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Part I
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PEGASUS PROVIDER
GROUP FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE POLICIES
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
P.O. BOX 2999
HARTFORD, CT 06104-2999
[LOGO] TELEPHONE (800) 861-1408
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This Prospectus describes a group flexible premium variable life insurance
policy (the "Group Policies," and each individually a "Group Policy") and
certificates of insurance (the "Certificates," and each individually a
"Certificate") offered by Hartford Life and Annuity Insurance Company
("Hartford"). (Effective January 1, 1998, ITT Hartford Life and Annuity
Insurance Company's name changed to Hartford Life and Annuity Insurance
Company). The Certificates are designed to provide lifetime insurance coverage
to the Insured(s) named in the Certificates, and maximum flexibility in
connection with premium payments and the Death Benefit, together with an
opportunity to participate in the investment experience of ICMG Registered
Variable Life Separate Account One. For a given amount of Death Benefit chosen,
the Owner has considerable flexibility in selecting the timing and amount of
premium payments. In addition to the Initial Premium payment, additional premium
payments are also allowed.
Group Policies may be issued to a Participating Employer or to a trust that is
adopted by a Participating Employer. Eligible employees of Participating
Employers may own Certificates issued under their respective Participating
Employer's Group Policy. Unless the Certificate provides otherwise, the persons
covered under the Group Policy (the "Owners") possess all rights and interests
under the Group Policy. The Owners are provided with the Certificates, which
describe each Owner's rights, benefits, and options under the Group Policy. The
Owner of a Certificate is the Insured unless another owner has been named in the
enrollment form for the Certificate.
Sales agents can provide prospective purchasers with individualized sales
illustrations which reflect all the fees and charges associated with the
Certificate options selected.
The Certificates provide for a Death Benefit, pursuant to which Death Proceeds
are payable at the Insured's death. You may select one of two death benefit
options. Death Benefit option A is an amount equal to the larger of (1) the Face
Amount and (2) the Variable Insurance Amount. Death Benefit option B is an
amount equal to the larger of (1) the Face Amount plus the Cash Value and (2)
the Vari-
able Insurance Amount. The Death Proceeds payable to the Beneficiary equal the
Death Benefit less any Debt outstanding under the Certificate plus any rider
benefits payable.
The Investment Value of a Certificate will also vary up or down to reflect the
investment experience of the Investment Divisions to which Net Premiums have
been allocated. The Owner bears the investment risk for all amounts so
allocated.
Depending upon the state of issuance of the Certificate and the applicable
provisions of the Certificate, Your initial Net Premium will, when Your
Certificate is issued, either be (i) invested in the Fidelity VIP Money Market
Investment Division during the right to examine period or (ii) invested
immediately in Your chosen Investment Divisions, upon Our receipt thereof. If
Your initial Net Premium is invested immediately in Your chosen Investment
Divisions, You will bear full investment risk for any amounts allocated to the
Investment Divisions during the 10 day right to examine period. Please note that
this automatic immediate investment feature only applies if Your Certificate so
specifies. Please check with Your agent to determine the status of Your
Certificate. You must fill out and send Us the appropriate form or comply with
other designated Hartford procedures if You would like to change how subsequent
Net Premiums are allocated.
The Portfolios underlying the Investment Divisions presently are: the VIP
Equity-Income Portfolio, the VIP High Income Portfolio, and the VIP Money Market
Portfolio of Variable Insurance Products Fund; the VIP II Asset Manager
Portfolio of Variable Insurance Products Fund II; the VIP III Growth
Opportunities Portfolio of Variable Insurance Products Fund III; the Pegasus
Bond Fund, the Pegasus Growth Fund, the Pegasus Growth and Value Fund, the
Pegasus Intrinsic Value Fund, and the Pegasus Mid-Cap Opportunity Fund of
Pegasus Variable Funds; and the Putnam VT International Growth Fund, the Putnam
VT Vista Fund, and the Putnam VT Voyager Fund of Putnam Variable Trust.
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IT MAY NOT BE ADVANTAGEOUS TO PURCHASE FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
AS A REPLACEMENT FOR YOUR CURRENT LIFE INSURANCE OR IF YOU ALREADY OWN A
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY.
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THIS PROSPECTUS IS VALID ONLY IF ACCOMPANIED BY THE CURRENT PROSPECTUSES OF THE
APPLICABLE ELIGIBLE FUNDS WHICH CONTAIN A FULL DESCRIPTION OF THOSE FUNDS. ALL
PROSPECTUSES SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS JANUARY 5, 1998.
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2 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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TABLE OF CONTENTS
<TABLE>
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SPECIAL TERMS......................................................... 4
SUMMARY............................................................... 6
THE COMPANY........................................................... 8
THE SEPARATE ACCOUNT.................................................. 8
THE FUNDS............................................................. 9
General............................................................. 9
Variable Insurance Products Fund, Variable Insurance Products Fund
II, and
Variable Insurance Products Fund III............................. 9
Pegasus Variable Funds............................................ 10
Putnam Variable Trust............................................. 10
The Portfolios...................................................... 10
DETAILED DESCRIPTION OF CERTIFICATE BENEFITS AND PROVISIONS........... 11
General............................................................. 11
Issuance of a Certificate........................................... 11
Premiums............................................................ 11
Premium Payment Flexibility....................................... 11
Allocation of Premium Payments.................................... 11
Accumulation Units................................................ 12
Accumulation Unit Values.......................................... 12
Premium Limitation................................................ 12
Values under the Certificate........................................ 12
Surrender of the Certificate........................................ 13
Partial Withdrawals............................................... 13
Transfers Among Investment Divisions................................ 13
Amount and Frequency of Transfers................................. 13
Transfers to or From Investment Divisions......................... 13
Procedures for Telephone Transfer................................. 14
Valuation of Payments and Transfers................................. 14
Loans............................................................... 14
Loan Interest..................................................... 14
Credited Interest................................................. 14
Loan Repayments................................................... 14
Termination Due to Excessive Debt................................. 14
Effect of Loans on Investment Value............................... 14
Death Benefit....................................................... 15
Death Benefit Options............................................. 15
Option Change..................................................... 15
Payment Options................................................... 15
Legal Developments Regarding Income Payments...................... 15
Beneficiary....................................................... 16
Increases and Decreases in Face Amount............................ 16
Benefits at Maturity................................................ 16
Termination of Participation in the Group Policy.................... 16
Lapse and Reinstatement While the Group Policy is in Effect......... 16
Lapse and Grace Period............................................ 16
Reinstatement..................................................... 16
Enrollment for a Certificate........................................ 17
The Right to Examine the Certificate................................ 17
Deductions From Premium............................................. 17
Front-End Sales Load.............................................. 17
Premium Related Tax Charge........................................ 17
DAC Tax Charge.................................................... 17
</TABLE>
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 3
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<TABLE>
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Deductions and Charges From Investment Value........................ 17
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Monthly Deduction Amounts......................................... 17
Mortality and Expense Risk Charge................................. 18
Taxes............................................................... 19
OTHER MATTERS......................................................... 19
Additions, Deletions or Substitutions of Investments................ 19
Voting Rights....................................................... 19
Our Rights.......................................................... 19
Statements to Owners................................................ 20
Limit on Right to Contest........................................... 20
Misstatement as to Age or Sex....................................... 20
Assignment.......................................................... 20
Dividends........................................................... 20
Experience Credits.................................................. 20
SUPPLEMENTAL BENEFITS................................................. 20
Maturity Date Extension Rider....................................... 20
EXECUTIVE OFFICERS AND DIRECTORS...................................... 21
DISTRIBUTION OF THE GROUP POLICIES.................................... 22
SAFEKEEPING OF THE SEPARATE ACCOUNT ASSETS............................ 22
FEDERAL TAX CONSIDERATIONS............................................ 22
General............................................................. 22
Taxation of the Company and the Separate Account.................... 22
Income Taxation of Certificate Benefits............................. 23
Modified Endowment Contracts........................................ 23
Diversification Requirements........................................ 23
Federal Income Tax Withholding...................................... 24
Other Tax Considerations............................................ 24
LEGAL PROCEEDINGS..................................................... 24
EXPERTS............................................................... 24
REGISTRATION STATEMENT................................................ 24
APPENDIX A -- ILLUSTRATIONS OF DEATH BENEFIT, CASH VALUE AND CASH
SURRENDER VALUE..................................................... 25
FINANCIAL STATEMENTS.................................................. 38
</TABLE>
THE GROUP POLICIES MAY NOT BE AVAILABLE IN ALL STATES.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER OR OTHER PERSON IS AUTHORIZED
TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED ON.
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4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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SPECIAL TERMS
As used in this Prospectus, the following terms have the indicated meanings:
ACCUMULATION UNIT: An accounting unit of measure used to calculate the value of
an Investment Division.
ADJUSTABLE LOAN INTEREST RATE: The interest rate charged on Loans that is
adjusted from time to time by Hartford. The method of calculation of the
Adjustable Loan Interest Rate is described later in this Prospectus.
ATTAINED AGE: The Issue Age plus the period since the Coverage Date.
CASH SURRENDER VALUE: The Cash Value, less Debt, less any charges accrued but
not yet deducted.
CASH VALUE: The Investment Value plus the Loan Account Value.
CERTIFICATE: The form evidencing and describing the Owner's rights, benefits,
and options under the Group Policy. The Certificate will describe, among other
things, (i) the benefits for the named Insured, (ii) to whom the benefits are
payable, and (iii) the limits and other terms of the Group Policy as they
pertain to the Insured.
CERTIFICATE ANNIVERSARY: An anniversary of the Coverage Date.
CHARGE DEDUCTION DIVISION: An Investment Division from which all charges are
deducted if so designated in the enrollment form or later elected.
CODE: The Internal Revenue Code of 1986, as amended.
COVERAGE DATE: The date insurance under the Certificate is effective as to an
Insured shown in the Specifications and is used to determine Coverage Years and
months from issue.
COVERAGE YEAR(S): The 12 month period following the Coverage Date and each
anniversary thereof.
CUSTOMER SERVICE CENTER: The service area of Hartford Life and Annuity Insurance
Company.
DEATH BENEFIT: The Death Benefit option in effect determines how the Death
Benefit is calculated. The two Death Benefit options provided are described in
the Death Benefit section of this Prospectus.
DEATH PROCEEDS: The Death Benefit less outstanding Debt plus any rider benefits
payable.
DEBT: The aggregate amount of outstanding Loans, plus any interest accrued at
the Adjustable Loan Interest Rate.
FACE AMOUNT: The minimum Death Benefit as long as the Certificate is in force.
It is specified at issue and may be changed after issue on request, or due to a
change in Death Benefit option or a partial withdrawal.
FUNDS: The registered open-end management investment companies in which assets
of the Investment Divisions of the Separate Account may be invested. Currently,
the Funds include: (i) Variable Insurance Products Fund ("VIP"), managed by
Fidelity Management & Research Company ("FMR"); (ii) Variable Insurance Products
Fund II ("VIP II"), managed by FMR; (iii) Variable Insurance Products Fund III
("VIP III"), managed by FMR; (iv) Pegasus Variable Funds, managed by First
Chicago NBD Investment Management Company ("FCNIMCO"); and (v) Putnam Variable
Trust, managed by Putnam Investment Management, Inc. ("Putnam Management").
GENERAL ACCOUNT: The assets of Hartford other than those allocated to the
Separate Account.
GRACE PERIOD: The 61 day period following the date We mail to the Owner notice
that the Cash Surrender Value is insufficient to pay the charges due. Unless the
Owner has given Us written notice of the termination in advance of the date of
termination of any Certificate, insurance will continue in force during this
period.
GROUP POLICY: The group flexible premium variable life insurance policy issued
by Hartford and described in this Prospectus.
HARTFORD (ALSO REFERRED TO AS "WE," "US," "OUR," THE "COMPANY"): Hartford Life
and Annuity Insurance Company. Effective January 1, 1998, ITT Hartford Life and
Annuity Insurance Company's name changed to Hartford Life and Annuity Insurance
Company.
IN WRITING: In a written form satisfactory to Us.
INITIAL PREMIUM: The amount of premium initially payable shown on Your
Certificate Specifications.
INSURED: The person on whose life the Certificate is issued. The Insured is
identified in the Certificate Specifications.
INVESTMENT DIVISION: A separate division of the Separate Account which invests
exclusively in the shares of a specified Portfolio of a Fund. The Separate
Account currently offers 13 Investment Divisions: (i) the Fidelity VIP
Equity-Income Investment Division, (ii) the Fidelity VIP High Income Investment
Division, (iii) the Fidelity VIP Money Market Investment Division, (iv) the
Fidelity VIP II Asset Manager Investment Division, (v) the Fidelity VIP III
Growth Opportunities Investment Division, (vi) the Pegasus Bond Investment
Division, (vii) the Pegasus Growth Investment Division, (viii) the Pegasus
Growth and Value Investment Division, (ix) the Pegasus Intrinsic Value
Investment Division, (x) the Pegasus Mid-Cap Opportunity Investment Division,
(xi) the Putnam VT International Growth Investment Division, (xii) the Putnam VT
Vista Investment Division, and (xiii) the Putnam VT Voyager Investment Division.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 5
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INVESTMENT VALUE: The sum of the values of assets in the Investment Divisions
under the Certificate.
ISSUE AGE: The Insured's age on the birthday nearest to the Coverage Date.
LOAN: Any amount borrowed against the Investment Value under a Certificate.
LOAN ACCOUNT: That portion of the Company's General Account to which amounts are
transferred as a result of a Loan. The Loan Account is credited with interest
and does not participate in the investment experience of the Separate Account.
LOAN ACCOUNT VALUE: The amounts of the Investment Value transferred to (or from)
the General Account to secure Loans, plus interest accrued at the daily
equivalent of an annual rate equal to the Adjustable Loan Interest Rate actually
charged, reduced by not more than 1%.
MATURITY DATE: The date on which an Insured's coverage matures as shown in the
Certificate Specifications. We will pay the Cash Surrender Value, if any, if the
Insured is living on the Maturity Date, upon surrender of the Certificate to
Hartford.
MONTHLY DEDUCTION AMOUNT: The fees and charges deducted from the Investment
Value on the Processing Date.
NET AMOUNT AT RISK: The Death Benefit less the Cash Value.
NET PREMIUM: The amount of premium actually credited to the Investment
Divisions.
NYSE: The New York Stock Exchange.
OWNER (ALSO REFERRED TO AS "YOU" OR "YOUR"): The person or legal entity so
designated in the enrollment form or as subsequently changed. The Owner may be
someone other than the Insured. The Owner possesses all rights under the Group
Policy with respect to the Certificates.
PARTICIPATING EMPLOYER: A participating employer, or a trust sponsored by a
participating employer, to which Hartford issues the Group Policy described in
this Prospectus.
PORTFOLIO: A separate mutual fund, series or portfolio of the Funds. There are
currently 13 Portfolios available under the Policies: the VIP Equity-Income
Portfolio, the VIP High Income Portfolio, and the VIP Money Market Portfolio of
VIP Fund; the VIP II Asset Manager Portfolio of VIP Fund II; the VIP III Growth
Opportunities Portfolio of VIP Fund III; the Pegasus Bond Fund, the Pegasus
Growth Fund, the Pegasus Growth and Value Fund, the Pegasus Intrinsic Value
Fund, and the Pegasus Mid-Cap Opportunity Fund of Pegasus Variable Funds; and
the Putnam VT International Growth Fund, the Putnam VT Vista Fund, and the
Putnam VT Voyager Fund of Putnam Variable Trust.
PRO RATA BASIS: An allocation method based on the proportion of the Investment
Value in each Investment Division.
PROCESSING DATE(S): The day(s) on which We deduct charges from the Investment
Value. The first Processing Date is the Coverage Date. There is a Processing
Date each month. Later Processing Dates are on the same calendar day as the
Coverage Date, or on the last day of any month which has no such calendar day.
PROCESSING PERIOD: The period from the Coverage Date to the next Processing
Date, and thereafter, the period from one Processing Date to the next.
SEC: The Securities and Exchange Commission.
SEPARATE ACCOUNT: ICMG Registered Variable Life Separate Account One, an account
established by Hartford to separate the assets funding the Group Policies from
other assets of Hartford.
VALUATION DAY: Each business day that Hartford and each of the Funds value their
respective investment portfolios, unless the Certificate Specifications indicate
otherwise. A business day is any day the NYSE is open for trading or any day the
SEC requires mutual funds, unit investment trusts or other investment portfolios
to be valued. The value of the Separate Account is determined at the close of
the NYSE (currently 4:00 p.m., Eastern Time) on such days.
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
VARIABLE INSURANCE AMOUNT: The Cash Value multiplied by the applicable variable
insurance factor provided in the Certificate.
VIP: Variable Insurance Products Fund.
VIP II: Variable Insurance Products Fund II.
VIP III: Variable Insurance Products Fund III.
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6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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SUMMARY
THE GROUP POLICIES
The Group Policies and Certificates offered by this Prospectus are funded by
ICMG Registered Variable Life Separate Account One (the "Separate Account"), a
separate account established by Hartford pursuant to Connecticut insurance law
and organized as a unit investment trust registered under the Investment Company
Act of 1940 (the "1940 Act"). The Separate Account has 13 Investment Divisions
dedicated to the Group Policies, each of which invests solely in a corresponding
Portfolio of the Funds.
Depending upon the state of issuance of Your Certificate and the applicable
provisions of Your Certificate, Your initial Net Premium will, when Your
Certificate is issued, either be (1) invested in the Fidelity VIP Money Market
Investment Division during the right to examine period or (2) invested
immediately in Your chosen Investment Divisions, upon Our receipt thereof. IF
YOUR INITIAL NET PREMIUM IS INVESTED IMMEDIATELY IN YOUR CHOSEN INVESTMENT
DIVISIONS, YOU WILL BEAR FULL INVESTMENT RISK FOR ANY AMOUNTS ALLOCATED TO THE
INVESTMENT DIVISIONS DURING THE RIGHT TO EXAMINE PERIOD. Please note that this
automatic immediate investment feature only applies if Your Certificate so
specifies. Please check with Your agent to determine the status of Your
Certificate. You must fill out and send Us the appropriate form In Writing or
comply with other designated Hartford procedures if You would like to change how
subsequent Net Premiums are allocated. See "Allocation of Premium Payments,"
page 11.
Pursuant to the Certificates, each selected Investment Division is credited
with Accumulation Units and each selected Investment Division's assets are
invested in the applicable underlying Portfolio. Subject to certain
restrictions, an Owner may transfer amounts among the available Investment
Divisions. See "Detailed Description of Certificate Benefits and Provisions --
Transfers Among Investment Divisions," page 13.
The Group Policies are first and foremost life insurance policies and the
Certificates evidencing an Owner's interest in the Group Policies provide for
death benefits, cash values, and other features traditionally associated with
life insurance. The Group Policies are called "flexible premium" because, once
the desired level and pattern of the Death Benefit have been determined, a
purchaser has considerable flexibility in the selection of the timing and amount
of premium to be paid. The Group Policies are called "variable" because, unlike
the fixed benefits of an ordinary whole life insurance policy, the Investment
Value under a Certificate will, and the Death Benefit may, increase or decrease
depending on the investment experience of the Investment Divisions to which the
Net Premiums have been allocated. See "Detailed Description of Certificate
Benefits and Provisions -- Death Benefit," page 15.
DEATH BENEFIT
The Certificates provide for two Death Benefit options. Under Death Benefit
option A, the Death Benefit is an amount equal to the larger of (1) the Face
Amount and (2) the Variable Insurance Amount. Under Death Benefit option B, the
Death Benefit is an amount equal to the larger of (1) the Face Amount plus the
Cash Value and (2) the Variable Insurance Amount. At the death of the Insured,
We will pay the Death Proceeds to the Beneficiary. The Death Proceeds equal the
Death Benefit less outstanding Debt plus any rider benefits payable under the
Certificate. See "Detailed Description of Certificate Benefits and Provisions --
Death Benefit," page 15.
PREMIUM
You have considerable flexibility as to when and in what amounts You pay
premiums.
No premium payment will be accepted which causes the Certificate to not meet
the tax qualification guidelines for life insurance under the Code.
GENERAL ACCOUNT
Amounts allocated to the Loan Account to secure a Loan become part of the
General Account assets of Hartford. Hartford invests the assets of the General
Account in accordance with applicable law governing the investments of insurance
company general accounts. See "Detailed Description of Certificate Benefits and
Provisions -- Loans" for a discussion of Loan repayments, page 14.
DEDUCTIONS FROM PREMIUM
Prior to the allocation of premiums to the selected Investment Divisions, a
deduction as a percentage of premium is made for the front-end sales load, state
premium taxes, and the Deferred Acquisition Cost ("DAC") tax charge. The amount
of each premium allocated among the Investment Divisions is Your Net Premium.
FRONT-END SALES LOAD
When We receive a Premium Payment, We deduct a front-end sales load. The
current front-end sales load is 6.75% of any premium paid for Coverage Years 1
through 7 and 4.75% of any premium paid in Coverage Years 8 and later. The
maximum front-end sales load is 9% of any premium paid for Coverage Years 1
through 7 and 7% of any premium paid in Coverage Years 8 and later.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 7
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The front-end sales load covers expenses relating to the sale and
distribution of the Certificates and may be reduced for certain sales of the
Certificates under circumstances which result in savings of such sales and
distribution expenses. For more information concerning the front-end sales load,
see "Detailed Description of the Certificate Benefits and Provisions --
Deductions From Premium," page 17.
LIMITS ON FRONT-END SALES LOAD
Certain insurance laws and regulations limit the front-end sales load which
can be assessed against the Certificates. The front-end sales load assessed in
the Certificates comply with these limitations.
PREMIUM RELATED TAX CHARGE
We deduct a percentage of each premium to cover taxes assessed against
Hartford by various states and jurisdictions that are attributable to premiums.
The percentage actually deducted will vary by locale depending on the tax rates
in effect there. The range is generally between 0% and 4%.
DAC TAX CHARGE
The Company deducts 1.25% of each premium to cover a federal premium tax
assessed against the Company. This charge is reasonable in relation to the
Company's federal income tax burden, under Internal Revenue Code Section 848,
resulting from the receipt of premiums. We will adjust the charge based on
changes in the applicable tax law.
DEDUCTIONS AND CHARGES FROM
INVESTMENT VALUE
As with many other types of insurance policies, each Certificate will have
an Investment Value. The Investment Value of the Certificate will increase or
decrease to reflect the investment experience of the chosen Investment
Divisions, deductions for the Monthly Deduction Amount and any amounts
transferred from the Investment Divisions into the Loan Account. There is no
minimum guaranteed Investment Value and the Owner bears the risk of the
investment in the underlying Fund Portfolios. See "Detailed Description of the
Certificate Benefits and Provisions -- Deductions and Charges From Investment
Value," page 17.
We will subtract amounts from Your Investment Value to provide for the
Monthly Deduction Amount. These will be taken from the Charge Deduction
Division, as specified in the Certificate Specifications, or if no Charge
Deduction Division is selected or if there is insufficient Investment Value in
the Charge Deduction Division, on a Pro Rata Basis from Your chosen Investment
Divisions on each Processing Date.
The Monthly Deduction Amount equals:
(a) the administrative expense charge; plus
(b) the charges for cost of insurance and additional benefits provided by rider,
if any.
Hartford may also set up a provision for income taxes imposed on the assets
of the Separate Account. See "Deductions and Charges From the Investment Value,"
page 17 and "Federal Tax Considerations," page 22.
A charge is made for mortality and expense risks assumed by Hartford.
Hartford currently deducts a daily charge for Coverage Years 1 through 10 at an
effective annual rate of .65% of the value of each Investment Division's assets
and for Coverage Years 11 and later at an effective annual rate of .50% of each
Investment Division's assets. In no event will the charge exceed .65% of an
Investment Division's assets on an annual basis.
CHARGES AGAINST THE FUNDS
The Separate Account purchases Fund shares at net asset value. The net asset
value of the portfolio shares reflects investment advisory fees and
administrative and other expenses deducted from the assets of the Funds.
Applicants should review the prospectuses for the Funds which accompany this
Prospectus for a description of the charges assessed against the assets of each
of the Funds.
The following table shows annual Fund operating expenses for 1996:
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT OTHER OPERATING
FEES EXPENSES EXPENSES
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<S> <C> <C> <C>
VIP Equity-Income
Portfolio (1)................. 0.51% 0.17% 0.68%
VIP High Income
Portfolio..................... 0.59% 0.22% 0.81%
VIP Money Market
Portfolio..................... 0.21% 0.09% 0.30%
VIP II Asset Manager
Portfolio (1)................. 0.64% 0.20% 0.84%
VIP III Growth
Opportunities Portfolio....... 0.61% 0.26% 0.87%
Pegasus Bond Fund (2) (3)...... 0.40% 0.35% 0.75%
Pegasus Growth Fund (2)........ 0.60% 0.35% 0.95%
Pegasus Growth and Value Fund
(2)........................... 0.60% 0.35% 0.95%
Pegasus Intrinsic Value
Fund (2) (3).................. 0.60% 0.35% 0.95%
Pegasus Mid-Cap Opportunity
Fund (2)...................... 0.60% 0.35% 0.95%
Putnam VT International Growth
Fund (3) (4).................. 0.80% 0.33% 1.13%
</TABLE>
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8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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<TABLE>
<CAPTION>
TOTAL
MANAGEMENT OTHER OPERATING
FEES EXPENSES EXPENSES
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Putnam VT Vista
Fund (3) (4).................. 0.65% 0.31% 0.96%
<S> <C> <C> <C>
Putnam VT Voyager
Fund (4)...................... 0.57% 0.21% 0.78%
</TABLE>
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(1) A portion of the brokerage commissions that certain Portfolios pay was used
to reduce expenses. In addition, certain Portfolios have entered into
arrangements with their custodian and transfer agent whereby interest earned
on uninvested cash balances was used to reduce custodian and transfer agent
expenses.
(2) Operating expenses of these Portfolios of the Pegasus Variable Funds reflect
the management fee schedule that will be in effect for future periods
combined with the historic or anticipated expense levels for the Portfolios.
FCNIMCO has agreed to waive portions of the management fee through December
18, 1998, in order to keep total portfolio operating expenses at the levels
shown in the table.
(3) These Portfolio expenses reflect the anticipated expenses for 1997. The
Portfolios had no actual expenses in 1996 because as of December 31, 1996,
they had not commenced operations.
(4) Expenses of these Portfolios have been restated to reflect a 12b-1 fee of
0.15% payable to class IB shares.
LOANS
An Owner may obtain a cash Loan from Hartford. The Loan is secured by the
Owner's Certificate. The maximum Loan amount is equal to the sum of the Cash
Surrender Value plus outstanding Debt, multiplied by .90, less outstanding Debt.
See "Detailed Description of Certificate Benefits and Provisions -- Loans," page
14.
THE RIGHT TO EXAMINE THE CERTIFICATE
An applicant has a limited right to return his or her Certificate. Subject
to applicable state regulations, if the applicant returns the Certificate within
10 days after delivery of the Certificate Hartford will return to the applicant,
within seven days thereafter, either (i) the premium paid or (ii) the Cash Value
under the Certificate plus charges deducted. See "The Right to Examine the
Certificate," page 17.
TAX CONSEQUENCES
The current Federal tax law generally excludes all Death Benefit payments
from the gross income of the Beneficiary under the Certificate. See "Federal Tax
Considerations," page 22.
There are circumstances when the Certificate may become a Modified Endowment
Contract under federal tax law. If it does, Loans and other pre-death
distributions are includable in gross income on an income-first basis. A 10%
penalty tax may be imposed on income distributed before the insured attains age
59 1/2. Prospective purchasers and Owners are advised to consult a qualified tax
adviser before taking steps that may affect whether the Certificate becomes a
Modified Endowment Contract. Hartford has instituted procedures to monitor
whether a Certificate may become a modified endowment contract after issue. See
"Federal Tax Considerations -- Modified Endowment Contract" for a discussion of
the "seven-pay" test, page 23.
THE COMPANY
Hartford Life and Annuity Insurance Company ("Hartford") is a stock life
insurance company engaged in the business of writing life insurance and
annuities, both individual and group, in all states of the United States and the
District of Columbia, except New York. Effective January 1, 1998, ITT Hartford
Life and Annuity Insurance Company's name changed to Hartford Life and Annuity
Insurance Company. Hartford was originally incorporated under the laws of
Wisconsin on January 9, 1956, and was subsequently redomiciled to Connecticut.
Its offices are located in Simsbury, Connecticut; however, its mailing address
is P.O. Box 2999, Hartford, CT 06104-2999. Hartford is a subsidiary of Hartford
Fire Insurance Company, one of the largest multiple lines insurance carriers in
the United States. Hartford is majority controlled by The Hartford Financial
Services Group, Inc., a Delaware corporation.
Hartford is rated A+ (superior) by A.M. Best and Company, Inc., on the basis
of its financial soundness and operating performance. Hartford is rated AA by
Standard & Poor's and AA+ by Duff and Phelps on the basis of its claims paying
ability. These ratings do not apply to the investment performance of the
Investment Divisions of the Separate Account. The ratings apply to Hartford's
ability to meet its insurance obligations, including those described in this
Prospectus.
THE SEPARATE ACCOUNT
ICMG Registered Variable Life Separate Account One is a separate account
established by Hartford on October 9, 1995, under the insurance laws of the
State of Connecticut, pursuant to a resolution of Hartford's Board of Directors.
The Separate Account is organized as a unit investment trust and is registered
with the SEC under the 1940 Act. Such registration does not signify that the SEC
supervises the management or the investment practices or policies of the
Separate Account. The Separate Account meets the definition of a "separate
account" under the federal securities laws.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
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Under Connecticut law, the assets of the Separate Account are held
exclusively for the benefit of Owners and persons entitled to payments under the
Group Policies and the Certificates and owners of any other policies which may
be available through the Separate Account. The assets of the Separate Account
are owned by the Company and the obligations under the Group Policies and the
Certificates are obligations of the Company. These assets are held separately
from the other assets of the Company and income, gains and losses incurred on
the assets in the Separate Account, whether or not realized, are credited to or
charged against the Separate Account without regard to other income, gains or
losses of the Company (except to the extent that assets in the Separate Account
exceed the reserves and other liabilities of the Separate Account). Therefore,
the investment performance of the Separate Account is entirely independent of
the investment performance of the General Account assets or any other separate
account maintained by the Company.
The Separate Account has 13 Investment Divisions dedicated to the Group
Policies, each of which invests solely in a corresponding Portfolio of the
Funds. Additional Investment Divisions may be established at the discretion of
the Company. The Separate Account may include other divisions which will not be
available under the Group Policies.
THE FUNDS
GENERAL
The shares of the Portfolios are sold by the Funds to the Separate Account.
The assets of the Separate Account attributable to the Group Policies are
invested exclusively in one of the Investment Divisions. An Owner may allocate
premium payments among the Investment Divisions. Owners should review the brief
descriptions of the investment objectives of each of the Portfolios in
connection with that allocation. See "The Portfolios," page 10.
Each Fund continually issues an unlimited number of full and fractional
shares of beneficial interest in the relevant Portfolios. In addition to being
offered to the Separate Account, each Fund's shares are, or may be, offered to
other separate accounts funding variable annuity contracts and variable life
insurance policies issued by Hartford, and to separate accounts of other
insurance companies. It is conceivable that in the future it may become
disadvantageous for both variable annuity and variable life insurance separate
accounts or for separate accounts of other life insurance companies to invest in
shares of the Funds. Although neither Hartford nor any of the Funds currently
foresee any such disadvantage, each Fund's Board of Trustees will monitor events
in order to identify any material conflict between different variable annuity
and variable life owners and to determine what action, if any, should be taken
in response thereto, including the possible withdrawal of the Separate Account's
participation in any of the Funds. Material conflicts could result from such
things as (1) changes in state insurance law, (2) changes in federal income tax
law, (3) changes in the investment management of any Portfolio of the Funds, or
(4) differences between voting instructions given by variable annuity and
variable life owners. If the Boards of Trustees were to conclude that separate
funds should be established for variable annuity and variable life insurance
separate accounts, Hartford will bear the attendant expenses.
All investment income of, and other distributions to, each Investment
Division arising from the applicable Portfolio are reinvested in shares of that
Portfolio at net asset value. Hartford will purchase Fund shares in connection
with premium payments allocated to the applicable Investment Division in
accordance with Owners' directions and will redeem Fund shares to meet
obligations under the Group Policies and the Certificates or make adjustments in
reserves, if any. The Funds are required to redeem Portfolio shares at net asset
value and generally to make payment within 7 days.
Applicants should read each of the Fund prospectuses accompanying this
Prospectus in connection with the purchase of a Certificate.
VARIABLE INSURANCE PRODUCTS FUND ("VIP"), VARIABLE INSURANCE PRODUCTS FUND II
("VIP II") AND VARIABLE INSURANCE PRODUCTS FUND III ("VIP III") (EACH, A
"FIDELITY FUND" AND COLLECTIVELY, THE "FIDELITY FUNDS")
The Separate Account currently invests in the Fidelity Funds. The Fidelity
Funds are diversified, open-end management investment companies organized as
Massachusetts business trusts by Fidelity Management & Research Company ("FMR")
and registered under the 1940 Act. The Fidelity Funds consist of several
investment portfolios, including VIP Equity-Income Portfolio, VIP High Income
Portfolio, VIP Money Market Portfolio, VIP II Asset Manager Portfolio, and VIP
III Growth Opportunities Portfolio, which are available as part of Pegasus
Provider.
Each Fidelity Fund is composed of multiple classes of shares with a common
investment objective and investment portfolio. The original class ("Original
Class") of shares is offered at net asset value and is not subject to a 12b-1
fee. The service class ("Service Class") shares are offered at net asset value
and are subject to a 12b-1 fee. Each class of shares is offered through its own
prospectus. Service Class shares of VIP Equity-Income Portfolio, VIP High Income
Portfolio, VIP II Asset Manager Portfolio, and VIP III Growth Opportunities
Portfolio and Original Class shares of VIP Money Market Portfolio are available
under the Group Policy.
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10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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The Fidelity Funds are each managed by FMR. FMR is one of America's largest
investment management organizations. It is composed of a number of different
companies, which provide a variety of financial services and products. FMR is
the original Fidelity company, founded in 1946. It provides a number of mutual
funds and other clients with investment research and portfolio management
services.
PEGASUS VARIABLE FUNDS
The Separate Account currently invests in shares of the Pegasus Variable
Funds, a diversified open-end management investment company registered under the
1940 Act and organized as a Delaware business trust. The Pegasus Variable Funds
consists of seven series, including Pegasus Bond Fund, Pegasus Growth Fund,
Pegasus Growth and Value Fund, Pegasus Intrinsic Value Fund and Pegasus Mid-Cap
Opportunity Fund, which are available as part of Pegasus Provider.
First Chicago NBD Investment Management Company ("FCNIMCO") is the
investment adviser to Pegasus Variable Funds. FCNIMCO is a wholly-owned
subsidiary of The First National Bank of Chicago, which, in turn, is a
wholly-owned subsidiary of First Chicago NBD Corporation, a registered bank
holding company. Included among FCNIMCO's accounts are pension and
profit-sharing funds for major corporations and state and local governments,
commingled trust funds and a variety of institutional and personal advisory
accounts, estates and trusts, either directly or through investment services
provided through its bank affiliates. FCNIMCO also acts as investment adviser
for other registered investment companies and investment company portfolios.
PUTNAM VARIABLE TRUST
The Separate Account currently invests in shares of Putnam Variable Trust, a
diversified open-end management investment company registered under the 1940 Act
and organized as a Massachusetts business trust. Putnam Variable Trust consists
of sixteen funds, including Putnam VT International Growth Fund, Putnam VT Vista
Fund and Putnam VT Voyager Fund, which are available as part of Pegasus
Provider.
Putnam Investment Management, Inc. ("Putnam Management") serves as the
investment manager of Putnam Variable Trust. An affiliate, The Putnam Advisory
Company, Inc., manages domestic and foreign institutional accounts and mutual
funds. Another affiliate, Putnam Fiduciary Trust Company, provides investment
advice to institutional clients under its banking and fiduciary policies. Putnam
Management and its affiliates are wholly-owned subsidiaries of Marsh & McLennan
Companies, Inc., a publicly owned holding company whose principal businesses are
international insurance brokerage and employee benefit consulting.
THE PORTFOLIOS
VIP EQUITY-INCOME PORTFOLIO
VIP Equity-Income Portfolio seeks reasonable income by investing primarily
in income-producing equity securities. In choosing these securities, the
Portfolio will also consider the potential for capital appreciation. This
Portfolio's goal is to achieve a yield which exceeds the composite yield on the
securities comprising the Standard & Poor's Composite Index of 500 Stocks (S&P
500). The Portfolio may invest in high yielding, lower-rated securities
(commonly referred to as "junk bonds") which are subject to greater risk than
investments in higher-rated securities.
VIP HIGH INCOME PORTFOLIO
VIP High Income Portfolio seeks high current income primarily through
investments in all types of income-producing debt securities, preferred stocks
and convertible securities. The Portfolio's investments will include high
yielding debt securities, with an emphasis on lower-rated securities (commonly
referred to as "junk bonds") which are subject to greater risk than investments
in higher-rated securities.
VIP MONEY MARKET PORTFOLIO
VIP Money Market Portfolio seeks as high a level of current income as is
consistent with preserving capital and providing liquidity. The Portfolio will
invest only in high-quality U.S. dollar denominated money market instruments of
domestic and foreign issuers. An investment in the Portfolio is not insured or
guaranteed by the U.S. Government, and there can be no assurance that the
Portfolio will maintain a stable asset value per share of $1.00.
VIP II ASSET MANAGER PORTFOLIO
VIP II Asset Manager Portfolio seeks high total return with reduced risk
over the long-term by allocating its assets among domestic and foreign stocks,
bonds and short-term instruments.
VIP III GROWTH OPPORTUNITIES PORTFOLIO
VIP III Growth Opportunities Portfolio seeks to provide capital growth by
investing primarily in common stocks and securities convertible into common
stocks. The Portfolio also has the ability to purchase other securities, such as
preferred stock and bonds, that may produce capital growth, and may invest in
foreign securities without limitation.
PEGASUS BOND FUND
Pegasus Bond Fund seeks to maximize total rate of return by investing
predominantly in intermediate and long-term debt instruments.
PEGASUS GROWTH FUND
Pegasus Growth Fund seeks long-term capital appreciation by investing
primarily in equity securities of domestic
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
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issuers believed by FCNIMCO to have above-average growth characteristics.
PEGASUS GROWTH AND VALUE FUND
Pegasus Growth and Value Fund seeks long-term capital growth, with income as
a secondary consideration, by investing primarily in equity securities of larger
companies that are attractively priced relative to their growth potential.
PEGASUS INTRINSIC VALUE FUND
Pegasus Intrinsic Value Fund seeks long-term capital appreciation by
investing primarily in equity securities believed by FCNIMCO to represent a
value or potential worth which is not fully recognized by prevailing market
prices.
PEGASUS MID-CAP OPPORTUNITY FUND
Pegasus Mid-Cap Opportunity Fund seeks long-term capital appreciation by
investing primarily in equity securities of companies with intermediate market
capitalizations.
PUTNAM VT INTERNATIONAL GROWTH FUND
Putnam VT International Growth Fund seeks capital appreciation by investing
primarily in equity securities of companies located in countries other than the
United States.
PUTNAM VT VISTA FUND
Putnam VT Vista Fund seeks capital appreciation by investing in a
diversified portfolio of common stocks which Putnam Management believes have the
potential for above-average capital appreciation.
PUTNAM VT VOYAGER FUND
Putnam VT Voyager Fund seeks capital appreciation by investing primarily in
common stocks of companies that Putnam Management believes have potential for
capital appreciation that is significantly greater than that of market averages.
There is no assurance that any Portfolio will achieve its stated objectives.
Owners are also advised to read the prospectuses for each of the Funds
accompanying this Prospectus for more detailed information. Each Fund is subject
to certain investment restrictions which may not be changed without the approval
of a majority of the shareholders of the Fund. See the accompanying prospectuses
for each of the Funds.
DETAILED DESCRIPTION OF
CERTIFICATE BENEFITS
AND PROVISIONS
GENERAL
This Prospectus describes a flexible premium group variable life insurance
policy where the Owner has considerable flexibility in selecting the timing and
amount of premium payments.
ISSUANCE OF A CERTIFICATE
Certificates will only be offered to eligible employees when provided by the
Participating Employer. Individuals wishing to purchase a Certificate must
complete an enrollment form In Writing, which must be received by Our Customer
Service Center before a Certificate will be issued. A Certificate will not be
issued with a specified Face Amount of less than the minimum Face Amount.
Acceptance is subject to Hartford's underwriting rules then in effect. Hartford
reserves the right to reject an enrollment form for any reason permitted by law.
PREMIUMS
PREMIUM PAYMENT FLEXIBILITY
A significant feature of the Certificate is that once the desired level and
pattern of Death Benefits have been determined, the Owner has considerable
flexibility in the selection of the timing and amount of premiums to be paid and
You can choose the level of premiums, within a range determined by Hartford,
based on the Face Amount of the Certificate, the Insured's sex (except where
unisex rates apply), Issue Age, and the Insured's risk classification.
A minimum Initial Premium is due on the Coverage Date. The amount of the
minimum Initial Premium is the amount which, after the deductions for sales
load, state premium tax, and DAC tax charge, is sufficient (disregarding
investment performance) to pay 12 times the first Monthly Deduction. Thereafter,
additional premiums may be paid at any time, subject to the premium limitations
set forth by the Internal Revenue Code as indicated in the section entitled
"Premium Limitation," page 12. You have the right to pay additional premiums of
at least $500.00 at any time.
ALLOCATION OF PREMIUM PAYMENTS
If the state of issue of Your Certificate requires that We return Your
Initial Premium, We will allocate the initial Net Premium submitted with Your
enrollment form to the Fidelity VIP Money Market Investment Division, until the
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12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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expiration of the right to examine period. Upon the expiration of the right to
examine period, the initial Net Premium will, at a later date, be invested
according to Your initial allocation instructions (except that any accrued
interest will remain in the Fidelity VIP Money Market Investment Division if it
is selected as an initial allocation option). This later date is the later of 10
days after We receive the premium and the date We receive the final requirement
to put the Certificate in force. The Certificates are credited with units
("Accumulation Units") in each selected Investment Division, the assets of which
are invested in the corresponding underlying Portfolio. An Owner may transfer
funds among the Investment Divisions subject to certain restrictions. See
"Detailed Description of Certificate Benefits and Provisions -- Transfers Among
Investment Divisions," page 13. Any additional Net Premiums received by Us prior
to such date will be allocated to the Fidelity VIP Money Market Investment
Division.
Alternatively, if the state of issue of Your Certificate provides for Our
return of the Certificate's Cash Value to the Owner, We will allocate the
initial Net Premium immediately among Your chosen Investment Divisions. IN THAT
CASE YOU WILL BEAR FULL INVESTMENT RISK FOR ANY AMOUNTS ALLOCATED TO THE
INVESTMENT DIVISIONS DURING THE RIGHT TO EXAMINE PERIOD. (Please note that this
automatic immediate investment feature only applies if Your Certificate so
specifies. Please check with Your agent to determine the status of Your
Certificate.)
Upon written request, You may change the premium allocation. Subsequent Net
Premiums will be allocated among Investment Divisions according to Your most
recent instructions, subject to the following. Portions allocated to the
Investment Divisions must be whole percentages of 10% or more. If We receive a
premium and Your most recent allocation instructions would violate this
requirement, We will allocate the Net Premium among the Investment Divisions
according to Your previous premium allocation.
The Owner will receive several different types of notification as to what
his or her current premium allocation is. The initial allocation chosen by the
Owner on the enrollment form is shown in the Certificate. In addition, each
transactional confirmation received after a premium payment will show how that
premium has been allocated. In addition, each annual statement summarizes the
current premium allocation in effect for that Certificate.
ACCUMULATION UNITS
Net Premiums allocated to the Investment Divisions are used to credit
Accumulation Units under the Certificate.
The number of Accumulation Units in each Investment Division to be credited
under the Certificate (including the initial allocation to the Fidelity VIP
Money Market Investment Division) will be determined first by multiplying the
Net Premium by the appropriate allocation percentage to determine the portion to
be invested in the Investment Division. Each portion to be invested in an
Investment Division is then divided by the Accumulation Unit Value of that
particular Investment Division next computed following receipt of the payment.
ACCUMULATION UNIT VALUES
The Accumulation Unit Value for each Investment Division will vary daily to
reflect the investment experience of the applicable Portfolio, as well as the
daily deduction for mortality and expense risks, and will be determined on each
Valuation Day by multiplying the Accumulation Unit Value of the particular
Investment Division on the preceding Valuation Day by a net investment factor
for that Investment Division for the Valuation Period then ended. The net
investment factor for each of the Investment Divisions is equal to the net asset
value per share of the corresponding Portfolio at the end of the Valuation
Period (plus the per share amount of any dividend or capital gain distributions
paid by that Portfolio in the Valuation Period then ended) divided by the net
asset value per share of the corresponding Portfolio at the beginning of the
Valuation Period, less the daily deduction for the mortality and expense risks
assumed by Hartford.
All valuations in connection with a Certificate, e.g., with respect to
determining Cash Value and Investment Value, or calculation of Death Benefits,
or with respect to determining the number of Accumulation Units to be credited
to a Certificate with each premium payment, other than the Initial Premium, will
be made on the date the request or payment is received by Hartford at the
Customer Service Center if such date is a Valuation Day; otherwise such
determination will be made on the next succeeding date which is a Valuation Day.
PREMIUM LIMITATION
If premiums are received which would cause the Certificate to fail to meet
the definition of a life insurance policy in accordance with the Internal
Revenue Code, We will refund the excess premium payments. We will refund such
premium payments and interest thereon within 60 days after the end of a Coverage
Year.
A premium payment that results in an increase in the Death Benefit greater
than the amount of the premium will be accepted only after We approve evidence
of insurability.
VALUES UNDER THE CERTIFICATE
As with traditional life insurance, each Certificate will have a Cash
Surrender Value. The Cash Surrender Value is equal to the Cash Value, less Debt,
less any charges accrued but not deducted. There is no minimum guaranteed Cash
Surrender Value. The Cash Value equals the value in the Investment Divisions
plus the Loan Account Value.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
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Each Certificate will also have an Investment Value. The Investment Value of
a Certificate changes on a daily basis and will be computed on each Valuation
Day. The Investment Value will vary to reflect the investment experience of the
Investment Divisions, Monthly Deduction Amounts and any amounts transferred to
the Loan Account to secure a Loan.
The Investment Value of a particular Certificate is related to the net asset
value of the Portfolios associated with the Investment Divisions to which Net
Premiums on the Certificate have been allocated. The total Investment Value in
the Investment Divisions on any Valuation Day is calculated by multiplying the
number of Accumulation Units in each Investment Division as of the Valuation Day
by the current Accumulation Unit Value of that Investment Division and then
summing the result for all the Investment Divisions. The Investment Value equals
the sum of the values of the assets in the Investment Divisions. See "Premiums
- -- Accumulation Unit Values," page 12.
SURRENDER OF THE CERTIFICATE
At any time prior to the Maturity Date, provided the Certificate is in
effect and has a Cash Surrender Value, the Owner may choose, without the consent
of the Beneficiary (provided the designation of the Beneficiary is not
irrevocable) to surrender the Certificate and receive the full Cash Surrender
Value from Us. To surrender a Certificate, You must submit a request for
surrender In Writing. We will determine the Cash Surrender Value as of the
Valuation Day We receive the request In Writing at Our Customer Service Center,
or the date requested by the Owner, whichever is later.
The Cash Surrender Value, which is the net amount available upon surrender
of the Certificate, equals the Cash Value, less Debt, less any charges accrued
but not yet deducted. The Certificate will terminate on the date of receipt of
the written request, or the date the Owner requests the surrender to be
effective, whichever is later.
The Cash Surrender Value may be paid in cash or allocated to any other
payment option agreed upon by Us.
PARTIAL WITHDRAWALS
At any time before the Maturity Date, and subject to Hartford's rules then
in effect, up to twelve (12) partial withdrawals are allowed per Coverage Year;
however, only one (1) partial withdrawal is allowed between any successive
Processing Dates. The minimum partial withdrawal allowed is $500.00. The maximum
partial withdrawal is an amount equal to the sum of the Cash Surrender Value
plus outstanding Debt, multiplied by .90, less outstanding Debt. Hartford
currently imposes a maximum $25.00 fee for processing partial withdrawals. A
partial withdrawal will reduce the Cash Surrender Value, Cash Value and
Investment Value. Any partial withdrawal will have a permanent effect on the
Cash Surrender Value and may have a permanent effect on the Death Benefits
payable. If Death Benefit option A is in effect, the Face Amount is reduced by
the amount of the partial withdrawal. Unless specified otherwise, partial
withdrawals will be deducted on a Pro Rata Basis from the Investment Divisions.
Requests for partial withdrawals must be made In Writing to Us. The effective
date of a partial withdrawal will be the Valuation Day We receive the request In
Writing at Our Customer Service Center. A 10% penalty tax may be imposed on
income distributed before the insured attains age 59 1/2. See "Federal Tax
Considerations -- Modified Endowment Contracts," page 23.
TRANSFERS AMONG INVESTMENT DIVISIONS
AMOUNT AND FREQUENCY OF TRANSFERS
Upon request and as long as the Certificate is in effect, You may transfer
amounts among the Investment Divisions up to six times per Coverage Year.
Transfer requests must be In Writing on a form approved by Hartford or by
telephone in accordance with established procedures. The amounts which may be
transferred and the number of transfers will be limited by Our rules then in
effect. Currently, the minimum value of Accumulation Units that may be
transferred from one Investment Division to another is the lesser of (i) $500 or
(ii) the total value of the Accumulation Units in the Investment Division. The
value of the remaining Accumulation Units in the Investment Division must equal
at least $500. If, after an ordered transfer, the value of the remaining
Accumulation Units in an Investment Division would be less than $500, the entire
value will be transferred.
Currently there are no restrictions on transfers other than those described
herein and there is no charge for permitted transfers between Investment
Divisions. Hartford reserves the right in the future to impose additional
restrictions on transfers, as a well as a charge for processing transfers.
TRANSFERS TO OR FROM INVESTMENT DIVISIONS
In the event of a transfer from an Investment Division, the number of
Accumulation Units credited to the Investment Division from which the transfer
is made will be reduced. The reduction will be determined by dividing:
1. the amount transferred by,
2. the Accumulation Unit Value for that Investment Division on the Valuation
Day We receive Your request for transfer In Writing.
In the event of a transfer to an Investment Division, We will increase the
number of Accumulation Units credited thereto. The increase will equal:
1. the amount transferred divided by,
2. the Accumulation Unit Value for that Investment Division determined on the
Valuation Day We receive Your request for transfer In Writing.
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14 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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PROCEDURES FOR TELEPHONE TRANSFERS
Owners may effect telephone transfers in two ways. All Owners may directly
contact a customer service representative. Owners may in the future also request
access to an electronic service known as a Voice Response Unit (VRU). The VRU
will permit the transfer of monies among the Investment Divisions and change of
the allocation of future payments. All Owners intending to conduct telephone
transfers through the VRU will be asked to complete a Telephone Authorization
Form.
Hartford will undertake reasonable procedures to confirm that instructions
communicated by telephone are genuine. Before a customer service representative
accepts any request, the caller will be asked for his or her social security
number and address. All calls will also be recorded. A Personal Identification
Number (PIN) will be assigned to all Owners who request VRU access. The PIN is
selected by and known only to the Owner. Proper entry of the PIN is required
before any transactions will be allowed through the VRU. Furthermore, all
transactions performed over the VRU, as well as with a customer service
representative, will be confirmed by Hartford through a written letter.
Moreover, all VRU transactions will be assigned a unique confirmation number
which will become part of the Certificate's history. Hartford is not liable for
any loss, cost or expense for action on telephone instructions which are
believed to be genuine in accordance with these procedures.
VALUATION OF PAYMENTS AND TRANSFERS
We value the Certificate on every Valuation Day.
We will pay Death Proceeds, Cash Surrender Values, partial withdrawals, and
Loan amounts attributable to the Investment Divisions within seven (7) days
after We receive all the information needed to process the payment unless the
NYSE is closed for other than a regular holiday or weekend, trading is
restricted by the SEC or the SEC declares that an emergency exists.
Hartford may defer payment of any amounts not attributable to the Investment
Divisions for up to six months from the date on which We receive the request.
LOANS
As long as the Certificate is in effect, an Owner may obtain, without the
consent of the Beneficiary (provided the designation of Beneficiary is not
irrevocable), a cash Loan from Hartford. The maximum Loan amount is equal to the
sum of the Cash Surrender Value plus outstanding Debt, multiplied by .90, less
outstanding Debt.
The amount of each Loan will be transferred on a Pro-Rata Basis from each of
the Investment Divisions (unless the Owner specifies otherwise) to the Loan
Account. The Loan Account is the mechanism used to ensure that any outstanding
Debt remains fully secured by the Investment Value.
LOAN INTEREST
Interest will accrue daily on outstanding Debt at the Adjustable Loan
Interest Rate indicated in the Certificate. The difference between the value of
the Loan Account and any outstanding Debt will be transferred from the
Investment Divisions to the Loan Account on each Certificate Anniversary.
The maximum Adjustable Loan Interest Rate We may charge for Loans is the
greater of 5% and the Published Monthly Average for the calendar month two
months prior to the date on which the Adjustable Loan Interest Rate is
determined. The Published Monthly Average means the "Moody's Corporate Bond
Yield Average -- Monthly Average Corporate" as published by Moody's Investors
Service, Inc. or any successor to that service. If that monthly average is no
longer published, a substitute average will be used.
CREDITED INTEREST
Amounts in the Loan Account for Coverage Years 1 through 10 will be credited
with interest at a rate equal to the Adjustable Loan Interest Rate then in
effect, minus 1%. Amounts in the Loan Account for Coverage Years 11 and later
will be credited with interest at a rate equal to the Adjustable Loan Interest
Rate then in effect, minus .20%.
LOAN REPAYMENTS
You can repay any part of or the entire Loan at any time. The amount of the
Loan repayment will be allocated to Your chosen Investment Divisions on a Pro
Rata Basis, determined as of the date of the Loan repayment. Unless specified
otherwise, additional premium payments received by Hartford during the period
when a Loan is outstanding will be treated as Loan repayments.
TERMINATION DUE TO EXCESSIVE DEBT
If total Debt outstanding equals or exceeds the Cash Surrender Value, the
Certificate will terminate 31 days after We have mailed notice to Your last
known address and that of any assignees of record. If sufficient Loan repayment
is not made by the end of this 31 day period, the Certificate will end without
value.
EFFECT OF LOANS ON INVESTMENT VALUE
A Loan, whether or not repaid, will have a permanent effect on the
Investment Value because the investment results of each Investment Division will
apply only to the amount remaining in such Investment Divisions. The longer a
Loan is outstanding, the greater the effect is likely to be. The effect could be
favorable or unfavorable. If the Investment Divisions earn more than the annual
interest rate for funds held in the Loan Account, an Owner's Investment Value
will not increase as rapidly as it would have had no
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
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Loan been made. If the Investment Divisions earn less than the Loan Account, the
Owner's Investment Value will be greater than it would have been had no Loan
been made. Also, if not repaid, the aggregate amount of outstanding Debt will
reduce the Death Proceeds and Cash Surrender Value otherwise payable.
DEATH BENEFIT
As long as the Certificate remains in force, the Certificate provides for
the payment of the Death Proceeds to the named Beneficiary when the Insured
under the Certificate dies. The Death Proceeds payable to the Beneficiary equal
the Death Benefit less any Debt outstanding under the Certificate plus any rider
benefits payable. The Death Benefit depends on the Death Benefit option You
select and is determined as of the date of the death of the Insured.
DEATH BENEFIT OPTIONS
There are two Death Benefit options: Death Benefit option A and Death
Benefit option B:
1. Under the Death Benefit option A, the Death Benefit is the greater of (a)
the Face Amount and (b) the Variable Insurance Amount.
2. Under Death Benefit option B, the Death Benefit is the greater of (a) the
Face Amount plus the Cash Value and (b) the Variable Insurance Amount.
Regardless of which Death Benefit option You select, the maximum amount
payable under such option will be the Death Proceeds.
OPTION CHANGE
While the Certificate is in force, You may change the Death Benefit option
selected under a Certificate by making a request In Writing during the lifetime
of the Insured. If the change is from Death Benefit option A to Death Benefit
option B, satisfactory evidence of insurability must be provided to Hartford.
The Face Amount after the change will be equal to the Face Amount before the
change, less the Cash Value on the effective date of the change. If the change
is from Death Benefit option B to Death Benefit option A, the Face Amount after
the change will be equal to the Face Amount before the change plus the Cash
Value on the effective date of change. Any change in the selection of a Death
Benefit option will become effective at the beginning of the Coverage month
following Hartford's approval of such change. We will notify You that the change
has been made.
All or part of the Death Proceeds may be paid in cash or applied under one
of the payment options described below.
PAYMENT OPTIONS
Death Proceeds under the Certificate may be paid in a lump sum or may be
applied to one of Hartford's payment options. The minimum amount that may be
placed under a payment option is $5,000 unless Hartford consents to a lesser
amount. Once payments under payment options 2, 3 or 4 commence, no surrender of
the Certificate may be made for the purpose of receiving a lump sum settlement
in lieu of the life insurance payments. The following options are available
under the Certificates:
FIRST OPTION -- Interest Income
Payments of interest at the rate We declare, but not less than 3% per year,
on the amount applied under this option.
SECOND OPTION -- Income of Fixed Amount
Equal payments of the amount chosen until the amount applied under this
option, with interest of not less than 3% per year, is exhausted. The final
payment will be for the balance remaining.
THIRD OPTION -- Payments for a Fixed Period
An amount payable monthly for the number of years selected which may be from
1 to 30 years.
FOURTH OPTION -- Life Income
LIFE ANNUITY -- an annuity payable monthly during the lifetime of the
Annuitant and terminating with the last monthly payment due preceding the
death of the Annuitant. Under this option, it is possible that only one
monthly annuity payment would be made, if the Annuitant died before the
second monthly annuity payment was due.
LIFE ANNUITY WITH 120 MONTHLY PAYMENTS CERTAIN -- an annuity providing
monthly income to the Annuitant for a fixed period of 120 months and for as
long thereafter as the Annuitant shall live.
The fourth payment option is based on the 1983a Individual Annuity Mortality
Table set back one year and a net investment rate of 3% per annum. The amount of
each payment under this option will depend upon the age of the Annuitant at the
time the first payment is due. If any periodic payment due any payee is less
than $200, Hartford may make payments less often. The first, second and third
payment options are based on a net investment rate of 3% per annum. Hartford
may, however, from time to time, at Our discretion if mortality appears more
favorable and interest rates justify, apply other tables which will result in
higher monthly payments for each $1,000 applied under one or more of the four
payment options.
Hartford will make any other arrangements for income payments as may be
agreed on.
LEGAL DEVELOPMENTS REGARDING INCOME PAYMENTS
In those states affected by the 1983 Supreme Court decision in Arizona
Governing Committee v. Norris, income
<PAGE>
16 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
payment options involving life income are based on unisex actuarial tables. In
addition, legislation has previously been introduced in Congress which, had it
been enacted, would have required the use of tables that do not vary on the
basis of sex for some or all annuities. Currently, several states have enacted
such laws.
BENEFICIARY
The Owner names the Beneficiary in the enrollment form for the Certificate.
The Owner may change the Beneficiary (unless irrevocably named) during the
Insured's lifetime by written request to Hartford. If no Beneficiary is living
when the Insured dies, the Death Proceeds will be paid to the Owner if living;
otherwise to the Owner's estate.
INCREASES AND DECREASES IN FACE AMOUNT
The minimum Face Amount of the Certificate is $50,000. At any time after
purchasing a Certificate, the Owner may request a change in the Face Amount by
making a request In Writing to Hartford and directing such request to Hartford's
Customer Service Center.
All requests to increase the Face Amount must be applied for on a new
enrollment form. All requests will be subject to evidence of insurability
satisfactory to the Company and subject to Our rules then in effect. Any
increase approved by Us will be effective on the Processing Date following the
date We approve the request. The Monthly Deduction Amount on the first
Processing Date on or after the effective date of the increase will reflect a
charge for the increase.
A decrease in the Face Amount will be effective on the first Processing Date
following the date We receive the request. Decreases must reduce the Face Amount
by at least $25,000, and the remaining Face Amount must not be less than
$50,000. Decreases will be applied:
(a) to the most recent increase; then
(b) successively to each prior increase, and then
(c) to the initial Face Amount.
We reserve the right to limit the number of Face Amount increases or
decreases made under the Certificate to no more than one in any 12 month period.
BENEFITS AT MATURITY
If the Insured is living on the Maturity Date, on surrender of the
Certificate to Hartford, Hartford will pay to the Owner the Cash Surrender Value
on the date the Certificate is surrendered. However, on the Maturity Date, the
Certificate will terminate and Hartford will have no further obligations under
the Certificate.
TERMINATION OF PARTICIPATION IN
THE GROUP POLICY
Participation in the Group Policy may be terminated by Hartford or the
Participating Employer. The party initiating the termination must provide notice
of such termination to each Owner of record, at his or her last known address,
at least 15 days prior to the date of termination. In the event of such
termination, no new enrollment forms for new Insureds will be accepted on or
after the date notice of discontinuance is received or sent by Hartford,
whichever is applicable, nor will any new Certificates be issued. If premium
payments are discontinued, Hartford will continue insurance Coverage under the
Certificate as long as the Cash Surrender Value is sufficient to cover the
charges due. This Continuation of Insurance will not continue the Coverage under
the Certificate beyond Attained Age 100, nor will it continue any optional
benefit rider beyond the Certificate's date of termination. If the Group Policy
is discontinued or amended to discontinue the eligible class to which an Insured
belongs (and if the Coverage on the Insured is not transferred to another
insurance carrier), any Certificate then in effect will remain in force under
the discontinued Group Policy, provided it is not canceled or surrendered by the
Owner, subject to Hartford's qualifications then in effect.
LAPSE AND REINSTATEMENT WHILE
THE GROUP POLICY IS IN EFFECT
LAPSE AND GRACE PERIOD
A Grace Period of 61 days will be allowed following the date We mail to the
Owner notice that the Cash Surrender Value is insufficient to pay the charges
due under the Certificate. Unless the Owner has given Hartford written notice of
termination in advance of the date of termination of the Certificate, insurance
will continue in force during the Grace Period. The Owner will be liable to
Hartford for all charges due under the Certificate then unpaid for the period
the Certificate remains in force.
In the event that total Debt outstanding equals or exceeds the Cash
Surrender Value, the Certificate will terminate 31 days after We have mailed
notice to Your last known address and that of any assignees of record. If
sufficient Loan repayment is not made by the end of this 31 day period, the
Certificate will end without value.
REINSTATEMENT
Prior to the death of the Insured, and unless (1) the Group Policy is
terminated (See "Termination of Participation in the Group Policy") or (2) the
Certificate has been surrendered for cash, the Certificate may be reinstated
prior to the Maturity Date, provided:
(a) you make Your request within three (3) years of the date of lapse; and
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 17
- --------------------------------------------------------------------------------
(b) satisfactory evidence of insurability is submitted.
To reinstate Your Certificate, you must remit a premium payment large enough
to keep the coverage under the Certificate in force for at least 3 months
following the date of reinstatement. The Face Amount of the reinstated
Certificate cannot exceed the Face Amount at the time of lapse. The Investment
Value on the reinstatement date will reflect:
(a) The Investment Value at the time of termination; plus
(b) Net Premiums attributable to premiums paid at the time of reinstatement.
Upon reinstatement, any Debt at the time of termination must be repaid or
carried over to the reinstated Certificate.
ENROLLMENT FOR A CERTIFICATE
Individuals wishing to purchase a Certificate must submit an enrollment form
to Hartford. Within limits, an applicant may choose the Initial Premium and the
initial Face Amount. A Certificate generally will be issued only on the lives of
Insureds Attained Age 79 and under who supply evidence of insurability
satisfactory to the Company. Acceptance is subject to Hartford's underwriting
rules and Hartford reserves the right to reject an enrollment form for any
reason. No change in the terms or conditions of a Certificate will be made
without the consent of the Owner.
The Certificate will be effective on the Coverage Date only after Hartford
has received all outstanding delivery requirements and received the Initial
Premium. The Coverage Date is the date used to determine all future cyclical
transactions on the Certificate, e.g., Processing Date, coverage months and
Coverage Years.
THE RIGHT TO EXAMINE THE CERTIFICATE
An Owner has a limited right to return a Certificate. Subject to applicable
state regulation, if the Certificate is returned, by mail or personal delivery
to Hartford or to the agent who sold the Certificate, to be canceled within 10
days after delivery of the Certificate to the Owner, Hartford will return either
(1) the total amount of premiums or (2) the Cash Value plus charges deducted
under the Certificate to the Owner within 7 days. If the state where Your
Certificate is issued requires that We return Your Initial Premium, We will
allocate Your initial Net Premium to the Fidelity VIP Money Market Investment
Division. If the state of issue of Your Certificate provides for Our return of
the Certificate's Cash Value to the Owner, We will allocate the initial Net
Premium immediately among Your chosen Investment Divisions.
DEDUCTIONS FROM PREMIUM
Before allocating the Net Premium to the Investment Divisions, a deduction
as a percentage of premium is made for the front-end sales load, premium taxes
and the DAC tax charge. The amount of each premium allocated to the Investment
Divisions is Your Net Premium.
FRONT-END SALES LOAD
The current front-end sales load is 6.75% of any premium paid for Coverage
Years 1 through 7 and 4.75% of any premium paid in Coverage Years 8 and later.
The front-end sales load covers expenses related to the sale and
distribution of the Certificates. The front-end sales load may be reduced for
certain sales of the Certificates under circumstances which result in a saving
of such sales and distribution expenses. To qualify for such a reduction, a plan
must satisfy certain criteria as to, for example, the expected number of Owners
and the anticipated Face Amount of all Certificates under the plan. Generally,
the sales contacts and effort and administrative costs per Certificate vary
based on such factors as the size of the plan, the purpose for which
Certificates are purchased and certain characteristics of the plan's members.
The amount of reduction and the criteria for qualification are related to the
reduced sales effort and administrative costs resulting from sales to qualifying
plans. Hartford may modify from time to time on a uniform basis both the amounts
of reductions and the criteria for qualification. Reductions in these charges
will not be unfairly discriminatory against any person, including the affected
Owners funded by the Separate Account.
PREMIUM RELATED TAX CHARGE
We deduct a percentage of each premium to cover taxes assessed against
Hartford that are attributable to premiums. This percentage will vary by locale
depending on the tax rates in effect there. The range of premium taxes actually
deducted by Hartford currently ranges from 0% to 4%.
DAC TAX CHARGE
The Company deducts 1.25% of each premium to cover a federal premium tax
assessed against the Company. This charge is reasonable in relation to the
Company's federal income tax burden, under Section 848 of the Code, resulting
from the receipt of premiums. We will adjust this charge based on changes in the
applicable tax law.
DEDUCTIONS AND CHARGES FROM
INVESTMENT VALUE
MONTHLY DEDUCTION AMOUNTS
On the Coverage Date and on each subsequent Processing Date, Hartford will
deduct an amount (the
<PAGE>
18 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
"Monthly Deduction Amount") from the Investment Value to cover certain charges
and expenses incurred in connection with a Certificate. The Monthly Deduction
Amount will vary from month to month. These will be taken from the Charge
Deduction Division, if designated in the enrollment form for the Certificate or
later elected.
If a Charge Deduction Division has been designated but the Investment Value
in the Charge Deduction Division is less than that required to cover all charges
due on such date:
(1) Hartford will apply the Investment Value of the Charge Deduction Division to
the charges due and set the Investment Value in the Charge Deduction
Division to zero; and
(2) any additional amount due will be allocated among the remaining Investment
Divisions on a Pro Rata Basis.
If no Charge Deduction Division has been designated or elected, any amounts
due will be allocated among the Owner's chosen Investment Divisions on a Pro
Rata Basis.
The Monthly Deduction Amount is equal to:
(a) the administrative expense charge; plus
(b) the charges for cost of insurance; plus
(c) any charges for additional benefits provided by rider.
(A) Monthly Administrative Fee and Other Expense Charges
Hartford will assess a monthly administrative charge to compensate
Hartford for administrative costs in connection with the Certificates. This
charge will be $5 per Coverage month initially and is guaranteed never to
exceed $10.00 per Coverage month. This charge covers the average expected
cost for these expenses.
(B) Cost of Insurance Charge
The charge for the cost of insurance is equal to:
(i) the cost of insurance rate per $1,000; multiplied by
(ii) the Net Amount at Risk; divided by
(iii) $1,000.
The Net Amount at Risk equals the Death Benefit less the Cash Value on
that date.
The cost of insurance charge is to cover Hartford's anticipated mortality
costs. Hartford uses various underwriting procedures, including medical
underwriting procedures, depending on the characteristics of the group to
which the Group Policies are issued. The current cost of insurance rates for
standard risks may be equal to or less than the 1980 Commissioners Standard
Ordinary Mortality Table. Substandard risks will be charged a higher cost of
insurance rate that will not exceed rates based on a multiple of the 1980
Commissioners Standard Ordinary Mortality Table. The multiple will be based
on the Insured's risk class. The use of simplified underwriting and
guaranteed issue procedures may result in the cost of insurance charges
being higher for some individuals than if medical underwriting procedures
were used.
Cost of insurance rates are based on the age, sex (except where unisex
rates apply), and rate class of the Insured and group mortality
characteristics and the particular characteristics (such as the rate class
structure) under the Group Policy that are agreed to by Hartford and the
Participating Employer. The actual monthly cost of insurance rates will be
based on Hartford's expectations as to future experience. Hartford will
determine the cost of insurance rate at the start of each Coverage Year. Any
changes in the cost of insurance rate will be made uniformly for all
Insureds in the same risk class.
The rate class of an Insured affects the cost of insurance rate. Hartford
and the Participating Employer will agree to the number of classes and
characteristics of each class. The classes may vary by smokers and
nonsmokers, active and retired status, and/or any other nondiscriminatory
classes agreed to by the Participating Employer. Where smoker and non-smoker
divisions are provided, an Insured who is in the nonsmoker division of a
rate class will have a lower cost of insurance than an Insured in the smoker
division of the same rate class, even if each Insured has an identical
Certificate.
Because the Cash Value and the Death Benefit Amount under a Certificate
may vary from month to month, the cost of insurance charge may also vary on
each Processing Date.
(C) Rider Charge
If the policy includes riders, a charge is deducted from the Investment
Value on each Processing Date.
The charge applicable to these riders is to compensate Hartford for
anticipated cost of providing these benefits and are specified on the
applicable rider.
The Riders available are described on page 20 under "Supplemental
Benefits" section.
MORTALITY AND EXPENSE RISK CHARGE
A charge is made for mortality and expense risks assumed by Hartford.
Hartford currently deducts a daily charge for Coverage Years 1 through 10 at an
effective annual rate of .65% of the value of each Investment Division's assets
and for Coverage Years 11 and later at an effective annual rate of .50% of an
Investment Division's assets. In no event will the charge exceed .65% of an
Investment Division's assets on an annual basis. See also, "Premiums --
Accumulation Unit Values," page 12.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 19
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The Mortality and Expense Risk Charge is equal to:
(i) the Mortality and Expense Risk Rate; multiplied by
(ii) the portion of the Cash Value allocated to the Investment Divisions and the
Loan Account.
The mortality risk assumed is that the actual cost of insurance charges
specified in the Certificate will be insufficient to meet actual claims. The
expense risk assumed is that expenses incurred in issuing and administering the
Certificates will exceed the administrative charges set forth therein.
If these charges are insufficient to cover actual costs and assumed risks,
the loss will fall on Hartford. Conversely, if the charge proves more than
sufficient, any excess will be added to Hartford's surplus.
TAXES
Currently, no charge is made to the Separate Account for federal, state, and
local taxes that may be attributable to the Separate Account. A change in the
applicable federal, state or local tax laws which impose tax on Hartford and/or
the Separate Account may result in a charge against the Certificates in the
future. Charges for other taxes, if any, attributable to the Separate Account
may also be made.
OTHER MATTERS
ADDITIONS, DELETIONS OR SUBSTITUTIONS
OF INVESTMENTS
Hartford reserves the right, subject to compliance with the law as then in
effect, to make additions to, deletions from, or substitutions for the Separate
Account and the Investment Divisions which fund the Group Policies. If shares of
any of the Portfolios should no longer be available for investment, or if, in
the judgment of Hartford's management, further investment in shares of any
Portfolio should become inappropriate in view of the purposes of the Group
Policies, Hartford may substitute shares of another Portfolio for shares already
purchased, or to be purchased in the future, under the Group Policies. No
substitution of securities will take place without notice to and consent of
Owners and without prior approval of the SEC to the extent required by the 1940
Act. Subject to Owner approval, if required, Hartford also reserves the right to
end the registration under the 1940 Act of the Separate Account or any other
separate accounts of which it is the depositor which may fund the Group
Policies.
VOTING RIGHTS
In accordance with its view of presently applicable law, Hartford will vote
the shares of the Funds at regular and special meetings of the shareholders of
the Funds in accordance with instructions from Owners (or the assignee of the
Certificates, as the case may be) having a voting interest in the Separate
Account. The number of shares held in the Separate Account which are
attributable to each Owner is determined by dividing the Owner's interest in
each Investment Division by the net asset value of the applicable shares of the
Funds. Hartford will vote shares for which no instructions have been given and
shares which are not attributable to Owners (i.e., shares owned by Hartford) in
the same proportion as it votes shares for which it has received instructions.
If the 1940 Act or any rule promulgated thereunder should be amended, however,
or if Hartford's present interpretation should change and, as a result, Hartford
determines it is permitted to vote the shares of the Funds in its own right, it
may elect to do so.
The voting interests of the Owners (or the assignees) in the Funds will be
determined as follows: Owners may cast one vote for each full or fractional
Accumulation Unit owned under their respective Certificates and allocated to an
Investment Division the assets of which are invested in the particular Fund on
the record date for the shareholder meeting for that Fund. If, however, an Owner
has taken a Loan secured by the Certificate, amounts transferred from the
Investment Division(s) to the Loan Account(s) in connection with the Loan (see
"Detailed Description of Certificate Benefits and Provisions -- Loans," page 14)
will not be considered in determining the voting interests of the Owner. Owners
should review the prospectuses for the Funds which accompany this Prospectus to
determine matters on which shareholders may vote.
Hartford may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that the shares be
voted so as to cause a change in the sub-classification or investment objective
of one or more of the Funds or to approve or disapprove an investment advisory
policy for the Funds. In addition, Hartford itself may disregard voting
instructions in favor of changes initiated by an Owner in the investment policy
or the investment adviser of the Funds if Hartford reasonably disapproves of
such changes. A change would be disapproved only if the proposed change is
contrary to state law or prohibited by state regulatory authorities. In the
event Hartford does disregard voting instructions, a summary of that action and
the reasons for such action will be included in the next periodic report to
Owners.
OUR RIGHTS
We reserve the right to take certain actions in connection with Our
operations and the operations of the Separate Account. These actions will be
taken in accordance with applicable laws (including obtaining any required
approval of the SEC). If necessary, We will seek approval by Owners.
<PAGE>
20 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Specifically, We reserve the right to:
- - Add or remove any Investment Division;
- - Create new separate accounts;
- - Combine the Separate Account with one or more other separate accounts;
- - Operate the Separate Account as a management investment company under the 1940
Act or in any other form permitted by law;
- - Deregister the Separate Account under the 1940 Act;
- - Manage the Separate Account under the direction of a committee or discharge
such committee at any time;
- - Transfer the assets of the Separate Account to one or more other separate
accounts; and
- - Restrict or eliminate any of the voting rights of Owners or other persons who
have voting rights as to the Separate Account.
Hartford also reserves the right to change the name of the Separate Account.
We have reserved all rights to the name of Hartford Life and Annuity
Insurance Company or any part of it. We may allow the Separate Account and other
entities to use Our name or part of it, but We may also withdraw this right.
STATEMENTS TO OWNERS
We will send You a statement at least once each Coverage Year, showing:
(a) the current Cash Value, Cash Surrender Value and Face Amount;
(b) the premiums paid, Monthly Deduction Amounts and Loans since the last
report;
(c) the amount of any outstanding Debt;
(d) notifications required by the provisions of the Certificate; and
(e) any other information required by the Insurance Department of the State
where the Certificate was delivered.
LIMIT ON RIGHT TO CONTEST
Hartford may not contest the validity of the Certificate after it has been
in effect during the Insured's lifetime for two years from the Issue Date. If
the Certificate is reinstated, the two-year period is measured from the date of
reinstatement. Any increase in the Face Amount as a result of a premium payment
is contestable for two years from its effective date. In addition, if the
Insured commits suicide in the two-year period, or such period as specified in
state law, the Death Benefit payable will be limited to the premiums paid less
any outstanding Debt and partial withdrawals.
MISSTATEMENT AS TO AGE OR SEX
If the age or sex of the Insured is incorrectly stated, the amount of all
benefits payable will be appropriately adjusted, as specified in the
Certificate.
ASSIGNMENT
The Certificate may be assigned as collateral for a loan or other
obligation. Hartford is not responsible for any payment made or action taken
before receipt of written notice of such assignment. Proof of interest must be
filed with any claim under a collateral assignment.
DIVIDENDS
No dividends will be paid under the Certificates.
EXPERIENCE CREDITS
The Certificates issued under a Group Policy may be eligible for experience
credits due to administrative savings. The amount of any experience credit may
be paid in cash or applied to and used to increase the Investment Value.
SUPPLEMENTAL BENEFITS
The following supplemental benefit, which is subject to the restrictions and
limitations set forth therein, may be included in a Certificate.
MATURITY DATE EXTENSION RIDER
We will extend the Maturity Date (the date on which the Certificate will
mature), to the date of death of the Insured. Certain Death Benefit and premium
restrictions apply. See "Federal Tax Considerations -- Income Taxation of
Certificate Benefits," page 23.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 21
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EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
POSITION WITH HARTFORD, OTHER BUSINESS PROFESSION, VOCATION OR EMPLOYMENT
NAME, AGE YEAR OF ELECTION FOR PAST 5 YEARS; OTHER DIRECTORSHIPS
- -------------------------------- ----------------------------------- ------------------------------------------------------------
<S> <C> <C>
Wendell J. Bossen, 63 Vice President, 1995** Vice President (1992-Present), Hartford Life Insurance
Company; Executive Vice President (1984), Mutual Benefit.
Gregory A. Boyko, 45 Vice President, 1995 Vice President & Controller (1995-Present), Hartford Life
Insurance Company; Chief Financial Officer (1994-1995),
IMG American Life; Senior Vice President (1992-1994),
Connecticut Mutual Life Insurance Company.
Peter W. Cummins, 60 Vice President, 1993 Vice President, Individual Annuity Operations
(1989-Present), Hartford.
Ann M. deRaismes, 46 Vice President, 1994 Vice President (1994-Present); Assistant Vice President
(1992-1994); Director of Human Resources (1991-1997),
Hartford Life Insurance Company.
James R. Dooley, 60 Vice President, 1973 Vice President, Director Information Services
(1973-Present), Hartford.
Timothy M. Fitch, 44 Vice President, 1995 Vice President, (1995-Present); Assistant Vice President
(1993-1995); Director (1991-1993), Hartford Life Insurance
Company.
Bruce D. Gardner, 46 Director, 1991* Vice President (1996-Present); General Counsel and Corporate
Secretary (1991-1995), Hartford Life Insurance Company.
Joseph H. Gareau, 50 Executive Vice President & Senior Vice President & Chief Investment Officer
Chief Investment Officer, (1992-1993), Hartford; Senior Vice President & Chief
1993 Investment Officer (1992), Hartford Insurance Group.
Director, 1993*
Donald J. Gillette, 51 Vice President, 1993 Vice President, Director of Marketing (1991-Present),
Hartford.
Lynda Godkin, 43 General Counsel, 1996 Associate General Counsel and Corporate Secretary
Corporate Secretary, 1995 (1995-1996); Assistant General Counsel and Secretary
(1994-1995); Counsel (1990-1994), Hartford Life Insurance
Company.
Lois W. Grady, 52 Vice President, 1993 Assistant Vice President (1988-1993), Hartford Life
Insurance Company.
Robert A. Kerzner, 45 Vice President, 1994 Vice President (1994-Present); Regional Vice President
(1991-1994), Hartford.
William B. Malchodi, Jr., 46 Vice President, 1994 Vice President (1994-Present); Director of Taxes
Director of Taxes, 1992 (1992-Present), Hartford Insurance Group.
Thomas M. Marra, 38 Executive Vice President & Senior Vice President & Director, Individual Life and
Director, Individual Life Annuity Division (1993-1996); Director of Individual
and Annuity Division, 1996 Annuities (1991-1993), Hartford.
Director, 1994*
Steven L. Mattieson, 52 Vice President, 1984 Vice President, Director of New Business (1984-Present),
Hartford.
Joseph J. Noto, 45 Vice President, 1989 President and Director (1994-Present), American Maturity
Life Insurance Company; Vice President (1989-Present),
Hartford Life Insurance Company.
Craig D. Raymond, 36 Vice President, 1993 Assistant Vice President (1992-1993); Actuary (1989-1994),
Chief Actuary, 1994 Hartford Life Insurance Company.
David T. Schrandt, 49 Vice President, 1987 Vice President, Treasurer and Controller (1987-Present),
Treasurer, 1987 Hartford.
</TABLE>
<PAGE>
22 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITION WITH HARTFORD, OTHER BUSINESS PROFESSION, VOCATION OR EMPLOYMENT
NAME, AGE YEAR OF ELECTION FOR PAST 5 YEARS; OTHER DIRECTORSHIPS
- -------------------------------- ----------------------------------- ------------------------------------------------------------
<S> <C> <C>
Lowndes A. Smith, 57 President, 1989 President & Chief Operating Officer (1989-Present), Hartford
Chief Executive Officer, 1993 Life Insurance Company.
Director, 1985*
Lizabeth H. Zlatkus, 37 Vice President, 1994 Vice President, Director Business Operations (1994-Present),
Director, 1994* Assistant Vice President, Director Executive Operations
(1992-1994), Hartford Life Insurance Company.
</TABLE>
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
- ---------
* Denotes date of election to Board of Directors.
** ITT Hartford Affiliated Company
DISTRIBUTION OF THE
GROUP POLICIES
Hartford intends to sell the Group Policies in all jurisdictions where it is
licensed to do business. The Group Policies will be sold by life insurance sales
representatives who represent Hartford and who are registered representatives of
Hartford Equity Sales Company, Inc. ("HESCO"), or certain other registered
broker-dealers. Any sales representative or employee will have been qualified to
sell variable life insurance policies under applicable Federal and State laws.
Each broker-dealer is registered with the SEC under the Securities Exchange Act
of 1934 and all are members of the National Association of Securities Dealers,
Inc. HESCO is the principal underwriter for the Group Policies. The maximum
sales commission payable to Hartford agents, independent registered insurance
brokers, and other registered broker-dealers is 6% of the premiums paid. In
addition, expense allowances, service fees and asset-based trail commissions may
be paid. The sales representative may be required to return all or a portion of
the commissions paid if a Certificate terminates prior to the second Certificate
Anniversary.
SAFEKEEPING OF THE SEPARATE ACCOUNT ASSETS
The assets of the Separate Account are held by Hartford. The assets of the
Separate Account are kept physically segregated and held separate and apart from
the General Account of Hartford. Hartford maintains records of all purchases and
redemptions of shares of the Fund. Additional protection for the assets of the
Separate Account is afforded by Hartford's blanket fidelity bond issued by Aetna
Casualty and Surety Company, in the aggregate amount of $50 million, covering
all of the officers and employees of Hartford.
FEDERAL TAX CONSIDERATIONS
GENERAL
SINCE THE TAX LAW IS COMPLEX AND SINCE TAX CONSEQUENCES WILL VARY ACCORDING
TO THE ACTUAL STATUS OF THE POLICY OWNER INVOLVED AND THE TYPE OF PLAN UNDER
WHICH THE POLICY IS PURCHASED, LEGAL AND TAX ADVICE MAY BE NEEDED BY A PERSON,
TRUSTEE OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A POLICY DESCRIBED HEREIN.
It should be understood that any detailed description of the Federal income
tax consequences regarding the purchase of these Policies cannot be made in this
Prospectus and that special tax rules may be applicable with respect to certain
purchase situations not discussed herein. In addition, no attempt is made here
to consider any applicable state or other tax laws. For detailed information, a
qualified tax adviser should always be consulted. This discussion of Federal tax
considerations is based upon Hartford understanding of current Federal income
tax laws as they are currently interpreted.
TAXATION OF THE COMPANY AND
THE SEPARATE ACCOUNT
The Separate Account is taxed as a part of Hartford which is taxed as a life
insurance company under Part 1 of Subchapter L of Chapter 1 of the Internal
Revenue Code ("Code"). Accordingly, the Separate Account will not be taxed as a
"regulated investment company" under Subchapter M of the Code. Investment income
and realized capital gains on the assets of the Separate Account (the underlying
Investment Divisions) are reinvested and are taken into account in determining
the value of the Accumulation Units (see "Detailed Description of Certificate
Benefits and Provisions -- Values under the Certificate," on page 12). As a
result, such investment income and realized
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 23
- --------------------------------------------------------------------------------
capital gains are automatically applied to increase reserves under the
Certificate.
Hartford does not expect to incur any Federal income tax on the earnings or
realized capital gains attributable to the Separate Account. Based upon these
expectations, no charge is currently being made to the Separate Account for
Federal income taxes. If Hartford incurs income taxes attributable to the
Separate Account or determines that such taxes will be incurred, it may assess a
charge for taxes against the Separate Account.
INCOME TAXATION OF CERTIFICATE BENEFITS
For Federal income tax purposes, the Certificates should be treated as life
insurance policies under Section 7702 of the Code. The death benefit under a
life insurance policy is excluded from the gross income of the Beneficiary.
Also, a life insurance policy owner is not taxed on increments in the policy
value until the policy is partially or completely surrendered. Section 7702
limits the amount of premiums that may be invested in a policy that is treated
as life insurance. Hartford intends to monitor premium levels to assure
compliance with the Section 7702 standards.
During the first fifteen policy years, an "income first" rule generally
applies to any distribution of cash that is required under Code Section 7702
because of a reduction in benefits under the Certificate.
Hartford also believes that any Loan received under a Certificate will be
treated as Debt of the Owner, and that no part of any Loan under a Certificate
will constitute income to the Owner. A surrender or assignment of the
Certificate may have tax consequences depending upon the circumstances. Owners
should consult qualified tax advisers concerning the effect of such changes.
Federal, state, and local estate tax, inheritance, and other tax
consequences of ownership or receipt of Certificate proceeds depend on the
circumstances of each Owner or Beneficiary.
The Maturity Date Extension Rider allows an Owner to extend the Maturity
Date to the date of the death of the Insured. Although Hartford believes that
the Certificate will continue to be treated as a life insurance contract for
federal income tax purposes after the scheduled Maturity Date, due to the lack
of specific guidance on this issue, this result is not certain. If the
Certificate is not treated as a life insurance contract for federal income tax
purposes after the Maturity Date, among other things, the Death Proceeds may be
taxable to the recipient. The Owner should consult a competent tax adviser
regarding the possible adverse tax consequences resulting from an extension of
the scheduled Maturity Date.
MODIFIED ENDOWMENT CONTRACTS
Code Section 7702A applies an additional test, the "seven-pay" test, to life
insurance contracts. A modified endowment contract is a life insurance policy
which satisfies the Section 7702 definition of life insurance but fails the
seven-pay test of Section 7702A. A policy fails the seven-pay test if the
accumulated amount paid into the Certificate at any time during the first seven
Coverage Years exceeds the sum of the net level premiums that would have been
paid up to that point if the Certificate provided for paid-up future benefits
after the payment of seven level annual premiums. Computational rules for the
seven-pay test are described in Section 7702A(c).
A policy that is classified as a modified endowment contract is eligible for
certain aspects of the beneficial tax treatment accorded to life insurance. That
is, the death benefit is excluded from income and increments in value are not
subject to current taxation. However, withdrawals and loans from a modified
endowment policy are treated first as income, then as a recovery of basis.
Taxable withdrawals are subject to a 10% additional tax, with certain
exceptions. Generally, only distributions and loans made in the first year in
which a policy becomes a modified endowment policy, and in subsequent years, are
taxable. However, distributions and loans made in the two years prior to a
policy's failing the seven-pay test are deemed to be in anticipation of failure
and are subject to tax.
If the Certificate satisfies the seven-pay test for seven years,
distributions and loans made thereafter will not be subject to the modified
endowment policy rules, unless the Certificate is changed materially. The
seven-pay test will be applied anew at any time the Certificate undergoes a
material change, which includes an increase in the Face Amount.
All modified endowment policies that are issued within any calendar year to
the same policy owner by one company or its affiliates shall be treated as one
modified endowment policy for the purpose of determining the taxable portion of
any loan or distribution.
Hartford has instituted procedures to monitor whether a Certificate may
become a modified endowment contract after issue.
DIVERSIFICATION REQUIREMENTS
Section 817 of the Code provides that a variable life insurance policy
(other than a pension plan policy) will not be treated as a life insurance
policy for any period during which the investments made by the separate account
underlying the policy are not adequately diversified in accordance with
regulations prescribed by the Treasury. If a policy is not treated as a life
insurance policy, the policy owner will be subject to income tax on the annual
increases in cash value. The Treasury has issued diversification regulations
which,
<PAGE>
24 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
among other things, generally require that no more than 55% of the value of the
total assets of the segregated asset account (such as the Funds) underlying a
variable contract is represented by any one investment, no more than 70% is
represented by any two investments, no more than 80% is represented by any three
investments, and no more than 90% is represented by any four investments. In
determining whether the diversification standards are met, all securities of the
same issuer, all interests in the same real property project, and all interests
in the same commodity are each treated as a single investment. In addition, in
the case of government securities, each government agency or instrumentality
shall be treated as a separate issuer. If the diversification standards are not
met, non-pension policy owners will be subject to current tax on the increase in
cash value in the policy.
A separate account must be in compliance with the diversification standards
on the last day of each calendar quarter or within 30 days after the quarter
ends. If an insurance company inadvertently fails to meet the diversification
standards, the company may comply within a reasonable period and avoid the
taxation of policy income on an ongoing basis. However, either the company or
Policy Owner must agree to pay the tax due for the period during which the
diversification standards were not met. The amount required to be paid shall be
an amount based upon the tax that would have been owed by the policy owner if
they were treated as receiving the income on the policy for such period or
periods.
FEDERAL INCOME TAX WITHHOLDING
If any amounts are deemed to be current taxable income to the Owner, such
amounts will be subject to Federal income tax withholding and reporting,
pursuant to Section 3405 of the Internal Revenue Code.
OTHER TAX CONSIDERATIONS
Qualified tax advisers should be consulted concerning the estate and gift
tax consequences of Certificate ownership and distributions under federal, state
and local law.
LEGAL PROCEEDINGS
There are no material legal proceedings pending to which the Separate
Account is a party.
EXPERTS
The audited financial statements included in this prospectus and elsewhere
in the registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports. Reference is made to said report on the
statutory-basis financial statements of Hartford Life and Annuity Insurance
Company which states the statutory-basis financial statements are presented in
accordance with statutory accounting practices prescribed or permitted by the
National Association of Insurance Commissioners and the State of Connecticut
Insurance Department, not presented in accordance with generally accepted
accounting principles. Reference is made to said report on the statutory-basis
financial statements of Hartford Life and Annuity Insurance Company (the
Depositor), which includes an explanatory paragraph with respect to the change
in valuation method in determining aggregate reserves for future benefits in
1994, as discussed in Note 1 of Notes to Statutory Financial Statements. The
principal business address of Arthur Andersen LLP is One Financial Plaza,
Hartford, Connecticut 06103.
The hypothetical illustrations included in this Prospectus and Registration
Statement have been approved by Pauline Gyllenhammer, ASA, MAAA, Senior
Actuarial Associate, and are included in reliance upon her opinion as to their
reasonableness.
REGISTRATION STATEMENT
A registration statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. This Prospectus does
not contain all information set forth in the registration statement, its
amendments and exhibits, to all of which reference is made for further
information concerning the Separate Account, Hartford, the Group Policies and
the Certificates.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 25
- --------------------------------------------------------------------------------
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFIT, CASH
VALUE AND CASH SURRENDER VALUE
The following tables illustrate how the Death Benefit, Cash Value and Cash
Surrender Value of a Group Policy may change with the investment experience of
the Separate Account. The tables show how the Death Benefit, Cash Value and Cash
Surrender Value of a Certificate issued to an Insured of a given age would vary
over time if the investment return on the assets held in each Portfolio were a
uniform, gross annual rate of 0%, 6% and 12%. The Death Benefit, Cash Value and
Cash Surrender Value would be different from those shown if the gross annual
investment returns averaged 0%, 6% and 12% over a period of years, but
fluctuated above and below those averages for individual Coverage Years. The
tables assume that no Loans are made and that no partial withdrawals have been
made. The tables are also based on the assumption that the Owner has not
requested an increase or decrease in the Face Amount and that no transfers have
been made in any Coverage Years.
The tables on pages 26 to 37 illustrate a Certificate issued to a Male
Insured, Age 45 in the Medical Non-Smoker Class with an Initial Face Amount of
$250,000. The Death Benefit, Cash Value and Cash Surrender Value would be lower
if the Insured was a smoker or in a special class since the cost of insurance
charges would increase.
The tables reflect the fact that the net return on the assets held in the
Investment Divisions is lower than the gross after-tax return of the Portfolios.
This is because these tables assume an investment management fee and other
estimated Portfolio expenses totaling 0.84%. The 0.84% figure is based on an
average of the current management fees and expenses of the available thirteen
Portfolios, taking into account any applicable expense caps or reimbursement
arrangements. Actual fees and expenses of the Portfolios associated with a
Certificate may be more or less than 0.84%, will vary from year to year, and
will depend on how the Cash Value is allocated.
As their headings indicate, the tables reflect the deductions of current
contractual charges and guaranteed contractual charges for a single gross
interest rate. These charges include the front-end sales load, the daily charge
to the Separate Account for assuming mortality and expense risks, and the
monthly administrative expense and cost of insurance charges. All tables assume
a charge of 2.00% for taxes attributable to premiums, a 1.25% charge for the
Federal DAC tax and reflect the fact that no charges against the Separate
Account are currently made for federal, state or local taxes attributable to the
Group Policy or Certificate.
Each table also shows the amount to which the premiums would accumulate if
an amount equal to those premiums were invested to earn interest, after taxes,
at 5% compounded annually.
Upon request, Hartford will furnish comparable illustrations based on a
proposed Certificate's specific circumstances.
<PAGE>
26 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
LEVEL DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$14,102 PREMIUM PAID FOR 7 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0.00% (-0.84% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 14,807 12,239 12,239 250,000 10,998 10,998 250,000
2 30,355 24,216 24,216 250,000 21,798 21,798 250,000
3 46,680 35,937 35,937 250,000 32,405 32,405 250,000
4 63,821 47,439 47,439 250,000 42,824 42,824 250,000
5 81,819 58,740 58,740 250,000 53,056 53,056 250,000
6 100,717 69,954 69,954 250,000 63,106 63,106 250,000
7 120,560 80,994 80,994 250,000 72,972 72,972 250,000
8 126,588 79,328 79,328 250,000 70,364 70,364 250,000
9 132,917 77,642 77,642 250,000 67,638 67,638 250,000
10 139,563 75,924 75,924 250,000 64,773 64,773 250,000
11 146,541 74,267 74,267 250,000 61,753 61,753 250,000
12 153,868 72,541 72,541 250,000 58,558 58,558 250,000
13 161,561 70,724 70,724 250,000 55,173 55,173 250,000
14 169,639 68,810 68,810 250,000 51,579 51,579 250,000
15 178,121 66,792 66,792 250,000 47,750 47,750 250,000
16 187,027 64,596 64,596 250,000 43,652 43,652 250,000
17 196,378 62,278 62,278 250,000 39,239 39,239 250,000
18 206,197 59,822 59,822 250,000 34,458 34,458 250,000
19 216,507 57,213 57,213 250,000 29,239 29,239 250,000
20 227,332 54,433 54,433 250,000 23,513 23,513 250,000
25 290,140 37,014 37,014 250,000 -- -- --
30 370,300 10,059 10,059 250,000 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT
FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 27
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
LEVEL DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$14,102 PREMIUM PAID FOR 7 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6.00% (5.16% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ------------------------------------ ------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- --------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 14,807 12,988 12,988 250,000 11,698 11,698 250,000
2 30,355 26,475 26,475 250,000 23,890 23,890 250,000
3 46,680 40,489 40,489 250,000 36,603 36,603 250,000
4 63,821 55,091 55,091 250,000 49,870 49,870 250,000
5 81,819 70,326 70,326 250,000 63,721 63,721 250,000
6 100,717 86,332 86,332 250,000 78,194 78,194 250,000
7 120,560 103,061 103,061 250,000 93,320 93,320 250,000
8 126,588 107,259 107,259 250,000 96,111 96,111 250,000
9 132,917 111,619 111,619 250,000 98,932 98,932 250,000
10 139,563 116,145 116,145 250,000 101,774 101,774 250,000
11 146,541 121,011 121,011 252,130 104,633 104,633 250,000
12 153,868 126,044 126,044 255,602 107,505 107,505 250,000
13 161,561 131,237 131,237 259,133 110,389 110,389 250,000
14 169,639 136,596 136,596 262,727 113,282 113,282 250,000
15 178,121 142,129 142,129 266,389 116,180 116,180 250,000
16 187,027 147,796 147,796 270,056 119,073 119,073 250,000
17 196,378 153,649 153,649 273,816 121,946 121,946 250,000
18 206,197 159,692 159,692 277,693 124,784 124,784 250,000
19 216,507 165,930 165,930 281,707 127,562 127,562 250,000
20 227,332 172,368 172,368 285,873 130,263 130,263 250,000
25 290,140 207,670 207,670 308,985 141,994 141,994 250,000
30 370,300 248,541 248,541 336,544 147,599 147,599 250,000
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT
FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
28 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
LEVEL DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$14,102 PREMIUM PAID FOR 7 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12.00% (11.16% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ---------------------------------------- -------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ------------ ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 14,807 13,736 13,736 250,000 12,399 12,399 250,000
2 30,355 28,823 28,823 250,000 26,068 26,068 250,000
3 46,680 45,411 45,411 250,000 41,149 41,149 250,000
4 63,821 63,696 63,696 250,000 57,806 57,806 250,000
5 81,819 83,881 83,881 250,000 76,221 76,221 250,000
6 100,717 106,273 106,273 254,083 96,602 96,602 250,000
7 120,560 130,925 130,925 304,005 119,031 119,031 276,543
8 126,588 144,078 144,078 325,025 129,977 129,977 293,388
9 132,917 158,535 158,535 347,606 141,883 141,883 311,284
10 139,563 174,416 174,416 371,869 154,820 154,820 330,298
11 146,541 192,129 192,129 398,458 168,873 168,873 350,497
12 153,868 211,577 211,577 427,072 184,128 184,128 371,956
13 161,561 232,909 232,909 457,767 200,690 200,690 394,751
14 169,639 256,303 256,303 490,695 218,666 218,666 418,966
15 178,121 281,959 281,959 526,031 238,171 238,171 444,689
16 187,027 309,996 309,996 563,818 259,320 259,320 472,013
17 196,378 340,733 340,733 604,415 282,233 282,233 501,037
18 206,197 374,419 374,419 648,085 307,031 307,031 531,867
19 216,507 411,332 411,332 695,115 333,834 333,834 564,616
20 227,332 451,769 451,769 745,803 362,778 362,778 599,401
25 290,140 719,091 719,091 1,064,976 545,479 545,479 808,621
30 370,300 1,136,917 1,136,917 1,532,372 809,012 809,012 1,091,620
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT
FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 29
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
INCREASING DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$14,102 PREMIUM PAID FOR 7 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0.00% (-0.84% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS --------------------------------- ---------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- --------- -------- ---------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 14,807 12,229 12,229 262,262 10,945 10,945 261,053
2 30,355 24,174 24,174 274,231 21,636 21,636 271,766
3 46,680 35,834 35,834 285,914 32,070 32,070 282,221
4 63,821 47,240 47,240 297,341 42,245 42,245 292,417
5 81,819 58,406 58,406 308,528 52,152 52,152 302,346
6 100,717 69,484 69,484 319,613 61,789 61,789 312,005
7 120,560 80,351 80,351 330,497 71,136 71,136 321,377
8 126,588 78,504 78,504 328,652 67,990 67,990 318,240
9 132,917 76,623 76,623 326,773 64,703 64,703 314,965
10 139,563 74,694 74,694 324,849 61,253 61,253 311,529
11 146,541 72,802 72,802 322,954 57,628 57,628 307,918
12 153,868 70,815 70,815 320,974 53,809 53,809 304,115
13 161,561 68,703 68,703 318,873 49,789 49,789 300,112
14 169,639 66,463 66,463 316,644 45,554 45,554 295,894
15 178,121 64,089 64,089 314,281 41,086 41,086 291,446
16 187,027 61,485 61,485 311,696 36,355 36,355 286,737
17 196,378 58,733 58,733 308,956 31,329 31,329 281,735
18 206,197 55,819 55,819 306,055 25,961 25,961 276,396
19 216,507 52,728 52,728 302,979 20,202 20,202 270,669
20 227,332 49,445 49,445 299,712 14,004 14,004 264,507
25 290,140 29,331 29,331 279,707 -- -- --
30 370,300 388 388 250,937 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT
FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
30 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
INCREASING DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$14,102 PREMIUM PAID FOR 7 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6.00% (5.16% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ------------------------------------ ------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- --------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 14,807 12,976 12,976 262,947 11,642 11,642 261,695
2 30,355 26,429 26,429 276,359 23,712 23,712 273,728
3 46,680 40,371 40,371 290,260 36,219 36,219 286,198
4 63,821 54,855 54,855 304,697 49,180 49,180 299,120
5 81,819 69,915 69,915 319,708 62,600 62,600 312,501
6 100,717 85,728 85,728 335,458 76,494 76,494 326,355
7 120,560 102,202 102,202 351,876 90,859 90,859 340,679
8 126,588 106,102 106,102 355,765 92,769 92,769 342,596
9 132,917 110,114 110,114 359,768 94,572 94,572 344,409
10 139,563 114,227 114,227 363,873 96,237 96,237 346,086
11 146,541 118,599 118,599 368,222 97,743 97,743 347,605
12 153,868 123,049 123,049 372,665 99,062 99,062 348,940
13 161,561 127,549 127,549 377,161 100,174 100,174 350,070
14 169,639 132,097 132,097 381,705 101,053 101,053 350,968
15 178,121 136,687 136,687 386,291 101,666 101,666 351,604
16 187,027 141,219 141,219 390,828 101,968 101,968 351,932
17 196,378 145,774 145,774 395,381 101,905 101,905 351,901
18 206,197 150,334 150,334 399,941 101,412 101,412 351,444
19 216,507 154,884 154,884 404,492 100,412 100,412 350,487
20 227,332 159,404 159,404 409,015 98,825 98,825 348,950
25 290,140 180,528 180,528 430,191 79,403 79,403 329,876
30 370,300 195,387 195,387 445,197 29,914 29,914 281,046
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT
FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 31
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
INCREASING DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$14,102 PREMIUM PAID FOR 7 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12.00% (11.16% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ---------------------------------------- ------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ------------ ----------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 14,807 13,724 13,724 263,629 12,341 12,341 262,334
2 30,355 28,773 28,773 278,562 25,872 25,872 275,761
3 46,680 45,277 45,277 294,939 40,710 40,710 290,486
4 63,821 63,417 63,417 312,937 56,988 56,988 306,637
5 81,819 83,378 83,378 332,739 74,840 74,840 324,352
6 100,717 105,503 105,503 354,676 94,424 94,424 343,786
7 120,560 129,890 129,890 378,865 115,898 115,898 365,095
8 126,588 142,752 142,752 391,626 125,773 125,773 374,902
9 132,917 156,893 156,893 405,655 136,480 136,480 385,537
10 139,563 172,430 172,430 421,070 148,081 148,081 397,060
11 146,541 189,766 189,766 438,249 160,652 160,652 409,546
12 153,868 208,812 208,812 457,146 174,273 174,273 423,076
13 161,561 229,719 229,719 477,891 189,044 189,044 437,746
14 169,639 252,678 252,678 500,670 205,065 205,065 453,658
15 178,121 277,897 277,897 525,692 222,446 222,446 470,921
16 187,027 305,512 305,512 555,663 241,294 241,294 489,641
17 196,378 335,803 335,803 595,671 261,722 261,722 509,931
18 206,197 369,001 369,001 638,707 283,844 283,844 531,906
19 216,507 405,379 405,379 685,055 307,778 307,778 555,682
20 227,332 445,230 445,230 735,008 333,656 333,656 581,390
25 290,140 708,677 708,677 1,049,553 498,237 498,237 744,890
30 370,300 1,120,446 1,120,446 1,510,173 738,596 738,596 996,606
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT
FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
32 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
LEVEL DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$6,000 PREMIUM PAID FOR 30 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0.00% (-0.84% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ------------------------------------ ------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- --------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,300 5,049 5,049 250,000 3,962 3,962 250,000
2 12,915 9,930 9,930 250,000 7,793 7,793 250,000
3 19,861 14,643 14,643 250,000 11,492 11,492 250,000
4 27,154 19,219 19,219 250,000 15,058 15,058 250,000
5 34,812 23,673 23,673 250,000 18,482 18,482 250,000
6 42,853 28,139 28,139 250,000 21,764 21,764 250,000
7 51,296 32,507 32,507 250,000 24,887 24,887 250,000
8 60,161 36,896 36,896 250,000 27,960 27,960 250,000
9 69,469 41,180 41,180 250,000 30,848 30,848 250,000
10 79,242 45,350 45,350 250,000 33,535 33,535 250,000
11 89,504 49,464 49,464 250,000 36,013 36,013 250,000
12 100,279 53,441 53,441 250,000 38,272 38,272 250,000
13 111,593 57,265 57,265 250,000 40,308 40,308 250,000
14 123,473 60,937 60,937 250,000 42,110 42,110 250,000
15 135,947 64,457 64,457 250,000 43,667 43,667 250,000
16 149,044 67,760 67,760 250,000 44,955 44,955 250,000
17 162,796 70,911 70,911 250,000 45,946 45,946 250,000
18 177,236 73,904 73,904 250,000 46,603 46,603 250,000
19 192,398 76,733 76,733 250,000 46,882 46,882 250,000
20 208,318 79,392 79,392 250,000 46,736 46,736 250,000
25 300,684 89,717 89,717 250,000 38,028 38,028 250,000
30 418,569 93,568 93,568 250,000 7,268 7,268 250,000
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT
FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 33
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
LEVEL DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$6,000 PREMIUM PAID FOR 30 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6.00% (5.16% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ------------------------------------ ------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- --------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,300 5,363 5,363 250,000 4,236 4,236 250,000
2 12,915 10,870 10,870 250,000 8,591 8,591 250,000
3 19,861 16,526 16,526 250,000 13,066 13,066 250,000
4 27,154 22,369 22,369 250,000 17,666 17,666 250,000
5 34,812 28,422 28,422 250,000 22,390 22,390 250,000
6 42,853 34,829 34,829 250,000 27,241 27,241 250,000
7 51,296 41,497 41,497 250,000 32,212 32,212 250,000
8 60,161 48,562 48,562 250,000 37,425 37,425 250,000
9 69,469 55,913 55,913 250,000 42,754 42,754 250,000
10 79,242 63,555 63,555 250,000 48,194 48,194 250,000
11 89,504 71,595 71,595 250,000 53,747 53,747 250,000
12 100,279 79,951 79,951 250,000 59,414 59,414 250,000
13 111,593 88,626 88,626 250,000 65,206 65,206 250,000
14 123,473 97,644 97,644 250,000 71,129 71,129 250,000
15 135,947 107,030 107,030 250,000 77,190 77,190 250,000
16 149,044 116,762 116,762 250,000 83,389 83,389 250,000
17 162,796 126,920 126,920 250,000 89,725 89,725 250,000
18 177,236 137,534 137,534 250,000 96,197 96,197 250,000
19 192,398 148,634 148,634 252,342 102,800 102,800 250,000
20 208,318 160,130 160,130 265,576 109,538 109,538 250,000
25 300,684 223,823 223,823 333,018 145,932 145,932 250,000
30 418,569 298,689 298,689 404,448 189,752 189,752 257,224
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT
FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
34 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
LEVEL DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$6,000 PREMIUM PAID FOR 30 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12.00% (11.16% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ------------------------------------- ------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- --------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,300 5,676 5,676 250,000 4,512 4,512 250,000
2 12,915 11,847 11,847 250,000 9,423 9,423 250,000
3 19,861 18,563 18,563 250,000 14,774 14,774 250,000
4 27,154 25,915 25,915 250,000 20,613 20,613 250,000
5 34,812 33,986 33,986 250,000 26,988 26,988 250,000
6 42,853 42,989 42,989 250,000 33,956 33,956 250,000
7 51,296 52,913 52,913 250,000 41,572 41,572 250,000
8 60,161 63,989 63,989 250,000 50,038 50,038 250,000
9 69,469 76,205 76,205 250,000 59,308 59,308 250,000
10 79,242 89,680 89,680 250,000 69,470 69,470 250,000
11 89,504 104,698 104,698 250,000 80,633 80,633 250,000
12 100,279 121,296 121,296 250,000 92,922 92,922 250,000
13 111,593 139,576 139,576 274,328 106,489 106,489 250,000
14 123,473 159,646 159,646 305,645 121,503 121,503 250,000
15 135,947 181,677 181,677 338,942 138,130 138,130 257,903
16 149,044 205,790 205,790 374,289 156,209 156,209 284,331
17 162,796 232,242 232,242 411,967 175,825 175,825 312,135
18 177,236 261,249 261,249 452,198 197,087 197,087 341,412
19 192,398 293,051 293,051 495,230 220,105 220,105 372,264
20 208,318 327,905 327,905 541,322 244,999 244,999 404,800
25 300,684 558,615 558,615 827,311 402,759 402,759 597,052
30 418,569 919,738 919,738 1,239,652 631,441 631,441 852,020
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT
FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 35
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
INCREASING DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$6,000 PREMIUM PAID FOR 30 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0.00% (-0.84% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ------------------------------------ ------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- --------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,300 5,045 5,045 255,069 3,941 3,941 254,041
2 12,915 9,913 9,913 259,952 7,732 7,732 257,844
3 19,861 14,600 14,600 264,654 11,367 11,367 261,492
4 27,154 19,137 19,137 269,204 14,844 14,844 264,982
5 34,812 23,537 23,537 273,614 18,153 18,153 268,305
6 42,853 27,947 27,947 278,024 21,289 21,289 271,455
7 51,296 32,246 32,246 282,333 24,231 24,231 274,413
8 60,161 36,550 36,550 286,645 27,084 27,084 277,284
9 69,469 40,728 40,728 290,834 29,708 29,708 279,926
10 79,242 44,770 44,770 294,887 32,081 32,081 282,320
11 89,504 48,724 48,724 298,848 34,193 34,193 284,453
12 100,279 52,503 52,503 302,643 36,025 36,025 286,309
13 111,593 56,082 56,082 306,238 37,574 37,574 287,882
14 123,473 59,457 59,457 309,630 38,825 38,825 289,157
15 135,947 62,623 62,623 312,813 39,761 39,761 290,120
16 149,044 65,485 65,485 315,700 40,356 40,356 290,743
17 162,796 68,126 68,126 318,360 40,576 40,576 290,993
18 177,236 70,533 70,533 320,786 40,377 40,377 290,830
19 192,398 72,693 72,693 322,966 39,711 39,711 290,202
20 208,318 74,590 74,590 324,886 38,531 38,531 289,064
25 300,684 79,366 79,366 329,798 23,584 23,584 274,377
30 418,569 73,709 73,709 324,340 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT
FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
36 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
INCREASING DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$6,000 PREMIUM PAID FOR 30 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6.00% (5.16% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ------------------------------------ ------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- --------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,300 5,358 5,358 255,356 4,215 4,215 254,294
2 12,915 10,851 10,851 260,838 8,523 8,523 258,594
3 19,861 16,477 16,477 266,453 12,922 12,922 262,986
4 27,154 22,272 22,272 272,233 17,410 17,410 267,466
5 34,812 28,254 28,254 278,199 21,979 21,979 272,028
6 42,853 34,582 34,582 284,498 26,625 26,625 276,667
7 51,296 41,147 41,147 291,043 31,327 31,327 281,364
8 60,161 48,079 48,079 297,954 36,195 36,195 286,229
9 69,469 55,259 55,259 305,113 41,089 41,089 291,121
10 79,242 62,682 62,682 312,515 45,984 45,984 296,015
11 89,504 70,440 70,440 320,245 50,864 50,864 300,897
12 100,279 78,432 78,432 328,217 55,707 55,707 305,743
13 111,593 86,640 86,640 336,406 60,502 60,502 310,542
14 123,473 95,066 95,066 344,814 65,229 65,229 315,275
15 135,947 103,715 103,715 353,444 69,862 69,862 319,916
16 149,044 112,494 112,494 362,212 74,364 74,364 324,429
17 162,796 121,492 121,492 371,192 78,690 78,690 328,770
18 177,236 130,702 130,702 380,383 82,782 82,782 332,882
19 192,398 140,118 140,118 389,782 86,573 86,573 336,698
20 208,318 149,729 149,729 399,376 89,992 89,992 340,149
25 300,684 200,079 200,079 449,668 99,177 99,177 349,578
30 418,569 251,609 251,609 501,207 85,333 85,333 336,262
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT
FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 37
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
INCREASING DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$6,000 PREMIUM PAID FOR 30 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12.00% (11.16% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ------------------------------------- ------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- --------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,300 5,671 5,671 255,642 4,489 4,489 254,546
2 12,915 11,826 11,826 261,755 9,348 9,348 259,374
3 19,861 18,507 18,507 268,391 14,610 14,610 264,600
4 27,154 25,800 25,800 275,630 20,309 20,309 270,261
5 34,812 33,779 33,779 283,550 26,480 26,480 276,391
6 42,853 42,674 42,674 292,364 33,162 33,162 283,029
7 51,296 52,447 52,447 302,061 40,387 40,387 290,206
8 60,161 63,320 63,320 312,848 48,323 48,323 298,091
9 69,469 75,263 75,263 324,698 56,890 56,890 306,602
10 79,242 88,374 88,374 337,707 66,126 66,126 315,780
11 89,504 102,900 102,900 352,109 76,085 76,085 325,676
12 100,279 118,838 118,838 367,924 86,821 86,821 336,345
13 111,593 136,306 136,306 385,259 98,405 98,405 347,855
14 123,473 155,461 155,461 404,267 110,907 110,907 360,276
15 135,947 176,474 176,474 425,117 124,400 124,400 373,683
16 149,044 199,438 199,438 447,911 138,954 138,954 388,145
17 162,796 224,644 224,644 472,921 154,639 154,639 403,731
18 177,236 252,312 252,312 500,374 171,521 171,521 420,509
19 192,398 282,687 282,687 530,514 189,668 189,668 438,545
20 208,318 316,037 316,037 563,604 209,153 209,153 457,914
25 300,684 538,477 538,477 797,486 330,217 330,217 578,256
30 418,569 887,888 887,888 1,196,724 500,362 500,362 747,473
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT
FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
38 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
PART I. FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
The following unaudited condensed consolidated financial statements of
Hartford Life Insurance Company and its subsidiaries (the "Company") have been
prepared in accordance with generally accepted accounting principles and
reflect, in the opinion of management, all adjustments which are of normal
recurring nature necessary to present fairly the financial position, the results
of operations and the cash flows for the periods presented. Certain
reclassifications of prior year results were made to conform to current
presentation. Interim results are not indicative of the results which may be
expected for any other interim period or the full year. Certain statements
contained in this discussion, other than statements of historical fact, are
forward-looking statements. These statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. The
forward-looking statements are made based upon management's expectations and
beliefs concerning future developments and their potential effect on the
Company. There can be no assurance that future developments will be in
accordance with management's expectations or that the effect of these future
developments on the Company will be those anticipated by management. Actual
results could differ materially from those expected by the Company, depending on
the outcome of certain factors, including those described with the
forward-looking statements. For a description of accounting policies, see Note 1
to Consolidated Financial Statements in the 1996 Form 10-K. The Company is an
indirect subsidiary of Hartford Life, Inc. ("HLI"). Accordingly, the financial
statements presented below are a partial disclosure of HLI's financial
statements. For a full disclosure of HLI's operations, refer to the HLI Form
10-Q, as filed with the Securities and Exchange Commission, for the quarter
ended September 30, 1997.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES 39
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS)
<TABLE>
<CAPTION>
QUARTER
ENDED SIX MONTHS
SEPTEMBER ENDED
30, SEPTEMBER 30,
----------- ---------------
1997 1996 1997 1996
---- ---- ------ ------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues
Premiums and other considerations............... $360 $319 $ 993 $1,262
Net investment income........................... 319 355 978 1,006
Net realized capital gains (losses)............. -- (202) 4 (203)
---- ---- ------ ------
Total Revenues................................ 679 472 1,975 2,065
---- ---- ------ ------
Benefits, Claims and Expenses
Benefits, claims and claim adjustment
expenses....................................... 318 447 970 1,235
Amortization of deferred policy acquisition
costs.......................................... 80 68 252 197
Dividends to policyholders...................... 47 63 119 410
Other insurance expenses........................ 105 58 295 256
---- ---- ------ ------
Total benefits, claims and expenses........... 550 636 1,636 2,098
---- ---- ------ ------
Income (loss) before income tax expense......... 129 (164) 339 (33)
Income tax expense (benefit).................... 48 (58) 121 (13)
---- ---- ------ ------
Net income (loss)................................. $ 81 $(106) $ 218 $ (20)
---- ---- ------ ------
---- ---- ------ ------
</TABLE>
<PAGE>
40 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER
30, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
Assets
Investments:
Fixed maturities, available for sale, at fair
value (amortized cost $13,849 and $13,579)..... $14,046 $13,624
Equity securities, available for sale, at fair
value.......................................... 155 119
Mortgage loans, at outstanding balance.......... -- 2
Policy loans, at outstanding balance............ 3,747 3,836
Other investments, at cost...................... 48 54
----------- ------------
Total investments............................. 17,996 17,635
Cash............................................ 53 43
Premiums and amounts receivable................. 134 137
Reinsurance recoverable......................... 6,356 6,259
Accrued investment income....................... 359 407
Deferred policy acquisition costs............... 3,156 2,760
Deferred income tax............................. 431 474
Other assets.................................... 246 357
Separate account assets......................... 64,020 49,690
----------- ------------
Total assets.................................. $92,751 $77,762
----------- ------------
----------- ------------
Liabilities and Stockholders' Equity
Future policy benefits.......................... $ 3,124 $ 2,474
Other policyholder funds........................ 21,168 22,134
Other liabilities............................... 2,224 1,572
Separate account liabilities.................... 64,020 49,690
----------- ------------
Total liabilities............................. 90,536 75,870
----------- ------------
----------- ------------
Common stock -- authorized 1,000 shares, $5,690
par value, issued and outstanding 1,000
shares......................................... 6 6
Additional paid-in capital...................... 1,045 1,045
Unrealized gain on securities, net of tax....... 135 30
Retained earnings............................... 1,029 811
----------- ------------
Total stockholders' equity.................... 2,215 1,892
----------- ------------
Total liabilities and stockholders' equity...... $92,751 $77,762
----------- ------------
----------- ------------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES 41
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1997 1996
-------- --------
(UNAUDITED)
<S> <C> <C>
Operating Activities:
Net income (loss)..................... $ 218 $ (20)
Adjustments to net income (loss):
Net realized capital (gains)
losses............................. (4) 203
Net increase in deferred policy
acquisition costs.................. (396) (399)
Net amortization of premium on fixed
maturities......................... 5 6
Increase in deferred income tax
benefit............................ (14) (188)
Decrease in premiums and amounts
receivable......................... 3 75
Decrease in other assets............ 169 15
Increase in reinsurance
recoverable........................ (310) (254)
Increase in liability for future
policy benefits.................... 650 278
Increase in other liabilities....... 131 116
Decrease in accrued investment
income............................. 48 --
-------- --------
Cash provided by (used for)
operating activities.............. 500 (168)
-------- --------
Investing Activities:
Purchases of fixed maturities
investments.......................... (4,628) (4,111)
Sales of fixed maturities
investments.......................... 3,039 2,450
Maturities and principal paydowns of
fixed maturities investments......... 1,643 2,124
Net sales (purchases) of other
investments.......................... 32 (339)
Net (purchases) sales of short-term
investments.......................... (70) 328
-------- --------
Cash provided by investing
activities........................ 16 452
-------- --------
Financing Activities:
Net disbursements for investment and
universal life-type contracts charged
from policyholder accounts........... (506) (316)
Capital contribution.................. -- 38
-------- --------
Cash used for financing
activities........................ (506) (278)
-------- --------
Net increase in cash.................. 10 6
Cash at beginning of period........... 43 46
-------- --------
Cash at end of period................... $ 53 $ 52
-------- --------
-------- --------
</TABLE>
<PAGE>
42 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. HARTFORD LIFE INC. INITIAL PUBLIC OFFERING
On February 10, 1997, HLI, an indirect parent of the Company, filed a
registration statement with the Securities and Exchange Commission, as amended,
relating to the Initial Public Offering ("IPO") of up to 20% of HLI's Class A
common stock. Pursuant to the IPO on May 22, 1997, HLI sold to the public 26
million shares at $28.25 per share and received net proceeds of $687. Of the
proceeds, $527 was used to retire debt related to HLI's promissory notes
outstanding and the line of credit discussed in the note below with the
remaining $160 contributed to HLI's insurance subsidiaries to be used for
working capital and other general corporate purposes.
The 26 million shares sold from the IPO represent approximately 18.6% of the
equity ownership in HLI and approximately 4.4% of the combined voting power of
HLI's Class A and Class B Common Stock. The Hartford Financial Services Group,
Inc. ("The Hartford"), an indirect parent of HLI, owns all of the 114 million
outstanding shares of Class B Common Stock of HLI, representing 81.4% of the
equity ownership in HLI and approximately 95.6% of the combined voting power of
HLI's Class A and Class B Common Stock. Holders of Class A Common Stock
generally have identical rights to the holders of Class B Common Stock except
that the holders of Class A Common Stock are entitled to one vote per share
while holders of Class B Common Stock are entitled to five votes per share on
all matters submitted to a vote of the HLI stockholders.
NOTE 2. HARTFORD LIFE INC. DEBT OFFERING
On February 7, 1997, HLI declared a dividend of $1,184 payable to its direct
parent, Hartford Accident and Indemnity Company ("HA&I"). As a result, HLI
borrowed $1,084 on February 18, 1997, pursuant to a $1,300 line of credit, with
interest payable at the two-month Eurodollar rate plus 15 basis points, which,
together with a promissory note in the amount of $100, was paid as a dividend to
HA&I on February 20, 1997. Of the $1,184 dividend, $893 constituted a repayment
of the portion of HLI's third party indebtedness internally allocated, for
financial reporting purposes, to HLI's insurance subsidiaries (the "Allocated
Advances"). In addition, on April 4, 1997, HLI declared and paid a dividend of
$25 to its parent in the form of a promissory note. Subsequently, $12 of this
note was forgiven in the form of a capital contribution from HA&I.
On February 14, 1997, HLI filed a shelf registration statement for the
issuance and sale of up to $1.0 billion in the aggregate of senior debt
securities, subordinated debt securities and preferred stock. On June 17, 1997,
HLI issued $650 of unsecured redeemable long-term debt in the form of notes and
debentures. Of this amount, $200 was in the form of 6.90% notes due June 15,
2004, $200 of 7.10% notes due June 15, 2007, and $250 of 7.65% debentures due
June 15, 2027. Interest on each of the notes and debentures is payable
semi-annually on June 15 and December 15, of each year, commencing December 15,
1997. HLI also issued $50 of short-term debt in the form of commercial paper. Of
the proceeds from this issuance, $670 was used to retire the remaining balance
on the $1,300 line of credit with the remainder being used for working capital
and other general corporate purposes. Subsequently, HLI reduced the capacity of
the line of credit from $1,300 to $250, which will be primarily used to support
the commercial paper program.
NOTE 3. CONTINGENCIES
(A) LITIGATION
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for monetary and punitive damages have
been asserted. Although there can be no assurances, management, at the present
time, does not anticipate that the ultimate liability arising from such pending
or threatened litigation will have a material effect on the financial condition
or operating results of the Company.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES 43
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS
OF RESULTS OF OPERATIONS
(IN MILLIONS)
QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
SEGMENT RESULTS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
QUARTER ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- --------------------
1997 1996 1997 1996
----- --------- --------- ---------
<S> <C> <C> <C> <C>
Annuity........................ $ 56 $ 40 $ 148 $ 110
Individual Life Insurance...... 15 11 38 30
Employee Benefits.............. 8 8 23 22
Guaranteed Investment
Contracts.................... -- (184) -- (214)
Corporate Operation............ 2 19 9 32
--- --------- --------- ---------
Net Income (Loss).............. $ 81 $ (106) $ 218 $ (20)
--- --------- --------- ---------
--- --------- --------- ---------
</TABLE>
Net income was $81 and $218 for the third quarter and nine months ended
September 30, 1997, as compared to a loss of $106 and $20 for the same periods
in 1996. Included in the results for the third quarter and nine months ended
September 30, 1996, are after-tax losses, primarily related to Closed Book GRC,
of $179 and $210. Excluding these after-tax losses, operating income increased
$8, or 11%, and $28, or 15%, for the third quarter and nine months ended
September 30, 1997, compared to the same periods in 1996. Net income in the
Annuity segment increased due to higher fee income on growing account values as
well as strong new business sales. Net income in the Individual Life Insurance
segment increased due to cost of insurance charges and other fee income on a
growing block of life insurance in-force. Guaranteed Investment Contracts
reported no net income in the third quarter of 1997 consistent with management's
expectations that net income (loss) subsequent to 1996 will be immaterial.
ANNUITY
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues........................ $ 336 $ 241 $ 924 $ 707
Expenses........................ 280 201 776 597
--------- --------- --------- ---------
Net Income...................... $ 56 $ 40 $ 148 $ 110
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Revenues, which are primarily comprised of investment income and fees earned
on assets under management, grew $95 or 39%, to $336 in the third quarter of
1997 and $217 or 31%, to $924 for the nine months ended September 30, 1997,
compared to the same periods in 1996. This growth resulted from an increase in
the average account value, primarily driven by individual variable annuities, of
$15.4 billion, or 36%, to $57.9 billion as of September 30, 1997 from $42.5
billion as of September 30, 1996, as a result of strong sales and market
appreciation in the separate account assets. Individual annuity sales were
approximately $2.6 billion and $7.6 billion for the third quarter and nine
months ended September 30, 1997, respectively, as compared to sales of $2.4
billion and $7.4 billion, respectively, for the same periods in 1996. Growth in
the assets under management by this segment also resulted in increased expenses
related to other insurance expenses, amortization of deferred policy acquisition
costs and taxes. Expenses increased $79, or 39%, to $280 in the third quarter of
1997 and $179, or 30%, to $776 for the nine months ended September 30, 1997,
compared to the same periods in 1996. Net income increased $16, or 40%, to $56
in the third quarter of 1997 and $38, or 35%, to $148 for the nine months ended
September 30, 1997, compared to the same periods in 1996.
INDIVIDUAL LIFE INSURANCE
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues........................ $ 122 $ 107 $ 358 $ 323
Expenses........................ 107 96 320 293
--------- --------- --------- ---------
Net Income...................... $ 15 $ 11 $ 38 $ 30
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Revenues increased $15, or 14%, to $122 in the third quarter of 1997 and
$35, or 11%, to $358 for the nine months ended September 30, 1997, over the
comparable periods in 1996. In the first quarter of 1996, a block of business
was assumed from Investors Equity which increased 1996 revenues by $9. Excluding
this transaction, year to date revenues increased $44, or 14% over prior year.
This growth was driven by increased cost of insurance charges and other fee
income earned on this growing block of business. Life insurance in-force grew
approximately $3 billion, or 6%, for September 30, 1997 over the prior period,
primarily due to sales of variable life products. Expenses in this segment
increased $11 or 11%, and $27 or 9%, for the third quarter and nine months ended
September 30, 1997, over the same periods in 1996, consistent with this growing
block of business. As a result, net income increased $4, or 36%, to $15 in the
third quarter of 1997 and $8, or 27%, to $38 for the nine months ended September
30, 1997, compared to the same periods in 1996.
<PAGE>
44 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
EMPLOYEE BENEFITS
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues........................ $ 150 $ 223 $ 471 $ 976
Expenses........................ 142 215 448 954
--------- --------- --------- ---------
Net Income...................... $ 8 $ 8 $ 23 $ 22
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Revenues declined $73, or 33%, to $150 in the third quarter of 1997 and
$505, or 52%, for the nine months ended September 30, 1997, as compared to the
same periods in 1996. This decline is mainly related to the passage of the
Health Insurance Portability and Accountability Act of 1996, which effectively
eliminated all future sales of leveraged COLI due to the phase out of the
interest deduction on policy loans by 1998. The Company continues to write
variable COLI. Expenses declined $73, or 34%, in the third quarter of 1997 and
$506, or 53%, for the nine months ended September 30, 1997, as compared to the
same periods in 1996. Significant declines in benefits, claims and claim
adjustment expenses and policyholder dividends are the result of the decline of
the block of COLI business. As a result, net income was unchanged for the third
quarter of 1997, as compared to the same periods in 1996 and increased $1, or
5%, for the nine months ended September 30, 1997, as compared to the same
periods in 1996.
GUARANTEED INVESTMENT CONTRACTS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
QUARTER ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- --------------------
1997 1996 1997 1996
----- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues....................... $ 62 $ (163) $ 196 $ (23)
Expenses....................... 62 21 196 191
--- --------- --------- ---------
Net Income (Loss).............. $ 0 $ (184) $ 0 $ (214)
--- --------- --------- ---------
--- --------- --------- ---------
</TABLE>
This segment reported no net income for the nine months ended September 30,
1997, as compared to losses of $184 and $214 for the same periods last year.
Exclusive of after-tax realized losses and other charges taken in the third
quarter of 1996 related to Closed Book GRC, this segment had an operating loss
of $15 and $45 for the third quarter and nine months ended September 30, 1996.
These results are consistent with management's expectations that net income
(loss) from Closed Book GRC in the years subsequent to 1996 will be immaterial
based on the Company's current projections for the performance of the assets and
liabilities associated with Closed Book GRC due to actions taken in the third
quarter of 1996. However, no assurance can be given that, under certain
unanticipated economic circumstances which results in the Company's assumptions
being proven inaccurate, further losses in respect of Closed Book GRC will not
occur in the future.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 45
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of ITT Hartford Life and Annuity Insurance Company:
We have audited the accompanying statutory-basis balance sheets of ITT Hartford
Life and Annuity Insurance Company (a Connecticut Corporation and wholly owned
subsidiary of Hartford Life Insurance Company) (the Company) as of December 31,
1996 and 1995, and the related statutory-basis statements of income, changes in
capital and surplus, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
statutory-basis financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The Company presents its financial statements in conformity with statutory
accounting practices as described in Note 1 of notes to statutory-basis
financial statements. When statutory-basis financial statements are presented
for purposes other than for filing with a regulatory agency, generally accepted
auditing standards require that an auditors' report on them state whether they
are presented in conformity with generally accepted accounting principles. The
accounting practices used by the Company vary from generally accepted accounting
principles as explained and quantified in Note 1. In our opinion, because the
differences in accounting practices as described in Note 1 are material, the
statutory-basis financial statements referred to above do not present fairly, in
accordance with generally accepted accounting principles, the financial position
of the Company as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996.
However, in our opinion, the statutory-basis financial statements referred to
above present fairly, in all material respects, the financial position of the
Company as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 1996
in conformity with statutory accounting practices as described in Note 1.
As discussed in Note 1 of notes to statutory financial statements, during 1994,
the Company changed its valuation method in determining aggregate reserves for
future benefits.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 10, 1997
<PAGE>
46 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
STATUTORY BASIS STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------------------
1996 1995 1994
---------- ---------- ----------
($000)
<S> <C> <C> <C>
Revenues
Premiums and Annuity Considerations............. $ 250,244 $ 165,792 $ 442,173
Annuity and Other Fund Deposits................. 1,897,347 1,087,661 608,685
Net Investment Income............................. 98,441 78,787 29,012
Commissions and Expense Allowances on
Reinsurance Ceded.............................. 370,637 183,380 154,527
Reserve Adjustment on Reinsurance Ceded......... 3,864,395 1,879,785 1,266,926
Other Revenues.................................. 161,906 140,796 41,857
---------- ---------- ----------
Total Revenues................................ 6,642,970 3,536,201 2,543,180
---------- ---------- ----------
Benefits and Expenses
Death and Annuity Benefits...................... 60,111 53,029 7,948
Surrenders and Other Benefit Payments........... 276,720 221,392 181,749
Commissions and Other Expenses.................. 491,720 236,202 186,303
Increase in Reserves for Future Benefits........ 27,351 94,253 416,748
Increase in Liability for Premium and Other
Deposit Funds.................................. 207,156 460,124 182,934
Net Transfers to Separate Accounts.............. 5,492,964 2,414,669 1,541,419
---------- ---------- ----------
Total Benefits and Expenses................... 6,556,022 3,479,669 2,517,101
---------- ---------- ----------
Net Gain from Operations Before Federal Income Tax
Expense.......................................... 86,948 56,532 26,079
Federal Income Tax Expense...................... 19,360 14,048 24,038
---------- ---------- ----------
Net Gain from Operations.......................... 67,588 42,484 2,041
Net Realized Capital Gains (Losses)............. 407 374 (2)
---------- ---------- ----------
Net Income........................................ $ 67,995 $ 42,858 $ 2,039
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 47
- --------------------------------------------------------------------------------
STATUTORY BASIS BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------
1996 1995
----------- ----------
<S> <C> <C>
($000)
Assets
Bonds........................................... $ 1,268,480 $1,226,489
Common Stocks................................... 44,996 39,776
Policy Loans.................................... 28,853 22,521
Cash and Short-Term Investments................. 176,830 173,304
Other Invested Assets........................... 2,858 13,432
----------- ----------
Total Cash and Invested Assets................ 1,522,017 1,475,522
----------- ----------
Investment Income Due and Accrued............... 14,555 18,021
Premium Balances Receivable..................... 373 402
Receivables from Affiliates..................... 257 8,182
Other Assets.................................... 19,099 25,907
Separate Account Assets......................... 14,619,324 7,324,910
----------- ----------
Total Assets.................................. $16,175,625 $8,852,944
----------- ----------
----------- ----------
Liabilities
Aggregate Reserves for Future Benefits.......... $ 571,970 $ 542,082
Policy and Contract Claims...................... 6,806 8,223
Liability for Premium and Other Deposit Funds... 1,155,143 948,361
Asset Valuation Reserve......................... 7,442 8,010
Payable to Affiliates........................... 10,022 3,682
Other Liabilities............................... (498,195) (220,658)
Separate Account Liabilities.................... 14,619,324 7,324,910
----------- ----------
Total Liabilities............................. 15,872,512 8,614,610
----------- ----------
Capital and Surplus
Common Stock.................................... 2,500 2,500
Gross Paid-In and Contributed Surplus........... 226,043 226,043
Unassigned Funds................................ 74,570 9,791
----------- ----------
Total Capital and Surplus..................... 303,113 238,334
----------- ----------
Total Liabilities and Capital and Surplus......... $16,175,625 $8,852,944
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
48 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
STATUTORY BASIS STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER
31,
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
($000)
Capital and Surplus -- Beginning of Year......................................................... $238,334 $ 91,285 $ 88,693
-------- -------- --------
Net Income..................................................................................... 67,995 42,858 2,039
Change in Net Unrealized Capital (Losses) Gains on Common Stocks............................... (5,171) 1,709 (133)
Change in Asset Valuation Reserve.............................................................. 568 (5,588) (1,356)
Change in Non-Admitted Assets.................................................................. 1,387 (1,944) (8,599)
Change in Reserve (Valuation Basis)............................................................ -- -- 10,659
Aggregate Write-ins for Surplus................................................................ -- 8,080 (18)
Dividends to Shareholder....................................................................... -- (10,000) --
Paid-In Surplus................................................................................ -- 111,934 --
-------- -------- --------
Change in Capital and Surplus................................................................ 64,779 147,049 2,592
-------- -------- --------
Capital and Surplus -- End of Year............................................................... $303,113 $238,334 $ 91,285
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 49
- --------------------------------------------------------------------------------
STATUTORY BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
($000)
Operations
Premiums, Annuity Considerations and
Other Fund Deposits.................. $ 2,147,627 $ 1,253,511 $ 1,050,493
Net Investment Income................. 106,178 78,328 24,519
Other Revenues........................ 4,396,892 2,253,466 1,515,700
----------- ----------- -----------
Total Revenues...................... 6,650,697 3,585,305 2,590,712
----------- ----------- -----------
Benefits Paid......................... 338,998 277,965 181,205
Federal Income Taxes Paid on
Operations........................... 28,857 208,423 20,634
Other Expenses........................ 6,254,139 2,664,385 1,832,905
----------- ----------- -----------
Total Benefits and Expenses......... 6,621,994 3,150,773 2,034,744
----------- ----------- -----------
Net Cash from Operations............ 28,703 434,532 555,968
----------- ----------- -----------
Proceeds from Investments
Bonds................................. 871,019 287,941 87,747
Common Stocks......................... 72,100 52 --
Other................................. 10 28 40
----------- ----------- -----------
Total Investment Proceeds........... 943,129 288,021 87,787
----------- ----------- -----------
Taxes (Paid) Received on Capital (Gains)
Losses................................. (936) (226) 96
Paid-In Surplus......................... -- 111,934 --
Other Cash Provided..................... 41,998 28,199 30,554
----------- ----------- -----------
Total Proceeds...................... 1,012,894 862,460 674,405
----------- ----------- -----------
Cost of Investments Acquired Bonds...... 914,523 720,521 595,181
Common Stocks......................... 82,495 35,794 808
Miscellaneous Applications............ 130 2,146 2,523
----------- ----------- -----------
Total Investments Acquired.......... 997,148 758,461 598,512
----------- ----------- -----------
Other Cash Applied
Dividends Paid to Shareholders........ -- 10,000 --
Other................................. 12,220 5,007 24,813
----------- ----------- -----------
Total Other Cash Applied............ 12,220 15,007 24,813
----------- ----------- -----------
Total Applications................ 1,009,368 773,468 623,325
----------- ----------- -----------
Net Change in Cash and Short-Term
Investments............................ 3,526 88,992 51,080
Cash and Short-Term Investments,
Beginning of Year...................... 173,304 84,312 33,232
----------- ----------- -----------
Cash and Short-Term Investments, End of
Year................................... $ 176,830 $ 173,304 $ 84,312
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
50 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
ITT Hartford Life and Annuity Insurance Company ("ILA" or "the Company"),
formerly known as ITT Life Insurance Corporation, is a wholly owned subsidiary
of Hartford Life Insurance Company ("HLIC"), which is an indirect subsidiary of
Hartford Life, Inc. ("Hartford Life"), which is ultimately owned by ITT Hartford
Group, Inc. ("The Hartford"), formerly a wholly owned subsidiary of ITT
Corporation ("ITT"). On February 10, 1997, The Hartford announced its plans to
sell up to 20% of Hartford Life to the public. On December 19, 1995, ITT
Corporation distributed all the outstanding shares of The Hartford to ITT
shareholders of record in an action known herein as the "Distribution". As a
result of the Distribution, The Hartford became an independent, publicly traded
company. During 1996, ILA re-domesticated from the State of Wisconsin to the
State of Connecticut.
ILA offers a complete line of ordinary and universal life insurance,
individual annuities and certain supplemental accident and health benefit
coverages.
BASIS OF PRESENTATION
The accompanying ILA statutory-basis financial statements were prepared in
conformity with statutory accounting practices prescribed or permitted by the
National Association of Insurance Commissioners ("NAIC") and the State of
Connecticut Department of Insurance.
The preparation of financial statements in conformity with statutory
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.
Statutory accounting practices and generally accepted accounting principles
("GAAP") differ in certain significant respects. These differences principally
involve:
(1) treatment of policy acquisition costs (commissions, underwriting and selling
expenses, premium taxes, etc.) which are charged to expense when incurred
for statutory purposes rather than on a pro-rata basis over the expected
life of the policy;
(2) recognition of premium revenues, which for statutory purposes are generally
recorded as collected or when due during the premium paying period of the
contract and which for GAAP purposes, generally, for universal life policies
and investment products, are only recorded for policy charges for the cost
of insurance, policy administration and surrender charges assessed to policy
account balances. Also, for GAAP purposes, premiums for traditional life
insurance policies are recognized as revenues when they are due from
policyholders and the retrospective deposit method is used in accounting for
universal life and other types of contracts where the payment pattern is
irregular or surrender charges are a significant source of profit. The
prospective deposit method is used for GAAP purposes where investment
margins are the primary source of profit;
(3) development of liabilities for future policy benefits, which for statutory
purposes predominantly use interest rate and mortality assumptions
prescribed by the NAIC which may vary considerably from interest and
mortality assumptions used for GAAP financial reporting;
(4) providing for income taxes based on current taxable income (tax return) only
for statutory purposes, rather than establishing additional assets or
liabilities for deferred Federal income taxes to recognize the tax effect
related to reporting revenues and expenses in different periods for
financial reporting and tax return purposes;
(5) excluding certain GAAP assets designated as non-admitted assets (e.g., past
due agents' balances and furniture and equipment) from the balance sheet for
statutory purposes by directly charging surplus;
(6) establishing accruals for post-retirement and post-employment health care
benefits on an option basis, using a twenty year phase-in approach, whereas
GAAP liabilities are required to be recorded;
(7) establishing a formula reserve for realized and unrealized losses due to
default and equity risk associated with certain invested assets (Asset
Valuation Reserve); as well as the deferral and amortization of realized
gains and losses, motivated by changes in interest rates during the period
the asset is held, into income over the remaining life to maturity of the
asset sold (Interest Maintenance Reserve); whereas on a GAAP basis, no such
formula reserve is required and realized gains and losses are recognized in
the period the asset is sold;
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 51
- --------------------------------------------------------------------------------
(8) the reporting of reserves and benefits net of reinsurance ceded, where risk
transfer has taken place; whereas on a GAAP basis, reserves are reported
gross of reinsurance with reserve credits presented as recoverable assets;
(9) the reporting of fixed maturities at amortized cost, whereas GAAP requires
that fixed maturities be classified as "held-to-maturity",
"available-for-sale" or "trading", based on the Company's intentions with
respect to the ultimate disposition of the security and its ability to
affect those intentions. The Company's fixed maturities were classified on a
GAAP basis as "available-for-sale" and accordingly, those investments were
reflected at fair value with the corresponding impact included as a
component of Stockholder's Equity designated as "Net unrealized capital
(loss)/ gain on investments, net of tax". For statutory reporting purposes,
Net Unrealized Capital Losses (Gains) on Common Stocks represent unrealized
losses (gains) on common stock reported at fair value; and
(10) separate account liabilities are valued on the Commissioner's Annuity
Reserve Valuation Method ("CARVM"), with the surplus generated recorded as
a liability to the general account (and a contra liability on the balance
sheet of the general account), whereas GAAP liabilities are valued at
account value.
As of and for the years ended December 31, 1996, 1995 and 1994, the
significant differences between statutory and GAAP basis net income and capital
and surplus for the Company are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
GAAP Net Income................ $ 41,202 $ 38,821 $ 23,295
Amortization and deferral of
policy acquisition costs...... (341,572) (174,341) (117,863)
Change in unearned revenue
reserve....................... 55,504 32,300 24,494
Deferred taxes................. 2,090 2,801 (9,267)
Separate accounts.............. 306,978 146,635 75,941
Other, net..................... 3,793 (3,358) 5,439
----------- ----------- -----------
Statutory Net Income........... $ 67,995 $ 42,858 $ 2,039
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
GAAP Capital and Surplus....... $ 503,887 $ 455,541 $ 199,785
Deferred policy acquisition
costs......................... (938,114) (596,542) (422,201)
Unearned revenue reserve....... 130,148 74,644 42,344
Deferred taxes................. 12,823 1,493 13,257
Separate accounts.............. 640,101 333,123 186,488
Asset valuation reserve........ (7,442) (8,010) (2,422)
Unrealized gain (loss) on
bonds......................... 5,112 (1,696) 21,918
Adjustment relating to Lyndon
contribution (see Note 3)..... (41,277) (41,277) --
Other, net..................... (2,125) 21,058 52,116
----------- ----------- -----------
Statutory Capital and
Surplus....................... $ 303,113 $ 238,334 $ 91,285
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
AGGREGATE RESERVES AND LIABILITIES FOR PREMIUM AND OTHER DEPOSIT FUNDS
Aggregate reserves for payment of future life, health and annuity benefits
were computed in accordance with actuarial standards. Reserves for life
insurance policies are generally based on the 1958 and 1980 Commissioner's
Standard Ordinary Mortality Tables and various valuation rates ranging from 2.5%
to 5%. Accumulation and on-benefit annuity reserves are based principally on
individual annuity tables at various rates ranging from 2.5% to 8.75% and using
CARVM. Accident and health reserves are established using a two year preliminary
term method and morbidity tables based on Company experience.
ILA has established separate accounts to segregate the assets and
liabilities of certain annuity contracts that must be segregated from the
Company's general assets under the terms of the contracts. The assets consist
primarily of marketable securities reported at market value. Premiums, benefits
and expenses of these contracts are reported in the Statutory Basis Statements
of Income.
During 1994, the Company changed the valuation method on aggregate reserves
for future benefits resulting in a $10.7 million increase in surplus. The new
valuation method is in accordance with presently accepted actuarial standards.
INVESTMENTS
Investments in bonds are carried at amortized cost. Bonds which are deemed
ineligible to be held at amortized cost by the NAIC Securities Valuation Office
("SVO")are carried at the appropriate SVO published value. When a permanent
reduction in the value of publicly traded securities occurs, the decrease is
reported as a realized loss and the carrying value is adjusted accordingly.
Common stocks are carried at market value with the difference from cost
reflected in surplus. Other invested assets are generally recorded at fair
value.
Changes in net unrealized capital (losses)/gains on common stocks are
reported as (reductions)/additions of surplus. The Asset Valuation Reserve
("AVR") is designed to provide a standardized reserving process for realized and
unrealized losses due to default and equity risks associated with invested
assets. The reserve decreased by $568 in 1996 and increased by $5,588 and $1,356
in 1995 and 1994, respectively. Additionally, the Interest Maintenance Reserve
("IMR") captures net realized capital gains and losses, net of applicable income
taxes, resulting from changes in interest rates and amortizes these gains or
losses into income over the remaining life of the mortgage loan or bond sold.
Realized capital gains and losses, net of taxes not included in IMR are reported
in the Statutory Basis Statements of Income. Realized investment gains and
losses are determined on a specific identification basis. The amount of net
capital gains reclassified from the IMR was $1,413 and
<PAGE>
52 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
$39 in 1996 and 1995, respectively, and the amount of net capital losses was $67
in 1994. The amount of income amortized was $392, $256 and $114 in 1996, 1995
and 1994, respectively.
OTHER LIABILITIES
The amount reflected in other liabilities includes a receivable from the
separate accounts of $640 million and $333 million as of December 31, 1996 and
1995, respectively. The balances are classified in accordance with NAIC
accounting practices.
2. INVESTMENTS
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Interest income from
bonds..................... $ 89,940 $ 76,100 $ 28,335
Interest income from policy
loans..................... 1,846 1,504 454
Interest and dividends from
other investments......... 7,864 2,288 1,069
--------- --------- ---------
Gross investment income.... 99,650 79,892 29,858
Less: investment
expenses.................. 1,209 1,105 846
--------- --------- ---------
Net investment income...... $ 98,441 $ 78,787 $ 29,012
--------- --------- ---------
--------- --------- ---------
</TABLE>
(B) COMPONENTS OF NET UNREALIZED CAPITAL (LOSSES)
GAINS ON COMMON STOCKS
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Gross unrealized capital gains
at end of year................ $ 713 $ 1,724 $ 75
Gross unrealized capital losses
at end of year................ (4,160) -- (60)
--------- --------- ---------
Net unrealized capital (losses)
gains......................... (3,447) 1,724 15
Balance at beginning of year... 1,724 15 148
--------- --------- ---------
Change in net unrealized
capital (losses) gains on
common stocks................. $ (5,171) $ 1,709 $ (133)
--------- --------- ---------
--------- --------- ---------
</TABLE>
(C) COMPONENTS OF NET UNREALIZED CAPITAL (LOSSES)
GAINS ON BONDS AND SHORT-TERM INVESTMENTS
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Gross unrealized capital
gains at end of year... $ 11,821 $ 22,251 $ 986
Gross unrealized capital
losses at end of
year................... (3,842) (1,374) (34,718)
---------- ---------- ----------
Net unrealized capital
gains (losses) after
tax.................... 7,979 20,877 (33,732)
Balance at beginning of
year................... 20,877 (33,732) 5,232
---------- ---------- ----------
Change in net unrealized
capital (losses) gains
on bonds and short-term
investments............ $ (12,898) $ 54,609 $ (38,964)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
(D) COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Bonds and short-term
investments..................... $ 2,756 $ 156 $ (101)
Common stocks.................... 0 52 0
Real estate and other............ 0 0 34
--------- --------- ---------
Realized capital gains (losses).. 2,756 208 (67)
Capital gains taxes (benefit).... 936 (205) 2
--------- --------- ---------
Net realized capital gains
(losses) after tax.............. 1,820 413 (69)
Less: IMR capital gains
(losses)........................ 1,413 39 (67)
--------- --------- ---------
Net realized capital gains
(losses)........................ $ 407 $ 374 $ (2)
--------- --------- ---------
--------- --------- ---------
</TABLE>
(E) OFF-BALANCE SHEET INVESTMENTS
The Company had no significant financial instruments with off-balance sheet
risk as of December 31, 1996 and 1995.
(F) CONCENTRATION OF CREDIT RISK
Excluding U.S. government and government agency investments, the Company is
not exposed to any significant concentration of credit risk.
(G) BONDS, SHORT-TERM AND COMMON STOCK INVESTMENTS
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 53
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
----------------------------------
GROSS UNREALIZED
AMORTIZED --------------------
COST GAINS LOSSES
------------ --------- ---------
<S> <C> <C> <C>
U.S. government and government agencies and authorities:
(Guaranteed and sponsored)....................................................... $ 58,761 $ 6 $ (195)
(Guaranteed and sponsored) -- asset-backed....................................... 78,237 1,477 (609)
States, municipalities and political subdivisions.................................. 25,958 163 (2)
International governments.......................................................... 7,447 205 --
Public utilities................................................................... 70,116 396 (424)
All other corporate................................................................ 410,530 6,357 (1,355)
All other corporate -- asset-backed................................................ 485,953 2,654 (1,081)
Short-term investments............................................................. 148,094 -- (66)
Certificates of deposit............................................................ 83,378 563 (110)
Parents, subsidiaries and affiliates............................................... 48,100 -- --
------------ --------- ---------
Total bonds and short-term investments......................................... $ 1,416,574 $ 11,821 $ (3,842)
------------ --------- ---------
------------ --------- ---------
Common stock -- unaffiliated....................................................... $ 13,064 $ 713 $ 0
Common stock -- affiliated......................................................... 35,379 0 4,160
------------ --------- ---------
Total common stocks............................................................ $ 48,443 $ 713 $ 4,160
------------ --------- ---------
------------ --------- ---------
<CAPTION>
AS OF DECEMBER 31, 1995
----------------------------------
GROSS UNREALIZED
AMORTIZED --------------------
COST GAINS LOSSES
------------ --------- ---------
<S> <C> <C> <C>
U.S. government and government agencies and authorities:
(Guaranteed and sponsored)....................................................... $ 44,268 $ 14 $ (248)
(Guaranteed and sponsored) -- asset-backed....................................... 176,160 4,644 (682)
States, municipalities and political subdivisions.................................. 16,948 38 (6)
International governments.......................................................... 5,402 441 --
Public utilities................................................................... 108,083 1,652 (90)
All other corporate................................................................ 374,058 8,145 (248)
All other corporate -- asset-backed................................................ 410,197 5,841 (89)
Short-term investments............................................................. 139,011 18 --
Certificates of deposit............................................................ 91,373 1,458 (11)
------------ --------- ---------
Total bonds and short-term investments......................................... $ 1,365,500 $ 22,251 $ (1,374)
------------ --------- ---------
------------ --------- ---------
Common stock -- unaffiliated....................................................... $ 2,668 $ 555 $ --
Common stock -- affiliated......................................................... 35,384 1,169 --
------------ --------- ---------
Total common stocks............................................................ $ 38,052 $ 1,724 $ --
------------ --------- ---------
------------ --------- ---------
<CAPTION>
FAIR
VALUE
------------
<S> <C>
U.S. government and government agencies and authorities:
(Guaranteed and sponsored)....................................................... $ 58,572
(Guaranteed and sponsored) -- asset-backed....................................... 79,105
States, municipalities and political subdivisions.................................. 26,119
International governments.......................................................... 7,652
Public utilities................................................................... 70,088
All other corporate................................................................ 415,532
All other corporate -- asset-backed................................................ 487,526
Short-term investments............................................................. 148,028
Certificates of deposit............................................................ 83,831
Parents, subsidiaries and affiliates............................................... 48,100
------------
Total bonds and short-term investments......................................... $ 1,424,553
------------
------------
Common stock -- unaffiliated....................................................... $ 13,777
Common stock -- affiliated......................................................... 31,219
------------
Total common stocks............................................................ $ 44,996
------------
------------
FAIR
VALUE
------------
<S> <C>
U.S. government and government agencies and authorities:
(Guaranteed and sponsored)....................................................... $ 44,034
(Guaranteed and sponsored) -- asset-backed....................................... 180,122
States, municipalities and political subdivisions.................................. 16,980
International governments.......................................................... 5,843
Public utilities................................................................... 109,645
All other corporate................................................................ 381,955
All other corporate -- asset-backed................................................ 415,949
Short-term investments............................................................. 139,029
Certificates of deposit............................................................ 92,820
------------
Total bonds and short-term investments......................................... $ 1,386,377
------------
------------
Common stock -- unaffiliated....................................................... $ 3,223
Common stock -- affiliated......................................................... 36,553
------------
Total common stocks............................................................ $ 39,776
------------
------------
</TABLE>
The amortized cost and estimated market value of bonds and short-term
investments at December 31, 1996 by management's anticipated maturity are shown
below. Asset-backed securities are distributed to maturity year based on ILA's
estimate of the rate of future prepayments of principal over the remaining life
of the securities. Expected maturities differ from contractual maturities
reflecting borrowers' rights to call or prepay their obligations.
<TABLE>
<CAPTION>
ESTIMATED FAIR
MATURITY AMORTIZED COST VALUE
- --------------------------------------------------------------------------------------- -------------- -------------------
<S> <C> <C>
Due in one year or less................................................................ $ 478,095 $ 478,852
Due after one year through five years.................................................. 622,805 623,105
Due after five years through ten years................................................. 259,479 265,681
Due after ten years.................................................................... 56,195 56,915
-------------- -------------------
Total.............................................................................. $ 1,416,574 $ 1,424,553
-------------- -------------------
-------------- -------------------
</TABLE>
<PAGE>
54 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Proceeds from sales of investments in bonds and short-term investments
during 1996, 1995 and 1994 were $668,078, $313,961 and $117,912, respectively,
resulting in gross realized gains of $3,675, $1,419 and $518, respectively, and
gross realized losses of $919, $1,263 and $619, respectively, before transfers
to IMR. The Company had realized gains of $52 during 1995 from a capital gain
distribution.
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS BALANCE SHEET ITEMS (IN MILLIONS):
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Bonds and short-term investments................................................. $ 1,417 $ 1,425 $ 1,366 $ 1,386
Common stocks.................................................................... 45 45 40 40
Policy loans..................................................................... 29 29 23 23
Other invested assets............................................................ 3 3 13 13
LIABILITIES LIABILITIES ON INVESTMENT CONTRACTS.................................... $ 1,245 $ 1,191 $ 1,031 $ 981
</TABLE>
The carrying amounts for policy loans approximates fair value. The
liabilities are determined by forecasting future cash flows and discounting the
forecasted cash flows at current market rates.
3. RELATED PARTY TRANSACTIONS
Transactions between the Company and its affiliates within The Hartford
relate principally to tax settlements, reinsurance, service fees, capital
contributions and payments of dividends.
On June 30, 1995, the assets of Lyndon Insurance Company were contributed to
ILA. As a result, ILA received approximately $365 million in bonds and
short-term investments, common stocks and cash, $28 million in policy reserves,
$187 million of current tax liability, $26 million in IMR, $8 million in AVR
(offset by an aggregate write-in to surplus), and $4 million of other
liabilities. The assets in excess of liabilities of $112 million were recorded
as an increase to paid-in surplus.
For additional information, see Note 5.
4. FEDERAL INCOME TAXES
The Company and The Hartford have entered into a tax sharing agreement under
which each member in the consolidated U.S. Federal income tax return will make
payments between them such that, with respect to any period, the amount of taxes
to be paid by the Company, subject to certain adjustments, generally will be
determined as though the Company were to file separate federal, state and local
income tax returns.
As long as The Hartford continues to beneficially own, directly or
indirectly, at least 80% of the combined voting power and 80% of the value of
the outstanding capital stock of Hartford Life, the Company will be included for
Federal income tax purposes in the consolidated group of which The Hartford is
the common parent. It is the current intention of The Hartford and its
subsidiaries to continue to file a single consolidated Federal income tax
return. The Company will continue to remit (receive from) The Hartford a current
income tax provision (benefit) computed in accordance with such tax sharing
agreement. Federal income taxes paid by the Company were $29,792, $215,921 and
$20,538 in 1996, 1995 and 1994, respectively. The effective tax rate was 22%,
25% and 92% in 1996, 1995 and 1994, respectively. The following schedule
provides a reconciliation of the tax provision at the U.S. Federal Statutory
rate to Federal income tax expense (in millions).
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- -----
<S> <C> <C> <C>
Tax provision at U.S. Federal statutory
rate..................................... $ 30 $ 20 $ 9
Tax deferred acquisition costs............ 27 8 8
Statutory to tax reserve differences...... -- 3 5
Unrealized (gain)/loss on separate
accounts................................. (21) (13) 2
Investments and other..................... (17) (4) --
--------- --------- ---
Federal income tax expense................ $ 19 $ 14 $ 24
--------- --------- ---
--------- --------- ---
</TABLE>
5. CAPITAL AND SURPLUS AND SHAREHOLDER
DIVIDEND RESTRICTIONS
The maximum amount of dividends which can be paid, without prior approval,
by State of Connecticut insurance companies to shareholders is subject to
restrictions relating to statutory surplus. Dividends are paid as determined by
the Board of Directors and are not cumulative. No dividends were paid in 1996 or
1994. ILA paid dividends of $10 million to its parent, HLIC, in 1995. As a
result of the Distribution by ITT, the assets of ITT Lyndon Insurance Company
(Lyndon) were contributed to ILA in June 1995. Substantially all the business
was removed from Lyndon prior to the contribution. The amount of assets which
exceeded liabilities at the contribution date ($112 million) was included in
paid-in surplus.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 55
- --------------------------------------------------------------------------------
6. PENSION PLANS AND OTHER POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS
The Company's employees are included in The Hartford's non-contributory
defined benefit pension plans. These plans provide pension benefits that are
based on years of service and the employee's compensation during the last ten
years of employment. The Company's funding policy is to contribute annually an
amount between the minimum funding requirements set forth in the Employee
Retirement Income Security Act of 1974 and the maximum amount that can be
deducted for Federal income tax purposes. Generally, pension costs are funded
through the purchase of HLIC's group pension contracts. Pension expense was
$358, $1,034, and $1,211 in 1996, 1995 and 1994, respectively. Liabilities for
the plan are held by The Hartford.
The Company also participates in The Hartford's Investment and Savings Plan,
which includes a deferred compensation option under IRC section 401(k) and an
ESOP allocation under IRC section 404(k). The liabilities for these plans are
included in the financial statements of The Hartford. The cost to ILA was not
material in 1996, 1995 and 1994.
The Company's employees are included in The Hartford's contributory defined
health care and life insurance benefit plans. These plans provide health care
and life insurance benefits for retired employees. Substantially all employees
may become eligible for those benefits if they reach normal or early retirement
age while still working for the Company. The Company has prefunded a portion of
the health care and life insurance obligations through trust funds where such
prefunding can be accomplished on a tax effective basis. Amounts allocated by
The Hartford for post-retirement health care and life insurance benefits expense
(not including provisions for accrual of post-retirement benefit obligations)
are immaterial. The assumed rate of future increases in the per capita cost of
health care (the health care trend rate) was 9.3% for 1996, decreasing ratably
to 6% in the year 2001. Increasing the health care trend rates by one percent
per year would have an immaterial impact on the accumulated post-retirement
benefit obligation and the annual expense. The cost to ILA was not material in
1996, 1995 and 1994.
Post-employment benefits are primarily comprised of obligations to provide
medical and life insurance to employees on long-term disability. Post-employment
benefit expense was not material in 1996, 1995 and 1994.
7. REINSURANCE
The Company cedes insurance to non-affiliated insurers in order to limit its
maximum loss. Such transfer does not relieve ILA of its primary liability. ILA
also assumes insurance from other insurers.
Life insurance net retained premiums were comprised of the following:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Direct premiums............ $ 226,612 $ 159,918 $ 133,180
Premiums assumed........... 33,817 13,299 960
Premiums ceded............. (10,185) (7,425) 308,033
---------- ---------- ----------
Premiums and annuity
considerations............ $ 250,244 $ 165,792 $ 442,173
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The Company ceded to a third party, on a modified coinsurance basis, 80% of
the variable annuity business written in 1994. The ceded business includes both
general and separate account liabilities. As a result of the agreement, in
December 1994, ILA transferred approximately $1,352 million in assets and
liabilities. The financial impact of the cession was an increase of
approximately $15 million to net income and surplus in 1994.
In November 1994, the Company ceded, on a modified coinsurance basis, 30% of
the separate account variable annuity business distributed by Paine Webber to
Paine Webber Life Insurance Company ("PWLIC"). As a result of the agreement, ILA
transferred approximately $24 million in assets and liabilities to PWLIC. The
financial impact of the cession was an increase of approximately $765 to net
income and surplus in 1994.
In October 1994, the agreement, effective December 1990, which required ILA
to coinsure 90% of all existing and new business, excluding variable annuity
business, written by the Company to HLIC, was terminated. As a result of the
termination, ILA received approximately $430 million in assets and liabilities
from HLIC. The impact of the transaction was a decrease of approximately $15
million to net income and surplus in 1994.
In November 1993, ILA acquired, through an assumption reinsurance
transaction, substantially all of the individual fixed and variable annuity
business of Hartford Life and Accident, an affiliate. As a result of this
transaction, the assets and liabilities of the Company increased approximately
$1 billion, substantially all of which was transferred to the separate accounts
of the Company. The remaining assets and liabilities (approximately $41 million)
were transferred in October 1995. The impact of these transactions on net income
and surplus was not significant.
8. SEPARATE ACCOUNTS
The Company maintains separate account assets and liabilities totaling $14.6
billion and $7.3 billion at December 31, 1996 and 1995, respectively. Separate
account assets are reported at fair value and separate account liabilities are
determined in accordance with CARVM, which approximates the market value less
applicable surrender charges. Separate account assets are segregated from other
investments, the policyholder assumes the investment risk,
<PAGE>
56 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
and the investment income and gains and losses accrue directly to the
policyholder. Separate account management fees, net of minimum guarantees, were
$144 million, $72 million and $42 million in 1996, 1995 and 1994, respectively,
and are recorded as a component of other revenues on the Statutory Basis
Statements of Income.
9. COMMITMENTS AND CONTINGENCIES
As of December 31, 1996 and 1995, the Company had no material contingent
liabilities, nor had the Company committed any surplus funds for any contingent
liabilities or arrangements. The Company is involved in various legal actions
which have arisen in the normal course of its business. In the opinion of
management, the ultimate liability with respect to such lawsuits as well as
other contingencies is not considered to be material in relation to the results
of operations and financial position of the Company.
Under insurance guaranty laws in most states, insurers doing business
therein can be assessed up to prescribed limits for policyholder losses incurred
by insolvent companies. The amount of any future assessments on ILA under these
laws cannot be reasonably estimated. Most of the laws do provide, however, that
an assessment may be excused or deferred if it would threaten an insurer's own
financial strength. Additionally, guaranty fund assessments are used to reduce
state premium taxes paid by the Company in certain states. ILA paid guaranty
fund assessments of $1,262, $1,684 and $583 in 1996, 1995 and 1994,
respectively. ILA incurred guaranteed fund expense of $548, $0 and $0 in 1996,
1995 and 1994, respectively.
<PAGE>
ICMG Registered Variable Life Separate Account One
ITT Hartford Life and Annuity Insurance Company
Financial Statements
as of September 30, 1997 (Unaudited)
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 58
- --------------------------------------------------------------------------------
ICMG Registered Variable Life Separate Account One
Statement of Assets and Liabilities
September 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
HARTFORD HVA NEUBERGER
HARTFORD CAPITAL MONEY & BERMAN
BOND APPRECIATION MARKET PARTNERS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 103,124
Cost $104,624
Market Value......... $ 108,572 -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 26,362
Cost $ 10,457
Market Value......... -- $ 124,603 -- --
HVA Money Market Fund,
Inc.
Shares 1,033,159
Cost $1,033,159
Market Value......... -- -- $ 1,033,159 --
Neuberger & Berman
Partners Portfolio
Shares 8,232
Cost $159,398
Market Value......... -- -- -- $ 170,649
Neuberger & Berman
Balanced Portfolio
Shares 1,570
Cost $ 27,208
Market Value......... -- -- -- --
Neuberger & Berman
Limited Maturity
Portfolio
Shares 7,110
Cost $ 98,613
Market Value......... -- -- -- --
Fidelity Equity Income
Portfolio
Shares 9,724
Cost $204,581
Market Value......... -- -- -- --
Fidelity High Income
Portfolio
Shares 6,184
Cost $ 75,663
Market Value......... -- -- -- --
Fidelity Overseas
Portfolio
Shares 7,773
Cost $145,801
Market Value......... -- -- -- --
Fidelity Asset Manager
Portfolio
Shares 4,212
Cost $ 68,278
Market Value......... -- -- -- --
Alger American Small
Capitalization
Portfolio
Shares 1,725
Cost $ 68,823
Market Value......... -- -- -- --
Alger American Growth
Portfolio
Shares 5,827
Cost $215,784
Market Value......... -- -- -- --
Receivable from ITT
Hartford Life and
Annuity Insurance
Company............... -- -- -- 351
------------- ----------- ----------- -------------
Total Assets........... 108,572 124,603 1,033,159 171,000
------------- ----------- ----------- -------------
LIABILITIES:
Payable for fund shares
purchased............. -- -- -- --
Payable to ITT Hartford
Life and Annuity
Insurance Company..... 264 484 646 --
------------- ----------- ----------- -------------
Total Liabilities...... 264 484 646 --
------------- ----------- ----------- -------------
Net Assets............. $ 108,308 $ 124,119 $ 1,032,513 $ 171,000
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
VARIABLE LIFE INSURANCE
POLICIES:
Units Owned by
Participants.......... 9,110 8,448 98,234 11,602
Unit Price............. $ 10.7130 $ 13.1371 $ 10.4048 $ 13.5693
Units Owned by ITT
Hartford Life and
Annuity Insurance
Company............... 1,000 1,000 1,000 1,000
Unit Price............. $ 10.7130 $ 13.1371 $ 10.4048 $ 13.5693
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 59
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEUBERGER
NEUBERGER & BERMAN FIDELITY FIDELITY FIDELITY
& BERMAN LIMITED EQUITY HIGH FIDELITY ASSET
BALANCED MATURITY INCOME INCOME OVERSEAS MANAGER
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------- --------------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 103,124
Cost $104,624
Market Value......... -- -- -- -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 26,362
Cost $ 10,457
Market Value......... -- -- -- -- -- --
HVA Money Market Fund,
Inc.
Shares 1,033,159
Cost $1,033,159
Market Value......... -- -- -- -- -- --
Neuberger & Berman
Partners Portfolio
Shares 8,232
Cost $159,398
Market Value......... -- -- -- -- -- --
Neuberger & Berman
Balanced Portfolio
Shares 1,570
Cost $ 27,208
Market Value......... $ 28,262 -- -- -- -- --
Neuberger & Berman
Limited Maturity
Portfolio
Shares 7,110
Cost $ 98,613
Market Value......... -- $ 99,184 -- -- -- --
Fidelity Equity Income
Portfolio
Shares 9,724
Cost $204,581
Market Value......... -- -- $ 231,421 -- -- --
Fidelity High Income
Portfolio
Shares 6,184
Cost $ 75,663
Market Value......... -- -- -- $ 83,179 -- --
Fidelity Overseas
Portfolio
Shares 7,773
Cost $145,801
Market Value......... -- -- -- -- $ 159,888 --
Fidelity Asset Manager
Portfolio
Shares 4,212
Cost $ 68,278
Market Value......... -- -- -- -- -- $ 74,266
Alger American Small
Capitalization
Portfolio
Shares 1,725
Cost $ 68,823
Market Value......... -- -- -- -- -- --
Alger American Growth
Portfolio
Shares 5,827
Cost $215,784
Market Value......... -- -- -- -- -- --
Receivable from ITT
Hartford Life and
Annuity Insurance
Company............... -- -- -- -- -- --
-------- --------------- -------- ------------ ------------ ------------
Total Assets........... 28,262 99,184 231,421 83,179 159,888 74,266
-------- --------------- -------- ------------ ------------ ------------
LIABILITIES:
Payable for fund shares
purchased............. -- -- -- -- -- --
Payable to ITT Hartford
Life and Annuity
Insurance Company..... 404 213 873 209 760 198
-------- --------------- -------- ------------ ------------ ------------
Total Liabilities...... 404 213 873 209 760 198
-------- --------------- -------- ------------ ------------ ------------
Net Assets............. $ 27,858 $ 98,971 $ 230,548 $ 82,970 $ 159,128 $ 74,068
-------- --------------- -------- ------------ ------------ ------------
-------- --------------- -------- ------------ ------------ ------------
VARIABLE LIFE INSURANCE
POLICIES:
Units Owned by
Participants.......... 1,299 8,405 17,341 6,040 12,078 5,255
Unit Price............. $ 12.1175 $ 10.5232 $ 12.5701 $ 11.7855 $ 12.1678 $ 11.8414
Units Owned by ITT
Hartford Life and
Annuity Insurance
Company............... 1,000 1,000 1,000 1,000 1,000 1,000
Unit Price............. $ 12.1175 $ 10.5232 $ 12.5701 $ 11.7855 $ 12.1678 $ 11.8414
<CAPTION>
ALGER
AMERICAN ALGER
SMALL AMERICAN
CAPITALIZATION GROWTH
PORTFOLIO PORTFOLIO
------------ ------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares
Cost
Market Value......... -- --
HVA Money Market Fund,
Inc.
Shares
Cost
Market Value......... -- --
Neuberger & Berman
Partners Portfolio
Shares
Cost
Market Value......... -- --
Neuberger & Berman
Balanced Portfolio
Shares
Cost
Market Value......... -- --
Neuberger & Berman
Limited Maturity
Portfolio
Shares
Cost
Market Value......... -- --
Fidelity Equity Income
Portfolio
Shares
Cost
Market Value......... -- --
Fidelity High Income
Portfolio
Shares
Cost
Market Value......... -- --
Fidelity Overseas
Portfolio
Shares
Cost
Market Value......... -- --
Fidelity Asset Manager
Portfolio
Shares
Cost
Market Value......... -- --
Alger American Small
Capitalization
Portfolio
Shares
Cost
Market Value......... $ 80,501 --
Alger American Growth
Portfolio
Shares
Cost
Market Value......... -- $ 258,021
Receivable from ITT
Hartford Life and
Annuity Insurance
Company............... -- --
------------ ------------
Total Assets........... 80,501 258,021
------------ ------------
LIABILITIES:
Payable for fund shares
purchased............. -- --
Payable to ITT Hartford
Life and Annuity
Insurance Company..... 271 29
------------ ------------
Total Liabilities...... 271 29
------------ ------------
Net Assets............. $ 80,230 $ 257,992
------------ ------------
------------ ------------
VARIABLE LIFE INSURANCE
POLICIES:
Units Owned by
Participants.......... 5,860 19,245
Unit Price............. $ 11.6954 $ 12.7437
Units Owned by ITT
Hartford Life and
Annuity Insurance
Company............... 1,000 1,000
Unit Price............. $ 11.6954 $ 12.7437
</TABLE>
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 60
- --------------------------------------------------------------------------------
ICMG REGISTERED VARIABLE LIFE SEPARATE ACCOUNT ONE
STATEMENT OF OPERATIONS & STATEMENT OF CHANGES IN NET ASSETS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
HARTFORD HVA NEUBERGER
HARTFORD CAPITAL MONEY & BERMAN
BOND APPRECIATION MARKET PARTNERS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 1,917 $ 837 $ 8,456 $ 514
EXPENSES:
Mortality and expense
undertakings.......... (460) (297) (1,109) (401)
------------- ----------- ----------- -------------
Net investment income
(loss).............. 1,457 540 7,347 113
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 1,895 (450) -- 8,680
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 4,597 19,893 -- 10,919
------------- ----------- ----------- -------------
Net gains (losses) on
investments......... 6,492 19,443 -- 19,599
------------- ----------- ----------- -------------
Net increase
(decrease) in net
assets resulting
from operations..... 7,949 19,983 7,347 19,712
------------- ----------- ----------- -------------
UNIT TRANSACTIONS:
Premiums............... 20,587 97,179 1,017,584 142,031
Administrative fee..... (86) (214) (172) (308)
Cost of insurance...... (1,839) (3,286) (2,642) (4,730)
Other activity......... 672 358 337 3,972
------------- ----------- ----------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 19,334 94,037 1,015,107 140,965
------------- ----------- ----------- -------------
Total increase
(decrease) in net
assets................ 27,283 114,020 1,022,454 160,677
NET ASSETS:
Beginning of period.... 81,025 10,099 10,059 10,323
------------- ----------- ----------- -------------
End of period.......... $ 108,308 $ 124,119 $ 1,032,513 $ 171,000
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 61
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEUBERGER
NEUBERGER & BERMAN FIDELITY FIDELITY FIDELITY
& BERMAN LIMITED EQUITY HIGH FIDELITY ASSET
BALANCED MATURITY INCOME INCOME OVERSEAS MANAGER
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------- --------------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 678 $ 4,823 $ 13,355 $ 812 $ 7,213 $ 1,233
EXPENSES:
Mortality and expense
undertakings.......... (96) (442) (857) (215) (581) (199)
------- ------- -------- ------------ ------------ ------------
Net investment income
(loss).............. 582 4,381 12,498 597 6,632 1,034
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 3,661 (178) 3,084 121 4,980 143
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 965 307 26,376 7,346 12,601 5,906
------- ------- -------- ------------ ------------ ------------
Net gains (losses) on
investments......... 4,626 129 29,460 7,467 17,581 6,049
------- ------- -------- ------------ ------------ ------------
Net increase
(decrease) in net
assets resulting
from operations..... 5,208 4,510 41,958 8,064 24,213 7,083
------- ------- -------- ------------ ------------ ------------
UNIT TRANSACTIONS:
Premiums............... 14,950 14,950 67,278 67,278 59,803 59,802
Administrative fee..... (32) (69) (215) (144) (170) (127)
Cost of insurance...... (486) (1,592) (4,247) (2,203) (3,180) (1,959)
Other activity......... (1,863) (129) (3,094) (188) (4,056) (806)
------- ------- -------- ------------ ------------ ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 12,569 13,160 59,722 64,743 52,397 56,910
------- ------- -------- ------------ ------------ ------------
Total increase
(decrease) in net
assets................ 17,777 17,670 101,680 72,807 76,610 63,993
NET ASSETS:
Beginning of period.... 10,081 81,301 128,868 10,163 82,518 10,075
------- ------- -------- ------------ ------------ ------------
End of period.......... $ 27,858 $ 98,971 $ 230,548 $ 82,970 $ 159,128 $ 74,068
------- ------- -------- ------------ ------------ ------------
------- ------- -------- ------------ ------------ ------------
<CAPTION>
ALGER
AMERICAN ALGER
SMALL AMERICAN
CAPITALIZATION GROWTH
PORTFOLIO PORTFOLIO
------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 1,930 $ 1,798
EXPENSES:
Mortality and expense
undertakings.......... (199) (969)
------------ ------------
Net investment income
(loss).............. 1,731 829
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 376 5,397
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 11,777 43,763
------------ ------------
Net gains (losses) on
investments......... 12,153 49,160
------------ ------------
Net increase
(decrease) in net
assets resulting
from operations..... 13,884 49,989
------------ ------------
UNIT TRANSACTIONS:
Premiums............... 59,804 59,801
Administrative fee..... (129) (213)
Cost of insurance...... (1,984) (4,430)
Other activity......... (1,238) 2,279
------------ ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 56,453 57,437
------------ ------------
Total increase
(decrease) in net
assets................ 70,337 107,426
NET ASSETS:
Beginning of period.... 9,893 150,566
------------ ------------
End of period.......... $ 80,230 $ 257,992
------------ ------------
------------ ------------
</TABLE>
<PAGE>
62 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
ICMG REGISTERED VARIABLE LIFE SEPARATE ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 (UNAUDITED)
1. ORGANIZATION:
ICMG Registered Variable Life Separate Account One (the Account) is a
separate investment account with ITT Hartford Life and Annuity Insurance Company
(the Company) and is registered with the Securities and Exchange Commission
(SEC) as a unit investment trust under the Investment Company Act of 1940, as
amended. The Account consists of twelve portfolios. Both the Company and the
Account are subject to supervision and regulation by the Department of Insurance
of the State of Connecticut and the SEC. The Account invests deposits by
variable life contractholders of the Company in various mutual funds (the Funds)
as directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting principles
in the investment company industry:
a) SECURITY TRANSACTIONS -- Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments sold is
determined on the basis of identified cost. Dividend and capital gains income
are accrued as of the ex-dividend date. Capital gains income represents
dividends from the Funds which are characterized as capital gains under tax
regulations.
b) SECURITY VALUATION -- The investment in shares of the funds are valued at
the closing net asset value per share as determined by the appropriate Fund as
of September 30, 1997.
c) FEDERAL INCOME TAXES -- The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no federal
income taxes are payable with respect to the operations of the Account.
d) USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of income and expenses during the period. Operating results in the future could
vary from the amounts derived from management's estimates.
3. ADMINISTRATION OF THE ACCOUNT
AND RELATED CHARGES:
a) MORTALITY AND EXPENSE UNDERTAKINGS -- The Company, as issuer of variable
life insurance contracts, provides the mortality and expense undertakings and,
with respect to the Account, receives an annual fee of 0.65% of the Account's
average daily net assets.
b) DEDUCTION OF OTHER FEES -- In accordance with the terms of the contracts,
the Company makes deductions for the cost of insurance, administrative fees,
state premium taxes and other insurance charges. These charges are deducted
through termination of units of interest from applicable contractholders'
accounts.
<PAGE>
ICMG Registered Variable Life Separate Account One
ITT Hartford Life and Annuity Insurance Company
Financial Statements as of December 31, 1996
Together With
Report of Independent Public Accountants
<PAGE>
64 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ITT Hartford Life and Annuity Insurance Company:
ICMG Registered Variable Life Separate Account One and to the
Owners of Units of Interest Therein:
We have audited the accompanying statement of assets and liabilities of ITT
Hartford Life and Annuity Insurance Company ICMG Registered Variable Life
Separate Account One (the Account) as of December 31, 1996, and the related
statements of operations and changes in net assets for the period from
inception, November 14, 1996, to December 31, 1996. These financial statements
are the responsibility of the Account's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 ITT Hartford Life and Annuity
Insurance Company ICMG Registered Variable Life Separate Account One as of
December 31, 1996, the results of its operations and the changes in its net
assets for the period from inception, November 14, 1996, to December 31, 1996 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 20, 1997
<PAGE>
This page intentionally left blank.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 66
- --------------------------------------------------------------------------------
ICMG REGISTERED VARIABLE LIFE SEPARATE ACCOUNT ONE
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
HARTFORD HVA NEUBERGER
HARTFORD CAPITAL MONEY & BERMAN
BOND APPRECIATION MARKET PARTNERS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------ --------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 81,426
Cost $ 82,228
Market Value......... $81,361 -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 2,582
Cost $ 10,008
Market Value......... -- $ 10,107 -- --
HVA Money Market Fund,
Inc.
Shares 10,067
Cost $ 10,067
Market Value......... -- -- $ 10,067 --
Neuberger & Berman
Partners Portfolio
Shares 627
Cost $ 10,000
Market Value......... -- -- -- $ 10,332
Neuberger & Berman
Balanced Portfolio
Shares 634
Cost $ 10,000
Market Value......... -- -- -- --
Neuberger & Berman
Limited Maturity Bond
Portfolio
Shares 5,810
Cost $ 81,373
Market Value......... -- -- -- --
Fidelity Equity Income
Portfolio
Shares 6,154
Cost $128,955
Market Value......... -- -- -- --
Fidelity High Income
Portfolio
Shares 812
Cost $ 10,000
Market Value......... -- -- -- --
Fidelity Overseas
Portfolio
Shares 4,398
Cost $ 81,373
Market Value......... -- -- -- --
Fidelity Asset Manager
Portfolio
Shares 596
Cost $ 10,000
Market Value......... -- -- -- --
Alger American Small
Capitalization
Portfolio
Shares 242
Cost $ 10,000
Market Value......... -- -- -- --
Alger American Growth
Portfolio
Shares 4,405
Cost $152,747
Market Value......... -- -- -- --
Total Assets........... 81,361 10,107 10,067 10,332
--------- ------------ --------- ---------
LIABILITIES:
Payable to ITT Hartford
Life and Annuity
Insurance Company..... 336 8 8 9
--------- ------------ --------- ---------
Total Liabilities...... 336 8 8 9
--------- ------------ --------- ---------
Net Assets............. $81,025 $ 10,099 $ 10,059 $ 10,323
--------- ------------ --------- ---------
--------- ------------ --------- ---------
VARIABLE LIFE INSURANCE
POLICIES:
Units Owned by
Participants.......... 7,112 -- -- --
Unit Price............. $9.9883 $ 10.0989 $10.0583 $10.3237
Units Owned by ITT
Hartford Life and
Annuity Insurance
Company............... 1,000 1,000 1,000 1,000
Unit Price............. $9.9883 $ 10.0989 $10.0583 $10.3237
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 67
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEUBERGER
NEUBERGER & BERMAN FIDELITY FIDELITY FIDELITY ALGER AMERICAN ALGER
& BERMAN LIMITED EQUITY HIGH FIDELITY ASSET SMALL AMERICAN
BALANCED MATURITY BOND INCOME INCOME OVERSEAS MANAGER CAPITALIZATION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------- --------- --------- --------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 81,426
Cost $ 82,228
Market Value......... -- -- -- -- -- -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 2,582
Cost $ 10,008
Market Value......... -- -- -- -- -- -- -- --
HVA Money Market Fund,
Inc.
Shares 10,067
Cost $ 10,067
Market Value......... -- -- -- -- -- -- -- --
Neuberger & Berman
Partners Portfolio
Shares 627
Cost $ 10,000
Market Value......... -- -- -- -- -- -- -- --
Neuberger & Berman
Balanced Portfolio
Shares 634
Cost $ 10,000
Market Value......... $ 10,089 -- -- -- -- -- -- --
Neuberger & Berman
Limited Maturity Bond
Portfolio
Shares 5,810
Cost $ 81,373
Market Value......... -- $ 81,637 -- -- -- -- -- --
Fidelity Equity Income
Portfolio
Shares 6,154
Cost $128,955
Market Value......... -- -- $129,422 -- -- -- -- --
Fidelity High Income
Portfolio
Shares 812
Cost $ 10,000
Market Value......... -- -- -- $ 10,171 -- -- -- --
Fidelity Overseas
Portfolio
Shares 4,398
Cost $ 81,373
Market Value......... -- -- -- -- $ 82,859 -- -- --
Fidelity Asset Manager
Portfolio
Shares 596
Cost $ 10,000
Market Value......... -- -- -- -- -- $ 10,083 -- --
Alger American Small
Capitalization
Portfolio
Shares 242
Cost $ 10,000
Market Value......... -- -- -- -- -- -- $ 9,901 --
Alger American Growth
Portfolio
Shares 4,405
Cost $152,747
Market Value......... -- -- -- -- -- -- -- $151,221
Total Assets........... 10,089 81,637 129,422 10,171 82,859 10,083 9,901 151,221
--------- ------------- --------- --------- --------- --------- ------- ---------
LIABILITIES:
Payable to ITT Hartford
Life and Annuity
Insurance Company..... 8 336 554 8 341 8 8 655
--------- ------------- --------- --------- --------- --------- ------- ---------
Total Liabilities...... 8 336 554 8 341 8 8 655
--------- ------------- --------- --------- --------- --------- ------- ---------
Net Assets............. $ 10,081 $ 81,301 $128,868 $ 10,163 $ 82,518 $ 10,075 $ 9,893 $150,566
--------- ------------- --------- --------- --------- --------- ------- ---------
--------- ------------- --------- --------- --------- --------- ------- ---------
VARIABLE LIFE INSURANCE
POLICIES:
Units Owned by
Participants.......... -- 7,108 11,812 -- 7,066 -- -- 14,311
Unit Price............. $10.0803 $10.0273 $10.0588 $10.1621 $10.2306 $10.0750 $9.8925 $ 9.8341
Units Owned by ITT
Hartford Life and
Annuity Insurance
Company............... 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Unit Price............. $10.0803 $10.0273 $10.0588 $10.1621 $10.2306 $10.0750 $9.8925 $ 9.8341
</TABLE>
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 68
- --------------------------------------------------------------------------------
ICMG Registered Variable Life Separate Account One
Statement of Operations
For the period from inception, November 14, 1996, to December 31, 1996
<TABLE>
<CAPTION>
HARTFORD HVA NEUBERGER
HARTFORD CAPITAL MONEY & BERMAN
BOND APPRECIATION MARKET PARTNERS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------ --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 855 $ 8 $ 67 $ --
EXPENSES:
Mortality and expense
undertakings.......... (62) (8) (8) (9)
--------- --- --------- ---------
Net investment income
(loss).............. 793 -- 59 (9)
--------- --- --------- ---------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- -- -- --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (867) 99 -- 332
--------- --- --------- ---------
Net realized and
unrealized gain
(loss) on
investments......... (867) 99 -- 332
--------- --- --------- ---------
Net increase
(decrease) in net
assets resulting
from operations..... $ (74) $99 $ 59 $323
--------- --- --------- ---------
--------- --- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 69
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEUBERGER
NEUBERGER & BERMAN FIDELITY FIDELITY FIDELITY ALGER AMERICAN ALGER
& BERMAN LIMITED EQUITY HIGH FIDELITY ASSET SMALL AMERICAN
BALANCED MATURITY BOND INCOME INCOME OVERSEAS MANAGER CAPITALIZATION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------- --------- --------- --------- --------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $-- $ -- $ -- $ -- $ -- $-- $ -- $ --
EXPENSES:
Mortality and expense
undertakings.......... (8) (62) (98) (8) (62) (8) (8) (116)
--- ----- --------- --------- --------- --- ------ --------
Net investment income
(loss).............. (8) (62) (98) (8) (62) (8) (8) (116)
--- ----- --------- --------- --------- --- ------ --------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- -- -- -- -- -- -- --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 89 264 467 171 1,486 83 (99) (1,526)
--- ----- --------- --------- --------- --- ------ --------
Net realized and
unrealized gain
(loss) on
investments......... 89 264 467 171 1,486 83 (99) (1,526)
--- ----- --------- --------- --------- --- ------ --------
Net increase
(decrease) in net
assets resulting
from operations..... $81 $202 $369 $163 $1,424 $75 $(107) $(1,642)
--- ----- --------- --------- --------- --- ------ --------
--- ----- --------- --------- --------- --- ------ --------
</TABLE>
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 70
- --------------------------------------------------------------------------------
ICMG Registered Variable Life Separate Account One
Statement of Changes in Net Assets
From the period from inception, November 14, 1996 to December 31, 1996
<TABLE>
<CAPTION>
HARTFORD HVA NEUBERGER
HARTFORD CAPITAL MONEY & BERMAN
BOND APPRECIATION MARKET PARTNERS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------ --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 855 $ 8 $ 67 $ --
EXPENSES:
Mortality and expense
undertakings.......... (62) (8) (8) (9)
--------- ------------ --------- ---------
Net investment income
(loss).............. 793 -- 59 (9)
--------- ------------ --------- ---------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- -- -- --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (867) 99 -- 332
--------- ------------ --------- ---------
Net realized and
unrealized gain
(loss) on
investments......... (867) 99 -- 332
--------- ------------ --------- ---------
Net increase
(decrease) in net
assets resulting
from operations..... (74) 99 59 323
--------- ------------ --------- ---------
UNIT TRANSACTIONS:
Premiums............... 81,371 10,000 10,000 10,000
Administrative fee..... (9) -- -- --
Cost of insurance...... (263) -- -- --
--------- ------------ --------- ---------
Net increase in net
assets resulting from
unit transactions..... 81,099 10,000 10,000 10,000
--------- ------------ --------- ---------
Total increase in net
assets................ 81,025 10,099 10,059 10,323
NET ASSETS:
Beginning of Period.... -- -- -- --
--------- ------------ --------- ---------
End of Period.......... $ 81,025 $10,099 $ 10,059 $10,323
--------- ------------ --------- ---------
--------- ------------ --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 71
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEUBERGER
NEUBERGER & BERMAN FIDELITY FIDELITY FIDELITY ALGER AMERICAN ALGER
& BERMAN LIMITED EQUITY HIGH FIDELITY ASSET SMALL AMERICAN
BALANCED MATURITY BOND INCOME INCOME OVERSEAS MANAGER CAPITALIZATION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------- --------- --------- --------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
EXPENSES:
Mortality and expense
undertakings.......... (8) (62) (98) (8) (62) (8) (8) (116)
--------- ------------- --------- --------- --------- --------- ------- ---------
Net investment income
(loss).............. (8) (62) (98) (8) (62) (8) (8) (116)
--------- ------------- --------- --------- --------- --------- ------- ---------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- -- -- -- -- -- -- --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 89 264 467 171 1,486 83 (99) (1,526)
--------- ------------- --------- --------- --------- --------- ------- ---------
Net realized and
unrealized gain
(loss) on
investments......... 89 264 467 171 1,486 83 (99) (1,526)
--------- ------------- --------- --------- --------- --------- ------- ---------
Net increase
(decrease) in net
assets resulting
from operations..... 81 202 359 163 1,424 75 (107) (1,542)
--------- ------------- --------- --------- --------- --------- ------- ---------
UNIT TRANSACTIONS:
Premiums............... 10,000 81,372 128,952 10,000 81,366 10,000 10,000 152,742
Administrative fee..... -- (9) (15) -- (9) -- -- (15)
Cost of insurance...... -- (264) (438) -- (263) -- -- (526)
--------- ------------- --------- --------- --------- --------- ------- ---------
Net increase in net
assets resulting from
unit transactions..... 10,000 81,099 128,499 10,000 81,094 10,000 10,000 152,208
--------- ------------- --------- --------- --------- --------- ------- ---------
Total increase in net
assets................ 10,081 81,301 128,868 10,163 82,518 10,075 9,893 150,566
NET ASSETS:
Beginning of Period.... -- -- -- -- -- -- -- --
--------- ------------- --------- --------- --------- --------- ------- ---------
End of Period.......... $10,081 $81,301 $ 128,868 $ 10,163 $ 82,518 $ 10,075 $ 9,893 $ 150,566
--------- ------------- --------- --------- --------- --------- ------- ---------
--------- ------------- --------- --------- --------- --------- ------- ---------
</TABLE>
<PAGE>
72 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
ICMG REGISTERED VARIABLE LIFE SEPARATE ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION:
ICMG Registered Variable Life Separate Account One (the Account) is a
separate investment account within ITT Hartford Life and Annuity Insurance
Company (the Company) and is registered with the Securities and Exchange
Commission (SEC) as a unit investment trust under the Investment Company Act of
1940, as amended. The Account consists of twelve portfolios. Both the Company
and the Account are subject to supervision and regulation by the Department of
Insurance of the State of Connecticut and the SEC. The Account invests deposits
by variable life contractholders of the Company in various mutual funds (the
Funds) as directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting principles
in the investment company industry:
a) SECURITY TRANSACTIONS -- Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments sold is
determined on the basis of identified cost. Dividend income is accrued as of the
ex-dividend date.
b) SECURITY VALUATION -- The investment in shares of the funds are valued at
the closing net asset value per share as determined by the appropriate Fund as
of December 31, 1996.
c) FEDERAL INCOME TAXES -- The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no federal
income taxes are payable with respect to the operations of the Account.
d) USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of income and expenses during the period. Operating results in the future could
vary from the amounts derived from management's estimates.
3. ADMINISTRATION OF THE ACCOUNT
AND RELATED CHARGES:
a) MORTALITY AND EXPENSE UNDERTAKINGS -- The Company, as issuer of variable
life insurance contracts, provides the mortality and expense undertakings and,
with respect to the Account, receives an annual fee of 0.65% of the Account's
average daily net assets.
b) DEDUCTION OF OTHER FEES -- In accordance with the terms of the contracts,
the Company makes deductions for the cost of insurance, administrative fees,
state premium taxes and other insurance charges. These charges are deducted
through termination of units of interest from applicable contractholders'
accounts.
<PAGE>
The following prospectus contains information relating to all of the funds
offered by the Hartford Mutual Funds. Not all of the funds in the Hartford
Mutual Funds are available to Pegasus Provider Policy Owners. Please review the
Pegasus Provider product prospectus for details regarding available funds (see
"The Portfolios").
