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PEGASUS PROVIDER
GROUP FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE POLICIES
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
P.O. BOX 2999
HARTFORD, CT 06104-2999
[LOGO] TELEPHONE (800) 861-1408
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This Prospectus describes a group flexible premium variable life insurance
policy (the "Group Policies," and each individually a "Group Policy") and
certificates of insurance (the "Certificates," and each individually a
"Certificate") offered by Hartford Life and Annuity Insurance Company
("Hartford"). The Certificates are designed to provide lifetime insurance
coverage to the Insured(s) named in the Certificates, and maximum flexibility in
connection with premium payments and the Death Benefit, together with an
opportunity to participate in the investment experience of ICMG Registered
Variable Life Separate Account One. For a given amount of Death Benefit chosen,
the Owner has considerable flexibility in selecting the timing and amount of
premium payments. In addition to the Initial Premium payment, additional premium
payments are also allowed.
Group Policies may be issued to a Participating Employer or to a trust that is
adopted by a Participating Employer. Eligible employees of Participating
Employers may own Certificates issued under their respective Participating
Employer's Group Policy. 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.
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.
The Portfolios underlying the Investment Divisions presently are: the VIP High
Income Portfolio, the VIP Equity-Income Portfolio, and the VIP Money Market
Portfolio of Variable Insurance Products Fund; the VIP II Asset Manager
Portfolio and the VIP II Index 500 Portfolio of Variable Insurance Products Fund
II; the VIP III Growth Opportunities Portfolio of Variable Insurance Products
Fund III; the Pegasus Bond Fund, the Pegasus Growth and Value Fund, the Pegasus
Mid-Cap Opportunity Fund, the Pegasus Growth Fund, and the Pegasus Intrinsic
Value Fund of Pegasus Variable Funds; and the Putnam VT International Growth
Fund, the Putnam VT Vista Fund, and the Putnam VT Voyager Fund of Putnam
Variable Trust.
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IT MAY NOT BE ADVANTAGEOUS TO PURCHASE FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
AS A REPLACEMENT FOR YOUR CURRENT LIFE INSURANCE OR IF YOU ALREADY OWN A
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY.
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THIS PROSPECTUS IS VALID ONLY IF ACCOMPANIED BY THE CURRENT PROSPECTUSES OF THE
AVAILABLE UNDERLYING 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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VARIABLE LIFE INSURANCE POLICIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED
OR GUARANTEED BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE
PROTECTED BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE
SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
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THE DATE OF THIS PROSPECTUS IS MAY 1, 1998.
REVISED MAY 1, 1998.
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2 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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TABLE OF CONTENTS
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SPECIAL TERMS......................................................... 4
SUMMARY............................................................... 6
HARTFORD.............................................................. 8
THE SEPARATE ACCOUNT.................................................. 9
THE FUNDS............................................................. 9
General............................................................. 9
Variable Insurance Products Fund, Variable Insurance Products Fund
II, and
Variable Insurance Products Fund III............................. 9
Pegasus Variable Funds............................................ 10
Putnam Variable Trust............................................. 10
The Portfolios...................................................... 10
DETAILED DESCRIPTION OF CERTIFICATE BENEFITS AND PROVISIONS........... 11
General............................................................. 11
Issuance of a Certificate........................................... 11
Premiums............................................................ 12
Premium Payment Flexibility....................................... 12
Allocation of Premium Payments.................................... 12
Accumulation Units................................................ 12
Accumulation Unit Values.......................................... 12
Premium Limitation................................................ 13
Values Under the Certificate........................................ 13
Surrender of the Certificate........................................ 13
Partial Withdrawals............................................... 13
Transfers Among Investment Divisions................................ 14
Amount and Frequency of Transfers................................. 14
Transfers to or from Investment Divisions......................... 14
Asset Rebalancing................................................. 14
Procedures for Telephone Transfers................................ 14
Valuation of Payments and Transfers................................. 14
Processing of Transactions........................................ 15
Loans............................................................... 15
Loan Interest..................................................... 15
Credited Interest................................................. 15
Loan Repayments................................................... 15
Termination Due to Excessive Debt................................. 15
Effect of Loans on Investment Value............................... 15
Death Benefit....................................................... 15
Minimum Death Benefit Testing Procedures.......................... 15
Death Benefit Options............................................. 16
Option Change..................................................... 16
Payment Options................................................... 16
Legal Developments Regarding Income Payments...................... 16
Beneficiary....................................................... 17
Increases and Decreases in Face Amount............................ 17
Benefits at Maturity................................................ 17
Termination of Participation in the Group Policy.................... 17
Lapse and Reinstatement While the Group Policy Is In Effect......... 17
Lapse and Grace Period............................................ 17
Reinstatement..................................................... 17
Enrollment for a Certificate........................................ 18
The Right to Examine the Certificate................................ 18
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 3
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Deductions from Premium............................................. 18
Front-End Sales Load.............................................. 18
Premium Related Tax Charge........................................ 18
DAC Tax Charge.................................................... 18
Deductions and Charges from Investment Value........................ 18
Monthly Deduction Amount.......................................... 18
Mortality and Expense Risk Charge................................... 19
Taxes............................................................... 20
OTHER MATTERS......................................................... 20
Additions, Deletions or Substitutions of Investments................ 20
Voting Rights....................................................... 20
Our Rights.......................................................... 20
Statements to Owners................................................ 21
Limit on Right to Contest........................................... 21
Misstatement as to Age or Sex....................................... 21
Assignment.......................................................... 21
Dividends........................................................... 21
Experience Credits.................................................. 21
SUPPLEMENTAL BENEFITS................................................. 21
Maturity Date Extension Rider....................................... 21
EXECUTIVE OFFICERS AND DIRECTORS...................................... 22
DISTRIBUTION OF THE GROUP POLICY...................................... 25
SAFEKEEPING OF THE SEPARATE ACCOUNT ASSETS............................ 26
FEDERAL TAX CONSIDERATIONS............................................ 26
General............................................................. 26
Taxation of Hartford and the Separate Account....................... 26
Income Taxation of Certificate Benefits............................. 26
Modified Endowment Contracts........................................ 27
Diversification Requirements........................................ 27
Federal Income Tax Withholding...................................... 27
Other Tax Considerations............................................ 27
LEGAL PROCEEDINGS..................................................... 27
EXPERTS............................................................... 28
REGISTRATION STATEMENT................................................ 28
APPENDIX A -- ILLUSTRATIONS OF DEATH BENEFIT, CASH VALUE AND CASH
SURRENDER VALUE..................................................... 29
FINANCIAL STATEMENTS.................................................. 42
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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 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.
BENEFICIARY: The person so designated by the Owner in the Certificate.
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 and from which Coverage Months and Coverage Years are determined.
COVERAGE MONTH(S): The 1-month period following the Coverage Date and each
anniversary thereof.
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 are described under
"Detailed Description of Certificate Benefits and Provisions -- Death Benefit,"
page 15.
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.
ENROLLMENT FORM: The form required to be filled out prior to issuance of a
Certificate. The specific form used will depend on the underwriting
classification and plan design.
FACE AMOUNT: The minimum Death Benefit as long as the Certificate is in force.
It is specified at issue and may be changed after issue on request, or due to a
change in Death Benefit option or a partial withdrawal.
FUNDS: The registered open-end management investment companies in which assets
of the Investment Divisions of the Separate Account may be invested. Currently,
the Funds include: (i) Variable Insurance Products Fund ("VIP"), managed by
Fidelity Management & Research Company ("FMR"); (ii) Variable Insurance Products
Fund II ("VIP II"), managed by FMR; (iii) Variable Insurance Products Fund III
("VIP III"), managed by FMR; (iv) Pegasus Variable Funds, managed by First
Chicago NBD Investment Management Company ("FCNIMCO"); and (v) Putnam Variable
Trust, managed by Putnam Investment Management, Inc.("Putnam Management").
GENERAL ACCOUNT: The assets of Hartford other than those allocated to the
Separate Account.
GRACE PERIOD: The 61-day period, measured in calendar days, following the date
We mail to the Owner notice that the Cash Surrender Value is insufficient to pay
the charges due. Unless the Owner has given Us written notice of the termination
in advance of the date of termination of any Certificate, insurance will
continue in force during this period.
GROUP POLICY: The group flexible premium variable life insurance policy issued
by Hartford and described in this Prospectus.
HARTFORD (ALSO REFERRED TO AS "WE," "US," "OUR"): Hartford Life and Annuity
Insurance Company.
IN WRITING: In a written form satisfactory to Us.
INITIAL PREMIUM: The amount of premium initially payable shown in Your
Certificate.
INSURED: The person on whose life the Certificate is issued. The Insured is
identified in the Certificate.
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 14 Investment Divisions: (i) the Fidelity VIP High
Income Investment Division, (ii) the Fidelity VIP Equity-Income Investment
Division, (iii) the Fidelity VIP Money Market Investment Division, (iv) the
Fidelity VIP II Asset Manager Investment Division, (v) the Fidelity VIP II Index
500 Investment Division, (vi) the Fidelity VIP III Growth Opportunities
Investment Division, (vii) the Pegasus Bond Investment Division, (viii) the
Pegasus Growth and Value Investment Division, (ix) the Pegasus Mid-Cap
Opportunity
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 5
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Investment Division, (x) the Pegasus Growth Investment Division, (xi) the
Pegasus Intrinsic Value Investment Division, (xii) the Putnam VT International
Growth Investment Division, (xiii) the Putnam VT Vista Investment Division, and
(xiv) the Putnam VT Voyager 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 Hartford'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. We will pay the Cash Surrender Value, if any, if the Insured is
living on the Maturity Date, upon surrender of the Certificate to Hartford.
MONTHLY DEDUCTION AMOUNT: The fees and charges deducted from the Investment
Value on the Processing Date.
NET AMOUNT AT RISK: The Death Benefit less the Cash Value.
NET PREMIUM: The amount of premium actually credited to the Investment
Divisions.
NYSE: The New York Stock Exchange.
OWNER (ALSO REFERRED TO AS "YOU" OR "YOUR"): The person or legal entity so
designated in the Enrollment Form or as subsequently changed. The Owner may be
someone other than the Insured. The Owner possesses all rights under the Group
Policy with respect to the Certificate.
PARTICIPATING EMPLOYER: A participating employer, or a trust sponsored by a
participating employer, to which Hartford issues the Group Policy described in
this Prospectus.
PORTFOLIO: A separate mutual fund, series or portfolio of the Funds. There are
currently 14 Portfolios available under the Group Policies: the VIP High Income
Portfolio, the VIP Equity-Income Portfolio, and the VIP Money Market Portfolio
of VIP; the VIP II Asset Manager Portfolio and the VIP II Index 500 Portfolio of
VIP II; the VIP III Growth Opportunities Portfolio of VIP III; the Pegasus Bond
Fund, the Pegasus Growth and Value Fund, the Pegasus Mid-Cap Opportunity Fund,
the Pegasus Growth Fund, and the Pegasus Intrinsic Value Fund of Pegasus
Variable Funds; and the Putnam VT International Growth Fund, the Putnam VT Vista
Fund, and the Putnam VT Voyager Fund of Putnam Variable Trust.
PRO RATA BASIS: An allocation method based on the proportion of the Investment
Value in each Investment Division.
PROCESSING DATE(S): The day(s) on which We deduct charges from the Investment
Value. The first Processing Date is the Coverage Date. There is a Processing
Date each month. Later Processing Dates are on the same calendar day as the
Coverage Date, or on the last day of any month which has no such calendar day.
PROCESSING PERIOD: The period from the Coverage Date to the next Processing
Date, and thereafter, the period from one Processing Date to the next.
SEC: The U.S. 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 indicates otherwise. A
business day is any day the NYSE is open for trading or any day the SEC requires
mutual funds, unit investment trusts or other investment portfolios to be
valued. The value of the Separate Account is determined at the close of the NYSE
(generally 4:00 p.m. Eastern Time) on such days.
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
VARIABLE INSURANCE AMOUNT: The Cash Value multiplied by the applicable variable
insurance factor provided in the Certificate.
VIP: Variable Insurance Products Fund.
VIP II: Variable Insurance Products Fund II.
VIP III: Variable Insurance Products Fund III.
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6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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SUMMARY
THE GROUP POLICY
The Group Policies, and the Certificates, offered by this Prospectus are
funded by 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 14 Investment Divisions dedicated to the Group Policies,
each of which invests solely in a corresponding Portfolio of the Funds.
Depending upon the state of issuance of Your Certificate and the applicable
provisions of Your Certificate, Your initial Net Premium will, when Your
Certificate is issued, either be (1) invested in the Fidelity VIP Money Market
Investment Division during the right to examine period or (2) invested
immediately in Your chosen Investment Divisions, upon Our receipt thereof. IF
YOUR INITIAL NET PREMIUM IS INVESTED IMMEDIATELY IN YOUR CHOSEN INVESTMENT
DIVISIONS, YOU WILL BEAR FULL INVESTMENT RISK FOR ANY AMOUNTS ALLOCATED TO THE
INVESTMENT DIVISIONS DURING THE RIGHT TO EXAMINE PERIOD. Please note that this
automatic immediate investment feature only applies if Your Certificate so
specifies. Please check with Your agent to determine the status of Your
Certificate. You must fill out and send Us the appropriate form In Writing or
comply with other designated Hartford procedures if You would like to change how
subsequent Net Premiums are allocated. See "Allocation of Premium Payments,"
page 12.
Pursuant to the Certificates, each selected Investment Division is credited
with Accumulation Units and each selected Investment Division's assets are
invested in the applicable underlying Portfolio. Subject to certain
restrictions, an Owner may transfer amounts among the available Investment
Divisions. See "Detailed Description of Certificate Benefits and Provisions --
Transfers Among Investment Divisions," page 14.
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 "flexible premium" because, once the
desired level and pattern of the Death Benefit have been determined, a purchaser
has considerable flexibility in the selection of the timing and amount of
premium to be paid. The Group Policies are called "variable" because, unlike the
fixed benefits of an ordinary whole life insurance policy, the Investment Value
under a Certificate will, and the Death Benefit may, increase or decrease
depending on the investment experience of the Investment Divisions to which the
Net Premiums have been allocated. See "Detailed Description of Certificate
Benefits and Provisions -- Death Benefit," page 15.
DEATH BENEFIT
The Certificates provide for two Death Benefit options. Under Death Benefit
Option A, the Death Benefit is an amount equal to the larger of (1) the Face
Amount and (2) the Variable Insurance Amount. Under Death Benefit Option B, the
Death Benefit is an amount equal to the larger of (1) the Face Amount plus the
Cash Value and (2) the Variable Insurance Amount. At the death of the Insured,
We will pay the Death Proceeds to the Beneficiary. The Death Proceeds equal the
Death Benefit less outstanding Debt plus any rider benefits payable under the
Certificate. See "Detailed Description of Certificate Benefits and Provisions --
Death Benefit," page 15.
PREMIUM
You have considerable flexibility as to when and in what amounts You pay
premiums.
No premium payment will be accepted which causes the Certificate to fail to
meet the tax qualification guidelines for life insurance under the Code.
GENERAL ACCOUNT
Amounts allocated to the Loan Account to secure a Loan become part of the
General Account assets of Hartford. Hartford invests the assets of the General
Account in accordance with applicable law governing the investments of insurance
company general accounts. See "Detailed Description of Certificate Benefits and
Provisions -- Loans," page 15.
DEDUCTIONS FROM PREMIUM
Prior to the allocation of premiums to the selected Investment Divisions, a
deduction as a percentage of premium is made for the front-end sales load, state
premium taxes, and the Deferred Acquisition Cost ("DAC") tax charge. The amount
of each premium allocated among the Investment Divisions is Your Net Premium.
FRONT-END SALES LOAD
When We receive a Premium Payment, We deduct a front-end sales load. The
current front-end sales load is 6.75% of any premium paid for Coverage Years 1
through 7 and 4.75% of any premium paid in Coverage Years 8 and later. The
maximum front-end sales load is 9% of any premium paid for Coverage Years 1
through 7 and 7% of any premium paid in Coverage Years 8 and later.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 7
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The front-end sales load covers expenses relating to the sale and
distribution of the Certificates and may be reduced for certain sales of the
Certificates under circumstances which result in savings of such sales and
distribution expenses. For more information concerning the front-end sales load,
see "Detailed Description of Certificate Benefits and Provisions -- Deductions
from Premium," page 18.
LIMITS ON FRONT-END SALES LOAD
Certain insurance laws and regulations limit the front-end sales load which
can be assessed against the Certificates. The front-end sales load assessed in
the Certificates complies with these limitations.
PREMIUM RELATED TAX CHARGE
We deduct a percentage of each premium to cover taxes assessed against
Hartford by various states and jurisdictions that are attributable to premiums.
The percentage actually deducted will vary by locale depending on the tax rates
in effect there. The range is generally between 0% and 4%.
DAC TAX CHARGE
Hartford deducts 1.25% of each premium to cover a federal premium tax
assessed against Hartford. This charge is reasonable in relation to Hartford's
federal income tax burden, under Code Section 848, resulting from the receipt of
premiums. We will adjust the charge based on changes in the applicable tax law.
DEDUCTIONS AND CHARGES
FROM INVESTMENT VALUE
As with many other types of insurance policies, each Certificate will have
an Investment Value. The Investment Value of the Certificate will increase or
decrease to reflect the investment experience of the chosen Investment
Divisions, deductions for the Monthly Deduction Amount and any amounts
transferred from the Investment Divisions into the Loan Account. There is no
minimum guaranteed Investment Value and the Owner bears the risk of the
investment in the underlying Portfolios. See "Detailed Description of
Certificate Benefits and Provisions -- Deductions and Charges from Investment
Value," page 18.
We will subtract amounts from Your Investment Value to provide for the
Monthly Deduction Amount. These will be taken from the Charge Deduction
Division, as specified in the Certificate. If there is insufficient Investment
Value in the Charge Deduction Division:
(1) Hartford will apply the Investment Value of the Charge Deduction Division to
the charges due and set the Investment Value in the Charge Deduction
Division to zero; and
(2) any additional amount due will be allocated among the remaining Investment
Divisions on a Pro Rata Basis.
If no Charge Deduction Division is selected, any amounts due will be taken
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; plus
(c) the charges for 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 Investment Value,"
page 18, and "Federal Tax Considerations," page 26.
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 each
Investment Division's assets. In no event will the charge exceed .65% of an
Investment Division's assets on an annual basis.
CHARGES AGAINST THE FUNDS
The Separate Account purchases Fund shares at net asset value. The net asset
value of those shares reflects investment advisory fees and administrative and
other expenses deducted from the assets of the Portfolios. 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
Portfolios.
The following table shows annual operating expenses after waivers or
reimbursements for 1997:
ANNUAL PORTFOLIO OPERATING EXPENSES
AFTER WAIVERS AND REIMBURSEMENTS
(as a percentage of net assets)
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TOTAL
MANAGEMENT OTHER OPERATING
PORTFOLIO NAME FEE EXPENSES EXPENSES(1)
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VIP High Income Portfolio (2).... 0.59% 0.22% 0.81%
VIP Equity-Income Portfolio
(2)............................. 0.50% 0.18% 0.68%
VIP Money Market Portfolio....... 0.21% 0.10% 0.31%
VIP II Asset Manager Portfolio
(2)............................. 0.55% 0.20% 0.75%
VIP II Index 500 Portfolio (3)... 0.24% 0.04% 0.28%
VIP III Growth Opportunities
Portfolio (2)................... 0.60% 0.24% 0.84%
Pegasus Bond Fund (4)............ 0.40% 0.35% 0.75%
Pegasus Growth and Value Fund
(4)............................. 0.60% 0.35% 0.95%
</TABLE>
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8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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TOTAL
MANAGEMENT OTHER OPERATING
PORTFOLIO NAME FEE EXPENSES EXPENSES(1)
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<S> <C> <C> <C>
Pegasus Mid-Cap Opportunity Fund
(4)............................. 0.60% 0.35% 0.95%
Pegasus Growth Fund (4).......... 0.60% 0.35% 0.95%
Pegasus Intrinsic Value Fund
(4)............................. 0.60% 0.35% 0.95%
Putnam VT International Growth
Fund (5)........................ 0.73% 0.62% 1.35%
Putnam VT Vista Fund............. 0.65% 0.37% 1.02%
Putnam VT Voyager Fund........... 0.54% 0.20% 0.74%
</TABLE>
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(1) Management Fee generally represents the fee paid to the investment adviser
or its affiliate for investment and administrative services provided. Other
Expenses are expenses (other than Management Fee) which are deducted from
the Portfolio including legal, accounting and custodian fees. For complete
description of the nature of the services provided in consideration of the
operating expenses deducted, please see the Fund prospectuses.
(2) A portion of the brokerage commissions that certain Portfolios pay was used
to reduce expenses. In addition, certain Portfolios have entered into
arrangements with their custodian and transfer agent whereby interest earned
on uninvested cash balances was used to reduce custodian and transfer agent
expenses. Including these reductions, the Total Operating Expenses presented
in the table would have been 0.80% for VIP High Income Portfolio, 0.65% for
VIP Equity-Income Portfolio, 0.75% for VIP II Asset Manager Portfolio, and
0.83% for VIP III Growth Opportunities Portfolio.
(3) FMR agreed to reimburse a portion of VIP II Index 500 Portfolio's expenses
during the period. Without this reimbursement, the Portfolio's Management
Fee, Other Expenses and Total Operating Expenses would have been 0.27%,
0.13%, and 0.40%, respectively.
(4) Operating expenses of these Portfolios of the Pegasus Variable Funds reflect
the management fee schedule that will be in effect for future periods
combined with the historic or anticipated expense levels for the Portfolios.
FCNIMCO has agreed to waive portions of the management fee through December
31, 1998, in order to keep total portfolio operating expenses at the levels
shown in the table. Absent such waivers, the Total Operating Expenses
presented were 0.75%, 0.95%, 0.95%, 0.95%, 0.95% for Pegasus Bond Fund,
Pegasus Growth and Value Fund, Pegasus Mid-Cap Opportunity Fund, Pegasus
Growth Fund and Pegasus Intrinsic Value Fund, respectively.
(5) Management Fee and Other Expenses shown in the table above reflect an
expense limitation. In the absence of an expense limitation, Total Operating
Expenses for the Putnam VT International Growth Fund would have been 1.42%.
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
15.
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 calendar 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 18.
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 26.
There are circumstances when the Certificate may become a Modified Endowment
Contract underFederal tax law. If it does, Loans and other pre-death
distributions are includable in gross income on an income-first basis. A 10%
penalty tax may be imposed on income distributed before the insured attains age
59 1/2. Prospective purchasers and Owners are advised to consult a qualified tax
adviser before taking steps that may affect whether the Certificate becomes a
Modified Endowment Contract. Hartford has instituted procedures to monitor
whether a Certificate may become a Modified Endowment Contract after issue. See
"Federal Tax Considerations -- Modified Endowment Contract" for a discussion of
the "seven-pay" test, page 26.
HARTFORD
Hartford is a stock life insurance company engaged in the business of
writing life insurance and annuities, both individual and group, in all states
of the United States and the District of Columbia, except New York. Effective on
January 1, 1998, Hartford's name changed from ITT Hartford Life and Annuity
Insurance Company to Hartford Life and Annuity Insurance Company. Hartford was
originally incorporated under the laws of Wisconsin on January 9, 1956, and was
subsequently redomiciled to Connecticut. Its offices are located in Simsbury,
Connecticut; however, its mailing address is P.O. Box 2999, Hartford, CT
06104-2999. Hartford is a subsidiary of Hartford Fire Insurance Company, one of
the largest multiple lines insurance carriers in the United States. Hartford is
ultimately controlled by The Hartford Financial Services Group, Inc., a Delaware
corporation.
Hartford is rated A+ (superior) by A.M. Best and Company, Inc., on the basis
of its financial soundness and operating performance. Hartford is rated AA by
Standard & Poor's and AA+ by Duff and Phelps on the basis of its claims paying
ability. These ratings do not apply to the investment performance of the
Sub-Accounts. The ratings apply to Hartford's ability to meet its insurance
obligations, including those described in this Prospectus.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
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THE SEPARATE ACCOUNT
ICMG Registered Variable Life Separate Account One is a separate account
established by Hartford on October 9, 1995, under the insurance laws of the
State of Connecticut, pursuant to a resolution of Hartford's Board of Directors.
The Separate Account is organized as a unit investment trust and is registered
with the SEC under the 1940 Act. Such registration does not signify that the SEC
supervises the management or the investment practices or policies of the
Separate Account. The Separate Account meets the definition of a "separate
account" under the federal securities laws.
Under Connecticut law, the assets of the Separate Account are held
exclusively for the benefit of Owners and persons entitled to payments under the
Group Policies and the Certificates and owners of any other policies which may
be available through the Separate Account. The assets of the Separate Account
are owned by Hartford and the obligations under the Group Policies and the
Certificates are obligations of Hartford. These assets are held separately from
the other assets of Hartford 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
Hartford (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 Hartford.
The Separate Account has 14 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
Hartford. The Separate Account may include other divisions which will not be
available under the Group Policies.
THE FUNDS
GENERAL
The shares of the Portfolios are sold by the Funds to the Separate Account.
The assets of the Separate Account attributable to the Group Policies are
invested exclusively in the Investment Divisions. An Owner may allocate Net
Premium payments among the Investment Divisions. Owners should review the brief
descriptions of the investment objectives of each of the Portfolios in
connection with that allocation. See "The Funds -- The Portfolios," page 10.
Each Fund continually issues an unlimited number of full and fractional
shares of beneficial interest in the relevant Portfolios. In addition to being
offered to the Separate Account, each Fund's shares are or may be offered to
other separate accounts funding variable annuity contracts and variable life
insurance policies issued by Hartford or its affiliates and to separate accounts
of other insurance companies. It is conceivable that in the future it may become
disadvantageous for both variable annuity and variable life insurance separate
accounts or for separate accounts of other life insurance companies to invest in
shares of the Funds simultaneously. Although neither Hartford nor any of the
Funds currently foresee any such disadvantage, each Fund's Board of Trustees
will monitor events in order to identify any material conflict between different
variable annuity and variable life owners and to determine what action, if any,
should be taken in response thereto, including the possible withdrawal of the
Separate Account's participation in any of the Funds. Material conflicts could
result from such things as (1) changes in state insurance law, (2) changes in
federal income tax law, (3) changes in the investment management of any
Portfolio of the Funds, or (4) differences between voting instructions given by
variable annuity and variable life owners. If the Boards of Trustees were to
conclude that separate underlying funds should be established for variable
annuity and variable life insurance separate accounts, Hartford will bear the
attendant expenses.
All investment income of, and other distributions to, each Investment
Division arising from the applicable Portfolio are reinvested in shares of that
Portfolio at net asset value. Hartford will purchase Portfolio shares in
connection with Net Premium payments allocated to the applicable Investment
Division in accordance with Owners' instructions and will redeem Portfolio
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 seven (7)
calendar days.
Applicants should read each of the Fund prospectuses accompanying this
Prospectus in connection with the purchase of a Certificate.
VARIABLE INSURANCE PRODUCTS FUND ("VIP"),
VARIABLE INSURANCE PRODUCTS FUND II ("VIP II")
AND VARIABLE INSURANCE PRODUCTS FUND III ("VIP III") (EACH,
A "FIDELITY FUND" AND COLLECTIVELY, THE "FIDELITY FUNDS").
The Separate Account currently invests in the Fidelity Funds. The Fidelity
Funds are diversified, open-end management investment companies organized as
Massachusetts business trusts by Fidelity Management & Research Company ("FMR")
and registered under the 1940 Act. The Fidelity Funds consist of several
investment portfolios, including VIP High Income Portfolio, VIP Equity-Income
Portfolio, VIP Money Market Portfolio, VIP II Asset Manager Portfolio, VIP II
Index 500 Portfolio, and VIP III Growth Opportunities Portfolio, which are
available as part of Pegasus Provider.
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10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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Some Fidelity Funds are composed of multiple classes of shares with a common
investment objective and investment portfolio. The initial class ("Initial
Class") of shares is offered at net asset value and is not subject to a 12b-1
fee. The service class ("Service Class") shares are offered at net asset value
and are subject to a 12b-1 fee. Each class of shares is offered through its own
prospectus. Service Class shares of VIP High Income Portfolio, VIP Equity-Income
Portfolio, VIP II Asset Manager Portfolio, and VIP III Growth Opportunities
Portfolio and Initial Class shares of VIP Money Market Portfolio and VIP II
Index 500 Portfolio are available under the Group Policy.
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.
Bankers Trust Company, a wholly-owned subsidiary of Bankers Trust New York
Corporation, serves as sub-adviser to VIP II Index 500 Portfolio.
PEGASUS VARIABLE FUNDS
The Separate Account currently invests in shares of the Pegasus Variable
Funds, a diversified open-end management investment company registered under the
1940 Act and organized as a Delaware business trust. The Pegasus Variable Funds
consists of seven series, including Pegasus Bond Fund, Pegasus Growth and Value
Fund, Pegasus Mid-Cap Opportunity Fund, Pegasus Growth Fund and Pegasus
Intrinsic Value Fund, which are available as part of Pegasus Provider.
First Chicago NBD Investment Management Company ("FCNIMCO") is the
investment adviser to Pegasus Variable Funds. FCNIMCO is a wholly-owned
subsidiary of The First National Bank of Chicago, which, in turn, is a
wholly-owned subsidiary of First Chicago NBD Corporation, a registered bank
holding company. Included among FCNIMCO's accounts are pension and
profit-sharing funds for major corporations and state and local governments,
commingled trust funds and a variety of institutional and personal advisory
accounts, estates and trusts, either directly or through investment services
provided through its bank affiliates. FCNIMCO also acts as investment adviser
for other registered investment companies and investment company portfolios.
PUTNAM VARIABLE TRUST
The Separate Account currently invests in shares of Putnam Variable Trust, a
diversified open-end management investment company registered under the 1940 Act
and organized as a Massachusetts business trust. Putnam Variable Trust consists
of sixteen funds, including Putnam VT International Growth Fund, Putnam VT Vista
Fund and Putnam VT Voyager Fund, which are available as part of Pegasus
Provider.
Putnam Investment Management, Inc. ("Putnam Management") serves as the
investment manager of Putnam Variable Trust. An affiliate, The Putnam Advisory
Company, Inc., manages domestic and foreign institutional accounts and mutual
funds. Another affiliate, Putnam Fiduciary Trust Company, provides investment
advice to institutional clients under its banking and fiduciary policies. Putnam
Management and its affiliates are wholly-owned subsidiaries of Marsh & McLennan
Companies, Inc., a publicly owned holding company whose principal businesses are
international insurance brokerage and employee benefit consulting.
THE PORTFOLIOS
VIP HIGH INCOME PORTFOLIO
VIP High Income Portfolio seeks high current income primarily through
investments in all types of income-producing debt securities, preferred stocks
and convertible securities. Although the Portfolio has no limits on the quality
and maturity of its investments, its strategy typically leads to longer-term,
lower-quality, fixed-income securities. These domestic and foreign investments
may present the risk of default or may be in default.
VIP EQUITY-INCOME PORTFOLIO
VIP Equity-Income Portfolio seeks reasonable income by investing primarily
in income-producing equity securities. In choosing these securities, the
Portfolio will also consider the potential for capital appreciation. This
Portfolio's goal is to achieve a yield which exceeds the composite yield on the
securities comprising the Standard & Poor's Composite Index of 500 Stocks
(commonly referred to as "S&P 500"). The Portfolio may invest in high yielding,
lower-rated securities (commonly referred to as "junk bonds") which are subject
to greater risk than investments in higher-rated securities.
VIP MONEY MARKET PORTFOLIO
VIP Money Market Portfolio seeks as high a level of current income as is
consistent with preserving capital and providing liquidity. The Portfolio will
invest only in high-quality U.S. dollar denominated money market instruments of
domestic and foreign issuers. An investment in the Portfolio is not insured or
guaranteed by the U.S. Government, and there can be no assurance that the
Portfolio will maintain a stable asset value per share of $1.00.
VIP II ASSET MANAGER PORTFOLIO
VIP II Asset Manager Portfolio seeks high total return with reduced risk
over the long-term by allocating its assets among domestic and foreign stocks,
bonds and short-term instruments.
VIP II INDEX 500 PORTFOLIO
VIP II Index 500 Portfolio seeks to provide investment results that
correspond to the total return of a broad range
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
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of common stocks publicly traded in the United States. To achieve its objective,
the Portfolio attempts to duplicate the composition and total return of the S&P
500.
VIP III GROWTH OPPORTUNITIES PORTFOLIO
VIP III Growth Opportunities Portfolio seeks to provide capital growth by
investing primarily in common stocks and securities convertible into common
stocks. The Portfolio also has the ability to purchase other securities, such as
preferred stock and bonds, that may produce capital growth, and may invest in
foreign securities without limitation.
PEGASUS BOND FUND
Pegasus Bond Fund seeks to maximize total rate of return by investing
predominantly in intermediate and long-term debt securities.
PEGASUS GROWTH AND VALUE FUND
Pegasus Growth and Value Fund seeks long-term capital growth, with income as
a secondary consideration. In seeking to achieve its objective, this Portfolio
will invest primarily in equity securities of larger companies that are
attractively priced relative to their growth potential.
PEGASUS MID-CAP OPPORTUNITY FUND
Pegasus Mid-Cap Opportunity Fund seeks long-term capital appreciation. In
seeking to achieve its objective, this Portfolio will invest primarily in equity
securities of companies with intermediate market capitalizations.
PEGASUS GROWTH FUND
Pegasus Growth Fund seeks long-term capital appreciation. In seeking to
achieve its objective, this Portfolio will invest primarily in equity securities
of domestic issuers believed by FCNIMCO to have above-average growth
characteristics.
PEGASUS INTRINSIC VALUE FUND
Pegasus Intrinsic Value Fund seeks long-term capital appreciation. In
seeking to achieve its objective, this Portfolio will invest primarily in equity
securities believed by FCNIMCO to represent a value or potential worth which is
not fully recognized by prevailing market prices.
PUTNAM VT INTERNATIONAL GROWTH FUND
Putnam VT International Growth Fund seeks capital appreciation by investing
primarily in equity securities of companies located in countries other than the
United States.
PUTNAM VT VISTA FUND
Putnam VT Vista Fund seeks capital appreciation by investing in a
diversified portfolio of common stocks which Putnam Management believes have the
potential for above-average capital appreciation.
PUTNAM VT VOYAGER FUND
Putnam VT Voyager Fund seeks capital appreciation by investing primarily in
common stocks of companies that Putnam Management believes have potential for
capital appreciation that is significantly greater than that of market averages.
There is no assurance that any Portfolio will achieve its stated objectives.
Owners are also advised to read the prospectuses for each of the Funds
accompanying this Prospectus for more detailed information. Each Fund is subject
to certain investment restrictions which may not be changed without the approval
of a majority of the shareholders of the Fund. See the accompanying prospectuses
for each of the Funds.
DETAILED DESCRIPTION
OF CERTIFICATE BENEFITS
AND PROVISIONS
GENERAL
This Prospectus describes a flexible premium group variable life insurance
policy where the Owner has considerable flexibility in selecting the timing and
amount of premium payments.
ISSUANCE OF A CERTIFICATE
Certificates will only be offered to eligible employees when provided by the
Participating Employer. Individuals wishing to purchase a Certificate must
complete an Enrollment Form In Writing, which must be received by Our Customer
Service Center before a Certificate will be issued. A Certificate will not be
issued with a specified Face Amount of less than the minimum Face Amount.
Acceptance is subject to Hartford's underwriting rules then in effect. Hartford
reserves the right to reject an Enrollment Form for any reason permitted by law.
There are two circumstances under which a Certificate may be issued with a
backdated Coverage Date. The first involves Group Policy rollovers from Section
1035 exchanges under the Code. Backdating will occur in order to prevent a gap
in coverage under the Certificate. Charges and deductions (other than those of
the Portfolios) will be made for the period the Coverage Date is backdated;
however, the Owner will not experience investment return during that time.
Backdating will also occur when an application accompanied by the Initial
Premium is received by Us but issuance of a Certificate is subject to Our
insurance underwriting requirements. The initial Net Premium will be allocated
to the Fidelity VIP Money Market Investment Division during
<PAGE>
12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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the underwriting period. See "Premiums -- Allocation of Premium Payments" below.
If the Insured meets Our underwriting requirements, a Certificate will be issued
with a backdated Coverage Date. Charges and deductions (other than those of the
Portfolios) will be made for the backdated period. If the Insured does not meet
Our underwriting requirements, no Certificate will be issued and no coverage
will have been in effect. A conditional receipt will be given to the applicant
reflecting receipt of the Initial Premium and outlining any interim coverage in
effect until the Certificate is either issued or declined.
Backdating may only be permitted in certain states.
PREMIUMS
PREMIUM PAYMENT FLEXIBILITY
A significant feature of the Certificate is that once the desired level and
pattern of the Death Benefit have been determined, the Owner has considerable
flexibility in the selection of the timing and amount of premiums to be paid and
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, as set forth in the Certificate, is due on the
Coverage Date. Unless determined otherwise by Hartford, 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 twelve (12) times the first Monthly Deduction
Amount. Thereafter, additional premiums may be paid at any time, subject to the
premium limitations set forth by the Code as indicated in the section entitled
"Premium Limitation," page 13. You have the right to pay additional premiums of
at least $500.00 at any time.
ALLOCATION OF PREMIUM PAYMENTS
If the state of issue of Your Certificate requires that We return Your
Initial Premium, We will allocate the initial Net Premium when Your Certificate
is issued to the Fidelity VIP 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 Fidelity VIP Money Market Investment Division if it
is selected as an initial allocation option). This later date is the later of
ten (10) calendar days after We receive the Initial Premium and the date We
receive the final requirement to put the Certificate in force. The Certificates
are credited with units ("Accumulation Units") in each selected Investment
Division, the assets of which are invested in the corresponding underlying
Portfolio. An Owner may transfer funds among the Investment Divisions subject to
certain restrictions. See "Detailed Description of Certificate Benefits and
Provisions -- Transfers Among Investment Divisions," page 14. Any additional
premiums received by Us prior to such date will be allocated to the Fidelity VIP
Money Market Investment Division.
Alternatively, if the state of issue of Your Certificate provides for Our
return of the Certificate's Cash Value to the Owner, We will allocate the
initial Net Premium immediately among Your chosen Investment Divisions. In that
case You will bear full investment risk for any amounts allocated to the
Investment Divisions during the right to examine period. (Please note that this
automatic immediate investment feature only applies if Your Certificate so
specifies. Please check with Your agent to determine the status of Your
Certificate.)
Upon written request, You may change the premium allocation. Portions
allocated to the Investment Divisions must be whole percentages of 5% or more.
Subsequent Net Premiums will be allocated among Investment Divisions according
to Your most recent instructions, subject to the following. If We receive a
premium and Your most recent allocation instructions would violate the 5%
requirement, We will allocate the Net Premium among the Investment Divisions
according to Your previous premium allocation. If the asset rebalancing option
is in effect, Net Premiums will be allocated accordingly until that option is
terminated. See "Transfers Among Investment Divisions -- Asset Rebalancing,"
page 14.
The Owner will receive several different types of notification as to what
his or her current premium allocation is. The initial allocation chosen by the
Owner on the Enrollment Form is shown in the Certificate. In addition, every
transactional confirmation generated after a premium payment is received will
show how that premium has been allocated. A Certificate's annual statement will
also summarize the current premium allocation in effect for that Certificate.
ACCUMULATION UNITS
Net Premiums allocated to the Investment Divisions are used to credit
Accumulation Units under the Certificate.
The number of Accumulation Units in each Investment Division to be credited
under the Certificate (including the initial allocation to the Fidelity VIP
Money Market Investment Division) will be determined first by multiplying the
Net Premium by the appropriate allocation percentage to determine the portion to
be invested in the Investment Division. Each portion to be invested in an
Investment Division is then divided by the Accumulation Unit Value of that
particular Investment Division next computed following receipt of the payment.
ACCUMULATION UNIT VALUES
The Accumulation Unit value for each Investment Division will vary daily to
reflect the investment experience of
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
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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 calculating the Death Benefit,
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 Code, We will
refund the excess premium payments. We will refund such premium payments and
interest thereon within sixty (60) days after the end of a Coverage Year.
A premium payment that results in an increase in the Death Benefit greater
than the amount of the premium will be accepted only after We approve evidence
of insurability.
VALUES UNDER THE CERTIFICATE
As with traditional life insurance, each Certificate will have a Cash
Surrender Value. The Cash Surrender Value is equal to the Cash Value, less Debt,
less any charges accrued but not deducted. There is no minimum guaranteed Cash
Surrender Value. The Cash Value equals the value in the Investment Divisions
plus the Loan Account Value.
Each Certificate will also have an Investment Value. The Investment Value of
a Certificate changes on a daily basis and will be computed on each Valuation
Day. The Investment Value will vary to reflect the investment experience of the
Investment Divisions, Monthly Deduction Amounts and any amounts transferred to
the Loan Account to secure a Loan.
The Investment Value of a particular Certificate is related to the net asset
value of the Portfolios associated with the Investment Divisions to which Net
Premiums on the Certificate have been allocated. The total Investment Value in
the Investment Divisions on any Valuation Day is calculated by multiplying the
number of Accumulation Units in each Investment Division as of the Valuation Day
by the current Accumulation Unit value of that Investment Division and then
summing the result for all the Investment Divisions. The Investment Value equals
the sum of the values of the assets in the Investment Divisions. See "Premiums
- -- Accumulation Unit Values," page 12.
SURRENDER OF THE CERTIFICATE
At any time prior to the Maturity Date, provided the Certificate is in
effect and has a Cash Surrender Value, the Owner may choose, without the consent
of the Beneficiary (provided the designation of the Beneficiary is not
irrevocable) to surrender the Certificate and receive the full Cash Surrender
Value from Us. To surrender a Certificate, You must submit a request for
surrender In Writing. We will determine the Cash Surrender Value as of the
Valuation Day We receive the request In Writing at Our Customer Service Center,
or the date requested by the Owner, whichever is later.
The Cash Surrender Value, which is the net amount available upon surrender
of the Certificate, equals the Cash Value, less Debt, less any charges accrued
but not yet deducted. The Certificate will terminate on the date of receipt of
the written request, or the date the Owner requests the surrender to be
effective, whichever is later.
The Cash Surrender Value may be paid in cash or allocated to any other
payment option agreed upon by Us.
PARTIAL WITHDRAWALS
At any time before the Maturity Date, and subject to Hartford's rules then
in effect, up to twelve (12) partial withdrawals are allowed per Coverage Year;
however, only one (1) partial withdrawal is allowed between any successive
Processing Dates. The minimum partial withdrawal allowed is $500.00. The maximum
partial withdrawal is an amount equal to the sum of the Cash Surrender Value
plus outstanding Debt, multiplied by .90, less outstanding Debt. Hartford
currently imposes a charge for processing partial withdrawals which is the
lesser of 2% of the amount withdrawn or $25.00. 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 Benefit 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
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14 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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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 27.
TRANSFERS AMONG INVESTMENT DIVISIONS
AMOUNT AND FREQUENCY OF TRANSFERS
Upon request and as long as the Certificate is in effect, You may transfer
amounts among the Investment Divisions, without charge, up to twelve (12) times
per Coverage Year. Transfers in excess of twelve (12) per Coverage Year will be
subject to a charge of $50 per transfer deducted from the amount of the
transfer. 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 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. Hartford reserves the right in the future to impose additional
restrictions on 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.
ASSET REBALANCING
Subject to Our rules then in effect, an Owner may authorize Hartford to
automatically reallocate Investment Value periodically in order to maintain a
particular percentage allocation among the Investment Divisions as selected by
the Owner ("Asset Rebalancing"). The Investment Value held in each Investment
Division will increase or decrease in value at different rates during the
relevant period. Asset Rebalancing is intended to reallocate Investment Value
from those Investment Divisions that have increased in value to those that have
decreased in value.
To elect Asset Rebalancing, a request In Writing must be received by
Hartford. If Asset Rebalancing is elected, all Investment Value must be included
in the automatic reallocation. The percentages selected under Asset Rebalancing
will override any prior percentage allocations chosen by the Owner and all
future Net Premiums will be allocated accordingly. Once elected, an Owner may
instruct Hartford In Writing at any time to terminate the option. In addition,
any transfer made outside of Asset Rebalancing will terminate the option.
PROCEDURES FOR TELEPHONE TRANSFERS
Owners may effect telephone transfers in two ways. All Owners may directly
contact a customer service representative. Owners may in the future also request
access to an electronic service known as a Voice Response Unit (VRU). The VRU
will permit the transfer of monies among the Investment Divisions and change of
the allocation of future payments. All Owners intending to conduct telephone
transfers through the VRU will be asked to complete a Telephone Authorization
Form.
Hartford will undertake reasonable procedures to confirm that instructions
communicated by telephone are genuine. Before a customer service representative
accepts any request, the caller will be asked for his or her social security
number and address. All calls will also be recorded. A Personal Identification
Number (PIN) will be assigned to all Owners who request VRU access. The PIN is
selected by and known only to the Owner. Proper entry of the PIN is required
before any transactions will be allowed through the VRU. Furthermore, all
transactions performed over the VRU, as well as with a customer service
representative, will be confirmed by Hartford through a written letter.
Moreover, all VRU transactions will be assigned a unique confirmation number
which will become part of the Certificate's history. Hartford is not liable for
any loss, cost or expense for action on telephone instructions which are
believed to be genuine in accordance with these procedures.
VALUATION OF PAYMENTS AND TRANSFERS
We value the Certificate on every Valuation Day.
We will generally pay Death Proceeds, Cash Surrender Values, partial
withdrawals, and Loan amounts attributable to the Investment Divisions within
seven (7) calendar 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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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
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PROCESSING OF TRANSACTIONS
Generally, transactions initiated by an Owner will be processed only on a
Valuation Day. Requests received by Hartford on a Valuation Day before the close
of trading on the NYSE (generally 4:00 p.m. Eastern Time) will be processed as
of that day, except as otherwise provided in this Prospectus. Those requests
received after the close of the NYSE will be processed as of the next Valuation
Day.
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.
Interest payments are due as shown in the Certificate. If interest is not paid
within 5 days of its due date, it will be added to the amount of the Loan as of
its due date.
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 thirty-one (31) calendar days after We have mailed
notice to Your last known address and that of any assignees of record. If
sufficient Loan repayment is not made by the end of this 31-day period, the
Certificate will end without value.
EFFECT OF LOANS ON INVESTMENT VALUE
A Loan, whether or not repaid, will have a permanent effect on the
Investment Value because the investment results of each Investment Division will
apply only to the amount remaining in such Investment Divisions. The longer a
Loan is outstanding, the greater the effect is likely to be. The effect could be
favorable or unfavorable. If the Investment Divisions earn more than the annual
interest rate for funds held in the Loan Account, an Owner's Investment Value
will not increase as rapidly as it would have had no Loan been made. If the
Investment Divisions earn less than the Loan Account, the Owner's Investment
Value will be greater than it would have been had no Loan been made. Also, if
not repaid, the aggregate amount of outstanding Debt will reduce the Death
Proceeds and Cash Surrender Value otherwise payable.
DEATH BENEFIT
As long as the Certificate remains in force, the Certificate provides for
the payment of the Death Proceeds to the named Beneficiary when the Insured
under the Certificate dies. The Death Proceeds payable to the Beneficiary equal
the Death Benefit less any Debt outstanding under the Certificate plus any rider
benefits payable. The Death Benefit depends on the Death Benefit option You
select and is determined as of the date of the death of the Insured.
MINIMUM DEATH BENEFIT TESTING PROCEDURES
Section 7702 of the Code defines alternative testing procedures, the
guideline premium test ("GPT") and the cash value accumulation test ("CVAT") in
order to meet the definition of life insurance under the Code. See "Federal Tax
Considerations -- Income Taxation of Certificate Benefits." Each Certificate
must qualify under either the GPT or the CVAT. Prior to issue, the Owner chooses
the procedure under which a Certificate will qualify. Once either the GPT or the
CVAT is chosen to test a Certificate, it cannot be changed while the Certificate
is in force.
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16 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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Under both testing procedures, there is a minimum Death Benefit required at
all times equal to the Variable Insurance Amount. The factors used to determine
the Variable Insurance Amount depend on the testing procedure chosen and are set
forth in the Certificate.
Under the GPT, there is also a maximum amount of premium which may be paid
with respect to each Certificate.
Use of the CVAT can be advantageous if an Owner intends to maximize the
total amount of premiums paid under a Certificate. An offsetting consideration,
however, is that the factors used to determine the Variable Insurance Amount are
higher under the CVAT, which can result in a higher Death Benefit over time and
thus, a higher total cost of insurance.
DEATH BENEFIT OPTIONS
Regardless of the minimum death benefit testing procedure chosen, there are
two Death Benefit options: Death Benefit Option A and Death Benefit Option B.
1. Under 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
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 17
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actuarial tables. In addition, legislation has previously been introduced in
Congress which, had it been enacted, would have required the use of tables that
do not vary on the basis of sex for some or all annuities. Currently, several
states have enacted such laws.
BENEFICIARY
The Owner names the Beneficiary in the Enrollment Form for the Certificate.
The Owner may change the Beneficiary (unless irrevocably named) during the
Insured's lifetime by written request to Hartford. If no Beneficiary is living
when the Insured dies, the Death Proceeds will be paid to the Owner if living;
otherwise to the Owner's estate.
INCREASES AND DECREASES IN FACE AMOUNT
The minimum Face Amount of the Certificate is $50,000. At any time after
purchasing a Certificate, the Owner may request a change in the Face Amount by
making a request In Writing to Hartford and directing such request to Hartford's
Customer Service Center.
All requests to increase the Face Amount must be applied for on a new
Enrollment Form. All requests will be subject to evidence of insurability
satisfactory to Hartford 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 twelve (12)
month period.
BENEFITS AT MATURITY
If the Insured is living on the Maturity Date, on surrender of the
Certificate to Hartford, Hartford will pay to the Owner the Cash Surrender Value
on the date the Certificate is surrendered. However, on the Maturity Date, the
Certificate will terminate and Hartford will have no further obligations under
the Certificate.
TERMINATION OF PARTICIPATION
IN THE GROUP POLICY
Participation in the Group Policy may be terminated by Hartford or the
Participating Employer. The party initiating the termination must provide notice
of such termination to each Owner of record, at his or her last known address,
at least fifteen (15) days prior to the date of termination. In the event of
such termination, no new Enrollment Forms for new Insureds will be accepted on
or after the date notice of discontinuance is received or sent by Hartford,
whichever is applicable, nor will any new Certificates be issued. If premium
payments are discontinued, Hartford will continue insurance coverage under the
Certificate as long as the Cash Surrender Value is sufficient to cover the
charges due. This continuation of insurance will not continue the coverage under
the Certificate beyond Attained Age 100, nor will it continue any optional
benefit rider beyond the Certificate's date of termination. If the Group Policy
is discontinued or amended to discontinue the eligible class to which an Insured
belongs (and if the coverage on the Insured is not transferred to another
insurance carrier), any Certificate then in effect will remain in force under
the discontinued Group Policy, provided it is not canceled or surrendered by the
Owner, subject to Hartford's qualifications then in effect.
LAPSE AND REINSTATEMENT WHILE
THE GROUP POLICY IS IN EFFECT
LAPSE AND GRACE PERIOD
A Grace Period will follow the date We mail notice to the Owner 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 thirty-one (31) calendar 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 (i) the Group Policy is
terminated (see "Termination of Participation in the Group Policy" above) or
(ii) 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 three (3)
months
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18 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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following the date of reinstatement. The Face Amount of the reinstated
Certificate cannot exceed the Face Amount at the time of lapse. The Investment
Value on the reinstatement date will reflect:
(a) The Investment Value at the time of termination; plus
(b) Net Premiums attributable to premiums paid at the time of reinstatement.
Upon reinstatement, any Debt at the time of termination must be repaid or
carried over to the reinstated Certificate.
ENROLLMENT FOR A CERTIFICATE
Individuals wishing to purchase a Certificate must submit an Enrollment Form
to Hartford. Within limits, an applicant may choose the Initial Premium and the
initial Face Amount. A Certificate generally will be issued only on the lives of
Insureds Attained Age 79 and under who supply evidence of insurability
satisfactory to Hartford. Acceptance is subject to Hartford's underwriting rules
and Hartford reserves the right to reject an Enrollment Form for any reason. No
change in the terms or conditions of a Certificate will be made without the
consent of the Owner.
The Certificate will be effective on the Coverage Date only after Hartford
has received all outstanding delivery requirements and received the Initial
Premium. The Coverage Date is the date used to determine all future cyclical
transactions on the Certificate, e.g., Processing Date, Coverage Months and
Coverage Years.
THE RIGHT TO EXAMINE THE CERTIFICATE
An Owner has a limited right to return a Certificate. Subject to applicable
state regulation, if the Certificate is returned, by mail or personal delivery
to Hartford or to the agent who sold the Certificate, to be canceled within ten
(10) calendar days after delivery of the Certificate to the Owner, Hartford will
return either (i) the total amount of premiums or (ii) the Cash Value plus
charges deducted under the Certificate to the Owner within seven (7) days. If
the state where Your Certificate is issued requires that We return Your Initial
Premium, We will allocate Your initial Net Premium to the Fidelity VIP Money
Market Investment Division. If the state of issue of Your Certificate provides
for Our return of the Certificate's Cash Value to the Owner, We will allocate
the initial Net Premium immediately among Your chosen Investment Divisions.
DEDUCTIONS FROM PREMIUM
Before allocating the Net Premium to the Investment Divisions, a deduction
as a percentage of premium is made for the front-end sales load, premium taxes
and the DAC tax charge. The amount of each premium allocated to the Investment
Divisions is Your Net Premium.
FRONT-END SALES LOAD
The current front-end sales load is 6.75% of any premium paid for Coverage
Years 1 through 7 and 4.75% of any premium paid in Coverage Years 8 and later.
The maximum front-end sales load is 9% of any premium paid in Coverage Years 1
through 7 and 7% 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
Hartford deducts 1.25% of each premium to cover a federal premium tax
assessed against Hartford. This charge is reasonable in relation to Hartford's
federal income tax burden, under Section 848 of the Code, resulting from the
receipt of premiums. We will adjust this charge based on changes in the
applicable tax law.
DEDUCTIONS AND CHARGES
FROM INVESTMENT VALUE
MONTHLY DEDUCTION AMOUNT
On the Coverage Date and on each subsequent Processing Date, Hartford will
deduct 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
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 19
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to month. It will be taken from the Charge Deduction Division, if designated in
the Enrollment Form for the Certificate or later elected.
If a Charge Deduction Division has been designated but the Investment Value
in the Charge Deduction Division is less than that required to cover all charges
due on such date:
(1) Hartford will apply the Investment Value of the Charge Deduction Division to
the charges due and set the Investment Value in the Charge Deduction
Division to zero; and
(2) any additional amount due will be allocated among the remaining Investment
Divisions on a Pro Rata Basis.
If no Charge Deduction Division has been designated or elected, any amounts
due will be allocated among the Owner's chosen Investment Divisions on a Pro
Rata Basis.
The Monthly Deduction Amount equals:
(a) the administrative expense charge; plus
(b) the charges for cost of insurance; plus
(c) the charges for additional benefits provided by rider, if any.
(A) Monthly Administrative Fee and Other Expense Charges
Hartford will assess a monthly administrative charge to compensate Hartford
for administrative costs in connection with the Certificates. This charge will
be $5 per Coverage Month initially and is guaranteed never to exceed $10.00 per
Coverage Month.
(B) Cost of Insurance Charge
The charge for the cost of insurance is equal to:
(i) the cost of insurance rate per $1,000; multiplied by
(ii) the Net Amount at Risk; divided by
(iii) $1,000.
The Net Amount at Risk equals the Death Benefit less the Cash Value on
that date.
The cost of insurance charge is to cover Hartford's anticipated mortality
costs. Hartford uses various underwriting procedures, including medical
underwriting procedures, depending on the characteristics of the group to
which the Group Policies are issued. The current cost of insurance rates for
standard risks may be equal to or less than the 1980 Commissioners Standard
Ordinary Mortality Table. Substandard risks will be charged a higher cost of
insurance rate that will not exceed rates based on a multiple of the 1980
Commissioners Standard Ordinary Mortality Table. The multiple will be based
on the Insured's risk class. The use of simplified underwriting and
guaranteed issue procedures may result in the cost of insurance charges
being higher for some individuals than if medical underwriting procedures
were used.
Cost of insurance rates are based on the age, sex (except where unisex
rates apply), and rate class of the Insured and group mortality
characteristics and the particular characteristics (such as the rate class
structure) under the Group Policy that are agreed to by Hartford and the
Participating Employer. The actual monthly cost of insurance rates will be
based on Hartford's expectations as to future experience. Hartford will
determine the cost of insurance rate at the start of each Coverage Year. Any
changes in the cost of insurance rate will be made uniformly for all
Insureds in the same risk class.
The rate class of an Insured affects the cost of insurance rate. Hartford
and the Participating Employer will agree to the number of classes and
characteristics of each class. The classes may vary by smokers and
nonsmokers, active and retired status, and/or any other nondiscriminatory
classes agreed to by the Participating Employer. Where smoker and non-smoker
divisions are provided, an Insured who is in the nonsmoker division of a
rate class will have a lower cost of insurance than an Insured in the smoker
division of the same rate class, even if each Insured has an identical
Certificate.
Because the Cash Value and the Death Benefit Amount under a Certificate
may vary from month to month, the cost of insurance charge may also vary on
each Processing Date.
(C) Rider Charge
If the Certificate includes riders, a charge is deducted from the
Investment Value on each Processing Date. The charge applicable to a rider
is specified on the rider and is to compensate Hartford for the anticipated
cost of providing the benefits thereunder.
The riders available are described on page 21 under "Supplemental
Benefits."
MORTALITY AND EXPENSE RISK CHARGE
A charge is made for mortality and expense risks assumed by Hartford.
Hartford currently deducts a daily charge for Coverage Years 1 through 10 at an
effective annual rate of .65% of the value of each Investment Division's assets
and for Coverage Years 11 and later at an effective annual rate of .50% of an
Investment Division's assets. In no event will the charge exceed .65% of an
Investment Division's assets on an annual basis. See also "Premiums --
Accumulation Unit Values," page 12.
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20 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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The mortality and expense risk charge is equal to:
(i) the mortality and expense risk rate; multiplied by
(ii) the portion of the Cash Value allocated to the Investment Divisions and
the Loan Account.
The mortality risk assumed is that the actual cost of insurance charges
specified in the Certificate will be insufficient to meet actual claims. The
expense risk assumed is that expenses incurred in issuing and administering the
Certificates will exceed the administrative charges set forth therein.
If these charges are insufficient to cover actual costs and assumed risks,
the loss will fall on Hartford. Conversely, if the charge proves more than
sufficient, any excess will be added to Hartford's surplus.
TAXES
Currently, no charge is made to the Separate Account for federal, state, and
local taxes that may be attributable to the Separate Account. A change in the
applicable federal, state or local tax laws which impose tax on Hartford and/or
the Separate Account may result in a charge against the Certificates in the
future. Charges for other taxes, if any, attributable to the Separate Account
may also be made.
OTHER MATTERS
ADDITIONS, DELETIONS OR
SUBSTITUTIONS OF INVESTMENTS
Hartford reserves the right, subject to compliance with the law as then in
effect, to make additions to, deletions from, or substitutions for the Separate
Account and the Investment Divisions which fund the Group Policies. If shares of
any of the Portfolios should no longer be available for investment, or if, in
the judgment of Hartford's management, further investment in shares of any
Portfolio should become inappropriate in view of the purposes of the Group
Policies, Hartford may substitute shares of another Portfolio for shares already
purchased, or to be purchased in the future, under the Group Policies. No
substitution of securities will take place without notice to and consent of
Owners and without prior approval of the SEC to the extent required by the 1940
Act. Subject to Owner approval, if required, Hartford also reserves the right to
end the registration under the 1940 Act of the Separate Account or any other
separate accounts of which it is the depositor which may fund the Group
Policies.
VOTING RIGHTS
In accordance with its view of presently applicable law, Hartford will vote
the shares of the Funds at regular and special meetings of the shareholders of
the Funds in accordance with instructions from Owners (or the assignee of the
Certificates, as the case may be) having a voting interest in the Separate
Account. The number of shares held in the Separate Account which are
attributable to each Owner is determined by dividing the Owner's interest in
each Investment Division by the net asset value of the applicable shares of the
Funds. Hartford will vote shares for which no instructions have been given and
shares which are not attributable to Owners (i.e., shares owned by Hartford) in
the same proportion as it votes shares for which it has received instructions.
If the 1940 Act or any rule promulgated thereunder should be amended, however,
or if Hartford's present interpretation should change and, as a result, Hartford
determines it is permitted to vote the shares of the Funds in its own right, it
may elect to do so.
The voting interests of the Owners (or the assignees) in the Funds will be
determined as follows: Owners may cast one vote for each full or fractional
Accumulation Unit owned under their respective Certificates and allocated to an
Investment Division the assets of which are invested in the particular Fund on
the record date for the shareholder meeting for that Fund. If, however, an Owner
has taken a Loan secured by the Certificate, amounts transferred from the
Investment Division(s) to the Loan Account(s) in connection with the Loan (see
"Detailed Description of Certificate Benefits and Provisions -- Loans," page 15)
will not be considered in determining the voting interests of the Owner. Owners
should review the prospectuses for the Funds which accompany this Prospectus to
determine matters on which shareholders may vote.
Hartford may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that the shares be
voted so as to cause a change in the sub-classification or investment objective
of one or more of the Funds or to approve or disapprove an investment advisory
policy for the Funds. In addition, Hartford itself may disregard voting
instructions in favor of changes initiated by an Owner in the investment policy
or the investment adviser of the Funds if Hartford reasonably disapproves of
such changes. A change would be disapproved only if the proposed change is
contrary to state law or prohibited by state regulatory authorities. In the
event Hartford does disregard voting instructions, a summary of that action and
the reasons for such action will be included in the next periodic report to
Owners.
OUR RIGHTS
We reserve the right to take certain actions in connection with Our
operations and the operations of the Separate Account. These actions will be
taken in accordance with applicable laws (including obtaining any required
approval of the SEC). If necessary, We will seek approval by Owners.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 21
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Specifically, We reserve the right to:
- - Add or remove any Investment Division;
- - Create new separate accounts;
- - Combine the Separate Account with one or more other separate accounts;
- - Operate the Separate Account as a management investment company under the 1940
Act or in any other form permitted by law;
- - Deregister the Separate Account under the 1940 Act;
- - Manage the Separate Account under the direction of a committee or discharge
such committee at any time;
- - Transfer the assets of the Separate Account to one or more other separate
accounts; and
- - Restrict or eliminate any of the voting rights of Owners or other persons who
have voting rights as to the Separate Account.
Hartford also reserves the right to change the name of the Separate Account.
We have reserved all rights to the name of Hartford Life and Annuity
Insurance Company or any part of it. We may allow the Separate Account and other
entities to use Our name or part of it, but We may also withdraw this right.
STATEMENTS TO OWNERS
We will send You a statement at least once each Coverage Year, showing:
(a) the current Cash Value, Cash Surrender Value and Face Amount;
(b) the premiums paid, Monthly Deduction Amounts and Loans since the last
report;
(c) the amount of any outstanding Debt;
(d) notifications required by the provisions of the Certificate; and
(e) any other information required by the Insurance Department of the State
where the Certificate was delivered.
LIMIT ON RIGHT TO CONTEST
Hartford may not contest the validity of the Certificate after it has been
in effect during the Insured's lifetime for two years from the Issue Date. If
the Certificate is reinstated, the two-year period is measured from the date of
reinstatement. Any increase in the Face Amount as a result of a premium payment
is contestable for two years from its effective date. In addition, if the
Insured commits suicide in the two-year period, or such period as specified in
state law, the Death Benefit payable will be limited to the premiums paid less
any outstanding Debt and partial withdrawals.
MISSTATEMENT AS TO AGE OR SEX
If the age or sex of the Insured is incorrectly stated, the amount of all
benefits payable will be appropriately adjusted, as specified in the
Certificate.
ASSIGNMENT
The Certificate may be assigned as collateral for a loan or other
obligation. Hartford is not responsible for any payment made or action taken
before receipt of written notice of such assignment. Proof of interest must be
filed with any claim under a collateral assignment.
DIVIDENDS
No dividends will be paid under the Certificates.
EXPERIENCE CREDITS
The Certificates issued under a Group Policy may be eligible for experience
credits due to administrative savings. The amount of any experience credit may
be paid in cash or applied to and used to increase the Investment Value.
SUPPLEMENTAL BENEFITS
The following supplemental benefit may in the future be included in a
Certificate, subject to the restrictions and limitations set forth therein.
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 26.
<PAGE>
22 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
POSITION WITH HARTFORD; OTHER BUSINESS PROFESSION, VOCATION OR EMPLOYMENT
NAME, AGE YEAR OF ELECTION FOR PAST 5 YEARS; OTHER DIRECTORSHIPS
- -------------------------------- ------------------------------------- -----------------------------------------------------------
<S> <C> <C>
Bossen, Wendell J., 64 Vice President, 1995** Vice President (1992-Present), Hartford Life and Accident
Insurance Company; Vice President (1992-Present),
Hartford Life Insurance Company; President
(1992-Present), International Corporate Marketing Group,
Inc.
Boyko, Gregory A., 46 Senior Vice President, Chief Vice President & Controller (1995-1997), Hartford; Director
Financial Officer & (1997-Present); Senior Vice President, Chief Financial
Treasurer, 1997 Officer & Treasurer (1997-Present); Vice President &
Director, 1997* Controller (1995-1997), Hartford Life and Accident
Insurance Company; Director (1997-Present); Senior Vice
President, Chief Financial Officer & Treasurer
(1997-Present); Vice President and Controller
(1995-1997), Hartford Life Insurance Company; Senior Vice
President, Chief Financial Officer & Treasurer
(1997-Present), Hartford Life, Inc.; Chief Financial
Officer (1994-1995) IMG American Life; Senior Vice
President (1992-1994), Connecticut Mutual Life Insurance
Company.
Cummins, Peter W., 60 Senior Vice President, 1997 Vice President (1993-1997), Hartford; Senior Vice
President, (1997-Present); Vice President (1989-1997),
Hartford Life and Accident Insurance Company; Senior Vice
President (1997-Present); Vice President (1989-1997);
Senior Vice President (1997-Present); Vice President
(1989-1997), Hartford Life Insurance Company.
deRaismes, Ann M., 47 Senior Vice President, 1997 Vice President (1994-1997), Hartford; Senior Vice President
Director of Human Resources, (1997-Present); Vice President (1994-1997); Assistant
1994 Vice President (1992-1994); Director of Human Resources
(1991-Present), Hartford Life and Accident Insurance
Company; Senior Vice President (1997-Present); Vice
President (1994-1997); Assistant Vice President
(1992-1994); Director of Human Resources (1991-Present),
Hartford Life Insurance Company; Vice President, Human
Resources (1997-Present), Hartford Life, Inc.
Dooley, James R., 61 Vice President, 1993 Director, Information Services (1973-1997), Hartford Life
Insurance Company.
Fitch, Timothy M., 45 Vice President, 1995 Vice President, (1995-Present); Actuary (1994-Present)
Actuary, 1997 Assistant Vice President (1992-1995), Hartford Life and
Accident Insurance Company; Vice President
(1995-Present); Actuary (1994-Present); Assistant Vice
President (1992-1995), Hartford Life Insurance Company.
Foy, David T., 31 Vice President, 1998 Assistant Vice President (1995-1998), Hartford; Vice
President (1998-Present); Assistant Vice President
(1995-1998), Hartford Life Insurance Company.
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 23
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITION WITH HARTFORD; OTHER BUSINESS PROFESSION, VOCATION OR EMPLOYMENT
NAME, AGE YEAR OF ELECTION FOR PAST 5 YEARS; OTHER DIRECTORSHIPS
- -------------------------------- ------------------------------------- -----------------------------------------------------------
<S> <C> <C>
Garrett, J. Richard, 53 Vice President, 1994 Treasurer (1994-1997), Hartford; Vice President
Assistant Treasurer, 1997 (1993-Present); Assistant Treasurer (1997-Present);
Treasurer (1984-1997), Hartford Life and Accident
Insurance Company; Vice President, (1993-Present);
Assistant Treasurer (1997-Present); Treasurer
(1986-1997), Hartford Life Insurance Company; Vice
President (1997-Present), Hartford Life, Inc.
Gillette, Donald J., 52 Vice President, 1997 Assistant Vice President, (1995-1997), Hartford; Assistant
Vice President (1995-1997), Hartford Life and Accident
Insurance Company; Assistant Vice President
(1995-Present), Hartford Life Insurance Company.
Godfrey, III, William A., 41 Senior Vice President, 1997 Senior Vice President (1997-Present), Hartford; Senior Vice
President (1997-Present), Hartford Life and Accident
Insurance Company; Vice President Information Technology
(1997-Present), Hartford Life, Inc.
Godkin, Lynda, 44 Senior Vice President, 1997 Assistant General Counsel and Secretary (1994-1995),
General Counsel, 1996 Hartford; Director (1997-Present); Senior Vice President
Corporate Secretary, 1996 (1997-Present); General Counsel (1996-Present); Corporate
Director, 1997* Secretary (1995-Present); Associate General Counsel
(1995-1996); Assistant General Counsel and Secretary
(1994-1995); Counsel (1990-1994), Hartford Life and
Accident Insurance Company; Senior Vice President
(1997-Present); General Counsel (1996-Present); Corporate
Secretary (1995-Present); Director (1997-Present);
Associate General Counsel (1995-1996); Assistant General
Counsel and Secretary (1994-1995); Counsel (1990-1994),
Hartford Life Insurance Company; Vice President and
General Counsel (1997-Present), Hartford Life, Inc.
Grady, Lois W., 53 Senior Vice President, 1998 Senior Vice President (1998-Present); Vice President
Vice President, 1994 (1993-1997); Assistant Vice President (1987-1993),
Hartford Life and Accident Insurance Company; Senior Vice
President (1998-Present); Vice President (1993-1997);
Assistant Vice President (1987-1993), Hartford Life
Insurance Company.
Graham, Christopher, 47 Vice President, 1997
Hunt, Mark E., 37 Vice President, 1998 Assistant Vice President (1997-1998), Hartford; Vice
President (1998-Present), Hartford Life and Accident
Insurance Company.
Joyce, Stephen T., 39 Vice President, 1997 Assistant Vice President (1995-1997), Hartford; Assistant
Vice President (1994-1997), Hartford Life and Accident
Insurance Company; Vice President (1997-Present);
Assistant Vice President (1994-1997), Hartford Life
Insurance Company.
Keeler, Michael D., 37 Vice President, 1998 Vice President (1998-Present); Hartford Life and Accident
Insurance Company.
</TABLE>
<PAGE>
24 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>
Kerzner, Robert A., 46 Senior Vice President, 1998 Senior Vice President (1998-Present); Vice President
Vice President, 1997 (1994-1998), Hartford; Senior Vice President
(1998-Present); Vice President (1994-1997); Regional Vice
President (1991-1994), Hartford Life Insurance Company.
Levenson, David N., 31 Vice President, 1998 Assistant Vice President (1997-1998), Hartford.
Malchodi, Jr., William B., 50 Vice President, 1994 [Director of Taxes (1992-1998), Hartford;] Vice President
Director of Taxes, 1992 [delete?] (1994-Present); Director of Taxes (1992-[1998] Present),
Hartford Life and Accident Insurance Company; Vice
President (1994-Present); Director of Taxes
(1991-Present), Hartford Life Insurance Company.
Marra, Thomas M., 38 Executive Vice President, 1996 Senior Vice President (1993-1996); Director of Individual
Director, Individual Life Annuities (1991-1993), Hartford; Director (1994-Present);
and Annuity Division, 1993 Executive Vice President (1995-Present); Director,
Director, 1994* Individual Life and Annuity Division (1994-Present);
Senior Vice President (1994-1995); Vice President
(1989-1994); Actuary (1987-1997), Hartford Life and
Accident Insurance Company; Director (1994-Present);
Executive Vice President (1995-Present); Director,
Individual Life and Annuity Division (1994-Present);
Senior Vice President (1994-1995); Vice President
(1989-1994); Actuary (1987-1995), Hartford Life Insurance
Company; Executive Vice President, Individual Life and
Annuities (1997-Present), Hartford Life, Inc.
Matthieson, Steven L., 53 Vice President, 1984 Director of New Business (1984-1997), Hartford.
O'Halloran, C. Michael, 51 Vice President, 1997 Vice President (1997-Present), Hartford Life and Accident
Insurance Company; Vice President (1997-Present),
Hartford Life Insurance Company; Corporate Secretary
(1997-Present), Hartford Life, Inc.; Senior Associate
General Counsel (1988-Present), Director of Corporate Law
(1994-Present), The Hartford Financial Services Group.
O'Sullivan, Daniel E., 43 Vice President, 1998 Vice President (1998-Present), Hartford; Vice President
(1988-Present), Hartford Life Insurance Company.
Raymond, Craig R., 37 Senior Vice President, 1997 Vice President (1993-1997); Assistant Vice President
Chief Actuary, 1994 (1992-1993); Actuary (1989-1994), Hartford; Senior Vice
President (1997-Present); Chief Actuary (1995-Present);
Vice President (1993-1997); Actuary (1990-1995), Hartford
Life and Accident Insurance Company; Senior Vice
President (1997-Present); Chief Actuary (1994-Present);
Vice President (1993-1997); Assistant Vice President
(1992-1993); Actuary (1989-1994), Hartford Life Insurance
Company; Vice President and Chief Actuary (1997-Present),
Hartford Life, Inc.
Schrandt, David T., 50 Vice President, 1987 Treasurer (1987-1997); Controller (1987-1997), Hartford.
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 25
- --------------------------------------------------------------------------------
<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>
Smith, Lowndes A., 58 President, 1989 Chief Operating Officer (1989-1997), Hartford; Director
Chief Executive Officer, 1997 (1981-Present); President (1989-Present); Chief Executive
Director, 1985* Officer (1997-Present); Chief Operating Officer
(1989-1997), Hartford Life and Accident Insurance
Company; Director (1981-Present); President
(1989-Present), Chief Executive Officer (1997-Present);
Chief Operating Officer (1989-1997), Hartford Life
Insurance Company; Chief Executive Officer and President
and Director (1997-Present), Hartford Life, Inc.
Welsh, Walter C., 51 Senior Vice President, 1997 Senior Vice President (1997-Present); Vice President
(1994-1997); Assistant Vice President (1992-1995),
Hartford Life and Accident Insurance Company; Senior Vice
President (1997-Present); Vice President (1995-1997);
Assistant Vice President (1992-1995), Hartford Life
Insurance Company; Vice President, Government Affairs
(1997-Present), Hartford Life, Inc.
Znamierowski, David M., 38 Senior Vice President, 1997 Director (1998-Present); Senior Vice President
Director, 1998 (1997-Present), Hartford Life and Accident Insurance
Company; Director (1998-Present); Senior Vice President
(1997-Present); Director, Risk Management Strategy
(1996-Present); Vice President (1997), Hartford Life
Insurance Company; Vice President, Investment Strategy
(1997-Present), Hartford Life, Inc.; Vice President,
Investment Strategy & Policy, Aetna Life and Casualty
Company.
- ---------
* Denotes date of election to Board of Directors of Hartford.
** Affiliated Company of The Hartford Financial Services Group, Inc.
</TABLE>
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
DISTRIBUTION OF
THE GROUP POLICY
Hartford intends to sell the Group Policy in all jurisdictions where it is
licensed to do business. The Group Policy 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 Policy. The maximum sales
commission payable to Hartford agents, independent registered insurance brokers,
and other registered broker-dealers is 6% of the premiums paid. In addition,
expense allowances, service fees and asset-based trail commissions may be paid.
The sales representative may be required to return all or a portion of the
commissions paid if a Certificate terminates prior to the second Certificate
Anniversary.
Broker-dealers or financial institutions are compensated according to a
schedule set forth by HESCO and any applicable rules or regulations for variable
insurance compensation. Compensation is generally based on premium payments made
by policyholders or contract owners. This compensation is usually paid from the
sales charges described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided.
<PAGE>
26 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
HESCO, its affiliates or Hartford may also make compensation arrangements with
certain broker-dealers or financial institutions based on total sales by the
broker-dealer or financial institution of insurance products. These payments,
which may be different for different broker-dealers or financial institutions,
will be made by HESCO, its affiliates or Hartford out of their own assets and
will not affect the amounts paid by the policyholders or contract owners to
purchase, hold or surrender variable insurance products.
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 OWNER INVOLVED AND THE TYPE OF PLAN UNDER WHICH THE
GROUP POLICY IS PURCHASED, LEGAL AND TAX ADVICE MAY BE NEEDED BY A PERSON,
TRUSTEE OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A GROUP POLICY DESCRIBED
HEREIN.
It should be understood that any detailed description of the Federal income
tax consequences regarding the purchase of the Group Policy 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's understanding of current
Federal income tax laws as they are currently interpreted.
TAXATION OF HARTFORD AND
THE SEPARATE ACCOUNT
The Separate Account is taxed as a part of Hartford which is taxed as a life
insurance company under Part 1 of Subchapter L of Chapter 1 of the Internal
Revenue Code ("Code"). Accordingly, the Separate Account will not be taxed as a
"regulated investment company" under Subchapter M of the Code. Investment income
and realized capital gains on the assets of the Separate Account (the underlying
Investment Divisions) are reinvested and are taken into account in determining
the value of the Accumulation Units (see "Detailed Description of Certificate
Benefits and Provisions -- Values Under the Certificate," on page 13). As a
result, such investment income and realized capital gains are automatically
applied to increase reserves under the Certificate.
Hartford does not expect to incur any Federal income tax on the earnings or
realized capital gains attributable to the Separate Account. Based upon these
expectations, no charge is currently being made to the Separate Account for
Federal income taxes. If Hartford incurs income taxes attributable to the
Separate Account or determines that such taxes will be incurred, it may assess a
charge for taxes against the Separate Account.
INCOME TAXATION OF CERTIFICATE BENEFITS
For Federal income tax purposes, the Certificates should be treated as life
insurance policies under Section 7702 of the Code. The death benefit under a
life insurance policy is excluded from the gross income of the Beneficiary.
Also, a life insurance policy owner is not taxed on increments in the policy
value until the policy is partially or completely surrendered. Section 7702
limits the amount of premiums that may be invested in a policy that is treated
as life insurance. Hartford intends to monitor premium levels to assure
compliance with the Section 7702 standards.
During the first fifteen policy years, an "income first" rule generally
applies to any distribution of cash that is required under Code Section 7702
because of a reduction in benefits under the Certificate.
Hartford also believes that any Loan received under a Certificate will be
treated as Debt of the Owner, and that no part of any Loan under a Certificate
will constitute income to the Owner. A surrender or assignment of the
Certificate may have tax consequences depending upon the circumstances. Owners
should consult qualified tax advisers concerning the effect of such changes.
Federal, state, and local estate tax, inheritance, and other tax
consequences of ownership or receipt of Certificate proceeds depend on the
circumstances of each Owner or Beneficiary.
The Maturity Date Extension Rider allows an Owner to extend the Maturity
Date to the date of the death of the Insured. Although Hartford believes that
the Certificate will continue to be treated as a life insurance contract for
federal income tax purposes after the scheduled Maturity Date, due to the lack
of specific guidance on this issue, this result is not certain. If the
Certificate is not treated as a life
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 27
- --------------------------------------------------------------------------------
insurance contract for federal income tax purposes after the Maturity Date,
among other things, the Death Proceeds may be taxable to the recipient. The
Owner should consult a competent tax adviser regarding the possible adverse tax
consequences resulting from an extension of the scheduled Maturity Date.
MODIFIED ENDOWMENT CONTRACTS
Code Section 7702A applies an additional test, the "seven-pay" test, to life
insurance contracts. A modified endowment contract is a life insurance policy
which satisfies the Section 7702 definition of life insurance but fails the
seven-pay test of Section 7702A. A policy fails the seven-pay test if the
accumulated amount paid into the Certificate at any time during the first seven
Coverage Years exceeds the sum of the net level premiums that would have been
paid up to that point if the Certificate provided for paid-up future benefits
after the payment of seven level annual premiums. Computational rules for the
seven-pay test are described in Section 7702A(c).
A policy that is classified as a modified endowment contract is eligible for
certain aspects of the beneficial tax treatment accorded to life insurance. That
is, the death benefit is excluded from income and increments in value are not
subject to current taxation. However, withdrawals and loans from a modified
endowment policy are treated first as income, then as a recovery of basis.
Taxable withdrawals are subject to a 10% additional tax, with certain
exceptions. Generally, only distributions and loans made in the first year in
which a policy becomes a modified endowment policy, and in subsequent years, are
taxable. However, distributions and loans made in the two years prior to a
policy's failing the seven-pay test are deemed to be in anticipation of failure
and are subject to tax.
If the Certificate satisfies the seven-pay test for seven years,
distributions and loans made thereafter will not be subject to the modified
endowment policy rules, unless the Certificate is changed materially. The
seven-pay test will be applied anew at any time the Certificate undergoes a
material change, which includes an increase in the Face Amount.
All modified endowment policies that are issued within any calendar year to
the same policy owner by one company or its affiliates shall be treated as one
modified endowment policy for the purpose of determining the taxable portion of
any loan or distribution.
Hartford has instituted procedures to monitor whether a Certificate may
become a modified endowment contract after issue.
DIVERSIFICATION REQUIREMENTS
Section 817 of the Code provides that a variable life insurance policy
(other than a pension plan policy) will not be treated as a life insurance
policy for any period during which the investments made by the separate account
underlying the policy are not adequately diversified in accordance with
regulations prescribed by the Treasury. If a policy is not treated as a life
insurance policy, the policy owner will be subject to income tax on the annual
increases in cash value. The Treasury has issued diversification regulations
which, among other things, generally require that no more than 55% of the value
of the total assets of the segregated asset account (such as the Funds)
underlying a variable contract is represented by any one investment, no more
than 70% is represented by any two investments, no more than 80% is represented
by any three investments, and no more than 90% is represented by any four
investments. In determining whether the diversification standards are met, all
securities of the same issuer, all interests in the same real property project,
and all interests in the same commodity are each treated as a single investment.
In addition, in the case of government securities, each government agency or
instrumentality shall be treated as a separate issuer. If the diversification
standards are not met, non-pension policy owners will be subject to current tax
on the increase in cash value in the policy.
A separate account must be in compliance with the diversification standards
on the last day of each calendar quarter or within 30 days after the quarter
ends. If an insurance company inadvertently fails to meet the diversification
requirements, Hartford may comply within a reasonable period and avoid the
taxation of policy income on an ongoing basis. However, either Hartford or 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.
<PAGE>
28 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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 report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report. Reference is made to the report on the
statutory-basis financial statements of Hartford Life and Annuity Insurance
Company (formerly 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, and are not presented in accordance with generally accepted
accounting principles. The principal business address of Arthur Andersen LLP is
One Financial Plaza, Hartford, Connecticut 06103.
The hypothetical illustrations included in this Prospectus and Registration
Statement have been approved by Pauline Gyllenhammer, ASA, MAAA, Senior
Actuarial Associate, are included in reliance upon her opinion as to their
reasonableness.
REGISTRATION STATEMENT
A registration statement has been filed with the SEC under the Securities
Act of 1933, as amended. This Prospectus does not contain all information set
forth in the registration statement, its amendments and exhibits, to all of
which reference is made for further information concerning the Separate Account,
Hartford, the Group Policies and the Certificates.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 29
- --------------------------------------------------------------------------------
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFIT, CASH VALUE
AND CASH SURRENDER VALUE
The following tables illustrate how the Death Benefit, Cash Value and Cash
Surrender Value of a Group Policy may change with the investment experience of
the Separate Account. The tables show how the Death Benefit, Cash Value and Cash
Surrender Value of a Certificate issued to an Insured of a given age would vary
over time if the investment return on the assets held in each Portfolio were a
uniform, gross annual rate of 0%, 6% and 12%. The Death Benefit, Cash Value and
Cash Surrender Value would be different from those shown if the gross annual
investment returns averaged 0%, 6% and 12% over a period of years, but
fluctuated above and below those averages for individual Coverage Years. The
tables assume that no Loans are made and that no partial withdrawals have been
made. The tables are also based on the assumption that the Owner has not
requested an increase or decrease in the Face Amount and that no transfers have
been made in any Coverage Years.
The tables on pages 30 to 41 illustrate a Certificate issued to a Male
Insured, Age 45 in the Medical Non-Smoker Class with an Initial Face Amount of
$250,000. The Death Benefit, Cash Value and Cash Surrender Value would be lower
if the Insured was a smoker or in a special class since the cost of insurance
charges would increase.
The tables reflect the fact that the net return on the assets held in the
Investment Divisions is lower than the gross after-tax return of the Portfolios.
This is because these tables assume an investment management fee and other
estimated Portfolio expenses totaling 0.81%. The 0.81% figure is based on an
average of the current management fees and expenses of the available 14
Portfolios, taking into account any applicable expense caps or reimbursement
arrangements. Actual fees and expenses of the Portfolios associated with a
Certificate may be more or less than 0.81%, will vary from year to year, and
will depend on how the Cash Value is allocated.
As their headings indicate, the tables reflect the deductions of current
contractual charges and guaranteed contractual charges for a single gross
interest rate. These charges include the front-end sales load, the daily charge
to the Separate Account for assuming mortality and expense risks, and the
monthly administrative expense and cost of insurance charges. All tables assume
a charge of 2.00% for taxes attributable to premiums, a 1.25% charge for the
federal DAC tax and reflect the fact that no charges against the Separate
Account are currently made for federal, state or local taxes attributable to the
Group Policy or Certificate.
Each table also shows the amount to which the premiums would accumulate if
an amount equal to those premiums were invested to earn interest, after taxes,
at 5% compounded annually.
Upon request, Hartford will furnish a comparable illustration based on a
proposed Certificate's specific circumstances.
<PAGE>
30 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% (-0.81% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ----------------------------------- -----------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ---------- --------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 14,807 12,243 12,243 250,000 11,001 11,001 250,000
2 30,355 24,227 24,227 250,000 21,808 21,808 250,000
3 46,680 35,959 35,959 250,000 32,425 32,425 250,000
4 63,821 47,475 47,475 250,000 42,857 42,857 250,000
5 81,819 58,793 58,793 250,000 53,105 53,105 250,000
6 100,717 70,028 70,028 250,000 63,174 63,174 250,000
7 120,560 81,092 81,092 250,000 73,062 73,062 250,000
8 126,588 79,449 79,449 250,000 70,475 70,475 250,000
9 132,917 77,785 77,785 250,000 67,769 67,769 250,000
10 139,563 76,088 76,088 250,000 64,924 64,924 250,000
11 146,541 74,452 74,452 250,000 61,922 61,922 250,000
12 153,868 72,746 72,746 250,000 58,744 58,744 250,000
13 161,561 70,949 70,949 250,000 55,376 55,376 250,000
14 169,639 69,054 69,054 250,000 51,798 51,798 250,000
15 178,121 67,055 67,055 250,000 47,985 47,985 250,000
16 187,027 64,877 64,877 250,000 43,900 43,900 250,000
17 196,378 62,577 62,577 250,000 39,501 39,501 250,000
18 206,197 60,138 60,138 250,000 34,732 34,732 250,000
19 216,507 57,545 57,545 250,000 29,525 29,525 250,000
20 227,332 54,781 54,781 250,000 23,808 23,808 250,000
25 290,140 37,433 37,433 250,000 -- -- --
30 370,300 10,535 10,535 250,000 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 0%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 31
- --------------------------------------------------------------------------------
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% (5.19% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ------------------------------------- -------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- --------------- ----------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 14,807 12,991 12,991 250,000 11,702 11,702 250,000
2 30,355 26,486 26,486 250,000 23,901 23,901 250,000
3 46,680 40,513 40,513 250,000 36,625 36,625 250,000
4 63,821 55,132 55,132 250,000 49,908 49,908 250,000
5 81,819 70,388 70,388 250,000 63,779 63,779 250,000
6 100,717 86,423 86,423 250,000 78,277 78,277 250,000
7 120,560 103,186 103,186 250,000 93,435 93,435 250,000
8 126,588 107,419 107,419 250,000 96,259 96,259 250,000
9 132,917 111,819 111,819 250,000 99,117 99,117 250,000
10 139,563 116,388 116,388 250,000 101,999 101,999 250,000
11 146,541 121,300 121,300 252,726 104,901 104,901 250,000
12 153,868 126,381 126,381 256,279 107,819 107,819 250,000
13 161,561 131,626 131,626 259,894 110,753 110,753 250,000
14 169,639 137,040 137,040 263,574 113,701 113,701 250,000
15 178,121 142,631 142,631 267,324 116,658 116,658 250,000
16 187,027 148,361 148,361 271,082 119,615 119,615 250,000
17 196,378 154,281 154,281 274,936 122,558 122,558 250,000
18 206,197 160,394 160,394 278,907 125,472 125,472 250,000
19 216,507 166,708 166,708 283,020 128,334 128,334 250,000
20 227,332 173,225 173,225 287,288 131,126 131,126 250,000
25 290,140 209,003 209,003 310,961 143,487 143,487 250,000
30 370,300 250,496 250,496 339,183 150,250 150,250 250,000
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 6%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
32 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% (11.19% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ------------------------------------------- ---------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- --------------- ------------- ------------ ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 14,807 13,740 13,740 250,000 12,403 12,403 250,000
2 30,355 28,835 28,835 250,000 26,079 26,079 250,000
3 46,680 45,436 45,436 250,000 41,172 41,172 250,000
4 63,821 63,742 63,742 250,000 57,848 57,848 250,000
5 81,819 83,954 83,954 250,000 76,289 76,289 250,000
6 100,717 106,383 106,383 254,340 96,703 96,703 250,000
7 120,560 131,081 131,081 304,360 119,174 119,174 276,869
8 126,588 144,289 144,289 325,493 130,169 130,169 293,813
9 132,917 158,810 158,810 348,201 142,131 142,131 311,820
10 139,563 174,766 174,766 372,606 155,133 155,133 330,956
11 146,541 192,566 192,566 399,356 169,259 169,259 351,291
12 153,868 212,116 212,116 428,150 184,599 184,599 372,899
13 161,561 233,565 233,565 459,046 201,258 201,258 395,860
14 169,639 257,095 257,095 492,200 219,345 219,345 420,258
15 178,121 282,906 282,906 527,787 238,975 238,975 446,181
16 187,027 311,122 311,122 565,853 260,267 260,267 473,725
17 196,378 342,063 342,063 606,761 283,340 283,340 502,991
18 206,197 375,983 375,983 650,776 308,319 308,319 534,086
19 216,507 413,161 413,161 698,191 335,326 335,326 567,125
20 227,332 453,900 453,900 749,306 364,498 364,498 602,229
25 290,140 723,462 723,462 1,071,425 548,809 548,809 813,539
30 370,300 1,145,374 1,145,374 1,543,736 815,054 815,054 1,099,748
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A 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>
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 0.00% (-0.81% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ----------------------------------- -----------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- --------------- ---------- --------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 14,807 12,232 12,232 262,265 10,949 10,949 261,057
2 30,355 24,185 24,185 274,241 21,647 21,647 271,775
3 46,680 35,856 35,856 285,935 32,090 32,090 282,240
4 63,821 47,275 47,275 297,376 42,277 42,277 292,448
5 81,819 58,459 58,459 308,579 52,200 52,200 302,393
6 100,717 69,557 69,557 319,684 61,855 61,855 312,070
7 120,560 80,448 80,448 330,592 71,223 71,223 321,462
8 126,588 78,623 78,623 328,769 68,096 68,096 318,345
9 132,917 76,763 76,763 326,912 64,828 64,828 315,089
10 139,563 74,855 74,855 325,008 61,395 61,395 311,670
11 146,541 72,984 72,984 323,134 57,786 57,786 308,074
12 153,868 71,015 71,015 321,173 53,981 53,981 304,286
13 161,561 68,922 68,922 319,091 49,974 49,974 300,296
14 169,639 66,699 66,699 316,879 45,751 45,751 296,090
15 178,121 64,342 64,342 314,532 41,293 41,293 291,652
16 187,027 61,754 61,754 311,963 36,571 36,571 286,952
17 196,378 59,016 59,016 309,238 31,551 31,551 281,957
18 206,197 56,115 56,115 306,350 26,189 26,189 276,623
19 216,507 53,037 53,037 303,287 20,434 20,434 270,900
20 227,332 49,765 49,765 300,031 14,237 14,237 264,740
25 290,140 29,689 29,689 280,065 -- -- --
30 370,300 745 745 251,295 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 0%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
34 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% (5.19% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ------------------------------------- -------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- --------------- ----------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 14,807 12,980 12,980 262,950 11,646 11,646 261,698
2 30,355 26,440 26,440 276,370 23,722 23,722 273,738
3 46,680 40,395 40,395 290,283 36,241 36,241 286,219
4 63,821 54,895 54,895 304,736 49,216 49,216 299,155
5 81,819 69,977 69,977 319,769 62,657 62,657 312,556
6 100,717 85,818 85,818 335,545 76,575 76,575 326,434
7 120,560 102,325 102,325 351,996 90,970 90,970 340,788
8 126,588 106,261 106,261 355,921 92,911 92,911 342,736
9 132,917 110,311 110,311 359,962 94,748 94,748 344,582
10 139,563 114,466 114,466 364,108 96,449 96,449 346,295
11 146,541 118,883 118,883 368,503 97,993 97,993 347,852
12 153,868 123,381 123,381 372,994 99,352 99,352 349,226
13 161,561 127,934 127,934 377,542 100,506 100,506 350,398
14 169,639 132,537 132,537 382,141 101,429 101,429 351,341
15 178,121 137,187 137,187 386,786 102,089 102,089 352,023
16 187,027 141,783 141,783 391,387 102,439 102,439 352,400
17 196,378 146,406 146,406 396,008 102,428 102,428 352,419
18 206,197 151,039 151,039 400,640 101,988 101,988 352,016
19 216,507 155,667 155,667 405,268 101,043 101,043 351,113
20 227,332 160,269 160,269 409,873 99,514 99,514 349,634
25 290,140 181,887 181,887 431,540 80,407 80,407 330,875
30 370,300 197,395 197,395 447,193 31,260 31,260 282,386
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 6%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 35
- --------------------------------------------------------------------------------
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% (11.19% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ------------------------------------------- ---------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- --------------- ------------- ------------ ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 14,807 13,728 13,728 263,632 12,344 12,344 262,337
2 30,355 28,785 28,785 278,573 25,883 25,883 275,771
3 46,680 45,302 45,302 294,964 40,734 40,734 290,508
4 63,821 63,463 63,463 312,981 57,029 57,029 306,677
5 81,819 83,450 83,450 332,809 74,906 74,906 324,416
6 100,717 105,612 105,612 354,781 94,523 94,523 343,882
7 120,560 130,045 130,045 379,016 116,039 116,039 365,232
8 126,588 142,962 142,962 391,831 125,962 125,962 375,087
9 132,917 157,167 157,167 405,924 136,727 136,727 385,778
10 139,563 172,780 172,780 421,413 148,393 148,393 397,366
11 146,541 190,205 190,205 438,679 161,041 161,041 409,928
12 153,868 209,354 209,354 457,678 174,750 174,750 423,545
13 161,561 230,381 230,381 478,541 189,622 189,622 438,316
14 169,639 253,478 253,478 501,458 205,760 205,760 454,343
15 178,121 278,858 278,858 526,639 223,274 223,274 471,737
16 187,027 306,655 306,655 557,729 242,275 242,275 490,608
17 196,378 337,151 337,151 598,048 262,877 262,877 511,070
18 206,197 370,583 370,583 641,430 285,197 285,197 533,241
19 216,507 407,227 407,227 688,162 309,356 309,356 557,240
20 227,332 447,380 447,380 738,541 335,491 335,491 583,202
25 290,140 713,063 713,063 1,056,024 501,962 501,962 748,573
30 370,300 1,128,904 1,128,904 1,521,539 745,274 745,274 1,005,595
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 12%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
36 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% (-0.81% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ----------------------------------- -----------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- --------------- ---------- --------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,300 5,051 5,051 250,000 3,963 3,963 250,000
2 12,915 9,935 9,935 250,000 7,797 7,797 250,000
3 19,861 14,652 14,652 250,000 11,500 11,500 250,000
4 27,154 19,234 19,234 250,000 15,070 15,070 250,000
5 34,812 23,695 23,695 250,000 18,500 18,500 250,000
6 42,853 28,169 28,169 250,000 21,789 21,789 250,000
7 51,296 32,547 32,547 250,000 24,919 24,919 250,000
8 60,161 36,947 36,947 250,000 28,001 28,001 250,000
9 69,469 41,242 41,242 250,000 30,898 30,898 250,000
10 79,242 45,425 45,425 250,000 33,595 33,595 250,000
11 89,504 49,554 49,554 250,000 36,085 36,085 250,000
12 100,279 53,547 53,547 250,000 38,355 38,355 250,000
13 111,593 57,387 57,387 250,000 40,404 40,404 250,000
14 123,473 61,076 61,076 250,000 42,219 42,219 250,000
15 135,947 64,615 64,615 250,000 43,790 43,790 250,000
16 149,044 67,938 67,938 250,000 45,092 45,092 250,000
17 162,796 71,110 71,110 250,000 46,098 46,098 250,000
18 177,236 74,124 74,124 250,000 46,771 46,771 250,000
19 192,398 76,977 76,977 250,000 47,065 47,065 250,000
20 208,318 79,659 79,659 250,000 46,936 46,936 250,000
25 300,684 90,118 90,118 250,000 38,318 38,318 250,000
30 418,569 94,135 94,135 250,000 7,660 7,660 250,000
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 0%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 37
- --------------------------------------------------------------------------------
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% (5.19% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ------------------------------------- -------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- --------------- ----------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,300 5,364 5,364 250,000 4,238 4,238 250,000
2 12,915 10,874 10,874 250,000 8,595 8,595 250,000
3 19,861 16,535 16,535 250,000 13,074 13,074 250,000
4 27,154 22,385 22,385 250,000 17,680 17,680 250,000
5 34,812 28,447 28,447 250,000 22,411 22,411 250,000
6 42,853 34,866 34,866 250,000 27,271 27,271 250,000
7 51,296 41,547 41,547 250,000 32,253 32,253 250,000
8 60,161 48,629 48,629 250,000 37,479 37,479 250,000
9 69,469 55,999 55,999 250,000 42,824 42,824 250,000
10 79,242 63,663 63,663 250,000 48,282 48,282 250,000
11 89,504 71,730 71,730 250,000 53,856 53,856 250,000
12 100,279 80,115 80,115 250,000 59,547 59,547 250,000
13 111,593 88,824 88,824 250,000 65,366 65,366 250,000
14 123,473 97,881 97,881 250,000 71,319 71,319 250,000
15 135,947 107,310 107,310 250,000 77,413 77,413 250,000
16 149,044 117,090 117,090 250,000 83,650 83,650 250,000
17 162,796 127,302 127,302 250,000 90,029 90,029 250,000
18 177,236 137,977 137,977 250,000 96,549 96,549 250,000
19 192,398 149,139 149,139 253,194 103,206 103,206 250,000
20 208,318 160,701 160,701 266,517 110,004 110,004 250,000
25 300,684 224,815 224,815 334,488 146,836 146,836 250,000
30 418,569 300,290 300,290 406,606 191,363 191,363 259,401
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 6%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
38 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% (11.19% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ----------------------------------------- ---------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ------------ ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,300 5,678 5,678 250,000 4,513 4,513 250,000
2 12,915 11,852 11,852 250,000 9,427 9,427 250,000
3 19,861 18,573 18,573 250,000 14,783 14,783 250,000
4 27,154 25,933 25,933 250,000 20,629 20,629 250,000
5 34,812 34,016 34,016 250,000 27,012 27,012 250,000
6 42,853 43,034 43,034 250,000 33,993 33,993 250,000
7 51,296 52,977 52,977 250,000 41,625 41,625 250,000
8 60,161 64,077 64,077 250,000 50,110 50,110 250,000
9 69,469 76,324 76,324 250,000 59,405 59,405 250,000
10 79,242 89,836 89,836 250,000 69,597 69,597 250,000
11 89,504 104,899 104,899 250,000 80,797 80,797 250,000
12 100,279 121,552 121,552 250,000 93,131 93,131 250,000
13 111,593 139,896 139,896 274,950 106,752 106,752 250,000
14 123,473 160,042 160,042 306,395 121,831 121,831 250,000
15 135,947 182,161 182,161 339,838 138,529 138,529 258,642
16 149,044 206,378 206,378 375,350 156,686 156,686 285,192
17 162,796 232,951 232,951 413,216 176,392 176,392 313,134
18 177,236 262,099 262,099 453,659 197,757 197,757 342,565
19 192,398 294,065 294,065 496,932 220,893 220,893 373,589
20 208,318 329,107 329,107 543,295 245,923 245,923 406,317
25 300,684 561,269 561,269 831,223 404,678 404,678 599,884
30 418,569 925,165 925,165 1,246,938 635,130 635,130 856,978
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A 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>
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 0.00% (-0.81% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS --------------------------------------- -------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- --------------- ----------- ------------ ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,300 5,046 5,046 255,071 3,942 3,942 254,042
2 12,915 9,918 9,918 259,957 7,736 7,736 257,847
3 19,861 14,610 14,610 264,663 11,375 11,375 261,499
4 27,154 19,152 19,152 269,218 14,856 14,856 264,994
5 34,812 23,558 23,558 273,636 18,171 18,171 268,322
6 42,853 27,977 27,977 278,053 21,313 21,313 271,478
7 51,296 32,286 32,286 282,371 24,262 24,262 274,444
8 60,161 36,600 36,600 286,694 27,123 27,123 277,322
9 69,469 40,790 40,790 290,895 29,756 29,756 279,974
10 79,242 44,844 44,844 294,961 32,139 32,139 282,377
11 89,504 48,812 48,812 298,936 34,260 34,260 284,520
12 100,279 52,607 52,607 302,745 36,103 36,103 286,386
13 111,593 56,201 56,201 306,356 37,662 37,662 287,969
14 123,473 59,592 59,592 309,764 38,924 38,924 289,255
15 135,947 62,776 62,776 312,964 39,872 39,872 290,229
16 149,044 65,656 65,656 315,869 40,478 40,478 290,863
17 162,796 68,316 68,316 318,548 40,709 40,709 291,125
18 177,236 70,742 70,742 320,993 40,521 40,521 290,972
19 192,398 72,922 72,922 323,193 39,866 39,866 290,356
20 208,318 74,839 74,839 325,132 38,695 38,695 289,228
25 300,684 79,716 79,716 330,147 23,788 23,788 274,581
30 418,569 74,155 74,155 324,784 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-HEND
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A 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>
40 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% (5.19% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ------------------------------------ -----------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- --------------- ----------- --------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,300 5,359 5,359 255,358 4,216 4,216 254,295
2 12,915 10,855 10,855 260,842 8,527 8,527 258,598
3 19,861 16,487 16,487 266,462 12,930 12,930 262,993
4 27,154 22,288 22,288 272,249 17,424 17,424 267,480
5 34,812 28,279 28,279 278,224 22,000 22,000 272,049
6 42,853 34,619 34,619 284,534 26,654 26,654 276,696
7 51,296 41,197 41,197 291,092 31,367 31,367 281,404
8 60,161 48,145 48,145 298,019 36,248 36,248 286,280
9 69,469 55,344 55,344 305,196 41,156 41,156 291,186
10 79,242 62,789 62,789 312,620 46,067 46,067 296,097
11 89,504 70,572 70,572 320,375 50,966 50,966 300,997
12 100,279 78,593 78,593 328,375 55,830 55,830 305,864
13 111,593 86,833 86,833 336,597 60,648 60,648 310,687
14 123,473 95,296 95,296 345,040 65,400 65,400 315,444
15 135,947 103,985 103,985 353,710 70,062 70,062 320,113
16 149,044 112,809 112,809 362,523 74,595 74,595 324,657
17 162,796 121,857 121,857 371,552 78,954 78,954 329,032
18 177,236 131,121 131,121 380,798 83,083 83,083 333,180
19 192,398 140,597 140,597 390,255 86,912 86,912 337,034
20 208,318 150,274 150,274 399,915 90,373 90,373 340,527
25 300,684 201,045 201,045 450,626 99,809 99,809 350,205
30 418,569 253,188 253,188 502,774 86,277 86,277 337,200
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 6%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 41
- --------------------------------------------------------------------------------
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% (11.19% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS --------------------------------------- -------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- --------------- ----------- ---------- ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,300 5,673 5,673 255,644 4,490 4,490 254,548
2 12,915 11,831 11,831 261,760 9,352 9,352 259,378
3 19,861 18,518 18,518 268,401 14,618 14,618 264,608
4 27,154 25,819 25,819 275,648 20,325 20,325 270,276
5 34,812 33,809 33,809 283,578 26,504 26,504 276,414
6 42,853 42,718 42,718 292,407 33,198 33,198 283,064
7 51,296 52,510 52,510 302,122 40,438 40,438 290,255
8 60,161 63,407 63,407 312,933 48,393 48,393 298,159
9 69,469 75,380 75,380 324,812 56,982 56,982 306,693
10 79,242 88,527 88,527 337,857 66,246 66,246 315,898
11 89,504 103,097 103,097 352,302 76,239 76,239 325,827
12 100,279 119,088 119,088 368,169 87,015 87,015 336,535
13 111,593 136,620 136,620 385,567 98,647 98,647 348,092
14 123,473 155,850 155,850 404,649 111,204 111,204 360,568
15 135,947 176,953 176,953 425,588 124,762 124,762 374,040
16 149,044 200,021 200,021 448,485 139,392 139,392 388,576
17 162,796 225,350 225,350 473,617 155,165 155,165 404,249
18 177,236 253,161 253,161 501,212 172,150 172,150 421,128
19 192,398 283,704 283,704 531,516 190,414 190,414 439,281
20 208,318 317,248 317,248 564,798 210,034 210,034 458,783
25 300,684 541,178 541,178 801,469 332,128 332,128 580,145
30 418,569 893,347 893,347 1,204,054 504,220 504,220 751,288
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A 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>
42
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of ITT Hartford Life
and Annuity Insurance Company:
We have audited the accompanying statutory 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,
1997 and 1996, and the related statutory statements of income, changes in
capital and surplus, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
statutory 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 financial
statements. When statutory 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 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, 1997 and 1996, and the
results of its operations and its cash flows for each of three years in the
period ended December 31, 1997.
However, in our opinion, the statutory financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1997 and 1996, and the results of operations and its cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with statutory accounting practices as described in Note 1.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
January 27, 1998
<PAGE>
43
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
($000)
<S> <C> <C> <C>
Revenues
Premiums and annuity considerations............. $ 296,645 $ 250,244 $ 165,792
Annuity and other fund deposits................. 1,981,246 1,897,347 1,087,661
Net investment income........................... 102,285 98,441 78,787
Commissions and expense allowances on
reinsurance ceded.............................. 396,921 370,637 183,380
Reserve adjustment on reinsurance ceded......... 3,672,076 3,864,395 1,879,785
Other revenues.................................. 288,632 161,906 140,796
---------- ---------- ----------
Total Revenues................................ 6,737,805 6,642,970 3,536,201
---------- ---------- ----------
Benefits and Expenses
Death and annuity benefits...................... 66,013 60,111 53,029
Surrenders and other benefit payments........... 461,733 276,720 221,392
Commissions and other expenses.................. 564,240 491,720 236,202
Increase in aggregate reserves for future
benefits....................................... 33,213 27,351 94,253
Increase in liability for premium and other
deposit funds.................................. 640,006 207,156 460,124
Net transfers to Separate Accounts.............. 4,914,980 5,492,964 2,414,669
---------- ---------- ----------
Total Benefits and Expenses................... 6,680,185 6,556,022 3,479,669
---------- ---------- ----------
Net Gain from Operations Before Federal Income
Taxes............................................ 57,620 86,948 56,532
Federal income tax (benefit) expense............ (14,878) 19,360 14,048
---------- ---------- ----------
Net Gain from Operations.......................... 72,498 67,588 42,484
Net realized capital gains, after tax........... 1,544 407 374
---------- ---------- ----------
Net Income........................................ $ 74,042 $ 67,995 $ 42,858
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these statutory financial
statements.
<PAGE>
44
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------
1997 1996
----------- -----------
($000)
<S> <C> <C>
Assets
Bonds........................................... $ 1,501,311 $ 1,268,480
Common stocks................................... 64,408 44,996
Mortgage loans.................................. 85,103 0
Policy loans.................................... 36,533 28,853
Cash and short-term investments................. 309,432 176,830
Other invested assets........................... 20,942 2,858
----------- -----------
Total cash and invested assets................ 2,017,729 1,522,017
----------- -----------
Investment income due and accrued............... 15,878 14,555
Premium balances receivable..................... 389 373
Receivables from affiliates..................... 1,269 257
Other assets.................................... 22,788 19,099
Separate Account assets......................... 23,208,728 14,619,324
----------- -----------
Total Assets.................................. $25,266,781 $16,175,625
----------- -----------
----------- -----------
Liabilities
Aggregate reserves for future benefits.......... $ 605,183 $ 571,970
Policy and contract claims...................... 5,672 6,806
Liability for premium and other deposit funds... 1,795,149 1,155,143
Asset valuation reserve......................... 13,670 7,442
Payable to affiliates........................... 20,972 10,022
Other liabilities............................... (754,393) (498,195)
Separate Account liabilities.................... 23,208,728 14,619,324
----------- -----------
Total liabilities............................. 24,894,981 15,872,512
----------- -----------
Capital and Surplus
Common stock.................................... 2,500 2,500
Gross paid-in and contributed surplus........... 226,043 226,043
Unassigned funds................................ 143,257 74,570
----------- -----------
Total capital and surplus..................... 371,800 303,113
----------- -----------
Total liabilities, capital and surplus.......... $25,266,781 $16,175,625
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these statutory financial
statements.
<PAGE>
45
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
--------- --------- ---------
($000)
<S> <C> <C> <C>
Capital and surplus -- beginning of year $ 303,113 $ 238,334 $ 91,285
--------- --------- ---------
Net income...................................... 74,042 67,995 42,858
Change in net unrealized capital gains (losses)
on common stocks and other invested assets..... 2,186 (5,171) 1,709
Change in asset valuation reserve............... (6,228) 568 (5,588)
Change in non-admitted assets................... (1,313) 1,387 (1,944)
Aggregate write-ins for surplus (See Note 3).... 0 0 8,080
Dividends to shareholder........................ 0 0 (10,000)
Paid-in surplus................................. 0 0 111,934
--------- --------- ---------
Change in capital and surplus................... 68,687 64,779 147,049
--------- --------- ---------
Capital and surplus -- end of year.............. $ 371,800 $ 303,113 $ 238,334
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these statutory financial
statements.
<PAGE>
46
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
($000)
<S> <C> <C> <C>
Operations
Premiums, annuity considerations and fund
deposits....................................... $ 2,277,874 $ 2,147,627 $ 1,253,511
Investment income............................... 101,991 106,178 78,328
Other income.................................... 4,381,718 4,396,892 2,253,466
----------- ----------- -----------
Total income.................................. 6,761,583 6,650,697 3,585,305
----------- ----------- -----------
Benefits Paid................................... 529,733 338,998 277,965
Federal income taxes (received) paid on
operations..................................... (14,499) 28,857 208,423
Other expenses.................................. 5,754,725 6,254,139 2,664,385
----------- ----------- -----------
Total benefits and expenses..................... 6,269,959 6,621,994 3,150,773
----------- ----------- -----------
Net cash from operations........................ 491,624 28,703 434,532
----------- ----------- -----------
Proceeds from Investments
Bonds........................................... 614,413 871,019 287,941
Common stocks................................... 11,481 72,100 52
Other........................................... 152 10 28
----------- ----------- -----------
Net investment proceeds....................... 626,046 943,129 288,021
----------- ----------- -----------
Taxes Paid on Capital Gains....................... 0 936 226
Paid-In Surplus................................... 0 0 111,934
Other Cash Provided............................. 0 41,998 28,199
----------- ----------- -----------
Total Proceeds................................ 1,117,670 1,012,894 862,460
----------- ----------- -----------
Cost of Investments Acquired
Bonds........................................... 848,267 914,523 720,521
Common stocks................................... 28,302 82,495 35,794
Mortgage loans.................................. 85,103 0 0
Miscellaneous applications...................... 18,548 130 2,146
----------- ----------- -----------
Total Investments Acquired.................... 980,220 997,148 758,461
----------- ----------- -----------
Other Cash Applied
Dividends paid to stockholders.................. 0 0 10,000
Other........................................... 4,848 12,220 5,007
----------- ----------- -----------
Total other cash applied...................... 4,848 12,220 15,007
----------- ----------- -----------
Total applications.......................... 985,068 1,009,368 773,468
----------- ----------- -----------
Net Change in Cash and Short-Term Investments..... 132,602 3,526 88,992
Cash and Short-Term Investments, Beginning of
Year........................................... 176,830 173,304 84,312
----------- ----------- -----------
Cash and Short-Term Investments, End of Year.... $ 309,432 $ 176,830 $ 173,304
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these statutory financial
statements.
<PAGE>
47
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
NOTES TO STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1997
(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. ("HLI"), which is majority owned by The Hartford Financial
Services Group, Inc. ("The Hartford"), formerly a wholly owned subsidiary of ITT
Corporation ("ITT"). On February 10, 1997, HLI filed a registration statement,
as amended, with the Securities and Exchange Commission relating to the initial
public offering of HLI Class A Common Stock (the "Offering"). Pursuant to the
Offering on May 22, 1997, HLI sold to the public 26 million shares, representing
18.6% of the equity ownership of HLI. 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 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. The most significant estimates are
for determining the liability for aggregate reserves for future benefits and the
liability for premium and other deposit funds. Although some variability is
inherent in these estimates, management believes the amounts provided are
adequate.
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, for universal life policies and
investment products, generally, 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 recorded upon adoption of the applicable standard;
<PAGE>
48
- --------------------------------------------------------------------------------
(7) establishing a formula reserve for realized and unrealized losses due to
default and equity risk associated with certain invested assets (Asset
Valuation Reserve); as well as the deferral and amortization of realized
gains and losses, motivated by changes in interest rates during the period
the asset is held, into income over the remaining life to maturity of the
asset sold (Interest Maintenance Reserve); whereas on a GAAP basis, no such
formula reserve is required and realized gains and losses are recognized in
the period the asset is sold;
(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 bonds were classified on a GAAP basis
as "available-for-sale" and accordingly, those investments and common stocks
were reflected at fair value with the corresponding impact included as a
component of Stockholder's Equity designated as "Net unrealized capital
gains (losses) on securities net of tax". For statutory reporting purposes,
Change in Net Unrealized Capital Gains (Losses) on Common Stocks and Other
Invested Assets includes the change in unrealized gains (losses) 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, 1997, 1996 and 1995, the
significant differences between statutory and GAAP basis net income and capital
and surplus for the Company are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ---------- ----------
<S> <C> <C> <C>
GAAP Net Income............... $ 58,050 $ 41,202 $ 38,821
Amortization and
deferral of policy
acquisition costs............ (345,658) (341,572) (174,341)
Change in unearned revenue
reserve...................... 4,641 55,504 32,300
Deferred taxes................ 47,113 2,090 2,801
Separate accounts............. 282,818 306,978 146,635
Other, net.................... 27,078 3,793 (3,358)
------------ ---------- ----------
Statutory Net Income.......... $ 74,042 $ 67,995 $ 42,858
------------ ---------- ----------
------------ ---------- ----------
<CAPTION>
1997 1996 1995
------------ ---------- ----------
<S> <C> <C> <C>
GAAP Capital and
Surplus...................... $ 570,469 $ 503,887 $ 455,541
Deferred policy acquisition
costs........................ (1,283,771) (938,114) (596,542)
Unearned revenue reserve...... 134,789 130,148 74,644
Deferred taxes................ 64,522 12,823 1,493
Separate accounts............. 923,040 640,101 333,123
Asset valuation reserve....... (13,670) (7,442) (8,010)
Unrealized gains (losses) on
bonds........................ 13,943 5,112 (1,696)
Adjustment relating to Lyndon
contribution (see Note 3).... (41,277) (41,277) (41,277)
Other, net.................... 3,755 (2,125) 21,058
------------ ---------- ----------
Statutory Capital and
Surplus...................... $ 371,800 $ 303,113 $ 238,334
------------ ---------- ----------
------------ ---------- ----------
</TABLE>
AGGREGATE RESERVES FOR FUTURE BENEFITS AND LIABILITY 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 6%. 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 Statements of
Income.
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 fair value with the current year change in the
difference from cost reflected in surplus. Other invested assets are generally
recorded at fair value.
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 increased by $6,228 in 1997,
decreased by $568 in 1996 and increased by $5,588 in 1995. Additionally, the
Interest Maintenance Reserve
<PAGE>
49
- --------------------------------------------------------------------------------
("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 Statements of Income. Realized investment gains and losses are
determined on a specific identification basis. The amount of net capital losses
reclassified from the IMR was $719 in 1997 and the amount of net capital gains
reclassified was $1,413 and $39 in 1996 and 1995, respectively. The amount of
income amortized was $85, $392 and $256 in 1997, 1996 and 1995, respectively.
OTHER LIABILITIES
The amount reflected in other liabilities includes a receivable from the
separate accounts of $923 million and $640 million as of December 31, 1997 and
1996, respectively. The balances are classified in accordance with NAIC
accounting practices.
MORTGAGE LOANS
Mortgage loans, carried at cost, which approximates fair value, include
investments in assets backed by mortgage loan pools.
2. INVESTMENTS:
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- --------
<S> <C> <C> <C>
Interest income from bonds and
short-term investments....... $100,475 $89,940 $ 76,100
Interest income from policy
loans........................ 1,958 1,846 1,504
Interest and dividends from
other investments............ 1,005 7,864 2,288
-------- ------- --------
Gross investment income....... 103,438 99,650 79,892
Less: investment expenses..... 1,153 1,209 1,105
-------- ------- --------
Net investment income......... $102,285 $98,441 $ 78,787
-------- ------- --------
-------- ------- --------
</TABLE>
(B) COMPONENTS OF NET UNREALIZED CAPITAL GAINS (LOSSES) ON COMMON STOCKS
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- --------
<S> <C> <C> <C>
Gross unrealized capital gains at
end of year........................ $ 537 $ 713 $ 1,724
Gross unrealized capital losses at
end of year........................ (1,820) (4,160) 0
-------- ------- --------
Net unrealized capital (losses)
gains.............................. (1,283) (3,447) 1,724
Balance at beginning of year........ (3,447) 1,724 15
-------- ------- --------
Change in net unrealized capital
gains (losses) on common stocks.... $ 2,164 $(5,171) $ 1,709
-------- ------- --------
-------- ------- --------
</TABLE>
(C) COMPONENTS OF NET UNREALIZED CAPITAL GAINS (LOSSES) ON BONDS AND SHORT-TERM
INVESTMENTS
<TABLE>
<CAPTION>
1997 1996 1995
------- -------- --------
<S> <C> <C> <C>
Gross unrealized capital gains at
end of year........................ $23,357 $ 11,821 $ 22,251
Gross unrealized capital losses at
end of year........................ (1,906) (3,842) (1,374)
------- -------- --------
Net unrealized capital gains........ 21,451 7,979 20,877
Balance at beginning of year........ 7,979 20,877 33,732
------- -------- --------
Change in net unrealized capital
gains (losses) on bonds and
short-term investments............. $13,472 $(12,898) $ 54,609
------- -------- --------
------- -------- --------
</TABLE>
(D) COMPONENTS OF NET REALIZED CAPITAL GAINS
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- ------
<S> <C> <C> <C>
Bonds and short-term investments......... $ (120) $ 2,756 $ 56
Common stocks............................ 0 0 52
Real estate and other.................... 114 0 0
------- ------- ------
Realized capital (losses) gains.......... (6) 2,756 208
Capital gains (benefit) tax.............. (831) 936 (205)
------- ------- ------
Net realized capital gains, after tax.... 825 1,820 413
Less: IMR capital (losses) gains......... (719) 1,413 39
------- ------- ------
Net realized capital gains............... $ 1,544 $ 407 $ 374
------- ------- ------
------- ------- ------
</TABLE>
(E) OFF-BALANCE SHEET INVESTMENTS
The Company had no significant financial instruments with off-balance sheet
risk as of December 31, 1997 and 1996.
(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.
<PAGE>
50 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
(G) BONDS, SHORT-TERM INVESTMENTS AND COMMON STOCKS
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
1997 COST GAINS LOSSES VALUE
- --------------------------------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. government and government agencies and
authorities:
Guaranteed and sponsored................... $ 11,114 $ 55 $ (51) $ 11,118
Guaranteed and sponsored -- asset-backed... 55,506 1,056 (269) 56,293
States, municipalities and political
subdivisions................................ 26,404 329 0 26,733
International governments.................... 7,609 500 0 8,109
Public utilities............................. 73,024 754 (132) 73,646
All other corporate.......................... 517,715 14,110 (704) 531,121
All other corporate -- asset-backed.......... 630,069 5,005 (739) 634,335
Short-term investments....................... 277,330 33 (8) 277,355
Certificates of deposit...................... 93,770 1,515 (3) 95,282
Parents, subsidiaries and affiliates......... 86,100 0 0 86,100
----------- ---------- ---------- -----------
Total bonds and short-term investments....... $ 1,778,641 $23,357 $(1,906) $ 1,800,092
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED FAIR
1997 COST GAINS LOSSES VALUE
- --------------------------------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Common stock -- unaffiliated................. $ 30,307 $ 537 $ 0 $ 30,844
Common stock -- affiliated................... 35,384 0 (1,820) 33,564
----------- ---------- ---------- -----------
Total common stocks.......................... $ 65,691 $ 537 $(1,820) $ 64,408
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
1997 COST GAINS LOSSES VALUE
- --------------------------------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. government and government agencies and
authorities:
Guaranteed and sponsored................... $ 58,761 $ 6 $ (195) $ 58,572
Guaranteed and sponsored -- asset-backed... 78,237 1,477 (609) 79,105
States, municipalities and political
subdivisions................................ 25,958 163 (2) 26,119
International governments.................... 7,447 205 0 7,652
Public utilities............................. 70,116 396 (424) 70,088
All other corporate.......................... 410,530 6,357 (1,355) 415,532
All other corporate -- asset-backed.......... 485,953 2,654 (1,081) 487,526
Short-term investments....................... 148,094 0 (66) 148,028
Certificates of deposit...................... 83,378 563 (110) 83,831
Parents, subsidiaries and affiliates......... 48,100 0 0 48,100
----------- ---------- ---------- -----------
Total bonds and short-term investments....... $ 1,416,574 $11,821 $(3,842) $ 1,424,553
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED FAIR
1997 COST GAINS LOSSES VALUE
- --------------------------------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Common stock -- unaffiliated................. $ 13,064 $ 713 $ 0 $ 13,777
Common stock -- affiliated................... 35,379 0 (4,160) 31,219
----------- ---------- ---------- -----------
Total common stocks.......................... $ 48,443 $ 713 $(4,160) $ 44,996
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
</TABLE>
The amortized cost and estimated fair value of bonds and short-term
investments at December 31, 1997 by management's anticipated maturity are shown
below. Asset-backed securities are distributed to maturity year based on ILA's
estimate of the rate of future prepayments of principal
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 51
- --------------------------------------------------------------------------------
over the remaining life of the securities. Expected maturities differ from
contractual maturities reflecting borrowers' rights to call or prepay their
obligations.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
MATURITY COST FAIR VALUE
- --------------------------------------------- ---------- -----------
<S> <C> <C>
Due in one year or less...................... $ 424,518 $ 696,203
Due after one year through five years........ 586,980 708,365
Due after five years through ten years....... 451,963 295,896
Due after ten years.......................... 315,180 99,628
---------- -----------
Total...................................... $1,778,641 $ 1,800,092
---------- -----------
---------- -----------
</TABLE>
Proceeds from sales of investments in bonds and short-term investments
during 1997, 1996 and 1995 were $367,626, $668,078 and $313,961, respectively,
resulting in gross realized gains of $964, $3,675 and $1,419, respectively, and
gross realized losses of $1,084, $919 and $1,263, 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>
1997 1996
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- -------
<S> <C> <C> <C> <C>
ASSETS
Bonds and short-term investments........... $1,778 $ 1,800 $1,417 $ 1,425
Common stocks.............................. 64 64 45 45
Policy loans............................... 37 37 29 29
Mortgage loans............................. 85 85 0 0
Other invested assets...................... 21 21 3 3
LIABILITIES
Liabilities on investment contracts........ $1,911 $ 1,835 $1,245 $ 1,191
</TABLE>
The carrying amounts for policy loans approximates fair value. The fair
value of liabilities on investment contracts 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. The Company has also invested in bonds
of its subsidiaries, Hartford Financial Services Corporation and HL Investment
Advisors, Inc., and common stock of its subsidiary, ITT Hartford Life, LTD.
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 HLI, 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 (received) paid by the Company were $(14,499), $29,792 and
$215,921 in 1997, 1996 and 1995, respectively. The effective tax rate was (26)%,
22% and 25% in 1997, 1996 and 1995, respectively. The following schedule
provides a reconciliation of the tax provision at the U.S. Federal Statutory
rate to Federal income tax (benefit) expense (in millions).
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Tax provision at U.S. Federal statutory
rate........................................ $ 20 $ 30 $ 20
Tax deferred acquisition costs............... 25 27 8
Statutory to tax reserve differences......... 1 0 3
Unrealized gain on separate accounts......... (44) (21) (13)
Investments and other........................ (17) (17) (4)
----- ----- -----
Federal income tax (benefit) expense......... $ (15) $ 19 $ 14
----- ----- -----
----- ----- -----
</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 1997 or
1996. 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
<PAGE>
52 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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
$265, $358, and $1,034 in 1997, 1996 and 1995, 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 1997, 1996 and 1995.
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 8.5% for 1997, 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
1997, 1996 and 1995.
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 1997, 1996 and 1995.
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>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Direct premiums................... $266,427 $226,612 $159,918
Premiums assumed.................. 51,630 33,817 13,299
Premiums ceded.................... (21,412) (10,185) (7,425)
-------- -------- --------
Premiums and annuity
considerations................... $296,645 $250,244 $165,792
-------- -------- --------
-------- -------- --------
</TABLE>
The Company cedes to RGA Reinsurance Company, on a modified coinsurance
basis, 80% of the variable annuity business written since 1994.
8. SEPARATE ACCOUNTS:
The Company maintains separate account assets and liabilities totaling $23.2
billion and $14.6 billion at December 31, 1997 and 1996, 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 $252 million, $144
million and $72 million in 1997, 1996 and 1995, respectively, and are recorded
as a component of other revenues on the Statutory Statements of Income.
9. COMMITMENTS AND CONTINGENCIES:
As of December 31, 1997 and 1996, 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 $1,544, $1,262 and $1,684 in 1997, 1996 and 1995,
respectively. ILA incurred guaranteed fund expense of $548 in 1997 and 1996 and
$0 in 1995.
<PAGE>
The following prospectuses contain information relating to all of the funds
offered by the Fidelity, Pegasus and Putnam prospectuses. Not all of the funds
in the Fidelity, Pegasus and Putnam prospectuses are available to Pegasus
Provider Policy Owners. Please review the Pegasus Provider product prospectus
for details regarding available funds (see "The Portfolios").
