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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 23, 1996
FILE NO. 333-01741
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1 TO
REGISTRATION STATEMENT
ON
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
CG CORPORATE INSURANCE VARIABLE LIFE SEPARATE
ACCOUNT 02
(EXACT NAME OF REGISTRANT)
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
900 Cottage Grove Road, Hartford, Connecticut 06152
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
Depositor's Telephone Number, including Area Code
(860) 726-6000
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Robert A. Picarello, Esquire COPY TO:
Connecticut General Life Insurance George N. Gingold,
Company Esquire
900 Cottage Grove Road 197 King Philip Drive
Hartford, Connecticut 06152 West Hartford, CT
(NAME AND ADDRESS OF AGENT FOR 06117-1409
SERVICE)
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Approximate date of proposed public offering: Continuous
INDEFINITE NUMBER OF UNITS OF INTEREST IN VARIABLE LIFE INSURANCE CONTRACTS
(TITLE AND AMOUNT OF SECURITIES BEING REGISTERED)
An indefinite amount of the securities being offered by the Registration
Statement has been registered pursuant to Rule 24f-2 under the Investment
Company Act of 1940. The initial registration fee of $500 was paid with the
declaration.
The registrant amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
It is proposed that this filing will become effective:
_________ immediately upon filing pursuant to paragraph (b) of Rule 485
_________ on _______, pursuant to paragraph (b) of Rule 485
_________ 60 days after filing pursuant to paragraph (a) of Rule 485
_________ on _______, pursuant to paragraph (a) of Rule 485
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CROSS REFERENCE SHEET
(RECONCILIATION AND TIE)
REQUIRED BY INSTRUCTION 4 TO FORM S-6
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ITEM OF FORM N-8B-2 LOCATION IN PROSPECTUS
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1 Cover Page Highlights
2 Cover Page
3 *
4 Distribution of Policies
5 The Company
6(a) The Variable Account
6(b) *
9 Legal Proceedings
10(a)-(c) Short-Term Right to Cancel the Policy; Surrenders;
Accumulation Value; Reports to Policy Owners
10(d) Right to Exchange for a Fixed Benefit Policy; Policy
Loans; Surrenders; Allocation of Net Premium Payments
10(e) Lapse and Reinstatement
10(f) Voting Rights
10(g)-(h) Substitution of Securities
10(i) Premium Payments; Transfers; Death Benefit; Policy
Values; Settlement Options
11 The Funds
12 The Funds
13 Charges; Fees
14 Issuance
15 Premium Payments; Transfers
16 The Variable Account
17 Surrenders
18 The Variable Account
19 Reports to Policy Owners
20 *
21 Policy Loans
22 *
23 The Company
24 Incontestability; Suicide; Misstatement of Age
25 The Company
26 Fund Participation Agreements
27 The Variable Account
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ITEM OF FORM N-8B-2 LOCATION IN PROSPECTUS
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28 Directors and Officers of the Company
29 The Company
30 *
31 *
32 *
33 *
34 *
35 *
37 *
38 Distribution of Policies
39 Distribution of Policies
40 *
41(a) Distribution of Policies
42 *
43 *
44 The Funds; Premium Payments
45 *
46 Surrenders
47 The Variable Account; Surrenders, Transfers
48 *
49 *
50 The Variable Account
51 Cover Page; Highlights; Premium Payments; Right to
Exchange for a Fixed Benefit Policy
52 Substitution of Securities
53 Tax Matters
54 *
55 *
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* Not Applicable
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CONNECTICUT GENERAL LIFE INSURANCE COMPANY
[LOGO]
CG CORPORATE INSURANCE VARIABLE LIFE SEPARATE ACCOUNT 02
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HOME OFFICE LOCATION: MAILING ADDRESS:
900 COTTAGE GROVE ROAD CIGNA INDIVIDUAL INSURANCE
BLOOMFIELD, CONNECTICUT CORPORATE VARIABLE PRODUCTS SERVICE CENTER
ROUTING S-324
HARTFORD, CT 06152-2324
(860)(726-7154)
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THE CORPORATE FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
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This prospectus describes a flexible premium variable life insurance
contract ("Policy") offered in an individual form by Connecticut General Life
Insurance Company ("the Company"). This Policy is intended to provide life
insurance benefits. It allows flexible premium payments, a choice of underlying
funding options, and a choice of three death benefit options. Its value will
vary with the investment performance of the underlying funding options selected,
as may the death benefit payable by the Company upon the death of the Insured.
Policy values may be used to continue the Policy in force, may be borrowed
within certain limits, and may be fully or partially surrendered. Annuity
settlement options equivalent to the Death Benefit are available for payment to
the Beneficiary upon the death of the Insured.
The Company offers sixteen funding vehicles under a Policy through the
Separate Account, each a diversified open-end management investment company
(commonly called a mutual fund) with a different investment objective: Alger
American Fund -- Small Cap Portfolio, MidCap Growth Portfolio and Growth
Portfolio; CIGNA Variable Products Group -- Money Market Fund and S&P 500 Index
Fund; Fidelity Variable Insurance Products Fund -- Equity-Income Portfolio and
High Income Portfolio; Fidelity Variable Insurance Products Fund II --
Investment Grade Bond Portfolio; Janus Aspen Series -- Short-Term Bond Portfolio
and Worldwide Growth Portfolio; MFS-Registered Trademark- Variable Insurance
Trust-Registered Trademark- -- MFS Emerging Growth Series and MFS Total Return
Series; Templeton Variable Insurance Products Series Fund -- Templeton
International Fund; OCC Accumulation Trust -- OCC Equity Portfolio, OCC Managed
Portfolio and OCC Small Cap Portfolio.
The fixed interest option offered under the Policy is the Fixed Account.
Amounts held in the Fixed Account are guaranteed and will earn interest at a
rate equal to the lesser of 4% per year or the prevailing 30 day Treasury Bill
Rate as of the last day of the preceding calendar month. Unless specifically
mentioned, this prospectus only describes the variable investment options.
It may not be advantageous to replace existing insurance or supplement an
existing flexible premium variable life insurance policy with this Policy. This
entire Prospectus, and those of the Funds, should be read carefully to
understand the Policy being offered.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
THE MUTUAL FUNDS AVAILABLE AS FUNDING OPTIONS FOR THE POLICIES OFFERED BY THIS
PROSPECTUS. ALL PROSPECTUSES SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS DATED: JULY , 1996
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TABLE OF CONTENTS
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PAGE
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Definitions..................................... 3
Highlights...................................... 5
Initial Choices............................... 5
Charges and Fees.............................. 5
The Company..................................... 6
The Variable Account............................ 7
The Funds....................................... 7
General....................................... 12
Substitution of Securities.................... 12
Voting Rights................................. 12
Fund Participation Agreements................. 12
Death Benefit................................... 13
Death Benefit Options....................... 13
Changes in Death Benefit Option............. 13
Payment of Death Benefit.................... 14
Changes in Specified Amount................. 15
Premium Payments; Transfers..................... 15
Premium Payments............................ 15
Allocation of Net Premium Payments.......... 16
Transfers................................... 16
Charges; Fees................................... 17
Premium Load................................ 17
Policy Issue Fee............................ 17
Monthly Deductions.......................... 17
Administrative Fee.......................... 18
Transaction Fee for Excess Transfers........ 18
Mortality and Expense Risk Charge........... 18
Surrenders During First Two Policy Years --
Refund of Portion of Premium Load.......... 18
The Fixed Account............................... 19
Policy Values................................... 19
Accumulation Value.......................... 19
Variable Accumulation Unit Value............ 20
Surrender Value............................. 20
Surrenders...................................... 20
Partial Surrenders.......................... 20
Full Surrenders............................. 20
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Deferral of Payment and Transfers........... 21
Lapse and Reinstatement......................... 21
Lapse of a Policy........................... 21
Reinstatement of a Lapsed Policy............ 21
Policy Loans.................................... 21
Settlement Options.............................. 22
Additional Insurance Benefit.................... 23
Other Policy Provisions......................... 23
Issuance.................................... 23
Short-Term Right to Cancel the Policy....... 23
Policy Owner................................ 23
Beneficiary................................. 23
Right to Exchange for a Fixed Benefit
Policy..................................... 24
Incontestability............................ 24
Misstatement of Age......................... 24
Suicide..................................... 24
Nonparticipating Policies................... 25
Tax Matters..................................... 25
Policy Proceeds............................. 25
Taxation of the Company..................... 26
Section 848 Charges......................... 26
Other Matters................................... 27
Directors and Officers of the Company....... 27
Distribution of Policies.................... 27
Changes of Investment Policy................ 28
Other Contracts Issued by the Company....... 28
State Regulation............................ 28
Reports to Policy Owners.................... 28
Advertising................................. 29
Legal Proceedings........................... 29
Experts..................................... 29
Registration Statement...................... 29
Financial Statements........................ 29
Appendix 1...................................... 51
Illustration of Accumulation Values,
Surrender Values, and Death Benefits....... 51
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2
<PAGE>
DEFINITIONS
ACCUMULATION VALUE: The sum of the Fixed Account Value, Variable Account Value
and the Loan Account Value.
ACCUMULATION UNIT: A unit of measure used to calculate the value of a Variable
Account Sub-Account.
ADDITIONAL INSURANCE BENEFIT: A benefit that can be added to the Policy to
provde annually renewable term life insurance on the life of the Insured. This
benefit is excluded from the specified amount when calculating the charges and
fees for the Policy and when calculating the Guideline Annual Premium.
ADDITIONAL PREMIUMS: Any premium paid in addition to Planned Premiums.
CASE: A group of Policies covering individuals with common employment or other
relationship, independent of the Policies.
CERTIFICATE: The document which evidences the coverage of an Insured in a Case.
CODE: The Internal Revenue Code of 1986, as amended.
CORRIDOR DEATH BENEFIT: The Death Benefit calculated as a percentage of the
Accumulation Value rather than by reference to the Specified Amount to satisfy
the Internal Revenue Service definition of "life insurance." (See "Payment of
Death Benefit").
COST OF INSURANCE: The portion of the Monthly Deduction designed to compensate
the Company for the anticipated cost of paying Death Benefits in excess of the
Accumulation Value, not including riders, supplemental benefits or monthly
expense charges.
DEATH BENEFIT: The amount payable to the beneficiary upon the death of the
Insured in accordance with the Death Benefit Option elected, before deduction of
the amount necessary to repay any loans in full and overdue deductions.
DEATH BENEFIT OPTION: Any of three methods for determining the Death Benefit.
FIXED ACCOUNT: The account under which principal is guaranteed and interest is
credited at a rate equal to the lesser of 4% per year or the prevailing 30 day
Treasury Bill Rate as of the last day of the preceding calendar month. Fixed
Account assets are general assets of the Company held in the Company's General
Account.
FIXED ACCOUNT VALUE: The portion of the Accumulation Value, other than the Loan
Account Value, held in the Company's General Account.
FUND(S): One or more of Alger American Fund -- Small Cap Portfolio, MidCap
Growth Portfolio and Growth Portfolio; CIGNA Variable Products Group -- Money
Market Fund and S&P 500 Index Fund; Fidelity Variable Insurance Products Fund --
Equity-Income Portfolio and High Income Portfolio; Fidelity Variable Insurance
Products Fund II -- Investment Grade Bond Portfolio; Janus Aspen Series --
Short-Term Bond Portfolio and Worldwide Growth Portfolio;
MFS-Registered Trademark- Variable Insurance Trust-Registered Trademark- -- MFS
Emerging Growth Series and MFS Total Return Series; Templeton Variable Insurance
Products Series Fund -- Templeton International Fund; OCC Accumulation Trust --
OCC Equity Portfolio, OCC Managed Portfolio and OCC Small Cap Portfolio. Each of
them is an open-end management investment company (mutual fund) whose shares are
available to fund the benefits provided by the Policy.
GENERAL ACCOUNT: The Company's general asset account, in which assets
attributable to the non-variable portion of Policies are held.
GRACE PERIOD: The 61-day period following a Monthly Anniversary Day on which the
Policy's Surrender Value is insufficient to cover the current Monthly Deduction.
The Company will send notice at least 31 days before the end of the Grace Period
that the Policy will lapse without value unless a sufficient payment (described
in the notification letter) is received by the Company.
GUIDELINE ANNUAL PREMIUM: The level amount of premium payment, calculated in
accordance with Rule 6e-3(T) under the Investment Company Act of 1940, required
to mature the Policy, excluding any Additional Insurance Benefit, under
guaranteed mortality and expense charges and an annual interest rate of 5%.
INSURED: The person on whose life the Policy is issued.
ISSUE AGE: The age of the Insured, to the nearest birthday, on the Issue Date.
ISSUE DATE: The date on which the Policy becomes effective, as shown in the
Policy Specifications.
LOAN ACCOUNT VALUE: An amount equal to the sum of all unpaid Policy loans and
loan interest.
MONTHLY ANNIVERSARY DAY: The day of the month as shown in the Policy
Specifications, or the next Valuation Day if that day is not a Valuation Day or
is nonexistent for that month, when the Company makes the Monthly Deduction.
3
<PAGE>
MONTHLY DEDUCTION: The monthly deduction made from the Net Accumulation Value;
this deduction includes the cost of insurance, an administrative expense charge,
and charges for supplemental riders or benefits, if applicable.
NET ACCUMULATION VALUE: The Accumulation Value less the Loan Account Value.
NET AMOUNT AT RISK: The Death Benefit before subtraction of outstanding loans,
if any, minus the Accumulation Value.
NET PREMIUM PAYMENT: The portion of a Premium Payment, after deduction of the
Premium Load, available for allocation to the Fixed Account and the Variable
Account Sub-Accounts.
OWNER. The Owner on the Date of Issue will be the person designated in the
Policy Specifications as having all ownership rights under the Policy. If no
person is designated as Owner, the Insured will be the Owner.
PLANNED PREMIUM: The amount of premium the Policy Owner chooses to pay the
Company on a scheduled basis.
POLICY: The life insurance contract described in this Prospectus, i.e., either
an individual Policy or a Certificate evidencing an Insured's coverage in a Case
under which flexible premium payments are permitted and the death benefit and
contract values may vary with the investment performance of the funding
option(s) selected.
POLICY YEAR: Each twelve-month period, beginning on the Issue Date, during which
the Policy is in effect.
PREMIUM LOAD: An amount equal to 6.5% of each Premium Payment, plus 40% of the
Premium Payment(s) in the first Policy Year up to one Guideline Annual Premium.
In the event that the Specified Amount under a Policy is increased, other than
through a change in the Death Benefit Option, an amount equal to 25% of the
increase in the Guideline Annual Premium will be deducted from Premium Payments
received during the 12 months following the increase.
PREMIUM PAYMENT: A premium payment made under the Policy.
RIGHT-TO-EXAMINE PERIOD: The period of time following the issuance of the Policy
during which the Owner may return the Policy and receive a refund of premiums
paid, the latest of (a) 10 days after the Policy and notice of withdrawal right
is received by the owner, unless otherwise stipulated by state law requirements,
or (b) 45 days after the application for the Policy is signed by the Owner.
SETTLEMENT OPTION(S): Several ways in which the Beneficiary may receive a Death
Benefit, or in which the Owner may choose to receive payments upon surrender of
the Policy, through the attachment of a rider.
SPECIFIED AMOUNT: The amount (at least $50,000), originally chosen by the Policy
Owner, initially equal to the Death Benefit including any Additional Insurance
Benefit, and which may be increased or decreased as described in this
Prospectus. The Additional Insurance Benefit is excluded from the Specified
Amount when calculating charges and fees for the Policy and when calculating the
Guideline Annual Premium.
SUB-ACCOUNT: That portion of the Variable Account which is invested in shares of
a specific Fund.
SURRENDER VALUE: The amount an Owner can receive in cash by surrendering the
Policy. This equals the Net Accumulation Value plus any Premium Load credits if
a surrender occurs within 24 months of issue. All of the Surrender Value may be
applied to one or more of the Settlement Options.
VALUATION DAY: Every day on which Accumulation Units are valued; any day on
which the New York Stock Exchange is open, except any day on which trading on
the Exchange is restricted, or on which an emergency exists, as determined by
the Securities and Exchange Commission, so that valuation or disposal of
securities is not practicable.
VALUATION PERIOD: The period of time beginning on the day following a Valuation
Day and ending on the next Valuation Day. A Valuation Period may be more than
one day in length.
VARIABLE ACCOUNT: CG Corporate Insurance Variable Life Separate Account 02.
Consists of all Sub-Accounts invested in shares of the Funds. Variable Account
assets are kept separate from the general assets of the Company and are not
chargeable with the general liabilities of the Company.
VARIABLE ACCOUNT VALUE: The portion of the Accumulation Value attributable to
the Variable Account.
CORPORATE VARIABLE PRODUCTS SERVICE CENTER: The office of the Company to which
Premium Payments should be sent, notices given and any customer service requests
made. Mailing address: CIGNA Individual Insurance, Corporate Variable Products
Service Center, Routing S-324, Hartford, CT 06152-2324.
4
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HIGHLIGHTS
The Policy is a flexible premium variable life insurance
policy. Its values may be accumulated on a fixed or variable
basis or a combination of fixed and variable bases. The
Policy's provisions may vary in some states.
INITIAL CHOICES
TO BE MADE
When purchasing a Policy, the Owner makes three important
choices:
1) Selecting one of the three Death Benefit Options;
2) Selecting the amount of Premium Payments to make; and
3) Selecting how Net Premium Payments will be allocated
among the available funding options.
LEVEL OR VARYING
DEATH BENEFIT
At the time of purchase, the Policy Owner (also called the
"Owner" in this Prospectus) must choose among the three
Death Benefit Options. The amount payable under any option
will be determined as of the date of the Insured's death.
Under the level Death Benefit Option, the Death Benefit will
be the greater of the Specified Amount, or the Corridor
Death Benefit. Under the "return of premium" Death Benefit
Option, the Death Benefit payable will be the greater of the
Specified Amount plus total Premium Payments made, or the
Corridor Death Benefit. Under the varying Death Benefit
Option, the Death Benefit will be the greater of the
Specified Amount plus the Accumulation Value, or the
Corridor Death Benefit (See "Death Benefit").
AMOUNT OF
PREMIUM PAYMENT
At the time of purchase, the Policy Owner must also choose
the amount of premium to be paid. The Owner may vary Premium
Payments to some extent and still keep the Policy in force.
If the Policy lapses it may be reinstated (See "Lapse and
Reinstatement"). Premium Payments are refundable during the
Right-to-Examine Period.
SELECTION OF
FUNDING
VEHICLE(S)
The Policy Owner must choose how to allocate Net Premium
Payments. Net Premium Payments allocated to the Variable
Account may be allocated to one or more Sub-Accounts of the
Variable Account, each of which invests in shares of a
particular Fund. The Initial Premium Payment will not be
allocated to the Variable Account until three days following
the expiration of the Right-to-Examine Period (see
"Short-Term Right to Cancel the Policy"). The Fixed Account
may also be elected as an allocation option. Allocations to
any Sub-Account or to the Fixed Account must be in whole
percentages with a minimum of 10% each. The variable portion
of a Policy is supported by the Fund(s) selected as funding
vehicle(s). The portion of the Variable Account Value
attributable to a particular Fund through the Sub-Account of
the Variable Account is not guaranteed and will vary with
the investment performance of that Fund.
CHARGES
AND FEES
There is a 6.5% premium load on all Premium Payments, and an
additional 40% premium load on Premium Payments of up to One
Guideline Annual Premium in the first Policy Year. In the
event that the Specified Amount under a Policy is increased,
other than through a change in Death Benefit Option, an
additional premium load of 25% of the increase in the
Guideline Annual Premium will be deducted from premiums
received during the 12 months following the increase.
Monthly deductions are made for the Cost of Insurance and
any Additional Insurance Benefits.
A policy issue charge of $250 and monthly deductions of $8
per month are also made for administrative expenses.
Daily charges from Variable Account Value are made for the
mortality and expense risk, currently at the annual rate of
.85% during the first ten Policy Years, .45% during the
eleventh through fifteenth Policy Years, and .15%
thereafter.
5
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Daily charges from Variable Account Value are made for
administrative expenses, currently at the annual rate of
.10% during the first ten Policy Years.
Investment results for each Sub-Account are affected by each
Fund's daily charge for investment advisory fees; these
charges vary by Fund and are shown at pp. 10-11 of this
Prospectus.
A transaction fee of $25 is imposed for partial surrenders
and for certain transfers in excess of four per Policy Year.
Interest is charged on Policy loans. The net interest spread
(the amount by which interest charged exceeds interest
credited) is currently .95% per year in the first ten Policy
Years, .45% in Policy Years eleven through fifteen and .15%
per year thereafter.
REDUCTION OF
CHARGES
This Policy is available for purchase by corporations and
other groups or sponsoring organizations on a Case basis.
The Company reserves the right to reduce premium loads or
any other charges on certain Cases where it is expected that
the amount or nature of such Cases will result in savings of
sales, underwriting, administrative or other costs.
Eligibility for these reductions and the amount of
reductions will be determined by a number of factors,
including the number of lives to be insured, the total
premiums expected to be paid, total assets under management
for the Policyowner, the nature of the relationship among
the insured individuals, the purpose for which the Policies
are being purchased, expected persistency of the individual
Policies, and any other circumstances which the Company
believes to be relevant to the expected reduction of its
expenses. Some of these reductions may be guaranteed and
others may be subject to withdrawal or modification by the
Company on a uniform Case basis. Reductions in charges will
not be unfairly discriminatory to any Policy Owners.
THE COMPANY
The Company is a stock life insurance company incorporated
in Connecticut in 1865. Its Home Office mailing address is
Hartford, Connecticut 06152, Telephone (860) 726-6000. It
has obtained authorization to do business in fifty states,
the District of Columbia and Puerto Rico. The Company issues
group and individual life and health insurance policies and
annuities. The Company has various wholly-owned subsidiaries
which are generally engaged in the insurance business. The
Company is a wholly-owned subsidiary of Connecticut General
Corporation, Bloomfield, Connecticut. Connecticut General
Corporation is wholly-owned by CIGNA Holdings Inc.,
Philadelphia, Pennsylvania which is in turn wholly-owned by
CIGNA Corporation, Philadelphia, Pennsylvania. Connecticut
General Corporation is the holding company of various
insurance companies, one of which is Connecticut General
Life Insurance Company.
The Company markets the Policies through independent
insurance brokers and general agents who are registered
representatives of broker-dealers which are members of the
National Association of Securities Dealers, Inc.
The Company, in common with other insurance companies, is
subject to regulation and supervision by the regulatory
authorities of the states in which it is licensed to do
business. A license from the state insurance department is a
prerequisite to the transaction of insurance business in
that state. In general, all states have statutory
administrative powers. Such regulation relates, among other
things, to licensing of insurers and their agents, the
approval of policy forms, the methods of computing reserves,
the form and content of statutory financial statements, the
amount of policyholders' and stockholders' dividends, and
the type of distribution of investments permitted. A blanket
bond for $100 million covers all of the officers and
employees of the Company.
6
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THE VARIABLE
ACCOUNT
CG Corporate Insurance Variable Life Insurance Separate
Account 02 was established pursuant to a February 23, 1996
resolution of the Board of Directors of the Company. Under
Connecticut insurance law, the income, gains or losses of
the Variable Account are credited without regard to the
other income, gains or losses of the Company. The Company
serves as the custodian of the assets of the Variable
Account. These assets are held for the Policies. Although
the assets maintained in the Variable Account will not be
charged with any liabilities arising out of any other
business conducted by the Company, all obligations arising
under the Policies are general corporate liabilities of the
Company. Any and all distributions made by the Funds with
respect to shares held by the Variable Account will be
reinvested in additional shares at net asset value.
Deductions and surrenders from the Variable Account will, in
effect, be made by surrendering shares of the Funds at net
asset value. On each Valuation Day of each Fund, the
Variable Account purchases or redeems Fund shares based on a
netting of all transactions for that day. Shares of the
Funds held in the Variable Account are held by the Company
through an open account system, which makes unnecessary the
issuance and delivery of stock certificates.
The Variable Account is registered with the Securities and
Exchange Commission ("Commission") as a unit investment
trust under the Investment Company Act of 1940. Such
registration does not involve supervision of the Variable
Account or the Company's management or investment practices
or policies by the Commission. The Company does not
guarantee the Variable Account's investment performance.
The Company has four other separate accounts registered as
unit investment trusts with the Commission, two for the
purpose of funding the Company's variable annuity contracts,
and two for the purpose of funding other variable life
insurance policies of the Company.
THE FUNDS
Each of the sixteen Sub-Accounts of the Variable Account is
invested solely in the shares of one of the sixteen Funds
available as funding vehicles under the Policies. Each of
the Funds is a series of one of eight entities, all
Massachusetts or Delaware business trusts. Each such entity
is registered as an open-end, diversified management
investment company under the Investment Company Act of 1940.
These entities are collectively referred to herein as the
"Series Funds."
The eight Series Funds and their Investment advisers and
distributors are:
Alger American Fund ("Alger Trust") managed by Fred
Alger Management, Inc., 75 Maiden Lane, New York, NY
10038; and distributed by Fred Alger & Company,
Incorporated, 30 Montgomery Street, Jersey City, NJ
07302;
CIGNA Variable Partners Group ("CIGNA Funds"), managed
by CIGNA Investments, Inc. and distributed by CIGNA
Financial Advisors, Inc., 900 Cottage Grove Road,
Hartford, CT 06152.
Variable Insurance Products Fund I ("Fidelity Trust I"),
and Variable Insurance Products Fund II ("Fidelity Trust
II"), managed by Fidelity Management & Research Company
and distributed by Fidelity Distributors Corporation, 82
Devonshire Street, Boston, MA 02103;
Janus Aspen Series ("Janus Series"), managed by Janus
Capital Corporation, 100 Fillmore Street, Suite 500,
Denver, CO 80206-4923.
7
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MFS-Registered Trademark- Variable Insurance
Trust-Registered Trademark- ("MFS Trust"), managed by
Massachusetts Financial Services Company and distributed
by MFS Investor Services, Inc., 500 Boylston Street,
Boston, MA 02116;
OCC Accumulation Trust, managed by OpCap Advisors and
distributed by OCC Distributors, One World Financial
Center, New York, NY 10281.
Templeton Variable Products Series Fund ("Templeton
Fund"), managed by Templeton Investment Counsel, Inc.,
500 E. Broward Blvd., Broward Financial Centre, Fort
Lauderdale, FL 33394-3091; and distributed by Franklin
Templeton Distributors, Inc., P.O. Box 33030, St.
Petersburg, FL 33733-8030;
Three Funds of ALGER AMERICAN Fund are available under the
Policies:
Alger American Small Cap Portfolio;
Alger American MidCap Growth Portfolio;
Alger American Growth Portfolio.
Two Funds of the CIGNA VARIABLE PRODUCTS GROUP are available
under the Policies:
CIGNA Variable Products Money Market Fund;
CIGNA Variable Products S&P 500 Index Fund.
Two Funds of FIDELITY Trust I are available under the
Policies:
Equity-Income Portfolio ("Fidelity Equity-Income
Portfolio").
High Income Portfolio ("Fidelity High Income Portfolio")
One Fund of FIDELITY Trust II is available under the
Policies.
Investment Grade Bond Portfolio ("Fidelity Investment
Grade Bond Portfolio")
Two Funds of JANUS ASPEN Series are available under the
Policies:
Short-Term Bond Portfolio;
Worldwide Growth Portfolio.
Two Funds of MFS Trust are available under the Policies:
MFS Emerging Growth Series;
MFS Total Return Series.
Three Funds of OCC ACCUMULATION Trust are available under
the Policies:
OCC Equity Portfolio;
OCC Managed Portfolio;
OCC Small Cap Portfolio.
One Fund of the TEMPLETON VARIABLE PRODUCTS SERIES is
available under the Policies:
Templeton International Fund
The investment advisory fees charged the Funds by their
advisers are shown on pages 10 and 11 of this Prospectus.
There follows a brief description of the investment
objective and program of each Fund. There can be no
assurance that any of the stated investment objectives will
be achieved.
ALGER AMERICAN SMALL CAP PORTFOLIO: Seeks long-term capital
appreciation by investing in a diversified, actively managed
portfolio of equity securities, primarily of companies where
included total market capitalization lies within the range
of companies included in the Russell 2000 Growth Index.
8
<PAGE>
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO: Seeks long-term
capital appreciation by investing in a diversified, actively
managed portfolio of equity securities, primarily of
companies where total market capitalization lies within the
range of companies included in the S&P MidCap 400 Index.
ALGER AMERICAN GROWTH PORTFOLIO: Seeks long-term capital
appreciation by investing in a diversified, actively managed
portfolio of equity securities, primarily of companies with
total market capitalization of $1 billion or greater.
CIGNA VARIABLE PRODUCTS MONEY MARKET FUND: Seeks to provide
as high a level of current income as is consistent with the
preservation of capital and liquidity and the maintenance of
a stable $1.00 per share net asset value by investing in
short-term money market instruments.
CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND: Seeks to provide
long-term growth of capital by investing principally in
common stocks of companies that compose the S&P
500-Registered Trademark-.
FIDELITY HIGH INCOME PORTFOLIO: Seeks high current income by
investing primarily in all types of income-producing debt
securities, preferred stocks, and convertible securities.
FIDELITY EQUITY-INCOME PORTFOLIO: Seeks reasonable income by
investing primarily in income-producing equity securities,
with some potential for capital appreciation, seeking to
exceed the composite yield on the securities comprising the
Standard and Poor's 500 Composite Stock Price Index.
FIDELITY INVESTMENT GRADE BOND PORTFOLIO: Seeks high current
income by investing primarily in fixed-income securities
such as bonds, notes and debentures.
JANUS ASPEN SERIES SHORT TERM BOND PORTFOLIO: Seeks a high
level of current income while minimizing interest rate risk
by investing in shorter term fixed-income securities.
JANUS ASPEN SERIES WORLDWIDE GROWTH PORTFOLIO: Seeks
long-term growth of capital by investing primarily in common
stocks of foreign and domestic issuers.
MFS EMERGING GROWTH PORTFOLIO: Seeks to provide long-term
growth of capital by investing in common stocks of small and
medium-sized companies which have the potential for growth.
MFS TOTAL RETURN PORTFOLIO: Seeks primarily to provide above
average income (compared to a portfolio entirely invested in
equity securities) consistent with the prudent employment of
capital and secondarily to provide a reasonable opportunity
for growth of capital and income.
OCC ACCUMULATION TRUST SMALL CAP PORTFOLIO: Seeks capital
appreciation through investments in a diversified portfolio
of equity securities of companies with market capitalization
of under $1 billion.
OCC ACCUMULATION TRUST MANAGED PORTFOLIO: Seeks growth of
capital over time through investment in a portfolio of
common stocks, bonds and cash equivalents, the percentage of
which will vary based on management's assessment of relative
investment values.
OCC ACCUMULATION TRUST EQUITY PORTFOLIO: Seeks long-term
capital appreciation through investment in a diversified
portfolio of equity securities on the basis of a value
oriented approach to investing.
TEMPLETON INTERNATIONAL FUND: Seeks long-term capital growth
through a flexible policy of investing in stocks and debt
obligations of companies and governments outside the United
States.
9
<PAGE>
EXPENSE DATA
The purpose of the following Table is to help Purchasers and prospective
purchasers understand the costs and expenses that are borne, directly and
indirectly, by Purchasers assuming that all Net Premium Payments are allocated
to the Variable Account. The table reflects expenses of the Variable Account as
well as of the Individual Funds underlying the Variable Sub-Accounts. The
Mortality and Expense Risk Charge shown is the currently charged rate during the
first ten Policy Years. It currently declines to .45% per year in the eleventh
Policy Year and to .15% in the sixteenth Policy Year. The Mortality and Expense
Risk Charge is guaranteed not to exceed .90% per year. The Administrative
Expense Charge shown is the currently charged rate during the first ten Policy
Years. It is guaranteed not to exceed .30% per year.
FEE TABLE
<TABLE>
<CAPTION>
FIDELITY VARIABLE INSURANCE
ALGER AMERICAN FUNDS PRODUCTS FUNDS
---------------------------------------- --------------------------------------
MIDCAP HIGH EQUITY INVESTMENT
SMALL CAP GROWTH GROWTH INCOME INCOME GRADE BOND
FUND FUND FUND PORTFOLIO PORTFOLIO PORTFOLIO
----------------- -------- --------- -------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT
ANNUAL EXPENSES
Mortality and
Expense Risk
Charge............. 0.85% 0.85% 0.85% 0.85% 0.85% 0.85%
Administrative
Expense Charge..... 0.10% 0.10% 0.10% 0.10% 0.10% 0.10%
--- --- --- --- --- ---
TOTAL SEPARATE
ACCOUNT ANNUAL
EXPENSES........... 0.95% 0.95% 0.95% 0.95% 0.95% 0.95%
FUND PORTFOLIO
ANNUAL OPERATING
EXPENSES
Management Fees..... 0.85% 0.80% 0.75% 0.60% 0.51% 0.45%
Other Expenses...... 0.07% 0.10% 0.10% 0.11% 0.10% 0.14%
--- --- --- --- --- ---
TOTAL FUND PORTFOLIO
ANNUAL OPERATING
EXPENSES........... 0.92%(1) 0.90%(1) 0.85%(1) 0.71%(2a) 0.61% 0.59%
</TABLE>
- ------------------------------
(1) Alger management has agreed to reimburse the Portfolios to the extent that
the annual operating expenses (excluding interest, taxes, fees for
brokerage services and extraordinary expenses) of the Alger American Small
Capitalization Portfolio exceed 1.50%; the Alger American Growth Portfolio
exceed 1.50%; and the Alger American MidCap Growth Portfolio exceed 1.50%
of the average net assets of the applicable Portfolio for any fiscal year.
In addition, from time to time, Alger Management, in its sole discretion
and as it deems appropriate, may assume certain expenses of one or more of
the Portfolios while retaining the ability to be reimbursed by the
applicable Portfolio for such amounts prior to the end of the fiscal year.
This will have the effect of lowering the applicable Portfolio's overall
expense ratio and of increasing yield to investors, or the converse, at the
time such amounts are assumed or reimbursed, as the case may be.
(2a) A portion of the brokerage commissions that Equity-Income Portfolio paid
were used to reduce the fund's expenses. Without this reduction, total
expenses would still have been 0.71%.
10
<PAGE>
The table does not reflect the monthly deductions for the cost of insurance and
any riders, nor does it reflect the administrative expense monthly deduction of
$8 or the $250 policy issue charge. The information set forth should be
considered together with the information provided in this Prospectus under the
heading "Charges and Fees", and in each Fund's Prospectus. All expenses are
expressed as a percentage of average account value.
<TABLE>
<CAPTION>
CIGNA VARIABLE
MFS-REGISTERED TRADEMARK- TEMPLETON
VARIABLE INSURANCE JANUS ASPEN SERIES VARIABLE PRODUCTS
TRUST-REGISTERED TRADEMARK- ------------------- PRODUCTS -----------------
- -------------------- OCC ACCUMULATION TRUST SHORT --------- S&P
EMERGING TOTAL ------------------------------------- WORLDWIDE TERM TEMPLETON MONEY 500
GROWTH RETURN SMALL CAP MANAGED EQUITY GROWTH BOND INTERNATIONAL MARKET INDEX
SERIES SERIES PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO FUND FUND FUND
- -------- ------- --------- --------- --------- ------- ------- --------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0.85% 0.85% 0.85% 0.85% 0.85% 0.85% 0.85% 0.85% 0.85% 0.85%
0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10%
--- ------- --- --- --- ------- ------- --- ------ ------
0.95% 0.95% 0.95% 0.95% 0.95% 0.95% 0.95% 0.95% 0.95% 0.95%
0.75% 0.75% 0.80% 0.80% 0.80% 0.68% 0.00% 0.49% 0.35% 0.25%
0.25%(3b) 0.25%(3b) 0.20% 0.14% 0.20% 0.22% 0.70% 0.22% 0.15%(6b) 0.35%(6b)
--- ------- --- --- --- ------- ------- --- ------ ------
1.00%(3a) 1.00%(3a) 1.00%(4) 0.94%(4) 1.00%(4) 0.90%(5) 0.70%(5) 0.71% 0.50%(6a) 0.60%(6a)
</TABLE>
- ------------------------------
(3a) The Advisor has agreed to bear, subject to reimbursement, expenses for each
of the Emerging Growth Series and Total Return Series such that each
Series' aggregate operating expenses shall not exceed, on an annualized
basis, 1.00% of the average daily net assets of the Series from November 2,
1994 through December 31, 1996, 1.25% of the average daily net assets of
the Series from January 1, 1997 through December 31, 1998, and 1.50 % of
the average daily net assets of the Series from January 1, 1999 through
December 21, 2004; provided however that this obligation may be terminated
or revised at any time. Absent this expense arrangement, "Other Expenses"
for the Emerging Growth Series and Total Return Series would be 2.16% and
2.02%, respectively, and "Total Operating Expenses" would be 2.91% and
2.77%, respectively, for these Series.
(3b) Each Series has an expense offset arrangement which reduces the Series'
custodian fee based upon the amount of cash maintained by the Series with
its custodian and dividend disbursing agent, and may enter into other such
arrangements and directed brokerage arrangements (which would also have the
effect of reducing the Series' expenses). Any such fee reductions are not
reflected under "Other Expenses."
(4) The annual expenses of the OCC Accumulation Trust Equity, Managed and Small
Cap Portfolios as of December 31, 1995 have been restated to reflect new
management fee and expense limitation arrangements in effect as of May 1,
1996. Effective May 1, 1996, the expenses of the Portfolios of the OCC
Accumulation Trust are contractually limited by OpCap Advisors so that
their respective annualized operating expenses do not exceed 1.25% of their
respective average daily net assets. Furthermore, through April 30, 1997,
the annualized operating expenses of the OCC Accumulation Trust Equity,
Managed, and Small Cap Portfolios will be voluntarily limited by OpCap
Advisors so that annualized operating expenses of these Portfolios do not
exceed 1.00% of their respective average daily net assets. Without such
voluntary expense limitations, and taking into account the revised
contractual provisions effective May 1, 1996 concerning management fees and
expense limitations, the Management Fees, Other Expenses and Total
Portfolio Annual Expenses incurred for the fiscal year ended December 31,
1995 would have been: .80%, .45% and 1.25%, respectively, for the Equity
Portfolio; .80%, .14% and .94%, respectively, for the Managed Portfolio;
and .80%, .39% and 1.19%, respectively, for the Small Cap Portfolio.
(5) The fees and expenses are based on expenses before expense offset
arrangements for the fiscal year ended December 31, 1995. The information
for the Portfolios is net of fee waivers or reductions from Janus Capital.
Fee reductions for the Worldwide Growth Portfolio reduces the management
fee to the level of the corresponding Janus retail fund. Other waivers, if
applicable, are first applied against the management fee and then against
other expenses. Without such waivers or reductions, the Management Fee,
Other Expenses, and Total Portfolio Operating Expenses would have been
0.87%, 0.22% and 1.09%, respectively, for the Worldwide Growth Portfolio
and 0.65%, 0.72% and 1.37%, respectively, for the Short-Term Bond
Portfolio.
(6a) CIGNA Investments, Inc., the fund's advisor, has voluntarily agreed to
reimburse such portion of its management fee as is necessary to cause the
Total Fund Operating Expenses during each calendar year not to exceed 0.50%
of the average daily net asset value of the Money Market Fund and 0.60% of
the average daily net asset value of the S&P 500 Index Fund. If this
reimbursement is not sufficient to cause the Total Fund Operating Expenses
of the fund not to exceed the applicable percentage of average daily net
asset value, CIGNA Investments, Inc. has agreed to pay such other expenses
of the fund as is necessary to keep Total Fund Operating Expenses from
exceeding the applicable percentage. These arrangements will continue in
effect until the end of the fiscal year ending December 31, 1996, and
afterwards to the extent described in the fund's prospectus. It is
currently expected that the fund's advisor will, as to the S&P 500 Index
Fund, not allow Total Fund Operating Expenses for 1997 to exceed 0.25% of
average daily net asset value. To the extent management fees are reimbursed
by CIGNA Investments, Inc., or expenses of the fund paid by CIGNA
Investments, Inc., the total return to shareholders will increase. Total
return to shareholders will decrease to the extent management fees are no
longer reimbursed or expenses of the fund are no longer paid.
(6b) Total expenses for the S&P 500 Index Fund for 1995 were 0.73% of the Fund's
average daily net asset value. The stated Other Expenses and Total Expenses
reflect the current voluntary expense limitation effective January 1, 1996.
As to the Money Market Fund, Other Expenses are based on estimated amounts
for the current fiscal year. Other Expenses include all expenses not
specifically assumed by CIGNA Investments, Inc.
11
<PAGE>
GENERAL
There is no assurance that the investment objective of any
of the Funds will be met. A Policy Owner bears the complete
investment risk for Accumulation Values allocated to a
Sub-Account. Each of the Sub-Accounts involves inherent
investment risk, and such risk varies significantly among
the Sub-Accounts. Policy Owners should read each Fund's
prospectus carefully and understand the Funds' relative
degrees of risk before making or changing investment
choices. Additional Funds may, from time to time, be made
available as investments to underlie the Policies. However,
the right to make such selections will be limited by the
terms and conditions imposed on such transactions by the
Company (See "Premium Payments").
SUBSTITUTION OF SECURITIES
If the shares of any Fund should no longer be available for
investment by the Variable Account or if, in the judgment of
the Company, further investment in such shares should become
inappropriate in view of the investment objectives of the
Policies, the Company may substitute shares of another Fund.
No substitution of securities in any Sub-Account may take
place without prior approval of the Commission and under
such requirements as it may impose.
VOTING RIGHTS
In accordance with its view of present applicable law, the
Company will vote the shares of each Fund held in the
Variable Account at special meetings of the shareholders of
the particular Series Fund in accordance with written
instructions received from persons having the voting
interest in the Variable Account. The Company will vote
shares for which it has not received instructions, as well
as shares attributable to it, in the same proportion as it
votes shares for which it has received instructions. The
Series Funds do not hold regular meetings of shareholders.
The number of shares which a person has a right to vote will
be determined as of a date to be chosen by the appropriate
Series Fund not more than sixty (60) days prior to the
meeting of the particular Series Fund. Voting instructions
will be solicited by written communication at least fourteen
(14) days prior to the meeting.
The Funds' shares are issued and redeemed only in connection
with variable annuity contracts and variable life insurance
policies issued through separate accounts of the Company and
other life insurance companies. The Series Funds do not
foresee any disadvantage to Policy Owners arising out of the
fact that shares may be made available to separate accounts
which are used in connection with both variable annuity and
variable life insurance products. Nevertheless, the Series
Funds' Boards intend to monitor events in order to identify
any material irreconcilable conflicts which may possibly
arise and to determine what action, if any, should be taken
in response thereto. If such a conflict were to occur, one
of the separate accounts might withdraw its investment in a
Fund. This might force a Fund to sell portfolio securities
at disadvantageous prices.
FUND PARTICIPATION AGREEMENTS
The Company has entered into agreements with the various
Series Funds and their advisers or distributors under which
the Company makes the Funds available under the Policies and
performing certain administrative services. In some cases,
the advisers or distributors may compensate the Company
therefor.
12
<PAGE>
DEATH BENEFIT
DEATH BENEFIT OPTIONS
Three different Death Benefit Options are available. The
amount payable under each option will be determined as of
the date of the Insured's death. Option B will be in effect
unless Option A or Option C has been elected in the
application for the Policy or unless a change has been
allowed.
Under OPTION A the Death Benefit will be the greater of the
Specified Amount (a minimum of $50,000 as of the date of
this Prospectus) plus the Accumulation Value, or the
Corridor Death Benefit. Option A provides a varying Death
Benefit which increases or decreases over time, depending on
the amount of premium paid and the investment performance of
the underlying funding options chosen.
Under OPTION B the Death Benefit will be the greater of the
Specified Amount or Corridor Death Benefit. Option B
provides a level Death Benefit until the Corridor Death
Benefit exceeds the Specified Amount.
Under OPTION C, the Death Benefit will be the greater of the
Specified Amount plus Premium Payments made, or the Corridor
Death Benefit. Option C provides a Death Benefit which
increases based on Premium Payments.
Under each of Option A, Option B, and Option C the amount
payable upon death will be the Death Benefit, reduced by
partial surrenders and by the amount necessary to repay any
loans in full.
CHANGES IN DEATH BENEFIT OPTION
A Death Benefit Option change will be allowed upon the
Owner's written request to the Corporate Variable Products
Service Center in form satisfactory to the Company, subject
to the following conditions:
- The change will take effect on the Monthly Anniversary
Day following the date of receipt of the request.
- No change in the Death Benefit Option may reduce the
Specified Amount below $50,000.
- For changes from Option B to Option A, the new Specified
Amount will equal the Death Benefit less the Accumulation
Value at the time of the change.
- For changes from Option B to Option C, the new Specified
Amount will equal the Death Benefit less premiums paid at
the time of the change.
- For changes from Option A to Option B, the new Specified
Amount will equal the Death Benefit at the time of the
change.
- For changes from Option A to Option C, the new Specified
Amount will equal the Death Benefit less premiums paid at
the time of the change.
- For changes from Option C to Option A, the new Specified
Amount will equal the Death Benefit less the Accumulation
Value at the time of the change.
- For changes from Option C to Option B, the new Specified
Amount will equal the Death Benefit at the time of the
change.
13
<PAGE>
PAYMENT OF DEATH BENEFIT
The Death Benefit under the Policy will be paid in a lump
sum within seven days after receipt at the Corporate
Variable Products Service Center of due proof of the
Insured's death (a certified copy of the death certificate),
unless the Owner or the Beneficiary has elected that it be
paid under one or more of the Settlement Options (See
"Settlement Options"). Payment of the Death Benefit may be
delayed if the Policy is being contested.
While the Insured is living, the Owner may elect a
Settlement Option for the Beneficiary and deem it
irrevocable, and may revoke or change a prior election. The
Beneficiary may make or change an election within 90 days of
the death of the Insured, unless the Owner has made an
irrevocable election.
All or a part of the Death Benefit may be applied under one
or more of the Settlement Options, or such other options as
the Company may make available in the future.
If the Policy is assigned as collateral security, the
Company will pay any amount due the assignee in one lump
sum. Any excess Death Benefit due will be paid as elected.
A Policy must satisfy either of two testing methods to
qualify as a life insurance contract for tax purposes under
Section 7702 of the Internal Revenue Code of 1986, as
amended. At the time of purchase, the Owner must choose a
Policy which uses either the Guideline Premium test or the
Cash Value Accumulation test. Both methods require a life
insurance Policy to meet minimum ratios of life insurance
coverage to Accumulation Value ("Applicable Percentages").
The Applicable Percentages for the Guideline Premium test
are 250% through Attained Age 40, decreasing over time to
150% at Attained Age 55, 120% at Attained Age 65 and 101% at
Attained Age 94 and above. The Guideline Premium test also
restricts the maximum premiums that may be paid into a life
insurance policy for a specified Death Benefit. The Cash
Value Accumulation test does not limit premiums which may be
paid but has higher required Applicable Percentages.
Applicable Percentages under the Cash Value Accumulation
Test for Non-Smokers decrease over time from 727% at
Attained Age 20, to 378% at Attained Age 40, and to 101% at
Attained Age 100.
See also Tax Matters.
14
<PAGE>
CHANGES IN SPECIFIED AMOUNT
Changes in the Specified Amount of a Policy can be made by
submitting a written request to the Corporate Variable
Products Service Center in form satisfactory to the Company.
Changes in the Specified Amount are subject to the following
conditions:
- Satisfactory evidence of insurability and a supplemental
application may be required for an increase in the
Specified Amount.
- An increase in the Specified Amount, other than through a
change in the Death Benefit Option, will result in an
additional Premium Load of 25% of the increase in the
Guideline Annual Premium on Premium Payments received
during the 12 months following the increase.
- No decrease may reduce the Specified Amount to less than
$50,000.
- No decrease may reduce the Specified Amount below the
minimum required to maintain the Policy's status under
the Code as a life insurance policy.
PREMIUM
PAYMENTS;
TRANSFERS
PREMIUM PAYMENTS
The Policies provide for flexible premium payments. Premium
Payments are payable in the frequency and in the amount
selected by the Policy Owner. The initial Premium Payment is
due on the Issue Date and is payable in advance. The minimum
payment is the amount necessary to maintain a positive
Surrender Value. The Company reserves the right to decline
any application or Premium Payment.
After the initial Premium Payment, all Premium Payments must
be sent directly to the Corporate Variable Products Service
Center and will be deemed received when actually received
there.
The Policy Owner may elect to increase, decrease or change
the frequency of Premium Payments.
PLANNED PREMIUMS are Premium Payments scheduled when a
Policy is applied for.
ADDITIONAL PREMIUMS are any Premium Payments made ($500
minimum) in addition to Planned Premiums.
PREMIUM INCREASES. At any time, the Owner may increase
Planned Premiums, or pay Additional Premiums, but:
- Evidence of insurability may be required if the
Additional Premium or the new Planned Premium during the
current Policy Year would increase the difference between
the Death Benefit and the Accumulation Value. If
satisfactory evidence of insurability is requested and
not provided, the increase in premium will be refunded
without interest and without participation of such
amounts in any underlying funding options.
- In no event may the total of all Premium Payments exceed
the then-current maximum premium limitations established
by federal law for a Policy to qualify as life insurance.
If, at any time, a Premium Payment would result in total
Premium Payments exceeding such maximum premium
limitation, the Company will only accept that portion of
the Premium Payment which will make total premiums equal
the maximum. Any part of the Premium Payment in excess of
that amount will be
15
<PAGE>
returned or applied as otherwise agreed and no further
Premium Payments will be accepted until allowed by the
then-current maximum premium limitations prescribed by
law.
- If there is any Policy indebtedness, any additional Net
Premium Payments will be used first as a loan repayment
with any excess applied as an additional Net Premium
Payment.
ALLOCATION OF NET PREMIUM PAYMENTS
At the time of purchase of the Policy, the Owner must decide
how to allocate Net Premium Payments among the Sub-Accounts
and the Fixed Account. Allocation to any one Variable
Account Sub-Account or to the Fixed Account cannot be less
than 10% of the Net Premium Payment, and must be in whole
percentages. For each Variable Account Sub-Account, the Net
Premium Payments are converted into Accumulation Units. The
number of Accumulation Units credited to the Policy is
determined by dividing the Net Premium Payment allocated to
the Sub-Account by the value of the Accumulation Unit for
the Sub-Account.
During the Right-to-Examine Period, the Net Premium Payment
will be allocated to the CIGNA Variable Products Group Money
Market Fund of the Variable Account, and earnings credited
from the Issue Date if the Premium Payment was received on
or before the Issue Date. The Company will allocate the
initial Net Premium Payment directly to the Sub-Account(s)
selected by the Owner within three days after expiration of
the Right-to-Examine Period.
Unless the Company is directed otherwise by the Policy
Owner, subsequent Net Premium Payments will be allocated on
the same basis as the most recent previous Net Premium
Payment. Such allocation will occur as of the next Valuation
Period after each payment is received.
The allocation for future Premium Payments may be changed at
any time free of charge. Any new allocation will apply to
Premium Payments made more than one week after the Company
receives the notice of the new allocation. Any new
allocation must allocate a minimum of 10% to any single
funding vehicle and must be expressed in whole percents.
TRANSFERS
Values may, at any time, be transferred ($500 minimum) from
one Sub-Account to another. Within the 30 days prior to each
Policy Anniversary, the Owner may also transfer a portion of
one or more Sub-Accounts to the Fixed Account. Transfers
from the Fixed Account are allowed in the 30-day period
following a Policy Anniversary and will be effective as of
the next Valuation Day after a request is received in good
order at the Corporate Variable Products Service Center. The
cumulative amount of transfers from the Fixed Account within
any such 30-day period cannot exceed 20% of the Fixed
Account Value on the most recent Policy Anniversary. If the
Fixed Account Value as of any Policy Anniversary is less
than $5,000, however, this condition will not apply. The
Company may further limit transfers from the Fixed Account
at any time.
Subject to the above restrictions, up to four transfers may
be made in any Policy Year without charge, and any value
remaining in the Fixed Account or a Sub-Account after a
transfer must be at least $500. Transfers must be made in
writing unless other arrangements have been previously
approved by the Company.
Any transfer among the Funds or to the Fixed Account will
result in the crediting and cancellation of Accumulation
Units based on the Accumulation Unit values next
16
<PAGE>
determined after a written request is received at the
Corporate Variable Products Service Center. Transfer
requests must be received by the Corporate Variable Products
Center by 4:00 Eastern Time in order to be effective that
day. Any transfer made which causes the remaining value of
Accumulation Units for a Sub-Account to be less than $500
will result in those remaining Accumulation Units being
cancelled and their aggregate value reallocated
proportionately among the other funding options chosen. The
Policy Owner should carefully consider current market
conditions and each Fund's investment policies and related
risks before allocating money to the Sub-Accounts. See pages
8-11 of this Prospectus.
The Company, at its sole discretion, may waive minimum
balance requirements on the Sub-Accounts.
CHARGES;
FEES
PREMIUM LOAD
A deduction of 6.5% from every Premium Payment will be made
to cover the premium load. An additional 40% on Premium
Payments up to one Guideline Annual Premium will be deducted
in the first Policy Year. In the event that the Specified
Amount under a Policy is increased, other than through a
change in the Death Benefit Option, an additional Premium
Load of 25% of the increase in the Guideline Annual Premium
will be deducted from Premium Payments received during the
12 months following the increase. This load represents state
taxes and federal income tax liabilities and a portion of
the sales expenses incurred by the Company. The Company
estimates that 2.25% of this deduction will be used for
premium taxes, which may be higher or lower than the actual
tax imposed by the applicable jurisdiction; it is in the
mid-range of state premium taxes, which range from 1.75% to
5.0%. The Company estimates 1.25% of each Premium Payment
will be used to meet federal income tax liabilities
attributable to the treatment of deferred acquisition costs.
The remaining 3.0% of the deduction (plus 40% of up to one
Guideline Annual Premium during the first Policy Year) is
for sales load. There is no deferred sales charge. The sales
load will not exceed maximum sales charges permitted under
the 1940 Act.
POLICY ISSUE FEE
A policy issue fee of $250 is deducted from the Accumulation
Value for a portion of the Company's administrative
expenses.
MONTHLY DEDUCTIONS
A Monthly Deduction of $8 is made from the Net Accumulation
Value for administrative expenses. This charge is for items
such as premium billing and collection, policy value
calculation, confirmations and periodic reports and will not
exceed the Company's costs.
A Monthly Deduction is also made from the Net Accumulation
Value for the Cost of Insurance and any charges for
supplemental riders. The Cost of Insurance depends on the
attained age, years since issue and risk class (in
accordance with state law) of the Insured and the current
Net Amount at Risk.
The Cost of Insurance is determined by subtracting the
Accumulation Value at the previous Monthly Anniversary Day
from the Death Benefit at the previous Monthly Anniversary
Day, and multiplying the result (the Net Amount at Risk) by
the applicable Cost of Insurance Rate as determined by the
Company. The Guaranteed Maximum Cost
17
<PAGE>
of Insurance Rates, per $1,000 of Net Amount at Risk, for
standard risks are based on the 1980 Commissioners Standard
Ordinary Mortality Table-B, Age Nearest Birthday (1980 CSO).
These Monthly Deductions are deducted proportionately from
the value of each funding option. This is accomplished for
the Sub-Accounts by canceling Accumulation Units and
withdrawing the value of the canceled Accumulation Units
from each funding option in the same proportion as their
respective values have to the Net Accumulation Value. The
Monthly Deductions are made on the Monthly Anniversary Day.
ADMINISTRATIVE FEE
For administrative costs a daily deduction, currently
equivalent to .10% per year during the first ten Policy
Years, is made from amounts held in the Variable Account.
This deduction is guaranteed not to exceed .30% per year.
TRANSACTION FEE FOR EXCESS TRANSFERS
There will be a $25 transaction fee for each transfer
between funding options in excess of four during any Policy
Year.
MORTALITY AND EXPENSE RISK CHARGE
For mortality and expense risks, a daily deduction,
currently equivalent to .85% per year during the first ten
Policy Years, .45% per year during the eleventh through
fifteenth Policy Years and .15% thereafter, is made from
amounts held in the Variable Account. This deduction is
guaranteed not to exceed .90% per year.
SURRENDERS DURING FIRST TWO POLICY YEARS -- REFUND OF
PORTION OF PREMIUM LOAD
If the Policy is surrendered during the first 12 months
after issue a credit will be paid equal to 60% of all
Premium Loads previously deducted. If the Policy is
surrendered during the months 13 through 24, the credit will
equal 30% of all Premium Loads previously deducted.
In the event a Policy is surrendered during the first two
Policy Years, the Aggregate Premium Load retained by the
Company for sales and promotional expense will not exceed
30% of the sum of Premium Payments in the first two Policy
Years up to one Guideline Annual Premium, plus 10% of
Premium Payments in the first two Policy Years between one
and two times one Guideline Annual Premium plus 9% of
Premium Payments in the first two Policy Years in excess of
two times one Guideline Annual Premium. Any surrenders may
result in tax implications. See "Tax Matters".
Based on its actuarial determination, the Company is not
certain whether the Premium Load, the policy issue fee and
the monthly administrative expense deduction will cover all
sales and administrative expenses which the Company will
incur in connection with the Policy. Any shortfall,
including but not limited to payment of sales and
distribution expenses, would be available for recovery from
the General Account of the Company, which supports insurance
and annuity obligations.
18
<PAGE>
THE FIXED
ACCOUNT
The Fixed Account is funded by the assets of the Company's
General Account. Amounts held in the Fixed Account are
guaranteed and will be credited with interest at rates equal
to the lesser of 4% per year or the prevailing 30 day
Treasury Bill Rate as of the last day of the preceding
calendar month.
THE FIXED ACCOUNT IS MADE UP OF THE GENERAL ASSETS OF THE
COMPANY OTHER THAN THOSE ALLOCATED TO ANY SEPARATE ACCOUNT.
THE FIXED ACCOUNT IS PART OF THE COMPANY'S GENERAL ACCOUNT.
BECAUSE OF APPLICABLE EXEMPTIVE AND EXCLUSIONARY PROVISIONS,
INTERESTS IN THE FIXED ACCOUNT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT"), AND
NEITHER THE FIXED ACCOUNT NOR THE COMPANY'S GENERAL ACCOUNT
HAS BEEN REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940
(THE "1940 ACT"). THEREFORE, NEITHER THE FIXED ACCOUNT NOR
ANY INTEREST THEREIN IS GENERALLY SUBJECT TO REGULATION
UNDER THE PROVISIONS OF THE 1933 ACT OR THE 1940 ACT.
ACCORDINGLY, THE COMPANY HAS BEEN ADVISED THAT THE STAFF OF
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED THE
DISCLOSURE IN THIS PROSPECTUS RELATING TO THE FIXED ACCOUNT.
POLICY VALUES
ACCUMULATION VALUE
Once a Policy has been issued, each Net Premium Payment
allocated to a Sub-Account of the Variable Account is
credited in the form of Accumulation Units, representing the
Fund in which assets of that Sub-Account are invested. Each
Net Premium Payment will be credited to the Policy as of the
end of the Valuation Period in which it is received at the
Corporate Variable Products Service Center (or portion
thereof allocated to a particular Sub-Account). The number
of Accumulation Units credited is determined by dividing the
Net Premium Payment by the value of an Accumulation Unit
next computed after receipt. Since each Sub-Account has a
unique Accumulation Unit value, a Policy Owner who has
elected a combination of funding options will have
Accumulation Units credited from more than one source.
The Accumulation Value of a Policy is determined by: (a)
multiplying the total number of Accumulation Units credited
to the Policy for each applicable Sub-Account by its
appropriate current Accumulation Unit value; (b) if a
combination of Sub-Accounts is elected, totaling the
resulting values; and (c) adding any values attributable to
the General Account (i.e., the Fixed Account Value and the
Loan Account Value).
The number of Accumulation Units credited to a Policy will
not be changed by any subsequent change in the value of an
Accumulation Unit. Such value may vary from Valuation Period
to Valuation Period to reflect the investment experience of
the Fund used in a particular Sub-Account.
The Fixed Account Value reflects amounts allocated to the
General Account through payment of premiums or transfers
from the Variable Account. The Fixed Account Value is
guaranteed; however, there is no assurance that the Variable
Account Value of the Policy will equal or exceed the Net
Premium Payments allocated to the Variable Account.
Each Policy Owner will be advised at least annually as to
the number of Accumulation Units which remain credited to
the Policy, the current Accumulation Unit values, the
Variable Account Value, the Fixed Account Value and the Loan
Account Value.
Accumulation Value will be affected by Monthly Deductions.
19
<PAGE>
VARIABLE ACCUMULATION UNIT VALUE
The value of a Variable Accumulation Unit for any Valuation
Period is determined by multiplying the value of that
Variable Accumulation Unit for the immediately preceding
Valuation Period by the Net Investment Factor for the
current period for the appropriate Sub-Account. The Net
Investment Factor is determined separately for each
Sub-Account by dividing (a) by (b) and subtracting (c) from
the results where (a) equals the net asset value per share
of the Fund held in the Sub-Account at the end of a
Valuation Period plus the per share amount of any
distribution declared by the Fund if the "ex-dividend" date
is during the Valuation Period plus or minus taxes or
provisions for taxes, if any, attributable to the operation
of the Sub-Account during the Valuation Period; (b) equals
the net asset value per share of the Fund held in the
Sub-Account at the beginning of that Valuation Period, and
(c) is the daily charge for mortality and expense risk plus
the daily fee for administration multiplied by the number of
days in the Valuation Period.
SURRENDER VALUE
The Surrender Value of a Policy is the amount the Owner can
receive in cash by surrendering the Policy. All or part of
the Surrender Value may be applied to one or more of the
Settlement Options available through a rider attached to the
Policy.
SURRENDERS
PARTIAL SURRENDERS
A partial surrender may be made at any time by written
request to the Corporate Variable Products Service Center
during the lifetime of the Insured and while the Policy is
in force. A $25 transaction fee is charged.
The amount of a partial surrender may not exceed 90% of the
Net Accumulation Value at the end of the Valuation Period in
which the election becomes or would become effective, and
may not be less than $500.
For Option B and C Policies (See "Death Benefit"): A partial
surrender will reduce the Accumulation Value, Death Benefit,
and Specified Amount. The Specified Amount and Accumulation
Value will be reduced by equal amounts and will reduce any
past increases in the reverse order in which they occurred.
For an Option A Policy (See "Death Benefit"): A partial
surrender will reduce the Accumulation Value and the Death
Benefit, but it will not reduce the Specified Amount.
The Specified Amount remaining in force after a partial
surrender may not be less than $50,000. Any request for a
partial surrender that would reduce the Specified Amount
below this amount will not be granted. In addition, if,
following the partial surrender and the corresponding
decrease in the Specified Amount, the Policy would not
comply with the maximum premium limitations required by
federal tax law, the decrease may be limited to the extent
necessary to meet the federal tax law requirements.
If, at the time of a partial surrender, the Net Accumulation
Value is attributable to more than one funding option, the
$25 transaction charge and the amount paid upon the
surrender will be taken proportionately from the values in
each funding option, unless the Policy Owner and the Company
agree otherwise.
FULL SURRENDERS
A full surrender may be made at any time. The Company will
pay the Surrender Value next computed after receiving the
Owner's written request at the Corporate Variable
20
<PAGE>
Products Service Center in a form satisfactory to the
Company. Payment of any amount from the Variable Account on
a full surrender will usually be made within seven calendar
days thereafter.
DEFERRAL OF PAYMENT AND TRANSFERS
Payment of the surrendered amount from the Variable Account
may be postponed when the New York Stock Exchange is closed
and for such other periods as the Commission may require.
Payment or transfer from the Fixed Account may be deferred
up to six months at the Company's option. If the Company
exercises its right to defer such payments or transfers
interest will be added as required by law.
LAPSE AND
REINSTATEMENT
LAPSE OF A POLICY
If there have been any loans or partial surrenders, and
depending on the investment performance of the funding
options, the Accumulation Value may be insufficient to keep
this Policy in force, and payment of an additional premium
may be necessary. The Policy may lapse unless there is
sufficient Surrender Value to cover the Monthly Deduction.
A lapse occurs if a Monthly Deduction is greater than the
Surrender Value and no payment to cover the Monthly
Deduction is made within the Grace Period. The Company will
send the Owner a lapse notice at least 31 days before the
Grace Period expires.
REINSTATEMENT OF A LAPSED POLICY
The Owner can apply for reinstatement at any time during the
Insured's lifetime. To reinstate a Policy, the Company will
require satisfactory evidence of insurability and an amount
sufficient to pay for the current Monthly Deduction plus two
additional Monthly Deductions.
If the Policy is reinstated within five years of the Issue
Date, all values including the Loan Account Value will be
reinstated to the point they were on the date of lapse.
If the Policy is reinstated after five years following the
Issue Date, it will be reinstated on the Monthly Anniversary
Day following the Company approval. The Accumulation Value
at reinstatement will be the Net Premium Payment then made
less the Monthly Deduction due that day.
POLICY LOANS
A Policy loan requires that a loan agreement be executed and
that the Policy be assigned to the Company. The loan may be
for any amount up to 90% of the then current Net
Accumulation Value. The amount of a loan, together with
subsequent accrued but not paid interest on the loan,
becomes part of the Loan Account Value. If Policy values are
held in more than one funding option, withdrawals from each
funding option will be made in proportion to the assets in
each funding option at the time of the loan for transfer to
the Loan Account, unless the Company is instructed otherwise
in writing at the Corporate Variable Products Service
Center.
21
<PAGE>
Interest on loans will accrue at an annual rate of 5%, and
net loan interest (interest charged less interest credited
as described below) is payable once a year in arrears on
each anniversary of the loan, or earlier upon full surrender
or other payment of proceeds of a Policy. Any interest not
paid when due becomes part of the loan and the net interest
will be withdrawn proportionately from the values in each
funding option.
The Company will credit interest on the Loan Account Value.
During the first ten Policy Years, the Company's current
practice is that interest will be credited at an annual rate
equal to the interest rate charged on the loan minus .95%
(guaranteed not to exceed 1.2%). Beginning with the eleventh
Policy Year, the Company's current practice is that interest
will be credited at an annual rate equal to the interest
rate charged on the loan, less .45% annually (guaranteed not
to exceed 1.2%), and beginning with the sixteenth Policy
Year, .15% annually (guaranteed not to exceed 1.2%). In no
case will the annual credited interest rate be less than
3.8%.
Repayments on the loan will be allocated among the funding
options according to current Net Premium Payment
allocations. However, the Company maintains the right to
require that amounts loaned from the Fixed Account be
allocated to the Fixed Account upon repayment. The Loan
Account Value will be reduced by the amount of any loan
repayment.
A Policy loan, whether or not repaid, will affect the
proceeds payable upon the Insured's death and the
Accumulation Value because the investment results of the
Variable Account or the Fixed Account will apply only to the
non-loaned portion of the Accumulation Value. The longer a
loan is outstanding, the greater the effect is likely to be.
Depending on the investment results of the Variable Account
or the Fixed Account while the loan is outstanding, the
effect could be favorable or unfavorable.
SETTLEMENT OPTIONS
Proceeds in the form of Settlement Options are payable by
the Company at the Beneficiary's election upon the Insured's
death, or while the Insured is alive upon election by the
Owner of one of the Settlement Options available through the
addition of a rider.
A written request may be made to elect, change, or revoke a
Settlement Option before payments begin under any Settlement
Option. This request must be in form satisfactory to the
Company, and will take effect upon its receipt at the
Corporate Variable Products Service Center. Payments after
the first payment will be made on the first day of each
month.
FIRST OPTION -- Payments for a stated number of years.
SECOND OPTION -- Payments for the lifetime of the payee,
guaranteed for a specified number of months;
THIRD OPTION -- Payment of interest annually on the sum left
with the Company at a rate of at least 3% per year, and upon
the payee's death the amount on deposit will be paid.
FOURTH OPTION -- Installments of specified amounts payable
until the proceeds with any interest thereon are exhausted.
ADDITIONAL OPTIONS -- Policy proceeds may also be settled
under any other method of settlement offered by the Company
at the time the request is made.
22
<PAGE>
ADDITIONAL INSURANCE BENEFIT
The Policy can be issued with an Additional Insurance
Benefit as a portion of the total Death Benefit. The benefit
provides annually renewable term life insurance on the life
of the Insured. This benefit is excluded from the Specified
Amount when calculating the charges and fees for the Policy
and when calculating the Guideline Annual Premium.
The cost of the benefit is added to the Monthly Deduction,
and is dependent on the attained age, years since issue,
risk class and gender classification. The Company may adjust
the monthly benefit rate from time to time, but the rate
will never exceed the guaranteed cost of insurance rate for
the benefit for that Policy Year.
The benefit provides a vehicle for a Policy Owner to
increase the insurance protection under the Policy.
OTHER POLICY PROVISIONS
ISSUANCE
A Policy may only be issued upon receipt of satisfactory
evidence of insurability, and generally only where the
Insured is below the age of 75.
SHORT-TERM RIGHT TO CANCEL THE POLICY
A Policy may be returned for cancellation and a full refund
of premium within 10 days after the Policy and notice of
withdrawal right are received, unless otherwise stipulated
by state law requirements, or within 45 days after the
application for the Policy is signed, whichever occurs
later. The Initial Premium Payment made when the Policy is
issued will be held in the CIGNA Variable Products Group
Money Market Fund of the Variable Account and not allocated
to any other Variable Sub-Accounts even if the Policy Owner
may have so directed until three business days following the
expiration of the Right-to-Examine Period. If the Policy is
returned for cancellation in a timely fashion, the refund of
premiums paid, without interest, will usually occur within
seven days of notice of cancellation, although a refund of
premiums paid by check may be delayed until the check
clears.
POLICY OWNER
While the Insured is living, all rights in this Policy are
vested in the Policy Owner named in the application or as
subsequently changed, subject to assignment, if any.
The Policy Owner may name a new Policy Owner while the
Insured is living. Any such change in ownership must be in a
written form satisfactory to the Company and recorded at the
Corporate Variable Products Service Center. Once recorded,
the change will be effective as of the date signed; however,
the change will not affect any payment made or action taken
by the Company before it was recorded. The Company may
require that the Policy be submitted for endorsement before
making a change.
If the Policy Owner is other than the Insured and dies
before the Insured, the Policy Owner's rights in this Policy
belong to the Policy Owner's estate.
BENEFICIARY
The Beneficiary(ies) shall be as named in the application or
as subsequently changed, subject to assignment, if any.
The Policy Owner may name a new Beneficiary while the
Insured is living. Any change must be in a written form
satisfactory to the Company and recorded at the Corporate
23
<PAGE>
Variable Products Service Center. Once recorded, the change
will be effective as of the date signed; however, the change
will not affect any payment made or action taken by the
Company before it was recorded.
If any Beneficiary predeceases the Insured, that
Beneficiary's interest passes to any surviving
Beneficiary(ies), unless otherwise provided. Multiple
Beneficiaries will be paid in equal shares, unless otherwise
provided. If no named Beneficiary survives the Insured, the
death proceeds shall be paid to the Policy Owner or the
Policy Owner's executor(s), administrator(s) or assigns.
RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY
The Policy Owner may, within the first two Policy Years,
exchange the Policy for a flexible premium adjustable life
insurance policy then being offered by the Company's
Corporate Insurance Department. The benefits for the new
policy will not vary with the investment experience of a
separate account. The exchange must be elected within 24
months from the Issue Date. No evidence of insurability will
be required.
The Policy Owner, the Insured and the Beneficiary under the
new policy will be the same as those under the exchanged
Policy on the effective date of the exchange. The new policy
will have a Death Benefit on the exchange date not more than
the Death Benefit of the original Policy immediately prior
to the exchange date. The new policy will have the same
Issue Date and Issue Age as the original Policy. The initial
Specified Amount and any increases in Specified Amount will
have the same rate class as those of the original Policy.
Any indebtedness may be transferred to the new policy.
INCONTESTABILITY
The Company will not contest payment of the death proceeds
based on the Initial Specified Amount after the Policy has
been in force during the Insured's lifetime for two years
from the Issue Date. For any increase in Specified Amount
requiring evidence of insurability, the Company will not
contest payment of the death proceeds based on such an
increase after it has been in force during the Insured's
lifetime for two years from its effective date.
MISSTATEMENT OF AGE
The Company will adjust the Death Benefit and Accumulation
Value. The adjustment process will recalculate all such
benefits and values to the amount that would have been
calculated using the rates that were in effect at the time
of each monthly anniversary. The proceeds will begin with
the recalculation based on the rates in effect on the Issue
Date. Each succeeding recalculation will be based on the
rates in effect on the corresponding monthly anniversary.
SUICIDE
If the Insured dies by suicide, while sane or insane, within
two years from the Issue Date, the Company will pay no more
than the sum of the premiums paid, less any indebtedness. If
the Insured dies by suicide, while sane or insane, within
two years from the date an application is accepted for an
increase in the Specified Amount, the Company will pay no
more than a refund of the monthly charges for the cost of
such additional benefit.
24
<PAGE>
NONPARTICIPATING POLICIES
These are nonparticipating Policies on which no dividends
are payable. These Policies do not share in the profits or
surplus earnings of the Company.
TAX MATTERS
The following discussion is general and is not intended as
tax advice. Counsel and other competent advisers should be
consulted for more complete information. This discussion is
based on the Company's understanding of Federal income tax
laws as they are currently interpreted by the Internal
Revenue Service. No representation is made as to the
likelihood of continuation of these current laws and
interpretations.
POLICY PROCEEDS
Section 7702 of the Code provides a definition of a life
insurance policy for federal tax purposes. This definition
can be satisfied by complying with either the cash value
test or the guideline premium test set forth in Section
7702. The Company will monitor compliance with these tests.
The Policy should thus receive the same federal income tax
treatment as fixed benefit life insurance. As a result, the
death proceeds payable under a Policy are excludable from
gross income of the Beneficiary under Section 101 of the
Code. However, if a Policy were determined not to be a life
insurance contract for purposes of Section 7702, such Policy
would not afford the tax advantage normally provided by a
life insurance policy.
A life insurance policy may be treated as a modified
endowment contract depending upon the amount of premiums
paid in relation to the death benefit provided under the
Policy. The premium limitation rules for determining whether
a Policy is a modified endowment contract are extremely
complex. In general, however, Section 7702A of the Code
defines modified endowment contracts as those policies
issued or materially changed on or after June 21, 1988 on
which the total premiums paid during the first seven years
exceed the amount that would have been paid if the policy
provided for paid up benefits after seven level annual
premiums. The Code provides for taxation of surrenders,
partial surrenders, loans, collateral assignments and other
pre-death distributions from modified endowment contracts to
the extent the cash value of the policy exceeds, at the time
of distribution, the premiums paid into the policy. A 10%
tax penalty generally applies to the taxable portion of such
distributions unless the Policy Owner is over age 59 1/2 or
disabled.
It may not be advantageous to replace existing insurance
with Policies described in this Prospectus. It may also be
disadvantageous to purchase a Policy to obtain additional
insurance protection if the purchaser already owns another
variable life insurance policy.
The Policies offered by this Prospectus may or may not be
issued as modified endowment contracts. If a Policy is not a
modified endowment contract, a cash distribution during the
first 15 years after a policy is issued which causes a
reduction in death benefits may still become fully or
partially taxable to the Owner pursuant to Section
7702(f)(7) of the Code. The Policy Owner should carefully
consider this potential effect and seek further information
before initiating any changes in the terms of the Policy.
Under certain conditions, a Policy may become a modified
endowment contract as a result of a material change or a
reduction in benefits as defined by Section 7702A(c) of the
Code.
In addition to meeting the tests required under Section 7702
and Section 7702A, Section 817(h) of the Code requires that
the investments of separate accounts such as the Variable
Account be adequately diversified. Treasury regulation
1.817-5 issued by the Secretary of the Treasury set the
standards for measuring the adequacy of this
25
<PAGE>
diversification. Generally, no more than 55 percent of the
value of the total assets may be represented by any one (1)
investment; no more than 70 percent of such value may be
represented by any two (2) investments; no more than 80
percent of such value may be represented by any three (3)
investments; and no more than 90 percent of such value may
be represented by any four (4) investments. U.S. Treasury
Securities are not subject to the diversification test and
to the extent that assets include such securities, somewhat
less stringent requirements may apply. A variable life
insurance policy that is not adequately diversified under
these regulations would not be treated as life insurance
under Section 7702 of the Code. The Company believes the
Variable Account investments meet the applicable
diversification standards.
Should the Secretary of the Treasury issue additional rules
or regulations limiting the number of funds, transfers
between funds, exchanges of funds or changes in investment
objectives of funds such that the Policy would no longer
qualify as life insurance under Section 7702 of the Code,
the Company will take whatever steps are available to remain
in compliance.
A total surrender or termination of the Policy by lapse, a
change in the Specified Amount, payment of Additional
Premiums, a Policy Loan, a change in Death Benefit Option,
the exchange of a Policy for a fixed-benefit policy, or the
assignment of a Policy may have adverse tax consequences. If
the amount received by the Policy Owner upon surrender or
termination plus total Policy indebtedness exceeds the
premiums paid into the Policy, the excess will generally be
treated as taxable income, regardless of whether or not the
Policy is a modified endowment contract.
Federal estate and state and local estate, inheritance and
other tax consequences of ownership or receipt of Policy
proceeds depend on the circumstances of each Policy Owner or
Beneficiary.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under the
Code. Since the Variable Account is not a separate entity
from the Company and its operations form a part of the
Company, it will not be taxed separately as a "regulated
investment company" under Sub-chapter M of the Code.
Investment income and realized capital gains on the assets
of the Variable Account are reinvested and taken into
account in determining the value of Accumulation Units.
The Company does not initially expect to incur any Federal
income tax liability that would be chargeable directly to
the Variable Account. Based upon these expectations, no
charge is currently being made against the Variable Account
for federal income taxes. If, however, the Company
determines that on a separate company basis such taxes may
be incurred, it reserves the right to assess a charge for
such taxes against the Variable Account.
The Company may also incur state and local taxes in addition
to premium taxes in several states. At present, these taxes
are not significant. If they increase, however, additional
charges for such taxes may be made.
SECTION 848 CHARGES
The premium load is assessed to cover state taxes, federal
income tax liabilities and a portion of the sales expenses
incurred by the Company. The portion of the premium load
other than for sales expenses is made up of 2.25% for state
taxes and 1.25% for the additional federal income tax burden
under Section 848 of the Code relating to the
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<PAGE>
tax treatment of deferred acquisition costs. The 1.25%
charge for federal income tax liabilities is reasonable in
relation to the Company's increased taxes under this Section
of the Code.
OTHER MATTERS
DIRECTORS AND OFFICERS OF THE COMPANY
The following persons are Directors and officers of the
Company. The address of each is 900 Cottage Grove Road,
Hartford, CT 06152 and each has been employed by the Company
or its affiliates for more than five years except Mr. Jones,
Mr. Alexander and Dr. Schaffer. Prior to February 1994, Mr.
Jones was Executive Vice President, Chief Administrative
Officer, Chief Operating Officer and Director, NAC Re
Corporation and NAC Reinsurance Corporation (Chief Operating
Officer of NAC Re Corporation beginning June 1993). Prior to
December 1994, Mr. Alexander was Director, Human Development
E.I. Dupont De Nemours, Inc. Prior to May 1993, Dr. Schaffer
was Vice President, Professional Affairs, Aetna Health
Plans, Aetna Life & Casualty.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND ADDRESS WITH THE COMPANY
- ------------------------------ -----------------------------------
<S> <C>
Thomas C. Jones President
(Principal Executive Officer)
James T. Kohan Vice President and Actuary
(Principal Financial Officer)
Robert Moose Vice President
(Principal Accounting Officer)
David C. Kopp Corporate Secretary
Andrew G. Helming Secretary
Stephen C. Stachelek Vice President and Treasurer
Harold W. Albert Director
Martin A. Brennan Director and Senior Vice President
Robert W. Burgess Director
John G. Day Director and Chief Counsel
S. Tyrone Alexander Director and Senior Vice President
Joseph M. Fitzgerald Director and Senior Vice President
H. Edward Hanway Director and Chairman of the Board
Arthur C. Reeds, III Director and Senior Vice President
Patricia L. Rowland Director and Senior Vice President
W. Allen Schaffer, M.D. Director and Senior Vice President
John Wilkinson Director, Senior Vice President and
Chief Financial Officer
</TABLE>
DISTRIBUTION OF POLICIES
The Policies will be sold by licensed insurance agents in
those states where the Policies may lawfully be sold. Such
agents will be registered representatives of broker-dealers
registered under the Securities Exchange Act of 1934 who are
members of the National Association of Securities Dealers,
Inc. (NASD). The Policies will be distributed by the
Company's principal underwriter, CIGNA Financial Advisors,
Inc. ("CFA"), whose address is the same as the Company's.
CFA is a Connecticut corporation organized in 1967, and is
the principal underwriter for the Company's other registered
separate accounts and for a registered separate account of
CIGNA Life Insurance Company, a wholly-owned subsidiary of
the Company.
Gross first year commissions paid by the Company, on the
sale of the Policies will not exceed 47% of one Guideline
Annual Premium, plus 4.3% of any Premium Payment in
27
<PAGE>
excess of the Guideline Annual Premium. Gross renewal
commissions paid by the Company will not exceed 4.3% of
Premium Payments, plus 25% of any increase in Guideline
Annual Premium.
CHANGES OF INVESTMENT POLICY
The Company may materially change the investment policy of
the Variable Account. The Company must inform the Policy
Owners and obtain all necessary regulatory approvals. Any
change must be submitted to the various state insurance
departments which shall disapprove it if deemed detrimental
to the interests of the Policy Owners or if it renders the
Company's operations hazardous to the public. If a Policy
Owner objects, the Policy may be converted to a
substantially comparable fixed benefit life insurance policy
offered by the Company on the life of the Insured. The
Policy Owner has the later of 60 days (6 months in
Pennsylvania) from the date of the investment policy change
or 60 days (6 months in Pennsylvania) from being informed of
such change to make this conversion. The Company will not
require evidence of insurability for this conversion.
The new policy will not be affected by the investment
experience of any separate account. The new policy will be
for an amount of insurance not exceeding the Death Benefit
of the Policy converted on the date of such conversion.
OTHER CONTRACTS ISSUED BY THE COMPANY
The Company does presently and will, from time to time,
offer other variable annuity contracts and variable life
insurance policies with benefits which vary in accordance
with the investment experience of a separate account of the
Company.
STATE REGULATION
The Company is subject to the laws of Connecticut governing
insurance companies and to regulation by the Connecticut
Insurance Department. An annual statement in a prescribed
form is filed with the Insurance Department each year
covering the operation of the Company for the preceding year
and its financial condition as of the end of such year.
Regulation by the Insurance Department includes periodic
examination to determine the Company's contract liabilities
and reserves so that the Insurance Department may certify
the items are correct. The Company's books and accounts are
subject to review by the Insurance Department at all times
and a full examination of its operations is conducted
periodically by the Connecticut Department of Insurance.
Such regulation does not, however, involve any supervision
of management or investment practices or policies.
REPORTS TO POLICY OWNERS
The Company maintains Policy records and will mail to each
Policy Owner, at the last known address of record, an annual
statement showing the amount of the current death benefit,
the Accumulation Value, and Surrender Value, premiums paid
and monthly charges deducted since the last report, the
amounts invested in the Fixed Account and in the Variable
Account and in each Sub-Account of the Variable Account, and
any Loan Account Value.
Policy Owners will also be sent annual reports containing
financial statements for the Variable Account and annual and
semi-annual reports of the Funds as required by the 1940
Act.
In addition, Policy Owners will receive statements of
significant transactions, such as changes in Specified
Amount, changes in Death Benefit Option, changes in future
premium allocation, transfers among Sub-Accounts, Premium
Payments, loans, loan repayments, reinstatement and
termination.
28
<PAGE>
ADVERTISING
The Company is also ranked and rated by independent
financial rating services, including Moody's, Standard &
Poor's, Duff & Phelps and A.M. Best Company. The purpose of
these ratings is to reflect the financial strength or
claims-paying ability of the Company. The ratings are not
intended to reflect the investment experience or financial
strength of the Variable Account. The Company may advertise
these ratings from time to time. In addition, the Company
may include in certain advertisements, endorsements in the
form of a list of organizations, individuals or other
parties which recommend the Company or the Policies.
Furthermore, the Company may occasionally include in
advertisements comparisons of currently taxable and tax
deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles
and general economic conditions.
LEGAL PROCEEDINGS
There are no material legal or administrative proceedings
pending or known to be contemplated, other than ordinary
routine litigation incidental to the business, to which the
Company and the Variable Account are parties or to which any
of their property is subject. The principal underwriter,
CFA, is not engaged in any material litigation of any
nature.
EXPERTS
Actuarial opinions regarding Deferred Acquisition Cost Tax
(DAC Tax) and Mortality and Expense Charges included in this
Prospectus have been rendered by Timothy J. Luedtke, FSA,
900 Cottage Grove Road, Hartford, CT 06152, as stated in the
opinions filed as Exhibits to the Registration Statement
given on the authority of Mr. Luedtke as an expert in
actuarial matters.
Legal matters in connection with the Policies described
herein are being passed upon by Robert A. Picarello, Esq.,
Chief Counsel, CIGNA Individual Insurance, 900 Cottage Grove
Road, Hartford, CT 06152, in the opinion filed as an Exhibit
to the Registration Statement given on his authority as an
expert in these matters.
The consolidated financial statements of Connecticut General
Life Insurance Company as of December 31, 1995 and 1994 and
for each of the three years in the period ended December 31,
1995 included in this Prospectus have been so included in
reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts
in auditing and accounting.
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities
and Exchange Commission under the Securities Act of 1933, as
amended, with respect to the Policies offered hereby. This
Prospectus does not contain all the information set forth in
the Registration Statement and amendments thereto and
exhibits filed as a part thereof, to all of which reference
is hereby made for further information concerning the
Variable Account, the Company, and the Policies offered
hereby. Statements contained in this Prospectus as to the
content of Policies and other legal instruments are
summaries. For a complete statement of the terms thereof,
reference is made to such instruments as filed.
FINANCIAL STATEMENTS
There follow the consolidated balance sheets of the Company
and its subsidiaries as of December 31, 1995 and 1994 and
related consolidated statements of income and retained
earnings and cash flows for the years ended December 31,
1995, 1994 and
29
<PAGE>
1993. They should be considered only as bearing upon the
ability of the Company to meet its obligations under the
Policies. No financial statements for the Variable Account
are included, because the Variable Account has not yet
commenced operations.
The most current financial statements of the Company are
those as of the end of the most recent fiscal year. The
Company does not prepare financial statements more often
than annually and believes that any incremental benefit to
prospective Policy Owners that may result from preparing and
delivering more current financial statements, though
unaudited, does not justify the additional cost that would
be incurred, in addition, the Company represents that, there
have been no adverse changes in the financial condition or
operations of the Company between the end of 1995 and the
date of this Prospectus.
30
<PAGE>
NORTHEAST INSURANCE SERVICES Telephone 860 240 2000
One Financial Plaza Facsimile 860 240 2282
Hartford, CT 06103
PRICE WATERHOUSE LLP [LOGO]
REPORT OF INDEPENDENT ACCOUNTANTS
February 13, 1996
The Board of Directors and Shareholder
Connecticut General Life Insurance Company
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and retained earnings and of cash flows
present fairly, in all material respects, the financial position of Connecticut
General Life Insurance Company and its subsidiaries at December 31, 1995 and
1994, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
31
<PAGE>
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
(IN MILLIONS)
- ----------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1995 1994 1993
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Premiums and fees................................. $ 4,998 $ 4,960 $ 4,704
Net investment income............................. 3,138 2,805 2,742
Realized investment gains (losses)................ (7) 27 (65)
Other revenues.................................... 9 8 15
-------- -------- --------
Total revenues................................ 8,138 7,800 7,396
-------- -------- --------
BENEFITS, LOSSES AND EXPENSES
Benefits, losses and settlement expenses.......... 5,892 5,574 5,215
Policy acquisition expenses....................... 127 89 84
Other operating expenses.......................... 1,358 1,363 1,351
-------- -------- --------
Total benefits, losses and expenses........... 7,377 7,026 6,650
-------- -------- --------
INCOME BEFORE INCOME TAXES........................ 761 774 746
-------- -------- --------
Income taxes (benefits):
Current......................................... 301 220 433
Deferred........................................ (44) 45 (197)
-------- -------- --------
Total taxes................................... 257 265 236
-------- -------- --------
NET INCOME........................................ 504 509 510
Dividends declared................................ (252) (300) (190)
Retained earnings, beginning of year.............. 2,968 2,759 2,439
-------- -------- --------
RETAINED EARNINGS, END OF YEAR.................... $ 3,220 $ 2,968 $ 2,759
- ----------------------------------------------------------------------------------
------------------------------
</TABLE>
THE NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE STATEMENTS.
32
<PAGE>
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(IN MILLIONS)
- -------------------------------------------------------------------------
AS OF DECEMBER 31, 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Available for sale, at fair value (amortized
cost, $20,031; $8,571)....................... $22,046 $ 8,324
Held to maturity, at amortized cost (fair
value, $10,075).............................. -- 10,061
Mortgage loans.................................. 10,218 8,975
Equity securities, at fair value (cost, $54;
$109).......................................... 66 119
Policy loans.................................... 6,925 5,237
Real estate..................................... 1,158 1,442
Other long-term investments..................... 193 128
Short-term investments.......................... 254 143
------- --------
Total investments........................... 40,860 34,429
Cash and cash equivalents......................... -- 80
Accrued investment income......................... 626 578
Premiums and accounts receivable.................. 991 911
Reinsurance recoverables.......................... 1,258 2,533
Deferred policy acquisition costs................. 689 700
Property and equipment, net....................... 319 346
Current income taxes.............................. 21 119
Deferred income taxes, net........................ 403 661
Goodwill.......................................... 503 518
Other assets...................................... 149 135
Separate account assets........................... 18,177 14,498
- -------------------------------------------------------------------------
Total....................................... $63,996 $ 55,508
- -------------------------------------------------------------------------
-------------------
LIABILITIES
Contractholder deposit funds...................... $29,762 $ 26,696
Future policy benefits............................ 8,547 7,875
Unpaid claims and claim expenses.................. 1,151 1,096
Unearned premiums................................. 95 84
------- --------
Total insurance and contractholder
liabilities................................ 39,555 35,751
Accounts payable, accrued expenses
and other liabilities............................. 1,872 1,632
Separate account liabilities...................... 18,075 14,427
- -------------------------------------------------------------------------
Total liabilities........................... 59,502 51,810
- -------------------------------------------------------------------------
-------------------
CONTINGENCIES -- NOTE 11
SHAREHOLDER'S EQUITY
Common stock (6 shares outstanding)............... 30 30
Additional paid-in capital........................ 766 764
Net unrealized appreciation (depreciation) on
investments..................................... 476 (66)
Net translation of foreign currencies............. 2 2
Retained earnings................................. 3,220 2,968
- -------------------------------------------------------------------------
Total shareholder's equity.................. 4,494 3,698
- -------------------------------------------------------------------------
Total....................................... $63,996 $ 55,508
- -------------------------------------------------------------------------
-------------------
</TABLE>
THE NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE STATEMENTS.
33
<PAGE>
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
(IN MILLIONS)
- ----------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1995 1994 1993
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................................ $ 504 $ 509 $ 510
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Insurance liabilities........................... (90) (249) 251
Reinsurance recoverables........................ 1,201 282 (392)
Premiums and accounts receivable................ 32 (188) 85
Deferred income taxes, net...................... (44) 45 (197)
Other assets.................................... (14) 68 54
Accounts payable, accrued expenses, other
liabilities and current income taxes........... 212 (192) 5
Other, net...................................... 22 (24) (82)
-------- -------- --------
Net cash provided by operating activities..... 1,823 251 234
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from investments sold:
Fixed maturities -- available for sale.......... 1,070 1,389 --
Fixed maturities -- held to maturity............ -- 12 599
Mortgage loans.................................. 383 496 1,004
Equity securities............................... 119 41 41
Real Estate..................................... 299 242 78
Other (primarily short-term investments)........ 2,268 1,005 3,762
Investment maturities and repayments:
Fixed maturities--available for sale............ 478 686 --
Fixed maturities--held to maturity.............. 1,756 1,764 3,167
Mortgage loans.................................. 420 194 202
Investments purchased:
Fixed maturities--available for sale............ (3,054) (2,390) --
Fixed maturities--held to maturity.............. (1,385) (1,788) (5,128)
Mortgage loans.................................. (1,908) (882) (823)
Equity securities............................... (20) (12) (112)
Policy loans.................................... (2,129) (1,614) (1,561)
Other (primarily short-term investments)........ (2,334) (1,093) (3,587)
Other, net........................................ (119) (129) (48)
-------- -------- --------
Net cash used in investing activities......... (4,156) (2,079) (2,406)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Deposits and interest credited to contractholder
deposit funds................................... 7,489 6,388 7,537
Withdrawals and benefit payments from
contractholder deposit funds.................... (4,985) (4,216) (5,166)
Dividends paid to Parent.......................... (252) (300) (190)
Other, net........................................ 1 36 (30)
-------- -------- --------
Net cash provided by financing activities..... 2,253 1,908 2,151
- ----------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents..................................... (80) 80 (21)
Cash and cash equivalents, beginning of year...... 80 -- 21
- ----------------------------------------------------------------------------------------
Cash and cash equivalents, end of year............ $ -- $ 80 $ --
- ----------------------------------------------------------------------------------------
Supplemental Disclosure of Cash Information:
Income taxes paid, net of refunds............... $ 211 $ 411 $ 352
Interest paid................................... $ 7 $ 5 $ 5
- ----------------------------------------------------------------------------------------
</TABLE>
THE NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE STATEMENTS.
34
<PAGE>
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- DESCRIPTION OF BUSINESS
Connecticut General Life Insurance Company and its subsidiaries (the Company)
provide insurance and related financial services throughout the United States
and in many locations worldwide. Principal products and services include group
life and health insurance, individual life insurance and annuity products, and
retirement and investment products and services.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of the Company and all significant subsidiaries. The Company is a
wholly-owned subsidiary of Connecticut General Corporation, which is an indirect
wholly-owned subsidiary of CIGNA Corporation (CIGNA). These consolidated
financial statements have been prepared in conformity with generally accepted
accounting principles, and reflect management's estimates and assumptions, such
as those regarding medical costs and interest rates, that affect the recorded
amounts. Significant estimates used in determining insurance and contractholder
liabilities, related reinsurance recoverables, and valuation allowances for
investment assets are discussed throughout the Notes to the Financial
Statements. Certain reclassifications have been made to prior years' amounts to
conform with the 1995 presentation.
B) RECENT ACCOUNTING PRONOUNCEMENTS: In 1993, the Company implemented
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." SFAS No. 115 requires that
debt and equity securities be classified into different categories and carried
at fair value if they are not classified as held to maturity. During the fourth
quarter of 1995, the Financial Accounting Standards Board (FASB) issued a guide
to implementation of SFAS No. 115, which permits a one-time opportunity to
reclassify securities subject to SFAS No. 115. Consequently, the Company
reclassified all held-to-maturity securities to available-for-sale as of
December 31, 1995. The non-cash reclassification of these securities, which had
an aggregate amortized cost of $9.2 billion and fair value of $10.1 billion,
resulted in an increase of approximately $396 million, net of
policyholder-related amounts and deferred income taxes, in net unrealized
appreciation included in Shareholders' Equity as of December 31, 1995.
In 1993, the Financial Accounting Standards Board (FASB) issued SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan," which provides guidance on
the accounting and disclosure for impaired loans. In 1994, the FASB issued SFAS
No. 118, "Accounting by Creditors for Impairment of a Loan -- Income Recognition
and Disclosures," which eliminates the income recognition requirements of SFAS
No. 114. The Company adopted SFAS Nos. 114 and 118 in the first quarter of 1995,
which resulted in a $6 million increase in net income.
In 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121
requires write-down to fair value when long-lived assets to be held and used are
impaired. Long-lived assets to be disposed of, including real estate held for
sale, must be carried at the lower of cost or fair value less costs to sell.
Depreciation of assets to be disposed of is prohibited. The Company will adopt
this standard in the first quarter of 1996. The effect on the Company's results
of operations, liquidity and financial condition is not expected to be material.
C) FINANCIAL INSTRUMENTS: In the normal course of business, the Company
enters into transactions involving various types of financial instruments,
including investments such as fixed maturities and equity securities and off-
balance-sheet financial instruments such as investment and loan commitments and
financial guarantees. These instruments have credit risk and also may be subject
to risk of loss due to interest rate and market fluctuations. The Company
evaluates and monitors each financial instrument individually and, where
appropriate, uses certain derivative instruments or obtains collateral or other
forms of security to minimize risk of loss.
See Note 12 for additional information on the fair value of financial
instruments.
D) INVESTMENTS: Investments in fixed maturities include bonds, asset-backed
securities, including collateralized mortgage obligations (CMOs), and redeemable
preferred stocks. Fixed maturities classified as held to maturity are
35
<PAGE>
carried at amortized cost, net of impairments, and those classified as available
for sale are carried at fair value, with unrealized appreciation or depreciation
included in Shareholder's Equity. Fixed maturities are considered impaired and
written down to fair value when a decline in value is considered to be other
than temporary.
Mortgage loans are carried principally at unpaid principal balances, net of
valuation reserves. Mortgage loans are considered impaired when it is probable
that the Company will be unable to collect all amounts according to the
contractual terms of the loan agreement. If impaired, a valuation reserve is
utilized when a decline in the fair value of the underlying collateral is below
the carrying value.
Fixed maturities and mortgage loans that are delinquent or restructured to
modify basic financial terms, typically to reduce the interest rate and, in
certain cases, extend the term, are placed on non-accrual status, and thereafter
interest income is recognized only when payment is received.
Real estate investments are either held for the production of income or held
for sale. Real estate investments held for the production of income are carried
at depreciated cost less valuation reserves when a decline in value is other
than temporary. Depreciation is generally calculated using the straight-line
method based on the estimated useful lives of the assets. Real estate
investments held for sale are generally those which are acquired through the
foreclosure of mortgage loans. These assets are valued at their fair value at
the time of foreclosure. The fair value is established as the new cost basis and
the asset acquired is reclassified from mortgage loans to real estate held for
sale. Subsequent to foreclosure, these investments are carried at the lower of
depreciated cost or current fair value less estimated costs to sell. Adjustments
to the carrying value as a result of changes in fair value subsequent to
foreclosure are recorded as valuation reserves and reported in realized
investment gains and losses. The Company considers several methods in
determining fair value for real estate acquired through foreclosure, with
greater emphasis placed on the use of discounted cash flow analyses and, in some
cases, the use of third-party appraisals. Assets held for sale are depreciated
using the straight-line method based on the estimated useful lives of the
assets.
Equity securities, which include common and non-redeemable preferred stocks,
are carried at fair value. Short-term investments are carried at fair value,
which approximates cost. Equity securities and short-term investments are
classified as available for sale.
Policy loans are generally carried at unpaid principal balances.
Realized investment gains and losses result from sales, investment asset
write-downs and changes in valuation reserves, after deducting amounts
attributable to experience-rated pension policyholders' contracts and
participating life policies ("policyholder share"). Generally, realized
investment gains and losses are based upon specific identification of the
investment assets.
Unrealized investment gains and losses, after deducting policyholder-related
amounts and net of deferred income taxes, if applicable, for investments carried
at fair value are included in Shareholder's Equity.
See Note 3(F) for a discussion of the Company's accounting policies for
derivative financial instruments.
E) CASH AND CASH EQUIVALENTS: Short-term investments with a maturity of three
months or less at the time of purchase are reported as cash equivalents.
F) REINSURANCE RECOVERABLES: Reinsurance recoverables are estimates of
amounts to be received from reinsurers, including amounts under reinsurance
agreements with affiliated companies. Allowances are established for amounts
deemed uncollectible.
G) DEFERRED POLICY ACQUISITION COSTS: Acquisition costs consist of
commissions, premium taxes and other costs, which vary with, and are primarily
related to, the production of revenues. Group life and a portion of group health
insurance business acquisition costs are deferred and amortized over the terms
of the insurance policies. Acquisition costs related to universal life products
and contractholder deposit funds are deferred and amortized in proportion to
total estimated gross profits over the expected life of the contracts.
Acquisition costs related to annuity and other life insurance businesses are
deferred and amortized, generally in proportion to the ratio of annual revenue
to the estimated total revenues over the contract periods.
Deferred acquisition costs are reviewed to determine if they are recoverable
from future income, including investment income. If such costs are estimated to
be unrecoverable, they are expensed. If such costs are estimated
36
<PAGE>
to be unrecoverable or are accelerated as a result of treating unrealized
investment gains and losses as though they had been realized, a deferred
acquisition cost valuation allowance may be established or adjusted, with a
comparable offset in net unrealized appreciation (depreciation).
H) PROPERTY AND EQUIPMENT: Property and equipment are carried at cost less
accumulated depreciation. When applicable, cost includes interest and real
estate taxes incurred during construction and other construction-related costs.
Depreciation is calculated principally on the straight-line method based on the
estimated useful lives of the assets. Accumulated depreciation was $387 million
and $333 million at December 31, 1995 and 1994, respectively.
I) OTHER ASSETS: Other Assets consists of various insurance-related assets,
principally ceded unearned premiums, reinsurance deposits and other amounts due
from affiliated companies.
J) GOODWILL: Goodwill represents the excess of the cost of businesses
acquired over the fair value of their net assets. These costs are amortized on
systematic bases over periods, not exceeding 40 years, that correspond with the
benefits estimated to be derived from the acquisitions. The Company evaluates
the carrying amount of goodwill by analyzing historical and estimated future
income and undiscounted estimated cash flows of the related businesses. Goodwill
is written down when impaired. Amortization periods are revised if it is
estimated that the remaining period of benefit of the goodwill has changed.
Accumulated amortization was $84 million and $70 million at December 31, 1995
and 1994, respectively.
K) SEPARATE ACCOUNTS: Separate account assets and liabilities are principally
carried at market value, with less than 5% carried at amortized cost, and
represent policyholder funds maintained in accounts having specific investment
objectives. The investment income, gains and losses of these accounts generally
accrue to the policyholders and, therefore, are not included in the Company's
net income.
L) CONTRACTHOLDER DEPOSIT FUNDS: Contractholder Deposit Funds are liabilities
for investment-related and universal life products which were $19.8 billion and
$10.0 billion, respectively, as of December 31, 1995, compared with $18.6
billion and $8.1 billion, respectively, as of December 31, 1994. These
liabilities consist of deposits received from customers and investment earnings
on their fund balances, less administrative charges and, for universal life fund
balances, mortality charges.
M) FUTURE POLICY BENEFITS: Future policy benefits are liabilities for life,
health and annuity products. Such liabilities are established in amounts
adequate to meet the estimated future obligations of policies in force. These
liabilities are computed using premium assumptions for group annuity policies
and the net level premium method for individual life and annuity policies, and
are based upon estimates as to future investment yield, mortality and
withdrawals that include provisions for adverse deviation. Future policy
benefits for individual life insurance and annuity policies are computed using
interest rates ranging from 2% to 11%, generally graded down after 10 to 30
years. Mortality, morbidity, and withdrawal assumptions are based on either the
Company's own experience or various actuarial tables.
N) UNPAID CLAIMS AND CLAIM EXPENSES: Liabilities for unpaid claims and claim
expenses are estimates of payments to be made on insurance claims for reported
losses and estimates of losses incurred but not reported.
O) UNEARNED PREMIUMS: Premiums for group life, and accident and health
insurance are reported as earned on a pro rata basis over the contract period.
The unexpired portion of these premiums is recorded as Unearned Premiums.
P) OTHER LIABILITIES: Other Liabilities consists principally of
postretirement and postemployment benefits and various insurance-related
liabilities, including amounts related to reinsurance contracts. Also included
in Other Liabilities are liabilities for guaranty fund assessments that can be
reasonably estimated.
Q) TRANSLATION OF FOREIGN CURRENCIES: Foreign operations primarily utilize
the local currencies as their functional currencies, and assets and liabilities
are translated at the rates of exchange as of the balance sheet date. The
translation gain or loss on such functional currencies, net of applicable taxes,
is generally reflected in Shareholder's Equity. Revenues and expenses are
translated at the average rates of exchange prevailing during the year.
37
<PAGE>
R) PREMIUM AND FEES, REVENUES AND RELATED EXPENSES: Premiums for group life
and accident and health insurance are recognized as revenue on a pro rata basis
over their contract periods. Premiums for individual life and health insurance
as well as individual and group annuity products, excluding universal life and
investment-related products, are recognized as revenue when due. Benefits,
losses and expenses are matched with premiums.
Revenues for universal life products consist of net investment income and
mortality, administration and surrender fees assessed against the fund values
during the period. Benefit expenses for universal life products consist of
benefit claims in excess of fund values and interest credited to fund values.
Revenues for investment-related products consist of net investment income and
contract charges assessed against the fund values during the period. Benefit
expenses for investment-related products primarily consist of interest credited
to the fund values after deduction for investment and risk fees.
S) PARTICIPATING BUSINESS: Certain life insurance policies contain dividend
payment provisions that enable the policyholder to participate in the earnings
of the Company's business. The participating insurance in force accounted for
7.0% of total insurance in force at December 31, 1995, compared with 5.2% at
December 31, 1994 and 3.6% at December 31, 1993.
T) INCOME TAXES: The Company and its domestic subsidiaries are included in
the consolidated United States federal income tax return filed by CIGNA. In
accordance with a tax sharing agreement with CIGNA, the provision for federal
income tax is computed as if the Company were filing a separate federal income
tax return, except that benefits arising from tax credits and net operating and
capital losses are allocated to those subsidiaries producing such attributes to
the extent they are utilized in CIGNA's consolidated federal income tax
provision.
Deferred income taxes are generally recognized when assets and liabilities
have different values for financial statement and tax reporting purposes. See
Note 6 for additional information.
NOTE 3 -- INVESTMENTS
A) FIXED MATURITIES: Fixed maturities are net of cumulative write-downs of
$103 million and $78 million, including policyholder share, as of December 31,
1995 and 1994, respectively.
As of December 31, 1995, all fixed maturities are classified as available for
sale and are carried at fair value. See Note 2(B) for additional information.
The amortized cost and fair value by contractual maturity periods for
available-for-sale fixed maturities (carried at fair value), including
policyholder share, as of December 31, 1995 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Amortized Fair
(IN MILLIONS) Cost Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less.................................................. $ 944 $ 980
Due after one year through five years.................................... 5,260 5,566
Due after five years through ten years................................... 4,936 5,404
Due after ten years...................................................... 3,401 4,276
Asset-backed securities.................................................. 5,490 5,820
- ------------------------------------------------------------------------------------------------
Total.................................................................... $ 20,031 $ 22,046
- ------------------------------------------------------------------------------------------------
---------------------
</TABLE>
Actual maturities could differ from contractual maturities because issuers may
have the right to call or prepay obligations with or without call or prepayment
penalties. Also, the Company may extend maturities in some cases.
38
<PAGE>
Gross unrealized appreciation (depreciation) for fixed maturities, including
policyholder share, by type of issuer was as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
December 31, 1995
- -----------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Amortized Fair
(IN MILLIONS) Cost Appreciation Depreciation Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for Sale (Carried at Fair Value)
Federal government bonds.......................... $ 497 $ 300 $ -- $ 797
State and local government bonds.................. 161 24 (1) 184
Foreign government bonds.......................... 131 9 (1) 139
Corporate securities.............................. 13,752 1,427 (73) 15,106
Asset-backed securities........................... 5,490 371 (41) 5,820
- -----------------------------------------------------------------------------------------------------
Total............................................. $20,031 $ 2,131 $ (116) $ 22,046
- -----------------------------------------------------------------------------------------------------
-----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
December 31, 1994
- -----------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Amortized Fair
(IN MILLIONS) Cost Appreciation Depreciation Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for Sale (Carried at Fair Value)
Federal government bonds.......................... $ 393 $ 35 $ (13) $ 415
State and local government bonds.................. 48 -- (4) 44
Foreign government bonds.......................... 135 1 (6) 130
Corporate securities.............................. 5,042 84 (244) 4,882
Asset-backed securities........................... 2,953 98 (198) 2,853
- -----------------------------------------------------------------------------------------------------
Total............................................. $ 8,571 $ 218 $ (465) $ 8,324
- -----------------------------------------------------------------------------------------------------
-----------------------------------------------
Held to Maturity (Carried at Amortized Cost)
State and local government bonds.................. $ 61 $ 4 $ (1) $ 64
Foreign government bonds.......................... 49 1 (1) 49
Corporate securities.............................. 8,088 293 (232) 8,149
Asset-backed securities........................... 1,863 46 (96) 1,813
- -----------------------------------------------------------------------------------------------------
Total............................................. $10,061 $ 344 $ (330) $ 10,075
- -----------------------------------------------------------------------------------------------------
-----------------------------------------------
</TABLE>
Asset-backed securities include investments in CMOs as of December 31, 1995 of
$2.1 billion carried at fair value (amortized cost, $2.0 billion). As of
December 31, 1994, investments in CMOs consisted of $1.5 billion carried at fair
value (amortized cost, $1.6 billion), and $150 million carried at amortized cost
(fair value, $160 million). Certain of these securities are backed by
Aaa/AAA-rated government agencies. All other CMO securities have high quality
standards through use of credit enhancement provided by subordinated securities
or mortgage insurance from an Aaa/AAA-rated insurance company. CMO holdings are
concentrated in securities with limited prepayment, extension and default risk,
such as planned amortization class bonds. The Company's investments in
interest-only and principal-only CMOs, which are also subject to interest rate
risk resulting from accelerated prepayments, represented approximately 2% and 6%
of total CMO investments at December 31, 1995 and 1994, respectively.
39
<PAGE>
At December 31, 1995, contractual fixed maturity investment commitments
approximated $229 million. The majority of investment commitments are for the
purchase of investment grade fixed maturities, bearing interest at a fixed
market rate, and require no collateral. These commitments are diversified by
issuer and maturity date, and it is estimated that the full amount will be
disbursed in 1996, with the majority occurring within the first three months.
B) SHORT-TERM INVESTMENTS AND CASH EQUIVALENTS: Short-term investments and
cash equivalents, in the aggregate, included debt securities, principally
corporate securities of $259 million and $323 million and federal government
securities of $70 million and $7 million at December 31, 1995 and 1994,
respectively, and foreign government securities of $1 million at December 31,
1994.
C) MORTGAGE LOANS AND REAL ESTATE: The Company's mortgage loans and real
estate investments are diversified by property type and location and, for
mortgage loans, by borrower. Mortgage loans are collateralized by the related
properties and generally approximate 80% of the property's value at the time the
original loan is made.
At December 31, the carrying values of mortgage loans and real estate
investments, including policyholder share, were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(IN MILLIONS) 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Mortgage Loans.................................... $ 10,218 $ 8,975
-------- --------
Real estate:
Held for sale..................................... 671 760
Held for production of income..................... 487 682
-------- --------
Total real estate................................. 1,158 1,442
- ---------------------------------------------------------------------------
Total............................................. $ 11,376 $ 10,417
- ---------------------------------------------------------------------------
---------------------
</TABLE>
Valuation reserves for mortgage loans, including policyholder share, were $82
million and $115 million as of December 31, 1995 and 1994, respectively.
Valuation reserves and cumulative write-downs related to real estate, including
policyholder share, were $310 million and $309 million as of December 31, 1995
and 1994, respectively.
During 1995, 1994 and 1993, non-cash investing activities included real estate
acquired through foreclosure of mortgage loans, which totaled $144 million, $127
million and $458 million, respectively.
At December 31, mortgage loans and real estate investments comprised the
following property types and geographic regions:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
(IN MILLIONS) 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Property type:
Office buildings........................................................ $ 4,493 $ 4,092
Retail facilities....................................................... 4,327 3,867
Hotels.................................................................. 711 819
Apartment buildings..................................................... 1,246 997
Other................................................................... 599 642
- ------------------------------------------------------------------------------------------------
Total..................................................................... $ 11,376 $ 10,417
- ------------------------------------------------------------------------------------------------
--------------------
Geographic region:
Central................................................................. $ 4,032 $ 3,664
Pacific................................................................. 2,580 2,558
Middle Atlantic......................................................... 1,951 1,652
South Atlantic.......................................................... 1,647 1,585
New England............................................................. 1,166 958
- ------------------------------------------------------------------------------------------------
Total..................................................................... $ 11,376 $ 10,417
- ------------------------------------------------------------------------------------------------
--------------------
</TABLE>
At December 31, 1995, scheduled mortgage loan maturities were as follows: 1996
- -- $1.1 billion; 1997 -- $1 billion; 1998 -- $750 million; 1999 -- $1.3 billion;
2000 -- $1.6 billion; and $4.5 billion thereafter. Actual
40
<PAGE>
maturities could differ from contractual maturities because borrowers may have
the right to prepay obligations with or without prepayment penalties, and loans
may be refinanced. During 1995 and 1994, the Company refinanced approximately
$379 million and $600 million, respectively, of its mortgage loans relating to
borrowers that were unable to obtain alternative financing.
At December 31, 1995, the Company's total investment in impaired mortgage
loans was $838 million, including $447 million, before valuation reserves
totaling $82 million, and $391 million, which had no valuation reserves. During
1995, valuation reserves for mortgage loans, including policyholder share,
decreased from $127 million as of December 31, 1994 to $82 million as of
December 31, 1995. The net decrease for the year reflects: (1) $27 million of
mortgage loan reserves transferred to foreclosed real estate, (2) $33 million of
charge-offs, and (3) a $15 million net increase in valuation reserves.
During 1995, the average total investment in impaired mortgage loans, before
valuation reserves, was approximately $935 million, and interest income recorded
and cash received on these loans was approximately $71 million.
At December 31, 1995, contractual commitments to extend credit under
commercial mortgage loan agreements amounted to approximately $580 million, all
of which were at a fixed market rate of interest. These commitments expire
within three months, and are diversified by property type and geographic region.
D) NET UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS: Unrealized
appreciation (depreciation) for investments carried at fair value as of December
31 were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(IN MILLIONS) 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C>
Unrealized appreciation:
Fixed maturities................................ $ 2,131 $ 218
Equity securities............................... 23 22
------- -------
2,154 240
------- -------
Unrealized depreciation:
Fixed maturities................................ (116) (465)
Equity securities............................... (11) (12)
------- -------
(127) (477)
------- -------
Less policyholder-related amounts................. 1,279 (141)
Shareholder net unrealized appreciation
(depreciation).................................. 748 (96)
Less deferred income taxes (benefits)............. 272 (30)
- -------------------------------------------------------------------------
Net unrealized appreciation (depreciation)........ $ 476 $ (66)
- -------------------------------------------------------------------------
-------------------
</TABLE>
Net unrealized appreciation (depreciation) for investments carried at fair
value is included as a separate component of Shareholders' Equity, net of
policyholder-related amounts and deferred income taxes. The net unrealized
appreciation (depreciation) for these investments, primarily fixed maturities,
during 1995, 1994 and 1993 was $542 million, ($494) million and $423 million,
respectively.
During 1995, 1994 and 1993, the net unrealized appreciation (depreciation) for
fixed maturities that were carried at amortized cost in the financial statements
was ($14) million, ($1.2) billion and $129 million, respectively.
E) NON-INCOME PRODUCING INVESTMENTS: At December 31, the carrying values of
investments that were non-income producing during the preceding 12 months,
including policyholder share, were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(IN MILLIONS) 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C>
Fixed maturities.................................. $ 75 $ 71
Mortgage loans.................................... 17 81
Real estate....................................... 234 280
- -------------------------------------------------------------------------
Total............................................. $ 326 $ 432
- -------------------------------------------------------------------------
-------------------
</TABLE>
41
<PAGE>
F) DERIVATIVE FINANCIAL INSTRUMENTS: The Company's investment strategy is to
manage the characteristics of investment assets, such as liquidity, currency,
yield and duration, to reflect the underlying characteristics of the related
insurance and contractholder liabilities, which vary among the Company's
principal product lines. In connection with this investment strategy, the
Company uses derivative instruments through hedging applications to manage
market risk.
Generally, the Company uses interest rate swap contracts to create, when
combined with cash flows from variable rate bonds, fixed rate cash flows that
meet its portfolio investment strategy. Currency swaps are used to match the
currency of individual investments to that of the associated liabilities.
Interest rate futures are used to temporarily hedge against changes in market
values of bonds and mortgage loans to be purchased or sold, and stock index
futures may be used to hedge the temporary cash position of equity accounts.
Interest rate futures also are used to hedge interest rate risk associated with
withdrawals by contractholders over a scheduled time period.
Cash requirements arise as a result of the Company's derivative activities.
Under interest rate swaps, the Company agrees with other parties to exchange, at
specified intervals, the difference between fixed rate and variable rate
interest amounts calculated by reference to an agreed-upon notional principal
amount. Under futures contracts, initial margin requirements are settled with
cash or other instruments and changes in the contract values are settled in cash
daily with the exchange on which the instrument is traded. Under currency swaps,
the parties generally exchange a principal amount in the two relevant
currencies, agreeing to re-exchange principal amounts at a specified future date
using an agreed-upon exchange rate, and agreeing to periodically exchange
amounts equal to interest payments using the agreed-upon exchange rate.
Because the Company's use of derivatives is limited to hedging applications,
changes in the market value of the derivatives are substantially offset by
changes in the market value of the hedged assets or underlying liabilities,
minimizing market risk. The Company routinely monitors, by individual
counterparty, exposure to credit risk associated with swap contracts. Futures
contracts are exchange-traded and, therefore, credit risk is limited since the
exchange assumes the obligations. The Company manages legal risks by following
industry standardized documentation procedures, by monitoring legal developments
and, consistent with its credit exposure policies, by limiting risks associated
with counterparty failure by diversifying the swaps portfolio among approved
dealers of high credit quality.
Changes in the market value of futures contracts that qualify for hedge
accounting are deferred and recorded as adjustments to the carrying value of the
related bond or mortgage loan. Deferred gains and losses are amortized into net
investment income over the life of the investments purchased or recognized in
full as realized investment gains and losses in the event that the investment or
futures contract is sold prior to maturity. Futures contracts totaled $22
million and $142 million as of December 31, 1995 and 1994, respectively, and
were accounted for as hedges. At December 31, 1995, gains and losses on futures
contracts deferred in anticipation of investment purchases were $4 million and
$1 million, respectively. At December 31, 1994, gains and losses on futures
contracts deferred in anticipation of investment purchases were $1 million and
$3 million, respectively.
Net interest received or paid on an interest rate swap contract is recognized
currently as an adjustment to net investment income. The fair value of interest
rate swap contracts is reported as an adjustment to the fair value of the
related investment. Underlying notional principal amounts associated with
interest rate swap contracts outstanding were $508 million and $596 million at
December 31, 1995 and 1994, respectively.
The interest payment cash flows received in U.S. dollars from currency swaps
related to foreign currency denominated investment securities (primarily
Canadian dollars, pound sterling, Swiss francs and Japanese yen) are recognized
as net investment income when received. The fair value of currency swaps is
reported as an adjustment to the fair value of the related investment.
Underlying principal amounts associated with currency swap contracts outstanding
were $335 million and $325 million at December 31, 1995 and 1994, respectively.
As of December 31, 1995 and 1994, respectively, the Company's variable rate
investments consisted of approximately $1.4 billion and $810 million of fixed
maturities, respectively. As of December 31, 1995 and 1994, the Company's fixed
rate investments consisted of $20.6 billion and $17.6 billion, respectively, of
fixed maturities and $10 billion and $9 billion, respectively, of mortgage
loans. As a result of recognizing amortization of deferred market value changes
in futures contracts, net investment income on bonds and mortgage loans was
increased by $10 million and $1 million, respectively, for the year ended
December 31, 1995 and by $7 million and $1 million,
42
<PAGE>
respectively, for the year ended December 31, 1994. In addition, the increase in
net investment income for bonds resulting from interest rate swap contracts was
$3 million, $12 million and $19 million for 1995, 1994 and 1993, respectively.
G) OTHER: As of December 31, 1995 and 1994, the Company had no concentration
of investments in a single investee exceeding 10% of Shareholder's Equity.
NOTE 4 -- INVESTMENT INCOME AND GAINS AND LOSSES
A) NET INVESTMENT INCOME: The components of net investment income, including
policyholder share, for the year ended December 31 were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
(IN MILLIONS) 1995 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities.................................. $ 1,669 $ 1,596 $ 1,547
Mortgage loans.................................... 866 776 892
Equity securities................................. 15 20 16
Policy loans...................................... 499 365 253
Real estate....................................... 301 291 238
Other long-term investments....................... 33 23 20
Short-term investments............................ 40 8 18
------- ------- -------
3,423 3,079 2,984
Less investment expenses.......................... 285 274 242
- -------------------------------------------------------------------------------------
Net investment income............................. $ 3,138 $ 2,805 $ 2,742
- -------------------------------------------------------------------------------------
-------------------------------
</TABLE>
Net investment income attributable to policyholder contracts, which is
included in the Company's revenues and is primarily offset by amounts included
in Benefits, Losses and Settlement Expenses, was approximately $1.8 billion,
$1.5 billion and $1.6 billion for 1995, 1994 and 1993, respectively. Net
investment income for separate accounts, which is not reflected in the Company's
revenues, was $885 million, $693 million and $604 million for December 31, 1995,
1994 and 1993, respectively.
As of December 31, 1995, fixed maturities and mortgage loans on non-accrual
status, including policyholder share, were $149 million and $523 million,
including restructured investments of $105 million and $447 million,
respectively. Amounts on non-accrual status as of December 31, 1994 were $272
million of fixed maturities and $743 million of mortgage loans, including
restructurings of $148 million and $543 million, respectively. If interest on
these investments had been recognized in accordance with their original terms,
net income would have been increased by $12 million, $14 million and $17 million
in 1995, 1994 and 1993, respectively.
B) REALIZED INVESTMENT GAINS AND LOSSES: Realized gains and losses on
investments, excluding policyholder share, for the year ended December 31 were
as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
(IN MILLIONS) 1995 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Realized investment gains (losses):
Fixed maturities................................ $ (10) $ 4 $ 28
Mortgage loans.................................. (5) -- (5)
Equity securities............................... 5 2 (5)
Real estate..................................... 4 15 (66)
Other........................................... (1) 6 (17)
------- ------- -------
(7) 27 (65)
Income tax (benefits) expenses.................... (2) 12 (16)
- -------------------------------------------------------------------------------------
Net realized investment gains (losses)............ $ (5) $ 15 $ (49)
- -------------------------------------------------------------------------------------
-------------------------------
</TABLE>
Impairments in the value of investments, net of recoveries, that are included
in realized investment gains and losses were $27 million, $33 million and $55
million in 1995, 1994 and 1993, respectively.
43
<PAGE>
Realized investment gains (losses) for separate accounts, which are not
reflected in the Company's revenues, were $412 million, ($51) million and $612
million for the years ended December 31, 1995, 1994 and 1993, respectively.
Realized investment (losses) attributable to policyholder contracts, which also
are not reflected in the Company's revenues, were ($6) million and ($5) million
for the years ended December 31, 1995 and 1993, respectively. Realized
investment gains (losses) attributable to policyholder contracts were zero for
the year ended December 31, 1994.
Sale of available-for-sale fixed maturities and equity securities, including
policyholder share, for the year ended December 31 were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(IN MILLIONS) 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C>
Proceeds from sales............................... $ 1,667 $ 2,116
Gross gains on sales.............................. $ 78 $ 73
Gross losses on sales............................. $ (53) $ (70)
- -------------------------------------------------------------------------
-------------------
</TABLE>
Prior to the SFAS No. 115 reclassification described in Note 2(B), $171
million of fixed maturities classified as held-to-maturity, including
policyholder share, were transferred to the available-for-sale category in 1995
resulting in the recognition in Shareholder's Equity of unrealized depreciation
of $15 million, net of policyholder-related amounts and deferred income taxes.
During 1994, the Company sold $14 million of held-to-maturity fixed maturities,
including policyholder share, resulting in gross proceeds of $12 million and a
pre-tax realized loss of $2 million. In addition, in 1994 $82 million of fixed
maturities classified as held-to-maturity, including policyholder share, were
transferred to the available-for-sale category at fair value, which was not
significantly different from the carrying value. The sales of fixed maturities
classified as held to maturity and the transfer of such securities to the
available-for-sale category were the result of significant credit deterioration
of the issuers of the affected investments.
Prior to adoption of SFAS No. 115, proceeds from voluntary sales of
investments in fixed maturities, including policyholder share, were $599 million
in 1993. Such sales resulted in gross realized gains and gross realized
(losses), including policyholder share, of $36 million and ($3) million,
respectively. These amounts exclude the effects of sales of fixed maturities
that, prior to the implementation of SFAS No. 115, were classified as short-term
investments.
NOTE 5 -- SHAREHOLDER'S EQUITY AND DIVIDEND RESTRICTIONS
The Connecticut Insurance Department (the Department) recognizes as net income
and surplus (shareholder's equity) those amounts determined in conformity with
statutory accounting practices prescribed or permitted by the Department, which
differ in certain respects from generally accepted accounting principles. As of
December 31, 1994, there were no permitted accounting practices utilized by the
Company that were materially different from those prescribed by the Department.
Capital stock of the Company at December 31, 1995 and 1994 consisted of
5,978,322 shares of common stock authorized, issued and outstanding (par value
$5.00).
The Company's statutory net income was $390 million, $428 million and $397
million for 1995, 1994 and 1993, respectively. Statutory surplus was $2.1
billion and $2.0 billion at December 31, 1995 and 1994, respectively. The
Connecticut Insurance Holding Company Act limits the amount of annual dividends
or other distributions available to shareholders of Connecticut insurance
companies without prior approval of the Insurance Commissioner. Under current
law, the maximum dividend distribution that may be made by the Company during
1996 without prior approval is $432 million. The amount of restricted net assets
as of December 31, 1995 was approximately $4.1 billion.
44
<PAGE>
NOTE 6 -- INCOME TAXES
The Company's net deferred tax asset of $403 million and $661 million as of
December 31, 1995 and 1994, respectively, reflects management's belief that the
Company's taxable income in future years will be sufficient to realize the net
deferred tax asset based on the Company's earnings history and its future
expectations. In determining the adequacy of future taxable income, management
considered the future reversal of its existing taxable temporary differences and
available tax planning strategies that could be implemented, if necessary.
In accordance with the Life Insurance Company Income Tax Act of 1959, a
portion of the Company's statutory income was not subject to current income
taxation but was accumulated in an account designated Policyholders' Surplus
Account. Under the Tax Reform Act of 1984, no further additions may be made to
the Policyholders' Surplus Account for tax years ending after December 31, 1983.
The balance in the account of approximately $450 million at December 31, 1995
would result in a tax liability of $158 million, only if distributed to the
shareholders or if the account balance exceeded a prescribed maximum. No income
taxes have been provided on this amount because, in management's opinion, the
likelihood that these conditions will be met is remote.
CIGNA's federal income tax returns are routinely audited by the Internal
Revenue Service (IRS), and provisions are made in CIGNA's financial statements
in anticipation of the results of these audits. In management's opinion,
adequate tax liabilities have been established for all years.
The tax effect of temporary differences which give rise to deferred income tax
assets and liabilities as of December 31 were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(IN MILLIONS) 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Insurance and contractholder liabilities........ $ 324 $ 337
Employee and retiree benefit plans.............. 176 175
Investments, net................................ 225 220
Unrealized depreciation on investments.......... -- 30
Other........................................... 72 71
------- -------
Total deferred tax assets....................... 797 833
------- -------
Deferred tax liabilities:
Policy acquisition expenses..................... 25 60
Depreciation.................................... 97 102
Unrealized appreciation on investments.......... 272 --
Other........................................... -- 10
------- -------
Total deferred tax liabilities.................. 394 172
- -------------------------------------------------------------------------
Deferred income taxes, net...................... $ 403 $ 661
- -------------------------------------------------------------------------
-------------------
</TABLE>
Total income tax expense was less than the amount computed using the nominal
federal income tax rate of 35% for the following reasons:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
(IN MILLIONS) 1995 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax expense at nominal rate....................... $ 266 $ 271 $ 261
Tax-exempt interest income........................ (6) (7) (6)
Dividends received deduction...................... (7) (3) (4)
Amortization of goodwill.......................... 4 4 5
Resolved federal tax audit issues................. -- (2) (3)
Increase in deferred tax asset for tax rate
change........................................... -- -- (13)
Other, net........................................ -- 2 (4)
- -------------------------------------------------------------------------------------
Total income tax expense.......................... $ 257 $ 265 $ 236
- -------------------------------------------------------------------------------------
-------------------------------
</TABLE>
45
<PAGE>
Temporary and other differences which resulted in the deferred tax expense
(benefit) for the year ended December 31 were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
(IN MILLIONS) 1995 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Insurance and contractholder liabilities.......... $ 13 $ 93 $ (80)
Policy acquisition expenses....................... (35) (8) (39)
Investments, net.................................. (21) (19) (36)
Employee and retiree benefit plans................ (1) (9) (16)
Realized investment (gains) losses................ 16 (20) (24)
Other............................................. (16) 8 (2)
- -------------------------------------------------------------------------------------
Deferred taxes (benefits)......................... $ (44) $ 45 $ (197)
- -------------------------------------------------------------------------------------
-------------------------------
</TABLE>
NOTE 7 -- PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS PLANS
A) PENSION PLANS: The Company provides retirement benefits to eligible
employees and agents. These benefits are provided through a plan sponsored by
CIGNA covering most domestic employees (the Plan) and by several separate
pension plans for various subsidiaries, agents and foreign employees.
The Plan is a non-contributory, defined benefit, trusteed plan available to
eligible domestic employees. Benefits are based on employees' years of service
and compensation during the highest three or, if service commenced after
December 31, 1988, five consecutive years of employment, offset by a portion of
the Social Security benefit for which they are eligible. CIGNA funds at least
the minimum amount required by the Employee Retirement Income Security Act of
1974. Allocated pension cost for the Company was $23 million, $31 million and
$27 million in 1995, 1994 and 1993, respectively.
The Plan, and several separate pension plans for various subsidiaries and
agents, had deposits with the Company totalling approximately $2.0 billion and
$1.7 billion at December 31, 1995 and 1994, respectively.
B) OTHER POSTRETIREMENT BENEFITS PLANS: In addition to providing pension
benefits, the Company provides certain health care and life insurance benefits
to retired employees, spouses and other eligible dependents through various
plans sponsored by CIGNA. A substantial portion of the Company's employees may
become eligible for these benefits upon retirement. CIGNA's contributions for
health care benefits depend upon a retiree's date of retirement, age, years of
service and other cost-sharing features, such as deductibles and coinsurance.
Under the terms of the benefit plans, benefit provisions and cost-sharing
features can be adjusted. In general, retiree health care benefits are not
funded by CIGNA, but are paid as covered expenses are incurred. Retiree life
insurance benefits are paid from plan assets or as covered expenses are
incurred.
An employer's postretirement benefit liability is primarily measured by
determining the present value of the projected future costs of health benefits
based on an estimate of health care cost trend rates. Expense for postretirement
benefits other than pensions allocated to the Company totalled $20 million for
1995, $28 million for 1994 and $15 million for 1993. The other postretirement
benefit liability included in Accounts Payable, Accrued Expenses and Other
Liabilities as of December 31, 1995 and 1994 was $427 million and $422 million,
including net intercompany payables of $28 million and $29 million,
respectively, for services provided by affiliates' employees.
C) OTHER POSTEMPLOYMENT BENEFITS: The Company provides certain salary
continuation (severance and disability), health care and life insurance benefits
to inactive and former employees, spouses and other eligible dependents through
various employee benefit plans sponsored by CIGNA.
Although severance benefits accumulate with additional service, the Company
recognizes severance expense when severance is probable and the costs can be
reasonably estimated. Postemployment benefits other than severance generally do
not vest or accumulate; therefore, the estimated cost of benefits is accrued
when determined to be probable and estimable, generally upon disability or
termination. See Note 8 for additional information regarding severance accrued
as part of cost reduction initiatives.
D) CAPITAL ACCUMULATION PLANS: CIGNA sponsors various capital accumulation
plans in which employee contributions on a pre-tax basis (401(k)) are
supplemented by CIGNA matching contributions. Contributions are
46
<PAGE>
invested, at the election of the employee, in one or more of the following
investments: CIGNA common stock fund, several non-CIGNA stock and bond
portfolios and a fixed-income fund. The Company's expense for such plans totaled
$14 million for 1995 and 1994 and $13 million for 1993.
NOTE 8 -- SEGMENT INFORMATION
The Company operates principally in three segments: Employee Life and Health
Benefits, Employee Retirement and Savings Benefits, and Individual Financial
Services. Other Operations consists principally of the results of the Company's
settlement annuity business.
Summarized financial information with respect to the business segments for the
year ended and as of December 31 was as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
(IN MILLIONS) 1995 1994 1993
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Employee Life and Health Benefits................. $ 4,243 $ 4,194 $ 3,811
Employee Retirement and Savings Benefits.......... 1,914 1,887 2,044
Individual Financial Services..................... 1,800 1,546 1,351
Other Operations.................................. 181 173 190
- ----------------------------------------------------------------------------------------
Total............................................. $ 8,138 $ 7,800 $ 7,396
- ----------------------------------------------------------------------------------------
----------------------------------
- ----------------------------------------------------------------------------------------
(IN MILLIONS) 1995 1994 1993
- ----------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES
Employee Life and Health Benefits................. $ 294 $ 323 $ 378
Employee Retirement and Savings Benefits.......... 232 258 172
Individual Financial Services..................... 252 237 198
Other Operations.................................. (17) (44) (2)
- ----------------------------------------------------------------------------------------
Total............................................. $ 761 $ 774 $ 746
- ----------------------------------------------------------------------------------------
----------------------------------
- ----------------------------------------------------------------------------------------
(IN MILLIONS) 1995 1994 1993
- ----------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
Employee Life and Health Benefits................. $ 7,629 $ 7,197 $ 7,307
Employee Retirement and Savings Benefits.......... 37,609 33,588 34,068
Individual Financial Services..................... 16,189 12,612 9,824
Other Operations.................................. 2,569 2,111 2,283
- ----------------------------------------------------------------------------------------
Total............................................. $ 63,996 $ 55,508 $ 53,482
- ----------------------------------------------------------------------------------------
----------------------------------
</TABLE>
During 1995, the Company recorded a $13 million pre-tax charge, included in
Other Operating Expenses, for cost reduction initiatives in the Employee Life
and Health Benefits segment. The charge consisted primarily of severance-related
expenses representing costs associated with nonvoluntary employee terminations
covering approximately 1,100 employees. The cash outlays associated with the
restructuring initiatives began in the third quarter of 1995 and will continue
through 1997, with most of the cash outlays expected to occur in 1996. During
1995, $3 million of severance was paid to 500 terminated employees. During 1993,
the Company implemented cost reduction initiatives in the Employee Life and
Health Benefits segment to reduce operating expenses. Results for 1993 reflected
a pre-tax charge of $8 million for the estimated costs of these cost reduction
actions. The Company has funded, and will continue to fund, these costs through
liquid assets, and such funding will not have a material adverse effect on its
liquidity.
47
<PAGE>
NOTE 9 -- LEASES AND RENTALS
Rental expenses for operating leases, principally with respect to buildings,
amounted to $60 million, $62 million and $66 million in 1995, 1994 and 1993,
respectively.
As of December 31, 1995, future net minimum rental payments under
non-cancelable operating leases were $92 million, payable as follows: 1996 - $37
million; 1997 - $24 million; 1998 - $13 million; 1999 - $9 million; 2000 - $4
million; and $5 million thereafter.
NOTE 10 -- REINSURANCE
In the normal course of business, the Company enters into agreements,
primarily relating to short-duration contracts, to assume and cede reinsurance
with other insurance companies. Reinsurance is ceded primarily to limit losses
from large exposures and to permit recovery of a portion of direct losses,
although ceded reinsurance does not relieve the originating insurer of
liability. The Company evaluates the financial condition of its reinsurers and
monitors concentrations of credit risk arising from similar geographic regions,
activities, or economic characteristic of its reinsurers.
Failure of reinsurers to indemnify the Company, as a result of reinsurer
insolvencies and disputes, could result in losses. As of December 31, 1995 and
1994 there were no allowances for uncollectible amounts. While future charges
for unrecoverable reinsurance may materially affect results of operations in
future periods, such amounts are not expected to have a material adverse effect
on the Company's liquidity or financial condition.
The effects of reinsurance on net earned premiums and fees for the year ended
December 31 were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
(IN MILLIONS) 1995 1994 1993
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-DURATION CONTRACTS
Premiums and Fees:
Direct.......................................... $ 3,374 $ 3,419 $ 2,666
Assumed......................................... 818 716 1,248
Ceded........................................... (391) (291) (329)
- ----------------------------------------------------------------------------------------
Net earned premiums and fees.................... $ 3,801 $ 3,844 $ 3,585
- ----------------------------------------------------------------------------------------
----------------------------------
- ----------------------------------------------------------------------------------------
(IN MILLIONS) 1995 1994 1993
- ----------------------------------------------------------------------------------------
LONG-DURATION CONTRACTS
Premiums and Fees:
Direct.......................................... $ 1,189 $ 1,068 $ 1,023
Assumed......................................... 127 126 166
Ceded........................................... (119) (78) (70)
- ----------------------------------------------------------------------------------------
Net earned premiums and fees.................... $ 1,197 $ 1,116 $ 1,119
- ----------------------------------------------------------------------------------------
----------------------------------
</TABLE>
The effects of reinsurance on written premiums and fees for short-duration
contracts were not materially different from the amounts shown above. Benefits,
Losses and Settlement Expenses for 1995, 1994 and 1993 were net of reinsurance
recoveries of $574 million, $415 million and $603 million, respectively.
NOTE 11 -- CONTINGENCIES
A) FINANCIAL GUARANTEES: The Company is contingently liable for financial
guarantees provided in the ordinary course of business on the repayment of
principal and interest on certain industrial revenue bonds. The contractual
amounts of financial guarantees reflect the Company's maximum exposure to credit
loss in the event of nonperformance. To limit the Company's exposure in the
event of default of any guaranteed obligation, various programs are in place to
ascertain the creditworthiness of guaranteed parties, to monitor this status on
a periodic basis and to reduce risk through security arrangements.
48
<PAGE>
The industrial revenue bonds guaranteed directly by the Company have remaining
maturities of up to 20 years. The guarantees provide for payment of debt service
only as it becomes due; consequently, an event of default would not cause an
acceleration of scheduled principal and interest payments. The principal amount
of the bonds guaranteed by the Company at December 31, 1995 and 1994 was $266
million and $296 million, respectively. Revenues in connection with industrial
revenue bond guarantees are derived principally from equity participations in
the related projects and are included in Net Investment Income as earned. Loss
reserves for financial guarantees are established when a default has occurred or
when the Company believes that a loss has been incurred. During 1994, losses for
industrial revenue bonds were $1 million. There were no such losses in 1995 and
1993.
The Company also guarantees a minimum level of benefits for certain separate
account contracts and, in the event that separate account assets are
insufficient to fund minimum policy benefits, the Company is obligated to fund
the difference. As of December 31, 1995 and 1994, the amount of minimum benefit
guarantees for separate account contracts was $5.1 billion and $4.8 billion,
respectively. Reserves in addition to the separate account liabilities are
established when the Company believes a payment will be required under one of
these guarantees. As of December 31, 1994, reserves of $6 million were recorded.
No such reserves were required as of December 31, 1995. Guarantee fees are part
of the overall management fee charged to separate accounts and are recognized in
income as earned.
Although the ultimate outcome of any loss contingencies arising from the
Company's financial guarantees may adversely affect results of operations in
future periods, they are not expected to have a material adverse effect on the
Company's liquidity or financial condition.
B) REGULATORY AND INDUSTRY DEVELOPMENTS: The Company's businesses are subject
to a changing social, economic, legal, legislative and regulatory environment
that could affect them. Some of the changes include initiatives to: reform the
federal tax system; restrict insurance pricing and the application of
underwriting standards; reform health care; and expand regulation. Some of the
more significant issues are discussed below.
Legislation is expected to be considered by Congress that is likely to limit,
and eventually substantially eliminate, the tax deductibility of policy loan
interest for corporate-owned life insurance. The outcome of such legislation is
uncertain and, although it could have a material adverse effect on results of
operations for the Individual Financial Services segment, it is not expected to
be material to the Company's consolidated results of operations, liquidity or
financial condition.
The Company expects proposals for federal and state legislation seeking some
health care insurance reforms. Due to uncertainties associated with the timing
and content of any health care legislation, the effect on the Company's future
results of operations, liquidity or financial condition cannot be reasonably
estimated at this time.
In recent years, the number of insurance companies that are impaired or
insolvent has increased. This is expected to result in an increase in mandatory
assessments by state guaranty funds of, or voluntary payments by, solvent
insurance companies to cover losses to policyholders of insolvent or
rehabilitated companies. Mandatory assessments, which are subject to statutory
limits, can be partially recovered through a reduction in future premium taxes
in some states. The Company recorded pre-tax charges of $17 million, $12 million
and $10 million for 1995, 1994 and 1993, respectively, for guaranty fund
assessments that can be reasonably estimated before giving effect to future
premium tax recoveries. Although future assessments and payments may adversely
affect results of operations in future periods, such amounts are not expected to
have a material adverse effect on the Company's liquidity or financial
condition.
The eventual effect on the Company of the changing environment in which it
operates remains uncertain.
C) LITIGATION: The Company is routinely engaged in litigation incidental to
its business, including litigation associated with syndicated investment
products. While the outcome of all litigation involving the Company, including
insurance-related litigation, cannot be determined, litigation is not expected
to result in losses that differ from recorded reserves by amounts that would be
material to results of operations, liquidity or financial condition.
NOTE 12 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments that are subject to fair value disclosure requirements
(insurance contracts, real estate, goodwill and taxes are excluded) are carried
in the financial statements at amounts that approximate fair values, unless
otherwise indicated in the following table. The fair values used for financial
instruments are estimates that in
49
<PAGE>
many cases may differ significantly from the amounts that could be realized upon
immediate liquidation. In cases where market prices are not available, estimates
of fair value are based on discounted cash flow analyses which utilize current
interest rates for similar financial instruments with comparable terms and
credit quality. The fair value of liabilities for contractholder deposit funds
was estimated using the amount payable on demand and, for those not payable on
demand, discounted cash flow analyses.
The following table presents carrying amounts and estimated fair values as of
December 31 for the Company's financial instruments that are not carried in the
financial statements at amounts approximating fair value.
<TABLE>
<CAPTION>
1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Carrying Fair Carrying Fair
(IN MILLIONS) Amount Value Amount Value
- ---------------------------------------------------------------------------------------------
Assets:
Fixed maturities-held to maturity............... $ -- $ -- $ 10,061 $ 10,075
Mortgage loans.................................. $ 10,218 $ 10,364 $ 8,975 $ 8,610
Liabilities:
Contractholder deposit funds
non-insurance products......................... $ 19,797 $ 19,890 $ 18,561 $ 18,381
- ---------------------------------------------------------------------------------------------
</TABLE>
For additional information on fair values of fixed maturities, see Note 2(A).
Fair values of off-balance-sheet financial instruments as of December 31, 1995
and 1994 were not material.
NOTE 13 -- RELATED PARTY TRANSACTIONS
The Company has ceded group accident and health business under an
experience-rated stop loss agreement to CIGNA P&C. Reinsurance recoverables from
CIGNA P&C were $1.3 billion at December 31, 1994. During 1993, the Company
earned experience-rated refunds from CIGNA P&C, net of premiums ceded, of $63
million. Effective January 1, 1995 the treaty was cancelled. Reserves of
approximately $300 million, primarily related to long-term disability business,
were recaptured in 1995, with CIGNA P&C assuming responsibility for runout
claims on the remaining reserves. Assets, principally mortgages, with a fair
market value equal to reserves were received as part of the recapture.
The Company has assumed the settlement annuity and group pension business
written by Life Insurance Company of North America (LINA), an affiliate.
Reserves held by the Company with respect to this business were $1.7 billion at
December 31, 1995 and 1994.
The Company cedes long-term disability business to LINA. Reinsurance
recoverables from LINA at December 31, 1995 and 1994 were $996 million and $992
million, respectively.
The Company had lines of credit available from affiliates totaling $600
million at both December 31, 1995 and 1994. All borrowings are payable upon
demand with interest rates equivalent to CIGNA's average monthly short-term
borrowing rate plus 1/4 of 1%. Interest expense was $1 million and $3 million
for 1994 and 1993 respectively. As of December 31, 1995 and 1994, there were no
borrowings outstanding under such lines.
The Company extended lines of credit to affiliates totalling $600 million at
December 31, 1995 and 1994. All loans are payable upon demand with interest
rates equivalent to CIGNA's average monthly short-term borrowing rate. As of
December 31, 1994, the Company had $1.5 million in outstanding loans to
affiliates under such lines. There were no amounts outstanding as of December
31, 1995.
The Company, together with other CIGNA subsidiaries, has entered into a
pooling arrangement known as the CIGNA Corporate Liquidity Account (the Account)
for the purpose of maximizing earnings on funds available for short-term
investments. Withdrawals from the Account, up to the total amount of the
participant's investment in the Account, are allowed on a demand basis. As of
December 31, 1995 and 1994, the Company had a balance in the Account of $212
million and $259 million, respectively.
CIGNA allocates to the Company its share of operating expenses incurred at the
corporate level. The Company also allocates a portion of its operating expenses
to affiliated companies on whose behalf it performs certain administrative
services.
50
<PAGE>
APPENDIX 1
ILLUSTRATIONS OF ACCUMULATION VALUES, SURRENDER VALUES,
AND DEATH BENEFITS
The illustrations in this Prospectus have been prepared to help show how values
under the Policies change with investment performance. The illustrations
illustrate how Accumulation Values, Surrender Values and Death Benefits under a
Policy would vary over time if the hypothetical gross investment rates of return
were a uniform annual effective rate of either 0%, 6% or 12%. If the
hypothetical gross investment rate of return averages 0%, 6%, or 12% over a
period of years, but fluctuates above or below those averages for individual
years, the Accumulation Values, Surrender Values and Death Benefits may be
different. The illustrations also assume there are no Policy loans, no
additional Premium Payments are made other than shown, no Accumulation Values
are allocated to the Fixed Account, and there are no changes in the Specified
Amount or Death Benefit Option.
The amounts shown for the Accumulation Value, Surrender Value and Death Benefit
as of each Policy Anniversary reflect the fact that the net investment return on
the assets held in the Sub-Accounts is lower than the gross return. This is due
to the daily charges made against the assets of the Sub-Accounts for assuming
mortality and expense risks and for administrative expenses. The administrative
expense charge is currently at an annual effective rate of 0.10% of the daily
net asset value of the Variable Account during the first ten Policy Years, and
is guaranteed not to exceed 0.30% per year. The current mortality and expense
risk charges are equivalent to an annual effective rate of 0.85% of the daily
net asset value of the Variable Account. After the Tenth Policy Year, the
mortality and expense risk charge is reduced to 0.45% on an annual basis of the
daily net assets of the Variable Account. After the Fifteenth Policy Year, the
mortality and expense risk charge is further reduced to 0.15% on an annual basis
of the daily net assets of the Variable Account. The mortality and expense risk
charge is guaranteed not to exceed an annual effective rate of 0.90%. In
addition, the net investment returns also reflect the deduction of Fund
investment advisory fees and other expenses which will vary depending on which
funding vehicle is chosen but which are assumed for purposes of these
illustrations to be equivalent to an annual effective rate of 0.85% of the daily
net asset value of the Variable Account.
Assuming current charges for administration and mortality and expense risks,
gross annual rates of 0%, 6%, and 12% correspond to net experience at constant
annual rates of -1.80%, 4.20% and 10.20% during the first ten policy years,
constant annual rates of -1.30%, 4.70% and 10.70% during the eleventh through
fifteenth policy years and constant annual rates of -1.00%, 5.00% and 11.00%
thereafter. Assuming guaranteed charges for administration and mortality and
expense risks, gross annual rates of 0%, 6% and 12% correspond to net experience
at constant annual rates of -2.05%, 3.95% and 9.95% in all policy years.
The illustrations also reflect the fact that the Company makes monthly charges
for providing insurance protection. Current values reflect current Cost of
Insurance charges and guaranteed values reflect the maximum Cost of Insurance
charges guaranteed in the Policy. The values shown are for Policies which are
issued as standard. Policies issued on a substandard basis would result in lower
Accumulation Values and Death Benefits than those illustrated.
The illustrations also reflect the fact that the Company deducts a premium load
from each Premium Payment. Current and guaranteed values reflect a deduction of
6.5% of each Premium Payment, plus an additional 40% of the first year's Premium
Payments up to one Guideline Annual Premium.
The Surrender Values shown in the illustrations reflect the fact that the
Company will refund a portion of the sales load for any Policy surrendered
during the first two years.
In addition, the illustrations reflect the fact that the Company deducts an $8
monthly administrative charge at the beginning of each Policy Month, as well as
an initial $250 policy issue charge.
Upon request, the Company will furnish a comparable illustration based on the
proposed insured's age, gender classification, smoking classification, risk
classification and premium payment requested.
51
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY
UNISEX NON SMOKER ISSUE AGE 45
$4,935 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION B
GUIDELINE TEST
<TABLE>
<CAPTION>
DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
NET NET NET NET NET NET NET NET NET
-1.80% 4.20% 10.20% -1.80% 4.20% 10.20% -1.80% 4.20% 10.20%
IN YEARS 1-10 IN YEARS 1-10 IN YEARS 1-10
NET NET NET NET NET NET NET NET NET
PREMIUMS -1.30% 4.70% 10.70% -1.30% 4.70% 10.70% -1.30% 4.70% 10.70%
ACCUMULATED IN YEARS 11-15 IN YEARS 11-15 IN YEARS 11-15
END OF AT NET NET NET NET NET NET NET NET NET
POLICY 5% INTEREST -1.00% 5.00% 11.00% -1.00% 5.00% 11.00% -1.00% 5.00% 11.00%
YEAR PER YEAR IN YEARS 16 AND AFTER IN YEARS 16 AND AFTER IN YEARS 16 AND AFTER
- ------ ----------- ------------------------------- ------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,935 500,000 500,000 500,000 1,686 1,808 1,930 3,063 3,185 3,307
2 10,117 500,000 500,000 500,000 5,396 5,875 6,370 6,180 6,660 7,155
3 10,673 500,000 500,000 500,000 8,910 9,981 11,128 8,910 9,981 11,128
4 11,251 500,000 500,000 500,000 12,223 14,119 16,228 12,223 14,119 16,228
5 11,814 500,000 500,000 500,000 15,362 18,315 21,732 15,362 18,315 21,732
6 12,404 500,000 500,000 500,000 18,342 22,586 27,697 18,342 22,586 27,697
7 13,035 500,000 500,000 500,000 21,167 26,935 34,173 21,167 26,935 34,173
8 13,686 500,000 500,000 500,000 23,852 31,380 41,229 23,852 31,380 41,229
9 14,371 500,000 500,000 500,000 26,400 35,928 48,929 26,400 35,928 48,929
10 15,089 500,000 500,000 500,000 28,805 40,577 57,336 28,805 40,577 57,336
15 24,195 500,000 500,000 500,000 38,511 65,807 114,266 38,511 65,807 114,266
20 30,880 500,000 500,000 500,000 39,924 90,705 205,622 39,924 90,705 205,622
25 39,412 500,000 500,000 500,000 26,035 108,632 355,972 26,035 108,632 355,972
30 56,013 0 500,000 656,119 0 112,468 620,332 0 112,468 620,332
</TABLE>
If Premiums are paid more frequently than
annually, the Death Benefits, Accumulation
Values and Surrender Values would be less than
those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates are assumed. Current mortality and
expense risk charges, administrative fees and
premium load are assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The "Net" percentages in these illustrations
reflect (1) the deduction of current mortality
and expense risk charges and administrative
expense charges and (2) assumed Fund total
expenses of 0.85% per year. See "Expense Data"
at pages 10-11 of this Prospectus.
52
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY
UNISEX NONSMOKER ISSUE AGE 45
$4,935 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION B
GUIDELINE TEST
<TABLE>
<CAPTION>
DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
NET NET NET NET NET NET NET NET NET
-2.05% 3.95% 9.95% -2.05% 3.95% 9.95% -2.05% 3.95% 9.95%
IN YEARS 1-10 IN YEARS 1-10 IN YEARS 1-10
NET NET NET NET NET NET NET NET NET
PREMIUMS -2.05% 3.95% 9.95% -2.05% 3.95% 9.95% -2.05% 3.95% 9.95%
ACCUMULATED IN YEARS 11-15 IN YEARS 11-15 IN YEARS 11-15
END OF AT NET NET NET NET NET NET NET NET NET
POLICY 5% INTEREST -2.05% 3.95% 9.95% -2.05% 3.95% 9.95% -2.05% 3.95% 9.95%
YEAR PER YEAR IN YEARS 16 AND AFTER IN YEARS 16 AND AFTER IN YEARS 16 AND AFTER
- ------ ----------- --------------------------------- --------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,935 500,000 500,000 500,000 639 727 816 2,016 2,104 2,193
2 10,117 500,000 500,000 500,000 3,330 3,678 4,038 4,115 4,462 4,823
3 10,673 500,000 500,000 500,000 5,843 6,620 7,453 5,843 6,620 7,453
4 11,251 500,000 500,000 500,000 8,163 9,534 11,063 8,163 9,534 11,063
5 11,814 500,000 500,000 500,000 10,290 12,416 14,884 10,290 12,416 14,884
6 12,404 500,000 500,000 500,000 12,213 15,253 18,926 12,213 15,253 18,926
7 13,035 500,000 500,000 500,000 13,905 18,008 23,181 13,905 18,008 23,181
8 13,686 500,000 500,000 500,000 15,345 20,657 27,648 15,345 20,657 27,648
9 14,371 500,000 500,000 500,000 16,505 23,162 32,321 16,505 23,162 32,321
10 15,089 500,000 500,000 500,000 17,353 25,482 37,187 17,353 25,482 37,187
15 24,195 500,000 500,000 500,000 16,157 33,103 64,481 16,157 33,103 64,481
20 30,880 500,000 500,000 500,000 2,050 28,544 95,694 2,050 28,544 95,694
25 39,412 0 0 500,000 0 0 125,367 0 0 125,367
30 56,013 0 0 500,000 0 0 141,214 0 0 141,214
</TABLE>
If Premiums are paid more frequently than
annually, the Death Benefits, Accumulation
Values and Surrender Values would be less than
those illustrated.
Assumes no policy loans or partial surrenders
have been made. Guaranteed cost of insurance
rates are assumed. Guaranteed mortality and
expense risk charges, administrative fees and
premium load are assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The "Net" percentages in these illustrations
reflect (1) the deduction of guaranteed
administrative expense and mortality and
expense risk charges and (2) assumed Fund
total expenses of 0.85% per year. See "Expense
Data" at pages 10-11 of this Prospectus.
53
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY
UNISEX NONSMOKER ISSUE AGE 45
$4,935 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION B
CASH VALUE TEST
<TABLE>
<CAPTION>
DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
NET NET NET NET NET NET NET NET NET
-1.80% 4.20% 10.20% -1.80% 4.20% 10.20% -1.80% 4.20% 10.20%
IN YEARS 1-10 IN YEARS 1-10 IN YEARS 1-10
NET NET NET NET NET NET
PREMIUMS -1.30% 4.70% 10.70% -1.30% 4.70% 10.70% -1.30% 4.70% 10.70%
ACCUMULATED IN YEARS 11-15 IN YEARS 11-15 IN YEARS 11-15
END OF AT NET NET NET NET NET NET NET NET NET
POLICY 5% INTEREST -1.00% 5.00% 11.00% -1.00% 5.00% 11.00% -1.00% 5.00% 11.00%
YEAR PER YEAR IN YEARS 16 AND AFTER IN YEARS 16 AND AFTER IN YEARS 16 AND AFTER
- ------ ----------- ------------------------------- ------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,935 500,000 500,000 500,000 1,686 1,808 1,930 3,063 3,185 3,307
2 10,117 500,000 500,000 500,000 5,396 5,875 6,370 6,180 6,660 7,155
3 10,673 500,000 500,000 500,000 8,910 9,981 11,128 8,910 9,981 11,128
4 11,251 500,000 500,000 500,000 12,223 14,119 16,228 12,223 14,119 18,228
5 11,814 500,000 500,000 500,000 15,362 18,315 21,732 15,362 18,315 21,732
6 12,404 500,000 500,000 500,000 18,342 22,586 27,697 18,342 22,586 27,697
7 13,035 500,000 500,000 500,000 21,167 25,935 34,173 21,167 26,935 34,173
8 13,686 500,000 500,000 500,000 23,852 31,380 41,229 23,852 31,380 41,229
9 14,371 500,000 500,000 500,000 26,400 35,928 48,929 26,400 35,928 48,929
10 15,089 500,000 500,000 500,000 28,805 40,577 57,336 28,805 40,577 57,336
15 24,195 500,000 500,000 500,000 38,511 65,807 114,266 38,511 65,807 114,266
20 30,880 500,000 500,000 500,000 39,924 90,705 205,622 39,924 90,705 205,622
25 39,412 500,000 500,000 567,169 26,035 108,632 355,032 26,035 108,632 355,032
30 56,013 0 500,000 847,694 0 112,468 593,185 0 112,468 593,185
</TABLE>
If Premiums are paid more frequently than
annually, the Death Benefits, Accumulation
Values and Surrender Values would be less than
those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates are assumed. Current mortality and
expense risk charges, administrative fees and
premium load are assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The "Net" percentages in these illustrations
reflect (1) the deduction of current
administrative expense charges and mortality
and expense risk charges and (2) assumed Fund
total expenses of 0.85% per year. See "Expense
Data" at pages 10-11 of this Prospectus.
54
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY
UNISEX NON SMOKER ISSUE AGE 45
$4,935 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION B
CASH VALUE TEST
<TABLE>
<CAPTION>
DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
NET NET NET NET NET NET NET NET NET
-2.05% 3.95% 9.95% -2.05% 3.95% 9.95% -2.05% 3.95% 9.95%
IN YEARS 1-10 IN YEARS 1-10 IN YEARS 1-10
NET NET NET NET NET NET NET NET NET
PREMIUMS -2.05% 3.95% 9.95% -2.05% 3.95% 9.95% -2.05% 3.95% 9.95%
ACCUMULATED IN YEARS 11-15 IN YEARS 11-15 IN YEARS 11-15
END OF AT NET NET NET NET NET NET NET NET NET
POLICY 5% INTEREST -2.05% 3.95% 9.95% -2.05% 3.95% 9.95% -2.05% 3.95% 9.95%
YEAR PER YEAR IN YEARS 16 AND AFTER IN YEARS 16 AND AFTER IN YEARS 16 AND AFTER
- ------ ----------- ------------------------------- ------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,935 500,000 500,000 500,000 639 727 816 2,016 2,104 2,193
2 10,117 500,000 500,000 500,000 3,330 3,678 4,038 4,115 4,462 4,823
3 10,673 500,000 500,000 500,000 5,843 6,620 7,453 5,843 6,620 7,453
4 11,251 500,000 500,000 500,000 8,163 9,534 11,063 8,163 9,534 11,063
5 11,814 500,000 500,000 500,000 10,290 12,416 14,884 10,290 12,416 14,884
6 12,404 500,000 500,000 500,000 12,213 15,253 18,926 12,213 15,253 18,926
7 13,035 500,000 500,000 500,000 13,905 18,008 23,181 13,905 18,008 23,181
8 13,686 500,000 500,000 500,000 15,345 20,657 27,648 15,345 20,657 27,648
9 14,371 500,000 500,000 500,000 16,505 23,162 32,321 16,505 23,162 32,321
10 15,089 500,000 500,000 500,000 17,353 25,482 37,187 17,353 25,482 37,187
15 24,195 500,000 500,000 500,000 16,157 33,103 64,481 16,157 33,103 64,481
20 30,880 500,000 500,000 500,000 2,050 28,544 95,694 2,050 28,544 95,694
25 39,412 0 0 500,000 0 0 125,367 0 0 125,367
30 56,013 0 0 500,000 0 0 141,214 0 0 141,214
</TABLE>
If Premiums are paid more frequently than
annually, the Death Benefits, Accumulation
Values and Surrender Values would be less than
those illustrated.
Assumes no policy loans or partial surrenders
have been made. Guaranteed cost of insurance
rates are assumed. Guaranteed mortality and
expense risk charges, administrative fees and
premium load are assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The "Net" percentages in these illustrations
reflect (1) the deduction of guaranteed
administrative expense and mortality and
expense risk charges and (2) assumed Fund
total expenses of 0.85% per year. See "Expense
Data" at pages 10-11 of this Prospectus.
55
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY
UNISEX UNISMOKER ISSUE AGE 45
$5,254 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION B
GUIDELINE TEST
<TABLE>
<CAPTION>
DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
NET NET NET NET NET NET NET NET NET
-1.80% 4.20% 10.20% -1.80% 4.20% 10.20% -1.80% 4.20% 10.20%
IN YEARS 1-10 IN YEARS 1-10 IN YEARS 1-10
NET NET NET NET NET NET NET NET NET
PREMIUMS -1.30% 4.70% 10.70% -1.30% 4.70% 10.70% -1.30% 4.70% 10.70%
ACCUMULATED IN YEARS 11-15 IN YEARS 11-15 IN YEARS 11-15
END OF AT NET NET NET NET NET NET NET NET NET
POLICY 5% INTEREST -1.00% 5.00% 11.00% -1.00% 5.00% 11.00% -1.00% 5.00% 11.00%
YEAR PER YEAR IN YEARS 16 AND AFTER IN YEARS 16 AND AFTER IN YEARS 16 AND AFTER
- ------ ----------- ------------------------------- ------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,254 500,000 500,000 500,000 1,777 1,907 2,037 3,243 3,373 3,503
2 10,771 500,000 500,000 500,000 5,677 6,185 6,709 6,512 7,020 7,544
3 11,359 500,000 500,000 500,000 9,342 10,474 11,686 9,342 10,474 11,686
4 11,972 500,000 500,000 500,000 12,781 14,780 17,003 12,781 14,780 17,003
5 12,571 500,000 500,000 500,000 16,017 19,123 22,719 16,017 19,123 22,719
6 13,199 500,000 500,000 500,000 19,067 23,522 28,893 19,067 23,522 26,893
7 13,869 500,000 500,000 500,000 21,943 27,988 35,584 21,943 27,988 35,584
8 14,563 500,000 500,000 500,000 24,656 32,534 42,856 24,656 32,534 42,856
9 15,291 500,000 500,000 500,000 27,217 37,174 50,784 27,217 37,174 50,784
10 16,055 500,000 500,000 500,000 29,621 41,906 59,433 29,621 41,906 50,433
15 25,748 500,000 500,000 500,000 38,968 67,294 117,802 38,968 67,294 117,802
20 32,861 500,000 500,000 500,000 39,065 91,518 211,210 39,065 91,518 211,210
25 41,940 500,000 500,000 500,000 22,859 107,777 365,814 22,859 107,777 365,814
30 59,609 0 500,000 677,652 0 109,058 638,736 0 109,058 638,736
</TABLE>
If Premiums are paid more frequently than
annually, the Death Benefits, Accumulation
Values and Surrender Values would be less than
those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates are assumed. Current mortality and
expense risk charges, administrative fees and
premium load are assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The "Net" percentages in these illustrations
reflect (1) the deduction of current
administrative expense charges and mortality
and expense risk charges and (2) assumed Fund
total expenses of 0.85% per year. See "Expense
Data" at pages 10-11 of this Prospectus.
56
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY
UNISEX UNISMOKER ISSUE AGE 45
$5,254 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION B
GUIDELINE TEST
<TABLE>
<CAPTION>
DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
NET NET NET NET NET NET NET NET NET
-2.05% 3.95% 9.95% -2.05% 3.95% 9.95% -2.05% 3.95% 9.95%
-------- -------- --------- -------- -------- --------- -------- -------- ---------
IN YEARS 1-10 IN YEARS 1-10 IN YEARS 1-10
NET NET NET NET NET NET NET NET NET
PREMIUMS -2.05% 3.95% 9.95% -2.05% 3.95% 9.95% -2.05% 3.95% 9.95%
ACCUMULATED IN YEARS 11-15 IN YEARS 11-15 IN YEARS 11-15
END OF AT NET NET NET NET NET NET NET NET NET
POLICY 5% INTEREST -2.05% 3.95% 9.95% -2.05% 3.95% 9.95% -2.05% 3.95% 9.95%
YEAR PER YEAR IN YEARS 16 AND AFTER IN YEARS 16 AND AFTER IN YEARS 16 AND AFTER
- ------ ----------- ------------------------------- ------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,254 500,000 500,000 500,000 268 349 431 1,734 1,815 1,897
2 10,771 500,000 500,000 500,000 2,674 2,991 3,320 3,509 3,826 4,155
3 11,359 500,000 500,000 500,000 4,860 5,563 6,319 4,860 5,563 6,319
4 11,972 500,000 500,000 500,000 6,826 8,059 9,437 6,826 8,059 9,437
5 12,571 500,000 500,000 500,000 8,549 10,448 12,657 8,549 10,448 12,657
6 13,199 500,000 500,000 500,000 10,019 12,711 15,979 10,019 12,711 15,979
7 13,869 500,000 500,000 500,000 11,207 14,812 19,381 11,207 14,812 19,381
8 14,563 500,000 500,000 500,000 12,090 16,714 22,845 12,090 16,714 22,845
9 15,291 500,000 500,000 500,000 12,628 18,366 26,337 12,628 18,366 26,337
10 16,056 500,000 500,000 500,000 12,789 19,720 29,825 12,789 19,720 29,825
15 25,748 500,000 500,000 500,000 7,196 20,595 46,444 7,196 20,595 46,444
20 32,861 0 500,000 500,000 0 5,195 57,237 0 5,195 57,237
25 41,940 0 0 500,000 0 0 46,542 0 0 46,542
30 59,609 0 0 0 0 0 0 0 0 0
</TABLE>
If Premiums are paid more frequently than
annually, the Death Benefits, Accumulation
Values and Surrender Values would be less than
those illustrated.
Assumes no policy loans or partial surrenders
have been made. Guaranteed cost of insurance
rates are assumed. Guaranteed mortality and
expense risk charges, administrative fees and
premium load are assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return,
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The "Net" percentages in these illustrations
reflect (1) the deduction of guaranteed
administrative expense charges and mortality
and expense risk charges and (2) assumed Fund
total expenses of 0.85% per year. See "Expense
Data" at pages 10-11 of this Prospectus.
57
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY
UNISEX UNISMOKER ISSUE AGE 45
$5,254 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION B
CASH VALUE TEST
<TABLE>
<CAPTION>
DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
NET NET NET NET NET NET NET NET NET
-1.80% 4.20% 10.20% -1.80% 4.20% 10.20% -1.80% 4.20% 10.20%
IN YEARS 1-10 IN YEARS 1-10 IN YEARS 1-10
NET NET NET NET NET NET
PREMIUMS -1.30% 4.70% 10.70% -1.30% 4.70% 10.70% -1.30% 4.70% 10.70%
ACCUMULATED IN YEARS 11-15 IN YEARS 11-15 IN YEARS 11-15
END OF AT NET NET NET NET NET NET NET NET NET
POLICY 5% INTEREST -1.00% 5.00% 11.00% -1.00% 5.00% 11.00% -1.00% 5.00% 11.00%
YEAR PER YEAR IN YEARS 16 AND AFTER IN YEARS 16 AND AFTER IN YEARS 16 AND AFTER
- ------ ----------- ------------------------------- ------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,254 500,000 500,000 500,000 1,777 1,907 2,037 3,243 3,373 3,503
2 10,771 500,000 500,000 500,000 5,677 6,185 6,709 6,512 7,020 7,544
3 11,359 500,000 500,000 500,000 9,342 10,474 11,686 9,342 10,474 11,686
4 11,972 500,000 500,000 500,000 12,781 14,780 17,003 12,781 14,780 17,003
5 12,571 500,000 500,000 500,000 16,017 19,123 22,719 16,017 19,123 22,719
6 13,199 500,000 500,000 500,000 19,067 23,522 28,893 19,067 23,522 28,893
7 13,869 500,000 500,000 500,000 21,943 27,988 35,584 21,943 27,988 35,584
8 14,563 500,000 500,000 500,000 24,656 32,534 42,856 24,656 32,534 42,856
9 15,291 500,000 500,000 500,000 27,217 37,174 50,784 27,217 37,174 50,784
10 16,055 500,000 500,000 500,000 29,621 41,906 59,433 29,621 41,906 58,433
15 25,748 500,000 500,000 500,000 38,968 67,294 117,802 38,968 67,294 117,802
20 32,861 500,000 500,000 500,000 39,065 91,518 211,210 39,065 91,518 211,210
25 41,940 500,000 500,000 571,686 22,859 107,777 364,640 22,859 107,777 364,640
30 59,609 0 500,000 864,277 0 109,058 608,995 0 109,058 608,995
</TABLE>
If Premiums are paid more frequently than
annually, the Death Benefits, Accumulation
Values and Surrender Values would be less than
those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates are assumed. Current mortality and
expense risk charges, administrative fees and
premium load are assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The "Net" percentages in these illustrations
reflect (1) the deduction of current
administrative expense charges and mortality
and expense risk charges and (2) assumed Fund
total expenses of 0.85% per year. See "Expense
Data" at pages 10-11 of this Prospectus.
58
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY
UNISEX UNISMOKER ISSUE AGE 45
$5,254 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION B
CASH VALUE TEST
<TABLE>
<CAPTION>
DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
NET NET NET NET NET NET NET NET NET
-2.05% 3.95% 9.95% -2.05% 3.95% 9.95% -2.05% 3.95% 9.95%
-------- -------- --------- -------- -------- --------- -------- -------- ---------
IN YEARS 1-10 IN YEARS 1-10 IN YEARS 1-10
NET NET NET NET NET NET NET NET NET
PREMIUMS -2.05% 3.95% 9.95% -2.05% 3.95% 9.95% -2.05% 3.95% 9.95%
ACCUMULATED IN YEARS 11-15 IN YEARS 11-15 IN YEARS 11-15
END OF AT NET NET NET NET NET NET NET NET NET
POLICY 5% INTEREST -2.05% 3.95% 9.95% -2.05% 3.95% 9.95% -2.05% 3.95% 9.95%
YEAR PER YEAR IN YEARS 16 AND AFTER IN YEARS 16 AND AFTER IN YEARS 16 AND AFTER
- ------ ----------- ------------------------------- ------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,254 500,000 500,000 500,000 268 349 431 1,734 1,815 1,897
2 10,117 500,000 500,000 500,000 2,674 2,991 3,320 3,509 3,826 4,155
3 11,359 500,000 500,000 500,000 4,860 5,563 6,319 4,860 5,563 6,319
4 11,972 500,000 500,000 500,000 6,826 8,059 9,437 6,826 8,059 9,437
5 12,571 500,000 500,000 500,000 8,549 10,448 12,657 8,549 10,448 12,657
6 13,199 500,000 500,000 500,000 10.019 12,711 15,979 10,019 12,711 15,979
7 13,869 500,000 500,000 500,000 11,207 14,812 19,381 11,207 14,812 19,381
8 14,563 500,000 500,000 500,000 12,090 16,714 22,845 12,090 16,714 22,845
9 15,291 500,000 500,000 500,000 12,628 18,366 26,337 12,628 18,366 26,337
10 16,056 500,000 500,000 500,000 12,789 19,720 29,825 12,789 19,720 29,825
15 25,748 500,000 500,000 500,000 7,196 20,595 46,444 7,196 20,595 46,444
20 32,861 0 500,000 500,000 0 5,195 57,237 0 5,195 57,237
25 41,940 0 0 500,000 0 0 46,542 0 0 46,542
30 59,609 0 0 0 0 0 0 0 0 0
</TABLE>
If Premiums are paid more frequently than
annually, the Death Benefits, Accumulation
Values and Surrender Values would be less than
those illustrated.
Assumes no policy loans or partial surrenders
have been made. Guaranteed cost of insurance
rates are assumed. Guaranteed mortality and
expense risk charges, administrative fees and
premium load are assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The "Net" percentages in these illustrations
reflect (1) the deduction of guaranteed
administrative expense charges and mortality
and expense risk charges and (2) assumed Fund
total expenses of 0.85% per year. See "Expense
Data" at pages 10-11 of this Prospectus.
59
<PAGE>
[LOGO]
550253 (3/96)
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet;
A cross-reference sheet (reconciliation and tie);
The prospectus, consisting of 60 pages;
The undertaking to file reports;
The signatures;
Opinion and consent of Robert A. Picarello Esq.
(filed with original filing March 15, 1996)
Opinions and consents of Timothy J. Luedtke, FSA
(filed with original filing March 15, 1996)
The consent of Price Waterhouse LLP
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
CG CORPORATE INSURANCE VARIABLE LIFE SEPARATE ACCOUNT 02, has duly caused this
Pre-Effective Amendment No. 1 to its Registration Statement on Form S-6 to be
signed on its behalf by the undersigned thereunto duly authorized, and its seal
to be hereunto affixed and attested, all in the town of Bloomfield and State of
Connecticut, on the 14th day of May, 1996.
CG CORPORATE INSURANCE VARIABLE LIFE
SEPARATE ACCOUNT 02
(Name of Registrant)
By: /s/ THOMAS C. JONES
-----------------------------------
Thomas C. Jones,
PRESIDENT
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
(Name of Depositor)
By: /s/ THOMAS C. JONES
-----------------------------------
Thomas C. Jones,
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below on May 14, 1996 by the following
persons in the capacities indicated:
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- -----------------
THOMAS C. JONES President (Principal
- ----------------------------------- Executive May 14, 1996
Thomas C. Jones Officer)
Vice President and
JAMES T. KOHAN* Actuary
- ----------------------------------- (Principal Financial May 14, 1996
James T. Kohan Officer)
ROBERT MOOSE*
- ----------------------------------- Vice President (Principal May 14, 1996
Robert Moose Accounting Officer)
HAROLD W. ALBERT*
- ----------------------------------- Director May 14, 1996
Harold W. Albert
MARTIN A. BRENNAN*
- ----------------------------------- Director May 14, 1996
Martin A. Brennan
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- -----------------
<C> <S> <C>
ROBERT W. BURGESS*
- ----------------------------------- Director May 14, 1996
Robert W. Burgess
JOHN G. DAY*
- ----------------------------------- Director May 14, 1996
John G. Day
JOSEPH M. FITZGERALD*
- ----------------------------------- Director May 14, 1996
Joseph M. Fitzgerald
ARTHUR C. REEDS, III*
- ----------------------------------- Director May 14, 1996
Arthur C. Reeds, III
PATRICIA L. ROWLAND*
- ----------------------------------- Director May 14, 1996
Patricia L. Rowland
W. ALLEN SCHAFFER, M.D.*
- ----------------------------------- Director May 14, 1996
W. Allen Schaffer, M.D.
*By ROBERT A. PICARELLO
- -----------------------------------
Robert A. Picarello May 14, 1996
ATTORNEY-IN-FACT
(A Majority of the Directors)
</TABLE>
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of Connecticut General Life
Insurance Company, hereby severally constitute and appoint David C. Kopp and
Robert A. Picarello, and each of them individually, our true and lawful
attorneys-in-fact, with full power to them and each of them to sign for us, in
our names and in the capacities indicated below, any and all Registration
Statements on Form N-4 or Form S-6 which may be filed with the Securities and
Exchange Commission under the Securities Act of 1933, hereby ratifying and
confirming our signatures as they may be signed by either of our
attorneys-in-fact to any such Registration Statement.
WITNESS our hands and common seal on this 31st day of May, 1995.
SIGNATURE TITLE
- ----------------------------------- -------------------------
THOMAS C. JONES
- ----------------------------------- President (Principal
Thomas C. Jones Executive Officer)
JAMES T. KOHAN Vice President and
- ----------------------------------- Actuary (Principal
James T. Kohan Financial Officer)
ROBERT MOOSE
- ----------------------------------- Vice President (Principal
Robert Moose Accounting Officer)
HAROLD W. ALBERT
- ----------------------------------- Director
Harold W. Albert
S. TYRONE ALEXANDER
- ----------------------------------- Director
S. Tyrone Alexander
MARTIN A. BRENNAN
- ----------------------------------- Director
Martin A. Brennan
ROBERT W. BURGESS
- ----------------------------------- Director
Robert W. Burgess
JOHN G. DAY
- ----------------------------------- Director
John G. Day
R. CHRIS DOERR
- ----------------------------------- Director
R. Chris Doerr
LAWRENCE P. ENGLISH
- ----------------------------------- Director
Lawrence P. English
JOSEPH M. FITZGERALD
- ----------------------------------- Director
Joseph M. Fitzgerald
ARTHUR C. REEDS, III
- ----------------------------------- Director
Arthur C. Reeds, III
W. ALLEN SCHAFFER, M.D.
- ----------------------------------- Director
W. Allen Schaffer, M.D.
PATRICIA L. ROWLAND
- ----------------------------------- Director
Patricia L. Rowland
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Pre-Effective Amendment No. 1 to the registration statement of the
CG Corporate Insurance Variable Life Separate Account 02 on Form S-6 of our
report dated February 13, 1996, relating to the consolidated financial
statements of Connecticut General Life Insurance Company, which appears in
such Prospectus. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
Price Waterhouse LLP
Hartford, Connecticut
May 20, 1996