As filed with the Securities and Exchange Registration No. 33-79122
Commission on April 17, 1998 Registration No. 811-2512
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
POST-EFFECTIVE AMENDMENT NO. 8 TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
and Amendment to
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Variable Annuity Account B of Aetna Life Insurance and Annuity Company
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RE4A, Hartford, Connecticut 06156
Depositor's Telephone Number, including Area Code: (860) 273-4686
Julie E. Rockmore, Counsel
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RE4A, Hartford, Connecticut 06156
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1998 pursuant to paragraph (b) of Rule 485
<PAGE>
VARIABLE ANNUITY ACCOUNT B
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-4
ITEM NO. PART A (PROSPECTUS) LOCATION
<S> <C> <C> <C>
1 Cover Page........................................... Cover Page
2 Definitions.......................................... Definitions
3 Synopsis............................................. Prospectus Summary; Fee Table
4 Condensed Financial Information...................... Condensed Financial Information
5 General Description of Registrant, Depositor, and
Portfolio Companies.................................. The Company; Variable Annuity Account B;
Investment Options - The Funds
6 Deductions........................................... Charges and Deductions;
Miscellaneous - Distribution
7 General Description of Variable Annuity Contracts.... Purchase - Contract Rights; Miscellaneous
8 Annuity Period....................................... Annuity Period
9 Death Benefit........................................ Death Benefit During Accumulation
10 Purchases and Contract Value......................... Period Purchase
11 Redemptions.......................................... Withdrawals; Purchase - Right to Cancel
12 Taxes................................................ Tax Status
13 Legal Proceedings.................................... Miscellaneous - Legal Matters and Proceedings
14 Table of Contents of the Statement of Additional Statement of Additional Information - Table of
Information.......................................... Contents
<PAGE>
FORM N-4
ITEM NO. PART B (STATEMENT OF ADDITIONAL INFORMATION) LOCATION
15 Cover Page........................................... Cover page
16 Table of Contents.................................... Table of Contents
17 General Information and History...................... General Information and History
18 Services............................................. General Information and History; Independent
Auditors
19 Purchase of Securities Being Offered................. Offering and Purchase of Contracts
20 Underwriters......................................... Offering and Purchase of Contracts
21 Calculation of Performance Data...................... Performance Data - Average Annual Total Return
Quotations
22 Annuity Payments..................................... Annuity Payments
23 Financial Statements................................. Financial Statements of the Separate Account;
Financial Statements of the Company
</TABLE>
Part C (Other Information)
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
================================================================================
The Contracts offered in connection with this Prospectus are the "Growth Plus"
group and individual deferred variable annuity contracts ("Contracts") issued
by Aetna Life Insurance and Annuity Company (the "Company"). The Contracts are
available as (1) nonqualified deferred variable annuity contracts; (2)
Individual Retirement Annuities ("IRA") under Section 408(b) of the Internal
Revenue Code ("Code") (may be subject to approval by state regulatory
agencies); and (3) contracts issued in connection with certain employer
sponsored qualified retirement plans (may be subject to approval by the Company
and state regulatory agencies). Currently, the IRA is not available as a
"SIMPLE IRA" as defined in Section 408(p) of the Internal Revenue Code. In most
states, group Contracts are offered to certain broker-dealers or banks which
have agreed to act as Distributors of the Contracts. Individuals who have
established accounts with those broker-dealers or banks are eligible to
participate in the Contract. Individual Contracts are offered only in those
states where the group Contracts are not authorized for sale. (See "Purchase.")
The securities offered in this Prospectus are distributed through Aetna Life
Insurance and Annuity Company as the Underwriter and by registered
broker-dealers or banks selected by it as Distributors. See "Purchase."
The Contracts provide that purchase payments may be allocated to the ALIAC
Guaranteed Account (the "Guaranteed Account"), a credited interest option, or
to one or more of the Subaccounts of Variable Annuity Account B, a separate
account of the Company. The Subaccounts invest directly in shares of the
following investment series of the Federated Insurance Series ("Trust"), a
Massachusetts business trust that is not affiliated with the Company:
<TABLE>
<CAPTION>
<S> <C>
[bullet] Federated American Leaders Fund II [bullet] Federated High Income Bond Fund II
[bullet] Federated Equity Income Fund II [bullet] Federated International Equity Fund II
[bullet] Federated Fund for U.S. Government Securities II [bullet] Federated Prime Money Fund II
[bullet] Federated Growth Strategies Fund II [bullet] Federated Utility Fund II
</TABLE>
Except as specifically mentioned, this Prospectus describes only investments
through the Separate Account. The Guaranteed Account is described in the
Appendix to this Prospectus, as well as in the Guaranteed Account's prospectus.
This Prospectus provides investors with the information about the Separate
Account that they should know before investing in the Contracts. Additional
information about the Separate Account is contained in a Statement of
Additional Information ("SAI") which is available at no charge. The SAI has
been filed with the Securities and Exchange Commission and is incorporated
herein by reference. The Table of Contents for the SAI is printed on page 23 of
this Prospectus. An SAI for this Prospectus and for any of the Fund
Prospectuses may be obtained by indicating the request on your Application or
by calling the number listed under the "Inquiries" section of the Prospectus
Summary.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
THE FUNDS AND THE ALIAC GUARANTEED ACCOUNT. ALL PROSPECTUSES SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE.
THIS PROSPECTUS, THE STATEMENT OF ADDITIONAL INFORMATION AND OTHER INFORMATION
ABOUT SEPARATE ACCOUNT B REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION CAN BE FOUND IN THE SEC'S WEB SITE AT "http://www.sec.gov."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION ARE DATED MAY 1,
1998
<PAGE>
TABLE OF CONTENTS
================================================================================
<TABLE>
<S> <C>
DEFINITIONS ............................. DEFINITIONS - 1
PROSPECTUS SUMMARY ...................... SUMMARY - 1
FEE TABLE ............................... FEE TABLE - 1
CONDENSED FINANCIAL INFORMATION.......... AUV HISTORY - 1
THE COMPANY .......................................... 1
VARIABLE ANNUITY ACCOUNT B ........................... 1
INVESTMENT OPTIONS ................................... 1
The Funds .......................................... 1
Credited Interest Options .......................... 3
PURCHASE ............................................. 3
Contract Availability .............................. 3
Purchasing Interests in the Contract ............... 3
General ............................................ 4
Purchase Payments .................................. 4
Contract Rights .................................... 4
Designations of Beneficiary and Annuitant .......... 4
Right to Cancel .................................... 5
CHARGES AND DEDUCTIONS ............................... 5
Daily Deductions from the Separate Account ......... 5
Mortality and Expense Risk Charge ................ 5
Administrative Charge ............................ 5
Maintenance Fee .................................... 5
Deferred Sales Charge .............................. 6
Fund Expenses ...................................... 7
Premium and Other Taxes ............................ 7
CONTRACT VALUATION ................................... 7
Account Value ...................................... 7
Accumulation Units ................................. 7
Net Investment Factor .............................. 7
TRANSFERS ............................................ 8
Telephone Transfers ................................ 8
Dollar Cost Averaging Program ...................... 8
Account Rebalancing Program ........................ 8
WITHDRAWALS .......................................... 9
SYSTEMATIC DISTRIBUTION OPTIONS ...................... 9
DEATH BENEFIT DURING ACCUMULATION PERIOD ............. 10
Death Benefit Amount ............................... 10
Death Benefit Payment Options ...................... 11
Death of the Annuitant ............................. 11
ANNUITY PERIOD ....................................... 12
Annuity Period Elections ........................... 12
Partial Annuitization .............................. 12
Annuity Options .................................... 12
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Annuity Payments .................................................. 13
Charges Deducted During the Annuity Period ........................ 13
Death Benefit Payable During the Annuity Period ................... 13
Death of the Certificate Holder During the Annuity Period ......... 14
TAX STATUS .......................................................... 14
Introduction ...................................................... 14
Taxation of the Company ........................................... 14
Tax Status of the Contract ........................................ 15
Taxation of Annuity Contracts ..................................... 16
Contracts Used with Certain Retirement Plans ...................... 18
Withholding ....................................................... 20
MISCELLANEOUS ....................................................... 20
Distribution ...................................................... 20
Delay or Suspension of Payments ................................... 20
Performance Reporting ............................................. 21
Voting Rights ..................................................... 21
Modification of the Contract ...................................... 21
Transfers of Ownership; Assignment ................................ 21
Involuntary Terminations .......................................... 22
Legal Matters and Proceedings ..................................... 22
Year 2000 ......................................................... 22
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION ................. 23
APPENDIX--ALIAC GUARANTEED ACCOUNT .................................. 24
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. THE COMPANY DOES NOT AUTHORIZE ANY
PERSON TO GIVE INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH
THE OFFERING CONTAINED IN THIS PROSPECTUS EXCEPT AS OTHERWISE CONTAINED HEREIN.
<PAGE>
DEFINITIONS
================================================================================
The following terms are defined as they are used in this Prospectus:
Account: A record that identifies contract values accumulated on each
Certificate Holder's behalf during the Accumulation Period.
Account Value: The total dollar value of amounts held in an Account as of each
Valuation Date during the Accumulation Period.
Account Year: A period of twelve months measured from the date on which an
Account is established (the effective date) or from an anniversary of such
effective date.
Accumulation Period: The period during which Purchase Payment(s) credited to an
Account are invested to fund future annuity payments.
Accumulation Unit: A measure of the value of each Subaccount before annuity
payments begin.
Adjusted Account Value: The Account Value, plus or minus the aggregate market
value adjustment for amounts allocated to the Guaranteed Account.
Adviser: Federated Advisers or Federated Global Research Corp., the investment
adviser of the Funds.
Annuitant: The person on whose life or life expectancy the annuity payments are
based.
Annuity: A series of payments for life, a definite period or a combination of
the two.
Annuity Date: The date on which annuity payments begin.
Annuity Period: The period during which annuity payments are made.
Annuity Unit: A measure of the value of each Subaccount selected during the
Annuity Period.
Application: The form or collection of information required by the Company to
purchase on interest in a group contract or an individual contract.
Beneficiary(ies): The person or persons who are entitled to receive any death
benefit proceeds. Under Nonqualified Contracts, Individual Retirement
Annuities, and Section 403(b) Contracts, Beneficiary refers to the beneficiary
named under the Contract. Under Qualified Contracts sold in conjunction with
401(a) or 457 Plans, Beneficiary refers to the beneficiary under the plan.
Certificate: The document issued to a Certificate Holder for an Account
established under a group contract.
Certificate Holder (You): A person or entity who purchases an individual
contract or acquires an interest under a group Contract.
Company (We, Us): Aetna Life Insurance and Annuity Company.
Contract: The group and individual deferred, variable annuity contracts offered
by this Prospectus.
Distributor(s): The registered broker-dealers, or banks that may be acting as
broker-dealers without separate registration under the Securities Exchange Act
of 1934, which have entered into selling agreements with the Underwriter to
distribute interests in the Contracts. The Underwriter may also serve as a
Distributor.
Fund(s): An open-end registered management investment company whose shares are
purchased by the Separate Account to fund the benefits provided by the
Contract.
Group Contract Holder: The entity to which a group Contract is issued.
- --------------------------------------------------------------------------------
DEFINITIONS - 1
<PAGE>
Home Office: The Company's principal executive offices located at 151
Farmington Avenue, Hartford, Connecticut 06156.
Individual Contract Holder: A person or entity who has purchased an individual
variable annuity Contract (also referred to as a "Certificate Holder").
Individual Retirement Annuity: An individual or group variable deferred annuity
intended to qualify under Code Section 408(b).
Nonqualified Contract: A Contract established to supplement an individual's
retirement income, or to provide an alternative investment option under an
Individual Retirement Account qualified under Code Section 408(a).
1940 Act: The Investment Company Act of 1940, as amended.
Purchase Payment(s): The gross payment(s) made to the Company under an Account.
Qualified Contracts: Contracts available for use with plans entitled to special
federal income tax treatment under Code Sections 401(a), 403(b), 408(b) or 457.
Registered Representative: The individual who is registered with a
broker-dealer acting as Distributor to offer and sell securities, or who is an
employee of a bank acting as Distributor that is exempt from broker-dealer
registration under the Securities Exchange Act of 1934. Registered
Representatives must also be licensed as insurance agents to sell variable
annuity contracts.
Separate Account: Variable Annuity Account B, a separate account established
for the purpose of funding variable annuity contracts issued by the Company.
Subaccount(s): The portion of the assets of the Separate Account that is
allocated to a particular Fund. Each Subaccount invests in the shares of only
one corresponding Fund.
Surrender Value: The amount payable upon the withdrawal of all or any portion
of an Account Value.
Underwriter: The registered broker-dealer which contracts with other registered
broker-dealers or banks to offer and sell the Contracts. The Company will serve
as Underwriter.
Valuation Date: The date and time at which the Accumulation Unit Value and
Annuity Unit Value of a Subaccount is calculated. Currently, this calculation
occurs after the close of business of the New York Stock Exchange on any normal
business day, Monday through Friday, that the New York Stock Exchange is open.
- --------------------------------------------------------------------------------
DEFINITIONS - 2
<PAGE>
PROSPECTUS SUMMARY
================================================================================
CONTRACTS OFFERED
The Contracts offered in connection with this Prospectus are group and
individual deferred variable annuity contracts issued by Aetna Life Insurance
and Annuity Company (the "Company"). The purpose of the Contract is to
accumulate values and to provide benefits upon retirement. The Contracts are
currently available for use as (1) individual nonqualified purchases (we
reserve the right to limit the ownership of nonqualified contracts to natural
persons); (2) Individual Retirement Annuities ("IRAs"), other than "SIMPLE
IRAs" as defined in Section 408(p) of the Internal Revenue Code (may be subject
to approval by state regulatory agencies); and (3) contracts issued in
conjunction with employer sponsored retirement plans under Sections 401(a),
403(b) or 457 of the Code (may be subject to approval by the Company and by
state regulatory agencies. See "Purchase.")
The Contracts are generally group variable annuity contracts under which
accounts are established for persons in the group. Individual Contracts are
offered in those states where the group Contracts are not authorized for sale.
CONTRACT PURCHASE
You may purchase an interest in the Contract by completing an Application
and submitting it to the Company. Contracts may be purchased by two individuals
as joint Certificate Holders. Joint Certificate Holders are allowed only on
Nonqualified Contracts. A joint Certificate Holder must be the spouse of the
other joint Certificate Holder (unless otherwise prohibited by state law).
References to "Certificate Holders" in this Prospectus mean both of the
Certificate Holders on joint Accounts. Purchase Payments can be applied to the
Contract through a lump-sum payment or through ongoing contributions. (See
"Purchase--Right to Cancel.")
FREE LOOK PERIOD
You may cancel the Contract or Certificate within 10 days after you
receive it (or longer if required by state law) by returning it to the Company
along with a written notice of cancellation. Unless state law requires
otherwise, the amount you will receive upon cancellation will reflect the
investment performance of the Subaccounts into which your Purchase Payments
were deposited. In some cases this may be more or less than the amount of your
Purchase Payments. Under a Contract issued as an Individual Retirement Annuity,
you will receive a refund of your Purchase Payment. (See "Purchase--Right to
Cancel.")
INVESTMENT OPTIONS
The Company has established Variable Annuity Account B, a registered unit
investment trust, for the purpose of funding the variable portion of the
Contracts. The Separate Account is divided into Subaccounts which invest
directly in shares of the Funds described herein. The Contract allows
investment in the Subaccounts, as well as in the Guaranteed Account described
below. For a complete list of the Funds available under the Contracts, and a
description of the investment objectives of each of the Funds and their
investment adviser, see "Investment Options--
The Funds" in this Prospectus, as well as the prospectuses for each of the
Funds.
The Guaranteed Account is the credited interest option available under the
Contract which allows you to earn fixed rates of interest, if held for the
guaranteed term. (See the Appendix to this Prospectus and the prospectus for
the Guaranteed Account.)
CHARGES AND DEDUCTIONS
Certain charges are associated with these Contracts. These charges include
daily deductions from the Separate Account (the mortality and expense risk
charges and an administrative charge), as well as any applicable maintenance
fee, transfer fees and premium and other taxes. The Funds also incur certain
fees and expenses which are deducted directly from the Funds. A deferred sales
charge may apply upon a full or partial withdrawal of the Account Value. (See
the Fee Table and "Charges and Deductions.")
- --------------------------------------------------------------------------------
SUMMARY - 1
<PAGE>
TRANSFERS
Prior to the Annuity Date, and subject to certain limitations, you can
transfer Account Values among the Subaccounts and the Guaranteed Account.
During the Annuity Period, if you have elected variable payments you can make
transfers among the Subaccounts available during the Annuity Period. Currently,
during the Accumulation Period, transfers are without charge. However, the
Company reserves the right to charge up to $10 for each additional transfer if
more than 12 transfers are made in a calendar year. Transfers can be requested
in writing or by telephone in accordance with the Company's transfer
procedures. If approved by your state, during the Annuity Period, you can
currently make up to four transfers each calendar year. There is no charge for
these transfers. (Transfers from the Guaranteed Account may be restricted and
subject to a market value adjustment. See the Appendix.)
The Company also offers a Dollar Cost Averaging Program and an Account
Rebalancing Program. The Dollar Cost Averaging Program permits the automatic
transfer of amounts from any of the Subaccounts and an available Guaranteed
Term to any of the other Subaccounts on a monthly or quarterly basis. The
Account Rebalancing Program allows you to request that each year, or at more
frequent intervals as allowed by the Company, We automatically reallocate your
Account Value to specified percentages among the Subaccounts in which you
invest. (See "Transfers.")
WITHDRAWALS
All or a part of the Account Value may be withdrawn prior to the Annuity
Date by properly completing a disbursement form and sending it to the Company.
Certain charges may be assessed upon withdrawal. Amounts withdrawn from the
Guaranteed Account may be subject to a market value adjustment ("MVA"). (See
the Appendix.) The taxable portion of the withdrawal may also be subject to
income tax and a federal tax penalty. (See "Withdrawals.")
The Contract also offers certain Systematic Distribution Options during
the Accumulation Period subject to certain criteria. Some Systematic
Distribution Options are not available in all states and may not be suitable in
every situation. (See "Systematic Distribution Options.")
GUARANTEED DEATH BENEFIT
These Contracts contain a guaranteed death benefit feature. Upon the death
of the Certificate Holder, or the Annuitant if the Certificate Holder is a
non-natural person, the Account Value may be increased under certain
circumstances. (See "Death Benefit During Accumulation Period.")
After Annuity Payments have commenced, a death benefit may be payable to
the Beneficiary depending upon the terms of the Contract and the Annuity Option
selected. (See "Death Benefit Payable During the Annuity Period.")
THE ANNUITY PERIOD
On the Annuity Date, you may elect to begin receiving Annuity Payments.
Annuity Payments can be made on either a fixed, variable or combination fixed
and variable basis. If a variable payout is selected, the payments will
continue to vary with the investment performance of the Subaccount(s) selected.
The Company reserves the right to limit the number of Subaccounts that may be
available during the Annuity Period. (See "Annuity Period.")
TAXES
Earnings are not generally taxed until you or your Beneficiary(ies)
actually receive a distribution from the Contract. A 10% federal tax penalty
may be imposed on certain withdrawals. (See "Tax Status.")
INQUIRIES
Questions, inquiries or requests for additional information can be
directed to your agent or local representative, or you may contact the Company
as follows:
[bullet] Write to: Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156-5996
Attention: Customer Service
[bullet] Call Customer Service: 1-800-531-4547 (for automated transfers
or changes in the allocation of Account
Values, call: 1-800-262-3862)
- --------------------------------------------------------------------------------
SUMMARY -2
<PAGE>
FEE TABLE
================================================================================
This Fee Table describes the various charges and expenses associated with
the Contract. No sales charge is paid upon purchase of the Contract. All costs
that are borne directly or indirectly under the Subaccounts and Funds are shown
below. The charges and expenses shown below do not include premium taxes that
may be applicable. For more information regarding expenses paid out of assets
of a particular Fund, see the Fund's prospectus.
CONTRACT HOLDER TRANSACTION EXPENSES
Deferred Sales Charge for withdrawals under each contract (as a percentage
of each Purchase Payment withdrawn):
<TABLE>
<CAPTION>
Years from Receipt of Deferred Sales
Purchase Payment Charge Deduction
- ----------------------------- -----------------
<S> <C>
Less than 1 7%
1 or more but less than 2 6%
2 or more but less than 3 5%
3 or more but less than 4 4%
4 or more but less than 5 3%
5 or more but less than 6 2%
6 or more but less than 7 1%
7 or more 0%
</TABLE>
<TABLE>
<S> <C>
Annual Maintenance Fee (1) ........................................................... $ 30.00
Transfer Charge (2) .................................................................. $ 0.00
SEPARATE ACCOUNT ANNUAL EXPENSES
(Daily deductions, equal to the percentage shown on an annual basis, made from amounts allocated to the
variable options under each Contract)
DURING THE ACCUMULATION PERIOD:
Mortality and Expense Risk Charge .................................................... 1.25%
Administrative Charge ................................................................ 0.15%
--------
Total Subaccount Annual Expenses ..................................................... 1.40%
========
DURING THE ANNUITY PERIOD:
Mortality and Expense Risk Charge .................................................... 1.25%
Administrative Charge ................................................................ 0.00%(3)
--------
Total Subaccount Annual Expenses ..................................................... 1.25%
========
Reduced charges apply to Purchase Payments in excess of $1.5 million.
(1) The maintenance fee, if applicable, will generally be deducted from each Account
annually and if the full Account Value is withdrawn. The maintenance fee is waived
when the Account Value is $50,000 or more on the date the maintenance fee is due.
(2) During the Accumulation Period we currently allow an unlimited number of
transfers without charge. However, we reserve the right to impose a fee of $10
for each transfer in excess of 12 per year.
(3) We currently do not impose an Administrative Charge during the Annuity Period.
However, we reserve the right to deduct a daily charge of not more than 0.25% per
year from the Subaccounts.
</TABLE>
- --------------------------------------------------------------------------------
FEE TABLE - 1
<PAGE>
ANNUAL EXPENSES OF THE FUNDS
The following table illustrates the advisory fees and other expenses applicable
to the Funds. Except as noted, the following figures are a percentage of
average net assets and, except where otherwise indicated, are based on figures
for the year ended December 31, 1997. A Fund's "Other Expenses" include
operating costs of the Fund. These expenses are reflected in the Fund's net
asset value and are not deducted from the Account Value.
<TABLE>
<CAPTION>
Investment
Advisory Fees(1) Other Expenses
(after expense (after expense Total Fund
reimbursement) reimbursement) Annual Expenses
------------------ ---------------- ----------------
<S> <C> <C> <C>
Federated American Leaders Fund II(2) 0.66% 0.19% 0.85%
Federated Equity Income Fund II(3) 0.00% 0.85% 0.85%
Federated Fund for U.S. Government Securities II(2) 0.15% 0.65% 0.80%
Federated Growth Strategies Fund II(2) 0.08% 0.77% 0.85%
Federated High Income Bond Fund II(2) 0.51% 0.29% 0.80%
Federated International Equity Fund II(2) 0.02% 1.21% 1.23%
Federated Prime Money Fund II(2) 0.30% 0.50% 0.80%
Federated Utility Fund II(2) 0.48% 0.37% 0.85%
</TABLE>
- ------------------
(1) The Adviser reimburses the Company for administrative costs incurred in
connection with administering the Funds as variable funding options under
the Contract. These reimbursements are paid out of the investment advisory
fees and are not charged to investors.
(2) The management fee for each of the funds has been reduced to reflect a
voluntary waiver of a portion of the management fee. The adviser can
terminate this voluntary waiver at any time at its sole discretion. The
maximum management fee for each of the Funds is as follows: 0.75%--American
Leaders Fund II, Growth Strategies Fund II, and Utility Fund II; 0.60%--Fund
for U.S. Government Securities II and High Income Bond Fund II;
1.00%--International Equity Fund II; and 0.50%--Prime Money Fund II.
The total operating expenses of each of the funds, absent the voluntary
waiver of a portion of the management fee, would have been : 0.94% for the
American Leaders Fund II; 1.25% for the Fund for U.S. Government Securities
II; 1.52% for the Growth Strategies Fund II; 0.89% for the High Income Bond
Fund II; 2.21% for the International Equity Fund II; 1.00% for the Prime
Money Fund II; and 1.12% for the Utility Fund II.
(3) The management fee has been reduced to reflect the voluntary waiver of the
management fee. The adviser can terminate this voluntary waiver at any time
at its sole discretion. The maximum investment advisory fee is 0.75%. The
fund has no present intention of paying or accruing the 12b-1 fee during the
fiscal year ending December 31, 1998. If the fund were paying or accruing
the 12b-1 fee, Institutional Shares would be able to pay up to 0.25% of its
average daily net assets for the 12b-1 fee. See "Fund Information" in the
Fund prospectus.
The total operating expenses would have been 2.29% absent the voluntary
waiver of the management fee and the voluntary reimbursement of certain
other operating expenses.
- --------------------------------------------------------------------------------
FEE TABLE - 2
<PAGE>
HYPOTHETICAL ILLUSTRATION (EXAMPLE)
THIS EXAMPLE IS PURELY HYPOTHETICAL. IT SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR EXPECTED RETURN. ACTUAL EXPENSES
AND/OR RETURN MAY BE MORE OR LESS THAN THOSE SHOWN BELOW.
The following Examples illustrate the expenses that would have been paid
assuming a $1,000 investment in the Contract and a 5% return on assets. For the
purposes of these Examples, the maximum maintenance fee of $30.00 that can be
deducted under the Contract has been converted to a percentage of assets equal
to 0.17%.
<TABLE>
<CAPTION>
EXAMPLE A EXAMPLE B
--------------------------------------- --------------------------------------
If you withdraw the entire Account If you do not withdraw the Account
Value at the end of the periods Value, or if you annuitize at the end
shown, you would pay the following of the periods shown, you would pay
expenses, including any applicable the following expenses (no deferred
deferred sales charge: sales charge is reflected):
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
-------- --------- --------- ---------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Federated American Leaders Fund II $85 $104 $138 $260 $23 $71 $121 $260
Federated Equity Income Fund II $85 $104 $138 $260 $23 $71 $121 $260
Federated Fund for U.S. Government Securities II $84 $103 $135 $255 $22 $69 $119 $255
Federated Growth Strategies Fund II $85 $104 $138 $260 $23 $71 $121 $260
Federated High Income Bond Fund II $84 $103 $135 $255 $22 $69 $119 $255
Federated International Equity Fund II $88 $116 $157 $298 $27 $82 $140 $298
Federated Prime Money Fund II $84 $103 $135 $255 $22 $69 $119 $255
Federated Utility Fund II $85 $104 $138 $260 $23 $71 $121 $260
</TABLE>
- --------------------------------------------------------------------------------
FEE TABLE - 3
<PAGE>
CONDENSED FINANCIAL INFORMATION
(Selected data for accumulation units outstanding throughout each period)
================================================================================
The condensed financial information presented below for each of the periods in
the four-year period ended December 31, 1997 (as applicable) is derived from the
financial statements of the Separate Account, which have been audited by KPMG
Peat Marwick LLP, independent auditors. The financial statements and the
independent auditors' report thereon for the year ended December 31, 1997 are
included in the Statement of Additional Information.
<TABLE>
<CAPTION>
1997 1996
------------------- ----------------
<S> <C> <C>
FEDERATED AMERICAN LEADERS FUND II
Value at beginning of period $15.548 $12.971
Value at end of period $20.287 $15.548
Increase (decrease) in value of accumulation units(1) 30.48% 19.87%
Number of accumulation units outstanding at end of period 5,757,361 3,931,613
FEDERATED EQUITY INCOME FUND II
Value at beginning of period $10.534
Value at end of period $12.305
Increase (decrease) in value of accumulation units(1) 16.82%(3)
Number of accumulation units outstanding at end of period 1,620,310
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
Value at beginning of period $11.099 $10.804
Value at end of period $11.883 $11.099
Increase (decrease) in value of accumulation units(1) 7.06% 2.74%
Number of accumulation units outstanding at end of period 1,110,579 689,789
FEDERATED GROWTH STRATEGIES FUND II
Value at beginning of period $12.596 $10.277
Value at end of period $15.777 $12.596
Increase (decrease) in value of accumulation unit(1) 25.25% 22.57%
Number of accumulation units outstanding at end of period 1,439,357 570,182
FEDERATED HIGH INCOME BOND FUND II
Value at beginning of period $13.119 $11.640
Value at end of period $14.724 $13.119
Increase (decrease) in value of accumulation units(1) 12.24% 12.71%
Number of accumulation units outstanding at end of period 3,613,943 2,069,633
FEDERATED INTERNATIONAL EQUITY FUND II
Value at beginning of period $10.952 $10.255
Value at end of period $11.888 $10.952
Increase (decrease) in value of accumulation unit(1) 8.54% 6.80%
Number of accumulation units outstanding at end of period 1,173,166 541,970
FEDERATED PRIME MONEY FUND II
Value at beginning of period $10.748 $10.406
Value at end of period $11.119 $10.748
Increase (decrease) in value of accumulation unit(1) 3.46% 3.29%
Number of accumulation units outstanding at end of period 677,262 720,521
FEDERATED UTILITY FUND II
Value at beginning of period $13.303 $12.095
Value at end of period $16.611 $13.303
Increase (decrease) in value of accumulation units(1) 24.86% 9.99%
Number of accumulation units outstanding at end of period 1,583,456 1,260,915
<CAPTION>
1995 1994
-------------------- --------------------
<S> <C> <C>
FEDERATED AMERICAN LEADERS FUND II
Value at beginning of period $9.838 $10.000
Value at end of period $12.971 $9.838
Increase (decrease) in value of accumulation units(1) 31.84% ( 1.62)%(2)
Number of accumulation units outstanding at end of period 2,057,364 188,708
FEDERATED EQUITY INCOME FUND II
Value at beginning of period
Value at end of period
Increase (decrease) in value of accumulation units(1)
Number of accumulation units outstanding at end of period
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
Value at beginning of period $10.073 $10.000
Value at end of period $10.804 $10.073
Increase (decrease) in value of accumulation units(1) 7.25% 0.73%(2)
Number of accumulation units outstanding at end of period 417,293 12,714
FEDERATED GROWTH STRATEGIES FUND II
Value at beginning of period $10.000
Value at end of period $10.277
Increase (decrease) in value of accumulation unit(1) 2.77%(4)
Number of accumulation units outstanding at end of period 17,503
FEDERATED HIGH INCOME BOND FUND II
Value at beginning of period $9.814 $10.000
Value at end of period $11.640 $9.814
Increase (decrease) in value of accumulation units(1) 18.61% (1.86)%(2)
Number of accumulation units outstanding at end of period 1,020,321 31,309
FEDERATED INTERNATIONAL EQUITY FUND II
Value at beginning of period $10.000
Value at end of period $10.255
Increase (decrease) in value of accumulation unit(1) 2.55%(5)
Number of accumulation units outstanding at end of period 158,319
FEDERATED PRIME MONEY FUND II
Value at beginning of period $10.033 $10.000
Value at end of period $10.406 $10.033
Increase (decrease) in value of accumulation unit(1) 3.71% 0.33%(6)
Number of accumulation units outstanding at end of period 554,934 51,949
FEDERATED UTILITY FUND II
Value at beginning of period $9.881 $10.000
Value at end of period $12.095 $9.881
Increase (decrease) in value of accumulation units(1) 22.40% (1.19)%(2)
Number of accumulation units outstanding at end of period 727,601 41,191
</TABLE>
- ------------------
(1)The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value during a calendar year,
and dividing the result by the beginning Accumulation Unit value. These
figures do not reflect the deferred sales charge or the fixed dollar annual
maintenance fee, if any. Inclusion of these charges would reduce the
investment results shown.
(2)Reflects less than a full year of performance activity. Funds were first
received in this option during September 1994.
(3)Reflects less than a full year of performance activity. Funds were first
received in this option during February 1997.
(4)Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during November 1995, when
the Fund became available under Contract.
(5)Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during May 1995, when the
Fund became available under Contract.
(6)Reflects less than a full year of performance activity. Funds were first
received in this option during November 1994.
- --------------------------------------------------------------------------------
AUV HISTORY - 1
<PAGE>
THE COMPANY
================================================================================
Aetna Life Insurance and Annuity Company (the "Company") is the issuer of
the Contract, and as such, it is responsible for providing the insurance and
annuity benefits under the Contract. The Company is a stock life insurance
company organized under the insurance laws of the State of Connecticut in 1976.
Through a merger, it succeeded to the business of Aetna Variable Annuity Life
Insurance Company (formerly Participating Annuity Life Insurance Company, an
Arkansas life insurance company organized in 1954). The Company is engaged in
the business of issuing life insurance policies and variable annuity contracts
in all states of the United States. The Company's principal executive offices
are located at 151 Farmington Avenue, Hartford, Connecticut 06156.
The Company is a wholly owned subsidiary of Aetna Retirement Holdings,
Inc., which is in turn a wholly owned subsidiary of Aetna Retirement Services,
Inc. and an indirect wholly owned subsidiary of Aetna Inc.
VARIABLE ANNUITY ACCOUNT B
================================================================================
The Company established Variable Annuity Account B (the "Separate
Account") in 1976 as a segregated asset account for the purpose of funding its
variable annuity contracts. The Separate Account is registered as a unit
investment trust under the Investment Company Act of 1940 (the "1940 Act"), and
meets the definition of "separate account" under federal securities laws. The
Separate Account is divided into "subaccounts" which do not invest directly in
stocks, bonds or other investments. Instead, each Subaccount buys and sells
shares of a corresponding Fund.
Although the Company holds title to the assets of the Separate Account,
such assets are not chargeable with liabilities of any other business conducted
by the Company. Income, gains or losses of the Separate Account are credited to
or charged against the assets of the Separate Account without regard to other
income, gains or losses of the Company. All obligations arising under the
Contracts are obligations of the Company.
INVESTMENT OPTIONS
================================================================================
THE FUNDS
Purchase Payments may be allocated to one or more of the Subaccounts of
the Federated Insurance Series (the "Trust") as designated on the Application.
In turn, the Subaccounts invest in the corresponding Funds at net asset value.
The availability of Funds may be subject to regulatory authorization. In
addition, the Company may add or withdraw Funds, as permitted by applicable
law.
If the shares of any Fund should no longer be available for investment by
the Separate Account or if in the judgment of the Company, further investment
in such shares should become inappropriate in view of the purpose of the
Contract, we may cease to make such Fund shares available for investment under
the Contract prospectively. The Company may, alternatively, substitute shares
of another Fund for shares already acquired. The Company reserves the right to
substitute shares of another Fund for shares already acquired without a proxy
vote. Any elimination, substitution or addition of Funds will be done in
accordance with applicable state and federal securities laws.
[bullet] Federated Insurance Series--Federated American Leaders Fund II
(formerly IMS Equity Growth and Income Fund) The primary objective of
the Fund is to achieve long-term growth of capital. The Fund's
secondary objective is to provide income. The Fund pursues its
investment objective by investing, under normal circumstances, at
least 65 of its total assets in common stock of "blue-chip" companies.
"Blue-chip" companies generally are top-quality, established growth
companies which, in the opinion of the Fund's adviser meet certain
criteria.(1)
[bullet] Federated Insurance Series--Federated Equity Income Fund II seeks to
provide above average income and capital appreciation. The Fund
attempts to achieve its
- --------------------------------------------------------------------------------
1
<PAGE>
objectives by investing at least 65 of its assets in income-producing
equity securities. Equity securities include common stocks, preferred
stocks, and securities (including debt securities) that are convertible
into common stocks. The portion of the Fund's total assets invested in
common stocks, preferred stocks, and convertible securities will vary
according to the Fund's assessment of market and economic conditions and
outlook.(1)
[bullet] Federated Insurance Series--Federated Fund for U.S. Government
Securities II (formerly IMS U.S. Government Bond Fund) seeks to
provide current income. The Fund pursues its investment objective by
investing at least 65% of the value of its total assets in securities
issued or guaranteed as to payment of principal and interest by the
U.S. government, its agencies or instrumentalities.(1)
[bullet] Federated Insurance Series--Federated Growth Strategies Fund II
(formerly IMS Growth Stock Fund) seeks capital appreciation. The Fund
pursues its objective by investing at least 65% of its assets in
equity securities of companies with prospects for above-average growth
in earnings and dividends or companies where significant fundamental
changes are taking place. Equity securities include common stocks,
preferred stocks, and securities (including debt securities) that are
convertible into common stocks.(1)
[bullet] Federated Insurance Series--Federated High Income Bond Fund II
(formerly IMS Corporate Bond Fund) seeks high current income by
investing primarily in a diversified portfolio of professionally
managed fixed income securities. The fixed-income securities in which
the Fund intends to invest are lower-rated corporate debt obligations
(commonly known as "junk bonds" or "high yield, high risk bonds" which
involve significant degree of risk). (See the Fund's prospectus for a
discussion of the risk factors involved in investing in lower-rated
corporate debt obligations).(1)
[bullet] Federated Insurance Series--Federated International Equity Fund II
(formerly IMS International Stock Fund) seeks total return on its
assets by investing at least 65% of its assets (and under normal
market conditions, substantially all of its assets) in equity
securities of issuers located in at least three different countries
outside of the United States. Investing in non-U.S. securities carries
substantial risks in addition to those associated with domestic
investments.(2)
[bullet] Federated Insurance Series--Federated Prime Money Fund II (formerly
IMS Prime Money Fund) seeks to provide current income consistent with
stability of principal and liquidity. The Fund pursues its investment
objective by investing exclusively in a portfolio of money market
instruments maturing in 397 days or less. The average maturity of the
money market instruments in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less. An investment in this
Fund is neither insured nor guaranteed by the U.S. government.(1)
[bullet] Federated Insurance Series--Federated Utility Fund II (formerly IMS
Utility Fund) seeks to achieve high current income and moderate
capital appreciation by investing primarily in a professionally
managed and diversified portfolio of equity and debt securities of
utility companies. Under normal market conditions, the Fund will
invest at least 65% of its total assets in securities of utility
companies.(1)(3)
Investment Advisers for the Funds:
(1) Federated Advisers
(2) Federated Global Research Corp.
(3) Federated Global Research Corp. (subadviser)
Risks Associated with Investment in the Funds. Some of the Funds may use
instruments known as derivatives as part of their investment strategies. The
use of certain derivatives may involve high risk of volatility to a Fund, and
the use of leverage in connection with such derivatives can also increase risk
of losses. Some of the Funds may also invest in foreign or international
securities which involve greater risks than U.S. investments.
More comprehensive information, including a discussion of potential
risks, is found in the current prospectus for each Fund which is distributed
with and accompanies this prospectus. You should read the Fund prospectuses and
consider carefully, and on a continuing basis, which Fund or combination of
Funds is best suited to your long-term investment objectives. Additional
prospectuses and statements of Additional Information for this Prospectus and
for each of the Funds can be obtained from the Company's Home Office at the
address and telephone number listed under the "Inquiries" section of the
Prospectus Summary.
Conflicts of Interest (Mixed and Shared Funding). Shares of the Funds are
sold to each of the Subaccounts for funding the variable annuity contracts
issued by the
- --------------------------------------------------------------------------------
2
<PAGE>
Company. Shares of the Funds may also be sold to other insurance companies for
the same purpose. This is referred to as "shared funding." Shares of the Funds
may also be used for funding variable life insurance contracts issued by the
Company or by third parties. This is referred to as "mixed funding." Because
the Funds available under the Contract are sold to fund variable annuity
contracts and variable life insurance policies issued by us or by other
companies, certain conflicts of interest could arise. If a conflict of interest
were to occur, one of the separate accounts might withdraw its investment in
the Trust, which might force the Trust to sell portfolio securities at
disadvantageous prices, causing its per share value to decrease. The Board of
Trustees of the Trust has agreed to monitor events in order to identify any
material irreconcilable conflicts which might arise and to determine what
action, if any, should be taken to address such conflict.
CREDITED INTEREST OPTION
Purchase Payments may be allocated to the ALIAC Guaranteed Account (the
"Guaranteed Account"). Through the Guaranteed Account, we guarantee stipulated
rates of interest for stated periods of time. Amounts must remain in the
Guaranteed Account for specified periods of the guaranteed term to receive the
quoted interest rates, or a market value adjustment (which may be positive or
negative) will be applied. (See the Appendix.)
PURCHASE
================================================================================
CONTRACT AVAILABILITY
The Contracts are offered as (1) nonqualified deferred annuity contracts,
(we reserve the right to limit ownership of nonqualified Contracts to natural
persons); (2) Individual Retirement Annuities, other than "SIMPLE IRAs" as
defined in Section 408(p) of the Internal Revenue Code; or (3) qualified
contracts used in conjunction with certain employer sponsored retirement plans
pursuant to Section 401(a), 403(b) and 457 of the Code. Individual Retirement
Annuities are currently available as rollovers, and may permit ongoing
contributions, subject to state regulatory approval. Additionally, availability
of the Qualified Contracts described under item (3) is subject to approval by
the Company and state regulatory agencies.
The maximum issue age for a Certificate Holder is generally 90; however,
some states may require a lower maximum issue age.
Joint Certificate Holders. Contracts may be purchased by two individuals
as Joint Certificate Holders. A Joint Certificate Holder must be the spouse of
the other Joint Certificate Holder unless otherwise prohibited by state law.
Tax law prohibits the purchase of Qualified Contracts by Joint Certificate
Holders.
PURCHASING INTERESTS IN THE CONTRACT
Group Contracts. Groups will generally consist of those eligible
individuals who have established an account with a broker-dealer or bank who
has agreed to act as a Distributor for the Contracts. The Distributor or its
designee will execute a master application and return it to the Company. The
master application will then be delivered to the Company for its approval. Once
the Application is approved, the Contract will be issued and the Contract
Holder will be entitled to exercise certain limited rights under the Contract.
(See "Contract Rights.") Under certain circumstances, the person who would
otherwise be the Contract Holder may designate a trustee or other third party
to act as Contract Holder in its place subject to applicable insurance laws. In
that event, the third party would exercise the Contract rights for the group
Contract.
Eligible individuals who want to purchase an interest in a Contract as
part of the group will fill out an Application and return it with their initial
Purchase Payment to their Registered Representative or to the Underwriter for
delivery to the Company. Once the Application is accepted, a Certificate will
be issued to the individual evidencing his or her interest in the group
Contract.
Individual Contracts. Certain states will not allow a group Contract to
be offered due to provisions in their insurance laws. In those states, an
eligible individual will submit an Application and will be issued a Contract
rather than a Certificate. Individuals who want to purchase a Contract must
fill out an Application and return it with their initial Purchase Payment to
their Registered Representative or to the Underwriter for delivery to the
- --------------------------------------------------------------------------------
3
<PAGE>
Company. Once the Application is accepted, an individual Contract will be
issued to the purchaser.
Rejection. Any Application and initial Purchase Payment tendered by a
prospective Certificate Holder may be rejected for any reason by the Company.
The Company will also return any forms that are incomplete or that do not
include sufficient information to set up an Account, unless the forms are
completed within five business days from the date the Company receives them.
Purchase Payments may be held for longer periods only with the consent of the
Certificate Holder. All forms that are rejected will be returned with a refund
of all Purchase Payments submitted with them.
GENERAL
Certificate Holders. The Term "Certificate Holders," as used in this
Prospectus, includes individuals purchasing an interest in the Contract as part
of a group and individuals who acquire individual Contracts. Generally,
Nonqualified Certificate Holders must be natural persons.
Joint Certificate Holders. Contracts may be purchased by two individuals
as joint Certificate Holders, except for Contracts acquired by individuals for
purposes of establishing a Qualified Contract. A joint Certificate Holder must
be the spouse of the other joint Certificate Holder unless otherwise prohibited
by state law. (See "Tax Status" and "Contract Rights.")
PURCHASE PAYMENTS
You may make Purchase Payments under the Contract in one lump sum,
through periodic payments or as a transfer from a pre-existing plan.
The minimum initial Purchase Payment amount is $1,500. Additional
Purchase Payments must be at least $500, or if made by automatic check plan,
$50 per month. In some states, a Contract is issued as an Individual Retirement
Annuity can accept only a lump sum, rollover Purchase Payment. Additional
Purchase Payments made to an existing Contract are subject to the terms and
conditions published by us at the time of the subsequent payment. A Purchase
Payment of more than $1,000,000 will be allowed only with the Company's
consent. We also reserve the right to reject any Purchase Payment to a
prospective or existing Account without advance notice, unless prohibited by
state law.
For Qualified Contracts, the Code imposes a maximum limit on annual
Purchase Payments which may be excluded from a Certificate Holder's gross
income. (See "Tax Status.")
Allocation of Purchase Payments. Purchase Payments will initially be
allocated to the Subaccounts or the Guaranteed Account as specified on the
Application. Changes in such allocation may be made in writing or by telephone
transfer. Allocations must be in whole percentages, and there may be
limitations on the number of investment options that can be selected.
CONTRACT RIGHTS
The Contract Holder has title to the Contract and has the right to accept
or reject any modifications to the Contract. For group Contracts, this is the
only right the Contract Holder has. All other rights, specifically those
relating to the Account under the Contract, are held by the Certificate Holder.
Certificate Holders' rights are subject to rights of any assignee under an
assignment filed with the Company and to the rights of any irrevocably named
beneficiary.
Joint Certificate Holders have equal rights under the Contract and with
respect to their Account. On the death of a Joint Certificate Holder prior to
the Annuity Date, the surviving Certificate Holder may retain all ownership
rights under the Contract or elect to have the proceeds distributed. (See
"Death Benefits.") All rights under the Contract must be exercised by both
Joint Certificate Holders with the exception of transfers among investment
options; which can be exercised by one Joint Certificate Holder, after the
Account has been established.
DESIGNATIONS OF BENEFICIARY AND ANNUITANT
You generally designate the beneficiary under the Contract on the
Application. However, for Qualified Contracts issued in conjunction with a Code
Section 401(a) qualified pension or profit sharing plan or a Code Section 457
deferred compensation plan, the employer or trustee must be both the
Certificate Holder and the Beneficiary under the Contract, and the participant
on whose behalf the Account was established must be the Annuitant. Under such
plans, the participant is generally allowed to designate a beneficiary under
the plan, and the Certificate Holder may direct that we pay any death proceeds
to the plan beneficiary. "Beneficiary" as used refers to the person who is
ultimately entitled to receive such proceeds.
For Qualified Contracts issued in conjunction with a Code Section 403(b)
tax deferred annuity program subject to the Employee Retirement Income Security
Act
- --------------------------------------------------------------------------------
4
<PAGE>
(ERISA), the spouse of a married participant must be the beneficiary of at
least 50% of the Account Value. If the married participant is age 35 or older,
the participant may name an alternate beneficiary provided he or she furnishes
a waiver and spousal consent which meets the requirements of ERISA Section 205.
The participant on whose behalf the Account was established must be the
Annuitant.
For Qualified Contracts issued as an Individual Retirement Annuity, the
Certificate Holder must be the Annuitant. For Nonqualified Contracts, the
Certificate Holder and the Annuitant may, but need not, be the same person.
RIGHT TO CANCEL
You may cancel the Contract or Certificate without penalty by returning
it to the Company or to the person from whom the Contract was purchased with a
written notice of your intent to cancel. In most states, you have ten days to
exercise this "free look" right; some states allow you longer. Unless state law
requires otherwise, the amount you will receive upon cancellation will reflect
the investment performance of the Subaccounts into which your Purchase Payments
were deposited. In some cases this may be more or less than the amount of your
Purchase Payments; therefore, you bear the entire investment risk for amounts
allocated among the Subaccounts during the free look period. Under Contracts
issued as Individual Retirement Annuities, you will receive a refund of your
Purchase Payment. Account Values will be determined as of the Valuation Date on
which we receive your request for cancellation at our Home Office.
CHARGES AND DEDUCTIONS
================================================================================
DAILY DEDUCTIONS FROM THE SEPARATE ACCOUNT
Mortality and Expense Risk Charge. The Company makes a daily deduction
from each of the Subaccounts for the mortality and expense risk charge. The
charge is equal, on an annual basis, to 1.25% of the daily net assets of the
Subaccounts and compensates the Company for the assumption of the mortality and
expense risks under the Contract. The mortality risks are those assumed for our
promise to make lifetime payments according to annuity rates specified in the
Contract. The expense risk is the risk that the actual expenses for costs
incurred under the Contract will exceed the maximum costs that can be charged
under the Contract.
If the amount deducted for mortality and expense risks is not sufficient
to cover the mortality costs and expense shortfalls, the loss is borne by the
Company. If the deduction is more than sufficient, the excess may be used to
recover distribution expenses relating to the Contracts and as a source of
profit to the Company. The Company expects to make a profit from the mortality
and expense risk charge.
Administrative Charge. During the Accumulation Period, the Company makes
a daily deduction from each of the Subaccounts for an administrative charge.
The charge is equal, on an annual basis, to 0.15% of the daily net assets of
the Subaccounts and compensates the Company for administrative expenses that
exceed revenues from the maintenance fee described below. The charge is set at
a level which does not exceed the average expected cost of the administrative
services to be provided while the Contract is in force. The Company does not
expect to make a profit from this charge.
During the Annuity Period, the Company reserves the right to make a
deduction for the administrative charge of an amount equal, on an annual basis,
up to 0.25% of the daily net assets of the Subaccounts. There is currently no
administrative charge during the Annuity Period. Once an Annuity Option is
elected, the charge will be established and will be effective during the entire
Annuity Period.
MAINTENANCE FEE
During the Accumulation Period, the Company will deduct an annual
maintenance fee from the Account Value. The maintenance fee is to reimburse the
Company for some of its administrative expenses relating to the establishment
and maintenance of the Accounts.
The maintenance fee deducted under the Contract is $30. The maintenance
fee will be deducted annually on the anniversary of the Contract effective
date. It is deducted on a pro rata basis from each investment option in which
you have an interest. If your entire Account Value is withdrawn, the full
maintenance fee, if applicable, will be deducted at the time of withdrawal. The
maintenance fee will not be deducted (either
- --------------------------------------------------------------------------------
5
<PAGE>
annually or upon withdrawal) if your Account Value is $50,000 or more on the
day the maintenance fee is due.
DEFERRED SALES CHARGE
Withdrawals of all or a portion of the Account Value may be subject to a
deferred sales charge. The deferred sales charge is a percentage of the
Purchase Payments withdrawn from the Subaccounts and the Guaranteed Account and
is based on the number of years which have elapsed since the Purchase Payment
was made. The deferred sales charge for each Purchase Payment is determined by
multiplying the Purchase Payment withdrawn by the appropriate percentage, in
accordance with the schedule set forth in the table below.
The charge only applies to the Purchase Payment (not to any associated
changes in value). To satisfy a partial withdrawal, the deferred sales charge
is calculated as if the Purchase Payments are withdrawn in the same order they
were applied to the Account. Partial withdrawals from the Guaranteed Account
will be treated as described in the Appendix and the prospectus for the
Guaranteed Account. The total charge will be the sum of the charges applicable
for all of the Purchase Payments withdrawn. Reduced charges apply to Purchase
Payments in excess of $1.5 million.
<TABLE>
<CAPTION>
Years since receipt of Deferred Sales
Purchase Payment Charge Deduction
- ----------------------------- -----------------
<S> <C>
Less than 1 7%
1 or more but less than 2 6%
2 or more but less than 3 5%
3 or more but less than 4 4%
4 or more but less than 5 3%
5 or more but less than 6 2%
6 or more but less than 7 1%
7 or more 0%
</TABLE>
A deferred sales charge will not be deducted from any portion of a
Purchase Payment withdrawn if the withdrawal is:
[bullet] applied to provide Annuity benefits;
[bullet] paid to a Beneficiary due to the Certificate Holder's death before
Annuity Payments start, up to a maximum of the Purchase Payment(s) in
the Account on the Certificate Holder's date of death (if the
Certificate Holder is a non-natural person, death benefits are paid at
the death of the Annuitant);
[bullet] made due to the election of an Additional Withdrawal Option (see
"Systematic Distribution Options");
[bullet] if approved by your state, under a Qualified Contract when the amount
withdrawn is equal to the minimum distribution required by the Code
for this Contract calculated using a method permitted under the Code
and agreed to by the Company;
[bullet] paid upon a full withdrawal where the Account Value is $2,500 or less
and no amount has been withdrawn during the prior 12 months; or
[bullet] paid if we close out your Account when the value is less than $2,500
(or other amount required by state law).
After the first Account Year, you may withdraw all or a portion of your
Purchase Payments without a deferred sales charge, provided that (1) such
withdrawal occurs within three years of your admission to a licensed nursing
care facility (including non-licensed facilities in New Hampshire), and (2) you
have spent at least 45 consecutive days in such facility. This waiver of
deferred sales charge does not apply if you are in a nursing care facility at
the time the Account is established. It will also not apply if otherwise
prohibited by state law.
The Company does not anticipate that the deferred sales charge will cover
all sales and administrative expenses which it incurs in connection with the
Contract. The difference will be covered by the general assets of the Company
which are attributable, in part, to mortality and expense risk charges under
the Contract described above.
Free Withdrawals. At least 12 months after the date the first Purchase
Payment is applied to your Account and subject to the restrictions described
below, you may withdraw up to 15% of your current Account Value during each
calendar year without imposition of a deferred sales charge. The free
withdrawal applies only to the first partial or full withdrawal in each
calendar year. The free withdrawal amount will be based on the Account Value
calculated on the Valuation Date next following our receipt of your request for
withdrawal. If your withdrawal exceeds the free withdrawal allowance, we will
deduct a deferred sales charge on the excess amount. (See the Appendix for a
discussion of withdrawals from the Guaranteed Account.) This provision may not
be exercised if an Additional Withdrawal Option is in effect in the same
calendar year or if you have withdrawn a minimum distribution required by the
Code for which the deferred sales charge has been waived in the same calendar
year. (See "Systematic Distribution Options.")
- --------------------------------------------------------------------------------
6
<PAGE>
FUND EXPENSES
Each Fund incurs certain expenses which are paid out of its net assets.
These expenses include, among other things, the investment advisory or
"management" fee. The expenses of the Funds are set forth in the Fee Table in
this Prospectus and described more fully in the accompanying Fund prospectuses.
PREMIUM AND OTHER TAXES
Several states and municipalities currently impose a premium tax on
Annuities. These taxes currently range from 0% to 4%. Ordinarily, any
applicable state premium tax will be deducted from the Account Value when it is
applied to an Annuity option. However, we reserve the right to deduct state
premium tax at any time from the Purchase Payment(s) or from the Account Value,
but no earlier than when we have a tax liability under state law.
Any municipal premium tax assessed at a rate in excess of 1% will be
deducted from the Purchase Payment(s) or from the amount applied to an Annuity
option based on our determination of when such tax is due. We will absorb any
municipal premium tax which is assessed at 1% or less. We reserve the right,
however, to reflect this added expense in our Annuity purchase rates for
residents of such municipalities.
CONTRACT VALUATION
================================================================================
ACCOUNT VALUE
Until the Annuity Date, the Account Value is the total dollar value of
amounts held in the Account as of any Valuation Date. The Account Value at any
given time is based on the value of the units held in each Subaccount, plus the
value of amounts held in the Guaranteed Account.
ACCUMULATION UNITS
The value of your interests in a Subaccount is expressed as the number of
"Accumulation Units" that you hold multiplied by an "Accumulation Unit Value"
(or "AUV") for each unit. The AUV on any Valuation Date is determined by
multiplying the value on the immediately preceding Valuation Date by the net
investment factor of that Subaccount for the period between the immediately
preceding Valuation Date and the current Valuation Date. (See "Net Investment
Factor" below.) The Accumulation Unit Value will be affected by the investment
performance, expenses and charges of the applicable Fund and is reduced each
day by a percentage that accounts for the daily assessment of mortality and
expense risk charges and the administrative charge.
Initial Purchase Payments will be credited to your Account at the AUV
next computed following our acceptance of the Application as described under
"Purchasing Interests in the Contract." Each subsequent Purchase Payment (or
amount transferred) received by the Company by the close of business of the New
York Stock Exchange will be credited to your Account at the AUV next computed
following our receipt of your payment or transfer request. The value of an
Accumulation Unit may increase or decrease.
NET INVESTMENT FACTOR
The net investment factor is used to measure the investment performance
of a Subaccount from one Valuation Date to the next. The net investment factor
for a Subaccount for any valuation period is equal to the sum of 1.0000 plus
the net investment rate. The net investment rate equals:
(a) the net assets of the Fund held by the Subaccount on the current
Valuation Date, minus
(b) the net assets of the Fund held by the Subaccount on the preceding
Valuation Date, plus or minus
(c) taxes or provisions for taxes, if any, attributable to the operation
of the Subaccount;
(d) divided by the total value of the Subaccount's Accumulation and
Annuity Units on the preceding Valuation Date;
(e) minus a daily charge at the annual effective rate of 1.25% for
mortality and expense risks, and an administrative charge of 0.15%
during the Accumulation Period and up to 0.25% during the Annuity
Period (currently 0% during the Annuity Period).
The net investment rate may be either positive or negative.
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TRANSFERS
================================================================================
At any time prior to the Annuity Date, you can transfer amounts held
under your Account among the investment options. Transfers from the Guaranteed
Account may be subject to a market value adjustment. (See the Appendix.) If
approved in your state, during the Annuity Period, if you have elected a
variable Annuity, you can make transfers only among the Subaccounts available
during the Annuity Period. (See "Annuity Options."). A request for transfer can
be made either in writing or by telephone. (See "Telephone Transfers" below.).
All transfers must be in accordance with the terms of the Contract. Any
transfer will be based on the Accumulation Unit Value next determined after the
Company receives a valid transfer request at its Home Office.
During the Accumulation Period, twelve free transfers are allowed per
calendar year. Thereafter, the Company reserves the right to charge up to $10
for each additional transfer. The Company currently does not impose this
charge. Currently, during the Annuity Period, four transfers are allowed each
calendar year.
TELEPHONE TRANSFERS
You automatically have the right to make transfers among Funds by
telephone. We have enacted procedures to prevent abuses of Account transactions
by telephone, including requiring the use of a personal identification number
(PIN) to execute transactions. You are responsible for safeguarding your PIN,
and for keeping Account information confidential. Although the Company's
failure to follow reasonable procedures may result in the Company's liability
for any losses due to unauthorized or fraudulent telephone transfers, the
Company will not be liable for following instructions communicated by telephone
which it reasonably believes to be genuine. Any losses incurred pursuant to
actions taken by the Company in reliance on telephone instructions reasonably
believed to be genuine shall be borne by you. To ensure authenticity, we record
calls on the 800 line.
DOLLAR COST AVERAGING PROGRAM
You may establish automated transfers of Account Values on a monthly or
quarterly basis through the Company's Dollar Cost Averaging Program. Dollar
Cost Averaging is a system for investing a fixed amount of money at regular
intervals over a period of time. The Dollar Cost Averaging Program permits the
transfer of amounts from any of the variable funding options and an available
Guaranteed Term subject to the Company's terms and conditions to any of the
Subaccounts. A market value adjustment will not be applied to dollar cost
averaging transfers from an available Guaranteed Term. There is no additional
charge for this Program. (See the Appendix for a discussion of the restrictions
and features attributable to the Guaranteed Account.)
Dollar Cost Averaging does not ensure a profit nor guarantee against loss
in a declining market. You should consider your financial ability to continue
purchases through periods of low price levels. For additional information,
please refer to the "Inquiries" section of the Prospectus Summary, which
describes how you can obtain further information.
Dollar Cost Averaging is not available to individuals who have elected an
Additional Withdrawal Option or the Account Rebalancing Program.
ACCOUNT REBALANCING PROGRAM
The Account Rebalancing Program allows you to have portions of your
Account Value automatically reallocated annually to a specified percentage or
at other more frequent intervals as allowed by the Company under the program.
Only Account Values accumulating in the Subaccounts can be rebalanced. You may
participate in this program by completing the Account Rebalancing section of
the Application, or by sending a written request to the Company at its Home
Office. The Account Rebalancing does not ensure a profit nor guarantee against
loss in a declining market.
Account Rebalancing is not available to Certificate Holders who have
elected the Dollar Cost Averaging Program.
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WITHDRAWALS
================================================================================
All or a portion of your Account Value may be withdrawn at any time
during the Accumulation Period. Withdrawal restrictions applicable to Section
403(b) Contracts are described below. To request a withdrawal, you must
properly complete a disbursement form and send it to our Home Office. Payments
for withdrawal requests will be made in accordance with Securities and Exchange
Commission requirements, but normally not later than seven calendar days
following our receipt of a disbursement form. Withdrawals may be subject to a
deferred sales charge (See "Charges and Deductions") and to taxes and to tax
penalties. (See "Tax Status.")
Withdrawals may be requested in one of the following forms:
[bullet] Full Withdrawal of an Account: The amount paid for a full withdrawal
will be the Adjusted Account Value minus any applicable deferred sales
charge and maintenance fee due.
[bullet] Partial Withdrawals (Percentage): The amount paid will be the
percentage of the Adjusted Account Value requested minus any
applicable deferred sales charge.
[bullet] Partial Withdrawals (Specified Dollar Amount): The amount paid will be
the dollar amount requested. However, the amount withdrawn from your
Account will equal the amount you request plus any applicable deferred
sales charge and plus or minus any applicable market value adjustment.
For any partial withdrawal, the value of the Accumulation Units canceled
will be withdrawn proportionately from the Guaranteed Account or each
Subaccount in which your Account is invested, unless you request otherwise in
writing. All amounts paid will be based on your Account Value as of the next
Valuation Date after we receive a request for withdrawal at our Home Office, or
on such later date as the disbursement form may specify.
The tax treatment of withdrawals from each Nonqualified Contract may be
affected if you own other annuity contracts issued by us (or our affiliates)
that were purchased on or after October 21, 1988. (See "Tax Status.")
Withdrawal Restrictions from 403(b) Plans. Under Section 403(b)
Contracts, the withdrawal of salary reduction contributions and earnings on
such contributions is generally prohibited prior to the participant's death,
disability, attainment of age 591/2, separation from service or financial
hardship. (See "Tax Status.")
SYSTEMATIC DISTRIBUTION OPTIONS
================================================================================
The Company offers certain withdrawal options under the Contract that are
not considered annuity options ("Systematic Distribution Options"). To exercise
these options, your Account Value must meet the minimum dollar amounts and age
criteria applicable to that option.
The Systematic Distribution Options currently available under the
Contract include the following:
[bullet] SWO--Systematic Withdrawal Option. SWO is a series of partial
withdrawals from your Account based on a payment method you select. It
is designed for those who want a periodic income while retaining
investment flexibility for amounts accumulated under a Contract.
[bullet] ECO--Estate Conservation Option. ECO offers the same investment
flexibility as SWO but is designed for those who want to receive only
the minimum distribution that the Code requires each year. ECO is
available only under Qualified Contracts. Under ECO, the Company
calculates the minimum distribution amount required by law, and pays
you that amount once a year. (See "Tax Status.")
Other Systematic Distribution Options may be added from time to time.
Additional information relating to any of the Systematic Distribution Options
may be obtained from your local representative or from the Company at its Home
Office.
If you select one of the Systematic Distribution Options, you will retain
all of the rights and flexibility permitted under the Contract during the
Accumulation Period. Your Account Value will continue to be subject to the
charges and deductions described in this Prospectus. Taking a withdrawal under
one of these Systematic Distribution Options may have tax
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consequences. Any person concerned about tax implications should consult a
competent tax advisor prior to electing an option.
Once you elect an Additional Withdrawal Option, you may revoke it any
time by submitting a written request to our Home Office. Once an option is
revoked, it may not be elected again for three years, nor may any other
Systematic Distribution Options be elected unless permitted by the Code. The
Company reserves the right to discontinue the availability of one or all of
these Systematic Distribution Options for new elections at any time, and/or to
change the terms of future elections.
DEATH BENEFIT DURING ACCUMULATION PERIOD
================================================================================
A death benefit will be payable to the Beneficiary(ies) if the
Certificate Holder dies before Annuity Payments have commenced. Upon the death
of a Joint Certificate Holder prior to the Annuity Date, the surviving
Certificate Holder, if any, will become the designated Beneficiary. Any other
Beneficiary designation on record with the Company at the time of death will be
treated as a contingent Beneficiary. If the Certificate Holder is a non-natural
person, the death benefit will be paid to the Beneficiary(ies) at the death of
the Annuitant.
A Beneficiary may elect the death benefit to be paid under one of the
options described below or if the designated Beneficiary is the spouse of the
Certificate Holder, he or she may continue as a Certificate Holder and exercise
all the deceased Certificate Holder's rights under the Contract.
DEATH BENEFIT AMOUNT
Upon the death of the Certificate Holder (or the Annuitant when the
Certificate Holder is a non-natural person), the death benefit proceeds will be
the greatest of:
(1) The Account Value as of the Valuation Date next following our receipt at
our Home Office of proof of death and election of the payment type to be
made; or
(2) The Account Value on the most recent seventh year anniversary of the
Effective Date plus any Purchase Payments made after such Effective Date
anniversary less any withdrawals and any amounts annuitized; or
(3) The amount of the death benefit determined as of the Valuation Date
corresponding to the date of death as follows:
(i) Until the first Effective Date anniversary, the death benefit is equal
to the Purchase Payments made by the Certificate Holder during that
year, less any withdrawals and any amounts annuitized. For each year
thereafter, the death benefit during the year is equal to the death
benefit at the beginning of the year (see (ii) below) plus all
Purchase Payments made during the year less any withdrawals and any
amounts annuitized that year.
(ii) On the anniversary of the Effective Date each year, the death benefit
is determined as follows:
(a) The death benefit on the previous Effective Date anniversary
increased by the death benefit factor of 4%; plus
(b) Purchase Payments made by the Certificate Holder during the year
since the last anniversary of the Effective Date increased by the
death benefit factor of 4% for the portion of the year since the
Purchase Payment was made; less
(c) Any withdrawals or amounts applied to an Annuity Option during the
year increased by the death benefit factor of 4% for the portion of
the year since the withdrawal or election of an Annuity Option.
Currently there is no limitation on the maximum death benefit payable;
however, we reserve the right, in the future, to impose a limitation on the
maximum allowable death benefit under sections (2) and (3) above. We currently
do not anticipate imposing such a limitation prior to May 1, 2000.
The death benefit calculation described in (2) and (3) applies until the
Certificate Holder attains age 85. Thereafter, the death benefit is only
adjusted for Purchase Payments, withdrawals and anuitizations. If the
Certificate Holder attains age 85 prior to the seventh anniversary of the
Effective Date, the death benefit will be the greater of (1) or (3) above. If
the Certificate
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Holder is a non-natural person the Death Benefit calculation will be based on
the age of the Annuitant.
The excess, if any, of the guaranteed death benefit value over the
Account Value is determined when we receive proof of death at our Home Office.
Any excess amount is allocated to the Federated Prime Money Fund II Subaccount.
The Account Value plus any excess amount deposited becomes the Account Value.
In the case of a spousal Beneficiary who continues the Account in his or
her own name, the death benefit shall be equal to the Adjusted Account Value
less any applicable deferred sales charge on any Purchase Payment made after we
receive proof of death.
For amounts held in the Guaranteed Account, see the Appendix for a
discussion of the calculation of death benefit proceeds.
DEATH BENEFIT PAYMENT OPTIONS
Death benefit proceeds may be paid to the Beneficiary as described below.
Prior to any election, the Account Value will remain in the Account and the
Account Value will continue to be affected by the investment performance of the
investment option(s) selected. The Beneficiary has the right to allocate or
transfer any amount to any available investment option (subject to an MVA, as
applicable). The Code requires that distributions begin within a certain time
period, as described below. If no elections are made, no distributions will be
made. Failure to commence distribution within those time periods can result in
tax penalties.
Nonqualified Contracts. If the Certificate Holder (or Annuitant if the
Certificate Holder is a non-natural person) dies and the Beneficiary is the
surviving spouse, he or she will automatically become the successor Certificate
Holder. The successor Certificate Holder may exercise all rights under the
Contract and elect to (1) continue in the Accumulation Period, or (2) apply
some or all of the Adjusted Account Value to any of the Annuity Options or (3)
receive, at any time, a lump sum payment of the death benefit. Under the Code,
distributions are not required until the successor Certificate Holder's death.
If the Certificate Holder (or Annuitant if the Certificate Holder is a
non-natural person) dies and the Beneficiary is not the surviving spouse, he or
she may elect Option (2) or (3) above. According to the Code, any portion of
the death benefit not distributed in installments over the life or life
expectancy beginning within one year of the date of death, must be distributed
within five years of the date of death. (See "Tax Status of the Contract.") A
market value adjustment will apply at the time the death benefit is paid.
Qualified Contracts. Under a Qualified Contract where the Certificate
Holder is a trust or an employer, the death benefit is paid at the death of the
Annuitant. The Beneficiary has the following options: (1) apply some or all of
the Adjusted Account Value to any of the Annuity Options, subject to the
distribution rules in Code Section 401(a)(9), or (2) receive at any time a lump
sum payment equal to all or a portion of the Adjusted Account Value. If the
Account was established in conjunction with a Section 401(a) qualified pension
or profit sharing plan or a Section 457 deferred compensation plan, payment
will be made, as directed by the Certificate Holder, to either the Certificate
Holder or to the plan beneficiary. If ECO or SWO is in effect and the
participant dies before the required beginning date for minimum distributions,
payments will cease. A Beneficiary may receive distributions under ECO or SWO
provided the election would satisfy the Code minimum distribution rules and
would be permitted under the Plan.
If ECO or SWO is in effect and the participant dies after the required
beginning date for minimum distributions, payments will continue as permitted
under the Code minimum distribution rules, unless revoked.
Death benefit payments must satisfy the distribution rules in Code
Section 401(a)(9). (See "Tax Status of the Contract.")
DEATH OF THE ANNUITANT
If the Certificate Holder is a non-natural person, a death benefit is
paid at the death of the Annuitant and a new Annuitant may not be named. In all
other circumstances, if the Annuitant who is not a Certificate Holder dies on
or before the Annuity Date, no Death Benefit is due and a new Annuitant may be
named. If no Annuitant is named, the Certificate Holder will be the Annuitant.
If the Annuitant dies after the Annuity Date, the death benefit, if any, will
be payable to the Beneficiary as specified in the Annuity Option elected. We
will require proof of the Annuitant's death. Death benefits will be paid at
least as rapidly as would have been paid under the method of distribution in
effect at the time of the Annuitant's death.
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ANNUITY PERIOD
================================================================================
ANNUITY PERIOD ELECTIONS
You must notify us in writing of the date you want Annuity Payments to
start (the "Annuity Date") and the Annuity Option elected. Payments may not
begin earlier than one year after purchase, or, unless we consent, later than
the later of (a) first day of the month following the Annuitant's 90th birthday
or (b) the tenth anniversary (fifth anniversary for Contracts or Certificates
issued in Pennsylvania) of the last Purchase Payment.
As of January 1, 1997, the Code generally requires that for Qualified
Contracts, other than for IRAs and for five-percent owners in other Qualified
Contracts, minimum annual distributions of the Account Value must begin by
April 1st of the calendar year following the calendar year in which a
participant attains age 70-1/2 or retires, whichever occurs later. For IRA
depositors and for five-percent owners, minimum distributions must begin by
April 1 of the calendar year following the calendar year in which the
participant attains age 70-1/2. In addition, distributions must be in a form and
amount sufficient to satisfy the Code requirements. These requirements may be
satisfied by the election of certain Annuity Options or Systematic Distribution
Options. (See "Tax Status.") For Nonqualified Contracts, failure to select an
Annuity Option and an Annuity Date, or postponement of the Annuity Date past
the Annuitant's 90th birthday or tenth anniversary of the last Purchase
Payment, may have adverse tax consequences.
You should consult with a qualified tax advisor if you are considering
such a course of action.
At least 30 days prior to the Annuity Date, you must notify us in writing
of the following:
[bullet] the date on which you would like annuity payments to begin;
[bullet] the Annuity Option under which you want payments to be calculated and
paid;
[bullet] whether the payments are to be made monthly, quarterly, semi-annually
or annually; and
[bullet] the investment option(s) used to provide annuity payments (i.e., a
fixed annuity using the general account or any of the Subaccounts
available at the time of annuitization or a combination of the two).
Annuity Payments will not begin until you have selected an Annuity
Option. Until a date and option are elected, the Account will continue in the
Accumulation Period. Once annuity payments begin, the Annuity Option may not be
changed.
PARTIAL ANNUITIZATION
You may elect an Annuity Option with respect to a portion of the Account
Value, while leaving the remaining portion of the Account Value invested in the
Accumulation Period. The Code and the regulations do not specifically address
the tax treatment applicable to payments provided in this way. Whether such
payments are taxable as annuity payments or as withdrawals is currently
unclear, therefore you should consult with a qualified tax advisor if you are
considering a partial annuitization of your Account.
ANNUITY OPTIONS
The Certificate Holder may choose one of the following Annuity Options:
Lifetime Annuity Options:
[bullet] Option 1--Life Annuity--An annuity with payments ending on the
Annuitant's death.
[bullet] Option 2--Life Annuity with Guaranteed Payments--
An annuity with payments guaranteed for 5-30 years.
*[bullet] Option 3--Life Annuity with Cash Refund Feature--
An annuity with a cash refund feature. Payments are guaranteed for the
amount applied to the Annuity option. If the Annuitant dies before the
amount applied to the Annuity Option (less any applicable premium tax)
has been paid, any remaining balance will be paid in one sum to the
Beneficiary. This option is available only when all payments are as a
fixed Annuity.
[bullet] Option 4--Life Annuity Based Upon the Lives of Two Annuitants--An
annuity paid during the lives of the Annuitant and a second Annuitant.
The Certificate Holder selects an Annuity with 100%, 66-2/3% or 50% of
the payment to continue after the first death, or an Annuity with 100%
of the payment to continue at the death of the second Annuitant and
50% of the payment to continue at the death of the Annuitant.
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[bullet] Option 5--Life Annuity Based Upon the Lives of Two Annuitants with
Guaranteed Payments--An Annuity with Payments for a minimum of 5-30
years, with 100% of the payment to continue after the first death.
*[bullet] Option 6--Life Annuity Based Upon the Lives of Two Annuitants with a
Cash Refund Feature--An Annuity with 100% of the payment to continue
after the first death with a cash refund feature. Payments are
guaranteed for the amount applied to the Annuity Option. If both
Annuitants die prior to the total payment of the amount applied to
the Annuity Option (less any premium tax), any remaining balance will
be paid in one sum to the beneficiary. This option is available only
when all payments are as a Fixed Annuity.
* (If approved by your state)
If Option 1 or 4 is elected, it is possible that only one Annuity Payment
will be made if the Annuitant under Option 1, or the surviving Annuitant under
Option 4, should die prior to the due date of the second Annuity Payment. Once
lifetime Annuity payments begin, the Certificate Holder cannot elect to receive
a lump-sum settlement.
Nonlifetime Annuity Option:
Under this option, payments may be made for 5-30 years, as selected by
the Certificate Holder. If this option is elected as a variable Annuity, the
Certificate Holder may request that the present value of all or any portion of
the remaining variable payments be paid in one sum. If elected on a fixed
basis, you cannot elect to receive a lump-sum settlement.
We may also offer additional Annuity Options under your Contract from
time to time. You can call the number listed in the "Inquiries" section of the
Prospectus Summary to determine which options are available and the terms of
such options. Additional or enhanced options may not be available to those who
have already commenced receiving Annuity payments.
ANNUITY PAYMENTS
Duration of Payments. For Qualified Contracts only, Annuity payments may
not extend beyond (a) the life of the Annuitant, (b) the joint lives of the
Annuitant and beneficiary, (c) a period certain greater than the Annuitant's
life expectancy, or (d) a period certain greater than the joint life
expectancies of the Annuitant and beneficiary.
Amount of Each Annuity Payment. The amount of each payment depends on how
you allocate your Account Value between fixed and variable payouts (some
options require all payments be made on a fixed basis). No election may be made
that would result in the first Annuity Payment of less than $50, or $250 per
year for total yearly Annuity Payments (less if required by state law). If the
Account Value on the Annuity Date is insufficient to elect an option for the
minimum amount specified, a lump-sum payment must be elected.
If Annuity Payments are to be made on a variable basis, the first and
subsequent payments will vary depending on the assumed net investment rate
selected (31/2 or 5% per annum). Selection of a 5% rate causes a higher first
payment, but Annuity Payments will increase thereafter only to the extent that
the net investment rate exceeds 5% on an annualized basis (plus up to 0.25% to
offset any applicable administrative charge). Annuity Payments would decline if
the rate were below 5%. Use of the 31/2% assumed rate causes a lower first
payment, but subsequent payments would increase more rapidly or decline more
slowly as changes occur in the net investment rate. (See the Statement of
Additional Information for further discussion on the impact of selecting an
assumed net investment rate.)
CHARGES DEDUCTED DURING THE ANNUITY PERIOD
We make a daily deduction for mortality and expense risks from any
amounts held on a variable basis. Therefore, electing the nonlifetime option on
a variable basis will result in a deduction being made even though we assume no
mortality risk. We may also deduct a daily administrative charge from amounts
held under the variable options. This charge, established when a variable
Annuity Option is elected, will not exceed 0.25% per year of amounts held on a
variable basis. Once established, the charge will be effective during the
entire Annuity Period. (See "Charges and Deductions.")
DEATH BENEFIT PAYABLE DURING THE ANNUITY PERIOD
The death benefit, if any, due when the Annuitant dies after Annuity
Payments have begun, will depend on the terms of the Contract and the Annuity
Option selected. If Option 1 or Option 4 was elected, Annuity Payments will
cease on the death of the Annuitant under Option 1 or death of the surviving
Annuitant under Option 4.
If Lifetime Option 2 or Option 5 was elected and the death of the
Annuitant under Option 2, or the
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surviving Annuitant under Option 5, occurs prior to the end of the guaranteed
minimum payment period, we will continue payments to the Beneficiary unless the
Beneficiary elects a lump sum.
If the nonlifetime option was elected, and the Annuitant dies before all
payments are made, the value of any remaining payments will be paid to the
Beneficiary unless the Beneficiary elects a lump sum.
When the Annuitant dies after Annuity payments have begun and if there is
a death benefit payable under the Annuity option elected, the remaining value
must be distributed to the Beneficiary at least as rapidly as under the
original method of distribution.
Any lump-sum payment paid under the applicable lifetime or nonlifetime
Annuity options will be made within seven calendar days after acceptable proof
of death, and a request for payment are received at our Home Office. The value
of any death benefit proceeds will be determined as of the next Valuation Date
after we receive acceptable proof of death and a request for payment. Under
Options 2 and 5, such value will be reduced by any payments made after the date
of death.
DEATH OF THE CERTIFICATE HOLDER DURING THE ANNUITY PERIOD
If the Certificate Holder is the Annuitant, and the Annuity Payments are
solely life contingent, the death of the Certificate Holder after the Annuity
Date terminates the Annuity payments. If the Certificate Holder is not the
Annuitant, or if Annuity Payments are for a stated period of time, the
Certificate Holder's death after the Annuity Date will not affect the Annuity
payment except as provided under "Death of the Annuitant." The remaining
payments under the Annuity Option elected will be made to the Beneficiary at
least as rapidly as under the method of distribution in effect at the time of
the Certificate Holder's death.
TAX STATUS
================================================================================
INTRODUCTION
The following provides a general discussion and is not intended as tax
advice. This discussion reflects the Company's understanding of current federal
income tax law. Such laws may change in the future, and it is possible that any
change could be retroactive (i.e., effective prior to the date of the change).
In addition, this discussion does not cover the potential application of
federal estate and gift tax laws, or state, local or any other tax law. The
Company makes no guarantee regarding the tax treatment of any contract or
transaction involving a Contract.
The Contract may be purchased on a non-tax qualified basis ("Nonqualified
Contract") or purchased and used in connection with certain retirement
arrangements entitled to special income tax treatment under Section 401(a),
403(b), 408(b) or 457 of the Code ("Qualified Contracts"). The ultimate effect
of federal income taxes on the amounts held under a Contract, on Annuity
payments, and on the economic benefit to the Contract Holder, Certificate
Holder or Beneficiary may depend upon the tax status of the individual
concerned. Any person concerned about these tax implications should consult a
competent tax adviser before initiating any transaction.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under the Code. Since
the Separate Account is not an entity separate from the Company, it will not be
taxed separately as a "regulated investment company" under the Code. Investment
income and realized capital gains are automatically applied to increase
reserves under the Contracts. Under existing federal income tax law, the
Company believes that the Separate Account investment income and realized net
capital gains will not be taxed to the extent that such income and gains are
applied to increase the reserves under the Contracts.
Accordingly, the Company does not anticipate that it will incur any
federal income tax liability attributable to the Separate Account and,
therefore, the Company does not intend to make provisions for any such taxes.
However, if changes in the federal tax laws or interpretation thereof result in
the Company being taxed on income or gains attributable to the Separate
Account, then the Company may impose a charge against the Separate Account
(with respect to some or all Contracts) in order to set aside provisions to pay
such taxes.
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TAX STATUS OF THE CONTRACT
Diversification. Section 817(h) of the Code requires that with respect to
Nonqualified Contracts, the investments of the Funds be "adequately
diversified" in accordance with Treasury Regulations in order for the Contracts
to qualify as annuity contracts under federal tax law. The Separate Account,
through the Funds, intends to comply with the diversification requirements
prescribed by the Treasury in Reg. Sec. 1.817-5, which affects how the Funds'
assets may be invested.
In addition, in certain circumstances, owners of variable annuity
contracts may be considered the owners, for federal income tax purposes, of the
assets of the separate accounts used to support their contracts. In these
circumstances, income and gains from the separate account assets would be
includible in the variable contract owner's gross income. The IRS has stated in
published rulings that a variable contract owner will be considered the owner
of separate account assets if the owner possesses incidents of investment
control over the assets. The ownership rights under the contract are similar
to, but different in certain respects from those described by the IRS in
rulings in which it was determined that owners were not owners of separate
account assets. For example, a Certificate Holder has additional flexibility in
allocating premium payments and account values. In addition, the number of
funds provided under the Contract is greater than the number of funds offered
in contracts on which rulings have been issued. These differences could result
in a Certificate Holder being treated as the owner of a pro rata portion of the
assets of the Separate Account. The Company reserves the right to modify the
Contract as necessary to attempt to prevent a Certificate Holder from being
considered the owner of a pro rata share of the assets of the Separate Account.
Required Distributions--Nonqualified Contracts: In order to be treated as
an annuity contract for federal income tax purposes, Section 72(s) of the Code
requires Nonqualified Contracts to provide that (a) if any Certificate Holder
dies on or after the Annuity Date but prior to the time the entire interest in
the Contract has been distributed, the remaining portion of such interest will
be distributed at least as rapidly as under the method of distribution in
effect at the time of the Certificate Holder's death, and (b) if any
Certificate Holder dies prior to the annuity date, the entire interest in the
Contract will be distributed within five years after the date of such
Certificate Holder's death. These requirements will be considered satisfied as
to any portion of a Certificate Holder's interest which is payable to or for
the benefit of a "designated beneficiary" and which is distributed over the
life of such "designated beneficiary" or over a period not extending beyond the
life expectancy of that beneficiary, provided that such distributions begin
within one year of the Certificate Holder's death. The "designated beneficiary"
refers to a natural person designated by the Certificate Holder as a
Beneficiary and to whom ownership of the contract passes by reason of death.
However, if the "designated beneficiary" is the surviving spouse of the
deceased Certificate Holder, the Certificate may be continued with the
surviving spouse as the new Certificate Holder.
The Nonqualifed Contracts contain provisions which are intended to comply
with the requirements of Section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. The Company intends to
review such provisions and modify them if necessary to assure that they comply
with the requirements of Code Section 72(s) when clarified by regulation or
otherwise.
The discussion under "Taxation of Annuities" below is based on the
assumption that the Contract qualifies as an annuity contract for federal
income tax purposes.
Required Distributions--Qualified Contracts. The Code has required
distribution rules for Section 401(a), 403(b) and 457 Plans and Individual
Retirement Annuities. Other than for IRAs and for five-percent owners in the
Qualified Contracts distributions must generally begin by April 1 of the
calendar year following the calendar year in which the participant attains age
70-1/2 or retires, whichever occurs later. For IRA depositors and for
five-percent owners, minimum distributions must begin by April 1 of the
calendar year following the calendar year in which the participant attains age
70-1/2 or retires, whichever occurs later. Under 403(b) plans, if the Company
maintains separate records, distribution of amounts held as of December 31,
1986 must generally begin by the end of the calendar year in which the
participant attains age 75 (or retires, whichever occurs later). However,
special rules require that some or all of the balance be distributed earlier if
any distributions are taken in excess of the minimum required amount.
To comply with these provisions, distributions must be in a form and
amount sufficient to satisfy the
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minimum distribution and minimum distribution incidental death benefit rules
specified in Section 401(a)(9) of the Code.
In general, annuity payments must be distributed over the participant's
life or the joint lives of the participant and beneficiary, or over a period
not greater than the participant's life expectancy or the joint life
expectancies of the participant and beneficiary. Also, any distribution under a
Section 457 Plan payable over a period of more than one year must be made in
substantially nonincreasing amounts.
If the participant dies on or after the required beginning date for
minimum distributions, distributions to the beneficiary must be made at least
as rapidly as the method of distribution in effect at the time of the
participant's death. However, if the required minimum distribution is
calculated each year based on the participant's single life expectancy or the
joint life expectancies of the participant and beneficiary, the regulations for
Code Section 401(a)(9) provide specific rules for calculating the required
minimum distributions at the participant's death. For example, if ECO was
elected with the calculation based on the participant's single life expectancy,
and the life expectancy is recalculated each year, the recalculated life
expectancy becomes zero in the calendar year following the participant's death
and the entire remaining interest must be distributed to the beneficiary by
December 31 of the year following the participant's death. However, a spousal
beneficiary, other than under a Section 457 Plan, has certain rollover rights
which can only be exercised in the year of the participant's death. The rules
are complex and the participant should consult a tax adviser before electing
the method of calculation to satisfy the minimum distribution requirements.
If the participant dies before the required beginning date for minimum
distributions, the entire interest must be distributed by December 31 of the
calendar year containing the fifth anniversary of the date of the participant's
death. Alternatively, payments may be made over the life of the beneficiary or
over a period not extending beyond the life expectancy of the beneficiary, not
to exceed 15 years for a non-spousal beneficiary under a Section 457 Plan,
provided the distribution begins to a non-spouse beneficiary by December 31 of
the calendar year following the calendar year of the participant's death. If
payments are made to a spousal beneficiary, distribution must begin by the
later of December 31 of the calendar year following the calendar year of the
death or December 31 of the calendar year in which the participant would have
attained age 70-1/2.
An exception applies for a spousal beneficiary under an Individual
Retirement Annuity. In lieu of taking a distribution under these rules, a
spousal beneficiary may elect to treat the Account as his or her own IRA and
defer taking a distribution until his or her age 70-1/2. The surviving spouse is
deemed to have made such an election if the surviving spouse makes a rollover
to or from the Account or fails to take a distribution within the required time
period.
If the participant or beneficiary fails to take the required minimum
distribution for any tax year, a 50% excise tax is imposed on the required
amount that was not distributed.
TAXATION OF ANNUITY CONTRACTS
In General: Section 72 of the Code governs taxation of annuities in
general. The Company believes that a Certificate Holder under a Nonqualified
Contract who is a natural person generally is not taxed on increases in the
Account Value until distribution occurs by withdrawing all or part of such
Account Value (e.g., withdrawals or Annuity Payments under the Annuity Option
elected). The taxable portion of a distribution (in the form of a single sum
payment or an annuity) is taxable as ordinary income.
Non-Natural Holders of a Nonqualified Contract: If the Certificate Holder
is not a natural person, a Nonqualified Contract is not treated as an annuity
for income tax purposes and the "income on the contract" for the taxable year
is currently taxable as ordinary income. "Income on the contract" is any
increase over the year in the Surrender Value, adjusted for Purchase Payments
made during the year, amounts previously distributed and amounts previously
included in income. There are some exceptions to the rule and a non-natural
person should consult with its tax advisor prior to purchasing this Contract. A
non-natural person exempt from federal income taxes should consult with its tax
advisor regarding treatment of "income on the contract" for purposes of the
unrelated business income tax. When the Certificate Holder is not a natural
person, the Annuitant is considered the Certificate Holder for the purpose of
meeting the required distribution-at-death rules. In addition, when the
Certificate Holder is not a natural person, a change in
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Annuitant is treated as the death of the Certificate Holder.
The following discussion generally applies to Qualified Contracts or
Nonqualified Contracts owned by a natural person.
Withdrawals: In the case of a withdrawal under a Qualified Contract,
including withdrawals under SWO or ECO, the amount taxable is generally based
on the ratio of the "investment in the contract" to Account Value. The
"investment in the contract" generally equals the amount of any nondeductible
Purchase Payments paid by or on behalf of any individual less any amount
received previously which was excludable from gross income. For a Qualified
Contract, the "investment in the contract" can be zero. Special tax rules may
be available for certain distributions from a Qualified Contract.
With respect to Nonqualified Contracts, partial withdrawals, including
withdrawals under SWO, are generally treated as taxable income to the extent
that the Account Value immediately before the withdrawal exceeds the
"investment in the contract" at that time. The Account Value immediately before
a withdrawal may have to be increased by any positive market value adjustment
(MVA) that results from such a withdrawal. There is, however, no definitive
guidance on the proper tax treatment of MVAs in these circumstances, and a
Certificate Holder should contact a competent tax advisor with respect to the
potential tax consequences of any MVA that arises as a result of a partial
withdrawal.
Full withdrawals of a Nonqualified Contract are treated as taxable income
to the extent that the amount received exceeds the "investment in the
contract."
Annuity Payments: Although the tax consequences may vary depending on the
Annuity Payment elected under the Contract, in general, only the portion of the
Annuity Payment that represents the amount by which the Account Value exceeds
the "investment in the contract" will be taxed; after the "investment in the
contract" is recovered, the full amount of any additional annuity payments is
taxable. For variable Annuity Payments, the taxable portion is generally
determined by an equation that establishes a specific dollar amount of each
payment that is not taxed. The dollar amount is determined by dividing the
"investment in the contract" by the total number of expected periodic payments.
However, the entire distribution will be taxable once the recipient has
recovered the dollar amount of his or her "investment in the contract." For
fixed annuity payments, in general there is no tax on the portion of each
payment which represents the same ratio that the "investment in the contract"
bears to the total expected value of the Annuity Payments for the term of the
payments; however, the remainder of each Annuity Payment is taxable. Once the
"investment in the contract" has been fully recovered, the full amount of any
additional Annuity Payments is taxable. If Annuity Payments cease as a result
of an Annuitant's death before full recovery of the "investment in the
contract," consult a competent tax advisor regarding deductibility of the
unrecovered amount.
Penalty Tax: In the case of a distribution pursuant to a Nonqualified
Contract, or a Qualified Contract other than a Qualified Contract sold in
conjunction with a Code Section 457 Plan, there may be imposed a federal income
tax penalty equal to 10% of the amount treated as taxable income.
In general, there is no penalty tax on distributions from a Nonqualified
Contract: (1) made on or after the date on which the taxpayer attains age
59-1/2; (2) made as a result of the death of the Certificate Holder; (3)
attributable to the taxpayer's total and permanent disability; (4) received in
substantially equal periodic payments (at least annually) over the life or life
expectancy of the taxpayer or the joint lives or joint life expectancies of the
taxpayer and a "designated beneficiary"; or (5) allocable to "investment in the
contract" before August 14, 1982. If a distribution is made from a Qualified
Contract sold in conjunction with a Section 401(a) Plan or Section 403(b) Plan,
the penalty tax will not apply on distributions made when the participant (a)
attains age 59-1/2, (b) becomes permanently and totally disabled, (c) dies, (d)
separates from service with the plan sponsor at or after age 55, (e) rolls over
the distribution amount to another plan of the same type in accordance with the
terms of the Code, or (f) takes the distributions in substantially equal
periodic payments (at least annually) over his or her life or life expectancy
or the joint lives or joint life expectancies of the participant and plan
beneficiary, provided the participant has separated from service with the plan
sponsor. In addition, the penalty tax does not apply for the amount of a
distribution equal to unreimbursed medical expenses incurred by the participant
that qualify for deduction as specified in the
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Code. The Code may impose other penalty taxes in other circumstances.
In general, the same exceptions described in the preceding paragraph will
apply to distributions made from an Individual Retirement Annuity. Beginning
January 1, 1997, the penalty tax is also waived on distributions made from an
IRA to pay for health insurance premiums for certain unemployed individuals.
Taxation of Death Benefit Proceeds: Amounts may be distributed from the
Contract because of the death of a Certificate Holder or the Annuitant.
Generally, such amounts are includible in the income of the recipient as
follows: (1) if distributed in a lump sum, they are taxed in the same manner as
a full surrender as described above, or (2) if distributed under an Annuity
Option, they are taxed in the same manner as Annuity Payments, as described
above.
Transfers, Assignments or Exchanges of the Contract: A transfer of
ownership of a Contract, the designation of an Annuitant, payee or other
beneficiary who is not also a Certificate Holder, the selection of certain
Annuity Dates, or the exchange of a Contract may result in certain tax
consequences. The assignment, pledge, or agreement to assign or pledge any
portion of the Account Value generally will be treated as a distribution. The
assignment or transfer of ownership of a Qualified Contract generally is not
allowed. Anyone contemplating any such designation, transfer, assignment,
selection, or exchange should contact a competent tax advisor with respect to
the potential tax effects of such a transaction.
Multiple Contracts: All deferred nonqualified annuity contracts that are
issued by the Company (or its affiliates) to the same owner during any calendar
year are treated as one annuity contract for purposes of determining the amount
includible in gross income under Section 72(e) of the Code. In addition, the
Treasury Department has specific authority to issue regulations that prevent
the avoidance of Section 72(e) through the serial purchase of annuity contracts
or otherwise. Congress has also indicated that the Treasury Department may have
authority to treat the combination purchase of an immediate annuity contract
and separate deferred annuity contracts as a single annuity contract under its
general authority to prescribe rules as may be necessary to enforce the income
tax laws.
CONTRACTS USED WITH CERTAIN RETIREMENT PLANS
Qualified Contracts in General
The Qualified Contract is designed for use as an Individual Retirement
Annuity or as a Contract used in connection with certain employer sponsored
retirement plans. The tax rules applicable to participants and beneficiaries in
Qualified Contracts are complex. Special favorable tax treatment may be
available for certain types of contributions and distributions. Adverse tax
consequences may result from contributions in excess of specified limits;
distributions prior to age 59-1/2 (subject to certain exceptions); distributions
that do not conform to specified commencement and minimum distribution rules;
aggregate distributions in excess of a specified annual amount; and in other
specified circumstances.
The Company makes no attempt to provide more than general information
about use of the Contracts with the various types of retirement plans.
Participants and beneficiaries under Qualified Contracts may be subject to the
terms and conditions of the retirement plans themselves, in addition to the
terms and conditions of the Contract issued in connection with such plans. Some
retirement plans are subject to distribution and other requirements that are
not incorporated in the provisions of the Contracts. Purchasers are responsible
for determining that contributions, distributions and other transactions with
respect to the Contracts satisfy applicable laws, and should consult their
legal counsel and tax advisor regarding the suitability of the Contract.
Section 457 Plans. Code Section 457 provides for certain deferred
compensation plans. These plans may be offered with respect to service for
state governments, local governments, political subdivisions, agencies,
instrumentalities and certain affiliates of such entities, and tax exempt
organizations. These plans are subject to various restrictions on contributions
and distributions. The plans may permit participants to specify the form of
investment for their deferred compensation account.
Prior to the August 20, 1996 enactment of the Small Business Job
Protection Act of 1996 (the "Small Business Act") compensation deferred under
the plans, all property and rights purchased with such amounts, and all income
attributable to such amounts, property or rights remained solely the property
and rights of the employer (without being restricted to the provision of
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benefits) subject only to the claims of the employer's general creditors. For
that reason, depending on the terms of the particular plan, the employer may
have been entitled to draw on deferred amounts for purposes unrelated to its
Section 457 plan obligations.
Under the Small Business Act, plans maintained by State or local
governments, their political subdivisions, agencies, instrumentalities and
certain affiliates will be required to hold all assets and income of the Plan
in trust for the exclusive benefit of plan participants and their
beneficiaries. For purposes of meeting the new requirement, custodial accounts
and annuity contracts are treated as trusts. State and local government plans
that were in existence on August 20, 1996 are allowed a transition period that
ends January 1, 1999 to comply with the new requirement.
In general, all amounts received under a Section 457 plan are taxable and
reportable to the IRS as taxable income. Also, all amounts except death benefit
proceeds are subject to federal income tax withholding as wages. If we make
payments directly to a participant on behalf of the employer as owner, we will
withhold federal taxes (and state taxes, if applicable).
The Code imposes a maximum limit on annual Purchase Payments which may be
excluded from the participant's gross income. Such limit is generally the
lesser of $8,000 (as adjusted to reflect changes in the cost of living) or
33-1/3% of the participant's includible compensation (25% of gross
compensation).
Section 401(a) Plans. Section 401(a) permits corporate employers to
establish various types of retirement plans for employees, and permits self-
employed individuals to establish various types of retirement plans for
themselves and for their employees. These retirement plans may permit the
purchase of the Contract to accumulate retirement savings under the plans.
Adverse tax consequences to the plan, to the participant or to both may result
if this Contract is assigned or transferred to an individual except to a
participant as a means to provide benefit payments.
The Code imposes a maximum limit on annual Purchase Payments that may be
excluded from a participant's gross income. Such limit must be calculated under
the Plan by the employer in accordance with Section 415 of the Code. This limit
is generally the lesser of 25% of the participant's compensation or $30,000. In
addition, Purchase Payments will be excluded from a participant's gross income
only if the Section 401(a) Plan meets certain nondiscrimination requirements.
All distributions will be taxed as they are received unless the
distribution is rolled over to another plan of the same type or to an individual
retirement annuity/account ("IRA") in accordance with the Code, or unless the
participant has made after-tax contributions to the plan, which are not taxed
upon distribution. The Code has specific rules that apply, depending on the type
of distribution received, if after-tax contributions were made.
In general, payments received by a beneficiary after the participant's
death are taxed in the same manner as if the participant had received those
payments, except that a limited death benefit exclusion may apply for payments
due to deaths that occurred on or before August 20, 1996. This exclusion no
longer applies to payments due to deaths occurring after August 20, 1996.
Section 403(b) Plans. Under Section 403(b), contributions made by public
school systems or nonprofit healthcare organizations and other Section
501(c)(3) tax exempt organizations to purchase annuity contracts for their
employees are generally excludable from the gross income of the employee.
In order to be excludable from taxable income, total annual contributions
made by the participant and his or her employer cannot exceed either of two
limits set by the Code. The first limit, under Section 415, is generally the
lesser of 25% of includible compensation or $30,000. The second limit, which is
the exclusion allowance under Section 403(b), is usually calculated according
to a formula that takes into account the participant's length of employment and
any pretax contributions to certain other retirement plans. These two limits
apply to the participant's contributions as well as to any contributions made
by the employer on behalf of the participant. There is an additional limit that
specifically limits salary reduction contributions to generally no more than
$10,000 annually (subject to indexing); a participant's own limit may be higher
or lower, depending on certain conditions. In addition, Purchase Payments will
be excluded from a participant's gross income only if the Plan meets certain
nondiscrimination requirements.
Section 403(b)(11) restricts the distribution under Section 403(b)
contracts of: (1) salary reduction
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contributions made after December 31, 1988; (2) earnings on those
contributions; and (3) earnings during such period on amounts held as of
December 31, 1988. Distribution of those amounts may only occur upon death of
the participant, attainment of age 59-1/2 , separation from service, total and
permanent disability, or financial hardship. In addition, income attributable
to salary reduction contributions may not be distributed in the case of
hardship.
Individual Retirement Annuities and Simplified Employee Pension Plans.
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity,
hereinafter referred to as an "IRA." Also, distributions from certain other
types of qualified plans may be "rolled over" on a tax-deferred basis into an
IRA. Employers may establish Simplified Employee Pension ("SEP") Plans and
contribute to an IRA owned by the employee. Purchasers of a Qualified Contract
for use with IRAs will be provided with supplemental information required by
the Internal Revenue Service. Purchasers should seek competent advice as to the
suitability of the Contract for use with IRAs.
WITHHOLDING
Pension and annuity distributions generally are subject to withholding
for the recipient's federal income tax liability at rates that vary according
to the type of distribution and the recipient's tax status. Recipients may be
provided the opportunity to elect not to have tax withheld from distributions;
however, certain distributions from Section 401(a) Plans and Section 403(b)
tax-deferred annuities are subject to mandatory 20% federal income tax
withholding. We will report to the IRS the taxable portion of all
distributions.
MISCELLANEOUS
================================================================================
DISTRIBUTION
The Company will serve as the principal underwriter for the securities
sold by this Prospectus. The Company is registered as a broker-dealer with the
Securities and Exchange Commission ("SEC") and is a member of the National
Association of Securities Dealers, Inc. ("NASD"). As principal underwriter, the
Company will contract with one or more registered broker-dealers, or with banks
that may be acting as broker-dealers without separate registration under the
Securities Exchange Act of 1934 pursuant to legal and regulatory exceptions
("Distributors"), to offer and sell the Contracts. All individuals offering and
selling the Contracts must either be registered representatives of a
broker-dealer, or employees of a bank exempt from registration under the
Securities Exchange Act of 1934, and must also be licensed as insurance agents
to sell variable annuity contracts.
Federated Securities Corp. ("FSC"), an affiliate of the Adviser, may
enter into agreements with some of the Distributors to provide services to
customers in connection with the Funds acquired through the Contracts. These
services will include providing customers with information concerning the
Funds, their investment objectives, policies and limitations; portfolio
securities; performance, responding to customer inquiries and providing such
other services as the parties may agree. Fees for these services may be based
on the total number of assets in the Funds attributable to the Distributors'
customers.
Payment of Commissions. Commissions will be paid to Distributors who sell
the Contracts. Distributors will be paid commissions, up to an amount currently
equal to 6.5% of Purchase Payments for promotional or distribution expenses
associated with the marketing of the Contracts.
Other than the mortality and expense risk charge, the administrative
charge and the reimbursements by Federated Advisers for administrative charges,
all expenses incurred in the operations of the Separate Account are borne by
the Company.
DELAY OR SUSPENSION OF PAYMENTS
The Company reserves the right to suspend or postpone the date of payment
for any benefit or values (a) on any Valuation Date on which the New York Stock
Exchange ("Exchange") is closed (other than customary weekend and holiday
closings) or when trading on the Exchange is restricted; (b) when an emergency
exists, as determined by the SEC, so that disposal of securities held in the
Subaccounts is not reasonably practicable or it is not reasonably practicable
for the Company fairly to determine the value of the Subaccount's assets; or
(c) during such other periods as the SEC may by order permit
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for the protection of investors. The conditions under which restricted trading
or an emergency exists shall be determined by the rules and regulations of the
SEC.
PERFORMANCE REPORTING
From time to time, the Company may advertise different types of
historical performance for the Subaccounts of the Separate Account. The Company
may advertise the "standardized average annual total returns" of the
Subaccounts, calculated in a manner prescribed by the SEC, as well as the
"non-standardized returns." "Standardized average annual total returns" are
computed according to a formula in which a hypothetical investment of $1,000 is
applied to the Subaccount and then related to the ending redeemable values over
the most recent one, five and ten-year periods (or since contributions were
first received in the Fund under the Separate Account, if less than the full
period). Standardized returns will reflect the reduction of all recurring
charges during each period (e.g., mortality and expense risk charges, annual
maintenance fees, the administrative charge and any applicable deferred sales
charge). "Non-standardized returns" will be calculated in a similar manner,
except that non-standardized figures will not reflect the deduction of any
applicable deferred sales charge (which would decrease the level of performance
shown if reflected in these calculations). The non-standardized figures may
also include monthly, quarterly, year-to-date and three-year periods and may
include performance from the Fund's inception date.
The Company may also advertise certain ratings, rankings or other
information related to the Company, the Subaccounts or the Funds. Further
details regarding performance reporting and advertising are described in the
Statement of Additional Information.
VOTING RIGHTS
Each Contract Holder may direct us in the voting of shares at
shareholders' meetings of the appropriate Funds(s). The number of votes to
which each Contract Holder may give direction will be determined as of the
record date. The number of votes each Contract Holder is entitled to direct
with respect to a particular Fund during the Accumulation Period equals the
portion of the Account Values(s) attributable to the Certificate Holder's
interest in that Fund, divided by the net asset value of one share of that
Fund. During the Annuity Period, the number of votes is equal to the valuation
reserve for the portion of the Contract attributable to the Certificate
Holder's interest in that Fund, divided by the net asset value of one share of
that Fund. In determining the number of votes, fractional votes will be
recognized. Where the value of the Contract or valuation reserve relates to
more than one Fund, the calculation of votes will be performed separately for
each Fund.
Certificate Holders under a group Contract have a fully vested (100%)
interest in the benefits provided to them under their Account. Therefore,
Certificate Holders may instruct the group Contract Holder how to direct the
Company to cast the votes for the portion of the value or valuation reserve
attributable to their Account. Votes attributable to those Certificate Holders
who do not instruct the group Contract Holder will be cast by the Company in
the same proportion as votes for which instructions have been received by the
group Contract Holder. Votes attributable to individual or group Contract
Holders who do not direct us will be cast by us in the same proportion as votes
for which directions the Company has received.
You will receive a notice of each meeting of shareholders, together with
any proxy solicitation materials, and a statement of the number of votes
attributable to your Account.
MODIFICATION OF THE CONTRACT
The Company may change the Contract as required by federal or state law.
In addition, the Company may, upon 30 days written notice to the Contract
Holder and the Certificate Holder, make other changes to group Contracts that
would apply only to individuals who become Certificate Holders under that
Contract after the effective date of such changes. If the group Contract Holder
does not agree to a change, the Company reserves the right to refuse to
establish new Accounts under the Contract. Certain changes will require the
approval of appropriate state or federal regulatory authorities.
TRANSFERS OF OWNERSHIP; ASSIGNMENT
Assignments or transfers of ownership of a Qualified Contract generally
are not allowed except as permitted under the Code, incident to a divorce. The
prohibition does not apply to a Qualified Contract sold in conjunction with (1)
a Section 457 deferred compensation plan, or (2) a Section 401(a) plan where
the Contract is owned by the trustee. We will accept assignments or transfers
of ownership of a Nonqualified Contract or a Qualified Contract where
assignments or
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transfers of ownership are not prohibited, with proper notification. The date
of any such transfer will be the date we receive the notification at our Home
Office. Refer to "Tax Status" for general tax information. If you are
contemplating a transfer of ownership or assignment you should consult a tax
advisor due to the potential for tax liability.
No assignment of a Contract will be binding on us unless made in writing
and sent to us at our Home Office. The Company will use reasonable procedures
to confirm that the assignment is authentic, including verification of
signature. If the Company fails to follow its procedures, it would be liable
for any losses to you directly resulting from the failure. Otherwise, we are
not responsible for the validity of any assignment. The rights of the Owner and
the interest of the Annuitant and any Beneficiary will be subject to the rights
of any assignee of record.
INVOLUNTARY TERMINATIONS
We reserve the right to terminate any Account with a value of $2,500 or
less immediately following a partial withdrawal (unless otherwise required by
state law). However, an Individual Retirement Annuity may only be closed out
when Purchase Payments have not been received for a 24-month period and the
paid-up annuity benefit at maturity would be less than $20 per month. If such
right is exercised, you will be given 90 days advance written notice. No
deferred sales charge will be deducted for involuntary terminations. The
Company does not intend to exercise this right in cases where the Account Value
is reduced to $2,500 or less solely due to investment performance.
LEGAL MATTERS AND PROCEEDINGS
The Company knows of no material legal proceedings pending to which the
Separate Account or the Company is a party or which would materially affect the
Separate Account. The validity of the securities offered by this Prospectus has
been passed upon by Counsel to the Company.
YEAR 2000
As a healthcare and financial services enterprise, Aetna Inc. (referred
to collectively with its affiliates and subsidiaries as Aetna), is dependent on
computer systems and applications to conduct its business. Aetna has developed
and is currently executing a comprehensive risk-based plan designed to make its
computer systems, applications and facilities Year 2000 ready. The plan covers
four stages including (i) inventory, (ii) assessment, (iii) remediation and
(iv) testing and certification. At year end 1997, Aetna, including the Company,
had substantially completed the inventory and assessment stages. The
remediation process is currently underway and targeted for completion by
December 31, 1998. Testing and certification of these systems and applications
are targeted for completion by mid-1999. The costs of these efforts will not
affect the Separate Account.
The Company, its affiliates and the mutual funds that serve as investment
options for the Separate Account also have relationships with investment
advisers, broker dealers, transfer agents, custodians or other securities
industry participants or other service providers that are not affiliated with
Aetna. Aetna, including the Company, is initiating communication with its
critical external relationships to determine the extent to which Aetna may be
vulnerable to such parties' failure to resolve their own Year 2000 issues.
Where practicable Aetna and the Company will assess and attempt to mitigate
their risks with respect to the failure of these parties' to be Year 2000
ready. There can be no assurance that failure of third parties to complete
adequate preparations in a timely manner, and any resulting systems
interruptions or other consequences, would not have an adverse effect, directly
or indirectly, on the Separate Account, including, without limitation, its
operation or the valuation of its assets and units.
- --------------------------------------------------------------------------------
22
<PAGE>
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
================================================================================
The Statement of Additional Information contains more specific information
on the Separate Account and the Contract, as well as the financial statements
of the Separate Account and the Company. A list of the contents of the SAI is
set forth below:
General Information and History
Variable Annuity Account B
Offering and Purchase of Contracts
Performance Data
General
Average Annual Total Return Quotations
Annuity Payments
Sales Material and Advertising
Independent Auditors
Financial Statements of the Separate Account
Financial Statements of the Company
- --------------------------------------------------------------------------------
23
<PAGE>
APPENDIX
ALIAC GUARANTEED ACCOUNT
================================================================================
The ALIAC Guaranteed Account (the "Guaranteed Account") is a credited
interest option available during the Accumulation Period under the Contracts.
The ALIAC Guaranteed Account is only offered in states where the offer and sale
has been authorized by the appropriate regulatory authorities. This Appendix is
a summary of the Guaranteed Account and is not intended to replace the
Guaranteed Account prospectus. You should read the accompanying Guaranteed
Account prospectus carefully before investing.
The Guaranteed Account is a credited interest option in which we guarantee
stipulated rates of interest for stated periods of time on amounts directed to
the Guaranteed Account. For guaranteed terms of one year or less, a guaranteed
rate is credited for the full term. For guaranteed terms of greater than one
year, the initial guaranteed rate is credited from the date of deposit to the
end of a specified period within the guaranteed term. The interest rate
stipulated is an annual effective yield; that is, it reflects a full year's
interest. Interest is credited daily at a rate that will provide the guaranteed
annual effective yield for one year. Guaranteed interest rates will never be
less than an annual effective rate of 3%.
During a deposit period, amounts may be applied to any of the available
guaranteed terms. A Guaranteed Term is the period of time specified by the
Company for which a specific Guaranteed Rate or Rates are offered on amounts
invested during a specific Deposit Period. Guaranteed Terms are made available
by the Company subject to the Company's terms and conditions. See the
prospectus for the Guaranteed Account for further details regarding Guaranteed
Term. The Company may offer more than one Guaranteed Term of the same duration.
Purchase Payments received after the initial payment will be allocated in the
same proportions as the last allocation, if no new allocation instructions are
received with the Purchase Payment. For amounts allocated to the Guaranteed
Account, if the same guaranteed term(s) are not available, the next shortest
term will be used. If no shorter guaranteed term is available, the next longer
guaranteed term will be used.
Except for transfers from an available Guaranteed Term subject to the
Company's terms and conditions in connection with the Dollar Cost Averaging
Program and withdrawals taken in connection with an Estate Conservation Option
or Systematic Withdrawal Option, and, if approved by your state, withdrawals
for minimum distributions required by the Code for which the deferred sales
charge is waived, withdrawals or transfers from a guaranteed term before the
guaranteed term matures may be subject to a market value adjustment ("MVA"). An
MVA reflects the change in the value of the investment due to changes in
interest rates since the date of deposit. When interest rates increase after
the date of deposit, the value of the investment decreases, and the MVA is
negative. Conversely, when interest rates decrease after the date of deposit,
the value of the investment increases, and the MVA is positive. It is possible
that a negative MVA could result in the Certificate Holder receiving an amount
which is less than the amount paid into the Guaranteed Account.
If a Certificate Holder requests a partial withdrawal of the Account Value
without designating from which investment option it should be taken, a
proportionate share will be withdrawn from the Guaranteed Account. The amount
will be withdrawn from all guaranteed term groups as defined in the prospectus
for the Guaranteed Account.
As a Guaranteed Term matures, assets accumulating under the Guaranteed
Account may be (a) transferred to a new Guaranteed Term, (b) transferred to
other available investment options, or (c) withdrawn. Amounts withdrawn may be
subject to a deferred sales charge. If no direction is received by the Company
at its Home Office by the maturity date of a guaranteed term, the amount from
the maturing guaranteed term will be transferred to the current deposit period
for a similar length guaranteed term. If the same guaranteed term is no longer
available, the next shortest guaranteed term available in the current deposit
period will be used. If no shorter guaranteed term is available, the next
longer guaranteed term will be used.
If you do not provide instructions concerning the maturity value of a
maturing guaranteed term, the maturity value transfer provision applies. This
provision allows you to transfer without an MVA to available guaranteed terms
of
- --------------------------------------------------------------------------------
24
<PAGE>
the current deposit period or to other available investment options, or
surrender without an MVA (if applicable, a deferred sales charge is assessed on
the surrendered amount). The provision is available only during the calendar
month immediately following a guaranteed term maturity date and only applies to
the first transaction regardless of the amount involved in the transaction.
MORTALITY AND EXPENSE RISK CHARGES
We make no deductions from the credited interest rate for mortality and
expense risks; these risks are considered in determining the credited rate.
TRANSFERS
Amounts applied to a guaranteed term during a deposit period may not be
transferred to any other funding option or to another guaranteed term during
that deposit period or for 90 days after the close of that deposit period. This
does not apply to (1) amounts transferred on the Maturity Date or under the
maturity value transfer provision; (2) amounts transferred from the Guaranteed
Account before the Maturity Date due to the election of an Annuity option, (3)
amounts transferred from an available Guaranteed Term in connection with the
Dollar Cost Averaging Program; and (4) amounts distributed under the Estate
Conservation or Systematic Withdrawal Option. Transfers after the 90-day period
are permitted from guaranteed term(s) to other guaranteed term(s) available
during a deposit period or to other available investment options. Except for
transactions described in items (1), (3) and (4) above, amounts withdrawn or
transferred from the Guaranteed Account prior to the maturity date will be
subject to a Market Value Adjustment. However, only a positive aggregate MVA
will be applied to transfers made due to annuitizations under one of Lifetime
Annuity Options described in item (2) above.
The Company reserves the right to limit the number of investment options
selected during the Accumulation Period. At this time there is no limit on the
number of options selected during the Accumulation Period, but the number of
investment options that may be selected at any one time by a Certificate Holder
presently is limited to 18. Under the Guaranteed Account, each guaranteed term
is counted as one funding option. If a guaranteed term matures, and is renewed
for the same term, it will not count as an additional funding option.
Transfers of the Guaranteed Account values on or within one calendar month
of a term's maturity date are not counted as one of the 12 free transfers of
accumulated values in the Certificate Holder's Account.
By notifying us at least 30 days prior to the Annuity Date, you may elect
a variable annuity and have amounts that have been accumulating under the
Guaranteed Account transferred to one or more of the Subaccounts available
during the Annuity Period. The Guaranteed Account cannot be used as an
investment option during the Annuity Period. Transfers made due to the election
of a Lifetime Annuity Option will be subject to only a positive aggregate MVA.
DEATH BENEFIT
Full and partial withdrawals and transfers made from the Guaranteed
Account (including transfers due to annuitization) within six months after the
date of the Certificate Holder's death (or Annuitant's death, if the
Certificate Holder is a non-natural person) will be the greater of:
(a) The aggregate MVA amount (i.e., the sum of all market value adjusted
amounts calculated due to a withdrawal of amounts). This total may be
greater or less than the Account Value of those amounts; or
(b) The applicable portion of the Account Value attributable to the Guaranteed
Account.
After the six-month period, the surrender or transfer amount will be
adjusted for the aggregate MVA amount, which may be greater or less than the
Account Value of those amounts. However, only a positive aggregate Market Value
Adjustment will be applied to transfers made due to annuitization under one of
the Lifetime Annuity Options.
- --------------------------------------------------------------------------------
25
<PAGE>
DISTRIBUTION
The Company is the principal underwriter of the Contract. The Company is
registered with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 as a broker-dealer, and is a member of the National
Association of Securities Dealers, Inc.
From time to time, the Company may offer customers of certain
brokers-dealers special guaranteed rates in connection with the Guaranteed
Account offered through the Contracts, and may negotiate different commissions
for these broker-dealers.
- --------------------------------------------------------------------------------
26
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ANNUITY ACCOUNT B
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
- --------------------------------------------------------------------------------
Statement of Additional Information dated May 1, 1998
Aetna Growth Plus
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the current prospectus for Variable Annuity Account B (the
"Separate Account") dated May 1, 1998.
A free prospectus is available upon request from the local Aetna Life Insurance
and Annuity Company office or by writing to or calling:
Aetna Life Insurance and Annuity Company
Customer Service
151 Farmington Avenue
Hartford, Connecticut 06156
1-800-531-4547
Read the prospectus before you invest. Terms used in this Statement of
Additional Information shall have the same meaning as in the prospectus.
TABLE OF CONTENTS
Page
General Information and History.................................... 1
Variable Annuity Account B......................................... 1
Offering and Purchase of Contracts................................. 2
Performance Data................................................... 2
General...................................................... 2
Average Annual Total Return Quotations....................... 3
Annuity Payments................................................... 5
Sales Material and Advertising..................................... 6
Independent Auditors............................................... 6
Financial Statements of the Separate Account....................... S-1
Financial Statements of the Company................................ F-1
<PAGE>
GENERAL INFORMATION AND HISTORY
AetnaLife Insurance and Annuity Company (the "Company") is a stock life
insurance company which was organized under the insurance laws of the State of
Connecticut in 1976. Through a merger, it succeeded to the business of Aetna
Variable Annuity Life Insurance Company (formerly Participating Annuity Life
Insurance Company organized in 1954). As of December 31, 1997, the Company had
$40.7 billion invested through its products, including $22.3 billion in its
separate accounts (of which the Company oversees the management of $17.6
billion) and $1.3 billion in its mutual funds offered outside of its separate
accounts. The Company is ranked among the top 2% of all U.S. life insurance
companies based on assets as of December 31, 1996. The Company is a wholly owned
subsidiary of Aetna Retirement Holdings, Inc., which is in turn a wholly owned
subsidiary of Aetna Retirement Services, Inc., and an indirect wholly owned
subsidiary of Aetna Inc. The Company is engaged in the business of issuing life
insurance policies and annuity contracts in all states of the United States. The
Company's Home Office is located at 151 Farmington Avenue, Hartford, Connecticut
06156.
In addition to serving as the principal underwriter and the depositor for the
Separate Account, the Company is also a registered investment adviser under the
Investment Advisers Act of 1940, and a registered broker-dealer under the
Securities Exchange Act of 1934.
Other than the mortality and expense risk charges and administrative charge
described in the prospectus, all expenses incurred in the operations of the
Separate Account are borne by the Company. See "Charges and Deductions" in the
prospectus. The Company receives reimbursement for certain administrative costs
from the investment adviser for the Federated Funds.
The assets of the Separate Account are held by the Company. The Separate Account
has no custodian. However, the Funds in whose shares the assets of the Separate
Account are invested each have custodians, as discussed in their respective
prospectuses.
VARIABLE ANNUITY ACCOUNT B
Variable Annuity Account B (the "Separate Account") is a separate account
established by the Company for the purpose of funding variable annuity contracts
issued by the Company. The Separate Account is registered with the Securities
and Exchange Commission as a unit investment trust under the Investment Company
Act of 1940, as amended. Purchase Payments made under the Contract may be
allocated to one or more of the Subaccounts. Each Subaccount invests in the
shares of only one of the Funds listed below. The Company may make additions to,
deletions from or substitutions of available investment options as permitted by
law and subject to the conditions of the Contract. The availability of the Funds
is subject to applicable regulatory authorization. Not all Funds are available
in all jurisdictions or under all Contracts. The Funds currently available under
the Contract are as follows:
<TABLE>
<S> <C>
Federated American Leaders Fund II Federated High Income Bond Fund II
Federated Equity Income Fund II Federated International Equity Fund II
Federated Fund for U.S. Government Securities II Federated Prime Money Fund II
Federated Growth Strategies Fund II Federated Utility Fund II
</TABLE>
1
<PAGE>
Complete descriptions of each of the Funds, including their investment
objectives, policies, risks and fees and expenses, are contained in the
prospectuses and statements of additional information for each of the Funds.
OFFERING AND PURCHASE OF CONTRACTS
The Company is both the depositor and the principal underwriter for the
securities sold by the prospectus. The Company offers the Contracts through life
insurance agents licensed to sell variable annuities who are Registered
Representatives as defined in the prospectus. The offering of the Contracts is
continuous. A description of the manner in which Contracts are purchased may be
found in the prospectus under the sections entitled "Purchase" and "Contract
Valuation."
PERFORMANCE DATA
GENERAL
From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account available under the
Contracts. The Company may advertise the "standardized average annual total
returns," calculated in a manner prescribed by the Securities and Exchange
Commission (the "standardized return"), as well as "non-standardized returns,"
both of which are described below.
The standardized and non-standardized total return figures are computed
according to a formula in which a hypothetical initial Purchase Payment of
$1,000 is applied to the various Subaccounts under the Contract, and then
related to the ending redeemable values over one, five and ten year periods (or
fractional periods thereof). The redeemable value is then divided by the initial
investment and this quotient is taken to the Nth root (N represents the number
of years in the period) and 1 is subtracted from the result which is then
expressed as a percentage, carried to at least the nearest hundredth of a
percent. The standardized figures use the actual returns of the Fund since
inception and then adjust them to reflect the deduction of all recurring charges
under the Contracts during each period (e.g., 1.25% mortality and expense risk
charge, $30.00 maintenance fee, 0.15% administrative charge, and deferred sales
charge of 7% of Purchase Payments grading down to 0% after 7 years). These
charges will be deducted on a pro rata basis in the case of fractional periods.
The maintenance fee is converted to a percentage of assets based on the average
account size under the Contracts described in the prospectus.
The non-standardized figures will be calculated in a similar manner, except that
they will not reflect the deduction of any applicable deferred sales charge
(which would decrease the level of performance shown if reflected in these
calculations). The non-standardized figures may also include monthly, quarterly,
year-to-date and three-year periods and may include returns calculated from the
Fund's inception date and/or date the Fund was added to the Separate Account.
Investment results of the Subaccounts will fluctuate over time, and any
presentation of the Subaccounts' total return quotations for any prior period
should not be considered as a representation of how the Subaccounts will perform
in any future period. Additionally, the Account Value upon redemption may be
more or less than your original cost.
2
<PAGE>
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - Standardized and Non-Standardized
The tables below reflect the average annual standardized and non-standardized
total return quotation figures for the periods ended December 31, 1997 for the
variable investment options under the Contracts issued by the Company.
For those Subaccounts where results are not available for the full calendar
period indicated, performance for such partial periods is shown in the column
labeled "Since Inception". For standardized performance, the "Since Inception"
column shows the average annual return since the date contributions were first
received in the Fund under the Separate Account. For nonstandardized
performance, the "Since Inception" column shows average annual total return
since the Fund's inception date.
3
<PAGE>
TABLE A
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Date
Contributions
STANDARDIZED First Received
Under the
Separate Account
- --------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 5 Year 10 Year Inception*
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Federated American Leaders Fund II 22.64% 23.76% 09/30/94
- --------------------------------------------------------------------------------------------------------------------------
Federated Equity Income Fund II 8.34% 02/28/97
- --------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II 0.62% 4.55% 09/30/94
- --------------------------------------------------------------------------------------------------------------------------
Federated Growth Strategies Fund II 17.72% 21.26% 10/02/95
- --------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II 5.49% 11.93% 09/30/94
- --------------------------------------------------------------------------------------------------------------------------
Federated International Equity Fund II 2.01% 5.46% 05/31/95
- --------------------------------------------------------------------------------------------------------------------------
Federated Prime Money Fund II(1) (2.76%) 2.45% 11/30/94
- --------------------------------------------------------------------------------------------------------------------------
Federated Utility Fund II 17.35% 16.30% 09/30/94
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the discussion preceding the Tables for an explanation of the
charges included and methodology used in the Standardized and Non-Standardized
figures. These figures represent historical performance and should not be
considered a projection of future performance.
* Reflects performance from the date contributions were first received in the
Fund under the Separate Account.
(1) The current yield for the Subaccount for the 7-day period ended December 31,
1997 (on an annualized basis) was 3.68%. The current yield reflects the
deduction of all charges under the Contract that are deducted from the total
return quotations shown above except the maximum 7% deferred sales charge.
TABLE B
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
NON-STANDARDIZED Fund
Inception
Date
- ------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 3 Years 5 Years 10 Years Inception**
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federated American Leaders Fund II 30.47% 27.27% 19.85% 02/10/94
- ------------------------------------------------------------------------------------------------------------------------------
Federated Equity Income Fund II 23.04% 01/02/97
- ------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II 7.04% 5.65% 4.89% 03/28/94
- ------------------------------------------------------------------------------------------------------------------------------
Federated Growth Strategies Fund II 25.24% 22.42% 10/02/95
- ------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II 12.22% 14.50% 9.77% 03/01/94
- ------------------------------------------------------------------------------------------------------------------------------
Federated International Equity Fund II 8.53% 6.72% 05/07/95
- ------------------------------------------------------------------------------------------------------------------------------
Federated Prime Money Fund II(1) 3.45% 3.47% 3.44% 11/17/94
- ------------------------------------------------------------------------------------------------------------------------------
Federated Utility Fund II 24.85% 18.91% 12.93% 02/10/94
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the discussion preceding the Tables for an explanation of the
charges included in the Standardized and Non-Standardized figures. These figures
represent historical performance and should not be considered a projection of
future performance.
** Reflects performance from the Fund's inception date.
(1) The current yield for the Subaccount for the 7-day period ended December 31,
1997 (on an annualized basis) was 3.68%. The current yield reflects the
deduction of all charges under the Contract that are deducted from the total
return quotations shown above. As in the table above, the maximum 7%
deferred sales charge is not reflected.
4
<PAGE>
ANNUITY PAYMENTS
When Annuity payments are to begin, the value of the Account is determined using
Accumulation Unit values as of the tenth Valuation Date before the first Annuity
payment is due. Such value (less any applicable premium tax) is applied to
provide an Annuity in accordance with the Annuity and investment options
elected.
The Annuity option tables found in the Contract show, for each form of Annuity,
the amount of the first Annuity payment for each $1,000 of value applied.
Thereafter, variable Annuity payments fluctuate as the Annuity Unit value(s)
fluctuates with the investment experience of the selected investment option(s).
The first payment and subsequent payments also vary depending on the assumed net
investment rate selected (3.5% or 5% per annum). Selection of a 5% rate causes a
higher first payment, but Annuity payments will increase thereafter only to the
extent that the net investment rate increases by more than 5% on an annual
basis. Annuity payments would decline if the rate failed to increase by 5%. Use
of the 3.5% assumed rate causes a lower first payment, but subsequent payments
would increase more rapidly or decline more slowly as changes occur in the net
investment rate.
When the Annuity Period begins, the Annuitant is credited with a fixed number of
Annuity Units (which does not change thereafter) in each of the designated
investment options. This number is calculated by dividing (a) by (b), where (a)
is the amount of the first Annuity payment based on a particular investment
option, and (b) is the then current Annuity Unit value for that investment
option. As noted, Annuity Unit values fluctuate from one Valuation Date to the
next; such fluctuations reflect changes in the net investment factor for the
appropriate Subaccount(s) (with a ten Valuation Date lag which gives the Company
time to process Annuity payments) and a mathematical adjustment which offsets
the assumed net investment rate of 3.5% or 5% per annum.
The operation of all these factors can be illustrated by the following
hypothetical example. These procedures will be performed separately for the
investment options selected during the Annuity Period.
EXAMPLE:
Assume that, at the date Annuity payments are to begin, there are 3,000
Accumulation Units credited under a particular Account and that the value of an
Accumulation Unit for the tenth Valuation Date prior to retirement was
$13.650000. This produces a total value of $40,950.
Assume also that no premium tax is payable and that the Annuity table in the
Contract provides, for the option elected, a first monthly variable Annuity
payment of $6.68 per $1000 of value applied; the Annuitant's first monthly
payment would thus be 40.950 multiplied by $6.68, or $273.55.
Assume then that the value of an Annuity Unit for the Valuation Date on which
the first payment was due was $13.400000. When this value is divided into the
first monthly payment, the number of Annuity Units is determined to be 20.414.
The value of this number of Annuity Units will be paid in each subsequent month.
If the net investment factor with respect to the appropriate Subaccount is
1.0015000 as of the tenth Valuation Date preceding the due date of the second
monthly payment, multiplying this factor by .9999058* (to neutralize the assumed
net investment rate of 3.5% per annum built into the number of Annuity Units
determined above) produces a result of 1.0014057. This is then multiplied by the
Annuity Unit value for the prior Valuation Date (assume such value to be
$13.504376) to produce an Annuity Unit value of $13.523359 for the Valuation
Date on which the second payment is due.
5
<PAGE>
The second monthly payment is then determined by multiplying the number of
Annuity Units by the current Annuity Unit value, or 20.414 times $13.523359,
which produces a payment of $276.07.
*If an assumed net investment rate of 5% is elected, the appropriate factor to
neutralize such assumed rate would be .9998663.
SALES MATERIAL AND ADVERTISING
The Company may include hypothetical illustrations in its sales literature that
explain the mathematical principles of dollar cost averaging, compounded
interest, tax deferred accumulation, and the mechanics of variable annuity
contracts. The Company may also discuss the difference between variable annuity
contracts and other types of savings or investment products, including, but not
limited to, personal savings accounts and certificates of deposit.
We may distribute sales literature that compares the percentage change in
Accumulation Unit values for any of the Subaccounts to established market
indices such as the Standard & Poor's 500 Stock Index and the Dow Jones
Industrial Average or to the percentage change in values of other management
investment companies that have investment objectives similar to the Subaccount
being compared.
We may publish in advertisements and reports, the ratings and other information
assigned to us by one or more independent rating organizations such as A.M. Best
Company, Duff & Phelps, Standard & Poor's Corporation and Moody's Investors
Services, Inc. The purpose of the ratings is to reflect our financial strength
and/or claims-paying ability. We may also quote ranking services such as
Morningstar's Variable Annuity/Life Performance Report and Lipper's Variable
Insurance Products Performance Analysis Service (VIPPAS), which rank variable
annuity or life Subaccounts or their underlying funds by performance and/or
investment objective. We may categorize the underlying Funds in terms of the
asset classes they represent and use such categories in marketing materials for
the Contracts. We may illustrate in advertisements the performance of the
underlying funds, if accompanied by performance which also shows the performance
of such funds reduced by applicable charges under the Separate Account. We may
also show in advertisements the portfolio holdings of the underlying funds,
updated at various intervals. From time to time, we will quote articles from
newspapers and magazines or other publications or reports, including, but not
limited to The Wall Street Journal, Money magazine, USA Today and The VARDS
Report.
The Company may provide in advertising, sales literature, periodic publications
or other materials information on various topics of interest to current and
prospective Certificate Holders. These topics may include the relationship
between sectors of the economy and the economy as a whole and its effect on
various securities markets, investment strategies and techniques (such as value
investing, market timing, dollar cost averaging, asset allocation, constant
ratio transfer and account rebalancing), the advantages and disadvantages of
investing in tax-deferred and taxable investments, customer profiles and
hypothetical purchase and investment scenarios, financial management and tax and
retirement planning, and investment alternatives to certificates of deposit and
other financial instruments, including comparison between the Contracts and the
characteristics of and market for such financial instruments.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, CityPlace II, Hartford, Connecticut 06103-4103, are the
independent auditors for the Separate Account and for the Company. The services
provided to the Separate Account
6
<PAGE>
include primarily the examination of the Separate Account's financial statements
and review of filings made with the SEC.
7
<PAGE>
FINANCIAL STATEMENTS
VARIABLE ANNUITY ACCOUNT B
Index
Statement of Assets and Liabilities....................................... S-2
Statements of Operations and Changes in Net Assets........................ S-6
Notes to Financial Statements............................................. S-7
Independent Auditors' Report.............................................. S-25
<PAGE>
Variable Annuity Account B
Statement of Assets and Liabilities - December 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at net asset value: (Note 1)
Aetna Variable Fund; 30,411,094 shares (cost $955,207,313) ...................... $1,022,883,150
Aetna Income Shares; 5,674,428 shares (cost $72,136,754) ........................ 72,918,472
Aetna Variable Encore Fund; 9,348,762 shares (cost $123,509,269) ................ 124,939,137
Aetna Investment Advisers Fund, Inc.; 10,156,919 shares (cost $141,710,363) ..... 162,842,121
Aetna GET Fund, Series B; 1,326,295 shares (cost $14,665,182) ................... 20,859,924
Aetna GET Fund, Series C; 866,713 shares (cost $8,784,556) ...................... 10,929,107
Aetna Ascent Variable Portfolio; 1,448,001 shares (cost $19,409,307) ............ 20,443,736
Aetna Crossroads Variable Portfolio; 1,552,948 shares (cost $19,616,465) ........ 20,320,625
Aetna Legacy Variable Portfolio; 1,652,443 shares (cost $19,438,586) ............ 19,994,608
Aetna Variable Portfolio, Inc.:
Capital Appreciation Portfolio; 328,354 shares (cost $4,457,675) ............... 3,912,594
Growth Portfolio; 326,907 shares (cost $4,163,981) ............................. 3,218,910
Index Plus Portfolio; 2,014,660 shares (cost $26,897,404) ...................... 28,239,788
Small Company Portfolio; 478,249 shares (cost $6,406,805) ...................... 6,107,129
Alger American Funds:
Balanced Portfolio; 525,665 shares (cost $4,964,549) ........................... 5,656,151
Income and Growth Portfolio; 1,287,394 shares (cost $11,439,405) ............... 14,148,460
Leveraged AllCap Portfolio; 616,315 shares (cost $12,739,767) .................. 14,280,009
American Century Investments:
Balanced Fund; 563,499 shares (cost $4,180,851) ................................ 4,643,230
International Fund; 855,695 shares (cost $5,491,134) ........................... 5,852,955
Calvert Social Balanced Portfolio; 490,079 shares (cost $912,050) ............... 971,337
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio; 5,712,922 shares (cost $118,902,067) .................. 138,709,740
Growth Portfolio; 2,167,158 shares (cost $65,817,036) .......................... 80,401,549
High Income Portfolio; 2,598,408 shares (cost $32,563,692) ..................... 35,286,379
Overseas Portfolio; 677,325 shares (cost $12,543,713) .......................... 13,004,643
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio; 652,031 shares (cost $10,605,372) ..................... 11,743,075
Contrafund Portfolio; 5,407,595 shares (cost $89,625,610) ...................... 107,827,442
Index 500 Portfolio; 673,020 shares (cost $66,103,932) ......................... 76,986,772
Investment Grade Bond Portfolio; 523,741 shares (cost $6,191,022) .............. 6,578,182
Insurance Management Series:
American Leaders Fund II; 5,952,606 shares (cost $86,738,072) .................. 116,849,662
Equity Income Fund II; 1,619,705 shares (cost $19,027,165) ..................... 19,938,571
Growth Strategies Fund II; 1,406,137 shares (cost $19,150,654) ................. 22,709,106
High Income Bond Fund II; 4,859,621 shares (cost $49,449,772) .................. 53,212,853
International Equity Fund II; 1,136,596 shares (cost $13,007,527) .............. 13,946,028
Prime Money Fund II; 7,530,487 shares (cost $7,530,487) ........................ 7,530,487
U.S. Government Securities Fund II; 1,252,067 shares (cost 12,683,585) ......... 13,196,784
Utility Fund II; 1,840,648 shares (cost $20,501,843) ........................... 26,302,858
Janus Aspen Series:
Aggressive Growth Portfolio; 1,867,831 shares (cost $33,789,408) ............... 38,383,925
Balanced Portfolio; 1,782,815 shares (cost $27,682,920) ........................ 31,145,778
Flexible Income Portfolio; 894,277 shares (cost $10,167,023) ................... 10,534,588
Growth Portfolio; 2,203,400 shares (cost $34,954,619) .......................... 40,718,827
Worldwide Growth Portfolio; 6,953,978 shares (cost $144,443,276) ............... 162,653,541
Lexington Emerging Markets Fund; 318,004 shares (cost $3,542,964) ............... 2,833,416
Lexington Natural Resources Trust Fund; 464,813 shares (cost $6,752,492) ........ 6,930,364
</TABLE>
S-2
<PAGE>
Variable Annuity Account B
Statement of Assets and Liabilities - December 31, 1997 (continued):
<TABLE>
<S> <C>
MFS Funds:
Total Return Series; 1,140,943 shares (cost $16,998,729) ............................ $ 18,973,878
Worldwide Government Series; 129,706 shares (cost $1,330,232) ....................... 1,324,295
Oppenheimer Funds:
Capital Appreciation Fund; 90,044 shares (cost $3,554,414) .......................... 3,688,200
Global Securities Fund; 125,453 shares (cost $2,681,784) ............................ 2,680,937
Growth & Income Fund; 616,565 shares (cost $12,222,979) ............................. 12,688,907
Strategic Bond Fund; 604,043 shares (cost $3,113,874) ............................... 3,092,701
Portfolio Partners, Inc. (PPI):
PPI MFS Emerging Equities Portfolio; 2,221,275 shares (cost $96,046,526) ............ 95,292,694
PPI MFS Research Growth Portfolio; 6,783,433 shares (cost $67,030,057) .............. 65,867,130
PPI MFS Value Equity Portfolio; 515,803 shares (cost $15,207,018) ................... 15,427,681
PPI Scudder International Growth Portfolio; 897,175 shares (cost $12,454,736) ....... 12,650,163
PPI T. Rowe Price Growth Equity Portfolio; 2,067,651 shares (cost $88,372,335) ...... 90,170,258
--------------
NET ASSETS (cost $2,666,918,351) ..................................................... $2,922,442,857
==============
Net assets represented by:
Reserves for annuity contracts in accumulation and payment period: (Notes 1 and 5)
</TABLE>
<TABLE>
<S> <C>
Aetna Variable Fund:
Annuity contracts in accumulation ........... $892,006,381
Annuity contracts in payment period ......... 130,876,769
Aetna Income Shares:
Annuity contracts in accumulation ........... 69,236,488
Annuity contracts in payment period ......... 3,681,984
Aetna Variable Encore Fund:
Annuity contracts in accumulation ........... 124,939,137
Aetna Investment Advisers Fund, Inc.:
Annuity contracts in accumulation ........... 150,761,384
Annuity contracts in payment period ......... 12,080,737
Aetna GET Fund, Series B:
Annuity contracts in accumulation ........... 20,859,924
Aetna GET Fund, Series C:
Annuity contracts in accumulation ........... 10,929,107
Aetna Ascent Variable Portfolio:
Annuity contracts in accumulation ........... 20,443,736
Aetna Crossroads Variable Portfolio:
Annuity contracts in accumulation ........... 20,250,904
Annuity contracts in payment period ......... 69,721
Aetna Legacy Variable Portfolio:
Annuity contracts in accumulation ........... 18,710,015
Annuity contracts in payment period ......... 1,284,593
Aetna Variable Portfolio, Inc.:
Capital Appreciation Portfolio:
Annuity contracts in accumulation ........... 3,912,594
Growth Portfolio:
Annuity contracts in accumulation ........... 3,210,344
Annuity contracts in payment period ......... 8,566
Index Plus Portfolio:
Annuity contracts in accumulation ........... 28,074,705
Annuity contracts in payment period ......... 165,083
</TABLE>
S-3
<PAGE>
Variable Annuity Account B
Statement of Assets and Liabilities - December 31, 1997 (continued):
<TABLE>
<S> <C>
Small Company Portfolio:
Annuity contracts in accumulation .................... $ 6,059,783
Annuity contracts in payment period .................. 47,346
Alger American Funds:
Balanced Portfolio:
Annuity contracts in accumulation .................... 5,656,151
Income and Growth Portfolio:
Annuity contracts in accumulation .................... 14,148,460
Leveraged AllCap Portfolio:
Annuity contracts in accumulation .................... 14,280,009
American Century Investments:
Balanced Fund:
Annuity contracts in accumulation .................... 4,643,230
International Fund:
Annuity contracts in accumulation .................... 5,852,955
Calvert Social Balanced Portfolio:
Annuity contracts in accumulation .................... 971,337
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Annuity contracts in accumulation .................... 138,709,740
Growth Portfolio:
Annuity contracts in accumulation .................... 80,401,549
High Income Portfolio:
Annuity contracts in accumulation .................... 35,217,837
Annuity contracts in payment period .................. 68,542
Overseas Portfolio:
Annuity contracts in accumulation .................... 13,004,643
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio:
Annuity contracts in accumulation .................... 11,743,075
Contrafund Portfolio:
Annuity contracts in accumulation .................... 107,827,442
Index 500 Portfolio:
Annuity contracts in accumulation .................... 76,986,772
Investment Grade Bond Portfolio:
Annuity contracts in accumulation .................... 6,578,182
Insurance Management Series:
American Leaders Fund II:
Annuity contracts in accumulation .................... 116,800,911
Annuity contracts in payment period .................. 48,751
Equity Income Fund II:
Annuity contracts in accumulation .................... 19,938,571
Growth Strategies Fund II:
Annuity contracts in accumulation .................... 22,709,106
High Income Bond Fund II:
Annuity contracts in accumulation .................... 53,212,853
International Equity Fund II:
Annuity contracts in accumulation .................... 13,946,028
Prime Money Fund II:
Annuity contracts in accumulation .................... 7,530,487
</TABLE>
S-4
<PAGE>
Variable Annuity Account B
Statement of Assets and Liabilities - December 31, 1997 (continued):
<TABLE>
<S> <C>
U.S. Government Securities Fund II:
Annuity contracts in accumulation ........... $ 13,196,784
Utility Fund II:
Annuity contracts in accumulation ........... 26,302,858
Janus Aspen Series:
Aggressive Growth Portfolio:
Annuity contracts in accumulation ........... 38,383,925
Balanced Portfolio:
Annuity contracts in accumulation ........... 31,145,778
Flexible Income Portfolio:
Annuity contracts in accumulation ........... 10,534,588
Growth Portfolio:
Annuity contracts in accumulation ........... 40,072,928
Annuity contracts in payment period ......... 645,899
Worldwide Growth Portfolio:
Annuity contracts in accumulation ........... 160,658,096
Annuity contracts in payment period ......... 1,995,445
Lexington Emerging Markets Fund:
Annuity contracts in accumulation ........... 2,833,416
Lexington Natural Resources Trust Fund:
Annuity contracts in accumulation ........... 6,930,364
MFS Funds:
Total Return Series:
Annuity contracts in accumulation ........... 18,973,878
Worldwide Government Series:
Annuity contracts in accumulation ........... 1,324,295
Oppenheimer Funds:
Capital Appreciation Fund:
Annuity contracts in accumulation ........... 3,688,200
Global Securities Fund:
Annuity contracts in accumulation ........... 2,680,937
Growth & Income Fund:
Annuity contracts in accumulation ........... 12,688,907
Strategic Bond Fund:
Annuity contracts in accumulation ........... 3,092,701
Portfolio Partners, Inc:
PPI MFS Emerging Equities Portfolio:
Annuity contracts in accumulation ........... 94,796,247
Annuity contracts in payment period ......... 496,447
PPI MFS Research Growth Portfolio:
Annuity contracts in accumulation ........... 65,867,130
PPI MFS Value Equity Portfolio:
Annuity contracts in accumulation ........... 15,049,606
Annuity contracts in payment period ......... 378,075
PPI Scudder International Growth Portfolio:
Annuity contracts in accumulation ........... 12,650,163
PPI T. Rowe Price Growth Equity Portfolio:
Annuity contracts in accumulation ........... 90,170,258
--------------
$2,922,442,857
==============
</TABLE>
See Notes to Financial Statements
S-5
<PAGE>
Variable Annuity Account B
Statements of Operations and Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996
----- ----
<S> <C> <C>
INVESTMENT INCOME:
Income: (Notes 1, 3 and 5)
Dividends ............................................................. $ 278,833,116 $ 120,367,178
Expenses: (Notes 2 and 5)
Valuation period deductions ........................................... (29,243,851) (17,483,870)
-------------- --------------
Net investment income .................................................. 249,589,265 102,883,308
-------------- --------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on sales of investments: (Notes 1, 4 and 5)
Proceeds from sales ................................................... 1,004,789,371 365,025,974
Cost of investments sold .............................................. 933,728,508 347,598,566
-------------- --------------
Net realized gain .................................................... 71,060,863 17,427,408
-------------- --------------
Net unrealized gain on investments: (Note 5)
Beginning of Year ..................................................... 122,191,053 28,746,944
End of Year ........................................................... 255,524,506 122,191,053
-------------- --------------
Net change in unrealized gain ........................................ 133,333,453 93,444,109
-------------- --------------
Net realized and unrealized gain on investments ........................ 204,394,316 110,871,517
-------------- --------------
Net increase in net assets resulting from operations ................... 453,983,581 213,754,825
-------------- --------------
FROM UNIT TRANSACTIONS:
Variable annuity contract purchase payments ............................ 571,517,770 538,586,667
Sales and administrative charges deducted by the Company ............... (16,265) (17,370)
-------------- --------------
Net variable annuity contract purchase payments ...................... 571,501,505 538,569,297
Transfers from the Company for mortality guarantee adjustments ......... 371,835 690,779
Transfers from the Company's fixed account options ..................... 144,526,667 50,549,121
Redemptions by contract holders ........................................ (82,942,177) (73,738,526)
Annuity Payments ....................................................... (16,137,431) (12,108,943)
Other .................................................................. 2,327,153 159,467
-------------- --------------
Net increase in net assets from unit transactions (Note 5) ........... 619,647,552 504,121,195
-------------- --------------
Change in net assets ................................................... 1,073,631,133 717,876,020
NET ASSETS:
Beginning of Year ...................................................... 1,848,811,724 1,130,935,704
-------------- --------------
End of Year ............................................................ $2,922,442,857 $1,848,811,724
============== ==============
</TABLE>
See Notes to Financial Statements
S-6
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1997
1. Summary of Significant Accounting Policies
Variable Annuity Account B (the "Account") is a separate account established
by Aetna Life Insurance and Annuity Company (the "Company") registered under
the Investment Company Act of 1940 as a unit investment trust. The Account is
sold exclusively for use with variable annuity contracts that may be entitled
to tax-deferred treatment under specific sections of the Internal Revenue
Code of 1986, as amended.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect amounts reported therein. Although actual results could differ
from these estimates, any such differences are expected to be immaterial to
the net assets of the Account.
a. Valuation of Investments
Investments in the following Funds are stated at the closing net asset value
per share as determined by each Fund on December 31, 1997:
<TABLE>
<S> <C>
Aetna Variable Fund Insurance Management Series:
Aetna Income Shares [bullet] American Leaders Fund II [bullet]
Aetna Variable Encore Fund [bullet] Equity Income Fund II
Aetna Investment Advisers Fund, Inc. [bullet] Growth Strategies Fund II
Aetna GET Fund, Series B [bullet] High Income Bond Fund II
Aetna GET Fund, Series C [bullet] International Equity Fund II
Aetna Ascent Variable Portfolio [bullet] Prime Money Fund II
Aetna Crossroads Variable Portfolio [bullet] U.S. Government Securities Fund II
Aetna Legacy Variable Portfolio [bullet] Utility Fund II
Aetna Variable Portfolio, Inc.: Janus Aspen Series:
[bullet] Capital Appreciation Portfolio [bullet] Aggressive Growth Portfolio
[bullet] Growth Portfolio [bullet] Balanced Portfolio
[bullet] Index Plus Portfolio [bullet] Flexible Income Portfolio
[bullet] Small Company Portfolio [bullet] Growth Portfolio
Alger American Funds: [bullet] Worldwide Growth Portfolio
[bullet] Balanced Portfolio Lexington Emerging Markets Fund
[bullet] Income and Growth Portfolio Lexington Natural Resources Trust Fund
[bullet] Leveraged AllCap Portfolio MFS Funds:
American Century Investments: [bullet] Total Return Series
[bullet] Balanced Fund [bullet] Worldwide Government Series
[bullet] International Fund Oppenheimer Funds:
Calvert Social Balanced Portfolio [bullet] Capital Appreciation Fund
Fidelity Investments Variable Insurance Products Fund: [bullet] Global Securities Fund
[bullet] Equity-Income Portfolio [bullet] Growth & Income Fund
[bullet] Growth Portfolio [bullet] Strategic Bond Fund
[bullet] High Income Portfolio Portfolio Partners, Inc.:
[bullet] Overseas Portfolio [bullet] PPI MFS Emerging Equities Portfolio
Fidelity Investments Variable Insurance Products Fund II: [bullet] PPI MFS Research Growth Portfolio
[bullet] Asset Manager Portfolio [bullet] PPI MFS Value Equity Portfolio
[bullet] Contrafund Portfolio [bullet] PPI Scudder International Growth Portfolio
[bullet] Index 500 Portfolio [bullet] PPI T. Rowe Price Growth Equity Portfolio
[bullet] Investment Grade Bond Portfolio
</TABLE>
b. Other
Investment transactions are accounted for on a trade date basis and dividend
income is recorded on the ex-dividend date. The cost of investments sold is
determined by specific identification.
S-7
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1997 (continued):
c. Federal Income Taxes
The operations of the Account form a part of, and are taxed with, the total
operations of the Company which is taxed as a life insurance company under
the Internal Revenue Code of 1986, as amended.
d. Annuity Reserves
Annuity reserves held in the Separate Accounts are computed for currently
payable contracts according to the Progressive Annuity, a49, 1971 Individual
Annuity Mortality, 1971 Group Annuity Mortality, 83a, and 1983 Group Annuity
Mortality tables using various assumed interest rates not to exceed seven
percent. Mortality experience is monitored by the Company. Charges to annuity
reserves for mortality experience are reimbursed to the Company if the
reserves required are less than originally estimated. If additional reserves
are required, the Company reimburses the Account.
2. Valuation Period Deductions
Deductions by the Account for mortality and expense risk charges are made in
accordance with the terms of the contracts and are paid to the Company.
3. Dividend Income
On an annual basis, the Funds distribute substantially all of their taxable
income and realized capital gains to their shareholders. Distributions to the
Account are automatically reinvested in shares of the Funds. The Account's
proportionate share of each Fund's undistributed net investment income
(distributions in excess of net investment income) and accumulated net
realized gain (loss) on investments is included in net unrealized gain (loss)
in the Statements of Operations and Changes in Net Assets.
4. Purchases and Sales of Investments
The cost of purchases and proceeds from sales of investments other than
short-term investments for the years ended December 31, 1997 and 1996
aggregated $1,874,026,188 and $1,004,789,371; $972,030,476 and $365,025,974,
respectively.
S-8
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Variable Fund: $206,171,606 ($9,508,053) $64,103,032 $51,274,099 $12,828,933
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------------------------------
Aetna Income Shares: 4,333,850 (737,718) 12,717,950 11,951,670 766,280
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 4,149,350 (1,373,114) 187,177,845 187,281,193 (103,348)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 20,983,218 (1,660,805) 12,262,658 9,696,803 2,565,855
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series B: 3,422,687 (286,592) 1,109,194 713,521 395,673
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series C: 169,021 (119,214) 963,591 833,090 130,501
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 1,293,085 (171,542) 2,422,808 2,093,544 329,264
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 1,366,067 (170,121) 1,119,794 921,119 198,675
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 1,122,530 (176,596) 1,280,095 1,125,823 154,272
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------------------------------
Aetna Variable Portfolio, Inc.:
Capital Appreciation Portfolio: 621,617 (11,486) 125,792 110,176 15,616
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 848,691 (9,678) 592,546 560,620 31,926
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------------------------------
Index Plus Portfolio: 1,110,445 (154,416) 2,229,246 1,790,247 438,999
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------------------------------
Small Company Portfolio: 366,132 (19,387) 261,692 230,152 31,540
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio: 142,299 (73,798) 1,098,365 1,473,706 (375,341)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
S-9
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Net
Net Unrealized
Gain (Loss) Net Increase (Decrease) Net Assets
- -------------------------------------- Change in In Net Assets -------------------------------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$59,979,314 $67,675,837 $7,696,523 $71,233,894
$644,728,031 $892,006,381
89,732,216 130,876,769
- ---------------------------------------------------------------------------------------------------------------
379,633 781,718 402,085 (1,964,060)
66,534,546 69,236,488
3,583,489 3,681,984
- ---------------------------------------------------------------------------------------------------------------
(540,607) 1,429,868 1,970,475 13,513,776
106,781,998 124,939,137
- ---------------------------------------------------------------------------------------------------------------
15,114,435 21,131,758 6,017,323 7,591,834
119,402,212 150,761,384
7,942,484 12,080,737
- ---------------------------------------------------------------------------------------------------------------
4,487,610 6,194,743 1,707,133 (712,316)
16,333,339 20,859,924
- ---------------------------------------------------------------------------------------------------------------
144,834 2,144,550 1,999,716 (532,193)
9,281,276 10,929,107
- ---------------------------------------------------------------------------------------------------------------
276,453 1,034,430 757,977 12,596,284
5,638,668 20,443,736
- ---------------------------------------------------------------------------------------------------------------
151,493 704,161 552,668 13,077,636
5,295,700 20,250,904
0 69,721
- ---------------------------------------------------------------------------------------------------------------
46,576 556,022 509,446 12,197,969
6,186,987 18,710,015
0 1,284,593
- ---------------------------------------------------------------------------------------------------------------
0 (545,082) (545,082) 3,831,929
0 3,912,594
- ---------------------------------------------------------------------------------------------------------------
0 (945,071) (945,071) 3,293,042
0 3,210,344
0 8,566
- ---------------------------------------------------------------------------------------------------------------
(4,046) 1,342,384 1,346,430 23,512,958
1,985,372 28,074,705
0 165,083
- ---------------------------------------------------------------------------------------------------------------
0 (299,676) (299,676) 6,028,520
0 6,059,783
0 47,346
- ---------------------------------------------------------------------------------------------------------------
(461,380) 691,602 1,152,982 1,032,718
3,777,291 5,656,151
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
S-10
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1997 (continued):
5.
Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Valuation
Period
Dividends Deductions
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Alger American Funds (continued):
Growth Portfolio: (1) $506,477 ($685,927)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Income and Growth Portfolio: 401,543 (156,768)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Leveraged AllCap Portfolio: 0 (196,601)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
MidCap Growth Portfolio: (1) 350,028 (308,858)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Small Capitalization Portfolio: (2) 2,260,717 (722,118)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
American Century Investments:
Balanced Fund: 199,265 (58,943)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Capital Appreciation Fund: (3) 725,963 (365,809)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
International Fund: 176,899 (85,324)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio: 67,562 (7,128)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: 7,870,976 (1,400,361)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Growth Portfolio: 2,159,319 (938,752)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
High Income Portfolio: 1,270,071 (337,944)
Annuity contracts in accumulation
Annuity contracts in payment period
- -------------------------------------------------------------------------------------------
Overseas Portfolio: 863,493 (164,196)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 761,827 (120,783)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Contrafund Portfolio: 1,931,363 (1,125,088)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Index 500 Portfolio: 1,159,193 (771,581)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio: 277,920 (79,205)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Proceeds Cost of Net
from Investments Realized
Sales Sold Gain (Loss)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alger American Funds (continued):
Growth Portfolio: (1) $78,591,434 $64,519,617 $14,071,817
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Income and Growth Portfolio: 2,602,037 3,401,714 (799,677)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Leveraged AllCap Portfolio: 7,570,244 6,461,486 1,108,758
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
MidCap Growth Portfolio: (1) 49,795,194 45,404,313 4,390,881
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Small Capitalization Portfolio: (2) 118,175,863 114,437,088 3,738,775
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
American Century Investments:
Balanced Fund: 704,536 619,119 85,417
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Capital Appreciation Fund: (3) 47,909,593 51,060,683 (3,151,090)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
International Fund: 4,226,767 3,417,937 808,830
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio: 212,241 199,799 12,442
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: 17,887,517 15,251,625 2,635,892
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Growth Portfolio: 10,659,015 9,711,716 947,299
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
High Income Portfolio: 4,857,948 4,277,783 580,165
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------
Overseas Portfolio: 5,725,552 5,116,905 608,647
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 1,009,159 904,890 104,269
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Contrafund Portfolio: 13,933,668 10,543,199 3,390,469
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Index 500 Portfolio: 17,678,295 13,392,232 4,286,063
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio: 1,100,211 1,085,995 14,216
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------
</TABLE>
S-11
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$2,349,936 $0 ($2,349,936) ($55,087,434)
$43,545,003 $0
- ----------------------------------------------------------------------------------------------------------
(828,912) 2,709,055 3,537,967 4,693,808
6,471,587 14,148,460
- ----------------------------------------------------------------------------------------------------------
220,810 1,540,243 1,319,433 628,691
11,419,728 14,280,009
- ----------------------------------------------------------------------------------------------------------
682,424 0 (682,424) (23,592,354)
19,842,727 0
- ----------------------------------------------------------------------------------------------------------
(495,260) 0 495,260 (64,524,063)
58,751,429 0
- ----------------------------------------------------------------------------------------------------------
145,325 462,379 317,054 1,109,081
2,991,356 4,643,230
- ----------------------------------------------------------------------------------------------------------
(1,588,390) 0 1,588,390 (43,166,616)
44,369,162 0
- ----------------------------------------------------------------------------------------------------------
375,835 361,821 (14,014) 259,970
4,706,594 5,852,955
- ----------------------------------------------------------------------------------------------------------
(881) 59,286 60,167 241,657
596,637 971,337
- ----------------------------------------------------------------------------------------------------------
5,773,475 19,807,673 14,034,198 43,088,538
72,480,497 138,709,740
- ----------------------------------------------------------------------------------------------------------
3,258,300 14,584,513 11,326,213 8,978,986
57,928,484 80,401,549
- ----------------------------------------------------------------------------------------------------------
814,429 2,722,687 1,908,258 17,156,365
14,709,464 35,217,837
0 68,542
- ----------------------------------------------------------------------------------------------------------
743,689 460,930 (282,759) 2,276,187
9,703,271 13,004,643
- ----------------------------------------------------------------------------------------------------------
484,182 1,137,702 653,520 4,412,778
5,931,464 11,743,075
- ----------------------------------------------------------------------------------------------------------
6,210,754 18,201,832 11,991,078 35,101,002
56,538,618 107,827,442
- ----------------------------------------------------------------------------------------------------------
2,241,040 10,882,841 8,641,801 36,290,926
27,380,370 76,986,772
- ----------------------------------------------------------------------------------------------------------
175,829 387,160 211,331 1,392,243
4,761,677 6,578,182
- ----------------------------------------------------------------------------------------------------------
</TABLE>
S-12
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1997 (continued):
5.
Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Insurance Management Series:
American Leaders Fund II: $2,033,587 ($1,272,645) $2,239,581 $1,354,167 $885,414
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------------------------------------------------
Equity Income Fund II: 52,763 (108,244) 188,614 167,057 21,557
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Growth Strategies Fund II: 63,162 (214,573) 650,403 461,919 188,484
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
High Income Bond Fund II: 2,232,254 (576,880) 5,856,816 5,388,542 468,274
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
International Equity Fund II: 8,680 (138,835) 787,960 678,156 109,804
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Prime Money Fund II: 365,689 (107,783) 7,931,948 7,931,971 (23)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund II: 366,225 (147,271) 3,825,499 3,747,648 77,851
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Utility Fund II: 838,523 (291,277) 1,512,321 1,157,193 355,128
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 0 (419,040) 19,586,639 19,136,007 450,632
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Balanced Portfolio: 786,909 (294,871) 2,053,281 1,687,149 366,132
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio: 528,359 (93,943) 1,111,581 1,079,357 32,224
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 967,832 (429,682) 2,254,366 1,752,378 501,988
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------------------------------------------------
Short-Term Bond Portfolio: (4) 62,602 (36,643) 13,023,397 12,927,175 96,222
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 2,077,847 (1,645,928) 21,615,276 15,329,845 6,285,431
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund: 2,717 (53,043) 4,235,697 4,177,632 58,065
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 209,099 (85,086) 3,246,699 2,653,024 593,675
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-13
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$8,810,467 $30,111,589 $21,301,122 $32,775,129
$61,127,055 $116,800,911
0 48,751
- --------------------------------------------------------------------------------------------------------
0 911,406 911,406 19,061,089
0 19,938,571
- --------------------------------------------------------------------------------------------------------
733,393 3,558,451 2,825,058 12,664,797
7,182,178 22,709,106
- --------------------------------------------------------------------------------------------------------
1,022,582 3,763,082 2,740,500 21,197,568
27,151,137 53,212,853
- --------------------------------------------------------------------------------------------------------
307,602 938,501 630,899 7,399,890
5,935,590 13,946,028
- --------------------------------------------------------------------------------------------------------
0 0 0 (471,714)
7,744,318 7,530,487
- --------------------------------------------------------------------------------------------------------
73,398 513,199 439,801 4,803,969
7,656,209 13,196,784
- --------------------------------------------------------------------------------------------------------
1,730,892 5,801,015 4,070,123 4,555,867
16,774,494 26,302,858
- --------------------------------------------------------------------------------------------------------
534,823 4,594,517 4,059,694 2,750,579
31,542,060 38,383,925
- --------------------------------------------------------------------------------------------------------
373,883 3,462,858 3,088,975 15,424,389
11,774,244 31,145,778
- --------------------------------------------------------------------------------------------------------
73,395 367,565 294,170 4,626,561
5,147,217 10,534,588
- --------------------------------------------------------------------------------------------------------
1,093,423 5,764,208 4,670,785 14,123,750
20,884,154 40,072,928
0 645,899
- --------------------------------------------------------------------------------------------------------
(27,376) 0 27,376 (2,070,168)
1,920,611 0
- --------------------------------------------------------------------------------------------------------
5,151,123 18,210,266 13,059,143 76,404,357
66,472,691 160,658,096
0 1,995,445
- --------------------------------------------------------------------------------------------------------
(66,591) (709,548) (642,957) 952,674
2,515,960 2,833,416
- --------------------------------------------------------------------------------------------------------
538,139 177,872 (360,267) 1,821,159
4,751,784 6,930,364
- --------------------------------------------------------------------------------------------------------
</TABLE>
S-14
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MFS Funds:
Emerging Growth Series: (2) $0 ($232,144) $37,594,997 $34,076,137 $3,518,860
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Research Series: (3) 0 (273,185) 37,686,630 34,109,865 3,576,765
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Total Return Series: 0 (154,993) 689,861 564,440 125,421
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Value Series: (5) 0 (19,996) 4,332,717 3,942,044 390,673
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Worldwide Government Series: 15,502 (12,983) 124,845 123,607 1,238
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management Trust:
Growth Portfolio: (5) 741,183 (92,357) 17,383,777 16,347,694 1,036,083
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Funds:
Capital Appreciation Fund: 0 (13,374) 8,964,190 9,092,515 (128,325)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Global Securities Fund: 0 (12,451) 850,938 802,777 48,161
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Growth & Income Fund: 37,178 (35,759) 188,084 164,087 23,997
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Strategic Bond Fund: 84,234 (10,842) 122,739 121,006 1,733
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Portfolio Partners, Inc.:
PPI MFS Emerging Equities Portfolio: 0 (120,211) 43,880,815 44,111,392 (230,577)
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------------------
PPI MFS Research Growth Portfolio: 0 (82,490) 37,923,531 37,983,794 (60,263)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
PPI MFS Value Equity Portfolio: 0 (16,913) 4,632,658 4,633,034 (376)
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------------------
PPI Scudder International Growth Portfolio: 0 (12,760) 259,410 255,379 4,031
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
PPI T. Rowe Price Growth Portfolio: 0 (115,952) 33,484,569 33,491,822 (7,253)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund:
International Portfolio: (6) 275,557 (123,791) 16,445,650 14,417,831 2,027,819
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
S-15
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
($85,796) $0 $85,796 ($12,370,520)
$8,998,008 $0
- -------------------------------------------------------------------------------------------------------
204,764 0 (204,764) (9,875,328)
6,776,512 0
- -------------------------------------------------------------------------------------------------------
72,010 1,975,149 1,903,139 12,883,941
4,216,370 18,973,878
- -------------------------------------------------------------------------------------------------------
935 0 (935) (578,583)
208,841 0
- -------------------------------------------------------------------------------------------------------
9,304 (5,937) (15,241) 927,866
407,913 1,324,295
- -------------------------------------------------------------------------------------------------------
(6,666) 0 6,666 (9,934,149)
8,242,574 0
- -------------------------------------------------------------------------------------------------------
0 133,786 133,786 3,696,113
0 3,688,200
- -------------------------------------------------------------------------------------------------------
0 (846) (846) 2,646,073
0 2,680,937
- -------------------------------------------------------------------------------------------------------
0 465,927 465,927 12,197,564
0 12,688,907
- -------------------------------------------------------------------------------------------------------
0 (21,173) (21,173) 3,038,749
0 3,092,701
- -------------------------------------------------------------------------------------------------------
0 (753,832) (753,832) 96,397,314
0 94,796,247
0 496,447
- -------------------------------------------------------------------------------------------------------
0 (1,162,926) (1,162,926) 67,172,809
0 65,867,130
- -------------------------------------------------------------------------------------------------------
0 220,662 220,662 15,224,308
0 15,049,606
0 378,075
- -------------------------------------------------------------------------------------------------------
0 195,427 195,427 12,463,465
0 12,650,163
- -------------------------------------------------------------------------------------------------------
0 1,797,922 1,797,922 88,495,541
0 90,170,258
- -------------------------------------------------------------------------------------------------------
1,510,449 0 (1,510,449) (12,719,263)
12,050,127 0
-------------------------------------------------------------------------------------------------------
</TABLE>
S-16
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Variable Annuity Account B $278,833,116 ($29,243,851) $1,004,789,371 $933,728,508 $71,060,863
=======================================================================================================================
</TABLE>
(1) - Effective November 28, 1997, this funds assets were transferred to the PPI
T. Rowe Price Growth Equity Portfolio.
(2) - Effective November 28, 1997, this funds assets were transferred to the PPI
MFS Emerging Equities Portfolio.
(3) - Effective November 28, 1997, this funds assets were transferred to PPI MFS
Research Growth Fund.
(4) - Effective November 28, 1997, this funds assets were transferred to the
Aetna Variable Encore Fund.
(5) - Effective November 28, 1997, this funds assets were transferred to the PPI
MFS Value Equity Portfolio.
(6) - Effective November 28, 1997, this funds assets were transferred to the PPI
Scudder International Growth Portfolio.
S-17
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$122,191,053 $255,524,506 $133,333,453 $619,647,552 $1,848,811,724 $2,922,442,857
=======================================================================================================================
</TABLE>
S-18
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Year Ended December 31, 1996
Valuation
Period
Dividends Deductions
- ------------------------------------------------------------------------------------
<S> <C> <C>
Aetna Variable Fund: $77,000,986 ($7,148,689)
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------
Aetna Income Shares: 4,527,825 (813,024)
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 5,358,925 (1,043,955)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 11,247,847 (1,372,478)
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------
Aetna GET Fund, Series B: 1,055,590 (226,340)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Aetna GET Fund, Series C: 46,499 (14,753)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 235,037 (27,609)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 257,055 (29,943)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 363,749 (38,623)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio: 10,290 (2,403)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio: 775,351 (33,904)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Growth Portfolio: 758,872 (394,360)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Income and Growth Portfolio: 2,009,995 (55,929)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Leveraged AllCap Portfolio: 61,186 (116,503)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
MidCap Portfolio: 190,158 (166,087)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Small Capitalization Portfolio: 184,900 (588,663)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced Portfolio: 44,676 (3,984)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------
Year Ended December 31, 1996
Proceeds Cost of Net
from Investments Realized
Sales Sold Gain (Loss)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aetna Variable Fund: $96,146,932 $97,318,697 ($1,171,765)
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------
Aetna Income Shares: 19,585,006 18,826,116 758,890
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 78,888,315 76,637,102 2,251,213
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 16,403,009 13,386,571 3,016,438
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------
Aetna GET Fund, Series B: 915,330 681,610 233,720
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna GET Fund, Series C: 361,353 354,510 6,843
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 317,740 277,917 39,823
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 362,140 312,870 49,270
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 406,948 384,407 22,541
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio: 139,030 133,438 5,592
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio: 244,368 332,405 (88,037)
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Growth Portfolio: 6,990,444 6,528,212 462,232
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Income and Growth Portfolio: 390,051 732,537 (342,486)
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Leveraged AllCap Portfolio: 4,991,495 4,605,949 385,546
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
MidCap Portfolio: 3,198,308 3,039,709 158,599
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Small Capitalization Portfolio: 31,506,275 29,929,826 1,576,449
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced Portfolio: 141,022 137,780 3,242
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
</TABLE>
S-19
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
($8,051,873) $59,979,314 $68,031,187 $4,966,306
$530,231,821 $644,728,031
62,550,401 89,732,216
- ---------------------------------------------------------------------------------------------------------------
3,224,044 379,633 (2,844,411) (9,600,618)
74,693,652 66,534,546
3,395,721 3,583,489
- ---------------------------------------------------------------------------------------------------------------
2,487,618 (540,607) (3,028,225) 22,111,260
81,132,780 106,781,998
- ---------------------------------------------------------------------------------------------------------------
12,419,220 15,114,435 2,695,215 602,270
104,415,595 119,402,212
6,739,809 7,942,484
- ---------------------------------------------------------------------------------------------------------------
2,566,580 4,487,610 1,921,030 (650,835)
14,000,174 16,333,339
- ---------------------------------------------------------------------------------------------------------------
0 144,834 144,834 9,097,853
0 9,281,276
- ---------------------------------------------------------------------------------------------------------------
5,570 276,453 270,883 4,773,151
347,383 5,638,668
- ---------------------------------------------------------------------------------------------------------------
8,209 151,493 143,284 4,409,627
466,407 5,295,700
- ---------------------------------------------------------------------------------------------------------------
1,609 46,576 44,967 5,470,774
323,579 6,186,987
- ---------------------------------------------------------------------------------------------------------------
0 (4,046) (4,046) 1,975,940
(1) 1,985,372
- ---------------------------------------------------------------------------------------------------------------
1,644 (461,380) (463,024) 2,897,855
689,050 3,777,291
- ---------------------------------------------------------------------------------------------------------------
(63,817) 2,349,936 2,413,753 29,514,421
10,790,085 43,545,003
- ---------------------------------------------------------------------------------------------------------------
(6,769) (828,912) (822,143) 4,660,630
1,021,520 6,471,587
- ---------------------------------------------------------------------------------------------------------------
32,561 220,810 188,249 8,946,454
1,954,796 11,419,728
- ---------------------------------------------------------------------------------------------------------------
7,193 682,424 675,231 15,727,261
3,257,565 19,842,727
- ---------------------------------------------------------------------------------------------------------------
46,283 (495,260) (541,543) 32,655,969
25,464,317 58,751,429
- ---------------------------------------------------------------------------------------------------------------
(13,512) (881) 12,631 193,226
346,846 596,637
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
S-20
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Year Ended December 31, 1996
Valuation
Period
Dividends Deductions
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: $940,850 ($608,164)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Growth Portfolio: 1,412,110 (540,670)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
High Income Portfolio: 178,909 (112,363)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Overseas Portfolio: 75,181 (91,010)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 119,231 (54,259)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Contrafund Portfolio: 146,164 (428,708)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Index 500 Portfolio: 143,406 (203,362)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Investment Grade Bond Portfolio: 45,797 (42,799)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Insurance Management Series:
American Leaders Fund II: 857,970 (631,122)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Growth Strategies Fund II: 405 (44,481)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
High Income Bond Fund II: 1,647,290 (260,987)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
International Equity Fund II: 10,567 (51,003)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Prime Money Fund II: 289,134 (87,958)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
U.S. Government Securities Fund II: 367,608 (86,361)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Utility Fund II: 547,259 (186,219)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 243,931 (266,292)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Balanced Portfolio: 181,099 (68,277)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Year Ended December 31, 1996
Proceeds Cost of Net
from Investments Realized
Sales Sold Gain (Loss)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: $4,030,269 $3,343,817 $686,452
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Growth Portfolio: 2,600,136 2,280,711 319,425
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
High Income Portfolio: 1,318,057 1,318,142 (85)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Overseas Portfolio: 880,668 813,434 67,234
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 540,553 465,407 75,146
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Contrafund Portfolio: 5,044,449 4,308,117 736,332
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Index 500 Portfolio: 6,086,685 5,356,843 729,842
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Investment Grade Bond Portfolio: 882,619 925,636 (43,017)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Insurance Management Series:
American Leaders Fund II: 6,368,961 4,596,688 1,772,273
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Growth Strategies Fund II: 119,084 103,727 15,357
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
High Income Bond Fund II: 5,863,283 5,644,702 218,581
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
International Equity Fund II: 250,169 236,027 14,142
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Prime Money Fund II: 12,400,851 12,398,826 2,025
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund II: 5,011,311 5,085,345 (74,034)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Utility Fund II: 1,034,753 867,262 167,491
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 6,134,481 4,875,603 1,258,878
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
Balanced Portfolio: 2,812,822 2,536,688 276,134
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------
</TABLE>
S-21
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$966,600 $5,773,475 $4,806,875 $51,230,275
$15,424,209 $72,480,497
- ----------------------------------------------------------------------------------------------------
(34,190) 3,258,300 3,292,490 38,219,867
15,225,262 57,928,484
- ----------------------------------------------------------------------------------------------------
15,029 814,429 799,400 12,636,277
1,207,326 14,709,464
- ----------------------------------------------------------------------------------------------------
51,434 743,689 692,255 6,948,020
2,011,591 9,703,271
- ----------------------------------------------------------------------------------------------------
98,360 484,182 385,822 4,043,035
1,362,489 5,931,464
- ----------------------------------------------------------------------------------------------------
122,841 6,210,754 6,087,913 38,043,675
11,953,242 56,538,618
- ----------------------------------------------------------------------------------------------------
70,864 2,241,040 2,170,176 22,367,490
2,172,818 27,380,370
- ----------------------------------------------------------------------------------------------------
11,466 175,829 164,363 3,931,632
705,701 4,761,677
- ----------------------------------------------------------------------------------------------------
2,916,888 8,810,467 5,893,579 26,548,788
26,685,567 61,127,055
- ----------------------------------------------------------------------------------------------------
3,614 733,393 729,779 6,301,239
179,879 7,182,178
- ----------------------------------------------------------------------------------------------------
229,008 1,022,582 793,574 12,876,189
11,876,490 27,151,137
- ----------------------------------------------------------------------------------------------------
43,172 307,602 264,430 4,073,916
1,623,538 5,935,590
- ----------------------------------------------------------------------------------------------------
(1,182) 0 1,182 1,765,443
5,774,492 7,744,318
- ----------------------------------------------------------------------------------------------------
75,600 73,398 (2,202) 2,942,870
4,508,328 7,656,209
- ----------------------------------------------------------------------------------------------------
799,746 1,730,892 931,146 6,514,735
8,800,082 16,774,494
- ----------------------------------------------------------------------------------------------------
1,164,909 534,823 (630,086) 19,085,222
11,850,407 31,542,060
- ----------------------------------------------------------------------------------------------------
26,040 373,883 347,843 10,311,561
725,884 11,774,244
- ----------------------------------------------------------------------------------------------------
</TABLE>
S-22
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Year Ended December 31, 1996
Valuation
Period
Dividends Deductions
<S> <C> <C>
Flexible Income Portfolio: $ 304,512 ($43,754)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
Growth Portfolio: 324,844 (141,840)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
Short-Term Bond Portfolio: 79,326 (23,159)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
Worldwide Growth Portfolio: 642,050 (384,732)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
Lexington Emerging Markets Fund: 0 (27,131)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 15,653 (38,378)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
MFS Funds:
Emerging Growth Series: 73,635 (33,243)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
Research Series: 94,710 (22,219)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
Total Return Series: 87,973 (13,218)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
Value Series: 4,089 (372)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
World Government Series: 0 (1,705)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
Neuberger & Berman Advisers Management Trust:
Growth Portfolio: 770,877 (98,063)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
Scudder Variable Life Investment Fund:
International Portfolio: 276,128 (136,107)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
TCI Portfolios, Inc.:
Balanced Fund: 67,198 (24,832)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
Growth Fund: 6,228,055 (611,968)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------
International Fund: 62,276 (41,867)
Annuity contracts in accumulation
Total Variable Annuity Account B $120,367,178 ($17,483,870)
==================================================================================
<CAPTION>
- -----------------------------------------------------------------------------------------------
Year Ended December 31, 1996
Proceeds Cost of Net
from Investments Realized
Sales Sold Gain (Loss)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Flexible Income Portfolio: $1,127,628 $1,090,808 $36,820
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
Growth Portfolio: 1,249,735 1,041,911 207,824
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
Short-Term Bond Portfolio: 2,910,009 2,872,811 37,198
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 4,899,145 3,899,490 999,655
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund: 1,463,410 1,431,864 31,546
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 2,192,808 1,809,743 383,065
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
MFS Funds:
Emerging Growth Series: 190,630 186,959 3,671
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
Research Series: 253,406 258,774 (5,368)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
Total Return Series: 140,628 132,113 8,515
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
Value Series: 496 486 10
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
World Government Series: 19,663 19,513 150
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management Trust:
Growth Portfolio: 3,864,131 3,857,033 7,098
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund:
International Portfolio: 4,557,311 4,016,790 540,521
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
TCI Portfolios, Inc.:
Balanced Fund: 247,893 231,495 16,398
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
Growth Fund: 19,145,021 17,607,144 1,537,877
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------
International Fund: 397,143 365,001 32,142
Annuity contracts in accumulation
Total Variable Annuity Account B $365,025,974 $347,598,566 $17,427,408
===============================================================================================
</TABLE>
S-23
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$29,809 $73,395 $43,586 $3,237,811
$1,568,242 $5,147,217
----------------------------------------------------------------------------------------------------------------
84,852 1,093,423 1,008,571 16,916,813
2,567,942 20,884,154
----------------------------------------------------------------------------------------------------------------
1,330 (27,376) (28,706) 1,106,654
749,298 1,920,611
----------------------------------------------------------------------------------------------------------------
253,639 5,151,123 4,897,484 54,723,321
5,594,913 66,472,691
----------------------------------------------------------------------------------------------------------------
(4,024) (66,591) (62,567) 2,232,953
341,159 2,515,960
----------------------------------------------------------------------------------------------------------------
188,717 538,139 349,422 2,162,813
1,879,209 4,751,784
----------------------------------------------------------------------------------------------------------------
0 (85,796) (85,796) 9,039,741
0 8,998,008
----------------------------------------------------------------------------------------------------------------
0 204,764 204,764 6,504,625
0 6,776,512
----------------------------------------------------------------------------------------------------------------
0 72,010 72,010 4,061,090
0 4,216,370
----------------------------------------------------------------------------------------------------------------
0 935 935 204,179
0 208,841
----------------------------------------------------------------------------------------------------------------
0 9,304 9,304 400,164
0 407,913
----------------------------------------------------------------------------------------------------------------
77,158 (6,666) (83,824) (710,088)
8,356,574 8,242,574
----------------------------------------------------------------------------------------------------------------
652,411 1,510,449 858,038 (54,117)
10,565,664 12,050,127
----------------------------------------------------------------------------------------------------------------
16,540 145,325 128,785 2,313,929
489,878 2,991,356
----------------------------------------------------------------------------------------------------------------
8,206,103 (1,588,390) (9,794,493) (7,301,710)
54,311,401 44,369,162
----------------------------------------------------------------------------------------------------------------
15,650 375,835 360,185 3,691,239
602,619 4,706,594
----------------------------------------------------------------------------------------------------------------
$28,746,944 $122,191,053 $93,444,109 $504,121,195 $1,130,935,704 $1,848,811,724
=========== ============ =========== ============ ============== ==============
</TABLE>
S-24
<PAGE>
Independent Auditors' Report
The Board of Directors of Aetna Life Insurance and Annuity Company and
Contract Owners of Variable Annuity Account B:
We have audited the accompanying statement of assets and liabilities of Aetna
Life Insurance and Annuity Company Variable Annuity Account B (the "Account") as
of December 31, 1997, and the related statements of operations and changes in
net assets for each of the years in the two-year period then ended and condensed
financial information for the year ended December 31, 1997. These financial
statements and condensed financial information are the responsibility of the
Account's management. Our responsibility is to express an opinion on these
financial statements and condensed financial information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and condensed
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and condensed financial information. Our procedures
included confirmation of securities owned as of December 31, 1997, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and condensed financial information
referred to above present fairly, in all material respects, the financial
position of Aetna Life Insurance and Annuity Company Variable Annuity Account B
as of December 31, 1997, the results of its operations and changes in its net
assets for each of the years in the two-year period then ended and condensed
financial information for the year ended December 31, 1997 in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
February 27, 1998
S-25
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
Index to Consolidated Financial Statements
------------------------------------------
Page
Independent Auditors' Report F-2
Consolidated Financial Statements:
Consolidated Statements of Income for the Years Ended
December 31, 1997, 1996 and 1995 F-3
Consolidated Balance Sheets as of December 31, 1997
and 1996 F-4
Consolidated Statements of Changes in Shareholder's Equity
for the Years Ended December 31, 1997, 1996 and 1995 F-5
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1997, 1996 and 1995 F-6
Notes to Consolidated Financial Statements F-7
F-1
<PAGE>
Independent Auditors' Report
The Shareholder and Board of Directors
Aetna Life Insurance and Annuity Company:
We have audited the accompanying consolidated balance sheets of Aetna Life
Insurance and Annuity Company and Subsidiary as of December 31, 1997 and 1996,
and the related consolidated statements of income, changes in shareholder's
equity and cash flows for each of the years in the three-year period ended
December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Aetna Life Insurance
and Annuity Company and Subsidiary at December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
February 3, 1998
F-2
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Income
(millions)
Years Ended December 31,
--------------------------------
1997 1996 1995
------- ------- -------
Revenue:
Premiums $267.1 $133.6 $212.7
Charges assessed against policyholders 475.0 396.5 318.9
Net investment income 1,080.5 1,045.6 1,004.3
Net realized capital gains 36.0 19.7 41.3
Other income 39.7 45.4 42.0
------- ------- -------
Total revenue 1,898.3 1,640.8 1,619.2
------- ------- -------
Benefits and expenses:
Current and future benefits 1,127.8 968.6 997.2
Operating expenses 347.4 342.2 310.8
Amortization of deferred policy
acquisition costs 128.4 69.8 48.0
Severance and facilities charges -- 61.3 --
------- ------- -------
Total benefits and expenses 1,603.6 1,441.9 1,356.0
------- ------- -------
Income before income taxes 294.7 198.9 263.2
Income taxes 89.4 57.8 87.3
------- ------- -------
Net income $205.3 $141.1 $175.9
======= ======= =======
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Balance Sheets
(millions, except share data)
<TABLE>
<CAPTION>
December 31, December 31,
Assets 1997 1996
- ------ ---- ----
<S> <C> <C>
Investments:
Debt securities available for sale, at fair value
(amortized cost: $12,912.2 and $12,539.1) $13,463.8 $12,905.5
Equity securities, available for sale:
Nonredeemable preferred stock (cost: $131.7 and $107.6) 147.6 119.0
Investment in affiliated mutual funds (cost: $78.1 and $77.3) 83.0 81.1
Common stock (cost: $0.2 and $0.0) .6 .3
Short-term investments 95.6 34.8
Mortgage loans 12.8 13.0
Policy loans 469.6 399.3
--------- --------
Total investments 14,273.0 13,553.0
Cash and cash equivalents 565.4 459.1
Accrued investment income 163.0 159.0
Premiums due and other receivables 63.7 26.6
Deferred policy acquisition costs 1,654.6 1,515.3
Reinsurance loan to affiliate 397.2 628.3
Other assets 46.8 33.7
Separate accounts assets 22,982.7 15,318.3
--------- --------
Total assets $40,146.4 $31,693.3
========= ========
Liabilities and Shareholder's Equity
Liabilities:
Future policy benefits $3,763.7 $3,617.0
Unpaid claims and claim expenses 38.0 28.9
Policyholders' funds left with the Company 11,143.5 10,663.7
--------- --------
Total insurance reserve liabilities 14,945.2 14,309.6
Other liabilities 312.8 354.7
Income taxes:
Current 12.4 20.7
Deferred 72.0 80.5
Separate accounts liabilities 22,970.0 15,318.3
--------- --------
Total liabilities 38,312.4 30,083.8
--------- --------
Shareholder's equity:
Common stock, par value $50 (100,000 shares
authorized; 55,000 shares issued and outstanding) 2.8 2.8
Paid-in capital 418.0 418.0
Accumulated other comprehensive income 92.9 60.5
Retained earnings 1,320.3 1,128.2
--------- --------
Total shareholder's equity 1,834.0 1,609.5
--------- --------
Total liabilities and shareholder's equity $40,146.4 $31,693.3
========= ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Changes in Shareholder's Equity
(millions)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Shareholder's equity, beginning of year $1,609.5 $1,583.0 $1,088.5
Comprehensive income
Net income 205.3 141.1 175.9
Other comprehensive income, net of tax
Unrealized gains (losses) on securities ($50.1
million, $(110.8) million and $494.6 million, 32.4 (72.0) 321.5
pretax, respectively)
-------- -------- --------
Total comprehensive income 237.7 69.1 497.4
-------- -------- --------
Capital contributions -- 10.4 0.0
Other changes 4.1 (49.5) 0.0
Common stock dividends (17.3) (3.5) (2.9)
-------- -------- --------
Shareholder's equity, end of year $1,834.0 $1,609.5 $1,583.0
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Cash Flows
(millions)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $205.3 $141.1 $175.9
Adjustments to reconcile net income to net cash provided by
(used for) operating activities:
(Increase) decrease in accrued investment income (4.0) 16.5 (33.3)
(Increase) decrease in premiums due and other receivables (33.3) 1.6 25.4
Increase in policy loans (70.3) (60.7) (89.9)
Increase in deferred policy acquisition costs (139.3) (174.0) (177.0)
Decrease in reinsurance loan to affiliate 231.1 27.2 34.8
Net increase in universal life account balances 286.4 243.2 393.4
(Decrease) increase in other insurance reserve liabilities (249.6) (211.5) 79.0
Net (decrease) increase in other liabilities and other assets (41.7) 3.1 13.0
Decrease in income taxes (31.4) (26.7) (4.5)
Net accretion of discount on investments (66.4) (68.0) (66.4)
Net realized capital gains (36.0) (19.7) (41.3)
Other, net -- 1.1 --
-------- -------- --------
Net cash provided by (used for) operating activities 50.8 (126.8) 309.1
-------- -------- --------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale 5,311.3 5,182.2 4,207.2
Equity securities 103.1 190.5 180.8
Mortgage loans 0.2 8.7 10.7
Limited partnership -- -- 26.6
Investment maturities and collections of:
Debt securities available for sale 1,212.7 885.2 583.9
Short-term investments 89.3 35.0 106.1
Cost of investment purchases in:
Debt securities available for sale (6,732.8) (6,534.3) (6,034.0)
Equity securities (113.3) (118.1) (170.9)
Short-term investments (149.9) (54.7) (24.7)
Mortgage loans -- -- (21.3)
Other, net -- (17.6) --
-------- -------- --------
Net cash used for investing activities (279.4) (423.1) (1,135.6)
-------- -------- --------
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts 1,621.2 1,579.5 1,884.5
Withdrawals of investment contracts (1,256.3) (1,146.2) (1,109.6)
Capital contribution to Separate Account (25.0) -- --
Return of capital from Separate Account 12.3 -- --
Capital contribution from HOLDCO -- 10.4 --
Dividends paid to shareholder (17.3) (3.5) (2.9)
-------- -------- --------
Net cash provided by financing activities 334.9 440.2 772.0
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 106.3 (109.7) (54.5)
Cash and cash equivalents, beginning of year 459.1 568.8 623.3
-------- -------- --------
Cash and cash equivalents, end of year $565.4 $459.1 $568.8
======== ======== ========
Supplemental cash flow information:
Income taxes paid, net $119.6 $85.5 $92.8
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Aetna Life Insurance and Annuity Company and its wholly owned subsidiary
(collectively, the "Company") are providers of financial services and life
insurance products in the United States. The Company has two business
segments: financial services and individual life insurance.
Financial services products include annuity contracts that offer a variety
of funding and payout options for individual and employer-sponsored
retirement plans qualified under Internal Revenue Code Sections 401, 403,
408 and 457, and non-qualified annuity contracts. These contracts may be
deferred or immediate ("payout annuities"). Financial services also include
investment advisory services and pension plan administrative services.
Individual life insurance products include universal life, variable
universal life, traditional whole life and term insurance.
Basis of Presentation
---------------------
The consolidated financial statements include Aetna Life Insurance and
Annuity Company and its wholly owned subsidiary, Aetna Insurance Company of
America. Aetna Life Insurance and Annuity Company is a wholly owned
subsidiary of Aetna Retirement Holdings, Inc. ("HOLDCO"). HOLDCO is a
wholly owned subsidiary of Aetna Retirement Services, Inc., whose ultimate
parent is Aetna Inc. ("Aetna").
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles. Certain reclassifications have
been made to 1996 and 1995 financial information to conform to the 1997
presentation.
New Accounting Standard
-----------------------
As of December 31, 1997 the Company adopted Financial Accounting Standard
("FAS") No. 130, Reporting Comprehensive Income. This statement establishes
standards for the reporting and presentation of comprehensive income and
its components in a full set of financial statements. Comprehensive income
encompasses all changes in shareholder's equity (except those arising from
transactions with shareholders) and includes net income and net unrealized
capital gains or losses on available-for-sale securities. As this new
standard only requires additional information in a financial statement, it
does not affect the Company's financial position or results of operations.
Future Application of Accounting Standards
------------------------------------------
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities
FAS No. 125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, was issued in June 1996 and provides
accounting and reporting standards for transfers of financial assets and
extinguishments of liabilities.
F-7
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Future Application of Accounting Standards (Continued)
FAS No. 125 is effective for 1997 financial statements; however, certain
provisions relating to accounting for repurchase agreements and securities
lending are not effective until January 1, 1998. Provisions effective in
1997 did not have a material effect on the Company's financial position or
results of operations. The Company does not expect adoption of this
statement for provisions effective in 1998 to have a material effect on its
financial position or results of operations.
Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments
In December 1997, the American Institute of Certified Public Accountants
issued Statement of Position 97-3, Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments, which provides guidance for
determining when an insurance or other enterprise should recognize a
liability for guaranty-fund and other insurance related assessments and
guidance for measuring the liability. This statement is effective for 1999
financial statements with early adoption permitted. The Company does not
expect adoption of this statement to have a material effect on its
financial position or results of operations.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from reported results
using those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, money market instruments
and other debt issues with a maturity of 90 days or less when purchased.
Investments
Debt and equity securities are classified as available for sale and carried
at fair value. These securities are written down (as realized capital
losses) for other than temporary declines in value. Unrealized capital
gains and losses related to available for sale investments, other than
amounts allocable to experience rated contractholders, are reflected in
shareholder's equity, net of related taxes.
Fair values for debt and equity securities are based on quoted market
prices or dealer quotations. Where quoted market prices or dealer
quotations are not available, fair values are measured utilizing quoted
market prices for similar securities or by using discounted cash flow
methods. Cost for mortgage-backed securities is adjusted for unamortized
premiums and discounts, which are amortized using the interest method over
the estimated remaining term of the securities, adjusted for anticipated
prepayments.
F-8
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Investments (Continued)
The company engages in securities lending whereby certain securities from
its portfolio are loaned to other institutions for short periods of time.
Initial collateral, primarily cash, is required at a rate of 102% of the
market value of a loaned domestic security and 105% of the market value of
a loaned foreign security. The collateral is deposited by the borrower with
a lending agent, and retained and invested by the lending agent according
to the Company's guidelines to generate additional income. The market value
of the loaned securities is monitored on a daily basis with additional
collateral obtained or refunded as the market value of the loaned
securities fluctuates. At December 31, 1997 and 1996, the Company loaned
securities (which are reflected as invested assets) with a market value of
approximately $385.1 million and $444.7 million, respectively.
Purchases and sales of debt and equity securities are recorded on the trade
date.
The investment in affiliated mutual funds represents an investment in Aetna
managed mutual funds which have been seeded by the Company, and is carried
at fair value.
Mortgage loans and policy loans are carried at unpaid principal balances,
net of impairment reserves. Sales of mortgage loans are recorded on the
closing date.
Short-term investments, consisting primarily of money market instruments
and other debt issues purchased with a maturity of 91 days to one year, are
considered available for sale and are carried at fair value, which
approximates amortized cost.
The Company utilizes futures contracts, swap agreements and warrants for
other than trading purposes in order to manage investment returns and price
risk and to align maturities, interest rates, and funds availability with
its obligations. (Refer to Note 3.)
Futures contracts are carried at fair value and require daily cash
settlement. Changes in the fair value of futures contracts that qualify as
hedges are deferred and recognized as an adjustment to the hedged asset or
liability. Deferred gains or losses on such futures contracts are amortized
over the life of the acquired asset or liability as a yield adjustment or
through net realized capital gains or losses upon disposal of an asset.
Changes in the fair value of futures contracts that do not qualify as
hedges are recorded in net realized capital gains or losses. Hedge
designation requires specific asset or liability identification, a
probability at inception of high correlation with the position underlying
the hedge, and that high correlation be maintained throughout the hedge
period. If a hedging instrument ceases to be highly correlated with the
position underlying the hedge, hedge accounting ceases at that date and
excess gains and losses on the hedging instrument are reflected in net
realized capital gains or losses.
Interest rate swap agreements which are designated as interest rate risk
management instruments at inception are accounted for using the accrual
method. Accordingly, the difference between amounts
F-9
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Investments (Continued)
paid and received on such agreements is reported in net investment income.
There is no recognition in the Consolidated Balance Sheets for changes in
the fair value of the agreement.
Warrants represent the right to purchase specific securities and are
accounted for as hedges. Upon exercise, the cost of the warrants are added
to the basis of the securities purchased.
Deferred Policy Acquisition Costs
Certain costs of acquiring insurance business are deferred. These costs,
all of which vary with and are primarily related to the production of new
and renewal business, consist principally of commissions, certain expenses
of underwriting and issuing contracts, and certain agency expenses. For
fixed ordinary life contracts, such costs are amortized over expected
premium-paying periods (up to 20 years). For universal life and certain
annuity contracts, such costs are amortized in proportion to estimated
gross profits and adjusted to reflect actual gross profits over the life of
the contracts (up to 20 years). Deferred policy acquisition costs are
written off to the extent that it is determined that future policy premiums
and investment income or gross profits are not adequate to cover related
losses and expenses.
Insurance Reserve Liabilities
Future policy benefits include reserves for universal life, immediate
annuities with life contingent payouts and traditional life insurance
contracts. Reserves for universal life contracts are equal to cumulative
deposits less charges and withdrawals plus credited interest thereon.
Reserves for immediate annuities with life contingent payouts and
traditional life insurance contracts are computed on the basis of assumed
investment yield, mortality, and expenses, including a margin for adverse
deviations. Such assumptions generally vary by plan, year of issue and
policy duration. Reserve interest rates range from 2.25% to 12.00% for all
years presented. Investment yield is based on the Company's experience.
Mortality and withdrawal rate assumptions are based on relevant Aetna
experience and are periodically reviewed against both industry standards
and experience.
Policyholders' funds left with the Company include reserves for deferred
annuity investment contracts and immediate annuities without life
contingent payouts. Reserves on such contracts are equal to cumulative
deposits less charges and withdrawals plus credited interest thereon (rates
range from 3.50% to 9.50% for all years presented) net of adjustments for
investment experience that the Company is entitled to reflect in future
credited interest. Reserves on contracts subject to experience rating
reflect the rights of contractholders, plan participants and the Company.
Unpaid claims for all lines of insurance include benefits for reported
losses and estimates of benefits for losses incurred but not reported.
F-10
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Premiums, Charges Assessed Against Policyholders, Benefits and Expenses
For universal life and certain annuity contracts, charges assessed against
policyholders' funds for the cost of insurance, surrender charges,
actuarial margin and other fees are recorded as revenue in charges assessed
against policyholders. Other amounts received for these contracts are
reflected as deposits and are not recorded as revenue. Life insurance
premiums, other than premiums for universal life and certain annuity
contracts, are recorded as premium revenue when due. Related policy
benefits are recorded in relation to the associated premiums or gross
profit so that profits are recognized over the expected lives of the
contracts. When annuity payments with life contingencies begin under
contracts that were initially investment contracts, the accumulated balance
in the account is treated as a single premium for the purchase of an
annuity and reflected as an offsetting amount in both premiums and current
and future benefits in the Consolidated Statements of Income.
Separate Accounts
Assets held under variable universal life and variable annuity contracts
are segregated in Separate Accounts and are invested, as designated by the
contractholder or participant under a contract, in shares of mutual funds
which are managed by the Company, or other selected mutual funds not
managed by the Company.
Separate Accounts assets and liabilities are carried at fair value except
for those relating to a guaranteed interest option. Since the Company bears
the investment risk where the contract is held to maturity, the assets of
the Separate Account supporting the guaranteed interest option are carried
at an amortized cost of $658.6 million for 1997 (fair value $668.7 million)
and $515.6 million for 1996 (fair value $523.0 million). Reserves relating
to the guaranteed interest option are maintained at fund value and reflect
interest credited at rates ranging from 4.10% to 8.00% in both 1997 and in
1996.
Separate Accounts assets and liabilities are shown as separate captions in
the Consolidated Balance Sheets. Deposits, investment income and net
realized and unrealized capital gains and losses of the Separate Accounts
are not reflected in the Consolidated Statements of Income (with the
exception of realized capital gains and losses on the sale of assets
supporting the guaranteed interest option). The Consolidated Statements of
Cash Flows do not reflect investment activity of the Separate Accounts.
Income Taxes
The Company is included in the consolidated federal income tax return of
Aetna. The Company is taxed at regular corporate rates after adjusting
income reported for financial statement purposes for certain items.
Deferred income tax expenses/benefits result from changes during the year
in cumulative temporary differences between the tax basis and book basis of
assets and liabilities.
F-11
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments
Debt securities available for sale as of December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ------
(millions)
<S> <C> <C> <C> <C>
U.S. government and government
agencies and authorities $1,219.7 $74.0 $0.1 $1,293.6
States, municipalities and political
subdivisions 0.3 -- -- 0.3
U.S. corporate securities:
Financial 2,370.7 84.6 1.3 2,454.0
Food & fiber 195.4 9.3 -- 204.7
Healthcare & consumer products 728.5 27.0 2.6 752.9
Media & broadcast 252.9 14.7 0.1 267.5
Natural resources 143.5 5.5 - 149.0
Transportation & capital goods 528.2 33.2 0.1 561.3
Utilities 521.3 23.5 0.9 543.9
Other corporate securities 96.9 3.2 - 100.1
---------- -------- -------- -----------
Total U.S. corporate securities 4,837.4 201.0 5.0 5,033.4
Foreign Securities:
Government 612.5 36.7 23.6 625.6
Utilities 177.5 28.7 -- 206.2
Other 857.9 27.7 42.8 842.8
---------- -------- -------- -----------
Total foreign securities 1,647.9 93.1 66.4 1,674.6
Residential mortgage-backed securities:
Pass-throughs 784.4 71.3 2.0 853.7
Collateralized mortgage obligations 2,280.5 137.4 2.0 2,415.9
---------- -------- -------- -----------
Total residential mortgage-
backed securities 3,064.9 208.7 4.0 3,269.6
Commercial/Multifamily mortgage-
backed securities 1,127.8 34.0 0.4 1,161.4
Other asset-backed securities 1,014.2 17.1 0.4 1,030.9
---------- -------- -------- -----------
Total Debt Securities $12,912.2 $627.9 $76.3 $13,463.8
========== ======== ======== ===========
</TABLE>
F-12
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
Debt securities available for sale as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ------
(millions)
<S> <C> <C> <C> <C>
U.S. government and government
agencies and authorities $1,072.4 $20.5 $4.5 $1,088.4
States, municipalities and political
subdivisions 6.0 1.2 -- 7.2
U.S. corporate securities:
Financial 2,143.4 43.1 9.7 2,176.8
Food & fiber 198.2 4.6 1.3 201.5
Healthcare & consumer products 735.9 20.2 6.3 749.8
Media & broadcast 274.9 7.0 2.8 279.1
Natural resources 187.7 4.5 0.4 191.8
Transportation & capital goods 521.9 22.0 1.8 542.1
Utilities 448.8 14.8 2.8 460.8
Other corporate securities 141.5 3.0 -- 144.5
--------- --------- -------- ---------
Total U.S. corporate securities 4,652.3 119.2 25.1 4,746.4
Foreign Securities:
Government 758.6 36.0 5.7 788.9
Utilities 187.8 16.1 -- 203.9
Other 945.5 30.9 6.3 970.1
--------- -------- --------- ---------
Total foreign securities 1,891.9 83.0 12.0 1,962.9
Residential mortgage-backed securities:
Pass-throughs 792.2 78.3 3.1 867.4
Collateralized mortgage obligations 2,227.8 94.9 13.7 2,309.0
--------- --------- -------- ---------
Total residential mortgage-
backed securities 3,020.0 173.2 16.8 3,176.4
Commercial/Multifamily mortgage-
backed securities 1,008.7 24.8 5.6 1,027.9
Other asset-backed securities 887.8 10.7 2.2 896.3
--------- -------- --------- --------
Total Debt Securities $12,539.1 $432.6 $66.2 $12,905.5
========= ======== ========= ========
</TABLE>
F-13
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
At December 31, 1997 and 1996, net unrealized appreciation of $551.6
million and $366.4 million, respectively, on available-for-sale debt
securities included $429.3 million and $288.5 million, respectively,
related to experience rated contracts, which were not reflected in
shareholder's equity but in future policy benefits and policyholders' funds
left with the Company.
The carrying and fair value of debt securities for the year ended December
31, 1997 are shown below by contractual maturity. Actual maturities may
differ from contractual maturities because securities may be restructured,
called, or prepaid.
Amortized Fair
Cost Value
--------- ------
(millions)
Due to mature:
One year or less $367.3 $367.6
After one year through five years 2,165.1 2,195.4
After five years through ten years 2,367.3 2,407.0
After ten years 2,805.6 3,031.9
Mortgage-backed securities 4,192.7 4,431.0
Other asset-backed securities 1,014.2 1,030.9
--------- ---------
Total $12,912.2 $13,463.8
========= =========
At December 31, 1997 and 1996, debt securities carried at $8.2 million and
$7.6 million, respectively, were on deposit as required by regulatory
authorities.
The Company did not have any investments in a single issuer, other than
obligations of the U.S. government, with a carrying value in excess of 10%
of the Company's shareholder's equity at December 31, 1997.
F-14
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
Included in the Company's debt securities were residential collateralized
mortgage obligations ("CMOs") supporting the following:
<TABLE>
<CAPTION>
1997 1996
--------------------- ------------------------
Fair Amortized Fair Amortized
Value Cost Value Cost
-------- -------- -------- --------
(millions)
<S> <C> <C> <C> <C>
Total residential CMOs(1) $2,415.9 $2,280.5 $2,309.0 $2,227.8
======== ======== ======== ========
Percentage of total:
Supporting experience rated products 81.6% 84.2%
Supporting remaining products 18.4% 15.8%
----- -----
100.0% 100.0%
===== =====
</TABLE>
(1) At December 31, 1997 and 1996, approximately 73% and 71%,
respectively, of the Company's residential CMO holdings were
backed by government agencies such as GNMA, FNMA, FHLMC.
There are various categories of CMOs which are subject to different degrees
of risk from changes in interest rates and, for nonagency-backed CMOs,
defaults. The principal risks inherent in holding CMOs are prepayment and
extension risks related to dramatic decreases and increases in interest
rates resulting in the repayment of principal from the underlying mortgages
either earlier or later than originally anticipated. At December 31, 1997
and 1996, approximately 4% and 3%, respectively, of the Company's CMO
holdings were invested in types of CMOs which are subject to more
prepayment and extension risk than traditional CMOs (such as interest- or
principal-only strips).
F-15
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
Investments in equity securities available for sale were as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
(millions)
1997
Equity Securities $210.0 $21.3 $0.1 $231.2
====== ===== ==== ======
1996
Equity Securities $184.9 $16.3 $0.8 $200.4
====== ===== ==== ======
3. Financial Instruments
Estimated Fair Value
--------------------
The carrying values and estimated fair values of certain of the Company's
financial instruments at December 31, 1997 and 1996 were as follows:
1997 1996
-------------------- -----------------
Carrying Fair Carrying Fair
Value Value Value Value
--------- ------ -------- -----
(millions)
Assets:
Mortgage loans $ 12.8 $ 12.4 $ 13.0 $ 13.2
Liabilities:
Investment contract
liabilities:
With a fixed maturity $ 1,030.3 $1,005.4 $1,014.1 $1,028.8
Without a fixed
maturity 10,113.2 9,587.5 9,649.6 9,427.6
Fair value estimates are made at a specific point in time, based on
available market information and judgments about the financial instrument,
such as estimates of timing and amount of future cash flows. Such estimates
do not reflect any premium or discount that could result from offering for
sale at one time the Company's entire holdings of a particular financial
instrument, nor do they consider the tax impact of the realization of
unrealized gains or losses. In many cases, the fair value estimates cannot
be substantiated by comparison to independent markets, nor can the
disclosed value be realized in immediate settlement of the instrument. In
evaluating the Company's management of interest rate, price and liquidity
risks, the fair values of all assets and liabilities should be taken into
consideration, not only those presented above.
F-16
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
3. Financial Instruments (Continued)
Estimated Fair Value (Continued)
The following valuation methods and assumptions were used by the Company in
estimating the fair value of the above financial instruments:
Mortgage loans: Fair values are estimated by discounting expected mortgage
loan cash flows at market rates which reflect the rates at which similar
loans would be made to similar borrowers. The rates reflect management's
assessment of the credit quality and the remaining duration of the loans.
Investment contract liabilities (included in policyholders' funds left with
the Company):
With a fixed maturity: Fair value is estimated by discounting cash flows at
interest rates currently being offered by, or available to, the Company for
similar contracts.
Without a fixed maturity: Fair value is estimated as the amount payable to
the contractholder upon demand. However, the Company has the right under
such contracts to delay payment of withdrawals which may ultimately result
in paying an amount different than that determined to be payable on demand.
Off-Balance-Sheet and Other Financial Instruments (including Derivative
Instruments)
The Company uses off-balance-sheet and other financial instruments
primarily to manage portfolio risks, including interest rate,
prepayment/call, credit, price, and liquidity risks. In 1997 and 1996,
Treasury futures contracts were used to manage interest rate risk in the
Company's bond portfolio; and, in 1996, stock index futures contracts were
used to manage price risk in the Company's equity portfolio. In 1996 and
1995, interest rate swaps and forward commitments to enter into interest
rate swaps, respectively, were also used to manage interest rate risk in
the Company's bond portfolio.
Futures Contracts:
Futures contracts represent commitments to either purchase or sell
securities at a specified future date and at a specified price or yield.
Futures contracts trade on organized exchanges and, therefore, have minimal
credit risk. Cash settlements are made daily based on changes in the prices
of the underlying assets. There were no futures contracts open as of
December 31, 1997 and 1996.
Interest Rate Swaps:
Under interest rate swaps, the Company agrees with other parties to
exchange interest amounts calculated by reference to an agreed notional
principal amount. Generally, no cash is exchanged at the outset of the
contract and no principal payments are made. A single net payment is
usually made by one counterparty at each due date or upon termination of
the contract. The Company would be
F-17
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
3. Financial Instruments (Continued)
Off-Balance-Sheet and Other Financial Instruments (Including Derivative
Instruments) (Continued)
exposed to credit-related losses in the event of nonperformance by
counterparties to financial instruments, however, the Company controls its
exposure to credit risk through credit approvals, credit limits and regular
monitoring procedures. The credit exposure of interest rate swaps is
represented by the fair value (market value) of contracts with a positive
fair value (market value) at the reporting date. There were no interest
rate swap agreements open as of December 31, 1997 and 1996.
During 1995, the Company received $0.4 million for writing call options on
underlying securities. The Company did not write any call options in 1997
and 1996.
Warrants:
Warrants are instruments giving the Company the right, but not the
obligation to buy a security at a given price during a specified period. As
of December 31, 1997 and 1996, the Company had open warrants to purchase
equity securities with a fair value of $0.6 million and $0.3 million,
respectively.
Debt Instruments with Derivative Characteristics:
The Company also had investments in certain debt instruments with
derivative characteristics, including those whose market value is at least
partially determined by, among other things, levels of or changes in
domestic and/or foreign interest rates (short or long term), exchange
rates, prepayment rates, equity markets or credit ratings/spreads. The
amortized cost and fair value of these securities, included in the debt
securities portfolio, as of December 31, 1997 was as follows:
Amortized Fair
Cost Value
--------- ----
(millions)
Residential collateralized mortgage
obligations $2,280.5 $2,415.9
Principal-only strips (included above) 59.0 67.0
Interest-only strips (included above) 12.8 24.3
Other structured securities with derivative
characteristics (1) 107.4 105.2
(1) Represents non-leveraged instruments whose fair values and credit
risk are based on underlying securities, including fixed income
securities and interest rate swap agreements.
F-18
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
4. Net Investment Income
Sources of net investment income were as follows:
1997 1996 1995
---- ---- ----
(millions)
Debt securities $962.8 $945.3 $891.5
Nonredeemable preferred stock 13.7 5.9 4.2
Investment in affiliated
mutual funds 4.9 14.3 14.9
Mortgage loans 1.3 2.2 1.4
Policy loans 19.9 18.4 13.7
Reinsurance loan to affiliate 37.5 44.1 46.5
Cash equivalents 44.2 29.4 38.9
Other 10.0 2.1 8.4
-------- -------- --------
Gross investment income 1,094.3 1,061.7 1,019.5
Less investment expenses (13.8) (16.1) (15.2)
-------- -------- --------
Net investment income $1,080.5 $1,045.6 $1,004.3
======== ======== ========
Net investment income includes amounts allocable to experience rated
contractholders of $823.1 million, $787.6 million and $744.2 million for
the years ended December 31, 1997, 1996 and 1995, respectively. Interest
credited to contractholders is included in current and future benefits.
5. Dividend Restrictions and Shareholder's Equity
The Company paid $17.3 million and $3.5 million in cash dividends to HOLDCO
in 1997 and 1996, respectively.
The amount of dividends that may be paid to the shareholder in 1998 without
prior approval by the Insurance Commissioner of the State of Connecticut is
$77.6 million.
The Insurance Department of the State of Connecticut (the "Department")
recognizes as net income and shareholder's capital and surplus 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. Statutory net income was
$80.5 million, $57.8 million and $70.0 million for the years ended December
31, 1997, 1996 and 1995, respectively. Statutory capital and surplus was
$778.7 million and $713.6 million as of December 31, 1997 and 1996,
respectively.
As of December 31, 1997 the Company does not utilize any statutory
accounting practices which are not prescribed by state regulatory
authorities that, individually or in the aggregate, materially affect
statutory capital and surplus.
F-19
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations
Realized capital gains or losses are the difference between the carrying
value and sale proceeds of specific investments sold.
Net realized capital gains on investments were as follows:
1997 1996 1995
---- ---- ----
(millions)
Debt securities $22.5 $11.1 $32.8
Equity securities 9.9 8.6 8.3
Other 3.6 -- 0.2
------ -------- ------
Pretax realized capital gains $36.0 $19.7 $41.3
====== ======== ======
After tax realized capital gains $23.2 $13.0 $25.8
====== ======== ======
Net realized capital gains of $96.1 million, $53.1 million and $61.1
million for 1997, 1996 and 1995, respectively, allocable to experience
rated contracts, were deducted from net realized capital gains and an
offsetting amount was reflected in policyholders' funds left with the
Company. Net unamortized gains were $138.1 million and $53.3 million at
December 31, 1997 and 1996, respectively.
Proceeds from the sale of available-for-sale debt securities and the
related gross gains and losses were as follows:
1997 1996 1995
----- ----- ----
(millions)
Proceeds on Sales $5,311.3 $5,182.2 $4,207.2
Gross Gains 25.8 24.3 44.6
Gross Losses 3.3 13.2 11.8
F-20
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations (Continued)
Changes in shareholder's equity related to changes in accumulated other
comprehensive income (unrealized capital gains and losses on securities)
(excluding those related to experience rated contractholders) were as
follows:
1997 1996 1995
---- ---- ----
(millions)
Debt securities $44.3 $(100.1) $255.9
Equity securities 5.6 (10.5) 27.3
Limited partnership -- -- 1.8
----- ------- ------
49.9 (110.6) 285.0
Increase (decrease) in deferred
income taxes (See Note 8) 17.5 (38.6) (36.5)
----- ------- ------
Net changes in accumulated other
comprehensive income $32.4 $(72.0) $321.5
===== ======= ======
Net unrealized capital gains allocable to experience rated contracts of
$356.7 million and $72.6 million at December 31, 1997 and $245.2 million
and $43.3 million at December 31, 1996 are reflected on the Consolidated
Balance Sheets in policyholders' funds left with the Company and future
policy benefits, respectively, and are not included in shareholder's
equity.
Shareholder's equity included the following accumulated other comprehensive
income, which are net of amounts allocable to experience rated
contractholders, at December 31:
1997 1996 1995
---- ---- ----
(millions)
Debt securities
Gross unrealized capital gains $140.6 $101.7 $179.3
Gross unrealized capital losses (18.4) (23.8) (1.3)
----- ----- -----
122.2 77.9 178.0
Equity securities
Gross unrealized capital gains 21.2 16.3 27.2
Gross unrealized capital losses (0.1) (0.8) (1.2)
---- ---- -----
21.1 15.5 26.0
Deferred income taxes (See Note 8) 50.4 32.9 71.5
---- ---- -----
Net accumulated other
comprehensive income $92.9 $60.5 $132.5
==== ==== =====
F-21
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations (Continued)
Changes in accumulated other comprehensive income related to changes in
unrealized gains (losses) on securities (excluding those related to
experience rated contractholders) were as follows:
1997 1996 1995
---- ---- ----
(millions)
Unrealized holding gains (losses)
arising during the period (1) $98.8 $(14.8) $390.5
Less: reclassification adjustment
for gains and other items included
in net income (2) 66.4 57.2 69.0
----- ------ ------
Net unrealized gains (losses)
on securities $32.4 $(72.0) $321.5
===== ====== ======
(1) Pretax unrealized holding gains (losses) arising during the
period were $152.0 million, ($22.8) million and $600.8 million
for 1997, 1996 and 1995, respectively.
(2) Pretax reclassification adjustments for gains and other items
included in net income were $102.4 million, $87.7 million and
$107.5 million for 1997, 1996 and 1995, respectively.
7. Severance and Facilities Charges
Severance and facilities charges during 1996, as described below, included
the following (pretax):
<TABLE>
<CAPTION>
Vacated
Asset Leased Corporate
(Millions) Severance Write-off Property Other Allocation Total
-------------------------- --------- --------- --------- ----- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Financial Services $29.1 $1.0 $1.3 $1.7 $ -- $33.1
Individual Life Insurance 12.5 0.4 0.5 0.8 -- 14.2
Corporate Allocation -- -- -- -- 14.0 14.0
--------- --------- --------- ----- ---------- ---------
Total Company $41.6 $1.4 $1.8 $2.5 $14.0 $61.3
-------------------------- --------- --------- --------- ----- ---------- ---------
</TABLE>
In the third quarter of 1996, the Company recorded a $30.7 million after
tax ($47.3 million pretax) charge principally related to actions taken or
expected to be taken to improve its cost structure relative to its
competitors. The severance portion of the charge is based on a plan to
eliminate 702 positions (primarily customer service, sales and information
technology support staff). The facilities portion of the charge is based on
a plan to consolidate sales/service field offices.
F-22
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
7. Severance and Facilities Charges (Continued)
In addition to the above charge, Aetna recorded a facilities and severance
charge in the second quarter of 1996, primarily as a result of actions
taken or expected to be taken to reduce the level of corporate expenses and
other costs previously absorbed by Aetna's property-casualty operations,
which were sold in April 1996. The cost allocated to the Company associated
with this charge was $9.1 million after tax ($14.0 million pretax).
Activity for 1997 and 1996 within the severance and facilities reserve
(pretax, in millions) and the number of positions eliminated related to
such actions were as follows:
(Millions) Reserve Positions
----------------------------------- ---------- ---------
Balance at December 31, 1995 $ -- --
Severance and facilities charges 47.3 702
Corporate Allocation 14.0 --
Actions taken (1) (13.4) (178)
---------- ---------
Balance at December 31, 1996 47.9 524
Actions taken (1) (27.1) (163)
---------- ---------
Balance at December 31, 1997 $20.8 361
========== =========
(1) Includes $15.9 million and $8.0 million in 1997 and 1996,
respectively, of severance-related actions and $7.9 million and $4.1
million in 1997 and 1996, respectively, of corporate
allocation-related actions.
The Company's severance actions are expected to be substantially completed
by September 30, 1998. The corporate allocation actions were substantially
completed in 1997.
F-23
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
8. Income Taxes
The Company is included in the consolidated federal income tax return, the
Illinois Unitary return and the Connecticut and the New York combined state
income tax returns of Aetna. Aetna allocates to each member an amount
approximating the tax it would have incurred were it not a member of the
consolidated group, and credits the member for the use of its tax saving
attributes used in the consolidated federal income tax return.
Income taxes for the years ended December 31, consist of:
1997 1996 1995
---- ---- ----
(millions)
Current taxes:
Income Taxes:
Federal income tax $64.5 $50.9 $82.9
State income tax 3.7 3.7 3.2
Net realized capital gains 45.6 25.3 28.5
----- ---- ----
113.8 79.9 114.6
----- ---- -----
Deferred taxes (benefits):
Income taxes:
Federal 8.4 (3.5) (14.4)
Net realized capital gains (losses) (32.8) (18.6) (12.9)
----- ----- -----
(24.4) (22.1) (27.3)
----- ----- -----
Total $89.4 $57.8 $87.3
===== ===== =====
Income taxes were different from the amount computed by applying the
federal income tax rate to income before income taxes for the following
reasons:
1997 1996 1995
---- ---- ----
(millions)
Income before income taxes $294.7 $198.9 $263.2
Tax rate 35% 35% 35%
------- ------- -------
Application of the tax rate 103.1 69.6 92.1
------- ------- -------
Tax effect of:
State income tax, net of
federal benefit 2.4 2.4 2.1
Excludable dividends (15.9) (8.7) (9.3)
Other, net (0.2) (5.5) 2.4
------- ------- --------
Income taxes $89.4 $57.8 $87.3
======= ======= ========
F-24
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
8. Income Taxes (Continued)
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities at December 31 are presented below:
1997 1996
---- ----
(millions)
Deferred tax assets:
Insurance reserves $415.8 $344.6
Unrealized gains allocable to
experience rated contracts 150.1 100.8
Investment losses 6.6 7.5
Postretirement benefits other
than pensions 26.3 27.0
Deferred compensation 31.2 25.0
Pension (3.6) 7.6
Restructuring charge 9.5 17.6
Depreciation 3.9 2.6
Other 8.8 9.1
--------- --------
Total gross assets 648.6 541.8
Deferred tax liabilities:
Deferred policy acquisition costs 515.6 482.1
Market discount 5.1 6.8
Net unrealized capital gains 200.5 133.7
Other (0.6) (0.3)
--------- ---------
Total gross liabilities 720.6 622.3
--------- ---------
Net deferred tax liability $72.0 $80.5
========= =========
Net unrealized capital gains and losses are presented in shareholder's
equity net of deferred taxes. As of December 31, 1997 and 1996, no
valuation allowances were required for unrealized capital gains and losses.
The "Policyholders' Surplus Account," which arose under prior tax law, is
generally that portion of a life insurance company's statutory income that
has not been subject to taxation. As of December 31, 1983, no further
additions could be made to the Policyholders' Surplus Account for tax
return purposes under the Deficit Reduction Act of 1984. The balance in
such account was approximately $17.2 million at December 31, 1997. This
amount would be taxed only under certain conditions. No income taxes have
been provided on this amount since management believes the conditions under
which such taxes would become payable are remote.
F-25
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
8. Income Taxes (Continued)
The Internal Revenue Service ("Service") has completed examinations of the
consolidated federal income tax returns of Aetna through 1990. Discussions
are being held with the Service with respect to proposed adjustments.
Management believes there are adequate defenses against, or sufficient
reserves to provide for, any such adjustments. The Service has commenced
its examinations for the years 1991 through 1994.
9. Benefit Plans
Employee Pension Plans - The Company, in conjunction with Aetna, has
noncontributory defined benefit pension plans covering substantially all
employees. The plans provide pension benefits based on years of service and
average annual compensation (measured over 60 consecutive months of highest
earnings in a 120-month period). Contributions are determined using the
Projected Unit Credit Method and, for qualified plans subject to ERISA
requirements, are limited to amounts that are tax-deductible. As of
December 31, 1997, Aetna's accrued pension cost has been allocated to its
subsidiaries, including the Company, under an allocation based on eligible
salaries. Data on a separate company basis regarding the proportionate
share of the projected benefit obligation and plan assets is not available.
The accumulated benefit obligation and plan assets are recorded by Aetna.
As of the measurement date (i.e., September 30), the accumulated plan
assets exceeded accumulated plan benefits. Allocated pretax charges to
operations for the pension plan (based on the Company's total salary cost
as a percentage of Aetna's total salary cost) were $2.7 million, $4.3
million and $6.1 million for the years ended December 31, 1997, 1996 and
1995, respectively.
Employee Postretirement Benefits - In addition to providing pension
benefits, Aetna currently provides certain health care and life insurance
benefits for retired employees. A comprehensive medical and dental plan is
offered to all full-time employees retiring at age 50 with 15 years of
service or at age 65 with 10 years of service. There is a cap on the
portion of the cost paid by the Company relating to medical and dental
benefits. Retirees are generally required to contribute to the plans based
on their years of service with Aetna. The costs to the Company associated
with the Aetna postretirement plans for 1997, 1996 and 1995 were $2.7
million, $1.8 million and $1.4 million, respectively.
As of December 31, 1996, Aetna transferred to the Company approximately
$77.7 million of accrued liabilities, primarily related to the pension and
postretirement benefit plans described above, that had been previously
recorded by Aetna. The after tax amount of this transfer (approximately
$50.5 million) is reported as a reduction in retained earnings. In 1997,
other changes in shareholder's equity includes an additional $0.8 million
reduction reflecting revisions to the allocation of these accrued
liabilities.
Agent Pension Plans - The Company, in conjunction with Aetna, has a
non-qualified pension plan covering certain agents. The plan provides
pension benefits based on annual commission earnings. As of the measurement
date (i.e., September 30), the accumulated plan assets exceeded accumulated
plan benefits.
F-26
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
9. Benefit Plans (Continued)
Agent Postretirement Benefits - The Company, in conjunction with Aetna,
also provides certain postretirement health care and life insurance
benefits for certain agents. The costs to the Company associated with the
agents' postretirement plans for 1997, 1996 and 1995 were $0.6 million,
$0.7 million and $0.8 million, respectively.
Incentive Savings Plan - Substantially all employees are eligible to
participate in a savings plan under which designated contributions, which
may be invested in common stock of Aetna or certain other investments, are
matched, up to 5% of compensation, by Aetna. Pretax charges to operations
for the incentive savings plan were $4.4 million, $5.4 million and $4.9
million in 1997, 1996 and 1995, respectively.
Stock Plans - Aetna has a stock incentive plan that provides for stock
options, deferred contingent common stock or equivalent cash awards or
restricted stock to certain key employees. Executive and middle management
employees may be granted options to purchase common stock of Aetna at or
above the market price on the date of grant. Options generally become 100%
vested three years after the grant is made, with one-third of the options
vesting each year. Aetna does not recognize compensation expense for stock
options granted at or above the market price on the date of grant under its
stock incentive plans. In addition, executives may be granted incentive
units which are rights to receive common stock or an equivalent value in
cash. The incentive units may vest within a range from 0% to 175% at the
end of a four year period based on the attainment of performance goals. The
costs to the Company associated with the Aetna stock plans for 1997, 1996
and 1995, were $2.9 million, $8.1 million and $6.3 million, respectively.
As of December 31, 1996, Aetna transferred to the Company approximately
$1.1 million of deferred tax benefits related to stock options. This amount
is reported as an increase in retained earnings. In 1997, other changes in
shareholder's equity include an additional increase of $2.3 million
reflecting revisions to the allocation of the deferred tax benefit.
10. Related Party Transactions
The Company is compensated by the Separate Accounts for bearing mortality
and expense risks pertaining to variable life and annuity contracts. Under
the insurance contracts, the Separate Accounts pay the Company a daily fee
which, on an annual basis, ranges, depending on the product, from 0.10% to
1.90% of their average daily net assets. The Company also receives fees
from Aetna managed mutual funds for serving as investment adviser. Under
the advisory agreements, these funds pay the Company a daily fee which, on
an annual basis, ranges, depending on the fund, from 0.25% to 0.85% of
their average daily net assets. The Company also receives fees (expressed
as a percentage of the average daily net assets) from some of its funds for
providing administration services, and from The Aetna Series Fund for
providing shareholder services and promoting sales. The amount of
compensation and fees received from the Separate Accounts and mutual funds,
included in charges assessed against policyholders, amounted to $271.2
million, $186.8 million and $128.1 million in 1997, 1996 and 1995,
respectively. The Company may waive advisory fees at its discretion.
F-27
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
10. Related Party Transactions (Continued)
The Company acts as an investment adviser for its affiliated mutual funds.
Since August 1996, Aeltus Investment Management, Inc. ("Aeltus"), a wholly
owned subsidiary of HOLDCO and an affiliate of the Company, has been acting
as Subadvisor for affiliated mutual funds and adviser for most of the
General Account assets. Fees paid by the Company to Aeltus, included in
both charges assessed against policyholders and net investment income, on
an annual basis, range from 0.06% to 0.55% of the average daily net assets
under management. For the years ended December 31, 1997 and 1996, the
Company paid $45.5 million and $16.0 million in such fees.
The Company may, from time to time, make reimbursements to an Aetna managed
mutual fund for some or all of its operating expenses. Reimbursement
arrangements may be terminated at any time without notice.
Since 1981, all domestic individual non-participating life insurance of
Aetna and its subsidiaries has been issued by the Company. Effective
December 31, 1988, the Company entered into a reinsurance agreement with
Aetna Life Insurance Company ("Aetna Life") in which substantially all of
the non-participating individual life and annuity business written by Aetna
Life prior to 1981 was assumed by the Company. A $6.1 million and a $108.0
million commission, paid by the Company to Aetna Life in 1996 and 1988,
respectively, was capitalized as deferred policy acquisition costs. In
consideration for the assumption of this business, a loan was established
relating to the assets held by Aetna Life which support the insurance
reserves. Effective January 1, 1997, this agreement has been amended to
transition (based on underlying investment rollover in Aetna Life) from a
modified coinsurance to a coinsurance arrangement. As a result of this
change, reserves will be ceded to the Company from Aetna Life as investment
rollover occurs and the loan previously established will be reduced. The
Company maintained insurance reserves of $574.5 million ($397.2 million
relating to the modified coinsurance agreement and $177.3 million relating
to the coinsurance agreement) and $628.3 million as of December 31, 1997
and 1996, respectively, relating to the business assumed. The fair value of
the loan relating to assets held by Aetna Life was $412.3 million and
$625.3 million as of December 31, 1997 and 1996, respectively, and is based
upon the fair value of the underlying assets. Premiums of $176.7 million,
$25.3 million and $28.0 million and current and future benefits of $183.9
million, $39.5 million and $43.0 million were assumed in 1997, 1996 and
1995, respectively.
Investment income of $37.5 million, $44.1 million and $46.5 million was
generated from the reinsurance loan to affiliate in 1997, 1996 and 1995,
respectively.
On December 16, 1988, the Company assumed $25.0 million of premium revenue
from Aetna Life for the purchase and administration of a life contingent
single premium variable payout annuity contract. In addition, the Company
also is responsible for administering fixed annuity payments that are made
to annuitants receiving variable payments. Reserves of $32.5 million and
$28.9 million were maintained for this contract as of December 31, 1997 and
1996, respectively.
Effective February 1, 1992, the Company increased its retention limit per
individual life to $2.0 million and entered into a reinsurance agreement
with Aetna Life to reinsure amounts in excess of this
F-28
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
10. Related Party Transactions (Continued)
limit, up to a maximum of $8.0 million on any new individual life business,
on a yearly renewable term basis. Premium amounts related to this agreement
were $5.9 million, $5.2 million and $3.2 million for 1997, 1996 and 1995,
respectively.
Effective October 1, 1997, the Company entered into a reinsurance agreement
with Aetna Life to assume amounts in excess of $0.2 million for certain of
its participating life insurance, on a yearly renewable term basis. Premium
amounts related to this agreement were $0.7 million in 1997.
The Company received a capital contribution of $10.4 million in cash from
HOLDCO in 1996. The Company received no capital contributions in 1997 or
1995.
The Company paid $17.3 million and $3.5 million in cash dividends to HOLDCO
in 1997 and 1996, respectively. In 1995, the Company dividended $2.9
million in the form of two of its subsidiaries, Systematized Benefits
Administrators, Inc. and Aetna Investment Services, Inc., to Aetna
Retirement Services, Inc. (the Company's former parent).
Premiums due and other receivables include $37.0 million and $2.8 million
due from affiliates in 1997 and 1996, respectively. Other liabilities
include $1.2 million and $10.7 million due to affiliates for 1997 and 1996,
respectively.
As of December 31, 1997, Aetna transferred to the Company $2.5 million
based on its decision not to settle state tax liabilities for the years
1996 and 1997. This amount has been reported as an other increase in
retained earnings.
Substantially all of the administrative and support functions of the
Company are provided by Aetna and its affiliates. The financial statements
reflect allocated charges for these services based upon measures
appropriate for the type and nature of service provided.
11. Reinsurance
The Company utilizes indemnity reinsurance agreements to reduce its
exposure to large losses in all aspects of its insurance business. Such
reinsurance permits recovery of a portion of losses from reinsurers,
although it does not discharge the primary liability of the Company as
direct insurer of the risks reinsured. The Company evaluates the financial
strength of potential reinsurers and continually monitors the financial
condition of reinsurers. Only those reinsurance recoverables deemed
probable of recovery are reflected as assets on the Company's Consolidated
Balance Sheets.
F-29
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
11. Reinsurance (Continued)
The following table includes premium amounts ceded/assumed to/from
affiliated companies as discussed in Note 10 above.
<TABLE>
<CAPTION>
Ceded to Assumed
Direct Other from Other Net
Amount Companies Companies Amount
(millions)
------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
1997
----
Premiums:
Life Insurance $ 35.7 $15.1 $177.4 $198.0
Accident and Health Insurance 5.6 5.6 -- --
Annuities 67.9 -- 1.2 69.1
------- ------------- ----------- ---------
Total earned premiums $109.2 $20.7 $178.6 $267.1
======= ============= =========== =========
1996
----
Premiums:
Life Insurance $ 34.6 $11.2 $25.3 $ 48.7
Accident and Health Insurance 6.3 6.3 -- --
Annuities 84.3 -- 0.6 84.9
------- ------------- ----------- ---------
Total earned premiums $125.2 $17.5 $25.9 $133.6
======= ============= =========== =========
1995
----
Premiums:
Life Insurance $ 28.8 $ 8.6 $28.0 $ 48.2
Accident and Health Insurance 7.5 7.5 -- --
Annuities 164.0 -- 0.5 164.5
------- ------------- ----------- ---------
Total earned premiums $200.3 $16.1 $28.5 $212.7
======= ============= =========== =========
</TABLE>
12. Commitments and Contingent Liabilities
Commitments
Through the normal course of investment operations, the Company commits to
either purchase or sell securities or money market instruments at a
specified future date and at a specified price or yield. The inability of
counterparties to honor these commitments may result in either higher or
lower replacement cost. Also, there is likely to be a change in the value
of the securities underlying the commitments. At December 31, 1997, the
Company had commitments to purchase investments of $38.7 million. The fair
value of the investments at December 31, 1997 approximated $39.0 million.
F-30
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
12. Commitments and Contingent Liabilities (Continued)
Litigation
The Company is involved in numerous lawsuits arising, for the most part, in
the ordinary course of its business operations. While the ultimate outcome
of litigation against the Company cannot be determined at this time, after
consideration of the defenses available to the Company and any related
reserves established, it is not expected to result in liability for amounts
material to the financial condition of the Company, although it may
adversely affect results of operations in future periods.
13. Segment Information (1)
The Company's operations are reported through two major business segments:
Financial Services and Individual Life Insurance. Summarized financial
information for the Company's principal operations was as follows:
1997 1996 1995
--------- --------- ---------
(millions)
Revenue:
Financial Services $1,277.9 $1,195.1 $1,211.3
Individual Life Insurance 620.4 445.7 407.9
--------- --------- ---------
Total revenue $1,898.3 $1,640.8 $1,619.2
========= ========= =========
Income before income taxes: (2)
Financial Services $188.2 $129.9 $160.1
Individual Life Insurance 106.5 83.0 103.1
--------- --------- ---------
Total income before
income taxes $294.7 $212.9 $263.2
========= ========= =========
Net income: (2)
Financial Services $137.5 $94.3 $113.8
Individual Life Insurance 67.8 55.9 62.1
--------- --------- ---------
Net income $205.3 $150.2 $175.9
========= ========= =========
Assets under management: (3)
Financial Services (4) $37,609.3 $27,268.1 $22,534.4
Individual Life Insurance 3,096.1 2,830.5 2,590.9
--------- --------- ---------
Total assets under management 40,705.4 $30,098.6 $25,125.3
========= ========= =========
(1) The 1996 results include severance and facilities charges of
$30.7 million, after tax. Of this charge $21.5 million related to
the Financial Services segment and $9.2 million related to the
Individual Life Insurance segment.
(2) Excludes any effect of the corporate facilities and severance
charge recorded in 1996 which is not directly allocable to the
Financial Services and Individual Life Insurance segments. (Refer
to Note 7).
(3) Excludes net unrealized capital gains (losses) of $551.5 million,
$366.4 million and $797.1 million at December 31, 1997, 1996 and
1995, respectively.
(4) The December 31, 1997 balance includes the transfer of $4,078.5
million of assets under management that were previously reported
by an affiliate.
F-31
<PAGE>
Form No. SAI. 79122-98 ALIAC Ed. May 1998
<PAGE>
VARIABLE ANNUITY ACCOUNT B
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Included in Part A:
Condensed Financial Information
(2) Included in Part B:
Financial Statements of Variable Annuity Account B:
- Statement of Assets and Liabilities as of December 31,
1997
- Statements of Operations and Changes in Net Assets for the
years ended December 31, 1997 and 1996
- Notes to Financial Statements
- Independent Auditors' Report
Financial Statements of the Depositor:
- Independent Auditors' Report
- Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995
- Consolidated Balance Sheets as of December 31, 1997 and
1996
- Consolidated Statements of Changes in Shareholder's Equity
for the years ended December 31, 1997, 1996 and 1995
- Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
- Notes to Consolidated Financial Statements
(b) Exhibits
(1) Resolution of the Board of Directors of Aetna Life Insurance
and Annuity Company establishing Variable Annuity Account B(1)
(2) Not applicable
(3.1) Federated Broker-Dealer Agreement (9/2/94)(2)
(3.2) Alternate Form of Broker-Dealer Agreement (1994)(2)
(4.1) Aetna Growth Plus Group Variable, Fixed or Combination Annuity
Contract (Nonparticipating) (G-CDA-GPI(4/94))
(4.2) Aetna Growth Plus Individual Variable, Fixed or Combination
Annuity Contract (Nonparticipating) (I-CDA-GPI(4/94))
(4.3) Certificate of Group Annuity Coverage (GP1CERT(4/94))
(4.4) Variable Fixed or Combination Annuity Contract
(Nonparticipating) (I-GP1(5/96))(3)
(4.5) Group Variable, Fixed or Combination Annuity Contract
(Nonparticipating) (G-GP1(5/96))(3)
(4.6) Certificate of Group Annuity Coverage (GP1CERT(5/96))(3)
(4.7) Variable Annuity Contract (G-CDA-97(NY))(4)
<PAGE>
(4.8) Variable Annuity Contract Certificate (GMCC-97(NY))(4)
(5.1) Application for Aetna Growth Plus Group Variable, Fixed or
Combination Annuity Contract (Nonparticipating) (GP1APP(4/94))
(5.2) Application for Aetna Growth Plus Individual Variable, Fixed
or Combination Annuity Contract (Nonparticipating)
(I-GP1APP(4/94))
(5.3) Application for Growth Plus (GPAPPNY(1/96))
(6.1) Certificate of Incorporation of Aetna Life Insurance and
Annuity Company(5)
(6.2) Amendment of Certificate of Incorporation of Aetna Life
Insurance and Annuity Company(6)
(6.3) By-Laws as amended September 17, 1997 of Aetna Life Insurance
and Annuity Company(7)
(7) Reinsurance Agreement(8)
(8) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Insurance Management Series and Federated
Advisors dated July 1, 1994(9)
(9) Opinion and Consent of Counsel
(10) Consent of Independent Auditors
(11) Not applicable
(12) Not applicable
(13) Schedule for Computation of Performance Data
(14) Not applicable
(15.1) Powers of Attorney(10)
(15.2) Authorization for Signatures(11)
1. Incorporated by reference to Post-Effective Amendment No. 6 to Registration
Statement on Form N-4 (File No. 33-75986), as filed electronically on April
22, 1996 (Accession No. 0000950146-96-000563).
2. Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form N-4 (File No. 33-79122), as filed electronically on August
16, 1995 (Accession No. 0000950109-95-003265).
3. Incorporated by reference to Post-Effective Amendment No. 7 to Registration
Statement on Form N-4 (File No. 33-79122), as filed electronically on April
22, 1997 (Accession No. 0000950146-97-000631).
4. Incorporated by reference to Post-Effective Amendment No. 32 to Registration
Statement on Form N-4 (File No. 33-34370), as filed electronically on
December 16, 1997 (Accession No. 0000950146-97-001918).
5. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form S-1 (File No. 33-60477), as filed electronically on April
15, 1996 (Accession No. 0000950146-96-000534).
6. Incorporated by reference to Post-Effective Amendment No. 12 to Registration
Statement on Form N-4 (File No. 33-75964), as filed electronically on
February 11, 1997 (Accession No. 0000950146-97-000159).
<PAGE>
7. Incorporated by reference to Post-Effective Amendment No. 12 to Registration
Statement on Form N-4 (File No. 33-91846), as filed electronically on
October 30, 1997 (Accession No. 0000950146-97-001589).
8. Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form N-4 (File No. 33-80750), as filed electronically on August
15, 1995.
9. Incorporated by reference to Post-Effective Amendment No. 27 to Registration
Statement on Form N-4 (file No. 33-34370), as filed electronically on April
16, 1997 (Accession No. 0000950146-97-000617).
10. Incorporated by reference to Post-Effective Amendment No. 9 to Registration
Statement on Form N-4 (File No. 333-01107), as filed electronically on April
7, 1998 (Accession No. 0000950146-98-000564).
11. Incorporated by reference to Post-Effective Amendment No. 5 to Registration
Statement on Form N-4 (File No. 33-75986), as filed electronically on April
12, 1996 (Accession No. 0000912057-96-006383).
<PAGE>
Item 25. Directors and Officers of the Depositor
Name and Principal
Business Address* Positions and Offices with Depositor
- ----------------- ------------------------------------
Thomas J. McInerney Director and President
Shaun P. Mathews Director and Senior Vice President
Catherine H. Smith Director, Chief Financial Officer and Senior Vice
President
Deborah Koltenuk Vice President and Treasurer, Corporate Controller
Frederick D. Kelsven Vice President and Chief Compliance Officer
Kirk P. Wickman Vice President, General Counsel and Corporate Secretary
* The principal business address of all directors and officers listed is 151
Farmington Avenue, Hartford, Connecticut 06156.
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
Incorporated herein by reference to Item 26 of Post-Effective Amendment No.
9 to the Registration Statement on Form N-4 (File No. 333-01107), as filed
electronically on April 7, 1998 (Accession No. 0000950146-98-000564).
Item 27. Number of Contract Owners
As of February 28, 1998, there were 63,194 individuals holding interests in
variable annuity contracts funded through Variable Annuity Account B.
Item 28. Indemnification
Reference is hereby made to Section 33-771(f) of the Connecticut General
Statutes ("C.G.S.") regarding indemnification of directors and Section 33-776(4)
regarding indemnification of officers, employees and agents of Connecticut
corporations. These statutes provide in general that Connecticut corporations
incorporated prior to January 1, 1997 shall indemnify their officers, directors,
employees and agents against "liability" (defined as the obligation to pay a
judgment, settlement, penalty, fine, excise tax in the case of an employee
benefit plan or reasonable expenses incurred with respect to a proceeding). In
the case of a proceeding by or in the right of the corporation, indemnification
is limited to reasonable expenses incurred in connection with the proceeding
against the corporation to which the individual was named a party. The
corporation's obligation to provide such indemnification does not apply unless
(1) the individual has met the standard of conduct set forth in Section 33-771;
and (2) a determination is made (by majority vote of a quorum of the board of
directors who were not parties to the proceeding, or if a quorum cannot be
obtained, by a committee of the board selected as described in Section
33-775(b)(2); by special legal counsel selected by the board of directors or
members thereof as described in Section 33-775(b)(3); by shareholders) that the
individual met the standard set forth in Section 33-771; or (3) the court, upon
application by the individual, determines in view of all the circumstances that
such person is reasonably entitled to be indemnified. Also, unless limited by
its Certificate of Incorporation, a corporation must indemnify an individual who
was wholly successful on the merits or otherwise against reasonable expenses
incurred by him in connection with a proceeding to which he was a party because
of his relationship as director, officer, employee or agent of the corporation.
The statute does specifically authorize a corporation to procure indemnification
insurance on behalf of an individual who is or was a director, officer, employer
or agent of the corporation. Consistent with the statute, Aetna Inc. has
procured insurance from Lloyd's of London and several major United States excess
insurers for its directors and officers and the directors and officers of its
subsidiaries, including the Depositor.
Item 29. Principal Underwriter
(a) In addition to serving as the principal underwriter and depositor for
the Registrant, Aetna Life Insurance and Annuity Company (Aetna) also
acts as the principal underwriter and investment adviser for Portfolio
Partners, Inc., Aetna Variable Encore Fund, Aetna Variable Fund, Aetna
Generation Portfolios, Inc., Aetna Income Shares, Aetna Balanced VP,
Inc. (formerly Aetna Investment Advisers Fund, Inc.), Aetna GET Fund,
and Aetna Variable Portfolios, Inc. (all management investment
companies registered under the Investment Company Act of 1940 (1940
Act)). Effective May 1, 1998, Aetna will no longer be the investment
adviser for Aetna Variable Encore Fund, Aetna Variable Fund, Aetna
Generation Portfolios, Inc., Aetna Income Shares, Aetna Balanced VP,
Inc. (formerly Aetna Investment Advisers Fund, Inc.), Aetna GET Fund,
and Aetna Variable Portfolios, Inc. Additionally, Aetna acts as the
principal underwriter and depositor for Variable Life Account B of
Aetna, Variable Annuity Account C of Aetna and Variable Annuity Account
G of Aetna (separate accounts of Aetna registered as unit investment
trusts under the 1940 Act). Aetna is also the principal underwriter for
Variable Annuity Account I of Aetna Insurance Company of America (AICA)
(a separate account of AICA registered as a unit investment trust under
the 1940 Act).
(b) See Item 25 regarding the Depositor.
<PAGE>
(c) Compensation as of December 31, 1997:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Name of Net Underwriting Compensation on
Principal Discounts and Redemption or Brokerage
Underwriter Commissions Annuitization Commissions Compensation*
- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Aetna Life Insurance $347,583 $29,637,063
and Annuity Company
</TABLE>
* Compensation shown in column 5 includes deductions for mortality and
expense risk guarantees and contract charges assessed to cover costs
incurred in the sales and administration of the contracts issued under
Variable Annuity Account B.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules under it relating to the securities
described in and issued under this Registration Statement are located at the
home office of the Depositor as follows:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156
Item 31. Management Services
Not applicable
Item 32. Undertakings
Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement on
Form N-4 as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than
sixteen months old for as long as payments under the variable annuity
contracts may be accepted;
(b) to include as part of any application to purchase a contract offered by
a prospectus which is part of this registration statement on Form N-4,
a space that an applicant can check to request a Statement of
Additional Information; and
<PAGE>
(c) to deliver any Statement of Additional Information and any financial
statements required to be made available under this Form N-4 promptly
upon written or oral request.
(d) The Company hereby represents that it is relying upon and will comply
with the provisions of Paragraphs (1) through (4) of the SEC Staff's
No-Action Letter dated November 22, 1988 with respect to language
concerning withdrawal restrictions applicable to plans established
pursuant to Section 403(b) of the Internal Revenue Code. See American
Counsel of Life Insurance; SEC No-Action Letter, [1989 Transfer Binder]
Fed. SEC. L. Rep. (CCH) P. 78,904 at 78,523 (November 22, 1988).
(e) Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
(f) Aetna Life Insurance and Annuity Company represents that the fees and
charges deducted under the contracts covered by this registration
statement, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed
by the insurance company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Variable Annuity Account B of Aetna Life Insurance and
Annuity Company, certifies that it meets the requirements of Securities Act Rule
485(b) for effectiveness of this Post-Effective Amendment to its Registration
Statement on Form N-4 (File No. 33-79122 ) and has duly caused this
Post-Effective Amendment to its Registration Statement on Form N-4 (File No.
33-79122 ) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Hartford, State of Connecticut, on the 17th day of
April, 1998.
VARIABLE ANNUITY ACCOUNT B OF
AETNA LIFE INSURANCE AND ANNUITY
COMPANY
(Registrant)
By: AETNA LIFE INSURANCE AND ANNUITY COMPANY
(Depositor)
By: Thomas J. McInerney*
------------------------------------------
Thomas J. McInerney
President
As required by the Securities Act of 1933, this Post-Effective Amendment
No. 8 to the Registration Statement on Form N-4 (File No. 33-79122 ) has been
signed by the following persons in the capacities and on the dates indicated.
Signature Title Date
Thomas J. McInerney* Director and President )
- ------------------------ (principal executive officer) )
Thomas J. McInerney )
)
Shaun P. Mathews* Director ) April
- ------------------------ )
Shaun P. Mathews ) 17, 1998
)
Catherine H. Smith* Director and Chief Financial Officer )
- ------------------------ )
Catherine H. Smith )
)
Deborah Koltenuk* Vice President and Treasurer, )
- ------------------------ Corporate Controller )
Deborah Koltenuk )
By: /s/ Julie E. Rockmore
------------------------------
Julie E. Rockmore
*Attorney-in-Fact
<PAGE>
VARIABLE ANNUITY ACCOUNT B
EXHIBIT INDEX
Exhibit No. Exhibit Page
99-B.1 Resolution of the Board of Directors of Aetna Life *
Insurance and Annuity Company establishing Variable Annuity
Account B
99-B.3.1 Federated Broker-Dealer Agreement (9/2/94) *
99-B.3.2 Alternate Form of Broker-Dealer Agreement (1994) *
99-B.4.1 Aetna Growth Plus Group Variable, Fixed or Combination _______
Annuity Contract (Nonparticipating) (G-CDA-GPI(4/94))
99-B.4.2 Aetna Growth Plus Individual Variable, Fixed or Combination _______
Annuity Contract (Nonparticipating) (I-CDA-GPI(4/94))
99-B.4.3 Certificate of Group Annuity Coverage (GP1CERT(4/94)) _______
99-B.4.4 Variable Fixed or Combination Annuity Contract *
(Nonparticipating) (I-GP1(5/96))
99-B.4.5 Group Variable, Fixed or Combination Annuity Contract *
(Nonparticipating) (G-GP1(5/96))
99-B.4.6 Certificate of Group Annuity Coverage (GP1CERT(5/96)) *
99-B.4.7 Variable Annuity Contract (G-CDA-97(NY)) *
99-B.4.8 Variable Annuity Contract Certificate (GMCC-97(NY)) *
99-B.5.1 Application for Aetna Growth Plus Group Variable, Fixed or _______
Combination Annuity Contract (Nonparticipating)
(GP1APP(4/94))
99-B.5.2 Application for Aetna Growth Plus Individual Variable, _______
Fixed or Combination Annuity Contract (Nonparticipating)
(I-GP1APP(4/94))
*Incorporated by reference
<PAGE>
Exhibit No. Exhibit Page
99-B.5.3 Application for Growth Plus (GPAPPNY(1/96)) _______
99-B.6.1 Certificate of Incorporation of Aetna Life Insurance and *
Annuity Company
99-B.6.2 Amendment of Certificate of Incorporation of Aetna Life *
Insurance and Annuity Company
99-B.6.3 By-Laws as amended September 17, 1997 of Aetna Life *
Insurance and Annuity Company
99-B.7 Reinsurance Agreement *
99-B.8 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company, Insurance Management Series and
Federated Advisors dated July 1, 1994
99-B.9 Opinion and Consent of Counsel _______
99-B.10 Consent of Independent Auditors _______
99-B.13 Schedule for Computation of Performance Data _______
99-B.15.1 Powers of Attorney *
99-B.15.2 Authorization for Signatures *
*Incorporated by reference
----------------------------------------------------
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 531-4547
Group Variable, Fixed or Combination Annuity Contract (Nonparticipating)
Aetna Life Insurance and Annuity Company (We or Us) agrees to pay benefits
according to the terms and conditions set forth in this Contract.
Specifications
- --------------------------------------------------------------------------------
Plan
- --------------------------------------------------------------------------------
Type of Plan
- --------------------------------------------------------------------------------
Contract Holder
- --------------------------------------------------------------------------------
Contract Number
- --------------------------------------------------------------------------------
Effective Date
This Contract is Delivered in and is subject to the laws and
regulations of that state.
THE VARIABLE FEATURES OF THE CONTRACT ARE DESCRIBED IN SECTIONS 6 AND 12.
Right to Cancel
- --------------------------------------------------------------------------------
The Group Contract Holder may cancel this Contract within ten (10) days of
receiving it by returning it to Us at the address above or to the person from
whom it was purchased. Within seven (7) days of the cancellation request, We
will return the Certificate Holder's Purchase Payment(s) made plus any increase,
or minus any decrease, on the amount allocated to the Separate Account.
Signed at the Home Office on the Effective Date.
/s/ Dan Kearney /s/ Lucille M. Nickerson
President Secretary
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA.
APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR
DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT
APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY.
<PAGE>
Table of Contents
Page
Right to Cancel.............................................................1
Contract Schedule...........................................................4
Separate Account.........................................................4
Growth Plus Guaranteed Account (GP Guaranteed Account)...................4
Separate Account and GP Guaranteed Account...............................4
Fixed Annuity............................................................5
Section 1. Definitions.....................................................6
Section 2. General Provisions..............................................8
The Contract.............................................................8
Certificates.............................................................8
Nonparticipating Contract................................................8
Misstatements and Adjustments............................................8
Reports..................................................................8
Premium Taxes............................................................8
Protection of Proceeds...................................................8
Evidence of Survival.....................................................8
Proof of Age.............................................................8
Change of Contract.......................................................8
Section 3. Ownership.......................................................9
Group Contract Holder....................................................9
Certificate Holder Rights................................................9
Transfer of Ownership....................................................9
Section 4. Beneficiary Provisions.........................................10
Beneficiary.............................................................10
Change of Beneficiary...................................................10
Death of Beneficiary....................................................10
Section 5. Purchase Payments..............................................10
Purchase Payments.......................................................10
Allocation of Purchase Payments.........................................10
Section 6. Separate Account...............................................11
General.................................................................11
Investment Allocations to the Separate Account..........................11
Valuation of Assets.....................................................11
Accumulation Unit.......................................................11
Net Return Factor for Each Valuation Period.............................11
Administrative Charge...................................................12
Mortality Risk Charge...................................................12
Expense Risk Charge.....................................................12
Mortality and Expense Guarantee.........................................12
Section 7. GP Guaranteed Account..........................................12
GP Guaranteed Account Guaranteed Interest Rate..........................12
Deposit Period..........................................................12
2
<PAGE>
Guaranteed Term.........................................................12
Guaranteed Term(s) Groups...............................................12
Maturity Date...........................................................13
Allocation of Net Purchase Payments to the
GP Guaranteed Account.................................................13
GP Guaranteed Account Guaranteed Term Maturity
Date and Maturity Value...............................................13
Transfers from the GP Guaranteed Account................................13
Withdrawals from the GP Guaranteed Account..............................13
Reinvestment............................................................14
GP Guaranteed Account Market Value Adjustment (Factor)..................14
Section 8. Certificate Holder's Account Value; Transfers
and Withdrawals During the Accumulation Period........................15
Certificate Holder's Account Value......................................15
Transfers During the Accumulation Period................................15
Withdrawals During the Accumulation Period..............................15
Deferred Sales Charge...................................................16
Waiver of Deferred Sales Charge.........................................16
Payment of Adjusted Certificate Holder's Account Value..................16
Systematic Withdrawal Option (SWO)......................................16
Section 9. Maintenance Charge.............................................17
Maintenance Charge......................................................17
Section 10. Proceeds Payable on Death.....................................17
Death of the Certificate Holder Prior to the Annuity Date...............17
Death Benefit Amount Prior to the Annuity Date..........................18
Death Benefit Payment Methods...........................................19
Death of Certificate Holder On or After the Annuity Date................19
Death of the Annuitant..................................................20
Section 11. Delay of Payments.............................................20
Delay of Payments.......................................................20
Section 12. Annuity Provisions............................................20
Designation of Annuitant................................................20
Terms of Annuity Options................................................21
Annuity Unit............................................................22
Annuity Unit Value......................................................22
Annuity Net Return Factor...............................................22
Annuity Options.........................................................22
3
<PAGE>
Contract Schedule
Separate Account
- --------------------------------------------------------------------------------
Separate Account Variable Account B
Charges to the A daily charge is deducted from the assets of the Separate
Separate Account: Account. The deduction is the daily equivalent of the annual
effective percentage shown below:
(a) During the Accumulation Period:
Administrative Charge 0.15%
Mortality Risk Charge 0.35%
Expense Risk Charge 0.90%
TOTAL Separate Account Charges During
Accumulation Period 1.40%
(b) During the Annuity Period:
Administrative Charge Not To Exceed 0.25%
Mortality Risk Charge 0.35%
Expense Risk Charge 0.90%
TOTAL Maximum Separate Account Charges
During Annuity Period 1.50%
Growth Plus Guaranteed Account (GP Guaranteed Account)
- --------------------------------------------------------------------------------
Minimum 3.0%
Guaranteed
Interest Rate
(effective
annual rate of
return):
Separate Account and GP Guaranteed Account
- ------------------ -------------------------------------------------------------
Minimum Initial $1,500
Purchase Payment:
Minimum $500 or $50 per month if paid by an automatic check plan
Subsequent
Purchase Payment:
Maximum $500,000 without Home Office approval
Subsequent
Purchase Payment:
Transfers: We allow an unlimited number of transfers during the
Accumulation Period. Twelve (12) transfers in any calendar
year are free. Thereafter, We reserve the right to charge a
transfer charge up to $10 for each subsequent transfer.
Maintenance The annual maintenance charge is $30. If the Certificate
Charge: Holder's Account is $50,000 or more on the date the
maintenance charge is to be deducted, the maintenance charge
is $0.
4
<PAGE>
Deferred Sales For each withdrawal from a Certificate Holder's Account, a
Charge: deferred sales charge for each Net Purchase Payment will be
determined as follows:
Years from Receipt of Deferred
Net Purchase Payment Sales Charge
0-1 7%
1-2 6%
2-3 5%
3-4 4%
4-5 3%
5-6 2%
6-7 1%
7+ 0%
Waiver of Section 8.05 provides for the following:
Deferred
Sales Charge: (c) At least 12 months after the date of the first Purchase
Payment in an amount equal to or less than 15% of the
Certificate Holder's Account Value.
(d) For a full withdrawal where the Certificate Holder's
Account Value does not exceed $2,500 and no
withdrawals have been taken from the Certificate
Holder's Account within the prior 12 months.
Systematic (a) Specified Payment - Maximum Percentage: 10%
Withdrawal
Option: (b) Specified Period - Minimum Period: 10 years
(c) Specified Percentage - Maximum Percentage: 10%
Death Benefit 4%
Factor:
Death Benefit Not to exceed 200% of the Purchase Payment(s), less
Maximum Amount: withdrawals
Death Benefit 85 years
Maximum Age:
Fund for Federated Prime Money Fund
Allocation of
Excess
Guaranteed Death
Benefit Value:
Latest Annuity 85th
Date:
Fixed Annuity
- --------------------------------------------------------------------------------
Minimum 3.0%
Guaranteed
Interest Rate
(effective
annual rate of
return):
5
<PAGE>
Section 1. Definitions
- --------------------------------------------------------------------------------
1.01 Accumulation Period - The period during which one or more Net
Purchase Payments applied to a Certificate Holder's Account
accumulate to provide future Annuity payments.
1.02 Accumulation Unit - A measure of the net investment results for
each variable investment option during the Accumulation Period. The
Accumulation Units for the applicable Funds are used to calculate
the portion of a Certificate Holder's Account Value attributable to
a Separate Account during the Accumulation Period.
1.03 Adjusted Certificate Holder Account Value - The Certificate
Holder's Account Value, plus or minus any aggregate GP Guaranteed
Account Market Value Adjustment.
1.04 Annuitant - The natural person on whose life an Annuity payment is
based.
1.05 Annuity - A series of payments We make for life, a definite period
or a combination of the two.
1.06 Annuity Date - The date on which Annuity payments commence.
1.07 Annuity Options - Annuity payment methods available during the
Annuity Period.
1.08 Annuity Period - The period of time during which Annuity payments
are made.
1.09 Annuity Unit - A measure of the net investment results for each
variable investment option during the Annuity Period. Annuity Units
are used to calculate the amount of each variable Annuity payment.
1.10 Beneficiary - The person(s) entitled to receive any death benefit
under the Certificate Holder's Account. Upon the death of a joint
Certificate Holder, the surviving joint Certificate Holder, if any,
is treated as the Beneficiary. Any other Beneficiary designation on
record with Us at the time of death is treated as a contingent
Beneficiary.
1.11 Certificate - The document issued to a Certificate Holder to
evidence a Certificate Holder's Account established under the group
Contract.
1.12 Certificate Holder - The person who has established a Certificate
Holder's Account under a group Contract. We reserve the right to
limit ownership to natural persons. If more than one Certificate
Holder owns an Account, each Certificate Holder shall be a joint
Certificate Holder. Any joint Certificate Holder must be the spouse
of the other joint Certificate Holder. Joint Certificate Holders
have joint ownership rights and both must authorize any exercising
of those ownership rights unless otherwise allowed by Us.
1.13 Certificate Holder's Account - A record We establish for each
Certificate Holder to maintain values under a group Contract.
1.14 Certificate Holder's Account Value - The dollar value as of any
Valuation Period of all amounts accumulated in a Certificate
Holder's Account.
1.15 Contract - This agreement between the Group Contract Holder and Us.
6
<PAGE>
1.16 Effective Date - The date a Certificate is issued to a Certificate
Holder.
1.17 Fund - One of the variable investment options which may be selected
by a Certificate Holder.
1.18 General Account - The General Account is made up of all of our
general assets other than those allocated to the separate accounts.
1.19 Growth Plus Guaranteed Account (GP Guaranteed Account) - An
investment option where We guarantee specified rate(s) of interest
for specified periods of time. The GP Guaranteed Account is a
separate account established by Us in accordance with the
provisions of the Connecticut General Statutes Section 38a-433.
Certificate Holders do not participate in the investment gain or
loss from the assets held in the GP Guaranteed Account. Assets in
the GP Guaranteed Account may be charged with liabilities arising
out of any other business We may conduct.
1.20 Group Contract Holder - The entity to which a group Contract is
issued.
1.21 Home Office - Our headquarters, located at 151 Farmington Avenue,
Hartford, CT 06156.
1.22 Market Value Adjustment - An adjustment to any withdrawal made from
the GP Guaranteed Account before the end of a guaranteed term as
stated in Section 7.11.
1.23 Net Purchase Payment - The Purchase Payment less premium taxes, if
applicable.
1.24 Purchase Payment - The gross payment accepted by Us and allocated
to the Certificate Holder's Account. We reserve the right to refuse
to accept any Purchase Payment at any time for any reason.
1.25 Separate Account: A separate account that buys and holds shares of
the Fund(s). Income, gains or losses, realized or unrealized, are
credited or charged to the Separate Account without regard to Our
other income, gains or losses. We own the assets held in the
Separate Account and are not a trustee as to such amounts. The
Separate Account generally is not guaranteed and is held at market
value. The name of the Separate Account is shown on the Contract
Schedule. The assets of the Separate Account, to the extent of
reserves and other Contract liabilities of the Separate Account,
will not be charged with Our other liabilities.
1.26 Valuation Period - The period of time for which a Fund determines
its net asset value, usually from 4:15 p.m. Eastern time each day
the New York Stock Exchange is open until 4:15 p.m. the next such
business day, or such other day that one or more of the Funds
determines its net asset value. The assets of the Separate Account
are not chargeable with the liabilities arising out of any other
business We may conduct.
1.27 Variable Annuity Contract - An Annuity Contract providing for the
accumulation of value and/or for Annuity payments which vary in
amount based on investment results.
7
<PAGE>
Section 2. General Provisions
- --------------------------------------------------------------------------------
2.01 The Contract - The entire Contract consists of this Contract and
any attached applications or endorsements.
2.02 Certificates - A Certificate is issued to each Certificate Holder
whose Purchase Payment(s) is accepted by Us. The Certificate
evidences a Certificate Holder's Account established under the
Contract. Certificates are not part of the Contract.
2.03 Nonparticipating Contract - Neither the Group Contract Holder,
Certificate Holder nor any Beneficiary have a right to share in our
earnings.
2.04 Misstatements and Adjustments - If We learn that the age of any
Annuitant or second Annuitant is misstated, the correct age will be
used to adjust payments. We reserve the right to request
reimbursement or adjust future payments for any amount overpaid. We
will pay the amount of any underpayment.
2.05 Reports - We furnish each Certificate Holder with a report showing
the Certificate Holder's Account Value at least once each calendar
year. We also furnish an annual report of the Separate Account.
2.06 Premium Taxes - Any premium taxes paid to any governmental entity
are charged against Purchase Payments or a Certificate Holder's
Account. We may, at our sole discretion, pay premium taxes when due
and deduct that amount from the Certificate Holder's Account at a
later date. Payment at an earlier date does not waive any right We
may have to deduct amounts at a later date.
2.07 Protection of Proceeds - To the extent permitted by law, all
payments under this Contract to a Certificate Holder or Beneficiary
shall be free from legal process and the claim of any creditor.
2.08 Evidence of Survival - The Company may require satisfactory
evidence of the continued survival of any person(s) on whose life
Annuity payments are based.
2.09 Proof of Age - The Company may require evidence of age of any
Annuitant under Annuity Options 2 and 3 and of the designated
second Annuitant under Annuity Option 3.
2.10 Change of Contract - Only our authorized officers may change the
terms of this Contract. We will notify the Group Contract Holder in
writing at least 30 days before the effective date of any change.
Any change will not affect the amount or terms of any Annuity which
begins before the change.
We may make any change that affects the GP Guaranteed Account
Market Value Adjustment with at least thirty (30) days' advance
written notice to the Group Contract Holder and the Certificate
Holder. Any such change shall become effective for any new
guaranteed term and will apply to all present and future
Certificate Holders' Accounts.
We reserve the right to change the terms of the Systematic
Withdrawal Option for future elections and discontinue the
availability of this option.
8
<PAGE>
Any change to any of the following provisions under this Contract
will not apply to Certificate Holder's Accounts in existence before
the effective date of the change:
(a) Net Purchase Payment (1.23)
(b) GP Guaranteed Account Guaranteed Interest Rate (7.01)
(c) Net Return Factor (6.05)
(d) Certificate Holder's Account Value (1.14)
(e) Deferred Sales Charge (8.04)
(f) Annuity Unit Value (12.04)
(g) Annuity Options (12.06)
(h) Fixed Annuity Interest Rates (12.01)
(i) Transfers (8.02).
Any change that affects the Annuity Option and the tables for the
Annuity Options may be made:
(a) No earlier than twelve (12) months after the Effective
Date; and
(b) No earlier than twelve (12) months after the effective
date of any prior change.
Any Certificate Holder's Account established on or after the
effective date of any change will be subject to the change. If the
Group Contract Holder does not agree to any change under this
provision, We reserve the right to not allow any new Certificate
Holder's Accounts to be established under this Contract. This
Contract may also be changed as deemed necessary by Us to comply
with federal or state law.
Section 3. Ownership
- --------------------------------------------------------------------------------
3.01 Group Contract Holder - The Group Contract Holder has title to the
Contract. The Contract and any amounts accumulated thereunder are
not subject to the claims of the Group Contract Holder nor any of
its creditors.
3.02 Certificate Holder Rights - The Certificate Holder has all interest
and right to amounts held in his or her Certificate Holder's
Account. The Certificate Holder and any joint Certificate Holder
are named on the Specifications page. The Certificate Holder and
any joint Certificate Holder may exercise all the rights under the
Certificate Holder's Account, subject to the rights of:
(a) Any assignee under an assignment filed at our Home Office;
and
(b) Any irrevocably named Beneficiary.
Upon the death of a Certificate Holder prior to the Annuity Date, a
spousal Beneficiary may elect to continue the Certificate Holder's
Account in his or her own name and retain all ownership rights and
privileges or take distribution of the death benefit as defined in
Section 10.
3.03 Transfer of Ownership - The Group Contract Holder may transfer
ownership of this Contract. A written request, dated and signed,
must be filed at our Home Office.
Any transfer of ownership terminates the interest of any existing
Group Contract Holder. It does not change the rights of any
Certificate Holder.
9
<PAGE>
A Certificate Holder may transfer all of his or her rights under
the Contract. A written request, dated and signed by the
Certificate Holder and any joint Certificate Holder, must be filed
at our Home Office. After the transfer is recorded, it will take
effect as of the date the request was signed. Any such transfer
terminates the interest of any existing Certificate Holder. It does
not change the Beneficiary, nor transfer the Beneficiary's
interest. A transfer will not affect any payments We may make or
actions We may take before such transfer has been recorded at our
Home Office.
Section 4. Beneficiary Provisions
- --------------------------------------------------------------------------------
4.01 Beneficiary - The Certificate Holder may name a Beneficiary and a
contingent Beneficiary. At the death of the Certificate Holder
prior to the Annuity Date, the Beneficiary(ies) named in our
records will receive a death benefit as stated in Section 10. Upon
the death of either joint Certificate Holder prior to the Annuity
Date, the surviving joint Certificate Holder, if any, will be
treated as the designated Beneficiary and any other Beneficiary
designation on record with Us at the time of death is treated as a
contingent Beneficiary.
4.02 Change of Beneficiary - The Certificate Holder may change the
Beneficiary. A written request, dated and signed by the Certificate
Holder, must be filed at our Home Office. If there are joint
Certificate Holders, both must sign the request. After the change
is recorded, it will take effect as of the date the request was
signed. If the request reaches our Home Office and is recorded
after the Certificate Holder dies, but before any payment is made,
the change is valid.
4.03 Death of Beneficiary - If all of the Beneficiaries and contingent
Beneficiaries die prior to the Certificate Holder's death, We pay
the death benefit in one sum to the Certificate Holder's estate.
Section 5. Purchase Payments
- --------------------------------------------------------------------------------
5.01 Purchase Payments - Subject to the maximum and minimum shown on the
Contract Schedule, the Certificate Holder may determine the amount
and frequency of Purchase Payments. We reserve the right not to
accept any Purchase Payment. We will declare from time to time the
acceptability of additional Purchase Payments.
5.02 Allocation of Purchase Payments - The Certificate Holder may elect
to have each Net Purchase Payment accumulate:
(a) On a variable basis invested in shares of one or more
Funds in which the Separate Account invests;
(b) For guaranteed terms offered in the current deposit
period(s) under the GP Guaranteed Account; or
(c) In a combination of any of the available investment
options.
Net Purchase Payments must be allocated in whole percentages. For
subsequent Purchase Payments, if no allocation instructions are
received with the Purchase Payment, the allocation will be as
indicated in the most recent directive from the Certificate Holder.
If the same guaranteed term(s) are not available, the next shortest
will be used. If no shorter guaranteed term is available, the next
longer guaranteed term will be used.
10
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Section 6. Separate Account
- --------------------------------------------------------------------------------
6.01 General - The assets of the Separate Account, equal to the reserves
and other Contract liabilities that depend on the investment
performance of the Separate Account are not chargeable with
liabilities arising out of any other business We may conduct.
Income, gains or losses of the Separate Account, realized or
unrealized, are credited to or charged against the assets of the
Separate Account without regard to Our other income, gains or
losses.
6.02 Investment Allocations to the Separate Account - The assets of the
Separate Account are segregated by Fund. If the shares of any Fund
are no longer available for investment by the Separate Account or
if in our judgment, further investment in such shares should become
inappropriate in view of the purpose of the Contract, We may cease
to make such Fund shares available for investment under the
Contract prospectively, or We may substitute shares of another Fund
for shares already acquired. We may also, from time to time, add
additional Funds. Any elimination, substitution or addition of
Funds will be done in accordance with applicable state and federal
securities laws. We reserve the right to substitute shares of
another Fund for shares already acquired without a proxy vote.
6.03 Valuation of Assets - The shares of the Funds will be valued at
their net asset value at the end of each Valuation Period.
6.04 Accumulation Unit - A Net Purchase Payment that is allocated to one
or more Funds is credited to the Certificate Holder's Account as
Accumulation Units. The number of Accumulation Units credited is
determined by dividing the applicable portion of the Net Purchase
Payment by the Accumulation Unit value for the appropriate Fund.
The Accumulation Unit value used is that which is computed for the
next Valuation Period after which the Purchase Payment is received
at our Home Office. Accumulation Units attributable to the initial
Purchase Payments will be credited within two business days of
acceptance.
Accumulation Unit values may increase or decrease from Valuation
Period to Valuation Period.
6.05 Net Return Factor for Each Valuation Period - The value of an
Accumulation Unit for any Valuation Period is calculated by
multiplying the Accumulation Unit value for the immediately
preceding Valuation Period by the net return factor of the
appropriate Fund for the current period.
The net return factor for each Fund is equal to 1.0000000 plus the
net return rate.
The net return rate equals:
(a) The value of the shares of the Fund held by the Separate
Account at the end of a Valuation Period; minus
(b) The value of the shares of the Fund held by the Separate
Account at the start of the Valuation Period; plus or
minus
(c) Taxes (or reserves for taxes) on the Separate Account (if
any); divided by
(d) The total value of the Fund(s) Accumulation Units and
Fund(s) Annuity Units of the Separate Account at the start
of the Valuation Period; minus
(e) A daily actuarial charge as shown on the Contract Schedule
for Annuity mortality and expense risks and profit and a
daily administrative charge.
11
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The net return rate may be more or less than zero (0) percent.
The value of a share of the Fund is equal to the net assets of the
Fund divided by the number of shares outstanding.
6.06 Administrative Charge - We deduct an administrative charge equal,
on an annual basis, to the amount shown on the Contract Schedule.
6.07 Mortality Risk Charge - We deduct a mortality risk charge equal, on
an annual basis, to the amount shown on the Contract Schedule.
6.08 Expense Risk Charge - We deduct an expense risk charge equal, on an
annual basis, to the amount shown on the Contract Schedule.
6.09 Mortality and Expense Guarantee - We guarantee that the dollar
amount of each Annuity payment after the first will not be affected
by variations in mortality or expense experience.
Section 7. GP Guaranteed Account
- --------------------------------------------------------------------------------
7.01 GP Guaranteed Account Guaranteed Interest Rate - All amounts
allocated to the GP Guaranteed Account earn a rate of interest that
is guaranteed for a specified period of time. The rate will be
credited daily and will never be less than the minimum guaranteed
interest rate shown on the Contract Schedule. We determine the rate
and it is not based on investment experience.
For guaranteed terms of one year or less, one guaranteed interest
rate is credited for the full guaranteed term. For longer
guaranteed terms, an initial guaranteed interest rate is credited
from the date of deposit to the end of a specified period within
the guaranteed term. There may be different guaranteed interest
rate(s) declared for subsequent specified time intervals throughout
the guaranteed term.
7.02 Deposit Period - A calendar week, a calendar month, a calendar
quarter, or any other period of time We specify during which Net
Purchase Payment(s), transfers and reinvestments are accepted into
the GP Guaranteed Account for one or more guaranteed terms. We
reserve the right to extend the deposit period.
7.03 Guaranteed Term - The period of time for which GP Guaranteed
Account guaranteed interest rates are guaranteed on Net Purchase
Payments. Transfers and reinvestments are made into a current
deposit period for the GP Guaranteed Account. Such period begins on
the day following the close of the deposit period and ends on the
designated Maturity Date. Guaranteed terms, if any, are offered at
our discretion for various lengths of time ranging up to and
including ten years.
During a deposit period, We may make available any number of
guaranteed terms. The Certificate Holder may allocate Net Purchase
Payments and transfers into any or all of the available guaranteed
terms.
7.04 Guaranteed Term(s) Groups - All GP Guaranteed Account guaranteed
term(s) with the same length of time from the close of the deposit
period until the designated Maturity Date.
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7.05 Maturity Date - The last day of a guaranteed term.
7.06 Allocation of Net Purchase Payments to the GP Guaranteed Account -
When the Certificate Holder wishes to allocate all or any portion
of a Net Purchase Payment to the Guaranteed Account, he or she must
tell Us the percentage to apply to one or more of the GP Guaranteed
Account guaranteed term(s) available during the current deposit
period. If no allocation instructions are received, a Net Purchase
Payment is allocated as indicated in the most recent directive from
the Certificate Holder. If the same guaranteed term is not
available for any amount allocated to the GP Guaranteed Account, We
will allocate the amount to the next shortest guaranteed term
available. If no shorter guaranteed term is available, We will
allocate it to the next longest guaranteed term.
7.07 GP Guaranteed Account Guaranteed Term Maturity Date and Maturity
Value - On the maturity date, the value of the total of all amounts
allocated to that guaranteed term is called the maturity value.
When Certificate Holders have assets in the GP Guaranteed Account,
at least eighteen (18) days before a maturity date, We notify them
of the:
(a) Projected maturity value; and
(b) Guaranteed terms and the applicable guaranteed interest
rates available during the current deposit period.
When no allocation instructions are received and the assets in a
guaranteed term have been reinvested by Us in another guaranteed
term on the maturity date, the Certificate Holder may transfer or
withdraw, during the month following the maturity date, the
reinvested amount with interest earned (as of the date the request
is received at our Home Office) without incurring a Market Value
Adjustment. This transaction is allowed only once for each maturity
date, regardless of whether the transfer or withdrawal is partial
or full.
7.08 Transfers from the GP Guaranteed Account - A Certificate Holder may
transfer any portion, or all, of an amount in the GP Guaranteed
Account to one or more of the Funds or to another available
guaranteed term. The amount withdrawn for any reason before the
maturity date is subject to a Market Value Adjustment.
7.09 Withdrawals from the GP Guaranteed Account - When the Certificate
Holder requests a withdrawal from the GP Guaranteed Account, if
instructions are not provided by the Certificate Holder, amounts
are withdrawn on a pro rata basis from the guaranteed term(s)
groups in which the Certificate Holder's Account is currently
invested. Within a guaranteed term group, the amount to be
withdrawn will be withdrawn first from the oldest deposit period.
Except on the maturity date, withdrawals from the GP Guaranteed
Account will be subject to a Market Value Adjustment.
13
<PAGE>
7.10 Reinvestment - We will mail a notice to the Certificate Holder
before a guaranteed term's maturity date. This notice will contain
the guaranteed terms available during the current deposit periods
with their guaranteed interest rate(s) and projected maturity
value. If no specific direction is given by the Certificate Holder
prior to the maturity date, each maturity value will be reinvested
in the current deposit period for a guaranteed term of the same
duration. If a guaranteed term of the same duration is unavailable,
each matured term value will automatically be reinvested in the
current deposit period for the next shortest guaranteed term
available. If no shorter guaranteed term is available, the next
longer guaranteed term will be used. We will mail a confirmation
statement to the Certificate Holder after the maturity date. This
notice will state the guaranteed term and guaranteed interest
rate(s) which will apply to the reinvested matured term value.
7.11 GP Guaranteed Account Market Value Adjustment (Factor) - The Market
Value Adjustment factor (MVA factor) reflects any change in
interest rates from the time assets are allocated to the GP
Guaranteed Account to the time they are transferred or withdrawn.
An MVA factor is applied to any amount withdrawn or transferred
from the GP Guaranteed Account before the end of a guaranteed term,
including amounts paid in a lump sum death benefit or applied to an
Annuity Option.
The amount withdrawn from the GP Guaranteed Account is multiplied
by the MVA factor which is calculated as follows:
x
---
365
(1 + i)
-----------
x
---
365
(1 + j)
-----------
Where:
i is the Deposit Period Yield
j is the Current Yield
x is the number of days remaining, (computed from
Wednesday of the week of withdrawal) in the
guaranteed Term.
Determination of MVA factor parameters:
A yield is computed at the close of the last business day of each
week of the deposit period. The yield will equal the average of the
yields on U.S. Treasury Notes which matured during the last three
months of the applicable guaranteed term.
The deposit period yield is the average of those yields for the
deposit period. If withdrawal is made prior to the close of the
deposit period, it is the average of those yields on each week
preceding withdrawal.
The current yield is the average of the yields on the last business
day of the week preceding withdrawal on the same U.S. Treasury
Notes included in the deposit period yield.
If no U.S. Treasury Notes matured during the last three months of
the guaranteed term, We reserve the right to use the average of the
yields on U.S. Treasury Notes that mature during a following
quarter.
14
<PAGE>
Section 8. Certificate Holder's Account Value; Transfers and Withdrawals During
the Accumulation Period
- --------------------------------------------------------------------------------
8.01 Certificate Holder's Account Value - The value of a Certificate
Holder's Account is determined by adding the value of the total of
Accumulation Units attributed to the selected Fund(s) to the value
of any amounts attributed to the GP Guaranteed Account.
8.02 Transfers During the Accumulation Period - Before the Annuity Date,
the Certificate Holder may transfer from any Fund or guaranteed
term of the GP Guaranteed Account to:
(a) Any other Fund; or
(b) Any guaranteed term of the GP Guaranteed Account available
in the current deposit period.
Transfer requests can be submitted as a percentage or as a dollar
amount. We may establish a minimum transfer amount. With a
guaranteed term group, the amount transferred is withdrawn first
from the oldest deposit period, then from the next oldest, and so
on until the amount requested is satisfied.
The Certificate Holder may make an unlimited number of transfers
during the Accumulation Period. The number of free transfers
allowed is shown on the Contract Schedule. Transfers in excess of
that number may be subject to the transfer charge shown on the
Contract Schedule. Transfers of a matured term value from the GP
Guaranteed Account on or within one calendar month after a
guaranteed term's maturity date do not count against the annual
transfer limit.
Amounts applied to guaranteed terms of the GP Guaranteed Account
may not be transferred to the Funds or to another guaranteed term
during the deposit period or for 90 days after the close of the
deposit period except for matured term value(s) during the calendar
month following the guaranteed term's maturity date.
Transfers from guaranteed terms of the GP Guaranteed Account are
subject to a Market Value Adjustment.
8.03 Withdrawals During the Accumulation Period - The Certificate Holder
may withdraw all or a portion of the Certificate Holder's Account
Value during the Accumulation Period by properly completing a
withdrawal request form. Withdrawal requests can be submitted as a
percentage or as a specific dollar amount. Net Purchase Payment
amounts are withdrawn first, and then the excess value, if any. For
any partial withdrawal, if instructions are not provided by the
Certificate Holder, amounts are withdrawn on a pro rata basis from
the Fund(s), and/or the guaranteed term(s) groups in which the
Certificate Holder's Account is currently invested. Within a
guaranteed term group, the amount to be withdrawn will be withdrawn
first from the oldest deposit period, then from the next oldest,
and so on until the amount requested is satisfied.
After deduction of the maintenance charge, if applicable, the
withdrawn amount shall be reduced by the applicable deferred sales
charge and any applicable premium taxes.
15
<PAGE>
8.04 Deferred Sales Charge - The deferred sales charge only applies to
the portion of the amount withdrawn attributable to Net Purchase
Payment(s) and varies according to the elapsed time since receipt
of the Purchase Payment. The deferred sales charge is shown on the
Contract Schedule.
8.05 Waiver of Deferred Sales Charge - No deferred sales charge is
deducted when the Certificate Holder's Account Value is paid:
(a) To a Beneficiary as a death benefit, except for Purchase
Payments made by a surviving joint Certificate Holder as
described in Section 10.02(b);
(b) As a premium for an Annuity Option;
(c) At least the number of months, as shown on the Contract
Schedule, after the date of the first Purchase Payment and
in an amount equal to or less than the percentage of the
Certificate Holder's Account Value as shown on the
Contract Schedule. This applies to the first withdrawal
request, partial or full, in a calendar year. The
Certificate Holder's Account Value is calculated as of the
date the withdrawal request is received in good order at
our Home Office. This waiver is not available to the
Certificate Holder while a SWO is in effect;
(d) For a full withdrawal where the Certificate Holder's
Account Value does not exceed the amount shown on the
Contract Schedule and no withdrawals have been taken from
the Certificate Holder's Account within the prior 12
months;
(e) For a distribution made by Us under Section 8.06; or
(f) For a distribution which is part of a SWO under Section
8.07.
We reserve the right to allow the proceeds of a total withdrawal to
be reinstated under the terms and conditions as established by Us
from time to time.
8.06 Payment of Adjusted Certificate Holder's Account Value - Upon 90
day's written notice to the Certificate Holder, We will terminate
the Certificate Holder's Account if the Certificate Holder's
Account Value becomes less than $1,500 immediately following any
partial withdrawal. We do not intend to exercise this right in
cases where the Certificate Holder's Account Value is reduced to
$1,500 or less solely due to investment performance. When We make a
distribution pursuant to this provision, the deferred sales charge
will not be deducted.
8.07 Systematic Withdrawal Option (SWO) - We will allow the Certificate
Holder to establish a schedule of withdrawals to be made
automatically from the Certificate Holders Account Value. All
distributed amounts will be withdrawn on a pro rata basis from the
Fund(s) and/or the guaranteed term(s) groups of the GP Guaranteed
Account in which the Certificate Holder's Account is invested.
16
<PAGE>
The Certificate Holder must elect one of the following SWO methods:
(a) Specified Payment: Payments of a designated dollar amount.
The annual amount may not be greater than the percentage
of the Certificate Holder's Account Value at time of the
election as shown on the Contract Schedule. This annual
dollar amount will remain constant. At our discretion, We
may require a minimum payment amount; or
(b) Specified Period: Payments which are made over a period of
time which must be at least the minimum period as shown on
the Contract Schedule. The annual amount paid each year is
calculated by dividing the Certificate Holders Account
Value as of December 31 of the prior year by the number of
payment years remaining; or
(c) Specified Percentage: Payment of a designated percentage
which cannot be greater than the percentage of the
Certificate Holder's Account Value at the time of election
as shown on the Contract Schedule. The percentage may be
changed by written request. We reserve the right to limit
the number of times the percentage may be changed. The
annual amount is calculated by multiplying the Certificate
Holder's Account Value as of December 31 of the year prior
to the payment by the designated percentage.
In our discretion, We may require a minimum initial Certificate
Holder's Account Value for election of this option. SWO may be
elected by submitting a completed and signed election form to Us.
Once elected, this option may be revoked by submitting a written
request to Us. SWO may be elected only once by the Certificate
Holder or by a spousal Beneficiary.
Certificate Holders should consult their tax adviser prior to
requesting this distribution option. We are not responsible for any
adverse tax consequences due to a Certificate Holder's receiving
SWO payments. A ten (10) percent penalty tax may apply to
distributions to a Certificate Holder who has not reached age
59-1/2. Upon death of the Certificate Holder, any payments will be
made under the terms of Section 10.
Section 9. Maintenance Charge
- --------------------------------------------------------------------------------
9.01 Maintenance Charge - We will deduct an annual maintenance charge as
shown in the Contract Schedule from the Certificate Holder's
Account during the Accumulation Period. We will deduct the
maintenance charge on the anniversary of the Effective Date of the
Certificate for the Certificate Holder's Account. This maintenance
charge is also deducted upon withdrawal of the entire Adjusted
Certificate Holder's Account. The maintenance charge is deducted
proportionately from each investment option used.
Section 10. Proceeds Payable on Death
- --------------------------------------------------------------------------------
10.01 Death of the Certificate Holder Prior to the Annuity Date - In the
event of the death of the Certificate Holder or a joint Certificate
Holder prior to the Annuity Date, a death benefit is payable to the
Beneficiary(ies) designated by the Certificate Holder. Upon the
death of a joint Certificate Holder, the surviving joint
Certificate Holder, if any, will be treated as the designated
Beneficiary. Any other Beneficiary designation on record with Us at
the time of death will be treated as a contingent Beneficiary.
17
<PAGE>
A Beneficiary may request We pay the death benefit under one of the
options described in Section 10.03. If the Beneficiary is the
spouse of the Certificate Holder, he or she may elect to continue
the Certificate Holder's Account in his or her own name and
exercise all the Certificate Holder's rights under the Contract.
10.02 Death Benefit Amount Prior to the Annuity Date -
(a) Except as set forth in Section 10.02(b), the amount of the
guaranteed death benefit value is equal to the greater of:
(i) The Certificate Holder's Account Value at the end
of the Valuation Period during which We receive
at our Home Office due proof of death and
election of the type of payment to be made; or
(ii) The death benefit determined as of the Valuation
Period corresponding to the date of death.
Until the first Effective Date anniversary, the
death benefit is equal to the Purchase Payments
made by the Certificate Holder prior to the
Effective Date anniversary less any withdrawals
and any amounts applied to an Annuity Option.
For each Certificate year thereafter, the death
benefit during the Certificate year equals the
death benefit at the beginning of the Certificate
year plus Purchase Payments made during the year
less any withdrawals and any amounts applied to
an Annuity Option.
On each Effective Date anniversary, the death
benefit is determined as follows:
(A) The death benefit on the previous
Effective Date anniversary increased by
the death benefit factor shown on the
Contract Schedule; plus
(B) Purchase Payments made by the
Certificate Holder during the
Certificate year increased by the death
benefit factor shown on the Contract
Schedule for the portion of the year
since the Purchase Payment was made;
less
(C) Any withdrawals or amounts applied to an
Annuity Option during the Certificate
year increased by the death benefit
factor shown on the Contract Schedule
for the portion of the Certificate year
since the withdrawal or election of
Annuity option; or
(iii) The Certificate Holder's Account Value on the
most recent seventh year anniversary of the
Effective Date plus any Purchase Payments made
after such Effective Date anniversary less any
withdrawals and any amounts applied to an Annuity
Option.
Notwithstanding the foregoing, the death benefit under
(ii) or (iii) will not exceed the death benefit maximum
amount shown on the Contract Schedule.
18
<PAGE>
The death benefit calculation described in (ii) and (iii)
above, applies until the Certificate Holder reaches the
death benefit maximum age shown on the Contract Schedule.
Thereafter, the death benefit is only adjusted for
Purchase Payments, withdrawals and amounts applied to
Annuity Options. If the Certificate Holder reaches the
death benefit maximum age shown on the Contract Schedule
prior to the seventh anniversary of the Effective Date,
the death benefit will be the greater of (i) or (ii)
above.
The excess, if any, of the guaranteed death benefit value
over the Certificate Holder's Account Value is determined
when we receive at our Home Office due proof of death and
allocated to the Fund shown on the Contract Schedule. The
Certificate Holder's Account Value plus any excess amount
deposited becomes the Certificate Holder's Account Value.
(b) In the case of a Beneficiary of a surviving joint
Certificate Holder who continued the Certificate Holder's
Account in his or her own name, the death benefit shall be
equal to (a)(i) above less any applicable deferred sales
charge on any Purchase Payment made after We have received
at our Home Office due proof of death of the first joint
Certificate Holder.
10.03 Death Benefit Payment Methods - A non-spousal Beneficiary must
elect the death benefit to be paid under one of the following
methods in the event of the death of the Certificate Holder prior
to the Annuity Date:
Method 1 - Lump sum payment of the death benefit; or
Method 2 - The payment of the entire death benefit within (5) years
of the date of the Certificate Holder's death; or
Method 3 - Payment of the death benefit over the lifetime of the
designated Beneficiary or over a period not extending beyond the
life expectancy of the designated Beneficiary with distribution
beginning within one year of the date of death of the Certificate
Holder.
Any portion of the death benefit not applied under Option 3 within
one year of the date of Certificate Holder's death, must be
distributed within five (5) years of the date of death. A Market
Value Adjustment will apply at the time the death benefit is paid.
A spousal Beneficiary may elect to continue the Certificate
Holder's Account in his or her name, elect a lump sum payment of
the death benefit or apply the Adjusted Certificate Holder's
Account Value to an Annuity Option.
10.04 Death of Certificate Holder On or After the Annuity Date - If the
Certificate Holder who is not the Annuitant, dies on or after the
Annuity Date, the remaining payments under the Annuity Option
elected will be made to the Beneficiary at least as rapidly as
under the method of distribution in effect at the Certificate
Holder's death.
19
<PAGE>
10.05 Death of the Annuitant - If the Annuitant, who is not a Certificate
Holder, dies on or before the Annuity Date, a new Annuitant may be
named. If no Annuitant is named, the Certificate Holder will be the
Annuitant. If the Annuitant dies after the Annuity Date, the death
benefit, if any, will be payable to the Beneficiary as specified in
the Annuity Option elected. We will require proof of the
Annuitant's death. Death benefits will be paid at least as rapidly
as under the method of distribution in effect at the Annuitant's
death.
Section 11. Delay of Payments
- --------------------------------------------------------------------------------
11.01 Delay of Payments - We will make any payments under this Contract
within seven days after a request is received in good order. We
reserve the right to suspend or postpone any type of payment from
the Separate Account for any period when:
(a) The New York Stock Exchange is closed for other than
customary weekend and holiday closings;
(b) Trading on the Exchange is restricted;
(c) An emergency exists as a result of which it is not
reasonably practicable to dispose of securities held in
the Separate Account or determine their value; or
(d) The Securities and Exchange Commission so permits delay
for the protection of security holders.
The applicable rules of the Securities and Exchange Commission will
govern as to whether the conditions in (b) or (c) exist.
We also reserve the right to delay any type of payment from the GP
Guaranteed Account for up to six (6) months.
Section 12. Annuity Provisions
- --------------------------------------------------------------------------------
12.01 Designation of Annuitant - The Certificate Holder and the Annuitant
need not be the same person. The Certificate Holder names the
Annuitant and during the Accumulation Period, may change the
designated Annuitant. We change the Annuitant when We receive a
written request in good order at our Home Office. We will not
change the Annuitant when Annuity payments have commenced.
The Certificate Holder elects an Annuity Option by telling Us to
use all or any portion of the Certificate Holder's Adjusted Account
Value (minus any applicable premium taxes if not previously
deducted) to purchase Annuity payments under an Annuity Option.
When an Annuity Option is chosen the Certificate Holder must
designate a:
(a) Fixed Annuity using the General Account;
(b) Variable Annuity using any of the Funds available during
the Annuity Period; or
(c) Combination of (a) and (b).
If a fixed Annuity is chosen, We will calculate the amount using an
interest assumption no less than the percentage specified on the
Contract Schedule. We may calculate the amount using a higher
interest rate.
If a variable Annuity is chosen, an Assumed Annual Net Return Rate
of 5% may be chosen. If not chosen, We will use an Assumed Annual
Net Return Rate of 3.5%.
20
<PAGE>
Payments are made on a monthly basis to the Certificate Holder
unless the Certificate Holder requests a different mode of payment.
Once elected, an Annuity Option may not be revoked, except for
Option 1 when elected on a variable basis.
12.02 Terms of Annuity Options - The minimum first payment amount must be
at least $50 per month and at least $250 per year.
If the Certificate Holder elects a fixed Annuity and We determine
that the Certificate Holder would receive larger payments by
applying the Certificate Holder's Account Value, reduced by the
deferred sales charge, to a single premium immediate Annuity
currently offered by Us, We will make the larger payments.
We determine the first payment of a variable Annuity, or the
payment amount of a fixed Annuity, using the Annuitant's (and
second Annuitant's if applicable) adjusted age which We calculate
as follows:
(a) If Annuity payments begin any time between July 1, 1992
and December 31, 1999, the adjusted age is the Annuitant's
age as of the birthday closest in time to the Annuity Date
reduced by one (1) year.
(b) If the Annuity begins any time between January 1, 2000 and
December 31, 2009, the adjusted age is the Annuitant's age
as of the birthday closest in time to the Annuity Date
reduced by two (2) years.
(c) For each succeeding decade, the adjusted age is the
Annuitant's age as determined in (b), reduced by one
additional year.
The Annuity rates for Options 2 and 3 are based on mortality from
1983 Table A.
Assumed Annual Net Return Rate is the interest rate used to
determine the amount of the first Annuity payment under a variable
Annuity. The Separate Account must earn this rate plus enough to
cover the mortality and expense risks charges (which may include
profit) and administrative charges if future variable Annuity
payments are to remain level.
The Certificate Holder must given written notice to Us at least 30
days before the Annuity payments begin, electing or changing:
(a) The date on which Annuity payments are to begin;
(b) The Annuity Option;
(c) Whether the payments are to be made monthly, quarterly,
semiannually or annually;
(d) The investment options used to provide Annuity payments.
The first Annuity payment may not be earlier than one (1) calendar
year after the initial Purchase Payment, nor later than the later
of the:
(a) First day of the month following the Annuitant's birthday
shown on the Contract Schedule; or
(b) Tenth anniversary of the last Purchase Payment. In lieu of
the election of an Annuity, the Certificate Holder may
request a lump sum payment.
21
<PAGE>
12.03 Annuity Unit - The number of Annuity Units per Fund is based on the
amount of the first variable Annuity payment which is equal to:
(a) The portion of the Certificate Holder's Account Value
(minus any premium taxes) applied to pay a variable
Annuity; divided by,
(b) 1000; multiplied by,
(c) The payment rate for the Annuity Option chosen.
Such amount, or portion, of the variable Annuity payment will be
divided by the Annuity Unit value for the appropriate Fund on the
tenth Valuation Period before the due date of the first payment to
determine the number of each Fund's Annuity Units. The number of
each Fund's Annuity Unit remains fixed. Each future payment is
equal to the sum of the products of each Fund's Annuity Unit value
multiplied by the appropriate number of units. The Fund's Annuity
Unit value on the tenth Valuation Period prior to the due date of
the payment is used.
12.04 Annuity Unit Value - For any Valuation Period, a Fund's Annuity
Unit value is equal to:
(a) The value for the previous Valuation Period; multiplied
by,
(b) The Annuity Net Return Factor for the Valuation Period;
multiplied by,
(c) A daily factor to reflect the Assumed Annual Net Return
Rate (the factor for 3.5% per year is .9999058; for 5% per
year it is .9998663).
The dollar value of a Fund(s) Annuity Unit values and payments may
go up or down due to investment gain or loss.
12.05 Annuity Net Return Factor - The Annuity net return factor is used
to compute all Separate Account Annuity Payments for any Fund.
The Annuity net return factor(s) for each Fund is equal to
1.0000000 plus the net return rate. The net return rate is equal
to:
(a) The value of the shares of the Fund held by the Separate
Account at the end of a Valuation Period; minus,
(b) The value of the shares of the Fund held by the Separate
Account at the start of the Valuation Period; plus or
minus,
(c) Taxes (or reserves for taxes) on the Separate Account (if
any); divided by
(d) The total value of the Fund(s) Accumulation Units and
Fund(s) Annuity Units of the Separate Account at the start
of the Valuation Period; minus,
(e) A daily actuarial charge as shown of the Contract Schedule
for Annuity mortality and expense risks and profit and a
daily administrative charge which will not exceed the
administrative charge as shown on the Contract Schedule.
The net return rate may be more or less than zero (0) percent.
The value of a share of the Fund is equal to the net assets of the
Fund divided by the number of shares outstanding.
12.06 Annuity Options
Option 1 - Payments for a Stated Period of Time - An Annuity will
be paid for the number of years chosen. The number of years must be
at least 5 and not more than 30.
22
<PAGE>
If payments for this Annuity Option are made under a variable
Annuity, the present value of any remaining payments may be
withdrawn at any time.
Option 2 - Life Income - An Annuity will be paid for the life of
the Annuitant. If also chosen, We will guarantee payments for 60,
120, 180, or 240 months.
Option 3 - Life Income Based upon the Lives of Two Annuitants - An
Annuity will be paid during the lives of the Annuitant and a second
Annuitant. Payments will continue until both Annuitants have died.
When this Annuity Option is chosen, a choice must be made of:
(a) 100% of the payment to continue after the first death;
(b) 66-2/3% of the payment to continue after the first death;
(c) 50% of the payment to continue after the first death;
(d) Payments for a minimum of 120 months with 100% of the
payment to continue after the first death; or
(e) 100% of the payment to continue at the death of the second
Annuitant and 50% of the payment to continue at the death
of the Annuitant.
We may make other options available as allowed by law.
23
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Years Guaranteed Rate Monthly Payment Quarterly Payment Semi-Annual Payment Annual Payment
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 3.00% 17.91 53.59 106.78 211.99
6 3.00% 15.14 45.30 90.27 179.22
7 3.00% 13.16 39.39 78.49 155.83
8 3.00% 11.68 34.96 69.66 138.31
9 3.00% 10.53 31.52 62.81 124.69
10 3.00% 9.61 28.77 57.33 113.82
11 3.00% 8.86 26.52 52.85 104.93
12 3.00% 8.24 24.65 49.13 97.54
13 3.00% 7.71 23.08 45.98 91.29
14 3.00% 7.26 21.73 43.29 85.95
15 3.00% 6.87 20.56 40.96 81.33
16 3.00% 6.53 19.54 38.93 77.29
17 3.00% 6.23 18.64 37.14 73.74
18 3.00% 5.96 17.84 35.56 70.59
19 3.00% 5.73 17.13 34.14 67.78
20 3.00% 5.51 16.50 32.87 65.26
21 3.00% 5.32 15.92 31.72 62.98
22 3.00% 5.15 15.40 30.68 60.92
23 3.00% 4.99 14.92 29.74 59.04
24 3.00% 4.84 14.49 28.88 57.33
25 3.00% 4.71 14.09 28.08 55.76
26 3.00% 4.59 13.73 27.36 54.31
27 3.00% 4.47 13.39 26.68 52.97
28 3.00% 4.37 13.08 26.06 51.74
29 3.00% 4.27 12.79 25.49 50.60
30 3.00% 4.18 12.52 24.95 49.53
- ------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
Payments Guaranteed for a Stated Period of Months
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Adjusted None 60 120 180 240
Age of ------------------------------------------------------------------------------------------------------------------
Annuitant Male Female Male Female Male Female Male Female Male Female
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $4.27 $3.90 $4.26 $3.90 $4.22 $3.89 $4.17 $3.86 $4.08 $3.82
51 4.34 3.97 4.33 3.96 4.30 3.95 4.23 3.92 4.14 3.88
52 4.43 4.03 4.41 4.03 4.37 4.01 4.30 3.98 4.20 3.93
53 4.51 4.10 4.50 4.10 4.45 4.08 4.37 4.04 4.26 3.99
54 4.60 4.18 4.59 4.17 4.54 4.15 4.45 4.11 4.32 4.04
55 4.70 4.25 4.68 4.25 4.62 4.22 4.53 4.18 4.39 4.11
56 4.80 4.34 4.78 4.33 4.72 4.30 4.61 4.25 4.45 4.17
57 4.91 4.42 4.89 4.41 4.82 4.38 4.69 4.32 4.51 4.23
58 5.03 4.52 5.00 4.51 4.92 4.47 4.78 4.40 4.58 4.30
59 5.15 4.61 5.12 4.60 5.03 4.56 4.87 4.48 4.65 4.37
60 5.28 4.72 5.25 4.70 5.14 4.66 4.96 4.57 4.71 4.44
61 5.43 4.83 5.39 4.81 5.27 4.76 5.06 4.66 4.78 4.51
62 5.58 4.95 5.53 4.93 5.39 4.87 5.16 4.75 4.84 4.58
63 5.74 5.08 5.69 5.05 5.53 4.99 5.26 4.85 4.90 4.65
64 5.91 5.21 5.85 5.18 5.66 5.10 5.36 4.95 4.96 4.72
65 6.10 5.36 6.03 5.32 5.81 5.22 5.46 5.05 5.02 4.79
66 6.30 5.51 6.21 5.47 5.96 5.36 5.56 5.16 5.08 4.86
67 6.51 5.67 6.41 5.63 6.12 5.50 5.66 5.26 5.13 4.93
68 6.73 5.85 6.62 5.80 6.28 5.65 5.77 5.37 5.18 5.00
69 6.97 6.04 6.84 5.98 6.44 5.80 5.86 5.49 5.23 5.06
70 7.23 6.25 7.07 6.18 6.61 5.97 5.96 5.60 5.27 5.12
71 7.51 6.47 7.32 6.39 6.79 6.14 6.05 5.71 5.31 5.18
72 7.80 6.71 7.58 6.62 6.96 6.32 6.14 5.83 5.34 5.23
73 8.12 6.98 7.85 6.86 7.14 6.50 6.23 5.94 5.37 5.28
74 8.46 7.26 8.14 7.12 7.32 6.69 6.31 6.04 5.40 5.32
75 8.82 7.57 8.45 7.40 7.50 6.89 6.38 6.14 5.42 5.35
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
25
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Male and Second Annuitant is Female)
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- -------------------------------------
Second Option 3a Option 3b Option 3c Option 3d Option 3e
Annuitant Annuitant
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $3.69 $4.05 $4.27 $3.69 $4.13
55 55 3.88 4.25 4.47 3.87 4.25
55 60 3.06 4.47 4.71 4.06 4.36
60 55 3.99 4.44 4.71 3.98 4.55
60 60 4.24 4.71 4.99 4.23 4.70
60 65 4.49 5.01 5.32 4.48 4.85
65 60 4.38 4.97 5.32 4.38 5.10
65 65 4.72 5.33 5.70 4.71 5.32
65 70 5.07 5.75 6.17 5.05 5.54
70 65 4.93 5.68 6.15 4.91 5.86
70 70 5.40 6.21 6.70 5.36 6.18
70 75 5.89 6.82 7.40 5.81 6.49
75 70 5.69 6.68 7.32 5.62 6.92
75 75 6.37 7.45 8.15 6.23 7.40
75 80 7.07 8.34 9.16 6.78 7.85
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
The rates assume the Annuitant Is Male and the Second Annuitant is Female.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
26
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Female and Second Annuitant is Male)
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- -------------------------------------
Second Option 3a Option 3b Option 3c Option 3d Option 3e
Annuitant Annuitant
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $3.75 $4.07 $4.26 $3.75 $3.98
55 55 3.88 4.25 4.47 3.87 4.06
55 60 3.99 4.44 4.71 3.98 4.12
60 55 4.06 4.47 4.71 4.06 4.37
60 60 4.24 4.71 4.99 4.23 4.47
60 65 4.38 4.97 5.32 4.38 4.54
65 60 4.49 5.01 5.32 4.48 4.89
65 65 4.72 5.33 5.70 4.71 5.02
65 70 4.93 5.68 6.15 4.91 5.14
70 65 5.07 5.75 6.17 5.05 5.60
70 70 5.40 6.21 6.70 5.36 5.79
70 75 5.69 6.68 7.32 5.62 5.96
75 70 5.89 6.83 7.40 5.81 6.63
75 75 6.37 7.45 8.15 6.23 6.92
75 80 6.78 8.11 8.99 6.54 7.15
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983
Table a. The rates assume the Annuitant is Female
and the Second Annuitant is Male. Rates for ages
not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
27
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Years Guaranteed Rate Monthly Payment Quarterly Payment Semi-Annual Payment Annual Payment
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 3.50% 18.12 54.19 107.92 213.99
6 3.50% 15.35 45.92 91.44 181.32
7 3.50% 13.38 40.01 79.69 158.01
8 3.50% 11.90 35.59 70.88 140.56
9 3.50% 10.75 32.16 64.05 127.00
10 3.50% 9.83 29.42 58.59 116.18
11 3.50% 9.09 27.18 54.13 107.34
12 3.50% 8.46 25.32 50.42 99.98
13 3.50% 7.94 23.75 47.29 93.78
14 3.50% 7.49 22.40 44.62 88.47
15 3.50% 7.10 21.24 42.31 83.89
16 3.50% 6.76 20.23 40.29 79.89
17 3.50% 6.47 19.34 38.51 76.37
18 3.50% 6.20 18.55 36.94 73.25
19 3.50% 5.97 17.85 35.54 70.47
20 3.50% 5.75 17.22 34.28 67.98
21 3.50% 5.56 16.65 33.15 65.74
22 3.50% 5.39 16.13 32.13 63.70
23 3.50% 5.24 15.66 31.19 61.85
24 3.50% 5.09 15.24 30.34 60.17
25 3.50% 4.96 14.85 29.56 58.62
26 3.50% 4.84 14.49 28.85 57.20
27 3.50% 4.73 14.15 28.19 55.90
28 3.50% 4.63 13.85 27.58 54.69
29 3.50% 4.53 13.57 27.02 53.57
30 3.50% 4.45 13.30 26.49 52.53
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Years Guaranteed Rate Monthly Payment Quarterly Payment Semi-Annual Payment Annual Payment
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 5.00% 18.74 56.00 111.33 219.98
6 5.00% 15.99 47.77 94.96 187.64
7 5.00% 14.02 41.90 83.30 164.59
8 5.00% 12.56 37.52 74.58 147.35
9 5.00% 11.42 34.11 67.81 133.99
10 5.00% 10.51 31.40 62.42 123.34
11 5.00% 9.77 29.19 58.03 114.66
12 5.00% 9.16 27.36 54.38 107.45
13 5.00% 8.64 25.81 51.31 101.39
14 5.00% 8.20 24.50 48.69 96.21
15 5.00% 7.82 23.36 46.44 91.75
16 5.00% 7.49 22.37 44.47 87.88
17 5.00% 7.20 21.51 42.75 84.48
18 5.00% 6.94 20.74 41.23 81.47
19 5.00% 6.71 20.06 39.88 78.80
20 5.00% 6.51 19.46 38.68 76.42
21 5.00% 6.33 18.91 37.59 74.28
22 5.00% 6.17 18.42 36.62 72.35
23 5.00% 6.02 17.98 35.73 70.61
24 5.00% 5.88 17.57 34.93 69.02
25 5.00% 5.76 17.20 34.20 67.57
26 5.00% 5.65 16.87 33.53 66.25
27 5.00% 5.54 16.56 32.92 65.04
28 5.00% 5.45 16.28 32.35 63.93
29 5.00% 5.36 16.01 31.83 62.90
30 5.00% 5.28 15.77 31.35 61.95
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
Payments Guaranteed for a Stated Period of Months
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Adjusted None 60 120 180 240
Age of ------------------------------------------------------------------------------------------------------------------
Annuitant Male Female Male Female Male Female Male Female Male Female
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $4.56 $4.20 $4.55 $4.19 $4.51 $4.18 $4.45 $4.15 $4.36 $4.11
51 4.64 4.26 4.62 4.25 4.58 4.24 4.51 4.21 4.42 4.16
52 4.72 4.32 4.70 4.32 4.66 4.30 4.58 4.26 4.48 4.21
53 4.80 4.39 4.79 4.38 4.74 4.36 4.65 4.32 4.53 4.27
54 4.89 4.46 4.87 4.46 4.82 4.43 4.73 4.39 4.59 4.32
55 4.99 4.54 4.97 4.53 4.91 4.50 4.80 4.46 4.65 4.38
56 5.09 4.62 5.07 4.61 5.00 4.58 4.88 4.53 4.72 4.44
57 5.20 4.71 5.17 4.70 5.10 4.66 4.96 4.60 4.78 4.50
58 5.32 4.80 5.29 4.79 5.20 4.75 5.05 4.68 4.84 4.57
59 5.44 4.90 5.41 4.88 5.31 4.84 5.14 4.76 4.91 4.63
60 5.57 5.00 5.53 4.99 5.42 4.93 5.23 4.84 4.97 4.70
61 5.71 5.11 5.67 5.09 5.54 5.03 5.32 4.93 5.03 4.77
62 5.86 5.23 5.81 5.21 5.66 5.14 5.42 5.02 5.09 4.84
63 6.02 5.36 5.97 5.33 5.79 5.25 5.51 5.11 5.16 4.91
64 6.20 5.49 6.13 5.46 5.93 5.37 5.61 5.21 5.21 4.98
65 6.38 5.64 6.31 5.60 6.07 5.49 5.71 5.31 5.27 5.05
66 6.58 5.79 6.49 5.75 6.22 5.63 5.81 5.41 5.32 5.12
67 6.79 5.95 6.69 5.91 6.38 5.76 5.91 5.52 5.38 5.18
68 7.02 6.13 6.89 6.08 6.53 5.91 6.01 5.63 5.42 5.25
69 7.26 6.32 7.11 6.26 6.70 6.06 6.11 5.74 5.47 5.31
70 7.52 6.53 7.35 6.45 6.86 6.23 6.20 5.85 5.51 5.37
71 7.80 6.75 7.59 6.66 7.03 6.39 6.29 5.96 5.54 5.42
72 8.09 6.99 7.85 6.89 7.21 6.57 6.38 6.07 5.57 5.47
73 8.41 7.26 8.12 7.13 7.38 6.75 6.46 6.17 5.60 5.51
74 8.75 7.54 8.41 7.39 7.55 6.94 6.53 6.28 5.63 5.55
75 9.12 7.85 8.71 7.66 7.73 7.13 6.61 6.38 5.65 5.59
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
30
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
Payments Guaranteed for a Stated Period of Months
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Adjusted None 60 120 180 240
Age of ------------------------------------------------------------------------------------------------------------------
Annuitant Male Female Male Female Male Female Male Female Male Female
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $5.48 $5.12 $5.46 $5.11 $5.41 $5.09 $5.34 $5.06 $5.24 $5.01
51 5.55 5.17 5.53 5.17 5.48 5.14 5.40 5.11 5.29 5.05
52 5.63 5.23 5.61 5.23 5.55 5.20 5.46 5.16 5.34 5.10
53 5.71 5.30 5.69 5.29 5.62 5.26 5.53 5.22 5.40 5.15
54 5.80 5.37 5.77 5.36 5.70 5.33 5.60 5.27 5.45 5.20
55 5.89 5.44 5.86 5.43 5.79 5.39 5.67 5.34 5.51 5.25
56 5.99 5.52 5.96 5.51 5.87 5.47 5.74 5.40 5.56 5.31
57 6.10 5.60 6.06 5.59 5.97 5.54 5.82 5.47 5.62 5.37
58 6.21 5.69 6.17 5.67 6.06 5.62 5.90 5.54 5.68 5.42
59 6.33 5.79 6.29 5.77 6.17 5.71 5.98 5.61 5.74 5.48
60 6.46 5.89 6.41 5.87 6.28 5.80 6.06 5.69 5.79 5.55
61 6.60 6.00 6.55 6.97 6.39 5.90 6.15 5.77 5.85 5.61
62 6.75 6.11 6.69 6.08 6.51 6.00 6.24 5.86 5.91 5.67
63 6.91 6.23 6.84 6.20 6.64 6.10 6.33 5.95 5.96 5.73
64 7.09 6.37 7.00 6.33 6.77 6.22 6.42 6.04 6.02 5.80
65 7.27 6.51 7.18 6.46 6.91 6.34 6.52 6.13 6.07 5.86
66 7.47 6.66 7.36 6.61 7.05 6.46 6.61 6.23 6.12 5.92
67 7.68 6.82 7.55 6.76 7.20 6.60 6.70 6.33 6.16 5.99
68 7.91 7.00 7.76 6.93 7.35 6.74 6.80 6.43 6.21 6.04
69 8.15 7.19 7.98 7.11 7.51 6.89 6.89 6.54 6.25 6.10
70 8.41 7.39 8.21 7.30 7.67 7.04 6.97 6.64 6.28 6.15
71 8.69 7.62 8.45 7.51 7.83 7.21 7.06 6.74 6.32 6.20
72 8.99 7.86 8.70 7.73 8.00 7.38 7.14 6.85 6.35 6.25
73 9.31 8.12 8.97 7.97 8.16 7.55 7.21 6.95 6.37 6.29
74 9.65 8.41 9.26 8.23 8.33 7.73 7.29 7.04 6.39 6.33
75 10.02 8.72 9.55 8.50 8.50 7.92 7.35 7.14 6.41 6.36
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
31
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Male and Second Annuitant is Female)
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- -------------------------------------
Second Option 3a Option 3b Option 3c Option 3d Option 3e
Annuitant Annuitant
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $3.97 $4.35 $4.56 $3.97 $4.42
55 55 4.16 4.54 4.76 4.15 4.54
55 60 4.34 4.76 5.00 4.34 4.64
60 65 4.27 4.73 5.00 4.26 4.83
60 60 4.51 4.99 5.27 4.50 4.98
60 65 4.76 5.29 5.60 4.75 5.13
65 60 4.66 5.25 5.61 4.65 5.39
65 65 4.99 5.61 5.99 4.98 5.60
65 70 5.34 6.03 6.46 5.31 5.81
70 65 5.19 5.97 6.44 5.17 6.14
70 70 5.67 6.49 6.99 5.62 6.47
70 75 6.16 7.10 7.68 6.07 6.77
75 70 5.95 6.96 7.61 5.87 7.20
75 75 6.64 7.73 8.43 6.48 7.68
75 80 7.33 8.62 9.45 7.02 8.13
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983
Table a. The rates assume the Annuitant is Male and
the Second Annuitant is Female. Rates for ages not
shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
32
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Female and Second Annuitant is Male)
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- -------------------------------------
Second Option 3a Option 3b Option 3c Option 3d Option 3e
Annuitant Annuitant
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $4.03 $4.36 $4.55 $4.03 $4.41
55 55 4.16 4.54 4.76 4.15 4.54
55 60 4.27 4.73 5.00 4.26 4.83
60 55 4.34 4.76 5.00 4.34 4.64
60 60 4.51 4.99 5.27 4.50 4.98
60 65 4.66 5.25 5.61 4.65 5.39
65 60 4.76 5.29 5.60 4.75 5.13
65 65 4.99 5.61 5.99 4.98 5.60
65 70 5.19 5.97 6.44 5.17 6.14
70 65 5.34 6.03 6.46 5.31 5.81
70 70 5.67 6.49 6.99 5.62 6.47
70 75 5.95 6.96 7.61 5.87 7.20
75 70 6.16 7.10 7.68 6.07 6.77
75 75 6.64 7.73 8.43 6.48 7.68
75 80 7.04 8.39 9.29 6.79 8.70
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983
Table a. The rates assume the Annuitant is Female
and the Second Annuitant is Male. Rates for ages
not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
33
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Male and Second Annuitant is Female)
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- -------------------------------------
Second Option 3a Option 3b Option 3c Option 3d Option 3e
Annuitant Annuitant
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $4.88 $5.26 $5.48 $4.88 $5.34
55 55 5.04 5.44 5.66 5.04 5.43
55 60 5.21 5.65 5.89 5.21 5.53
60 55 5.15 5.63 5.91 5.14 5.73
60 60 5.37 5.87 6.16 5.37 5.86
60 65 5.61 6.16 6.49 5.60 6.01
65 60 5.52 6.14 6.51 5.51 6.28
65 65 5.83 6.49 6.87 5.82 6.47
65 70 6.17 6.90 7.33 6.13 6.67
70 65 6.04 6.84 7.34 6.00 7.03
70 70 6.49 7.35 7.87 6.44 7.33
70 75 6.97 7.96 8.56 6.87 7.62
75 70 6.77 7.84 8.51 6.68 8.08
75 75 7.45 8.60 9.33 7.27 8.55
75 80 8.14 9.49 10.35 7.80 8.98
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983
Table a. The rates assume the Annuitant is Male and
the Second Annuitant is Female. Rates for ages not
shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
34
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Female and Second Annuitant is Male)
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- -------------------------------------
Second Option 3a Option 3b Option 3c Option 3d Option 3e
Annuitant Annuitant
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $4.93 $5.27 $5.46 $4.93 $5.19
55 55 5.04 5.44 5.66 5.04 5.43
55 60 5.15 5.63 5.91 5.14 5.73
60 55 5.21 5.65 5.89 5.21 5.53
60 60 5.37 5.87 6.16 5.37 5.86
60 65 5.52 6.14 6.51 5.51 6.28
65 60 5.61 6.16 6.49 5.60 6.01
65 65 5.83 6.49 6.87 5.82 6.47
65 70 6.04 6.84 7.34 6.00 7.03
70 65 6.17 6.90 7.33 6.13 6.67
70 70 6.49 7.35 7.87 6.44 7.33
70 75 6.77 7.84 8.51 6.68 8.08
75 70 6.97 7.96 8.56 6.87 7.62
75 75 7.45 8.60 9.33 7.27 8.55
75 80 7.86 9.28 10.20 7.57 9.59
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983
Table a. The rates assume the Annuitant is Female
and the Second Annuitant is Male. Rates for ages
not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
35
<PAGE>
- --------------------------------------------------------------------------------
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 531-4547
Group Variable, Fixed, or Combination Annuity Contract
Nonparticipating
- --------------------------------------------------------------------------------
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA.
APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR
DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT
APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY.
G-CDA-GP1(4/94)
----------------------------------------------------
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 531-4547
Individual Variable, Fixed or Combination Annuity Contract (Nonparticipating)
Aetna Life Insurance and Annuity Company (We or Us) agrees to pay benefits
according to the terms and conditions set forth in this Contract.
Specifications
- --------------------------------------------------------------------------------
Plan
- --------------------------------------------------------------------------------
Type of Plan
- --------------------------------------------------------------------------------
Contract Holder
- --------------------------------------------------------------------------------
Annuitant
- --------------------------------------------------------------------------------
Contract Number
- --------------------------------------------------------------------------------
Effective Date
This Contract is delivered in and is subject to the laws and
regulations of that state.
THE VARIABLE FEATURES OF THE CONTRACT ARE DESCRIBED IN SECTIONS 6 AND 12.
Right to Cancel
- --------------------------------------------------------------------------------
The Contract Holder may cancel this Contract within ten (10) days of receiving
it by returning it to Us at the address above or to the person from whom it was
purchased. Within seven (7) days of the cancellation request, We will return the
Contract Holder's Purchase Payment(s) made plus any increase, or minus any
decrease on the amount allocated to the Separate Account.
Signed at the Home Office on the Effective Date.
/s/ Dan Kearney /s/ Susan E. Schechter
President Secretary
ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA.
APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR
DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT
APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY.
<PAGE>
Table of Contents
Page
Right to Cancel..............................................................1
Contract Schedule............................................................4
Separate Account..........................................................4
ALIAC Guaranteed Account (AG Account).....................................4
Separate Account and AG Account...........................................4
Fixed Annuity.............................................................5
Section 1. Definitions......................................................6
Section 2. General Provisions...............................................7
The Contract..............................................................7
Nonparticipating Contract.................................................7
Misstatements and Adjustments.............................................8
Reports...................................................................8
Premium Taxes.............................................................8
Protection of Proceeds....................................................8
Evidence of Survival......................................................8
Proof of Age..............................................................8
Change of Contract........................................................8
Section 3. Ownership........................................................8
Contract Holder Rights....................................................8
Transfer of Ownership.....................................................9
Section 4. Beneficiary Provisions...........................................9
Beneficiary...............................................................9
Change of Beneficiary.....................................................9
Death of Beneficiary......................................................9
Section 5. Purchase Payments................................................9
Purchase Payments.........................................................9
Allocation of Purchase Payments...........................................9
Section 6. Separate Account................................................10
General..................................................................10
Investment Allocations to the Separate Account...........................10
Valuation of Assets......................................................10
Accumulation Unit........................................................10
Net Return Factor for Each Valuation Period..............................10
Administrative Charge....................................................11
Mortality Risk Charge....................................................11
Expense Risk Charge......................................................11
Mortality and Expense Guarantee..........................................11
Section 7. AG Account......................................................11
AG Account Guaranteed Interest Rate......................................11
Deposit Period...........................................................11
Guaranteed Term..........................................................11
Guaranteed Term(s) Groups................................................12
2
<PAGE>
Maturity Date............................................................12
Allocation of Net Purchase Payments to the AG Account....................12
AG Account Guaranteed Term Maturity Date and Maturity Value..............12
Transfers from the AG Account............................................12
Withdrawals from the AG Account..........................................12
Reinvestment.............................................................13
AG Account Market Value Adjustment (Factor)..............................13
Section 8. Contract Value; Transfers and Withdrawals
During the Accumulation Period..................................14
Contract Value...........................................................14
Transfers During the Accumulation Period.................................14
Withdrawals During the Accumulation Period...............................14
Deferred Sales Charge....................................................15
Waiver of Deferred Sales Charge..........................................15
Payment of Adjusted Contract Value.......................................15
Systematic Withdrawal Option (SWO).......................................15
Section 9. Maintenance Charge..............................................16
Maintenance Charge.......................................................16
Section 10. Proceeds Payable on Death......................................16
Death of the Contract Holder Prior to the Annuity Date...................16
Death Benefit Amount Prior to the Annuity Date...........................16
Death Benefit Payment Methods............................................18
Death of Contract Holder On or After the Annuity Date....................18
Death of the Annuitant...................................................18
Section 11. Delay of Payments..............................................18
Delay of Payments........................................................18
Section 12. Annuity Provisions.............................................19
Designation of Annuitant.................................................19
Terms of Annuity Options.................................................19
Annuity Unit.............................................................20
Annuity Unit Value.......................................................20
Annuity Net Return Factor................................................21
Annuity Options..........................................................21
3
<PAGE>
Contract Schedule
Separate Account
- --------------------------------------------------------------------------------
Separate Account Variable Account B
Charges to the Separate A daily charge is deducted from the assets of
Account: the Separate Account. The deduction is the
daily equivalent of the annual effective
percentage shown below:
(a) During the Accumulation Period:
Administrative Charge 0.15%
Mortality Risk Charge 0.35%
Expense Risk Charge 0.90%
TOTAL Separate Account Charges
During Accumulation Period 1.40%
(b) During the Annuity Period:
Administrative Charge Not To Exceed 0.25%
Mortality Risk Charge 0.35%
Expense Risk Charge 0.90%
TOTAL Maximum Separate Account
Charges During Annuity Period 1.50%
ALIAC Guaranteed Account (AG Account)
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest 3.0%
Rate (effective annual rate of
return):
Separate Account and AG Account
- -------------------------------- -----------------------------------------------
Minimum Initial Purchase $1,500
Payment:
Minimum Subsequent Purchase $500 or $50 per month if paid by an automatic
Payment: check plan
Maximum Subsequent Purchase $500,000 without Home Office approval
Payment:
Transfers: We allow an unlimited number of transfers
during the Accumulation Period. Twelve (12)
transfers in any calendar year are free.
Thereafter, We reserve the right to charge a
transfer charge up to $10 for each subsequent
transfer.
Maintenance Charge: The annual maintenance charge is $30. If the
Contract Value is $50,000 or more on the date
the maintenance charge is to be deducted, the
maintenance charge is $0.
4
<PAGE>
Deferred Sales Charge: For each withdrawal from a Contract, a deferred
sales charge for each Net Purchase Payment will
be determined as follows:
Years from Receipt of Deferred
Net Purchase Payment Sales Charge
0-1 7%
1-2 6%
2-3 5%
3-4 4%
4-5 3%
5-6 2%
6-7 1%
7+ 0%
Waiver of Deferred Section 8.05 provides for the following:
Sales Charge:
(c) At least 12 months after the date of
the first Purchase Payment in an
amount equal to or less than 15% of
the Contract Value.
(d) For a full withdrawal where the
Contract Value does not exceed $2,500
and no withdrawals have been taken
from the Contract within the prior 12
months.
<TABLE>
<S> <C> <C>
Systematic Withdrawal Option: (a) Specified Payment - Maximum Percentage: 10%
(b) Specified Period - Minimum Period: 10 years
(c) Specified Percentage - Maximum Percentage: 10%
</TABLE>
Death Benefit Factor: 4%
Death Benefit Maximum Amount: There is no maximum death benefit amount.
Death Benefit Maximum Age: 85 years
Fund for Allocation of Excess Federated Prime Money Fund
Guaranteed Death Benefit Value:
Latest Annuity Date: 90th birthday
Fixed Annuity
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest 3.0%
Rate (effective annual rate of
return):
5
<PAGE>
Section 1. Definitions
- --------------------------------------------------------------------------------
1.01 Accumulation Period - The period during which one or more Net
Purchase Payments applied to the Contract accumulate to provide
future Annuity payments.
1.02 Accumulation Unit - A measure of the net investment results for
each variable investment option during the Accumulation Period. The
Accumulation Units for the applicable Funds are used to calculate
the portion of the Contract Value attributable to a Separate
Account during the Accumulation Period.
1.03 Adjusted Contract Value - The Contract Value, plus or minus any
aggregate AG Account Market Value Adjustment.
1.04 Annuitant - The natural person on whose life an Annuity payment is
based.
1.05 Annuity - A series of payments We make for life, a definite period
or a combination of the two.
1.06 Annuity Date - The date on which Annuity payments commence.
1.07 Annuity Options - Annuity payment methods available during the
Annuity Period.
1.08 Annuity Period - The period of time during which Annuity payments
are made.
1.09 Annuity Unit - A measure of the net investment results for each
variable investment option during the Annuity Period. Annuity Units
are used to calculate the amount of each variable Annuity payment.
1.10 Beneficiary - The person(s) entitled to receive any death benefit
under the Contract. Upon the death of a joint Contract Holder, the
surviving joint Contract Holder, if any, is treated as the
Beneficiary. Any other Beneficiary designation on record with Us at
the time of death is treated as a contingent Beneficiary.
1.11 Contract Holder - The person who purchases this Contract. We
reserve the right to limit ownership to natural persons. If more
than one Contract Holder owns the contract, each Contract Holder
shall be a joint Contract Holder. Any joint Contract Holder must be
the spouse of the other joint Contract Holder. Joint Contract
Holders have joint ownership rights and both must authorize any
exercising of those ownership rights unless otherwise allowed by
Us.
1.12 Contract Value - The dollar value as of any Valuation Period of all
amounts accumulated in the Contract.
1.13 Contract - This agreement between the Contract Holder and Us.
1.14 Effective Date - The date the Contract is issued to the Contract
Holder.
1.15 Fund - One of the variable investment options which may be selected
by the Contract Holder.
6
<PAGE>
1.16 General Account - The General Account is made up of all of our
general assets other than those allocated to the separate accounts.
1.17 ALIAC Guaranteed Account (AG Account) - An investment option where
We guarantee specified rate(s) of interest for specified periods of
time. The AG Account is a separate account established by Us in
accordance with the provisions of the Connecticut General Statutes
Section 38a-433. The Contract Holder does not participate in the
investment gain or loss from the assets held in the AG Account.
Assets in the AG Account may be charged with liabilities arising
out of any other business We may conduct.
1.18 Home Office - Our headquarters, located at 151 Farmington Avenue,
Hartford, CT 06156.
1.19 Market Value Adjustment - An adjustment to any withdrawal made from
the AG Account before the end of a guaranteed term as stated in
Section 7.11.
1.20 Net Purchase Payment - The Purchase Payment less premium taxes, if
applicable.
1.21 Purchase Payment - The gross payment accepted by Us and allocated
to the Contract. We reserve the right to refuse to accept any
Purchase Payment at any time for any reason.
1.22 Separate Account - A separate account that buys and holds shares of
the Fund(s). Income, gains or losses, realized or unrealized, are
credited or charged to the Separate Account without regard to Our
other income, gains or losses. We own the assets held in the
Separate Account and are not a trustee as to such amounts. The
Separate Account generally is not guaranteed and is held at market
value. The name of the Separate Account is shown on the Contract
Schedule. The assets of the Separate Account, to the extent of
reserves and other Contract liabilities of the Separate Account,
will not be charged with Our other liabilities.
1.23 Valuation Period - The period of time for which a Fund determines
its net asset value, usually from 4:15 p.m. Eastern time each day
the New York Stock Exchange is open until 4:15 p.m. the next such
business day, or such other day that one or more of the Funds
determines its net asset value. The assets of the Separate Account
are not chargeable with the liabilities arising out of any other
business We may conduct.
1.24 Variable Annuity Contract - An Annuity Contract providing for the
accumulation of value and/or for Annuity payments which vary in
amount based on investment results.
Section 2. General Provisions
- --------------------------------------------------------------------------------
2.01 The Contract - The entire Contract consists of this Contract and
any attached applications or endorsements.
2.02 Nonparticipating Contract - Neither the Contract Holder nor any
Beneficiary have a right to share in our earnings.
7
<PAGE>
2.03 Misstatements and Adjustments - If We learn that the age of any
Annuitant or second Annuitant is misstated, the correct age will be
used to adjust payments. We reserve the right to request
reimbursement or adjust future payments for any amount overpaid. We
will pay the amount of any underpayment.
2.04 Reports - We furnish the Contract Holder with a report showing the
Contract Value at least once each calendar year. We also furnish an
annual report of the Separate Account.
2.05 Premium Taxes - Any premium taxes paid to any governmental entity
are charged against Purchase Payments or the Contract Value. We
may, at our sole discretion, pay premium taxes when due and deduct
that amount from the Contract at a later date. Payment at an
earlier date does not waive any right We may have to deduct amounts
at a later date.
2.06 Protection of Proceeds - To the extent permitted by law, all
payments under this Contract to the Contract Holder or Beneficiary
shall be free from legal process and the claim of any creditor.
2.07 Evidence of Survival - The Company may require satisfactory
evidence of the continued survival of any person(s) on whose life
Annuity payments are based.
2.08 Proof of Age - The Company may require evidence of age of any
Annuitant under Annuity Options 2 and 3 and of the designated
second Annuitant under Annuity Option 3.
2.09 Change of Contract -We reserve the right to change the Contract,
but only if a change is necessary to:
(a) Make the Contract or the Separate Account comply with
state or federal laws or regulations; or
(b) Assure the continued qualified status of the Contract
under the Code or other federal laws or regulations
governing annuity contracts; or
(c) Reflect a change in the operation of the Separate Account
or the Funds; or
(d) Provide additional funds; or
(e) Withdraw Funds
We will notify the Contract Holder in writing 30 days before any
change becomes effective. When appropriate, we will endorse the
Contract for the change.
Section 3. Ownership
- --------------------------------------------------------------------------------
3.01 Contract Holder Rights - The Contract Holder has all interest and
right to amounts held in his or her Contract. The Contract Holder
and any joint Contract Holder are named on the Specifications page.
The Contract Holder and any joint Contract Holder may exercise all
the rights under the Contract, subject to the rights of:
(a) Any assignee under an assignment filed at our Home Office;
and
(b) Any irrevocably named Beneficiary.
8
<PAGE>
Upon the death of a Contract Holder prior to the Annuity Date, a
spousal Beneficiary may elect to continue the Contract in his or
her own name and retain all ownership rights and privileges or take
distribution of the death benefit as defined in Section 10.
3.02 Transfer of Ownership - The Contract Holder may transfer all of his
or her rights under the Contract. A written request, dated and
signed by the Contract Holder and any joint Contract Holder, must
be filed at our Home Office. After the transfer is recorded, it
will take effect as of the date the request was signed. Any such
transfer terminates the interest of the existing Contract Holder.
It does not change the Beneficiary, nor transfer the Beneficiary's
interest. A transfer will not affect any payments We may make or
actions We may take before such transfer has been recorded at our
Home Office.
Section 4. Beneficiary Provisions
- --------------------------------------------------------------------------------
4.01 Beneficiary - The Contract Holder may name a Beneficiary and a
contingent Beneficiary. At the death of the Contract Holder prior
to the Annuity Date, the Beneficiary(ies) named in our records will
receive a death benefit as stated in Section 10. Upon the death of
a joint Contract Holder prior to the Annuity Date, the surviving
joint Contract Holder, if any, will be treated as the designated
Beneficiary and any other Beneficiary designation on record with Us
at the time of death is treated as a contingent Beneficiary.
4.02 Change of Beneficiary - The Contract Holder may change the
Beneficiary. A written request, dated and signed by the Contract
Holder, must be filed at our Home Office. If there are joint
Contract Holders, both must sign the request. After the change is
recorded, it will take effect as of the date the request was
signed. If the request reaches our Home Office and is recorded
after the Contract Holder dies, but before any payment is made, the
change is valid.
4.03 Death of Beneficiary - If all of the Beneficiaries and contingent
Beneficiaries die prior to the Contract Holder's death, We pay the
death benefit in one sum to the Contract Holder's estate.
Section 5. Purchase Payments
- --------------------------------------------------------------------------------
5.01 Purchase Payments - Subject to the maximum and minimum shown on the
Contract Schedule, the Contract Holder may determine the amount and
frequency of Purchase Payments. We reserve the right not to accept
any Purchase Payment. We will declare from time to time the
acceptability of additional Purchase Payments.
5.02 Allocation of Purchase Payments - The Contract Holder may elect to
have each Net Purchase Payment accumulate:
(a) On a variable basis invested in shares of one or more
Funds in which the Separate Account invests;
(b) For guaranteed terms offered in the current deposit
period(s) under the AG Account; or
(c) In a combination of any of the available investment
options.
9
<PAGE>
Net Purchase Payments must be allocated in whole percentages. For
subsequent Purchase Payments, if no allocation instructions are
received with the Purchase Payment, the allocation will be as
indicated in the most recent directive from the Contract Holder. If
the same guaranteed term(s) are not available, the next shortest
will be used. If no shorter guaranteed term is available, the next
longer guaranteed term will be used.
Section 6. Separate Account
- --------------------------------------------------------------------------------
6.01 General - The assets of the Separate Account, equal to the reserves
and other Contract liabilities that depend on the investment
performance of the Separate Account are not chargeable with
liabilities arising out of any other business We may conduct.
Income, gains or losses of the Separate Account, realized or
unrealized, are credited to or charged against the assets of the
Separate Account without regard to Our other income, gains or
losses.
6.02 Investment Allocations to the Separate Account - The assets of the
Separate Account are segregated by Fund. If the shares of any Fund
are no longer available for investment by the Separate Account or
if in our judgment, further investment in such shares should become
inappropriate in view of the purpose of the Contract, We may cease
to make such Fund shares available for investment under the
Contract prospectively, or We may substitute shares of another Fund
for shares already acquired. We may also, from time to time, add
additional Funds. Any elimination, substitution or addition of
Funds will be done in accordance with applicable state and federal
securities laws. We reserve the right to substitute shares of
another Fund for shares already acquired without a proxy vote.
6.03 Valuation of Assets - The shares of the Funds will be valued at
their net asset value at the end of each Valuation Period.
6.04 Accumulation Unit - A Net Purchase Payment that is allocated to one
or more Funds is credited to the Contract as Accumulation Units.
The number of Accumulation Units credited is determined by dividing
the applicable portion of the Net Purchase Payment by the
Accumulation Unit value for the appropriate Fund. The Accumulation
Unit value used is that which is computed for the next Valuation
Period after which the Purchase Payment is received at our Home
Office. Accumulation Units attributable to the initial Purchase
Payments will be credited within two business days of acceptance.
Accumulation Unit values may increase or decrease from Valuation
Period to Valuation Period.
6.05 Net Return Factor for Each Valuation Period - The value of an
Accumulation Unit for any Valuation Period is calculated by
multiplying the Accumulation Unit value for the immediately
preceding Valuation Period by the net return factor of the
appropriate Fund for the current period.
The net return factor for each Fund is equal to 1.0000000 plus the
net return rate.
The net return rate equals:
(a) The value of the shares of the Fund held by the Separate
Account at the end of a Valuation Period; minus
10
<PAGE>
(b) The value of the shares of the Fund held by the Separate
Account at the start of the Valuation Period; plus or
minus
(c) Taxes (or reserves for taxes) on the Separate Account (if
any); divided by
(d) The total value of the Fund(s) Accumulation Units and
Fund(s) Annuity Units of the Separate Account at the start
of the Valuation Period; minus
(e) A daily actuarial charge as shown on the Contract Schedule
for Annuity mortality and expense risks and profit and a
daily administrative charge.
The net return rate may be more or less than zero (0) percent.
The value of a share of the Fund is equal to the net assets of the
Fund divided by the number of shares outstanding.
6.06 Administrative Charge - We deduct an administrative charge equal,
on an annual basis, to the amount shown on the Contract Schedule.
6.07 Mortality Risk Charge - We deduct a mortality risk charge equal, on
an annual basis, to the amount shown on the Contract Schedule.
6.08 Expense Risk Charge - We deduct an expense risk charge equal, on an
annual basis, to the amount shown on the Contract Schedule.
6.09 Mortality and Expense Guarantee - We guarantee that the dollar
amount of each Annuity payment after the first will not be affected
by variations in mortality or expense experience.
Section 7. AG Account
- --------------------------------------------------------------------------------
7.01 AG Account Guaranteed Interest Rate - All amounts allocated to the
AG Account earn a rate of interest that is guaranteed for a
specified period of time. The rate will be credited daily and will
never be less than the minimum guaranteed interest rate shown on
the Contract Schedule. We determine the rate and it is not based on
investment experience.
For guaranteed terms of one year or less, one guaranteed interest
rate is credited for the full guaranteed term. For longer
guaranteed terms, an initial guaranteed interest rate is credited
from the date of deposit to the end of a specified period within
the guaranteed term. There may be different guaranteed interest
rate(s) declared for subsequent specified time intervals throughout
the guaranteed term.
7.02 Deposit Period - A calendar week, a calendar month, a calendar
quarter, or any other period of time We specify during which Net
Purchase Payment(s), transfers and reinvestments are accepted into
the AG Account for one or more guaranteed terms. We reserve the
right to extend the deposit period.
7.03 Guaranteed Term - The period of time for which AG Account
guaranteed interest rates are guaranteed on Net Purchase Payments.
Transfers and reinvestments are made into a current deposit period
for the AG Account. Such period begins on the day following the
close of the deposit period and ends on the designated Maturity
Date. Guaranteed terms, if any, are offered at our discretion for
various lengths of time ranging up to and including ten years.
11
<PAGE>
During a deposit period, We may make available any number of
guaranteed terms. The Contract Holder may allocate Net Purchase
Payments and transfers into any or all of the available guaranteed
terms.
7.04 Guaranteed Term(s) Groups - All AG Account guaranteed term(s) with
the same length of time from the close of the deposit period until
the designated Maturity Date.
7.05 Maturity Date - The last day of a guaranteed term.
7.06 Allocation of Net Purchase Payments to the AG Account - When the
Contract Holder wishes to allocate all or any portion of a Net
Purchase Payment to the Guaranteed Account, he or she must tell Us
the percentage to apply to one or more of the AG Account guaranteed
term(s) available during the current deposit period. If no
allocation instructions are received, a Net Purchase Payment is
allocated as indicated in the most recent directive from the
Contract Holder. If the same guaranteed term is not available for
any amount allocated to the AG Account, We will allocate the amount
to the next shortest guaranteed term available. If no shorter
guaranteed term is available, We will allocate it to the next
longest guaranteed term.
7.07 AG Account Guaranteed Term Maturity Date and Maturity Value - On
the maturity date, the value of the total of all amounts allocated
to that guaranteed term is called the maturity value.
When the Contract Holder has assets in the AG Account, at least
eighteen (18) days before a maturity date, We notify the Contract
Holder of the:
(a) Projected maturity value; and
(b) Guaranteed terms and the applicable guaranteed interest
rates available during the current deposit period.
When no allocation instructions are received and the assets in a
guaranteed term have been reinvested by Us in another guaranteed
term on the maturity date, the Contract Holder may transfer or
withdraw, during the month following the maturity date, the
reinvested amount with interest earned (as of the date the request
is received at our Home Office) without incurring a Market Value
Adjustment. This transaction is allowed only once for each maturity
date, regardless of whether the transfer or withdrawal is partial
or full.
7.08 Transfers from the AG Account - A Contract Holder may transfer any
portion, or all, of an amount in the AG Account to one or more of
the Funds or to another available guaranteed term. The amount
withdrawn for any reason before the maturity date is subject to a
Market Value Adjustment.
7.09 Withdrawals from the AG Account - When the Contract Holder requests
a withdrawal from the AG Account, if instructions are not provided
by the Contract Holder, amounts are withdrawn on a pro rata basis
from the guaranteed term(s) groups in which the Contract Value is
currently invested. Within a guaranteed term group, the amount to
be withdrawn will be withdrawn first from the oldest deposit
period. Except on the maturity date, withdrawals from the AG
Account will be subject to a Market Value Adjustment.
12
<PAGE>
7.10 Reinvestment - We will mail a notice to the Contract Holder before
a guaranteed term's maturity date. This notice will contain the
guaranteed terms available during the current deposit periods with
their guaranteed interest rate(s) and projected maturity value. If
no specific direction is given by the Contract Holder prior to the
maturity date, each maturity value will be reinvested in the
current deposit period for a guaranteed term of the same duration.
If a guaranteed term of the same duration is unavailable, each
matured term value will automatically be reinvested in the current
deposit period for the next shortest guaranteed term available. If
no shorter guaranteed term is available, the next longer guaranteed
term will be used. We will mail a confirmation statement to the
Contract Holder after the maturity date. This notice will state the
guaranteed term and guaranteed interest rate(s) which will apply to
the reinvested matured term value.
7.11 AG Account Market Value Adjustment (Factor) - The Market Value
Adjustment factor (MVA factor) reflects any change in interest
rates from the time assets are allocated to the AG Account to the
time they are transferred or withdrawn. An MVA factor is applied to
any amount withdrawn or transferred from the AG Account before the
end of a guaranteed term, including amounts paid in a lump sum
death benefit or applied to an Annuity Option.
The amount withdrawn from the AG Account is multiplied by the MVA
factor which is calculated as follows:
x
---
365
(1 + i)
-----------
x
---
365
(1 + j)
-----------
Where:
i is the Deposit Period Yield
j is the Current Yield
x is the number of days remaining,
(computed from Wednesday of the week of
withdrawal) in the guaranteed Term.
Determination of MVA factor parameters:
A yield is computed at the close of the last business day of each
week of the deposit period. The yield will equal the average of the
yields on U.S. Treasury Notes which matured during the last three
months of the applicable guaranteed term.
The deposit period yield is the average of those yields for the
deposit period. If withdrawal is made prior to the close of the
deposit period, it is the average of those yields on each week
preceding withdrawal.
The current yield is the average of the yields on the last business
day of the week preceding withdrawal on the same U.S. Treasury
Notes included in the deposit period yield.
13
<PAGE>
If no U.S. Treasury Notes matured during the last three months of
the guaranteed term, We reserve the right to use the average of the
yields on U.S. Treasury Notes that mature during a following
quarter.
Section 8. Contract Value; Transfers and Withdrawals During the Accumulation
Period
- --------------------------------------------------------------------------------
8.01 Contract Value - The value of the Contract is determined by adding
the value of the total of Accumulation Units attributed to the
selected Fund(s) to the value of any amounts attributed to the AG
Account.
8.02 Transfers During the Accumulation Period - Before the Annuity Date,
the Contract Holder may transfer from any Fund or guaranteed term
of the AG Account to:
(a) Any other Fund; or
(b) Any guaranteed term of the AG Account available in the
current deposit period.
Transfer requests can be submitted as a percentage or as a dollar
amount. We may establish a minimum transfer amount. With a
guaranteed term group, the amount transferred is withdrawn first
from the oldest deposit period, then from the next oldest, and so
on until the amount requested is satisfied.
The Contract Holder may make an unlimited number of transfers
during the Accumulation Period. The number of free transfers
allowed is shown on the Contract Schedule. Transfers in excess of
that number may be subject to the transfer charge shown on the
Contract Schedule. Transfers of a matured term value from the AG
Account on or within one calendar month after a guaranteed term's
maturity date do not count against the annual transfer limit.
Amounts applied to guaranteed terms of the AG Account may not be
transferred to the Funds or to another guaranteed term during the
deposit period or for 90 days after the close of the deposit period
except for matured term value(s) during the calendar month
following the guaranteed term's maturity date.
Transfers from guaranteed terms of the AG Account are subject to a
Market Value Adjustment.
8.03 Withdrawals During the Accumulation Period - The Contract Holder
may withdraw all or a portion of the Contract Value during the
Accumulation Period by properly completing a withdrawal request
form. Withdrawal requests can be submitted as a percentage or as a
specific dollar amount. Net Purchase Payment amounts are withdrawn
first, and then the excess value, if any. For any partial
withdrawal, if instructions are not provided by the Contract
Holder, amounts are withdrawn on a pro rata basis from the Fund(s),
and/or the guaranteed term(s) groups in which the Contract is
currently invested. Within a guaranteed term group, the amount to
be withdrawn will be withdrawn first from the oldest deposit
period, then from the next oldest, and so on until the amount
requested is satisfied.
After deduction of the maintenance charge, if applicable, the
withdrawn amount shall be reduced by the applicable deferred sales
charge and any applicable premium taxes.
14
<PAGE>
8.04 Deferred Sales Charge - The deferred sales charge only applies to
the portion of the amount withdrawn attributable to Net Purchase
Payment(s) and varies according to the elapsed time since receipt
of the Purchase Payment. The deferred sales charge is shown on the
Contract Schedule.
8.05 Waiver of Deferred Sales Charge - No deferred sales charge is
deducted when the Contract Value is paid:
(a) To a Beneficiary as a death benefit, except for Purchase
Payments made by a surviving joint Contract Holder as
described in Section 10.02(b);
(b) As a premium for an Annuity Option;
(c) At least the number of months, as shown on the Contract
Schedule, after the date of the first Purchase Payment and
in an amount equal to or less than the percentage of the
Contract Value as shown on the Contract Schedule. This
applies to the first withdrawal request, partial or full,
in a calendar year. The Contract Value is calculated as of
the date the withdrawal request is received in good order
at our Home Office. This waiver is not available to the
Contract Holder while a SWO is in effect;
(d) For a full withdrawal where the Contract Value does not
exceed the amount shown on the Contract Schedule and no
withdrawals have been taken from the Contract within the
prior 12 months;
(e) For a distribution made by Us under Section 8.06; or
(f) For a distribution which is part of a SWO under Section
8.07.
We reserve the right to allow the proceeds of a total withdrawal to
be reinstated under the terms and conditions as established by Us
from time to time.
8.06 Payment of Adjusted Contract Value - Upon 90 day's written notice
to the Contract Holder, We will terminate the Contract if the
Contract Value becomes less than $1,500 immediately following any
partial withdrawal. We do not intend to exercise this right in
cases where the Contract Value is reduced to $1,500 or less solely
due to investment performance. When We make a distribution pursuant
to this provision, the deferred sales charge will not be deducted.
8.07 Systematic Withdrawal Option (SWO) - We will allow the Contract
Holder to establish a schedule of withdrawals to be made
automatically from the Contract Value. All distributed amounts will
be withdrawn on a pro rata basis from the Fund(s) and/or the
guaranteed term(s) groups of the AG Account in which the Contract
Value is invested.
The Contract Holder must elect one of the following SWO methods:
(a) Specified Payment: Payments of a designated dollar amount.
The annual amount may not be greater than the percentage
of the Contract Value at time of the election as shown on
the Contract Schedule. This annual dollar amount will
remain constant. At our discretion, We may require a
minimum payment amount; or
(b) Specified Period: Payments which are made over a period of
time which must be at least the minimum period as shown on
the Contract Schedule. The annual amount paid each year is
calculated by dividing the Contract Value as of December
31 of the prior year by the number of payment years
remaining; or
15
<PAGE>
(c) Specified Percentage: Payment of a designated percentage
which cannot be greater than the percentage of the
Contract Value at the time of election as shown on the
Contract Schedule. The percentage may be changed by
written request. We reserve the right to limit the number
of times the percentage may be changed. The annual amount
is calculated by multiplying the Contract Value as of
December 31 of the year prior to the payment by the
designated percentage.
In our discretion, We may require a minimum initial Contract Value
for election of this option. SWO may be elected by submitting a
completed and signed election form to Us. Once elected, this option
may be revoked by submitting a written request to Us. SWO may be
elected only once by the Contract Holder or by a spousal
Beneficiary.
The Contract Holders should consult his/her tax adviser prior to
requesting this distribution option. We are not responsible for any
adverse tax consequences due to a Contract Holder's receiving SWO
payments. A ten (10) percent penalty tax may apply to distributions
to a Contract Holder who has not reached age 59-1/2. Upon death of
the Contract Holder, any payments will be made under the terms of
Section 10.
Section 9. Maintenance Charge
- --------------------------------------------------------------------------------
9.01 Maintenance Charge - We will deduct an annual maintenance charge as
shown in the Contract Schedule from the Contract Value during the
Accumulation Period. We will deduct the maintenance charge on the
anniversary of the Effective Date of the Contract. This maintenance
charge is also deducted upon withdrawal of the entire Adjusted
Contract Value. The maintenance charge is deducted proportionately
from each investment option used.
Section 10. Proceeds Payable on Death
- --------------------------------------------------------------------------------
10.01 Death of the Contract Holder Prior to the Annuity Date - In the
event of the death of the Contract Holder or a joint Contract
Holder prior to the Annuity Date, a death benefit is payable to the
Beneficiary(ies) designated by the Contract Holder. Upon the death
of a joint Contract Holder, the surviving joint Contract Holder, if
any, will be treated as the designated Beneficiary. Any other
Beneficiary designation on record with Us at the time of death will
be treated as a contingent Beneficiary.
A Beneficiary may request We pay the death benefit under one of the
options described in Section 10.03. If the Beneficiary is the
spouse of the Contract Holder, he or she may elect to continue the
Contract in his or her own name and exercise all the Contract
Holder's rights under the Contract.
10.02 Death Benefit Amount Prior to the Annuity Date
(a) Except as set forth in Section 10.02(b), the amount of the
guaranteed death benefit value is equal to the greater of:
(i) The Contract Value at the end of the Valuation
Period during which We receive at our Home Office
due proof of death and election of the type of
payment to be made; or
16
<PAGE>
(ii) The death benefit determined as of the Valuation
Period corresponding to the date of death.
Until the first Effective Date anniversary, the
death benefit is equal to the Purchase Payments
made by the Contract Holder prior to the
Effective Date anniversary less any withdrawals
and any amounts applied to an Annuity Option.
For each Contract year thereafter, the death
benefit during the Contract year equals the death
benefit at the beginning of the Contract year
plus Purchase Payments made during the year less
any withdrawals and any amounts applied to an
Annuity Option.
On each Effective Date anniversary, the death
benefit is determined as follows:
(A) The death benefit on the previous
Effective Date anniversary increased by
the death benefit factor shown on the
Contract Schedule; plus
(B) Purchase Payments made by the Contract
Holder during the Contract year
increased by the death benefit factor
shown on the Contract Schedule for the
portion of the year since the Purchase
Payment was made; less
(C) Any withdrawals or amounts applied to an
Annuity Option during the Contract year
increased by the death benefit factor
shown on the Contract Schedule for the
portion of the Contract year since the
withdrawal or election of Annuity
option; or
(iii) The Contract Value on the most recent seventh
year anniversary of the Effective Date plus any
Purchase Payments made after such Effective Date
anniversary less any withdrawals and any amounts
applied to an Annuity Option.
Notwithstanding the foregoing, the death benefit under
(ii) or (iii) will not exceed the death benefit maximum
amount shown on the Contract Schedule.
The death benefit calculation described in (ii) and (iii)
above, applies until the Contract Holder reaches the death
benefit maximum age shown on the Contract Schedule.
Thereafter, the death benefit is only adjusted for
Purchase Payments, withdrawals and amounts applied to
Annuity Options. If the Contract Holder reaches the death
benefit maximum age shown on the Contract Schedule prior
to the seventh anniversary of the Effective Date, the
death benefit will be the greater of (i) or (ii) above.
The excess, if any, of the guaranteed death benefit value
over the Contract Value is determined when we receive at
our Home Office due proof of death and allocated to the
Fund shown on the Contract Schedule. The Contract Value
plus any excess amount deposited becomes the Contract
Value.
(b) In the case of a Beneficiary of a surviving joint Contract
Holder who continued the Contract in his or her own name,
the death benefit shall be equal to (a)(i) above less any
applicable deferred sales charge on any Purchase Payment
made after We have received at our Home Office due proof
of death of the first joint Contract Holder.
17
<PAGE>
10.03 Death Benefit Payment Method - A non-spousal Beneficiary must elect
the death benefit to be paid under one of the following methods in
the event of the death of the Contract Holder prior to the Annuity
Date:
Method 1 - Lump sum payment of the death benefit; or
Method 2 - The payment of the entire death benefit within (5) years
of the date of the Contract Holder's death; or
Method 3 - Payment of the death benefit over the lifetime of the
designated Beneficiary or over a period not extending beyond the
life expectancy of the designated Beneficiary with distribution
beginning within one year of the date of death of the Contract
Holder.
Any portion of the death benefit not applied under Option 3 within
one year of the date of Contract Holder's death, must be
distributed within five (5) years of the date of death. A Market
Value Adjustment will apply at the time the death benefit is paid.
A spousal Beneficiary may elect to continue the Contract in his or
her name, elect a lump sum payment of the death benefit or apply
the Adjusted Contract Value to an Annuity Option.
10.04 Death of Contract Holder On or After the Annuity Date - If the
Contract Holder, who is not the Annuitant, dies on or after the
Annuity Date, the remaining payments under the Annuity Option
elected will be made to the Beneficiary at least as rapidly as
under the method of distribution in effect at the Contract Holder's
death.
10.05 Death of the Annuitant - If the Annuitant, who is not a Contract
Holder, dies on or before the Annuity Date, a new Annuitant may be
named. If no Annuitant is named, the Contract Holder will be the
Annuitant. If the Annuitant dies after the Annuity Date, the death
benefit, if any, will be payable to the Beneficiary as specified in
the Annuity Option elected. We will require proof of the
Annuitant's death. Death benefits will be paid at least as rapidly
as under the method of distribution in effect at the Annuitant's
death.
Section 11. Delay of Payments
- --------------------------------------------------------------------------------
11.01 Delay of Payments - We will make any payments under this Contract
within seven days after a request is received in good order. We
reserve the right to suspend or postpone any type of payment from
the Separate Account for any period when:
(a) The New York Stock Exchange is closed for other than
customary weekend and holiday closings;
(b) Trading on the Exchange is restricted;
(c) An emergency exists as a result of which it is not
reasonably practicable to dispose of securities held in
the Separate Account or determine their value; or
(d) The Securities and Exchange Commission so permits delay
for the protection of security holders.
The applicable rules of the Securities and Exchange Commission will
govern as to whether the conditions in (b) or (c) exist.
18
<PAGE>
We also reserve the right to delay any type of payment from the AG
Account for up to six (6) months.
Section 12. Annuity Provisions
- --------------------------------------------------------------------------------
12.01 Designation of Annuitant - The Contract Holder and the Annuitant
need not be the same person. The Contract Holder names the
Annuitant and during the Accumulation Period, may change the
designated Annuitant. We change the Annuitant when We receive a
written request in good order at our Home Office. We will not
change the Annuitant when Annuity payments have commenced.
The Contract Holder elects an Annuity Option by telling Us to use
all or any portion of the Contract Value (minus any applicable
premium taxes if not previously deducted) to purchase Annuity
payments under an Annuity Option.
When an Annuity Option is chosen the Contract Holder must designate
a:
(a) Fixed Annuity using the General Account;
(b) Variable Annuity using any of the Funds available during
the Annuity Period; or
(c) Combination of (a) and (b).
If a fixed Annuity is chosen, We will calculate the amount using an
interest assumption no less than the percentage specified on the
Contract Schedule. We may calculate the amount using a higher
interest rate.
If a variable Annuity is chosen, an Assumed Annual Net Return Rate
of 5% may be chosen. If not chosen, We will use an Assumed Annual
Net Return Rate of 3.5%.
Payments are made on a monthly basis to the Contract Holder unless
the Contract Holder requests a different mode of payment.
Once elected, an Annuity Option may not be revoked, except for
Option 1 when elected on a variable basis.
12.02 Terms of Annuity Option - The minimum first payment amount must be
at least $50 per month and at least $250 per year.
If the Contract Holder elects a fixed Annuity and We determine that
the Contract Holder would receive larger payments by applying the
Contract Value, reduced by the deferred sales charge, to a single
premium immediate Annuity currently offered by Us, We will make the
larger payments.
We determine the first payment of a variable Annuity, or the
payment amount of a fixed Annuity, using the Annuitant's (and
second Annuitant's if applicable) adjusted age which We calculate
as follows:
19
<PAGE>
(a) If Annuity payments begin any time between July 1, 1992
and December 31, 1999, the adjusted age is the Annuitant's
age as of the birthday closest in time to the Annuity Date
reduced by one (1) year.
(b) If the Annuity begins any time between January 1, 2000 and
December 31, 2009, the adjusted age is the Annuitant's age
as of the birthday closest in time to the Annuity Date
reduced by two (2) years.
(c) For each succeeding decade, the adjusted age is the
Annuitant's age as determined in (b), reduced by one
additional year.
The Annuity rates for Options 2 and 3 are based on mortality from
1983 Table A.
Assumed Annual Net Return Rate is the interest rate used to
determine the amount of the first Annuity payment under a variable
Annuity. The Separate Account must earn this rate plus enough to
cover the mortality and expense risks charges (which may include
profit) and administrative charges if future variable Annuity
payments are to remain level.
The Contract Holder must give written notice to Us at least 30 days
before the Annuity payments begin, electing or changing:
(a) The date on which Annuity payments are to begin;
(b) The Annuity Option;
(c) Whether the payments are to be made monthly, quarterly,
semiannually or annually;
(d) The investment options used to provide Annuity payments.
The first Annuity payment may not be earlier than one (1) calendar
year after the initial Purchase Payment, nor later than the later
of the:
(a) First day of the month following the Annuitant's birthday
shown on the Contract Schedule; or
(b) Tenth anniversary of the last Purchase Payment. In lieu of
the election of an Annuity, the Contract Holder may
request a lump sum payment.
12.03 Annuity Unit - The number of Annuity Units per Fund is based on the
amount of the first variable Annuity payment which is equal to:
(a) The portion of the Contract Value (minus any premium
taxes) applied to pay a variable Annuity; divided by,
(b) 1000; multiplied by,
(c) The payment rate for the Annuity Option chosen.
Such amount, or portion, of the variable Annuity payment will be
divided by the Annuity Unit value for the appropriate Fund on the
tenth Valuation Period before the due date of the first payment to
determine the number of each Fund's Annuity Units. The number of
each Fund's Annuity Unit remains fixed. Each future payment is
equal to the sum of the products of each Fund's Annuity Unit value
multiplied by the appropriate number of units. The Fund's Annuity
Unit value on the tenth Valuation Period prior to the due date of
the payment is used.
12.04 Annuity Unit Value - For any Valuation Period, a Fund's Annuity
Unit value is equal to:
20
<PAGE>
(a) The value for the previous Valuation Period; multiplied
by,
(b) The Annuity Net Return Factor for the Valuation Period;
multiplied by,
(c) A daily factor to reflect the Assumed Annual Net Return
Rate (the factor for 3.5% per year is .9999058; for 5% per
year it is .9998663).
The dollar value of a Fund(s) Annuity Unit values and payments may
go up or down due to investment gain or loss.
12.05 Annuity Net Return Factor - The Annuity net return factor is used
to compute all Separate Account Annuity payments for any Fund.
The Annuity net return factor(s) for each Fund is equal to
1.0000000 plus the net return rate. The net return rate is equal
to:
(a) The value of the shares of the Fund held by the Separate
Account at the end of a Valuation Period; minus,
(b) The value of the shares of the Fund held by the Separate
Account at the start of the Valuation Period; plus or
minus,
(c) Taxes (or reserves for taxes) on the Separate Account (if
any); divided by
(d) The total value of the Fund(s) Accumulation Units and
Fund(s) Annuity Units of the Separate Account at the start
of the Valuation Period; minus,
(e) A daily actuarial charge as shown of the Contract Schedule
for Annuity mortality and expense risks and profit and a
daily administrative charge which will not exceed the
administrative charge as shown on the Contract Schedule.
The net return rate may be more or less than zero (0) percent.
The value of a share of the Fund is equal to the net assets of the
Fund divided by the number of shares outstanding.
12.06 Annuity Options
Option 1 - Payments for a Stated Period of Time - An Annuity will
be paid for the number of years chosen. The number of years must be
at least 5 and not more than 30.
If payments for this Annuity Option are made under a variable
Annuity, the present value of any remaining payments may be
withdrawn at any time.
Option 2 - Life Income - An Annuity will be paid for the life of
the Annuitant. If also chosen, We will guarantee payments for 60,
120, 180, or 240 months.
Option 3 - Life Income Based upon the Lives of Two Annuitants - An
Annuity will be paid during the lives of the Annuitant and a second
Annuitant. Payments will continue until both Annuitants have died.
When this Annuity Option is chosen, a choice must be made of:
21
<PAGE>
(a) 100% of the payment to continue after the first death;
(b) 66-2/3% of the payment to continue after the first death;
(c) 50% of the payment to continue after the first death;
(d) Payments for a minimum of 120 months with 100% of the
payment to continue after the first death; or
(e) 100% of the payment to continue at the death of the second
Annuitant and 50% of the payment to continue at the death
of the Annuitant.
We may make other options available as allowed by law.
22
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Years Guaranteed Rate Monthly Payment Quarterly Payment Semi-Annual Payment Annual Payment
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 3.00% 17.91 53.59 106.78 211.99
6 3.00% 15.14 45.30 90.27 179.22
7 3.00% 13.16 39.39 78.49 155.83
8 3.00% 11.68 34.96 69.66 138.31
9 3.00% 10.53 31.52 62.81 124.69
10 3.00% 9.61 28.77 57.33 113.82
11 3.00% 8.86 26.52 52.85 104.93
12 3.00% 8.24 24.65 49.13 97.54
13 3.00% 7.71 23.08 45.98 91.29
14 3.00% 7.26 21.73 43.29 85.95
15 3.00% 6.87 20.56 40.96 81.33
16 3.00% 6.53 19.54 38.93 77.29
17 3.00% 6.23 18.64 37.14 73.74
18 3.00% 5.96 17.84 35.56 70.59
19 3.00% 5.73 17.13 34.14 67.78
20 3.00% 5.51 16.50 32.87 65.26
21 3.00% 5.32 15.92 31.72 62.98
22 3.00% 5.15 15.40 30.68 60.92
23 3.00% 4.99 14.92 29.74 59.04
24 3.00% 4.84 14.49 28.88 57.33
25 3.00% 4.71 14.09 28.08 55.76
26 3.00% 4.59 13.73 27.36 54.31
27 3.00% 4.47 13.39 26.68 52.97
28 3.00% 4.37 13.08 26.06 51.74
29 3.00% 4.27 12.79 25.49 50.60
30 3.00% 4.18 12.52 24.95 49.53
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
Payments Guaranteed for a Stated Period of Months
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted
Age of None 60 120 180 240
- ------------------------------------------------------------------------------------------------------------------------------------
Annuitant Male Female Male Female Male Female Male Female Male Female
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $4.27 $3.90 $4.26 $3.90 $4.22 $3.89 $4.17 $3.86 $4.08 $3.82
51 4.34 3.97 4.33 3.96 4.30 3.95 4.23 3.92 4.14 3.88
52 4.43 4.03 4.41 4.03 4.37 4.01 4.30 3.98 4.20 3.93
53 4.51 4.10 4.50 4.10 4.45 4.08 4.37 4.04 4.26 3.99
54 4.60 4.18 4.59 4.17 4.54 4.15 4.45 4.11 4.32 4.04
55 4.70 4.25 4.68 4.25 4.62 4.22 4.53 4.18 4.39 4.11
56 4.80 4.34 4.78 4.33 4.72 4.30 4.61 4.25 4.45 4.17
57 4.91 4.42 4.89 4.41 4.82 4.38 4.69 4.32 4.51 4.23
58 5.03 4.52 5.00 4.51 4.92 4.47 4.78 4.40 4.58 4.30
59 5.15 4.61 5.12 4.60 5.03 4.56 4.87 4.48 4.65 4.37
60 5.28 4.72 5.25 4.70 5.14 4.66 4.96 4.57 4.71 4.44
61 5.43 4.83 5.39 4.81 5.27 4.76 5.06 4.66 4.78 4.51
62 5.58 4.95 5.53 4.93 5.39 4.87 5.16 4.75 4.84 4.58
63 5.74 5.08 5.69 5.05 5.53 4.99 5.26 4.85 4.90 4.65
64 5.91 5.21 5.85 5.18 5.66 5.10 5.36 4.95 4.96 4.72
65 6.10 5.36 6.03 5.32 5.81 5.22 5.46 5.05 5.02 4.79
66 6.30 5.51 6.21 5.47 5.96 5.36 5.56 5.16 5.08 4.86
67 6.51 5.67 6.41 5.63 6.12 5.50 5.66 5.26 5.13 4.93
68 6.73 5.85 6.62 5.80 6.28 5.65 5.77 5.37 5.18 5.00
69 6.97 6.04 6.84 5.98 6.44 5.80 5.86 5.49 5.23 5.06
70 7.23 6.25 7.07 6.18 6.61 5.97 5.96 5.60 5.27 5.12
71 7.51 6.47 7.32 6.39 6.79 6.14 6.05 5.71 5.31 5.18
72 7.80 6.71 7.58 6.62 6.96 6.32 6.14 5.83 5.34 5.23
73 8.12 6.98 7.85 6.86 7.14 6.50 6.23 5.94 5.37 5.28
74 8.46 7.26 8.14 7.12 7.32 6.69 6.31 6.04 5.40 5.32
75 8.82 7.57 8.45 7.40 7.50 6.89 6.38 6.14 5.42 5.35
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
24
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Male and Second Annuitant is Female)
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- --------------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $3.69 $4.05 $4.27 $3.69 $4.13
55 55 3.88 4.25 4.47 3.87 4.25
55 60 3.06 4.47 4.71 4.06 4.36
60 55 3.99 4.44 4.71 3.98 4.55
60 60 4.24 4.71 4.99 4.23 4.70
60 65 4.49 5.01 5.32 4.48 4.85
65 60 4.38 4.97 5.32 4.38 5.10
65 65 4.72 5.33 5.70 4.71 5.32
65 70 5.07 5.75 6.17 5.05 5.54
70 65 4.93 5.68 6.15 4.91 5.86
70 70 5.40 6.21 6.70 5.36 6.18
70 75 5.89 6.82 7.40 5.81 6.49
75 70 5.69 6.68 7.32 5.62 6.92
75 75 6.37 7.45 8.15 6.23 7.40
75 80 7.07 8.34 9.16 6.78 7.85
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
The rates assume the Annuitant Is Male and the Second Annuitant is Female.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
25
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Female and Second Annuitant is Male)
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- --------------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $3.75 $4.07 $4.26 $3.75 $3.98
55 55 3.88 4.25 4.47 3.87 4.06
55 60 3.99 4.44 4.71 3.98 4.12
60 55 4.06 4.47 4.71 4.06 4.37
60 60 4.24 4.71 4.99 4.23 4.47
60 65 4.38 4.97 5.32 4.38 4.54
65 60 4.49 5.01 5.32 4.48 4.89
65 65 4.72 5.33 5.70 4.71 5.02
65 70 4.93 5.68 6.15 4.91 5.14
70 65 5.07 5.75 6.17 5.05 5.60
70 70 5.40 6.21 6.70 5.36 5.79
70 75 5.69 6.68 7.32 5.62 5.96
75 70 5.89 6.83 7.40 5.81 6.63
75 75 6.37 7.45 8.15 6.23 6.92
75 80 6.78 8.11 8.99 6.54 7.15
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983
Table a. The rates assume the Annuitant is Female
and the Second Annuitant is Male. Rates for ages
not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
26
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Years Guaranteed Rate Monthly Payment Quarterly Payment Semi-Annual Payment Annual Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 3.50% 18.12 54.19 107.92 213.99
6 3.50% 15.35 45.92 91.44 181.32
7 3.50% 13.38 40.01 79.69 158.01
8 3.50% 11.90 35.59 70.88 140.56
9 3.50% 10.75 32.16 64.05 127.00
10 3.50% 9.83 29.42 58.59 116.18
11 3.50% 9.09 27.18 54.13 107.34
12 3.50% 8.46 25.32 50.42 99.98
13 3.50% 7.94 23.75 47.29 93.78
14 3.50% 7.49 22.40 44.62 88.47
15 3.50% 7.10 21.24 42.31 83.89
16 3.50% 6.76 20.23 40.29 79.89
17 3.50% 6.47 19.34 38.51 76.37
18 3.50% 6.20 18.55 36.94 73.25
19 3.50% 5.97 17.85 35.54 70.47
20 3.50% 5.75 17.22 34.28 67.98
21 3.50% 5.56 16.65 33.15 65.74
22 3.50% 5.39 16.13 32.13 63.70
23 3.50% 5.24 15.66 31.19 61.85
24 3.50% 5.09 15.24 30.34 60.17
25 3.50% 4.96 14.85 29.56 58.62
26 3.50% 4.84 14.49 28.85 57.20
27 3.50% 4.73 14.15 28.19 55.90
28 3.50% 4.63 13.85 27.58 54.69
29 3.50% 4.53 13.57 27.02 53.57
30 3.50% 4.45 13.30 26.49 52.53
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Years Guaranteed Rate Monthly Payment Quarterly Payment Semi-Annual Payment Annual Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 5.00% 18.74 56.00 111.33 219.98
6 5.00% 15.99 47.77 94.96 187.64
7 5.00% 14.02 41.90 83.30 164.59
8 5.00% 12.56 37.52 74.58 147.35
9 5.00% 11.42 34.11 67.81 133.99
10 5.00% 10.51 31.40 62.42 123.34
11 5.00% 9.77 29.19 58.03 114.66
12 5.00% 9.16 27.36 54.38 107.45
13 5.00% 8.64 25.81 51.31 101.39
14 5.00% 8.20 24.50 48.69 96.21
15 5.00% 7.82 23.36 46.44 91.75
16 5.00% 7.49 22.37 44.47 87.88
17 5.00% 7.20 21.51 42.75 84.48
18 5.00% 6.94 20.74 41.23 81.47
19 5.00% 6.71 20.06 39.88 78.80
20 5.00% 6.51 19.46 38.68 76.42
21 5.00% 6.33 18.91 37.59 74.28
22 5.00% 6.17 18.42 36.62 72.35
23 5.00% 6.02 17.98 35.73 70.61
24 5.00% 5.88 17.57 34.93 69.02
25 5.00% 5.76 17.20 34.20 67.57
26 5.00% 5.65 16.87 33.53 66.25
27 5.00% 5.54 16.56 32.92 65.04
28 5.00% 5.45 16.28 32.35 63.93
29 5.00% 5.36 16.01 31.83 62.90
30 5.00% 5.28 15.77 31.35 61.95
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
Payments Guaranteed for a Stated Period of Months
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted
Age of None 60 120 180 240
- ------------------------------------------------------------------------------------------------------------------------------------
Annuitant Male Female Male Female Male Female Male Female Male Female
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $4.56 $4.20 $4.55 $4.19 $4.51 $4.18 $4.45 $4.15 $4.36 $4.11
51 4.64 4.26 4.62 4.25 4.58 4.24 4.51 4.21 4.42 4.16
52 4.72 4.32 4.70 4.32 4.66 4.30 4.58 4.26 4.48 4.21
53 4.80 4.39 4.79 4.38 4.74 4.36 4.65 4.32 4.53 4.27
54 4.89 4.46 4.87 4.46 4.82 4.43 4.73 4.39 4.59 4.32
55 4.99 4.54 4.97 4.53 4.91 4.50 4.80 4.46 4.65 4.38
56 5.09 4.62 5.07 4.61 5.00 4.58 4.88 4.53 4.72 4.44
57 5.20 4.71 5.17 4.70 5.10 4.66 4.96 4.60 4.78 4.50
58 5.32 4.80 5.29 4.79 5.20 4.75 5.05 4.68 4.84 4.57
59 5.44 4.90 5.41 4.88 5.31 4.84 5.14 4.76 4.91 4.63
60 5.57 5.00 5.53 4.99 5.42 4.93 5.23 4.84 4.97 4.70
61 5.71 5.11 5.67 5.09 5.54 5.03 5.32 4.93 5.03 4.77
62 5.86 5.23 5.81 5.21 5.66 5.14 5.42 5.02 5.09 4.84
63 6.02 5.36 5.97 5.33 5.79 5.25 5.51 5.11 5.16 4.91
64 6.20 5.49 6.13 5.46 5.93 5.37 5.61 5.21 5.21 4.98
65 6.38 5.64 6.31 5.60 6.07 5.49 5.71 5.31 5.27 5.05
66 6.58 5.79 6.49 5.75 6.22 5.63 5.81 5.41 5.32 5.12
67 6.79 5.95 6.69 5.91 6.38 5.76 5.91 5.52 5.38 5.18
68 7.02 6.13 6.89 6.08 6.53 5.91 6.01 5.63 5.42 5.25
69 7.26 6.32 7.11 6.26 6.70 6.06 6.11 5.74 5.47 5.31
70 7.52 6.53 7.35 6.45 6.86 6.23 6.20 5.85 5.51 5.37
71 7.80 6.75 7.59 6.66 7.03 6.39 6.29 5.96 5.54 5.42
72 8.09 6.99 7.85 6.89 7.21 6.57 6.38 6.07 5.57 5.47
73 8.41 7.26 8.12 7.13 7.38 6.75 6.46 6.17 5.60 5.51
74 8.75 7.54 8.41 7.39 7.55 6.94 6.53 6.28 5.63 5.55
75 9.12 7.85 8.71 7.66 7.73 7.13 6.61 6.38 5.65 5.59
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
29
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
Payments Guaranteed for a Stated Period of Months
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted
Age of None 60 120 180 240
- ------------------------------------------------------------------------------------------------------------------------------------
Annuitant Male Female Male Female Male Female Male Female Male Female
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $5.48 $5.12 $5.46 $5.11 $5.41 $5.09 $5.34 $5.06 $5.24 $5.01
51 5.55 5.17 5.53 5.17 5.48 5.14 5.40 5.11 5.29 5.05
52 5.63 5.23 5.61 5.23 5.55 5.20 5.46 5.16 5.34 5.10
53 5.71 5.30 5.69 5.29 5.62 5.26 5.53 5.22 5.40 5.15
54 5.80 5.37 5.77 5.36 5.70 5.33 5.60 5.27 5.45 5.20
55 5.89 5.44 5.86 5.43 5.79 5.39 5.67 5.34 5.51 5.25
56 5.99 5.52 5.96 5.51 5.87 5.47 5.74 5.40 5.56 5.31
57 6.10 5.60 6.06 5.59 5.97 5.54 5.82 5.47 5.62 5.37
58 6.21 5.69 6.17 5.67 6.06 5.62 5.90 5.54 5.68 5.42
59 6.33 5.79 6.29 5.77 6.17 5.71 5.98 5.61 5.74 5.48
60 6.46 5.89 6.41 5.87 6.28 5.80 6.06 5.69 5.79 5.55
61 6.60 6.00 6.55 6.97 6.39 5.90 6.15 5.77 5.85 5.61
62 6.75 6.11 6.69 6.08 6.51 6.00 6.24 5.86 5.91 5.67
63 6.91 6.23 6.84 6.20 6.64 6.10 6.33 5.95 5.96 5.73
64 7.09 6.37 7.00 6.33 6.77 6.22 6.42 6.04 6.02 5.80
65 7.27 6.51 7.18 6.46 6.91 6.34 6.52 6.13 6.07 5.86
66 7.47 6.66 7.36 6.61 7.05 6.46 6.61 6.23 6.12 5.92
67 7.68 6.82 7.55 6.76 7.20 6.60 6.70 6.33 6.16 5.99
68 7.91 7.00 7.76 6.93 7.35 6.74 6.80 6.43 6.21 6.04
69 8.15 7.19 7.98 7.11 7.51 6.89 6.89 6.54 6.25 6.10
70 8.41 7.39 8.21 7.30 7.67 7.04 6.97 6.64 6.28 6.15
71 8.69 7.62 8.45 7.51 7.83 7.21 7.06 6.74 6.32 6.20
72 8.99 7.86 8.70 7.73 8.00 7.38 7.14 6.85 6.35 6.25
73 9.31 8.12 8.97 7.97 8.16 7.55 7.21 6.95 6.37 6.29
74 9.65 8.41 9.26 8.23 8.33 7.73 7.29 7.04 6.39 6.33
75 10.02 8.72 9.55 8.50 8.50 7.92 7.35 7.14 6.41 6.36
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
30
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Male and Second Annuitant is Female)
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- --------------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $3.97 $4.35 $4.56 $3.97 $4.42
55 55 4.16 4.54 4.76 4.15 4.54
55 60 4.34 4.76 5.00 4.34 4.64
60 55 4.27 4.73 5.00 4.26 4.83
60 60 4.51 4.99 5.27 4.50 4.98
60 65 4.76 5.29 5.60 4.75 5.13
65 60 4.66 5.25 5.61 4.65 5.39
65 65 4.99 5.61 5.99 4.98 5.60
65 70 5.34 6.03 6.46 5.31 5.81
70 65 5.19 5.97 6.44 5.17 6.14
70 70 5.67 6.49 6.99 5.62 6.47
70 75 6.16 7.10 7.68 6.07 6.77
75 70 5.95 6.96 7.61 5.87 7.20
75 75 6.64 7.73 8.43 6.48 7.68
75 80 7.33 8.62 9.45 7.02 8.13
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983
Table a. The rates assume the Annuitant is Male and
the Second Annuitant is Female. Rates for ages not
shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
31
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Female and Second Annuitant is Male)
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- --------------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $4.03 $4.36 $4.55 $4.03 $4.41
55 55 4.16 4.54 4.76 4.15 4.54
55 60 4.27 4.73 5.00 4.26 4.83
60 55 4.34 4.76 5.00 4.34 4.64
60 60 4.51 4.99 5.27 4.50 4.98
60 65 4.66 5.25 5.61 4.65 5.39
65 60 4.76 5.29 5.60 4.75 5.13
65 65 4.99 5.61 5.99 4.98 5.60
65 70 5.19 5.97 6.44 5.17 6.14
70 65 5.34 6.03 6.46 5.31 5.81
70 70 5.67 6.49 6.99 5.62 6.47
70 75 5.95 6.96 7.61 5.87 7.20
75 70 6.16 7.10 7.68 6.07 6.77
75 75 6.64 7.73 8.43 6.48 7.68
75 80 7.04 8.39 9.29 6.79 8.70
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983
Table a. The rates assume the Annuitant is Female
and the Second Annuitant is Male. Rates for ages
not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
32
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Male and Second Annuitant is Female)
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- --------------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $4.88 $5.26 $5.48 $4.88 $5.34
55 55 5.04 5.44 5.66 5.04 5.43
55 60 5.21 5.65 5.89 5.21 5.53
60 55 5.15 5.63 5.91 5.14 5.73
60 60 5.37 5.87 6.16 5.37 5.86
60 65 5.61 6.16 6.49 5.60 6.01
65 60 5.52 6.14 6.51 5.51 6.28
65 65 5.83 6.49 6.87 5.82 6.47
65 70 6.17 6.90 7.33 6.13 6.67
70 65 6.04 6.84 7.34 6.00 7.03
70 70 6.49 7.35 7.87 6.44 7.33
70 75 6.97 7.96 8.56 6.87 7.62
75 70 6.77 7.84 8.51 6.68 8.08
75 75 7.45 8.60 9.33 7.27 8.55
75 80 8.14 9.49 10.35 7.80 8.98
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983
Table a. The rates assume the Annuitant is Male and
the Second Annuitant is Female. Rates for ages not
shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
33
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Female and Second Annuitant is Male)
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- --------------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $4.93 $5.27 $5.46 $4.93 $5.19
55 55 5.04 5.44 5.66 5.04 5.43
55 60 5.15 5.63 5.91 5.14 5.73
60 55 5.21 5.65 5.89 5.21 5.53
60 60 5.37 5.87 6.16 5.37 5.86
60 65 5.52 6.14 6.51 5.51 6.28
65 60 5.61 6.16 6.49 5.60 6.01
65 65 5.83 6.49 6.87 5.82 6.47
65 70 6.04 6.84 7.34 6.00 7.03
70 65 6.17 6.90 7.33 6.13 6.67
70 70 6.49 7.35 7.87 6.44 7.33
70 75 6.77 7.84 8.51 6.68 8.08
75 70 6.97 7.96 8.56 6.87 7.62
75 75 7.45 8.60 9.33 7.27 8.55
75 80 7.86 9.28 10.20 7.57 9.59
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983
Table a. The rates assume the Annuitant is Female
and the Second Annuitant is Male. Rates for ages
not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
34
<PAGE>
- --------------------------------------------------------------------------------
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 531-4547
Individual Variable, Fixed, or Combination Annuity Contract
Nonparticipating
- --------------------------------------------------------------------------------
ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA.
APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR
DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT
APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY.
I-CDA-GP1(4/94)
----------------------------------------
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 531-4547
Aetna Life Insurance and Annuity Company (We or Us) agrees to pay benefits
according to the terms and conditions set forth in this Contract.
- --------------------------------------------------------------------------------
Certificate of Group Annuity Coverage
Aetna certifies that an account is established for you under the Group Annuity
Contract and Certificate numbers shown below.
This certificate describes Group Annuity Contract provisions. It replaces any
and all prior certificates or endorsements issued to you under the stated
Contract and Certificate numbers. This Certificate is for information only and
is not a part of the Contract.
THE VARIABLE FEATURES OF THE GROUP CONTRACT ARE DESCRIBED IN SECTIONS 6 AND 12.
- --------------------------------------------------------------------------------
Right to Cancel
The Certificate Holder may cancel the Certificate within ten (10) days of
receiving it by returning it to Us at the address above or the person from whom
it was purchased. Within seven (7) days of the cancellation request, We will
return the Certificate Holder's Purchase Payment(s) made plus any increase, or
minus any decrease on the amount allocated to the Separate Account.
Signed at the Home Office on the Effective Date.
/s/ Dan Kearney /s/ Susan E. Schechter
President Secretary
- --------------------------------------------------------------------------------
Contract Holder Group Annuity Contract Number
- --------------------------------------------------------------------------------
Certificate Holder Certificate Number
- --------------------------------------------------------------------------------
Annuitant Name Type of Plan
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THIS CERTIFICATE CONTAINS A MARKET VALUE ADJUSTMENT
FORMULA. APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN
INCREASE OR DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA
DOES NOT APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY.
<PAGE>
Page
Table of Contents
Right to Cancel................................................................1
Contract Schedule..............................................................4
Separate Account......................................................4
ALIAC Guaranteed Account (AG Account).................................4
Separate Account and AG Account.......................................4
Fixed Annuity.........................................................6
Section 1. Definitions....................................................7
Section 2. General Provisions.............................................9
The Contract..........................................................9
Certificates..........................................................9
Nonparticipating Contract.............................................9
Misstatements and Adjustments.........................................9
Reports...............................................................9
Premium Taxes.........................................................9
Protection of Proceeds................................................9
Evidence of Survival..................................................9
Proof of Age..........................................................9
Change of Contract....................................................9
Section 3. Ownership.....................................................10
Group Contract Holder................................................10
Certificate Holder Rights............................................10
Transfer of Ownership................................................11
Section 4. Beneficiary Provisions........................................11
Beneficiary..........................................................11
Change of Beneficiary................................................11
Death of Beneficiary.................................................11
Section 5. Purchase Payments.............................................11
Purchase Payments....................................................11
Allocation of Purchase Payments......................................11
Section 6. Separate Account..............................................12
General..............................................................12
Investment Allocations to the Separate Account.......................12
Valuation of Assets..................................................12
Accumulation Unit....................................................12
Net Return Factor for Each Valuation Period..........................12
Administrative Charge................................................13
Mortality Risk Charge................................................13
Expense Risk Charge..................................................13
Mortality and Expense Guarantee......................................13
2
<PAGE>
Section 7. AG Account....................................................13
AG Account Guaranteed Interest Rate..................................13
Deposit Period.......................................................13
Guaranteed Term......................................................14
Guaranteed Term(s) Groups............................................14
Maturity Date........................................................14
Allocation of Net Purchase Payments to the AG Account................14
AG Account Guaranteed Term Maturity Date and Maturity Value..........14
Transfers from the AG Account........................................14
Withdrawals from the AG Account......................................15
Reinvestment.........................................................15
AG Account Market Value Adjustment (Factor)..........................15
Section 8. Certificate Holder's Account Value; Transfers and
Withdrawals During the Accumulation Period ...................16
Certificate Holder's Account Value...................................16
Transfers During the Accumulation Period.............................16
Withdrawals During the Accumulation Period...........................17
Deferred Sales Charge................................................17
Waiver of Deferred Sales Charge......................................17
Payment of Adjusted Certificate Holder Account Value.................17
Systematic Withdrawal Option (SWO)...................................18
Section 9. Maintenance Charge............................................18
Maintenance Charge...................................................18
Section 10. Proceeds Payable on Death.....................................19
Death of the Certificate Holder Prior to the Annuity Date............19
Death Benefit Amount Prior to the Annuity Date.......................19
Death Benefit Payment Methods........................................20
Death of Certificate Holder On or After the Annuity Date.............21
Death of the Annuitant...............................................21
Section 11. Delay of Payments.............................................21
Delay of Payments....................................................21
Section 12. Annuity Provisions............................................21
Designation of Annuitant.............................................21
Terms of Annuity Options.............................................22
Annuity Unit.........................................................23
Annuity Unit Value...................................................23
Annuity Net Return Factor............................................23
Annuity Options......................................................24
3
<PAGE>
Contract Schedule
Separate Account
- --------------------------------------------------------------------------------
Separate Account: Variable Account B
Charges to the Separate A daily charge is deducted from the assets of
Account: the Separate Account. The deduction is the daily
equivalent of the annual effective percentage
shown below:
(a) During the Accumulation Period:
Administrative Charge 0.15%
Mortality Risk Charge 0.35%
Expense Risk Charge 0.90%
TOTAL Separate Account Charges
During Accumulation Period 1.40%
(b) During the Annuity Period
Administrative Charge Not To Exceed 0.25%
Mortality Risk Charge 0.35%
Expense Risk Charge 0.90%
TOTAL Maximum Separate Account
Charges During Annuity Period 1.50%
ALIAC Guaranteed Account (AG Account)
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest 3.0%
Rate (effective annual rate
of return):
Separate Account and AG Account
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Minimum Initial Purchase $1,500
Payment:
Minimum Subsequent $500 or $50 per month if paid by an automatic
Purchase Payment: check plan
Maximum Subsequent $500,000 without Home Office approval
Purchase Payment:
Transfers: We allow an unlimited number of transfers during
the Accumulation Period. Twelve (12) transfers
in any calendar year are free. Thereafter, We
reserve the right to charge a transfer charge up
to $10 for each subsequent transfer.
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Maintenance Charge: The annual maintenance charge is $30. If the
Certificate Holder's Account is $50,000 or more
on the date the maintenance charge is to be
deducted, the maintenance charge is $0.
Deferred Sales Charge: For each withdrawal from a Certificate Holder's
Account, a deferred sales charge for each Net
Purchase Payment will be determined as follows:
Years from Receipt of Deferred
Net Purchase Payment Sales Charge
0-1 7%
1-2 6%
2-3 5%
3-4 4%
4-5 3%
5-6 2%
6-7 1%
7+ 0%
Waiver of Deferred Section 8.05 provides for the following:
Sales Charge:
(c) At least 12 months after the date of the
first Purchase Payment in an amount
equal to or less than 15% of the
Certificate Holder's Account Value.
(d) For a full withdrawal where the
Certificate Holder's Account Value does
not exceed $2,500 and no withdrawals
have been taken from the Certificate
Holder's Account within the prior 12
months.
<TABLE>
<S> <C> <C>
Systematic Withdrawal Option: (a) Specified Payment - Maximum Percentage: 10%
(b) Specified Period - Minimum Period: 10 years
(c) Specified Percentage - Maximum Percentage: 10%
</TABLE>
Death Benefit Factor: 4%
Death Benefit There is no maximum death benefit amount.
Maximum Amount:
Death Benefit 85 years
Maximum Age:
Fund for Allocation of Excess Federated Prime Money Fund II
Guaranteed Death Benefit
Value:
Latest Annuity Date: The Certificate Holder's 90th birthday.
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Fixed Annuity
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Minimum Guaranteed 3.0%
Interest Rate
(effective annual rate
of return):
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Section 1. Definitions
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1.01 Accumulation Period - The period during which one or more Net
Purchase Payments applied to a Certificate Holder's Account
accumulate to provide future Annuity payments.
1.02 Accumulation Unit - A measure of the net investment results for
each variable investment option during the Accumulation Period. The
Accumulation Units for the applicable Funds are used to calculate
the portion of a Certificate Holder's Account Value attributable to
a Separate Account during the Accumulation Period.
1.03 Adjusted Certificate Holder Account Value - The Certificate
Holder's Account Value, plus or minus any aggregate AG Account
Market Value Adjustment.
1.04 Annuitant - The natural person on whose life an Annuity payment is
based.
1.05 Annuity - A series of payments We make for life, a definite period
or a combination of the two.
1.06 Annuity Date - The date on which Annuity payments commence.
1.07 Annuity Options - Annuity payment methods available during the
Annuity Period.
1.08 Annuity Period - The period of time during which Annuity payments
are made.
1.09 Annuity Unit - A measure of the net investment results for each
variable investment option during the Annuity Period. Annuity Units
are used to calculate the amount of each variable Annuity payment.
1.10 Beneficiary - The person(s) entitled to receive any death benefit
under the Certificate Holder's Account. Upon the death of a joint
Certificate Holder, the surviving joint Certificate Holder, if any,
is treated as the Beneficiary. Any other Beneficiary designation on
record with Us at the time of death is treated as a contingent
Beneficiary.
1.11 Certificate - The document issued to a Certificate Holder to
evidence a Certificate Holder's Account established under the group
Contract.
1.12 Certificate Holder - A person who has established a Certificate
Holder's Account under a group Contract. We reserve the right to
limit ownership to natural persons. If more than one Certificate
Holder owns an Account, each Certificate Holder shall be a joint
Certificate Holder. Any joint Certificate Holder must be the spouse
of the other joint Certificate Holder. Joint Certificate Holders
have joint ownership rights and both must authorize any exercising
of those ownership rights unless otherwise allowed by Us.
1.13 Certificate Holder's Account - A record We establish for each
Certificate Holder to maintain values under a group Contract.
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1.14 Certificate Holder's Account Value - The dollar value as of any
Valuation Period of all amounts accumulated in a Certificate
Holder's Account.
1.15 Contract - This agreement between the Group Contract Holder and Us.
1.16 Effective Date - The date a Certificate is issued to a Certificate
Holder.
1.17 Fund - One of the variable investment options which may be selected
by a Certificate Holder.
1.18 General Account - The General Account is made up of all of our
general assets other than those allocated to the separate accounts.
1.19 ALIAC Guaranteed Account (AG Account) - An investment option where
We guarantee specified rate(s) of interest for specified periods of
time. The AG Account is a separate account established by Us in
accordance with the provisions of the Connecticut General Statutes
Section 38a-433. Certificate Holders do not participate in the
investment gain or loss from the assets held in the AG Account.
Assets in the AG Account may be charged with liabilities arising
out of any other business We may conduct.
1.20 Group Contract Holder - The entity to which a group Contract is
issued.
1.21 Home Office - Our headquarters, located at 151 Farmington Avenue,
Hartford, CT 06156.
1.22 Market Value Adjustment - An adjustment to any withdrawal made from
the AG Account before the end of a guaranteed term as stated in
Section 7.11.
1.23 Net Purchase Payment - The Purchase Payment less premium taxes, if
applicable.
1.24 Purchase Payment - The gross payment accepted by Us and allocated
to the Certificate Holder's Account. We reserve the right to refuse
to accept any Purchase Payment at any time for any reason.
1.25 Separate Account - A separate account that buys and holds shares of
the Fund(s). Income, gains or losses, realized or unrealized, are
credited or charged to the Separate Account without regard to Our
other income, gains or losses. We own the assets held in the
Separate Account and are not a trustee as to such amounts. The
Separate Account generally is not guaranteed and is held at market
value. The name of the Separate Account is shown on the Contract
Schedule. The assets of the Separate Account, to the extent of
reserves and other Contract liabilities of the Separate Account,
will not be charged with Our other liabilities.
1.26 Valuation Period - The period of time for which a Fund determines
its net asset value, usually from 4:15 p.m. Eastern time each day
the New York Stock Exchange is open until 4:15 p.m. the next such
business day, or such other day that one or more of the Funds
determines its net asset value. The assets of the Separate Account
are not chargeable with the liabilities arising out of any other
business We may conduct.
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1.27 Variable Annuity Contract - An Annuity Contract providing for the
accumulation of value and/or for Annuity payments which vary in
amount based on investment results.
Section 2. General Provisions
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2.01 The Contract - The entire Contract consists of this Contract and
any attached applications or endorsements.
2.02 Certificates - A Certificate is issued to each Certificate Holder
whose Purchase Payment(s) is accepted by Us. The Certificate
evidences a Certificate Holder's Account established under the
Contract. Certificates are not part of the Contract.
2.03 Nonparticipating Contract - Neither the Group Contract Holder,
Certificate Holder nor any Beneficiary have a right to share in our
earnings.
2.04 Misstatements and Adjustments - If We learn that the age of any
Annuitant or second Annuitant is misstated, the correct age will be
used to adjust payments. We reserve the right to request
reimbursement or adjust future payments for any amount overpaid. We
will pay the amount of any underpayment.
2.05 Reports - We furnish each Certificate Holder with a report showing
the Certificate Holder's Account Value at least once each calendar
year. We also furnish an annual report of the Separate Account.
2.06 Premium Taxes - Any premium taxes paid to any governmental entity
are charged against Purchase Payments or a Certificate Holder's
Account. We may, at our sole discretion, pay premium taxes when due
and deduct that amount from the Certificate Holder's Account at a
later date. Payment at an earlier date does not waive any right We
may have to deduct amounts at a later date.
2.07 Protection of Proceeds - To the extent permitted by law, all
payments under this Contract to a Certificate Holder or Beneficiary
shall be free from legal process and the claim of any creditor.
2.08 Evidence of Survival - The Company may require satisfactory
evidence of the continued survival of any person(s) on whose life
Annuity payments are based.
2.09 Proof of Age - The Company may require evidence of age of any
Annuitant under Annuity Options 2 and 3 and of the designated
second Annuitant under Annuity Option 3.
2.10 Change of Contract - Only our authorized officers may change the
terms of this Contract. We will notify the Group Contract Holder in
writing at least 30 days before the effective date of any change.
Any change will not affect the amount or terms of any Annuity which
begins before the change.
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We may make any change that affects the AG Account Market Value
Adjustment with at least thirty (30) days' advance written notice
to the Group Contract Holder and the Certificate Holder. Any such
change shall become effective for any new guaranteed term and will
apply to all present and future Certificate Holders' Accounts.
We reserve the right to change the terms of the Systematic
Withdrawal Option for future elections and discontinue the
availability of this option.
Any change to any of the following provisions under this Contract
will not apply to Certificate Holder's Accounts in existence before
the effective date of the change:
(a) Net Purchase Payment (1.23)
(b) AG Account Guaranteed Interest Rate (7.01)
(c) Net Return Factor (6.05)
(d) Certificate Holder's Account Value (1.14)
(e) Deferred Sales Charge (8.04)
(f) Annuity Unit Value (12.04)
(g) Annuity Options (12.06)
(h) Fixed Annuity Interest Rates (12.01)
(i) Transfers (8.02).
Any change that affects the Annuity Option and the tables for the
Annuity Options may be made:
(a) No earlier than twelve (12) months after the Effective
Date; and
(b) No earlier than twelve (12) months after the effective date
of any prior change.
Any Certificate Holder's Account established on or after the
effective date of any change will be subject to the change. If the
Group Contract Holder does not agree to any change under this
provision, We reserve the right to not allow any new Certificate
Holder's Accounts to be established under this Contract. This
Contract may also be changed as deemed necessary by Us to comply
with federal or state law.
Section 3. Ownership
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3.01 Group Contract Holder - The Group Contract Holder has title to the
Contract. The Contract and any amounts accumulated thereunder are
not subject to the claims of the Group Contract Holder nor any of
its creditors.
3.02 Certificate Holder Rights - The Certificate Holder has all interest
and right to amounts held in his or her Certificate Holder's
Account. The Certificate Holder and any joint Certificate Holder
are named on the Specifications page. The Certificate Holder and
any joint Certificate Holder may exercise all the rights under the
Certificate Holder's Account, subject to the rights of:
(a) Any assignee under an assignment filed at our Home Office;
and
(b) Any irrevocably named Beneficiary.
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Upon the death of a Certificate Holder prior to the Annuity Date, a
spousal Beneficiary may elect to continue the Certificate Holder's
Account in his or her own name and retain all ownership rights and
privileges or take distribution of the death benefit as defined in
Section 10.
3.03 Transfer of Ownership - The Group Contract Holder may transfer
ownership of this Contract. A written request, dated and signed,
must be filed at our Home Office.
Any transfer of ownership terminates the interest of any existing
Group Contract Holder. It does not change the rights of any
Certificate Holder.
A Certificate Holder may transfer all of his or her rights under
the Contract. A written request, dated and signed by the
Certificate Holder and any joint Certificate Holder, must be filed
at our Home Office. After the transfer is recorded, it will take
effect as of the date the request was signed. Any such transfer
terminates the interest of any existing Certificate Holder. It does
not change the Beneficiary, nor transfer the Beneficiary's
interest. A transfer will not affect any payments We may make or
actions We may take before such transfer has been recorded at our
Home Office.
Section 4. Beneficiary Provisions
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4.01 Beneficiary - The Certificate Holder may name a Beneficiary and a
contingent Beneficiary. At the death of the Certificate Holder
prior to the Annuity Date, the Beneficiary(ies) named in our
records will receive a death benefit as stated in Section 10. Upon
the death of either joint Certificate Holder prior to the Annuity
Date, the surviving joint Certificate Holder, if any, will be
treated as the designated Beneficiary and any other Beneficiary
designation on record with Us at the time of death is treated as a
contingent Beneficiary.
4.02 Change of Beneficiary - The Certificate Holder may change the
Beneficiary. A written request, dated and signed by the Certificate
Holder, must be filed at our Home Office. If there are joint
Certificate Holders, both must sign the request. After the change
is recorded, it will take effect as of the date the request was
signed. If the request reaches our Home Office and is recorded
after the Certificate Holder dies, but before any payment is made,
the change is valid.
4.03 Death of Beneficiary - If all of the Beneficiaries and contingent
Beneficiaries die prior to the Certificate Holder's death, We pay
the death benefit in one sum to the Certificate Holder's estate.
Section 5. Purchase Payments
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5.01 Purchase Payments - Subject to the maximum and minimum shown on the
Contract Schedule, the Certificate Holder may determine the amount
and frequency of Purchase Payments. We reserve the right not to
accept any Purchase Payment. We will declare from time to time the
acceptability of additional Purchase Payments.
5.02 Allocation of Purchase Payments - The Certificate Holder may elect
to have each Net Purchase Payment accumulate:
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(a) On a variable basis invested in shares of one or more Funds
in which the Separate Account invests;
(b) For guaranteed terms offered in the current deposit
period(s) under the AG Account; or
(c) In a combination of any of the available investment
options.
Net Purchase Payments must be allocated in whole percentages. For
subsequent Purchase Payments, if no allocation instructions are
received with the Purchase Payment, the allocation will be as
indicated in the most recent directive from the Certificate Holder.
If the same guaranteed term(s) are not available, the next shortest
will be used. If no shorter guaranteed term is available, the next
longer guaranteed term will be used.
Section 6. Separate Account
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6.01 General - The assets of the Separate Account, equal to the reserves
and other Contract liabilities that depend on the investment
performance of the Separate Account are not chargeable with
liabilities arising out of any other business We may conduct.
Income, gains or losses of the Separate Account, realized or
unrealized, are credited to or charged against the assets of the
Separate Account without regard to Our other income, gains or
losses.
6.02 Investment Allocations to the Separate Account - The assets of the
Separate Account are segregated by Fund. If the shares of any Fund
are no longer available for investment by the Separate Account or
if in our judgment, further investment in such shares should become
inappropriate in view of the purpose of the Contract, We may cease
to make such Fund shares available for investment under the
Contract prospectively, or We may substitute shares of another Fund
for shares already acquired. We may also, from time to time, add
additional Funds. Any elimination, substitution or addition of
Funds will be done in accordance with applicable state and federal
securities laws. We reserve the right to substitute shares of
another Fund for shares already acquired without a proxy vote.
6.03 Valuation of Assets - The shares of the Funds will be valued at
their net asset value at the end of each Valuation Period.
6.04 Accumulation Unit - A Net Purchase Payment that is allocated to one
or more Funds is credited to the Certificate Holder's Account as
Accumulation Units. The number of Accumulation Units credited is
determined by dividing the applicable portion of the Net Purchase
Payment by the Accumulation Unit value for the appropriate Fund.
The Accumulation Unit value used is that which is computed for the
next Valuation Period after which the Purchase Payment is received
at our Home Office. Accumulation Units attributable to the initial
Purchase Payments will be credited within two business days of
acceptance.
Accumulation Unit values may increase or decrease from Valuation
Period to Valuation Period.
6.05 Net Return Factor for Each Valuation Period - The value of an
Accumulation Unit for any Valuation Period is calculated by
multiplying the Accumulation Unit value for the immediately
preceding Valuation Period by the net return factor of the
appropriate Fund for the current period.
The net return factor for each Fund is equal to 1.0000000 plus the
net return rate.
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The net return rate equals:
(a) The value of the shares of the Fund held by the Separate
Account at the end of a Valuation Period; minus
(b) The value of the shares of the Fund held by the Separate
Account at the start of the Valuation Period; plus or minus
(c) Taxes (or reserves for taxes) on the Separate Account (if
any); divided by
(d) The total value of the Funds(s) Accumulation Units and
Fund(s) Annuity Units of the Separate Account at the start
of the Valuation Period; minus
(e) A daily actuarial charge as shown on the Contract Schedule
for Annuity mortality and expense risks and profit and a
daily administrative charge.
The net return rate may be more or less than zero (0) percent.
The value of a share of the Fund is equal to the net assets of the
Fund divided by the number of shares outstanding.
6.06 Administrative Charge - We deduct an administrative charge equal,
on an annual basis, to the amount shown on the Contract Schedule.
6.07 Mortality Risk Charge - We deduct a mortality risk charge equal, on
an annual basis, to the amount shown on the Contract Schedule.
6.08 Expense Risk Charge - We deduct an expense risk charge equal, on an
annual basis, to the amount shown on the Contract Schedule.
6.09 Mortality and Expense Guarantee - We guarantee that the dollar
amount of each Annuity payment after the first will not be affected
by variations in mortality or expense experience.
Section 7. AG Account
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7.01 AG Account Guaranteed Interest Rate - All amounts allocated to the
AG Account earn a rate of interest that is guaranteed for a
specified period of time. The rate will be credited daily and will
never be less than the minimum guaranteed interest rate shown on
the Contract Schedule. We determine the rate and it is not based on
investment experience.
For guaranteed terms of one year or less, one guaranteed interest
rate is credited for the full guaranteed term. For longer
guaranteed terms, an initial guaranteed interest rate is credited
from the date of deposit to the end of a specified period within
the guaranteed term. There may be different guaranteed interest
rate(s) declared for subsequent specified time intervals throughout
the guaranteed term.
7.02 Deposit Period - A calendar week, a calendar month, a calendar
quarter, or any other period of time We specify during which Net
Purchase Payment(s), transfers and reinvestments are accepted into
the AG Account for one or more guaranteed terms. We reserve the
right to extend the deposit period.
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7.03 Guaranteed Term - The period of time for which AG Account
guaranteed interest rates are guaranteed on Net Purchase Payments.
Transfers and reinvestments are made into a current deposit period
for the AG Account. Such period begins on the day following the
close of the deposit period and ends on the designated Maturity
Date. Guaranteed terms, if any, are offered at our discretion for
various lengths of time ranging up to and including ten years.
During a deposit period, We may make available any number of
guaranteed terms. The Certificate Holder may allocate Net Purchase
Payments and transfers into any or all of the available guaranteed
terms.
7.04 Guaranteed Term(s) Groups - All AG Account guaranteed term(s) with
the same length of time from the close of the deposit period until
the designated Maturity Date.
7.05 Maturity Date - The last day of a guaranteed term.
7.06 Allocation of Net Purchase Payments to the AG Account - When the
Certificate Holder wishes to allocate all or any portion of a Net
Purchase Payment to the AG Account, he or she must tell Us the
percentage to apply to one or more of the AG Account guaranteed
term(s) available during the current deposit period. If no
allocation instructions are received, a Net Purchase Payment is
allocated as indicated in the most recent directive from the
Certificate Holder. If the same guaranteed term is not available
for any amount allocated to the AG Account, We will allocate the
amount to the next shortest guaranteed term available. If no
shorter guaranteed term is available, We will allocate it to the
next longest guaranteed term.
7.07 AG Account Guaranteed Term Maturity Date and Maturity Value - On
the maturity date, the value of the total of all amounts allocated
to that guaranteed term is called the maturity value.
When Certificate Holders have assets in the AG Account, at least
eighteen (18) days before a maturity date, We notify them of the:
(a) Projected maturity value; and
(b) Guaranteed terms and the applicable guaranteed interest
rates available during the current deposit period.
When no allocation instructions are received and the assets in a
guaranteed term have been reinvested by Us in another guaranteed
term on the maturity date, the Certificate Holder may transfer or
withdraw, during the month following the maturity date, the
reinvested amount with interest earned (as of the date the request
is received at our Home Office) without incurring a Market Value
Adjustment. This transaction is allowed only once for each maturity
date, regardless of whether the transfer or withdrawal is partial
or full.
7.08 Transfers from the AG Account - A Certificate Holder may transfer
any portion, or all, of an amount in the AG Account to one or more
of the Funds or to another available guaranteed term. The amount
withdrawn for any reason before the maturity date is subject to a
Market Value Adjustment.
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7.09 Withdrawals from the AG Account - When the Certificate Holder
requests a withdrawal from the AG Account, if instructions are not
provided by the Certificate Holder, amounts are withdrawn on a pro
rata basis from the guaranteed term(s) groups in which the
Certificate Holder's Account is currently invested. Within a
guaranteed term group, the amount to be withdrawn will be withdrawn
first from the oldest deposit period. Except on the maturity date,
withdrawals from the AG Account will be subject to a Market Value
Adjustment.
7.10 Reinvestment - We will mail a notice to the Certificate Holder
before a guaranteed term's maturity date. This notice will contain
the guaranteed terms available during the current deposit periods
with their guaranteed interest rate(s) and projected maturity
value. If no specific direction is given by the Certificate Holder
prior to the maturity date, each maturity value will be reinvested
in the current deposit period for a guaranteed term of the same
duration. If a guaranteed term of the same duration is unavailable,
each matured term value will automatically be reinvested in the
current deposit period for the next shortest guaranteed term
available. If no shorter guaranteed term is available, the next
longer guaranteed term will be used. We will mail a confirmation
statement to the Certificate Holder after the maturity date. This
notice will state the guaranteed term and guaranteed interest
rate(s) which will apply to the reinvested matured term value.
7.11 AG Account Market Value Adjustment (Factor) - The Market Value
Adjustment factor (MVA factor) reflects any change in interest
rates from the time assets are allocated to the AG Account to the
time they are transferred or withdrawn. An MVA factor is applied to
any amount withdrawn or transferred from the AG Account before the
end of a guaranteed term, including amounts paid in a lump sum
death benefit or applied to an Annuity Option.
The amount withdrawn from the AG Account is multiplied by the MVA
factor which is calculated as follows:
x
---
365
(1 + i)
-----------
x
---
365
(1 + j)
-----------
Where:
i is the Deposit Period Yield
j is the Current Yield
x is the number of days remaining, (computed
from Wednesday of the week of withdrawal) in
the guaranteed Term.
Determination of MVA factor parameters:
A yield is computed at the close of the last business day of each
week of the deposit period. The yield will equal the average of the
yields on U.S. Treasury Notes which matured during the last three
months of the applicable guaranteed term.
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The deposit period yield is the average of those yields for the
deposit period. If withdrawal is made prior to the close of the
deposit period, it is the average of those yields on each week
preceding withdrawal.
The current yield is the average of the yields on the last business
day of the week preceding withdrawal on the same U.S. Treasury
Notes included in the deposit period yield.
If no U.S. Treasury Notes matured during the last three months of
the guaranteed term, We reserve the right to use the average of the
yields on U.S. Treasury Notes that mature during a following
quarter.
Section 8. Certificate Holder's Account Value; Transfers and Withdrawals
During the Accumulation Period
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8.01 Certificate Holder's Account Value - The value of a Certificate
Holder's Account is determined by adding the value of the total of
Accumulation Units attributed to the selected Fund(s) to the value
of any amounts attributed to the AG Account.
8.02 Transfers During the Accumulation Period - Before the Annuity Date,
the Certificate Holder may transfer from any Fund or guaranteed
term of the AG Account to:
(a) Any other Fund; or
(b) Any guaranteed term of the AG Account available in the
current deposit period.
Transfer requests can be submitted as a percentage or as a dollar
amount. We may establish a minimum transfer amount. Within a
guaranteed term group, the amount transferred is withdrawn first
from the oldest deposit period, then from the next oldest, and so
on until the amount requested is satisfied.
The Certificate Holder may make an unlimited number of transfers
during the Accumulation Period. The number of free transfers
allowed is shown on the Contract Schedule. Transfers in excess of
that number may be subject to the transfer charge shown on the
Contract Schedule. Transfers of a matured term value from the AG
Account on or within one calendar month after a guaranteed term's
maturity date do not count against the annual transfer limit.
Amounts applied to guaranteed terms of the AG Account may not be
transferred to the Funds or to another guaranteed term during the
deposit period or for 90 days after the close of the deposit period
except for matured term value(s) during the calendar month
following the guaranteed term's maturity date.
Transfers from guaranteed terms of the AG Account are subject to a
Market Value Adjustment.
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8.03 Withdrawals During the Accumulation Period - The Certificate Holder
may withdraw all or a portion of the Certificate Holder's Account
Value during the Accumulation Period by properly completing a
withdrawal request form. Withdrawal requests can be submitted as a
percentage or as a specific dollar amount. Net Purchase Payment
amounts are withdrawn first, and then the excess value, if any. For
any partial withdrawal, if instructions are not provided by the
Certificate Holder, amounts are withdrawn on a pro rata basis from
the Fund(s), and/or the guaranteed term(s) groups in which the
Certificate Holder's Account is currently invested. Within a
guaranteed term group, the amount to be withdrawn will be withdrawn
first from the oldest deposit period, then from the next oldest,
and so on until the amount requested is satisfied.
After deduction of the maintenance charge, if applicable, the
withdrawn amount shall be reduced by the applicable deferred sales
charge and any applicable premium taxes.
8.04 Deferred Sales Charge - The deferred sales charge only applies to
the portion of the amount withdrawn attributable to Net Purchase
Payment(s) and varies according to the elapsed time since receipt
of the Purchase Payment. The deferred sales charge is shown on the
Contract Schedule.
8.05 Waiver of Deferred Sales Charge - No deferred sales charge is
deducted when a Certificate Holder's Account Value is paid:
(a) To a Beneficiary as a death benefit, except for Purchase
Payments made by a surviving joint Certificate Holder as
described in Section 10.02(b);
(b) As a premium for an Annuity Option;
(c) At least the number of months, as shown on the Contract
Schedule, after the date of the first Purchase Payment and
in an amount equal to or less than the percentage of the
Certificate Holder's Account Value as shown on the Contract
Schedule. This applies to the first withdrawal request,
partial or full, in a calendar year. The Certificate
Holder's Account Value is calculated as of the date the
withdrawal request is received in good order at our Home
Office. This waiver is not available to the Certificate
Holder while a SWO is in effect;
(d) For a full withdrawal where the Certificate Holder's
Account Value does not exceed the amount shown on the
Contract Schedule and no withdrawals have been taken from
the Certificate Holder's Account within the prior 12
months;
(e) For a distribution made by Us under Section 8.06; or
(f) For a distribution which is part of a SWO under Section
8.07.
We reserve the right to allow the proceeds of a total withdrawal to
be reinstated under the terms and conditions as established by Us
from time to time.
8.06 Payment of Adjusted Certificate Holder Account Value - Upon 90
day's written notice to the Certificate Holder, We will terminate
any Certificate Holder's Account if the Certificate Holder's
Account Value becomes less than $1,500 immediately following any
partial withdrawal. We do not intend to exercise this right in
cases where the Certificate Holder's Account Value is reduced to
$1,500 or less solely due to investment performance. When We make a
distribution pursuant to this provision, the deferred sales charge
will not be deducted.
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8.07 Systematic Withdrawal Option (SWO) - We will allow the Certificate
Holder to establish a schedule of withdrawals to be made
automatically from the Certificate Holder's Account Value. All
distributed amounts will be withdrawn on a pro rata basis from the
Fund(s) and/or the guaranteed term(s) groups of the AG Account in
which the Certificate Holder's Account is invested.
The Certificate Holder must elect one of the following SWO methods:
(a) Specified Payment: Payments of a designated dollar amount.
The annual amount may not be greater than the percentage of
the Certificate Holder's Account Value at time of the
election as shown on the Contract Schedule. This annual
dollar amount will remain constant. At our discretion, We
may require a minimum payment amount; or
(b) Specified Period: Payments which are made over a period of
time which must be at least the minimum period as shown on
the Contract Schedule. The annual amount paid each year is
calculated by dividing the Certificate Holder's Account
Value as of December 31 of the prior year by the number of
payment years remaining; or
(c) Specified Percentage: Payment of a designated percentage
which cannot be greater than the percentage of the
Certificate Holder's Account Value at the time of election
as shown on the Contract Schedule. The percentage may be
changed by written request. We reserve the right to limit
the number of times the percentage may be changed. The
annual amount is calculated by multiplying the Certificate
Holder's Account Value as of December 31 of the year prior
to the payment by the designated percentage.
In our discretion, We may require a minimum initial Certificate
Holder's Account Value for election of this option. SWO may be
elected by submitting a completed and signed election form to Us.
Once elected, this option may be revoked by submitting a written
request to Us. SWO may be elected only once by the Certificate
Holder or by a spousal Beneficiary.
Certificate Holders should consult their tax adviser prior to
requesting this distribution option. We are not responsible for any
adverse tax consequences due to a Certificate Holder's receiving
SWO payments. A ten (10) percent penalty tax may apply to
distributions to a Certificate Holder who has not reached age
59-1/2. Upon death of the Certificate Holder, any payments will be
made under the terms of Section 10.
Section 9. Maintenance Charge
- --------------------------------------------------------------------------------
9.01 Maintenance Charge - We will deduct an annual maintenance charge as
shown in the Contract Schedule from the Certificate Holder's
Account during the Accumulation Period. We will deduct the
maintenance charge on the anniversary of the Effective Date of the
Certificate for the Certificate Holder's Account. This maintenance
charge is also deducted upon withdrawal of the entire Adjusted
Certificate Holder's Account. The maintenance charge is deducted
proportionately from each investment option used.
18
<PAGE>
Section 10. Proceeds Payable on Death
- --------------------------------------------------------------------------------
10.01 Death of the Certificate Holder Prior to the Annuity Date - In the
event of the death of the Certificate Holder or a joint Certificate
Holder prior to the Annuity Date, a death benefit is payable to the
Beneficiary(ies) designated by the Certificate Holder. Upon the
death of a joint Certificate Holder, the surviving joint
Certificate Holder, if any, will be treated as the designated
Beneficiary. Any other Beneficiary designation on record with Us at
the time of death will be treated as a contingent Beneficiary.
A Beneficiary may request We pay the death benefit under one of the
options described in Section 10.03. If the Beneficiary is the
spouse of the Certificate Holder, he or she may elect to continue
the Certificate Holder's Account in his or her own name and
exercise all the Certificate Holder's rights under the Contract.
10.02 Death Benefit Amount Prior to the Annuity Date
(a) Except as set forth in Section 10.02(b), the amount of the
guaranteed death benefit value is equal to the greater of:
(i) The Certificate Holder's Account Value at the end of
the Valuation Period during which We receive at our
Home Office due proof of death and election of the
type of payment to be made; or
(ii) The death benefit determined as of the Valuation
Period corresponding to the date of death.
Until the first Effective Date anniversary, the
death benefit is equal to the Purchase Payments made
by the Certificate Holder prior to the Effective
Date anniversary less any withdrawals and any
amounts applied to an Annuity Option.
For each Certificate year thereafter, the death
benefit during the Certificate year equals the death
benefit at the beginning of the Certificate year
plus Purchase Payments made during the year less any
withdrawals and any amounts applied to an Annuity
Option.
On each Effective Date anniversary, the death
benefit is determined as follows:
(A) The death benefit on the previous Effective
Date anniversary increased by the death
benefit factor shown on the Contract
Schedule; plus
(B) Purchase Payments made by the Certificate
Holder during the Certificate year increased
by the death benefit factor shown on the
Contract Schedule for the portion of the
year since the Purchase Payment was made;
less
(C) Any withdrawals or amounts applied to an
Annuity Option during the Certificate year
increased by the death benefit factor shown
on the Contract Schedule for the portion of
the Certificate year since the withdrawal or
election of Annuity option; or
19
<PAGE>
(iii) The Certificate Holder's Account Value on the most
recent seventh year anniversary of the Effective
Date plus any Purchase Payments made after such
Effective Date anniversary less any withdrawals and
any amounts applied to an Annuity Option.
Notwithstanding the foregoing, the death benefit under (ii)
or (iii) will not exceed the death benefit maximum amount
shown on the Contract Schedule.
The death benefit calculation described in (ii) and (iii)
above, applies until the Certificate Holder reaches the
death benefit maximum age shown on the Contract Schedule.
Thereafter, the death benefit is only adjusted for Purchase
Payments, withdrawals and amounts applied to Annuity
Options. If the Certificate Holder reaches the death
benefit maximum age shown on the Contract Schedule prior to
the seventh anniversary of the Effective Date, the death
benefit will be the greater of (i) or (ii) above.
The excess, if any, of the guaranteed death benefit value
over the Certificate Holder's Account Value is determined
when we receive at our Home Office due proof of death and
allocated to the Fund shown on the Contract Schedule. The
Certificate Holder's Account Value plus any excess amount
deposited becomes the Certificate Holder's Account Value.
(b) In the case of a Beneficiary of a surviving joint
Certificate Holder who continued the Certificate Holder's
Account in his or her own name, the death benefit shall be
equal to (a)(i) above less any applicable deferred sales
charge on any Purchase Payment made after We have received
at our Home Office due proof of death of the first joint
Certificate Holder.
10.03 Death Benefit Payment Methods - A non-spousal Beneficiary must
elect the death benefit to be paid under one of the following
methods in the event of the death of the Certificate Holder prior
to the Annuity Date:
Method 1 - Lump sum payment of the death benefit; or
Method 2 - The payment of the entire death benefit within (5) years
of the date of the Certificate Holder's death; or
Method 3 - Payment of the death benefit over the lifetime of the
designated Beneficiary or over a period not extending beyond the
life expectancy of the designated Beneficiary with distribution
beginning within one year of the date of death of the Certificate
Holder.
Any portion of the death benefit not applied under Option 3 within
one year of the date of Certificate Holder's death, must be
distributed within five (5) years of the date of death. A Market
Value Adjustment will apply at the time the death benefit is paid.
A spousal Beneficiary may elect to continue the Certificate
Holder's Account in his or her name, elect a lump sum payment of
the death benefit or apply the Adjusted Certificate Holder's
Account Value to an Annuity Option.
20
<PAGE>
10.04 Death of Certificate Holder On or After the Annuity Date - If the
Certificate Holder who is not the Annuitant, dies on or after the
Annuity Date, the remaining payments under the Annuity Option
elected will be made to the Beneficiary at least as rapidly as
under the method of distribution in effect at the Certificate
Holder's death.
10.05 Death of the Annuitant - If the Annuitant, who is not a Certificate
Holder, dies on or before the Annuity Date, a new Annuitant may be
named. If no Annuitant is named, the Certificate Holder will be the
Annuitant. If the Annuitant dies after the Annuity Date, the death
benefit, if any, will be payable to the Beneficiary as specified in
the Annuity Option elected. We will require proof of the
Annuitant's death. Death benefits will be paid at least as rapidly
as under the method of distribution in effect at the Annuitant's
death.
Section 11. Delay of Payments
- --------------------------------------------------------------------------------
11.01 Delay of Payments - We will make any payments under this Contract
within seven days after a request is received in good order. We
reserve the right to suspend or postpone any type of payment from
the Separate Account for any period when:
(a) The New York Stock Exchange is closed for other than
customary weekend and holiday closings;
(b) Trading on the Exchange is restricted;
(c) An emergency exists as a result of which it is not
reasonably practicable to dispose of securities held in the
Separate Account or determine their value; or
(d) The Securities and Exchange Commission so permits delay for
the protection of security holders.
The applicable rules of the Securities and Exchange Commission will
govern as to whether the conditions in (b) or (c) exist.
We also reserve the right to delay any type of payment from the AG
Account for up to six (6) months.
Section 12. Annuity Provisions
- --------------------------------------------------------------------------------
12.01 Designation of Annuitant - The Certificate Holder and the Annuitant
need not be the same person. The Certificate Holder names the
Annuitant and during the Accumulation Period, may change the
designated Annuitant. We change the Annuitant when We receive a
written request in good order at our Home Office. We will not
change the Annuitant when Annuity payments have commenced.
The Certificate Holder elects an Annuity Option by telling Us to
use all or any portion of the Certificate Holder's Adjusted Account
Value (minus any applicable premium taxes if not previously
deducted) to purchase Annuity payments under an Annuity Option.
21
<PAGE>
When an Annuity Option is chosen the Certificate Holder must
designate a:
(a) Fixed Annuity using the General Account;
(b) Variable Annuity using any of the Funds available during
the Annuity Period; or
(c) Combination of (a) and (b).
If a fixed Annuity is chosen, We will calculate the amount using an
interest assumption no less than the percentage specified on the
Contract Schedule. We may calculate the amount using a higher
interest rate.
If a variable Annuity is chosen, an Assumed Annual Net Return Rate
of 5% may be chosen. If not chosen, We will use an Assumed Annual
Net Return Rate of 3.5%
Payments are made on a monthly basis to the Certificate Holder
unless the Certificate Holder requests a different mode of payment.
Once elected, an Annuity Option may not be revoked, except for
Option 1 when elected on a variable basis.
12.02 Terms of Annuity Options - The minimum first payment amount must be
at least $50 per month and at least $250 per year.
If the Certificate Holder elects a fixed Annuity and We determine
that the Certificate Holder would receive larger payments by
applying the Certificate Holder's Account Value, reduced by the
deferred sales charge, to a single premium immediate Annuity
currently offered by Us, We will make the larger payments.
We determine the first payment of a variable Annuity, or the
payment amount of a fixed Annuity, using the Annuitant's (and
second Annuitant's if applicable) adjusted age which We calculate
as follows:
(a) If Annuity payments begin any time between July 1, 1992 and
December 31, 1999, the adjusted age is the Annuitant's age
as of the birthday closest in time to the Annuity Date
reduced by one (1) year.
(b) If the Annuity begins any time between January 1, 2000 and
December 31, 2009, the adjusted age is the Annuitant's age
as of the birthday closest in time to the Annuity Date
reduced by two (2) years.
(c) For each succeeding decade, the adjusted age is the
Annuitant's age as determined in (b), reduced by one
additional year.
The Annuity rates for Options 2 and 3 are based on mortality from
1983 Table A.
Assumed Annual Net Return Rate is the interest rate used to
determine the amount of the first Annuity payment under a variable
Annuity. The Separate Account must earn this rate plus enough to
cover the mortality and expense risks charges (which may include
profit) and administrative charges if future variable Annuity
payments are to remain level.
22
<PAGE>
The Certificate Holder must give written notice to Us at least 30
days before the Annuity payments begin, electing or changing:
(a) The date on which Annuity payments are to begin;
(b) The Annuity Option;
(c) Whether the payments are to be made monthly, quarterly,
semiannually or annually;
(d) The investment options used to provide Annuity payments.
The first Annuity payment may not be earlier than one (1) calendar
year after the initial Purchase Payment, nor later than the later
of the:
(a) First day of the month following the Annuitant's birthday
shown on the Contract Schedule; or
(b) Tenth anniversary of the last Purchase Payment. In lieu of
the election of an Annuity, the Certificate Holder may
request a lump sum payment.
12.03 Annuity Unit - The number of Annuity Units per Fund is based on the
amount of the first variable Annuity payment which is equal to:
(a) The portion of the Certificate Holder's Account Value
(minus any premium taxes) applied to pay a variable
Annuity; divided by,
(b) 1000; multiplied by,
(c) The payment rate for the Annuity Option chosen.
Such amount, or portion, of the variable Annuity payment will be
divided by the Annuity Unit value for the appropriate Fund on the
tenth Valuation Period before the due date of the first payment to
determine the number of each Fund's Annuity Units. The number of
each Fund's Annuity Unit remains fixed. Each future payment is
equal to the sum of the products of each Fund's Annuity Unit value
multiplied by the appropriate number of units. The Fund's Annuity
Unit value on the tenth Valuation Period prior to the due date of
the payment is used.
12.04 Annuity Unit Value - For any Valuation Period, a Fund's Annuity
Unit value is equal to:
(a) The value for the previous Valuation Period; multiplied by,
(b) The Annuity Net Return Factor for the Valuation Period;
multiplied by,
(c) A daily factor to reflect the Assumed Annual Net Return
Rate (the factor for 3.5% per year is .9999058; for 5% per
year it is .9998663).
The dollar value of a Fund(s) Annuity Unit values and payments may
go up or down due to investment gain or loss.
12.05 Annuity Net Return Factor - The Annuity net return factor is used
to compute all Separate Account Annuity payments for any Fund.
The Annuity net return factor(s) for each Fund is equal to
1.0000000 plus the net return rate. The net return rate is equal
to:
23
<PAGE>
(a) The value of the shares of the Fund held by the Separate
Account at the end of a Valuation Period; minus,
(b) The value of the shares of the Fund held by the Separate
Account at the start of the Valuation Period; plus or
minus,
(c) Taxes (or reserves for taxes) on the Separate Account (if
any); divided by
(d) The total value of the Fund(s) Accumulation Units and
Fund(s) Annuity Units of the Separate Account at the start
of the Valuation Period; minus,
(e) A daily actuarial charge as shown of the Contract Schedule
for Annuity mortality and expense risks and profit and a
daily administrative charge which will not exceed the
administrative charge as shown on the Contract Schedule.
The net return rate may be more or less than zero (o) percent.
The value of a share of the Fund is equal to the net assets of the
Fund divided by the number of shares outstanding.
12.06 Annuity Options
Option 1 - Payments for a Stated Period of Time - An Annuity will
be paid for the number of years chosen. The number of years must be
at least 5 and not more than 30.
If payments for this Annuity Option are made under a variable
Annuity, the present value of any remaining payments may be
withdrawn at any time.
Option 2 - Life Income - An Annuity will be paid for the life of
the Annuitant. If also chosen, We will guarantee payments for 60,
120, 180, or 240 months.
Option 3 - Life Income Based upon the Lives of Two Annuitants - An
Annuity will be paid during the lives of the Annuitant and a second
Annuitant. Payments will continue until both Annuitants have died.
When this Annuity Option is chosen, a choice must be made of:
(a) 100% of the payment to continue after the first death;
(b) 66-2/3% of the payment to continue after the first death:
(c) 50% of the payment to continue after the first death;
(d) Payments for a minimum of 120 months with 100% of the
payment to continue after the first death; or
(e) 100% of the payment to continue at the death of the second
Annuitant and 50% of the payment to continue at the death
of the Annuitant.
We may make other options available as allowed by law.
24
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
- ------------------------------------------------------------------------------
Guaranteed Monthly Quarterly Semi-Annual Annual
Years Rate Payment Payment Payment Payment
- ------------------------------------------------------------------------------
5 3.00% 17.91 53.59 106.78 211.99
6 3.00% 15.14 45.30 90.27 179.22
7 3.00% 13.16 39.39 78.49 155.83
8 3.00% 11.68 34.96 69.66 138.31
9 3.00% 10.53 31.52 62.81 124.69
10 3.00% 9.61 28.77 57.33 113.82
11 3.00% 8.86 26.52 52.85 104.93
12 3.00% 8.24 24.65 49.13 97.54
13 3.00% 7.71 23.08 45.98 91.29
14 3.00% 7.26 21.73 43.29 85.95
15 3.00% 6.87 20.56 40.96 81.33
16 3.00% 6.53 19.54 38.93 77.29
17 3.00% 6.23 18.64 37.14 73.74
18 3.00% 5.96 17.84 35.56 70.59
19 3.00% 5.73 17.13 34.14 67.78
20 3.00% 5.51 16.50 32.87 65.26
21 3.00% 5.32 15.92 31.72 62.98
22 3.00% 5.15 15.40 30.68 60.92
23 3.00% 4.99 14.92 29.74 59.04
24 3.00% 4.84 14.49 28.88 57.33
25 3.00% 4.71 14.09 28.08 55.76
26 3.00% 4.59 13.73 27.36 54.31
27 3.00% 4.47 13.39 26.68 52.97
28 3.00% 4.37 13.08 26.06 51.74
29 3.00% 4.27 12.79 25.49 50.60
30 3.00% 4.18 12.52 24.95 49.53
- ------------------------------------------------------------------------------
25
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
Payments Guaranteed for a Stated Period of Months
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
None 60 120 180 240
Adjusted -----------------------------------------------------------------------------------------------------------------
Age of
Annuitant Male Female Male Female Male Female Male Female Male Female
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $ 4.27 $ 3.90 $ 4.26 $ 3.90 $ 4.22 $ 3.89 $ 4.17 $ 3.86 $ 4.08 $ 3.82
51 4.34 3.97 4.33 3.96 4.30 3.95 4.23 3.92 4.14 3.88
52 4.43 4.03 4.41 4.03 4.37 4.01 4.30 3.98 4.20 3.93
53 4.51 4.10 4.50 4.10 4.45 4.08 4.37 4.04 4.26 3.99
54 4.60 4.18 4.59 4.17 4.54 4.15 4.45 4.11 4.32 4.04
55 4.70 4.25 4.68 4.25 4.62 4.22 4.53 4.18 4.39 4.11
56 4.80 4.34 4.78 4.33 4.72 4.30 4.61 4.25 4.45 4.17
57 4.91 4.42 4.89 4.41 4.82 4.38 4.69 4.32 4.51 4.23
58 5.03 4.52 5.00 4.51 4.92 4.47 4.78 4.40 4.58 4.30
59 5.15 4.61 5.12 4.60 5.03 4.56 4.87 4.48 4.65 4.37
60 5.28 4.72 5.25 4.70 5.14 4.66 4.96 4.57 4.71 4.44
61 5.43 4.83 5.39 4.81 5.27 4.76 5.06 4.66 4.78 4.51
62 5.58 4.95 5.53 4.93 5.39 4.87 5.16 4.75 4.84 4.58
63 5.74 5.08 5.69 5.05 5.53 4.99 5.26 4.85 4.90 4.65
64 5.91 5.21 5.85 5.18 5.66 5.10 5.36 4.95 4.96 4.72
65 6.10 5.36 6.03 5.32 5.81 5.22 5.46 5.05 5.02 4.79
66 6.30 5.51 6.21 5.47 5.96 5.36 5.56 5.16 5.08 4.86
67 6.51 5.67 6.41 5.63 6.12 5.50 5.66 5.26 5.13 4.93
68 6.73 5.85 6.62 5.80 6.28 5.65 5.77 5.37 5.18 5.00
69 6.97 6.04 6.84 5.98 6.44 5.80 5.86 5.49 5.23 5.06
70 7.23 6.25 7.07 6.18 6.61 5.97 5.96 5.60 5.27 5.12
71 7.51 6.47 7.32 6.39 6.79 6.14 6.05 5.71 5.31 5.18
72 7.80 6.71 7.58 6.62 6.96 6.32 6.14 5.83 5.34 5.23
73 8.12 6.98 7.85 6.86 7.14 6.50 6.23 5.94 5.37 5.28
74 8.46 7.26 8.14 7.12 7.32 6.69 6.31 6.04 5.40 5.32
75 8.82 7.57 8.45 7.40 7.50 6.89 6.38 6.14 5.42 5.35
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
26
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Male and Second Annuitant is Female)
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Adjusted Ages
- -------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $ 3.69 $ 4.05 $ 4.27 $ 3.69 $ 4.13
55 55 3.88 4.25 4.47 3.87 4.25
55 60 3.06 4.47 4.71 4.06 4.36
60 55 3.99 4.44 4.71 3.98 4.55
60 60 4.24 4.71 4.99 4.23 4.70
60 65 4.49 5.01 5.32 4.48 4.85
65 60 4.38 4.97 5.32 4.38 5.10
65 65 4.72 5.33 5.70 4.71 5.32
65 70 5.07 5.75 6.17 5.05 5.54
70 65 4.93 5.68 6.15 4.91 5.86
70 70 5.40 6.21 6.70 5.36 6.18
70 75 5.89 6.82 7.40 5.81 6.49
75 70 5.69 6.68 7.32 5.62 6.92
75 75 6.37 7.45 8.15 6.23 7.40
75 80 7.07 8.34 9.16 6.78 7.85
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
The rates assume the Annuitant is Male and
the Second Annuitant is Female.
Rates for ages not shown will be provided on request and will be computed on a
basis consistent with the rates in the above tables.
27
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Female and Second Annuitant is Male)
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Adjusted Ages
- -------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $ 3.75 $ 4.07 $ 4.26 $ 3.75 $ 3.98
55 55 3.88 4.25 4.47 3.87 4.06
55 60 3.99 4.44 4.71 3.98 4.12
60 55 4.06 4.47 4.71 4.06 4.37
60 60 4.24 4.71 4.99 4.23 4.47
60 65 4.38 4.97 5.32 4.38 4.54
65 60 4.49 5.01 5.32 4.48 4.89
65 65 4.72 5.33 5.70 4.71 5.02
65 70 4.93 5.68 6.15 4.91 5.14
70 65 5.07 5.75 6.17 5.05 5.60
70 70 5.40 6.21 6.70 5.36 5.79
70 75 5.69 6.68 7.32 5.62 5.96
75 70 5.89 6.83 7.40 5.81 6.63
75 75 6.37 7.45 8.15 6.23 6.92
75 80 6.78 8.11 8.99 6.54 7.15
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
The rates assume the Annuitant is Female and the Second Annuitant is Male.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
28
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
- ------------------------------------------------------------------------------
Guaranteed Monthly Quarterly Semi-Annual Annual
Years Rate Payment Payment Payment Payment
- ------------------------------------------------------------------------------
5 3.50% 18.12 54.19 107.92 213.99
6 3.50% 15.35 45.92 91.44 181.32
7 3.50% 13.38 40.01 79.69 158.01
8 3.50% 11.90 35.59 70.88 140.56
9 3.50% 10.75 32.16 64.05 127.00
10 3.50% 9.83 29.42 58.59 116.18
11 3.50% 9.09 27.18 54.13 107.34
12 3.50% 8.46 25.32 50.42 99.98
13 3.50% 7.94 23.75 47.29 93.78
14 3.50% 7.49 22.40 44.62 88.47
15 3.50% 7.10 21.24 42.31 83.89
16 3.50% 6.76 20.23 40.29 79.89
17 3.50% 6.47 19.34 38.51 76.37
18 3.50% 6.20 18.55 36.94 73.25
19 3.50% 5.97 17.85 35.54 70.47
20 3.50% 5.75 17.22 34.28 67.98
21 3.50% 5.56 16.65 33.15 65.74
22 3.50% 5.39 16.13 32.13 63.70
23 3.50% 5.24 15.66 31.19 61.85
24 3.50% 5.09 15.24 30.34 60.17
25 3.50% 4.96 14.85 29.56 58.62
26 3.50% 4.84 14.49 28.85 57.20
27 3.50% 4.73 14.15 28.19 55.90
28 3.50% 4.63 13.85 27.58 54.69
29 3.50% 4.53 13.57 27.02 53.57
30 3.50% 4.45 13.30 26.49 52.53
- ------------------------------------------------------------------------------
29
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
- ------------------------------------------------------------------------------
Guaranteed Monthly Quarterly Semi-Annual Annual
Years Rate Payment Payment Payment Payment
- ------------------------------------------------------------------------------
5 5.00% 18.74 56.00 111.33 219.98
6 5.00% 15.99 47.77 94.96 187.64
7 5.00% 14.02 41.90 83.30 164.59
8 5.00% 12.56 37.52 74.58 147.35
9 5.00% 11.42 34.11 67.81 133.99
10 5.00% 10.51 31.40 62.42 123.34
11 5.00% 9.77 29.19 58.03 114.66
12 5.00% 9.16 27.36 54.38 107.45
13 5.00% 8.64 25.81 51.31 101.39
14 5.00% 8.20 24.50 48.69 96.21
15 5.00% 7.82 23.36 46.44 91.75
16 5.00% 7.49 22.37 44.47 87.88
17 5.00% 7.20 21.51 42.75 84.48
18 5.00% 6.94 20.74 41.23 81.47
19 5.00% 6.71 20.06 39.88 78.80
20 5.00% 6.51 19.46 38.68 76.42
21 5.00% 6.33 18.91 37.59 74.28
22 5.00% 6.17 18.42 36.62 72.35
23 5.00% 6.02 17.98 35.73 70.61
24 5.00% 5.88 17.57 34.93 69.02
25 5.00% 5.76 17.20 34.20 67.57
26 5.00% 5.65 16.87 33.53 66.25
27 5.00% 5.54 16.56 32.92 65.04
28 5.00% 5.45 16.28 32.35 63.93
29 5.00% 5.36 16.01 31.83 62.90
30 5.00% 5.28 15.77 31.35 61.95
- ------------------------------------------------------------------------------
30
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
Payments Guaranteed for a Stated Period of Months
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
None 60 120 180 240
Adjusted -----------------------------------------------------------------------------------------------------------------
Age of
Annuitant Male Female Male Female Male Female Male Female Male Female
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $ 4.56 $ 4.20 $ 4.55 $ 4.19 $ 4.51 $ 4.18 $ 4.45 $ 4.15 $ 4.36 $ 4.11
51 4.64 4.26 4.62 4.25 4.58 4.24 4.51 4.21 4.42 4.16
52 4.72 4.32 4.70 4.32 4.66 4.30 4.58 4.26 4.48 4.21
53 4.80 4.39 4.79 4.38 4.74 4.36 4.65 4.32 4.53 4.27
54 4.89 4.46 4.87 4.46 4.82 4.43 4.73 4.39 4.59 4.32
55 4.99 4.54 4.97 4.53 4.91 4.50 4.80 4.46 4.65 4.38
56 5.09 4.62 5.07 4.61 5.00 4.58 4.88 4.53 4.72 4.44
57 5.20 4.71 5.17 4.70 5.10 4.66 4.96 4.60 4.78 4.50
58 5.32 4.80 5.29 4.79 5.20 4.75 5.05 4.68 4.84 4.57
59 5.44 4.90 5.41 4.88 5.31 4.84 5.14 4.76 4.91 4.63
60 5.57 5.00 5.53 4.99 5.42 4.93 5.23 4.84 4.97 4.70
61 5.71 5.11 5.67 5.09 5.54 5.03 5.32 4.93 5.03 4.77
62 5.86 5.23 5.81 5.21 5.66 5.14 5.42 5.02 5.09 4.84
63 6.02 5.36 5.97 5.33 5.79 5.25 5.51 5.11 5.16 4.91
64 6.20 5.49 6.13 5.46 5.93 5.37 5.61 5.21 5.21 4.98
65 6.38 5.64 6.31 5.60 6.07 5.49 5.71 5.31 5.27 5.05
66 6.58 5.79 6.49 5.75 6.22 5.63 5.81 5.41 5.32 5.12
67 6.79 5.95 6.69 5.91 6.38 5.76 5.91 5.52 5.38 5.18
68 7.02 6.13 6.89 6.08 6.53 5.91 6.01 5.63 5.42 5.25
69 7.26 6.32 7.11 6.26 6.70 6.06 6.11 5.74 5.47 5.31
70 7.52 6.53 7.35 6.45 6.86 6.23 6.20 5.85 5.51 5.37
71 7.80 6.75 7.59 6.66 7.03 6.39 6.29 5.96 5.54 5.42
72 8.09 6.99 7.85 6.89 7.21 6.57 6.38 6.07 5.57 5.47
73 8.41 7.26 8.12 7.13 7.38 6.75 6.46 6.17 5.60 5.51
74 8.75 7.54 8.41 7.39 7.55 6.94 6.53 6.28 5.63 5.55
75 9.12 7.85 8.71 7.66 7.73 7.13 6.61 6.38 5.65 5.59
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
31
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
Payments Guaranteed for a Stated Period of Months
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
None 60 120 180 240
Adjusted -----------------------------------------------------------------------------------------------------------------
Age of
Annuitant Male Female Male Female Male Female Male Female Male Female
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $ 5.48 $ 5.12 $ 5.46 $ 5.11 $ 5.41 $ 5.09 $ 5.34 $ 5.06 $ 5.24 $ 5.01
51 5.55 5.17 5.53 5.17 5.48 5.14 5.40 5.11 5.29 5.05
52 5.63 5.23 5.61 5.23 5.55 5.20 5.46 5.16 5.34 5.10
53 5.71 5.30 5.69 5.29 5.62 5.26 5.53 5.22 5.40 5.15
54 5.80 5.37 5.77 5.36 5.70 5.33 5.60 5.27 5.45 5.20
55 5.89 5.44 5.86 5.43 5.79 5.39 5.67 5.34 5.51 5.25
56 5.99 5.52 5.96 5.51 5.87 5.47 5.74 5.40 5.56 5.31
57 6.10 5.60 6.06 5.59 5.97 5.54 5.82 5.47 5.62 5.37
58 6.21 5.69 6.17 5.67 6.06 5.62 5.90 5.54 5.68 5.42
59 6.33 5.79 6.29 5.77 6.17 5.71 5.98 5.61 5.74 5.48
60 6.46 5.89 6.41 5.87 6.28 5.80 6.06 5.69 5.79 5.55
61 6.60 6.00 6.55 6.97 6.39 5.90 6.15 5.77 5.85 5.61
62 6.75 6.11 6.69 6.08 6.51 6.00 6.24 5.86 5.91 5.67
63 6.91 6.23 6.84 6.20 6.64 6.10 6.33 5.95 5.96 5.73
64 7.09 6.37 7.00 6.33 6.77 6.22 6.42 6.04 6.02 5.80
65 7.27 6.51 7.18 6.46 6.91 6.34 6.52 6.13 6.07 5.86
66 7.47 6.66 7.36 6.61 7.05 6.46 6.61 6.23 6.12 5.92
67 7.68 6.82 7.55 6.76 7.20 6.60 6.70 6.33 6.16 5.99
68 7.91 7.00 7.76 6.93 7.35 6.74 6.80 6.43 6.21 6.04
69 8.15 7.19 7.98 7.11 7.51 6.89 6.89 6.54 6.25 6.10
70 8.41 7.39 8.21 7.30 7.67 7.04 6.97 6.64 6.28 6.15
71 8.69 7.62 8.45 7.51 7.83 7.21 7.06 6.74 6.32 6.20
72 8.99 7.86 8.70 7.73 8.00 7.38 7.14 6.85 6.35 6.25
73 9.31 8.12 8.97 7.97 8.16 7.55 7.21 6.95 6.37 6.29
74 9.65 8.41 9.26 8.23 8.33 7.73 7.29 7.04 6.39 6.33
75 10.02 8.72 9.55 8.50 8.50 7.92 7.35 7.14 6.41 6.36
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
32
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Male and Second Annuitant is Female)
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Adjusted Ages
- -------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $ 3.97 $ 4.35 $ 4.56 $ 3.97 $ 4.42
55 55 4.16 4.54 4.76 4.15 4.54
55 60 4.34 4.76 5.00 4.34 4.64
60 55 4.27 4.73 5.00 4.26 4.83
60 60 4.51 4.99 5.27 4.50 4.98
60 65 4.76 5.29 5.60 4.75 5.13
65 60 4.66 5.25 5.61 4.65 5.39
65 65 4.99 5.61 5.99 4.98 5.60
65 70 5.34 6.03 6.46 5.31 5.81
70 65 5.19 5.97 6.44 5.17 6.14
70 70 5.67 6.49 6.99 5.62 6.47
70 75 6.16 7.10 7.68 6.07 6.77
75 70 5.95 6.96 7.61 5.87 7.20
75 75 6.64 7.73 8.43 6.48 7.68
75 80 7.33 8.62 9.45 7.02 8.13
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
The rates assume the Annuitant is Male and the Second Annuitant is Female.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
33
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Female and Second Annuitant is Male)
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Adjusted Ages
- -------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $ 4.03 $ 4.36 $ 4.55 $ 4.03 $ 4.41
55 55 4.16 4.54 4.76 4.15 4.54
55 60 4.27 4.73 5.00 4.26 4.83
60 55 4.34 4.76 5.00 4.34 4.64
60 60 4.51 4.99 5.27 4.50 4.98
60 65 4.66 5.25 5.61 4.65 5.39
65 60 4.76 5.29 5.60 4.75 5.13
65 65 4.99 5.61 5.99 4.98 5.60
65 70 5.19 5.97 6.44 5.17 6.14
70 65 5.34 6.03 6.46 5.31 5.81
70 70 5.67 6.49 6.99 5.62 6.47
70 75 5.95 6.96 7.61 5.87 7.20
75 70 6.16 7.10 7.68 6.07 6.77
75 75 6.64 7.73 8.43 6.48 7.68
75 80 7.04 8.39 9.29 6.79 8.70
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
The rates assume the Annuitant is Female and the Second Annuitant is Male.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
34
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Male and Second Annuitant is Female)
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Adjusted Ages
- -------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $ 4.88 $ 5.26 $ 5.48 $ 4.88 $ 5.34
55 55 5.04 5.44 5.66 5.04 5.43
55 60 5.21 5.65 5.89 5.21 5.53
60 55 5.15 5.63 5.91 5.14 5.73
60 60 5.37 5.87 6.16 5.37 5.86
60 65 5.61 6.16 6.49 5.60 6.01
65 60 5.52 6.14 6.51 5.51 6.28
65 65 5.83 6.49 6.87 5.82 6.47
65 70 6.17 6.90 7.33 6.13 6.67
70 65 6.04 6.84 7.34 6.00 7.03
70 70 6.49 7.35 7.87 6.44 7.33
70 75 6.97 7.96 8.56 6.87 7.62
75 70 6.77 7.84 8.51 6.68 8.08
75 75 7.45 8.60 9.33 7.27 8.55
75 80 8.14 9.49 10.35 7.80 8.98
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
The rates assume the Annuitant is Male and the Second Annuitant is Female.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
35
<PAGE>
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
(Annuitant is Female and the Second Annuitant is Male)
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Adjusted Ages
- -------------------------------
Second
Annuitant Annuitant Option 3a Option 3b Option 3c Option 3d Option 3e
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $ 4.93 $ 5.27 $ 5.46 $ 4.93 $ 5.19
55 55 5.04 5.44 5.66 5.04 5.43
55 60 5.15 5.63 5.91 5.14 5.73
60 55 5.21 5.65 5.89 5.21 5.53
60 60 5.37 5.87 6.16 5.37 5.86
60 65 5.52 6.14 6.51 5.51 6.28
65 60 5.61 6.16 6.49 5.60 6.01
65 65 5.83 6.49 6.87 5.82 6.47
65 70 6.04 6.84 7.34 6.00 7.03
70 65 6.17 6.90 7.33 6.13 6.67
70 70 6.49 7.35 7.87 6.44 7.33
70 75 6.77 7.84 8.51 6.68 8.08
75 70 6.97 7.96 8.56 6.87 7.62
75 75 7.45 8.60 9.33 7.27 8.55
75 80 7.86 9.28 10.20 7.57 9.59
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a.
The rates assume the Annuitant is Male and the Second Annuitant is Female.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
36
<PAGE>
- --------------------------------------------------------------------------------
Aetna Life Insurance and Annuity Company
Home Office: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 531-4547
Certificate of Group Annuity Coverage
- --------------------------------------------------------------------------------
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA.
APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR
DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT
APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY.
GPlCERT(4/94)
<TABLE>
<S> <C> <C>
Aetna Life Insurance and Annuity Company Aetna Growth Plus
Home Office: 151 Farmington Avenue Group Annuity Contract
Hartford, Connecticut 06156-8022 Application
- ------------------------------------------------------------------------------------------------------------------------------------
Contract Holder 1. Name of Contract Holder
Information
----------------------------------------------------------------------------------------------------------
(Please print or type.) 2. Address
----------------------------------------------------------------------------------------------------------
City State ZIP Code
----------------------------------------------------------------------------------------------------------
3. Tax Identification Number
----------------------------------------------------------------------------------------------------------
4. Contract Effective Date
----------------------------------------------------------------------------------------------------------
5. Type of Contract: [ ] Nonqualified [ ] IRA Rollover (IRC Section 408)
----------------------------------------------------------------------------------------------------------
6. Special Requests
----------------------------------------------------------------------------------------------------------
7. I acknowledge receipt of the Aetna Growth Plus Annuity Contract Prospectus dated __________ and all
current prospectuses pertaining to all of the variable investment options under the contract. [ ]
Check here to receive a Statement of Additional Information for the Growth Plus Annuity Contract.
----------------------------------------------------------------------------------------------------------
8. Will this contract change or replace any existing life insurance or annuity contract? [ ] Yes [ ] No
If yes, please provide carrier name, policy number and proposed cancellation date.
----------------------------------------------------------------------------------------------------------
9. The following will receive compensation when Aetna issues the annuity described in this application:
________________________________________________________(to be completed by the agent)
----------------------------------------------------------------------------------------------------------
I understand that any amount withdrawn from the GP Guaranteed Account prior to the maturity date of a
guaranteed term is subject to a market value adjustment as specified in the contract. I further understand
that annuity payments and account values, when based on the investment experience of a Separate Account
are variable and not guaranteed as to fixed dollar amount.
Dated at _______________________________ this ________________ day of _______________ 19____.
City and State
----------------------------------------------------------------------------------------------------------
Contract Holder Title Witness
----------------------------------------------------------------------------------------------------------
Agent's Do you have any reason to believe any existing life insurance or annuity contracts will be modified or
Note replaced if this contract is issued? [ ] Yes [ ] No
--------------------------------------------------------- ------------------------------------------------
Signature of Agent State License (if applicable)
----------------------------------------------------------------------------------------------------------
Home Office Errors and omissions may be corrected by a company agent number but no change in plan, classification,
Use Only amount, or extra benefits can be made without written consent of the Contract Holder. (N/A in W. Va)
Accepted _______________________________
</TABLE>
GP1APP(4/94)
Aetna Life Insurance and Annuity Company
Individual Annuity Application 151 Farmington Avenue
Hartford, Connecticut 06156
<TABLE>
<S> <C>
Please Print: Type of Contract: [ ] Nonqualified Annuity [ ] Individual Retirement Annuity
====================================================================================================================================
Primary Name (Last, First, Middle Initial) Social Security Number
Contract Holder
This information will be -----------------------------------------------------------------------------------------------------
used for tax reporting. Street Address City State Zip
-----------------------------------------------------------------------------------------------------
Date of Birth Marital Status Male Telephone Number [ ] Home [ ] Work
[ ] M [ ] S Female
----------------------------------------------------------------------------------------------------
Are you associated with a National Association of Securities Dealer Firm? U.S. citizen?
[ ] No [ ] Yes If yes, please specify. [ ] Yes [ ] No
If no, please specify:
====================================================================================================================================
Joint Name (Last, First, Middle Initial) Social Security Number
Contract Holder
A joint contract holder must -----------------------------------------------------------------------------------------------------
be the spouse of the primary Street Address City State Zip
Contract Holder.
Not allowed with IRA.
-----------------------------------------------------------------------------------------------------
Date of Birth Marital Status Male
[ ] M [ ] S Female
-----------------------------------------------------------------------------------------------------
Are you associated with a National Association of Securities Dealer Firm?
[ ] No [ ] Yes If yes, please specify.
====================================================================================================================================
Primary Name (Last, First, Middle Initial) Social Security Number
Annuitant
-----------------------------------------------------------------------------------------------------
If different than Contract Street Address City State Zip
Holder.
-----------------------------------------------------------------------------------------------------
If IRA, the annuitant Date of Birth Marital Status Male
contract holder must be the [ ] M [ ] S Female
same person.
====================================================================================================================================
Joint Name (Last, First, Middle Initial) Social Security Number
Annuitant
If different than Joint -----------------------------------------------------------------------------------------------------
Contract Holder. Street Address City State Zip
Not allowed with IRA. -----------------------------------------------------------------------------------------------------
Date of Birth Marital Status Male
[ ] M [ ] S Female
====================================================================================================================================
Payment [ ] Single Payment [ ] Installment Payment
Amount $________ Amount $__________
Frequency [ ] Monthly [ ] Quarterly [ ] Semiannual [ ] Annual
Beginning ______________________________
====================================================================================================================================
Investment Options Variable Fund Options GP Guaranteed Accounts
Please use whole percentages. ___% Equity Growth and Income Fund ___% 3-year guaranteed term
Percentages must total 100%. ___% Utility Fund ___% 5-year guaranteed term
___% Prime Money Fund ___% 8-year guaranteed term
___% U.S. Government Bond Fund
___% Corporate Bond Fund
[ ] I wish to use Dollar Cost Averaging. Please submit a Dollar Cost Averaging Election Form
====================================================================================================================================
Home Office Accepted
Use Only
<PAGE>
====================================================================================================================================
Beneficiary Beneficiary Relationship Social Security Number
Designations
_____________________________________________________________________________________________________
For additional beneficiaries, Beneficiary Relationship Social Security Number
attach and sign a separate
sheet. _____________________________________________________________________________________________________
Beneficiary Relationship Social Security Number
- ------------------------------------------------------------------------------------------------------------------------------------
Unless directed otherwise, we will pay any death benefits due in equal shares to the beneficiaries
named or to all living members of a class (e.g., children).
====================================================================================================================================
Special Requests
====================================================================================================================================
Signatures I declare the information above is correct and true to the best of my knowledge. I understand that
this application will be a part of the contract Aetna Life Insurance and Annuity Company issues to
me. Under penalty of perjury, I certify that the social security number(s) shown on this form is
(are) correct.
I understand: (1) When based on the investment experience of a Separate Account, all payments and
contract values are variable and are not guaranteed as to fixed dollar amount; and (2) all payments
made from the GP Guaranteed Account are subject to Market Value Adjustment provisions which may
result in a positive or negative adjustment to amounts payable.
I have received the current Aetna Growth Plus prospectus dated _________ and all current
prospectuses for variable fund options available under this contract. [ ] Please send me a Statement
of Additional Information.
[ ] ALIAC may hold my application and Purchase Payment if it cannot accept my application within
five business days after receiving it at its home office.
Will this contract change or replace any existing life insurance and annuity contracts? [ ] No [ ]
Yes If yes, please submit any required replacement form(s) with this application. If contract is
funded through a 1035 Exchange, please provide the following information:
Name of Company____________________________________ Contract Number_________________________________
Signed at__________________________________________ ________________________________________________
City and State Date
___________________________________________________ ________________________________________________
Contract Holder Witness
___________________________________________________ ________________________________________________
Joint Contract Holder (if applicable) Witness
====================================================================================================================================
Producer's Note Do you have any reason to believe any existing insurance and annuity contracts will be modified or
replaced if this contract is issued? [ ] Yes [ ] No I have reviewed the details of the client's
retirement program during the solicitation of the application, and believe the Contract applied for
is suitable for that program.
____________________________________________________________________________________________________
Signature Of Producer/Agent Date
____________________________________________________________________________________________________
Print Name Social Security Number
____________________________________________________________________________________________________
State License Number Aetna Code
====================================================================================================================================
Additional Corrections and amendments. ALIAC may correct errors and omissions, but any change in the
Information Annuitant's or Joint Annuitant's age or sex, or terms of annuity payments requires written consent
of the Contract Holder(s).
(Not valid in W. Va.)
</TABLE>
I-GP1APP(4/94)
<TABLE>
<S> <C>
[Aetna logo] Aetna Life Insurance & Annuity Company Aetna Growth Plus
Home Office: 151 Farmington Avenue Group Variable Annuity
Hartford, Connecticut 06156-8022 Contract Application
- -----------------------------------------------------------------------------------------------------------------------------------
Contract Holder 1. Name of Contract Holder
((Firm))
---------------------------------------------------------------------------------------------------------------
Information 2. Address
Please print ((Address))
---------------------------------------------------------------------------------------------------------------
City State Zip Code
((City)) ((State)) ((Zip))
---------------------------------------------------------------------------------------------------------------
3. Tax Identification Number
((Tax_Id))
---------------------------------------------------------------------------------------------------------------
4. Contract Effective Date
((Effective_Date))
---------------------------------------------------------------------------------------------------------------
5. Type of Contract: [X] Nonqualified [X] IRA Rollover (IRC Section 408)
---------------------------------------------------------------------------------------------------------------
6. Special Requests
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
7. Will this contract change or replace any existing life insurance or annuity contract?
[ ] Yes [X] No If yes, please provide carrier name, policy number and proposed cancellation date.
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
I understand that (1) when based on the investment experience of a Separate Account, all payments and contract
values are variable and are not guaranteed as to fixed dollar amount; and that (2) some payments made from the
ALIAC Guaranteed Account prior to the completion of a guaranteed term are subject to Market Value Adjustment
which may result in a positive or negative adjustment to amounts payable. The length of these terms vary from
one to ten years.
I acknowledge receipt of the Aetna Growth Plus Variable Annuity Contract Prospectus dated _________ and all
current prospectuses pertaining to the variable investment options under the contract.
[ ] Check here to receive a Statement of Additional Information.
Dated at ______________________ this ____ day of _______________ 19____.
City and State
---------------------------------------------------------------------------------------------------------------
Contract Holder Title Witness
---------------------------------------------------------------------------------------------------------------
Agent's Note Do you have any reason to believe any existing life insurance or annuity contracts will be modified or
replaced if this contract is issued? [ ] Yes [ ] No
---------------------------------------------------------------------------------------------------------------
Signature of Agent
---------------------------------------------------------------------------------------------------------------
Home Office Use Errors and omissions may be corrected by a company agent number but no change in plan, classification,
Only amount, or extra benefits can be made without written consent of the Contract Holder.
Accepted__________________________________________
</TABLE>
GPAPPNY(1/96)
[Aetna Letterhead] 151 Farmington Avenue
[Aetna Logo] Hartford, CT 06156
Julie E. Rockmore
April 17, 1998 Counsel
Law Division, RE4A
Investments & Financial Services
(860) 273-4686
Fax: (860) 273-8340
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Aetna Life Insurance and Annuity Company and its Variable
Annuity Account B
Post-Effective Amendment No. 8 to Registration Statement on
Form N-4
Prospectus Title: ALIAC Growth Plus
File Nos.: 33-79122 and 811-2512
Dear Sir or Madam:
The undersigned serves as counsel to Aetna Life Insurance and Annuity
Company, a Connecticut life insurance company (the "Company"). It is
my understanding that the Company, as depositor, has registered an
indefinite amount of securities (the "Securities") under the
Securities Act of 1933 (the "Securities Act") as provided in Rule
24f-2 under the Investment Company Act of 1940 (the "Investment
Company Act").
In connection with this opinion, I have reviewed the N-4 Registration
Statement, as amended to the date hereof, and this Post-Effective
Amendment No. 8. I have also examined originals or copies, certified
or otherwise identified to my satisfaction, of such documents, trust
records and other instruments I have deemed necessary or appropriate
for the purpose of rendering this opinion. For purposes of such
examination, I have assumed the genuineness of all signatures on
original documents and the conformity to the original of all copies.
I am admitted to practice law in Connecticut, and do not purport to be
an expert on the laws of any other state. My opinion herein as to any
other law is based upon a limited inquiry thereof which I have deemed
appropriate under the circumstances.
<PAGE>
Based upon the foregoing, and, assuming the Securities are sold in
accordance with the provisions of the prospectus, I am of the opinion
that the Securities being registered will be legally issued and will
represent binding obligations of the Company.
I consent to the filing of this opinion as an exhibit to the
Registration Statement.
Sincerely,
/s/ Julie E. Rockmore
Julie E. Rockmore
Consent of Independent Auditors
The Board of Directors of Aetna Life Insurance and Annuity Company and
Contractholders of Aetna Variable Annuity Account B:
We consent to the use of our reports dated February 3, 1998 and February 27,
1998 included in this Post-Effective Amendment No. 8 to Registration Statement
(No. 33-79122) on Form N-4 and to the references to our firm under the headings
"Condensed Financial Information" in the prospectus and "Independent Auditors"
in the statement of additional information.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
April 17, 1998
SCHEDULE FOR COMPUTATION OF TOTAL RETURN CALCULATIONS
TOTAL RETURN CALCUALTION (STANDARDIZED)
The standardized rate represents fund performance for the most recent 1-year,
5-year and 10-year periods. The "1-year rate" represents fund performance for
the period January 1, 1997 through December 31, 1997; the "5-year rate" is for
the period January 1, 1993 through December 31, 1997; the "10-year rate" is for
the period January 1, 1988 through December 31, 1997. "Since inception" figures
assume the redemption on December 31, 1997 of values attributable to a $1,000
payment made on the date contributions were first received in the fund under the
separate account.
The formula used in the computation of the total return calculation is as
follows:
Formula
P(1 + T) (n) = ERV
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of 1,
5, or 10 year periods (or a fractional
portion thereof) of a hypothetical $1,000
payment made at the beginning of the 1, 5,
or 10 year periods
The total returns reflect the deduction of all recurring charges during each
period (e.g., mortality and expense risk charges, maintenance fees,
administrative charges (if applicable) and deferred sales charges).
TOTAL RETURN CALCULATION (NON-STANDARDIZED)
The non-standardized rate represents fund performance for the most recent
1-year, 3-year, 5-year and 10-year periods. The "1-year rate" represents fund
performance for the period January 1, 1997 through December 31, 1997; the
"3-year rate" is for the period January 1, 1995 through December 31, 1997; the
"5-year rate" is for the period January 1, 1993 through December 31, 1997; and
the "10-year rate" is for the period January 1, 1988 through December 31, 1997.
The non-standardized figures will be calculated in a manner similar to the one
discussed above for the standardized figures, except that non-standardized
figures will not reflect the deduction of any applicable deferred sales charge
(which would decrease the level of performance shown if reflected in these
calculations), and the "since inception" figures assume the redemption on
December 31, 1997 of values attributable to a $1,000 payment made on the
inception dates of the funds.
For an illustration of the Computation of the Total Return Quotations, both
Standardized and Non-Standardized, see attached.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Maintenance One Year
Fund Name Fee As of Date As of AUV as of Date
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federated American Leaders Fund II 30 12/31/97 20.28723 12/31/96
- ------------------------------------------------------------------------------------------------------------
Federated Equity Income Fund II 30 12/31/97 12.305409 02/28/97
- ------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II 30 12/31/97 11.882802 12/31/96
- ------------------------------------------------------------------------------------------------------------
Federated Growth Strategies Fund II 30 12/31/97 15.777259 12/31/96
- ------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II 30 12/31/97 14.724322 12/31/96
- ------------------------------------------------------------------------------------------------------------
Federated International Equity Fund II 30 12/31/97 11.887511 12/31/96
- ------------------------------------------------------------------------------------------------------------
Federated Prime Money Fund II 30 12/31/97 11.119024 12/31/96
- ------------------------------------------------------------------------------------------------------------
Federated Utility Fund II 30 12/31/97 16.611043 12/31/96
- ------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
One Year One Year Five Year Five Year Five Year Ten Year Ten Year Ten Year
as of AUV w/ DSC as of Date as of AUV w/ DSC as of Date as of AUV w/ DSC
- -------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
15.547578 22.64% 09/30/94 09/30/94
- -------------------------------------------------------------------------------------------------------------
02/28/97 02/28/97
- -------------------------------------------------------------------------------------------------------------
11.099349 0.62% 09/30/94 09/30/94
- -------------------------------------------------------------------------------------------------------------
12.596299 17.72% 10/02/95 10/02/95
- -------------------------------------------------------------------------------------------------------------
13.118818 5.49% 09/30/94 09/30/94
- -------------------------------------------------------------------------------------------------------------
10.951879 2.01% 05/31/95 05/31/95
- -------------------------------------------------------------------------------------------------------------
10.746775 (2.76%) 11/30/94 11/30/94
- -------------------------------------------------------------------------------------------------------------
13.30343 17.35% 09/30/94 09/30/94
- -------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Separate
Inception Inception Inception Account One Year Three Five Year Ten Year
Date AUV w/ DSC Charge Free Out DSC Year DSC DSC DSC
- ---------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
09/30/94 9.9987 23.76% 140 0.15 6.00% 4.00% 2.00% 0.00%
- ---------------------------------------------------------------------------------------------------------
02/28/97 10.561494 8.34% 140 0.15 6.00% 4.00% 2.00% 0.00%
- ---------------------------------------------------------------------------------------------------------
09/30/94 9.993809 4.55% 140 0.15 6.00% 4.00% 2.00% 0.00%
- ---------------------------------------------------------------------------------------------------------
11/30/95 10.288488 21.26% 140 0.15 6.00% 4.00% 2.00% 0.00%
- ---------------------------------------------------------------------------------------------------------
09/30/94 9.984514 11.93% 140 0.15 6.00% 4.00% 2.00% 0.00%
- ---------------------------------------------------------------------------------------------------------
05/31/95 9.999389 5.46% 140 0.15 6.00% 4.00% 2.00% 0.00%
- ---------------------------------------------------------------------------------------------------------
11/30/94 10.005649 2.45% 140 0.15 6.00% 4.00% 2.00% 0.00%
- ---------------------------------------------------------------------------------------------------------
09/30/94 9.978018 16.30% 140 0.15 6.00% 4.00% 2.00% 0.00%
- ----------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
- -------------
Inception
DSC
- -------------
<C>
4.00%
- -------------
7.00%
- -------------
4.00%
- -------------
5.00%
- -------------
4.00%
- -------------
5.00%
- -------------
4.00%
- -------------
4.00%
- -------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Maintenance One Year
Fund Name Fee As of Date As of AUV as of Date
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federated American Leaders Fund II 30 12/31/97 20.28723 12/31/96
- -------------------------------------------------------------------------------------------------------------
Federated Equity Income Fund II 30 12/31/97 12.305409 01/02/97
- -------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II 30 12/31/97 11.882802 12/31/96
- -------------------------------------------------------------------------------------------------------------
Federated Growth Strategies Fund II 30 12/31/97 15.777259 12/31/96
- -------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II 30 12/31/97 14.724322 12/31/96
- -------------------------------------------------------------------------------------------------------------
Federated International Equity Fund II 30 12/31/97 11.887511 12/31/96
- -------------------------------------------------------------------------------------------------------------
Federated Prime Money Fund II 30 12/31/97 11.119024 12/31/96
- -------------------------------------------------------------------------------------------------------------
Federated Utility Fund II 30 12/31/97 16.611043 12/31/96
- -------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
One Year One Year Three Year Three Year Three Year Five Year Five Year Five Year
as of AUV w/out DSC as of Date as of AUV w/out DSC as of Date as of AUV w/out DSC
- -----------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
15.547578 30.47% 12/30/94 9.836834 27.27% 02/10/94
- -----------------------------------------------------------------------------------------------------------------
01/02/97 01/02/97
- -----------------------------------------------------------------------------------------------------------------
11.099349 7.04% 12/30/94 10.07309 5.65% 03/28/94
- -----------------------------------------------------------------------------------------------------------------
12.596299 25.24% 10/02/95
- -----------------------------------------------------------------------------------------------------------------
13.118818 12.22% 12/30/94 9.805358 14.50% 03/01/94
- -----------------------------------------------------------------------------------------------------------------
10.951879 8.53% 05/07/95
- -----------------------------------------------------------------------------------------------------------------
10.746775 3.45% 12/30/94 10.032208 3.47% 11/17/94
- -----------------------------------------------------------------------------------------------------------------
13.30343 24.85% 12/30/94 9.876361 18.91% 02/10/94
- -----------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Separate
Ten Year Ten Year Ten Year Inception Inception Inception Account
as of Date as of AUV w/out DSC Date AUV w/out DSC Charge Free Out
- -------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
02/10/94 02/10/94 10.029431 19.85% 140 0.15
- -------------------------------------------------------------------------------------------------------------
01/02/97 01/02/97 10 23.04% 140 0.15
- -------------------------------------------------------------------------------------------------------------
03/28/94 03/28/94 9.921704 4.89% 140 0.15
- -------------------------------------------------------------------------------------------------------------
10/02/95 10/02/95 10.011456 22.42% 140 0.15
- -------------------------------------------------------------------------------------------------------------
03/01/94 03/01/94 10.293537 9.77% 140 0.15
- -------------------------------------------------------------------------------------------------------------
05/07/95 05/07/95 10.000979 6.72% 140 0.15
- -------------------------------------------------------------------------------------------------------------
11/17/94 11/17/94 9.998777 3.44% 140 0.15
- -------------------------------------------------------------------------------------------------------------
02/10/94 02/10/94 10.346817 12.93% 140 0.15
- -------------------------------------------------------------------------------------------------------------
</TABLE>
