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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 Mutual Funds; the Neuberger & Berman Advisers
Management Trust 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 the Fidelity Variable Insurance Products Fund;
the VIP II Asset Manager Portfolio of the Fidelity Variable Insurance Products
Fund II; the Alger American Small Capitalization Portfolio and the Alger
American Growth Portfolio of The Alger American Fund; the JPM Bond Portfolio,
the JPM Equity Portfolio, the JPM Small Company Portfolio and the JPM
International Equity Portfolio of the JPM Series Trust II; and the Fixed Income
Portfolio, the High Yield Portfolio, the Equity Growth Portfolio, the Value
Portfolio, the Global Equity Portfolio and the Emerging Markets Equity Portfolio
of the Morgan Stanley Universal Funds, Inc.
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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 SEPTEMBER 3, 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........................................................... 9
THE SEPARATE ACCOUNT.................................................. 9
THE FUNDS............................................................. 9
General............................................................. 9
a) Hartford Mutual Funds.......................................... 10
b) Neuberger & Berman Advisers Managers Trust..................... 10
c) Variable Insurance Products Fund and Variable Insurance
Products Fund II............................................... 10
d) The Alger American Fund........................................ 10
e) JPM Series Trust II............................................ 10
f) Morgan Stanley Universal Funds, Inc............................ 11
The Portfolios...................................................... 11
DETAILED DESCRIPTION OF CERTIFICATE BENEFITS AND PROVISIONS........... 13
General............................................................. 13
Issuance of a Certificate........................................... 13
Premiums............................................................ 13
Premium Payment Flexibility....................................... 13
Allocation of Premium Payments.................................... 13
Accumulation Units................................................ 14
Accumulation Unit Values.......................................... 14
Premium Limitation................................................ 14
Values under the Certificate........................................ 14
Surrender of the Certificate........................................ 15
Partial Withdrawals............................................... 15
Transfers Between the Investment Divisions.......................... 15
Amount and Frequency of Transfers................................. 15
Transfers to or from Investment Divisions......................... 15
Procedures for Telephone Transfers................................ 15
Valuation of Payments and Transfers................................. 16
Loans............................................................... 16
Loan Interest..................................................... 16
Credited Interest................................................. 16
Loan Repayments................................................... 16
Termination Due to Excessive Debt................................. 16
Effect of Loans on Investment Value............................... 16
Death Benefit....................................................... 17
Death Benefit Options............................................. 17
Option Change..................................................... 17
Payment Options................................................... 17
Legal Developments Regarding Income Payments...................... 17
Beneficiary....................................................... 18
Increases and Decreases in Face Amount............................ 18
Benefits at Maturity................................................ 18
Termination of Participation in the Group Policy.................... 18
Lapse and Reinstatement While the Group Policy is in Effect......... 18
Lapse and Grace Period............................................ 18
Reinstatement..................................................... 18
Enrollment for a Certificate........................................ 19
The Right to Examine the Certificate................................ 19
Deductions From the Premium......................................... 19
Front-End Sales Load.............................................. 19
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ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 3
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Premium Related Tax Charge........................................ 19
DAC Tax Charge.................................................... 19
Deductions and Charges From the Investment Value.................... 19
Monthly Deduction Amounts......................................... 19
Mortality and Expense Risk Charge................................... 20
Taxes............................................................. 21
OTHER MATTERS......................................................... 21
Additions, Deletions or Substitutions of Investments................ 21
Voting Rights....................................................... 21
Our Rights.......................................................... 22
Statements to Owners................................................ 22
Limit on Right to Contest........................................... 22
Misstatement as to Age or Sex....................................... 22
Assignment.......................................................... 22
Dividends........................................................... 22
Experience Credits.................................................. 22
SUPPLEMENTAL BENEFITS................................................. 22
Maturity Date Extension Rider....................................... 23
EXECUTIVE OFFICERS AND DIRECTORS...................................... 23
DISTRIBUTION OF THE GROUP POLICIES.................................... 24
SAFEKEEPING OF THE SEPARATE ACCOUNT ASSETS............................ 24
FEDERAL TAX CONSIDERATIONS............................................ 24
General............................................................. 24
Taxation of the Company and the Separate Account.................... 24
Income Taxation of Certificate Benefits............................. 25
Modified Endowment Contracts........................................ 25
Diversification Requirements........................................ 25
Federal Income Tax Withholding...................................... 26
Other Tax Considerations............................................ 26
LEGAL PROCEEDINGS..................................................... 26
EXPERTS............................................................... 26
REGISTRATION STATEMENT................................................ 26
APPENDIX A -- ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES AND CASH
SURRENDER VALUES.................................................... 27
FINANCIAL STATEMENTS.................................................. 40
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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; (v) The Alger American Fund (the "Alger American"),
managed by Fred Alger Management, Inc. ("Alger Management"); (vi) JPM Series
Trust II ("JPM Series Trust"), managed by J.P. Morgan Investment Management Inc.
("J.P. Morgan"); and (vii) Morgan Stanley Universal Funds, Inc. ("Morgan Stanley
Funds"), managed by either Morgan Stanley Asset Management Inc. ("MSAM") or
Miller Anderson & Sherrerd, LLP ("MAS").
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 22 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 AMT Partners
Investment Division, (v) the N&B AMT Balanced Investment Division, (vi) the N&B
AMT Limited Maturity Bond Investment Division, (vii) the
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ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 5
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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 Small Capitalization Investment Division (xii) the Alger American
Growth Investment Division, (xiii) the JPM Bond Investment Division, (xiv) the
JPM Equity Investment Division, (xv) the JPM Small Company Portfolio, (xvi) the
JPM International Equity Investment Division, (xvii) the MS Fixed Income
Investment Division, (xviii) the MS High Yield Investment Division, (xix) the MS
Equity Growth Investment Division, (xx) the MS Value Investment Division, (xxi)
the MS Global Equity Investment Division, and (xxii) the MS Emerging Markets
Equity 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 Funds or series or portfolio
of the remaining Funds. There are currently 22 Portfolios available under the
Policies: the Hartford Bond, Hartford Capital Appreciation and HVA Money Market
mutual funds of the Hartford Funds; the N&B AMT Partners, N&B AMT Balanced and
N&B AMT Limited Maturity Bond portfolios of the Neuberger & Berman AMT; 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; the Alger American Small Capitalization and Alger
American Growth portfolios of the Alger American Fund; the JPM Bond, JPM Equity,
JPM Small Company and JPM International Equity Portfolios of JPM Series Trust;
and the MS Fixed Income, MS High Yield, MS Equity Growth, MS Value, MS Global
Equity and MS Emerging Markets Equity Portfolios of the Morgan Stanley Funds.
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 22 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 checkF
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 13.
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 the Investment Divisions," page 15.
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 17.
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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 17.
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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 16.
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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 19.
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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
Certificate Benefits and Provisions -- Deductions and Charges from the
Investment Value," page 19.
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 19 and "Federal Tax Considerations," page 24.
A charge is made for mortality and expense risks assumed by Hartford.
Hartford currently deducts a daily charge for Coverage Years 1 through 10 at an
effective annual rate of .65% of the value of each Investment Division's assets
and for Coverage Years 11 and later at an effective annual rate of .50% of each
Investment Division's assets. In no event will the charge exceed .65% of an
Investment Division's assets on an annual basis.
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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.
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8 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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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%
N&B AMT Partners Portfolio (1).................. 0.840% 0.110% 0.950%
N&B AMT Balanced Portfolio (1).................. 0.850% 0.240% 1.090%
N&B 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 High Income Portfolio.............. 0.590% 0.120% 0.710%
Fidelity VIP Overseas Portfolio (2)............. 0.760% 0.170% 0.930%
Fidelity VIP II Asset Manager Portfolio (2)..... 0.640% 0.100% 0.740%
Alger American Small Capitalization Portfolio... 0.850% 0.030% 0.880%
Alger American Growth Portfolio................. 0.750% 0.040% 0.790%
JPM Bond Portfolio (3).......................... 0.300% 0.450% 0.750%
JPM Equity Portfolio (3)........................ 0.400% 0.500% 0.900%
JPM Small Company Portfolio (3)................. 0.600% 0.550% 1.150%
JPM International Equity Portfolio (3).......... 0.600% 0.600% 1.200%
MS Fixed Income Portfolio (4)................... 0.400% 0.300% 0.700%
MS High Yield Portfolio (4)..................... 0.500% 0.300% 0.800%
MS Equity Growth Portfolio (4).................. 0.550% 0.300% 0.850%
MS Value Portfolio (4).......................... 0.550% 0.300% 0.850%
MS Global Equity Portfolio (4).................. 0.800% 0.350% 1.150%
MS Emerging Markets Equity Portfolio (4)........ 1.250% 0.500% 1.750%
</TABLE>
- --------------------------
(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 fund 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
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.
(3) Pursuant to a voluntary agreement, fees and expenses were reimbursed to the
extent expenses exceeded .75%, .90%, 1.15% and 1.20% of the average daily
net assets of JPM Bond Portfolio, JPM Equity Portfolio, JPM Small Company
Portfolio and JPM International Equity Portfolio, respectively. Without such
reimbursement, total expenses would have been 2.18%, 2.13%, 2.69% and 3.18%
for JPM Bond Portfolio, JPM Equity Portfolio, JPM Small Company Portfolio
and JPM International Equity Portfolio, respectively.
(4) Computed for the period January 1, 1997, to March 31, 1997, annualized.
- ---------------------------------------------------
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
16.
- ---------------------------------------------------
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 19.
- ---------------------------------------------------
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 24.
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 Contracts" for a discussion of
the "seven pay test," page 25.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
- --------------------------------------------------------------------------------
- ---------------------------------------------------
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
majority owned by The Hartford Financial Services Group, Inc., a Delaware
Corporation.
Hartford is rated A+ (superior) by A.M. Best and Company, Inc., on the basis
of its financial soundness and operating performance. Hartford is rated AA by
Standard & Poor's and AA+ by Duff and Phelps on the basis of its claims paying
ability. These ratings do not apply to the investment performance of the
Sub-Accounts of the Separate Account. The ratings apply to Hartford's ability to
meet its insurance obligations, including those described in this Prospectus.
- ---------------------------------------------------
THE SEPARATE ACCOUNT
ICMG Registered Variable Life Separate Account One is a separate account
established by Hartford on October 9, 1995 under the insurance laws of the State
of Connecticut, pursuant to a resolution of Hartford's Board of Directors. The
Separate Account is organized as a unit investment trust and is registered with
the SEC under the 1940 Act. Such registration does not signify that the SEC
supervises the management or the investment practices or policies of the
Separate Account. The Separate Account meets the definition of a "separate
account" under the federal securities laws.
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 22 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
11.
<PAGE>
10 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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 registered under the 1940 Act
and 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 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 ("VIP FUND") AND VARIABLE INSURANCE PRODUCTS
FUND II ("VIP 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.
JPM SERIES TRUST II ("JPM SERIES TRUST")
The Separate Account currently invests in shares of JPM Series Trust, a
diversified open-end management investment company registered under the 1940 Act
and organized as a Delaware business trust. JPM Series Trust consists of five
portfolios, including the JPM Bond, JPM Equity, JPM Small Company and JPM
International Equity Portfolios available as part of Endeavour I.
Each Portfolio of JPM Series Trust is advised by J.P. Morgan Investment
Management Inc. ("J.P. Morgan"), a wholly-owned subsidiary of J.P. Morgan & Co.
Incorporated which is a bank holding company with a long history of service as
adviser, underwriter and lender to an extensive roster of major companies and as
financial adviser to national governments.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
- --------------------------------------------------------------------------------
MORGAN STANLEY UNIVERSAL FUNDS, INC. ("MORGAN STANLEY FUNDS")
The Separate Account currently invests in shares of Morgan Stanley Funds, a
diversified open-end management investment company registered under the 1940 Act
and organized as a corporation under the laws of the State of Maryland. Morgan
Stanley Funds consists of 17 portfolios, including the Fixed Income, High Yield,
Equity Growth, Value, Global Equity and Emerging Markets Equity Portfolios
available as part of Endeavour I.
The investment adviser for Equity Growth, Global Equity and Emerging Markets
Equity Portfolios is Morgan Stanley Asset Management Inc. ("MSAM"), a
wholly-owned subsidiary of Morgan Stanley Group Inc., which is a publicly owned
financial services corporation. The investment adviser for Fixed Income, High
Yield and Value Portfolios is Miller Anderson & Sherrerd, LLP ("MAS"), which is
indirectly wholly-owned by Morgan Stanley Group, Inc.
- ---------------------------------------------------
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.
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-
<PAGE>
12 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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
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
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.
JPM BOND PORTFOLIO
JPM Bond Portfolio seeks high total return consistent with moderate risk of
capital and maintenance of liquidity. Although the net asset value of the
Portfolio will fluctuate, the Portfolio attempts to preserve the value of its
investments to the extent consistent with its objective. Under normal market
conditions, 65% of the Portfolio's assets will be invested in bonds, debentures
and other debt instruments. The Portfolio may invest up to 20% of its assets in
securities denominated in foreign currencies and may invest without limitation
in U.S. dollar-denominated securities of foreign issuers.
JPM EQUITY PORTFOLIO
JPM Equity Portfolio seeks high total return from a portfolio comprised of
selected equity securities. The Portfolio invests primarily in the common stock
of U.S. corporations with market capitalizations above $1.5 billion.
JPM SMALL COMPANY PORTFOLIO
JPM Small Company Portfolio seeks high total return from a portfolio of
equity securities of small companies. The Portfolio invests at least 65% of the
value of its total assets in the common stock of small U.S. companies primarily
with market capitalizations less than $1 billion.
JPM INTERNATIONAL EQUITY PORTFOLIO
JPM International Equity Portfolio seeks high total return from a portfolio
of equity securities of foreign corporations. Under normal market conditions,
the Portfolio will invest in a minimum of three different foreign countries.
MORGAN STANLEY FIXED INCOME PORTFOLIO ("MS FIXED INCOME PORTFOLIO")
MS Fixed Income Portfolio seeks above average total return over a market
cycle of three to five years by investing in a diversified portfolio of U.S.
government and agency securities, corporate bonds, foreign bonds, mortgage-
backed securities of domestic issuers, and other fixed income securities and
derivatives. Under normal circumstances, the Portfolio will invest at least 65%
of its total assets in fixed income securities, not more than 20% of which will
be below investment grade, i.e., high yield securities (commonly referred to as
junk bonds).
MORGAN STANLEY HIGH YIELD PORTFOLIO ("MS HIGH YIELD PORTFOLIO")
MS High Yield Portfolio seeks above average total return over a market cycle
of three to five years by investing at least 65% of its total assets in high
yield securities of U.S. and foreign issuers including corporate bonds and other
fixed income securities. The Portfolio expects to achieve its objective through
maximizing current income, although it may seek capital growth opportunities
when consistent with its objective.
MORGAN STANLEY EQUITY GROWTH PORTFOLIO ("MS EQUITY GROWTH PORTFOLIO")
MS Equity Growth Portfolio seeks long-term capital appreciation by investing
primarily in growth-oriented common and preferred stocks, convertible
securities, rights and warrants to purchase common stocks, depositary receipts
and other equity securities. Under normal circumstances, the Portfolio will
invest at least 65% of its total assets in equity securities.
MORGAN STANLEY VALUE PORTFOLIO ("MS VALUE PORTFOLIO")
MS Value Portfolio seeks above average total return over a market cycle of
three to five years by investing primarily in common and preferred stocks,
convertible securities, rights and warrants to purchase common stocks, ADRs and
other equity securities of companies with equity capitalizations usually greater
than $300 million. Under normal circumstances, the Portfolio will invest at
least 65% of its total assets in equity securities. The Portfolio may invest up
to 5% of its total assets in foreign equity securities.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
- --------------------------------------------------------------------------------
MORGAN STANLEY GLOBAL EQUITY PORTFOLIO ("MS GLOBAL EQUITY PORTFOLIO")
MS Global Equity Portfolio seeks long-term capital appreciation by investing
primarily in common and preferred stocks, convertible securities, and rights and
warrants to purchase common stocks, depositary receipts and other equity
securities of issuers throughout the world, including issuers in the United
States and emerging market countries. Under normal circumstances, at least 65%
of the total assets of the Portfolio will be invested in equity securities. At
least 20% of the Portfolio's total assets will be invested in common stocks of
U.S. issuers and the remaining equity position will be invested in at least
three countries other than the United States.
MORGAN STANLEY EMERGING MARKET EQUITY PORTFOLIO ("MS EMERGING MARKET EQUITY
PORTFOLIO")
MS Emerging Markets Equity Portfolio seeks long-term capital appreciation by
investing primarily in common and preferred stocks, convertible securities,
rights and warrants to purchase common stocks, sponsored and unsponsored ADRs
and other equity securities of emerging market country issuers. Under normal
circumstances, at least 65% of the Portfolio's total assets will be invested in
emerging market country equity securities.
There is no assurance that any Portfolio will achieve its stated objectives.
Owners are also advised to read the prospectuses for each of the Funds
accompanying this Prospectus for more detailed information. Each Fund is subject
to certain investment restrictions which may not be changed without the approval
of a majority of the shareholders of the Fund. See the accompanying prospectuses
for each of the Funds.
- ---------------------------------------------------
DETAILED DESCRIPTION OF
CERTIFICATE BENEFITS
AND PROVISIONS
- -------------------------------- GENERAL
This Prospectus describes a flexible premium group variable life insurance
policy where the Owner has considerable flexibility in selecting the timing and
amount of premium payments.
- ---------------------------------------------------
ISSUANCE OF A CERTIFICATE
Certificates will only be offered to eligible employees when provided by the
Participating Employer. Individuals wishing to purchase a Certificate must
complete an enrollment form In Writing, which must be received by Our Customer
Service Center before a Certificate will be issued. A Certificate will not be
issued with a specified Face Amount of less than the minimum Face Amount.
Acceptance is subject to Hartford's underwriting rules then in effect. Hartford
reserves the right to reject an enrollment form for any reason permitted by law.
- ---------------------------------------------------
PREMIUMS
PREMIUM PAYMENT FLEXIBILITY
A significant feature of the Certificate is that once the desired level and
pattern of Death Benefits have been determined, the Owner has considerable
flexibility in the selection of the timing and amount of premiums to be paid and
You can choose the level of premiums, within a range determined by Hartford,
based on the Face Amount of the Certificate, the Insured's sex (except where
unisex rates apply), Issue Age, and the Insured's risk classification.
A minimum Initial Premium is due on the Coverage Date. The amount of the
minimum Initial Premium is the amount which, after the deductions for sales
load, state premium tax, and DAC tax charge, is sufficient (disregarding
investment performance) to pay 12 times the first Monthly Deduction. Thereafter,
additional premiums may be paid at any time, subject to the premium limitations
set forth by the Internal Revenue Code as indicated in the section entitled
"Premium Limitation," page 14. 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 the Investment Divisions," page 15. 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
<PAGE>
14 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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 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 14.
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ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
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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 25.
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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 twelve times per Coverage Year.
Transfer requests must be in writing on a form approved by Hartford or by
telephone in accordance with established procedures. The amounts which may be
transferred and the number of transfers will be limited by Our rules then in
effect. Currently, the minimum value of Accumulation Units that may be
transferred from one Investment Division to another is the lesser of (i) $500 or
(ii) the total value of the Accumulation Units in the Investment Division. The
value of the remaining Accumulation Units in the Investment Division must equal
at least $500. If, after an ordered transfer, the value of the remaining
Accumulation Units in an Investment Division would be less than $500, the entire
value will be transferred.
Currently there are no restrictions on transfers other than those described
herein and there is no charge for permitted transfers between Investment
Divisions. Hartford reserves the right in the future to impose additional
restrictions on transfers, as a well as a charge for processing transfers.
TRANSFERS TO OR FROM INVESTMENT DIVISIONS
In the event of a transfer from an Investment Division, the number of
Accumulation Units credited to the Investment Division from which the transfer
is made will be reduced. The reduction will be determined by dividing:
1. the amount transferred by,
2. the Accumulation Unit Value for that Investment Division on the Valuation
Day We receive Your request for transfer In Writing.
In the event of a transfer to an Investment Division, We will increase the
number of Accumulation Units credited thereto. The increase will equal:
1. the amount transferred divided by,
2. the Accumulation Unit Value for that Investment Division determined on the
Valuation Day We receive Your request for transfer In Writing.
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.
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16 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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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 average is no
longer published, a substitute average will be used.
CREDITED INTEREST
Amounts in the Loan Account for Coverage Years 1 through 10 will be credited
with interest at a rate equal to the Adjustable Loan Interest Rate then in
effect, minus 1%. Amounts in the Loan Account for Coverage Years 11 and later
will be credited with interest at a rate equal to the Adjustable Loan Interest
Rate then in effect, minus .20%.
LOAN REPAYMENTS
You can repay any part of or the entire Loan at any time. The amount of the
Loan repayment will be allocated to Your chosen Investment Divisions on a Pro
Rata Basis, determined as of the date of the Loan repayment. Unless specified
otherwise, additional premium payments received by Hartford during the period
when a Loan is outstanding will be treated as Loan repayments.
TERMINATION DUE TO EXCESSIVE DEBT
If total Debt outstanding equals or exceeds the Cash Surrender Value, the
Certificate will terminate 31 days after We have mailed notice to Your last
known address and that of any assignees of record. If sufficient Loan repayment
is not made by the end of this 31 day period, the Certificate will end without
value.
EFFECT OF LOANS ON INVESTMENT VALUE
A Loan, whether or not repaid, will have a permanent effect on the
Investment Value because the investment results of each Investment Division will
apply only to the amount remaining in such Investment Divisions. The longer a
Loan is outstanding, the greater the effect is likely to be. The effect could be
favorable or unfavorable. If the Investment Divisions earn more than the annual
interest rate for funds held in the Loan Account, an Owner's Investment Value
will not increase as rapidly as it would have had no 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.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 17
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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.
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.
<PAGE>
18 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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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 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:
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 19
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(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 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
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20 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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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
(1) 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 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 22 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 currently deducts a daily charge for Coverage Years 1 through 10 at an
effective annual rate of .65% of the value of each Investment Division's assets
and for Coverage Years 11 and later at an effective annual rate of .50% of an
Investment Division's assets. In no event will the charge exceed .65% of an
Investment Division's assets on an annual basis. See also, "Premiums --
Accumulation Unit Values," page 14.
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ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 21
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The Mortality and Expense Risk Charge is equal to:
(i) the Mortality and Expense Risk Rate; multiplied by
(ii) the portion of the Cash Value allocated to the Investment Divisions and
the Loan Account.
The mortality risk assumed is that the actual cost of insurance charges
specified in the Certificate will be insufficient to meet actual claims. The
expense risk assumed is that expenses incurred in issuing and administering the
Certificates will exceed the administrative charges set forth therein.
If these charges are insufficient to cover actual costs and assumed risks,
the loss will fall on Hartford. Conversely, if the charge proves more than
sufficient, any excess will be added to Hartford's surplus.
TAXES
Currently, no charge is made to the Separate Account for federal, state, and
local taxes that may be attributable to the Separate Account. A change in the
applicable federal, state or local tax laws which impose tax on Hartford and/or
the Separate Account may result in a charge against the Certificates in the
future. Charges for other taxes, if any, attributable to the Separate Account
may also be made.
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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 AMT, the Board
of Trustees for the Alger American Fund, the Board of Trustees for each of the
VIP Fund and the VIP Fund II, the Board of Trustees of JPM Series Trust and the
Board of Directors of Morgan Stanley Funds (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
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 16) 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
<PAGE>
22 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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.
- ---------------------------------------------------
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.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 23
- --------------------------------------------------------------------------------
- ---------------------------------------------------
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 25.
- --------------------------------------------------------------------------------
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 Senior Vice President, Chief Vice President & Controller (1995-1997), Hartford Life
Financial Officer & Insurance Company; Chief Financial Officer (1994-1995),
Treasurer, 1997 IMG American Life; Senior Vice President (1992-1994),
Director, 1997* Connecticut Mutual Life Insurance Company.
Peter W. Cummins, 60 Senior Vice President, 1997 Vice President, Individual Annuity Operations (1989-1997),
Hartford.
Ann M. deRaismes, 46 Senior Vice President, 1997 Vice President (1994-1997); 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.
Richard J. Garrett, 52 Vice President & Assistant Treasurer, Treasurer (1994-Present); Vice President (1993-Present),
1997 Hartford Life Insurance Company.
Donald J. Gillette, 51 Vice President, 1993 Vice President, Director of Marketing (1991-Present),
Hartford.
William A. Godfrey, III, 39 Senior Vice President, 1996 Senior Vice President (1995-1996), Fleet Financial Services
Information Technical Services; Vice President
(1987-1995), Shawmut National Bank.
Lynda Godkin, 43 Senior Vice President, 1997 Associate General Counsel and Corporate Secretary
General Counsel, 1996 (1995-1996); Assistant General Counsel and Secretary
Corporate Secretary, 1995 (1994-1995); Counsel (1990-1994), Hartford Life Insurance
Director, 1997* Company.
Lois W. Grady, 52 Vice President, 1993 Assistant Vice President (1988-1993), Hartford Life
Insurance Company.
David A. Hall, 43 Vice President & Senior Vice President & Actuary (1993-1997), Hartford.
Actuary, 1997
Robert A. Kerzner, 45 Vice President, 1994 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.
Michael O'Halloran, 50 Vice President, 1997 Vice President; Senior Associate General, Director of
Corporate Law (1994-Present); Senior Associate General
Counsel (1988-1994), Hartford Insurance Group.
Craig D. Raymond, 36 Senior Vice President, 1997 Vice President (1993-1997); Assistant Vice President
Chief Actuary, 1997 (1992-1993); Actuary (1989-1994), Hartford Life Insurance
Company.
David T. Schrandt, 49 Vice President, 1987 Vice President, Treasurer and Controller (1987-Present),
Treasurer, 1987 Hartford.
</TABLE>
<PAGE>
24 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITION WITH HARTFORD OTHER BUSINESS PROFESSION, VOCATION OR EMPLOYMENT
NAME, AGE YEAR OF ELECTION FOR PAST 5 YEARS; OTHER DIRECTORSHIPS
- ------------------------------- ------------------------------------- -----------------------------------------------------------
<S> <C> <C>
Lowndes A. Smith, 57 President, 1989 President & Chief Operating Officer (1989-Present),
Chief Executive Officer, 1993 Hartford Life Insurance Company.
Director, 1985*
Walter C. Welsh, 50 Senior Vice President, 1997 Senior Vice President (1997-Present); Vice President
(1995-1997); Assistant Vice President (1993-1995),
Hartford Life Insurance Company.
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.
David M. Znamierowski, 37 Senior Vice President, 1997 Vice President (1996-1997), Hartford; Vice President,
Investment Strategy and Policy (1991-1996).
</TABLE>
- ------------------------
* Denotes date of election to Board of Directors.
** ITT Hartford Affiliated Company
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
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 25
- --------------------------------------------------------------------------------
("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 14). 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
<PAGE>
26 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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.
- ---------------------------------------------------
FEDERAL INCOME TAX WITHHOLDING
If any amounts are deemed to be current taxable income to the Owner, such
amounts will be subject to Federal income tax withholding and reporting,
pursuant to Section 3405 of the Internal Revenue Code.
- ---------------------------------------------------
OTHER TAX CONSIDERATIONS
Qualified tax advisers should be consulted concerning the estate and gift
tax consequences of Certificate ownership and distributions under federal, state
and local law.
- ---------------------------------------------------
LEGAL PROCEEDINGS
There are no material legal proceedings pending to which the Separate
Account is a party.
- ---------------------------------------------------
EXPERTS
The audited financial statements included in this prospectus and elsewhere
in the registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports. Reference is made to said report on the
statutory-basis financial statements of 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 her opinion as to their reasonableness.
- ---------------------------------------------------
REGISTRATION STATEMENT
A registration statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. This Prospectus does
not contain all information set forth in the registration statement, its
amendments and exhibits, to all of which reference is made for further
information concerning the Separate Account, Hartford, the Group Policies and
the Certificates.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY 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 28 to 39 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 0.87%. The 0.87% figure is based on an average of the
current management fees and expenses of the available twenty-two 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 0.87%, 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 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 0.00% (-0.87% 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 12,236 12,236 250,000 10,994 10,994 250,000
2 30,355 24,205 24,205 250,000 21,788 21,788 250,000
3 46,680 35,915 35,915 250,000 32,384 32,384 250,000
4 63,821 47,403 47,403 250,000 42,790 42,790 250,000
5 81,819 58,686 58,686 250,000 53,006 53,006 250,000
6 100,717 69,880 69,880 250,000 63,038 63,038 250,000
7 120,560 80,896 80,896 250,000 72,882 72,882 250,000
8 126,588 79,208 79,208 250,000 70,253 70,253 250,000
9 132,917 77,499 77,499 250,000 67,507 67,507 250,000
10 139,563 75,760 75,760 250,000 64,623 64,623 250,000
11 146,541 74,071 74,071 250,000 61,585 61,585 250,000
12 153,868 72,300 72,300 250,000 58,372 58,372 250,000
13 161,561 70,420 70,420 250,000 54,971 54,971 250,000
14 169,639 68,420 68,420 250,000 51,360 51,360 250,000
15 178,121 66,288 66,288 250,000 47,517 47,517 250,000
16 187,027 63,936 63,936 250,000 43,405 43,405 250,000
17 196,378 61,446 61,446 250,000 38,979 38,979 250,000
18 206,197 58,799 58,799 250,000 34,185 34,185 250,000
19 216,507 55,980 55,980 250,000 28,956 28,956 250,000
20 227,332 52,966 52,966 250,000 23,219 23,219 250,000
25 290,140 33,885 33,885 250,000 -- -- --
30 370,300 3,819 3,819 250,000 -- -- --
</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>
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 6.00% (5.13% 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 12,984 12,984 250,000 11,695 11,695 250,000
2 30,355 26,463 26,463 250,000 23,880 23,880 250,000
3 46,680 40,466 40,466 250,000 36,582 36,582 250,000
4 63,821 55,050 55,050 250,000 49,833 49,833 250,000
5 81,819 70,263 70,263 250,000 63,663 63,663 250,000
6 100,717 86,242 86,242 250,000 78,110 78,110 250,000
7 120,560 102,937 102,937 250,000 93,206 93,206 250,000
8 126,588 107,098 107,098 250,000 95,963 95,963 250,000
9 132,917 111,419 111,419 250,000 98,747 98,747 250,000
10 139,563 115,902 115,902 250,000 101,550 101,550 250,000
11 146,541 120,715 120,715 251,519 104,367 104,367 250,000
12 153,868 125,681 125,681 254,873 107,192 107,192 250,000
13 161,561 130,789 130,789 258,259 110,026 110,026 250,000
14 169,639 136,042 136,042 261,674 112,865 112,865 250,000
15 178,121 141,443 141,443 265,120 115,705 115,705 250,000
16 187,027 146,946 146,946 268,523 118,533 118,533 250,000
17 196,378 152,618 152,618 272,000 121,337 121,337 250,000
18 206,197 158,462 158,462 275,576 124,099 124,099 250,000
19 216,507 164,483 164,483 279,273 126,795 126,795 250,000
20 227,332 170,684 170,684 283,104 129,404 129,404 250,000
25 290,140 204,457 204,457 304,236 140,510 140,510 250,000
30 370,300 243,093 243,093 329,204 144,972 144,972 250,000
</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>
30 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 12.00% (11.13% 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 13,732 13,732 250,000 12,396 12,396 250,000
2 30,355 28,811 28,811 250,000 26,057 26,057 250,000
3 46,680 45,385 45,385 250,000 41,125 41,125 250,000
4 63,821 63,651 63,651 250,000 57,764 57,764 250,000
5 81,819 83,808 83,808 250,000 76,154 76,154 250,000
6 100,717 106,164 106,164 253,827 96,500 96,500 250,000
7 120,560 130,770 130,770 303,650 118,888 118,888 276,217
8 126,588 143,868 143,868 324,558 129,786 129,786 292,963
9 132,917 158,261 158,261 347,012 141,636 141,636 310,749
10 139,563 174,067 174,067 371,134 154,509 154,509 329,640
11 146,541 191,679 191,679 397,537 168,487 168,487 349,704
12 153,868 210,994 210,994 425,909 183,658 183,658 371,014
13 161,561 232,146 232,146 456,287 200,123 200,123 393,645
14 169,639 255,303 255,303 488,806 217,989 217,989 417,678
15 178,121 280,648 280,648 523,618 237,369 237,369 443,202
16 187,027 308,272 308,272 560,725 258,377 258,377 470,306
17 196,378 338,517 338,517 600,531 281,130 281,130 499,090
18 206,197 371,620 371,620 643,291 305,748 305,748 529,656
19 216,507 407,845 407,845 689,279 332,349 332,349 562,116
20 227,332 447,472 447,472 738,773 361,066 361,066 596,586
25 290,140 708,217 708,217 1,048,974 542,169 542,169 803,732
30 370,300 1,112,496 1,112,496 1,499,622 803,012 803,012 1,083,549
</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 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 0.00% (-0.87% 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 12,225 12,225 262,258 10,942 10,942 261,050
2 30,355 24,163 24,163 274,220 21,626 21,626 271,756
3 46,680 35,812 35,812 285,893 32,050 32,050 282,201
4 63,821 47,204 47,204 297,306 42,212 42,212 292,385
5 81,819 58,353 58,353 308,476 52,104 52,104 302,300
6 100,717 69,411 69,411 319,541 61,723 61,723 311,941
7 120,560 80,255 80,255 330,403 71,049 71,049 321,291
8 126,588 78,385 78,385 328,534 67,883 67,883 318,135
9 132,917 76,482 76,482 326,634 64,578 64,578 314,841
10 139,563 74,533 74,533 324,689 61,111 61,111 311,388
11 146,541 72,606 72,606 322,760 57,470 57,470 307,761
12 153,868 70,564 70,564 320,728 53,637 53,637 303,944
13 161,561 68,374 68,374 318,551 49,604 49,604 299,928
14 169,639 66,025 66,025 316,214 45,357 45,357 295,699
15 178,121 63,505 63,505 313,709 40,879 40,879 291,240
16 187,027 60,702 60,702 310,929 36,141 36,141 286,523
17 196,378 57,734 57,734 307,975 31,107 31,107 281,513
18 206,197 54,585 54,585 304,841 25,734 25,734 276,169
19 216,507 51,240 51,240 301,512 19,972 19,972 270,439
20 227,332 47,680 47,680 297,970 13,772 13,772 264,275
25 290,140 25,766 25,766 276,177 0 0 0
30 370,300 0 0 0 0 0 0
</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>
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 6.00% (5.13% 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 12,972 12,972 262,944 11,639 11,639 261,692
2 30,355 26,417 26,417 276,348 23,701 23,701 273,718
3 46,680 40,348 40,348 290,237 36,198 36,198 286,177
4 63,821 54,814 54,814 304,658 49,143 49,143 299,084
5 81,819 69,852 69,852 319,648 62,544 62,544 312,446
6 100,717 85,639 85,639 335,370 76,413 76,413 326,276
7 120,560 102,079 102,079 351,756 90,748 90,748 340,571
8 126,588 105,943 105,943 355,610 92,626 92,626 342,456
9 132,917 109,917 109,917 359,574 94,396 94,396 344,235
10 139,563 113,989 113,989 363,638 96,026 96,026 345,877
11 146,541 118,300 118,300 367,928 97,494 97,494 347,359
12 153,868 122,664 122,664 372,288 98,773 98,773 348,654
13 161,561 127,047 127,047 376,670 99,843 99,843 349,742
14 169,639 131,438 131,438 381,059 100,678 100,678 350,597
15 178,121 135,822 135,822 385,444 101,245 101,245 351,186
16 187,027 140,080 140,080 389,712 101,498 101,498 351,467
17 196,378 144,324 144,324 393,958 101,385 101,385 351,385
18 206,197 148,536 148,536 398,173 100,839 100,839 350,876
19 216,507 152,696 152,696 402,338 99,784 99,784 349,864
20 227,332 156,780 156,780 406,427 98,140 98,140 348,270
25 290,140 174,834 174,834 424,561 78,406 78,406 328,885
30 370,300 184,502 184,502 434,420 28,580 28,580 279,718
</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 33
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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% (11.13% 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 13,720 13,720 263,626 12,337 12,337 262,330
2 30,355 28,761 28,761 278,551 25,861 25,861 275,751
3 46,680 45,251 45,251 294,915 40,687 40,687 290,463
4 63,821 63,372 63,372 312,894 56,946 56,946 306,597
5 81,819 83,305 83,305 332,669 74,774 74,774 324,288
6 100,717 105,395 105,395 354,570 94,326 94,326 343,690
7 120,560 129,735 129,735 378,714 115,758 115,758 364,958
8 126,588 142,542 142,542 391,421 125,583 125,583 374,717
9 132,917 156,618 156,618 405,386 136,234 136,234 385,296
10 139,563 172,080 172,080 420,727 147,769 147,769 396,753
11 146,541 189,312 189,312 437,804 160,263 160,263 409,164
12 153,868 208,217 208,217 456,563 173,797 173,797 422,607
13 161,561 228,934 228,934 477,121 188,467 188,467 437,178
14 169,639 251,641 251,641 499,655 204,372 204,372 452,975
15 178,121 276,536 276,536 524,359 221,620 221,620 470,107
16 187,027 303,726 303,726 552,456 240,316 240,316 488,677
17 196,378 333,524 333,524 591,673 260,571 260,571 508,796
18 206,197 366,137 366,137 633,800 282,496 282,496 530,575
19 216,507 401,827 401,827 679,108 306,206 306,206 554,129
20 227,332 440,869 440,869 727,871 331,830 331,830 579,586
25 290,140 697,759 697,759 1,033,485 494,533 494,533 741,228
30 370,300 1,096,064 1,096,064 1,477,472 731,907 731,907 987,603
</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>
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 0.00% (-0.87% 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 5,048 5,048 250,000 3,960 3,960 250,000
2 12,915 9,926 9,926 250,000 7,789 7,789 250,000
3 19,861 14,634 14,634 250,000 11,485 11,485 250,000
4 27,154 19,204 19,204 250,000 15,045 15,045 250,000
5 34,812 23,651 23,651 250,000 18,464 18,464 250,000
6 42,853 28,109 28,109 250,000 21,739 21,739 250,000
7 51,296 32,468 32,468 250,000 24,855 24,855 250,000
8 60,161 36,846 36,846 250,000 27,919 27,919 250,000
9 69,469 41,118 41,118 250,000 30,797 30,797 250,000
10 79,242 45,274 45,274 250,000 33,474 33,474 250,000
11 89,504 49,362 49,362 250,000 35,942 35,942 250,000
12 100,279 53,296 53,296 250,000 38,189 38,189 250,000
13 111,593 57,057 57,057 250,000 40,212 40,212 250,000
14 123,473 60,641 60,641 250,000 42,002 42,002 250,000
15 135,947 64,046 64,046 250,000 43,545 43,545 250,000
16 149,044 67,194 67,194 250,000 44,819 44,819 250,000
17 162,796 70,177 70,177 250,000 45,795 45,795 250,000
18 177,236 72,988 72,988 250,000 46,436 46,436 250,000
19 192,398 75,621 75,621 250,000 46,699 46,699 250,000
20 208,318 78,066 78,066 250,000 46,537 46,537 250,000
25 300,684 86,998 86,998 250,000 37,739 37,739 250,000
30 418,569 88,570 88,570 250,000 6,879 6,879 250,000
</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>
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 6.00% (5.13% 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 5,361 5,361 250,000 4,235 4,235 250,000
2 12,915 10,865 10,865 250,000 8,587 8,587 250,000
3 19,861 16,516 16,516 250,000 13,058 13,058 250,000
4 27,154 22,352 22,352 250,000 17,652 17,652 250,000
5 34,812 28,396 28,396 250,000 22,368 22,368 250,000
6 42,853 34,792 34,792 250,000 27,211 27,211 250,000
7 51,296 41,446 41,446 250,000 32,170 32,170 250,000
8 60,161 48,495 48,495 250,000 37,370 37,370 250,000
9 69,469 55,827 55,827 250,000 42,684 42,684 250,000
10 79,242 63,446 63,446 250,000 48,106 48,106 250,000
11 89,504 71,449 71,449 250,000 53,639 53,639 250,000
12 100,279 79,750 79,750 250,000 59,283 59,283 250,000
13 111,593 88,348 88,348 250,000 65,048 65,048 250,000
14 123,473 97,264 97,264 250,000 70,941 70,941 250,000
15 135,947 106,520 106,520 250,000 76,968 76,968 250,000
16 149,044 116,085 116,085 250,000 83,128 83,128 250,000
17 162,796 126,060 126,060 250,000 89,422 89,422 250,000
18 177,236 136,477 136,477 250,000 95,846 95,846 250,000
19 192,398 147,371 147,371 250,219 102,395 102,395 250,000
20 208,318 158,650 158,650 263,145 109,073 109,073 250,000
25 300,684 220,829 220,829 328,596 145,034 145,034 250,000
30 418,569 293,250 293,250 397,128 188,149 188,149 255,056
</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>
36 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 12.00% (11.13% 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 5,674 5,674 250,000 4,510 4,510 250,000
2 12,915 11,842 11,842 250,000 9,419 9,419 250,000
3 19,861 18,552 18,552 250,000 14,765 14,765 250,000
4 27,154 25,896 25,896 250,000 20,598 20,598 250,000
5 34,812 33,956 33,956 250,000 26,963 26,963 250,000
6 42,853 42,944 42,944 250,000 33,919 33,919 250,000
7 51,296 52,848 52,848 250,000 41,520 41,520 250,000
8 60,161 63,901 63,901 250,000 49,965 49,965 250,000
9 69,469 76,087 76,087 250,000 59,211 59,211 250,000
10 79,242 89,524 89,524 250,000 69,343 69,343 250,000
11 89,504 104,487 104,487 250,000 80,469 80,469 250,000
12 100,279 121,009 121,009 250,000 92,714 92,714 250,000
13 111,593 139,188 139,188 273,577 106,226 106,226 250,000
14 123,473 159,119 159,119 304,652 121,176 121,176 250,000
15 135,947 180,961 180,961 337,628 137,732 137,732 257,165
16 149,044 204,815 204,815 372,545 155,733 155,733 283,471
17 162,796 230,951 230,951 409,709 175,259 175,259 311,138
18 177,236 259,577 259,577 449,339 196,418 196,418 340,261
19 192,398 290,920 290,920 491,669 219,318 219,318 370,941
20 208,318 325,225 325,225 536,944 244,078 244,078 403,287
25 300,684 551,283 551,283 816,532 400,847 400,847 594,231
30 418,569 902,367 902,367 1,216,373 627,772 627,772 847,088
</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 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 0.00% (-0.87% 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 5,043 5,043 255,068 3,940 3,940 254,039
2 12,915 9,909 9,909 259,948 7,728 7,728 257,840
3 19,861 14,591 14,591 264,646 11,360 11,360 261,485
4 27,154 19,122 19,122 269,189 14,832 14,832 264,971
5 34,812 23,515 23,515 273,593 18,136 18,136 268,288
6 42,853 27,917 27,917 277,995 21,265 21,265 271,431
7 51,296 32,207 32,207 282,294 24,200 24,200 274,383
8 60,161 36,500 36,500 286,596 27,045 27,045 277,245
9 69,469 40,667 40,667 290,774 29,660 29,660 279,879
10 79,242 44,695 44,695 294,814 32,024 32,024 282,264
11 89,504 48,620 48,620 298,747 34,125 34,125 284,387
12 100,279 52,350 52,350 302,494 35,948 35,948 286,233
13 111,593 55,853 55,853 306,015 37,486 37,486 287,794
14 123,473 59,119 59,119 309,301 38,726 38,726 289,059
15 135,947 62,139 62,139 312,341 39,652 39,652 290,011
16 149,044 64,799 64,799 315,030 40,235 40,235 290,622
17 162,796 67,220 67,220 317,471 40,444 40,444 290,862
18 177,236 69,386 69,386 319,659 40,234 40,234 290,687
19 192,398 71,285 71,285 321,580 39,558 39,558 290,049
20 208,318 72,897 72,897 323,216 38,367 38,367 288,901
25 300,684 75,809 75,809 326,278 23,382 23,382 274,175
30 418,569 67,269 67,269 317,955 0 0 0
</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>
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 6.00% (5.13% 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 5,356 5,356 255,355 4,213 4,213 254,293
2 12,915 10,846 10,846 260,833 8,519 8,519 258,590
3 19,861 16,467 16,467 266,443 12,914 12,914 262,978
4 27,154 22,255 22,255 272,217 17,397 17,397 267,453
5 34,812 28,228 28,228 278,174 21,959 21,959 272,008
6 42,853 34,546 34,546 284,463 26,595 26,595 276,638
7 51,296 41,097 41,097 290,994 31,287 31,287 281,325
8 60,161 48,013 48,013 297,889 36,143 36,143 286,178
9 69,469 55,174 55,174 305,029 41,022 41,022 291,055
10 79,242 62,576 62,576 312,411 45,901 45,901 295,934
11 89,504 70,292 70,292 320,101 50,762 50,762 300,796
12 100,279 78,219 78,219 328,010 55,585 55,585 305,622
13 111,593 86,329 86,329 336,104 60,357 60,357 310,399
14 123,473 94,618 94,618 344,377 65,057 65,057 315,105
15 135,947 103,079 103,079 352,824 69,662 69,662 319,719
16 149,044 111,603 111,603 361,342 74,134 74,134 324,202
17 162,796 120,310 120,310 370,034 78,427 78,427 328,510
18 177,236 129,189 129,189 378,898 82,483 82,483 332,586
19 192,398 138,232 138,232 387,927 86,235 86,235 336,363
20 208,318 147,423 147,423 397,106 89,612 89,612 339,773
25 300,684 194,773 194,773 444,425 98,548 98,548 348,954
30 418,569 241,150 241,150 490,855 84,395 84,395 335,330
</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 39
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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% (11.13% 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 5,669 5,669 255,641 4,487 4,487 254,545
2 12,915 11,821 11,821 261,750 9,344 9,344 259,370
3 19,861 18,497 18,497 268,380 14,601 14,601 264,592
4 27,154 25,781 25,781 275,612 20,294 20,294 270,247
5 34,812 33,750 33,750 283,521 26,455 26,455 276,367
6 42,853 42,629 42,629 292,321 33,126 33,126 282,994
7 51,296 52,384 52,384 301,999 40,336 40,336 290,156
8 60,161 63,233 63,233 312,763 48,254 48,254 298,023
9 69,469 75,147 75,147 324,584 56,797 56,797 306,512
10 79,242 88,221 88,221 337,557 66,005 66,005 315,662
11 89,504 102,687 102,687 351,901 75,931 75,931 325,525
12 100,279 118,533 118,533 367,627 86,628 86,628 336,155
13 111,593 135,867 135,867 384,831 98,165 98,165 347,619
14 123,473 154,834 154,834 403,656 110,611 110,611 359,985
15 135,947 175,592 175,592 424,258 124,039 124,039 373,328
16 149,044 198,209 198,209 446,712 138,518 138,518 387,715
17 162,796 223,002 223,002 471,316 154,115 154,115 403,214
18 177,236 250,182 250,182 498,288 170,896 170,896 419,892
19 192,398 279,986 279,986 527,862 188,925 188,925 437,813
20 208,318 312,665 312,665 560,291 208,276 208,276 457,048
25 300,684 529,802 529,802 784,715 328,316 328,316 576,378
30 418,569 868,613 868,613 1,170,873 496,532 496,532 743,685
</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>
40 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
PART I. FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
The following unaudited financial statements, reflect, in the opinion of
management, all adjustments which are of normal recurring nature necessary to
present fairly the financial position, the results of operations and the cash
flows for the periods presented. Certain reclassifications of prior year results
were made to conform to current presentation. Interim results are not indicative
of the results which may be expected for any other interim period or the full
year. Statements contained in this discussion, other than statements of
historical fact, are forward-looking statements. These statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The forward-looking statements are made based upon
management's expectations and beliefs concerning future developments and their
potential effect on Hartford Life Insurance Company ("the Company"). There can
be no assurance that future developments will be in accordance with management's
expectations or that the effect of these future developments on the Company will
be those anticipated by management. Actual results could differ materially from
those expected by the Company, depending on the outcome of certain factors,
including those described with the forward-looking statements. For a description
of accounting policies, see Note 1 to Consolidated Financial Statements in the
1996 Form 10-K. The Company is an indirect subsidiary of Hartford Life, Inc.
("HLI"). Accordingly, the financial statements presented below are a partial
disclosure of HLI's financials. For a full disclosure of HLI's operations, refer
to the HLI 10Q, as filed with the Securities and Exchange Commission as of June
30, 1997.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES 41
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS)
<TABLE>
<CAPTION>
QUARTER SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
----------- ---------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
---- ---- ------ ------
(UNAUDITED) (UNAUDITED)
Revenues
Premiums and other considerations............... $323 $299 $ 633 $ 943
Net investment income........................... 322 318 659 651
Net realized capital gains (losses)............. 0 (1) 4 (1)
---- ---- ------ ------
Total Revenues................................ 645 616 1,296 1,593
---- ---- ------ ------
Benefits, Claims and Expenses
Benefits, claims and claim adjustment
expenses....................................... 310 392 652 788
Amortization of deferred policy acquisition
costs.......................................... 91 63 172 129
Dividends to policyholders...................... 18 61 72 347
Other insurance expenses........................ 117 34 190 198
---- ---- ------ ------
Total Benefits, Claims and Expenses........... 536 550 1,086 1,462
---- ---- ------ ------
Income before income tax expense................ 109 66 210 131
Income tax expense.............................. 35 23 73 45
---- ---- ------ ------
Net income........................................ $ 74 $ 43 $ 137 $ 86
---- ---- ------ ------
---- ---- ------ ------
</TABLE>
<PAGE>
42 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
<S> <C> <C>
(UNAUDITED)
Assets
Investments:
Fixed maturities, available for sale, at fair
value (amortized cost $13,797 and $13,579)..... $13,844 $13,624
Equity securities, available for sale, at fair
value.......................................... 137 119
Mortgage loans, at outstanding balance.......... -- 2
Policy loans, at outstanding balance............ 3,754 3,836
Other investments, at cost...................... 50 54
----------- ------------
Total investments............................. 17,785 17,635
Cash............................................ 77 43
Premiums and amounts receivable................. 58 137
Reinsurance recoverable......................... 6,362 6,259
Accrued investment income....................... 35 407
Deferred policy acquisition costs............... 2,989 2,760
Deferred income tax............................. 466 474
Other assets.................................... 308 357
Separate account assets......................... 58,970 49,690
----------- ------------
Total assets.................................. $87,374 $77,762
----------- ------------
----------- ------------
Liabilities and Stockholders' Equity
Future policy benefits.......................... $ 2,889 $ 2,474
Other policyholder funds........................ 21,279 22,134
Other liabilities............................... 2,204 1,572
Separate account liabilities.................... 58,970 49,690
----------- ------------
Total liabilities............................. 85,342 75,870
----------- ------------
Common stock -- authorized 1,000 shares, $5,690
par value, issued and outstanding 1,000
shares......................................... 6 6
Additional paid-in capital...................... 1,045 1,045
Unrealized gain on investments, net of tax...... 33 30
Retained earnings............................... 948 811
----------- ------------
Total stockholders' equity.................... 2,032 1,892
----------- ------------
Total liabilities and stockholders' equity...... $87,374 $77,762
----------- ------------
----------- ------------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES 43
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
--------------------
<S> <C> <C>
1997 1996
-------- --------
(UNAUDITED)
Operating Activities:
Net income............................ $ 137 $ 86
Adjustments to net income:
Net realized capital (gains) losses on
sale of investments.................. (4) 1
Net increase in deferred policy
acquisition costs.................... (229) (300)
Net amortization of premium on fixed
maturities........................... 0 7
Decrease (increase) in deferred income
tax benefit.......................... 9 (88)
Decrease in premiums and amounts
receivable........................... 92 20
Decrease in other assets.............. 50 26
Increase in reinsurance recoverable... (251) (264)
Increase in liability for future
policy benefits...................... 415 304
Increase in other liabilities......... 146 150
Decrease (increase) in accrued
investment income.................... 48 (5)
-------- --------
Cash provided by (used for)
operating activities............... 413 (63)
-------- --------
Investing Activities:
Purchases of fixed maturities
investments.......................... (3,801) (2,717)
Sales of fixed maturities
investments.......................... 2,274 1,348
Maturities and principal paydowns of
fixed maturities investments......... 1,343 1,469
Net sales (purchases) of other
investments.......................... 110 (120)
Net sales of short-term investments... 138 232
-------- --------
Cash provided by investing
activities......................... 64 212
-------- --------
Financing Activities:
Net disbursements for investment and
universal life-type contracts charged
from policyholder accounts........... (443) (187)
Capital contribution.................. -- 38
-------- --------
Cash used for financing
activities......................... (443) (149)
-------- --------
Net increase in cash.................. 34 0
Cash at beginning of period........... 43 46
-------- --------
Cash at end of period................... $ 77 $ 46
-------- --------
-------- --------
</TABLE>
<PAGE>
44 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS
OF RESULTS OF OPERATIONS
(IN MILLIONS)
QUARTER AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
SEGMENT RESULTS
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------ --------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
----- --------- --------- ---------
Annuity................................... $ 49 $ 37 $ 92 $ 70
Individual Life Insurance................. 12 10 23 19
Employee Benefits......................... 9 6 15 14
Guaranteed Investment Contracts........... -- (15) -- (30)
Corporate Operation....................... 4 5 7 13
--- --------- --------- ---------
Net Income................................ $ 74 $ 43 $ 137 $ 86
--- --------- --------- ---------
--- --------- --------- ---------
</TABLE>
Net income increased $31, or 72%, and $51, or 59%, for the second quarter
and six months ended June 30, 1997, respectively, over prior year. This increase
is reflective of continued, solid growth in both the Annuity and Individual Life
Insurance segments. Net income in the Annuity segment increased due to higher
fee income on growing account values as well as strong new business sales. Net
income in the Individual Life Insurance segment increased due to cost of
insurance charges and other fee income on a growing block of life insurance
in-force, as well as favorable mortality results. Guaranteed Investment
Contracts reported no net income in the second quarter of 1997 consistent with
management's expectations that net income subsequent to 1996 will be immaterial.
ANNUITY
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
--------- --------- --------- ---------
Revenues................................ $ 308 $ 232 $ 588 $ 466
Expenses................................ 259 195 496 396
--------- --------- --------- ---------
Net Income.............................. $ 49 $ 37 $ 92 $ 70
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Revenues, which are primarily comprised of investment income and management
and maintenance fees, grew $76, or 33%, to $308 in the second quarter of 1997
and $122, or 26%, to $588 for the six months ended June 30, 1997. This growth
resulted from an increase in the average account value, primarily driven by
individual variable annuities, of $14.2 billion, or 35%, to $55.2 billion as of
June 30, 1997 from $41.0 billion as of June 30, 1996. This is a result of
approximately $10 billion in new sales of individual annuities over the last
twelve months and market appreciation. Additionally, new individual annuity
sales were approximately $2.5 billion and $5.1 billion for the second quarter
and six months ended June 30, 1997, respectively, similar to sales of $2.7
billion and $4.9 billion, respectively, for the same periods of 1996. Growth in
the assets under management by this segment also resulted in increased expenses
related to other insurance expenses, amortization of deferred policy acquisition
costs and taxes. Expenses increased $64, or 33%, to $259 in the second quarter
of 1997 and $100, or 25%, to $496 for the six months ended June 30, 1997. Net
income increased $12, or 32%, to $49 in the second quarter of 1997 and $22, or
31%, to $92 for the six months ended June 30, 1997.
INDIVIDUAL LIFE INSURANCE
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
--------- --------- --------- ---------
Revenues................................ $ 125 $ 101 $ 236 $ 216
Expenses................................ 113 91 213 197
--------- --------- --------- ---------
Net Income.............................. $ 12 $ 10 $ 23 $ 19
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Revenues increased $24, or 24%, to $125 in the second quarter of 1997 and
$20, or 9%, to $236 for the six months ended June 30, 1997. In the first quarter
of 1996, a block of business was assumed from Investors Equity which increased
revenues by $9. Excluding this transaction, year to date revenues increased $29,
or 14% over prior year. This growth was driven by increased cost of insurance
charges and other fee income earned on this growing block of business. Life
insurance in-force grew approximately $3.3 billion, or 6%, as of June 30, 1997
over the prior period, primarily due to sales of variable life products.
Expenses in this segment increased $22, or 24%, to $113 and $16, or 8%, in the
second quarter of 1997 and for the six months ended June 30, 1997, respectively,
over the same period last year, consistent with a growing block of business. As
a result, net income increased $2, or 20%, to $12 in the second quarter of 1997
and $4, or 21%, to $23 for the six months ended June 30, 1997.
EMPLOYEE BENEFITS
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
--------- --------- --------- ---------
Revenues................................ $ 142 $ 210 $ 321 $ 753
Expenses................................ 133 204 306 739
--------- --------- --------- ---------
Net Income.............................. $ 9 $ 6 $ 15 $ 14
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES 45
- --------------------------------------------------------------------------------
Revenues declined $68, or 32%, to $142 in the second quarter of 1997 and
$432, or 57%, for the six months ended June 30, 1997 over the same period last
year. This decline is mainly related to the passage of the Health Insurance
Portability and Accountability Act of 1996, which effectively eliminated all
future sales of leveraged COLI. Expenses declined $71, or 35%, in the second
quarter of 1997 and $433, or 59%, for the six months ended June 30, 1997, over
the same period last year. Significant declines in benefits, claims and claim
adjustment expenses and policyholder dividends are the result of the decline of
the block of COLI business. As a result, net income increased $3, or 50%, in the
second quarter of 1997 and $1, or 7%, for the six months ended June 30, 1997.
GUARANTEED INVESTMENT CONTRACTS
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
--------- --------- --------- ---------
Revenues................................ $ 62 $ 67 $ 134 $ 140
Expenses................................ 62 82 134 170
--------- --------- --------- ---------
Net Income.............................. $ -- $ (15) $ -- $ (30)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
This segment had no net income for the three and six months ended June 30,
1997, as compared to losses of $15 and $30 for the same periods last year. These
results are consistent with management's expectations that net income (loss)
from Closed Book GRC in the years subsequent to 1996 will be immaterial based on
the Company's current projections for the performance of the assets and
liabilities associated with Closed Book GRC due to actions taken in the third
quarter of 1996.
<PAGE>
46 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
HARTFORD LIFE INC. INITIAL PUBLIC OFFERING
On February 10, 1997, HLI, an indirect parent of the Company, filed a
registration statement with the Securities and Exchange Commission, as amended,
relating to an Initial Public Offering ("IPO") of up to 20% of HLI's Class A
common stock. Pursuant to the IPO on May 22, 1997, HLI sold to the public 26
million shares at $28.25 per share and received net proceeds of $687. Of the
proceeds, $527 was used to retire debt related to HLI's promissory notes
outstanding and the line of credit discussed in the note below with the
remaining $160 contributed to HLI's insurance subsidiaries to be used for
working capital and other general corporate purposes.
The 26 million shares sold from the IPO represent approximately 18.6% of the
equity ownership in HLI and approximately 4.4% of the combined voting power of
HLI's Class A and Class B Common Stock. The Hartford Financial Services Group,
Inc. ("The Hartford"), an indirect parent of HLI, owns all of the 114 million
outstanding shares of Class B Common Stock of HLI, representing 81.4% of the
equity ownership in HLI and approximately 95.6% of the combined voting power of
HLI's Class A and Class B Common Stock. Holders of Class A Common Stock
generally have identical rights to the holders of Class B Common Stock except
that the holders of Class A Common Stock are entitled to one vote per share
while holders of Class B Common Stock are entitled to five votes per share on
all matters submitted to a vote of the HLI stockholders.
HARTFORD LIFE INC. DEBT OFFERING
On February 7, 1997, HLI declared a dividend of $1,184 payable to its direct
parent, Hartford Accident and Indemnity Company ("HA&I"). As a result, HLI
borrowed $1,084 on February 18, 1997, pursuant to a $1,300 line of credit, with
interest payable at the two-month Eurodollar rate plus 15 basis points, which,
together with a promissory note in the amount of $100, was paid as a dividend to
HA&I on February 20, 1997. Of the $1,184 dividend, $893 constituted a repayment
of the portion of HLI's third party indebtedness internally allocated, for
financial reporting purposes, to HLI's insurance subsidiaries (the "Allocated
Advances"). In addition, on April 4, 1997, HLI declared and paid a dividend of
$25 to its parent in the form of a promissory note. Subsequently, $12 of this
note was forgiven in the form of a capital contribution from HA&I.
On February 14, 1997, HLI filed a shelf registration statement for the
issuance and sale of up to $1.0 billion in the aggregate of senior debt
securities, subordinated debt securities and preferred stock. On June 17, 1997,
HLI issued $650 of unsecured redeemable long-term debt in the form of notes and
debentures. Of this amount, $200 was in the form of 6.90% notes due June 15,
2004, $200 of 7.10% notes due June 15, 2007, and $250 of 7.65% debentures due
June 15, 2027. Interest on each of the notes and debentures is payable
semi-annually on June 15 and December 15, of each year, commencing December 15,
1997. HLI also issued $50 of short-term debt in the form of commercial paper. Of
the proceeds from this issuance, $670 was used to retire the remaining balance
on the $1,300 line of credit with the remainder being used for working capital
and other general corporate purposes. Subsequently, HLI reduced the capacity of
the line of credit from $1,300 to $250, which will be primarily used to support
the commercial paper program.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 47
- --------------------------------------------------------------------------------
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>
48 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
STATUTORY BASIS STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------------------
<S> <C> <C> <C>
1996 1995 1994
---------- ---------- ----------
($000)
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 Prremium 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 49
- --------------------------------------------------------------------------------
STATUTORY BASIS BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------
<S> <C> <C>
1996 1995
----------- ----------
($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>
50 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
STATUTORY BASIS STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-----------------------------
<S> <C> <C> <C>
1996 1995 1994
-------- -------- -------
($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 51
- --------------------------------------------------------------------------------
STATUTORY BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------
<S> <C> <C> <C>
1996 1995 1994
---------- ---------- ----------
($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>
52 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
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 53
- --------------------------------------------------------------------------------
(Interest Maintenance Reserve); whereas on a GAAP basis, no such formula
reserve is required and realized gains and losses are recognized in the
period the asset is sold;
(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
----------- ----------- -----------
----------- ----------- -----------
<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>
54 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 55
- --------------------------------------------------------------------------------
(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 --------------------
COST GAINS LOSSES
------------ --------- ---------
<S> <C> <C> <C>
U.S. government and government agencies and authorities:
(Guaranteed and sponsored)....................................................... $ 58,761 $ 6 $ (195)
(Guaranteed and sponsored) -- asset-backed....................................... 78,237 1,477 (609)
States, municipalities and political subdivisions.................................. 25,958 163 (2)
International governments.......................................................... 7,447 205 --
Public utilities................................................................... 70,116 396 (424)
All other corporate................................................................ 410,530 6,357 (1,355)
All other corporate -- asset-backed................................................ 485,953 2,654 (1,081)
Short-term investments............................................................. 148,094 -- (66)
Certificates of deposit............................................................ 83,378 563 (110)
Parents, subsidiaries and affiliates............................................... 48,100 -- --
------------ --------- ---------
Total bonds and short-term investments......................................... $ 1,416,574 $ 11,821 $ (3,842)
------------ --------- ---------
------------ --------- ---------
Common stock -- unaffiliated....................................................... $ 13,064 $ 713 $ 0
Common stock -- affiliated......................................................... 35,379 0 4,160
------------ --------- ---------
Total common stocks............................................................ $ 48,443 $ 713 $ 4,160
------------ --------- ---------
------------ --------- ---------
<CAPTION>
AS OF DECEMBER 31, 1995
----------------------------------
GROSS UNREALIZED
AMORTIZED --------------------
COST GAINS LOSSES
------------ --------- ---------
<S> <C> <C> <C>
U.S. government and government agencies and authorities:
(Guaranteed and sponsored)....................................................... $ 44,268 $ 14 $ (248)
(Guaranteed and sponsored) -- asset-backed....................................... 176,160 4,644 (682)
States, municipalities and political subdivisions.................................. 16,948 38 (6)
International governments.......................................................... 5,402 441 --
Public utilities................................................................... 108,083 1,652 (90)
All other corporate................................................................ 374,058 8,145 (248)
All other corporate -- asset-backed................................................ 410,197 5,841 (89)
Short-term investments............................................................. 139,011 18 --
Certificates of deposit............................................................ 91,373 1,458 (11)
------------ --------- ---------
Total bonds and short-term investments......................................... $ 1,365,500 $ 22,251 $ (1,374)
------------ --------- ---------
------------ --------- ---------
Common stock -- unaffiliated....................................................... $ 2,668 $ 555 $ --
Common stock -- affiliated......................................................... 35,384 1,169 --
------------ --------- ---------
Total common stocks............................................................ $ 38,052 $ 1,724 $ --
------------ --------- ---------
------------ --------- ---------
<CAPTION>
FAIR
VALUE
------------
<S> <C>
U.S. government and government agencies and authorities:
(Guaranteed and sponsored)....................................................... $ 58,572
(Guaranteed and sponsored) -- asset-backed....................................... 79,105
States, municipalities and political subdivisions.................................. 26,119
International governments.......................................................... 7,652
Public utilities................................................................... 70,088
All other corporate................................................................ 415,532
All other corporate -- asset-backed................................................ 487,526
Short-term investments............................................................. 148,028
Certificates of deposit............................................................ 83,831
Parents, subsidiaries and affiliates............................................... 48,100
------------
Total bonds and short-term investments......................................... $ 1,424,553
------------
------------
Common stock -- unaffiliated....................................................... $ 13,777
Common stock -- affiliated......................................................... 31,219
------------
Total common stocks............................................................ $ 44,996
------------
------------
FAIR
VALUE
------------
<S> <C>
U.S. government and government agencies and authorities:
(Guaranteed and sponsored)....................................................... $ 44,034
(Guaranteed and sponsored) -- asset-backed....................................... 180,122
States, municipalities and political subdivisions.................................. 16,980
International governments.......................................................... 5,843
Public utilities................................................................... 109,645
All other corporate................................................................ 381,955
All other corporate -- asset-backed................................................ 415,949
Short-term investments............................................................. 139,029
Certificates of deposit............................................................ 92,820
------------
Total bonds and short-term investments......................................... $ 1,386,377
------------
------------
Common stock -- unaffiliated....................................................... $ 3,223
Common stock -- affiliated......................................................... 36,553
------------
Total common stocks............................................................ $ 39,776
------------
------------
</TABLE>
The amortized cost and estimated market value of bonds and short-term
investments at December 31, 1996 by management's anticipated maturity are shown
below. Asset-backed securities are distributed to maturity year based on ILA's
estimate
<PAGE>
56 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
of the rate of future prepayments of principal over the remaining life of the
securities. Expected maturities differ from contractual maturities reflecting
borrowers' rights to call or prepay their obligations.
<TABLE>
<CAPTION>
ESTIMATED
MATURITY AMORTIZED COST FAIR 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,
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 57
- --------------------------------------------------------------------------------
respectively. The following schedule provides a reconciliation of the tax
provision at the U.S. Federal Statutory rate to Federal income tax expense (in
millions).
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- -----
<S> <C> <C> <C>
Tax provision at U.S. Federal statutory
rate..................................... $ 30 $ 20 $ 9
Tax deferred acquisition costs............ 27 8 8
Statutory to tax reserve differences...... -- 3 5
Unrealized (gain)/loss on separate
accounts................................. (21) (13) 2
Investments and other..................... (17) (4) --
--------- --------- ---
Federal income tax expense................ $ 19 $ 14 $ 24
--------- --------- ---
--------- --------- ---
</TABLE>
5. CAPITAL AND SURPLUS AND SHAREHOLDER
DIVIDEND RESTRICTIONS
The maximum amount of dividends which can be paid, without prior approval,
by State of Connecticut insurance companies to shareholders is subject to
restrictions relating to statutory surplus. Dividends are paid as determined by
the Board of Directors and are not cumulative. No dividends were paid in 1996 or
1994. ILA paid dividends of $10 million to its parent, HLIC, in 1995. As a
result of the Distribution by ITT, the assets of ITT Lyndon Insurance Company
(Lyndon) were contributed to ILA in June 1995. Substantially all the business
was removed from Lyndon prior to the contribution. The amount of assets which
exceeded liabilities at the contribution date ($112 million) was included in
paid-in surplus.
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
<PAGE>
58 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
the cession was an increase of approximately $765 to net income and surplus in
1994.
In October 1994, the agreement, effective December 1990, which required ILA
to coinsure 90% of all existing and new business, excluding variable annuity
business, written by the Company to HLIC, was terminated. As a result of the
termination, ILA received approximately $430 million in assets and liabilities
from HLIC. The impact of the transaction was a decrease of approximately $15
million to net income and surplus in 1994.
In November 1993, ILA acquired, through an assumption reinsurance
transaction, substantially all of the individual fixed and variable annuity
business of Hartford Life and Accident, an affiliate. As a result of this
transaction, the assets and liabilities of the Company increased approximately
$1 billion, substantially all of which was transferred to the separate accounts
of the Company. The remaining assets and liabilities (approximately $41 million)
were transferred in October 1995. The impact of these transactions on net income
and surplus was not significant.
8. SEPARATE ACCOUNTS
The Company maintains separate account assets and liabilities totaling $14.6
billion and $7.3 billion at December 31, 1996 and 1995, respectively. Separate
account assets are reported at fair value and separate account liabilities are
determined in accordance with CARVM, which approximates the market value less
applicable surrender charges. Separate account assets are segregated from other
investments, the policyholder assumes the investment risk, and the investment
income and gains and losses accrue directly to the policyholder. Separate
account management fees, net of minimum guarantees, were $144 million, $72
million and $42 million in 1996, 1995 and 1994, respectively, and are recorded
as a component of other revenues on the Statutory Basis Statements of Income.
9. COMMITMENTS AND CONTINGENCIES
As of December 31, 1996 and 1995, the Company had no material contingent
liabilities, nor had the Company committed any surplus funds for any contingent
liabilities or arrangements. The Company is involved in various legal actions
which have arisen in the normal course of its business. In the opinion of
management, the ultimate liability with respect to such lawsuits as well as
other contingencies is not considered to be material in relation to the results
of operations and financial position of the Company.
Under insurance guaranty laws in most states, insurers doing business
therein can be assessed up to prescribed limits for policyholder losses incurred
by insolvent companies. The amount of any future assessments on ILA under these
laws cannot be reasonably estimated. Most of the laws do provide, however, that
an assessment may be excused or deferred if it would threaten an insurer's own
financial strength. Additionally, guaranty fund assessments are used to reduce
state premium taxes paid by the Company in certain states. ILA paid guaranty
fund assessments of $1,262, $1,684 and $583 in 1996, 1995 and 1994,
respectively. ILA incurred guaranteed fund expense of $548, $0 and $0 in 1996,
1995 and 1994, respectively.
<PAGE>
ICMG Registered Variable Life Separate Account One
ITT Hartford Life and Annuity Insurance Company
Financial Statements
as of June 30, 1997 (Unaudited)
<PAGE>
60 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ICMG REGISTERED VARIABLE LIFE SEPARATE ACCOUNT ONE
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
HARTFORD HVA NEUBERGER
HARTFORD CAPITAL MONEY & BERMAN
BOND APPRECIATION MARKET PARTNERS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------ --------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 117,114
Cost $117,832
Market Value......... $118,893 -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 16,626
Cost $ 61,822
Market Value......... -- $ 69,693 -- --
HVA Money Market Fund,
Inc.
Shares 39,927
Cost $ 39,927
Market Value......... -- -- $ 39,927 --
Neuberger & Berman
Partners Portfolio
Shares 4,387
Cost $ 72,604
Market Value......... -- -- -- $ 79,707
Neuberger & Berman
Balanced Portfolio
Shares 2,211
Cost $ 34,924
Market Value......... -- -- -- --
Neuberger & Berman
Limited Maturity
Portfolio
Shares 7,056
Cost $ 98,048
Market Value......... -- -- -- --
Fidelity Equity Income
Portfolio
Shares 9,409
Cost $194,403
Market Value......... -- -- -- --
Fidelity High Income
Portfolio
Shares 4,240
Cost $ 50,512
Market Value......... -- -- -- --
Fidelity Overseas
Portfolio
Shares 8,348
Cost $153,344
Market Value......... -- -- -- --
Fidelity Asset Manager
Portfolio
Shares 3,232
Cost $ 50,891
Market Value......... -- -- -- --
Alger American Small
Capitalization
Portfolio
Shares 1,296
Cost $ 49,422
Market Value......... -- -- -- --
Alger American Growth
Portfolio
Shares 5,089
Cost $177,165
Market Value......... -- -- -- --
Receivable from ITT
Hartford Life and
Annuity Insurance
Company............... -- 6,887 20,374 23,441
--------- ------------ --------- ---------
Total Assets........... 118,893 76,580 60,301 103,148
--------- ------------ --------- ---------
LIABILITIES:
Payable for fund shares
purchased............. 159 83 57 --
Payable to ITT Hartford
Life and Annuity
Insurance Company..... 21,964 -- -- --
--------- ------------ --------- ---------
Total Liabilities...... 22,123 83 57 --
--------- ------------ --------- ---------
Net Assets............. $ 96,770 $ 76,497 $ 60,244 $103,148
--------- ------------ --------- ---------
--------- ------------ --------- ---------
VARIABLE LIFE INSURANCE
POLICIES:
Units Owned by
Participants.......... 8,372 5,633 4,858 7,658
Unit Price............. $10.3257 $11.5326 $10.2844 $11.9130
Units Owned by ITT
Hartford Life and
Annuity Insurance
Company............... 1,000 1,000 1,000 1,000
Unit Price............. $10.3257 $11.5326 $10.2844 $11.9130
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 61
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEUBERGER ALGER
NEUBERGER & BERMAN FIDELITY FIDELITY FIDELITY AMERICAN ALGER
& BERMAN LIMITED EQUITY HIGH FIDELITY ASSET SMALL AMERICAN
BALANCED MATURITY INCOME INCOME OVERSEAS MANAGER CAPITALIZATION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- --------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 117,114
Cost $117,832
Market Value......... -- -- -- -- -- -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 16,626
Cost $ 61,822
Market Value......... -- -- -- -- -- -- -- --
HVA Money Market Fund,
Inc.
Shares 39,927
Cost $ 39,927
Market Value......... -- -- -- -- -- -- -- --
Neuberger & Berman
Partners Portfolio
Shares 4,387
Cost $ 72,604
Market Value......... -- -- -- -- -- -- -- --
Neuberger & Berman
Balanced Portfolio
Shares 2,211
Cost $ 34,924
Market Value......... $ 36,653 -- -- -- -- -- -- --
Neuberger & Berman
Limited Maturity
Portfolio
Shares 7,056
Cost $ 98,048
Market Value......... -- $ 96,101 -- -- -- -- -- --
Fidelity Equity Income
Portfolio
Shares 9,409
Cost $194,403
Market Value......... -- -- $207,574 -- -- -- -- --
Fidelity High Income
Portfolio
Shares 4,240
Cost $ 50,512
Market Value......... -- -- -- $ 52,698 -- -- -- --
Fidelity Overseas
Portfolio
Shares 8,348
Cost $153,344
Market Value......... -- -- -- -- $167,301 -- -- --
Fidelity Asset Manager
Portfolio
Shares 3,232
Cost $ 50,891
Market Value......... -- -- -- -- -- $ 53,644 -- --
Alger American Small
Capitalization
Portfolio
Shares 1,296
Cost $ 49,422
Market Value......... -- -- -- -- -- -- $51,214 --
Alger American Growth
Portfolio
Shares 5,089
Cost $177,165
Market Value......... -- -- -- -- -- -- -- $201,171
Receivable from ITT
Hartford Life and
Annuity Insurance
Company............... -- -- -- 441 -- -- -- 10,906
--------- --------- --------- --------- --------- --------- ------------- ---------
Total Assets........... 36,653 96,101 207,574 53,139 167,301 53,644 51,214 212,077
--------- --------- --------- --------- --------- --------- ------------- ---------
LIABILITIES:
Payable for fund shares
purchased............. -- -- -- -- -- -- -- --
Payable to ITT Hartford
Life and Annuity
Insurance Company..... 16,121 4,335 15,803 -- 32,969 4,493 2,690 --
--------- --------- --------- --------- --------- --------- ------------- ---------
Total Liabilities...... 16,121 4,335 15,803 -- 32,969 4,493 2,690 --
--------- --------- --------- --------- --------- --------- ------------- ---------
Net Assets............. $ 20,532 $ 91,766 $191,771 $ 53,139 $134,332 $ 49,151 $48,524 $212,077
--------- --------- --------- --------- --------- --------- ------------- ---------
--------- --------- --------- --------- --------- --------- ------------- ---------
VARIABLE LIFE INSURANCE
POLICIES:
Units Owned by
Participants.......... 837 7,917 15,433 3,871 10,313 3,401 3,889 17,611
Unit Price............. $11.1799 $10.2911 $11.6702 $10.9096 $11.8737 $11.1678 $9.9244 $11.3952
Units Owned by ITT
Hartford Life and
Annuity Insurance
Company............... 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Unit Price............. $11.1799 $10.2911 $11.6702 $10.9096 $11.8737 $11.1678 $9.9244 $11.3952
</TABLE>
<PAGE>
62 ITT Hartford Life and Annuity Insurance Company
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ICMG REGISTERED VARIABLE LIFE SEPARATE ACCOUNT ONE
STATEMENT OF OPERATIONS & STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
HARTFORD HVA NEUBERGER
HARTFORD CAPITAL MONEY & BERMAN
BOND APPRECIATION MARKET PARTNERS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------ --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 1,917 $ 837 $ 650 $ 514
EXPENSES:
Mortality and expense
undertakings.......... (303) (111) (82) (151)
--------- ------------ --------- ---------
Net investment income
(loss).............. 1,614 726 568 363
--------- ------------ --------- ---------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- -- -- --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 1,929 7,774 -- 6,770
--------- ------------ --------- ---------
Net gains (losses) on
investments......... 1,929 7,774 -- 6,770
--------- ------------ --------- ---------
Net increase
(decrease) in net
assets resulting
from operations..... 3,543 8,500 568 7,133
--------- ------------ --------- ---------
UNIT TRANSACTIONS:
Premiums............... 13,443 59,882 51,291 88,578
Administrative fee..... (54) (120) (101) (174)
Cost of insurance...... (1,187) (1,864) (1,573) (2,712)
--------- ------------ --------- ---------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 12,202 57,898 49,617 85,692
--------- ------------ --------- ---------
Total increase
(decrease) in net
assets................ 15,745 66,398 50,185 92,825
NET ASSETS:
Beginning of Period.... 81,025 10,099 10,059 10,323
--------- ------------ --------- ---------
End of Period.......... $ 96,770 $76,497 $ 60,244 $ 103,148
--------- ------------ --------- ---------
--------- ------------ --------- ---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 63
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEUBERGER
NEUBERGER & BERMAN FIDELITY FIDELITY FIDELITY ALGER AMERICAN ALGER
& BERMAN LIMITED EQUITY HIGH FIDELITY ASSET SMALL AMERICAN
BALANCED MATURITY INCOME INCOME OVERSEAS MANAGER CAPITALIZATION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- --------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 678 $ 4,823 $ 13,355 $ 812 $ 7,213 $ 1,233 $ 1,930 $ 1,798
EXPENSES:
Mortality and expense
undertakings.......... (47) (277) (497) (89) (331) (84) (79) (563)
--------- --------- --------- --------- --------- --------- ------- ---------
Net investment income
(loss).............. 631 4,546 12,858 723 6,882 1,149 1,851 1,235
--------- --------- --------- --------- --------- --------- ------- ---------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- -- -- -- -- -- -- --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 1,640 (2,211) 12,704 2,014 12,471 2,670 1,891 25,532
--------- --------- --------- --------- --------- --------- ------- ---------
Net gains (losses) on
investments......... 1,640 (2,211) 12,704 2,014 12,471 2,670 1,891 25,532
--------- --------- --------- --------- --------- --------- ------- ---------
Net increase
(decrease) in net
assets resulting
from operations..... 2,271 2,335 25,562 2,737 19,353 3,819 3,742 26,767
--------- --------- --------- --------- --------- --------- ------- ---------
UNIT TRANSACTIONS:
Premiums............... 8,481 9,220 40,097 41,610 34,523 36,473 36,077 37,607
Administrative fee..... (18) (44) (129) (83) (102) (74) (72) (127)
Cost of insurance...... (283) (1,046) (2,627) (1,288) (1,960) (1,142) (1,116) (2,736)
--------- --------- --------- --------- --------- --------- ------- ---------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 8,180 8,130 37,341 40,239 32,461 35,257 34,889 34,744
--------- --------- --------- --------- --------- --------- ------- ---------
Total increase
(decrease) in net
assets................ 10,451 10,465 62,903 42,976 51,814 39,076 38,631 61,511
NET ASSETS:
Beginning of Period.... 10,081 81,301 128,868 10,163 82,518 10,075 9,893 150,566
--------- --------- --------- --------- --------- --------- ------- ---------
End of Period.......... $20,532 $91,766 $ 191,771 $ 53,139 $ 134,332 $ 49,151 $48,524 $ 212,077
--------- --------- --------- --------- --------- --------- ------- ---------
--------- --------- --------- --------- --------- --------- ------- ---------
</TABLE>
<PAGE>
64 ITT Hartford Life and Annuity Insurance Company
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ICMG REGISTERED VARIABLE LIFE SEPARATE ACCOUNT ONE
STATEMENT OF CHANGES IN NET ASSETS
FROM THE PERIOD NOVEMBER 14, 1996 TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
HARTFORD HVA NEUBERGER
HARTFORD CAPITAL MONEY & BERMAN
BOND APPRECIATION MARKET PARTNERS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------ --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 855 $ 8 $ 67 $ --
EXPENSES:
Mortality and expense
undertakings.......... (62) (8) (8) (9)
--------- ------------ --------- ---------
Net investment income
(loss).............. 793 -- 59 (9)
--------- ------------ --------- ---------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- -- -- --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (867) 99 -- 332
--------- ------------ --------- ---------
Net gains (losses) on
investments......... (867) 99 -- 332
--------- ------------ --------- ---------
Net increase
(decrease) in net
assets resulting
from operations..... (74) 99 59 323
--------- ------------ --------- ---------
UNIT TRANSACTIONS:
Premiums............... 81,371 10,000 10,000 10,000
Administrative fee..... (9) -- -- --
Cost of insurance...... (263) -- -- --
--------- ------------ --------- ---------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 81,099 10,000 10,000 10,000
--------- ------------ --------- ---------
Total increase
(decrease) in net
assets................ 81,025 10,099 10,059 10,323
NET ASSETS:
Beginning of Period.... -- -- -- --
--------- ------------ --------- ---------
End of Period.......... $ 81,025 $10,099 $ 10,059 $10,323
--------- ------------ --------- ---------
--------- ------------ --------- ---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 65
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEUBERGER
NEUBERGER & BERMAN FIDELITY FIDELITY FIDELITY ALGER AMERICAN ALGER
& BERMAN LIMITED EQUITY HIGH FIDELITY ASSET SMALL AMERICAN
BALANCED MATURITY INCOME INCOME OVERSEAS MANAGER CAPITALIZATION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- --------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
EXPENSES:
Mortality and expense
undertakings.......... (8) (62) (98) (8) (62) (8) (8) (116)
--------- --------- --------- --------- --------- --------- ------- ---------
Net investment income
(loss).............. (8) (62) (98) (8) (62) (8) (8) (116)
--------- --------- --------- --------- --------- --------- ------- ---------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- -- -- -- -- -- -- --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 89 264 467 171 1,486 83 (99) (1,526)
--------- --------- --------- --------- --------- --------- ------- ---------
Net gains (losses) on
investments......... 89 264 467 171 1,486 83 (99) (1,526)
--------- --------- --------- --------- --------- --------- ------- ---------
Net increase
(decrease) in net
assets resulting
from operations..... 81 202 369 163 1,424 75 (107) (1,642)
--------- --------- --------- --------- --------- --------- ------- ---------
UNIT TRANSACTIONS:
Premiums............... 10,000 81,372 128,952 10,000 81,366 10,000 10,000 152,742
Administrative fee..... -- (9) (15) -- (9) -- -- (18)
Cost of insurance...... -- (264) (438) -- (263) -- -- (526)
--------- --------- --------- --------- --------- --------- ------- ---------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 10,000 81,099 128,499 10,000 81,094 10,000 10,000 152,198
--------- --------- --------- --------- --------- --------- ------- ---------
Total increase
(decrease) in net
assets................ 10,081 81,301 128,868 10,163 82,518 10,075 9,893 150,566
NET ASSETS:
Beginning of Period.... -- -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ------- ---------
End of Period.......... $10,081 $81,301 $ 128,868 $ 10,163 $ 82,518 $ 10,075 $ 9,893 $ 150,566
--------- --------- --------- --------- --------- --------- ------- ---------
--------- --------- --------- --------- --------- --------- ------- ---------
</TABLE>
<PAGE>
66 ITT Hartford Life and Annuity Insurance Company
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ICMG REGISTERED VARIABLE LIFE SEPARATE ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 (UNAUDITED)
1. ORGANIZATION:
ICMG Registered Variable Life Separate Account One (the Account) is a
separate investment account with ITT Hartford Life and Annuity Insurance
Company (the Company) and is registered with the Securities and Exchange
Commission (SEC) as a unit investment trust under the Investment Company Act
of 1940, as amended. The Account consists of twelve portfolios. Both the
Company and the Account are subject to supervision and regulation by the
Department of Insurance of the State of Connecticut and the SEC. The Account
invests deposits by variable life contractholders of the Company in various
mutual funds (the Funds) as directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividend and capital
gains income are accrued as of the ex-dividend date. Capital gains
income represents dividends from the Funds which are characterized as
capital gains under tax regulations.
b) SECURITY VALUATION--The investment in shares of the funds are valued at
the closing net asset value per share as determined by the appropriate
Fund as of June 30, 1997.
c) FEDERAL INCOME TAXES--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as
an insurance company under the Internal Revenue Code. Under current law,
no federal income taxes are payable with respect to the operations of
the Account.
d) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the financial statements and
the reported amounts of income and expenses during the period. Operating
results in the future could vary from the amounts derived from
management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
a) MORTALITY AND EXPENSE UNDERTAKINGS--The Company, as issuer of variable
annuity contracts, provides the mortality and expense undertakings and,
with respect to the Account, receives an annual fee of 0.65% of the
Account's average daily net assets.
b) DEDUCTION OF OTHER FEES--In accordance with the terms of the contracts,
the Company makes deductions for the cost of insurance, administrative
fees, state premium taxes and other insurance charges. These charges are
deducted through termination of units of interest from applicable
contractholders' accounts.
<PAGE>
[This page intentionally left blank]
<PAGE>
ICMG Registered Variable Life Separate Account One
ITT Hartford Life and Annuity Insurance Company
Financial Statements as of December 31, 1996
Together With
Report of Independent Public Accountants
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 69
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
ICMG REGISTERED VARIABLE LIFE SEPARATE ACCOUNT ONE AND TO THE
OWNERS OF UNITS OF INTEREST THEREIN:
We have audited the accompanying statement of assets and liabilities of ITT
Hartford Life and Annuity Insurance Company ICMG Registered Variable Life
Separate Account One (the Account) as of December 31, 1996, and the related
statements of operations and changes in net assets for the period from
inception, November 14, 1996, to December 31, 1996. These financial statements
are the responsibility of the Account's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ITT Hartford Life and Annuity
Insurance Company ICMG Registered Variable Life Separate Account One as of
December 31, 1996, the results of its operations and the changes in its net
assets for the period from inception, November 14, 1996, to December 31, 1996
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 20, 1997
<PAGE>
70 ITT Hartford Life and Annuity Insurance Company
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ICMG REGISTERED VARIABLE LIFE SEPARATE ACCOUNT ONE
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
HARTFORD HVA NEUBERGER
HARTFORD CAPITAL MONEY & BERMAN
BOND APPRECIATION MARKET PARTNERS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------ --------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 81,426
Cost $ 82,228
Market Value......... $81,361 -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 2,582
Cost $ 10,008
Market Value......... -- $ 10,107 -- --
HVA Money Market Fund,
Inc.
Shares 10,067
Cost $ 10,067
Market Value......... -- -- $ 10,067 --
Neuberger & Berman
Partners Portfolio
Shares 627
Cost $ 10,000
Market Value......... -- -- -- $ 10,332
Neuberger & Berman
Balanced Portfolio
Shares 634
Cost $ 10,000
Market Value......... -- -- -- --
Neuberger & Berman
Limited Maturity Bond
Portfolio
Shares 5,810
Cost $ 81,373
Market Value......... -- -- -- --
Fidelity Equity Income
Portfolio
Shares 6,154
Cost $128,955
Market Value......... -- -- -- --
Fidelity High Income
Portfolio
Shares 812
Cost $ 10,000
Market Value......... -- -- -- --
Fidelity Overseas
Portfolio
Shares 4,398
Cost $ 81,373
Market Value......... -- -- -- --
Fidelity Asset Manager
Portfolio
Shares 596
Cost $ 10,000
Market Value......... -- -- -- --
Alger American Small
Capitalization
Portfolio
Shares 242
Cost $ 10,000
Market Value......... -- -- -- --
Alger American Growth
Portfolio
Shares 4,405
Cost $152,747
Market Value......... -- -- -- --
Total Assets........... 81,361 10,107 10,067 10,332
--------- ------------ --------- ---------
LIABILITIES:
Payable to ITT Hartford
Life and Annuity
Insurance Company..... 336 8 8 9
--------- ------------ --------- ---------
Total Liabilities...... 336 8 8 9
--------- ------------ --------- ---------
Net Assets............. $81,025 $ 10,099 $ 10,059 $ 10,323
--------- ------------ --------- ---------
--------- ------------ --------- ---------
VARIABLE LIFE INSURANCE
POLICIES:
Units Owned by
Participants.......... 7,112 -- -- --
Unit Price............. $9.9883 $ 10.0989 $10.0583 $10.3237
Units Owned by ITT
Hartford Life and
Annuity Insurance
Company............... 1,000 1,000 1,000 1,000
Unit Price............. $9.9883 $ 10.0989 $10.0583 $10.3237
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 71
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEUBERGER
NEUBERGER & BERMAN FIDELITY FIDELITY FIDELITY ALGER AMERICAN ALGER
& BERMAN LIMITED EQUITY HIGH FIDELITY ASSET SMALL AMERICAN
BALANCED MATURITY BOND INCOME INCOME OVERSEAS MANAGER CAPITALIZATION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------- --------- --------- --------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 81,426
Cost $ 82,228
Market Value......... -- -- -- -- -- -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 2,582
Cost $ 10,008
Market Value......... -- -- -- -- -- -- -- --
HVA Money Market Fund,
Inc.
Shares 10,067
Cost $ 10,067
Market Value......... -- -- -- -- -- -- -- --
Neuberger & Berman
Partners Portfolio
Shares 627
Cost $ 10,000
Market Value......... -- -- -- -- -- -- -- --
Neuberger & Berman
Balanced Portfolio
Shares 634
Cost $ 10,000
Market Value......... $ 10,089 -- -- -- -- -- -- --
Neuberger & Berman
Limited Maturity Bond
Portfolio
Shares 5,810
Cost $ 81,373
Market Value......... -- $ 81,637 -- -- -- -- -- --
Fidelity Equity Income
Portfolio
Shares 6,154
Cost $128,955
Market Value......... -- -- $129,422 -- -- -- -- --
Fidelity High Income
Portfolio
Shares 812
Cost $ 10,000
Market Value......... -- -- -- $ 10,171 -- -- -- --
Fidelity Overseas
Portfolio
Shares 4,398
Cost $ 81,373
Market Value......... -- -- -- -- $ 82,859 -- -- --
Fidelity Asset Manager
Portfolio
Shares 596
Cost $ 10,000
Market Value......... -- -- -- -- -- $ 10,083 -- --
Alger American Small
Capitalization
Portfolio
Shares 242
Cost $ 10,000
Market Value......... -- -- -- -- -- -- $ 9,901 --
Alger American Growth
Portfolio
Shares 4,405
Cost $152,747
Market Value......... -- -- -- -- -- -- -- $151,221
Total Assets........... 10,089 81,637 129,422 10,171 82,859 10,083 9,901 151,221
--------- ------------- --------- --------- --------- --------- ------- ---------
LIABILITIES:
Payable to ITT Hartford
Life and Annuity
Insurance Company..... 8 336 554 8 341 8 8 655
--------- ------------- --------- --------- --------- --------- ------- ---------
Total Liabilities...... 8 336 554 8 341 8 8 655
--------- ------------- --------- --------- --------- --------- ------- ---------
Net Assets............. $ 10,081 $ 81,301 $128,868 $ 10,163 $ 82,518 $ 10,075 $ 9,893 $150,566
--------- ------------- --------- --------- --------- --------- ------- ---------
--------- ------------- --------- --------- --------- --------- ------- ---------
VARIABLE LIFE INSURANCE
POLICIES:
Units Owned by
Participants.......... -- 7,108 11,812 -- 7,066 -- -- 14,311
Unit Price............. $10.0803 $10.0273 $10.0588 $10.1621 $10.2306 $10.0750 $9.8925 $ 9.8341
Units Owned by ITT
Hartford Life and
Annuity Insurance
Company............... 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Unit Price............. $10.0803 $10.0273 $10.0588 $10.1621 $10.2306 $10.0750 $9.8925 $ 9.8341
</TABLE>
<PAGE>
72 ITT Hartford Life and Annuity Insurance Company
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ICMG REGISTERED VARIABLE LIFE SEPARATE ACCOUNT ONE
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION, NOVEMBER 14, 1996, TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
HARTFORD HVA NEUBERGER
HARTFORD CAPITAL MONEY & BERMAN
BOND APPRECIATION MARKET PARTNERS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------ --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 855 $ 8 $ 67 $ --
EXPENSES:
Mortality and expense
undertakings.......... (62) (8) (8) (9)
--------- --- --------- ---------
Net investment income
(loss).............. 793 -- 59 (9)
--------- --- --------- ---------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- -- -- --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (867) 99 -- 332
--------- --- --------- ---------
Net realized and
unrealized gain
(loss) on
investments......... (867) 99 -- 332
--------- --- --------- ---------
Net increase
(decrease) in net
assets resulting
from operations..... $ (74) $99 $ 59 $323
--------- --- --------- ---------
--------- --- --------- ---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 73
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEUBERGER
NEUBERGER & BERMAN FIDELITY FIDELITY FIDELITY ALGER AMERICAN ALGER
& BERMAN LIMITED EQUITY HIGH FIDELITY ASSET SMALL AMERICAN
BALANCED MATURITY BOND INCOME INCOME OVERSEAS MANAGER CAPITALIZATION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------- --------- --------- --------- --------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $-- $ -- $ -- $ -- $ -- $-- $ -- $ --
EXPENSES:
Mortality and expense
undertakings.......... (8) (62) (98) (8) (62) (8) (8) (116)
--- ----- --------- --------- --------- --- ------ --------
Net investment income
(loss).............. (8) (62) (98) (8) (62) (8) (8) (116)
--- ----- --------- --------- --------- --- ------ --------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- -- -- -- -- -- -- --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 89 264 467 171 1,486 83 (99) (1,526)
--- ----- --------- --------- --------- --- ------ --------
Net realized and
unrealized gain
(loss) on
investments......... 89 264 467 171 1,486 83 (99) (1,526)
--- ----- --------- --------- --------- --- ------ --------
Net increase
(decrease) in net
assets resulting
from operations..... $81 $202 $369 $163 $1,424 $75 $(107) $(1,642)
--- ----- --------- --------- --------- --- ------ --------
--- ----- --------- --------- --------- --- ------ --------
</TABLE>
<PAGE>
74 ITT Hartford Life and Annuity Insurance Company
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ICMG REGISTERED VARIABLE LIFE SEPARATE ACCOUNT ONE
STATEMENT OF CHANGES IN NET ASSETS
FROM THE PERIOD FROM INCEPTION, NOVEMBER 14, 1996 TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
HARTFORD HVA NEUBERGER
HARTFORD CAPITAL MONEY & BERMAN
BOND APPRECIATION MARKET PARTNERS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------ --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 855 $ 8 $ 67 $ --
EXPENSES:
Mortality and expense
undertakings.......... (62) (8) (8) (9)
--------- ------------ --------- ---------
Net investment income
(loss).............. 793 -- 59 (9)
--------- ------------ --------- ---------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- -- -- --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (867) 99 -- 332
--------- ------------ --------- ---------
Net realized and
unrealized gain
(loss) on
investments......... (867) 99 -- 332
--------- ------------ --------- ---------
Net increase
(decrease) in net
assets resulting
from operations..... (74) 99 59 323
--------- ------------ --------- ---------
UNIT TRANSACTIONS:
Premiums............... 81,371 10,000 10,000 10,000
Administrative fee..... (9) -- -- --
Cost of insurance...... (263) -- -- --
--------- ------------ --------- ---------
Net increase in net
assets resulting from
unit transactions..... 81,099 10,000 10,000 10,000
--------- ------------ --------- ---------
Total increase in net
assets................ 81,025 10,099 10,059 10,323
NET ASSETS:
Beginning of Period.... -- -- -- --
--------- ------------ --------- ---------
End of Period.......... $ 81,025 $10,099 $ 10,059 $10,323
--------- ------------ --------- ---------
--------- ------------ --------- ---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 75
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEUBERGER
NEUBERGER & BERMAN FIDELITY FIDELITY FIDELITY ALGER AMERICAN ALGER
& BERMAN LIMITED EQUITY HIGH FIDELITY ASSET SMALL AMERICAN
BALANCED MATURITY BOND INCOME INCOME OVERSEAS MANAGER CAPITALIZATION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------- --------- --------- --------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
EXPENSES:
Mortality and expense
undertakings.......... (8) (62) (98) (8) (62) (8) (8) (116)
--------- ------------- --------- --------- --------- --------- ------- ---------
Net investment income
(loss).............. (8) (62) (98) (8) (62) (8) (8) (116)
--------- ------------- --------- --------- --------- --------- ------- ---------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- -- -- -- -- -- -- --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 89 264 467 171 1,486 83 (99) (1,526)
--------- ------------- --------- --------- --------- --------- ------- ---------
Net realized and
unrealized gain
(loss) on
investments......... 89 264 467 171 1,486 83 (99) (1,526)
--------- ------------- --------- --------- --------- --------- ------- ---------
Net increase
(decrease) in net
assets resulting
from operations..... 81 202 359 163 1,424 75 (107) (1,542)
--------- ------------- --------- --------- --------- --------- ------- ---------
UNIT TRANSACTIONS:
Premiums............... 10,000 81,372 128,952 10,000 81,366 10,000 10,000 152,742
Administrative fee..... -- (9) (15) -- (9) -- -- (15)
Cost of insurance...... -- (264) (438) -- (263) -- -- (526)
--------- ------------- --------- --------- --------- --------- ------- ---------
Net increase in net
assets resulting from
unit transactions..... 10,000 81,099 128,499 10,000 81,094 10,000 10,000 152,208
--------- ------------- --------- --------- --------- --------- ------- ---------
Total increase in net
assets................ 10,081 81,301 128,868 10,163 82,518 10,075 9,893 150,566
NET ASSETS:
Beginning of Period.... -- -- -- -- -- -- -- --
--------- ------------- --------- --------- --------- --------- ------- ---------
End of Period.......... $10,081 $81,301 $ 128,868 $ 10,163 $ 82,518 $ 10,075 $ 9,893 $ 150,566
--------- ------------- --------- --------- --------- --------- ------- ---------
--------- ------------- --------- --------- --------- --------- ------- ---------
</TABLE>
<PAGE>
76 ITT Hartford Life and Annuity Insurance Company
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ICMG Registered Variable Life Separate Account One
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION:
ICMG Registered Variable Life Separate Account One (the Account) is a
separate investment account within ITT Hartford Life and Annuity Insurance
Company (the Company) and is registered with the Securities and Exchange
Commission (SEC) as a unit investment trust under the Investment Company Act
of 1940, as amended. The Account consists of twelve portfolios. Both the
Company and the Account are subject to supervision and regulation by the
Department of Insurance of the State of Connecticut and the SEC. The Account
invests deposits by variable life contractholders of the Company in various
mutual funds (the Funds) as directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividend income is
accrued as of the ex-dividend date.
b) SECURITY VALUATION--The investment in shares of the funds are valued at
the closing net asset value per share as determined by the appropriate
Fund as of December 31, 1996.
c) FEDERAL INCOME TAXES--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as
an insurance company under the Internal Revenue Code. Under current law,
no federal income taxes are payable with respect to the operations of
the Account.
d) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the financial statements and
the reported amounts of income and expenses during the period. Operating
results in the future could vary from the amounts derived from
management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
a) MORTALITY AND EXPENSE UNDERTAKINGS--The Company, as issuer of variable
life insurance contracts, provides the mortality and expense
undertakings and, with respect to the Account, receives an annual fee of
0.65% of the Account's average daily net assets.
b) DEDUCTION OF OTHER FEES--In accordance with the terms of the contracts,
the Company makes deductions for the cost of insurance, administrative
fees, state premium taxes and other insurance charges. These charges are
deducted through termination of units of interest from applicable
contractholders' accounts.
