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ENDEAVOUR I
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
GROUP POLICIES
ITT HARTFORD LIFE AND ANNUITY INSURANCE
COMPANY
P.O. BOX 2999
HARTFORD, CONNECTICUT 06104-2999
[LOGO] TELEPHONE: 1-800-861-1408
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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 ITT Hartford Life and Annuity Insurance Company
("Hartford"). (On January 1, 1998, Hartford's name will change 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 Death Benefits,
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 Variable 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 HVA 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 Hartford
Bond Portfolio, Hartford Capital Appreciation Portfolio and HVA Money Market
Portfolio of the Hartford Funds; the Neuberger & Berman Advisers Management
Trust ("AMT") Partners Portfolio, Balanced Portfolio and Limited Maturity Bond
Portfolio; the VIP Equity Income Portfolio, the VIP High Income Portfolio and
the VIP Overseas Portfolio of Fidelity Variable Insurance Products Fund; the VIP
II Asset Manager Portfolio of the Fidelity Variable Insurance Products Fund II;
and the Alger American Small Capitalization Portfolio and the Alger American
Growth Portfolio of The Alger American Fund.
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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 MAY 1, 1997.
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2 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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TABLE OF CONTENTS
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SPECIAL TERMS......................................................... 4
SUMMARY............................................................... 6
THE COMPANY........................................................... 8
THE SEPARATE ACCOUNT.................................................. 9
THE FUNDS............................................................. 9
General............................................................. 9
a) Hartford Mutual Funds.......................................... 9
b) Neuberger & Berman Advisers Managers Trust..................... 9
c) Variable Insurance Products Fund and Variable Insurance
Products Fund II................................................. 10
e) The Alger American Fund........................................ 10
The Portfolios...................................................... 10
DETAILED DESCRIPTION OF CERTIFICATE BENEFITS AND PROVISIONS........... 11
General............................................................. 11
Issuance of a Certificate........................................... 11
Premiums............................................................ 12
Premium Payment Flexibility....................................... 12
Allocation of Premium Payments.................................... 12
Accumulation Units................................................ 12
Accumulation Unit Values.......................................... 12
Premium Limitation................................................ 13
Values under the Certificate........................................ 13
Surrender of the Certificate........................................ 13
Partial Withdrawals............................................... 13
Transfers Between the Investment Divisions.......................... 13
Amount and Frequency of Transfers................................. 13
Transfers to or from Investment Divisions......................... 14
Procedures for Telephone Transfer................................. 14
Valuation of Payments and Transfers................................. 14
Loans............................................................... 14
Loan Interest..................................................... 14
Credited Interest................................................. 15
Loan Repayments................................................... 15
Termination Due to Excessive Debt................................. 15
Effect of Loans on Investment Value............................... 15
Death Benefit....................................................... 15
Death Benefit Options............................................. 15
Option Change..................................................... 15
Payment Options................................................... 15
Legal Developments Regarding Income Payments...................... 16
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......... 17
Lapse and Grace Period............................................ 17
Reinstatement..................................................... 17
Enrollment for a Certificate........................................ 17
The Right to Examine the Certificate................................ 17
Deductions From the Premium......................................... 17
Front-end Sales Load.............................................. 17
Premium Related Tax Charge........................................ 18
DAC Tax Charge.................................................... 18
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ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 3
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<TABLE>
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Deductions and Charges From the Investment Value.................... 18
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Monthly Deduction Amounts......................................... 18
Mortality and Expense Risk Charge................................... 19
Taxes............................................................. 19
OTHER MATTERS......................................................... 19
Additions, Deletions or Substitutions of Investments................ 19
Voting Rights....................................................... 19
Our Rights.......................................................... 20
Statements to Owners................................................ 20
Limit on Right to Contest........................................... 20
Misstatement as to Age or Sex....................................... 21
Assignment.......................................................... 21
Dividends........................................................... 21
Experience Credits.................................................. 21
SUPPLEMENTAL BENEFITS................................................. 21
Maturity Date Extension Rider....................................... 21
EXECUTIVE OFFICERS AND DIRECTORS...................................... 22
DISTRIBUTION OF THE GROUP POLICIES.................................... 23
SAFEKEEPING OF THE SEPARATE ACCOUNT ASSETS............................ 23
FEDERAL TAX CONSIDERATIONS............................................ 23
General............................................................. 23
Taxation of the Company and the Separate Account.................... 23
Income Taxation of Certificate Benefits............................. 24
Modified Endowment Contracts........................................ 24
Diversification Requirements........................................ 24
Federal Income Tax Withholding...................................... 25
Other Tax Considerations............................................ 25
LEGAL PROCEEDINGS..................................................... 25
EXPERTS............................................................... 25
REGISTRATION STATEMENT................................................ 25
APPENDIX A -- ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES AND CASH
SURRENDER VALUES.................................................... 26
FINANCIAL STATEMENTS..................................................
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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 ITT 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) the Hartford Mutual Funds ("The Hartford Funds"), managed
by HL Investment Advisors, Inc. ("HL Advisors"); (ii) Neuberger & Berman
Advisers Management Trust (the "Neuberger & Berman AMT"), managed by Neuberger &
Berman Management Incorporated ("N&B Management"); (iii) the Variable Insurance
Products Fund (the "VIP Fund"), managed by Fidelity Management & Research
Company ("FMR"); (iv) the Variable Insurance Products Fund II (the "VIP II
Fund"), managed by FMR; and (v) The Alger American Fund ("Alger American"),
managed by Fred Alger Management, Inc. ("Alger 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 flexible premium variable life insurance contract issued by
Hartford and described in this Prospectus.
HARTFORD (ALSO REFERRED TO AS "WE," "US," "OUR," THE "COMPANY"): ITT Hartford
Life and Annuity Insurance Company. On January 1, 1998, the name of ITT Hartford
Life and Annuity Insurance Company will change 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 12 Investment Divisions: (i) the Hartford Bond
Investment Division, (ii) the Hartford Capital Appreciation Investment Division,
(iii) the HVA Money Market Investment Division, (iv) the N&B Appreciation
Investment Division, (v) the N&B Balanced Investment Division, (vi) the N&B
Limited Maturity Bond Investment Division, (vii) the Fidelity VIP Equity Income
Investment Division, (viii) the Fidelity VIP High Income Investment Division,
(ix) the Fidelity VIP Overseas Investment Division, (x) the Fidelity VIP II
Asset Manager Investment Division, (xi) the Alger American
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ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 5
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Small Capitalization Investment Division and (xii) the Alger American Growth
Investment Division.
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 PREMIUM: The amount of premium actually credited to the Investment
Divisions.
NET AMOUNT AT RISK: The Death Benefit less the Cash Value.
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 of The Hartford Fund or series or portfolio of
the remaining Funds. There are currently 12 Portfolios available under the
Policies: the Hartford Bond, Hartford Capital Appreciation and HVA Money Market
mutual funds of The Hartford Funds; the N&B Appreciation, N&B Balanced and N&B
Limited Maturity Bond portfolios of the Neuberger & Berman Trust; the VIP
Equity-Income, VIP High Income and VIP Overseas portfolios of Fidelity Variable
Insurance Products Fund; the VIP II Asset Manager portfolio of Fidelity Variable
Insurance Products Fund II; and the Alger American Small Capitalization and
Alger American Growth portfolios of The Alger American Fund.
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
Securities and Exchange Commission (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 Specifications.
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6 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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SUMMARY
- --------------------------------THE GROUP POLICY
The flexible premium variable life insurance Group Policies, and the
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 12 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 HVA 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 12.
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 Between 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 Death Benefits 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.
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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.
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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.
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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.
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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.
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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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ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 7
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Front-end sales loads which cover expenses relating to the sale and
distribution of the Certificates may be reduced for certain sales of the
Certificates under circumstances which may result in savings of such sales and
distribution expenses. For more information concerning the front-end sales load,
see "Deductions from the Premium", page 17.
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LIMITS ON FRONT-END SALES LOADS
Certain insurance laws and regulations limit the front-end sales loads which
can be assessed against the Certificates. The front-end sales loads assessed in
the Certificates comply with these limitations.
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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%.
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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.
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DEDUCTIONS AND CHARGES FROM
THE 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 -- Investment Value," page 18.
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 18 and "Federal Tax Considerations," page 23.
A charge is made for mortality and expense risks assumed by Hartford.
Hartford deducts a daily charge at a maximum effective annual rate of .65% of
the value of each Investment Division's assets. For more information about the
Monthly Deduction Amount, see "Deductions and Charges From the Investment
Value," page 18.
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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 percentage of net assets)
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TOTAL FUND
MANAGEMENT OTHER OPERATING
FEES EXPENSES EXPENSES
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HVA Money Market Fund........................... 0.423% 0.021% 0.444%
Hartford Bond Fund.............................. 0.490% 0.030% 0.520%
Hartford Capital Appreciation Fund.............. 0.629% 0.017% 0.646%
Neuberger & Berman Partners Portfolio (1)....... 0.840% 0.110% 0.950%
Neuberger & Berman AMT Balanced Portfolio (1)... 0.850% 0.240% 1.090%
Neuberger & Berman AMT Limited Maturity Bond
Portfolio (1)................................. 0.650% 0.130% 0.780%
Fidelity VIP Equity-Income Portfolio (2)........ 0.510% 0.070% 0.580%
Fidelity VIP II Asset Manager (2)............... 0.640% 0.100% 0.740%
Fidelity VIP High Income Portfolio.............. 0.590% 0.120% 0.710%
</TABLE>
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8 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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<TABLE>
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TOTAL FUND
MANAGEMENT OTHER OPERATING
FEES EXPENSES EXPENSES
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Fidelity VIP Overseas Portfolio (2)............. 0.760% 0.170% 0.930%
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Alger American Small Capitalization Portfolio... 0.850% 0.030% 0.880%
Alger American Growth Portfolio................. 0.750% 0.040% 0.790%
</TABLE>
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(1) Neuberger & Berman Advisers Management Trust is divided into Portfolios,
each of which invests all of its net investable assets in a corresponding
series of Advisers Managers Trust. The figures reported under "Management
Fees" include the aggregate of the administration fees paid by the Portfolio
and the management fees paid by its corresponding series of Advisers
Managers Trust. Similarly, "Other Expenses" includes all other expenses of
the Portfolio and its corresponding series of Advisers Managers Trust.
(2) A portion of the brokerage commissions that certain funds pay was used to
reduce funds expenses. In addition, certain funds 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
whereby interst earned on uninvested cash balances was used to reduce
custodian and transfer agent expenses. Including these reductions, the total
operating expenses presented in the table would have been .56% for Equity
Income Portfolio, .92% for Overseas Portfolio, and .73% for Asset Manager
Portfolio.
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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.
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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.
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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 23.
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 24.
- ---------------------------------------------------
THE COMPANY
ITT 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. On January 1, 1998, Hartford's name will
change 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
ultimately owned by ITT Hartford Group, Inc., a Delaware corporation. Subject to
shareholder approval on May 2, 1997, the name of ITT Hartford Group, Inc. will
change to The Hartford Financial Services Group, Inc.
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
Sub-Accounts of the Separate Account. The ratings apply to Hartford's ability to
meet its insurance obligations, including those described in this Prospectus.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
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- ---------------------------------------------------
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.
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 12 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 in the future 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
and may be sold to other separate accounts of Hartford or its affiliates which
fund similar variable annuity or variable life insurance products. 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 following brief descriptions
of the investment objectives of each of the Portfolios in connection with that
allocation.
Each Fund continually issues an unlimited number of full and fractional
shares of beneficial interest in the relevant Portfolios. Such shares are
offered to separate accounts, including the Separate Account, established by
Hartford or one of its affiliated companies specifically to fund the Group
Policies and other policies issued by Hartford or its affiliates as permitted by
the 1940 Act.
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 the prospectuses for each of the Funds accompanying
this Prospectus in connection with the purchase of a Certificate. The investment
objectives of each of the Portfolios are as set forth in "The Portfolios," page
10.
HARTFORD MUTUAL FUNDS (COLLECTIVELY, THE "HARTFORD FUNDS")
The Separate Account currently invests in the Hartford Funds, which are each
diversified open-end management investment companies. The Hartford Funds are
each organized as corporations under the laws of the State of Maryland and are
registered as investment companies under the 1940 Act.
The investment adviser for the HVA Money Market Fund, Inc., Hartford Bond
Fund, Inc. and Hartford Capital Appreciation Fund, Inc. is HL Investment
Advisors, Inc. ("HL Advisors"). In addition, HL Advisors has entered an
investment services agreement with Hartford Investment Management Company, Inc.,
("HIMCO"), pursuant to which HIMCO will provide certain investment services to
Hartford Bond Fund and HVA Money Market Fund. Wellington Management Company,
L.L.P. ("Wellington Management") serves as sub-investment adviser for Hartford
Capital Appreciation Fund, Inc.
NEUBERGER & BERMAN ADVISERS MANAGERS TRUST ("NEUBERGER & BERMAN AMT")
The Separate Account currently invests in Neuberger & Berman AMT, a
diversified open-end management investment company organized as a Delaware
business trust. Neuberger & Berman AMT consists of seven portfolios, including
the N&B AMT Partners, N&B AMT Balanced and N&B AMT Limited Maturity Bond
Portfolios available as part of Endeavour I. Each portfolio of Neuberger &
Berman
<PAGE>
10 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
AMT invests its assets in a corresponding series of the Advisers Managers Trust,
which is also an open-end management investment company registered under the
1940 Act and is organized as a New York common-law trust. The investment
performance of N&B AMT Partners, N&B AMT Balanced and N&B AMT Limited Maturity
Bond Portfolios will directly correspond with the investment performance of the
corresponding series of the Advisers Managers Trust. This "Master/Feeder Fund"
structure is different from that of many other investment companies which
directly acquire and manage their own portfolios of securities.
The N&B AMT Portfolios are advised by Neuberger & Berman Management
Incorporated. Neuberger & Berman, L.L.C. serves as the sub-adviser for the N&B
AMT Limited Maturity Bond Portfolio.
VARIABLE INSURANCE PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND II (EACH,
A "FIDELITY FUND" AND COLLECTIVELY, THE "FIDELITY FUNDS")
The Separate Account currently invests in both 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. Each Fidelity Fund consists of several
investment portfolios, including the VIP Equity-Income, VIP High Income, VIP
Overseas and VIP II Asset Manager Portfolios available as part of Endeavour I.
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.
THE ALGER AMERICAN FUND ("ALGER AMERICAN FUND")
The Separate Account currently invests in shares of the Alger American Fund,
a diversified open-end management investment company registered under the 1940
Act and organized as a Massachusetts business trust. The Alger American Fund
consists of six series, including the Alger American Small Capitalization and
Alger American Growth Portfolios available as part of Endeavour I.
The Alger American Fund is managed by Fred Alger Management, Inc. ("Alger
Management"), a subsidiary of Fred Alger & Company, Incorporated, which is in
turn a subsidiary of Alger Associates, Inc., a financial services holding
company. Alger Management has been in the business of providing investment
advisory services since 1964.
- ---------------------------------------------------
THE PORTFOLIOS
HARTFORD BOND FUND, INC. ("HARTFORD BOND PORTFOLIO")
The Hartford Bond Portfolio seeks to achieve maximum current income
consistent with preservation of capital by investing primarily in fixed-income
securities. Up to 20% of the total assets of the Portfolio may be invested in
debt securities rated in the highest category below investment grade ("Ba" by
Moody's Investor Services, Inc. or "BB" by Standard & Poor's) or, if unrated,
are determined to be of comparable quality by the Portfolio's investment
adviser. Securities rated below investment grade are commonly referred to as
"high yield-high risk securities" or "junk bonds." For more information
concerning the risks associated with investing in such securities, please refer
to the section in the accompanying prospectus for the Hartford Funds entitled
"Hartford Bond Fund, Inc. -- Investment Policies."
HARTFORD CAPITAL APPRECIATION FUND, INC. ("HARTFORD CAPITAL APPRECIATION
PORTFOLIO")
The Hartford Capital Appreciation Portfolio seeks to achieve growth of
capital by investing in securities selected solely on the basis of potential for
capital appreciation; income, if any, is an incidental consideration.
HVA MONEY MARKET FUND, INC. ("HVA MONEY MARKET PORTFOLIO")
The HVA Money Market Portfolio seeks to achieve maximum current income
consistent with liquidity and preservation of capital.
NEUBERGER & BERMAN AMT PARTNERS PORTFOLIO ("N&B AMT PARTNERS PORTFOLIO")
The N&B AMT Partners Portfolio seeks to achieve capital growth. This
Portfolio invests primarily in common stocks of medium to large capitalization
established companies, using a value-oriented investment approach designed to
increase capital with reasonable risk. Its investment program seeks securities
believed to be undervalued based on strong fundamentals such as low
price-to-earnings ratios, consistent cash flow and support from asset values.
NEUBERGER & BERMAN AMT BALANCED PORTFOLIO ("N&B AMT BALANCED PORTFOLIO")
The N&B AMT Balanced Portfolio seeks to achieve long-term capital growth and
reasonable current income without undue risk to principal. Under normal
circumstances, this Portfolio will invest 50% to 70% of its assets in a
diversified portfolio of common stocks of companies that, although potentially
temporarily out of favor in the market, have strong balance sheets and
reasonable valuations relative to their growth rates. This Portfolio will invest
its remaining assets in a diversified portfolio of short-term and
intermediate-term U.S. government and agency securities and other investment
grade debt securities.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
- --------------------------------------------------------------------------------
NEUBERGER & BERMAN AMT LIMITED MATURITY BOND PORTFOLIO ("N&B AMT LIMITED
MATURITY BOND PORTFOLIO")
The N&B AMT Limited Maturity Bond Portfolio seeks to achieve the highest
current income consistent with low risk to principal and liquidity; and
secondarily, total return. This Portfolio invests in a diversified portfolio
consisting of U.S. government and agency securities and investment grade
securities.
FIDELITY VIP EQUITY-INCOME PORTFOLIO ("VIP EQUITY-INCOME PORTFOLIO")
The 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 Daily Stock Price Index of 500
Common Stocks. 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. For a further discussion of lower-rated
securities, please see "Risks of Lower-Rated Debt Securities" in the
accompanying relevant Fund prospectus.
FIDELITY VIP HIGH INCOME PORTFOLIO ("VIP HIGH INCOME PORTFOLIO")
The 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. For a further discussion of lower-rated securities,
please see "Risks of Lower-Rated Debt Securities" in the accompanying relevant
Fund prospectus.
FIDELITY VIP OVERSEAS PORTFOLIO ("VIP OVERSEAS PORTFOLIO")
The VIP Overseas Portfolio seeks long-term growth of capital primarily
through investments in foreign securities and provides a means for aggressive
investors to diversify their own portfolios by participating in companies and
economies outside of the United States.
FIDELITY VIP II ASSET MANAGER PORTFOLIO ("VIP II ASSET MANAGER PORTFOLIO")
The VIP II Asset Manager Portfolio seeks high total return with reduced risk
over the long-term by allocating its assets among stocks, bonds and short-term
fixed-income instruments.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO ("ALGER AMERICAN SMALL
CAPITALIZATION PORTFOLIO")
The Alger American Small Capitalization Portfolio seeks long-term capital
appreciation by investing in a diversified, actively managed portfolio of equity
securities, primarily of companies with total market capitalization within the
range of companies included in the Russell 2000 Growth Index or the Standard &
Poor's Small Cap 600 Index, updated quarterly.
ALGER AMERICAN GROWTH PORTFOLIO ("ALGER AMERICAN GROWTH PORTFOLIO")
The Alger American Growth Portfolio seeks long-term capital appreciation by
investing in a diversified, actively managed portfolio of equity securities,
primarily of companies with total market capitalization of $1 billion or
greater.
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.
<PAGE>
12 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- ---------------------------------------------------
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 13. 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 HVA Money Market Investment Division, until the
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 HVA 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
Between Investment Divisions," page 13. Any additional Net Premiums received by
Us prior to such date will be allocated to the HVA 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. Portions
allocated to the Investment Divisions must be whole percentages of 10% or more.
Subsequent Net Premiums will be allocated among Investment Divisions according
to Your most recent instructions, subject to the following. The Investment Value
may be allocated to no more than five Investment Divisions at any one time. 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 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 HVA 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
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
- --------------------------------------------------------------------------------
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.
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 24.
- ---------------------------------------------------
TRANSFERS BETWEEN THE
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
<PAGE>
14 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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.
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
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
- --------------------------------------------------------------------------------
average is no longer published, a substitute average will be used.
CREDITED INTEREST
Amounts in the Loan Account will be credited with interest at a rate equal
to the Adjustable Loan Interest Rate then in effect, minus 1% in the first 10
years that a Certificate is in force, and minus 0.5% thereafter.
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 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.
<PAGE>
16 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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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 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
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 17
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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
(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.
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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 HVA 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 THE 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.
Front-end sales loads cover 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
<PAGE>
18 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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
THE INVESTMENT VALUE
MONTHLY DEDUCTION AMOUNTS
On the Coverage Date and on each subsequent Processing Date, Hartford will
deduct an amount (the "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 equals:
(a) the administrative expense charge; plus
(b) the charges for cost of insurance, plus any charges for additional benefits
provided by rider.
(a)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
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 19
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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.
(b)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 21 under "Supplemental
Benefits" section.
(c)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.
- ---------------------------------------------------
MORTALITY AND EXPENSE RISK CHARGE
A charge is made for mortality and expense risks assumed by Hartford.
Hartford deducts a daily charge at a maximum effective annual rate of .65% of
the value of each Investment Division's assets. See also, "Premiums --
Accumulation Unit Values," Page 12.
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.
It is conceivable that in the future it may be disadvantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in the Funds simultaneously. Although neither Hartford nor the Funds
currently foresee any such disadvantages either to variable life insurance
Owners or to variable annuity contract owners, the Board of Directors of The
Hartford Funds, the Board of Trustees for the Neuberger & Berman Trust, the
Board of Trustees for The Alger American Fund and the Board of Trustees for each
of the VIP Fund and the VIP Fund II (collectively the "Boards") intend to
monitor events in order to identify any material conflicts between such Owners
and to determine what action, if any, should be taken in response thereto. If
the Boards were to conclude that separate funds should be established for
variable annuity and variable life insurance separate accounts, Hartford will
bear the attendant expenses.
- ---------------------------------------------------
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
<PAGE>
20 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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
"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.
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 ITT 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.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 21
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- ---------------------------------------------------
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 24.
<PAGE>
22 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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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, 1993 (1992-1993), Hartford; Senior Vice President & Chief
Director, 1993* Investment Officer (1992), Hartford Insurance Group.
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.
David A. Hall, 43 Senior Vice President & Senior Vice President & Actuary (1993-Present), Hartford.
Actuary, 1993
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 and Annuity Division (1993-1996); Director of Individual
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.
</TABLE>
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 23
- --------------------------------------------------------------------------------
<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>
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.
Lowndes A. Smith, 57 President, 1989 President & Chief Operating Officer (1989-Present),
Chief Executive Officer, 1993 Hartford Life Insurance Company.
Director, 1985*
Lizabeth H. Zlatkus, 37 Vice President, 1994 Vice President, Director Business Operations
Director, 1994* (1994-Present), Assistant Vice President, Director
Executive Operations (1992-1994), Hartford Life
Insurance Company.
<FN>
- ------------------------
* Denotes date of election to Board of Directors.
** ITT Hartford Affiliated Company.
</TABLE>
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
- ---------------------------------------------------
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 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
<PAGE>
24 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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 "Certificate
Benefits and Provisions -- Values under the Certificate", on page 13). As a
result, such investment income and realized 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
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 25
- --------------------------------------------------------------------------------
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, 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 need 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 statutory-basis 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 report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report. Reference is made to said report on the
statutory-basis financial statements of ITT 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 ITT 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, Actuarial
Associate, are included in reliance upon his 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>
26 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX A
ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES
AND CASH SURRENDER VALUES
The following tables illustrate how the Death Benefits, Cash Values and Cash
Surrender Values of a Policy may change with the investment experience of the
Separate Account. The tables show how the Death Benefits, Cash Values and Cash
Surrender Values 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 Benefits, Cash Values
and Cash Surrender Values 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 27 to 38 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 Benefits, Cash Values and Cash Surrender Values 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 Funds. This
is because these tables assume an investment management fee and other estimated
Fund expenses totaling 0.70%. The 0.70% figure is based on an average of the
current management fees and expenses of the available twelve Funds, taking into
account any applicable expense caps or reimbursement arrangements. Actual fees
and expenses of the Funds associated with a Certificate may be more or less than
0.70%, 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 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 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 a comparable illustration based on a
proposed Certificate's specific circumstances.
<PAGE>
ITT 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 0.00% (-0.70% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED --------------------------------- ---------------------------------
END OF AT 5% CASH CASH
POLICY 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 11,943 11,943 250,000 11,013 11,013 250,000
2 30,355 23,644 23,644 250,000 21,844 21,844 250,000
3 46,680 35,107 35,107 250,000 32,494 32,494 250,000
4 63,821 46,369 46,369 250,000 42,971 42,971 250,000
5 81,819 57,449 57,499 250,000 53,275 53,275 250,000
6 100,717 68,460 68,460 250,000 63,410 63,410 250,000
7 120,560 79,312 79,312 250,000 73,372 73,372 250,000
8 126,588 77,772 77,772 250,000 70,858 70,858 250,000
9 132,917 76,207 76,207 250,000 68,223 68,223 250,000
10 139,563 74,608 74,608 250,000 65,444 65,444 250,000
11 146,541 72,941 72,941 250,000 62,507 62,507 250,000
12 153,868 71,192 71,192 250,000 59,390 59,390 250,000
13 161,561 69,331 69,331 250,000 56,081 56,081 250,000
14 169,639 67,350 67,350 250,000 52,558 52,558 250,000
15 178,121 65,235 65,235 250,000 48,798 48,798 250,000
16 187,027 62,899 62,899 250,000 44,763 44,763 250,000
17 196,378 60,424 60,424 250,000 40,411 40,411 250,000
18 206,197 57,790 57,790 250,000 35,685 35,685 250,000
19 216,507 54,983 54,983 250,000 30,519 30,519 250,000
20 227,332 51,979 51,979 250,000 24,841 24,841 250,000
25 290,140 32,923 32,923 250,000 -- -- --
30 370,300 2,817 2,817 250,000 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
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 CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT 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 CONTRACT 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>
28 ITT 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 6.00% (5.30% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED --------------------------------- ---------------------------------
END OF AT 5% CASH CASH
POLICY 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 12,674 12,674 250,000 11,715 11,715 250,000
2 30,355 25,850 25,850 250,000 23,941 23,941 250,000
3 46,680 39,558 39,558 250,000 36,707 36,707 250,000
4 63,821 53,858 53,858 250,000 50,048 50, 048 250,000
5 81,819 68,796 68,796 250,000 63,995 63,995 250,000
6 100,717 84,514 84,514 250,000 78,589 78,589 250,000
7 120,560 100,962 100,962 250,000 93,864 93,864 250,000
8 126,588 105,202 105,202 250,000 96,816 96,816 250,000
9 132,917 109,613 109,613 250,000 99,812 99,812 250,000
10 139,563 114,198 114,198 250,000 102,842 102,842 250,000
11 146,541 118,943 118,943 250,000 105,906 105,906 250,000
12 153,868 123,850 123,850 251,157 108,999 108,999 250,000
13 161,561 128,899 128,899 254,526 112,123 112,123 250,000
14 169,639 134,094 134,094 257,924 115,277 115,277 250,000
15 178,121 139,436 139,436 261,355 118,458 118,458 250,000
16 187,027 144,879 144,879 264,744 121,658 121,658 250,000
17 196,378 150,492 150,492 268,208 124,867 124,867 250,000
18 206,197 156,274 156,274 271,769 128,071 128,071 250,000
19 216,507 162,234 162,234 274,451 131,251 131,251 250,000
20 227,332 168,372 168,372 279,267 134,393 134,393 250,000
25 290,140 201,822 201,822 300,311 149,164 149,164 250,000
30 370,300 240,120 240,120 325,173 160,373 160,373 250,000
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
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 CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT 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 CONTRACT 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 INSURANCE COMPANY 13
- --------------------------------------------------------------------------------
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.
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 .
- ---------------------------------------------------
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. See "Federal Tax
Considerations -- Modified Endowment Contracts", page .
- ---------------------------------------------------
TRANSFERS BETWEEN THE
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
<PAGE>
14 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
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.
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.
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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.
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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
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HARTFORD LIFE INSURANCE COMPANY 15
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average is no longer published, a substitute average will be used.
CREDITED INTEREST
Amounts in the Loan Account will be credited with interest at a rate equal
to the Adjustable Loan Interest Rate then in effect, minus 1% in the first 10
years that a Certificate is in force, and minus 0.5% thereafter.
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 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.
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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.
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16 HARTFORD LIFE INSURANCE COMPANY
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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 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.
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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.
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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
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HARTFORD LIFE INSURANCE COMPANY 17
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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.
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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
(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.
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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.
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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 HVA 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.
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DEDUCTIONS FROM THE 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.
Front-end sales loads cover 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
<PAGE>
18 HARTFORD LIFE INSURANCE COMPANY
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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.
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DEDUCTIONS AND CHARGES FROM
THE INVESTMENT VALUE
MONTHLY DEDUCTION AMOUNTS
On the Coverage Date and on each subsequent Processing Date, Hartford will
deduct an amount (the "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 equals:
(a) the administrative expense charge; plus
(b) the charges for cost of insurance, plus any charges for additional benefits
provided by rider.
(a)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
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 19
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nonsmoker division of a rate class will have a lower cost of insurance than
an Insured in the smoker division of the
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 19
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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.
(b)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 under "Supplemental Benefits"
section.
(c)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.
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MORTALITY AND EXPENSE RISK CHARGE
A charge is made for mortality and expense risks assumed by Hartford.
Hartford deducts a daily charge at a maximum effective annual rate of .65% of
the value of each Investment Division's assets. See also, "Premiums --
Accumulation Unit Values," Page .
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.
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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.
It is conceivable that in the future it may be disadvantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in the Funds simultaneously. Although neither Hartford nor the Funds
currently foresee any such disadvantages either to variable life insurance
Owners or to variable annuity contract owners, the Board of Directors of The
Hartford Funds, the Board of Trustees for the Neuberger & Berman Trust, the
Board of Trustees for The Alger American Fund and the Board of Trustees for each
of the VIP Fund and the VIP Fund II (collectively the "Boards") intend to
monitor events in order to identify any material conflicts between such Owners
and to determine what action, if any, should be taken in response thereto. If
the Boards were to conclude that separate funds should be established for
variable annuity and variable life insurance separate accounts, Hartford will
bear the attendant expenses.
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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
<PAGE>
20 HARTFORD LIFE INSURANCE COMPANY
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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
"Certificate Benefits and Rights--Loans," page ) 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.
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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.
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 ITT 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.
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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.
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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.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 21
- --------------------------------------------------------------------------------
- ---------------------------------------------------
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 .
<PAGE>
22 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 & Chief Senior Vice President & Chief Investment Officer
Investment Officer, 1993 Director, (1992-1993), Hartford; Senior Vice President & Chief
1993* Investment Officer (1992), Hartford Insurance Group.
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.
David A. Hall, 43 Senior Vice President & Senior Vice President & Actuary (1993-Present), Hartford.
Actuary, 1993
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 & Director, Senior Vice President & Director, Individual Life and
Individual Life and Annuity Annuity Division (1993-1996); Director of Individual
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.
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 23
- --------------------------------------------------------------------------------
<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>
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.
Lowndes A. Smith, 57 President, 1989 President & Chief Operating Officer (1989-Present),
Chief Executive Officer, 1993 Hartford Life Insurance Company.
Director, 1985*
Lizabeth H. Zlatkus, 37 Vice President, 1994 Vice President, Director Business Operaitons
Director, 1994* (1994-Present), Assistant Vice President, Director
Executive Operations (1992-1994), Hartford Life
Insurance Company.
<FN>
- ------------------------
* Denotes date of election to Board of Directors.
** ITT Hartford Affiliated Company.
</TABLE>
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
<PAGE>
24 HARTFORD LIFE INSURANCE 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 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 "Certificate Benefits and Provisions --
Values under the Certificate", on page ). As a result, such investment income
and realized 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.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 25
- --------------------------------------------------------------------------------
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, 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 need 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.
<PAGE>
26 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- ---------------------------------------------------
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 statutory-basis 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 report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report. Reference is made to said report on the
statutory-basis financial statements of ITT 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 ITT 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, Assistant
Actuary, are included in reliance upon his 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 INSURANCE COMPANY 27
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX A
ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES
AND CASH SURRENDER VALUES
The following tables illustrate how the Death Benefits, Cash Values and Cash
Surrender Values of a Policy may change with the investment experience of the
Separate Account. The tables show how the Death Benefits, Cash Values and Cash
Surrender Values 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 Benefits, Cash Values
and Cash Surrender Values 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 to 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 Benefits, Cash Values and Cash Surrender Values 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 Funds. This
is because these tables assume an investment management fee and other estimated
Fund expenses totaling 0.70%. The 0.70% figure is based on an average of the
current management fees and expenses of the available twelve Funds, taking into
account any applicable expense caps or reimbursement arrangements. Actual fees
and expenses of the Funds associated with a Certificate may be more or less than
0.70%, 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 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 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 a comparable illustration based on a
proposed Certificate's specific circumstances.
<PAGE>
28 HARTFORD LIFE 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% (-0.70%NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED --------------------------------- ---------------------------------
END OF AT 5% CASH CASH
POLICY 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 11,943 11,943 250,000 11,013 11,013 250,000
2 30,355 23,644 23,644 250,000 21,844 21,844 250,000
3 46,680 35,107 35,107 250,000 32,494 32,494 250,000
4 63,821 46,369 46,369 250,000 42,971 42,971 250,000
5 81,819 57,449 57,499 250,000 53,275 53,275 250,000
6 100,717 68,460 68,460 250,000 63,410 63,410 250,000
7 120,560 79,312 79,312 250,000 73,372 73,372 250,000
8 126,588 77,772 77,772 250,000 70,858 70,858 250,000
9 132,917 76,207 76,207 250,000 68,223 68,223 250,000
10 139,563 74,608 74,608 250,000 65,444 65,444 250,000
11 146,541 72,941 72,941 250,000 62,507 62,507 250,000
12 153,868 71,192 71,192 250,000 59,390 59,390 250,000
13 161,561 69,331 69,331 250,000 56,081 56,081 250,000
14 169,639 67,350 67,350 250,000 52,558 52,558 250,000
15 178,121 65,235 65,235 250,000 48,798 48,798 250,000
16 187,027 62,899 62,899 250,000 44,763 44,763 250,000
17 196,378 60,424 60,424 250,000 40,411 40,411 250,000
18 206,197 57,790 57,790 250,000 35,685 35,685 250,000
19 216,507 54,983 54,983 250,000 30,519 30,519 250,000
20 227,332 51,979 51,979 250,000 24,841 24,841 250,000
25 290,140 32,923 32,923 250,000 -- -- --
30 370,300 2,817 2,817 250,000 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
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 CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT 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 CONTRACT 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 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 6.00% (5.30%NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED --------------------------------- ---------------------------------
END OF AT 5% CASH CASH
POLICY 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 12,674 12,674 250,000 11,715 11,715 250,000
2 30,355 25,850 25,850 250,000 23,941 23,941 250,000
3 46,680 39,558 39,558 250,000 36,707 36,707 250,000
4 63,821 53,858 53,858 250,000 50,048 50, 048 250,000
5 81,819 68,796 68,796 250,000 63,995 63,995 250,000
6 100,717 84,514 84,514 250,000 78,589 78,589 250,000
7 120,560 100,962 100,962 250,000 93,864 93,864 250,000
8 126,588 105,202 105,202 250,000 96,816 96,816 250,000
9 132,917 109,613 109,613 250,000 99,812 99,812 250,000
10 139,563 114,198 114,198 250,000 102,842 102,842 250,000
11 146,541 118,943 118,943 250,000 105,906 105,906 250,000
12 153,868 123,850 123,850 251,157 108,999 108,999 250,000
13 161,561 128,899 128,899 254,526 112,123 112,123 250,000
14 169,639 134,094 134,094 257,924 115,277 115,277 250,000
15 178,121 139,436 139,436 261,355 118,458 118,458 250,000
16 187,027 144,879 144,879 264,744 121,658 121,658 250,000
17 196,378 150,492 150,492 268,208 124,867 124,867 250,000
18 206,197 156,274 156,274 271,769 128,071 128,071 250,000
19 216,507 162,234 162,234 274,451 131,251 131,251 250,000
20 227,332 168,372 168,372 279,267 134,393 134,393 250,000
25 290,140 201,822 201,822 300,311 149,164 149,164 250,000
30 370,300 240,120 240,120 325,173 160,373 160,373 250,000
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
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 CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT 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 CONTRACT 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>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 29
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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% (11.30% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED --------------------------------- ---------------------------------
END OF AT 5% CASH CASH
POLICY 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 13,403 13,403 250,000 12,416 12,416 250,000
2 30,355 28,141 28,141 250,000 26,120 26,120 250,000
3 46,680 44,362 44,362 250,000 41,260 41,260 250,000
4 63,821 62,264 62,264 250,000 58,004 58,004 250,000
5 81,819 82,050 82,050 250,000 76,539 76,539 250,000
6 100,717 104,029 104,029 250,000 97,079 97,079 250,000
7 120,560 128,268 128,268 297,803 119,704 119,704 278,078
8 126,588 141,331 141,331 318,794 130,879 130,879 295,392
9 132,917 155,708 155,708 341,372 143,050 143,050 313,810
10 139,563 171,523 171,523 365,662 156,292 156,292 333,403
11 146,541 188,883 391,737 170,696 170,696 170,696 354,243
12 153,868 207,924 207,924 419,710 186,353 186,353 376,410
13 161,561 228,775 228,775 449,660 203,374 203,374 399,988
14 169,639 251,604 251,604 481,721 221,873 221,873 425,066
15 178,121 276,591 276,591 516,046 241,972 241,972 451,739
16 187,027 303,826 303,826 552,635 263,795 263,795 480,107
17 196,378 333,647 333,647 591,889 287,470 287,470 510,279
18 206,197 366,285 366,285 634,054 313,126 313,126 542,369
19 216,507 402,004 402,004 679,405 340,896 340,896 576,498
20 227,332 441,080 441,080 728,217 370,924 370,924 612,796
25 290,140 698,226 698,226 1,034,173 561,291 561,291 831,973
30 370,300 1,097,000 1,097,000 1,478,729 837,775 837,775 1,130,313
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
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 CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT 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 CONTRACT 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>
30 ITT 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 0.00% (-0.70% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED --------------------------------- ---------------------------------
END OF AT 5% CASH CASH
POLICY 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 11,933 11,933 261,964 10,961 10,961 261,068
2 30,355 23,603 23,603 273,656 21,682 21,682 271,808
3 46,680 35,007 35,007 285,082 32,159 32,159 282,306
4 63,821 46,175 46,175 296,270 42,390 42,390 292,558
5 81,819 57,123 57,123 307,236 52,367 52,367 302,555
6 100,717 68,000 68,000 318,119 62,084 62,084 312,294
7 120,560 78,683 78,683 328,818 71,525 71,525 321,758
8 126,588 76,962 76,962 327,100 68,465 68,465 318,709
9 132,917 75,206 75,206 325,346 65,261 65,261 315,516
10 139,563 73,398 73,398 323,543 61,887 61,887 312,157
11 146,541 71,497 71,497 321,649 58,333 58,333 308,617
12 153,868 69,482 69,482 319,644 54,578 54,578 304,879
13 161,561 67,315 67,315 317,490 50,617 50,617 300,935
14 169,639 64,989 64,989 315,177 46,434 46,434 296,771
15 178,121 62,493 62,493 312,695 42,012 42,012 292,368
16 187,027 59,712 59,712 309,938 37,320 37,320 287,699
17 196,378 56,767 56,767 307,006 32,325 32,325 282,729
18 206,197 53,638 53,638 303,892 26,983 26,983 277,415
19 216,507 50,314 50,314 300,584 21,241 21,241 271,706
20 227,332 46,774 46,774 297,062 151,051 15,051 265,553
25 290,140 24,947 24,947 275,357 -- -- --
30 370,300 -- -- -- -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
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 CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT 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 CONTRACT 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>
ITT 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 6.00% (5.30% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED --------------------------------- ---------------------------------
END OF AT 5% CASH CASH
POLICY 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 12,663 12,633 262,633 11,659 11,659 261,710
2 30,355 25,805 25,805 275,735 23,762 23,762 273,775
3 46,680 39,443 39,443 289,331 36,322 36,322 286,296
4 63,821 53,626 53,626 303,468 49,354 49,354 299,288
5 81,819 68,393 68,393 318,185 62,868 62,868 312,762
6 100,717 83,922 83,922 333,649 76,879 76,879 326,730
7 120,560 100,120 100,120 349,789 91,386 91,386 341,194
8 126,588 104,066 104,066 353,725 93,447 93,447 343,261
9 132,917 108,133 108,133 357,782 95,411 95,411 345,234
10 139,563 112,312 112,312 361,951 97,247 97,247 347,080
11 146,541 116,560 116,560 366,194 98,933 98,933 348,780
12 153,868 120,862 120,862 370,491 100,442 100,442 350,304
13 161,561 125,179 125,179 374,806 101,756 101,756 351,634
14 169,639 129,500 129,500 379,127 102,847 102,847 352,744
15 178,121 133,813 133,813 383,441 103,683 103,683 353,601
16 187,027 137,997 137,997 387,636 104,218 104,218 354,163
17 196,378 142,167 142,167 391,807 104,400 104,400 354,375
18 206,197 146,298 146,298 395,942 104,163 104,163 354,173
19 216,507 150,376 150,376 400,024 103,429 103,429 353,481
20 227,332 154,374 154,374 404,029 102,119 102,119 352,221
25 290,140 171,947 171,947 421,683 84,222 84,222 334,669
30 370,300 181,020 181,020 430,948 36,402 36,402 287,507
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
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 CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT 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 CONTRACT 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>
32 ITT 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 12.00% (11.30% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED --------------------------------- ---------------------------------
END OF AT 5% CASH CASH
POLICY 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 13,391 13,391 263,298 12,357 12,357 262,348
2 30,355 28,092 28,092 277,884 25,923 25,923 275,809
3 46,680 44,231 44,231 293,898 40,820 40,820 290,590
4 63,821 61,992 61,992 311,517 57,182 57,182 306,824
5 81,819 81,557 81,557 330,925 75,151 75,151 324,653
6 100,717 103,275 103,275 352,455 94,889 94,889 344,236
7 120,560 127,240 127,240 376,224 116,560 116,560 365,739
8 126,588 140,002 140,002 388,884 126,665 126,665 375,773
9 132,917 154,051 154,051 402,820 137,641 137,641 386,674
10 139,563 169,508 169,508 418,154 149,554 149,554 398,505
11 146,541 186,473 186,473 434,988 162,486 162,486 411,348
12 153,868 205,087 205,087 453,458 176,524 176,524 425,290
13 161,561 225,480 225,480 473,696 191,775 191,775 440,435
14 169,639 247,830 247,830 495,876 208,347 208,347 456,892
15 178,121 272,332 272,332 520,190 226,360 226,360 474,779
16 187,027 299,090 299,090 546,751 245,931 245,931 494,214
17 196,378 328,442 328,442 582,656 267,184 267,184 515,320
18 206,197 360,570 360,570 624,161 290,247 290,247 538,225
19 216,507 395,730 395,730 668,803 315,252 315,252 563,061
20 227,332 434,196 434,196 716,852 342,348 342,348 589,975
25 290,140 687,323 687,323 1,018,024 515,918 515,918 764,719
30 370,300 1,079,864 1,079,864 1,455,630 769,993 769,993 1,038,862
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
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 CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT 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 CONTRACT 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>
ITT 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 0.00% (-0.70% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED --------------------------------- ---------------------------------
END OF AT 5% CASH CASH
POLICY 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 4,924 4,924 250,000 3,968 3,968 250,000
2 12,915 9,687 9,687 250,000 7,811 7,811 250,000
3 19,861 14,290 14,290 250,000 11,526 11,526 250,000
4 27,154 18,763 18,763 250,000 15,112 15,112 250,000
5 34,812 23,122 23,122 250,000 18,563 18,563 250,000
6 42,853 27,500 27,500 250,000 21,874 21,874 250,000
7 51,296 31,787 31,787 250,000 25,031 25,031 250,000
8 60,161 36,099 36,099 250,000 28,142 28,142 250,000
9 69,469 40,314 40,314 250,000 31,072 31,072 250,000
10 79,242 44,422 44,422 250,000 33,804 33,804 250,000
11 89,504 48,391 48,391 250,000 36,332 36,332 250,000
12 100,279 52,210 52,210 250,000 38,644 38,644 250,000
13 111,593 55,854 55,854 250,000 40,735 40,735 250,000
14 123,473 59,323 59,323 250,000 42,597 42,597 250,000
15 135,947 62,612 62,612 250,000 44,215 44,215 250,000
16 149,044 65,645 65,645 250,000 45,568 45,568 250,000
17 162,796 68,513 68,513 250,000 46,626 46,626 250,000
18 177,236 71,206 71,206 250,000 47,353 47,353 250,000
19 192,398 73,722 73,722 250,000 47,703 47,703 250,000
20 208,318 76,049 76,049 250,000 47,632 47,632 250,000
25 300,684 84,346 84,346 250,000 39,331 39,331 250,000
30 418,569 85,135 85,135 250,000 9,035 9,035 250,000
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
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 CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT 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 CONTRACT 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>
34 ITT 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 6.00% (5.30% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED --------------------------------- ---------------------------------
END OF AT 5% CASH CASH
POLICY 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 5,229 5,229 250,000 4,243 4,243 250,000
2 12,915 10,604 10,604 250,000 8,610 8,610 250,000
3 19,861 16,130 16,130 250,000 13,105 13,105 250,000
4 27,154 21,843 21,843 250,000 17,732 17,732 250,000
5 34,812 27,769 27,769 250,000 22,490 22,490 250,000
6 42,853 34,052 34,052 250,000 27,385 27,385 250,000
7 51,296 40,597 40,597 250,000 32,408 32,408 250,000
8 60,161 47,542 47,542 250,000 37,684 37,684 250,000
9 69,469 54,777 54,777 250,000 43,087 43,087 250,000
10 79,242 62,309 62,309 250,000 48,612 48,612 250,000
11 89,504 70,123 70,123 250,000 54,264 54,264 250,000
12 100,279 78,226 78,226 250,000 60,043 60,043 250,000
13 111,593 86,616 86,616 250,000 65,963 65,963 250,000
14 123,473 95,313 95,313 250,000 72,030 72,030 250,000
15 135,947 104,339 104,339 250,000 78,253 78,253 250,000
16 149,044 113,659 113,659 250,000 84,635 84,635 250,000
17 162,796 123,376 123,376 250,000 91,176 91,176 250,000
18 177,236 133,518 133,518 250,000 97,878 97,878 250,000
19 192,398 144,121 144,121 250,000 104,739 104,379 250,000
20 208,318 155,518 155,158 257,350 111,766 111,766 250,000
25 300,684 216,025 216,025 321,445 150,258 150,258 250,000
30 418,569 286,969 286,969 388,618 197,093 197,093 267,146
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
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 CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT 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 CONTRACT 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>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 35
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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% (11.30% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED --------------------------------- ---------------------------------
END OF AT 5% CASH CASH
POLICY 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 5,535 5,535 250,000 4,518 4,518 250,000
2 12,915 11,557 11,557 250,000 9,443 9,443 250,000
3 19,861 18,117 18,117 250,000 14,816 14,816 250,000
4 27,154 25,305 25,305 250,000 20,687 20,687 250,000
5 34,812 33,204 33,204 250,000 27,105 27,105 250,000
6 42,853 42,029 42,029 250,000 34,131 34,131 250,000
7 51,296 51,767 51,767 250,000 41,821 41,821 250,000
8 60,161 62,651 62,651 250,000 50,379 50,379 250,000
9 69,469 74,669 74,669 250,000 59,765 59,765 250,000
10 79,242 87,941 87,941 250,000 70,070 70,070 250,000
11 89,504 102,584 102,584 250,000 81,408 81,408 250,000
12 100,279 118,751 118,751 250,000 93,909 93,909 250,000
13 111,593 136,560 136,560 268,409 107,730 107,730 250,000
14 123,473 156,085 156,085 298,841 123,051 123,051 250,000
15 135,947 177,483 177,483 331,137 140,011 140,011 261,387
16 149,044 200,853 200,853 365,336 158,459 158,459 288,395
17 162,796 226,460 226,460 401,741 178,501 178,501 316,851
18 177,236 254,506 254,506 440,560 200,252 200,252 346,858
19 192,398 285,216 285,216 482,028 223,831 223,831 378,526
20 208,318 318,831 318,831 526,386 249,366 249,366 411,972
25 300,684 540,360 540,360 800,351 411,856 411,856 610,473
30 418,569 884,473 884,473 1,192,249 648,965 648,965 875,573
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
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 CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT 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 CONTRACT 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>
36 ITT 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 0.00% (-0.70% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED --------------------------------- ---------------------------------
END OF AT 5% CASH CASH
POLICY 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 4,919 4,919 254,943 3,947 3,947 254,046
2 12,915 9,671 9,671 259,708 7,749 7,749 257,860
3 19,861 14,249 14,249 264,301 11,400 11,400 261,524
4 27,154 18,683 18,683 268,747 14,898 14,898 265,034
5 34,812 22,989 22,989 273,063 18,231 18,231 268,381
6 42,853 27,313 27,313 277,386 21,396 21,396 271,560
7 51,296 31,531 31,531 281,613 24,370 24,370 274,550
8 60,161 35,759 35,759 285,850 27,259 27,259 277,456
9 69,469 39,871 39,871 289,971 29,922 29,922 280,137
10 79,242 43,853 43,853 293,964 32,337 32,337 282,573
11 89,504 47,662 47,662 297,787 34,493 34,493 284,750
12 100,279 51,281 51,281 301,422 36,372 36,372 286,652
13 111,593 54,672 54,672 304,832 37,968 37,968 288,272
14 123,473 57,828 57,828 308,008 39,268 39,268 289,596
15 135,947 60,741 60,741 310,941 40,255 40,255 290,609
16 149,044 63,297 63,297 313,526 40,899 40,899 291,282
17 162,796 65,616 65,616 315,865 41,169 41,169 291,583
18 177,236 67,680 67,680 317,950 41,020 41,020 291,468
19 192,398 69,479 69,479 319,771 40,402 40,402 290,889
20 208,318 70,994 70,994 321,310 39,267 39,267 289,797
25 300,684 73,439 73,439 323,904 24,498 24,498 275,290
30 418,569 64,458 64,458 315,141 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
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 CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT 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 CONTRACT 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>
ITT 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 6.00% (5.30% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED --------------------------------- ---------------------------------
END OF AT 5% CASH CASH
POLICY 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 5,225 5,225 255,223 4,21 4,221 254,300
2 12,915 10,586 10,586 260,573 8,542 8,542 258,612
3 19,861 16,082 16,082 266,058 12,960 12,960 263,022
4 27,154 21,748 21,748 271,709 17,475 17,475 267,529
5 34,812 27,604 27,604 277,549 22,078 22,078 272,124
6 42,853 33,810 33,810 283,725 26,764 26,764 276,804
7 51,296 40,254 40,254 290,149 31,516 31,516 281,550
8 60,161 47,068 47,068 296,941 36,444 36,444 286,473
9 69,469 54,135 54,135 303,987 41,406 41,406 291,432
10 79,242 61,452 61,452 311,283 46,379 46,379 296,404
11 89,504 68,984 68,984 318,797 51,348 51,348 301,374
12 100,279 76,721 76,721 326,516 56,291 56,291 306,319
13 111,593 84,631 84,631 334,412 61,197 61,197 311,228
14 123,473 92,712 92,712 342,478 66,046 66,046 316,082
15 135,947 100,959 100,959 350,711 70,814 70,814 320,856
16 149,044 109,259 109,259 359,006 75,463 75,463 325,516
17 162,796 117,734 117,734 367,466 79,949 79,949 330,016
18 177,236 126,369 126,369 376,088 84,215 84,215 334,300
19 192,398 135,160 135,160 384,865 88,192 88,192 338,302
20 208,318 144,089 144,089 393,782 91,811 91,811 341,952
25 300,684 189,952 189,952 439,620 102,201 102,201 352,580
30 418,569 234,498 234,498 484,226 89,866 89,866 340,768
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
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 CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT 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 CONTRACT 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>
38 ITT 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 12.00% (11.30% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED --------------------------------- ---------------------------------
END OF AT 5% CASH CASH
POLICY 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 5,530 5,530 255,502 4,495 4,495 254,552
2 12,915 11,536 11,536 261,467 9,368 9,368 259,392
3 19,861 18,063 18,063 267,948 14,651 14,651 264,639
4 27,154 25,192 25,192 275,025 20,381 20,381 270,331
5 34,812 33,003 33,003 282,776 26,594 26,594 276,501
6 42,853 41,721 41,721 291,415 33,332 33,332 283,193
7 51,296 51,311 51,311 300,929 40,626 40,626 290,439
8 60,161 61,994 61,994 311,527 48,651 48,651 298,411
9 69,469 73,744 73,744 323,184 57,326 57,326 307,029
10 79,242 86,658 86,658 335,997 66,693 66,693 316,336
11 89,504 100,812 100,812 350,043 76,811 76,811 326,388
12 100,279 116,316 116,316 365,429 87,736 87,736 337,242
13 111,593 133,271 133,271 382,257 99,543 99,543 348,973
14 123,473 151,819 151,819 400,666 112,308 112,308 361,654
15 135,947 172,116 172,116 420,810 126,110 126,110 375,365
16 149,044 194,222 194,222 442,758 141,023 141,023 390,182
17 162,796 218,454 218,454 466,805 157,125 157,125 406,180
18 177,236 245,012 245,012 493,160 174,492 174,492 423,437
19 192,398 274,129 274,129 522,054 193,196 193,196 442,024
20 208,318 306,052 306,052 553,732 213,324 213,324 462,028
25 300,684 518,130 518,130 767,425 339,286 339,286 587,214
30 418,569 849,534 849,534 1,145,152 518,712 518,712 765,616
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
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 CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT 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 CONTRACT 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>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 39
- --------------------------------------------------------------------------------
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>
40 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 41
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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>
42 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATUTORY BASIS STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
<TABLE>
<CAPTION>
FOR THE YEARS 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 43
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATUTORY BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS 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>
44 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
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 45
- --------------------------------------------------------------------------------
realized gains and losses are recognized in the period the asset is sold;
(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.
<PAGE>
46 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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 $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>
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 47
- --------------------------------------------------------------------------------
(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
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
------------------------------------------------
GROSS UNREALIZED
AMORTIZED -------------------- FAIR
COST GAINS LOSSES VALUE
------------ --------- --------- ------------
<S> <C> <C> <C> <C>
U.S. government and government agencies and authorities:
(Guaranteed and sponsored)............................................. $ 58,761 $ 6 $ (195) $ 58,572
(Guaranteed and sponsored) -- asset-backed............................. 78,237 1,477 (609) 79,105
States, municipalities and political subdivisions........................ 25,958 163 (2) 26,119
International governments................................................ 7,447 205 -- 7,652
Public utilities......................................................... 70,116 396 (424) 70,088
All other corporate...................................................... 410,530 6,357 (1,355) 415,532
All other corporate -- asset-backed...................................... 485,953 2,654 (1,081) 487,526
Short-term investments................................................... 148,094 -- (66) 148,028
Certificates of deposit.................................................. 83,378 563 (110) 83,831
Parents, subsidiaries and affiliates..................................... 48,100 -- -- 48,100
------------ --------- --------- ------------
Total bonds and short-term investments................................. $ 1,416,574 $ 11,821 $ (3,842) $ 1,424,553
------------ --------- --------- ------------
------------ --------- --------- ------------
Common stock -- unaffiliated............................................. $ 13,064 $ 713 $ 0 $ 13,777
Common stock -- affiliated............................................... 35,379 0 4,160 31,219
------------ --------- --------- ------------
Total common stocks...................................................... $ 48,443 $ 713 $ 4,160 $ 44,996
------------ --------- --------- ------------
------------ --------- --------- ------------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995
----------------------------------------------------
GROSS UNREALIZED
AMORTIZED ------------------------ FAIR
COST GAINS LOSSES VALUE
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
U.S. government and government agencies and authorities:
(Guaranteed and sponsored)........................................... $ 44,268 $ 14 $ (248) $ 44,034
(Guaranteed and sponsored) -- asset-backed........................... 176,160 4,644 (682) 180,122
States, municipalities and political subdivisions...................... 16,948 38 (6) 16,980
International governments.............................................. 5,402 441 -- 5,843
Public utilities....................................................... 108,083 1,652 (90) 109,645
All other corporate.................................................... 374,058 8,145 (248) 381,955
All other corporate -- asset-backed.................................... 410,197 5,841 (89) 415,949
Short-term investments................................................. 139,011 18 -- 139,029
Certificates of deposit................................................ 91,373 1,458 (11) 92,820
------------ ----------- ----------- ------------
Total bonds and short-term investments............................... $ 1,365,500 $ 22,251 $ (1,374) $ 1,386,377
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
Common stock -- unaffiliated........................................... $ 2,668 $ 555 $ -- $ 3,223
Common stock -- affiliated............................................. 35,384 1,169 -- 36,553
------------ ----------- ----------- ------------
Total common stocks.................................................. $ 38,052 $ 1,724 $ -- $ 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
<PAGE>
48 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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
AMORTIZED FAIR
MATURITY 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>
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
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 49
- --------------------------------------------------------------------------------
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.
- ---------------------------------------------------
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.
<PAGE>
50 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- ---------------------------------------------------
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, 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>
NOT ALL OF THE FOLLOWING FUNDS ARE AVAILABLE IN THE ENDEAVOR I PRODUCT.
PLEASE REFER TO PAGE 1 OF THE PROSPECTUS FOR A LIST OF AVAILABLE FUNDS.
