 31, 2013 and 2012:
2013 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: |
||||||||||||||||
Bonds |
||||||||||||||||
Government |
$ | | $ | 15,835 | $ | | $ | 15,835 | ||||||||
Industrial and miscellaneous |
| 12,688 | 42,852 | 55,540 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total bonds |
| 28,523 | 42,852 | 71,375 | ||||||||||||
Preferred stock |
||||||||||||||||
Industrial and miscellaneous |
| | 136 | 136 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total preferred stock |
| | 136 | 136 | ||||||||||||
Common stock |
||||||||||||||||
Industrial and miscellaneous |
4,313 | 1 | 41,354 | 45,668 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total common stock |
4,313 | 1 | 41,354 | 45,668 | ||||||||||||
Short-term |
||||||||||||||||
Government |
| 2 | | 2 | ||||||||||||
Industrial and miscellaneous |
| 285,271 | | 285,271 | ||||||||||||
Mutual funds |
| 185,481 | | 185,481 | ||||||||||||
Sweep accounts |
| 270 | | 270 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total short-term |
| 471,024 | | 471,024 | ||||||||||||
Derivative assets |
238 | 186,624 | 5,195 | 192,057 | ||||||||||||
Separate account assets |
11,637,283 | 1,998,253 | 13,923 | 13,649,459 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets |
$ | 11,641,834 | $ | 2,684,425 | $ | 103,460 | $ | 14,429,719 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities: |
||||||||||||||||
Derivative liabilities |
$ | | $ | 122,024 | $ | | $ | 122,024 | ||||||||
Separate account liabilities |
538 | 1,129 | | 1,667 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities |
$ | 538 | $ | 123,153 | $ | | $ | 123,691 | ||||||||
|
|
|
|
|
|
|
|
Mon Life 2013 SEC | 42 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
2012 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: |
||||||||||||||||
Bonds |
||||||||||||||||
Industrial and miscellaneous |
$ | | $ | 27,052 | $ | 15,467 | $ | 42,519 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total bonds |
| 27,052 | 15,467 | 42,519 | ||||||||||||
Preferred stock |
||||||||||||||||
Industrial and miscellaneous |
| | 136 | 136 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total preferred stock |
| | 136 | 136 | ||||||||||||
Common stock |
||||||||||||||||
Industrial and miscellaneous |
5,773 | | 73,233 | 79,006 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total common stock |
5,773 | | 73,233 | 79,006 | ||||||||||||
Short-term investments |
||||||||||||||||
Government |
| 2 | | 2 | ||||||||||||
Industrial and miscellaneous |
| 1,098,015 | | 1,098,015 | ||||||||||||
Mutual funds |
| 166,890 | | 166,890 | ||||||||||||
Sweep accounts |
| 75,196 | | 75,196 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total short-term investments |
| 1,340,103 | | 1,340,103 | ||||||||||||
Derivative assets |
66 | 97,509 | | 97,575 | ||||||||||||
Separate account assets |
9,723,879 | 1,800,700 | 24,038 | 11,548,617 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets |
$ | 9,729,718 | $ | 3,265,364 | $ | 112,874 | $ | 13,107,956 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities: |
||||||||||||||||
Derivative liabilities |
$ | | $ | 21,020 | $ | | $ | 21,020 | ||||||||
Separate account liabilities |
| 1,722 | | 1,722 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities |
$ | | $ | 22,742 | $ | | $ | 22,742 | ||||||||
|
|
|
|
|
|
|
|
Bonds classified in Level 2 are valued using inputs from third party pricing services or broker quotes. Level 3 measurements for bonds are primarily those valued using non-binding broker quotes, which cannot be corroborated by other market observable data or internal modeling which utilize inputs that are not market observable.
Preferred stock in Level 3 is being internally calculated.
Common stock in Level 3 is comprised primarily of shares in the Federal Home Loan Bank (FHLB) of Des Moines, which are valued at par as a proxy for fair value as they can only be redeemed by the bank. In addition, the Company owns common stock being carried at book value and some warrants that are valued using broker quotes.
Mon Life 2013 SEC | 43 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Short-term investments are classified as Level 2 as they are carried at amortized cost, which approximates fair value.
Derivatives classified as Level 2 would represent over-the-counter (OTC) contracts valued using pricing models based on the net present value of estimated future cash flows, directly observed prices from exchange-traded derivatives, other OTC trades or external pricing services.
Derivatives classified as Level 3 represent OTC contracts valued using internal pricing models based on observable bond market prices and other market observable data or third party pricing and broker quotes.
Separate account assets are valued and classified in the same way as general account assets (described above). For example, separate account assets in Level 3 are those valued using non-binding broker quotes, which cannot be corroborated by other market observable data or internal modeling which utilize inputs that are not market observable.
Separate account liabilities consist of derivative liabilities held on the separate accounts. They are valued in the same way as the general account derivatives (described above).
During 2013 and 2012, there were no transfers between Level 1 and 2, respectively.
Mon Life 2013 SEC | 44 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The following tables summarize the changes in assets classified in Level 3 for 2013 and 2012:
Balance at January 1, 2013 |
Transfers into Level 3 |
Transfers out of Level 3 |
Total Gains and (Losses) Included in Net income (a) |
Total Gains and (Losses) Included in Surplus (b) |
||||||||||||||||
Bonds |
||||||||||||||||||||
RMBS |
$ | 247 | $ | | $ | | $ | (128 | ) | $ | 95 | |||||||||
Other |
15,220 | 12,501 | | (569 | ) | 17,686 | ||||||||||||||
Preferred stock |
136 | | | | | |||||||||||||||
Common stock |
73,233 | 84 | | (13 | ) | (1,005 | ) | |||||||||||||
Derivatives |
| | | 2,753 | | |||||||||||||||
Separate account assets |
24,038 | | 11,839 | 78 | 2,777 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 112,874 | $ | 12,585 | $ | 11,839 | $ | 2,121 | $ | 19,553 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Purchases | Issuances | Sales | Settlements | Balance at December 31, 2013 |
||||||||||||||||
Bonds |
||||||||||||||||||||
RMBS |
$ | | $ | | $ | | $ | | $ | 214 | ||||||||||
Other |
142 | | | 2,342 | 42,638 | |||||||||||||||
Preferred stock |
| | | | 136 | |||||||||||||||
Common stock |
15 | | 18,725 | 12,234 | 41,355 | |||||||||||||||
Derivatives |
| 2,442 | | | 5,195 | |||||||||||||||
Separate account assets |
| | | 1,131 | 13,923 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 157 | $ | 2,442 | $ | 18,725 | $ | 15,707 | $ | 103,461 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Mon Life 2013 SEC | 45 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Balance at January 1, 2012 |
Transfers into Level 3 |
Transfers out of Level 3 |
Total Gains and (Losses) Included in Net income (a) |
Total Gains and (Losses) Included in Surplus (b) |
||||||||||||||||
Bonds |
||||||||||||||||||||
RMBS |
$ | 1,219 | $ | 621 | $ | 1,047 | $ | (198 | ) | $ | (236 | ) | ||||||||
Other |
13,224 | 3,149 | 2,993 | (1,835 | ) | 3,127 | ||||||||||||||
Preferred stock |
136 | | | | | |||||||||||||||
Common stock |
78,106 | | 788 | | (2,486 | ) | ||||||||||||||
Derivatives |
| 4,257 | | | 1,400 | |||||||||||||||
Separate account assets |
31,150 | 1,145 | 1,033 | 104 | (6,422 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 123,835 | $ | 9,172 | $ | 5,861 | $ | (1,929 | ) | $ | (4,617 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Purchases | Issuances | Sales | Settlements | Balance at December 31, 2012 |
||||||||||||||||
Bonds |
||||||||||||||||||||
RMBS |
$ | | $ | | $ | | $ | 112 | $ | 247 | ||||||||||
Other |
30 | 2,610 | | 2,092 | 15,220 | |||||||||||||||
Preferred stock |
| | | | 136 | |||||||||||||||
Common stock |
| 2,116 | | 3,715 | 73,233 | |||||||||||||||
Derivatives |
6,369 | | | 12,026 | | |||||||||||||||
Separate account assets |
| | | 906 | 24,038 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 6,399 | $ | 4,726 | $ | | $ | 18,851 | $ | 112,874 | ||||||||||
|
|
|
|
|
|
|
|
|
|
(a) | Recorded as a component of Net Realized Capital Gains/Losses in the Statements of Operations |
(b) | Recorded as a component of Change in Net Unrealized Capital Gains/Losses in the Statements of Changes in Capital and Surplus |
The Companys policy is to recognize transfers in and out of levels as of the beginning of the reporting period.
Transfers in for bonds were attributed to securities being valued using third party vendor inputs at December 31, 2012 and 2011, subsequently changing to being internally modeled during 2013 and 2012. In addition, transfers in for bonds were attributed to securities being carried at amortized cost at December 31, 2012 and 2011, subsequently being carried at fair value during 2013 and 2012. Transfers in for bonds were also attributed to securities being valued using broker quotes which utilize observable inputs at December 31, 2011, subsequently changing to being valued using broker quotes which utilize unobservable inputs during 2012.
Mon Life 2013 SEC | 46 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Transfers out for bonds were attributed to securities being carried at fair value at December 31, 2011, subsequently changing to being carried at amortized cost during 2012. Also, transfers out for bonds were the result of securities being valued using internal models at December 31, 2011, subsequently changing to being valued using third party vendor inputs during 2012.
Transfers in for common stock were attributed to securities being valued using third party vendor inputs at December 31, 2012, subsequently changing to being internally modeled during 2013.
Transfers out for common stock were attributed to securities being valued using a stale price at December 31, 2011, subsequently changing to being valued using third party vendor inputs during 2012.
Transfers in for derivatives were attributed to securities being carried at amortized cost at December 31, 2011, subsequently changing to being carried at fair value during 2012.
Transfers in for separate account bonds were partly attributed to securities being valued using third party vendor inputs at December 31, 2011, subsequently changing to being valued using a stale price, thus causing the transfer into Level 3 during 2012. Transfers in for separate account bonds were also attributed to securities being carried at amortized cost at December 31, 2011, subsequently changing to being carried at fair value during 2012.
Transfers out for separate account bonds were partly attributed to securities being valued using non-binding broker quotes or internal modeling which utilize unobservable inputs at December 21, 2012, subsequently changing to being valued using third party vendor inputs during 2013. Transfers out for separate account bonds were attributed to securities being valued using internal modeling at December 31, 2011, subsequently changing to being valued using third party vendor inputs during 2012.
Nonrecurring fair value measurements
As indicated in Note 1, real estate held for sale is measured at the lower of carrying amount or fair value less cost to sell. As of December 31, 2013 and 2012, the Company has several properties that are held for sale. Therefore, these properties are carried at fair value less cost to sell, which amounts to $6,900 and $4,792 as of December 31, 2013 and 2012, respectively.
The properties held for sale include one home office property with a fair value of $3,500 as of December 31, 2013 and 2012. Fair value of this property was determined based upon an external appraisal following the income approach. In addition, several residential properties are held for sale with a fair value of $3,400 and $1,292 as of December 31, 2013 and 2012, respectively. Fair value for these residential properties was also determined based upon external appraisals.
Mon Life 2013 SEC | 47 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The fair value measurements are classified in Level 3 as the external appraisals utilize inputs and adjustments for the specific attributes of these properties that are not market observable.
5. Investments
The carrying amounts and estimated fair values of investments in bonds and preferred stocks are as follows:
Carrying Amount |
Gross Unrealized Gains |
Gross Unrealized Losses 12 Months or More |
Gross Unrealized Losses less Than 12 Months |
Estimated Fair Value |
||||||||||||||||
December 31, 2013 |
||||||||||||||||||||
Unaffiliated bonds: |
||||||||||||||||||||
United States Government and agencies |
$ | 603,161 | $ | 11,257 | $ | 3,328 | $ | 16,419 | $ | 594,671 | ||||||||||
State, municipal and other government |
407,239 | 36,555 | 1,818 | 8,507 | 433,469 | |||||||||||||||
Hybrid securities |
405,592 | 7,433 | 53,637 | 73 | 359,315 | |||||||||||||||
Industrial and miscellaneous |
8,507,349 | 752,983 | 64,818 | 93,914 | 9,101,600 | |||||||||||||||
Mortgage and other asset-backed securities |
2,401,458 | 115,242 | 60,791 | 24,903 | 2,431,006 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
12,324,799 | 923,470 | 184,392 | 143,816 | 12,920,061 | ||||||||||||||||
Unaffiliated preferred stocks |
9,541 | 411 | 997 | | 8,955 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 12,334,340 | $ | 923,881 | $ | 185,389 | $ | 143,816 | $ | 12,929,016 | |||||||||||
|
|
|
|
|
|
|
|
|
|
Mon Life 2013 SEC | 48 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Carrying Amount |
Gross Unrealized Gains |
Gross Unrealized Losses 12 Months or More |
Gross Unrealized Losses less Than 12 Months |
Estimated Fair Value |
||||||||||||||||
December 31, 2012 |
||||||||||||||||||||
Unaffiliated bonds: |
||||||||||||||||||||
United States Government and agencies |
$ | 374,681 | $ | 69,908 | $ | 71 | $ | 32 | $ | 444,486 | ||||||||||
State, municipal and other government |
439,755 | 80,688 | 6,794 | 83 | 513,566 | |||||||||||||||
Hybrid securities |
407,536 | 10,892 | 102,392 | | 316,036 | |||||||||||||||
Industrial and miscellaneous |
8,568,198 | 1,242,136 | 12,199 | 14,798 | 9,783,337 | |||||||||||||||
Mortgage and other asset-backed securities |
2,601,502 | 139,599 | 118,613 | 1,714 | 2,620,774 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
12,391,672 | 1,543,223 | 240,069 | 16,627 | 13,678,199 | ||||||||||||||||
Unaffiliated preferred stocks |
8,418 | 275 | 978 | | 7,715 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 12,400,090 | $ | 1,543,498 | $ | 241,047 | $ | 16,627 | $ | 13,685,914 | |||||||||||
|
|
|
|
|
|
|
|
|
|
At December 31, 2013 and 2012, respectively, for bonds and preferred stocks that have been in a continuous loss position for greater than or equal to twelve months, the Company held 219 and 192 securities with a carrying amount of $1,506,148 and $1,524,672 and an unrealized loss of $185,389 and $241,047 with an average price of 87.7 and 84.2 (fair value/amortized cost). Of this portfolio, 76.4% and 66.6% were investment grade with associated unrealized losses of $124,981 and $107,124, respectively.
At December 31, 2013 and 2012, respectively, for bonds and preferred stocks that have been in a continuous loss position for less than twelve months, the Company held 461 and 144 securities with a carrying amount of $3,079,455 and $874,294 and an unrealized loss of $143,816 and $16,627 with an average price of 95.3 and 98.1 (fair value/amortized cost). Of this portfolio, 97.3% and 96.8% were investment grade with associated unrealized losses of $140,339 and $15,035, respectively.
At December 31, 2013 and 2012, respectively, for common stocks that have been in a continuous loss position for greater than or equal to twelve months, the Company held 3 and 3 securities with a cost of $14 and $14 and an unrealized loss of $1 and $1 with an average price of 96.9 and 96.9 (fair value/cost).
At December 31, 2013 and 2012, respectively, for common stocks that have been in a continuous loss position for less than twelve months, the Company held 2 and 5 securities with a cost of $14,052 and $28,665 and an unrealized loss of $1 and $78 with an average price of 100.0 and 99.7 (fair value/cost).
Mon Life 2013 SEC | 49 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The estimated fair value of bonds, preferred stocks and common stocks with gross unrealized losses at December 31, 2013 and 2012 is as follows:
Losses 12 Months or More |
Losses Less Than 12 Months |
Total | ||||||||||
December 31, 2013 |
||||||||||||
Unaffiliated bonds: |
||||||||||||
United States Government and agencies |
$ | 15,070 | $ | 372,247 | $ | 387,317 | ||||||
State, municipal and other government |
9,976 | 110,669 | 120,645 | |||||||||
Hybrid securities |
197,309 | 22,080 | 219,389 | |||||||||
Industrial and miscellaneous |
590,431 | 1,823,597 | 2,414,028 | |||||||||
Mortgage and other asset-backed securities |
505,970 | 607,046 | 1,113,016 | |||||||||
|
|
|
|
|
|
|||||||
1,318,756 | 2,935,639 | 4,254,395 | ||||||||||
Unaffiliated preferred stocks |
2,003 | | 2,003 | |||||||||
Unaffiliated common stocks |
14 | 14,051 | 14,065 | |||||||||
|
|
|
|
|
|
|||||||
$ | 1,320,773 | $ | 2,949,690 | $ | 4,270,463 | |||||||
|
|
|
|
|
|
|||||||
Losses 12 Months or More |
Losses Less Than 12 Months |
Total | ||||||||||
December 31, 2012 |
||||||||||||
Unaffiliated bonds: |
||||||||||||
United States Government and agencies |
$ | 3,328 | $ | 14,923 | $ | 18,251 | ||||||
State, municipal and other government |
35,022 | 3,614 | 38,636 | |||||||||
Hybrid securities |
202,462 | | 202,462 | |||||||||
Industrial and miscellaneous |
189,141 | 781,804 | 970,945 | |||||||||
Mortgage and other asset-backed securities |
851,649 | 57,326 | 908,975 | |||||||||
|
|
|
|
|
|
|||||||
1,281,602 | 857,667 | 2,139,269 | ||||||||||
Unaffiliated preferred stocks |
2,022 | | 2,022 | |||||||||
Unaffiliated common stocks |
14 | 28,588 | 28,602 | |||||||||
|
|
|
|
|
|
|||||||
$ | 1,283,638 | $ | 886,255 | $ | 2,169,893 | |||||||
|
|
|
|
|
|
Mon Life 2013 SEC | 50 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The carrying amount and estimated fair value of bonds at December 31, 2013, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
Carrying Amount |
Estimated Fair Value |
|||||||
Due in one year or less |
$ | 216,702 | $ | 219,687 | ||||
Due after one year through five years |
1,968,356 | 2,103,074 | ||||||
Due after five years through ten years |
2,014,564 | 2,117,004 | ||||||
Due after ten years |
5,723,719 | 6,049,290 | ||||||
|
|
|
|
|||||
9,923,341 | 10,489,055 | |||||||
Mortgage and other asset-backed securities |
2,401,458 | 2,431,006 | ||||||
|
|
|
|
|||||
$ | 12,324,799 | $ | 12,920,061 | |||||
|
|
|
|
For impairment policies related to non-structured and structured securities, refer to Note 1 under Investments.
Banking
At December 31, 2013 the Companys banking sector portfolio had investments in an unrealized loss position which had a fair value of $651,783 and a carrying value of $746,112, resulting in a gross unrealized loss of $94,329. The gross unrealized losses in the banking sub-sector primarily reflect low floating rate coupons on some securities, credit spread widening since the time of acquisition due to the Sovereign debt crisis in Europe, residual impact from the U.S. financial crisis, and global economic uncertainty. Following the implementation of new, more stringent global legislation on bank capital and liquidity requirements, credit spreads in the sector have outperformed the broader corporate market in 2013. Decisive steps by EU leaders and world central banks continue to stabilize the euro and improve funding conditions for most banks. Globally, there remain pockets of concentrated risk on bank balance sheets, and ratings for some countries and banks remain under pressure, but the banking sub-sector has largely been strengthened and oversight increased.
The value of the Companys investments in deeply subordinated securities in the financial services sector may be significantly impacted if issuers of certain securities with optional deferral features exercise the option to defer coupon payments or are required to defer as a condition of receiving government aid. The deeply subordinated securities issued by non-US Banks are broadly referred to as capital securities which can be categorized as Tier 1 or Upper Tier 2. Capital securities categorized as Tier 1 are typically perpetual with a non-cumulative coupon that can be deferred under certain conditions. Capital securities categorized as Upper Tier 2 are
Mon Life 2013 SEC | 51 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
generally perpetual with a cumulative coupon that is deferrable under certain conditions. The deeply subordinated securities issued by US Banks can be categorized as Trust Preferred or Hybrid. Capital securities categorized as trust preferred typically have an original maturity of 30 years with call features after 10 years with a cumulative coupon that is deferrable under certain conditions. Capital securities categorized as hybrid typically have an original maturity of more than 30 years, may be perpetual and are generally subordinate to traditional trust preferred securities.
The Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the unrealized loss and does not consider those investments to be impaired as of December 31, 2013.
Subprime Mortgages
At December 31, 2013, the Companys asset-backed securities (ABS) subprime mortgages portfolio had investments in an unrealized loss position which had a fair value of $382,043 and a carrying value of $418,865, resulting in a gross unrealized loss of $36,822. ABS housing securities are secured by pools of residential mortgage loans primarily those which are categorized as subprime. The unrealized loss is primarily due to decreased liquidity and increased credit spreads in the market combined with significant increases in expected losses on loans within the underlying pools.
The Company does not currently invest in or originate whole loan residential mortgages. The Company categorizes ABS issued by a securitization trust as having subprime mortgage exposure when the average credit score of the underlying mortgage borrowers in a securitization trust is below 660 at issuance. The Company also categorizes ABS issued by a securitization trust with second lien mortgages as subprime mortgage exposure, even though a significant percentage of second lien mortgage borrowers may not necessarily have credit scores below 660 at issuance. The Company does not have any direct residential mortgages to subprime borrowers outside of the ABS structures.
All ABS subprime mortgage securities are monitored and reviewed on a monthly basis. Detailed cash flow models using the current collateral pool and capital structure on the portfolio are updated and are reviewed quarterly. Model output is generated under base and stress-case scenarios. The Companys internal ABS-housing asset specialists utilize widely recognized industry modeling software to perform a loan-by-loan, bottom-up approach to modeling. Key assumptions used in the models are projected defaults, loss severities and prepayments. Each of these key assumptions varies greatly based on the significantly diverse characteristics of the current collateral pool for each security. Loan-to-value, loan size and borrower credit history are some of the key characteristics used to determine the level of assumption that is utilized. Defaults
Mon Life 2013 SEC | 52 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
were estimated by identifying the loans that are in various delinquency buckets and defaulting a certain percentage of them over the near-term and long-term. Assumed defaults on delinquent loans are dependent on the specific securitys collateral attributes and historical performance.
Loss severity assumptions were determined by observing historical rates from broader market data and by adjusting those rates for vintage specific pool performance, collateral type, mortgage insurance and estimated loan modifications. Prepayments were estimated by examining historical averages of prepayment activity on the underlying collateral. Once the entire pool is modeled, the results are closely analyzed by the Companys internal asset specialist to determine whether or not the particular tranche or holding is at risk for not collecting all contractual cash flows, taking into account the seniority and other terms of the tranches held.
If cash flow models indicate a credit event will impact future cash flows and the Company does not have the intent to sell the tranche or holding and does have the intent and ability to hold the security, the security is impaired to discounted cash flows. As the remaining unrealized losses in the ABS subprime mortgage portfolio relate to holdings where the Company expects to receive full principal and interest, the Company does not consider the underlying investments to be impaired as of December 31, 2013.
There were no loan-backed securities with a recognized other-than-temporary impairment (OTTI) due to intent to sell or lack of intent and ability to hold during the years ended December 31, 2103, 2012 or 2011.
Mon Life 2013 SEC | 53 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The following tables provide the aggregate totals for loan-backed securities with a recognized OTTI due to the Companys cash flow analysis, in which the security is written down to estimated future cash flows discounted at the securitys effective yield.
Amortized Cost before Current Period OTTI |
Recognized OTTI |
Amortized Cost After OTTI |
Fair Value | |||||||||||||
Year ended December 31, 2013 |
||||||||||||||||
1st quarter present value of cash flows expected to be less than the amortized cost basis |
$ | 64,235 | $ | 4,238 | $ | 59,997 | $ | 29,895 | ||||||||
2nd quarter present value of cash flows expected to be less than the amortized cost basis |
63,316 | 23,474 | 39,842 | 23,109 | ||||||||||||
3rd quarter present value of cash flows expected to be less than the amortized cost basis |
51,903 | 6,627 | 45,276 | 23,345 | ||||||||||||
4th quarter present value of cash flows expected to be less than the amortized cost basis |
42,936 | 6,503 | 36,433 | 22,696 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Aggregate total |
$ | 222,390 | $ | 40,842 | $ | 181,548 | $ | 99,045 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Amortized Cost before Current Period OTTI |
Recognized OTTI |
Amortized Cost After OTTI |
Fair Value | |||||||||||||
Year ended December 31, 2012 |
||||||||||||||||
1st quarter present value of cash flows expected to be less than the amortized cost basis |
$ | 39,343 | $ | 1,922 | $ | 37,421 | $ | 25,549 | ||||||||
2nd quarter present value of cash flows expected to be less than the amortized cost basis |
49,355 | 3,300 | 46,055 | 21,984 | ||||||||||||
3rd quarter present value of cash flows expected to be less than the amortized cost basis |
36,667 | 2,145 | 34,522 | 20,556 | ||||||||||||
4th quarter present value of cash flows expected to be less than the amortized cost basis |
36,404 | 885 | 35,519 | 17,847 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Aggregate total |
$ | 161,769 | $ | 8,252 | $ | 153,517 | $ | 85,936 | ||||||||
|
|
|
|
|
|
|
|
Mon Life 2013 SEC | 54 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Amortized Cost before Current Period OTTI |
Recognized OTTI |
Amortized Cost After OTTI |
Fair Value | |||||||||||||
Year ended December 31, 2011 |
||||||||||||||||
1st quarter present value of cash flows expected to be less than the amortized cost basis |
$ | 70,530 | $ | 5,417 | $ | 65,113 | $ | 32,730 | ||||||||
2nd quarter present value of cash flows expected to be less than the amortized cost basis |
78,321 | 4,614 | 73,707 | 32,487 | ||||||||||||
3rd quarter present value of cash flows expected to be less than the amortized cost basis |
58,385 | 3,162 | 55,223 | 35,076 | ||||||||||||
4th quarter present value of cash flows expected to be less than the amortized cost basis |
54,581 | 7,175 | 47,406 | 39,648 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Aggregate total |
$ | 261,817 | $ | 20,368 | $ | 241,449 | $ | 139,941 | ||||||||
|
|
|
|
|
|
|
|
Mon Life 2013 SEC | 55 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The following loan-backed and structured securities were held at December 31, 2013, for which an OTTI was recognized during the current reporting period:
CUSIP |
Amortized Cost before Current Period OTTI |
Present Value of Projected Cash Flows |
Recognized OTTI |
Amortized Cost After OTTI |
Fair Value at Time of OTTI |
Quarter in which Impairment Occurred |
||||||||||||||||||
00075XAG2 |
$ | 9,270 | $ | 8,751 | $ | 519 | $ | 8,751 | $ | 341 | 1Q 2013 | |||||||||||||
00442LAD1 |
2,454 | 2,325 | 129 | 2,325 | 2,088 | 1Q 2013 | ||||||||||||||||||
02148YAJ3 |
84 | 82 | 2 | 82 | 45 | 1Q 2013 | ||||||||||||||||||
02149QAD2 |
3,277 | 3,234 | 43 | 3,234 | 2,721 | 1Q 2013 | ||||||||||||||||||
045427AE1 |
753 | 311 | 442 | 311 | 169 | 1Q 2013 | ||||||||||||||||||
05953YAG6 |
215 | 209 | 6 | 209 | 159 | 1Q 2013 | ||||||||||||||||||
14984WAA8 |
11,205 | 10,969 | 236 | 10,969 | 10,570 | 1Q 2013 | ||||||||||||||||||
35729PPC8 |
4,000 | 3,869 | 131 | 3,869 | 703 | 1Q 2013 | ||||||||||||||||||
39539KAF0 |
213 | 205 | 8 | 205 | 199 | 1Q 2013 | ||||||||||||||||||
46628SAJ2 |
2,367 | 2,247 | 120 | 2,247 | 2,287 | 1Q 2013 | ||||||||||||||||||
55308LAB2 |
5,692 | 5,230 | 462 | 5,230 | 3,740 | 1Q 2013 | ||||||||||||||||||
65536PAA8 |
15 | 14 | 1 | 14 | 10 | 1Q 2013 | ||||||||||||||||||
75971EAF3 |
4,666 | 4,576 | 90 | 4,576 | 3,462 | 1Q 2013 | ||||||||||||||||||
761118VY1 |
3,127 | 3,065 | 62 | 3,065 | 2,444 | 1Q 2013 | ||||||||||||||||||
81379EAD4 |
47 | | 47 | | 1 | 1Q 2013 | ||||||||||||||||||
83612TAF9 |
7,863 | 7,176 | 687 | 7,176 | 358 | 1Q 2013 | ||||||||||||||||||
86358EZU3 |
8,849 | 7,653 | 1,196 | 7,653 | 525 | 1Q 2013 | ||||||||||||||||||
3622NAAC4 |
82 | 81 | 1 | 81 | 72 | 1Q 2013 | ||||||||||||||||||
00075XAG2 |
8,737 | 4,832 | 3,905 | 4,832 | 298 | 2Q 2013 | ||||||||||||||||||
05953YAG6 |
202 | 199 | 3 | 199 | 149 | 2Q 2013 | ||||||||||||||||||
126670ZN1 |
7,108 | 3,498 | 3,610 | 3,498 | 6,137 | 2Q 2013 | ||||||||||||||||||
126694A32 |
1,710 | 1,698 | 12 | 1,698 | 1,432 | 2Q 2013 | ||||||||||||||||||
14984WAA8 |
10,701 | 10,522 | 179 | 10,522 | 10,201 | 2Q 2013 | ||||||||||||||||||
24763LDE7 |
190 | 189 | 1 | 189 | 147 | 2Q 2013 | ||||||||||||||||||
35729PPC8 |
3,857 | 3,793 | 64 | 3,793 | 403 | 2Q 2013 | ||||||||||||||||||
68400DAG9 |
5,917 | 547 | 5,370 | 547 | 8 | 2Q 2013 | ||||||||||||||||||
68403HAF9 |
2,226 | 4 | 2,222 | 4 | 2 | 2Q 2013 | ||||||||||||||||||
83611MMM7 |
7,430 | 7,128 | 302 | 7,128 | 408 | 2Q 2013 | ||||||||||||||||||
83612TAC6 |
7,498 | 6,902 | 596 | 6,902 | 3,863 | 2Q 2013 | ||||||||||||||||||
83612TAF9 |
7,159 | 18 | 7,141 | 18 | 18 | 2Q 2013 |
Mon Life 2013 SEC | 56 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
CUSIP |
Amortized Cost before Current Period OTTI |
Projected Cash Flows |
Recognized OTTI |
Amortized Cost After OTTI |
Fair Value | Quarter in which Impairment Occurred |
||||||||||||||||||
86358EZU3 |
554 | 486 | 68 | 486 | 28 | 2Q 2013 | ||||||||||||||||||
61753NAC4 |
28 | 27 | 1 | 27 | 15 | 2Q 2013 | ||||||||||||||||||
00075XAG2 |
4,819 | 2,950 | 1,869 | 2,950 | 90 | 3Q 2013 | ||||||||||||||||||
00442LAD1 |
2,163 | 2,055 | 108 | 2,055 | 2,627 | 3Q 2013 | ||||||||||||||||||
02146QAB9 |
64 | 63 | 1 | 63 | 108 | 3Q 2013 | ||||||||||||||||||
02149QAD2 |
3,087 | 3,083 | 4 | 3,083 | 2,600 | 3Q 2013 | ||||||||||||||||||
045427AE1 |
291 | 283 | 8 | 283 | 383 | 3Q 2013 | ||||||||||||||||||
059515AC0 |
555 | 528 | 27 | 528 | 402 | 3Q 2013 | ||||||||||||||||||
05953YAG6 |
193 | 183 | 10 | 183 | 145 | 3Q 2013 | ||||||||||||||||||
35729PPC8 |
3,783 | 3,598 | 185 | 3,598 | 355 | 3Q 2013 | ||||||||||||||||||
36245RAA7 |
719 | 714 | 5 | 714 | 540 | 3Q 2013 | ||||||||||||||||||
39539KAF0 |
151 | 151 | | 151 | 127 | 3Q 2013 | ||||||||||||||||||
61754HAB8 |
352 | 341 | 11 | 341 | 245 | 3Q 2013 | ||||||||||||||||||
68400DAG9 |
543 | 4 | 539 | 4 | 2 | 3Q 2013 | ||||||||||||||||||
75970QAJ9 |
3,245 | 3,162 | 83 | 3,162 | 2,691 | 3Q 2013 | ||||||||||||||||||
75971EAF3 |
4,459 | 4,398 | 61 | 4,398 | 3,532 | 3Q 2013 | ||||||||||||||||||
761118VY1 |
3,497 | 3,273 | 224 | 3,273 | 2,843 | 3Q 2013 | ||||||||||||||||||
83611MMM7 |
7,118 | 6,863 | 255 | 6,863 | 356 | 3Q 2013 | ||||||||||||||||||
83612TAC6 |
6,899 | 6,751 | 148 | 6,751 | 3,855 | 3Q 2013 | ||||||||||||||||||
86358EZU3 |
7,508 | 4,477 | 3,031 | 4,477 | 329 | 3Q 2013 | ||||||||||||||||||
52524YAF0 |
2,430 | 2,373 | 57 | 2,373 | 2,102 | 3Q 2013 | ||||||||||||||||||
61753NAC4 |
26 | 26 | | 26 | 14 | 3Q 2013 | ||||||||||||||||||
00075XAG2 |
2,937 | 1,013 | 1,924 | 1,013 | 57 | 4Q 2013 | ||||||||||||||||||
00442LAD1 |
1,980 | 1,931 | 49 | 1,931 | 2,724 | 4Q 2013 | ||||||||||||||||||
02149QAD2 |
2,983 | 2,902 | 81 | 2,902 | 2,589 | 4Q 2013 | ||||||||||||||||||
045427AE1 |
270 | 218 | 52 | 218 | 169 | 4Q 2013 | ||||||||||||||||||
24763LDE7 |
189 | 164 | 25 | 164 | 154 | 4Q 2013 | ||||||||||||||||||
35729PPC8 |
3,589 | 3,174 | 415 | 3,174 | 343 | 4Q 2013 | ||||||||||||||||||
75970QAJ9 |
3,127 | 2,974 | 153 | 2,974 | 2,684 | 4Q 2013 | ||||||||||||||||||
75971EAF3 |
4,325 | 4,127 | 198 | 4,127 | 3,599 | 4Q 2013 | ||||||||||||||||||
761118RM2 |
1,818 | 1,490 | 328 | 1,490 | 1,620 | 4Q 2013 | ||||||||||||||||||
83611MMM7 |
6,854 | 6,457 | 397 | 6,457 | 757 | 4Q 2013 | ||||||||||||||||||
83612TAC6 |
6,716 | 6,518 | 198 | 6,518 | 4,026 | 4Q 2013 | ||||||||||||||||||
86358EZU3 |
4,443 | 1,936 | 2,507 | 1,936 | 279 | 4Q 2013 | ||||||||||||||||||
12640WAG5 |
1,995 | 1,851 | 144 | 1,851 | 2,111 | 4Q 2013 | ||||||||||||||||||
61753NAC4 |
25 | 24 | 1 | 24 | 15 | 4Q 2013 | ||||||||||||||||||
45660LKW8 |
1,685 | 1,652 | 33 | 1,652 | 1,571 | 4Q 2013 |
Mon Life 2013 SEC | 57 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The unrealized losses of loan-backed and structured securities where fair value is less than cost or amortized cost for which an OTTI has not been recognized in earnings as of December 31, 2013 and 2012 is as follows:
Losses 12 Months or More |
Losses Less Than 12 Months |
|||||||
Year ended December 31, 2013 |
||||||||
The aggregate amount of unrealized losses |
$ | 115,229 | $ | 24,886 | ||||
The aggregate related fair value of securities with unrealized losses |
605,686 | 607,046 | ||||||
Losses 12 Months or More |
Losses Less Than 12 Months |
|||||||
Year ended December 31, 2012 |
||||||||
The aggregate amount of unrealized losses |
$ | 235,956 | $ | 7,106 | ||||
The aggregate related fair value of securities with unrealized losses |
917,808 | 79,785 |
Detail of net investment income is presented below:
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Income: |
||||||||||||
Bonds |
$ | 608,872 | $ | 665,143 | $ | 698,531 | ||||||
Preferred stocks |
4,516 | 3,791 | 3,007 | |||||||||
Common stocks |
1,893 | 3,599 | 3,305 | |||||||||
Mortgage loans on real estate |
98,876 | 119,979 | 123,944 | |||||||||
Real estate |
1,247 | 1,018 | 1,095 | |||||||||
Policy loans |
29,032 | 29,076 | 30,126 | |||||||||
Cash, cash equivalents and short-term investments |
1,353 | 2,203 | 2,440 | |||||||||
Derivatives |
12,632 | 15,357 | 5,840 | |||||||||
Other invested assets |
3,991 | 13,212 | 8,697 | |||||||||
Other |
(738 | ) | 3,441 | 1,121 | ||||||||
|
|
|
|
|
|
|||||||
Gross investment income |
761,674 | 856,819 | 878,106 | |||||||||
Less investment expenses |
32,345 | 34,505 | 36,065 | |||||||||
|
|
|
|
|
|
|||||||
Net investment income |
$ | 729,329 | $ | 822,314 | $ | 842,041 | ||||||
|
|
|
|
|
|
Mon Life 2013 SEC | 58 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Proceeds from sales and other disposals (excluding maturities) of bonds and preferred stock and related gross realized capital gains and losses were as follows:
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Proceeds |
$ | 1,582,738 | $ | 4,357,730 | $ | 2,597,080 | ||||||
|
|
|
|
|
|
|||||||
Gross realized gains |
$ | 12,758 | $ | 417,006 | $ | 66,223 | ||||||
Gross realized losses |
(13,236 | ) | (27,531 | ) | (22,934 | ) | ||||||
|
|
|
|
|
|
|||||||
Net realized capital gains (losses) |
$ | (478 | ) | $ | 389,475 | $ | 43,289 | |||||
|
|
|
|
|
|
The Company had gross realized losses for the years ended December 31, 2013, 2012 and 2011 of $41,176, $22,898 and $33,707, respectively, which relate to losses recognized on other-than-temporary declines in the fair value of bonds and preferred stocks.
Net realized capital gains (losses) on investments are summarized below:
Realized | ||||||||||||
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Bonds |
$ | (41,648 | ) | $ | 366,392 | $ | 9,633 | |||||
Preferred stocks |
| 185 | (51 | ) | ||||||||
Common stocks |
(203 | ) | 181 | 2,699 | ||||||||
Mortgage loans on real estate |
(30 | ) | (3,240 | ) | (8,533 | ) | ||||||
Real estate |
(2,742 | ) | (3,704 | ) | (1,869 | ) | ||||||
Cash, cash equivalents and short-term investments |
1 | 1 | 14 | |||||||||
Derivatives |
(66,568 | ) | (47,592 | ) | (115,760 | ) | ||||||
Other invested assets |
20,448 | 24,655 | 14,586 | |||||||||
|
|
|
|
|
|
|||||||
(90,742 | ) | 336,878 | (99,281 | ) | ||||||||
Federal income tax effect |
35,916 | (128,376 | ) | 24,360 | ||||||||
Transfer to (from) interest maintenance reserve |
43,475 | (216,378 | ) | 46,079 | ||||||||
|
|
|
|
|
|
|||||||
Net realized capital losses on investments |
$ | (11,351 | ) | $ | (7,876 | ) | $ | (28,842 | ) | |||
|
|
|
|
|
|
At December 31, 2013 and 2012, the Company had recorded investments in restructured securities of $320 and $7,170, respectively. The capital (losses) taken as a result of restructures in 2013, 2012 and 2011 were $(156), $(368) and $(6,868), respectively. The Company often has impaired a security prior to the restructure date. These impairments are not included in the calculation of restructure related losses and are accounted for as a realized loss, reducing the cost basis of the security involved.
Mon Life 2013 SEC | 59 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The changes in net unrealized capital gains and losses on investments were as follows:
Change in Unrealized | ||||||||||||
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Bonds |
$ | 50,095 | $ | (16,551 | ) | $ | 4,454 | |||||
Preferred stocks |
| 1,408 | (1,408 | ) | ||||||||
Common stocks |
(892 | ) | (4,558 | ) | (5,607 | ) | ||||||
Affiliated entities |
(4,768 | ) | (5,899 | ) | (570 | ) | ||||||
Mortgage loans on real estate |
253 | 1,255 | (1,637 | ) | ||||||||
Derivatives |
94,576 | 26,867 | 3,422 | |||||||||
Other invested assets |
18,545 | (38,135 | ) | (4,716 | ) | |||||||
|
|
|
|
|
|
|||||||
Change in unrealized capital gains (losses), before tax |
157,809 | (35,613 | ) | (6,062 | ) | |||||||
Taxes on unrealized capital gains/loss |
(62,279 | ) | 2,354 | (6,021 | ) | |||||||
|
|
|
|
|
|
|||||||
Change in unrealized capital gains (losses), net of tax |
$ | 95,530 | $ | (33,259 | ) | $ | (12,083 | ) | ||||
|
|
|
|
|
|
The Companys investments in mortgage loans principally involve commercial real estate.
The credit quality of mortgage loans by type of property for the year ended December 31, 2013 were as follows:
Farm | Commercial | Total | ||||||||||
AAA - AA |
$ | 755 | $ | 1,151,315 | $ | 1,152,070 | ||||||
A |
40,812 | 330,399 | 371,211 | |||||||||
BBB |
6,719 | 22,496 | 29,215 | |||||||||
BB |
| 131,804 | 131,804 | |||||||||
B |
| 3,352 | 3,352 | |||||||||
|
|
|
|
|
|
|||||||
$ | 48,286 | $ | 1,639,366 | $ | 1,687,652 | |||||||
|
|
|
|
|
|
The credit quality for commercial and farm mortgage loans was determined based on an internal credit rating model which assigns a letter rating to each mortgage loan in the portfolio as an indicator of the credit quality of the mortgage loan. The internal credit rating model was designed based on rating agency methodology, then modified for credit risk associated with the Companys mortgage lending process, taking into account such factors as projected future cash flows, net operating income, and collateral value. The model produces a credit rating score and an associated letter rating which is intended to align with S&P ratings as closely as possible. Information supporting the credit risk rating process is updated at least annually.
During 2013, the maximum and minimum lending rates for mortgage loans during were 5.87% and 3.00%, respectively. The maximum percentage of any one mortgage loan to the value of the underlying real estate originated during the year ending December 31, 2013 at the time of
Mon Life 2013 SEC | 60 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
origination was 77%. During 2013, the Company did not reduce interest rates on any outstanding mortgages. At December 31, 2013, mortgage loans with a carrying value of $1,061 were non-income producing for the previous 180 days. There was no accrued interest related to these mortgage loans that required excluding the amount from investment income at December 31, 2013. The Company did not have any taxes, assessments and other amounts advanced not included in the mortgage loan total for the year ended December 31, 2013.
The following tables provide the age analysis of mortgage loans aggregated by type:
Residential | Commercial | |||||||||||||||||||||||||||
December 31, 2013 | Farm | Insured | All Other | Insured | All Other | Mezzanine | Total | |||||||||||||||||||||
Recorded Investment (All) |
||||||||||||||||||||||||||||
(a) Current |
$ | 48,286 | $ | | $ | 3,930 | $ | | $ | 1,505,460 | $ | 133,906 | $ | 1,691,582 | ||||||||||||||
(b) 30-59 Days Past Due |
| | 217 | | | | 217 | |||||||||||||||||||||
(c) 60-89 Days Past Due |
| | | | | | | |||||||||||||||||||||
(d) 90-179 Days Past Due |
| | | | | | | |||||||||||||||||||||
(e) 180+ Days Past Due |
| | 1,061 | | | | 1,061 | |||||||||||||||||||||
Residential | Commercial | |||||||||||||||||||||||||||
December 31, 2012 | Farm | Insured | All Other | Insured | All Other | Mezzanine | Total | |||||||||||||||||||||
Recorded Investment (All) |
||||||||||||||||||||||||||||
(a) Current |
$ | 74,872 | $ | | $ | 4,176 | $ | | $ | 1,608,517 | $ | 175,705 | $ | 1,863,270 | ||||||||||||||
(b) 30-59 Days Past Due |
| | 190 | | | | 190 | |||||||||||||||||||||
(c) 60-89 Days Past Due |
| | 125 | | | | 125 | |||||||||||||||||||||
(d) 90-179 Days Past Due |
| | 138 | | | | 138 | |||||||||||||||||||||
(e) 180+ Days Past Due |
| | 1,128 | | | | 1,128 |
During 2012, the maximum and minimum lending rates for mortgage loans during were 5.00% and 3.65%, respectively. The maximum percentage of any one mortgage loan to the value of the underlying real estate originated during the year ending December 31, 2012 at the time of origination was 67%. During 2012, the Company did not reduce interest rates on any outstanding mortgages. At December 31, 2012, mortgage loans with a carrying value of $1,128 were non-income producing for the previous 180 days. Accrued interest of $152 related to these mortgage loans was excluded from investment income at December 31, 2012. The Company did not have any taxes, assessments and other amounts advanced not included in the mortgage loan total for the year ended December 31, 2012.
At December 31, 2013 and 2012, respectively, the net admitted asset value in impaired loans with a related allowance for credit losses was $7,983 and $7,926. The Company held an allowance for credit losses on mortgage loans in the amount of $247 and $499 at December 31, 2013 and 2012, respectively. The average recorded investment in impaired loans during 2013 and 2012 was $7,915 and $7,735, respectively. There was no recorded investment in impaired loans without an allowance for credit losses during 2013 or 2012.
Mon Life 2013 SEC | 61 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The following table provides a reconciliation of the beginning and ending balances for the allowance for credit losses on mortgage loans:
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Balance at beginning of period |
$ | 499 | $ | 1,754 | $ | 117 | ||||||
Additions, net charged to operations |
| | 1,754 | |||||||||
Recoveries in amounts previously charged off |
(252 | ) | (1,255 | ) | (117 | ) | ||||||
|
|
|
|
|
|
|||||||
Balance at end of period |
$ | 247 | $ | 499 | $ | 1,754 | ||||||
|
|
|
|
|
|
The Company accrues interest income on impaired loans to the extent deemed collectible (delinquent less than 91 days) and the loan continues to perform under its original or restructured contractual terms. Interest income on nonperforming loans generally is recognized on a cash basis. The Company recognized $540, $552 and $312 of interest income on impaired loans for the years ended December 31, 2013, 2012 and 2011, respectively. The Company recognized interest income on a cash basis of $540, $552 and $312 for the years ended December 31, 2013, 2012 and 2011, respectively.
The fair value of property is determined based on an appraisal from a third-party appraiser, along with information obtained from discussions with internal asset managers and a listing broker regarding recent comparable sales data and other relevant property information. Impairment losses of $2,768, $3,996 and $2,373 were taken on real estate in 2013, 2012 and 2011, respectively, to write the book value down to the current fair value and were reflected as realized losses in the statements of operations.
During 2013 and 2012, respectively, mortgage loans of $7,754 and $4,690 were foreclosed or acquired by deed and transferred to real estate. At December 31, 2013 and 2012, the Company held a mortgage loan loss reserve in the AVR of $21,969 and $17,693, respectively.
Mon Life 2013 SEC | 62 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The Companys mortgage loan portfolio is diversified by geographic region and specific collateral property type as follows:
At December 31, 2013, 2012 and 2011, the Company held mortgage loans with a total net admitted value of $378, $137 and $137, respectively, which had been restructured in accordance with SSAP No. 36, Troubled Debt Restructuring. There were no realized losses during the years ended December 31, 2013, 2012 and 2011 related to such restructurings. There were no commitments to lend additional funds to debtors owing receivables at December 31, 2013, 2012 or 2011.
During 2012, the Company recorded an impairment of $694 for its investment in Green Mountain Partners II, L.P. The impairment was taken because the decline in fair value of the fund was deemed to be other than temporary and a recovery in value from the remaining underlying investments in the fund was not anticipated. The write-down was included in net realized capital gains (losses) within the statements of operations.
During 2011, the Company recorded an impairment of $1,982 for its investment in Ridge Capital Fund I, L.P. The impairment was taken because the decline in fair value of the fund was deemed to be other than temporary and a recovery in value from the remaining underlying investments in the fund was not anticipated. The write-down was included in net realized capital gains (losses) within the statements of operations.
On December 31, 2010, the Company acquired two real estate related limited liability company interests (Transamerica Pyramid Properties, LLC and Transamerica Realty Properties, LLC) from Transamerica Life Insurance Company (TLIC), an affiliate, for a combined purchase price of $252,975. The price paid was based predominantly on the valuations of the properties within each of those entities. This transaction was accounted for as a business combination using the statutory purchase method and resulted in goodwill of $100,674, which was included in the
Mon Life 2013 SEC | 63 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
carrying amount of these other invested assets. Amortization in the amount of $10,067 was recorded during each of the years ending December 31, 2013 and 2012, which is reflected in the carrying value of these other invested assets with an offset to the change in net unrealized capital gains/losses. As the carrying amount of the total positive goodwill of the Company exceeded 10% of the September 30, 2013 capital and surplus, adjusted to exclude positive goodwill and net deferred tax assets as of September 30, 2013, goodwill in the amount of $10,702 associated with this transaction was nonadmitted at December 31, 2013. The entire goodwill balance associated with this transaction was admitted at December 31, 2012.
For the year ending December 31, 2013, the Company had ownership interests in forty-eight LIHTC properties. The remaining years of unexpired tax credits ranged from one to nine and none of the properties were subject to regulatory review. The length of time remaining for holding periods ranged from one to fourteen years. The amount of contingent equity commitments expected to be paid during the years 2014 to 2025 is $2,032. There were no impairment losses, write-downs or reclassifications during the year related to any of these credits.
For the year ending December 31, 2012, the Company had ownership interests in fifty-seven LIHTC properties. The remaining years of unexpired tax credits ranged from one to thirteen and none of the properties were subject to regulatory review. The length of time remaining for holding periods ranged from one to fifteen years. The amount of contingent equity commitments expected to be paid during the years 2013 to 2025 is $7,640. There were no impairment losses, write-downs or reclassifications during the year related to any of these credits.
The following tables provide the carrying value of state transferable tax credits gross of any related tax liabilities and total unused transferable tax credits by state and in total as of December 31, 2013 and 2012:
December 31, 2013 | ||||||||||||
Description of State Transferable and Non-transferable Tax Credits |
State | Carrying Value | Unused Amount* | |||||||||
Low-Income Housing Tax Credits |
MA | $ | 462 | $ | 1,033 | |||||||
|
|
|
|
|||||||||
Total |
$ | 462 | $ | 1,033 | ||||||||
|
|
|
|
|||||||||
December 31, 2012 | ||||||||||||
Description of State Transferable and Non-transferable Tax Credits |
State | Carrying Value | Unused Amount | |||||||||
Low-Income Housing Tax Credits |
MA | $ | 810 | $ | 1,381 | |||||||
|
|
|
|
|||||||||
Total |
$ | 810 | $ | 1,381 | ||||||||
|
|
|
|
*The | unused amount reflects credits that the Company deems will be realizable in the period from 2014 to 2015. |
Mon Life 2013 SEC | 64 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The Company had no non-transferable state tax credits.
The Company estimated the utilization of the remaining state transferable tax credits by projecting a future tax liability based on projected premium, tax rates and tax credits and comparing the projected future tax liability to the availability of remaining state transferable tax credits. The Company had no impairment losses related to state transferable tax credits as of December 31, 2013, 2012 and 2011.
Derivatives
The Company has entered into collateral agreements with certain counterparties wherein the counterparty is required to post assets (cash or securities) on the Companys behalf in an amount equal to the difference between the net positive fair value of the contracts and an agreed upon threshold based on the credit rating of the counterparty. If the net fair value of all contracts with this counterparty is negative, then the Company is required to post similar assets (cash or securities).
At December 31, 2013 and 2012, the fair value of all derivative contracts, aggregated at a counterparty level, with a positive fair value amounted to $370,542 and $585,525, respectively.
At December 31, 2013 and 2012, the fair value of all derivative contracts, aggregated at a counterparty level, with a negative fair value amounted to $47,904 and $186,630, respectively.
For the years ended December 31, 2013, 2012 and 2011, the Company has recorded $88,048, $287 and $(14,830), respectively, for the component of derivative instruments utilized for hedging purposes that did not qualify for hedge accounting. This has been recorded directly to unassigned surplus as an unrealized gain (loss).
The Company did not recognize any unrealized gains or losses during 2013, 2012 or 2011 that represented the component of derivative instruments gain or loss that was excluded from the assessment of hedge effectiveness.
The maximum term over which the Company is hedging its exposure to the variability of future cash flows is approximately 20 years for forecasted hedge transactions.
For the years ended December 31, 2013, 2012 and 2011 none of the Companys cash flow hedges have been discontinued as it was probable that the original forecasted transactions would occur by the end of the originally specified time period documented at inception of the hedging relationship.
Mon Life 2013 SEC | 65 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
As of December 31, 2013 and 2012, the company has accumulated deferred gains in the amount of $3,616 and $3,822, respectively, related to the termination of swaps that were hedging forecasted transactions. It is expected that these gains will be used as basis adjustments on futures asset purchases expected to transpire throughout 2026.
At December 31, 2013 and 2012, the Company had replicated assets with a fair value of $562,373 and $469,474, respectively, and credit default and forward starting interest rate swaps with a fair value of $8,188 and $(26,540), respectively.
For the year ended December 31, 2013 and 2012, the Company recognized $77 and $1,639 in capital losses related to replication transactions.
As stated in Note 1, the Company replicates investment grade corporate bonds by writing credit default swaps. As a writer of credit swaps, the Company actively monitors the underlying asset, being careful to note any events (default or similar credit event) that would require the Company to perform on the credit swap. If such events would take place, the Company has recourse provisions from the proceeds of the bankruptcy settlement of the underlying entity or by the sale of the underlying bond.
Mon Life 2013 SEC | 66 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
As of December 31, 2013, credit default swaps, used in replicating corporate bonds are as follows:
Maximum Future | ||||||||||||
Maturity | Payout | Current Fair | ||||||||||
Deal, Receive (Pay), Underlying |
Date | (Estimated) | Value | |||||||||
43231,SWAP, USD 1 / (USD 0), :912810PX0 |
12/20/2015 | $ | 10,000 | $ | 111 | |||||||
43285,SWAP, USD 1 / (USD 0), :CDXIG 17 |
12/20/2016 | 7,500 | 154 | |||||||||
43286,SWAP, USD 1 / (USD 0), :CDXIG17 |
12/20/2016 | 3,500 | 72 | |||||||||
43299,SWAP, USD 1 / (USD 0), :JP1200551248 |
3/20/2017 | 12,000 | 293 | |||||||||
43302,SWAP, USD 1 / (USD 0), :US50064FAD69 |
3/20/2017 | 10,000 | 198 | |||||||||
43307,SWAP, USD 1 / (USD 0), :US731011AN26 |
3/20/2017 | 15,000 | 264 | |||||||||
43310,SWAP, USD 1 / (USD 0), :US50064FAD69 |
3/20/2017 | 10,000 | 198 | |||||||||
43321,SWAP, USD 1 / (USD 0), :USY6826RAA06 |
3/20/2017 | 5,000 | 57 | |||||||||
43347,SWAP, USD 1 / (USD 0), :US416515AY06 |
6/20/2017 | 25,000 | 437 | |||||||||
47295,SWAP, USD 1 / (USD 0), :US59156RAN89 |
6/20/2017 | 25,000 | 418 | |||||||||
47296,SWAP, USD 1 / (USD 0), :US172967ES69 |
6/20/2017 | 25,000 | 420 | |||||||||
47297,SWAP, USD 1 / (USD 0), :US743410AW27 |
6/20/2017 | 25,000 | 345 | |||||||||
43374,SWAP, USD 1 / (USD 0), :CDX IG 18 |
6/20/2017 | 10,000 | 215 | |||||||||
43394,SWAP, USD 1 / (USD 0), :XS0114288789 |
9/20/2017 | 10,000 | (113 | ) | ||||||||
43601,SWAP, USD 1 / (USD 0), :US88322LAA70 |
9/20/2017 | 5,100 | 10 | |||||||||
43613,SWAP, USD 1 / (USD 0), :US455780AQ93 |
9/20/2017 | 7,800 | (206 | ) | ||||||||
46410,SWAP, USD 1 / (USD 0), :912810QL5 |
12/20/2017 | 20,000 | 426 | |||||||||
46411,SWAP, USD 1 / (USD 0), :912810QL5 |
12/20/2017 | 19,000 | 405 | |||||||||
46915,SWAP, USD 1 / (USD 0), :61761DAD4 |
12/20/2017 | 20,000 | 247 | |||||||||
47037,SWAP, USD 1 / (USD 0), :12624PAE5 |
12/20/2017 | 5,000 | 106 | |||||||||
47657,SWAP, USD 1 / (USD 0), :92939RBB7 |
12/20/2017 | 12,500 | 209 | |||||||||
48775,SWAP, USD 1 / (USD 0), :12624QAR4 |
12/20/2017 | 12,500 | 266 | |||||||||
49952,SWAP, USD 1 / (USD 0), :94987MAB7 |
12/20/2017 | 5,000 | 73 | |||||||||
53497,SWAP, USD 1 / (USD 0), :20048EAY7 |
12/20/2017 | 15,000 | 319 | |||||||||
53821,SWAP, USD 1 / (USD 0), :92937EAZ7 |
3/20/2018 | 22,000 | 432 | |||||||||
54329,SWAP, USD 1 / (USD 0), :76116FAG2 |
3/20/2018 | 10,000 | 30 | |||||||||
54865,SWAP, USD 5 / (USD 0), :61761QAE3 |
3/20/2018 | 15,000 | 2408 | |||||||||
55127,SWAP, USD 1 / (USD 0), :36228CUV3 |
3/20/2018 | 2,300 | (95 | ) | ||||||||
60519,SWAP, USD 1 / (USD 0), :912828TY6 |
6/20/2018 | 20,000 | 275 | |||||||||
60520,SWAP, USD 1 / (USD 0), :912828TY6 |
6/20/2018 | 20,000 | (7 | ) | ||||||||
60521,SWAP, USD 1 / (USD 0), :912828TY6 |
6/20/2018 | 10,000 | (1 | ) | ||||||||
59110,SWAP, USD 1 / (USD 0), :912828TY6 |
6/20/2018 | 20,000 | 200 | |||||||||
59117,SWAP, USD 1 / (USD 0), :912828TY6 |
6/20/2018 | 10,000 | (1 | ) | ||||||||
59280,SWAP, USD 1 / (USD 0), :912828TY6 |
6/20/2018 | 20,000 | 275 |
Mon Life 2013 SEC | 67 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
At December 31, 2013 and 2012, the Company held options with a fair value of $5,432 and $66, respectively.
At December 31, 2013 and 2012, the Companys outstanding derivative financial instruments with on and off balance sheet risks, shown in notional amounts, are summarized as follows:
Notional Amount | ||||||||
2013 | 2012 | |||||||
Interest rate and currency swaps: |
||||||||
Receive floatingpay floating |
$ | | $ | 31,620 | ||||
Receive fixedpay floating |
43,970 | 88,562 | ||||||
Receive floatingpay fixed |
19,500 | 19,500 | ||||||
Receive fixedpay fixed |
482,442 | | ||||||
Swaps: |
||||||||
Receive fixedpay floating |
1,701,576 | 2,748,946 | ||||||
Receive fixedpay fixed |
53,003 | | ||||||
Receive floatingpay fixed |
179,200 | 664,840 | ||||||
Receive floatingpay floating |
39,200 | 39,200 |
The Company recognized net realized gains (losses) from futures contracts in the amount of $3,578, $1,917 and $(399), for the years ended December 31, 2013, 2012 and 2011, respectively.
Open futures contracts at December 31, 2013 and 2012 were as follows:
Opening | Year-End | |||||||||||||
Fair | Fair | |||||||||||||
Long/Short |
Number of Contracts | Contract Type | Value | Value | ||||||||||
December 31, 2013 |
||||||||||||||
Long |
50 | S&P 500 March 2014 Futures |
$ | 22,253 | $ | 23,013 | ||||||||
Short |
116 | S&P 500 E-MINI March 2014 Futures |
10,325 | 10,678 | ||||||||||
Long |
10 | NASDAQ 100 E-MINI March 2014 Futures |
693 | 716 |
Mon Life 2013 SEC | 68 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Long/Short |
Number of Contracts | Contract Type | Opening Fair Value |
Year-End Fair Value |
||||||||
December 31, 2012 |
||||||||||||
Long |
46 | S&P 500 March 2013 Futures |
$ | 16,262 | $ | 16,331 | ||||||
Short |
(69) | S&P 500 E-MINI March 2013 Futures |
(4,857 | ) | (4,774 | ) | ||||||
Long |
3 | NASDAQ 100 E-MINI March 2013 Futures |
$ | 157 | $ | 159 |
The following tables show the pledged or restricted assets as of December 31, 2013 and 2012, respectively:
Gross Restricted | ||||||||||||||||||||
Restricted Asset Category |
Total General Account (G/A) |
G/A Supporting Separate Account (S/A) Activity |
Total S/A Restricted Assets |
S/A Assets Supporting G/A Activity |
Total | |||||||||||||||
a. Subject to contractual obligation for which liability is not shown |
$ | | $ | | $ | | $ | | $ | | ||||||||||
b. Collateral held under security lending agreements |
322,169 | | | | 322,169 | |||||||||||||||
c. Subject to repurchase agreements |
| | | | | |||||||||||||||
d. Subject to reverse repurchase agreements |
| | | | | |||||||||||||||
e. Subject to dollar repurchase agreements |
52,930 | | | | 52,930 | |||||||||||||||
f. Subject to dollar reverse repurchase agreements |
| | | | | |||||||||||||||
g. Placed under option contracts |
| | | | | |||||||||||||||
h. Letter stock or securities restricted as to sale |
| | | | | |||||||||||||||
i. On deposit with state(s) |
9,184 | | | | 9,184 | |||||||||||||||
j. On deposit with other regulatory bodies |
| | | | | |||||||||||||||
k. Pledged as collateral not captured in other categories |
587,282 | | | | 587,282 | |||||||||||||||
l. Other restricted assets - reinsurance |
189,895 | | | | 189,895 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
m. Total Restricted Assets |
$ | 1,161,460 | $ | | $ | | $ | | $ | 1,161,460 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Mon Life 2013 SEC | 69 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Gross Restricted | Percentage | |||||||||||||||||||
Restricted Asset Category |
Total From Prior Year |
Increase/ (Decrease) |
Total Current Year Admitted Restricted |
Gross Restricted to Total Assets |
Admitted Restricted to Total Admitted Assets |
|||||||||||||||
a. Subject to contractual obligation for which liability is not shown |
$ | | $ | | $ | | 0.00 | % | 0.00 | % | ||||||||||
b. Collateral held under security lending agreements |
347,440 | (25,271 | ) | 322,169 | 1.01 | 1.01 | ||||||||||||||
c. Subject to repurchase agreements |
| | | 0.00 | 0.00 | |||||||||||||||
d. Subject to reverse repurchase agreements |
| | | 0.00 | 0.00 | |||||||||||||||
e. Subject to dollar repurchase agreements |
6,422 | 46,508 | 52,930 | 0.17 | 0.17 | |||||||||||||||
f. Subject to dollar reverse repurchase agreements |
| | | 0.00 | 0.00 | |||||||||||||||
g. Placed under option contracts |
| | | 0.00 | 0.00 | |||||||||||||||
h. Letter stock or securities restricted as to sale |
| | | 0.00 | 0.00 | |||||||||||||||
i. On deposit with state(s) |
10,498 | (1,314 | ) | 9,184 | 0.03 | 0.03 | ||||||||||||||
j. On deposit with other regulatory bodies |
| | | 0.00 | 0.00 | |||||||||||||||
k. Pledged as collateral not captured in other categories |
1,346,969 | (759,687 | ) | 587,282 | 1.84 | 1.84 | ||||||||||||||
l. Other restricted assets - reinsurance |
200,281 | (10,386 | ) | 189,895 | 0.60 | 0.60 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
m. Total Restricted Assets |
$ | 1,911,610 | $ | (750,150 | ) | $ | 1,161,460 | 3.65 | % | 3.65 | % | |||||||||
|
|
|
|
|
|
|
|
|
|
Assets pledged as collateral not captured in other categories includes the following:
Invested assets with a carrying value of $15,185 and $14,443 pledged in conjunction with derivative transactions as of December 31, 2013 and 2012, respectively.
Mon Life 2013 SEC | 70 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Invested assets with a carrying amount of $572,097 and $1,332,526 pledged in conjunction with funding agreement transactions as of December 31, 2013 and 2012, respectively.
6. Reinsurance
Certain premiums and benefits are assumed from and ceded to other insurance companies under various reinsurance agreements. The Company reinsures portions of the risk on certain insurance policies which exceed its established limits, thereby providing a greater diversification of risk and minimizing exposure on larger risks. The Company remains contingently liable with respect to any insurance ceded and this would become an actual liability in the event that the assuming insurance company became unable to meet its obligation under the reinsurance treaty.
Premiums earned reflect the following reinsurance amounts:
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Direct premiums |
$ | 2,068,373 | $ | 1,867,885 | $ | 1,794,666 | ||||||
Reinsurance assumednon affiliates |
131,992 | 178,530 | 190,059 | |||||||||
Reinsurance assumedaffiliates |
25,047 | 28,940 | 22,874 | |||||||||
Reinsurance cedednon affiliates |
(62,896 | ) | (61,142 | ) | (61,076 | ) | ||||||
Reinsurance cededaffiliates |
(456,039 | ) | (492,496 | ) | (543,301 | ) | ||||||
|
|
|
|
|
|
|||||||
Net premiums earned |
$ | 1,706,477 | $ | 1,521,717 | $ | 1,403,222 | ||||||
|
|
|
|
|
|
The Company received reinsurance recoveries in the amount of $405,026, $450,571 and $455,081 during 2013, 2012 and 2011, respectively. At December 31, 2013 and 2012, estimated amounts recoverable from reinsurers that have been deducted from policy and contract claim reserves totaled $28,006 and $27,288, respectively. The aggregate reserves for policies and contracts were reduced for reserve credits for reinsurance ceded at December 31, 2013 and 2012 of $6,610,550 and $8,221,493, respectively, of which $6,523,603 and $8,112,442, respectively, were ceded to affiliates.
At December 31, 2013 and 2012, amounts recoverable from unaffiliated unauthorized reinsurers totaled $2,885 and $3,590, respectively, and reserve credits for reinsurance ceded totaled $10,367 and $13,406, respectively. The reinsurers hold collateral under these reinsurance agreements in the form of trust agreements totaling $19,539 and $18,269 at December 31, 2013 and 2012, respectively, that can be drawn on for amounts that remain unpaid for more than 120 days. There would be no reduction in surplus at December 31, 2013 if all reinsurance agreements were cancelled.
Mon Life 2013 SEC | 71 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
During 2013, the Company did not enter into any new reinsurance agreements in which a reserve credit was taken.
Effective September 30, 2012, the Company agreed to amend and restate the indemnity reinsurance treaty originally effective October 1, 2009 with MLIC Re, Inc., an affiliate. The amended and restated treaty now includes an experience refund mechanism and a revised schedule of coinsurance reserves. The Company received consideration of $425,000, paid a treaty settlement equal to the change in modified coinsurance reserves of $497,500 and increased ceded coinsurance reserves by $497,500 resulting in a pre-tax gain of $425,000 ($276,250 net of tax) which has been credited directly to unassigned surplus on a net of tax basis.
On April 26, 2011, Aegon N.V. announced the divestiture of its life reinsurance operations, Transamerica Reinsurance, to SCOR SE (SCOR), a Societas Europaea organized under the laws of France, which was effective August 9, 2011. The life reinsurance business conducted by Transamerica Reinsurance was written through several of Aegon N.V.s U.S. and international affiliates, all of which remain Aegon N.V. affiliates following the closing, except for Transamerica International Reinsurance Ireland, Limited (TIRI), an Irish reinsurance company. In preparation of the disposition of the life reinsurance business to SCOR, during the second quarter of 2011, the Company, as well as other affiliated life insurance companies, recaptured certain business that had been reinsured to TIRI, subsequently ceding the majority of the business recaptured to Transamerica International Re (Bermuda) Ltd. (TIRe), an affiliate. As a result of these transactions, the net impact to the Company was a pre-tax loss of $20,567 which was included in the statement of operations, and a net of tax gain of $15,885 which was credited directly to unassigned surplus. These amounts include current year amortization of previously deferred gains, as well as releases of previously deferred gains from unassigned surplus into earnings. Additional information surrounding these transactions is outlined below.
Effective April 1, 2011, the Company recaptured the life, military universal life, final settlement and Korean accidental death business that was previously reinsured on a coinsurance and a coinsurance funds withheld basis to affiliates. The Company paid recapture consideration of $15,400, received invested assets of $12,200, released the associated funds withheld liability of $2,130, recaptured reserves of $24,805, assumed other assets of $5,248 and released into income a previously deferred unamortized gain resulting from the original transaction in the amount of $60 ($39 after-tax). The resulting pre-tax loss of $20,567 was included in the statement of operations.
Subsequently, effective April 1, 2011, the Company ceded the life and military universal life business on a coinsurance funds withheld basis to an affiliate. The Company received an initial ceding commission of $12,100, transferred other assets of $4,159, established a funds withheld
Mon Life 2013 SEC | 72 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
liability of $4,796 and released reserves of $20,770, resulting in a pre-tax gain of $23,915 ($15,545 on a net of tax basis) which was credited directly to unassigned surplus.
Effective December 31, 2011, the Company recaptured the credit life and credit disability business that was previously reinsured on a coinsurance funds withheld basis to an unaffiliated party. The Company released the associated funds withheld liability of $2,428, recaptured reserves of $4,466 and exchanged no consideration resulting in a pre-tax loss of $2,038 which was included in the statement of operations.
Subsequently, December 31, 2011, the Company ceded that credit life and credit disability business, as well as additional in force business written and assumed by the Company as well as all new policies issued thereafter, on a coinsurance funds withheld basis to an affiliate. The Company established a funds withheld liability of $19,980, released reserves of $39,420 and exchanged no consideration resulting in a pre-tax gain of $19,440 ($12,637 after-tax) which was credited directly to unassigned surplus on a net of tax basis.
Effective September 30, 2011, the Company recaptured the term life business previously coinsured to an affiliate. Also effective September 30, 2011, the same block of business was recaptured by an affiliate, from which it had been assumed. The Company recaptured reserves of $402,985, released reserves of the same amount and released into income a previously deferred unamortized gain resulting from the original cession of the business to an affiliate in the amount of $421,601 ($274,041 net of tax) resulting in a pre-tax gain of $421,601 was included in the statement of operations.
The Company entered into an assumption reinsurance transaction with TLIC effective September 30, 2008. TLIC was the issuer of a series of corporate-owned life insurance policies issued to Life Investors Insurance Company of America (LIICA), an affiliate. The assumption reinsurance transaction resulted in the Company assuming all liabilities of TLIC arising under these policies. The Company assumed reserves of $138,025 and received consideration of $125,828. The Company recorded $12,197 of goodwill related to this transaction. The Company amortized $1,130 and $1,073 of this balance during 2012 and 2011, respectively.
During 2013, 2012 and 2011, the Company amortized deferred gains from reinsurance transactions of $63,742, $68,733 and $59,795, respectively, into earnings on a net of tax basis with a corresponding charge to unassigned surplus.
Mon Life 2013 SEC | 73 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
7. Income Taxes
The net deferred income tax asset at December 31, 2013 and 2012 and the change from the prior year are comprised of the following components:
December 31, 2013 | ||||||||||||
Ordinary | Capital | Total | ||||||||||
Gross Deferred Tax Assets |
$ | 349,840 | $ | 137,099 | $ | 486,939 | ||||||
Statutory Valuation Allowance Adjustment |
| | | |||||||||
|
|
|
|
|
|
|||||||
Adjusted Gross Deferred Tax Assets |
349,840 | 137,099 | 486,939 | |||||||||
Deferred Tax Assets Nonadmitted |
187,165 | 15,215 | 202,380 | |||||||||
|
|
|
|
|
|
|||||||
Subtotal (Net Deferred Tax Assets) |
162,675 | 121,884 | 284,559 | |||||||||
Deferred Tax Liabilities |
64,832 | 57,016 | 121,848 | |||||||||
|
|
|
|
|
|
|||||||
Net Admitted Deferred Tax Assets |
$ | 97,843 | $ | 64,868 | $ | 162,711 | ||||||
|
|
|
|
|
|
|||||||
December 31, 2012 | ||||||||||||
Ordinary | Capital | Total | ||||||||||
Gross Deferred Tax Assets |
$ | 345,565 | $ | 167,073 | $ | 512,638 | ||||||
Statutory Valuation Allowance Adjustment |
| | | |||||||||
|
|
|
|
|
|
|||||||
Adjusted Gross Deferred Tax Assets |
345,565 | 167,073 | 512,638 | |||||||||
Deferred Tax Assets Nonadmitted |
202,027 | 14,941 | 216,968 | |||||||||
|
|
|
|
|
|
|||||||
Subtotal (Net Deferred Tax Assets) |
143,538 | 152,132 | 295,670 | |||||||||
Deferred Tax Liabilities |
39,461 | 56,277 | 95,738 | |||||||||
|
|
|
|
|
|
|||||||
Net Admitted Deferred Tax Assets |
$ | 104,077 | $ | 95,855 | $ | 199,932 | ||||||
|
|
|
|
|
|
|||||||
Ordinary | Change Capital |
Total | ||||||||||
Gross Deferred Tax Assets |
$ | 4,275 | $ | (29,974 | ) | $ | (25,699 | ) | ||||
Statutory Valuation Allowance Adjustment |
| | | |||||||||
|
|
|
|
|
|
|||||||
Adjusted Gross Deferred Tax Assets |
4,275 | (29,974 | ) | (25,699 | ) | |||||||
Deferred Tax Assets Nonadmitted |
(14,862 | ) | 274 | (14,588 | ) | |||||||
|
|
|
|
|
|
|||||||
Subtotal (Net Deferred Tax Assets) |
19,137 | (30,248 | ) | (11,111 | ) | |||||||
Deferred Tax Liabilities |
25,371 | 739 | 26,110 | |||||||||
|
|
|
|
|
|
|||||||
Net Admitted Deferred Tax Assets |
$ | (6,234 | ) | $ | (30,987 | ) | $ | (37,221 | ) | |||
|
|
|
|
|
|
Mon Life 2013 SEC | 74 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The main components of deferred income tax amounts are as follows:
Year Ended December 31 | ||||||||||||
2013 | 2012 | Change | ||||||||||
Ordinary |
||||||||||||
Policyholder reserves |
$ | 206,923 | $ | 196,726 | $ | 10,197 | ||||||
Investments |
15,714 | 12,069 | 3,645 | |||||||||
Deferred acquisition costs |
108,377 | 113,728 | (5,351 | ) | ||||||||
Compensation and benefits accrual |
308 | 1,432 | (1,124 | ) | ||||||||
Receivablesnonadmitted |
13,879 | 16,270 | (2,391 | ) | ||||||||
Section 197 Intangible Amortization |
570 | 629 | (59 | ) | ||||||||
Corporate Provision |
105 | 202 | (97 | ) | ||||||||
Other (including items <5% of ordinary tax assets) |
3,964 | 4,509 | (545 | ) | ||||||||
|
|
|
|
|
|
|||||||
Subtotal |
349,840 | 345,565 | 4,275 | |||||||||
Nonadmitted |
187,165 | 202,027 | (14,862 | ) | ||||||||
|
|
|
|
|
|
|||||||
Admitted ordinary deferred tax assets |
162,675 | 143,538 | 19,137 | |||||||||
Capital: |
||||||||||||
Investments |
137,099 | 167,073 | (29,974 | ) | ||||||||
|
|
|
|
|
|
|||||||
Subtotal |
137,099 | 167,073 | (29,974 | ) | ||||||||
Statutory valuation allowance adjustment |
| | | |||||||||
Nonadmitted |
15,215 | 14,941 | 274 | |||||||||
|
|
|
|
|
|
|||||||
Admitted capital deferred tax assets |
121,884 | 152,132 | (30,248 | ) | ||||||||
|
|
|
|
|
|
|||||||
Admitted deferred tax assets |
$ | 284,559 | $ | 295,670 | $ | (11,111 | ) | |||||
|
|
|
|
|
|
Mon Life 2013 SEC | 75 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Year Ended December 31 | ||||||||||||
2013 | 2012 | Change | ||||||||||
Deferred Tax Liabilities: |
||||||||||||
Ordinary |
||||||||||||
Investments |
$ | 46,938 | $ | 18,864 | $ | 28,074 | ||||||
§807(f) adjustment |
10,617 | 12,766 | (2,149 | ) | ||||||||
Reinsurance ceded. |
2,304 | 2,896 | (592 | ) | ||||||||
Intercompany gain amortization |
4,601 | 4,754 | (153 | ) | ||||||||
Other (including items <5% of total ordinary tax liabilities) |
372 | 181 | 191 | |||||||||
|
|
|
|
|
|
|||||||
Subtotal |
64,832 | 39,461 | 25,371 | |||||||||
Capital |
||||||||||||
Investments |
57,016 | 56,277 | 739 | |||||||||
|
|
|
|
|
|
|||||||
Subtotal |
57,016 | 56,277 | 739 | |||||||||
|
|
|
|
|
|
|||||||
Deferred tax liabilities |
121,848 | 95,738 | 26,110 | |||||||||
|
|
|
|
|
|
|||||||
Net deferred tax assets/liabilities |
$ | 162,711 | $ | 199,932 | $ | (37,221 | ) | |||||
|
|
|
|
|
|
As discussed in Note 1, for the years ended December 31, 2013 and 2012 the Company admits deferred income tax assets pursuant to SSAP No. 101. The amount of admitted adjusted gross deferred income tax assets under each component of SSAP No. 101 is as follows:
December 31, 2013 | ||||||||||||
Ordinary | Capital | Total | ||||||||||
Admission Calculation Components SSAP No. 101 |
||||||||||||
2(a) Federal Income Taxes Paid in Prior Years Recoverable Through Loss Carrybacks |
$ | 97,843 | $ | 44,058 | $ | 141,901 | ||||||
2(b) Adjusted Gross Deferred Tax Assets Expected to be Realized (Excluding The Amount of Deferred Tax Assets From 2(a) above) After Application of the Threshold Limitation (the Lesser of 2(b)1 and 2(b)2 below) |
| 20,810 | 20,810 | |||||||||
1. Adjusted Gross Deferred Tax Assets Expected to be Realized Following the Balance Sheet Date |
| 20,810 | 20,810 | |||||||||
2. Adjusted Gross Deferred Tax Assets Allowed per Limitation Threshold |
XXX | XXX | 120,297 | |||||||||
2(c) Adjusted Gross Deferred Tax Assets (Excluding The Amount Of Deferred Tax Assets From 2(a) and 2(b) above) Offset by Gross Deferred Tax Liabilities |
64,832 | 57,016 | 121,848 | |||||||||
|
|
|
|
|
|
|||||||
2(d) Deferred Tax Assets Admitted as the result of application of SSAP No. 101, Total (2(a) + 2(b) + 2(c)) |
$ | 162,675 | $ | 121,884 | $ | 284,559 | ||||||
|
|
|
|
|
|
Mon Life 2013 SEC | 76 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
December 31, 2012 | ||||||||||||
Ordinary | Capital | Total | ||||||||||
Admission Calculation Components SSAP No. 101 |
||||||||||||
2(a) Federal Income Taxes Paid in Prior Years Recoverable Through Loss Carrybacks |
$ | 104,077 | $ | 95,855 | $ | 199,932 | ||||||
2(b) Adjusted Gross Deferred Tax Assets Expected to be Realized (Excluding The Amount of Deferred Tax Assets From 2(a) above) After Application of the Threshold Limitation (the Lesser of 2(b)1 and 2(b)2 below) |
| | | |||||||||
1. Adjusted Gross Deferred Tax Assets Expected to be Realized Following the Balance Sheet Date |
| | | |||||||||
2. Adjusted Gross Deferred Tax Assets Allowed per Limitation Threshold |
XXX | XXX | 107,057 | |||||||||
2(c) Adjusted Gross Deferred Tax Assets (Excluding The Amount Of Deferred Tax Assets From 2(a) and 2(b) above) Offset by Gross Deferred Tax Liabilities |
39,461 | 56,277 | 95,738 | |||||||||
|
|
|
|
|
|
|||||||
2(d) Deferred Tax Assets Admitted as the result of application of SSAP No. 101, Total (2(a) + 2(b) +2(c)) |
$ | 143,538 | $ | 152,132 | $ | 295,670 | ||||||
|
|
|
|
|
|
|||||||
Ordinary | Change Capital |
Total | ||||||||||
Admission Calculation Components SSAP No. 101 |
||||||||||||
2(a) Federal Income Taxes Paid in Prior Years Recoverable Through Loss Carrybacks |
$ | (6,234 | ) | $ | (51,797 | ) | $ | (58,031 | ) | |||
2(b) Adjusted Gross Deferred Tax Assets Expected to be Realized (Excluding The Amount of Deferred Tax Assets From 2(a) above) After Application of the Threshold Limitation (the Lesser of 2(b)1 and 2(b)2 below) |
| 20,810 | 20,810 | |||||||||
1. Adjusted Gross Deferred Tax Assets Expected to be Realized Following the Balance Sheet Date |
| 20,810 | 20,810 | |||||||||
2. Adjusted Gross Deferred Tax Assets Allowed per Limitation Threshold |
XXX | XXX | 13,240 | |||||||||
2(c) Adjusted Gross Deferred Tax Assets (Excluding The Amount Of Deferred Tax Assets From 2(a) and 2(b) above) Offset by Gross Deferred Tax Liabilities |
25,371 | 739 | 26,110 | |||||||||
|
|
|
|
|
|
|||||||
2(d) Deferred Tax Assets Admitted as the result of application of SSAP No. 101, Total (2(a) + 2(b) + 2(c)) |
$ | 19,137 | $ | (30,248 | ) | $ | (11,111 | ) | ||||
|
|
|
|
|
|
Mon Life 2013 SEC | 77 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
December 31 | ||||||||||||
2013 | 2012 | Change | ||||||||||
Ratio Percentage Used To Determine Recovery Period and Threshold Limitation Amount |
578 | % | 564 | % | 14 | % | ||||||
|
|
|
|
|
|
|||||||
Amount of Adjusted Capital and Surplus Used To Determine Recovery Period and Threshold Limitation in 2(b)2 above |
$ | 801,931 | $ | 603,615 | $ | 198,316 | ||||||
|
|
|
|
|
|
The impact of tax planning strategies at December 31, 2013 and 2012 was as follows:
December 31, 2013 | ||||||||||||
Ordinary Percent |
Capital Percent |
Total Percent | ||||||||||
Impact of Tax Planning Strategies: |
||||||||||||
Adjusted Gross DTAs |
$ | 349,840 | $ | 137,099 | $ | 486,939 | ||||||
(% of Total Adjusted Gross DTAs) |
0 | % | 58 | % | 16 | % | ||||||
|
|
|
|
|
|
|||||||
Net Admitted Adjusted Gross DTAs |
$ | 162,675 | $ | 121,884 | $ | 284,559 | ||||||
(% of Total Net Admitted Adjusted Gross DTAs) |
0 | % | 17 | % | 7 | % | ||||||
|
|
|
|
|
|
|||||||
December 31, 2012 | ||||||||||||
Ordinary Percent |
Capital Percent |
Total Percent | ||||||||||
Impact of Tax Planning Strategies: |
||||||||||||
Adjusted Gross DTAs |
$ | 345,565 | $ | 167,073 | $ | 512,638 | ||||||
(% of Total Adjusted Gross DTAs) |
0 | % | 23 | % | 7 | % | ||||||
|
|
|
|
|
|
|||||||
Net Admitted Adjusted Gross DTAs |
$ | 143,538 | $ | 152,132 | $ | 295,670 | ||||||
(% of Total Net Admitted Adjusted Gross DTAs) |
0 | % | 0 | % | 0 | % | ||||||
|
|
|
|
|
|
Mon Life 2013 SEC | 78 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Ordinary Percent |
Change Capital Percent |
Total Percent | ||||||||||
Impact of Tax Planning Strategies: |
||||||||||||
Adjusted Gross DTAs |
$ | 4,275 | $ | (29,974 | ) | $ | (25,699 | ) | ||||
(% of Total Adjusted Gross DTAs) |
0 | % | 35 | % | 9 | % | ||||||
|
|
|
|
|
|
|||||||
Net Admitted Adjusted Gross DTAs |
$ | 19,137 | $ | (30,248 | ) | $ | (11,111 | ) | ||||
(% of Total Net Admitted Adjusted Gross DTAs) |
0 | % | 17 | % | 7 | % | ||||||
|
|
|
|
|
|
The Companys tax planning strategies do not include the use of reinsurance-related tax planning strategies.
Current income taxes incurred consist of the following major components:
Year Ended December 31 | ||||||||||||
2013 | 2012 | Change | ||||||||||
Current Income Tax |
||||||||||||
Federal |
$ | 23,987 | $ | 103,095 | $ | (79,108 | ) | |||||
|
|
|
|
|
|
|||||||
Subtotal |
23,987 | 103,095 | (79,108 | ) | ||||||||
|
|
|
|
|
|
|||||||
Federal income tax on net capital gains |
(35,916 | ) | 128,376 | (164,292 | ) | |||||||
|
|
|
|
|
|
|||||||
Federal and foreign income taxes incurred |
$ | (11,929 | ) | $ | 231,471 | $ | (243,400 | ) | ||||
|
|
|
|
|
|
|||||||
Year Ended December 31 | ||||||||||||
2012 | 2011 | Change | ||||||||||
Current Income Tax |
||||||||||||
Federal |
$ | 103,095 | $ | 31,580 | $ | 71,515 | ||||||
|
|
|
|
|
|
|||||||
Subtotal |
103,095 | 31,580 | 71,515 | |||||||||
|
|
|
|
|
|
|||||||
Federal income tax on net capital gains |
128,376 | (24,360 | ) | 152,736 | ||||||||
|
|
|
|
|
|
|||||||
Federal and foreign income taxes incurred |
$ | 231,471 | $ | 7,220 | $ | 224,251 | ||||||
|
|
|
|
|
|
|||||||
Year Ended December 31 | ||||||||||||
2011 | 2010 | Change | ||||||||||
Current Income Tax |
||||||||||||
Federal |
$ | 31,580 | $ | 39,987 | $ | (8,407 | ) | |||||
|
|
|
|
|
|
|||||||
Subtotal |
31,580 | 39,987 | (8,407 | ) | ||||||||
|
|
|
|
|
|
|||||||
Federal income tax on net capital gains |
(24,360 | ) | 28,435 | (52,795 | ) | |||||||
|
|
|
|
|
|
|||||||
Federal and foreign income taxes incurred |
$ | 7,220 | $ | 68,422 | $ | (61,202 | ) | |||||
|
|
|
|
|
|
Mon Life 2013 SEC | 79 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The Company did not report a valuation allowance for deferred income tax assets as of December 31, 2013 or 2012.
The Companys current income tax incurred and change in deferred income tax differs from the amount obtained by applying the federal statutory rate of 35% to income before tax as follows:
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Current income taxes incurred |
$ | (11,929 | ) | $ | 231,472 | $ | 7,220 | |||||
Change in deferred income taxes |
(10,470 | ) | (823 | ) | (218,165 | ) | ||||||
(without tax on unrealized gains and losses) |
||||||||||||
|
|
|
|
|
|
|||||||
Total income tax reported |
$ | (22,399 | ) | $ | 230,649 | $ | (210,945 | ) | ||||
|
|
|
|
|
|
|||||||
Income before taxes |
$ | 107,663 | $ | 591,395 | $ | 442,849 | ||||||
35.00 | % | 35.00 | % | 35.00 | % | |||||||
|
|
|
|
|
|
|||||||
Expected income tax expense (benefit) at 35% statutory rate |
$ | 37,682 | $ | 206,988 | $ | 154,997 | ||||||
Increase (decrease) in actual tax reported resulting from: |
||||||||||||
Dividends received deduction |
(3,157 | ) | (3,847 | ) | (4,257 | ) | ||||||
Tax credits |
(18,501 | ) | (21,244 | ) | (24,476 | ) | ||||||
Tax-exempt Income |
(8 | ) | (6 | ) | (182 | ) | ||||||
Tax adjustment for IMR |
(5,450 | ) | (3,860 | ) | (1,544 | ) | ||||||
Surplus adjustment for in-force ceded |
(22,310 | ) | 72,631 | (112,555 | ) | |||||||
Nondeductible expenses |
694 | 766 | 483 | |||||||||
Deferred tax benefit on other items in surplus |
(3,209 | ) | (7,569 | ) | (17,505 | ) | ||||||
Provision to return |
357 | (2,625 | ) | 9,962 | ||||||||
Life-owned life insurance |
(876 | ) | (856 | ) | (835 | ) | ||||||
Dividends from certain foreign corporations |
319 | 423 | 329 | |||||||||
Prior period adjustment |
(8,973 | ) | (5,876 | ) | (23,612 | ) | ||||||
Pre-tax income of SMLLCs |
| (4,441 | ) | (2,550 | ) | |||||||
Change in basis due to corporate restructuring |
| | (185,900 | ) | ||||||||
Other |
1,033 | 165 | (3,300 | ) | ||||||||
|
|
|
|
|
|
|||||||
Total income tax reported |
$ | (22,399 | ) | $ | 230,649 | $ | (210,945 | ) | ||||
|
|
|
|
|
|
For federal income tax purposes, the Company joins in a consolidated income tax return filing with its indirect parent company, Transamerica Corporation, and other affiliated companies. The method of allocation between the companies is subject to a written tax allocation agreement. Under the terms of the tax allocation agreement, allocations are based on separate income tax return calculations. The Company is entitled to recoup federal income taxes paid in the event the future losses and credits reduce the greater of the Companys separately computed income tax
Mon Life 2013 SEC | 80 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
liability or the consolidated groups income tax liability in the year generated. The Company is also entitled to recoup federal income taxes paid in the event the losses and credits reduce the greater of the Companys separately computed income tax liability or the consolidated groups income tax liability in any carryback or carryforward year when so applied. Intercompany income tax balances are settled within thirty days of payment to or filing with the Internal Revenue Service. A tax return has not yet been filed for 2013.
As of December 31, 2013 and 2012, the Company had no operating loss or tax credit carryforwards available for tax purposes. The Company did not have a capital loss carryforward at December 31, 2013 and 2012.
The Company incurred income taxes during 2013, 2012 and 2011 of $19,577, $224,089, and $14,014, respectively, which will be available for recoupment in the event of future net losses.
The amount of tax contingencies calculated for the Company as of December 31, 2013 and 2012 is $194 and $198, respectively. The total amount of tax contingencies that, if recognized, would affect the effective income tax rate is $194. The Company classifies interest and penalties related to income taxes as income tax expense. The Companys interest (benefit) expense related to income taxes for the years ending December 31, 2013, 2012 and 2011 is $(525), $766 and $(136), respectively. The total interest payable balance as of December 31, 2013 and 2012 is $8 and $9, respectively. The Company recorded no liability for penalties. It is not anticipated that the total amounts of unrecognized tax benefits will significantly increase within twelve months of the reporting date.
The Companys federal income tax returns have been examined by the Internal Revenue Service and closing agreements have been executed through 2004. The examination for the years 2005 through 2006 have been completed and resulted in tax return adjustments that are currently undergoing final calculation at appeal. The examination for the years 2007 through 2008 has been completed and resulted in tax return adjustments that are currently being appealed. An examination is already in progress for the years 2009 and 2010. The Company believes that there are adequate defenses against or sufficient provisions established related to any open or contested tax positions.
8. Policy and Contract Attributes
Participating life insurance policies were issued by the Company which entitle policyholders to a share in the earnings of the participating policies, provided that a dividend distribution, which is determined annually based on mortality and persistency experience of the participating policies, is authorized by the Company. Participating insurance constituted less than 1% of ordinary life insurance in force at December 31, 2013 and 2012.
Mon Life 2013 SEC | 81 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
For the years ended December 31, 2013, 2012 and 2011, premiums for participating life insurance policies were $1,185, $1,232 and $1,298, respectively. The Company accounts for its policyholder dividends based on dividend scales and experience of the policies. The Company paid dividends in the amount of $1,259, $1,279 and $1,342 to policyholders during 2013, 2012 and 2011, respectively, and did not allocate any additional income to such policyholders.
A portion of the Companys policy reserves and other policyholders funds (including separate account liabilities) relates to liabilities established on a variety of the Companys annuity and deposit fund products. There may be certain restrictions placed upon the amount of funds that can be withdrawn without penalty. The amount of reserves on these products, by withdrawal characteristics, is summarized as follows:
December 31, 2013 | ||||||||||||||||||||
General Account |
Separate Account with Guarantees |
Separate Account Non- Guaranteed |
Total | Percent | ||||||||||||||||
Subject to discretionary withdrawal |
||||||||||||||||||||
With fair value adjustment |
$ | 28,645 | $ | 20,697 | $ | | $ | 49,342 | 0 | % | ||||||||||
At book value less surrender charge of 5% or more |
13,831 | | | 13,831 | 0 | |||||||||||||||
At fair value |
74 | | 14,304,849 | 14,304,923 | 60 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total with adjustment or at fair value |
42,550 | 20,697 | 14,304,849 | 14,368,096 | 60 | |||||||||||||||
At book value without adjustment |
||||||||||||||||||||
(minimal or no charge or adjustment) |
3,867,503 | | | 3,867,503 | 16 | |||||||||||||||
Not subject to discretionary withdrawal |
5,415,525 | 78,682 | 63,097 | 5,557,304 | 24 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total annuity reserves and deposit liabilities |
9,325,578 | 99,379 | 14,367,946 | 23,792,903 | 100 | % | ||||||||||||||
|
|
|||||||||||||||||||
Less reinsurance ceded |
5,017,441 | | | 5,017,441 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Net annuity reserves and deposit liabilities |
$ | 4,308,137 | $ | 99,379 | $ | 14,367,946 | $ | 18,775,462 | ||||||||||||
|
|
|
|
|
|
|
|
Mon Life 2013 SEC | 82 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
December 31, 2012 | ||||||||||||||||||||
General Account |
Separate Account with Guarantees |
Separate Account Non- Guaranteed |
Total | Percent | ||||||||||||||||
Subject to discretionary withdrawal |
||||||||||||||||||||
With fair value adjustment |
$ | 42,069 | $ | 23,609 | $ | | $ | 65,678 | 0 | % | ||||||||||
At book value less surrender charge of 5% or more |
22,755 | | | 22,755 | 0 | |||||||||||||||
At fair value |
111 | | 12,400,461 | 12,400,572 | 52 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total with adjustment or at fair value |
64,935 | 23,609 | 12,400,461 | 12,489,005 | 52 | |||||||||||||||
At book value without adjustment |
||||||||||||||||||||
(minimal or no charge or adjustment) |
4,276,647 | | | 4,276,647 | 18 | |||||||||||||||
Not subject to discretionary withdrawal |
6,934,154 | 170,007 | 54,778 | 7,158,939 | 30 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total annuity reserves and deposit liabilities |
11,275,736 | 193,616 | 12,455,239 | 23,924,591 | 100 | % | ||||||||||||||
|
|
|||||||||||||||||||
Less reinsurance ceded |
6,637,964 | | | 6,637,964 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Net annuity reserves and deposit liabilities |
$ | 4,637,772 | $ | 193,616 | $ | 12,455,239 | $ | 17,286,627 | ||||||||||||
|
|
|
|
|
|
|
|
Included in the liability for deposit-type contracts at December 31, 2013 and 2012 are approximately $53,121 and $52,574, respectively, of funding agreements issued to special purpose entities in conjunction with non-recourse medium-term note programs. Under these programs, the proceeds from each note series issuance are used to purchase a funding agreement from the Company which secures that particular series of notes. In general, the payment terms of the note series match the payment terms of the funding agreement that secures that series. Claims for the principal and interest for these funding agreements are afforded equal priority as other policyholders.
At December 31, 2013 the contractual maturities were as follows:
Year |
Amount | |||
2014 |
$ | | ||
2015 |
| |||
2016 |
| |||
2017 |
| |||
Thereafter |
53,121 |
The Companys liability for deposit-type contracts includes GICs and Funding Agreements assumed from Transamerica Life Insurance Company, an affiliate. The liabilities assumed are $900,065 and $900,084 at December 31, 2013 and 2012, respectively.
Mon Life 2013 SEC | 83 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Certain separate and variable accounts held by the Company represent funds for which the benefit is determined by the performance and/or fair value of the investments held in the separate account. The assets and the liabilities of these are carried at fair value. These variable annuities generally provide an additional minimum guaranteed death benefit. Some variable annuities also provide a minimum guaranteed income benefit. The Companys Guaranteed Indexed separate accounts provide customers a return based on the total performance of a specified financial index plus an enhancement. Hedging instruments that return the chosen index are purchased by the Company and held within the separate account. The assets in the accounts, carried at fair value, consist primarily of long-term bonds. Information regarding the separate accounts of the Company are as follows:
Guaranteed Indexed |
Nonindexed Guaranteed Less Than 4% |
Nonguaranteed | Total | |||||||||||||
Premiums, deposits and other considerations for the year ended December 31, 2013 |
$ | | $ | 132 | $ | 569,801 | $ | 569,933 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Reserves for separate accounts as of December 31, 2013 with assets at fair value |
$ | 78,682 | $ | 20,697 | $ | 14,377,033 | $ | 14,476,412 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 78,682 | $ | 20,697 | $ | 14,377,033 | $ | 14,476,412 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Reserves by withdrawal characteristics as of December 31, 2013: |
||||||||||||||||
With fair value adjustment |
$ | 78,682 | $ | 20,697 | $ | | $ | 99,379 | ||||||||
At fair value |
| | 14,313,937 | 14,313,937 | ||||||||||||
Not subject to discretionary withdrawal |
| | 63,096 | 63,096 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total separate account liabilities at December 31, 2013 |
$ | 78,682 | $ | 20,697 | $ | 14,377,033 | $ | 14,476,412 | ||||||||
|
|
|
|
|
|
|
|
Mon Life 2013 SEC | 84 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Guaranteed Indexed |
Nonindexed Guaranteed Less Than 4% |
Nonguaranteed | Total | |||||||||||||
Premiums, deposits and other considerations for the year ended December 31, 2012 |
$ | | $ | 120 | $ | 466,200 | $ | 466,320 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Reserves for separate accounts as of December 31, 2012 with assets at fair value |
$ | 170,007 | $ | 23,609 | $ | 12,462,862 | $ | 12,656,478 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total as of December 31, 2012 |
$ | 170,007 | $ | 23,609 | $ | 12,462,862 | $ | 12,656,478 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Reserves by withdrawal characteristics as of December 31, 2012: |
||||||||||||||||
With fair value adjustment |
$ | 170,007 | $ | 23,609 | $ | | $ | 193,616 | ||||||||
At fair value |
| | 12,408,084 | 12,408,084 | ||||||||||||
Not subject to discretionary withdrawal |
| | 54,778 | 54,778 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total separate account liabilities at December 31, 2012 |
$ | 170,007 | $ | 23,609 | $ | 12,462,862 | $ | 12,656,478 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Guaranteed Indexed |
Nonindexed Guaranteed Less Than 4% |
Nonguaranteed | Total | |||||||||||||
Premiums, deposits and other considerations for the year ended December 31, 2011 |
$ | | $ | 107 | $ | 402,748 | $ | 402,855 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Reserves for separate accounts as of December 31, 2011 with assets at fair value |
$ | 170,658 | $ | 25,929 | $ | 11,260,745 | $ | 11,457,332 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total as of December 31, 2011 |
$ | 170,658 | $ | 25,929 | $ | 11,260,745 | $ | 11,457,332 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Reserves by withdrawal characteristics as of December 31, 2011: |
||||||||||||||||
With fair value adjustment |
$ | 170,658 | $ | 25,929 | $ | | $ | 196,587 | ||||||||
At fair value |
| | 11,203,196 | 11,203,196 | ||||||||||||
Not subject to discretionary withdrawal |
$ | | | 57,549 | 57,549 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total separate account liabilities at December 31, 2011 |
$ | 170,658 | $ | 25,929 | $ | 11,260,745 | $ | 11,457,332 | ||||||||
|
|
|
|
|
|
|
|
Mon Life 2013 SEC | 85 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
A reconciliation of the amounts transferred to and from the Companys separate accounts is presented below:
Year Ended December 31 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Transfer as reported in the summary of operations of the separate accounts statement: |
||||||||||||
Transfers to separate accounts |
$ | 569,933 | $ | 466,321 | $ | 402,855 | ||||||
Transfers from separate accounts |
(888,332 | ) | (656,788 | ) | (540,288 | ) | ||||||
|
|
|
|
|
|
|||||||
Net transfers from separate accounts |
(318,399 | ) | (190,467 | ) | (137,433 | ) | ||||||
Miscellaneous reconciling adjustments |
5,606 | 1,087 | 763 | |||||||||
|
|
|
|
|
|
|||||||
Net transfers as reported in the statement of operations of the life, accident and health annual statement |
$ | (312,793 | ) | $ | (189,380 | ) | $ | (136,670 | ) | |||
|
|
|
|
|
|
The legal insulation of separate account assets prevents such assets from being generally available to satisfy claims resulting from the general account. At December 31, 2013 and 2012, the Companys separate account statement included legally insulated assets of $14,524,270 and $12,530,256, respectively. The assets legally insulated from general account claims at December 31, 2013 and 2012 are attributed to the following products:
Product |
2013 | 2012 | ||||||
Variable annuities |
$ | 12,390,614 | 10,609,856 | |||||
Group annuities |
1,993,324 | 1,715,754 | ||||||
Modified separate account |
131,244 | 197,024 | ||||||
Variable life |
9,088 | 7,623 | ||||||
|
|
|
|
|||||
Total separate account assets |
$ | 14,524,270 | $ | 12,530,256 | ||||
|
|
|
|
The Company does not participate in securities lending transactions within the separate account.
For variable annuities with guaranteed living benefits and variable annuities with minimum guaranteed death benefits the Company complies with Actuarial Guideline XLIII (AG 43), which replaces Actuarial Guidelines 34 and 39. AG 43 specifies statutory reserve requirements for variable annuity contracts with benefit guarantees (VACARVM) and without benefit guarantees and related products. The AG 43 reserve calculation includes variable annuity products issued after January 1, 1981. Examples of covered guaranteed benefits include guaranteed minimum accumulation benefits, return of premium death benefits, guaranteed minimum income benefits, guaranteed minimum withdrawal benefits and guaranteed payout annuity floors. The aggregate
Mon Life 2013 SEC | 86 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
reserve for contracts falling within the scope of AG 43 is equal to the conditional tail expectation (CTE) Amount, but not less than the standard scenario amount (SSA).
To determine the CTE Amount, the Company used 1,000 of the pre-packaged scenarios developed by the American Academy of Actuaries (AAA) produced in October 2005 and prudent estimate assumptions based on company experience. The SSA was determined using the assumptions and methodology prescribed in AG 43 for determining the SSA.
At December 31, 2013 and 2012, the Company had variable and separate account annuities with minimum guaranteed benefits as follows:
Benefit and Type of Risk |
Subjected Account Value |
Amount of Reserve Held |
Reinsurance Reserve Credit |
|||||||||
December 31, 2013 |
||||||||||||
Minimum guaranteed death benefit |
$ | 7,417,616 | $ | 2,889 | $ | | ||||||
Minimum guaranteed income benefit |
11,336 | 1,018 | | |||||||||
Minimum guaranteed withdrawal benefit |
160,497 | | | |||||||||
December 31, 2012 |
||||||||||||
Minimum guaranteed death benefit |
$ | 6,541,811 | $ | 3,495 | $ | | ||||||
Minimum guaranteed income benefit |
9,960 | 1,602 | | |||||||||
Minimum guaranteed withdrawal benefit |
102,022 | | |
The Company offers variable and separate account annuities with minimum guaranteed benefits. In accordance with the guarantees provided, if the investment proceeds are insufficient to cover the rate of return guaranteed for the product, the policyholder proceeds will be remitted by the general account. As of December 31, 2013 and 2012, the general account of the Company had a maximum guarantee for separate account liabilities of $107,007 and $170,007, respectively. To compensate the general account for the risk taken, the separate account paid risk charges of $1,392, $545 and $104 to the general account in 2013, 2012 and 2011, respectively. During the years ended December 31, 2013, 2012 and 2011, the general account of the Company had paid $501, $239 and $613, respectively, toward separate account guarantees.
Mon Life 2013 SEC | 87 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Reserves on the Companys 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 policiess paid-through date to the policys next anniversary date. At December 31, 2013 and 2012, the gross premium and loading amounts related to these assets (which are reported as premiums deferred and uncollected), are as follows:
Gross | Loading | Net | ||||||||||
December 31, 2013 |
||||||||||||
Life and annuity: |
||||||||||||
Ordinary direct first year business |
$ | 16,769 | $ | 12,176 | $ | 4,593 | ||||||
Ordinary direct renewal business |
194,579 | 51,318 | 143,261 | |||||||||
Group life direct business |
13,030 | 3,386 | 9,644 | |||||||||
Credit direct business |
440 | | 440 | |||||||||
Reinsurance ceded |
(20,766 | ) | | (20,766 | ) | |||||||
|
|
|
|
|
|
|||||||
Total life and annuity |
204,052 | 66,880 | 137,172 | |||||||||
Accident and health: |
||||||||||||
Direct |
35,888 | | 35,888 | |||||||||
Reinsurance assumed |
6,714 | | 6,714 | |||||||||
Reinsurance ceded |
(1,645 | ) | | (1,645 | ) | |||||||
|
|
|
|
|
|
|||||||
Total accident and health |
40,957 | | 40,957 | |||||||||
|
|
|
|
|
|
|||||||
$ | 245,009 | $ | 66,880 | $ | 178,129 | |||||||
|
|
|
|
|
|
|||||||
Gross | Loading | Net | ||||||||||
December 31, 2012 |
||||||||||||
Life and annuity: |
||||||||||||
Ordinary direct first year business |
$ | 17,360 | $ | 12,774 | $ | 4,586 | ||||||
Ordinary direct renewal business |
201,276 | 53,166 | 148,110 | |||||||||
Group life direct business |
14,508 | 3,775 | 10,733 | |||||||||
Credit direct business |
508 | | 508 | |||||||||
Reinsurance ceded |
(19,565 | ) | | (19,565 | ) | |||||||
|
|
|
|
|
|
|||||||
Total life and annuity |
214,087 | 69,715 | 144,372 | |||||||||
Accident and health: |
||||||||||||
Direct |
47,336 | | 47,336 | |||||||||
Reinsurance assumed |
11,786 | | 11,786 | |||||||||
Reinsurance ceded |
(2,076 | ) | | (2,076 | ) | |||||||
|
|
|
|
|
|
|||||||
Total accident and health |
57,046 | | 57,046 | |||||||||
|
|
|
|
|
|
|||||||
$ | 271,133 | $ | 69,715 | $ | 201,418 | |||||||
|
|
|
|
|
|
Mon Life 2013 SEC | 88 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The Company anticipates investment income as a factor in the premium deficiency calculation, in accordance with SSAP No. 54, Individual and Group Accident and Health Contracts. At December 31, 2013 and 2012, the Company established a premium deficiency reserve of $117,300 and $0, respectively.
At December 31, 2013 and 2012, the Company had insurance in force aggregating $4,156,319 and $4,262,496, respectively, in which the gross premiums are less than the net premiums required by the valuation standards established by the Insurance Division, Department of Commerce, of the State of Iowa. The Company established policy reserves of $50,445 and $42,640 to cover these deficiencies at December 31, 2013 and 2012, respectively.
The Companys primary method utilized to estimate premium adjustments for contracts subject to redetermination is to review experience periodically and to adjust premiums for differences between the experience anticipated at the time of redetermination and that underlying the original premiums. The Company has not limited its degree of discretion contractually; however, in some states it has agreed not to raise premiums in order to recoup past losses. The Company forgoes premium changes on existing policies at its option if the administrative cost and other business issues associated with the change outweigh the direct financial impact of the change. Also, the Company has extra-contractually guaranteed the current premium scale for certain policies.
Liabilities for losses and loss/claim adjustment expenses for accident and health contracts are estimated using statistical claim development models to develop best estimates of liabilities for medical expense business and using tabular reserves employing mortality/morbidity tables and discount rates meeting minimum regulatory requirements for other business. The balance in the liability for unpaid accident and health claim adjustment expenses as of December 31, 2013 and 2012 was $2,367 and $2,096, respectively.
9. Capital and Surplus
The Company is subject to limitations, imposed by the State of Iowa, on the payment of dividends to its stockholders. Generally, dividends during any twelve-month period may not be paid, without prior regulatory approval, in excess of the greater of (a) 10 percent of statutory surplus as of the preceding December 31, or (b) statutory gain from operations before net realized capital gains (losses) on investments for the preceding year. Subject to the availability of unassigned surplus at the time of such dividend, the Company can make a dividend payment of up to $178,225 without the prior approval of insurance regulatory authorities in 2014.
The Company paid an ordinary common stock dividend of $118,422 and $16,578 to its parent companies, CGC and Aegon, respectively, on December 26, 2013. The Company reported a contribution receivable from parent companies of $135,000 at December 31, 2013. Capital
Mon Life 2013 SEC | 89 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
contributions of $118,422 and $16,578 were received from CGC and Aegon, respectively, on February 14, 2014. The Company paid a capital contribution of $368 to its subsidiary, Aegon Direct Marketing Services, Inc., on December 31, 2013.
The Company paid an ordinary common stock dividend of $394,560 and $55,440 to its parent companies, CGC and Aegon, respectively, on December 21, 2012. The Company paid a capital contribution of $368 to its subsidiary, Aegon Direct Marketing Services, Inc., on December 31, 2012.
On December 23, 2011, the Company paid a common stock dividend of $300,000 to its parent companies. Of this amount, $117,400 was an ordinary cash dividend and $182,600 was an extraordinary cash dividend. CGC received $263,100 and Aegon received $36,900.
Life and health insurance companies are subject to certain RBC requirements as specified by the NAIC. Under those requirements, the amount of capital and surplus maintained by a life or health insurance company is to be determined based on the various risk factors related to it. At December 31, 2013, the Company meets the minimum RBC requirements.
The Company has two classes of common stock, Class A and Class B. Each outstanding share of Class A is entitled to four votes for any matter submitted to a vote at a meeting of stockholders, whereas each outstanding share of Class B is entitled to on such vote.
On December 23, 2004, the Company received $117,168 from CGDC and $42,832 from Aegon, both affiliates, in exchange for surplus notes. Prior to the merger discussed in Note 1, CGDC dividended the Companys surplus notes to its direct shareholders in the amount of $102,734 to CGC and $14,434 to Aegon. These notes are due 20 years from the date of issuance at an interest rate of 6% and are subordinate and junior in right of payment to all obligations and liabilities of the Company. In the event of liquidation of the Company, full payment of the surplus notes shall be made before the holders of common stock become entitled to any distribution of the remaining assets of the Company. The Company received approval from the Insurance Division, Department of Commerce, of the State of Iowa prior to paying quarterly interest payments.
Mon Life 2013 SEC | 90 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Additional information related to the surplus notes at December 31, 2013 and 2012 is as follows:
For Year Ending |
Balance Outstanding |
Interest Paid Current Year |
Cumulative Interest Paid |
Accrued Interest |
||||||||||||
2013 |
||||||||||||||||
CGC |
$ | 102,734 | $ | 6,164 | $ | 61,695 | $ | 514 | ||||||||
AEGON |
57,266 | 3,436 | 24,918 | 286 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 160,000 | $ | 9,600 | $ | 86,613 | $ | 800 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
2012 |
||||||||||||||||
CGC |
$ | 102,734 | $ | 6,164 | $ | 55,531 | $ | 514 | ||||||||
AEGON |
57,266 | 3,436 | 21,483 | 286 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 160,000 | $ | 9,600 | $ | 77,014 | $ | 800 | ||||||||
|
|
|
|
|
|
|
|
10. Securities Lending
The Company participates in an agent-managed securities lending program. The Company receives collateral equal to 102% of the fair value of the loaned domestic securities as of the transaction date. If the fair value of the collateral is at any time less than 102% of the fair value of the loaned securities, the counterparty is mandated to deliver additional collateral, the fair value of which, together with the collateral already held in connection with the lending transaction, is at least equal to 102% of the fair value of the loaned government or domestic securities. In the event the Company loans a foreign security and the denomination of the currency of the collateral is other than the denomination of the currency of the loaned foreign security, the Company receives and maintains collateral equal to 105% of the fair value of the loaned security.
At December 31, 2013 and 2012, respectively, securities in the amount of $310,280 and $333,420 were on loan under securities lending agreements as part of this program. At December 31, 2013, the collateral the Company received from securities lending activities was in the form of cash and on open terms. This cash collateral is reinvested and is not available for general corporate purposes. The reinvested cash collateral has a fair value of $322,142 and $350,162 at December 31, 2013 and 2012, respectively.
Mon Life 2013 SEC | 91 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The contractual maturities of the securities lending collateral positions are as follows:
Fair Value | ||||
Open |
$ | 322,169 | ||
30 days or less |
| |||
31 to 60 days |
| |||
61 to 90 days |
| |||
Greater than 90 days |
| |||
|
|
|||
Total |
322,169 | |||
Securities received |
| |||
|
|
|||
Total collateral received |
$ | 322,169 | ||
|
|
The Company receives primarily cash collateral in an amount in excess of the fair value of the securities lent. The Company reinvests the cash collateral into higher yielding securities than the securities which the Company has lent to other entities under the arrangement.
The maturity dates of the reinvested securities lending collateral are as follows:
Amortized Cost | Fair Value | |||||||
Open |
$ | 31,493 | $ | 31,493 | ||||
30 days or less |
107,759 | 107,759 | ||||||
31 to 60 days |
100,576 | 100,576 | ||||||
61 to 90 days |
61,175 | 61,175 | ||||||
91 to 120 days |
1,516 | 1,516 | ||||||
121 to 180 days |
18,394 | 18,394 | ||||||
Greater than 3 years |
1,296 | 1,229 | ||||||
|
|
|
|
|||||
Total |
322,209 | 322,142 | ||||||
Securities received |
| | ||||||
|
|
|
|
|||||
Total collateral reinvested |
$ | 322,209 | $ | 322,142 | ||||
|
|
|
|
For securities lending, the Companys sources of cash that it uses to return the cash collateral is dependent upon the liquidity of the current market conditions. Under current conditions, the Company has securities with a par value of $322,254 (fair value of $322,142) that are currently tradable securities that could be sold and used to pay for the $322,169 in collateral calls that could come due under a worst-case scenario.
11. Retirement and Compensation Plans
The Companys employees participate in a qualified defined benefit pension plan sponsored by Aegon. The Company has no legal obligation for the plan. The Company recognizes pension
Mon Life 2013 SEC | 92 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
expense equal to its allocation from Aegon. The pension expense is allocated among the participating companies based on International Accounting Standards 19 (IAS 19), Accounting for Employee Benefits and based upon actuarial participant benefit calculations. The benefits are based on years of service and the employees eligible annual compensation. Pension expenses were $4,311, $4,350 and $5,134, for the years ended December 31, 2013, 2012 and 2011, respectively. The plan is subject to the reporting and disclosure requirements of the Employee Retirement Income Security Act of 1974.
The Companys employees also participate in a defined contribution plan sponsored by Aegon which is qualified under Section 401(k) of the Internal Revenue Service Code. Employees of the Company who customarily work at least 1,000 hours during each calendar year and meet the other eligibility requirements are participants of the plan. Participants may elect to contribute up to 25% of their salary to the plan. The Company will match an amount up to three percent of the participants salary. Participants may direct all of their contributions and plan balances to be invested in a variety of investment options. The plan is subject to the reporting and disclosure requirements of the Employee Retirement Income Security Act of 1974. Expense related to this plan was $1,219, $1,276 and $1,682, for the years ended December 31, 2013, 2012 and 2011, respectively.
Aegon sponsors supplemental retirement plans to provide the Companys senior management with benefits in excess of normal pension benefits. The plans are noncontributory, and benefits are based on years of service and the employees compensation level. The plans are unfunded and nonqualified under the Internal Revenue Service Code. In addition, Aegon has established incentive deferred compensation plans for certain key employees of the Company. The Companys allocation of expense for these plans for each of the years ended December 31, 2013, 2012 and 2011 was insignificant. Aegon also sponsors an employee stock option plan/stock appreciation rights for employees of the company and a stock purchase plan for its producers, with the participating affiliated companies establishing their own eligibility criteria, producer contribution limits and company matching formula. These plans have been accrued or funded as deemed appropriate by management of Aegon and the Company.
In addition to pension benefits, the Company participates in plans sponsored by Aegon that provide postretirement medical, dental and life insurance benefits to employees meeting certain eligibility requirements. Portions of the medical and dental plans are contributory. The postretirement plan expenses are charged to affiliates in accordance with an intercompany cost sharing arrangement. The Company expensed $1,246, $1,285 and $1,307 related to these plans for the years ended December 31, 2013, 2012 and 2011, respectively.
Mon Life 2013 SEC | 93 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
12. Related Party Transactions
The Company shares certain officers, employees and general expenses with affiliated companies.
The Company is party to a common cost allocation service arrangement between Aegon companies, in which various affiliated companies may perform specified administrative functions in connection with the operation of the Company, in consideration of reimbursement of actual costs of services rendered. The Company is also a party to a Management and Administrative and Advisory agreement with Aegon USA Realty Advisors, Inc. whereby the advisor serves as the administrator and advisor for the Companys mortgage loan operations. Aegon USA Investment Management, LLC acts as a discretionary investment manager under an Investment Management Agreement with the Company. During 2013, 2012 and 2011, the Company paid $108,918, $100,736 and $47,194, respectively, for these services, which approximates their costs to the affiliates.
Transamerica Capital, Inc. provides wholesaling distribution services for the Company under a distribution agreement. The Company incurred expenses under this agreement of $61, $71 and $64 for the years ended December 31, 2013, 2012 and 2011, respectively.
At December 31, 2013 and 2012, the Company reported a net amount of $30,774 and $32,590 due to parent, subsidiary and affiliated companies, respectively. Terms of settlement require that these amounts be settled within 90 days. Receivables from and payables to affiliates bear interest at the thirty-day commercial paper rate. During 2013, 2012 and 2011, the Company paid net interest of $26, $40 and $111, respectively, to affiliates.
The Company has an administration service agreement with Transamerica Asset Management, Inc. to provide administrative services to the Aegon/Transamerica Series Trust. The Company received $471, $436 and $385 for these services during 2013, 2012 and 2011, respectively.
The Company had no short-term notes receivable at December 31, 2013 and 2012.
In prior years, the Company purchased life insurance policies covering the lives of certain employees of the Company from an affiliate. At December 31, 2013 and 2012, the cash surrender value of these policies was $79,733 and $77,229, respectively.
During 1998, TLIC issued life insurance policies to LIICA, covering the lives of certain LIICA employees. As discussed in Note 6Reinsurance, the Company entered into an assumption reinsurance transaction with TLIC effective September 30, 2008, resulting in the Company assuming all liabilities of TLIC arising under these policies. Accordingly, the Company held
Mon Life 2013 SEC | 94 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
aggregate reserves for policies and contracts related to these policies of $161,384 and $156,981 at December 31, 2013 and 2012, respectively.
13. Managing General Agents
The Company utilizes managing general agents and third-party administrators in its operation. Information regarding these entities for the year ended December 31, 2013 is as follows:
Name and Address of Managing General Agent or Third-Party Administrator |
FEIN | Exclusive Contract |
Types of Business Written | Types of Authority Granted |
Total Direct Premiums Written/ Produced By |
|||||||||||||
The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, PA 19355 |
23-1945930 | No | Deferred and Income Annuities | C, B, P, U | $ | 522,058 | ||||||||||||
Gallagher Bollinger, Inc. 101 JFK Parkway Short Hills, NJ 07078 |
22-0781130 | No | Group A&H, Life | C, CA, P, U | 91,233 | |||||||||||||
All Other TPA Premiums |
184 | |||||||||||||||||
|
|
|||||||||||||||||
Total |
$ | 613,475 | ||||||||||||||||
|
|
C- | Claims Payment |
CA- | Claims Adjustment |
B- | Binding Authority |
P- | Premium Collection |
U- | Underwriting |
For years ended December 31, 2013, 2012 and 2011, the Company had $522,058, $422,874 and $345,517, respectively, of direct premiums written by The Vanguard Group, Inc. For years ended December 31, 2013, 2012 and 2011, the Company had $91,233, $93,480 and $104,706, respectively, of direct premiums written by Gallagher Bollinger, Inc. For years ended December 31, 2013, 2012 and 2011, the Company had $184, $146 and $576, respectively, of direct premiums written by all other managing general agents.
14. Commitments and Contingencies
The Company has issued synthetic GIC contracts to benefit plan sponsors on assets totaling $59,317,033 and $58,306,775 as of December 31, 2013 and 2012, respectively. A synthetic GIC is an off-balance sheet fee-based product sold primarily to tax qualified plans. The plan sponsor retains ownership and control of the related plan assets. The Company provides book value benefit responsiveness in the event that qualified plan benefit requests exceed plan cash flows. In
Mon Life 2013 SEC | 95 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
certain contracts, the Company agrees to make advances to meet benefit payment needs and earns a market interest rate on these advances. The periodically adjusted contract-crediting rate is the means by which investment and benefit responsive experience is passed through to participants. In return for the book value benefit responsive guarantee, the Company receives a premium that varies based on such elements as benefit responsive exposure and contract size. The Company underwrites the plans for the possibility of having to make benefit payments and also must agree to the investment guidelines to ensure appropriate credit quality and cash flow. A contract reserve has been established for the possibility of unexpected benefit payments at below market interest rates of $127 and $1,612 at December 31, 2013 and 2012, respectively.
At December 31, 2013 and 2012, the Company has no mortgage loan commitments. At December 31, 2011, the Company had mortgage loan commitments of $4,160. The Company has contingent commitments of $42,822 and $46,975 at December 31, 2013 and 2012, respectively, to provide additional funding for various joint ventures, partnerships and limited liability companies, which includes LIHTC commitments of $2,032 and $7,640, respectively.
At December 31, 2013 and 2012, the Company has private placement commitments outstanding of $24,000 and $0, respectively.
At December 31, 2013 and 2012, no securities were acquired (sold) on a to be announced (TBA) basis.
The Company may pledge assets as collateral for derivative transactions. At December 31, 2013 and 2012, the Company has pledged invested assets with a carrying value of $15,185 and $14,443, respectively, and fair value of $15,853 and $17,892, respectively, in conjunction with these transactions.
Cash collateral received from derivative counterparties as well as the obligation to return the collateral is recorded on the Companys balance sheet. The amount of cash collateral posted as of December 31, 2013 and 2012, respectively, was $149,006 and $213,917. In addition, securities in the amount of $206,338 and $224,372 were posted to the Company as of December 31, 2013 and 2012, respectively, which were not included on the balance sheet of the Company as the Company does not have the ability to sell or repledge the collateral. A portion of the cash collateral received by the Company has been reposted as collateral to other counterparties. The amount of cash collateral reposted was $0 and $2,580 as of December 31, 2013 and 2012, respectively.
The Company may pledge assets as collateral for transactions involving funding agreements. At December 31, 2013 and 2012, the Company has pledged invested assets with a carrying amount
Mon Life 2013 SEC | 96 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
of $14,780 and $245,905 respectively, and fair value of $14,564 and $276,565 respectively, in conjunction with these transactions.
The Company has provided back-stop guarantees for the performance of non-insurance affiliates or subsidiaries that are involved in the guaranteed sale of investments in low-income housing tax credit partnerships. The nature of the obligation is to provide third party investors with a minimum guaranteed annual and cumulative return on their contributed capital which is based on tax credits and tax losses generated from the low income housing tax credit partnerships. Guarantee payments arise if low income housing tax credit partnerships experience unexpected significant decreases in tax credits and tax losses or there are compliance issues with the partnerships. A significant portion of the remaining term of the guarantees is between 13-21 years. In accordance with SSAP No. 5R, the Company did not recognize a liability for the low income housing tax credit since the amount is considered immaterial to the Companys financial results. The maximum potential amount of future payments (undiscounted) that the Company could be required to make under these guarantees was $173 and $245 at December 31, 2013 and 2012, respectively. No payments are required as of December 31, 2013. The current assessment of risk of making payments under these guarantees is remote.
The following table provides an aggregate compilation of guarantee obligations as of December 31, 2013 and 2012:
December 31 | ||||||||
2013 | 2012 | |||||||
Aggregate maximum potential of future payments of all guarantees (undiscounted) |
$ | 173 | $ | 245 | ||||
|
|
|
|
|||||
Current liability recognized in financial statements: |
||||||||
Noncontingent liabilities |
$ | | $ | | ||||
|
|
|
|
|||||
Contingent liabilities |
$ | | $ | | ||||
|
|
|
|
|||||
Ultimate financial statement impact if action required: |
||||||||
Other |
$ | 173 | $ | 245 | ||||
|
|
|
|
|||||
Total impact if action required |
$ | 173 | $ | 245 | ||||
|
|
|
|
The Company has issued funding agreements to FHLB, and the funds received are reported as deposit-type liabilities per SSAP No. 52, Deposit-Type Contracts. Total reserves are equal to the funding agreements balance. These funding agreements are used for investment spread management purposes and are subject to the same asset/liability management practices as other deposit-type business. All of the funding agreements issued to FHLB are classified in the general account as it is a general obligation of the Company. Collateral is required by FHLB to support repayment of the funding agreements. In addition, FHLB requires their common stock to be purchased.
Mon Life 2013 SEC | 97 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Year Ended December 31 | ||||||||
2013 | 2012 | |||||||
FHLB stock purchased/owned as part of the agreement |
$ | 26,000 | $ | 27,800 | ||||
Collateral pledged to the FHLB |
557,317 | 1,086,622 | ||||||
Borrowing capacity currently available |
897,824 | 560,000 | ||||||
Agreement General Account |
||||||||
Assets |
1,742,275 | 1,690,805 | ||||||
Liabilities |
1,300,000 | 1,300,130 |
The Company has provided guarantees for the obligations of noninsurance affiliates who have accepted assignments of structured settlement payment obligations from other insurers and purchase structured settlement insurance policies from subsidiaries of the Company that match those obligations. The guarantees made by the Company are specific to each structured settlement contract and vary in date and duration of the obligation. These are numerous and are backed by the reserves established by the Company to represent the present value of the future payments for those contracts. The statutory reserve established at December 31, 2012 for the total payout block is $2,383,901. As this reserve is already recorded on the balance sheet of the Company, there was no additional liability recorded due to the adoption of SSAP No. 5R.
The Company is a party to legal proceedings involving a variety of issues incidental to its business, including class actions. Lawsuits may be brought in nearly any federal or state court in the United States or in an arbitral forum. In addition, there continues to be significant federal and state regulatory activity relating to financial services companies. The Companys legal proceedings are subject to many variables, and given its complexity and scope, outcomes cannot be predicted with certainty. Although legal proceedings sometimes include substantial demands for compensatory and punitive damages, and injunctive relief, it is managements opinion that damages arising from such demands will not be material to the Companys financial position.
In addition, the insurance industry has increasingly and routinely been the subject of litigation, investigations, regulatory activity and challenges by various governmental and enforcement authorities and policyholder advocate groups concerning certain practices. For example, unclaimed property administrators and state insurance regulators are performing unclaimed property examinations of the life insurance industry in the U.S., including the Company. These are in some cases multi-state examinations that include the collective action of many of the states. Additionally, some states are conducting separate examinations or instituting separate enforcement actions in regard to unclaimed property laws and related claims practices. As other insurers in the United States have done, the Company identified certain additional internal processes that it has implemented or is in the process of implementing. As of December 31, 2013 and 2012, the Companys reserves related to this matter were $45,219 and $10,297, respectively.
Mon Life 2013 SEC | 98 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
Also, various major insurers in the U.S. have entered into settlements with insurance regulators recently regarding claims settlement practices. Certain examinations are still ongoing.
The Company is subject to insurance guaranty laws in the states in which it writes business. These laws provide for assessments against insurance companies for the benefit of policyholders and claimants in the event of insolvency of other insurance companies. Assessments are charged to operations when received by the Company except where right of offset against other taxes paid is allowed by law. Amounts available for future offsets are recorded as an asset on the Companys balance sheet. The future obligation for known insolvencies has been accrued based on the most recent information available from the National Organization of Life and Health Insurance Guaranty Associations. Potential future obligations for unknown insolvencies are not determinable by the Company and are not required to be accrued for financial reporting purposes. The Company has established a reserve of $2,212 and $3,395 and an offsetting premium tax benefit of $847 and $1,347 at December 31, 2013 and 2012, respectively, for its estimated share of future guaranty fund assessments related to several major insurer insolvencies. The guaranty fund expense (benefit) was $990, $(2,874) and $(8,063), at December 31, 2013, 2012 and 2011, respectively.
15. Sales, Transfer, and Servicing of Financial Assets and Extinguishments of Liabilities
Municipal repurchase agreements require a minimum of 95% of the fair value of the securities transferred to be maintained as collateral. At December 31, 2013 and 2012, the Company had no recorded liabilities for municipal repurchase agreements.
The Company enters into dollar repurchase agreements in which securities are delivered to the counterparty once adequate collateral has been received. At December 31, 2013 and 2012, the Company had dollar repurchase agreements outstanding in the amount of $52,930 and $5,825, respectively. The Company had an outstanding liability for borrowed money in the amount $53,453 and $6,222 at December 31, 2013 and 2012, respectively due to participation in dollar repurchase agreements which includes accrued interest.
Mon Life 2013 SEC | 99 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
The contractual maturities of dollar repurchase agreements are as follows:
Fair Value | ||||
Open |
$ | 53,266 | ||
30 days or less |
| |||
31 to 60 days |
| |||
61 to 90 days |
| |||
Greater than 90 days |
| |||
|
|
|||
Total |
53,266 | |||
Securities received |
| |||
|
|
|||
Total collateral received |
$ | 53,266 | ||
|
|
In the course of the Companys asset management, securities are sold and reacquired within 30 days of the sale date to enhance the Companys yield on its investment portfolio. The details by NAIC designation 3 or below of securities sold during 2013 and reacquired within 30 days of the sale date are:
Number of Transactions |
Book Value of Securities Sold |
Cost of Securities Repurchased |
Gain/(Loss) | |||||||||||||
Bonds: |
||||||||||||||||
NAIC 6 |
1 | $ | 36 | $ | 72 | $ | 3 |
16. Subsequent Events
The financial statements are adjusted to reflect events that occurred between the balance sheet date and the date when the financial statements are issued, provided they give evidence of conditions that existed at the balance sheet date (Type I). Events that are indicative of conditions that arose after the balance sheet date are disclosed, but do not result in an adjustment of the financial statements themselves (Type II). With the exception of the Affordable Care Act annual fee described below, the Company has not identified any Type I or Type II subsequent events for the year ended December 31, 2013 through the date the financial statements are issued.
On January 1, 2014, the Company will be subject to an annual fee under section 9010 of the Affordable Care Act (ACA). This annual fee will be allocated to individual health insurers based on the ratio of the amount of the entitys net premiums written during the preceding calendar year to the amount of health insurance for any U.S. health risk that is written during the preceding calendar year. A health insurance entitys portion of the annual fee becomes payable once the entity provides health insurance for any U.S. health risk for each calendar year beginning on or after January 1, 2014. As of December 31, 2013, the Company has written health insurance
Mon Life 2013 SEC | 100 |
Monumental Life Insurance Company
Notes to Financial Statements Statutory Basis (continued)
(Dollars in Thousands)
subject to the ACA assessment, expects to conduct health insurance business in 2014, and estimates their portion of the annual health insurance industry fee to be payable on September 30, 2014 to be $1,381. This assessment is not expected to have a material impact on risk based capital in 2014.
Mon Life 2013 SEC | 101 |
Statutory-Basis
Financial Statement Schedules
Mon Life 2013 SEC |
Monumental Life Insurance Company
Summary of Investments Other Than Investments in Related Parties
(Dollars in Thousands)
December 31, 2013
Schedule I
Type of Investment |
Cost (1) | Market Value | Amount at Which Shown in the Balance Sheet (2) |
|||||||||
Fixed maturities |
||||||||||||
Bonds: |
||||||||||||
United States government and government agencies and authorities |
$ | 702,488 | $ | 698,416 | $ | 702,757 | ||||||
States, municipalities and political subdivisions |
365,585 | 397,439 | 365,585 | |||||||||
Foreign governments |
196,331 | 188,850 | 192,500 | |||||||||
Hybrid Securities |
654,097 | 582,931 | 654,097 | |||||||||
All other corporate bonds |
10,453,434 | 11,052,424 | 10,409,860 | |||||||||
Redeemable preferred stocks |
9,541 | 8,955 | 9,541 | |||||||||
|
|
|
|
|
|
|||||||
Total fixed maturities |
12,381,476 | 12,929,015 | 12,334,340 | |||||||||
Equity securities |
||||||||||||
Common stocks: |
||||||||||||
Industrial, miscellaneous and all other |
44,500 | 45,669 | 45,669 | |||||||||
|
|
|
|
|
|
|||||||
Total equity securities |
44,500 | 45,669 | 45,669 | |||||||||
Mortgage loans on real estate |
1,692,860 | 1,692,860 | ||||||||||
Real estate |
7,285 | 7,285 | ||||||||||
Policy loans |
470,549 | 470,549 | ||||||||||
Other long-term investments |
336,388 | 336,388 | ||||||||||
Securities Lending |
322,209 | 322,209 | ||||||||||
Cash, cash equivalents and short-term investments |
558,923 | 558,923 | ||||||||||
|
|
|
|
|||||||||
Total investments |
$ | 15,814,190 | $ | 15,768,223 | ||||||||
|
|
|
|
(1) | Original cost of equity securities and, as to fixed maturities, original cost reduced by repayments and adjusted for amortization of premiums or accrual discounts. |
(2) | United States government and corporate bonds of $71,375 are held at fair value rather than amortized cost due to having an NAIC 6 rating. |
Mon Life 2013 SEC | 102 |
Monumental Life Insurance Company
Supplementary Insurance Information
(Dollars in Thousands)
December 31, 2013
Schedule III
Future Policy Benefits and Expenses |
Unearned Premiums |
Policy and Contract Liabilities |
Premium Revenue |
Net Investment Income* |
Benefits, Claims Losses and Settlement Expenses |
Other Operating Expenses* |
||||||||||||||||||||||
Year ended December 31, 2013 |
||||||||||||||||||||||||||||
Individual life |
$ | 5,234,408 | $ | | $ | 105,825 | $ | 400,933 | $ | 285,191 | $ | 249,758 | $ | 301,105 | ||||||||||||||
Individual health |
616,993 | 24,181 | 43,741 | 163,907 | 30,895 | 221,766 | 83,668 | |||||||||||||||||||||
Group life and health |
643,125 | 30,939 | 88,494 | 440,210 | 34,434 | 271,048 | 175,801 | |||||||||||||||||||||
Annuity |
3,425,826 | | 68 | 701,427 | 378,809 | 1,128,645 | (144,481 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
$ | 9,920,352 | $ | 55,120 | $ | 238,128 | $ | 1,706,477 | $ | 729,329 | $ | 1,871,217 | $ | 416,093 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Year ended December 31, 2012 |
||||||||||||||||||||||||||||
Individual life |
$ | 5,237,303 | $ | | $ | 62,480 | $ | 270,263 | $ | 310,669 | $ | (133,512 | ) | $ | 274,367 | |||||||||||||
Individual health |
456,177 | 25,536 | 48,467 | 175,625 | 29,136 | 113,040 | 60,804 | |||||||||||||||||||||
Group life and health |
646,721 | 37,324 | 87,409 | 458,397 | 37,114 | 270,127 | 201,138 | |||||||||||||||||||||
Annuity |
3,629,809 | | 127 | 617,432 | 445,395 | 929,457 | 44,166 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
$ | 9,970,010 | $ | 62,860 | $ | 198,483 | $ | 1,521,717 | $ | 822,314 | $ | 1,179,112 | $ | 580,475 | |||||||||||||||
|
|
|
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|
|
|
|
|
|
|
|||||||||||||||
Year ended December 31, 2011 |
||||||||||||||||||||||||||||
Individual life |
$ | 5,530,556 | $ | | $ | 52,163 | $ | 208,344 | $ | 306,133 | $ | 245,580 | $ | 260,215 | ||||||||||||||
Individual health |
410,107 | 29,906 | 49,827 | 174,245 | 24,563 | 95,201 | 71,698 | |||||||||||||||||||||
Group life and health |
667,286 | 38,644 | 93,530 | 474,154 | 37,963 | 297,090 | 210,966 | |||||||||||||||||||||
Annuity |
3,840,063 | | 41 | 546,479 | 470,382 | 832,759 | 111,786 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
$ | 10,448,012 | $ | 68,550 | $ | 195,561 | $ | 1,403,222 | $ | 839,041 | $ | 1,470,630 | $ | 654,665 | |||||||||||||||
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|
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* | Allocations of net investment income and other operating expenses are based on a number and assumptions of estimates, and the results would change if different methods were applied. |
Mon Life 2013 SEC | 103 |
Monumental Life Insurance Company
Reinsurance
(Dollars in Thousands)
December 31, 2013
Schedule IV
Gross Amount |
Ceded to Other Companies |
Assumed From Other Companies |
Net Amount |
Percentage of Amount Assumed to Net |
||||||||||||||||
Year ended December 31, 2013 |
||||||||||||||||||||
Life insurance in force |
$ | 53,926,362 | $ | 34,924,942 | $ | 3,588,743 | 22,590,163 | 16 | % | |||||||||||
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|||||||||||
Premiums: |
||||||||||||||||||||
Individual life |
$ | 786,161 | $ | 396,054 | $ | 10,826 | $ | 400,933 | 3 | % | ||||||||||
Individual health |
116,968 | 8,564 | 55,503 | 163,907 | 34 | % | ||||||||||||||
Group life and health |
461,308 | 86,001 | 64,902 | 440,209 | 15 | % | ||||||||||||||
Annuity |
703,936 | 28,317 | 25,808 | 701,427 | 4 | % | ||||||||||||||
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|
|
|
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$ | 2,068,373 | $ | 518,936 | $ | 157,039 | $ | 1,706,476 | 9 | % | |||||||||||
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Year ended December 31, 2012 |
||||||||||||||||||||
Life insurance in force |
$ | 59,790,366 | $ | 39,457,731 | $ | 2,789,989 | $ | 23,122,624 | 12 | % | ||||||||||
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Premiums: |
||||||||||||||||||||
Individual life |
$ | 678,988 | $ | 421,821 | $ | 13,096 | $ | 270,263 | 5 | % | ||||||||||
Individual health |
120,598 | 7,260 | 62,287 | 175,625 | 35 | % | ||||||||||||||
Group life and health |
470,794 | 93,042 | 80,645 | 458,397 | 18 | % | ||||||||||||||
Annuity |
597,505 | 31,514 | 51,441 | 617,432 | 8 | % | ||||||||||||||
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|
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$ | 1,867,885 | $ | 553,637 | $ | 207,469 | $ | 1,521,717 | 14 | % | |||||||||||
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Year ended December 31, 2011 |
||||||||||||||||||||
Life insurance in force |
$ | 62,029,782 | $ | 41,743,562 | $ | 2,686,755 | $ | 22,972,975 | 12 | % | ||||||||||
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Premiums: |
||||||||||||||||||||
Individual life |
$ | 657,650 | $ | 456,986 | $ | 7,679 | $ | 208,343 | 4 | % | ||||||||||
Individual health |
124,649 | 22,292 | 71,889 | 174,246 | 41 | % | ||||||||||||||
Group life and health |
487,397 | 93,904 | 80,661 | 474,154 | 17 | % | ||||||||||||||
Annuity |
524,970 | 31,195 | 52,704 | 546,479 | 10 | % | ||||||||||||||
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|
|||||||||||
$ | 1,794,666 | $ | 604,377 | $ | 212,933 | $ | 1,403,222 | 15 | % | |||||||||||
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Mon Life 2013 SEC | 104 |
WRL Series Life Account Financials
FINANCIAL STATEMENTS
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
Years Ended December 31, 2013 and 2012
S-1
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
Financial Statements
Years Ended December 31, 2013 and 2012
Contents
Report of Independent Registered Public Accounting Firm |
1 | |||
Financial Statements |
||||
S-4 | ||||
S-6 | ||||
S-14 |
S-2
Building a better working world
Ernst & Young LLP Suite 3000
801Grand Avenue
Des Moines, IA 50309-2764
Tel: +1515 243 2727
Fax: +1515 362 7200
The Board of Directors and Contract Owners
Of WRL Series Life Account
Western Reserve Life Assurance Co. of Ohio
We have audited the accompanying statements of assets and liabilities of the subaccounts of Western Reserve Life Assurance Co. of Ohio WRL Series Life Account (the Separate Account), comprised of subaccounts as listed in the accompanying statements of assets and liabilities, as of December 31, 2013, and the related statements of operations and changes in net assets for the periods indicated thereon. These financial statements are the responsibility of the Separate Accounts management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Separate Accounts internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Separate Accounts internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2013 by correspondence with the fund companies or their transfer agents. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the respective subaccounts of Western Reserve Life Assurance Co. of Ohio WRL Series Life Account, at December 31,2013, the results of their operations and changes in their net assets for the periods indicated thereon, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Des Moines, Iowa
April 28, 2014
A member firm of Ernst & Young Global Limited
S-3
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
Statements of Assets and Liabilities
December 31, 2013
Subaccount |
Number of Shares | Cost | Assets at Market Value |
Due (to)/from General Account |
Net Assets | Units Outstanding | Range of Unit Values | |||||||||||||||||||||||||
AllianceBernstein Balanced Wealth Strategy Class B Shares |
119,934.123 | $ | 1,459,833 | $ | 1,637,101 | $ | (1 | ) | $ | 1,637,100 | 96,496 | $ | 12.355811 | $ | 17.665367 | |||||||||||||||||
Fidelity® VIP Contrafund® Service Class 2 |
627,758.128 | 15,963,711 | 21,199,392 | (2 | ) | 21,199,390 | 1,061,778 | 14.020766 | 20.013995 | |||||||||||||||||||||||
Fidelity® VIP Equity-Income Service Class 2 |
502,007.111 | 10,858,400 | 11,485,923 | (2 | ) | 11,485,921 | 627,239 | 14.212334 | 18.356476 | |||||||||||||||||||||||
Fidelity® VIP Growth Opportunities Service Class 2 |
221,959.058 | 4,084,343 | 6,587,745 | 2 | 6,587,747 | 495,704 | 13.288362 | 15.835002 | ||||||||||||||||||||||||
Fidelity® VIP Index 500 Service |
106,895.651 | 15,190,999 | 19,728,661 | (13 | ) | 19,728,648 | 1,059,391 | 14.682625 | 19.469248 | |||||||||||||||||||||||
Franklin Templeton VIP Founding Funds Allocation Class 4 Shares |
290,982.871 | 2,242,475 | 2,194,011 | 1 | 2,194,012 | 114,612 | 13.300390 | 19.940509 | ||||||||||||||||||||||||
Access VP High Yield |
196,878.416 | 5,741,053 | 5,908,321 | (1 | ) | 5,908,320 | 354,737 | 12.600722 | 17.510682 | |||||||||||||||||||||||
ProFund VP Asia 30 |
93,204.808 | 4,654,949 | 5,217,605 | 1 | 5,217,606 | 578,009 | 8.977163 | 10.202458 | ||||||||||||||||||||||||
ProFund VP Basic Materials |
70,225.572 | 3,362,756 | 3,893,306 | 24 | 3,893,330 | 382,073 | 10.027675 | 10.718093 | ||||||||||||||||||||||||
ProFund VP Bull |
144,056.708 | 4,912,118 | 5,456,868 | (4 | ) | 5,456,864 | 379,024 | 13.754578 | 14.521932 | |||||||||||||||||||||||
ProFund VP Consumer Services |
59,443.245 | 2,723,150 | 3,394,209 | | 3,394,209 | 174,922 | 17.217920 | 20.920899 | ||||||||||||||||||||||||
ProFund VP Emerging Markets |
219,992.582 | 5,635,491 | 5,253,423 | (2,378 | ) | 5,251,045 | 763,357 | 6.860433 | 8.314749 | |||||||||||||||||||||||
ProFund VP Europe 30 |
27,446.855 | 616,099 | 710,050 | 1 | 710,051 | 70,112 | 10.077904 | 12.020777 | ||||||||||||||||||||||||
ProFund VP Falling U.S. Dollar |
27,271.186 | 750,826 | 757,594 | (1 | ) | 757,593 | 91,312 | 7.874793 | 9.245773 | |||||||||||||||||||||||
ProFund VP Financials |
127,207.539 | 3,020,217 | 3,559,267 | 46 | 3,559,313 | 384,821 | 9.192863 | 13.528156 | ||||||||||||||||||||||||
ProFund VP International |
113,881.020 | 2,552,908 | 2,733,144 | 35 | 2,733,179 | 297,995 | 9.143276 | 11.419377 | ||||||||||||||||||||||||
ProFund VP Japan |
133,371.978 | 2,242,376 | 2,520,730 | (591 | ) | 2,520,139 | 264,230 | 9.507379 | 14.326343 | |||||||||||||||||||||||
ProFund VP Mid-Cap |
153,147.270 | 4,762,679 | 5,239,168 | 655 | 5,239,823 | 354,544 | 13.596900 | 15.530244 | ||||||||||||||||||||||||
ProFund VP Money Market |
15,946,965.500 | 15,946,966 | 15,946,966 | 4,349 | 15,951,315 | 1,587,303 | 9.239971 | 10.546944 | ||||||||||||||||||||||||
ProFund VP NASDAQ-100 |
251,002.282 | 6,506,831 | 7,650,550 | 272 | 7,650,822 | 370,711 | 15.020042 | 20.904236 | ||||||||||||||||||||||||
ProFund VP Oil & Gas |
144,474.584 | 6,860,410 | 7,726,501 | (1 | ) | 7,726,500 | 716,936 | 9.683747 | 11.504333 | |||||||||||||||||||||||
ProFund VP Pharmaceuticals |
132,395.605 | 3,947,831 | 4,526,606 | 7 | 4,526,613 | 272,535 | 16.555338 | 17.445073 | ||||||||||||||||||||||||
ProFund VP Precious Metals |
165,452.984 | 5,385,983 | 3,896,418 | (7 | ) | 3,896,411 | 888,589 | 4.370272 | 4.605538 | |||||||||||||||||||||||
ProFund VP Short Emerging Markets |
32,514.186 | 412,505 | 421,709 | 6 | 421,715 | 83,885 | 4.550910 | 9.172235 | ||||||||||||||||||||||||
ProFund VP Short International |
33,111.148 | 519,975 | 425,809 | 3 | 425,812 | 91,408 | 4.243829 | 6.627263 | ||||||||||||||||||||||||
ProFund VP Short NASDAQ-100 |
119,306.949 | 682,753 | 578,639 | 4 | 578,643 | 198,467 | 2.902010 | 5.366754 | ||||||||||||||||||||||||
ProFund VP Short Small-Cap |
255,367.835 | 1,300,552 | 1,095,528 | (2 | ) | 1,095,526 | 418,451 | 2.483097 | 5.264126 | |||||||||||||||||||||||
ProFund VP Small-Cap |
225,961.612 | 8,181,855 | 8,995,532 | 1,649 | 8,997,181 | 575,020 | 14.225744 | 15.840460 | ||||||||||||||||||||||||
ProFund VP Small-Cap Value |
122,871.113 | 4,679,130 | 5,133,555 | 1,633 | 5,135,188 | 328,402 | 14.772168 | 16.481570 | ||||||||||||||||||||||||
ProFund VP Telecommunications |
76,640.985 | 678,002 | 672,141 | 1 | 672,142 | 54,824 | 12.198288 | 13.401226 | ||||||||||||||||||||||||
ProFund VP U.S. Government Plus |
130,783.996 | 2,931,010 | 2,316,185 | 12 | 2,316,197 | 185,209 | 11.998188 | 13.144663 | ||||||||||||||||||||||||
ProFund VP UltraNASDAQ-100 |
169,137.261 | 6,489,645 | 8,712,260 | | 8,712,260 | 524,419 | 16.442301 | 16.771435 | ||||||||||||||||||||||||
ProFund VP UltraSmall-Cap |
434,966.489 | 7,983,390 | 10,830,666 | 2 | 10,830,668 | 687,819 | 15.672330 | 18.182846 | ||||||||||||||||||||||||
ProFund VP Utilities |
59,714.208 | 2,104,928 | 2,094,774 | (2 | ) | 2,094,772 | 187,028 | 10.435155 | 12.928726 | |||||||||||||||||||||||
TA Aegon Active Asset Allocation - Conservative Initial Class |
959,112.587 | 9,922,786 | 10,559,830 | (4 | ) | 10,559,826 | 949,238 | 10.943511 | 11.560433 | |||||||||||||||||||||||
TA Aegon Active Asset Allocation - Moderate Initial Class |
253,610.661 | 2,744,268 | 2,939,348 | 1 | 2,939,349 | 255,835 | 11.292449 | 11.656557 | ||||||||||||||||||||||||
TA Aegon Active Asset Allocation - Moderate Growth Initial Class |
2,837,707.574 | 27,381,609 | 33,768,720 | (166 | ) | 33,768,554 | 2,854,987 | 11.622154 | 12.865116 | |||||||||||||||||||||||
TA Aegon High Yield Bond Initial Class |
2,355,435.888 | 19,341,765 | 19,314,574 | 1,016 | 19,315,590 | 958,905 | 12.522507 | 20.433261 | ||||||||||||||||||||||||
TA Aegon Money Market Initial Class |
37,528,493.470 | 37,528,493 | 37,528,493 | (29 | ) | 37,528,464 | 2,061,971 | 9.316270 | 20.398106 | |||||||||||||||||||||||
TA Aegon U.S. Government Securities Initial Class |
644,957.393 | 8,437,342 | 7,952,325 | (677 | ) | 7,951,648 | 548,374 | 10.958200 | 14.663209 | |||||||||||||||||||||||
TA AllianceBernstein Dynamic Allocation Initial Class |
380,471.742 | 3,157,487 | 3,473,707 | (14 | ) | 3,473,693 | 211,633 | 10.648655 | 16.846779 | |||||||||||||||||||||||
TA Asset Allocation - Conservative Initial Class |
3,270,800.577 | 32,676,153 | 36,960,047 | (38 | ) | 36,960,009 | 2,123,723 | 11.789846 | 17.538227 |
S-4
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
Statements of Assets and Liabilities
December 31, 2013
Subaccount |
Number of Shares | Cost | Assets at Market Value |
Due (to)/from General Account |
Net Assets | Units Outstanding | Range of Unit Values | |||||||||||||||||||||||||
TA Asset Allocation - Growth Initial Class |
27,296,760.346 | $ | 262,417,873 | $ | 308,453,392 | $ | 3,111 | $ | 308,456,503 | 16,494,167 | $ | 12.873074 | $ | 19.073415 | ||||||||||||||||||
TA Asset Allocation - Moderate Initial Class |
7,122,044.436 | 71,382,027 | 86,176,738 | (39 | ) | 86,176,699 | 4,718,623 | 12.177407 | 18.416756 | |||||||||||||||||||||||
TA Asset Allocation - Moderate Growth Initial Class |
24,489,882.351 | 269,810,367 | 312,490,899 | 2,919 | 312,493,818 | 16,718,753 | 12.571518 | 18.790500 | ||||||||||||||||||||||||
TA Barrow Hanley Dividend Focused Initial Class |
3,613,877.643 | 50,835,306 | 69,350,312 | 144 | 69,350,456 | 2,340,738 | 13.051362 | 32.660389 | ||||||||||||||||||||||||
TA BlackRock Global Allocation Initial Class |
525,994.992 | 5,036,613 | 5,486,128 | 2 | 5,486,130 | 475,997 | 11.328843 | 11.687343 | ||||||||||||||||||||||||
TA BlackRock Tactical Allocation Initial Class |
459,212.315 | 4,740,316 | 5,010,006 | 3 | 5,010,009 | 422,236 | 11.663657 | 12.032649 | ||||||||||||||||||||||||
TA BNP Paribas Large Cap Growth Initial Class |
302,059.738 | 5,316,438 | 6,959,456 | (6 | ) | 6,959,450 | 300,744 | 14.428149 | 24.096790 | |||||||||||||||||||||||
TA Clarion Global Real Estate Securities Initial Class |
4,075,407.986 | 47,462,447 | 47,560,011 | (103 | ) | 47,559,908 | 1,637,406 | 10.986776 | 31.425633 | |||||||||||||||||||||||
TA Hanlon Income Initial Class |
2,299,305.940 | 25,658,118 | 25,637,261 | (148 | ) | 25,637,113 | 2,168,193 | 10.927524 | 12.292544 | |||||||||||||||||||||||
TA International Moderate Growth Initial Class |
1,187,503.576 | 9,919,081 | 11,863,161 | (458 | ) | 11,862,703 | 1,035,656 | 11.024814 | 12.309103 | |||||||||||||||||||||||
TA Janus Balanced Initial Class |
759,962.394 | 8,054,699 | 9,621,124 | (71 | ) | 9,621,053 | 776,819 | 11.456573 | 12.852511 | |||||||||||||||||||||||
TA Jennison Growth Initial Class |
1,548,826.511 | 13,438,357 | 16,587,932 | 944 | 16,588,876 | 997,359 | 15.131767 | 17.172210 | ||||||||||||||||||||||||
TA JPMorgan Core Bond Initial Class |
3,374,812.019 | 42,779,129 | 42,590,128 | 55 | 42,590,183 | 1,189,246 | 10.950996 | 44.008979 | ||||||||||||||||||||||||
TA JPMorgan Enhanced Index Initial Class |
398,090.513 | 5,437,411 | 7,002,412 | 6 | 7,002,418 | 363,316 | 14.808199 | 19.916705 | ||||||||||||||||||||||||
TA JPMorgan Mid Cap Value Initial Class |
400,053.591 | 5,383,104 | 8,409,126 | 6 | 8,409,132 | 297,704 | 15.470946 | 28.390027 | ||||||||||||||||||||||||
TA JPMorgan Tactical Allocation Initial Class |
3,826,358.202 | 51,185,970 | 50,814,037 | (66 | ) | 50,813,971 | 1,836,341 | 10.218215 | 36.047329 | |||||||||||||||||||||||
TA MFS International Equity Initial Class |
5,066,375.747 | 36,636,346 | 44,178,797 | (53 | ) | 44,178,744 | 2,542,705 | 11.892127 | 17.849759 | |||||||||||||||||||||||
TA Morgan Stanley Capital Growth Initial Class |
2,774,166.053 | 31,712,605 | 41,973,132 | (245 | ) | 41,972,887 | 1,614,954 | 15.367704 | 26.415253 | |||||||||||||||||||||||
TA Morgan Stanley Mid-Cap Growth Initial Class |
10,562,229.075 | 267,847,412 | 400,730,971 | (5,247 | ) | 400,725,724 | 6,801,694 | 13.605045 | 73.383598 | |||||||||||||||||||||||
TA Multi-Managed Balanced Initial Class |
9,034,369.585 | 103,085,116 | 122,596,395 | (487 | ) | 122,595,908 | 5,788,779 | 13.152086 | 21.225720 | |||||||||||||||||||||||
TA PIMCO Tactical - Balanced Initial Class |
623,153.044 | 6,716,367 | 7,222,344 | (1 | ) | 7,222,343 | 619,030 | 10.756257 | 12.125705 | |||||||||||||||||||||||
TA PIMCO Tactical - Conservative Initial Class |
899,022.997 | 9,675,498 | 9,862,282 | 148 | 9,862,430 | 892,693 | 9.964341 | 11.487913 | ||||||||||||||||||||||||
TA PIMCO Tactical - Growth Initial Class |
1,197,589.376 | 12,939,141 | 13,712,398 | 76 | 13,712,474 | 1,186,871 | 10.142407 | 12.013286 | ||||||||||||||||||||||||
TA PIMCO Total Return Initial Class |
2,393,815.772 | 28,545,739 | 27,193,747 | 2 | 27,193,749 | 1,680,310 | 11.014671 | 16.405073 | ||||||||||||||||||||||||
TA Systematic Small/Mid Cap Value Initial Class |
5,603,462.449 | 108,919,284 | 132,633,956 | 575 | 132,634,531 | 4,447,355 | 14.460043 | 30.555964 | ||||||||||||||||||||||||
TA T. Rowe Price Small Cap Initial Class |
3,878,867.021 | 43,187,970 | 55,235,066 | (524 | ) | 55,234,542 | 2,153,737 | 15.786342 | 26.762648 | |||||||||||||||||||||||
TA Vanguard ETF - Balanced Initial Class |
73,646.529 | 813,299 | 870,502 | (1 | ) | 870,501 | 69,037 | 12.023765 | 13.230608 | |||||||||||||||||||||||
TA Vanguard ETF - Growth Initial Class |
311,555.507 | 3,206,357 | 3,470,728 | 5 | 3,470,733 | 269,355 | 12.740878 | 13.501839 | ||||||||||||||||||||||||
TA WMC Diversified Growth Initial Class |
27,545,189.146 | 658,218,427 | 877,038,822 | (6,046 | ) | 877,032,776 | 42,951,581 | 13.197108 | 20.523353 |
S-5
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
Statements of Operations and Change in Net Assets
Year Ended December 31, 2012, Except as Noted
Investment Income |
Investment Expense |
Increase (Decrease) in Net Assets from Operations |
||||||||||||||||||||||||||||||||||||||||||||||||||
Subaccount |
Net Assets as of January 1, 2012 |
Reinvested Dividends |
Mortality and Expense Risk and Administrative Charges |
Net Investment Income (Loss) |
Capital Gain Distributions |
Realized Gain (Loss) on Investments |
Net Realized Capital Gains (Losses) on Investments |
Net Change in Unrealized Appreciation (Depreciation) |
Net Gain (Loss) on Investment |
Net Increase (Decrease) in Net Assets Resulting from Operations |
Increase (Decrease) in Net Assets from Contract Transactions |
Total Increase (Decrease) in Net Assets |
Net Assets as of December 31, 2012 |
|||||||||||||||||||||||||||||||||||||||
AllianceBernstein Balanced Wealth Strategy Class B Shares |
$ | 647,958 | $ | 14,996 | $ | 6,674 | $ | 8,322 | $ | | $ | 20,671 | $ | 20,671 | $ | 58,756 | $ | 79,427 | $ | 87,749 | $ | 188,644 | $ | 276,393 | $ | 924,351 | ||||||||||||||||||||||||||
Fidelity® VIP Contrafund® Service Class 2 |
15,287,373 | 185,584 | 148,975 | 36,609 | | 70,872 | 70,872 | 2,164,818 | 2,235,690 | 2,272,299 | (911,276 | ) | 1,361,023 | 16,648,396 | ||||||||||||||||||||||||||||||||||||||
Fidelity® VIP Equity-Income Service Class 2 |
7,793,281 | 243,512 | 74,381 | 169,131 | 535,153 | (158,049 | ) | 377,104 | 661,774 | 1,038,878 | 1,208,009 | (439,164 | ) | 768,845 | 8,562,126 | |||||||||||||||||||||||||||||||||||||
Fidelity® VIP Growth Opportunities Service Class 2 |
3,926,217 | 7,393 | 43,353 | (35,960 | ) | | 21,935 | 21,935 | 698,001 | 719,936 | 683,976 | 208,206 | 892,182 | 4,818,399 | ||||||||||||||||||||||||||||||||||||||
Fidelity® VIP Index 500 Service |
9,370,215 | 231,118 | 91,769 | 139,349 | 135,160 | 271,893 | 407,053 | 854,941 | 1,261,994 | 1,401,343 | 1,772,160 | 3,173,503 | 12,543,718 | |||||||||||||||||||||||||||||||||||||||
Franklin Templeton VIP Founding Funds Allocation Class 4 Shares |
669,001 | 22,583 | 7,947 | 14,636 | | 13,634 | 13,634 | 87,730 | 101,364 | 116,000 | 265,328 | 381,328 | 1,050,329 | |||||||||||||||||||||||||||||||||||||||
Access VP High Yield |
2,258,889 | 125,872 | 24,252 | 101,620 | | 43,444 | 43,444 | 186,986 | 230,430 | 332,050 | 1,037,149 | 1,369,199 | 3,628,088 | |||||||||||||||||||||||||||||||||||||||
ProFund VP Asia 30 |
3,927,613 | | 38,143 | (38,143 | ) | | (485,676 | ) | (485,676 | ) | 898,915 | 413,239 | 375,096 | (10,181 | ) | 364,915 | 4,292,528 | |||||||||||||||||||||||||||||||||||
ProFund VP Basic Materials |
4,487,958 | 14,250 | 39,058 | (24,808 | ) | | (142,088 | ) | (142,088 | ) | 410,776 | 268,688 | 243,880 | (432,450 | ) | (188,570 | ) | 4,299,388 | ||||||||||||||||||||||||||||||||||
ProFund VP Bull |
2,419,318 | | 23,063 | (23,063 | ) | | 295,744 | 295,744 | (28,252 | ) | 267,492 | 244,429 | (136,156 | ) | 108,273 | 2,527,591 | ||||||||||||||||||||||||||||||||||||
ProFund VP Consumer Services |
1,868,275 | | 13,166 | (13,166 | ) | 4,562 | 233,284 | 237,846 | 42,707 | 280,553 | 267,387 | (488,732 | ) | (221,345 | ) | 1,646,930 | ||||||||||||||||||||||||||||||||||||
ProFund VP Emerging Markets |
5,637,656 | 67,524 | 56,818 | 10,706 | | (766,440 | ) | (766,440 | ) | 1,014,391 | 247,951 | 258,657 | 3,264,163 | 3,522,820 | 9,160,476 | |||||||||||||||||||||||||||||||||||||
ProFund VP Europe 30 |
322,844 | 10,425 | 3,775 | 6,650 | | 9,334 | 9,334 | 93,102 | 102,436 | 109,086 | 1,476,736 | 1,585,822 | 1,908,666 | |||||||||||||||||||||||||||||||||||||||
ProFund VP Falling U.S. Dollar |
612,079 | | 4,350 | (4,350 | ) | | (33,177 | ) | (33,177 | ) | 27,753 | (5,424 | ) | (9,774 | ) | (20,748 | ) | (30,522 | ) | 581,557 | ||||||||||||||||||||||||||||||||
ProFund VP Financials |
1,628,344 | 3,102 | 18,260 | (15,158 | ) | | (39,058 | ) | (39,058 | ) | 345,050 | 305,992 | 290,834 | 138,400 | 429,234 | 2,057,578 | ||||||||||||||||||||||||||||||||||||
ProFund VP International |
1,434,875 | | 13,412 | (13,412 | ) | | (127,758 | ) | (127,758 | ) | 355,345 | 227,587 | 214,175 | 465,737 | 679,912 | 2,114,787 | ||||||||||||||||||||||||||||||||||||
ProFund VP Japan |
1,222,963 | | 3,162 | (3,162 | ) | | (86,108 | ) | (86,108 | ) | 70,723 | (15,385 | ) | (18,547 | ) | (973,126 | ) | (991,673 | ) | 231,290 | ||||||||||||||||||||||||||||||||
ProFund VP Mid-Cap |
2,408,185 | | 35,901 | (35,901 | ) | | 446,912 | 446,912 | 214,357 | 661,269 | 625,368 | 1,701,172 | 2,326,540 | 4,734,725 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Money Market |
21,461,631 | 3,488 | 151,097 | (147,609 | ) | | | | | | (147,609 | ) | (4,438,881 | ) | (4,586,490 | ) | 16,875,141 | |||||||||||||||||||||||||||||||||||
ProFund VP NASDAQ-100 |
8,536,019 | | 82,829 | (82,829 | ) | | 1,900,564 | 1,900,564 | 14,423 | 1,914,987 | 1,832,158 | (4,256,364 | ) | (2,424,206 | ) | 6,111,813 | ||||||||||||||||||||||||||||||||||||
ProFund VP Oil & Gas |
6,560,703 | 7,807 | 60,387 | (52,580 | ) | 567,477 | (291,208 | ) | 276,269 | (191,974 | ) | 84,295 | 31,715 | 343,382 | 375,097 | 6,935,800 |
S-6
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
Statements of Operations and Change in Net Assets
Year Ended December 31, 2012, Except as Noted
Investment Income |
Investment Expense |
Increase (Decrease) in Net Assets from Operations |
||||||||||||||||||||||||||||||||||||||||||||||||||
Subaccount |
Net Assets as of January 1, 2012 |
Reinvested Dividends |
Mortality and Expense Risk and Administrative Charges |
Net Investment Income (Loss) |
Capital Gain Distributions |
Realized Gain (Loss) on Investments |
Net Realized Capital Gains (Losses) on Investments |
Net Change in Unrealized Appreciation (Depreciation) |
Net Gain (Loss) on Investment |
Net Increase (Decrease) in Net Assets Resulting from Operations |
Increase (Decrease) in Net Assets from Contract Transactions |
Total Increase (Decrease) in Net Assets |
Net Assets as of December 31, 2012 |
|||||||||||||||||||||||||||||||||||||||
ProFund VP Pharmaceuticals |
$ | 3,002,517 | $ | 32,378 | $ | 23,043 | $ | 9,335 | $ | | $ | 274,518 | $ | 274,518 | $ | (38,114 | ) | $ | 236,404 | $ | 245,739 | $ | (660,602 | ) | $ | (414,863 | ) | $ | 2,587,654 | |||||||||||||||||||||||
ProFund VP Precious Metals |
8,366,429 | | 69,579 | (69,579 | ) | | (711,592 | ) | (711,592 | ) | (589,571 | ) | (1,301,163 | ) | (1,370,742 | ) | 457,093 | (913,649 | ) | 7,452,780 | ||||||||||||||||||||||||||||||||
ProFund VP Short Emerging Markets |
588,647 | | 4,314 | (4,314 | ) | | (40,823 | ) | (40,823 | ) | (38,943 | ) | (79,766 | ) | (84,080 | ) | (85,466 | ) | (169,546 | ) | 419,101 | |||||||||||||||||||||||||||||||
ProFund VP Short International |
664,257 | | 5,679 | (5,679 | ) | 23,144 | (84,977 | ) | (61,833 | ) | (74,010 | ) | (135,843 | ) | (141,522 | ) | 20,927 | (120,595 | ) | 543,662 | ||||||||||||||||||||||||||||||||
ProFund VP Short NASDAQ-100 |
964,827 | | 8,604 | (8,604 | ) | | (249,254 | ) | (249,254 | ) | 13,731 | (235,523 | ) | (244,127 | ) | 197,703 | (46,424 | ) | 918,403 | |||||||||||||||||||||||||||||||||
ProFund VP Short Small-Cap |
1,119,129 | | 8,369 | (8,369 | ) | | (187,309 | ) | (187,309 | ) | 791 | (186,518 | ) | (194,887 | ) | (181,571 | ) | (376,458 | ) | 742,671 | ||||||||||||||||||||||||||||||||
ProFund VP Small-Cap |
1,729,449 | | 38,541 | (38,541 | ) | 100,003 | (11,188 | ) | 88,815 | 156,522 | 245,337 | 206,796 | 4,017,443 | 4,224,239 | 5,953,688 | |||||||||||||||||||||||||||||||||||||
ProFund VP Small-Cap Value |
584,329 | | 28,703 | (28,703 | ) | | 52,706 | 52,706 | 104,561 | 157,267 | 128,564 | 3,884,767 | 4,013,331 | 4,597,660 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Telecommunications |
243,416 | 16,249 | 8,700 | 7,549 | | 148,543 | 148,543 | 1,998 | 150,541 | 158,090 | 641,501 | 799,591 | 1,043,007 | |||||||||||||||||||||||||||||||||||||||
ProFund VP U.S. Government Plus |
5,859,541 | | 58,593 | (58,593 | ) | 1,052,718 | 188,817 | 1,241,535 | (1,253,036 | ) | (11,501 | ) | (70,094 | ) | 2,234,257 | 2,164,163 | 8,023,704 | |||||||||||||||||||||||||||||||||||
ProFund VP UltraNASDAQ-100(1) |
| | 15,739 | (15,739 | ) | | 325,483 | 325,483 | (107,712 | ) | 217,771 | 202,032 | 2,103,999 | 2,306,031 | 2,306,031 | |||||||||||||||||||||||||||||||||||||
ProFund VP UltraSmall-Cap |
5,757,669 | | 46,135 | (46,135 | ) | | 809,063 | 809,063 | 106,390 | 915,453 | 869,318 | (2,437,805 | ) | (1,568,487 | ) | 4,189,182 | ||||||||||||||||||||||||||||||||||||
ProFund VP Utilities |
3,795,806 | 66,490 | 26,222 | 40,268 | | 182,944 | 182,944 | (282,515 | ) | (99,571 | ) | (59,303 | ) | (1,490,137 | ) | (1,549,440 | ) | 2,246,366 | ||||||||||||||||||||||||||||||||||
TA AEGON Active Asset Allocation - Conservative Initial Class |
4,719,304 | 27,004 | 60,699 | (33,695 | ) | 34,819 | 69,207 | 104,026 | 326,715 | 430,741 | 397,046 | 2,673,778 | 3,070,824 | 7,790,128 | ||||||||||||||||||||||||||||||||||||||
TA AEGON Active Asset Allocation - Moderate Initial Class |
852,713 | 2,130 | 11,286 | (9,156 | ) | 1,505 | 36,551 | 38,056 | 64,020 | 102,076 | 92,920 | 777,067 | 869,987 | 1,722,700 | ||||||||||||||||||||||||||||||||||||||
TA AEGON Active Asset Allocation - Moderate Growth Initial Class |
28,522,037 | 193,754 | 243,569 | (49,815 | ) | | 241,099 | 241,099 | 2,651,384 | 2,892,483 | 2,842,668 | (2,023,280 | ) | 819,388 | 29,341,425 | |||||||||||||||||||||||||||||||||||||
TA AEGON High Yield Bond Initial Class |
15,387,057 | 1,336,224 | 181,310 | 1,154,914 | | 271,332 | 271,332 | 1,554,227 | 1,825,559 | 2,980,473 | 5,230,950 | 8,211,423 | 23,598,480 | |||||||||||||||||||||||||||||||||||||||
TA AEGON Money Market Initial Class |
49,515,480 | 2,305 | 396,747 | (394,442 | ) | | | | | | (394,442 | ) | (7,718,192 | ) | (8,112,634 | ) | 41,402,846 | |||||||||||||||||||||||||||||||||||
TA AEGON U.S. Government Securities Initial Class |
12,040,949 | 193,388 | 96,096 | 97,292 | 281,268 | 76,754 | 358,022 | (44,084 | ) | 313,938 | 411,230 | (652,160 | ) | (240,930 | ) | 11,800,019 | ||||||||||||||||||||||||||||||||||||
TA AllianceBernstein Dynamic Allocation Initial Class |
3,015,977 | 27,665 | 28,309 | (644 | ) | | (8,403 | ) | (8,403 | ) | 171,938 | 163,535 | 162,891 | 218,171 | 381,062 | 3,397,039 | ||||||||||||||||||||||||||||||||||||
TA Asset Allocation - Conservative Initial Class |
40,133,908 | 1,332,645 | 371,237 | 961,408 | | 647,358 | 647,358 | 1,058,224 | 1,705,582 | 2,666,990 | (328,955 | ) | 2,338,035 | 42,471,943 |
S-7
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
Statements of Operations and Change in Net Assets
Year Ended December 31, 2012, Except as Noted
Investment Income |
Investment Expense |
Increase (Decrease) in Net Assets from Operations | ||||||||||||||||||||||||||||||||||||||||||||||||||
Subaccount |
Net Assets as of January 1, 2012 |
Reinvested Dividends |
Mortality and Expense Risk and Administrative Charges |
Net Investment Income (Loss) |
Capital Gain Distributions |
Realized Gain (Loss) on Investments |
Net Realized Capital Gains (Losses) on Investments |
Net Change in Unrealized Appreciation (Depreciation) |
Net Gain (Loss) on Investment |
Net Increase (Decrease) in Net Assets Resulting from Operations |
Increase (Decrease) in Net Assets from Contract Transactions |
Total Increase (Decrease) in Net Assets |
Net Assets as of December 31, 2012 |
|||||||||||||||||||||||||||||||||||||||
TA Asset Allocation - Growth Initial Class |
$ | 238,137,274 | $ | 3,389,090 | $ | 2,171,012 | $ | 1,218,078 | $ | | $ | (7,437,969 | ) | $ | (7,437,969 | ) | $ | 33,604,600 | $ | 26,166,631 | $ | 27,384,709 | $ | (9,527,913 | ) | $ | 17,856,796 | $ | 255,994,070 | |||||||||||||||||||||||
TA Asset Allocation - Moderate Initial Class |
82,588,491 | 2,168,740 | 716,680 | 1,452,060 | | (2,155,334 | ) | (2,155,334 | ) | 7,427,760 | 5,272,426 | 6,724,486 | (8,264,432 | ) | (1,539,946 | ) | 81,048,545 | |||||||||||||||||||||||||||||||||||
TA Asset Allocation - Moderate Growth Initial Class |
271,487,804 | 6,960,136 | 2,408,621 | 4,551,515 | | (2,322,326 | ) | (2,322,326 | ) | 23,552,020 | 21,229,694 | 25,781,209 | (16,773,704 | ) | 9,007,505 | 280,495,309 | ||||||||||||||||||||||||||||||||||||
TA Barrow Hanley Dividend Focused Initial Class |
58,346,888 | 1,073,118 | 527,887 | 545,231 | | (674,661 | ) | (674,661 | ) | 6,379,435 | 5,704,774 | 6,250,005 | (4,107,865 | ) | 2,142,140 | 60,489,028 | ||||||||||||||||||||||||||||||||||||
TA BlackRock Global Allocation Initial Class |
1,832,732 | 116,028 | 24,039 | 91,989 | 80,419 | (13,188 | ) | 67,231 | 71,956 | 139,187 | 231,176 | 1,646,857 | 1,878,033 | 3,710,765 | ||||||||||||||||||||||||||||||||||||||
TA BlackRock Tactical Allocation Initial Class |
1,074,808 | 59,050 | 19,534 | 39,516 | 89,344 | 23,094 | 112,438 | 21,399 | 133,837 | 173,353 | 2,083,782 | 2,257,135 | 3,331,943 | |||||||||||||||||||||||||||||||||||||||
TA BNP Paribas Large Cap Growth Initial Class |
3,339,827 | 32,659 | 34,091 | (1,432 | ) | | 184,586 | 184,586 | 352,333 | 536,919 | 535,487 | 177,107 | 712,594 | 4,052,421 | ||||||||||||||||||||||||||||||||||||||
TA Clarion Global Real Estate Securities Initial Class |
39,627,251 | 1,592,380 | 393,540 | 1,198,840 | | (5,590,112 | ) | (5,590,112 | ) | 13,817,409 | 8,227,297 | 9,426,137 | (650,848 | ) | 8,775,289 | 48,402,540 | ||||||||||||||||||||||||||||||||||||
TA Hanlon Income Initial Class |
30,165,370 | 708,052 | 251,752 | 456,300 | | 137,444 | 137,444 | 269,769 | 407,213 | 863,513 | (1,135,338 | ) | (271,825 | ) | 29,893,545 | |||||||||||||||||||||||||||||||||||||
TA International Moderate Growth Initial Class |
10,957,032 | 311,328 | 88,450 | 222,878 | | (485,045 | ) | (485,045 | ) | 1,422,071 | 937,026 | 1,159,904 | (1,283,515 | ) | (123,611 | ) | 10,833,421 | |||||||||||||||||||||||||||||||||||
TA Janus Balanced Initial Class |
8,735,617 | | 74,937 | (74,937 | ) | | 9,813 | 9,813 | 1,073,332 | 1,083,145 | 1,008,208 | (685,417 | ) | 322,791 | 9,058,408 | |||||||||||||||||||||||||||||||||||||
TA Jennison Growth Initial Class |
15,313,587 | 11,700 | 135,479 | (123,779 | ) | 1,193,687 | 1,521,713 | 2,715,400 | 91,262 | 2,806,662 | 2,682,883 | (4,792,434 | ) | (2,109,551 | ) | 13,204,036 | ||||||||||||||||||||||||||||||||||||
TA JPMorgan Core Bond Initial Class |
55,847,749 | 1,462,219 | 503,457 | 958,762 | 22,457 | 900,560 | 923,017 | 379,747 | 1,302,764 | 2,261,526 | (3,147,971 | ) | (886,445 | ) | 54,961,304 | |||||||||||||||||||||||||||||||||||||
TA JPMorgan Enhanced Index Initial Class |
4,287,113 | 43,178 | 36,028 | 7,150 | | 394,458 | 394,458 | 161,970 | 556,428 | 563,578 | (235,514 | ) | 328,064 | 4,615,177 | ||||||||||||||||||||||||||||||||||||||
TA JPMorgan Mid Cap Value Initial Class |
6,976,202 | 53,687 | 65,220 | (11,533 | ) | | 120,803 | 120,803 | 1,172,138 | 1,292,941 | 1,281,408 | (974,501 | ) | 306,907 | 7,283,109 | |||||||||||||||||||||||||||||||||||||
TA JPMorgan Tactical Allocation Initial Class |
58,567,573 | 347,109 | 510,278 | (163,169 | ) | | (2,326,995 | ) | (2,326,995 | ) | 6,283,315 | 3,956,320 | 3,793,151 | (3,857,180 | ) | (64,029 | ) | 58,503,544 | ||||||||||||||||||||||||||||||||||
TA MFS International Equity Initial Class |
35,715,997 | 623,763 | 336,094 | 287,669 | | (2,093,916 | ) | (2,093,916 | ) | 8,973,054 | 6,879,138 | 7,166,807 | (1,947,575 | ) | 5,219,232 | 40,935,229 | ||||||||||||||||||||||||||||||||||||
TA Morgan Stanley Capital Growth Initial Class |
28,217,193 | | 269,468 | (269,468 | ) | 5,482,103 | (507,320 | ) | 4,974,783 | (716,995 | ) | 4,257,788 | 3,988,320 | (3,131,500 | ) | 856,820 | 29,074,013 | |||||||||||||||||||||||||||||||||||
TA Morgan Stanley Mid-Cap Growth Initial Class |
320,319,419 | | 2,906,653 | (2,906,653 | ) | 16,069,972 | 6,519,362 | 22,589,334 | 5,156,982 | 27,746,316 | 24,839,663 | (36,161,019 | ) | (11,321,356 | ) | 308,998,063 | ||||||||||||||||||||||||||||||||||||
TA Multi-Managed Balanced Initial Class |
109,394,054 | 1,842,586 | 1,014,790 | 827,796 | 17,061,517 | 1,701,777 | 18,763,294 | (7,297,732 | ) | 11,465,562 | 12,293,358 | (8,589,665 | ) | 3,703,693 | 113,097,747 | |||||||||||||||||||||||||||||||||||||
TA PIMCO Tactical - Balanced Initial Class |
9,877,534 | 145,489 | 61,551 | 83,938 | | (251,066 | ) | (251,066 | ) | 208,259 | (42,807 | ) | 41,131 | (2,699,835 | ) | (2,658,704 | ) | 7,218,830 |
S-8
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
Statements of Operations and Change in Net Assets
Year Ended December 31, 2012, Except as Noted
Investment Income |
Investment Expense |
Increase (Decrease) in Net Assets from Operations | ||||||||||||||||||||||||||||||||||||||||||||||||||
Subaccount |
Net Assets as of January 1, 2012 |
Reinvested Dividends |
Mortality and Expense Risk and Administrative Charges |
Net Investment Income (Loss) |
Capital Gain Distributions |
Realized Gain (Loss) on Investments |
Net Realized Capital Gains (Losses) on Investments |
Net Change in Unrealized Appreciation (Depreciation) |
Net Gain (Loss) on Investment |
Net Increase (Decrease) in Net Assets Resulting from Operations |
Increase (Decrease) in Net Assets from Contract Transactions |
Total Increase (Decrease) in Net Assets |
Net Assets as of December 31, 2012 |
|||||||||||||||||||||||||||||||||||||||
TA PIMCO Tactical - Conservative Initial Class |
$ | 9,346,564 | $ | 146,415 | $ | 82,669 | $ | 63,746 | $ | | $ | (89,616 | ) | $ | (89,616 | ) | $ | 102,304 | $ | 12,688 | $ | 76,434 | $ | 391,628 | $ | 468,062 | $ | 9,814,626 | ||||||||||||||||||||||||
TA PIMCO Tactical - Growth Initial Class |
12,936,910 | 99,237 | 108,992 | (9,755 | ) | | (163,709 | ) | (163,709 | ) | 188,345 | 24,636 | 14,881 | (524,796 | ) | (509,915 | ) | 12,426,995 | ||||||||||||||||||||||||||||||||||
TA PIMCO Total Return Initial Class |
33,381,877 | 1,438,403 | 299,499 | 1,138,904 | | 570,687 | 570,687 | 436,358 | 1,007,045 | 2,145,949 | 1,689,184 | 3,835,133 | 37,217,010 | |||||||||||||||||||||||||||||||||||||||
TA Systematic Small/Mid Cap Value Initial Class |
35,587,598 | 198,885 | 343,170 | (144,285 | ) | 9,626,975 | 2,719,306 | 12,346,281 | (6,615,996 | ) | 5,730,285 | 5,586,000 | (164,792 | ) | 5,421,208 | 41,008,806 | ||||||||||||||||||||||||||||||||||||
TA T. Rowe Price Small Cap Initial Class |
26,401,828 | | 282,450 | (282,450 | ) | 2,569,391 | 4,123,894 | 6,693,285 | (2,758,495 | ) | 3,934,790 | 3,652,340 | (1,495,714 | ) | 2,156,626 | 28,558,454 | ||||||||||||||||||||||||||||||||||||
TA Vanguard ETF - Balanced Initial Class |
392,883 | 6,448 | 4,233 | 2,215 | 11,949 | 2,303 | 14,252 | 19,517 | 33,769 | 35,984 | 53,373 | 89,357 | 482,240 | |||||||||||||||||||||||||||||||||||||||
TA Vanguard ETF - Growth Initial Class |
1,996,047 | 23,795 | 13,749 | 10,046 | 107,992 | 70,950 | 178,942 | 621 | 179,563 | 189,609 | (780,545 | ) | (590,936 | ) | 1,405,111 | |||||||||||||||||||||||||||||||||||||
TA WMC Diversified Growth Initial Class |
709,945,091 | 2,333,333 | 6,775,768 | (4,442,435 | ) | | (4,566,559 | ) | (4,566,559 | ) | 94,743,039 | 90,176,480 | 85,734,045 | (68,855,531 | ) | 16,878,514 | 726,823,605 |
S-9
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
Statements of Operations and Change in Net Assets
Year Ended December 31, 2013
Investment Income |
Investment Expense |
Increase (Decrease) in Net Assets from Operations | ||||||||||||||||||||||||||||||||||||||||||||||||||
Subaccount |
Net Assets as of January 1, 2012 |
Reinvested Dividends |
Mortality and Expense Risk and Administrative Charges |
Net Investment Income (Loss) |
Capital Gain Distributions |
Realized Gain (Loss) on Investments |
Net Realized Capital Gains (Losses) on Investments |
Net Change in Unrealized Appreciation (Depreciation) |
Net Gain (Loss) on Investment |
Net Increase (Decrease) in Net Assets Resulting from Operations |
Increase (Decrease) in Net Assets from Contract Transactions |
Total Increase (Decrease) in Net Assets |
Net Assets as of December 31, 2012 |
|||||||||||||||||||||||||||||||||||||||
AllianceBernstein Balanced Wealth Strategy Class B Shares |
$ | 924,351 | $ | 30,499 | $ | 10,841 | $ | 19,658 | $ | | $ | 46,747 | $ | 46,747 | $ | 116,427 | $ | 163,174 | $ | 182,832 | $ | 529,917 | $ | 712,749 | $ | 1,637,100 | ||||||||||||||||||||||||||
Fidelity® VIP Contrafund® Service Class 2 |
16,648,396 | 159,832 | 168,866 | (9,034 | ) | 5,597 | (25,222 | ) | (19,625 | ) | 4,965,574 | 4,945,949 | 4,936,915 | (385,921 | ) | 4,550,994 | 21,199,390 | |||||||||||||||||||||||||||||||||||
Fidelity® VIP Equity-Income Service Class 2 |
8,562,126 | 244,659 | 90,627 | 154,032 | 717,634 | (146,380 | ) | 571,254 | 1,604,255 | 2,175,509 | 2,329,541 | 594,254 | 2,923,795 | 11,485,921 | ||||||||||||||||||||||||||||||||||||||
Fidelity® VIP Growth Opportunities Service Class 2 |
4,818,399 | 2,655 | 49,686 | (47,031 | ) | 3,087 | 517,796 | 520,883 | 1,241,379 | 1,762,262 | 1,715,231 | 54,117 | 1,769,348 | 6,587,747 | ||||||||||||||||||||||||||||||||||||||
Fidelity® VIP Index 500 Service Class 2 |
12,543,718 | 298,163 | 135,654 | 162,509 | 151,119 | 917,402 | 1,068,521 | 3,048,361 | 4,116,882 | 4,279,391 | 2,905,539 | 7,184,930 | 19,728,648 | |||||||||||||||||||||||||||||||||||||||
Franklin Templeton VIP Founding Funds Allocation Class 4 Shares |
1,050,329 | 180,757 | 15,026 | 165,731 | 299,325 | (6,669 | ) | 292,656 | (130,476 | ) | 162,180 | 327,911 | 815,772 | 1,143,683 | 2,194,012 | |||||||||||||||||||||||||||||||||||||
Access VP High Yield |
3,628,088 | 110,197 | 36,617 | 73,580 | 104,662 | 231,279 | 335,941 | (15,946 | ) | 319,995 | 393,575 | 1,886,657 | 2,280,232 | 5,908,320 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Asia 30 |
4,292,528 | 2,488 | 38,564 | (36,076 | ) | | (203,334 | ) | (203,334 | ) | 778,182 | 574,848 | 538,772 | 386,306 | 925,078 | 5,217,606 | ||||||||||||||||||||||||||||||||||||
ProFund VP Basic Materials |
4,299,388 | 36,218 | 33,121 | 3,097 | | (176,258 | ) | (176,258 | ) | 730,330 | 554,072 | 557,169 | (963,227 | ) | (406,058 | ) | 3,893,330 | |||||||||||||||||||||||||||||||||||
ProFund VP Bull |
2,527,591 | | 39,705 | (39,705 | ) | 62,717 | 457,065 | 519,782 | 512,332 | 1,032,114 | 992,409 | 1,936,864 | 2,929,273 | 5,456,864 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Consumer Services |
1,646,930 | 5,881 | 21,936 | (16,055 | ) | 6,665 | 221,442 | 228,107 | 593,987 | 822,094 | 806,039 | 941,240 | 1,747,279 | 3,394,209 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Emerging Markets |
9,160,476 | 47,497 | 66,451 | (18,954 | ) | | (549,094 | ) | (549,094 | ) | (568,676 | ) | (1,117,770 | ) | (1,136,724 | ) | (2,772,707 | ) | (3,909,431 | ) | 5,251,045 | |||||||||||||||||||||||||||||||
ProFund VP Europe 30 |
1,908,666 | 6,637 | 15,763 | (9,126 | ) | | (4,539 | ) | (4,539 | ) | 4,228 | (311 | ) | (9,437 | ) | (1,189,178 | ) | (1,198,615 | ) | 710,051 | ||||||||||||||||||||||||||||||||
ProFund VP Falling U.S. Dollar |
581,557 | | 4,463 | (4,463 | ) | | (30,386 | ) | (30,386 | ) | 24,129 | (6,257 | ) | (10,720 | ) | 186,756 | 176,036 | 757,593 | ||||||||||||||||||||||||||||||||||
ProFund VP Financials |
2,057,578 | 9,963 | 26,009 | (16,046 | ) | | 401,106 | 401,106 | 367,699 | 768,805 | 752,759 | 748,976 | 1,501,735 | 3,559,313 | ||||||||||||||||||||||||||||||||||||||
ProFund VP International |
2,114,787 | | 20,982 | (20,982 | ) | 178,255 | 69,781 | 248,036 | 7,223 | 255,259 | 234,277 | 384,115 | 618,392 | 2,733,179 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Japan |
231,290 | | 10,679 | (10,679 | ) | | 160,664 | 160,664 | 254,853 | 415,517 | 404,838 | 1,884,011 | 2,288,849 | 2,520,139 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Mid-Cap |
4,734,725 | | 63,590 | (63,590 | ) | 456,491 | 1,031,542 | 1,488,033 | 318,073 | 1,806,106 | 1,742,516 | (1,237,418 | ) | 505,098 | 5,239,823 | |||||||||||||||||||||||||||||||||||||
ProFund VP Money Market |
16,875,141 | 3,350 | 141,473 | (138,123 | ) | | | | | | (138,123 | ) | (785,703 | ) | (923,826 | ) | 15,951,315 | |||||||||||||||||||||||||||||||||||
ProFund VP NASDAQ-100 |
6,111,813 | | 59,167 | (59,167 | ) | | 856,241 | 856,241 | 1,296,775 | 2,153,016 | 2,093,849 | (554,840 | ) | 1,539,009 | 7,650,822 | |||||||||||||||||||||||||||||||||||||
ProFund VP Oil & Gas |
6,935,800 | 30,673 | 63,568 | (32,895 | ) | 272,133 | (89,559 | ) | 182,574 | 1,357,598 | 1,540,172 | 1,507,277 | (716,577 | ) | 790,700 | 7,726,500 |
S-10
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
Statements of Operations and Change in Net Assets
Year Ended December 31, 2013
Investment Income |
Investment Expense |
Increase (Decrease) in Net Assets from Operations | ||||||||||||||||||||||||||||||||||||||||||||||||||
Subaccount |
Net Assets as of January 1, 2012 |
Reinvested Dividends |
Mortality and Expense Risk and Administrative Charges |
Net Investment Income (Loss) |
Capital Gain Distributions |
Realized Gain (Loss) on Investments |
Net Realized Capital Gains (Losses) on Investments |
Net Change in Unrealized Appreciation (Depreciation) |
Net Gain (Loss) on Investment |
Net Increase (Decrease) in Net Assets Resulting from Operations |
Increase (Decrease) in Net Assets from Contract Transactions |
Total Increase (Decrease) in Net Assets |
Net Assets as of December 31, 2012 |
|||||||||||||||||||||||||||||||||||||||
ProFund VP Pharmaceuticals |
$ | 2,587,654 | $ | 55,745 | $ | 30,752 | $ | 24,993 | $ | 151,238 | $ | 235,990 | $ | 387,228 | $ | 456,071 | $ | 843,299 | $ | 868,292 | $ | 1,070,667 | $ | 1,938,959 | $ | 4,526,613 | ||||||||||||||||||||||||||
ProFund VP Precious Metals |
7,452,780 | | 42,153 | (42,153 | ) | | (2,893,758 | ) | (2,893,758 | ) | 198,582 | (2,695,176 | ) | (2,737,329 | ) | (819,040 | ) | (3,556,369 | ) | 3,896,411 | ||||||||||||||||||||||||||||||||
ProFund VP Short Emerging Markets |
419,101 | | 4,037 | (4,037 | ) | | (61,354 | ) | (61,354 | ) | 52,413 | (8,941 | ) | (12,978 | ) | 15,592 | 2,614 | 421,715 | ||||||||||||||||||||||||||||||||||
ProFund VP Short International |
543,662 | | 4,384 | (4,384 | ) | | (110,708 | ) | (110,708 | ) | (6,017 | ) | (116,725 | ) | (121,109 | ) | 3,259 | (117,850 | ) | 425,812 | ||||||||||||||||||||||||||||||||
ProFund VP Short NASDAQ-100 |
918,403 | | 7,304 | (7,304 | ) | | (180,959 | ) | (180,959 | ) | (96,473 | ) | (277,432 | ) | (284,736 | ) | (55,024 | ) | (339,760 | ) | 578,643 | |||||||||||||||||||||||||||||||
ProFund VP Short Small-Cap |
742,671 | | 10,723 | (10,723 | ) | | (280,558 | ) | (280,558 | ) | (167,608 | ) | (448,166 | ) | (458,889 | ) | 811,744 | 352,855 | 1,095,526 | |||||||||||||||||||||||||||||||||
ProFund VP Small-Cap |
5,953,688 | | 49,293 | (49,293 | ) | 119,306 | 964,036 | 1,083,342 | 596,909 | 1,680,251 | 1,630,958 | 1,412,535 | 3,043,493 | 8,997,181 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Small-Cap Value |
4,597,660 | 12,963 | 31,197 | (18,234 | ) | | 868,698 | 868,698 | 352,581 | 1,221,279 | 1,203,045 | (665,517 | ) | 537,528 | 5,135,188 | |||||||||||||||||||||||||||||||||||||
ProFund VP Telecommunications |
1,043,007 | 27,332 | 7,982 | 19,350 | 41,378 | 20,403 | 61,781 | (1,728 | ) | 60,053 | 79,403 | (450,268 | ) | (370,865 | ) | 672,142 | ||||||||||||||||||||||||||||||||||||
ProFund VP U.S. Government Plus |
8,023,704 | 7,105 | 30,590 | (23,485 | ) | 197,838 | (684,449 | ) | (486,611 | ) | (406,400 | ) | (893,011 | ) | (916,496 | ) | (4,791,011 | ) | (5,707,507 | ) | 2,316,197 | |||||||||||||||||||||||||||||||
ProFund VP UltraNASDAQ-100 |
2,306,031 | | 47,303 | (47,303 | ) | | 626,444 | 626,444 | 2,330,327 | 2,956,771 | 2,909,468 | 3,496,761 | 6,406,229 | 8,712,260 | ||||||||||||||||||||||||||||||||||||||
ProFund VP UltraSmall-Cap |
4,189,182 | | 58,402 | (58,402 | ) | | 1,788,178 | 1,788,178 | 2,310,720 | 4,098,898 | 4,040,496 | 2,600,990 | 6,641,486 | 10,830,668 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Utilities |
2,246,366 | 63,787 | 21,225 | 42,562 | | 119,785 | 119,785 | 40,608 | 160,393 | 202,955 | (354,549 | ) | (151,594 | ) | 2,094,772 | |||||||||||||||||||||||||||||||||||||
TA Aegon Active Asset Allocation - Conservative Initial Class |
7,790,128 | 131,131 | 90,892 | 40,239 | 131,587 | 185,731 | 317,318 | 261,693 | 579,011 | 619,250 | 2,150,448 | 2,769,698 | 10,559,826 | |||||||||||||||||||||||||||||||||||||||
TA Aegon Active Asset Allocation - Moderate Initial Class |
1,722,700 | 13,290 | 18,364 | (5,074 | ) | 12,608 | 79,309 | 91,917 | 120,186 | 212,103 | 207,029 | 1,009,620 | 1,216,649 | 2,939,349 | ||||||||||||||||||||||||||||||||||||||
TA Aegon Active Asset Allocation - Moderate Growth Initial Class |
29,341,425 | 296,072 | 265,066 | 31,006 | | 613,646 | 613,646 | 4,034,530 | 4,648,176 | 4,679,182 | (252,053 | ) | 4,427,129 | 33,768,554 | ||||||||||||||||||||||||||||||||||||||
TA Aegon High Yield Bond Initial Class |
23,598,480 | 1,158,162 | 183,565 | 974,597 | | 1,532,398 | 1,532,398 | (1,475,867 | ) | 56,531 | 1,031,128 | (5,314,018 | ) | (4,282,890 | ) | 19,315,590 | ||||||||||||||||||||||||||||||||||||
TA Aegon Money Market Initial Class |
41,402,846 | 2,020 | 345,856 | (343,836 | ) | | | | | | (343,836 | ) | (3,530,546 | ) | (3,874,382 | ) | 37,528,464 | |||||||||||||||||||||||||||||||||||
TA Aegon U.S. Government Securities Initial Class |
11,800,019 | 197,926 | 78,367 | 119,559 | 185,209 | (40,271 | ) | 144,938 | (539,655 | ) | (394,717 | ) | (275,158 | ) | (3,573,213 | ) | (3,848,371 | ) | 7,951,648 | |||||||||||||||||||||||||||||||||
TA AllianceBernstein Dynamic Allocation Initial Class |
3,397,039 | 39,899 | 29,992 | 9,907 | | 153,145 | 153,145 | 48,069 | 201,214 | 211,121 | (134,467 | ) | 76,654 | 3,473,693 | ||||||||||||||||||||||||||||||||||||||
TA Asset Allocation - Conservative Initial Class |
42,471,943 | 1,183,426 | 337,016 | 846,410 | 58,378 | 2,760,001 | 2,818,379 | (603,717 | ) | 2,214,662 | 3,061,072 | (8,573,006 | ) | (5,511,934 | ) | 36,960,009 |
S-11
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
Statements of Operations and Change in Net Assets
Year Ended December 31, 2013
Investment Income |
Investment Expense |
Increase (Decrease) in Net Assets from Operations | ||||||||||||||||||||||||||||||||||||||||||||||||||
Subaccount |
Net Assets as of January 1, 2012 |
Reinvested Dividends |
Mortality and Expense Risk and Administrative Charges |
Net Investment Income (Loss) |
Capital Gain Distributions |
Realized Gain (Loss) on Investments |
Net Realized Capital Gains (Losses) on Investments |
Net Change in Unrealized Appreciation (Depreciation) |
Net Gain (Loss) on Investment |
Net Increase (Decrease) in Net Assets Resulting from Operations |
Increase (Decrease) in Net Assets from Contract Transactions |
Total Increase (Decrease) in Net Assets |
Net Assets as of December 31, 2012 |
|||||||||||||||||||||||||||||||||||||||
TA Asset Allocation - Growth Initial Class |
$ | 255,994,070 | $ | 3,427,804 | $ | 2,394,684 | $ | 1,033,120 | $ | | $ | (4,255,599 | ) | $ | (4,255,599 | ) | $ | 67,755,941 | $ | 63,500,342 | $ | 64,533,462 | $ | (12,071,029 | ) | $ | 52,462,433 | $ | 308,456,503 | |||||||||||||||||||||||
TA Asset Allocation - Moderate Initial Class |
81,048,545 | 2,040,997 | 722,481 | 1,318,516 | | (581,555 | ) | (581,555 | ) | 9,168,344 | 8,586,789 | 9,905,305 | (4,777,151 | ) | 5,128,154 | 86,176,699 | ||||||||||||||||||||||||||||||||||||
TA Asset Allocation - Moderate Growth Initial Class |
280,495,309 | 6,748,863 | 2,513,630 | 4,235,233 | | (38,417 | ) | (38,417 | ) | 45,687,018 | 45,648,601 | 49,883,834 | (17,885,325 | ) | 31,998,509 | 312,493,818 | ||||||||||||||||||||||||||||||||||||
TA Barrow Hanley Dividend Focused Initial Class |
60,489,028 | 1,513,223 | 566,665 | 946,558 | | (520,060 | ) | (520,060 | ) | 15,872,206 | 15,352,146 | 16,298,704 | (7,437,276 | ) | 8,861,428 | 69,350,456 | ||||||||||||||||||||||||||||||||||||
TA BlackRock Global Allocation Initial Class |
3,710,765 | 89,851 | 37,264 | 52,587 | 54,790 | 51,763 | 106,553 | 421,467 | 528,020 | 580,607 | 1,194,758 | 1,775,365 | 5,486,130 | |||||||||||||||||||||||||||||||||||||||
TA BlackRock Tactical Allocation Initial Class |
3,331,943 | 95,354 | 36,173 | 59,181 | 100,479 | 82,709 | 183,188 | 235,313 | 418,501 | 477,682 | 1,200,384 | 1,678,066 | 5,010,009 | |||||||||||||||||||||||||||||||||||||||
TA BNP Paribas Large Cap Growth Initial Class |
4,052,421 | 55,759 | 47,752 | 8,007 | | 278,687 | 278,687 | 1,236,827 | 1,515,514 | 1,523,521 | 1,383,508 | 2,907,029 | 6,959,450 | |||||||||||||||||||||||||||||||||||||||
TA Clarion Global Real Estate Securities Initial Class |
48,402,540 | 2,720,130 | 438,213 | 2,281,917 | | (3,123,847 | ) | (3,123,847 | ) | 2,228,021 | (895,826 | ) | 1,386,091 | (2,228,723 | ) | (842,632 | ) | 47,559,908 | ||||||||||||||||||||||||||||||||||
TA Hanlon Income Initial Class |
29,893,545 | 1,217,607 | 228,956 | 988,651 | | 159,772 | 159,772 | (492,298 | ) | (332,526 | ) | 656,125 | (4,912,557 | ) | (4,256,432 | ) | 25,637,113 | |||||||||||||||||||||||||||||||||||
TA International Moderate Growth Initial Class |
10,833,421 | 231,249 | 96,242 | 135,007 | | 84,950 | 84,950 | 1,042,200 | 1,127,150 | 1,262,157 | (232,875 | ) | 1,029,282 | 11,862,703 | ||||||||||||||||||||||||||||||||||||||
TA Janus Balanced Initial Class |
9,058,408 | 76,999 | 78,983 | (1,984 | ) | | 315,031 | 315,031 | 1,286,911 | 1,601,942 | 1,599,958 | (1,037,313 | ) | 562,645 | 9,621,053 | |||||||||||||||||||||||||||||||||||||
TA Jennison Growth Initial Class |
13,204,036 | 34,365 | 115,310 | (80,945 | ) | 991,955 | 286,269 | 1,278,224 | 3,036,269 | 4,314,493 | 4,233,548 | (848,708 | ) | 3,384,840 | 16,588,876 | |||||||||||||||||||||||||||||||||||||
TA JPMorgan Core Bond Initial Class |
54,961,304 | 1,384,040 | 429,513 | 954,527 | | 967,664 | 967,664 | (3,313,464 | ) | (2,345,800 | ) | (1,391,273 | ) | (10,979,848 | ) | (12,371,121 | ) | 42,590,183 | ||||||||||||||||||||||||||||||||||
TA JPMorgan Enhanced Index Initial Class |
4,615,177 | 37,849 | 48,982 | (11,133 | ) | 39,389 | 282,257 | 321,646 | 1,226,685 | 1,548,331 | 1,537,198 | 850,043 | 2,387,241 | 7,002,418 | ||||||||||||||||||||||||||||||||||||||
TA JPMorgan Mid Cap Value Initial Class |
7,283,109 | 38,197 | 71,260 | (33,063 | ) | 91,544 | 329,860 | 421,404 | 1,725,105 | 2,146,509 | 2,113,446 | (987,423 | ) | 1,126,023 | 8,409,132 | |||||||||||||||||||||||||||||||||||||
TA JPMorgan Tactical Allocation Initial Class |
58,503,544 | 597,856 | 467,565 | 130,291 | | (1,452,268 | ) | (1,452,268 | ) | 3,709,395 | 2,257,127 | 2,387,418 | (10,076,991 | ) | (7,689,573 | ) | 50,813,971 | |||||||||||||||||||||||||||||||||||
TA MFS International Equity Initial Class |
40,935,229 | 477,227 | 380,345 | 96,882 | | (1,799,797 | ) | (1,799,797 | ) | 8,311,026 | 6,511,229 | 6,608,111 | (3,364,596 | ) | 3,243,515 | 44,178,744 | ||||||||||||||||||||||||||||||||||||
TA Morgan Stanley Capital Growth Initial Class |
29,074,013 | 227,815 | 296,485 | (68,670 | ) | 149,329 | (139,008 | ) | 10,321 | 13,291,604 | 13,301,925 | 13,233,255 | (334,381 | ) | 12,898,874 | 41,972,887 | ||||||||||||||||||||||||||||||||||||
TA Morgan Stanley Mid-Cap Growth Initial Class |
308,998,063 | 2,868,497 | 3,107,432 | (238,935 | ) | 7,180,039 | 10,044,069 | 17,224,108 | 95,909,828 | 113,133,936 | 112,895,001 | (21,167,340 | ) | 91,727,661 | 400,725,724 | |||||||||||||||||||||||||||||||||||||
TA Multi-Managed Balanced Initial Class |
113,097,747 | 1,869,038 | 1,047,337 | 821,701 | 3,832,854 | 1,923,401 | 5,756,255 | 11,998,614 | 17,754,869 | 18,576,570 | (9,078,409 | ) | 9,498,161 | 122,595,908 | ||||||||||||||||||||||||||||||||||||||
TA PIMCO Tactical - Balanced Initial Class |
7,218,830 | 45,900 | 60,512 | (14,612 | ) | | 40,461 | 40,461 | 748,230 | 788,691 | 774,079 | (770,566 | ) | 3,513 | 7,222,343 |
S-12
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
Statements of Operations and Change in Net Assets
Year Ended December 31, 2013
Investment Income |
Investment Expense |
Increase (Decrease) in Net Assets from Operations | ||||||||||||||||||||||||||||||||||||||||||||||||||
Subaccount |
Net Assets as of January 1, 2012 |
Reinvested Dividends |
Mortality and Expense Risk and Administrative Charges |
Net Investment Income (Loss) |
Capital Gain Distributions |
Realized Gain (Loss) on Investments |
Net Realized Capital Gains (Losses) on Investments |
Net Change in Unrealized Appreciation (Depreciation) |
Net Gain (Loss) on Investment |
Net Increase (Decrease) in Net Assets Resulting from Operations |
Increase (Decrease) in Net Assets from Contract Transactions |
Total Increase (Decrease) in Net Assets |
Net Assets as of December 31, 2012 |
|||||||||||||||||||||||||||||||||||||||
TA PIMCO Tactical - Conservative Initial Class |
$ | 9,814,626 | $ | 67,942 | $ | 81,861 | $ | (13,919 | ) | $ | | $ | (66,371 | ) | $ | (66,371 | ) | $ | 801,141 | $ | 734,770 | $ | 720,851 | $ | (673,047 | ) | $ | 47,804 | $ | 9,862,430 | ||||||||||||||||||||||
TA PIMCO Tactical - Growth Initial Class |
12,426,995 | 110,985 | 108,665 | 2,320 | | (108,622 | ) | (108,622 | ) | 2,040,067 | 1,931,445 | 1,933,765 | (648,286 | ) | 1,285,479 | 13,712,474 | ||||||||||||||||||||||||||||||||||||
TA PIMCO Total Return Initial Class |
37,217,010 | 643,732 | 279,341 | 364,391 | 365,846 | 54,339 | 420,185 | (2,011,329 | ) | (1,591,144 | ) | (1,226,753 | ) | (8,796,508 | ) | (10,023,261 | ) | 27,193,749 | ||||||||||||||||||||||||||||||||||
TA Systematic Small/Mid Cap Value Initial Class |
41,008,806 | 501,323 | 867,084 | (365,761 | ) | 241,100 | 2,934,422 | 3,175,522 | 25,403,556 | 28,579,078 | 28,213,317 | 63,412,408 | 91,625,725 | 132,634,531 | ||||||||||||||||||||||||||||||||||||||
TA T. Rowe Price Small Cap Initial Class |
28,558,454 | 33,712 | 363,628 | (329,916 | ) | 1,951,775 | 1,297,951 | 3,249,726 | 11,839,370 | 15,089,096 | 14,759,180 | 11,916,908 | 26,676,088 | 55,234,542 | ||||||||||||||||||||||||||||||||||||||
TA Vanguard ETF - Balanced Initial Class |
482,240 | 7,731 | 5,224 | 2,507 | 8,612 | 8,391 | 17,003 | 43,504 | 60,507 | 63,014 | 325,247 | 388,261 | 870,501 | |||||||||||||||||||||||||||||||||||||||
TA Vanguard ETF - Growth Initial Class |
1,405,111 | 38,203 | 21,340 | 16,863 | 55,211 | 42,024 | 97,235 | 277,696 | 374,931 | 391,794 | 1,673,828 | 2,065,622 | 3,470,733 | |||||||||||||||||||||||||||||||||||||||
TA WMC Diversified Growth Initial Class |
726,823,605 | 8,339,087 | 7,075,995 | 1,263,092 | | 8,955,932 | 8,955,932 | 207,244,939 | 216,200,871 | 217,463,963 | (67,254,792 | ) | 150,209,171 | 877,032,776 |
S-13
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
December 31, 2013
1. Organization and Summary of Significant Accounting Policies
Organization
WRL Series Life Account (the Separate Account) is a segregated investment account of Western Reserve Life Assurance Co. of Ohio (WRL), an indirect wholly owned subsidiary of AEGON N.V., a holding company organized under the laws of The Netherlands.
The Separate Account is registered with the Securities and Exchange Commission as a Unit Investment Trust pursuant to provisions of the Investment Company Act of 1940. The Separate Account consists of multiple investment subaccounts. Each subaccount invests exclusively in the corresponding portfolio of a Mutual Fund. Each Mutual Fund is registered as an open-end management investment company under the Investment Company Act of 1940, as amended. Activity in these specified investment subaccounts is available to contract owners of WRL Financial Freedom Builder, WRL Freedom Elite, WRL Freedom Equity Protector, WRL Freedom Wealth Protector, WRL Freedom Elite Builder, WRL Freedom Elite Builder II, WRL Freedom Elite Advisor, WRL Freedom Excelerator, WRL SP Plus, and WRL For Life.
Subaccount Investment by Mutual Fund:
Subaccount |
Mutual Fund | |
AllianceBernstein Variable Products Series Fund |
AllianceBernstein Variable Products Series Fund | |
AllianceBernstein Balanced Wealth Strategy Class B Shares |
AllianceBernstein Balanced Wealth Strategy Portfolio Class B Shares | |
Fidelity® Variable Insurance Products Fund |
Fidelity® Variable Insurance Products Fund | |
Fidelity® VIP Contrafund® Service Class 2 |
Fidelity® VIP Contrafund® Portfolio Service Class 2 | |
Fidelity® VIP Equity-Income Service Class 2 |
Fidelity® VIP Equity-Income Portfolio Service Class 2 | |
Fidelity® VIP Growth Opportunities Service Class 2 |
Fidelity® VIP Growth Opportunities Portfolio Service Class 2 | |
Fidelity® VIP Index 500 Service Class 2 |
Fidelity® VIP Index 500 Portfolio Service Class 2 | |
Franklin Templeton Variable Insurance Products Trust |
Franklin Templeton Variable Insurance Products Trust | |
Franklin Templeton VIP Founding Funds Allocation Class 4 Shares |
Franklin Templeton VIP Founding Funds Allocation Class 4 Shares | |
Access One Trust |
Access One Trust | |
Access VP High Yield |
Access VP High Yield | |
Profunds Trust |
Profunds Trust | |
ProFund VP Asia 30 |
ProFund VP Asia 30 | |
ProFund VP Basic Materials |
ProFund VP Basic Materials | |
ProFund VP Bull |
ProFund VP Bull | |
ProFund VP Consumer Services |
ProFund VP Consumer Services | |
ProFund VP Emerging Markets |
ProFund VP Emerging Markets | |
ProFund VP Europe 30 |
ProFund VP Europe 30 | |
ProFund VP Falling U.S. Dollar |
ProFund VP Falling U.S. Dollar | |
ProFund VP Financials |
ProFund VP Financials | |
ProFund VP International |
ProFund VP International | |
ProFund VP Japan |
ProFund VP Japan | |
ProFund VP Mid-Cap |
ProFund VP Mid-Cap | |
ProFund VP Money Market |
ProFund VP Money Market | |
ProFund VP NASDAQ-100 |
ProFund VP NASDAQ-100 | |
ProFund VP Oil & Gas |
ProFund VP Oil & Gas | |
ProFund VP Pharmaceuticals |
ProFund VP Pharmaceuticals | |
ProFund VP Precious Metals |
ProFund VP Precious Metals | |
ProFund VP Short Emerging Markets |
ProFund VP Short Emerging Markets | |
ProFund VP Short International |
ProFund VP Short International | |
ProFund VP Short NASDAQ-100 |
ProFund VP Short NASDAQ-100 | |
ProFund VP Short Small-Cap |
ProFund VP Short Small-Cap |
S-14
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
Notes to Financial Statements
December 31, 2013
1. Organization and Summary of Significant Accounting Policies (continued)
Subaccount Investment by Mutual Fund:
Subaccount |
Mutual Fund | |
Profunds Trust |
Profunds Trust | |
ProFund VP Small-Cap |
ProFund VP Small-Cap | |
ProFund VP Small-Cap Value |
ProFund VP Small-Cap Value | |
ProFund VP Telecommunications |
ProFund VP Telecommunications | |
ProFund VP U.S. Government Plus |
ProFund VP U.S. Government Plus | |
ProFund VP UltraNASDAQ-100 |
ProFund VP UltraNASDAQ-100 | |
ProFund VP UltraSmall-Cap |
ProFund VP UltraSmall-Cap | |
ProFund VP Utilities |
ProFund VP Utilities | |
Transamerica Series Trust |
Transamerica Series Trust | |
TA Aegon Active Asset Allocation - Conservative Initial Class |
Transamerica Aegon Active Asset Allocation - Conservative Initial Class | |
TA Aegon Active Asset Allocation - Moderate Initial Class |
Transamerica Aegon Active Asset Allocation - Moderate Initial Class | |
TA Aegon Active Asset Allocation - Moderate Growth |
Transamerica Aegon Active Asset Allocation - Moderate Growth Initial Class | |
TA Aegon High Yield Bond Initial Class |
Transamerica Aegon High Yield Bond Initial Class | |
TA Aegon Money Market Initial Class |
Transamerica Aegon Money Market Initial Class | |
TA Aegon U.S. Government Securities Initial Class |
Transamerica Aegon U.S. Government Securities Initial Class | |
TA AllianceBernstein Dynamic Allocation Initial Class |
Transamerica AllianceBernstein Dynamic Allocation Initial Class | |
TA Asset Allocation - Conservative Initial Class |
Transamerica Asset Allocation - Conservative Initial Class | |
TA Asset Allocation - Growth Initial Class |
Transamerica Asset Allocation - Growth Initial Class | |
TA Asset Allocation - Moderate Initial Class |
Transamerica Asset Allocation - Moderate Initial Class | |
TA Asset Allocation - Moderate Growth Initial Class |
Transamerica Asset Allocation - Moderate Growth Initial Class | |
TA Barrow Hanley Dividend Focused Initial Class |
Transamerica Barrow Hanley Dividend Focused Initial Class | |
TA BlackRock Global Allocation Initial Class |
Transamerica BlackRock Global Allocation Initial Class | |
TA BlackRock Tactical Allocation Initial Class |
Transamerica BlackRock Tactical Allocation Initial Class | |
TA BNP Paribas Large Cap Growth Initial Class |
Transamerica BNP Paribas Large Cap Growth Initial Class | |
TA Clarion Global Real Estate Securities Initial Class |
Transamerica Clarion Global Real Estate Securities Initial Class | |
TA Hanlon Income Initial Class |
Transamerica Hanlon Income Initial Class | |
TA International Moderate Growth Initial Class |
Transamerica International Moderate Growth Initial Class | |
TA Janus Balanced Initial Class |
Transamerica Janus Balanced Initial Class | |
TA Jennison Growth Initial Class |
Transamerica Jennison Growth Initial Class | |
TA JPMorgan Core Bond Initial Class |
Transamerica JPMorgan Core Bond Initial Class | |
TA JPMorgan Enhanced Index Initial Class |
Transamerica JPMorgan Enhanced Index Initial Class | |
TA JPMorgan Mid Cap Value Initial Class |
Transamerica JPMorgan Mid Cap Value Initial Class | |
TA JPMorgan Tactical Allocation Initial Class |
Transamerica JPMorgan Tactical Allocation Initial Class | |
TA MFS International Equity Initial Class |
Transamerica MFS International Equity Initial Class | |
TA Morgan Stanley Capital Growth Initial Class |
Transamerica Morgan Stanley Capital Growth Initial Class | |
TA Morgan Stanley Mid-Cap Growth Initial Class |
Transamerica Morgan Stanley Mid-Cap Growth Initial Class | |
TA Multi-Managed Balanced Initial Class |
Transamerica Multi-Managed Balanced Initial Class | |
TA PIMCO Tactical - Balanced Initial Class |
Transamerica PIMCO Tactical - Balanced Initial Class | |
TA PIMCO Tactical - Conservative Initial Class |
Transamerica PIMCO Tactical - Conservative Initial Class | |
TA PIMCO Tactical - Growth Initial Class |
Transamerica PIMCO Tactical - Growth Initial Class | |
TA PIMCO Total Return Initial Class |
Transamerica PIMCO Total Return Initial Class |
S-15
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
Notes to Financial Statements
December 31, 2013
1. Organization and Summary of Significant Accounting Policies (continued)
Subaccount Investment by Mutual Fund:
Subaccount |
Mutual Fund | |
Transamerica Series Trust |
Transamerica Series Trust | |
TA Systematic Small/Mid Cap Value Initial Class |
Transamerica Systematic Small/Mid Cap Value Initial Class | |
TA T. Rowe Price Small Cap Initial Class |
Transamerica T. Rowe Price Small Cap Initial Class | |
TA Vanguard ETF - Balanced Initial Class |
Transamerica Vanguard ETF - Balanced Initial Class | |
TA Vanguard ETF - Growth Initial Class |
Transamerica Vanguard ETF - Growth Initial Class | |
TA WMC Diversified Growth Initial Class |
Transamerica WMC Diversified Growth Initial Class |
Each period reported on reflects a full twelve month period except as follows:
Subaccount |
Inception Date | |
ProFund VP UltraNASDAQ-100 | April 30, 2012 | |
TA BlackRock Global Allocation Initial Class | May 19, 2011 | |
TA BlackRock Tactical Allocation Initial Class | May 19, 2011 | |
TA Aegon Active Asset Allocation - Conservative Initial Class | April 29, 2011 | |
TA Aegon Active Asset Allocation - Moderate Initial Class | April 29, 2011 | |
TA Aegon Active Asset Allocation - Moderate Growth Initial Class | April 29, 2011 | |
TA Jennison Growth Initial Class | April 29, 2010 | |
TA Janus Balanced Initial Class | July 1, 2009 | |
AllianceBernstein Balanced Wealth Strategy Class B Shares | May 1, 2009 | |
Franklin Templeton VIP Founding Funds Allocation Class 4 Shares | May 1, 2009 | |
TA Hanlon Income Initial Class | May 1, 2009 | |
TA BNP Paribas Large Cap Growth Initial Class | May 1, 2009 | |
TA PIMCO Tactical - Balanced Initial Class | May 1, 2009 | |
TA PIMCO Tactical - Conservative Initial Class | May 1, 2009 | |
TA PIMCO Tactical - Growth Initial Class | May 1, 2009 |
The following subaccount name changes were made effective during the fiscal year ended December 31, 2013:
Subaccount |
Formerly | |
TA Barrow Hanley Dividend Focused Initial Class | TA BlackRock Large Cap Value Initial Class | |
TA BNP Paribas Large Cap Growth Initial Class | TA Multi Managed Large Cap Core Initial Class | |
TA Vanguard ETF - Balanced Initial Class | TA Index 50 Initial Class | |
TA Vanguard ETF - Growth Initial Class | TA Index 75 Initial Class |
During the current year the following subaccounts were liquidated and subsequently reinvested:
Reinvested Subaccount |
Liquidated Subaccount | |
TA Systematic Small/Mid-Cap Value Initial Class | TA Third Avenue Value Initial Class | |
TA Vanguard ETF - Growth Initial Class | TA Efficient Markets Initial Class |
S-16
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
Notes to Financial Statements
December 31, 2013
1. Organization and Summary of Significant Accounting Policies (continued)
Investments
Net purchase payments received by the Separate Account are invested in the portfolios of the Mutual Funds as selected by the contract owner. Investments are stated at the closing net asset values per share on December 31, 2013.
Realized capital gains and losses from sales of shares in the Separate Account are determined on the first-in, first-out basis. Investment transactions are accounted for on the trade date (date the order to buy or sell is executed) and dividend income is recorded on the ex-dividend date. Unrealized gains or losses from investments in the Mutual Funds are included in the Statements of Operations and Changes in Net Assets.
Dividend Income
Dividends received from the Mutual Fund investments are reinvested to purchase additional mutual fund shares.
Accounting Policy
The financial statements included herein have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for variable annuity separate accounts registered as unit investment trusts. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions regarding matters that affect the reported amount of assets and liabilities. Actual results could differ from those estimates.
S-17
Western Reserve Life Assurance Co. of
Ohio
WRL Series Life Account
Notes to Financial
2. Investments
The aggregate cost of purchases and proceeds from sales of investments for the period ended December 31, 2013 were as follows:
Subaccount |
Purchases | Sales | ||||||
AllianceBernstein Balanced Wealth Strategy Class B Shares |
$ | 860,274 | $ | 310,700 | ||||
Fidelity® VIP Contrafund® Service Class 2 |
1,481,870 | 1,871,084 | ||||||
Fidelity® VIP Equity-Income Service Class 2 |
2,317,028 | 850,753 | ||||||
Fidelity® VIP Growth Opportunities Service Class 2 |
890,468 | 880,538 | ||||||
Fidelity® VIP Index 500 Service Class 2 |
6,099,371 | 2,880,195 | ||||||
Franklin Templeton VIP Founding Funds Allocation Class 4 Shares |
1,569,530 | 288,705 | ||||||
Access VP High Yield |
4,926,313 | 2,861,304 | ||||||
ProFund VP Asia 30 |
2,173,470 | 1,823,157 | ||||||
ProFund VP Basic Materials |
1,264,516 | 2,224,622 | ||||||
ProFund VP Bull |
6,963,395 | 5,003,869 | ||||||
ProFund VP Consumer Services |
2,069,495 | 1,137,647 | ||||||
ProFund VP Emerging Markets |
9,282,156 | 12,071,248 | ||||||
ProFund VP Europe 30 |
5,128,854 | 6,327,146 | ||||||
ProFund VP Falling U.S. Dollar |
735,487 | 552,959 | ||||||
ProFund VP Financials |
2,708,566 | 1,975,662 | ||||||
ProFund VP International |
4,299,675 | 3,757,813 | ||||||
ProFund VP Japan |
4,895,992 | 3,022,066 | ||||||
ProFund VP Mid-Cap |
9,042,720 | 9,887,862 | ||||||
ProFund VP Money Market |
37,320,818 | 38,248,985 | ||||||
ProFund VP NASDAQ-100 |
11,774,777 | 12,388,932 | ||||||
ProFund VP Oil & Gas |
1,944,683 | 2,422,005 | ||||||
ProFund VP Pharmaceuticals |
2,610,019 | 1,363,122 | ||||||
ProFund VP Precious Metals |
3,068,772 | 3,929,723 | ||||||
ProFund VP Short Emerging Markets |
877,266 | 865,610 | ||||||
ProFund VP Short International |
389,349 | 390,258 | ||||||
ProFund VP Short NASDAQ-100 |
2,414,619 | 2,476,898 | ||||||
ProFund VP Short Small-Cap |
2,822,214 | 2,021,339 | ||||||
ProFund VP Small-Cap |
11,319,680 | 9,839,187 | ||||||
ProFund VP Small-Cap Value |
10,533,100 | 11,218,476 | ||||||
ProFund VP Telecommunications |
490,822 | 880,257 | ||||||
ProFund VP U.S. Government Plus |
1,442,543 | 6,058,886 | ||||||
ProFund VP UltraNASDAQ-100 |
12,355,045 | 8,905,587 | ||||||
ProFund VP UltraSmall-Cap |
7,868,178 | 5,325,622 | ||||||
ProFund VP Utilities |
3,085,826 | 3,397,801 | ||||||
TA Aegon Active Asset Allocation - Conservative Initial Class |
4,389,996 | 2,067,714 | ||||||
TA Aegon Active Asset Allocation - Moderate Initial Class |
1,807,935 | 790,784 |
S-18
Western Reserve Life Assurance Co. of
Ohio
WRL Series Life Account
Notes to Financial
2. Investments (continued)
Subaccount |
Purchases | Sales | ||||||
TA Aegon Active Asset Allocation - Moderate Growth Initial Class |
$ | 3,742,690 | $ | 3,963,510 | ||||
TA Aegon High Yield Bond Initial Class |
10,901,913 | 15,242,352 | ||||||
TA Aegon Money Market Initial Class |
12,463,177 | 16,337,194 | ||||||
TA Aegon U.S. Government Securities Initial Class |
2,803,590 | 6,071,271 | ||||||
TA AllianceBernstein Dynamic Allocation Initial Class |
748,179 | 872,620 | ||||||
TA Asset Allocation - Conservative Initial Class |
4,126,323 | 11,794,475 | ||||||
TA Asset Allocation - Growth Initial Class |
11,937,503 | 22,978,716 | ||||||
TA Asset Allocation - Moderate Initial Class |
5,552,353 | 9,010,894 | ||||||
TA Asset Allocation - Moderate Growth Initial Class |
13,623,592 | 27,276,671 | ||||||
TA Barrow Hanley Dividend Focused Initial Class |
9,542,787 | 16,033,655 | ||||||
TA BlackRock Global Allocation Initial Class |
2,107,038 | 804,903 | ||||||
TA BlackRock Tactical Allocation Initial Class |
2,333,392 | 973,349 | ||||||
TA BNP Paribas Large Cap Growth Initial Class |
2,353,044 | 961,032 | ||||||
TA Clarion Global Real Estate Securities Initial Class |
6,669,807 | 6,617,008 | ||||||
TA Hanlon Income Initial Class |
3,379,730 | 7,303,379 | ||||||
TA International Moderate Growth Initial Class |
1,334,867 | 1,432,263 | ||||||
TA Janus Balanced Initial Class |
1,389,269 | 2,428,492 | ||||||
TA Jennison Growth Initial Class |
3,673,153 | 3,611,783 | ||||||
TA JPMorgan Core Bond Initial Class |
4,230,853 | 14,256,226 | ||||||
TA JPMorgan Enhanced Index Initial Class |
2,105,597 | 1,227,296 | ||||||
TA JPMorgan Mid Cap Value Initial Class |
180,374 | 1,109,315 | ||||||
TA JPMorgan Tactical Allocation Initial Class |
5,577,931 | 15,524,589 | ||||||
TA MFS International Equity Initial Class |
6,745,602 | 10,013,056 | ||||||
TA Morgan Stanley Capital Growth Initial Class |
4,144,106 | 4,397,578 | ||||||
TA Morgan Stanley Mid-Cap Growth Initial Class |
24,722,996 | 38,943,858 | ||||||
TA Multi-Managed Balanced Initial Class |
8,913,809 | 13,337,158 | ||||||
TA PIMCO Tactical - Balanced Initial Class |
830,938 | 1,616,115 | ||||||
TA PIMCO Tactical - Conservative Initial Class |
1,077,584 | 1,764,702 | ||||||
TA PIMCO Tactical - Growth Initial Class |
1,315,819 | 1,961,861 | ||||||
TA PIMCO Total Return Initial Class |
7,100,214 | 15,166,480 | ||||||
TA Systematic Small/Mid Cap Value Initial Class |
80,671,368 | 17,383,295 | ||||||
TA T. Rowe Price Small Cap Initial Class |
19,943,761 | 6,404,150 | ||||||
TA Vanguard ETF - Balanced Initial Class |
470,422 | 134,054 | ||||||
TA Vanguard ETF - Growth Initial Class |
2,205,864 | 459,963 | ||||||
TA WMC Diversified Growth Initial Class |
20,021,876 | 86,007,324 |
S-19
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
Notes to Financial Statements
3. Change in Units
The change in units outstanding were as follows:
Year Ended December 31, 2013 | Year Ended December 31, 2012 | |||||||||||||||||||||||
Subaccount |
Units Purchased | Units Redeemed and Transferred to/from |
Net Increase (Decrease) |
Units Purchased | Units Redeemed and Transferred to/from |
Net Increase (Decrease) |
||||||||||||||||||
AllianceBernstein Balanced Wealth Strategy Class B Shares |
120,348 | (86,630 | ) | 33,718 | 33,414 | (20,120 | ) | 13,294 | ||||||||||||||||
Fidelity® VIP Contrafund® Service Class 2 |
25,867 | (46,373 | ) | (20,506 | ) | 166,982 | (228,567 | ) | (61,585 | ) | ||||||||||||||
Fidelity® VIP Equity-Income Service Class 2 |
21,161 | 13,677 | 34,838 | 96,766 | (129,912 | ) | (33,146 | ) | ||||||||||||||||
Fidelity® VIP Growth Opportunities Service Class 2 |
183,915 | (182,481 | ) | 1,434 | 194,226 | (176,228 | ) | 17,998 | ||||||||||||||||
Fidelity® VIP Index 500 Service Class 2 |
88,424 | 94,350 | 182,774 | 388,268 | (258,646 | ) | 129,622 | |||||||||||||||||
Franklin Templeton VIP Founding Funds Allocation Class 4 Shares |
105,506 | (58,192 | ) | 47,314 | 35,873 | (17,517 | ) | 18,356 | ||||||||||||||||
Access VP High Yield |
16,798 | 100,067 | 116,865 | 203,772 | (133,371 | ) | 70,401 | |||||||||||||||||
ProFund VP Asia 30 |
11,328 | 24,123 | 35,451 | 315,929 | (342,226 | ) | (26,297 | ) | ||||||||||||||||
ProFund VP Basic Materials |
68,709 | (182,089 | ) | (113,380 | ) | 318,889 | (379,760 | ) | (60,871 | ) | ||||||||||||||
ProFund VP Bull |
30,364 | 122,845 | 153,209 | 519,684 | (538,104 | ) | (18,420 | ) | ||||||||||||||||
ProFund VP Consumer Services |
18,673 | 38,540 | 57,213 | 205,398 | (249,540 | ) | (44,142 | ) | ||||||||||||||||
ProFund VP Emerging Markets |
30,522 | (503,287 | ) | (472,765 | ) | 1,163,893 | (731,755 | ) | 432,138 | |||||||||||||||
ProFund VP Europe 30 |
236,719 | (394,305 | ) | (157,586 | ) | 221,715 | (38,500 | ) | 183,215 | |||||||||||||||
ProFund VP Falling U.S. Dollar |
68,308 | (45,175 | ) | 23,133 | 47,519 | (49,978 | ) | (2,459 | ) | |||||||||||||||
ProFund VP Financials |
19,863 | 73,437 | 93,300 | 377,978 | (372,558 | ) | 5,420 | |||||||||||||||||
ProFund VP International |
21,373 | 3,249 | 24,622 | 343,723 | (283,594 | ) | 60,129 | |||||||||||||||||
ProFund VP Japan |
21,611 | 206,951 | 228,562 | 255,620 | (449,783 | ) | (194,163 | ) | ||||||||||||||||
ProFund VP Mid-Cap |
889,722 | (950,409 | ) | (60,687 | ) | 996,462 | (823,394 | ) | 173,068 | |||||||||||||||
ProFund VP Money Market |
129,093 | (208,249 | ) | (79,156 | ) | 5,853,895 | (6,289,354 | ) | (435,459 | ) | ||||||||||||||
ProFund VP NASDAQ-100 |
23,003 | (46,504 | ) | (23,501 | ) | 1,640,523 | (1,878,992 | ) | (238,469 | ) | ||||||||||||||
ProFund VP Oil & Gas |
13,156 | (87,176 | ) | (74,020 | ) | 528,455 | (501,201 | ) | 27,254 | |||||||||||||||
ProFund VP Pharmaceuticals |
12,219 | 56,926 | 69,145 | 295,362 | (353,724 | ) | (58,362 | ) | ||||||||||||||||
ProFund VP Precious Metals |
81,176 | (238,825 | ) | (157,649 | ) | 778,524 | (727,724 | ) | 50,800 | |||||||||||||||
ProFund VP Short Emerging Markets |
2,923 | (1,306 | ) | 1,617 | 135,730 | (152,942 | ) | (17,212 | ) | |||||||||||||||
ProFund VP Short International |
3,560 | (3,257 | ) | 303 | 316,927 | (313,897 | ) | 3,030 | ||||||||||||||||
ProFund VP Short NASDAQ-100 |
15,019 | (36,958 | ) | (21,939 | ) | 766,829 | (732,996 | ) | 33,833 | |||||||||||||||
ProFund VP Short Small-Cap |
20,933 | 203,816 | 224,749 | 1,374,432 | (1,415,119 | ) | (40,687 | ) |
S-20
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
Notes to Financial Statements
3. Change in Units (continued)
Year Ended December 31, 2013 | Year Ended December 31, 2012 | |||||||||||||||||||||||
Subaccount |
Units Purchased | Units Redeemed and Transferred to/from |
Net Increase (Decrease) |
Units Purchased | Units Redeemed and Transferred to/from |
Net Increase (Decrease) |
||||||||||||||||||
ProFund VP Small-Cap |
11,942 | 45,316 | 57,258 | 1,327,315 | (981,001 | ) | 346,314 | |||||||||||||||||
ProFund VP Small-Cap Value |
18,101 | (91,310 | ) | (73,209 | ) | 1,197,973 | (854,949 | ) | 343,024 | |||||||||||||||
ProFund VP Telecommunications |
681 | (40,553 | ) | (39,872 | ) | 236,793 | (167,660 | ) | 69,133 | |||||||||||||||
ProFund VP U.S. Government Plus |
1,555 | (330,926 | ) | (329,371 | ) | 728,570 | (590,471 | ) | 138,099 | |||||||||||||||
ProFund VP UltraNASDAQ-100 |
35,539 | 242,455 | 277,994 | 1,331,090 | (1,084,665 | ) | 246,425 | |||||||||||||||||
ProFund VP UltraSmall-Cap |
52,237 | 143,647 | 195,884 | 1,931,930 | (2,309,104 | ) | (377,174 | ) | ||||||||||||||||
ProFund VP Utilities |
5,256 | (43,472 | ) | (38,216 | ) | 423,736 | (576,036 | ) | (152,300 | ) | ||||||||||||||
TA Aegon Active Asset Allocation - Conservative Initial Class |
5,899 | 198,650 | 204,549 | 550,240 | (284,031 | ) | 266,209 | |||||||||||||||||
TA Aegon Active Asset Allocation - Moderate Initial Class |
12,915 | 77,405 | 90,320 | 153,395 | (76,200 | ) | 77,195 | |||||||||||||||||
TA Aegon Active Asset Allocation - Moderate Growth Initial Class |
23,800 | (46,426 | ) | (22,626 | ) | 824,963 | (1,031,151 | ) | (206,188 | ) | ||||||||||||||
TA Aegon High Yield Bond Initial Class |
9,453 | (285,937 | ) | (276,484 | ) | 1,016,557 | (715,853 | ) | 300,704 | |||||||||||||||
TA Aegon Money Market Initial Class |
24,739 | (152,009 | ) | (127,270 | ) | 1,017,361 | (1,416,183 | ) | (398,822 | ) | ||||||||||||||
TA Aegon U.S. Government Securities Initial Class |
5,966 | (245,767 | ) | (239,801 | ) | 460,698 | (509,608 | ) | (48,910 | ) | ||||||||||||||
TA AllianceBernstein Dynamic Allocation Initial Class |
4,010 | (11,114 | ) | (7,104 | ) | 74,821 | (58,940 | ) | 15,881 | |||||||||||||||
TA Asset Allocation - Conservative Initial Class |
17,691 | (540,948 | ) | (523,257 | ) | 651,526 | (668,556 | ) | (17,030 | ) | ||||||||||||||
TA Asset Allocation - Growth Initial Class |
57,580 | (763,708 | ) | (706,128 | ) | 2,986,691 | (3,633,690 | ) | (646,999 | ) | ||||||||||||||
TA Asset Allocation - Moderate Initial Class |
23,326 | (294,186 | ) | (270,860 | ) | 905,218 | (1,427,518 | ) | (522,300 | ) | ||||||||||||||
TA Asset Allocation - Moderate Growth Initial Class |
61,337 | (1,091,223 | ) | (1,029,886 | ) | 2,901,893 | (3,982,670 | ) | (1,080,777 | ) | ||||||||||||||
TA Barrow Hanley Dividend Focused Initial Class |
39,509 | (245,344 | ) | (205,835 | ) | 784,937 | (927,758 | ) | (142,821 | ) | ||||||||||||||
TA BlackRock Global Allocation Initial Class |
49,385 | 60,707 | 110,092 | 278,192 | (109,924 | ) | 168,268 | |||||||||||||||||
TA BlackRock Tactical Allocation Initial Class |
12,320 | 96,269 | 108,589 | 288,261 | (85,217 | ) | 203,044 | |||||||||||||||||
TA BNP Paribas Large Cap Growth Initial Class |
12,166 | 57,426 | 69,592 | 96,542 | (86,555 | ) | 9,987 | |||||||||||||||||
TA Clarion Global Real Estate Securities Initial Class |
25,418 | (59,658 | ) | (34,240 | ) | 473,010 | (489,470 | ) | (16,460 | ) | ||||||||||||||
TA Hanlon Income Initial Class |
10,872 | (430,669 | ) | (419,797 | ) | 972,242 | (1,070,820 | ) | (98,578 | ) | ||||||||||||||
TA International Moderate Growth Initial Class |
7,879 | (29,134 | ) | (21,255 | ) | 228,051 | (366,497 | ) | (138,446 | ) | ||||||||||||||
TA Janus Balanced Initial Class |
11,831 | (100,348 | ) | (88,517 | ) | 260,654 | (328,505 | ) | (67,851 | ) | ||||||||||||||
TA Jennison Growth Initial Class |
48,651 | (135,122 | ) | (86,471 | ) | 793,569 | (1,152,148 | ) | (358,579 | ) |
S-21
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
Notes to Financial Statements
3. Change in Units (continued)
Year Ended December 31, 2013 | Year Ended December 31, 2012 | |||||||||||||||||||||||
Subaccount |
Units Purchased | Units Redeemed and Transferred to/from |
Net Increase (Decrease) |
Units Purchased | Units Redeemed and Transferred to/from |
Net Increase (Decrease) |
||||||||||||||||||
TA JPMorgan Core Bond Initial Class |
27,163 | (231,101 | ) | (203,938 | ) | 427,808 | (518,466 | ) | (90,658 | ) | ||||||||||||||
TA JPMorgan Enhanced Index Initial Class |
8,754 | 39,769 | 48,523 | 230,701 | (252,912 | ) | (22,211 | ) | ||||||||||||||||
TA JPMorgan Mid Cap Value Initial Class |
1,243 | (39,016 | ) | (37,773 | ) | 1,036 | (49,242 | ) | (48,206 | ) | ||||||||||||||
TA JPMorgan Tactical Allocation Initial Class |
49,853 | (248,933 | ) | (199,080 | ) | 672,979 | (748,448 | ) | (75,469 | ) | ||||||||||||||
TA MFS International Equity Initial Class |
19,911 | (202,968 | ) | (183,057 | ) | 465,057 | (594,814 | ) | (129,757 | ) | ||||||||||||||
TA Morgan Stanley Capital Growth Initial Class |
41,778 | (58,434 | ) | (16,656 | ) | 362,182 | (542,301 | ) | (180,119 | ) | ||||||||||||||
TA Morgan Stanley Mid-Cap Growth Initial Class |
145,061 | 478,128 | 623,189 | 2,317,412 | (3,010,460 | ) | (693,048 | ) | ||||||||||||||||
TA Multi-Managed Balanced Initial Class |
63,785 | (517,276 | ) | (453,491 | ) | 793,462 | (1,285,339 | ) | (491,877 | ) | ||||||||||||||
TA PIMCO Tactical - Balanced Initial Class |
9,518 | (79,003 | ) | (69,485 | ) | 270,747 | (529,027 | ) | (258,280 | ) | ||||||||||||||
TA PIMCO Tactical - Conservative Initial Class |
18,659 | (81,484 | ) | (62,825 | ) | 347,277 | (309,376 | ) | 37,901 | |||||||||||||||
TA PIMCO Tactical - Growth Initial Class |
9,880 | (71,584 | ) | (61,704 | ) | 400,307 | (453,299 | ) | (52,992 | ) | ||||||||||||||
TA PIMCO Total Return Initial Class |
8,952 | (546,143 | ) | (537,191 | ) | 1,192,076 | (1,091,648 | ) | 100,428 | |||||||||||||||
TA Systematic Small/Mid Cap Value Initial Class |
37,667 | 2,542,653 | 2,580,320 | 820,995 | (808,554 | ) | 12,441 | |||||||||||||||||
TA T. Rowe Price Small Cap Initial Class |
52,802 | 501,845 | 554,647 | 1,388,548 | (1,475,396 | ) | (86,848 | ) | ||||||||||||||||
TA Vanguard ETF - Balanced Initial Class |
5,640 | 21,050 | 26,690 | 22,132 | (16,926 | ) | 5,206 | |||||||||||||||||
TA Vanguard ETF - Growth Initial Class |
8,359 | 132,111 | 140,470 | 35,922 | (109,952 | ) | (74,030 | ) | ||||||||||||||||
TA WMC Diversified Growth Initial Class |
443,599 | (4,052,875 | ) | (3,609,276 | ) | 19,118,163 | (23,543,209 | ) | (4,425,046 | ) |
S-22
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
Notes to Financial Statements
December 31, 2013
4. Financial Highlights
The Separate Account offers various death benefit options, which have differing fees that are charged against the contract owners account balance. These charges are discussed in more detail in the individuals policy. Differences in the fee structures for these units result in different unit values, expense ratios, and total returns.
Subaccount |
Year Ended |
Units | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio |
Net Assets | Investment Income Ratio* |
Expense Ratio** Lowest to Highest |
Total Return*** Corresponding to Lowest to Highest Expense Ratio |
|||||||||||||||||||||||||||||||||||||||||||
AllianceBernstein Balanced Wealth Strategy Class B Shares |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 96,496 | $ | 17.67 | to | $ | 16.48 | $ | 1,637,100 | 2.44 | % | 0.00 | % | to | 1.50 | % | 16.27 | % | to | 14.55 | % | ||||||||||||||||||||||||||||||
12/31/2012 | 62,778 | 15.19 | to | 14.39 | 924,351 | 1.93 | 0.00 | to | 1.50 | 13.38 | to | 11.69 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 49,484 | 13.40 | to | 12.88 | 647,958 | 1.93 | 0.00 | to | 1.50 | (3.06 | ) | to | (4.49 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 44,709 | 13.82 | to | 13.48 | 609,047 | 2.05 | 0.00 | to | 1.50 | 10.30 | to | 8.67 | ||||||||||||||||||||||||||||||||||||||
12/31/2009(1) | 21,898 | 12.53 | to | 12.41 | 272,849 | 0.28 | 0.00 | to | 1.50 | 25.33 | to | 24.09 | ||||||||||||||||||||||||||||||||||||||
Fidelity® VIP Contrafund® Service Class 2 |
|
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12/31/2013 | 1,061,778 | 14.02 | to | 19.96 | 21,199,390 | 0.85 | 0.30 | to | 0.90 | 30.56 | to | 29.79 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 1,082,284 | 10.74 | to | 15.38 | 16,648,396 | 1.12 | 0.30 | to | 0.90 | 15.79 | to | 15.10 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 1,143,869 | 9.27 | to | 13.36 | 15,287,373 | 0.75 | 0.30 | to | 0.90 | (3.65 | ) | to | (3.65 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 1,277,562 | 13.87 | to | 13.87 | 17,720,846 | 1.02 | 0.90 | to | 0.90 | 15.88 | to | 15.88 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 1,385,317 | 11.97 | to | 11.97 | 16,581,630 | 1.18 | 0.90 | to | 0.90 | 34.26 | to | 34.26 | ||||||||||||||||||||||||||||||||||||||
Fidelity® VIP Equity-Income Service Class 2 |
|
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12/31/2013 | 627,239 | 14.21 | to | 18.31 | 11,485,921 | 2.43 | 0.30 | to | 0.90 | 27.44 | to | 26.69 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 592,401 | 11.15 | to | 14.45 | 8,562,126 | 2.95 | 0.30 | to | 0.90 | 16.70 | to | 16.01 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 625,547 | 9.56 | to | 12.46 | 7,793,281 | 2.28 | 0.30 | to | 0.90 | (0.24 | ) | to | (0.24 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 656,922 | 12.49 | to | 12.49 | 8,204,632 | 1.63 | 0.90 | to | 0.90 | 13.89 | to | 13.89 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 711,747 | 10.97 | to | 10.97 | 7,805,053 | 2.09 | 0.90 | to | 0.90 | 28.73 | to | 28.73 | ||||||||||||||||||||||||||||||||||||||
Fidelity® VIP Growth Opportunities Service Class 2 |
|
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12/31/2013 | 495,704 | 15.84 | to | 13.29 | 6,587,747 | 0.05 | 0.30 | to | 0.90 | 37.13 | to | 36.31 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 494,270 | 11.55 | to | 9.75 | 4,818,399 | 0.15 | 0.30 | to | 0.90 | 18.96 | to | 18.25 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 476,272 | 9.71 | to | 8.24 | 3,926,217 | | 0.30 | to | 0.90 | 1.06 | to | 1.06 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 451,620 | 8.16 | to | 8.16 | 3,683,913 | | 0.90 | to | 0.90 | 22.37 | to | 22.37 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 541,193 | 6.67 | to | 6.67 | 3,607,491 | 0.26 | 0.90 | to | 0.90 | 44.16 | to | 44.16 | ||||||||||||||||||||||||||||||||||||||
Fidelity® VIP Index 500 Service Class 2 |
|
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12/31/2013 | 1,059,391 | 15.36 | to | 15.01 | 19,728,648 | 1.84 | 0.00 | to | 1.50 | 31.91 | to | 29.96 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 876,617 | 11.64 | to | 11.55 | 12,543,718 | 2.08 | 0.00 | to | 1.50 | 15.63 | to | 13.91 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 746,995 | 10.07 | to | 10.14 | 9,370,215 | 1.73 | 0.00 | to | 1.50 | 1.78 | to | 0.28 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 757,255 | 9.89 | to | 10.11 | 9,418,539 | 1.86 | 0.00 | to | 1.50 | 14.73 | to | 13.03 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 717,829 | 8.62 | to | 8.94 | 7,869,261 | 2.41 | 0.00 | to | 1.50 | 26.30 | to | 24.43 | ||||||||||||||||||||||||||||||||||||||
Franklin Templeton VIP Founding Funds Allocation Class 4 Shares |
|
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12/31/2013 | 114,612 | 19.94 | to | 18.60 | 2,194,012 | 10.64 | 0.00 | to | 1.50 | 23.68 | to | 21.85 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 67,298 | 16.12 | to | 15.27 | 1,050,329 | 2.54 | 0.00 | to | 1.50 | 15.17 | to | 13.46 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 48,942 | 14.00 | to | 13.45 | 669,001 | 0.02 | 0.00 | to | 1.50 | (1.67 | ) | to | (3.12 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 32,527 | 14.24 | to | 13.89 | 456,236 | 2.63 | 0.00 | to | 1.50 | 10.24 | to | 8.61 | ||||||||||||||||||||||||||||||||||||||
12/31/2009(1) | 15,380 | 12.91 | to | 12.79 | 197,428 | 4.77 | 0.00 | to | 1.50 | 29.14 | to | 27.87 | ||||||||||||||||||||||||||||||||||||||
Access VP High Yield |
|
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12/31/2013 | 354,737 | 17.51 | to | 15.89 | 5,908,320 | 2.62 | 0.00 | to | 1.50 | 10.02 | to | 8.39 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 237,872 | 15.92 | to | 14.66 | 3,628,088 | 4.52 | 0.00 | to | 1.50 | 14.12 | to | 12.43 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 167,471 | 13.95 | to | 13.04 | 2,258,889 | 1.07 | 0.00 | to | 1.50 | 2.74 | to | 1.23 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 153,131 | 13.57 | to | 12.88 | 2,027,460 | 6.13 | 0.00 | to | 1.50 | 16.37 | to | 14.66 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 682,198 | 11.66 | to | 11.23 | 7,829,265 | 8.96 | 0.00 | to | 1.50 | 16.91 | to | 15.19 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Asia 30 |
|
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12/31/2013 | 578,009 | 9.46 | to | 10.20 | 5,217,606 | 0.06 | 0.00 | to | 1.50 | 14.97 | to | 13.27 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 542,558 | 8.23 | to | 9.01 | 4,292,528 | - | 0.00 | to | 1.50 | 15.48 | to | 13.76 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 568,855 | 7.13 | to | 7.92 | 3,927,613 | 0.04 | 0.00 | to | 1.50 | (27.00 | ) | to | (28.07 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 646,594 | 9.76 | to | 11.01 | 6,160,651 | 0.07 | 0.00 | to | 1.50 | 13.90 | to | 12.22 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 814,042 | 8.57 | to | 9.81 | 6,866,995 | 1.14 | 0.00 | to | 1.50 | 54.20 | to | 51.92 |
S-23
Western Reserve Life Assurance Co. of
Ohio
WRL Series Life Account
Notes to Financial
4. Financial Highlights
Subaccount |
Year Ended |
Units | Corresponding to Lowest to Highest Expense Ratio |
Net Assets | Investment Income Ratio* |
Ratio** Lowest to Highest |
Corresponding to Lowest to Highest Expense Ratio |
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ProFund VP Basic Materials |
|
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12/31/2013 | 382,073 | $ | 10.72 | to | $ | 10.03 | $ | 3,893,330 | 0.95 | % | 0.00 | % | to | 1.50 | % | 18.43 | % | to | 16.68 | % | ||||||||||||||||||||||||||||||
12/31/2012 | 495,453 | 9.05 | to | 8.59 | 4,299,388 | 0.32 | 0.00 | to | 1.50 | 8.49 | to | 6.87 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 556,324 | 8.34 | to | 8.04 | 4,487,958 | 0.13 | 0.00 | to | 1.50 | (16.15 | ) | to | (17.39 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 842,823 | 9.95 | to | 9.73 | 8,181,637 | 0.55 | 0.00 | to | 1.50 | 29.69 | to | 27.78 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 741,812 | 7.67 | to | 7.62 | 5,600,499 | 0.90 | 0.00 | to | 1.50 | 62.37 | to | 59.97 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Bull |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 379,024 | 13.76 | to | 13.75 | 5,456,864 | | 0.00 | to | 1.50 | 29.76 | to | 27.84 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 225,815 | 10.61 | to | 10.76 | 2,527,591 | | 0.00 | to | 1.50 | 13.89 | to | 12.20 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 244,235 | 9.31 | to | 9.59 | 2,419,318 | | 0.00 | to | 1.50 | 0.00 | to | (1.47 | ) | |||||||||||||||||||||||||||||||||||||
12/31/2010 | 880,494 | 9.31 | to | 9.73 | 8,807,186 | 0.14 | 0.00 | to | 1.50 | 12.58 | to | 10.91 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 1,069,349 | 8.27 | to | 8.78 | 9,581,607 | 1.38 | 0.00 | to | 1.50 | 24.34 | to | 22.51 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Consumer Services |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 174,922 | 20.35 | to | 20.92 | 3,394,209 | 0.23 | 0.00 | to | 1.50 | 39.87 | to | 37.80 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 117,709 | 14.55 | to | 15.18 | 1,646,930 | | 0.00 | to | 1.50 | 22.10 | to | 20.29 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 161,851 | 11.92 | to | 12.62 | 1,868,275 | | 0.00 | to | 1.50 | 5.50 | to | 3.94 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 74,047 | 11.30 | to | 12.14 | 816,386 | | 0.00 | to | 1.50 | 21.39 | to | 19.60 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 18,603 | 9.30 | to | 10.15 | 170,351 | | 0.00 | to | 1.50 | 30.80 | to | 28.87 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Emerging Markets |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 763,357 | 7.23 | to | 7.47 | 5,251,045 | 0.62 | 0.00 | to | 1.50 | (6.42 | ) | to | (7.81 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2012 | 1,236,122 | 7.73 | to | 8.10 | 9,160,476 | 1.06 | 0.00 | to | 1.50 | 6.57 | to | 4.99 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 803,984 | 7.25 | to | 7.71 | 5,637,656 | | 0.00 | to | 1.50 | (19.70 | ) | to | (20.89 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 2,157,293 | 9.03 | to | 9.75 | 19,013,392 | | 0.00 | to | 1.50 | 9.77 | to | 8.15 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 1,372,513 | 8.22 | to | 9.02 | 11,111,642 | 0.13 | 0.00 | to | 1.50 | 62.36 | to | 59.96 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Europe 30 |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 70,112 | 10.62 | to | 10.16 | 710,051 | 0.36 | 0.00 | to | 1.50 | 21.64 | to | 19.84 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 227,698 | 8.73 | to | 8.48 | 1,908,666 | 2.21 | 0.00 | to | 1.50 | 16.60 | to | 14.86 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 44,483 | 7.49 | to | 7.38 | 322,844 | 0.61 | 0.00 | to | 1.50 | (8.88 | ) | to | (10.23 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 35,416 | 8.22 | to | 8.22 | 284,103 | 1.53 | 0.00 | to | 1.50 | 2.63 | to | 1.12 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 54,733 | 8.01 | to | 8.13 | 431,550 | 3.65 | 0.00 | to | 1.50 | 32.30 | to | 30.34 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Falling U.S. Dollar |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 91,312 | 8.71 | to | 7.87 | 757,593 | | 0.00 | to | 1.50 | (2.01 | ) | to | (3.46 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2012 | 68,179 | 8.89 | to | 8.16 | 581,557 | | 0.00 | to | 1.50 | (0.77 | ) | to | (2.24 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2011 | 70,638 | 8.96 | to | 8.34 | 612,079 | | 0.00 | to | 1.50 | (2.72 | ) | to | (4.16 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 56,113 | 9.21 | to | 8.71 | 504,230 | | 0.00 | to | 1.50 | (2.59 | ) | to | (4.03 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2009 | 65,423 | 9.45 | to | 9.07 | 608,825 | 3.24 | 0.00 | to | 1.50 | 3.32 | to | 1.79 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Financials |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 384,821 | 9.69 | to | 11.45 | 3,559,313 | 0.33 | 0.00 | to | 1.50 | 32.08 | to | 30.13 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 291,521 | 7.33 | to | 8.80 | 2,057,578 | 0.15 | 0.00 | to | 1.50 | 24.73 | to | 22.88 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 286,101 | 5.88 | to | 7.16 | 1,628,344 | | 0.00 | to | 1.50 | (13.83 | ) | to | (15.10 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 297,817 | 6.82 | to | 8.43 | 1,983,828 | 0.24 | 0.00 | to | 1.50 | 10.93 | to | 9.29 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 295,380 | 6.15 | to | 7.72 | 1,788,997 | 1.87 | 0.00 | to | 1.50 | 15.01 | to | 13.31 | ||||||||||||||||||||||||||||||||||||||
ProFund VP International |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 297,995 | 9.64 | to | 9.58 | 2,733,179 | | 0.00 | to | 1.50 | 19.49 | to | 17.73 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 273,373 | 8.06 | to | 8.14 | 2,114,787 | | 0.00 | to | 1.50 | 15.93 | to | 14.21 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 213,244 | 6.96 | to | 7.12 | 1,434,875 | | 0.00 | to | 1.50 | (14.34 | ) | to | (15.60 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 977,030 | 8.12 | to | 8.44 | 7,742,694 | | 0.00 | to | 1.50 | 7.80 | to | 6.21 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 745,355 | 7.53 | to | 7.95 | 5,526,517 | 0.03 | 0.00 | to | 1.50 | 24.65 | to | 22.80 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Japan |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 264,230 | 10.02 | to | 9.53 | 2,520,139 | | 0.00 | to | 1.50 | 48.24 | to | 46.05 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 35,668 | 6.76 | to | 6.53 | 231,290 | | 0.00 | to | 1.50 | 22.95 | to | 21.12 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 229,831 | 5.50 | to | 5.39 | 1,222,963 | | 0.00 | to | 1.50 | (18.54 | ) | to | (19.74 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 48,243 | 6.75 | to | 6.71 | 317,483 | | 0.00 | to | 1.50 | (6.53 | ) | to | (7.91 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2009 | 17,702 | 7.22 | to | 7.29 | 125,805 | 0.60 | 0.00 | to | 1.50 | 10.33 | to | 8.70 |
S-24
Western Reserve Life Assurance Co. of
Ohio
WRL Series Life Account
Notes to Financial
4. Financial Highlights
Subaccount |
Year Ended |
Units | Corresponding to Lowest to Highest Expense Ratio |
Net Assets | Investment Income Ratio* |
Ratio** Lowest to Highest |
Corresponding to Lowest to Highest Expense Ratio |
|||||||||||||||||||||||||||||||||||||||||||
ProFund VP Mid-Cap |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 354,544 | $ | 15.53 | to | $ | 14.96 | $ | 5,239,823 | | % | 0.00 | % | to | 1.50 | % | 30.79 | % | to | 28.86 | % | ||||||||||||||||||||||||||||||
12/31/2012 | 415,231 | 11.87 | to | 11.61 | 4,734,725 | | 0.00 | to | 1.50 | 15.54 | to | 13.82 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 242,163 | 10.28 | to | 10.20 | 2,408,185 | | 0.00 | to | 1.50 | (4.18 | ) | to | (5.60 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 262,715 | 10.73 | to | 10.80 | 2,750,087 | | 0.00 | to | 1.50 | 24.05 | to | 22.22 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 687,103 | 8.65 | to | 8.84 | 5,848,174 | | 0.00 | to | 1.50 | 32.88 | to | 30.91 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Money Market |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 1,587,303 | 10.55 | to | 9.24 | 15,951,315 | 0.02 | 0.00 | to | 1.50 | 0.02 | to | (1.46 | ) | |||||||||||||||||||||||||||||||||||||
12/31/2012 | 1,666,459 | 10.54 | to | 9.38 | 16,875,141 | 0.02 | 0.00 | to | 1.50 | 0.02 | to | (1.47 | ) | |||||||||||||||||||||||||||||||||||||
12/31/2011 | 2,101,918 | 10.54 | to | 9.52 | 21,461,631 | 0.02 | 0.00 | to | 1.50 | 0.02 | to | (1.45 | ) | |||||||||||||||||||||||||||||||||||||
12/31/2010 | 1,269,322 | 10.54 | to | 9.66 | 13,069,723 | 0.02 | 0.00 | to | 1.50 | 0.02 | to | (1.46 | ) | |||||||||||||||||||||||||||||||||||||
12/31/2009 | 1,731,987 | 10.54 | to | 9.80 | 17,988,781 | 0.04 | 0.00 | to | 1.50 | 0.03 | to | (1.45 | ) | |||||||||||||||||||||||||||||||||||||
ProFund VP NASDAQ-100 |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 370,711 | 19.51 | to | 17.40 | 7,650,822 | | 0.00 | to | 1.50 | 34.27 | to | 32.29 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 394,212 | 14.53 | to | 13.15 | 6,111,813 | | 0.00 | to | 1.50 | 16.23 | to | 14.51 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 632,681 | 12.50 | to | 11.49 | 8,536,019 | | 0.00 | to | 1.50 | 1.45 | to | (0.04 | ) | |||||||||||||||||||||||||||||||||||||
12/31/2010 | 280,798 | 12.32 | to | 11.49 | 3,763,880 | | 0.00 | to | 1.50 | 18.24 | to | 16.50 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 309,635 | 10.42 | to | 9.86 | 3,532,987 | | 0.00 | to | 1.50 | 52.01 | to | 49.76 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Oil & Gas |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 716,936 | 11.36 | to | 9.68 | 7,726,500 | 0.42 | 0.00 | to | 1.50 | 24.07 | to | 22.24 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 790,956 | 9.16 | to | 7.92 | 6,935,800 | 0.11 | 0.00 | to | 1.50 | 2.90 | to | 1.37 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 763,702 | 8.90 | to | 7.82 | 6,560,703 | 0.14 | 0.00 | to | 1.50 | 2.25 | to | 0.74 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 628,257 | 8.70 | to | 7.76 | 5,332,083 | 0.43 | 0.00 | to | 1.50 | 17.76 | to | 16.02 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 601,195 | 7.39 | to | 6.69 | 4,371,867 | | 0.00 | to | 1.50 | 15.50 | to | 13.79 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Pharmaceuticals |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 272,535 | 17.45 | to | 17.14 | 4,526,613 | 1.57 | 0.00 | to | 1.50 | 31.63 | to | 29.68 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 203,390 | 13.25 | to | 13.22 | 2,587,654 | 1.19 | 0.00 | to | 1.50 | 11.85 | to | 10.19 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 261,752 | 11.85 | to | 12.00 | 3,002,517 | 1.25 | 0.00 | to | 1.50 | 16.13 | to | 14.42 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 62,654 | 10.20 | to | 10.48 | 623,810 | 4.80 | 0.00 | to | 1.50 | 0.48 | to | (1.01 | ) | |||||||||||||||||||||||||||||||||||||
12/31/2009 | 59,997 | 10.15 | to | 10.59 | 599,768 | 1.75 | 0.00 | to | 1.50 | 16.90 | to | 15.17 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Precious Metals |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 888,589 | 4.61 | to | 4.56 | 3,896,411 | | 0.00 | to | 1.50 | (37.94 | ) | to | (38.86 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2012 | 1,046,238 | 7.42 | to | 7.46 | 7,452,780 | | 0.00 | to | 1.50 | (14.55 | ) | to | (15.82 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2011 | 995,438 | 8.69 | to | 8.87 | 8,366,429 | | 0.00 | to | 1.50 | (19.21 | ) | to | (20.41 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 1,062,460 | 10.75 | to | 11.14 | 11,151,546 | | 0.00 | to | 1.50 | 32.93 | to | 30.97 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 738,773 | 8.09 | to | 8.51 | 5,881,222 | 0.91 | 0.00 | to | 1.50 | 35.33 | to | 33.33 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Short Emerging Markets |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 83,885 | 5.32 | to | 4.55 | 421,715 | | 0.00 | to | 1.50 | (0.23 | ) | to | (1.70 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2012 | 82,268 | 5.33 | to | 4.63 | 419,101 | | 0.00 | to | 1.50 | (13.04 | ) | to | (14.34 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2011 | 99,480 | 6.13 | to | 5.40 | 588,647 | | 0.00 | to | 1.50 | 10.66 | to | 9.03 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 65,112 | 5.54 | to | 4.96 | 351,515 | | 0.00 | to | 1.50 | (18.42 | ) | to | (19.63 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2009 | 72,599 | 6.79 | to | 6.17 | 484,875 | | 0.00 | to | 1.50 | (48.71 | ) | to | (49.47 | ) | ||||||||||||||||||||||||||||||||||||
ProFund VP Short International |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 91,408 | 4.92 | to | 4.24 | 425,812 | | 0.00 | to | 1.50 | (21.01 | ) | to | (22.18 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2012 | 91,105 | 6.23 | to | 5.45 | 543,662 | | 0.00 | to | 1.50 | (20.15 | ) | to | (21.34 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2011 | 88,075 | 7.80 | to | 6.93 | 664,257 | | 0.00 | to | 1.50 | 1.80 | to | 0.30 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 81,702 | 7.66 | to | 6.91 | 610,615 | | 0.00 | to | 1.50 | (14.69 | ) | to | (15.96 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2009 | 97,210 | 8.98 | to | 8.22 | 859,623 | | 0.00 | to | 1.50 | (30.28 | ) | to | (31.31 | ) | ||||||||||||||||||||||||||||||||||||
ProFund VP Short NASDAQ-100 |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 198,467 | 3.07 | to | 2.90 | 578,643 | | 0.00 | to | 1.50 | (29.40 | ) | to | (30.45 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2012 | 220,406 | 4.34 | to | 4.17 | 918,403 | | 0.00 | to | 1.50 | (18.79 | ) | to | (20.00 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2011 | 186,573 | 5.35 | to | 5.22 | 964,827 | | 0.00 | to | 1.50 | (10.48 | ) | to | (11.80 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 99,793 | 5.97 | to | 5.91 | 581,354 | | 0.00 | to | 1.50 | (21.18 | ) | to | (22.35 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2009 | 98,258 | 7.58 | to | 7.62 | 732,716 | 0.31 | 0.00 | to | 1.50 | (40.66 | ) | to | (41.54 | ) |
S-25
Western Reserve Life Assurance Co. of
Ohio
WRL Series Life Account
Notes to Financial
4. Financial Highlights
Subaccount |
Year Ended |
Units | Corresponding to Lowest to Highest Expense Ratio |
Net Assets | Investment Income Ratio* |
Ratio** Lowest to Highest |
Corresponding to Lowest to Highest Expense Ratio |
|||||||||||||||||||||||||||||||||||||||||||
ProFund VP Short Small-Cap |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 418,451 | $ | 3.10 | to | $ | 2.48 | $ | 1,095,526 | | % | 0.00 | % | to | 1.50 | % | (31.25 | )% | to | (32.27 | )% | ||||||||||||||||||||||||||||||
12/31/2012 | 193,702 | 4.51 | to | 3.67 | 742,671 | | 0.00 | to | 1.50 | (18.96 | ) | to | (20.17 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2011 | 234,389 | 5.56 | to | 4.59 | 1,119,129 | | 0.00 | to | 1.50 | (9.09 | ) | to | (10.43 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 253,954 | 6.12 | to | 5.13 | 1,345,858 | | 0.00 | to | 1.50 | (28.94 | ) | to | (30.00 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2009 | 411,632 | 8.61 | to | 7.32 | 3,097,540 | 0.65 | 0.00 | to | 1.50 | (32.37 | ) | to | (33.37 | ) | ||||||||||||||||||||||||||||||||||||
ProFund VP Small-Cap |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 575,020 | 15.11 | to | 15.84 | 8,997,181 | | 0.00 | to | 1.50 | 37.18 | to | 35.16 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 517,762 | 11.02 | to | 11.72 | 5,953,688 | | 0.00 | to | 1.50 | 14.75 | to | 13.04 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 171,448 | 9.60 | to | 10.37 | 1,729,449 | | 0.00 | to | 1.50 | (5.65 | ) | to | (7.05 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 117,806 | 10.18 | to | 11.15 | 1,271,453 | | 0.00 | to | 1.50 | 24.79 | to | 22.95 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 120,140 | 8.15 | to | 9.07 | 1,048,224 | | 0.00 | to | 1.50 | 26.07 | to | 24.21 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Small-Cap Value |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 328,402 | 16.40 | to | 16.48 | 5,135,188 | 0.34 | 0.00 | to | 1.50 | 37.67 | to | 35.64 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 401,611 | 11.91 | to | 12.15 | 4,597,660 | | 0.00 | to | 1.50 | 16.16 | to | 14.43 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 58,587 | 10.26 | to | 10.62 | 584,329 | | 0.00 | to | 1.50 | (4.10 | ) | to | (5.52 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 49,925 | 10.70 | to | 11.24 | 521,884 | 0.13 | 0.00 | to | 1.50 | 22.10 | to | 20.30 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 201,181 | 8.76 | to | 9.34 | 1,734,523 | 0.18 | 0.00 | to | 1.50 | 20.40 | to | 18.62 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Telecommunications |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 54,824 | 12.85 | to | 12.60 | 672,142 | 3.00 | 0.00 | to | 1.50 | 12.07 | to | 10.41 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 94,696 | 11.47 | to | 11.41 | 1,043,007 | 1.62 | 0.00 | to | 1.50 | 16.52 | to | 14.79 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 25,563 | 9.84 | to | 9.94 | 243,416 | 5.16 | 0.00 | to | 1.50 | 1.87 | to | 0.36 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 39,952 | 9.66 | to | 9.91 | 376,895 | 3.94 | 0.00 | to | 1.50 | 15.68 | to | 13.98 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 29,614 | 8.35 | to | 8.69 | 243,481 | 3.96 | 0.00 | to | 1.50 | 7.32 | to | 5.73 | ||||||||||||||||||||||||||||||||||||||
ProFund VP U.S. Government Plus |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 185,209 | 13.14 | to | 12.00 | 2,316,197 | 0.19 | 0.00 | to | 1.50 | (19.11 | ) | to | (20.31 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2012 | 514,580 | 16.25 | to | 15.06 | 8,023,704 | | 0.00 | to | 1.50 | 0.97 | to | (0.53 | ) | |||||||||||||||||||||||||||||||||||||
12/31/2011 | 376,481 | 16.09 | to | 15.14 | 5,859,541 | 0.15 | 0.00 | to | 1.50 | 43.51 | to | 41.40 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 301,462 | 11.21 | to | 10.70 | 3,297,051 | 0.45 | 0.00 | to | 1.50 | 10.11 | to | 8.49 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 228,350 | 10.18 | to | 9.87 | 2,287,999 | 0.05 | 0.00 | to | 1.50 | (32.62 | ) | to | (33.62 | ) | ||||||||||||||||||||||||||||||||||||
ProFund VP UltraNASDAQ-100 |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 524,419 | 16.77 | to | 16.44 | 8,712,260 | | 0.30 | to | 1.50 | 78.51 | to | 76.40 | ||||||||||||||||||||||||||||||||||||||
12/31/2012(1) | 246,425 | 9.40 | to | 9.32 | 2,306,031 | | 0.30 | to | 1.50 | | to | | ||||||||||||||||||||||||||||||||||||||
ProFund VP UltraSmall-Cap |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 687,819 | 16.52 | to | 17.53 | 10,830,668 | | 0.00 | to | 1.50 | 86.66 | to | 83.90 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 491,935 | 8.85 | to | 9.53 | 4,189,182 | | 0.00 | to | 1.50 | 29.51 | to | 27.59 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 869,109 | 6.83 | to | 7.47 | 5,757,669 | | 0.00 | to | 1.50 | (18.83 | ) | to | (20.03 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 829,608 | 8.42 | to | 9.34 | 6,826,647 | | 0.00 | to | 1.50 | 48.44 | to | 46.25 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 514,743 | 5.67 | to | 6.39 | 2,876,036 | 0.09 | 0.00 | to | 1.50 | 40.18 | to | 38.10 | ||||||||||||||||||||||||||||||||||||||
ProFund VP Utilities |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 187,028 | 11.79 | to | 10.44 | 2,094,772 | 2.62 | 0.00 | to | 1.50 | 13.31 | to | 11.64 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 225,244 | 10.41 | to | 9.35 | 2,246,366 | 2.18 | 0.00 | to | 1.50 | 0.14 | to | (1.35 | ) | |||||||||||||||||||||||||||||||||||||
12/31/2011 | 377,544 | 10.39 | to | 9.47 | 3,795,806 | 2.13 | 0.00 | to | 1.50 | 17.51 | to | 15.78 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 163,393 | 8.84 | to | 8.18 | 1,410,040 | 2.82 | 0.00 | to | 1.50 | 5.95 | to | 4.38 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 223,809 | 8.35 | to | 7.84 | 1,838,272 | 4.24 | 0.00 | to | 1.50 | 10.73 | to | 9.10 | ||||||||||||||||||||||||||||||||||||||
TA Aegon Active Asset Allocation - Conservative Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 949,238 | 11.56 | to | 10.94 | 10,559,826 | 1.27 | 0.00 | to | 1.50 | 7.29 | to | 5.70 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 744,689 | 10.78 | to | 10.35 | 7,790,128 | 0.39 | 0.00 | to | 1.50 | 6.99 | to | 5.40 | ||||||||||||||||||||||||||||||||||||||
12/31/2011(1) | 478,480 | 10.07 | to | 9.82 | 4,719,304 | | 0.00 | to | 1.50 | 0.71 | to | (1.77 | ) |
S-26
Western Reserve Life Assurance Co. of
Ohio
WRL Series Life Account
Notes to Financial
4. Financial Highlights
Subaccount |
Year Ended |
Units | Corresponding to Lowest to Highest Expense Ratio |
Net Assets | Investment Income Ratio* |
Ratio** Lowest to Highest |
Corresponding to Lowest to Highest Expense Ratio |
|||||||||||||||||||||||||||||||||||||||||||
TA Aegon Active Asset Allocation - Moderate Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 255,835 | $ | 11.66 | to | $ | 11.29 | $ | 2,939,349 | 0.61 | % | 0.30 | % | to | 1.50 | % | 10.98 | % | to | 9.67 | % | ||||||||||||||||||||||||||||||
12/31/2012 | 165,515 | 10.50 | to | 10.30 | 1,722,700 | 0.16 | 0.30 | to | 1.50 | 8.38 | to | 7.10 | ||||||||||||||||||||||||||||||||||||||
12/31/2011(1) | 88,320 | 9.69 | to | 9.61 | 852,713 | | 0.30 | to | 1.50 | (3.38 | ) | to | (3.85 | ) | ||||||||||||||||||||||||||||||||||||
TA Aegon Active Asset Allocation - Moderate Growth Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 2,854,987 | 12.87 | to | 11.62 | 33,768,554 | 0.94 | 0.00 | to | 1.50 | 16.96 | to | 15.23 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 2,877,613 | 11.00 | to | 10.09 | 29,341,425 | 0.67 | 0.00 | to | 1.50 | 11.18 | to | 9.53 | ||||||||||||||||||||||||||||||||||||||
12/31/2011(1) | 3,083,801 | 9.89 | to | 9.21 | 28,522,037 | | 0.00 | to | 1.50 | (1.06 | ) | to | (7.91 | ) | ||||||||||||||||||||||||||||||||||||
TA Aegon High Yield Bond Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 958,905 | 17.02 | to | 15.27 | 19,315,590 | 5.47 | 0.00 | to | 1.50 | 6.60 | to | 5.02 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 1,235,389 | 15.96 | to | 14.54 | 23,598,480 | 6.51 | 0.00 | to | 1.50 | 17.37 | to | 15.63 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 934,685 | 13.60 | to | 12.58 | 15,387,057 | 5.02 | 0.00 | to | 1.50 | 4.77 | to | 3.22 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 1,162,625 | 12.98 | to | 12.18 | 18,462,510 | 14.76 | 0.00 | to | 1.50 | 12.44 | to | 10.78 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 843,437 | 11.55 | to | 11.00 | 12,028,440 | 11.92 | 0.00 | to | 1.50 | 47.24 | to | 45.06 | ||||||||||||||||||||||||||||||||||||||
TA Aegon Money Market Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 2,061,971 | 10.85 | to | 9.32 | 37,528,464 | 0.01 | 0.00 | to | 1.50 | 0.01 | to | (1.47 | ) | |||||||||||||||||||||||||||||||||||||
12/31/2012 | 2,189,241 | 10.85 | to | 9.46 | 41,402,846 | 0.01 | 0.00 | to | 1.50 | 0.01 | to | (1.48 | ) | |||||||||||||||||||||||||||||||||||||
12/31/2011 | 2,588,063 | 10.85 | to | 9.60 | 49,515,480 | 0.01 | 0.00 | to | 1.50 | 0.01 | to | (1.47 | ) | |||||||||||||||||||||||||||||||||||||
12/31/2010 | 2,879,808 | 10.85 | to | 9.74 | 55,703,313 | 0.01 | 0.00 | to | 1.50 | 0.01 | to | (1.47 | ) | |||||||||||||||||||||||||||||||||||||
12/31/2009 | 3,395,492 | 10.85 | to | 9.89 | 66,003,875 | 0.15 | 0.00 | to | 1.50 | 0.13 | to | (1.35 | ) | |||||||||||||||||||||||||||||||||||||
TA Aegon U.S. Government Securities Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 548,374 | 13.82 | to | 11.72 | 7,951,648 | 2.15 | 0.00 | to | 1.50 | (2.24 | ) | to | (3.68 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2012 | 788,175 | 14.14 | to | 12.17 | 11,800,019 | 1.73 | 0.00 | to | 1.50 | 5.14 | to | 3.58 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 837,085 | 13.44 | to | 11.75 | 12,040,949 | 2.71 | 0.00 | to | 1.50 | 7.61 | to | 6.02 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 889,073 | 12.49 | to | 11.08 | 11,996,681 | 3.14 | 0.00 | to | 1.50 | 4.40 | to | 2.86 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 747,743 | 11.97 | to | 10.77 | 9,746,046 | 2.39 | 0.00 | to | 1.50 | 4.47 | to | 2.92 | ||||||||||||||||||||||||||||||||||||||
TA AllianceBernstein Dynamic Allocation Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 211,633 | 12.79 | to | 10.65 | 3,473,693 | 1.15 | 0.00 | to | 1.50 | 7.18 | to | 5.60 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 218,737 | 11.93 | to | 10.08 | 3,397,039 | 0.86 | 0.00 | to | 1.50 | 6.14 | to | 4.56 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 202,856 | 11.24 | to | 9.64 | 3,015,977 | 0.75 | 0.00 | to | 1.50 | 1.81 | to | 0.31 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 228,404 | 11.04 | to | 9.61 | 3,385,087 | 5.37 | 0.00 | to | 1.50 | 9.29 | to | 7.67 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 233,242 | 10.10 | to | 8.93 | 3,191,995 | 3.68 | 0.00 | to | 1.50 | 31.30 | to | 29.36 | ||||||||||||||||||||||||||||||||||||||
TA Asset Allocation - Conservative Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 2,123,723 | 14.09 | to | 12.56 | 36,960,009 | 3.07 | 0.00 | to | 1.50 | 9.37 | to | 7.75 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 2,646,980 | 12.89 | to | 11.66 | 42,471,943 | 3.16 | 0.00 | to | 1.50 | 7.46 | to | 5.86 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 2,664,010 | 11.99 | to | 11.01 | 40,133,908 | 2.75 | 0.00 | to | 1.50 | 2.65 | to | 1.14 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 3,004,809 | 11.68 | to | 10.89 | 44,599,874 | 3.33 | 0.00 | to | 1.50 | 8.93 | to | 7.32 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 2,997,140 | 10.72 | to | 10.15 | 41,211,153 | 4.38 | 0.00 | to | 1.50 | 25.22 | to | 23.37 | ||||||||||||||||||||||||||||||||||||||
TA Asset Allocation - Growth Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 16,494,167 | 13.68 | to | 12.87 | 308,456,503 | 1.22 | 0.00 | to | 1.50 | 26.81 | to | 24.94 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 17,200,295 | 10.79 | to | 10.30 | 255,994,070 | 1.34 | 0.00 | to | 1.50 | 12.60 | to | 10.92 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 17,847,294 | 9.58 | to | 9.29 | 238,137,274 | 1.20 | 0.00 | to | 1.50 | (5.42 | ) | to | (6.81 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 18,709,468 | 10.13 | to | 9.97 | 266,427,278 | 1.10 | 0.00 | to | 1.50 | 14.95 | to | 13.25 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 19,621,917 | 8.81 | to | 8.80 | 245,375,296 | 2.77 | 0.00 | to | 1.50 | 29.82 | to | 27.90 | ||||||||||||||||||||||||||||||||||||||
TA Asset Allocation - Moderate Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 4,718,623 | 14.35 | to | 12.84 | 86,176,699 | 2.44 | 0.00 | to | 1.50 | 13.50 | to | 11.82 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 4,989,483 | 12.64 | to | 11.48 | 81,048,545 | 2.62 | 0.00 | to | 1.50 | 9.44 | to | 7.81 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 5,511,783 | 11.55 | to | 10.65 | 82,588,491 | 2.23 | 0.00 | to | 1.50 | 0.59 | to | (0.90 | ) | |||||||||||||||||||||||||||||||||||||
12/31/2010 | 6,092,945 | 11.49 | to | 10.74 | 91,600,425 | 2.97 | 0.00 | to | 1.50 | 10.38 | to | 8.75 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 6,257,288 | 10.41 | to | 9.88 | 86,014,287 | 4.21 | 0.00 | to | 1.50 | 26.40 | to | 24.53 |
S-27
Western Reserve Life Assurance Co. of
Ohio
WRL Series Life Account
Notes to Financial
4. Financial Highlights
Subaccount |
Year Ended |
Units | Corresponding to Lowest to Highest Expense Ratio |
Net Assets | Investment Income Ratio* |
Ratio** Lowest to Highest |
Corresponding to Lowest to Highest Expense Ratio |
|||||||||||||||||||||||||||||||||||||||||||
TA Asset Allocation - Moderate Growth Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 16,718,753 | $ | 14.04 | to | $ | 12.94 | $ | 312,493,818 | 2.29 | % | 0.00 | % | to | 1.50 | % | 19.38 | % | to | 17.62 | % | ||||||||||||||||||||||||||||||
12/31/2012 | 17,748,639 | 11.76 | to | 11.00 | 280,495,309 | 2.48 | 0.00 | to | 1.50 | 10.65 | to | 9.00 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 18,829,416 | 10.63 | to | 10.09 | 271,487,804 | 2.04 | 0.00 | to | 1.50 | (2.01 | ) | to | (3.46 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 20,252,081 | 10.84 | to | 10.45 | 300,804,661 | 2.21 | 0.00 | to | 1.50 | 12.73 | to | 11.06 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 21,162,715 | 9.62 | to | 9.41 | 281,532,459 | 3.37 | 0.00 | to | 1.50 | 28.16 | to | 26.26 | ||||||||||||||||||||||||||||||||||||||
TA Barrow Hanley Dividend Focused Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 2,340,738 | 13.47 | to | 13.05 | 69,350,456 | 2.35 | 0.00 | to | 1.50 | 30.24 | to | 28.32 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 2,546,573 | 10.34 | to | 10.17 | 60,489,028 | 1.80 | 0.00 | to | 1.50 | 11.72 | to | 10.06 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 2,689,394 | 9.26 | to | 9.24 | 58,346,888 | 1.73 | 0.00 | to | 1.50 | 2.74 | to | 1.22 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 2,680,772 | 9.01 | to | 9.13 | 58,169,402 | 0.80 | 0.00 | to | 1.50 | 10.44 | to | 8.81 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 2,096,273 | 8.16 | to | 8.39 | 41,943,389 | 1.48 | 0.00 | to | 1.50 | 13.99 | to | 12.31 | ||||||||||||||||||||||||||||||||||||||
TA BlackRock Global Allocation Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 475,997 | 11.69 | to | 11.33 | 5,486,130 | 2.00 | 0.30 | to | 1.50 | 14.27 | to | 12.92 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 365,905 | 10.23 | to | 10.03 | 3,710,765 | 4.03 | 0.30 | to | 1.50 | 9.94 | to | 8.64 | ||||||||||||||||||||||||||||||||||||||
12/31/2011(1) | 197,637 | 9.30 | to | 9.24 | 1,832,732 | | 0.30 | to | 1.50 | (7.22 | ) | to | (7.65 | ) | ||||||||||||||||||||||||||||||||||||
TA BlackRock Tactical Allocation Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 422,236 | 12.03 | to | 11.66 | 5,010,009 | 2.22 | 0.30 | to | 1.50 | 12.29 | to | 10.97 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 313,647 | 10.72 | to | 10.51 | 3,331,943 | 2.55 | 0.30 | to | 1.50 | 9.90 | to | 8.60 | ||||||||||||||||||||||||||||||||||||||
12/31/2011(1) | 110,603 | 9.75 | to | 9.68 | 1,074,808 | | 0.30 | to | 1.50 | (2.77 | ) | to | (3.21 | ) | ||||||||||||||||||||||||||||||||||||
TA BNP Paribas Large Cap Growth Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 300,744 | 24.10 | to | 22.48 | 6,959,450 | 1.02 | 0.00 | to | 1.50 | 33.10 | to | 31.13 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 231,152 | 18.10 | to | 17.14 | 4,052,421 | 0.84 | 0.00 | to | 1.50 | 17.13 | to | 15.39 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 221,165 | 15.46 | to | 14.85 | 3,339,827 | 0.84 | 0.00 | to | 1.50 | (2.27 | ) | to | (3.71 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 164,285 | 15.82 | to | 15.43 | 2,560,486 | 0.65 | 0.00 | to | 1.50 | 19.17 | to | 17.41 | ||||||||||||||||||||||||||||||||||||||
12/31/2009(1) | 158,510 | 13.27 | to | 13.14 | 2,091,116 | 0.77 | 0.00 | to | 1.50 | 32.71 | to | 31.39 | ||||||||||||||||||||||||||||||||||||||
TA Clarion Global Real Estate Securities Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 1,637,406 | 10.99 | to | 11.67 | 47,559,908 | 5.50 | 0.00 | to | 1.50 | 3.90 | to | 2.36 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 1,671,646 | 10.57 | to | 11.40 | 48,402,540 | 3.58 | 0.00 | to | 1.50 | 25.25 | to | 23.39 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 1,688,106 | 8.44 | to | 9.24 | 39,627,251 | 6.97 | 0.00 | to | 1.50 | (5.74 | ) | to | (7.13 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 1,792,747 | 8.96 | to | 9.94 | 45,249,664 | 6.28 | 0.00 | to | 1.50 | 15.67 | to | 13.96 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 1,918,495 | 7.74 | to | 8.73 | 42,497,293 | | 0.00 | to | 1.50 | 33.42 | to | 31.45 | ||||||||||||||||||||||||||||||||||||||
TA Hanlon Income Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 2,168,193 | 12.29 | to | 11.47 | 25,637,113 | 4.44 | 0.00 | to | 1.50 | 3.19 | to | 1.66 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 2,587,990 | 11.91 | to | 11.28 | 29,893,545 | 2.38 | 0.00 | to | 1.50 | 3.72 | to | 2.18 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 2,686,568 | 11.49 | to | 11.04 | 30,165,370 | 1.68 | 0.00 | to | 1.50 | 3.16 | to | 1.64 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 2,580,151 | 11.13 | to | 10.86 | 28,321,102 | 0.20 | 0.00 | to | 1.50 | 0.39 | to | (1.09 | ) | |||||||||||||||||||||||||||||||||||||
12/31/2009(1) | 1,569,291 | 11.09 | to | 10.98 | 17,304,606 | | 0.00 | to | 1.50 | 10.90 | to | 9.80 | ||||||||||||||||||||||||||||||||||||||
TA International Moderate Growth Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 1,035,656 | 12.31 | to | 11.02 | 11,862,703 | 2.05 | 0.00 | to | 1.50 | 12.72 | to | 11.05 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 1,056,911 | 10.92 | to | 9.93 | 10,833,421 | 2.98 | 0.00 | to | 1.50 | 12.81 | to | 11.13 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 1,195,357 | 9.68 | to | 8.93 | 10,957,032 | 2.05 | 0.00 | to | 1.50 | (7.37 | ) | to | (8.74 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 1,086,132 | 10.45 | to | 9.79 | 10,841,225 | 2.70 | 0.00 | to | 1.50 | 10.50 | to | 8.87 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 1,085,246 | 9.46 | to | 8.99 | 9,885,528 | 2.72 | 0.00 | to | 1.50 | 29.69 | to | 27.78 | ||||||||||||||||||||||||||||||||||||||
TA Janus Balanced Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 776,819 | 12.85 | to | 12.02 | 9,621,053 | 0.81 | 0.00 | to | 1.50 | 19.27 | to | 17.51 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 865,336 | 10.78 | to | 10.23 | 9,058,408 | | 0.00 | to | 1.50 | 12.75 | to | 11.08 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 933,187 | 9.56 | to | 9.21 | 8,735,617 | 0.23 | 0.00 | to | 1.50 | (10.60 | ) | to | (11.92 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 911,158 | 10.69 | to | 10.45 | 9,619,762 | 0.14 | 0.00 | to | 1.50 | 3.39 | to | 1.87 | ||||||||||||||||||||||||||||||||||||||
12/31/2009(1) | 651,788 | 10.34 | to | 10.26 | 6,711,223 | | 0.00 | to | 1.50 | 3.40 | to | 2.63 |
S-28
Western Reserve Life Assurance Co. of
Ohio
WRL Series Life Account
Notes to Financial
4. Financial Highlights
Subaccount |
Year Ended |
Units | Corresponding to Lowest to Highest Expense Ratio |
Net Assets | Investment Income Ratio* |
Ratio** Lowest to Highest |
Corresponding to Lowest to Highest Expense Ratio |
|||||||||||||||||||||||||||||||||||||||||||
TA Jennison Growth Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 997,359 | $ | 17.17 | to | $ | 16.26 | $ | 16,588,876 | 0.26 | % | 0.00 | % | to | 1.50 | % | 37.70 | % | to | 35.67 | % | ||||||||||||||||||||||||||||||
12/31/2012 | 1,083,830 | 12.47 | to | 11.98 | 13,204,036 | 0.08 | 0.00 | to | 1.50 | 15.77 | to | 14.05 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 1,442,409 | 10.77 | to | 10.51 | 15,313,587 | 0.13 | 0.00 | to | 1.50 | (0.63 | ) | to | (2.09 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010(1) | 983,566 | 10.84 | to | 10.73 | 10,598,851 | 0.05 | 0.00 | to | 1.50 | 8.40 | to | 7.32 | ||||||||||||||||||||||||||||||||||||||
TA JPMorgan Core Bond Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 1,189,246 | 14.94 | to | 12.53 | 42,590,183 | 2.84 | 0.00 | to | 1.50 | (1.84 | ) | to | (3.29 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2012 | 1,393,184 | 15.22 | to | 12.96 | 54,961,304 | 2.59 | 0.00 | to | 1.50 | 4.98 | to | 3.42 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 1,483,842 | 14.50 | to | 12.53 | 55,847,749 | 4.24 | 0.00 | to | 1.50 | 7.53 | to | 5.94 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 1,497,898 | 13.49 | to | 11.83 | 54,990,397 | 5.90 | 0.00 | to | 1.50 | 8.24 | to | 6.64 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 1,590,917 | 12.46 | to | 11.09 | 54,892,177 | 4.57 | 0.00 | to | 1.50 | 9.58 | to | 7.96 | ||||||||||||||||||||||||||||||||||||||
TA JPMorgan Enhanced Index Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 363,316 | 15.71 | to | 15.57 | 7,002,418 | 0.66 | 0.00 | to | 1.50 | 32.52 | to | 30.56 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 314,793 | 11.86 | to | 11.93 | 4,615,177 | 1.04 | 0.00 | to | 1.50 | 16.35 | to | 14.62 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 337,004 | 10.19 | to | 10.41 | 4,287,113 | 1.98 | 0.00 | to | 1.50 | 0.74 | to | (0.75 | ) | |||||||||||||||||||||||||||||||||||||
12/31/2010 | 159,313 | 10.12 | to | 10.48 | 2,022,985 | 1.37 | 0.00 | to | 1.50 | 15.17 | to | 13.47 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 146,884 | 8.78 | to | 9.24 | 1,631,165 | 2.05 | 0.00 | to | 1.50 | 29.59 | to | 27.68 | ||||||||||||||||||||||||||||||||||||||
TA JPMorgan Mid Cap Value Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 297,704 | 15.47 | to | 28.39 | 8,409,132 | 0.48 | 0.30 | to | 0.90 | 31.42 | to | 30.64 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 335,477 | 11.77 | to | 21.73 | 7,283,109 | 0.74 | 0.30 | to | 0.90 | 20.16 | to | 19.45 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 383,683 | 9.80 | to | 18.19 | 6,976,202 | 1.11 | 0.30 | to | 0.90 | 1.26 | to | 1.11 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 443,622 | 15.12 | to | 17.99 | 7,977,312 | 1.82 | 0.75 | to | 0.90 | 22.07 | to | 21.89 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 543,852 | 12.39 | to | 14.76 | 8,022,955 | 1.78 | 0.75 | to | 0.90 | 25.47 | to | 25.28 | ||||||||||||||||||||||||||||||||||||||
TA JPMorgan Tactical Allocation Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 1,836,341 | 11.81 | to | 10.22 | 50,813,971 | 1.12 | 0.00 | to | 1.50 | 5.51 | to | 3.95 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 2,035,421 | 11.19 | to | 9.83 | 58,503,544 | 0.60 | 0.00 | to | 1.50 | 7.72 | to | 6.12 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 2,110,890 | 10.39 | to | 9.26 | 58,567,573 | 1.77 | 0.00 | to | 1.50 | 3.63 | to | 2.10 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 2,142,565 | 10.03 | to | 9.07 | 59,508,491 | 3.72 | 0.00 | to | 1.50 | (0.11 | ) | to | (1.59 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2009 | 2,455,555 | 10.04 | to | 9.22 | 69,300,036 | 3.15 | 0.00 | to | 1.50 | 4.20 | to | 2.65 | ||||||||||||||||||||||||||||||||||||||
TA MFS International Equity Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 2,542,705 | 12.41 | to | 12.59 | 44,178,744 | 1.12 | 0.00 | to | 1.50 | 18.09 | to | 16.35 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 2,725,762 | 10.51 | to | 10.82 | 40,935,229 | 1.67 | 0.00 | to | 1.50 | 22.16 | to | 20.34 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 2,855,519 | 8.60 | to | 8.99 | 35,715,997 | 1.23 | 0.00 | to | 1.50 | (10.06 | ) | to | (11.38 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 3,152,339 | 9.56 | to | 10.15 | 44,273,875 | 1.38 | 0.00 | to | 1.50 | 10.49 | to | 8.86 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 3,477,566 | 8.65 | to | 9.32 | 44,762,291 | 2.77 | 0.00 | to | 1.50 | 32.68 | to | 30.72 | ||||||||||||||||||||||||||||||||||||||
TA Morgan Stanley Capital Growth Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 1,614,954 | 17.73 | to | 17.56 | 41,972,887 | 0.68 | 0.00 | to | 1.50 | 48.25 | to | 46.06 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 1,631,610 | 11.96 | to | 12.02 | 29,074,013 | | 0.00 | to | 1.50 | 15.55 | to | 13.83 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 1,811,729 | 10.35 | to | 10.56 | 28,217,193 | | 0.00 | to | 1.50 | (5.81 | ) | to | (7.20 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 1,888,765 | 10.99 | to | 11.38 | 31,571,559 | 0.88 | 0.00 | to | 1.50 | 27.44 | to | 25.55 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 2,028,036 | 8.62 | to | 9.06 | 26,897,044 | 2.57 | 0.00 | to | 1.50 | 27.91 | to | 26.02 | ||||||||||||||||||||||||||||||||||||||
TA Morgan Stanley Mid-Cap Growth Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 6,801,694 | 20.86 | to | 17.35 | 400,725,724 | 0.82 | 0.00 | to | 1.50 | 39.14 | to | 37.09 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 6,178,505 | 14.99 | to | 12.66 | 308,998,063 | | 0.00 | to | 1.50 | 9.08 | to | 7.46 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 6,871,553 | 13.74 | to | 11.78 | 320,319,419 | 0.31 | 0.00 | to | 1.50 | (6.71 | ) | to | (8.09 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 6,111,664 | 14.73 | to | 12.81 | 315,951,891 | 0.12 | 0.00 | to | 1.50 | 33.90 | to | 31.92 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 6,505,939 | 11.00 | to | 9.71 | 256,353,724 | | 0.00 | to | 1.50 | 60.56 | to | 58.19 | ||||||||||||||||||||||||||||||||||||||
TA Multi-Managed Balanced Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 5,788,779 | 16.93 | to | 15.16 | 122,595,908 | 1.59 | 0.00 | to | 1.50 | 18.09 | to | 16.35 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 6,242,270 | 14.33 | to | 13.03 | 113,097,747 | 1.63 | 0.00 | to | 1.50 | 12.57 | to | 10.90 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 6,734,147 | 12.73 | to | 11.75 | 109,394,054 | 2.30 | 0.00 | to | 1.50 | 4.04 | to | 2.50 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 7,285,593 | 12.24 | to | 11.47 | 114,812,439 | 0.69 | 0.00 | to | 1.50 | 24.12 | to | 22.29 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 375,051 | 9.86 | to | 9.38 | 4,796,603 | 1.77 | 0.00 | to | 1.50 | 26.30 | to | 24.43 |
S-29
Western Reserve Life Assurance Co. of
Ohio
WRL Series Life Account
Notes to Financial
4. Financial Highlights
Subaccount |
Year Ended |
Units | Corresponding to Lowest to Highest Expense Ratio |
Net Assets | Investment Income Ratio* |
Ratio** Lowest to Highest |
Corresponding to Lowest to Highest Expense Ratio |
|||||||||||||||||||||||||||||||||||||||||||
TA PIMCO Tactical - Balanced Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 619,030 | $ | 12.13 | to | $ | 11.31 | $ | 7,222,343 | 0.63 | % | 0.00 | % | to | 1.50 | % | 12.16 | % | to | 10.50 | % | ||||||||||||||||||||||||||||||
12/31/2012 | 688,515 | 10.81 | to | 10.24 | 7,218,830 | 1.97 | 0.00 | to | 1.50 | 1.29 | to | (0.22 | ) | |||||||||||||||||||||||||||||||||||||
12/31/2011 | 946,795 | 10.67 | to | 10.26 | 9,877,534 | 1.26 | 0.00 | to | 1.50 | (3.20 | ) | to | (4.62 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 981,490 | 11.03 | to | 10.76 | 10,667,540 | 0.37 | 0.00 | to | 1.50 | (3.28 | ) | to | (4.71 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2009(1) | 413,683 | 11.40 | to | 11.29 | 4,689,366 | | 0.00 | to | 1.50 | 14.00 | to | 12.87 | ||||||||||||||||||||||||||||||||||||||
TA PIMCO Tactical - Conservative Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 892,693 | 11.49 | to | 10.72 | 9,862,430 | 0.70 | 0.00 | to | 1.50 | 8.44 | to | 6.83 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 955,518 | 10.59 | to | 10.03 | 9,814,626 | 1.50 | 0.00 | to | 1.50 | 1.70 | to | 0.19 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 917,617 | 10.42 | to | 10.01 | 9,346,564 | 1.38 | 0.00 | to | 1.50 | (7.15 | ) | to | (8.52 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 867,427 | 11.22 | to | 10.94 | 9,594,997 | 0.63 | 0.00 | to | 1.50 | (1.85 | ) | to | (3.30 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2009(1) | 584,425 | 11.43 | to | 11.32 | 6,641,823 | | 0.00 | to | 1.50 | 14.30 | to | 13.17 | ||||||||||||||||||||||||||||||||||||||
TA PIMCO Tactical - Growth Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 1,186,871 | 12.01 | to | 11.21 | 13,712,474 | 0.86 | 0.00 | to | 1.50 | 17.03 | to | 15.30 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 1,248,575 | 10.27 | to | 9.72 | 12,426,995 | 0.77 | 0.00 | to | 1.50 | 0.98 | to | (0.52 | ) | |||||||||||||||||||||||||||||||||||||
12/31/2011 | 1,301,567 | 10.17 | to | 9.77 | 12,936,910 | 1.51 | 0.00 | to | 1.50 | (11.37 | ) | to | (12.68 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 1,260,674 | 11.47 | to | 11.19 | 14,255,487 | 0.94 | 0.00 | to | 1.50 | (0.44 | ) | to | (1.91 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2009(1) | 900,763 | 11.52 | to | 11.41 | 10,317,734 | | 0.00 | to | 1.50 | 15.20 | to | 14.06 | ||||||||||||||||||||||||||||||||||||||
TA PIMCO Total Return Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 1,680,310 | 14.74 | to | 12.51 | 27,193,749 | 2.00 | 0.00 | to | 1.50 | (2.55 | ) | to | (3.99 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2012 | 2,217,501 | 15.12 | to | 13.02 | 37,217,010 | 4.20 | 0.00 | to | 1.50 | 7.55 | to | 5.95 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 2,117,073 | 14.06 | to | 12.29 | 33,381,877 | 2.45 | 0.00 | to | 1.50 | 6.27 | to | 4.70 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 2,044,774 | 13.23 | to | 11.74 | 30,675,838 | 3.99 | 0.00 | to | 1.50 | 7.19 | to | 5.61 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 2,049,990 | 12.35 | to | 11.12 | 28,964,781 | 6.81 | 0.00 | to | 1.50 | 16.03 | to | 14.32 | ||||||||||||||||||||||||||||||||||||||
TA Systematic Small/Mid Cap Value Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 4,447,355 | 22.17 | to | 16.00 | 132,634,531 | 0.50 | 0.00 | to | 1.50 | 36.32 | to | 34.30 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 1,867,035 | 16.26 | to | 11.91 | 41,008,806 | 1.00 | 0.00 | to | 1.50 | 16.39 | to | 14.66 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 1,854,594 | 13.97 | to | 10.39 | 35,587,598 | | 0.00 | to | 1.50 | (2.66 | ) | to | (4.09 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 1,809,020 | 14.36 | to | 10.83 | 36,122,323 | 0.82 | 0.00 | to | 1.50 | 30.41 | to | 28.49 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 1,536,758 | 11.01 | to | 8.43 | 23,766,218 | 3.32 | 0.00 | to | 1.50 | 43.21 | to | 41.10 | ||||||||||||||||||||||||||||||||||||||
TA T. Rowe Price Small Cap Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 2,153,737 | 22.45 | to | 20.00 | 55,234,542 | 0.08 | 0.00 | to | 1.50 | 44.07 | to | 41.94 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 1,599,090 | 15.58 | to | 14.09 | 28,558,454 | | 0.00 | to | 1.50 | 15.69 | to | 13.97 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 1,685,938 | 13.47 | to | 12.37 | 26,401,828 | | 0.00 | to | 1.50 | 1.69 | to | 0.19 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 1,795,626 | 13.25 | to | 12.34 | 27,953,674 | | 0.00 | to | 1.50 | 34.42 | to | 32.44 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 1,580,683 | 9.85 | to | 9.32 | 18,450,816 | | 0.00 | to | 1.50 | 38.70 | to | 36.65 | ||||||||||||||||||||||||||||||||||||||
TA Vanguard ETF - Balanced Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 69,037 | 13.23 | to | 12.91 | 870,501 | 1.25 | 0.00 | to | 1.50 | 11.76 | to | 10.11 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 42,347 | 11.84 | to | 11.73 | 482,240 | 1.31 | 0.00 | to | 1.50 | 8.67 | to | 7.06 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 37,141 | 10.89 | to | 10.95 | 392,883 | 1.27 | 0.00 | to | 1.50 | 1.57 | to | 0.07 | ||||||||||||||||||||||||||||||||||||||
12/31/2010 | 22,580 | 10.73 | to | 10.95 | 237,099 | 1.34 | 0.00 | to | 1.50 | 11.07 | to | 9.43 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 9,982 | 9.66 | to | 10.00 | 95,207 | 0.20 | 0.00 | to | 1.50 | 16.62 | to | 14.90 | ||||||||||||||||||||||||||||||||||||||
TA Vanguard ETF - Growth Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 269,355 | 13.50 | to | 13.46 | 3,470,733 | 1.54 | 0.00 | to | 1.50 | 19.09 | to | 17.33 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 128,885 | 11.34 | to | 11.48 | 1,405,111 | 1.47 | 0.00 | to | 1.50 | 11.79 | to | 10.13 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 202,915 | 10.14 | to | 10.42 | 1,996,047 | 1.72 | 0.00 | to | 1.50 | (0.86 | ) | to | (2.32 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 126,380 | 10.23 | to | 10.67 | 1,263,507 | 1.27 | 0.00 | to | 1.50 | 13.15 | to | 11.48 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 87,173 | 9.04 | to | 9.57 | 776,576 | 0.36 | 0.00 | to | 1.50 | 23.68 | to | 21.85 | ||||||||||||||||||||||||||||||||||||||
TA WMC Diversified Growth Initial Class |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
12/31/2013 | 42,951,581 | 14.05 | to | 13.20 | 877,032,776 | 1.05 | 0.00 | to | 1.50 | 32.46 | to | 30.51 | ||||||||||||||||||||||||||||||||||||||
12/31/2012 | 46,560,857 | 10.60 | to | 10.11 | 726,823,605 | 0.31 | 0.00 | to | 1.50 | 13.17 | to | 11.49 | ||||||||||||||||||||||||||||||||||||||
12/31/2011 | 50,985,903 | 9.37 | to | 9.07 | 709,945,091 | 0.37 | 0.00 | to | 1.50 | (3.73 | ) | to | (5.15 | ) | ||||||||||||||||||||||||||||||||||||
12/31/2010 | 41,871,514 | 9.73 | to | 9.56 | 611,309,502 | 0.54 | 0.00 | to | 1.50 | 17.81 | to | 16.07 | ||||||||||||||||||||||||||||||||||||||
12/31/2009 | 45,909,649 | 8.26 | to | 8.24 | 574,078,382 | 0.95 | 0.00 | to | 1.50 | 29.20 | to | 27.29 |
S-30
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
Notes to Financial Statements
December 31, 2013
4. Financial Highlights (continued)
(1) | See footnote 1 |
* | These amounts represent the dividends, excluding distributions of capital gains, received by the subaccount from the Mutual Fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that are assessed against contract owner accounts either through reductions in the unit values or the redemption of units. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the Mutual Fund in which the subaccounts invest. |
** | These amounts represent the annualized contract expenses of the subaccount, consisting primarily of mortality and expense charges, for each period indicated. These ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the Mutual Fund have been excluded. |
*** | These amounts represent the total return for the periods indicated, including changes in the value of the Mutual Fund, and expenses assessed through the reduction of unit values. These ratios do not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. Effective 2012, total returns reflect a full twelve month period and total returns for subaccounts opened during the year have not been disclosed as they may not be indicative of a full year return. Effective 2011, expense ratios not in effect for the full twelve months are not reflected in the total return as they may not be indicative of a full year return. |
S-31
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
Notes to Financial Statements
December 31, 2013
5. Administrative and Mortality and Expense Risk Charges
Under some forms of the contracts, 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 contracts, monthly charges against policy cash values are made to compensate WRL for costs of insurance provided. A daily charge equal to an annual rate from 0.00% and 1.50% of average daily net assets is assessed to compensate WRL for assumption of mortality and expense risks in connection with the issuance and administration of the contracts. This charge (not assessed at the individual contract level) effectively reduces the value of a unit outstanding during the year.
6. Income Tax
Operations of the Separate Account form a part of WRL, which is taxed as a life insurance company under Subchapter L of the Internal Revenue Code of 1986, as amended (the Code). The operations of the Separate Account are accounted for separately from other operations of WRL for purposes of federal income taxation. The Separate Account is not separately taxable as a regulated investment company under Subchapter M of the Code and is not otherwise taxable as an entity separate from WRL. Under existing federal income tax laws, the income of the Separate Account is not taxable to WRL, as long as earnings are credited under the variable annuity contracts.
7. Dividend Distributions
Dividends are not declared by the Separate Account, since the increase in the value of the underlying investment in the Mutual Funds is reflected daily in the accumulation unit price used to calculate the equity value within the Separate Account. Consequently, a dividend distribution by the Mutual Funds does not change either the accumulation unit price or equity values within the Separate Account.
S-32
Western Reserve Life Assurance Co. of Ohio
WRL Series Life Account
Notes to Financial Statements
December 31, 2013
8. Fair Value Measurements and Fair Value Hierarchy
The Accounting Standards Codification (ASC) 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the nature of inputs used to measure fair value and enhances disclosure requirements for fair value measurements.
The Separate Account has categorized its financial instruments into a three level hierarchy which is based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.
Financial assets and liabilities recorded at fair value on the Statements of Assets and Liabilities are categorized as follows:
Level 1. Unadjusted quoted prices for identical assets or liabilities in an active market.
Level 2. Quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:
a) | Quoted prices for similar assets or liabilities in active markets |
b) | Quoted prices for identical or similar assets or liabilities in non-active markets |
c) | Inputs other than quoted market prices that are observable |
d) | Inputs that are derived principally from or corroborated by observable market data |
Level 3. Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect managements own assumptions about the assumptions a market participant would use in pricing the asset or liability.
All investments in the Mutual Funds included in the Statements of Assets and Liabilities are stated at fair value and are based upon daily unadjusted quoted prices, therefore are considered Level 1.
9. Subsequent Events
The Separate Account has evaluated the financial statements for subsequent events through the date which the financial statements were issued. During this period, there were no subsequent events requiring recognition or disclosure in the financial statements.
S-33
PART C - OTHER INFORMATION
Item 26. |
Exhibits | |||
(a) |
Board of Directors Resolution | |||
(i) |
Resolution of the Board of Directors of Western Reserve establishing the separate account (3) | |||
(ii) |
Resolution of TPLIC Board authorizing Plan of Merger and attached Plan of Merger (15) | |||
(iii) |
Resolution of WRL Board of Directors authorizing Plan of Merger and attached Plan of Merger (15) | |||
(iv) |
Resolution Authorizing Re-domestication of the Separate Account (15) | |||
(b) |
Not Applicable | |||
(c) |
Underwriting Contracts | |||
(i) |
Amended and Restated Principal Underwriting Agreement between Transamerica Capital Inc. and Monumental Life dated March 1, 2013 (13) | |||
(ii) |
Amendment No. 1 to Amended and Restated Principal Underwriting Agreement between Transamerica Capital Inc. and Transamerica Premier Life Insurance Company (formerly, Monumental Life) dated July 31, 2014 (15) | |||
(d) |
Contracts | |||
(i) |
Specimen Flexible Premium Variable Life Insurance Policy (1) | |||
(ii) |
Endorsement (EL101) (2) | |||
(e) |
Applications | |||
Application for Flexible Premium Variable Life Insurance Policy (1) | ||||
(f) |
Depositors Certificate of Incorporation and By-Laws | |||
(i) |
Restated Articles of Incorporation and Articles of Re-domestication of TPLIC (formerly, Monumental Life Insurance Company) (16) | |||
(ii) |
Amended By-Laws of TPLIC (formerly, Monumental Life Insurance Company) (13) | |||
(g) |
Reinsurance Contracts | |||
(i) |
Reinsurance Treaty dated September 30, 2000 and Amendments Thereto (3) | |||
(ii) |
Reinsurance Treaty dated July 1, 2002 and Amendments Thereto (3) | |||
(h) |
Participation Agreements | |||
(i) |
Participation Agreement among Transamerica Series Trust and Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company, Monumental Life Insurance Company, and Western Reserve Life Assurance Co. of Ohio dated May 1, 2013 (11) | |||
(ii) |
Amendment No. 1 to Participation Agreement among Transamerica Series Trust and Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company, Monumental Life Insurance Company, and Western Reserve Life Assurance Co. of Ohio dated May 1, 2013 (11) | |||
(iii) |
Revision to Schedule A dated September 3, 2013 of the Participation Agreement among Transamerica Series Trust and Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company, Monumental Life Insurance Company, and Western Reserve Life Assurance Co. of Ohio dated May 1, 2013 (11) | |||
(iv) |
Revision to Schedule A dated September 18, 2013 of the Participation Agreement among Transamerica Series Trust and Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company, Monumental Life Insurance Company, and Western Reserve Life Assurance Co. of Ohio dated May 1, 2013 (11) | |||
(v) |
Revision to Schedule A dated October 31, 2013 of the Participation Agreement among Transamerica Series Trust and Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company, Monumental Life Insurance Company, and Western Reserve Life Assurance Co. of Ohio dated May 1, 2013 (11) | |||
(vi) |
Amended and Restated Participation Agreements Among Variable Insurance Products Fund, Fidelity Distributors Corporation and Western Reserve dated February 28, 2014 (15) | |||
(vii) |
Amendment No. 1 to Amended and Restated Participation Agreement Among Variable Insurance Products Funds, Fidelity Distributors Corporation and Western Reserve dated October 21, 2014 (15) | |||
(viii) |
Summary Prospectus Agreement between WRL and Fidelity Distributors Corporation dated May 1, 2011 (9) | |||
(ix) |
Participation Agreement Among Western Reserve, ProFunds, Access One Trust and ProFund Advisors LLC dated June 6, 2006 (6) | |||
(x) |
Amendment No. 1 to Participation Agreement among Western Reserve, ProFunds, Access One Trust and ProFund Advisors LLC dated June 1, 2007 (5) | |||
(xi) |
Amendment No. 2 to Participation Agreement among Western Reserve, ProFunds, Access One Trust and ProFund Advisors LLC dated August 30, 2008 (5) | |||
(xii) |
Amendment No. 3 to Participation Agreement among Western Reserve, ProFunds, Access One Trust and ProFund Advisors LLC dated February 28, 2008 (7) | |||
(xiii) |
Amendment No. 5 to ProFunds Participation Agreement among Western Reserve, ProFunds, Access One Trust and ProFunds Advisors LLC dated May 1, 2012 (9) |
(xiv) |
Amendment No. 6 to Participation Agreement among Western Reserve Life Assurance Co. of Ohio and ProFunds, Access One Trust and ProFund Advisors LLC dated May 1, 2013 (11) | |||
(xv) |
Confidentiality Amendment to ProFunds Participation Agreement among Western Reserve, ProFunds, Access One Trust and ProFunds Advisors LLC dated February 22, 2012 (9) | |||
(xvi) |
Participation Agreement between AllianceBernstein Variable Products Series Fund, Inc. and TPLIC (formerly, Monumental Life) dated August 2, 2000 (12) | |||
(xvii) |
Amendment to Participation Agreement Among AllianceBernstein Variable Products Series Fund, Inc. and TPLIC dated May 9, 2008 (12) | |||
(xviii) |
Amendment No. 2 to Participation Agreement between AllianceBernstein Variable Products Series Fund, Inc. and TPLIC dated April 25, 2013 (13) | |||
(xix) |
Amendment No. 3 to Participation Agreement between AllianceBernstein Variable Products Series Fund, Inc. and TPLIC dated April 30, 2014 (14) | |||
(xx) |
Amendment No. 4 to Participation Agreement between AllianceBernstein Variable Products Series Fund, Inc. and TPLIC dated October 1, 2014 (15) | |||
(xxi) |
Participation Agreement Among Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc., Western Reserve Life Assurance Co. of Ohio and Transamerica Capital, Inc. dated November 10, 2008 (8) | |||
(xxii) |
Amendment No. 1 to Participation Agreement Among Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc., Western Reserve Life Assurance Co. of Ohio and Transamerica Capital, Inc. dated May 1, 2009 (8) | |||
(xxiii) |
Amendment No. 2 to Participation Agreement Among Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc., Western Reserve Life Assurance Co. of Ohio and Transamerica Capital, Inc. dated October 1, 2010 (10) | |||
(xxiv) |
Amendment No. 3 to Participation Agreement Among Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc., Western Reserve Life Assurance Co. of Ohio and Transamerica Capital, Inc. dated October 31, 2011 (9) | |||
(xxv) |
Amendment to Participation Agreement among Franklin Templeton Variable Insurance Products Trust. Franklin/Templeton Distributors, Inc., Western Reserve Life Assurance Co. of Ohio and Transamerica Capital, Inc. dated January 15, 2013 (11) | |||
(xxvi) |
Addendum to Participation Agreement among Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc., Western Reserve and Transamerica Capital, Inc. dated May 1, 2011 (10) | |||
(i) |
Not Applicable | |||
(j) |
Not Applicable | |||
(k) |
Legal Opinion | |||
(i) |
Legal Opinion and Consent of Arthur D. Woods, Esq. (17) | |||
(l) |
Actuarial Opinion | |||
(i) |
Not Applicable | |||
(m) |
Sample Hypothetical Illustration (4) | |||
(n) |
Other Opinions: | |||
(i) |
Written Consent of Ernst & Young LLP (17) | |||
(o) |
Not Applicable | |||
(p) |
Not Applicable | |||
(q) |
Redeemability Exemption | |||
(i) |
Memorandum describing issuance, transfer and redemption procedures (17) | |||
(r) |
Powers of Attorney for: (15) | |||
(i) |
Mark W. Mullin | |||
(ii) |
Arthur C. Schneider | |||
(iii) |
Brenda K. Clancy | |||
(iv) |
Jason Orlandi | |||
(v) |
Robert J. Kontz | |||
(vi) |
C. Michiel van Katjiwk | |||
(vii) |
Eric J. Martin | |||
(viii) |
Scott W. Ham |
(1) | This exhibit was previously filed on the Initial Registration Statement to Form S-6 Registration Statement dated March 14, 1997 (File No. 333-23359) and is incorporated herein by reference. |
(2) | This exhibit was previously filed on Post-Effective Amendment No. 16 to Form S-6 Registration Statement dated April 21, 1998 (File No. 33-31140) and is incorporated herein by reference. |
(3) | This exhibit was previously filed on Pre-Effective Amendment No. 1 to Form N-6 Registration Statement dated January 31, 2003 (File No. 333-100993) and is incorporated herein by reference. |
(4) | This exhibit was previously filed on Post-Effective Amendment No. 10 to Form N-6 Registration Statement dated April 26, 2004 (File No. 333-23359) and is incorporated herein by reference. |
(5) | This exhibit was previously filed on Pre-Effective Amendment No. 1 to Form N-6 Registration Statement dated October 16, 2007 (File 333-144117) and is incorporated herein by reference. |
(6) | This exhibit was previously filed on the Initial Registrations Statement to Form N-6 Registration Statement dated June 14, 2006 (File No. 333-135005) and is incorporated herein by reference. |
(7) | This exhibit was previously filed on Post-Effective Amendment No. 6 to Form N-6 Registration Statement dated April 14, 2008 (File No. 333-110315) and is incorporated herein by reference. |
(8) | This exhibit was previously filed on Post-Effective Amendment No. 6 to Form N-6 Registration Statement dated April 27, 2009 (File No. 333-135005) and is incorporated herein by reference. |
(9) | This exhibit previously filed on Post-Effective amendment No. 16 to Form N-6 Registration Statement dated April 18, 2012 (File No. 333-107705) and is incorporated herein by reference. |
(10) | This exhibit previously filed on Post-Effective amendment No. 15 to Form N-6 Registration Statement dated April 22, 2013 (File No. 333-110315) and is incorporated herein by reference. |
(11) | This exhibit previously filed on Post-Effective amendment No. 16 to Form N-6 Registration Statement dated April 29, 2014 (File No. 333-110315) and is incorporated herein by reference. |
(12) | This exhibit was previously filed on Post-Effective amendment No. 5 to Form N-4 Registration Statement dated April 29, 2009 (File No. 333-146323) and is incorporated herein by reference. |
(13) | This exhibit was previously filed on Post-Effective amendment No. 9 to Form N-4 Registration Statement dated April 25, 2013 (File No. 333-146323) and is incorporated herein by reference. |
(14) | This exhibit was previously filed on Post-Effective amendment No. 10 to Form N-4 Registration Statement dated April 30, 2014 (File No. 333-146323) and is incorporated herein by reference. |
(15) | This exhibit was previously filed on the Initial Registration Statement dated October 1, 2014 (File No. 333-199047) and is incorporated herein by reference. |
(16) | Incorporated herein by reference to initial filing to Form N-4 Registration Statement (File 333-138040) filed on October 17, 2006. |
(17) | Filed herewith. |
Item 27. Directors and Officers of the Depositor
Name | Principal Business Address |
Position and Offices with Depositor | ||
Mark W. Mullin | (2) | Director | ||
Brenda K. Clancy | (1) | Director, Chairman of the Board, Chief Executive Officer and President | ||
Arthur C. Schneider | (1) | Director, Senior Vice President and Chief Tax Officer | ||
Robert J. Kontz | (1) | Director and Vice President | ||
Eric J. Martin | (1) | Senior Vice President and Corporate Controller | ||
C. Michiel van Katwijk | (1) | Director, Chief Financial Officer, Senior Vice President and Treasurer | ||
Scott W. Ham | (2) | Director and Division President- Life & Protection | ||
Jason Orlandi | (1) | Director, Senior Vice President, Secretary and General Counsel |
(1) | 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499-0001 |
(2) | Two East Chase St., Baltimore, MD 21202 |
Item 28. Persons Controlled or Under Common Control with the Depositor or Registrant
Name |
Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
25 East 38th Street, LLC |
Delaware | Sole Member: Yarra Rapids, LLC | Real estate investments | |||
239 West 20th Street, LLC |
Delaware | Sole Member: Yarra Rapids, LLC | Real estate investments | |||
313 East 95th Street, LLC |
Delaware | Sole Member: Yarra Rapids, LLC | Real estate investments | |||
319 East 95th Street, LLC |
Delaware | Sole Member: Yarra Rapids, LLC | Real estate investments | |||
44764 Yukon Inc. |
Canada | 100% Creditor Resources, Inc. | Holding company | |||
AEGON Alliances, Inc. |
Virginia | 100% Commonwealth General Corporation | Insurance company marketing support | |||
AEGON Asset Management Services, Inc. |
Delaware | 100% AUSA Holding Company | Registered investment advisor | |||
AEGON Assignment Corporation |
Illinois | 100% AEGON Financial Services Group, Inc. | Administrator of structured settlements | |||
AEGON Assignment Corporation of Kentucky |
Kentucky | 100% AEGON Financial Services Group, Inc. | Administrator of structured settlements | |||
AEGON Canada ULC |
Canada | AEGON Canada Holding B.V. owns 174,588,712 shares of Common Stock; 1,500 shares of Series II Preferred stock; 2 shares of Series III Preferred stock. TIHI Canada Holding, LLC owns 1,441,941.26 shares of Class B - Series I Preferred stock. | Holding company | |||
AEGON Capital Management Inc. |
Canada | 100% AEGON Asset Management (Canada) B.V. | Portfolio management company/investment advisor | |||
AEGON Direct & Affinity Marketing Services Australia Pty Limited |
Australia | 100% Transamerica Direct Marketing Asia Pacific Pty Ltd. | Marketing/operations company | |||
AEGON Direct & Affinity Marketing Services Co., Ltd. |
Japan | 100% AEGON DMS Holding B.V. | Marketing company | |||
AEGON Direct & Affinity Marketing Services Limited |
Hong Kong | 100% AEGON DMS Holding B.V. | Provide consulting services ancillary to the marketing of insurance products overseas. | |||
AEGON Direct & Affinity Marketing Services (Thailand) Limited |
Thailand | 97% Transamerica International Direct Marketing Consultants, LLC; remaining 3% held by various AEGON employees | Marketing of insurance products in Thailand | |||
AEGON Direct Marketing Services, Inc. |
Maryland | Monumental Life Insurance Company owns 103,324 shares; Commonwealth General Corporation owns 37,161 shares | Marketing company | |||
AEGON Direct Marketing Services Europe Ltd. |
United Kingdom | 100% Cornerstone International Holdings, Ltd. | Marketing |
Name | Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
AEGON Direct Marketing Services Insurance Broker (HK) Limited | Hong Kong | 100% AEGON Direct Marketing Services Hong Kong Limited | Brokerage company | |||
AEGON Direct Marketing Services International, Inc. | Maryland | 100% AUSA Holding Company | Marketing arm for sale of mass marketed insurance coverage | |||
AEGON Direct Marketing Services Korea Co., Ltd. | Korea | 100% AEGON DMS Holding B.V. | Provide consulting services ancillary to the marketing of insurance products overseas. | |||
AEGON Direct Marketing Services Mexico, S.A. de C.V. | Mexico | 100% AEGON DMS Holding B.V. | Provide management advisory and technical consultancy services. | |||
AEGON Direct Marketing Services Mexico Servicios, S.A. de C.V. | Mexico | 100% AEGON DMS Holding B.V. | Provide marketing, trading, telemarketing and advertising services in favor of any third party, particularly in favor of insurance and reinsurance companies. | |||
AEGON Direct Marketing Services, Inc. | Taiwan | 100% AEGON DMS Holding B.V. | Authorized business: Enterprise management consultancy, credit investigation services, to engage in business not prohibited or restricted under any law of R.O.C., except business requiring special permission of government. | |||
AEGON Financial Services Group, Inc. | Minnesota | 100% Transamerica Life Insurance Company | Marketing | |||
AEGON Fund Management Inc. | Canada | 100% AEGON Asset Management (Canada) B.V. | Mutual fund manager | |||
AEGON Funding Company, LLC. | Delaware | 100% AEGON USA, LLC | Issue debt securities-net proceeds used to make loans to affiliates | |||
AEGON Institutional Markets, Inc. | Delaware | 100% Commonwealth General Corporation | Provider of investment, marketing and administrative services to insurance companies | |||
AEGON Life Insurance Agency Inc. | Taiwan | 100% AEGON Direct Marketing Services, Inc. (Taiwan Domiciled) | Life insurance | |||
AEGON Managed Enhanced Cash, LLC | Delaware | Members: Transamerica Life Insurance Company (91.2389%); Monumental Life Insurance Company (8.7611%) | Investment vehicle for securities lending cash collateral | |||
AEGON Management Company | Indiana | 100% AEGON U.S. Holding Corporation | Holding company | |||
AEGON N.V. | Netherlands | 22.446% of Vereniging AEGON Netherlands Membership Association | Holding company | |||
AEGON Structured Settlements, Inc. | Kentucky | 100% Commonwealth General Corporation | Administers structured settlements of plaintiffs physical injury claims against property and casualty insurance companies. |
Name | Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
AEGON U.S. Holding Corporation | Delaware | 100% Transamerica Corporation | Holding company | |||
AEGON USA Asset Management Holding, LLC | Iowa | 100% AUSA Holding Company | Holding company | |||
AEGON USA Investment Management, LLC | Iowa | 100% AEGON USA Asset Management Holding, LLC | Investment advisor | |||
AEGON USA Real Estate Services, Inc. | Delaware | 100% AEGON USA Realty Advisors, Inc. | Real estate and mortgage holding company | |||
AEGON USA Realty Advisors, LLC | Iowa | Sole Member - AEGON USA Asset Management Holding, LLC | Administrative and investment services | |||
AEGON USA Realty Advisors of California, Inc. | Iowa | 100% AEGON USA Realty Advisors, Inc. | Investments | |||
AEGON USA, LLC | Iowa | 100% AEGON U.S. Holding Corporation | Holding company | |||
AFSG Securities Corporation | Pennsylvania | 100% Commonwealth General Corporation | Inactive | |||
ALH Properties Eight LLC | Delaware | 100% FGH USA LLC | Real estate | |||
ALH Properties Eleven LLC | Delaware | 100% FGH USA LLC | Real estate | |||
ALH Properties Four LLC | Delaware | 100% FGH USA LLC | Real estate | |||
ALH Properties Nine LLC | Delaware | 100% FGH USA LLC | Real estate | |||
ALH Properties Seven LLC | Delaware | 100% FGH USA LLC | Real estate | |||
ALH Properties Seventeen LLC | Delaware | 100% FGH USA LLC | Real estate | |||
ALH Properties Sixteen LLC | Delaware | 100% FGH USA LLC | Real estate | |||
ALH Properties Ten LLC | Delaware | 100% FGH USA LLC | Real estate | |||
ALH Properties Twelve LLC | Delaware | 100% FGH USA LLC | Real estate | |||
ALH Properties Two LLC | Delaware | 100% FGH USA LLC | Real estate | |||
AMTAX HOLDINGS 308, LLC | Ohio | TAHP Fund II, LLC - 100% member; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 347, LLC | Ohio | TAHP Fund II, LLC - 100% member; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 388, LLC | Ohio | TAHP Fund II, LLC - 100% member; TAH Pentagon Funds LLC - non-owner manager | Affordable housing |
Name | Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
AMTAX HOLDINGS 483, LLC | Ohio | TAHP Fund I, LLC - 100% MEMBER; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 546, LLC | Ohio | TAHP Fund II, LLC - 100% member; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 559, LLC | Ohio | TAHP Fund I, LLC - 100% MEMBER; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 561, LLC | Ohio | TAHP Fund VII, LLC - 100% member; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 567, LLC | Ohio | TAHP Fund I, LLC - 100% MEMBER; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 588, LLC | Ohio | TAHP Fund I, LLC - 100% MEMBER; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 613, LLC | Ohio | Garnet LIHTC Fund VII, LLC - 99% member; Cupples State LIHTC Investors, LLC - 1% member; TAH Pentagon Funds, LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 639, LLC | Ohio | TAHP Fund I, LLC - 100% MEMBER; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 649, LLC | Ohio | TAHP Fund I, LLC - 100% MEMBER; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 672, LLC | Ohio | TAHP Fund I, LLC - 100% MEMBER; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
AMTAX HOLDINGS 713, LLC | Ohio | TAHP Fund II, LLC - 100% member; TAH Pentagon Funds LLC - non-owner manager | Affordable housing | |||
Apollo Housing Capital Arrowhead Gardens, LLC | Delaware | Garnet LIHTC Fund XXXV, LLC - sole Member | Affordable housing |
Name | Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Asia Investment Holding Limited | Hong Kong | 99% Transamerica Life Insurance Company | Holding company | |||
AUSA Holding Company | Maryland | 100% AEGON USA, LLC | Holding company | |||
AUSA Properties, Inc. | Iowa | 100% AUSA Holding Company | Own, operate and manage real estate | |||
AXA Equitable AgriFinance, LLC | Delaware | Members: AEGON USA Realty Advisors, LLC (50%); AXA Equitable Life Insurance Company, a non-affiliate of AEGON (50%) | Agriculturally-based real estate advisory services | |||
Bay Area Community Investments I, LP | California | Partners: 69.995% Transamerica Life Insurance Company; 29.995% Monumental Life Insurance Company; 0.01% Transamerica Affordable housing, Inc. | Investments in low income housing tax credit properties | |||
Bay State Community Investments I, LLC | Delaware | 100% Monumental Life Insurance Company | Investments in low income housing tax credit properties | |||
Bay State Community Investments II, LLC | Delaware | 100% Monumental Life Insurance Company | Investments in low income housing tax credit properties | |||
Canadian Premier Life Insurance Company | Canada | 100% Transamerica Life Canada | Insurance company | |||
CBC Insurance Revenue Securitization, LLC | Delaware | 100% Clark Consulting, LLC | Special purpose | |||
Cedar Funding, Ltd. | Cayman Islands | 100% Transamerica Life Insurance Company | Investments | |||
Clark, LLC | Delaware | Sole Member - Diversified Retirement Corporation | Holding company | |||
Clark Consulting, LLC | Delaware | 100% Clark, LLC | Financial consulting firm | |||
Clark Investment Strategies, Inc. | Delaware | 100% Clark Consulting, LLC | Registered investment advisor | |||
Clark Securities, Inc. | California | 100% Clark Consulting, LLC | Broker-Dealer | |||
Commonwealth General Corporation | Delaware | 100% AEGONUSA, LLC | Holding company | |||
Consumer Membership Services Canada Inc. | Canada | 100% AEGON Canada ULC | Marketing of credit card protection membership services in Canada | |||
Cornerstone International Holdings Ltd. | UK | 100% AEGON DMS Holding B.V. | Holding company | |||
CRG Insurance Agency, Inc. | California | 100% Clark Consulting, Inc. | Insurance agency | |||
Creditor Resources, Inc. | Michigan | 100% AUSA Holding Company | Credit insurance |
Name | Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
CRI Canada Ltd. | Canada | 44764 Yukon Inc. owns all preferred shares of stock; various non-AEGON entities/investors own common shares of stock | Holding company | |||
CRI Solutions Inc. | Maryland | 100% Creditor Resources, Inc. | Sales of reinsurance and credit insurance | |||
Cupples State LIHTC Investors, LLC | Delaware | 100% Garnet LIHTC Fund VIII, LLC | Investments | |||
Erfahrungsschatz GmbH | Germany | 100% Cornerstone International Holdings, Ltd. | Marketing/membership | |||
FD TLIC, Limited Liability Company | New York | 100% Transamerica Life Insurance Company | Broadway production | |||
FD TLIC Ltd. | United Kingdom | 100% FD TLIC, LLC | Theatre production | |||
FGH Realty Credit LLC | Delaware | 100% FGH USA, LLC | Real estate | |||
FGH USA LLC | Delaware | 100% RCC North America LLC | Real estate | |||
FGP 90 West Street LLC | Delaware | 100% FGH USA LLC | Real estate | |||
FGP West Mezzanine LLC | Delaware | 100% FGH USA LLC | Real estate | |||
FGP West Street LLC | Delaware | 100% FGP West Mezzanine LLC | Real estate | |||
FGP West Street Two LLC | Delaware | 100% FGH USA LLC | Real estate | |||
Fifth FGP LLC | Delaware | 100% FGH USA LLC | Real estate | |||
Financial Planning Services, Inc. | District of Columbia | 100% Commonwealth General Corporation | Special-purpose subsidiary | |||
First FGP LLC | Delaware | 100% FGH USA LLC | Real estate | |||
Fong LCS Associates, LLC | Delaware | 100% Investors Warranty of America, Inc. | Investments | |||
Fourth FGP LLC | Delaware | 100% FGH USA LLC | Real estate | |||
Garnet Assurance Corporation | Kentucky | 100%Transamerica Life Insurance Company | Investments | |||
Garnet Assurance Corporation II | Iowa | 100% Commonwealth General Corporation | Business investments | |||
Garnet Assurance Corporation III | Iowa | 100% Transamerica Life Insurance Company | Business investments | |||
Garnet Community Investments, LLC | Delaware | 100% Monumental Life Insurance Company | Investments |
Name | Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Garnet Community Investments II, LLC | Delaware | 100% Monumental Life Insurance Company | Securities | |||
Garnet Community Investments III, LLC | Delaware | 100% Transamerica Life Insurance Company | Business investments | |||
Garnet Community Investments IV, LLC | Delaware | 100% Monumental Life Insurance Company | Investments | |||
Garnet Community Investments V, LLC | Delaware | 100% Monumental Life Insurance Company | Investments | |||
Garnet Community Investments VI, LLC | Delaware | 100% Monumental Life Insurance Company | Investments | |||
Garnet Community Investments VII, LLC | Delaware | 100% Monumental Life Insurance Company | Investments | |||
Garnet Community Investments VIII, LLC | Delaware | 100% Monumental Life Insurance Company | Investments | |||
Garnet Community Investments IX, LLC | Delaware | 100% Monumental Life Insurance Company | Investments | |||
Garnet Community Investments X, LLC | Delaware | 100% Monumental Life Insurance Company | Investments | |||
Garnet Community Investments XI, LLC | Delaware | 100% Monumental Life Insurance Company | Investments | |||
Garnet Community Investments XII, LLC | Delaware | 100% Monumental Life Insurance Company | Investments | |||
Garnet Community Investments XVIII, LLC | Delaware | 100% Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XX, LLC | Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXIV, LLC | Delaware | Sole Member - Transamerica Life Insurance Company | Real estate investments | |||
Garnet Community Investments XXV, LLC | Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investment XXVI, LLC | Delaware | 100% Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXVII, LLC | Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investment XXVIII, LLC | Delaware | Sole Member - Transamerica Life Insurance Company | Investments |
Name | Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Garnet Community Investments XXIX, LLC | Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXX, LLC | Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXXI, LLC | Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXXII, LLC | Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXXIII, LLC | Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXXIV, LLC | Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXXV, LLC | Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXXVI, LLC | Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXXVII, LLC | Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXXVIII, LLC | Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XXXIX, LLC | Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XL, LLC | Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XLI, LLC | Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet Community Investments XLII, LLC | Delaware | Sole Member - Transamerica Life Insurance Company | Investments | |||
Garnet LIHTC Fund II, LLC | Delaware | Members: Garnet Community Investments II, LLC (99.99%); Transamerica Life Insurance Company (0.01%) | Investments | |||
Garnet LIHTC Fund III, LLC | Delaware | Members: Garnet Community Investments III, LLC (0.01%); Jefferson-Pilot Life Insurance Company, a non-AEGON affiliate (99.99%) | Investments |
Name | Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Garnet LIHTC Fund IV, LLC | Delaware | Members: Garnet Community Investments IV, LLC (0.01%); Goldenrod Asset Management, Inc., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund V, LLC | Delaware | Members: Garnet Community Investments V, LLC (0.01%); Lease Plan North America, Inc., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund VI, LLC | Delaware | Members: Garnet Community Investments VI, LLC (0.01%); Pydna Corporation, a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund VII, LLC | Delaware | Members: Garnet Community Investments VII, LLC (0.01%); J.P. Morgan Chase Bank, N.A., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund VIII, LLC | Delaware | Members: Garnet Community Investments VIII, LLC (0.01%); J.P. Morgan Chase Bank, N.A., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund IX, LLC | Delaware | Members: Garnet Community Investments IX, LLC (0.01%); Bank of America, N.A., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund X, LLC | Delaware | Members: Garnet Community Investments X, LLC (0.01%); Goldenrod Asset Management, a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XI, LLC | Delaware | Members: Garnet Community Investments XI, LLC (0.01%); NorLease, Inc., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XII, LLC | Delaware | Garnet Community Investments XII, LLC (.01%); and the following non-AEGON affiliates: Bank of America, N.A. (73.39%); J.P. Morgan Chase Bank, N.A. (13.30%); NorLease, Inc. (13.30%) | Investments | |||
Garnet LIHTC Fund XII-A, LLC | Delaware | Garnet Community Investments XII, LLC (0.01%); Bank of America, N.A., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XII-B, LLC | Delaware | Garnet Community Investments XII, LLC (0.01%); J.P. Morgan Chase Bank, N.A., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XII-C, LLC | Delaware | Garnet Community Investments XII, LLC (.01%); NorLease, Inc., a non-AEGON affiliate (99.99%) | Investments |
Name | Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Garnet LIHTC Fund XIII, LLC | Delaware | Garnet Community Investments XII, LLC (.01%); and the following non-AEGON affiliates: Bank of America, N.A. (73.39%); J.P. Morgan Chase Bank, N.A. (13.30%); NorLease, Inc. (13.30%) | Investments | |||
Garnet LIHTC Fund XIII-A, LLC | Delaware | Garnet Community Investments XII, LLC (.01%); J.P. Morgan Chase Bank, N.A., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XIII-B, LLC | Delaware | Garnet Community Investments XII, LLC (.01%); Norlease, Inc., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XIV, LLC | Delaware | 0.01% Garnet Community Investments, LLC; 49.995% Wells Fargo Bank, N.A.; and 49.995% Goldenrod Asset Management, Inc. | Investments | |||
Garnet LIHTC Fund XV, LLC | Delaware | Members: Garnet Community Investments, LLC (0.01%); Bank of America, N.A., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XVI, LLC | Delaware | Members: Garnet Community Investments, LLC (0.01%); FNBC Leasing Corporation, a non-AEGON entity (99.99%) | Investments | |||
Garnet LIHTC Fund XVII, LLC | Delaware | Members: Garnet Community Investments, LLC (0.01%); ING USA Annuity and Life Insurance company, a non-affiliate of AEGON (12.999%), and ReliaStar Life Insurance Company, a non-affiliate of AEGON (86.991%). | Investments | |||
Garnet LIHTC Fund XVIII, LLC | Delaware | Members: Garnet Community Investments XVIII, LLC (0.01%); Verizon Capital Corp., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XIX, LLC | Delaware | Members: Garnet Community Investments, LLC (0.01%); Bank of America, N.A., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XX, LLC | Delaware | Sole Member - Garnet Community Investments XX, LLC | Investments | |||
Garnet LIHTC Fund XXI, LLC | Delaware | 100% Garnet Community Investments, LLC | Investments |
Name | Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Garnet LIHTC Fund XXII, LLC | Delaware | Members: Garnet Community Investments, LLC (0.01%); Norlease, Inc., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XXIII, LLC | Delaware | Members: Garnet Community Investments, LLC (0.01%); Idacorp Financial Services, Inc., a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XXIV, LLC | Delaware | Members: Garnet Community Investments XXIV, LLC (0.01% as Managing Member); Transamerica Life Insurance Company (21.26%); non-affiliates of AEGON: New York Life Insurance Company (25.51%), New York Life Insurance and Annuity Corporation (21.73%) and Principal Life Insurance Company (31.49%) | Investments | |||
Garnet LIHTC Fund XXV, LLC | Delaware | Members: Garnet Community Investment XXV, LLC (0.01%); Garnet LIHTC Fund XXVIII LLC (1%); non-affiliates of AEGON: Mt. Hamilton Fund, LLC (97.99%); Google Affordable housing I LLC (1%) | Investments | |||
Garnet LIHTC Fund XXVI, LLC | Delaware | Members: Garnet Community Investments XXVI, LLC (0.01%); American Income Life Insurance Company, a non-affiliate of AEGON (99.99%) | Investments | |||
Garnet LIHTC Fund XXVII, LLC | Delaware | Members: Garnet Community Investments XXVII, LLC (0.01%); Transamerica Life Insurance Company (16.7045%); non-affiliates of AEGON: Aetna Life Insurance Company (30.2856%); New York Life Insurance Company (22.7142%); ProAssurance Casualty Company (3.6343%); ProAssurance Indemnity Company (8.4800%); State Street Bank and Trust Company (18.1714%) | Investments | |||
Garnet LIHTC Fund XXVIII, LLC | Delaware | Members: Garnet Community Investments XXVIII LLC (0.01%); non-affiliates of AEGON: USAA Casualty Insurance Company (17.998%); USAA General Indemnity Company (19.998%); USAA Life Insurance Company (3.999%); United Services Automobile Association (57.994%) | Real estate investments | |||
Garnet LIHTC Fund XXIX, LLC | Delaware | Members: Garnet Community Investments XXIX, LLC (.01%); non-affiliate of AEGON: Bank of America, N.A. (99.99%) | Investments |
Name | Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Garnet LIHTC Fund XXX, LLC | Delaware | Garnet Community Investments XXX, LLC (0.01%); non-affiliate of AEGON, New York Life Insurance Company (99.99%) | Investments | |||
Garnet LIHTC Fund XXXI, LLC | Delaware | Members: Garnet Community Investments XXXI, LLC (0.1%); non-affiliates of AEGON: Thunderbolt Peak Fund, LLC (98.99%); Google Affordable housing I, LLC (1%) | Investments | |||
Garnet LIHTC Fund XXXII, LLC | Delaware | Sole Member: Garnet Community Investments XXXVII, LLC. | Investments | |||
Garnet LIHTC Fund XXXIII, LLC | Delaware | Members: Garnet Community Investment XXXIII, LLC (0.01%); non-affiliate of AEGON, NorLease, Inc. (99.99%) | Investments | |||
Garnet LIHTC Fund XXXIV, LLC | Delaware | Members: non-AEGON affiliate, U.S. Bancorp Community Development Corporation (99.99%); Garnet Community Investments XXXIV, LLC (.01%) | Investments | |||
Garnet LIHTC Fund XXXV, LLC | Delaware | Members: Garnet Community Investment XXXV, LLC (0.01%); non-affiliate of AEGON, Microsoft Corporation (99.99%) | Investments | |||
Garnet LIHTC Fund XXXVI, LLC | Delaware | Members: Garnet Community Investments XXXVI, LLC (1%) as managing member; JPM Capital Corporation, a non-AEGON affiliate (99%) as investor member | Investments | |||
Garnet LIHTC Fund XXXVII, LLC | Delaware | Members: Garnet Community Investments XXXVII, LLC (.01%); LIH Realty Corporation, a non-AEGON affiliate (99.99%) | Investments | |||
Garnet LIHTC Fund XXXVIII, LLC | Delaware | Sole Member - Garnet Community Investments XXXVIII, LLC | Investments | |||
Garnet LIHTC Fund XXXIX, LLC | Delaware | Sole Member - Garnet Community Investments XXXIX, LLC | Investments | |||
Garnet LIHTC Fund XL, LLC | Delaware | Sole Member - Garnet Community Investments XL, LLC | Investments | |||
Garnet LIHTC Fund XLI, LLC | Delaware | Sole Member - Garnet Community Investments XL, LLC | Investments | |||
Garnet LIHTC Fund XLII, LLC | Delaware | Sole Member - Garnet Community Investments XL, LLC | Investments | |||
Global Preferred Re Limited | Bermuda | 100% AEGON USA, LLC | Reinsurance | |||
Harbor View Re Corp. | Hawaii | 100% Commonwealth General Corporation | Captive insurance company | |||
Horizons Acquisition 5, LLC | Florida | Sole Member - PSL Acquisitions Operating, LLC | Development company |
Name | Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Horizons St. Lucie Development, LLC | Florida | Sole Member - PSL Acquisitions Operating, LLC | Development company | |||
Imani Fe, LP | California | Partners: Garnet LIHTC Fund XIV, LL (99.99% investor limited partner); Transamerica Affordable housing, Inc. (non-owner manager); non-affiliates of AEGON: ABS Imani Fe, LLC (.0034% class A limited partner); Central Valley Coalition for Affordable housing (.0033% co-managing general partner); Grant Housing and Economic Development Corporation (.0033% managing partner) | Affordable housing | |||
InterSecurities Insurance Agency, Inc. | California | 100% Western Reserve Life Assurance Co. of Ohio | Insurance agency | |||
Interstate North Office Park GP, LLC | Delaware | 100% Interstate North Office Park Owner, LLC | Investments | |||
Interstate North Office Park, LP | Delaware | 100% Interstate North Office Park Owner, LLC | Investments | |||
Interstate North Office Park Owner, LLC | Delaware | 100% Investors Warranty of America, Inc. | Investments | |||
Interstate North Office Park (Land) GP, LLC | Delaware | 100% Interstate North Office Park Owner, LLC | Investments | |||
Interstate North Office Park (Land) LP | Delaware | 100% Interstate North Office Park Owner, LLC | Investments | |||
Investors Warranty of America, Inc. | Iowa | 100% AUSA Holding Company | Leases business equipment | |||
LCS Associates, LLC | Delaware | 100% Investors Warranty of America, Inc. | Investments | |||
Legacy General Insurance Company | Canada | 100% AEGON Canada ULC | Insurance company | |||
Life Investors Alliance LLC | Delaware | Sole Member - Transamerica Life Insurance Company | Purchase, own, and hold the equity interest of other entities | |||
LIICA Holdings, LLC | Delaware | Sole Member: Transamerica Life Insurance Company | To form and capitalize LIICA Re I, Inc. | |||
LIICA Re I, Inc. | Vermont | 100% LIICA Holdings, LLC | Captive insurance company | |||
LIICA Re II, Inc. | Vermont | 100% Transamerica Life Insurance Company | Captive insurance company | |||
Massachusetts Fidelity Trust Company | Iowa | 100% AUSA Holding Company | Trust company |
Name | Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
McDonald Corporate Tax Credit Fund IV Limited Partnership | Delaware | Partners: Monumental Life Insurance Company - 99.9% General Partner; TAH-McD IV, LLC - 0.10% General Partner | Tax credit fund | |||
MLIC Re I, Inc. | Vermont | 100% Stonebridge Life Insurance Company | Captive insurance company | |||
Money Services, Inc. | Delaware | 100% AUSA Holding Company | Provides financial counseling for employees and agents of affiliated companies | |||
Monumental Financial Services, Inc. | Maryland | 100% AEGON USA, LLC | DBA in the State of West Virginia for United Financial Services, Inc. | |||
Monumental General Administrators, Inc. | Maryland | 100% AUSA Holding Company | Provides management services to unaffiliated third party administrator | |||
nVISION Financial, Inc. | Iowa | 100% AUSA Holding Company | Special-purpose subsidiary | |||
New Markets Community Investment Fund, LLC | Iowa | 50% AEGON Institutional Markets, Inc.; 50% AEGON USA Realty Advisors, Inc. | Community development entity | |||
Oncor Insurance Services, LLC | Iowa | Sole Member - Life Investors Financial Group, Inc. | Direct sales of term life insurance | |||
Pearl Holdings, Inc. I | Delaware | 100% AEGON USA Asset Management Holding, LLC | Holding company | |||
Pearl Holdings, Inc. II | Delaware | 100% AEGON USA Asset Management Holding, LLC | Holding company | |||
Peoples Benefit Services, LLC | Pennsylvania | Sole Member - Stonebridge Life Insurance Company | Special-purpose subsidiary | |||
Pine Falls Re, Inc. | Vermont | 100% Stonebridge Life Insurance Company | Captive insurance company | |||
Primus Guaranty, Ltd. | Bermuda | Members: Transamerica Life Insurance Company (20% 13.1%) and non-affiliates of AEGON and the public holders own the remainder. | Provides protection from default risk of investment grade corporate and sovereign issues of financial obligations. | |||
PSL Acquisitions Operating, LLC | Iowa | Sole Member: Investors Warranty of America, Inc. | Owner of Core subsidiary entities | |||
Pyramid Insurance Company, Ltd. | Hawaii | 100% Transamerica Corporation | Property & Casualty Insurance | |||
RCC North America LLC | Delaware | 100% AEGON USA, LLC | Real estate |
Name | Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Real Estate Alternatives Portfolio 1 LLC | Delaware | Members: Transamerica Life Insurance Company (90.96%); Monumental Life Insurance Company (6.30%); Transamerica Financial Life Insurance Company (2.74%). Manager: AEGON USA Realty Advisors, Inc. | Real estate alternatives investment | |||
Real Estate Alternatives Portfolio 2 LLC | Delaware | Members are: Transamerica Life Insurance Company (90.25%); Transamerica Financial Life Insurance Company (7.5%); Stonebridge Life Insurance Company (2.25%). Manager: AEGON USA Realty Advisors, Inc. | Real estate alternatives investment | |||
Real Estate Alternatives Portfolio 3 LLC | Delaware | Members are: Transamerica Life Insurance Company (73.4%); Monumental Life Insurance Company (25.6%); Stonebridge Life Insurance Company (1%). Manager: AEGON USA Realty Advisors, Inc. | Real estate alternatives investment | |||
Real Estate Alternatives Portfolio 3A, Inc. | Delaware | Members: Monumental Life Insurance Company (37%); Transamerica Financial Life Insurance Company (9.4%); Transamerica Life Insurance Company (52.6%); Stonebridge Life Insurance Company (1%) | Real estate alternatives investment | |||
Real Estate Alternatives Portfolio 4 HR, LLC | Delaware | Members are: Transamerica Life Insurance Company (64%); Monumental Life Insurance Company (32%); Transamerica Financial Life Insurance Company (4%). Manager: AEGON USA Realty Advisors, Inc. | Investment vehicle for alternative real estate investments that are established annually for our affiliated companies common investment | |||
Real Estate Alternatives Portfolio 4 MR, LLC | Delaware | Members are: Transamerica Life Insurance Company (64%); Monumental Life Insurance Company (32%); Transamerica Financial Life Insurance Company (4%). Manager: AEGON USA Realty Advisors, Inc. | Investment vehicle for alternative real estate investments that are established annually for our affiliated companies common investment |
Name | Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
River Ridge Insurance Company | Vermont | 100% AEGON Management Company | Captive insurance company | |||
SB Frazer Owner, LLC | Delaware | 100% Stonebridge Life Insurance Company | Investments | |||
Second FGP LLC | Delaware | 100% FGH USA LLC | Real estate | |||
Selient Inc. | Canada | 100% AEGON Canada ULC | Application service provider providing loan origination platforms to Canadian credit unions. | |||
Seventh FGP LLC | Delaware | 100% FGH USA LLC | Real estate | |||
Short Hills Management Company | New Jersey | 100% AEGON U.S. Holding Corporation | Dormant | |||
Southwest Equity Life Insurance Company | Arizona | Voting common stock is allocated 75% of total cumulative vote - AEGON USA, LLC. Participating Common stock (100% owned by non-AEGON shareholders) is allocated 25% of total cumulative vote. | Insurance | |||
St. Lucie West Development Company, LLC | Florida | Sole Member - PSL Acquisitions Operating, LLC | Development company | |||
Stonebridge Benefit Services, Inc. | Delaware | 100% Commonwealth General Corporation | Health discount plan | |||
Stonebridge International Insurance Ltd. | UK | 100% Cornerstone International Holdings Ltd. | General insurance company | |||
Stonebridge Life Insurance Company | Vermont | 100% Commonwealth General Corporation | Insurance company | |||
Stonebridge Reinsurance Company | Vermont | 100% Stonebridge Life Insurance Company | Captive insurance company | |||
TAH-MCD IV, LLC | Iowa | Sole Member - Transamerica Affordable housing, Inc. | Serve as the general partner for McDonald Corporate Tax Credit Fund IV Limited Partnership | |||
TAH Pentagon Funds, LLC | Iowa | Sole Member - Transamerica Affordable housing, Inc. | Serve as a general partner in a lower-tier tax credit entity | |||
TAHP Fund I, LLC | Delaware | Sole Member - Monumental Life Insurance Company | Real estate investments |
Name | Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
TAHP Fund II, LLC | Delaware | Sole Member - Garnet LIHTC Fund VIII, LLC | Low incoming housing tax credit | |||
TAHP Fund VII, LLC | Delaware | Investor Member: Garnet LIHTC Fund XIX, LLC | Real estate investments | |||
TCF Asset Management Corporation | Colorado | 100% TCFC Asset Holdings, Inc. | A depository for foreclosed real and personal property | |||
TCFC Air Holdings, Inc. | Delaware | 100% Transamerica Commercial Finance Corporation, I | Holding company | |||
TCFC Asset Holdings, Inc. | Delaware | 100% Transamerica Commercial Finance Corporation, I | Holding company | |||
The AEGON Trust Advisory Board: Mark W. Mullin, Alexander R. Wynaendts, and Craig D. Vermie | Delaware | 100% AEGON International B.V. | Voting Trust | |||
The RCC Group, Inc. | Delaware | 100% FGH USA LLC | Real estate | |||
THH Acquisitions, LLC | Iowa | Sole Member - Investors Warranty of America, Inc. | Acquirer of Core South Carolina mortgage loans from Investors Warranty of America, Inc. and holder of foreclosed real estate. | |||
TIHI Canada Holding, LLC | Iowa | Sole Member - Transamerica International Holdings, Inc. | Holding company | |||
TLIC Oakbrook Reinsurance, Inc. | Iowa | 100% Transamerica Life Insurance Company | Limited purpose subsidiary life insurance company | |||
TLIC Riverwood Reinsurance, Inc. | Iowa | 100% Transamerica Life Insurance Company | Limited purpose subsidiary life insurance company | |||
Tradition Development Company, LLC | Florida | Sole Member - PSL Acquisitions Operating, LLC | Development company | |||
Tradition Irrigation Company, LLC | Florida | Sole Member - PSL Acquisitions Operating, LLC | Irrigation company | |||
Tradition Land Company, LLC | Iowa | Sole Member: Investors Warranty of America, Inc. | Acquirer of Core Florida mortgage loans from Investors Warranty and holder of foreclosed real estate. | |||
Transamerica Accounts Holding Corporation | Delaware | 100% TCFC Asset Holdings, Inc. | Holding company | |||
Transamerica Advisors Life Insurance Company | Arkansas | 100% AEGON USA, LLC | Insurance company |
Name | Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Transamerica Affinity Marketing Corretora de Seguros Ltda. | Brazil | 749,000 quota shares owned by AEGON DMS Holding B.V.; 1 quota share owned by AEGON International B.V. | Brokerage company | |||
Transamerica Affinity Services, Inc. | Maryland | 100% AEGON Direct Marketing Services, Inc. | Marketing company | |||
Transamerica Affordable housing, Inc. | California | 100% Transamerica Realty Services, LLC | General partner LHTC Partnership | |||
Transamerica Agency Network, Inc. | Iowa | 100% AUSA Holding Company | Special purpose subsidiary | |||
Transamerica Annuity Service Corporation | New Mexico | 100% Transamerica International Holdings, Inc. | Performs services required for structured settlements | |||
Transamerica Asset Management, Inc. | Florida | Western Reserve Life Assurance Co. of Ohio owns 77%; AUSA Holding Co. owns 23%. | Fund advisor | |||
Transamerica Aviation LLC | Delaware | 100% TCFC Air Holdings, Inc. | Special purpose corporation | |||
Transamerica (Bermuda) Services Center, Ltd. | Bermuda | 100% AEGON International B.V. | Special purpose corporation | |||
Transamerica Capital, Inc. | California | 100% AUSA Holding Company | Broker/Dealer | |||
Transamerica Casualty Insurance Company | Ohio | 100% AEGON USA, LLC | Insurance company | |||
Transamerica Commercial Finance Corporation, I | Delaware | 100% Transamerica Finance Corporation | Holding company | |||
Transamerica Consumer Finance Holding Company | Delaware | 100% TCFC Asset Holdings, Inc. | Consumer finance holding company | |||
Transamerica Corporation | Delaware | 100% The AEGON Trust | Major interest in insurance and finance | |||
Transamerica Corporation | Oregon | 100% Transamerica Corporation | Holding company | |||
Transamerica Direct Marketing Asia Pacific Pty Ltd. | Australia | 100% AEGON DMS Holding B.V. | Holding company | |||
Transamerica Direct Marketing Consultants Private Limited | India | 99.95% AEGON DMS Holding B.V.; non-AEGON affiliate, Keshav Sunderraj owns .05% | Marketing consultant | |||
Transamerica Distribution Finance - Overseas, Inc. | Delaware | 100% TCFC Asset Holdings, Inc. | Commercial Finance | |||
Transamerica Finance Corporation | Delaware | 100% Transamerica Corporation | Commercial & Consumer Lending & equipment leasing | |||
Transamerica Financial Advisors, Inc. | Delaware | 1,000 shares owned by AUSA Holding Company; 209 shares owned by Transamerica International Holdings, Inc.; 729 shares owned by AEGON Asset Management Services, Inc. | Broker/Dealer |
Name | Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Transamerica Financial Life Insurance Company | New York | 87.40% AEGON USA, LLC; 12.60% Transamerica Life Insurance Company | Insurance | |||
Transamerica Fund Services, Inc. | Florida | Western Reserve Life Assurance Co. of Ohio owns 44%; AUSA Holding Company owns 56% | Mutual fund | |||
Transamerica Funding LP | U.K. | 99% Transamerica Leasing Holdings, Inc.; 1% Transamerica Commercial Finance Corporation, I | Intermodal leasing | |||
Transamerica Home Loan | California | 100% Transamerica Consumer Finance Holding Company | Consumer mortgages | |||
Transamerica Insurance Marketing Asia Pacific Pty Ltd. | Australia | 100% Transamerica Direct Marketing Asia Pacific Pty Ltd. | Insurance intermediary | |||
Transamerica International Direct Marketing Consultants, LLC | Maryland | 51% Hugh J. McAdorey; 49% AEGON Direct Marketing Services, Inc. | Provide consulting services ancillary to the marketing of insurance products overseas. | |||
Transamerica International Holdings, Inc. | Delaware | 100% AEGON USA, LLC | Holding company | |||
Transamerica International RE (Bermuda) Ltd. | Bermuda | 100% AEGON USA, LLC | Reinsurance | |||
Transamerica International Re Escritório de Representação no Brasil Ltd | Brazil | 95% Transamerica International Re(Bermuda) Ltd.; 5% Transamerica International Holdings, Inc. | Insurance and reinsurance consulting | |||
Transamerica Investment Management, LLC | Delaware | Sole Member - AEGON USA Asset Management Holding, LLC | Investment advisor | |||
Transamerica Investors Securities Corporation | Delaware | 100% Transamerica Retirement Solutions Corporation | Broker/Dealer | |||
Transamerica Leasing Holdings Inc. | Delaware | 100% Transamerica Finance Corporation | Holding company | |||
Transamerica Life Canada | Canada | 100% AEGON Canada ULC | Life insurance company | |||
Transamerica Life Insurance Company | Iowa | 676,190 shares Common Stock owned by Transamerica International Holdings, Inc.; 86,590 shares of Preferred Stock owned by Transamerica Corporation; 30,564 shares of Preferred Stock owned by AEGON USA, LLC | Insurance | |||
Transamerica Life (Bermuda) Ltd. | Bermuda | 100% Transamerica Life Insurance Company | Long-term life insurer in Bermuda - will primarily write fixed universal life and term insurance | |||
Transamerica Oakmont Corporation | California | 100% Transamerica International Holdings, Inc. | General partner retirement properties |
Name | Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Transamerica Oakmont Corporation | California | 100% Transamerica International Holdings, Inc. | General partner retirement properties | |||
Transamerica Pacific Insurance Company, Ltd. | Hawaii | 26,000 shares common stock owned by Commonwealth General Corporation; 1,000 shares of common stock owned by Transamerica International Holdings, Inc. | Life insurance | |||
Transamerica Premier Life Insurance Company | Iowa | 100% Commonwealth General Corporation | Insurance Company | |||
Transamerica Pyramid Properties LLC | Iowa | 100% Monumental Life Insurance Company | Realty limited liability company | |||
Transamerica Realty Investment Properties LLC | Delaware | 100% Monumental Life Insurance Company | Realty limited liability company | |||
Transamerica Realty Services, LLC | Delaware | AUSA Holding Company - sole Member | Real estate investments | |||
Transamerica Resources, Inc. | Maryland | 100% Monumental General Administrators, Inc. | Provides education and information regarding retirement and economic issues. | |||
Transamerica Retirement Advisors, Inc. | Delaware | 100% Transamerica Retirement Solutions Corporation | Investment advisor | |||
Transamerica Retirement Insurance Agency, Inc. | Delaware | 100% Transamerica Retirement Solutions Corporation | Conduct business as an insurance agency. | |||
Transamerica Retirement Solutions Corporation | Delaware | 100% AUSA Holding Company | Retirement plan services. | |||
Transamerica Securities Inc. | Canada | 100% World Financial Group Holding Company of Canada, Inc. | Mutual fund dealer | |||
Transamerica Small Business Capital, Inc. | Delaware | 100% TCFC Asset Holdings, Inc. | Holding company | |||
Transamerica Stable Value Solutions Inc. | Delaware | 100% Commonwealth General Corporation | Principle Business: Provides management services to the stable value division of AEGON insurers who issue synthetic GIC contracts. | |||
Transamerica Travel and Conference Services, LLC | Iowa | 100% Money Services, Inc. | Travel and conference services | |||
Transamerica Vendor Financial Services Corporation | Delaware | 100% TCFC Asset Holdings, Inc. | Provides commercial leasing | |||
Transamerica Ventures, LLC | Delaware | 100% AUSA Holding Company | Investments | |||
Transamerica Ventures Fund, LLC | Delaware | 100% AUSA Holding Company | Investments | |||
United Financial Services, Inc. | Maryland | 100% AEGON USA, LLC | General agency | |||
Universal Benefits, LLC | Iowa | 100% AUSA Holding Company | Third party administrator |
Name | Jurisdiction of Incorporation |
Percent of Voting Securities Owned |
Business | |||
Western Reserve Life Assurance Co. of Ohio | Ohio | 100% AEGON USA, LLC | Insurance | |||
WFG China Holdings, Inc. | Delaware | 100% World Financial Group, Inc. | Hold interest in Insurance Agency located in Peoples Republic of China | |||
WFG Insurance Agency of Puerto Rico, Inc. | Puerto Rico | 100% World Financial Group Insurance Agency, Inc. | Insurance agency | |||
WFG Properties Holdings, LLC | Georgia | 100% World Financial Group, Inc. | Marketing | |||
WFG Reinsurance Limited | Bermuda | 51% owned by World Financial Group, Inc; remaining 49% is annually offered to independent contractors associated with WFG Reinsurance Ltd. | Reinsurance | |||
World Financial Group Canada Inc. | Canada | 100% World Financial Group Holding Company of Canada Inc. | Marketing | |||
World Financial Group Holding Company of Canada Inc. | Canada | 100% Transamerica International Holdings, Inc. | Holding company | |||
World Financial Group, Inc. | Delaware | 100% AEGON Asset Management Services, Inc. | Marketing | |||
World Financial Group Insurance Agency of Canada Inc. | Ontario | 50% World Financial Group Holding Co. of Canada Inc.; 50% World Financial Group Subholding Co. of Canada Inc. | Insurance agency | |||
World Financial Group Insurance Agency of Hawaii, Inc. | Hawaii | 100% World Financial Group Insurance Agency, Inc. | Insurance agency | |||
World Financial Group Insurance Agency of Massachusetts, Inc. | Massachusetts | 100% World Financial Group Insurance Agency, Inc. | Insurance agency | |||
World Financial Group Insurance Agency of Wyoming, Inc. | Wyoming | 100% World Financial Group Insurance Agency, Inc. | Insurance agency | |||
World Financial Group Insurance Agency, Inc. | California | 100% Western Reserve Life Assurance Co. of Ohio | Insurance agency | |||
World Financial Group Subholding Company of Canada Inc. | Canada | 100% World Financial Group Holding Company of Canada, Inc. | Holding company | |||
Yarra Rapids, LLC | Delaware | Members are: Real Estate Alternatives Portfolio 4MR, LLC (49%) and non-AEGON affiliate (51%) | Real estate investments | |||
Zahorik Company, Inc. | California | 100% AUSA Holding Company | Inactive | |||
Zero Beta Fund, LLC | Delaware | Members are: Transamerica Life Insurance Company (82.35%); Monumental Life Insurance Company (16.16%); Transamerica Financial Life Insurance Company (1.49%) Manager: AEGON USA Investment Management LLC | Aggregating vehicle formed to hold various fund investments. |
Item 29. | Indemnification |
The Iowa Code (Sections 490.850 et. seq.) provides for permissive indemnification in certain situations, mandatory indemnification in other situations, and prohibits indemnification in certain situations. The Code also specifies procedures for determining when indemnification payments can be made.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Depositor pursuant to the foregoing provisions, or otherwise, the Depositor has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Depositor of expenses incurred or paid by a director, officer or controlling person in connection with the securities being registered), the Depositor will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
Item 30. | Principal Underwriter |
(a) | Transamerica Capital, Inc. serves as the principal underwriter for: |
Transamerica Capital, Inc. serves as the principal underwriter for the Retirement Builder Variable Annuity Account, Separate Account VA B, Separate Account VA Q, Separate Account VA FF, Separate Account VA HH, Separate Account VA-1, Separate Account VA-2L, Separate Account VA-5, Separate Account VA-6, Separate Account VA-7, Separate Account VA-8, Separate Account Fund B, Separate Account Fund C, Transamerica Corporate Separate Account Sixteen, Transamerica Separate Account R3, Separate Account VL, Separate Account VUL-1; Separate Account VUL-2, Separate Account VUL-3, Separate Account VUL-4, Separate Account VUL-5, Separate Account VUL-6, Separate Account VUL-A, and Variable Life Account A. These accounts are separate accounts of Transamerica Life Insurance Company.
Transamerica Capital, Inc. serves as principal underwriter for Separate Account VA BNY, Separate Account VA QNY, TFLIC Separate Account VNY, Separate Account VA-2LNY, TFLIC Separate Account C, Separate Account VA-5NLNY, Separate Account VA-6NY, TFLIC Series Annuity Account, TFLIC Series Life Account, ML of New York Variable Annuity Separate Account, ML of New York Variable Annuity Separate Account A, ML of New York Variable Annuity Separate Account B, ML of New York Variable Annuity Separate Account C, ML of New York Variable Annuity Separate Account D, ML of New York Variable Life Separate Account, and ML of New York Variable Life Separate Account II. These accounts are separate accounts of Transamerica Financial Life Insurance Company.
Transamerica Capital, Inc. also serves as principal underwriter for Separate Account VA BB, Separate Account VA CC, Separate Account VL E, Separate Account VA U, Separate Account VA V, Separate Account VA AA, WRL Series Life Account, WRL Series Life Account G, WRL Series Life Corporate Account, WRL Series Annuity Account and WRL Series Annuity Account B. These accounts are separate accounts of Transamerica Premier Life Insurance Company (formerly, Monumental Life Insurance Company).
Transamerica Capital, Inc. also serves as principal underwriter for Merrill Lynch Life Variable Annuity Separate Account, Merrill Lynch Life Variable Annuity Separate Account A, Merrill Lynch Life Variable Annuity Separate Account B, Merrill Lynch Life Variable Annuity Separate Account C, Merrill Lynch Life Variable Annuity Separate Account D, Merrill Lynch Variable Life Separate Account, and Merrill Lynch Life Variable Life Separate Account II. These accounts are separate accounts of Transamerica Advisors Life Insurance Company.
Transamerica Capital, Inc. also serves as principal underwriter for Transamerica Series Trust, Transamerica Funds, Transamerica Investors, Inc., Transamerica Partners Funds Group, Transamerica Partners Funds Group II, Transamerica Partners Portfolios, and Transamerica Asset Allocation Variable Funds.
(b) | Directors and Officers of Transamerica Capital, Inc.: |
Name
|
Principal Business Address
|
Position and Offices with Underwriter
| ||
Michael W. Brandsma
|
(2) | Director, President and Chief Financial Officer | ||
David W. Hopewell
|
(1) | Director | ||
David R. Paulsen
|
(2) | Director, Chief Executive Officer and Chief Sales Officer | ||
Blake S. Bostwick
|
(2) | Chief Marketing Officer and Chief Operations Officer | ||
Courtney John
|
(2) | Chief Compliance Officer and Vice President | ||
Amy Angle
|
(3) | Assistant Vice President | ||
Elizabeth Belanger
|
(4) | Assistant Vice President | ||
Dennis P. Gallagher
|
(5) | Assistant Vice President | ||
Brenda L. Smith
|
(5) | Assistant Vice President | ||
Lisa Wachendorf
|
(1) | Assistant Vice President | ||
Arthur D. Woods
|
(5) | Assistant Vice President | ||
Jeffrey T. McGlaun
|
(3) | Assistant Treasurer | ||
Carrie N. Powicki
|
(2) | Secretary | ||
C. Michael van Katwijk
|
(3) | Treasurer |
(1) | 4333 Edgewood Road N.E., Cedar Rapids, IA 52499-0001 |
(2) | 4600 S Syracuse St, Suite 1100, Denver, CO 80237-2719 |
(3) | 100 Light Street, Floor B1, Baltimore, MD 21202 |
(4) | 440 Mamaroneck Avenue, Harrison, NY 10528 |
(5) | 570 Carillon Parkway, St. Petersburg, FL 33716 |
(c) | Compensation to Principal Underwriter: |
Name of Principal Underwriter
|
Net Underwriting Discounts and Commissions(1)
|
Compensation on
|
Brokerage
|
Compensation
| ||||
Transamerica Capital, Inc. | 0 | $12,715,049.51 | 0 |
(1) | TCI passes through any commissions paid to it to the selling firms and does not retain any portion of such payments. |
(2) | Fiscal Year 2013 |
Item 31. | Location of Accounts and Records |
All accounts, books, or other documents required to be maintained by Section 31(a) of the 1940 Act and the rules promulgated thereunder are maintained by the Registrant through Transamerica Premier Life Insurance Company at 570 Carillon Parkway, St. Petersburg, Florida 33716, 4800 140th Avenue North, Clearwater, Florida 33762 or 12855 Starkey Road, Largo, Florida 33773 or 4333 Edgewood Road NE, Cedar Rapids, Iowa 52499-0001.
Item 32. | Management Services |
Not Applicable
Item 33. | Fee Representation |
Transamerica Premier Life Insurance Company (Transamerica premier) hereby represents that the fees and charges deducted under the WRL Financial Freedom Builder policies, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by Transamerica Premier.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant, WRL Series Life Account, has duly caused this Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of St. Petersburg and in the State of Florida, on this 1st day of October 2014.
WRL SERIES LIFE ACCOUNT |
(Registrant) |
Transamerica Premier Life Insurance Company |
(depositor) |
By: Brenda K. Clancy* |
Chairman of the Board, Chief Executive Officer & President of Transamerica Premier Life Insurance Company |
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 21 to the Registration Statement has been signed below by the following persons in the capacities indicated on October 1, 2014:
Mark W. Mullin* Mark W. Mullin |
Director | |||||
Arthur C. Schneider* Arthur C. Schneider |
Director, Senior Vice President and Chief Tax Officer | |||||
Brenda K. Clancy* Brenda K. Clancy |
Director, Chairman of the Board, Chief Executive Officer and President | |||||
Jason Orlandi* Jason Orlandi |
Director, Senior Vice President, Secretary and General Counsel | |||||
Robert J. Kontz* Robert J. Kontz |
Director and Vice President | |||||
C. Michiel van Katwijk* C. Michiel van Katwijk |
Director, Chief Financial Officer, Senior Vice President and Treasurer | |||||
Eric J. Martin* Eric J. Martin |
Senior Vice President and Corporate Controller | |||||
Scott W. Ham* Scott W. Ham |
Director and Division President-Life & Protection | |||||
s/ Arthur D. Woods *By: Arthur D. Woods |
Vice President and Senior Counsel |
*By: Arthur D. Woods Attorney-in-Fact pursuant to Powers of Attorney filed herewith
Exhibit Index
Exhibit |
Description | |
26(k)(i) | Legal Opinion & Consent of Arthur D. woods, Esq. | |
26(n)(i) | Written Consent of Ernst & Young LLP | |
26(q)(i) | Memorandum describing issuance, transfer and redemption procedures, as amended |
Exhibit 26(k)(i)
Legal Opinion & Consent of Arthur D. Woods, Esq.
TRANSAMERICA PREMIER LIFE INSURANCE COMPANY
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-0001
October 1, 2014
Board of Directors
Transamerica Premier Life Insurance Company
WRL Series Life Account
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-0001
Directors:
In my capacity as Vice President and Senior Counsel of Transamerica Premier Life Insurance Company, I have participated in the preparation and review of the Initial Registration Statement on Form N-6 filed with the U.S. Securities and Exchange Commission under the Securities Act of 1933 for the purpose of changing the depositor of certain individual flexible premium variable life insurance policies (WRL Financial Freedom Builder or the Policies) that are funded through WRL Series Life Account (the Separate Account, File No. 811-4420) from Western Reserve Life Assurance Co. of Ohio to Transamerica Premier Life Insurance Company (formerly, Monumental Life Insurance Company). I have consulted with outside counsel and examined such documents and such law as I considered necessary and appropriate, and on the basis of such examination and consideration, it is my opinion that:
1. | Transamerica Premier Life Insurance Company has been duly organized under the laws of the State of Iowa and is a validly existing corporation. |
2. | The Separate Account has been duly created and validly exists as a separate account pursuant to Iowa Insurance Law. |
3. | Iowa Insurance Law Section 508A.1 provides that the portion of the assets of any such separate account equal to the reserves and other policy liabilities with respect to such separate account shall not be chargeable with liabilities arising out of any other business Transamerica Premier Life Insurance Company may conduct. |
4. | The Policies, when issued as contemplated by the Registration Statement, are legal and binding obligations of Transamerica Premier Life Insurance Company in accordance with their terms. |
I hereby consent to the filing of this opinion as an exhibit to the Registration Statement and the use of my name under Legal Matters in the Statement of Additional Information.
Very truly yours, |
/s/ Arthur D. Woods |
Arthur D. Woods, Esq. Vice President and Senior Counsel |
Exhibit 26(n)(i)
Auditor Consent
Consent of Independent Registered Public Accounting Firm
We consent to the reference to our firm under the caption Independent Registered Public Accounting Firm in the Statement of Additional Information and to the use, in this Initial Registration Statement for WRL Series Life Account (File No. 811-4420) on Form N-6, of our reports: (1) dated April 28, 2014, with respect to the statutory-basis financial statements and schedules of Western Reserve Life Assurance Co. of Ohio; (2) dated April 25, 2014, with respect to the statutory-basis financial statements and schedules of Monumental Life Insurance Company (which changed its name to Transamerica Premier Life Insurance Company on July 31, 2014); and (3) dated April 28, 2014, with respect to the financial statements of the subaccounts of WRL Series Life Account, which are available for investment by owners of the WRL Financial Freedom Builder policies.
/s/ Ernst & Young LLP
Des Moines, IA
October 1, 2014
Exhibit 26(q)(i)
Memorandum describing issuance, transfer and redemption procedures, as amended
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
TRANSAMERICA PREMIER LIFE INSURANCE COMPANY
(formerly, WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO)
ISSUANCE, REDEMPTION AND TRANSFER PROCEDURES
This document sets forth, as required by Rule 6e-3(T)(b)(12)(ii), the administrative procedures that will be followed by Transamerica Premier Life Insurance Company (formerly, Western Reserve Life Assurance Co. of Ohio) (Company) in connection with the issuance of the Individual Flexible Premium Variable Life Insurance Policy (Policy) described in this Registration Statement, the transfer of assets held thereunder, and the redemption by Policyowners of their interest in the Policies.
1. | Public Offering Price: |
PURCHASE AND RELATED TRANSACTIONS |
Set out below is a summary of the principal Policy provisions and administrative procedures which might be deemed to constitute, either directly or indirectly, a purchase transaction. The summary shows that, because of the insurance nature of the Policies, the procedures involved necessarily differ in certain significant respects from the purchase procedures for mutual funds and contractual plans.
(a) | PREMIUM SCHEDULES AND UNDERWRITING STANDARDS |
Premiums for the Policies will not be the same for all Policyowners. The Company will require the Policyowner to pay an initial premium that is at least equal to a minimum monthly first year premium set forth in the Policy.
Policyowners will determine a planned periodic premium payment schedule that provides for a level premium payable at a fixed interval for a specified period of time. Payment of premiums in accordance with this schedule is not, however, mandatory, and failure to make a planned periodic premium payment will not of itself cause the Policy to lapse. Instead, Policyowners may make premium payments in any amount at any frequency, subject only to the minimum premium amount, and the maximum premium limitation. If at any time a premium is paid which would result in total premiums exceeding the current maximum premium limitation set forth in the Policy, the Company will accept only that portion of the premium which will make total premiums equal that amount. Any portion of the premium in excess of that amount will be returned to the Policyowner and no further premiums will be accepted until allowed by the current maximum premium limitations set forth in the Policy. The Policy will remain in force so long as net surrender value is sufficient to pay certain monthly charges imposed in connection with the Policy.
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Thus, the amount of a premium, if any, that must be paid to keep the Policy In Force depends upon the net surrender value of the Policy, which in turn depends on such factors as the investment experience and the cost of insurance charge. However, until the No Lapse Date shown on the Policy Schedule Page, the Policy will remain in force and no grace period will begin provided (1) the total of the premiums received (minus any withdrawals, minus any outstanding loans and any pro rata Decrease Charge deducted from the Cash Value) equals or exceeds the minimum monthly guarantee premium shown in the Policy times the number of months since the Policy Date, including the current month.
The cost of insurance rate utilized in computing the cost of insurance charge will not be the same for each insured. The chief reason is that the principle of pooling and distribution of mortality risks is based upon the assumption that the insured incurs an insurance rate commensurate with the mortality risk which is actuarially determined based upon factors such as attained age, sex, rate class and length of time a Policy is in force. Accordingly, while not all insureds will be subject to the same cost of insurance rate, there will be a single rate for all insureds in a given actuarial category.
The Policies will be offered and sold pursuant to established underwriting standards and in accordance with state insurance laws. State insurance laws prohibit unfair discrimination among insureds, but recognize that premiums must be based upon factors such as age, sex, health and occupation.
(b) | APPLICATION AND INITIAL PREMIUM PROCESSING |
Upon receipt of a completed application, the Company will follow certain insurance underwriting (I.E., evaluation of risks) procedures designed to determine whether the proposed insureds are insurable. This process may involve such verification procedures as medical examinations and may require that further information be provided by the proposed insured before a determination can be made. A Policy will not be issued until this underwriting procedure has been completed.
The record date of the Policy will be the date on which the Policy is recorded on the Companys books as an In Force Policy and the Company will allocate net premiums to the sub-accounts of the WRL Series Life Account on the first valuation date on or following the record date in accordance with the directions on the application.
If the Company determines to its satisfaction that on the date the application is signed and submitted with an initial payment the proposed insured was insurable and acceptable under the Companys underwriting rules and standards for insurance for the amount, plan and risk classification applied for in the application, then the insurance protection applied for, subject to the limits of liability and in accordance with the terms set forth in the Policy and in the conditional receipt, will by reason of such payment take effect on the later of the date of the application, or the completion of all medical tests and examinations, if required.
Under the Companys current rules, the minimum specified amount at issue for Issue Ages 0-45 is $50,000 declining to $25,000 for Issue Ages 46 to 80. The Company reserves the right to revise its rules from time to time to specify a different minimum specified amount at issue.
2
(c) | PREMIUM ALLOCATION |
In the application for a Policy, the Policyowner can allocate net premiums (total premiums less any premium expense charges)among the sub-accounts of the WRL Series Life Account and the Fixed Account. Notwithstanding the allocation in the application, if a premium payment of $1,000 or more is paid upon submission of the application, the net premium will initially be allocated on the Policy Date to the sub-account of the WRL Series Life Account that invests exclusively in shares of the Transamerica Aegon Money Market VP subaccount and will be re-allocated on the first valuation date(1) on or following the Record Date in accordance with the directions in the application. Net premiums paid after the record date will be allocated in accordance with the net asset value per share of a portfolio of the Fund will be determined, once daily, as of the close of the regular session of business on the New York Stock Exchange (currently 4:00 p.m., New York City time) Monday through Friday, except on customary national holidays on which the New York Exchange is closed.
Policyowners instructions in the application. The minimum percentage of each premium that may be allocated to any account is currently 1%; percentages must be in whole numbers. The allocation for future net premiums may be changed at any time by providing the Company with written notification. However, the Company reserves the right to limit the number of changes of the allocation of net premiums to one per year.
(d) | REINSTATEMENT |
A lapsed Policy may be reinstated any time within 5 years after the date of lapse and before the maturity date by submitting the following items to the Company:
1. | A written application for reinstatement from the Policyowner; |
2. | Evidence of insurability satisfactory to Transamerica Premier; and |
3. | A premium that, after the deduction of premium expense charges, is large enough to cover: |
(a) one monthly deduction at the time of termination; (b) the next two monthly deductions which will become due after the time of reinstatement; and (c) an amount sufficient to cover any surrender charge (as set forth in the Policy) as of the date of reinstatement.
(1) | A valuation period is the period between two successive valuation dates, commencing at the close of business of each valuation date and ending at the close of business of the next succeeding valuation. The net asset value per share of a portfolio of the Fund will be determined, once daily, as of the close of the regular session of business on the New York Stock Exchange (currently 4:00 p.m., New York City time) Monday through Friday, except on customary national holidays on which the New York Exchange is closed. |
3
Any indebtedness on the date of lapse will not be reinstated. The Cash Value of the Policy loan on the date of reinstatement will also not be reinstated. The amount of Cash Value on the date of reinstatement will be equal to the amount of the cash value on the date of lapse (exclusive of any Policy loan on that date) increased by the net premiums paid at reinstatement, less the amounts paid in accordance with (a) above. Upon approval of the application for reinstatement, the effective date of reinstatement will be the first monthly anniversary on or next following the date of approval of the application of reinstatement.
(e) | REPAYMENT OF INDEBTEDNESS |
A loan under the Policy will be subject to an interest rate of 5.2% payable annually in advance (equivalent to an effective annual rate of 5.5%). Outstanding indebtedness may be repaid at any time before the maturity date of the Policy and while the Policy is in force. Payments made by the Policyowner while there is indebtedness will be treated as premium payments unless the Policyowner indicates that the payment should be treated as a loan repayment. Under the Companys current procedures, at each Policy anniversary, the Company will compare the amount of the outstanding loan (including interest in advance until the next Policy Anniversary, if not paid)to the amount in the loan reserve. The Company will also make this comparison any time the Policyowner repays all or part of the loan. At each such time, if the amount of the outstanding loan exceeds the amount in the loan reserve, the Company will withdraw the difference from the accounts and transfer it to the loan reserve, in the same manner as when a loan is made.
If the amount in the loan reserve exceeds the amount of the outstanding loan, the Company will withdraw the difference from the loan reserve and transfer it to the accounts in the same manner as premiums are allocated. The Company will allocate the repayment of indebtedness at the end of the valuation period during which the repayment is received.
(f) | CORRECTION OF MISSTATEMENT OF AGE OR SEX |
If the Company discovers that the age or sex of any insured has been misstated, the Company will adjust the death benefits based on what the cost of insurance charge for the most recent monthly deduction would have purchased based on the correct age or sex.
2. | REDEMPTION PROCEDURES: |
SURRENDER AND RELATED TRANSACTIONS |
This section outlines those procedures which might be deemed to constitute redemptions under the Policy. These procedures differ in certain significant respects from the redemption procedures for mutual funds and contractual plans.
(a) | CASH VALUES |
At any time before the earlier of the death of the insured or the maturity date, the Policyowner may totally surrender or, after the first Policy year, make a cash withdrawal from the Policy by sending a written request to the Company. The amount available for surrender is the net surrender value at the
4
end of the valuation period during which the surrender request is received at the Companys office. The net surrender value as of any date is equal to:
(1) | the cash value as of such date; minus |
(2) | any surrender charge as of such date; minus |
(3) | any outstanding Policy loan; plus |
(4) | any unearned interest. |
A surrender charge as described in appendix A will be deducted if the Policy is surrendered during the first 15 Policy years. Surrenders from the Series Account will generally be paid within seven days of receipt of the written request. Postponement of payments may, however, occur in certain circumstances(2).
If the Policy is being totally surrendered, the Policy itself must be returned to the Company along with the request. A Policyowner may elect to have the amount paid in a lump sum or under a settlement option.
For a cash withdrawal, the amount available may be limited to no less than $500 and to no more than 10% of the net surrender value. The amount paid plus a processing fee equal to the lesser of $25 or 2% of the amount withdrawn will be deducted from the Policys cash value at the end of the valuation period during which the request is received. The amount will be deducted from the accounts in the same manner as the current allocation instructions unless the Policyowner directs otherwise. Cash withdrawals are allowed only once each Policy year.
In addition, when death benefit Option A is in effect, the specified amount will be reduced by the cash withdrawal. No cash withdrawal will be permitted which would result in a specified amount lower than the minimum specified amount set forth in the Policy or would deny the Policy status as life insurance under the Internal Revenue Code and applicable regulations.
(2) | Payment of any amount from the Series Account upon complete surrender, cash withdrawal, policy loan, or benefits payable at death or maturity may be postponed whenever: (i) the New York Stock Exchange is closed other than customary week-end and holiday closings, or trading on the New York Stock Exchange is restricted as determined by Commission; (ii) the Commission by order permits postponement for the protection of Policyowners; or (iii) an emergency exists, as determined by the Commission, as a result of which disposal of securities in not reasonably practicable or it is not reasonably practicable to determine the value of the WRL Series Life Accounts net assets. Transfers may also be postponed under these circumstances. The Company further reserves the right to defer payment of transfer, cash withdrawals or surrenders from the Fixed Account for up to six months. |
5
Payments under the Policy of any amount paid by check may be postponed until such time as the check has cleared the Policyowners bank.
(b) | BENEFIT CLAIMS |
As long as the Policy remains In Force, the Company will generally pay a death benefit to the named beneficiary in accordance with the designated death benefit option within seven days after the Company receives due proof of death of the insured, and the Company receives proof that the insured died while the Policy was in force, and verifies the validity of the claim. Payment of death benefits may, however, be postponed under certain circumstances(3). In particular, during the first two Policy years, and during the first two years after a Policy is reinstated, and in other circumstances in which the Company may have a basis for contesting the claim, there can be a delay beyond the seven day period. The amount of the death benefit is determined at the end of the valuation period during which the insured dies. The death benefit proceeds payable under the designated death benefit option will be reduced by any outstanding indebtedness and any due and unpaid charges. The proceeds will be increased by any additional insurance provided by rider and any unearned loan interest.
The amount of the death benefit is guaranteed not to be less than the specified amount of the Policy. These proceeds may be reduced by any outstanding indebtedness and any due and unpaid charges. The death benefit may, however, exceed the specified amount of the Policy. The amount by which the death benefit exceeds the specified amount depends upon the death benefit option in effect and the cash value of the Policy. Under Death Benefit Option A, the death benefit will only vary when the limitation percentage of cash value set forth in the Policy exceeds the specified amount of the Policy. Under Death Benefit Option B, the death benefit will always vary with the cash value because the death benefit will at least equal the specified amount plus the cash value. Under Death Benefit Option C, the death benefit will vary as the Cash Value and the Insureds Attained Age varies.
The amount of the benefit payable at maturity is the net surrender value of the Policy on the maturity date. These proceeds will be reduced by any outstanding indebtedness. This benefit will only be paid if the insured is living on the Policys maturity date. The Policy will mature on the anniversary nearest the insureds 95th birthday, if the insured is living and the Policy is in force.
(c) | POLICY LOANS |
After the first Policy year and so long as the Policy remains In Force, the Policyowner may borrow money from the Company using the Policy as the only security for the loan. The maximum amount that may be borrowed is an amount which, together with any loans already outstanding and any surrender charge, is 90% of the cash value. Indebtedness equals the total of all Policy loans less any unearned loan interest on the loans. The loan value will be
(4) | SEE note 2, SUPRA. |
6
determined at the end of the valuation period during which the loan request is received. Loans have priority over the claims of any assignee or other person. The loan may be repaid all or in part at any time before that maturity date and while the Policy is in force. Payments made by the Policyowner while there is indebtedness will be treated as premium payments unless the Policyowner indicates that the payment should be treated as a loan repayment. The interest rate charged on Policy loans accrues daily. Interest payments are payable annually in advance. If unpaid when due, interest will be added to the amount of the loan and will become part of the loan and bear interest at the same rate.
A Policyowner may allocate a Policy loan among the accounts. If no such allocation is made, the Company will allocate the loan in accordance with the Policyowners current allocation instructions. The loan amount will normally be paid within seven days after receipt of a written request. Postponement of loans may take place under certain circumstances(3).
Cash Value equal to the portion of the Policy loan plus interest in advance until the next Policy anniversary allocated to each account will be transferred from the account to the loan reserve, reducing the Policys Cash Value in that account. The loan reserve is a portion of the Fixed Account to which amounts are transferred as collateral for Policy loans. As noted above, under the Companys current procedures, at each Policy anniversary, thwe Company will compare the amount of the outstanding loan (including interest in advance until the next Policy anniversary, if not paid) to the amount in the loan reserve. The Company will also make this comparison any time the Policyowner repays all or part of the loan. At each such time, if the amount of the outstanding loan exceeds the amount in the loan reserve, the Company will withdraw the difference from the accounts and transfer it to the loan reserve, in the same manner as when a loan is made. If the amount in the loan reserve exceeds the amount of the outstanding loan, the Company will withdraw the difference from the loan reserve and transfer it to the accounts in the same manner as premiums are allocated. Cash Value in the loan reserve will be credited with guaranteed interest at 4% per year. Additional interest may be credited to this Cash Value.
(d) | POLICY LAPSE |
Lapse will only occur where net surrender value is insufficient to cover the monthly deduction, and a grace period expires without a sufficient payment.
If net surrender value on any Monthly Anniversary is insufficient to cover the monthly deduction on such day, the Policyowner must, except as noted below, pay during the grace period a payment at least sufficient to provide a net premium to cover the sum of the monthly deductions due within the grace
(5) | SEE note 2, SUPRA. |
7
period. However, until the No Lapse Date shown on the Policy Schedule Page, the Policy will remain in force and no grace period will begin provided (1) the total premiums received (minus any withdrawals and minus any outstanding loans and any pro rata Decrease Charge deducted from the Cash Value) equals or exceeds the minimum monthly guarantee premium shown in the Policy times the number of months since the Policy date, including the current month, and (2) no riders have been added since the Policy Date, including the current month. Should the Policyowner request the addition of any rider after the Policy Date but prior to the No Lapse Date, the Policyowner will be notified as to the effect on grace period processing prior to the date the rider is effective.
If net surrender value is insufficient to cover the monthly deduction, The Company will notify the Policyowner and any assignee of record of the minimum payment needed to keep the Policy in force. The Policyowner will then have a grace period of 61 days, measured from the date notice is sent to the Policyowner, to make sufficient payment. If the Company does not receive a sufficient payment within the grace period, lapse of the Policy will result. If a sufficient payment is received during the grace period, any resulting net premium will be allocated among the accounts in accordance with the Policyowners then current instructions. If the insured dies during the grace period, the death benefit proceeds will equal the amount of death benefit proceeds immediately prior to the commencement of the grace period, reduced by any due and unpaid charges. SEE Reinstatement, p. 4.
3. | TRANSFERS |
The WRL Series Life Account has several sub-accounts. Each sub-account invests exclusively in the shares of a corresponding portfolio of Transamerica Series Trust an open-end diversified management company registered with the Commission. Policyowners may transfer Cash Value among the sub-accounts of the WRL Series Life Account or from the sub-accounts to the Fixed Account, which is part of the Companys general account. For transfers from the Fixed Account to a sub-account, the Company reserves the right to require that transfer requests be in writing and received at the Companys administrative office within thirty days after a Policy anniversary. Under the Policy, the amount that may be transferred is limited to the greater of (a) 25% of the amount in the Fixed Account, or (b) the amount transferred in the prior Policy year from the Fixed Account, unless the Company consents otherwise. The transfer will take place on the day the Company receives the request. No transfer charge will apply to transfers from the Fixed Account to a Sub-Account. Amounts may be withdrawn from the Fixed Account for cash withdrawals and surrenders only upon written request of the Policyowner, and are subject to any applicable requirements for a signature guarantee. The Company further reserves the right to defer payment of transfers, cash withdrawals, or surrenders from the Fixed Account for up to six months. In addition, Policy provisions relating to transfers, cash withdrawals or surrenders from the WRL Series Life Account will also apply to Fixed Account transactions. Policyowners may make transfer requests in writing or by telephone. Written requests must be in a form acceptable to the Company. Telephonic requests are permissible if the Policyowner has
8
previously authorized telephone transfers in writing. The Company may, at any time, revoke or modify the transfer privilege. Cash value transferred from one sub-account into more than one sub-account counts as one transfer. The Company will effectuate transfers and determine all values in connection with transfers at the end of the valuation period during which the transfer request is received. Postponement of transfers may take place under certain circumstances(5). The Company reserves the right to impose a $25 transfer charge for each transfer in excess of one per Policy Month or twelve per Policy year and will be deducted from each sub-account from which a transfer is being made in an equal amount. Transfers resulting from policy loans, the exercise of conversion rights, and the reallocation of cash value immediately after the record date, will not be subject to a transfer charge. No transfer charge will apply to transfers from the Fixed Account to a sub-account.
4. | CONVERSION PROCEDURE |
At any time upon written request within 24 months of the policy date, the Policyowner may elect to transfer all sub-account values to the Fixed Account.
No transfer charge will be assessed.
9
APPENDIX A
SURRENDER CHARGE
During the first fifteen Policy years, a Surrender Charge will be incurred upon surrender of the Policy. The Surrender Charge consists of the Surrender Charge Per Thousand multiplied by the applicable Surrender Charge Factor.
(a) Surrender Charge Per Thousand. The surrender Charge Per Thousand Dollars of initial Specified Amount varies with the Insureds Issue Age, gender and classification. See the table below indicating the charges per thousand dollars of initial Specified Amount.
(b) Surrender Charge Factor. As stated above, the factor is applied to the charge per thousand dollars of initial Specified Amount due upon any Surrender of a Policy during the first fifteen Policy years. In Policy years 1 - 5 this factor is 1.00 for Insureds at Issue Ages 0 - 39 and then declines at a rate of 0.10 per year until reaching zero at the end of the fifteenth (15th)Policy year as shown below. For Insureds at Issue Ages older than 39, this factor is less than 1.00 at the end of the first (1st) Policy year and declines to zero at the end of the fifteenth (15th) Policy year. Therefore, application of the factor to the Surrender Charge Per Thousand in the event of any surrender during the second through fifteenth Policy years will result in the same or reduced surrender charges. If a surrender occurs after the fifteenth (15th)Policy year, there is no Surrender Charge Per Thousand due. See the example below. Factors for the Builder Plus Program are different than those shown below.
SURRENDER CHARGE FACTORS
ISSUE AGES 0 - 39
SURRENDER CHARGE FACTOR |
FACTOR | |||
At Issue |
1.00 | |||
1-5 |
1.00 | |||
6 |
.90 | |||
7 |
.80 | |||
8 |
.70 | |||
9 |
.60 | |||
10 |
.50 | |||
11 |
.40 | |||
12 |
.30 | |||
13 |
.20 | |||
14 |
.10 | |||
15 |
0 | |||
16+ |
0 |
* | THE FACTOR ON ANY DATE OTHER THAN ANNIVERSARY WILL BE INTERPOLATED BETWEEN THE TWO END OF YEAR FACTORS. |
(C) Example: Assume a male tobacco use, purchases the Policy at Issue Age 35. The Surrender Charge Per Thousand is $16.48. This is multiplied
by the Surrender Charge Factor resulting in the following Table of Surrender Charges:
TABLE OF SURRENDER CHARGES PER $1,000 OF
SPECIFIED AMOUNT AS OF THE POLICY DATE
END OF |
SURRENDER CHARGE PER $1,000 OF SPECIFIED AMOUNT ON POLICY PAGE 3A |
END OF POLICY YEAR |
SURRENDER CHARGE PER $1,000 OF SPECIFIED AMOUNT ON POLICY PAGE 3A |
|||||||||
At Issue |
$ | 16.48 | 9 | $ | 9.89 | |||||||
1 |
16.48 | 10 | 8.24 | |||||||||
2 |
16.48 | 11 | 6.59 | |||||||||
3 |
16.48 | 12 | 4.94 | |||||||||
4 |
16.48 | 13 | 3.30 | |||||||||
5 |
16.48 | 14 | 1.65 | |||||||||
6 |
14.83 | 15 | 0.00 | |||||||||
7 |
13.18 | 16 | + | 0.00 | ||||||||
8 |
11.54 |
* THE SURRENDER CHARGE ON ANY DATE OTHER THAN AN ANNIVERSARY WILL BE INTERPOLATED BETWEEN THE TWO END OF YEAR CHARGES.